Exhibit 10.1

 

AGREEMENT AND PLAN OF

 

MERGER

 

BY AND AMONG

 

LABOR READY, INC.,

 

LABOR READY ACQUISITION SUB II, INC.,

 

CLP HOLDINGS CORP.,

 

AND

 

AS SHAREHOLDER REPRESENTATIVES,

 

BAIRD CAPITAL PARTNERS MANAGEMENT COMPANY, LLC

 

AND

 

WILLIAM BLAIR CAPITAL PARTNERS VI, L.L.C.

 

--------------------------------------------------------------------------------

 

Table of Contents

 

ARTICLE I

 

ARTICLE II

 

SECTION 2.1. The Merger

 

SECTION 2.2. Effective Time of the Merger

 

SECTION 2.3. Redemption of Company Preferred Stock

 

ARTICLE III

 

SECTION 3.1. Articles of Incorporation

 

SECTION 3.2. By-Laws

 

SECTION 3.3. Effect of the Merger

 

SECTION 3.4. Directors

 

SECTION 3.5. Officers

 

ARTICLE IV

 

SECTION 4.1. Conversion of Company Common Stock in the Merger

 

SECTION 4.2. Conversion of Subsidiary Shares in Merger

 

SECTION 4.3. Total Company Value

 

SECTION 4.4. Payment of Merger Consideration

 

SECTION 4.5. Final Determination of Total Company Value; Payment of Adjustment
Escrow

 

SECTION 4.6. Adjustments to Merger Consideration

 

SECTION 4.7. Closing

 

SECTION 4.8. Closing of the Company’s Transfer Books

 

SECTION 4.9. Dissenting Shares
[a05-10131_1ex10d1.htm#Section4_9_DissentingShares_054555]

 

SECTION 4.10. Lost Certificates
[a05-10131_1ex10d1.htm#Section4_10_LostCertificates_054558]

 

ARTICLE V [a05-10131_1ex10d1.htm#Articlev_054600]

 

SECTION 5.1. Organization and Qualifications
[a05-10131_1ex10d1.htm#Section5_1_OrganizationAndQualifi_054604]

 

SECTION 5.2. Authority; Non-Contravention; Approvals
[a05-10131_1ex10d1.htm#Section5_2_AuthorityNoncontravent_054609]

 

SECTION 5.3. Litigation [a05-10131_1ex10d1.htm#Section5_3_Litigation_054620]

 

SECTION 5.4. Brokers and Finders
[a05-10131_1ex10d1.htm#Section5_4_BrokersAndFinders_054623]

 

ARTICLE VI [a05-10131_1ex10d1.htm#Articlevi_054627]

 

SECTION 6.1. Organization and Qualification
[a05-10131_1ex10d1.htm#Section6_1_OrganizationAndQualifi_054630]

 

SECTION 6.2. Capitalization
[a05-10131_1ex10d1.htm#Section6_2_Capitalization_054632]

 

SECTION 6.3. Subsidiaries [a05-10131_1ex10d1.htm#Section6_3_Subsidiaries_054635]

 

SECTION 6.4. Authority; Non-Contravention; Approvals.
[a05-10131_1ex10d1.htm#Section6_4_AuthorityNoncontravent_054638]

 

SECTION 6.5. Company Financial Statements
[a05-10131_1ex10d1.htm#Section6_5_CompanyFinancialStatem_054641]

 

SECTION 6.6. Absence of Undisclosed Liabilities
[a05-10131_1ex10d1.htm#Section6_6_AbsenceOfUndisclosedLi_054644]

 

SECTION 6.7. Absence of Certain Changes or Events
[a05-10131_1ex10d1.htm#Section6_7_AbsenceOfCertainChange_054647]

 

SECTION 6.8. Absence of Litigation
[a05-10131_1ex10d1.htm#Section6_8_AbsenceOfLitigation_054650]

 

SECTION 6.9. No Violation of Law
[a05-10131_1ex10d1.htm#Section6_9_NoViolationOfLaw_054652]

 

SECTION 6.10. Taxes [a05-10131_1ex10d1.htm#Section6_10_Taxes_054655]

 

 

i

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SECTION 6.11. Employee Benefits Plans; ERISA.
[a05-10131_1ex10d1.htm#Section6_11_EmployeeBenefitsPlans_054657]

 

SECTION 6.12. Labor and Employment Matters
[a05-10131_1ex10d1.htm#Section6_12_LaborAndEmploymentMat_054700]

 

SECTION 6.13. Environmental Matters
[a05-10131_1ex10d1.htm#Section6_13_EnvironmentalMatters_054704]

 

SECTION 6.14. Condition of and Title to Assets
[a05-10131_1ex10d1.htm#Section6_14_ConditionOfAndTitleTo_054707]

 

SECTION 6.15. Company Common Shareholder Approval
[a05-10131_1ex10d1.htm#Section6_15_CompanyCommonSharehol_054710]

 

SECTION 6.16. Trademarks and Intellectual Property Compliance
[a05-10131_1ex10d1.htm#Section6_16_TrademarksAndIntellec_054713]

 

SECTION 6.17. Contracts and Other Agreements; Compliance
[a05-10131_1ex10d1.htm#Section6_17_ContractsAndOtherAgre_054717]

 

SECTION 6.18. Insurance [a05-10131_1ex10d1.htm#Section6_18_Insurance_054720]

 

SECTION 6.19. Brokers and Finders
[a05-10131_1ex10d1.htm#Section6_19_BrokersAndFinders_054723]

 

SECTION 6.20. Certain Transactions
[a05-10131_1ex10d1.htm#Section6_20_CertainTransactions_054726]

 

SECTION 6.21. Books and Records
[a05-10131_1ex10d1.htm#Section6_21_BooksAndRecords_054728]

 

SECTION 6.22. Employees [a05-10131_1ex10d1.htm#Section6_22_Employees_054731]

 

SECTION 6.23. Customers and Suppliers
[a05-10131_1ex10d1.htm#Section6_23_CustomersAndSuppliers_054734]

 

SECTION 6.24. Accounts Receivable
[a05-10131_1ex10d1.htm#Section6_24_AccountsReceivable_054736]

 

SECTION 6.25. Board Recommendation
[a05-10131_1ex10d1.htm#Section6_25_BoardRecommendation_054740]

 

SECTION 6.26. Disclosure [a05-10131_1ex10d1.htm#Section6_26_Disclosure_054742]

 

ARTICLE VII [a05-10131_1ex10d1.htm#Articlevii_054744]

 

SECTION 7.1. Conduct of Business by the Company Pending the Merger
[a05-10131_1ex10d1.htm#Section7_1_ConductOfBusinessByThe_054748]

 

SECTION 7.2. Control of the Company’s Operations
[a05-10131_1ex10d1.htm#Section7_2_ControlOfTheCompanysOp_054752]

 

SECTION 7.3. Acquisition Transactions
[a05-10131_1ex10d1.htm#Section7_3_AcquisitionTransaction_054757]

 

SECTION 7.4. Employees [a05-10131_1ex10d1.htm#Section7_4_Employees_054808]

 

ARTICLE VIII [a05-10131_1ex10d1.htm#Articleviii_054811]

 

SECTION 8.1. Access to Information
[a05-10131_1ex10d1.htm#Section8_1_AccessToInformation_054813]

 

SECTION 8.2. Company Common Shareholder Approval
[a05-10131_1ex10d1.htm#Section8_2_CompanyCommonSharehold_054818]

 

SECTION 8.3. Expenses and Fees
[a05-10131_1ex10d1.htm#Section8_3_ExpensesAndFees_054822]

 

SECTION 8.4. Agreement to Cooperate
[a05-10131_1ex10d1.htm#Section8_4_AgreementToCooperate_054824]

 

SECTION 8.5. Public Statements
[a05-10131_1ex10d1.htm#Section8_5_PublicStatements_054828]

 

SECTION 8.6. Indemnification of Directors and Officers and Controlling Persons
[a05-10131_1ex10d1.htm#Section8_6_IndemnificationOfDirec_054831]

 

SECTION 8.7. Notification of Certain Matters
[a05-10131_1ex10d1.htm#Section8_7_NotificationOfCertainM_054837]

 

SECTION 8.8. Execution of Additional Documents
[a05-10131_1ex10d1.htm#Section8_8_ExecutionOfAdditionalD_054839]

 

SECTION 8.9. Tax Matters. [a05-10131_1ex10d1.htm#Section8_9_TaxMatters__054844]

 

SECTION 8.10. Worker’s Compensation Insurance
[a05-10131_1ex10d1.htm#Section8_10_WorkersCompensationIn_054849]

 

ARTICLE IX [a05-10131_1ex10d1.htm#Articleix_054855]

 

SECTION 9.1. Conditions to Each Party’s Obligation to Effect the Merger
[a05-10131_1ex10d1.htm#Section9_1_ConditionsToEachPartys_054857]

 

SECTION 9.2. Additional Conditions to Obligation of the Company to Effect the
Merger [a05-10131_1ex10d1.htm#Section9_2_AdditionalConditionsTo_054906]

 

SECTION 9.3. Additional Conditions to Obligations of Parent and Subsidiary to
Effect the Merger
[a05-10131_1ex10d1.htm#Section9_3_AdditionalConditionsTo_054914]

 

ARTICLE X [a05-10131_1ex10d1.htm#Articlex_054920]

 

SECTION 10.1. Indemnification of Parent and Subsidiary After Effective Time
[a05-10131_1ex10d1.htm#Section10_1_IndemnificationOfPare_054923]

 

SECTION 10.2. Indemnification of the Company Common Shareholders
[a05-10131_1ex10d1.htm#Section10_2_IndemnificationOfTheC_054928]

 

SECTION 10.3. Procedure Relative to Indemnification
[a05-10131_1ex10d1.htm#Section10_3_ProcedureRelativeToIn_054932]

 

SECTION 10.4. Losses Net of Insurance and Tax Benefits
[a05-10131_1ex10d1.htm#Section10_4_LossesNetOfInsuranceA_054938]

 

 

ii

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SECTION 10.5. Limits on Indemnification Claims.
[a05-10131_1ex10d1.htm#Section10_5_LimitsOnIndemnificati_054943]

 

SECTION 10.6. Sole Remedy [a05-10131_1ex10d1.htm#Section10_6_SoleRemedy_055003]

 

SECTION 10.7. Payable Claims
[a05-10131_1ex10d1.htm#Section10_7_PayableClaims_055005]

 

SECTION 10.8. Treatment of Indemnity Payments
[a05-10131_1ex10d1.htm#Section10_8_TreatmentOfIndemnityP_055011]

 

SECTION 10.9. Assignment; Reimbursement
[a05-10131_1ex10d1.htm#Section10_9_AssignmentReimburseme_055014]

 

ARTICLE XI [a05-10131_1ex10d1.htm#Articlexi_055510]

 

SECTION 11.1. Termination [a05-10131_1ex10d1.htm#Section11_1_Termination_055017]

 

SECTION 11.2. Effect of Termination
[a05-10131_1ex10d1.htm#Section11_2_EffectOfTermination_055020]

 

SECTION 11.3. Break-up Fee [a05-10131_1ex10d1.htm#Section11_3_BreakupFee_055022]

 

SECTION 11.4. Amendment [a05-10131_1ex10d1.htm#Section11_4_Amendment_055025]

 

SECTION 11.5. Waiver [a05-10131_1ex10d1.htm#Section11_5_Waiver_055027]

 

ARTICLE XII [a05-10131_1ex10d1.htm#Articlexii_055511]

 

SECTION 12.1. Shareholder Representatives
[a05-10131_1ex10d1.htm#Section12_1_ShareholderRepresenta_055029]

 

SECTION 12.2. Company Disclosure Letter
[a05-10131_1ex10d1.htm#Section12_2_CompanyDisclosureLett_055034]

 

SECTION 12.3. Notices [a05-10131_1ex10d1.htm#Section12_3_Notices_055105]

 

SECTION 12.4. Interpretation
[a05-10131_1ex10d1.htm#Section12_4_Interpretation_055108]

 

SECTION 12.5. Miscellaneous
[a05-10131_1ex10d1.htm#Section12_5_Miscellaneous_055112]

 

SECTION 12.6. Governing Law; Jurisdiction
[a05-10131_1ex10d1.htm#Section12_6_GoverningLawJurisdict_055114]

 

SECTION 12.7. Counterparts
[a05-10131_1ex10d1.htm#Section12_7_Counterparts_055118]

 

SECTION 12.8. Successors in Interest
[a05-10131_1ex10d1.htm#Section12_8_SuccessorsInInterest_055120]

 

SECTION 12.9. Exhibits and Schedules
[a05-10131_1ex10d1.htm#Section12_9_ExhibitsAndSchedules_055123]

 

SECTION 12.10. Severability
[a05-10131_1ex10d1.htm#Section12_10_Severability_055125]

 

SECTION 12.11. No Joint Venture
[a05-10131_1ex10d1.htm#Section12_11_NoJointVenture_055130]

 

SECTION 12.12. Specific Performance
[a05-10131_1ex10d1.htm#Section12_12_SpecificPerformance_055132]

 

 

iii

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AGREEMENT AND PLAN OF MERGER

 

THIS AGREEMENT AND PLAN OF MERGER, is made as of this 26th day of May, 2005 (the
“Agreement”), by and among LABOR READY, INC., a Washington corporation
(“Parent”), LABOR READY ACQUISITION SUB II, INC., a Nevada corporation and a
wholly-owned, direct subsidiary of Parent (“Subsidiary”), CLP HOLDINGS CORP., a
Nevada corporation (the “Company”), BAIRD CAPITAL PARTNERS MANAGEMENT COMPANY,
LLC, a Wisconsin limited liability company (“Baird”) and WILLIAM BLAIR CAPITAL
PARTNERS VI, L.L.C., a Delaware limited liability company (“Blair”, and together
with Baird, “Shareholder Representatives”).

 

R E C I T A L S:

 

WHEREAS, the respective Boards of Directors of Parent, Subsidiary and the
Company have each approved the merger of Subsidiary with and into the Company
(the “Merger”), upon the terms and subject to the conditions set forth herein.

 

NOW, THEREFORE, in consideration of the representations, warranties, covenants
and agreements contained herein, the parties hereto, intending to be legally
bound, agree as follows:

 

ARTICLE I

 

DEFINITIONS

 

As used in this Agreement, the following terms shall have the following
meanings, unless otherwise expressly provided or unless the context clearly
requires otherwise:

 

“Accounts Receivable” shall be defined as set forth in Section 6.24.

 

“Adjustment Escrow” shall be defined as set forth in Section 4.4(a).

 

“Adjustment Short Fall Payment” shall be defined as set forth in Section 4.5(a).

 

“Agreement” shall be defined as set forth in the Preamble.

 

“Arbitrable Claim” shall be defined as set forth in Section 10.3(d).

 

“Baird” shall be defined as set forth in the Preamble.

 

“Balance Sheet Date” means December 31, 2004.

 

“Basket Amount” shall be defined as set forth in Section 10.5.

 

“Blair” shall be defined as set forth in the Preamble.

 

--------------------------------------------------------------------------------

 

“Break-Up Fee” shall be defined as set forth in Section 11.3.

 

“Claim Notice” shall be defined as set forth in Section 10.3(a).

 

“Claiming Party” shall be defined as set forth in Section 10.3(a).

 

“Closing” shall be defined as set forth in Section 4.7.

 

“Closing Cash” shall be defined as set forth in Section 4.3(a).

 

“Closing Date” shall be defined as set forth in Section 4.7.

 

“Closing Date Balance Sheet” shall be defined as set forth in Section 4.3(b).

 

“CLP Mergers” shall be defined as set forth in Section 6.3.

 

“CLP Resources” shall mean CLP Resources, Inc., a Delaware corporation, which is
a wholly owned, direct subsidiary of the Company.

 

“Code” shall be defined as the Internal Revenue Code of 1986, as amended.

 

“Company” shall be defined as set forth in the Preamble.

 

“Company Actuarial Reviewer” shall mean Deloitte Consulting, LLP; provided that
if Deloitte Consulting LLP no longer provides actuarial services at the time the
actuarial review described in Section 8.10(b) is required or if Deloitte
Consulting, LLP is unwilling to prepare such actuarial review, then Parent and
the Shareholder Representatives shall mutually agree upon a replacement.

 

“Company Affiliated Transaction” shall have the meaning set forth in
Section 6.20.

 

“Company Class A Preferred Stock” shall mean the class A preferred stock, $.01
par value per share, of the Company.

 

“Company Class B Preferred Stock” shall mean the class B preferred stock, $.01
par value per share, of the Company.

 

“Company Common Shareholders” shall mean holders of shares of Company Common
Stock.

 

“Company Common Shareholder Approval” shall be defined as set forth in
Section 8.2.

 

“Company Common Stock” shall mean the common stock, par value $.01 per share, of
the Company.

 

2

--------------------------------------------------------------------------------

 

“Company Common Stock Certificates” shall have the meaning set forth in
Section 4.4(b).

 

“Company Disclosure Letter” shall have the meaning set forth in the caption to
Article VI, below.

 

“Company Financial Statements” shall be defined as provided in Section 6.5.

 

“Company Intellectual Property” shall mean both Company Owned Intellectual
Property and such Company Licensed Intellectual Property as is a part of any
Company products or services or is used by the Company in its business.

 

“Company Licensed Intellectual Property” shall mean all Intellectual Property
Rights owned by any third party.

 

“Company Material Adverse Effect” shall mean an effect or effects or fact or
condition which, individually or in the aggregate is materially adverse to the
financial condition, business, properties, assets, operations of the Company and
the Company Subsidiaries, taken as a whole.  Without limiting the definition of
Company Material Adverse Effect in the preceding sentence, a Company Material
Adverse Effect will be deemed to exist if there will occur any event that causes
or may reasonably be expected to cause or result in estimable monetary loss
which, individually or when aggregated with all other events, exceeds $150,000.

 

“Company Owned Intellectual Property” shall mean all Intellectual Property
Rights owned by the Company.

 

“Company Permits” shall have the meaning set forth in Section 6.9.

 

“Company Plans” means all employee benefit plans and programs maintained by the
Company or a Company Subsidiary, including employee benefit plans within the
meaning set forth in Section 3(3) of ERISA.

 

“Company Preferred Shareholders” shall be defined as set forth in
Section 2.3(a).

 

“Company Preferred Stock” shall mean the Company Class A Preferred Stock and the
Company Class B Preferred Stock issued and outstanding.

 

“Company Preferred Stock Certificates” shall have the meaning set forth in
Section 2.3(b).

 

“Company Required Statutory Approvals” means the making of the Merger Filing
with the Nevada Secretary of State in connection with the Merger.

 

“Company Shareholders” shall mean the Company Common Shareholders and the
Company Preferred Shareholders.

 

3

--------------------------------------------------------------------------------

 

“Company Stock” shall mean the Company Common Stock, the Company Class A
Preferred Stock and the Company Class B Preferred Stock issued and outstanding.

 

“Company Subsidiaries” shall mean CLP Resources and Contractors.

 

“Company’s knowledge” for those warranties and representations set forth in
Article VI of this Agreement or elsewhere in this Agreement, which are subject
to the qualification “to the Company’s knowledge” or “to the knowledge of the
Company,” or otherwise limited to matters “known” to the Company, the Company
will be deemed to have knowledge of a matter if Noel S. Wheeler, Selby F.
Little, III, Richard Mercuri, Edward Nubel or Donna Gagnon has actual knowledge
of the matter after a reasonable investigation of the surrounding circumstances.

 

“Contracts” shall be defined as set forth in Section 6.17.

 

“Contractors” shall mean Contractors Labor Pool, Inc., a Delaware corporation,
which is a wholly-owned, direct subsidiary of CLP Resources.

 

“Definitively Resolved” shall be defined as set forth in Section 10.7.

 

“De minimis Amount” shall be defined as set forth in Section 10.5.

 

“Dissenting Shares” shall be defined as set forth in Section 4.9(a).

 

“Dissenting Shareholder” shall be defined as set forth in Section 4.9(a).

 

“Distribution Share” shall be defined as a Company Common Shareholder’s share of
the Merger Consideration as set forth on Schedule 4.1 attached hereto.

 

“Effective Time” shall be defined as set forth in Section 2.2.

 

“Environmental Laws” shall mean all federal, state and local laws in effect on
the date hereof and other governmental restrictions and requirements, including
statutes, regulations, ordinances, codes, rules, judgments, decrees, orders and
requirements relating to the discharge, emission or release of air pollutants,
water pollutants or process waste water or otherwise relating in any way to the
protection or clean-up of the environment or to hazardous substances in general
or to storage tanks, petroleum products, polychlorinated biphenyls or asbestos,
including, but not limited to, the Federal Solid Waste Disposal Act, the Federal
Clean Air Act, the Federal Clean Water Act, the Federal Resource Conservation
and Recovery Act of 1976, the Federal Comprehensive Environmental Response,
Compensation and Liability Act of 1980, regulations of the Environmental
Protection Agency, regulations of the Nuclear Regulatory Agency, and regulations
of any state department of natural resources, state environmental protection
agency or any Governmental Authority whatsoever.

 

“ERISA” shall mean the Employee Retirement Income Securities Act of 1974, as
amended.

 

4

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“Escrow Agent” shall be defined as set forth in Section 4.4(a).

 

“Escrow Agreement” shall be defined as set forth in Section 9.1(e).

 

“Escrow Interest” shall be defined as set forth in Section 4.5(a).

 

“Escrow Rate” shall be defined as set forth in Section 4.5(a).

 

“Estimated Closing Cash” shall be defined as set forth in Section 4.3(a).

 

“Estimated Merger Consideration” shall be defined as set forth in
Section 4.3(a).

 

“FTC” shall mean the Federal Trade Commission.

 

“GAAP” shall mean generally accepted accounting principles in the United States
of America.

 

“Governmental Authority” means any foreign, domestic, federal, territorial,
state or local governmental authority, quasi-governmental authority,
instrumentality, court, government or self-regulatory organization, commission,
tribunal or organization or any regulatory, administrative or other agency, or
any political or other subdivision, department or branch of any of the
foregoing.

 

“Hazardous Substance” shall mean any substance that has been or is presently
listed, defined, designated or classified as hazardous, toxic, radioactive, or
dangerous, or otherwise regulated under any Environmental Law, including any
substance to which exposure is regulated by any Governmental Authority or any
Environmental Law including, without limitation, any toxic waste, pollutant,
contaminant, hazardous substance, toxic substance, hazardous waste, special
waste, industrial substance or petroleum or any derivative or by-product
thereof, radon, radioactive material, asbestos or asbestos containing material,
urea formaldehyde foam insulation, lead or polychlorinated biphenyls.

 

“HSR Act” shall mean the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended.

 

“Indebtedness” of any Person at any date shall mean (a) all indebtedness of such
Person, including interest and any prepayment penalties, expenses, or fees
thereon created, issued or incurred for borrowed money or for the deferred
purchase price of property or services (other than current trade liabilities
incurred in the ordinary course of business and payable in accordance with
customary practices), (b) any other indebtedness of such Person which is
evidenced by a note, bond, debenture or similar instrument, (c) all obligations
of such Person under capital lease obligations, and (d) except for Liens
identified on the Company Disclosure Letter as “Permitted Liens,” all
liabilities secured by any Lien on any property owned by such Person even though
such Person has not assumed or otherwise become liable for the payment thereof;
provided that Indebtedness shall not include the Company’s premium finance

 

5

--------------------------------------------------------------------------------

 

obligations relating to insurance coverages pursuant to the Premium Finance
Agreement between CLP Resources and AICCO, Inc.

 

“Indemnified Parties” shall be defined as set forth in Section 8.6(a).

 

“Indemnity Escrow” shall be defined as set forth in Section 4.4(a).

 

“Indemnity Escrow Period” shall mean that period of time commencing as of the
Closing Date and ending on the twenty four (24) month anniversary of the Closing
Date.

 

“Indemnifying Party” shall be defined as set forth in Section 10.3(a).

 

“Intellectual Property Rights” shall mean any or all of the following and all
rights in, arising out of, or associated therewith:  (i) United States and
foreign issued (a) patents, utility models, and applications therefore, and all
reissues, divisions, re-examinations, renewals, continuations and
continuations-in-part, provisionals and extensions thereof, and equivalent or
similar rights anywhere in the world in inventions and discoveries, including
invention disclosures, (b) all rights in World Wide Web addresses and domain
names and applications and registrations therefore, trade names, logos, common
law trademarks and service marks, trade dress, trademark and service mark
applications, registrations and renewals, and all goodwill associated therewith
throughout the world, (c) copyrights, and registrations, applications and
renewals and extensions therefore and all rights corresponding thereto
(including moral rights) throughout the world, (d) all trade secrets and other
rights in know-how and confidential or proprietary information (including ideas,
research and development, formulas, recipes, compositions, manufacturing and
production processes and techniques, technical data, designs, drawings,
specifications, customer and supplier lists, pricing and cost information, and
business and marketing plans and proposals), (e) any similar, corresponding or
equivalent rights to any of the foregoing in (a)-(d) above, anywhere in the
world; (ii) any and all computer software and code (including data, databases,
data collections, instructions, techniques, and documentation); (iii) all copies
and tangible embodiments thereof (in whatever form or medium); and (iv) rights
of publicity and privacy.

 

“Investor Shareholders” shall be defined as set forth in Section 9.1(a).

 

“Laws” means any federal, state, local or foreign statute, law, order,
ordinance, judgment rule or regulation in effect as of the date hereof.

 

“Legal Proceedings” shall mean any action, demand, suit, litigation,
arbitration, charge, assessment, proceeding (including without limitation, any
civil, criminal, administrative, investigative or appellate proceeding),
hearing, inquiry, audit, or investigation commenced, brought, conducted or heard
by or before, or otherwise involving, any court or other Governmental Authority
or any arbitrator or arbitration panel.

 

“Liability Cap” shall be defined as set forth in Section 10.5.

 

6

--------------------------------------------------------------------------------

 

“Lien” shall mean any mortgage, title defect or objection, lien, pledge, charge,
claim, security interest, hypothecation, restriction or encumbrance of any kind
or nature whatsoever.

 

“Losses” shall be defined as set forth in Section 10.1.

 

“Material Customers” shall be defined as set forth in Section 6.23.

 

“Material Suppliers” shall be defined as set forth in Section 6.23(b).

 

“Merger” shall be defined as set forth in the Recitals to this Agreement.

 

“Merger Consideration” shall be defined as set forth in Section 4.1(a).

 

“Merger Filing” shall be defined as set forth in Section 2.2.

 

“Merger Payment Fund” shall be defined as set forth in Section 4.4(a).

 

“Multi-Employer Plan” shall be defined as set forth in Section 3(37) of ERISA.

 

“Net Working Capital” shall be defined as set forth in Section 4.3.

 

“Net Working Capital Adjustment” shall be defined as set forth in Section 4.3.

 

“Non-Dissenting Shares” shall be defined as set forth in Section 4.9(a).

 

“Notice of Objection” shall be defined as set forth in Section 4.3(d).

 

“NRS” shall mean Nevada Revised Statutes Chapters 78 and 92A.

 

“Parent” shall be defined as set forth in the Preamble.

 

“Parent Actuarial Reviewer” shall mean Tillinghast, Towers and Perrin; provided
that if Tillinghast, Towers and Perrin no longer provides actuarial services at
the time the actuarial review described in Section 8.10(c) is required or if
Tillinghast, Towers and Perrin is unwilling to prepare such actuarial review,
then Parent and the Shareholder Representatives shall mutually agree upon a
replacement.

 

“Parent’s knowledge” for those warranties and representations set forth in
Article V of this Agreement, or elsewhere in this Agreement, which are subject
to the qualification “to Parent’s knowledge,” Parent will be deemed to have
knowledge of a matter if any executive officer of Parent or Subsidiary has
actual knowledge of the matter after a reasonable investigation of the
surrounding circumstances.

 

“Parent Material Adverse Effect” shall mean an effect or effects or fact or
condition which, individually or in the aggregate is materially adverse to the
financial condition, business, properties, assets, operations of Parent and
Subsidiary, taken as a whole.  Without limiting the

 

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definition of Parent Material Adverse Effect in the preceding sentence, a Parent
Material Adverse Effect will be deemed to exist if there will occur any event
that causes or may reasonably be expected to cause or result in estimable
monetary loss which, individually or when aggregated with all other events,
exceeds $150,000.

 

“Parent Required Statutory Approvals” means the making of the Merger Filing with
the Nevada Secretary of State in connection with the Merger.

 

“Participating Shareholder” shall mean each Company Common Shareholder other
than the Dissenting Shareholders.

 

“Payable Claim” shall be defined as set forth in Section 10.7.

 

“Paying Agent” shall be defined as set forth in Section 2.3(b).

 

“Paying Agent Agreement” shall be defined as set forth in Section 9.1(h).

 

“Pending Claims” shall be defined as set forth in Section 10.1.

 

“Person” shall mean an individual, corporation, partnership, limited liability
company, joint venture, association, joint stock company, unincorporated
syndicate, unincorporated organization, trust, trustee, executor, administrator
or other legal representative, Governmental Authority, political subdivision, or
any group of Persons acting in concert.

 

“Post-Closing Tax Periods” shall be defined as set forth in Section 8.9(b).

 

“Pre-Closing Tax Periods” shall be defined as set forth in Section 8.9(c).

 

“Proportionate Share” shall mean a Company Common Shareholder’s pro rata share
of a given dollar amount based on the number of shares of Company Common Stock
held by such Company Common Shareholder as set forth on Schedule 4.1 attached
hereto.

 

“Real Estate” shall be defined as set forth in Section 6.14.

 

“Redemption Consideration” shall be defined as set forth in Section 2.3(a).

 

“Resolving Accounting Firm” shall mean the Denver office of the accounting firm
of KPMG, unless Parent and the Shareholder Representatives agree otherwise.

 

“Restricted Transaction” shall be defined as set forth in Section 7.3.

 

“Settled Claim” shall be defined as set forth in Section 10.7.

 

“Separate Basket Amount” shall be defined as set forth in Section 10.5(b).

 

“Separate Liability Cap” shall be defined as set forth in Section 10.5(b).

 

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“Separate Losses” shall be defined as set forth in Section 10.5(b).

 

“Shareholder Representatives” shall be defined as set forth in the Preamble.

 

“Stub Amount” shall mean the amount of the Ultimates upon which the Company
based accrued workers’ compensation expense for the period between December 1,
2004 and the Closing Date, which shall be determined as set forth in
Section 4.3(a).

 

“Subsidiary” shall be defined as set forth in the Preamble.

 

“Subsidiary Common Stock” shall mean common stock, $.01 par value, of
Subsidiary.

 

“Surviving Corporation” shall be defined as set forth in Section 2.1.

 

“Surviving Payable Claims” shall be defined as set forth in Section 10.6.

 

“Tax” or “Taxes” means all federal, state, county, local, foreign and other
taxes or assessments and any deficiency, interest, penalty or other charge
related thereto imposed by any Governmental Authority, including, without
limitation, income, estimated income, business, occupation, franchise, property
(real and personal), sales, employment, gross receipts, use, transfer, ad
valorem, value-added, profits, license, capital, payroll, employee withholding,
unemployment, excise, goods and services, severance, and stamp, or other like
assessment or charge of any kind whatsoever, together with any interest or
penalty.

 

“Tax Adjustment” shall be defined as set forth in Section 4.3.

 

“Tax Return” shall mean any return, report or other document or information
required to be supplied to a taxing authority in connection with Taxes,
including any schedule or attachment thereto and including any amendment
thereof.

 

“Third Party Claim” shall be defined as set forth in Section 10.3(a).

 

“Total Company Value” shall be defined as set forth in Section 4.3.

 

“Ultimates” shall be defined as set forth in Section 8.10(b).

 

ARTICLE II

 

THE MERGER AND REDEMPTION OF COMPANY PREFERRED STOCK

 

SECTION 2.1.  The Merger.  Upon the terms and subject to the conditions of this
Agreement, at the Effective Time in accordance with the NRS, Subsidiary shall be
merged with and into the Company and the separate corporate existence of
Subsidiary shall thereupon cease.  The Company shall be the surviving
corporation in the Merger and is hereinafter sometimes

 

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referred to as the “Surviving Corporation.”  The Surviving Corporation will be
governed by the laws of the State of Nevada as a direct, wholly-owned subsidiary
of Parent.

 

SECTION 2.2.  Effective Time of the Merger.  The Merger shall become effective
when Articles of Merger, duly prepared and executed by the parties in accordance
with the relevant provisions of the NRS (the “Merger Filing”) are duly filed
with the Nevada Secretary of State, or at such other time specified in the
Articles of Merger as agreed to by Parent, Subsidiary and the Company (the
“Effective Time”).  The filing of the Articles of Merger shall be made on the
Closing Date as soon as practicable after the satisfaction or waiver of the
conditions set forth in Article IX.

 

SECTION 2.3.  Redemption of Company Preferred Stock

 

(A)                                  IMMEDIATELY PRIOR TO THE CONSUMMATION OF
THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT, THE COMPANY SHALL REDEEM ALL OF
THE ISSUED AND OUTSTANDING COMPANY PREFERRED STOCK FROM THE HOLDERS THEREOF (THE
“COMPANY PREFERRED SHAREHOLDERS”) AT A PRICE PER SHARE DESCRIBED IN THE
COMPANY’S ARTICLES OF INCORPORATION, AS AMENDED FROM TIME TO TIME, IN EFFECT
IMMEDIATELY PRIOR TO THE EFFECTIVE TIME (IN THE AGGREGATE, THE “REDEMPTION
CONSIDERATION”).  THE REDEMPTION CONSIDERATION, THE PORTION OF THE REDEMPTION
CONSIDERATION PAYABLE BY THE COMPANY TO AND THE NUMBER OF SHARES OF COMPANY
PREFERRED STOCK HELD BY EACH COMPANY PREFERRED SHAREHOLDER AND THE IDENTITY OF
EACH COMPANY PREFERRED SHAREHOLDER IS SET FORTH ON SCHEDULE 2.3 ATTACHED HERETO.

 

(B)                                 THE REDEMPTION CONSIDERATION SHALL BE PAID
AT THE CLOSING BY THE COMPANY DEPOSITING THE ESTIMATED CLOSING CASH WITH MELLON
INVESTOR SERVICES, LLC (THE “PAYING AGENT”) FOR DISTRIBUTION TO THE COMPANY
PREFERRED SHAREHOLDERS AND TO THE EXTENT OF ANY INSUFFICIENCY, THE REMAINDER OF
THE REDEMPTION CONSIDERATION (THE “REMAINING REDEMPTION PAYMENT”) SHALL BE
DEPOSITED BY PARENT ON BEHALF OF THE SURVIVING CORPORATION WITH THE PAYING
AGENT, AND AS SOON AS PRACTICAL THEREAFTER, PAYMENT OF THE REDEMPTION
CONSIDERATION SHALL BE MADE BY THE PAYING AGENT TO THE COMPANY PREFERRED
SHAREHOLDERS IN ACCORDANCE WITH SCHEDULE 2.3, THIS SECTION 2.3(B) AND THE PAYING
AGENT AGREEMENT.  NO LATER THAN TEN (10) DAYS AFTER THE EFFECTIVE TIME, THE
COMPANY SHALL MAIL TO EACH COMPANY PREFERRED SHAREHOLDER (I) A LETTER OF
TRANSMITTAL (WHICH SHALL SPECIFY THAT DELIVERY SHALL BE EFFECTED, AND RISK OF
LOSS AND TITLE TO CERTIFICATES REPRESENTING OUTSTANDING SHARES OF COMPANY
PREFERRED STOCK (THE “COMPANY PREFERRED STOCK CERTIFICATES”) SHALL PASS, ONLY
UPON PROPER DELIVERY OF THE COMPANY PREFERRED STOCK CERTIFICATES TO THE PAYING
AGENT) AND (II) INSTRUCTIONS FOR USE IN EFFECTING THE SURRENDER OF THE COMPANY
PREFERRED STOCK CERTIFICATES FOR PAYMENT OF THE REDEMPTION CONSIDERATION
THEREFORE, IN THE FORM ATTACHED HERETO AS EXHIBIT 2.3(B).  UPON SURRENDER OF
COMPANY PREFERRED STOCK CERTIFICATES TO THE PAYING AGENT, TOGETHER WITH SUCH
LETTER OF TRANSMITTAL DULY EXECUTED AND ANY OTHER REQUIRED DOCUMENTS, SUCH
COMPANY PREFERRED SHAREHOLDER SHALL BE ENTITLED TO RECEIVE HIS, HER OR ITS SHARE
OF THE REDEMPTION CONSIDERATION IN ACCORDANCE WITH SCHEDULE 2.3 AND THE COMPANY
PREFERRED STOCK CERTIFICATE WILL BE CANCELLED.  NO INTEREST SHALL BE PAID OR
ACCRUE ON THE REDEMPTION CONSIDERATION PAYABLE UPON SURRENDER OF THE COMPANY
PREFERRED STOCK CERTIFICATES.  IF ANY PAYMENT OF THE REDEMPTION CONSIDERATION IS
TO BE MADE TO A PERSON OTHER

 

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THAN THE ONE IN WHOSE NAME THE COMPANY PREFERRED STOCK CERTIFICATE SURRENDERED
IN EXCHANGE THEREFORE IS REGISTERED, IT SHALL BE A CONDITION OF SUCH PAYMENT
THAT THE COMPANY PREFERRED STOCK CERTIFICATE SO SURRENDERED SHALL BE PROPERLY
ENDORSED AND OTHERWISE IN PROPER FORM FOR TRANSFER.  NOTWITHSTANDING THE
FOREGOING, NEITHER THE PAYING AGENT NOR ANY OTHER PARTY HERETO SHALL BE LIABLE
TO ANY COMPANY PREFERRED SHAREHOLDER FOR ANY REDEMPTION CONSIDERATION DELIVERED
TO A PUBLIC OFFICIAL PURSUANT TO APPLICABLE ESCHEAT LAW.

 

(C)                                  IN THE EVENT ANY COMPANY PREFERRED STOCK
CERTIFICATE SHALL HAVE BEEN LOST, STOLEN OR DESTROYED, UPON THE MAKING OF AN
AFFIDAVIT OF THAT FACT BY THE PERSON CLAIMING SUCH COMPANY PREFERRED STOCK
CERTIFICATE TO BE LOST, STOLEN OR DESTROYED, AND AN AGREEMENT BY SUCH PERSON TO
INDEMNIFY THE SURVIVING CORPORATION AND PARENT AGAINST ANY CLAIM THAT MAY BE
MADE AGAINST IT WITH RESPECT TO SUCH COMPANY PREFERRED STOCK CERTIFICATE, THE
PAYING AGENT SHALL DELIVER IN EXCHANGE FOR SUCH AFFIDAVIT AND AGREEMENT, PAYMENT
OF SUCH COMPANY PREFERRED SHAREHOLDER’S SHARE OF THE REDEMPTION CONSIDERATION IN
THE MANNER SET FORTH IN THIS SECTION 2.3, LESS ANY FEES DEDUCTED AS SET FORTH IN
THE LETTER OF TRANSMITTAL.

 

ARTICLE III

 

THE SURVIVING CORPORATION

 

SECTION 3.1.  Articles of Incorporation.  The Articles of Incorporation of the
Surviving Corporation shall be amended and restated at and as of the Effective
Time to read as did the Articles of Incorporation of Subsidiary immediately
prior to the Effective Time (except that the name of the Surviving Corporation
shall be such name as Parent shall specify), until duly amended further in
accordance with the terms thereof and the NRS.

 

SECTION 3.2.  By-Laws.  The By-Laws of the Surviving Corporation shall be
amended and restated at and as of the Effective Time to read as did the By-Laws
of Subsidiary immediately prior to the Effective Time (except that the name of
the Surviving Corporation shall be such name as Parent shall specify), until
duly amended further in accordance with the terms thereof, the Articles of
Incorporation of the Surviving Corporation and the NRS.

 

SECTION 3.3.  Effect of the Merger.  At the Effective Time, the effect of the
Merger shall be as provided in this Agreement and the applicable provisions of
the NRS.  Without limiting the generality of the foregoing, and subject thereto,
at the Effective Time, except as otherwise provided herein, all the property,
assets, rights, privileges, powers and franchises of Subsidiary and the Company
shall vest in the Surviving Corporation, all debts, liabilities and duties of
Subsidiary and the Company shall become the debts, liabilities and duties of the
Surviving Corporation in the same manner as if the Surviving Corporation had
itself incurred them, and the separate corporate existence of the Company with
all its rights, privileges, immunities, powers and franchises shall continue
unaffected by the Merger, except as set forth herein.

 

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SECTION 3.4.  Directors.  From and after the Effective Time, the directors of
Subsidiary shall serve as the initial directors of the Surviving Corporation to
hold office in accordance with the Articles of Incorporation and By-Laws of the
Surviving Corporation, until their successors are duly elected or appointed.

 

SECTION 3.5.  Officers.  From and after the Effective Time, the officers of
Subsidiary shall serve as the initial officers of the Surviving Corporation and
in the same capacities as they served Subsidiary, in each case until their
respective successors are duly elected or appointed.

 

ARTICLE IV

 

CONVERSION OF SHARES

 

SECTION 4.1.  Conversion of Company Common Stock in the Merger.  At the
Effective Time, by virtue of the Merger and without any action on the part of
any holder of any shares of Company Common Stock:

 

(A)                                  EACH SHARE OF COMPANY COMMON STOCK, OTHER
THAN DISSENTING SHARES AND COMPANY COMMON STOCK HELD IN TREASURY, SHALL BE
CONVERTED INTO THE RIGHT TO RECEIVE CASH IN AN AGGREGATE AMOUNT EQUAL TO THE
TOTAL COMPANY VALUE DIVIDED BY THE AGGREGATE NUMBER OF SHARES OF COMPANY COMMON
STOCK ISSUED AND OUTSTANDING IMMEDIATELY PRIOR TO THE EFFECTIVE TIME (EXCLUDING
ANY SHARES OF COMPANY COMMON STOCK HELD IN TREASURY).  THE AGGREGATE AMOUNT OF
CONSIDERATION TO BE PAID TO ALL PARTICIPATING SHAREHOLDERS IS REFERRED TO HEREIN
AS THE “MERGER CONSIDERATION”.  SUBJECT TO SECTION 4.9, THE MERGER CONSIDERATION
SHALL BE PAYABLE TO THE COMPANY COMMON SHAREHOLDERS AS SET FORTH ON SCHEDULE 4.1
ATTACHED HERETO AND IN THE MANNER SET FORTH IN SECTION 4.4, BELOW.

 

(B)                                 EACH SHARE OF COMPANY COMMON STOCK HELD IN
TREASURY BY THE COMPANY IMMEDIATELY PRIOR TO THE EFFECTIVE TIME, IF ANY, SHALL
BE CANCELED AND EXTINGUISHED WITHOUT PAYMENT THEREFOR.

 

(C)                                  NO SHARE OF COMPANY COMMON STOCK SHALL BE
DEEMED TO BE OUTSTANDING OR TO HAVE ANY RIGHTS OTHER THAN THOSE SET FORTH IN
THIS SECTION 4.1 OR IN SECTION 4.9, BELOW, (IF APPLICABLE) AFTER THE EFFECTIVE
TIME.  FROM AND AFTER THE EFFECTIVE TIME, ALL OUTSTANDING SHARES OF COMPANY
COMMON STOCK SHALL NO LONGER BE OUTSTANDING AND SHALL AUTOMATICALLY BE CANCELED
AND RETIRED AND SHALL CEASE TO EXIST.  UNTIL SURRENDERED TO PARENT, EACH
OUTSTANDING CERTIFICATE (OTHER THAN CERTIFICATES RELATING TO DISSENTING SHARES)
WHICH PRIOR TO THE EFFECTIVE TIME REPRESENTED SHARES OF COMPANY COMMON STOCK
SHALL AFTER THE EFFECTIVE TIME BE DEEMED FOR ALL PURPOSES TO REPRESENT THE RIGHT
ONLY TO RECEIVE THE APPLICABLE DISTRIBUTION SHARE IN ACCORDANCE WITH THIS
ARTICLE IV.

 

SECTION 4.2.  Conversion of Subsidiary Shares in Merger.  At the Effective Time,
by virtue of the Merger and without any action on the part of Parent as sole
shareholder of

 

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Subsidiary, each issued and outstanding share of Subsidiary Common Stock shall
be converted into one (1) share of common stock, par value $.01 per share, of
the Surviving Corporation.

 

SECTION 4.3.  Total Company Value.  For purposes of this Agreement, “Total
Company Value” means Forty-Six Million Two Hundred Thousand Dollars
($46,200,000) (i) increased or decreased as appropriate by the Net Working
Capital Adjustment; (ii) increased or decreased as appropriate by the Tax
Adjustment; (iii) less the amount of the Remaining Redemption Payment paid by
Parent pursuant to Section 2.3(b), above; (iv) less the amount of funded
Indebtedness, if any; and (v) less the Transaction Costs, if any.  For purposes
hereof, “Net Working Capital” of the Company as of the Closing Date shall mean
(x) the sum of all the Company’s current assets (consisting of accounts
receivable, other current assets and prepaid expenses (including all deposits
and cash collateral with third parties), but excluding cash and cash
equivalents, deferred tax assets and current income taxes receivable), less (y)
the sum of all the Company’s current liabilities (consisting of accounts
payable, accrued expenses and salaries, current and long-term portions of
accrued worker’s compensation insurance expense, and other current liabilities,
but excluding any amounts that relate to (A) accrued legal, investment banking
and other costs related to the consummation of the transactions contemplated by
this Agreement (including, without limitation, all success fees payable to
employees of the Company or any of its subsidiaries as set forth on
Schedule 4.4(a) attached hereto), to the extent not paid in cash by the Company
prior to Closing (the “Transaction Costs”), (B) funded Indebtedness and (C) any
current income taxes payable (each of (A) and (B) shall be the responsibility of
the Company Shareholders and shall be paid at Closing as set forth in
Section 4.4(a)) and (C) shall remain the responsibility of the Company after the
Closing), all determined as of the Closing Date in accordance with GAAP applied
on a basis consistent with the methodologies, practices and principles used in
the preparation of the Company’s 2004 audited balance sheet and the interim
monthly balance sheets, except as otherwise provided in this sentence.  “Net
Working Capital Adjustment” shall mean the amount determined by subtracting One
Hundred Twenty One Thousand Six Hundred Ninety-Three Dollars ($121,693) from the
Net Working Capital of the Company as of the Closing Date (expressed either as a
negative or positive number, as appropriate).  For purposes hereof, the “Tax
Adjustment” as of the Closing Date shall mean the amount by which income tax
receivables (excluding any income tax receivables that are not expected to be
realized during the Indemnity Escrow Period) is greater than (or less than) the
amount of income tax payable accrued by the Company through Closing, all
determined as of the Closing Date in accordance with GAAP applied on a basis
consistent with the methodologies, practices and principles used in the
preparation of the Company’s 2004 audited balance sheet and the interim monthly
balance sheets.  Schedule 4.3 attached hereto sets forth the specific
methodology, practices and principles that shall be applied in determining the
Net Working Capital Adjustment, the Tax Adjustment, Closing Cash and the
Indebtedness of the Company at Closing, if any.  The Total Company Value shall
be determined as follows:

 

(A)                                  ON THE DATE HEREOF, THE COMPANY SHALL
DELIVER TO PARENT A WRITTEN GOOD FAITH ESTIMATE OF THE TOTAL COMPANY VALUE (THE
“ESTIMATED MERGER CONSIDERATION”), THE NET WORKING CAPITAL, THE AMOUNT OF THE
NET WORKING CAPITAL ADJUSTMENT, THE AMOUNT OF THE TAX ADJUSTMENT, THE STUB
AMOUNT AND A WRITTEN GOOD FAITH ESTIMATE OF THE ACTUAL CASH BALANCES

 

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CALCULATED IN ACCORDANCE WITH GAAP (INCLUDING CASH COLLATERAL HELD BY FLEET
CAPITAL CORPORATION) OF THE COMPANY AS OF THE CLOSING DATE (THE “CLOSING CASH”
AND SUCH GOOD FAITH ESTIMATE THE “ESTIMATED CLOSING CASH”).  THE ESTIMATED
MERGER CONSIDERATION AND ESTIMATED CLOSING CASH SHALL BE ACCOMPANIED BY (I) A
CERTIFICATE SIGNED BY AN OFFICER OF THE COMPANY CERTIFYING THAT THE ESTIMATED
MERGER CONSIDERATION AND ESTIMATED CLOSING CASH WERE CALCULATED IN GOOD FAITH
BASED UPON THE BOOKS AND RECORDS OF THE COMPANY AND THE COMPANY SUBSIDIARIES AND
IN ACCORDANCE WITH GAAP APPLIED ON A BASIS CONSISTENT WITH THE METHODOLOGIES,
PRACTICES, AND PRINCIPLES USED IN THE PREPARATION OF THE COMPANY’S 2004 AUDITED
BALANCE SHEET AND THE INTERIM MONTHLY BALANCE SHEETS AND (II) COPIES OF ALL WORK
PAPERS, SCHEDULES AND OTHER DOCUMENTS REQUESTED BY PARENT OR ITS AGENTS,
REPRESENTATIVES AND ACCOUNTANTS PREPARED OR USED BY THE COMPANY IN CONNECTION
WITH THE CALCULATION OF THE ESTIMATED MERGER CONSIDERATION AND/OR THE ESTIMATED
CLOSING CASH.

 

(B)                                 WITHIN SIXTY (60) DAYS AFTER CLOSING, PARENT
SHALL PREPARE AND DELIVER TO THE SHAREHOLDER REPRESENTATIVES A BALANCE SHEET OF
THE COMPANY AS OF THE CLOSING DATE (THE “CLOSING DATE BALANCE SHEET”) IN
ACCORDANCE WITH GAAP APPLIED ON A BASIS CONSISTENT WITH THE METHODOLOGIES,
PRACTICES, AND PRINCIPLES USED IN THE PREPARATION OF THE COMPANY’S 2004 AUDITED
BALANCE SHEET AND THE INTERIM MONTHLY BALANCE SHEETS.  THE CLOSING DATE BALANCE
SHEET SHALL BE ACCOMPANIED BY A REPORT SETTING FORTH PARENT’S CALCULATION OF THE
TOTAL COMPANY VALUE, THE NET WORKING CAPITAL, THE AMOUNT OF THE NET WORKING
CAPITAL ADJUSTMENT, THE AMOUNT OF THE TAX ADJUSTMENT, THE STUB AMOUNT AND THE
AMOUNT OF THE CLOSING CASH.

 

(C)                                  FOLLOWING THE DELIVERY OF THE CLOSING DATE
BALANCE SHEET, THE SHAREHOLDER REPRESENTATIVES WILL HAVE THE RIGHT TO REVIEW THE
CLOSING DATE BALANCE SHEET AND IN CONNECTION WITH SUCH REVIEW, PARENT SHALL
PROVIDE COPIES OF ALL WORK PAPERS, SCHEDULES AND OTHER DOCUMENTS REQUESTED BY
THE SHAREHOLDER REPRESENTATIVES OR THEIR AGENTS, REPRESENTATIVES AND ACCOUNTANTS
PREPARED OR USED BY PARENT IN CONNECTION WITH THE CALCULATION OF THE CLOSING
DATE BALANCE SHEET AND THE TOTAL COMPANY VALUE, THE NET WORKING CAPITAL, THE
AMOUNT OF THE NET WORKING CAPITAL ADJUSTMENT, THE AMOUNT OF THE TAX ADJUSTMENT,
THE STUB AMOUNT AND THE AMOUNT OF THE CLOSING CASH.

 

(D)                                 THE DETERMINATION BY PARENT OF THE TOTAL
COMPANY VALUE, THE NET WORKING CAPITAL, THE NET WORKING CAPITAL ADJUSTMENT, THE
TAX ADJUSTMENT, THE STUB AMOUNT AND THE CLOSING CASH SHALL BE FINAL AND BINDING
ON PARENT, THE SHAREHOLDER REPRESENTATIVES AND THE COMPANY COMMON SHAREHOLDERS
UNLESS, WITHIN THIRTY (30) DAYS AFTER THE DATE PARENT HAS DELIVERED THE CLOSING
DATE BALANCE SHEET TO THE SHAREHOLDER REPRESENTATIVES, THE SHAREHOLDER
REPRESENTATIVES SHALL HAVE GIVEN WRITTEN NOTICE OF ANY DISAGREEMENT OR OBJECTION
(A “NOTICE OF OBJECTION”) TO PARENT WITH RESPECT TO ANY ITEM ON THE CLOSING DATE
BALANCE SHEET OR THE CALCULATION OF THE TOTAL COMPANY VALUE, THE NET WORKING
CAPITAL, THE NET WORKING CAPITAL ADJUSTMENT, THE TAX ADJUSTMENT, THE STUB AMOUNT
OR THE CLOSING CASH.  THE NOTICE OF OBJECTION SHALL STATE IN REASONABLE DETAIL
THE NATURE OF THE SHAREHOLDER REPRESENTATIVES’ DISAGREEMENT(S) AND/OR
OBJECTION(S) AND THE SHAREHOLDER REPRESENTATIVES SHALL PROVIDE TO PARENT, UPON
REQUEST, ALL OF THE WORK PAPERS, SCHEDULES AND DOCUMENTS PREPARED OR UTILIZED BY
THE SHAREHOLDER REPRESENTATIVES IN CONNECTION THEREWITH.  AFTER THE DELIVERY OF
ANY NOTICE OF

 

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OBJECTION, THE SHAREHOLDER REPRESENTATIVES AND PARENT SHALL CONSULT WITH EACH
OTHER AND THEIR RESPECTIVE REPRESENTATIVES WITH RESPECT TO THE ITEMS OF
DISAGREEMENT(S) AND/OR OBJECTION(S).  IF THE SHAREHOLDER REPRESENTATIVES AND
PARENT ARE UNABLE TO REACH AGREEMENT WITH RESPECT TO THE ITEM OR ITEMS IN
DISPUTE WITHIN TWENTY (20) DAYS AFTER THE NOTICE OF OBJECTION HAS BEEN GIVEN,
THE ITEMS SHALL BE RESOLVED BY THE RESOLVING ACCOUNTING FIRM.  PARENT AND ITS
REPRESENTATIVES AND THE SHAREHOLDER REPRESENTATIVES AND THEIR REPRESENTATIVES
SHALL COOPERATE FULLY WITH THE RESOLVING ACCOUNTING FIRM.  THE SHAREHOLDER
REPRESENTATIVES AND PARENT SHALL GIVE, AND SHALL CAUSE THEIR RESPECTIVE
REPRESENTATIVES TO GIVE, THE RESOLVING ACCOUNTING FIRM AND ITS REPRESENTATIVES
SUCH ASSISTANCE AND ACCESS TO THE ASSETS AND BOOKS AND RECORDS OF THE SURVIVING
CORPORATION AND ANY APPLICABLE WORK PAPERS, SCHEDULES AND OTHER DOCUMENTS, AS
THE RESOLVING ACCOUNTING FIRM SHALL REASONABLY REQUEST.  THE RESOLUTION OF THE
ITEMS OF DISAGREEMENT(S) AND/OR OBJECTION(S) BY THE RESOLVING ACCOUNTING FIRM
SHALL BE FINAL AND BINDING ON PARENT, THE SHAREHOLDER REPRESENTATIVES AND THE
COMPANY COMMON SHAREHOLDERS.  ALL EXPENSES AND FEES INCURRED IN CONNECTION WITH
RESOLVING SUCH DISPUTED ITEMS SHALL BE ALLOCATED AS FOLLOWS:  (I) PARENT’S SHARE
(IF ANY) SHALL BE BASED UPON THE PERCENTAGE WHICH THE DISPUTED ITEMS NOT
DETERMINED IN FAVOR OF PARENT BEARS TO THE AGGREGATE AMOUNT OF ALL ITEMS
DISPUTED, AND (II) THE BALANCE SHALL BE PAID BY THE PARTICIPATING SHAREHOLDERS
(WITH THE PARTICIPATING SHAREHOLDERS’ PORTION BEING FUNDED FROM THE ADJUSTMENT
ESCROW; PROVIDED, HOWEVER, IF THE ADJUSTMENT ESCROW IS INSUFFICIENT TO SATISFY
SUCH PARTICIPATING SHAREHOLDER PORTION, THE PARTICIPATING SHAREHOLDERS SHALL PAY
SUCH INSUFFICIENCY AS SOON AS PRACTICABLE IN ACCORDANCE WITH THEIR PROPORTIONATE
SHARE).

 

SECTION 4.4.  Payment of Merger Consideration.  The Merger Consideration shall
be payable to the Participating Shareholders as follows:

 

(A)                                  AT THE CLOSING, PARENT SHALL DEPOSIT WITH
THE PAYING AGENT AN AMOUNT IN CASH (THE “MERGER PAYMENT FUND”) EQUAL TO THE
DIFFERENCE BETWEEN (I) THE ESTIMATED MERGER CONSIDERATION AND (II) THE SUM OF
(A) FOUR HUNDRED AND FIFTY THOUSAND  DOLLARS ($450,000) (THE “ADJUSTMENT
ESCROW”) AND (B) SEVEN MILLION DOLLARS ($7,000,000) (THE “INDEMNITY ESCROW”);
PROVIDED THAT PARENT MAY ELECT TO PAY OR CAUSE THE SURVIVING CORPORATION TO PAY
THE AMOUNTS SET FORTH ON SCHEDULE 4.4(A) DIRECTLY AND DEDUCT SUCH AMOUNTS FROM
THE AMOUNT OF THE MERGER PAYMENT FUND THAT IS DEPOSITED WITH THE PAYING AGENT. 
AT THE CLOSING, PARENT WILL DEPOSIT THE ADJUSTMENT ESCROW AND THE INDEMNITY
ESCROW WITH MELLON INVESTOR SERVICES, LLC (THE “ESCROW AGENT”).  THE ESCROW
AGENT WILL HOLD AND DISBURSE THE ADJUSTMENT ESCROW AND THE INDEMNITY ESCROW IN
ACCORDANCE WITH THE ESCROW AGREEMENT (AND IN THE CASE OF THE ADJUSTMENT ESCROW)
SECTION 4.5.  THE PAYING AGENT SHALL, PURSUANT TO THE PAYING AGENT AGREEMENT,
IMMEDIATELY UPON CLOSING PAY FROM THE MERGER PAYMENT FUND THE COMPANY’S ACCRUED
LEGAL, INVESTMENT BANKING AND OTHER COSTS RELATED TO THE CONSUMMATION OF THE
TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT AND FUNDED INDEBTEDNESS IN THE
AMOUNTS SET FORTH ON SCHEDULE 4.4(A) (UNLESS PARENT ELECTS TO PAY OR CAUSE THE
SURVIVING CORPORATION TO PAY SUCH AMOUNTS DIRECTLY) AND DISTRIBUTE THE REMAINDER
OF THE MERGER PAYMENT FUND TO THE PARTICIPATING SHAREHOLDERS IN ACCORDANCE WITH
THEIR DISTRIBUTION SHARE OF THE MERGER PAYMENT FUND.

 

(B)                                 NO LATER THAN TEN (10) DAYS AFTER THE
EFFECTIVE TIME, THE PAYING AGENT SHALL MAIL TO EACH COMPANY COMMON SHAREHOLDER
(I) A LETTER OF TRANSMITTAL (WHICH SHALL SPECIFY

 

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THAT DELIVERY SHALL BE EFFECTED, AND RISK OF LOSS AND TITLE TO CERTIFICATES
REPRESENTING OUTSTANDING SHARES OF COMPANY COMMON STOCK (THE “COMPANY COMMON
STOCK CERTIFICATES”) SHALL PASS, ONLY UPON PROPER DELIVERY OF THE COMPANY COMMON
STOCK CERTIFICATES TO THE PAYING AGENT) AND (II) INSTRUCTIONS FOR USE IN
EFFECTING THE SURRENDER OF THE COMPANY COMMON STOCK CERTIFICATES FOR PAYMENT OF
THE MERGER PAYMENT FUND THEREFORE, SUBSTANTIALLY IN THE FORM ATTACHED HERETO AS
EXHIBIT 2.3(B).  UPON SURRENDER OF COMPANY COMMON STOCK CERTIFICATES TO THE
PAYING AGENT, TOGETHER WITH SUCH LETTER OF TRANSMITTAL DULY EXECUTED AND ANY
OTHER REQUIRED DOCUMENTS, THE HOLDER OF SUCH COMPANY COMMON STOCK CERTIFICATE(S)
SHALL BE ENTITLED TO RECEIVE HIS, HER OR ITS DISTRIBUTION SHARE OF THE MERGER
PAYMENT FUND AT THE EFFECTIVE TIME, AND THE COMPANY COMMON STOCK CERTIFICATE
SHALL BE CANCELLED.  UNTIL SO SURRENDERED, THE COMPANY COMMON STOCK CERTIFICATES
SHALL REPRESENT SOLELY THE RIGHT TO RECEIVE SUCH COMPANY COMMON SHAREHOLDER’S
DISTRIBUTION SHARE OF THE MERGER PAYMENT FUND WITH RESPECT TO THE SHARES OF
COMPANY COMMON STOCK REPRESENTED THEREBY.  NO INTEREST SHALL BE PAID OR ACCRUE
ON THE MERGER PAYMENT FUND PAYABLE UPON SURRENDER OF THE COMPANY COMMON STOCK
CERTIFICATES.  IF ANY PAYMENT OF THE MERGER PAYMENT FUND IS TO BE MADE TO A
PERSON OTHER THAN THE ONE IN WHOSE NAME THE COMPANY COMMON STOCK CERTIFICATE
SURRENDERED IN EXCHANGE THEREFOR IS REGISTERED, IT SHALL BE A CONDITION OF SUCH
PAYMENT THAT THE COMPANY COMMON STOCK CERTIFICATE SO SURRENDERED SHALL BE
PROPERLY ENDORSED AND OTHERWISE IN PROPER FORM FOR TRANSFER AND THAT THE PERSON
REQUESTING SUCH PAYMENT SHALL PAY TO THE COMPANY ANY APPLICABLE TRANSFER OR
OTHER SIMILAR TAXES, OR SHALL ESTABLISH TO THE SATISFACTION OF THE COMPANY THAT
ANY SUCH TAX HAS BEEN PAID OR IS NOT APPLICABLE.  NOTWITHSTANDING THE FOREGOING,
NEITHER THE PAYING AGENT NOR ANY OTHER PARTY HERETO SHALL BE LIABLE TO ANY
COMPANY COMMON SHAREHOLDER FOR ANY AMOUNT OF THE MERGER PAYMENT FUND DELIVERED
TO A PUBLIC OFFICIAL PURSUANT TO APPLICABLE ESCHEAT LAW.

 

SECTION 4.5.  FINAL DETERMINATION OF TOTAL COMPANY VALUE; PAYMENT OF ADJUSTMENT
ESCROW

 

(A)                                  WITHIN TWO (2) BUSINESS DAYS AFTER THE
FINAL DETERMINATION OF THE TOTAL COMPANY VALUE AND CLOSING CASH PURSUANT TO
SECTION 4.3, ABOVE, IF THE SUM OF (I) THE AMOUNT OF THE TOTAL COMPANY VALUE, AS
FINALLY DETERMINED, MINUS THE ESTIMATED MERGER CONSIDERATION PLUS (II) THE
AMOUNT OF THE CLOSING CASH, AS FINALLY DETERMINED, MINUS THE ESTIMATED CLOSING
CASH, IS ZERO OR A POSITIVE NUMBER (THE “ADJUSTMENT SHORT FALL PAYMENT”), THEN
PARENT SHALL DEPOSIT WITH THE PAYING AGENT AN AMOUNT OF CASH, IF ANY, EQUAL TO
THE AMOUNT OF THE ADJUSTMENT SHORT FALL PAYMENT AND PARENT AND THE SHAREHOLDER
REPRESENTATIVES SHALL DELIVER WRITTEN NOTICE TO THE ESCROW AGENT TO DELIVER THE
ADJUSTMENT ESCROW PLUS THE ESCROW INTEREST TO THE PAYING AGENT.  INTEREST SHALL
ACCRUE DAILY ON THE ADJUSTMENT ESCROW FROM THE CLOSING DATE TO THE DATE OF
PAYMENT BY THE ESCROW AGENT PURSUANT TO THIS SECTION 4.5 (THE “ESCROW INTEREST”)
AT THE INTEREST RATE SET FORTH IN THE ESCROW AGREEMENT (THE “ESCROW RATE”).  AS
SOON AS PRACTICABLE FOLLOWING THE DEPOSIT OF (I) THE ADJUSTMENT SHORT FALL
PAYMENT BY PARENT WITH THE PAYING AGENT, IF ANY, AND (II) THE ADJUSTMENT ESCROW
AND THE ESCROW INTEREST BY THE ESCROW AGENT WITH THE PAYING AGENT, PAYMENT OF
THE ADJUSTMENT ESCROW, THE ADJUSTMENT SHORT FALL PAYMENT AND THE ESCROW INTEREST
SHALL BE MADE BY THE PAYING AGENT TO THE PARTICIPATING SHAREHOLDERS IN
ACCORDANCE WITH THEIR PROPORTIONATE SHARE.

 

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(B)                                 WITHIN TWO (2) BUSINESS DAYS AFTER THE FINAL
DETERMINATION OF THE TOTAL COMPANY VALUE AND CLOSING CASH PURSUANT TO
SECTION 4.3, ABOVE, IF THE SUM OF (I) THE AMOUNT OF THE TOTAL COMPANY VALUE, AS
FINALLY DETERMINED, MINUS THE ESTIMATED MERGER CONSIDERATION PLUS (II) THE
AMOUNT OF THE CLOSING CASH, AS FINALLY DETERMINED, MINUS THE ESTIMATED CLOSING
CASH IS A NEGATIVE NUMBER, THEN THE ESCROW AGENT SHALL PAY TO PARENT AN AMOUNT
EQUAL TO THE ABSOLUTE VALUE OF SUCH NUMBER FROM THE ADJUSTMENT ESCROW, TOGETHER
WITH THE ESCROW INTEREST ACCRUED ON SUCH AMOUNT.  IF THE ADJUSTMENT ESCROW IS
INSUFFICIENT TO PAY THE AMOUNT DUE HEREUNDER, AFTER DISTRIBUTING THE ENTIRE
ADJUSTMENT ESCROW AND ESCROW INTEREST TO PARENT, SUCH INSUFFICIENCY SHALL BE
PAID BY THE PARTICIPATING SHAREHOLDERS IN ACCORDANCE WITH THEIR PROPORTIONATE
SHARE, AS SOON AS PRACTICABLE; PROVIDED THAT PARENT CAN ELECT TO RECOVER ALL OR
ANY PORTION OF SUCH AMOUNT FROM THE INDEMNITY ESCROW.  ANY REMAINING PORTION OF
THE ADJUSTMENT ESCROW AND ESCROW INTEREST THEREON, IF ANY, HELD BY THE ESCROW
AGENT AFTER SUCH PAYMENT TO PARENT, SHALL BE PAID TO THE PAYING AGENT FOR
DISTRIBUTION TO THE PARTICIPATING SHAREHOLDERS IN ACCORDANCE WITH THEIR
PROPORTIONATE SHARE.

 

SECTION 4.6.  Adjustments to Merger Consideration.  If, between the date of this
Agreement and the Effective Time, the outstanding shares of Company Common Stock
shall have been changed into a different number of shares or a different class
or series or otherwise changed by reason of any reclassification,
recapitalization, split-up, stock dividend, stock combination, exchange of
shares, or readjustment, or similar transaction, the amount of the Merger
Consideration to be paid per share (but not the aggregate amount of the Merger
Consideration) shall be proportionately adjusted.

 

SECTION 4.7.  Closing.  The closing (the “Closing”) of the Merger and other
transactions contemplated by this Agreement shall take place as soon as
practicable after satisfaction or waiver of the last to be fulfilled of the
conditions set forth in Article IX (the “Closing Date”), at the offices of
Preston Gates & Ellis LLP, Seattle, Washington, unless another date and/or
location is agreed to in writing by the parties hereto.  The Closing shall be
effective at the Effective Time.

 

SECTION 4.8.  Closing of the Company’s Transfer Books.  At the Effective Time,
the stock transfer books of the Company shall be closed and no transfer of
shares of Company Common Stock which were outstanding immediately prior to the
Effective Time shall thereafter be made.  From and after the Effective Time, the
holders of Company Common Stock Certificates evidencing ownership of shares of
Company Common Stock outstanding immediately prior to the Effective Time shall
cease to have any rights as shareholders of the Company, except as otherwise
provided herein or by Law.  If, after the Effective Time, subject to the terms
and conditions of this Agreement, Company Common Stock Certificates formerly
representing Company Common Stock are presented to the Paying Agent, Parent or
Surviving Corporation, as the case may be, they shall be canceled and exchanged
for payment of the Distribution Share relating to such Company Common Stock by
the Paying Agent in the manner set forth herein.

 

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SECTION 4.9.  Dissenting Shares

 

(A)                                  NOTWITHSTANDING ANYTHING TO THE CONTRARY
CONTAINED IN THIS AGREEMENT, ANY SHARES (“DISSENTING SHARES”) OF THE COMPANY
COMMON STOCK WHICH ARE HELD BY ANY COMPANY COMMON SHAREHOLDER WHO HAS PROPERLY
ASSERTED HIS, HER OR ITS DISSENTERS’ RIGHTS UNDER THE NRS (A “DISSENTING
SHAREHOLDER”) SHALL NOT BE CONVERTED INTO OR REPRESENT THE RIGHT TO RECEIVE THE
MERGER CONSIDERATION IN ACCORDANCE WITH THIS ARTICLE IV, AND THE DISSENTING
SHAREHOLDER SHALL BE ENTITLED ONLY TO SUCH RIGHTS AS MAY BE GRANTED TO HIM, HER
OR IT UNDER THE NRS; PROVIDED, HOWEVER, THAT IF THE STOCKHOLDERS AGREEMENT OF
THE COMPANY DATED DECEMBER 4, 1998 OR THE STOCK RESTRICTION AGREEMENT BETWEEN
THE COMPANY AND CERTAIN COMPANY SHAREHOLDERS LAWFULLY WAIVES THE RIGHT OF A
COMPANY SHAREHOLDER TO ASSERT DISSENTERS’ RIGHTS OR IF THE STATUS OF ANY SUCH
SHARES AS DISSENTING SHARES SHALL NOT BE PERFECTED, OR IF ANY SUCH SHARES SHALL
LOSE THEIR STATUS AS DISSENTING SHARES UNDER THE NRS, THEN, AS OF THE LATER OF
THE EFFECTIVE TIME OR THE TIME OF FAILURE TO PERFECT SUCH STATUS OR THE LOSS OF
SUCH STATUS, SUCH SHARES (THE “NON-DISSENTING SHARES”) SHALL AUTOMATICALLY BE
CONVERTED INTO AND SHALL REPRESENT ONLY THE RIGHT TO RECEIVE (UPON THE SURRENDER
OF THE CERTIFICATE OR CERTIFICATES REPRESENTING SUCH SHARES) THE DISTRIBUTION
SHARE OF THE MERGER CONSIDERATION IN ACCORDANCE WITH THIS ARTICLE IV.

 

(B)                                 THE COMPANY AND THE SHAREHOLDER
REPRESENTATIVES SHALL GIVE PARENT (I) PROMPT NOTICE OF ANY WRITTEN DEMAND
RECEIVED BY THE COMPANY FROM A DISSENTING SHAREHOLDER ASSERTING DISSENTERS’
RIGHTS UNDER THE NRS, AND (II) THE OPPORTUNITY TO PARTICIPATE IN ALL
NEGOTIATIONS AND PROCEEDINGS WITH RESPECT TO ANY SUCH DEMAND.  THE COMPANY WILL
NOT VOLUNTARILY MAKE ANY PAYMENT WITH RESPECT TO ANY DEMANDS FOR DISSENTERS’
RIGHTS OR FOR APPROVAL AND WILL NOT, EXCEPT WITH THE PRIOR WRITTEN CONSENT OF
PARENT, SETTLE ANY SUCH DEMANDS.

 

SECTION 4.10.  Lost Certificates.  In the event any Company Common Stock
Certificate shall have been lost, stolen or destroyed, upon the making of an
affidavit of that fact by the person claiming such Company Common Stock
Certificate to be lost, stolen or destroyed, and an agreement (in a form
satisfactory to Parent) by such person to indemnify the Surviving Corporation
and Parent against any claim that may be made against it with respect to such
Company Common Stock Certificate, Paying Agent shall deliver in exchange for
such affidavit and agreement, payment of such Company Common Shareholder’s
Distribution Share of the Merger Consideration in the manner set forth herein,
less any fees deducted as set forth in the letter of transmittal.

 

ARTICLE V

 

REPRESENTATIONS AND WARRANTIES OF PARENT AND SUBSIDIARY

 

Parent and Subsidiary each jointly and severally represent and warrant to the
Company as of the date hereof as follows:

 

SECTION 5.1.  Organization and Qualifications.  Parent is a corporation duly
organized and validly existing under the laws of the State of Washington and
Subsidiary is a

 

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corporation duly organized, validly existing and in good standing under the laws
of the State of Nevada.  Each of Parent and Subsidiary has the requisite
corporate power and authority to own, lease and operate its assets and
properties and to carry on its business as it is now being conducted.  Each of
Parent and Subsidiary is qualified to do business and is in good standing in
each jurisdiction in which the properties owned, leased or operated by it or the
nature of the business conducted by it makes such qualification necessary,
except where the failure to be so qualified and in good standing will not, when
taken together with all other such failures, have a Parent Material Adverse
Effect.  Neither Parent nor Subsidiary is in violation of any of the provisions
of their respective Certificate or Articles of Incorporation or By-Laws. 
Subsidiary was organized solely for the purpose of engaging in the transactions
contemplated by this Agreement.  As of the Effective Time, and at all times
prior to the Effective Time, all of the outstanding stock of Subsidiary will be
and has been owned by Parent and there have not been nor will there be any other
agreements relating to the stock of Subsidiary.  As of the date hereof and the
Effective Time, except for obligations or liabilities incurred in connection
with its incorporation or organization and the transactions contemplated by this
Agreement, Subsidiary has not and will not have incurred, directly or
indirectly, any obligations or liabilities or engaged in any business activities
of any type or kind whatsoever or entered into any agreement or arrangements
with any person or entity.

 

SECTION 5.2.  Authority; Non-Contravention; Approvals

 

(A)                                  PARENT AND SUBSIDIARY EACH HAVE FULL
CORPORATE POWER AND AUTHORITY TO ENTER INTO THIS AGREEMENT AND, SUBJECT TO
PARENT REQUIRED STATUTORY APPROVALS, TO CONSUMMATE THE TRANSACTIONS CONTEMPLATED
HEREBY.  THIS AGREEMENT HAS BEEN APPROVED BY THE BOARDS OF DIRECTORS OF PARENT
AND SUBSIDIARY AND BY PARENT, AS THE SOLE SHAREHOLDER OF SUBSIDIARY, AND NO
OTHER CORPORATE PROCEEDINGS ON THE PART OF PARENT OR SUBSIDIARY ARE NECESSARY TO
AUTHORIZE THE EXECUTION AND DELIVERY OF THIS AGREEMENT OR THE CONSUMMATION BY
PARENT AND SUBSIDIARY OF THE TRANSACTIONS CONTEMPLATED HEREBY.  THIS AGREEMENT
HAS BEEN DULY EXECUTED AND DELIVERED BY EACH OF PARENT AND SUBSIDIARY, AND,
ASSUMING THE DUE AUTHORIZATION, EXECUTION AND DELIVERY HEREOF BY THE COMPANY AND
THE SHAREHOLDER REPRESENTATIVES, CONSTITUTES THE VALID AND LEGALLY BINDING
AGREEMENT OF EACH OF PARENT AND SUBSIDIARY, ENFORCEABLE AGAINST EACH OF THEM IN
ACCORDANCE WITH ITS TERMS, EXCEPT AS THE ENFORCEABILITY HEREOF MAY BE LIMITED BY
APPLICABLE BANKRUPTCY, INSOLVENCY OR SIMILAR LAWS AFFECTING OR RELATING TO THE
ENFORCEMENT OF CREDITORS’ RIGHTS GENERALLY OR BY EQUITABLE PRINCIPLES RELATING
TO ENFORCEABILITY.

 

(B)                                 THE EXECUTION AND DELIVERY OF THIS AGREEMENT
BY EACH OF PARENT AND SUBSIDIARY DOES NOT, AND THE PERFORMANCE OF THIS AGREEMENT
AND THE TRANSACTIONS CONTEMPLATED HEREBY BY PARENT AND SUBSIDIARY WILL NOT,
VIOLATE, CONFLICT WITH OR RESULT IN A BREACH OF ANY PROVISION OF, OR CONSTITUTE
A DEFAULT (OR AN EVENT WHICH, WITH NOTICE OR LAPSE OF TIME OR BOTH, WOULD
CONSTITUTE A DEFAULT) UNDER, OR RESULT IN THE TERMINATION OF, OR ACCELERATE THE
PERFORMANCE REQUIRED BY, OR RESULT IN A RIGHT OF TERMINATION OR ACCELERATION
UNDER, OR RESULT IN THE CREATION OF ANY LIEN UPON ANY OF THE PROPERTIES OR
ASSETS OF PARENT AND SUBSIDIARY, UNDER, ANY OF THE TERMS, CONDITIONS OR
PROVISIONS OF (I) THE RESPECTIVE CERTIFICATE OR ARTICLES OF INCORPORATION AND/OR
BY-LAWS OF PARENT OR SUBSIDIARY, AS AMENDED FROM TIME TO TIME, (II) ANY STATUTE,
LAW, ORDINANCE,

 

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RULE, REGULATION, JUDGMENT, DECREE, ORDER, INJUNCTION, WRIT, PERMIT OR LICENSE
OF ANY GOVERNMENTAL AUTHORITY APPLICABLE TO PARENT OR SUBSIDIARY OR ANY OF THEIR
RESPECTIVE PROPERTIES OR ASSETS, OR (III) ANY NOTE, BOND, MORTGAGE, INDENTURE,
DEED OF TRUST, LICENSE, FRANCHISE, PERMIT, CONTRACT, LEASE OR OTHER INSTRUMENT,
OBLIGATION OR AGREEMENT OF ANY KIND TO WHICH PARENT OR SUBSIDIARY IS NOW A PARTY
OR BY WHICH PARENT OR SUBSIDIARY OR ANY OF THEIR RESPECTIVE PROPERTIES OR ASSETS
MAY BE BOUND.

 

(C)                                  EXCEPT FOR PARENT REQUIRED STATUTORY
APPROVALS, NO DECLARATION, FILING OR REGISTRATION WITH, OR NOTICE TO, OR
AUTHORIZATION, CONSENT OR APPROVAL OF, ANY GOVERNMENTAL AUTHORITY IS NECESSARY
FOR THE EXECUTION AND DELIVERY OF THIS AGREEMENT BY PARENT OR SUBSIDIARY OR THE
CONSUMMATION BY PARENT OR SUBSIDIARY OF THE TRANSACTIONS CONTEMPLATED HEREBY,
OTHER THAN SUCH DECLARATIONS, FILINGS, REGISTRATIONS, NOTICES, AUTHORIZATIONS,
CONSENTS OR APPROVALS WHICH WILL BE MADE ON OR BEFORE THE EFFECTIVE TIME OR
WHICH, IF NOT MADE OR OBTAINED, AS THE CASE MAY BE, WOULD NOT, IN THE AGGREGATE,
HAVE A PARENT MATERIAL ADVERSE EFFECT, OR AFFECT SUBSIDIARY’S ABILITY TO
CONSUMMATE THE MERGER.

 

SECTION 5.3.  Litigation.  There is no claim, action, suit, inquiry,
arbitration, litigation, proceeding or investigation or other legal or
administrative proceeding pending, or, to Parent’s knowledge, threatened,
against or affecting Parent or Subsidiary or, to Parent’s knowledge, any of
their respective officers, directors or other employees, that individually or in
the aggregate could have a Parent Material Adverse Effect or could reasonably be
expected to have the effect of preventing or delaying Parent or Subsidiary from
performing its obligations under this Agreement or the transactions contemplated
hereby.

 

SECTION 5.4.  Brokers and Finders.  Neither Parent, Subsidiary, nor any of their
respective officers, directors, agents or employees has employed any investment
banker, broker or finder or incurred any liability for any investment banking
fees, financial advisory fees, brokerage fees, commissions or finder’s fees in
connection with the transactions contemplated hereby.

 

The warranties and representations of Parent and Subsidiary herein contained
shall be true and correct on the Closing Date and shall survive until the two
(2) year anniversary of the Effective Time, except for the warranties and
representations contained in Sections 5.1 and 5.2, which shall survive until the
expiration of the relevant statute of limitations period, if any.

 

ARTICLE VI

 

REPRESENTATIONS AND WARRANTIES OF THE COMPANY

 

Except as set forth in the disclosure letter delivered by the Company to Parent
and Subsidiary at or prior to the execution hereof, attached hereto and
incorporated herein by reference (the “Company Disclosure Letter”), the Company
represents and warrants to each of Parent and Subsidiary as of the date hereof
as follows:

 

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SECTION 6.1.  Organization and Qualification.  The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Nevada and has the requisite corporate power and authority to own, lease and
operate its assets and properties and to carry on its business as it is now
being conducted.  The Company is qualified to do business and is in good
standing, where applicable, in each jurisdiction in which the properties owned,
leased or operated by it or the nature of the business conducted by it makes
such qualification necessary (which jurisdictions are listed on Schedule 6.1 of
the Company Disclosure Letter), except where the failure to be so qualified and
in good standing would not, when taken together with all other such failures,
have a Company Material Adverse Effect.  True, accurate and complete copies of
the Company’s Articles of Incorporation and By-Laws, in each case as in effect
on the date hereof, including all amendments thereto, have heretofore been
delivered to Parent.  Schedule 6.1 contains a complete and correct list of the
officers and directors of the Company and each of the Company Subsidiaries.

 

SECTION 6.2.  Capitalization

 

(A)                                  THE AUTHORIZED CAPITAL STOCK OF THE COMPANY
CONSISTS OF (I) 2,000,000 SHARES OF COMPANY COMMON STOCK, OF WHICH
1,275,710.4410 ARE ISSUED AND OUTSTANDING, ALL OF WHICH ARE OWNED BY THE COMPANY
COMMON SHAREHOLDERS IN THE AMOUNTS SET FORTH ON SCHEDULE 4.1, (II) 2,000,000
SHARES OF COMPANY CLASS A PREFERRED STOCK, OF WHICH 78,752.3502 ARE ISSUED AND
OUTSTANDING, ALL OF WHICH ARE OWNED BY THE COMPANY PREFERRED SHAREHOLDERS IN THE
AMOUNTS SET FORTH ON SCHEDULE 2.3, AND (III) 500,000 SHARES OF COMPANY CLASS B
PREFERRED STOCK, OF WHICH 19,509.1634 ARE ISSUED AND OUTSTANDING AND ARE OWNED
BY THE COMPANY PREFERRED SHAREHOLDERS IN THE AMOUNTS SET FORTH ON SCHEDULE 2.3. 
ALL OF THE ISSUED AND OUTSTANDING SHARES OF THE COMPANY STOCK HAVE BEEN DULY
AUTHORIZED AND VALIDLY ISSUED AND ARE FULLY PAID AND ARE NONASSESSABLE.  THE
ISSUED AND OUTSTANDING SHARES OF COMPANY COMMON STOCK ARE NOT SUBJECT TO
PREEMPTIVE RIGHTS CREATED BY STATUTE, THE COMPANY’S ARTICLES OF INCORPORATION OR
BY-LAWS OR ANY AGREEMENT TO WHICH THE COMPANY IS A PARTY OR BOUND.  ALL COMPANY
STOCK AND ANY OTHER SECURITIES OF THE COMPANY OUTSTANDING AS OF THE DATE HEREOF
HAVE BEEN OFFERED AND SOLD BY THE COMPANY IN COMPLIANCE WITH ALL APPLICABLE
FEDERAL AND STATE SECURITIES LAWS.

 

(B)                                 THERE ARE (I) NO OUTSTANDING SUBSCRIPTIONS,
OPTIONS, CALLS, CONTRACTS, COMMITMENTS, UNDERSTANDINGS, RESTRICTIONS,
ARRANGEMENTS, RIGHTS OR WARRANTS, INCLUDING ANY RIGHTS PLAN, AND ANY RIGHT OF
CONVERSION OR EXCHANGE UNDER ANY OUTSTANDING SECURITY, INSTRUMENT OR OTHER
AGREEMENT, OBLIGATING THE COMPANY TO ISSUE, DELIVER OR SELL, OR CAUSE TO BE
ISSUED, DELIVERED OR SOLD, ADDITIONAL SHARES OF COMPANY STOCK OR OBLIGATING THE
COMPANY TO GRANT, EXTEND OR ENTER INTO ANY SUCH AGREEMENT OR COMMITMENT, (II) NO
VOTING TRUSTS, PROXIES OR OTHER AGREEMENTS OR UNDERSTANDINGS TO WHICH THE
COMPANY OR ANY COMPANY SUBSIDIARY IS A PARTY OR IS BOUND WITH RESPECT TO THE
VOTING OF ANY SHARES OF COMPANY STOCK AND (III) NO OUTSTANDING BONDS,
DEBENTURES, NOTES OR OTHER INDEBTEDNESS OF THE COMPANY OR ANY COMPANY SUBSIDIARY
HAVING THE RIGHT TO VOTE (OR CONVERTIBLE INTO, OR EXCHANGEABLE FOR, SECURITIES
HAVING THE RIGHT TO VOTE) ON ANY MATTER ON WHICH THE HOLDERS OF THE COMPANY
STOCK MAY VOTE.  EXCEPT AS SET FORTH IN SECTION 2.3, ABOVE, THE COMPANY DOES NOT
HAVE ANY CONTRACTS, AGREEMENTS OR UNDERSTANDINGS TO PURCHASE OR REDEEM ANY OF
THE COMPANY STOCK.

 

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(C)                                  THE COMPANY DISCLOSURE LETTER SETS FORTH AN
ACCURATE LIST OF ALL OF THE OWNERS OF COMPANY STOCK IMMEDIATELY PRIOR TO THE
CONSUMMATION OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT, INCLUDING THE
NUMBER OF SHARES OF EACH CLASS OF COMPANY STOCK OWNED BY EACH OWNER.

 

SECTION 6.3.  Subsidiaries.  Each Company Subsidiary is duly organized and
validly existing as a corporation and in good standing under the laws of the
State of Delaware and has the requisite corporate power and authority to own,
lease and operate its assets and properties and to carry on its business as it
is now being conducted.  Each Company Subsidiary is qualified to do business,
and is in good standing, in each jurisdiction in which the properties owned,
leased or operated by it or the nature of the business conducted by it makes
such qualification necessary (which jurisdictions are listed on Schedule 6.3 of
the Company Disclosure Letter), except where the failure to be so qualified and
in good standing would not, when taken together with all other such failures,
have a Company Material Adverse Effect.  All of the issued and outstanding
shares of capital stock of each Company Subsidiary have been duly authorized and
validly issued and are fully paid and nonassessable.  All of the capital stock
of CLP Resources is beneficially and of record owned directly by the Company,
free and clear of any Liens and all of the stock of Contractors is beneficially
and of record owned directly by CLP Resources, free and clear of any Liens. 
None of the issued and outstanding shares of capital stock owned by any Company
Subsidiary is subject to preemptive rights created by statute, any Company
Subsidiary’s Articles of Incorporation or By-Laws or any agreement to which any
Company Subsidiary is a party or bound.

 

True, accurate and complete copies of the Articles of Incorporation and By-Laws,
in each case as in effect on the date hereof, of each Company Subsidiary have
heretofore been made available to Parent.  There are no subscriptions, options,
warrants, rights, calls, contracts, voting trusts, proxies or other commitments,
understandings, restrictions or arrangements relating to the issuance, sale,
voting, transfer, ownership or other rights with respect to any of the capital
stock of any Company Subsidiary, including any right of conversion or exchange
under any outstanding security, instrument or agreement.  Except for CLP
Resources and Contractors, the Company does not directly or indirectly own any
capital stock of, any equity interest in, or any other ownership or investment
interest in, any corporation, partnership, limited liability company, joint
venture or other business entity or enterprise.  No Company Subsidiary (x)
directly or indirectly owns any capital stock of, any equity interest in, or any
other ownership or investment interest in, any corporation, partnership, limited
liability company, joint venture or other business entity or enterprise or (y)
is a party to, or otherwise subject to any legal restriction or any agreement
restricting the ability of such Company Subsidiary to pay dividends out of
profits or make any other similar distributions of profits to the Company.

 

Contractors, which was incorporated on June 19, 2000, is an inactive
corporation, which was incorporated for the purpose of reserving the corporate
name “Contractors Labor Pool, Inc.” in the State of Delaware and certain other
states.  The Company has provided Parent with copies of all documents relating
to the merger of each of Wendy Hendrick Enterprises, Inc. and Crown Technical
Services, Inc. into CLP Resources (collectively, the “CLP Mergers”).  The CLP

 

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Mergers were effected in accordance with the requirements set forth in the
Delaware General Corporation Law.

 

SECTION 6.4.  Authority; Non-Contravention; Approvals.

 

(A)                                  THE COMPANY HAS FULL CORPORATE POWER AND
AUTHORITY TO ENTER INTO THIS AGREEMENT AND, SUBJECT TO THE COMPANY COMMON
SHAREHOLDER APPROVAL AND THE COMPANY REQUIRED STATUTORY APPROVALS, TO CONSUMMATE
THE TRANSACTIONS CONTEMPLATED HEREBY.  THIS AGREEMENT HAS BEEN APPROVED BY THE
BOARD OF DIRECTORS OF THE COMPANY, AND NO OTHER CORPORATE PROCEEDINGS ON THE
PART OF THE COMPANY OR ANY COMPANY SUBSIDIARY ARE NECESSARY TO AUTHORIZE THE
EXECUTION AND DELIVERY OF THIS AGREEMENT OR, EXCEPT FOR THE COMPANY COMMON
SHAREHOLDER APPROVAL, THE CONSUMMATION BY THE COMPANY OF THE TRANSACTIONS
CONTEMPLATED HEREBY.  THIS AGREEMENT HAS BEEN DULY EXECUTED AND DELIVERED BY THE
COMPANY, AND, ASSUMING THE DUE AUTHORIZATION, EXECUTION AND DELIVERY HEREOF BY
PARENT AND SUBSIDIARY AND THE SHAREHOLDER REPRESENTATIVES, CONSTITUTES A VALID
AND LEGALLY BINDING AGREEMENT OF THE COMPANY, ENFORCEABLE AGAINST THE COMPANY IN
ACCORDANCE WITH ITS TERMS, EXCEPT AS THE ENFORCEABILITY HEREOF MAY BE LIMITED BY
APPLICABLE BANKRUPTCY, INSOLVENCY OR OTHER SIMILAR LAWS AFFECTING OR RELATING TO
THE ENFORCEMENT OF CREDITORS’ RIGHTS GENERALLY OR BY EQUITABLE PRINCIPLES
RELATING TO ENFORCEABILITY.

 

(B)                                 THE EXECUTION AND DELIVERY OF THIS AGREEMENT
BY THE COMPANY DO NOT, AND THE PERFORMANCE OF THIS AGREEMENT AND THE
CONSUMMATION OF THE TRANSACTIONS CONTEMPLATED HEREBY BY THE COMPANY SHALL NOT,
VIOLATE, CONFLICT WITH OR RESULT IN A BREACH OF ANY PROVISION OF, OR CONSTITUTE
A DEFAULT (OR AN EVENT WHICH, WITH NOTICE OR LAPSE OF TIME OR BOTH, WOULD
CONSTITUTE A DEFAULT) UNDER, OR RESULT IN THE TERMINATION OF, OR ACCELERATE THE
PERFORMANCE REQUIRED BY, OR RESULT IN A RIGHT OF TERMINATION OR ACCELERATION OR
LOSS OF A MATERIAL BENEFIT UNDER, OR RESULT IN THE CREATION OF ANY LIEN UPON ANY
OF THE PROPERTIES OR ASSETS OF THE COMPANY OR ANY COMPANY SUBSIDIARY UNDER ANY
OF THE TERMS, CONDITIONS OR PROVISIONS OF (I) THE ARTICLES OF INCORPORATION OR
BY-LAWS OF THE COMPANY OR OF ANY COMPANY SUBSIDIARY, AS AMENDED FROM TIME TO
TIME, (II) ANY STATUTE, LAW, ORDINANCE, RULE, REGULATION, JUDGMENT, DECREE,
ORDER, INJUNCTION, WRIT, PERMIT OR LICENSE OF ANY GOVERNMENTAL AUTHORITY
APPLICABLE TO THE COMPANY OR ANY COMPANY SUBSIDIARY OR ANY OF THEIR RESPECTIVE
PROPERTIES OR ASSETS, OR (III) ANY NOTE, BOND, MORTGAGE, INDENTURE, DEED OF
TRUST, LICENSE, FRANCHISE, PERMIT, CONTRACT, LEASE OR OTHER INSTRUMENT,
OBLIGATION OR AGREEMENT OF ANY KIND TO WHICH THE COMPANY OR ANY COMPANY
SUBSIDIARY IS NOW A PARTY OR BY WHICH THE COMPANY OR ANY COMPANY SUBSIDIARY OR
ANY OF THEIR RESPECTIVE PROPERTIES OR ASSETS MAY BE BOUND.  THE CONSUMMATION BY
THE COMPANY OF THE TRANSACTIONS CONTEMPLATED HEREBY WILL NOT RESULT IN ANY
VIOLATION, CONFLICT, BREACH, TERMINATION, ACCELERATION OR CREATION OF LIENS
UNDER ANY OF THE TERMS, CONDITIONS OR PROVISIONS DESCRIBED IN CLAUSES
(I) THROUGH (III) OF THE PRECEDING SENTENCE, SUBJECT, IN THE CASE OF THE TERMS,
CONDITIONS OR PROVISIONS DESCRIBED IN CLAUSE (II) ABOVE, TO OBTAINING (PRIOR TO
THE EFFECTIVE TIME) THE COMPANY REQUIRED STATUTORY APPROVALS AND THE COMPANY
COMMON SHAREHOLDER APPROVAL.  EXCLUDED FROM THE FOREGOING SENTENCES OF THIS
PARAGRAPH (B), INSOFAR AS THEY APPLY TO THE TERMS, CONDITIONS OR PROVISIONS
DESCRIBED IN CLAUSES (II) AND (III) OF THE FIRST SENTENCE OF THIS PARAGRAPH (B),
ARE SUCH VIOLATIONS, CONFLICTS, BREACHES, DEFAULTS, TERMINATIONS, ACCELERATIONS
OR CREATIONS OF LIENS THAT WOULD NOT, IN THE AGGREGATE, HAVE A COMPANY MATERIAL
ADVERSE EFFECT.

 

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(C)                                  EXCEPT FOR THE COMPANY REQUIRED STATUTORY
APPROVALS AND THE COMPANY COMMON SHAREHOLDER APPROVAL, NO DECLARATION, FILING OR
REGISTRATION WITH, OR NOTICE TO, OR AUTHORIZATION, CONSENT OR APPROVAL OF, ANY
GOVERNMENTAL AUTHORITY IS NECESSARY FOR THE EXECUTION AND DELIVERY OF THIS
AGREEMENT BY THE COMPANY OR THE CONSUMMATION BY THE COMPANY OF THE TRANSACTIONS
CONTEMPLATED HEREBY, OTHER THAN SUCH DECLARATIONS, FILINGS, REGISTRATIONS,
NOTICES, AUTHORIZATIONS, CONSENTS OR APPROVALS WHICH SHALL HAVE BEEN MADE OR
OBTAINED PRIOR TO THE EFFECTIVE TIME OR IF NOT MADE OR OBTAINED, AS THE CASE MAY
BE, WOULD NOT, IN THE AGGREGATE, HAVE A COMPANY MATERIAL ADVERSE EFFECT.

 

SECTION 6.5.  Company Financial Statements.  The audited consolidated financial
statements of the Company for the fiscal periods ended December 27, 2002,
December 26, 2003 and December 31, 2004; and the unaudited consolidated
financial statements of the Company as of and for the fiscal period ended
April 1, 2005 (the “Company Financial Statements”) have been prepared in
accordance with GAAP and present fairly and in all material respects the
consolidated financial condition of the Company and the Company Subsidiaries as
of such dates and the results of operations and statements of cash flows of the
Company for such periods, subject, in the case of the unaudited financial
statements, to normal year-end adjustments not material in scope or amount and
the absence of notes to the financial statements and other presentation items. 
There has been no change in the Company’s accounting policies or the methods of
making accounting estimates or changes in estimates that are material to the
Company Financial Statements, except as described in the notes thereto. 
Schedule 6.5 of the Company Disclosure Letter lists, and the Company has
delivered to Parent copies of the documentation creating or governing, all
securitization transactions and “off-balance sheet arrangements” (as defined in
Item 303(a) of Regulation S-K promulgated by the SEC) effected by the Company
since the Balance Sheet Date.  The Company Financial Statements contain
appropriate allowances and reserves for the Company and the Company
Subsidiaries’ accounts receivable and accrued liabilities.

 

SECTION 6.6.  Absence of Undisclosed Liabilities.  Neither the Company nor any
Company Subsidiary has any liabilities or obligations (whether absolute,
accrued, contingent or otherwise) of any nature, except:  (a) liabilities,
obligations or contingencies which are accrued or reserved against in the
Company Financial Statements or reflected in the notes thereto; (b) liabilities,
obligations or contingencies since the Balance Sheet Date that were incurred in
the ordinary course of business and consistent with past practices and are
accrued or reserved against on the books and records of the Company;
(c) liabilities, obligations or contingencies which would not, in the aggregate,
have a Company Material Adverse Effect; (d) liabilities and obligations under
executory contracts set forth in Schedule 6.17 (except for item 14 thereof)
that, according to the terms of such agreements, are to be performed by the
Company or a Company Subsidiary after the Closing Date; and (e) liabilities and
obligations which are reasonably apparent as liabilities and obligations of the
Company or a Company Subsidiary in a section of the Company Disclosure Letter. 
Notwithstanding the foregoing, if any event, act, omission, circumstance or
matter giving rise to a liability or obligation which could constitute a breach
of the representations and warranties contained in this Section 6.6 is covered
by any other

 

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representation or warranty in this Article VI, then this Section 6.6 shall not
apply to such event, act, omission, circumstance or matter.

 

SECTION 6.7.  Absence of Certain Changes or Events.  Since the Balance Sheet
Date, the Company and the Company Subsidiaries have conducted their businesses
only in the ordinary course and in a manner consistent with past practice and
there has not been any:

 

(A)                                  CHANGE IN THE FINANCIAL CONDITION, RESULTS
OF OPERATIONS OR BUSINESS OF THE COMPANY OR ANY COMPANY SUBSIDIARY HAVING, IN
THE AGGREGATE, A COMPANY MATERIAL ADVERSE EFFECT;

 

(B)                                 DAMAGE, DESTRUCTION OR LOSS (WHETHER OR NOT
COVERED BY INSURANCE) WITH RESPECT TO ANY ASSETS OF THE COMPANY OR ANY COMPANY
SUBSIDIARY OR THEIR BUSINESSES CAUSING, IN THE AGGREGATE, A COMPANY MATERIAL
ADVERSE EFFECT;

 

(C)                                  CHANGE BY THE COMPANY OR ANY COMPANY
SUBSIDIARY IN ITS ACCOUNTING METHODS, PRINCIPLES OR PRACTICES;

 

(D)                                 REVALUATION BY THE COMPANY OR ANY COMPANY
SUBSIDIARY OF ANY OF THEIR RESPECTIVE ASSETS IN ANY MATERIAL RESPECT;

 

(E)                                  DECLARATION, SETTING ASIDE OR PAYMENT OF
ANY DIVIDENDS OR DISTRIBUTIONS IN RESPECT OF SHARES OF COMPANY STOCK OR ANY
REDEMPTION, PURCHASE OR OTHER ACQUISITION OF ANY SECURITIES OF THE COMPANY OR
ANY COMPANY SUBSIDIARY, EXCEPT AS SET FORTH IN SECTION 2.3, ABOVE;

 

(F)                                    STOCK SPLIT, RECLASSIFICATION,
SUBDIVISION, EXCHANGE OR ANY OTHER CHANGE IN THE COMPANY’S AUTHORIZED OR ISSUED
CAPITAL STOCK, GRANT OF ANY STOCK OPTION OR RIGHT TO PURCHASE SHARES OF COMPANY
STOCK OR ISSUANCE OF ANY COMPANY STOCK OR SECURITY CONVERTIBLE INTO COMPANY
STOCK, GRANT OF ANY REGISTRATION RIGHTS, PURCHASE, REDEMPTION, RETIREMENT, OR
OTHER ACQUISITION BY THE COMPANY OF ANY SHARES OF ANY COMPANY STOCK, EXCEPT AS
SET FORTH IN SECTION 2.3, ABOVE;

 

(G)                                 AMENDMENT TO THE ARTICLES OF INCORPORATION
OR BY-LAWS OF THE COMPANY OR ANY COMPANY SUBSIDIARY;

 

(H)                                 ANY (I) GRANT OF SEVERANCE OR TERMINATION
PAY (UNLESS REQUIRED BY LAW) TO ANY DIRECTOR, OFFICER, OR EMPLOYEE OF THE
COMPANY OR ANY COMPANY SUBSIDIARY, (II) ENTRY INTO ANY EMPLOYMENT, DEFERRED
COMPENSATION (BASED UPON THE MEANING OF SUCH TERM PRIOR TO THE ADOPTION OF CODE
SECTION 409A), OR OTHER SIMILAR AGREEMENT (OR ANY MATERIAL AMENDMENT TO ANY SUCH
EXISTING AGREEMENT) WITH ANY DIRECTOR, OFFICER, OR EMPLOYEE OF THE COMPANY OR
ANY COMPANY SUBSIDIARY, (III) INCREASE IN BENEFITS PAYABLE UNDER ANY EXISTING
SEVERANCE OR TERMINATION PAY POLICIES OR EMPLOYMENT AGREEMENTS, (IV) INCREASE IN
COMPENSATION, BONUS, OR OTHER BENEFITS PAYABLE TO DIRECTORS, OFFICERS, OR
EMPLOYEES OF THE COMPANY OR ANY COMPANY SUBSIDIARY, IN EACH CASE OTHER THAN
THOSE REQUIRED BY WRITTEN CONTRACTUAL AGREEMENTS OR IN THE AGGREGATE TO ANY
INDIVIDUAL IN AN AMOUNT NOT TO EXCEED $75,000, (V) ADOPTION OF, OR ANY INCREASE

 

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in the payments to or benefits under any Company Plan; or (v) acceleration of,
or amendment or change to, the period of exercisability, vesting, or exercise
price of options, restricted stock, stock bonus, or other awards granted under
any Company Plan or authorization of cash payments in exchange for any options,
restricted stock, stock bonus, or other awards granted under any of such plans
except, in each case, as carried out in the ordinary course or otherwise
required under applicable law or the existing terms of Company Plans or
agreements;

 

(I)                                     ENTRY INTO, TERMINATION OF, OR RECEIPT
OF NOTICE OF TERMINATION OF (I) ANY LICENSE, DISTRIBUTORSHIP, DEALER, SALES
REPRESENTATIVE, JOINT VENTURE, CREDIT, OR SIMILAR AGREEMENT, OR (II) ANY
CONTRACT OR TRANSACTION INVOLVING A TOTAL REMAINING COMMITMENT BY OR TO THE
COMPANY OR ANY COMPANY SUBSIDIARY OF AT LEAST TWENTY-FIVE THOUSAND DOLLARS
($25,000), EXCEPT PURCHASES OF INVENTORY AND SALES OF GOODS AND SERVICES IN THE
ORDINARY COURSE OF BUSINESS;

 

(J)                                     SALE (OTHER THAN SALES IN THE ORDINARY
COURSE OF BUSINESS), LEASE, OR OTHER DISPOSITION OF ANY ASSET OR PROPERTY OF THE
COMPANY OR ANY COMPANY SUBSIDIARY OR MORTGAGE, PLEDGE, OR IMPOSITION OF ANY LIEN
ON ANY MATERIAL ASSET OR PROPERTY OF THE COMPANY OR ANY COMPANY SUBSIDIARY,
INCLUDING THE SALE, LEASE, OR OTHER DISPOSITION OF ANY OF THE INTELLECTUAL
PROPERTY RIGHTS, EXCEPT SALES OF ASSETS OR PROPERTY OF THE COMPANY OR ANY
COMPANY SUBSIDIARY WITH A FAIR MARKET VALUE OF LESS THAN TWENTY-FIVE THOUSAND
DOLLARS ($25,000) IN CONNECTION WITH CAPITAL REPLACEMENT IN THE ORDINARY COURSE
OF BUSINESS;

 

(K)                                  CANCELLATION OR WAIVER OF ANY DEBTS, CLAIMS
OR RIGHTS WITH A VALUE TO THE COMPANY OR ANY COMPANY SUBSIDIARY IN EXCESS OF
TWENTY-FIVE THOUSAND DOLLARS ($25,000);

 

(L)                                     ANY INCURRENCE, ASSUMPTION, OR GUARANTEE
BY THE COMPANY OR ANY COMPANY SUBSIDIARY OF ANY INDEBTEDNESS FOR BORROWED MONEY;

 

(M)                               A MATERIAL CHANGE TO ANY TAX ELECTION OR ANY
SETTLEMENT OR CONSENT TO ANY CLAIM OR ASSESSMENT RELATING TO TAXES INCURRED, OR
ANY INCURRENCE OF ANY OBLIGATION TO MAKE ANY PAYMENT OF, OR IN RESPECT OF, ANY
TAXES, EXCEPT IN THE ORDINARY COURSE OF BUSINESS, OR AGREEMENT TO EXTEND OR
WAIVE THE STATUTORY PERIOD OF LIMITATIONS FOR THE ASSESSMENT OR COLLECTION OF
TAXES;

 

(N)                                 ANY ENTRY BY THE COMPANY OR ANY COMPANY
SUBSIDIARY INTO ANY JOINT VENTURE, PARTNERSHIP, OR LIMITED LIABILITY COMPANY OR
OPERATING AGREEMENT WITH ANY PERSON;

 

(O)                                 ANY GRANTING BY THE COMPANY OR ANY COMPANY
SUBSIDIARY OF A LIEN ON ANY MATERIAL PROPERTY OR ASSETS OF THE COMPANY OR ANY
COMPANY SUBSIDIARY; OR

 

(P)                                 AGREEMENT, WHETHER ORAL OR WRITTEN, BY THE
COMPANY OR ANY COMPANY SUBSIDIARY TO DO ANY OF THE FOREGOING.

 

SECTION 6.8.  Absence of Litigation.  Except as set forth on Schedule 6.8 (which
sets forth the forum, the parties thereto, the subject matter thereof, and the
amount of damages claimed, if any), there is no Legal Proceeding now pending or,
to the knowledge of the Company, threatened against the Company or any Company
Subsidiary.  Neither the Company

 

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nor any Company Subsidiary is subject to any continuing order of, or written
agreement or memorandum of understanding with, or continuing investigation by,
any Governmental Authority, or any judgment, decree, injunction, rule or order
of any Governmental Authority, or any arbitrator.

 

SECTION 6.9.  No Violation of Law.  Neither the Company nor any Company
Subsidiary is in violation of or has been given notice or been charged with any
violation of any Laws except for violations which, in the aggregate, could not
reasonably be expected to have a Company Material Adverse Effect.  The Company
and each Company Subsidiary has and at all times has had all permits, licenses,
franchises, variances, exemptions, orders and other governmental authorizations,
consents and approvals necessary to conduct their businesses as presently
conducted (collectively, the “Company Permits”), except for permits, licenses,
franchises, variances, exemptions, orders, authorizations, consents and
approvals the absence of which, alone or in the aggregate, would not have a
Company Material Adverse Effect.  All Company Permits required to conduct the
business of the Company and the Company Subsidiaries as currently conducted are
in full force and effect, and neither the Company nor any Company Subsidiary is
in violation of the terms of any Company Permit.

 

SECTION 6.10.  Taxes.  For purposes of this Section 6.10, references to the
“Company” shall include each Company Subsidiary except as otherwise required by
the context.

 

(A)                                  THE COMPANY (I) HAS TIMELY OR DULY FILED OR
SHALL TIMELY AND DULY FILE WITH THE APPROPRIATE GOVERNMENTAL AUTHORITIES ALL TAX
RETURNS REQUIRED TO BE FILED BY IT FOR ALL PERIODS ENDING ON OR PRIOR TO THE
EFFECTIVE TIME AND ALL SUCH TAX RETURNS ARE ACCURATE AND COMPLETE IN ALL
MATERIAL RESPECTS, AND (II) HAS DULY PAID IN FULL ALL TAXES DUE AS REFLECTED ON
SUCH TAX RETURNS AS FILED AND HAS PAID ALL OTHER TAXES AS ARE DUE, EXCEPT SUCH
AS ARE BEING CONTESTED IN GOOD FAITH BY APPROPRIATE GOVERNMENT PROCEEDINGS AND
WITH RESPECT TO WHICH THE COMPANY IS MAINTAINING RESERVES ADEQUATE FOR THEIR
PAYMENT (AND IN EACH SUCH CASE, AS DESCRIBED IN SCHEDULE 6.10 OF THE COMPANY
DISCLOSURE LETTER).  NEITHER THE INTERNAL REVENUE SERVICE NOR ANY OTHER
GOVERNMENTAL AUTHORITY OR TAXING AUTHORITY OR AGENCY IS NOW ASSERTING, EITHER
THROUGH AUDITS, ADMINISTRATIVE PROCEEDINGS, COURT PROCEEDINGS OR OTHERWISE, OR,
TO THE KNOWLEDGE OF THE COMPANY, THREATENING TO ASSERT AGAINST THE COMPANY ANY
DEFICIENCY OR CLAIM FOR ADDITIONAL TAXES.  THE COMPANY HAS NOT BEEN GRANTED ANY
WAIVER OF ANY STATUTE OF LIMITATIONS WITH RESPECT TO, OR ANY EXTENSION OF A
PERIOD FOR THE ASSESSMENT OF, ANY TAX.  THERE ARE NO TAX LIENS ON ANY ASSETS OF
THE COMPANY OTHER THAN FOR TAXES WHICH ARE PAYABLE BUT NOT YET DUE.  THE COMPANY
HAS NOT RECEIVED A RULING OR ENTERED INTO AN AGREEMENT WITH THE INTERNAL REVENUE
SERVICE OR ANY OTHER TAXING AUTHORITY OR AGENCY.  THE ACCRUALS AND RESERVES FOR
TAXES REFLECTED IN THE LATEST COMPANY FINANCIAL STATEMENTS ARE ADEQUATE TO COVER
ALL TAXES PAYABLE THROUGH THE DATE THEREOF (INCLUDING TAXES BEING CONTESTED).

 

(B)                                 NO CLAIM HAS EVER BEEN MADE BY A
GOVERNMENTAL AUTHORITY IN A JURISDICTION WHERE THE COMPANY DOES NOT FILE TAX
RETURNS THAT THE COMPANY IS OR MAY BE SUBJECT TO TAXATION BY THAT JURISDICTION. 
THE COMPANY HAS WITHHELD AND PAID ALL TAXES REQUIRED TO BE WITHHELD AND PAID IN
CONNECTION WITH ANY AMOUNTS PAID OR OWING TO ANY EMPLOYEE, INDEPENDENT

 

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contractor, creditor, shareholder or other third party.  The Company is not and
has never been a real property holding corporation within the meaning of
Section 897 of the Code.  The Company has not engaged in any “reportable
transaction” within the meaning of Treasury Regulation Section 1.6011-4(b).  The
Company has not taken any position on any Tax Return or filing which is or would
be subject to penalties under Section 6662 of the Code.  Section 6.10 of the
Company Disclosure Letter accurately sets forth the years for which the
Company’s federal, state, local and foreign Tax Returns have been audited and
any years that are the subject of a pending audit by the Internal Revenue
Service or any other applicable taxing authorities.  The Company is not a party
to any Tax sharing or Tax allocation agreement and has not been a member of any
affiliated group of corporations within the meaning of Section 1504 of the Code
other than the group of which the Company is currently the common parent.  The
Company neither has nor has had a “permanent establishment” (as defined in any
applicable income tax treaty) in any country other than the United States.  The
Company does not have any liability for the Taxes of any other person under
Treasury Regulation Section 1.1502-6 (or any similar provision of state, local
or foreign law), as a transferee or successor, by contract, or otherwise.  The
Company has not constituted either a “distributing corporation” or a “controlled
corporation” in a distribution of stock qualifying for tax-free treatment under
Section 355 of the Code (i) in the two (2) years prior to the date of this
Agreement, or (ii) in a distribution that could otherwise constitute part of a
“plan” or “series of related transactions” (within the meaning of
Section 355(e) of the Code) in conjunction with the transactions contemplated
hereunder.  The Company will not be required to include any item of income in,
or exclude any item of deduction from, taxable income for any period (or portion
thereof) ending after the Closing Date as a result of any change in method of
accounting for a taxable period ending on or prior to the Closing Date.

 

SECTION 6.11.  Employee Benefits Plans; ERISA.

 

(A)                                  EACH COMPANY PLAN IS LISTED IN
SCHEDULE 6.11 OF THE COMPANY DISCLOSURE LETTER.  NEITHER THE COMPANY NOR ANY
COMPANY SUBSIDIARY HAS ANY OBLIGATION TO CREATE ANY ADDITIONAL COMPANY PLAN OR
TO AMEND ANY COMPANY PLAN SO AS TO INCREASE BENEFITS THEREUNDER, EXCEPT AS
REQUIRED UNDER THE TERMS OF THE COMPANY PLANS, UNDER EXISTING COLLECTIVE
BARGAINING AGREEMENTS OR TO COMPLY WITH APPLICABLE LAW.  THERE ARE NO
RESTRICTIONS ON THE RIGHTS OF COMPANY OR ANY COMPANY SUBSIDIARY TO AMEND OR
TERMINATE ANY COMPANY PLAN WITHOUT INCURRING ANY LIABILITY THEREUNDER (OTHER
THAN ORDINARY ADMINISTRATIVE EXPENSES).

 

(B)                                 THE COMPANY HAS FURNISHED TO PARENT A
COMPLETE AND ACCURATE COPY OF EACH COMPANY PLAN AND A COMPLETE AND ACCURATE COPY
OF EACH MATERIAL DOCUMENT PREPARED IN CONNECTION WITH EACH SUCH COMPANY PLAN,
INCLUDING, WITHOUT LIMITATION AND WHERE APPLICABLE, A COPY OF (I) EACH TRUST OR
OTHER FUNDING ARRANGEMENT, (II) EACH SUMMARY PLAN DESCRIPTION AND SUMMARY OF
MATERIAL MODIFICATIONS, (III) THE THREE (3) MOST RECENTLY FILED INTERNAL REVENUE
SERVICE FORM 5500S AND RELATED SCHEDULES, (IV) ALL INTERNAL REVENUE SERVICE
DETERMINATION LETTERS FOR EACH SUCH COMPANY PLAN, (V) THE THREE (3) MOST
RECENTLY PREPARED ACTUARIAL REPORTS AND FINANCIAL STATEMENTS IN CONNECTION WITH
EACH SUCH COMPANY PLAN, AND (VI) ANY OTHER RELATED DOCUMENTS AS PARENT HAS
REASONABLY REQUESTED.

 

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(C)                                  NEITHER THE COMPANY NOR ANY CURRENT OR
FORMER MEMBER OF THE COMPANY’S “CONTROLLED GROUP,” WITHIN THE MEANING OF
SECTION 4001(A)(14) OF ERISA, MAINTAINS OR CONTRIBUTES TO OR HAD AN OBLIGATION
TO CONTRIBUTE TO, OR WITHIN THE FIVE (5) YEARS PRECEDING THE EFFECTIVE TIME HAS
MAINTAINED OR CONTRIBUTED TO OR HAD AN OBLIGATION TO CONTRIBUTE TO, AN EMPLOYEE
PENSION BENEFIT PLAN SUBJECT TO TITLE IV OF ERISA.    IN CONNECTION WITH THE
CONSUMMATION OF THE MERGER, NO PAYMENTS OF MONEY OR OTHER PROPERTY, ACCELERATION
OF BENEFITS, OR PROVISIONS OF OTHER RIGHTS HAVE OR WILL BE MADE HEREUNDER, UNDER
ANY AGREEMENT CONTEMPLATED HEREIN, OR UNDER THE COMPANY PLANS OR ANY OTHER PLAN,
ARRANGEMENT OR AGREEMENT TO WHICH THE COMPANY OR ANY COMPANY SUBSIDIARY IS A
PARTY THAT WOULD BE REASONABLY LIKELY TO RESULT IN IMPOSITION OF THE SANCTIONS
IMPOSED UNDER SECTIONS 280G AND 4999 OF THE CODE, DETERMINED WITHOUT REGARD TO
WHETHER SUCH PAYMENT IS REASONABLE COMPENSATION FOR SERVICES PERFORMED OR TO BE
PERFORMED IN THE FUTURE, AND WHETHER OR NOT SOME OTHER SUBSEQUENT ACTION OR
EVENT WOULD BE REQUIRED TO CAUSE SUCH PAYMENT, ACCELERATION, OR PROVISION TO BE
TRIGGERED.  NEITHER THE COMPANY, ANY COMPANY SUBSIDIARY, PARENT, OR ANY
AFFILIATE OF PARENT WILL BE OBLIGATED TO PAY, OR REIMBURSE ANY INDIVIDUAL FOR,
ANY EXCISE TAXES OR SIMILAR TAXES IMPOSED ON ANY EMPLOYEE OR FORMER EMPLOYEE OF,
OR INDIVIDUAL PROVIDING SERVICES TO, THE COMPANY OR ANY COMPANY SUBSIDIARY UNDER
SECTION 4999 OF THE CODE OR ANY SIMILAR PROVISIONS AS A RESULT OF THE
CONSUMMATION OF THE MERGER, EITHER ALONE OR IN CONNECTION WITH ANY OTHER EVENT. 
NEITHER THE COMPANY NOR ANY COMPANY SUBSIDIARY IS A PARTY TO ANY AGREEMENT, PLAN
OR ARRANGEMENT PURSUANT TO WHICH COMPENSATION IS OR WOULD BE INCLUDIBLE IN THE
GROSS INCOME OF AN EMPLOYEE, DIRECTOR OR INDEPENDENT CONTRACTOR OF THE COMPANY
OR ANY COMPANY SUBSIDIARY, OR TO WHICH INTEREST OR ANY ADDITIONAL TAX WOULD
APPLY AS A RESULT OF THE OPERATION OF SECTION 409A OF THE CODE.  NONE OF THE
COMPANY PLANS PROVIDES FOR OR PROMISES RETIREE MEDICAL, DISABILITY OR LIFE
INSURANCE BENEFITS TO ANY CURRENT OR FORMER EMPLOYEE, OFFICER OR DIRECTOR OF THE
COMPANY OR ANY COMPANY SUBSIDIARY, EXCEPT AS OTHERWISE REQUIRED WITH RESPECT TO
HEALTH PLAN COVERAGE IN §4980B OF THE CODE.  EACH OF THE COMPANY PLANS IS
SUBJECT ONLY TO THE LAWS OF THE UNITED STATES OR A POLITICAL SUBDIVISION
THEREOF.

 

(D)                                 EACH COMPANY PLAN HAS BEEN OPERATED IN ALL
MATERIAL RESPECTS IN ACCORDANCE WITH THE REQUIREMENTS OF ALL APPLICABLE LAWS AND
ALL PERSONS WHO PARTICIPATE IN THE OPERATION OF SUCH COMPANY PLANS AND ALL
COMPANY PLAN “FIDUCIARIES” (WITHIN THE MEANING OF SECTION 3(21) OF ERISA) HAVE
ACTED IN ALL MATERIAL RESPECTS IN COMPLIANCE WITH THE PROVISIONS OF ALL
APPLICABLE LAWS.  THE COMPANY AND THE COMPANY SUBSIDIARIES HAVE PERFORMED ALL
OBLIGATIONS REQUIRED TO BE PERFORMED BY ANY OF THEM UNDER, ARE NOT IN ANY
RESPECT IN DEFAULT UNDER OR IN VIOLATION OF, AND THERE IS NO DEFAULT OR
VIOLATION BY ANY PARTY TO, ANY COMPANY PLAN, EXCEPT WHERE SUCH FAILURES,
DEFAULTS OR VIOLATIONS WOULD NOT, INDIVIDUALLY OR IN THE AGGREGATE, HAVE A
COMPANY MATERIAL ADVERSE EFFECT, TAKEN AS A WHOLE.  NO LEGAL ACTION, SUIT OR
CLAIM IS PENDING OR, TO THE KNOWLEDGE OF THE COMPANY, THREATENED WITH RESPECT TO
ANY COMPANY PLAN (OTHER THAN CLAIMS FOR BENEFITS IN THE ORDINARY COURSE). 
NEITHER THE COMPANY NOR ANY COMPANY SUBSIDIARY HAS INCURRED ANY MATERIAL
“WITHDRAWAL LIABILITY” WITHIN THE MEANING OF SECTION 4201 OF ERISA.

 

(E)                                  EACH COMPANY PLAN THAT IS INTENDED TO BE
QUALIFIED UNDER SECTION 401(A) OF THE CODE OR SECTION 401(K) OF THE CODE HAS
RECEIVED A FAVORABLE DETERMINATION LETTER FROM THE

 

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INTERNAL REVENUE SERVICE THAT IT IS SO QUALIFIED, AND EACH TRUST ESTABLISHED IN
CONNECTION WITH ANY COMPANY PLAN THAT IS INTENDED TO BE EXEMPT FROM FEDERAL
INCOME TAXATION UNDER SECTION 501(A) OF THE CODE IS SO EXEMPT, AND NO FACT OR
EVENT HAS OCCURRED SINCE THE DATE OF SUCH DETERMINATION LETTER FROM THE INTERNAL
REVENUE SERVICE TO ADVERSELY AFFECT THE QUALIFIED STATUS OF ANY SUCH COMPANY
PLAN OR THE EXEMPT STATUS OF ANY SUCH TRUST.  NO TRUST MAINTAINED OR CONTRIBUTED
TO BY THE COMPANY OR ANY COMPANY SUBSIDIARY IS INTENDED TO BE QUALIFIED AS A
VOLUNTARY EMPLOYEES’ BENEFICIARY ASSOCIATION OR IS INTENDED TO BE EXEMPT FROM
FEDERAL INCOME TAXATION UNDER SECTION 501(C)(9) OF THE CODE.

 

(F)                                    THERE HAS BEEN NO NON-EXEMPT PROHIBITED
TRANSACTION (WITHIN THE MEANING OF SECTION 406 OF ERISA OR SECTION 4975 OF THE
CODE) WITH RESPECT TO ANY COMPANY PLAN.  NEITHER THE COMPANY NOR ANY COMPANY
SUBSIDIARY HAS INCURRED ANY LIABILITY FOR ANY EXCISE TAX ARISING UNDER
SECTION 4972 OR 4980B OF THE CODE AND, TO THE KNOWLEDGE OF THE COMPANY, NO FACT
OR EVENT EXISTS THAT COULD GIVE RISE TO ANY SUCH LIABILITY.  NEITHER THE COMPANY
NOR ANY COMPANY SUBSIDIARY OR AFFILIATE THEREOF HAS WITHDRAWN (INCLUDING A
PARTIAL WITHDRAWAL) FROM ANY MULTI-EMPLOYER PLAN WITHIN THE MEANING SET FORTH IN
SECTION 3(37) OF ERISA.

 

(G)                                 ALL CONTRIBUTIONS, PREMIUMS OR PAYMENTS
REQUIRED TO BE MADE WITH RESPECT TO ANY COMPANY PLAN HAVE BEEN MADE ON OR BEFORE
THEIR DUE DATES.

 

(H)                                 NEITHER THE COMPANY NOR ANY COMPANY
SUBSIDIARY IS A PARTY TO ANY EMPLOYMENT, SEVERANCE, CONSULTING, RETIREMENT,
CHANGE OF CONTROL, DEFERRED COMPENSATION OR OTHER SIMILAR CONTRACTS WITH ANY
EMPLOYEES, FORMER EMPLOYEES, CONSULTANTS, OFFICERS OR DIRECTORS OF THE COMPANY
OR ANY COMPANY SUBSIDIARY OTHER THAN SUCH CONTRACTS THAT ARE DISCLOSED IN THE
COMPANY DISCLOSURE LETTER.  NEITHER THE EXECUTION AND DELIVERY OF THIS AGREEMENT
NOR THE CONSUMMATION OF THE TRANSACTIONS CONTEMPLATED HEREBY WILL (I) RESULT IN
ANY PAYMENT (INCLUDING SEVERANCE, UNEMPLOYMENT COMPENSATION, PARACHUTE PAYMENT,
BONUS, OR OTHERWISE) BECOMING DUE TO ANY DIRECTOR, EMPLOYEE, OR INDEPENDENT
CONTRACTOR OF THE COMPANY OR ANY COMPANY SUBSIDIARY, FROM THE COMPANY UNDER ANY
COMPANY PLAN, AGREEMENT OR OTHERWISE, (II) MATERIALLY INCREASE ANY BENEFITS
OTHERWISE PAYABLE UNDER ANY COMPANY PLAN OR AGREEMENT, OR (III) RESULT IN THE
ACCELERATION OF THE TIME OF PAYMENT OR VESTING OF ANY SUCH BENEFITS.

 

(I)                                     NEITHER THE COMPANY NOR ANY MEMBER OF
ITS CONTROLLED GROUP HAS EVER ESTABLISHED, MAINTAINED, OR CONTRIBUTED TO OR
OTHERWISE PARTICIPATED IN, OR HAD AN OBLIGATION TO MAINTAIN, CONTRIBUTE TO, OR
OTHERWISE PARTICIPATE IN, ANY MULTI-EMPLOYER PLAN OR ANY MULTIPLE EMPLOYER
WELFARE ARRANGEMENT AS DEFINED IN SECTION 3(40) OF ERISA.  NEITHER THE COMPANY
NOR ANY COMPANY SUBSIDIARY HAS ENGAGED IN, NOR IS EITHER A SUCCESSOR OR PARENT
CORPORATION TO AN ENTITY THAT HAS ENGAGED IN, A TRANSACTION DESCRIBED IN ERISA
SECTION 4069.

 

(J)                                     NO COMPANY PLAN IS SUBJECT TO ANY
ONGOING AUDIT, INVESTIGATION, OR OTHER ADMINISTRATIVE PROCEEDING OF THE IRS, THE
U.S. DEPARTMENT OF LABOR, OR ANY OTHER GOVERNMENTAL AUTHORITY OR IS SCHEDULED TO
BE SUBJECT TO SUCH AN AUDIT, INVESTIGATION, OR PROCEEDING.

 

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(K)                                  NEITHER THE COMPANY NOR ANY COMPANY
SUBSIDIARY IS A PARTY TO ANY AGREEMENT, PLAN, CONTRACT OR ARRANGEMENT PURSUANT
TO WHICH COMPENSATION IS OR WOULD BE INCLUDIBLE IN THE GROSS INCOME OF AN
EMPLOYEE, DIRECTOR, OR INDEPENDENT CONTRACTOR OF THE COMPANY OR A SUBSIDIARY OR
TO WHICH INTEREST OR ANY ADDITIONAL TAX WOULD APPLY AS A RESULT OF CODE
SECTION 409A.

 

SECTION 6.12.  Labor and Employment Matters.  The Company and each Company
Subsidiary have at all times been in compliance in all respects with all
currently applicable laws and regulations respecting employment, termination of
employment, discrimination in employment, terms and conditions of employment,
wages, hours, and occupational safety and health and employment practices, and
has not engaged in any unfair labor practice, except to the extent any of the
foregoing could not, singly or in the aggregate, reasonably be expected to cause
a Company Material Adverse Effect.  Except to the extent any of the following
could not, singly or in the aggregate, reasonably be expected to cause a Company
Material Adverse Effect:  the Company and each Company Subsidiary have at all
times in all respects withheld all amounts required by law or by agreement to be
withheld from the wages, salaries, and other payments to their employees and are
not liable for any arrears of wages or any taxes or any penalty for failure to
comply with any of the foregoing (or, if any penalty or interest were assessed
against the Company or any Company Subsidiary regarding the foregoing, it has
been fully satisfied).  Neither the Company nor any Company Subsidiary is liable
for any material payment to any trust or other fund or to any Governmental
Authority with respect to unemployment compensation benefits, social security,
or other benefits or obligations for employees (other than routine payments to
be made in the normal course of business and consistent with past practice). 
There are no pending claims against the Company or any Company Subsidiary under
any workers compensation plan or policy or for long term disability.  There are
no controversies pending or, to the Company’s knowledge, threatened, between the
Company or any Company Subsidiary and any of their respective employees, which
controversies have or could reasonably be expected to result in an action, suit,
proceeding, claim, arbitration, or investigation before any Governmental
Authority, including claims for compensation, pending severance benefits,
vacation time, vacation pay, or pension benefits, or any other claim pending
before any Governmental Authority from any current or former employee or any
other Person arising out of Company’s or any Company Subsidiary’s status as
employer or purported employer or any workplace practices or policies whether in
the form of claims for employment discrimination, harassment, unfair labor
practices, grievances, wage and hour violations, wrongful discharge, or
otherwise.  Neither the Company nor any Company Subsidiary is a party to any
collective bargaining agreement or other labor union contract nor does the
Company know of any activities or proceedings of any labor union to organize any
such employees.  To the Company’s knowledge, no employees of the Company or any
Company Subsidiary are or have ever been in material violation of any term of
any employment contract, non-competition agreement, or any restrictive covenant
to a former employer relating to the right of any such employee to be employed
by the Company or any Company Subsidiary because of the nature of the business
conducted by the Company or any Company Subsidiary or to the use of trade
secrets or proprietary information of others.

 

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SECTION 6.13.  Environmental Matters.  To the knowledge of the Company, the
Company and the Company Subsidiaries have conducted their respective businesses
in compliance in all material respects with all applicable Environmental Laws,
including, without limitation, having all permits, licenses and other approvals
and authorizations necessary for the operation of their respective businesses as
presently conducted.  None of the real properties owned or leased by the Company
or any Company Subsidiary contain any Hazardous Substance as a result of any
activity of the Company or any Company Subsidiary in amounts exceeding the
levels permitted by all applicable Environmental Laws.  Neither the Company nor
any Company Subsidiary has received any formal or informal notices, demand
letters or requests for information from any Governmental Authority or third
party indicating that the Company or any Company Subsidiary may be in violation
of, or liable under, any Environmental Law in connection with the ownership or
operation of their businesses.  There are no civil, criminal or administrative
actions, suits, demands, claims, hearings, investigations or proceedings pending
or, to the Company’s knowledge, threatened against the Company or any Company
Subsidiary relating to any violation, or alleged violation, of any Environmental
Law, or with respect to an investigation or remediation of Hazardous Substances
released or alleged to have been released to the environment.  To the knowledge
of the Company, no reports or notices have been submitted or filed, or are
required to be submitted or filed, by the Company or any Company Subsidiary
concerning the release of any Hazardous Substance or the threatened or actual
violation of any Environmental Law.  No Hazardous Substance has been disposed
of, released or transported in violation of any applicable Environmental Law on
or from any properties owned, leased or operated by the Company or any Company
Subsidiary as a result of any activity of the Company or any Company Subsidiary
during the time such properties were owned, leased or operated by the Company or
any Company Subsidiary.  There have been no environmental investigations,
studies, audits, tests, reviews or other analyses regarding compliance or
noncompliance with any applicable Environmental Law, or the release or potential
release of Hazardous Substances, arranged for, conducted by or which are in
possession of the Company or any Company Subsidiary relating to the activities
of the Company or any Company Subsidiary, or conditions on any property owned,
leased or operated by the Company or any Company Subsidiary.  To the knowledge
of the Company, there are no underground storage tanks on, in or under any
properties owned, leased or operated by the Company or any Company Subsidiary
and no underground storage tanks have been closed or removed by the Company or
any Company Subsidiary from any of such properties during the time such
properties were owned, leased or operated by the Company or any Company
Subsidiary.  To the knowledge of the Company, there is no asbestos or asbestos
containing material present in any of the properties owned, leased or operated
by the Company or any Company Subsidiary and no asbestos has been removed by the
Company or any Company Subsidiary from any of such properties during the time
such properties were owned, leased or operated by the Company or any Company
Subsidiary.  Neither the Company, any Company Subsidiary, nor any of their
respective properties are subject to any liabilities or expenditures (fixed or
contingent) relating to any suit, settlement, court order, administrative order,
regulatory requirement, judgment or claim asserted or arising under any
Environmental Law.  Excluded from the foregoing provisions of this Section 6.13
are violations

 

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of such provisions that, singly, or in the aggregate, would not reasonably be
expected to have a Company Material Adverse Effect.

 

SECTION 6.14.  Condition of and Title to Assets.  The Company and the Company
Subsidiaries have good and marketable title to all their respective properties
and assets, real and personal, free and clear of all Liens, except (a) Liens for
Taxes not yet due and payable; or(b) immaterial liens incurred in the ordinary
course of business, and except for such matters which, singly or in the
aggregate, could not reasonably be expected to cause a Company Material Adverse
Effect.  All tangible personal property of the Company and the Company
Subsidiaries is, taken as a whole, in good operating condition and repair,
ordinary wear and tear excepted.  All leases under which the Company or any
Company Subsidiary leases (i) any personal property (requiring lease payments of
Twenty-Five Thousand ($25,000) per year or more) or (ii) real property (copies
of which have been made available to Parent) (leases covered by (i) and (ii) are
collectively referred to herein as “Company Leases”) are valid and in full force
and effect in accordance with their respective terms, and there is not, under
any of such leases, any existing default or event on the part of the Company or
any Company Subsidiary which, with notice or lapse of time or both, would become
a default other than defaults under such leases which in the aggregate will not
give rise to a right to terminate, amend or accelerate such lease.  No consent
is required from any party under any Company Lease in connection with the
completion of the Merger and other transactions contemplated by this Agreement,
and, to the Company’s knowledge, no party to any Company Lease intends to
cancel, terminate, or refuse to renew the same or to exercise any option or
other right thereunder.  The Company Disclosure Letter sets forth a complete and
accurate list of all real property owned or leased by the Company or any Company
Subsidiary (the “Real Estate”) and a complete and accurate list of each lease of
real property by the Company or any Company Subsidiary.  The building, plants,
structures, and equipment of the Company and the Company Subsidiaries are
sufficient for the continued conduct of the businesses of the Company and the
Company Subsidiaries after the Closing in substantially the same manner as
conducted prior to the Closing.  To the knowledge of the Company, all buildings,
structures and other improvements on the Real Estate are in material compliance
with, all applicable Laws, covenants, restrictions and conditions.  To the
Company’s knowledge, there are no zoning, building code, occupancy restriction
or other land-use regulations or, to Company’s knowledge, any proposed change in
any applicable Laws that detrimentally affects the use or operation of any Real
Estate, nor has Company received any notice of any special assessment
proceedings affecting the Real Estate, or applied for any change to the zoning
or land use status of the Real Estate.

 

SECTION 6.15.  Company Common Shareholder Approval.  The affirmative vote of the
holders of a majority of the outstanding shares of the Company Common Stock is
sufficient to and is the only vote of the holders of any class or series of
capital stock of the Company necessary to approve this Agreement and the
transactions contemplated hereby pursuant to applicable Law; provided, however,
the approval of the Investor Shareholders is required pursuant to
Section 9.1(a), below.

 

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SECTION 6.16.  Trademarks and Intellectual Property Compliance.  The Company
and/or the Company Subsidiaries own or have sufficient rights to the Company
Intellectual Property to carry out the Company’s current and anticipated future
(up to the Closing) activities.  Neither the (a) exercise of any rights in any
Company Owned Intellectual Property by the Company (b) operation of the
Company’s business, nor (c) exploitation of the Company’s products or services,
infringes any Intellectual Property Rights (not including patents filed outside
of the United States), or any other intellectual property, proprietary, or
personal rights of any third party, or constitutes unfair competition or unfair
trade practice under the laws of the applicable jurisdiction, nor  to the
Company’s knowledge do any of the activities described in Sections
6.16(a)-(c) infringe any patents filed outside of the United States.  The
Company is not, nor as a result of the execution or delivery of this Agreement
or performance by the Company of the Company’s obligations hereunder, will the
Company be, in violation of any license, sublicense, or other agreement relating
to the Company Intellectual Property.  The Merger will not give rise to or cause
under any agreements relating to Company Intellectual Property (x) a right of
termination under, or breach of, or any loss or change in the rights or
obligations of the Company; or (y) an obligation to pay any royalties or other
amounts to any third party in excess of those that the Company is otherwise
obligated to pay absent a Merger.  No claims are pending or, to the knowledge of
the Company, threatened by any third party with respect to the ownership,
validity, enforceability or effectiveness of any Company Intellectual Property,
or to the effect that any activity described in Sections 6.16(a), (b), or (c)
infringes or under circumstances identified by a third party will infringe on
any Intellectual Property Right or, to the knowledge of the Company, constitutes
unfair competition or unfair trade practices under the laws of the applicable
jurisdiction.  The Company Disclosure Letter sets forth an accurate list of each
of the following: (aa) with respect to Company Owned Intellectual Property, all
United States and foreign:  (i) patents and patent applications (including
provisional applications); (ii) registered trademarks and service marks,
applications to register trademarks and service marks, intent-to-use
applications, or other registrations or applications related to trademarks and
service marks, and any domain name registrations; (iii) registered copyrights
and applications for copyright registration; registered mask works and
applications to register mask works; and (iv) any other Company Owned
Intellectual Property that is the subject of an application, certification,
filing, registration, or other document issued by, filed with, or recorded by,
any state, government or other public legal authority at any time; (bb) all
licenses, sublicenses, and other agreements or arrangements (including covenants
not to sue) that are contracts to which the Company is a party and pursuant to
which any third party is authorized to have access to, or use of, Company Owned
Intellectual Property or to exercise any other right with regard thereto; (cc)
all agreements and licenses pursuant to which the Company has been granted a
license to any Company Licensed Intellectual Property (other than license
agreements for standard “shrink wrapped, off-the-shelf” third party Intellectual
Property Rights) where such Company Licensed Intellectual Property is a part of
a Company product or service; and (dd) any obligations of exclusivity,
non-competition, non-solicitation, right of first refusal, or right of first
negotiation to which the Company is subject under any agreement that does not
fall within the ambit of Sections 6.16 (bb) or (cc) and that are either material
to the Company’s business or that could reasonably be expected to have a Company
Material Adverse Effect.  All of the Company

 

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Intellectual Property listed on the Company Disclosure Letter is valid and
enforceable.  To the Company’s knowledge, no third party is currently
infringing, misappropriating or using the Company Owned Intellectual Property
without authorization.

 

SECTION 6.17.  Contracts and Other Agreements; Compliance.  Schedule 6.17 sets
forth a true and complete list of all of the following to which the Company or
any Company Subsidiary is a party or by which they are bound (collectively, the
“Contracts”):

 

(I)                                     ANY AGREEMENT (A) RELATING TO THE
EMPLOYMENT OF, OR THE PERFORMANCE OF SERVICES BY, ANY EMPLOYEE, CONSULTANT OR
OTHER PERSON OTHER THAN ORDINARY COURSE, AT-WILL WRITTEN OR ORAL OFFERS OR
AGREEMENTS TERMINABLE WITHIN NINETY (90) DAYS WITHOUT THE PAYMENT OF ANY PENALTY
AND EXCLUDING EMPLOYMENT ARRANGEMENTS REQUIRED BY LAW, (B) PURSUANT TO WHICH THE
COMPANY OR ANY COMPANY SUBSIDIARY IS OR MAY BECOME OBLIGATED TO MAKE ANY
SEVERANCE, TERMINATION, OR SIMILAR PAYMENT TO ANY CURRENT OR FORMER EMPLOYEE OR
DIRECTOR, (C) PURSUANT TO WHICH THE COMPANY OR ANY COMPANY SUBSIDIARY IS OR MAY
BECOME OBLIGATED TO MAKE ANY BONUS OR SIMILAR PAYMENT TO ANY CURRENT OR FORMER
EMPLOYEE OR DIRECTOR, OR (D) PURSUANT TO WHICH THE COMPANY OR ANY COMPANY
SUBSIDIARY MAY BE REQUIRED TO PROVIDE, OR ACCELERATE THE VESTING OF, ANY
PAYMENTS, BENEFITS, OR EQUITY RIGHTS UPON THE OCCURRENCE OF THE MERGER OR ANY
OTHER TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT;

 

(II)                                  ANY AGREEMENT THAT PROVIDES FOR
INDEMNIFICATION OF ANY OFFICER, DIRECTOR, EMPLOYEE, OR AGENT OF THE COMPANY OR
ANY COMPANY SUBSIDIARY;

 

(III)                               ANY AGREEMENT IMPOSING ANY MATERIAL
RESTRICTION ON THE RIGHT OR ABILITY OF THE COMPANY OR ANY COMPANY SUBSIDIARY, OR
THAT, TO THE COMPANY’S KNOWLEDGE, AS A RESULT OF THE MERGER, WOULD IMPOSE A
RESTRICTION ON THE RIGHT OR ABILITY OF PARENT OR ANY OF ITS SUBSIDIARIES, TO
COMPETE IN ANY LINE OF BUSINESS OR IN ANY GEOGRAPHIC REGION WITH ANY OTHER
PERSON OR TO TRANSACT BUSINESS OR DEAL IN ANY OTHER MANNER WITH ANY OTHER
PERSON;

 

(IV)                              ANY AGREEMENT THAT CONTEMPLATES OR INVOLVES
THE PAYMENT OR DELIVERY OF CASH OR OTHER CONSIDERATION IN AN AMOUNT OR HAVING A
VALUE IN EXCESS OF FIFTY THOUSAND DOLLARS ($50,000) IN THE AGGREGATE OR
CONTEMPLATES OR INVOLVES THE PERFORMANCE OF SERVICES HAVING A VALUE IN EXCESS OF
FIFTY THOUSAND DOLLARS ($50,000) IN THE AGGREGATE;

 

(V)                                 ANY AGREEMENT OF PARTNERSHIP OR JOINT
VENTURE, LIMITED LIABILITY COMPANY OR OPERATING AGREEMENT THAT WOULD GIVE RISE
TO AN OBLIGATION ON THE PART OF THE COMPANY TO FORM A JOINT VENTURE OR TO
ACQUIRE SECURITIES OF A THIRD PARTY; AND

 

(VI)                              ANY OTHER CONTRACT, AGREEMENT, OR COMMITMENT
NOT OTHERWISE LISTED IN SCHEDULE 6.17, (A) THE TERMINATION OF WHICH WOULD CAUSE
A COMPANY MATERIAL ADVERSE EFFECT, OR (B) THAT, IF NO REQUIRED CONSENT REGARDING
THE MERGER OR OTHER

 

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TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT IS OBTAINED, WOULD HAVE A COMPANY
MATERIAL ADVERSE EFFECT OR A MATERIAL ADVERSE EFFECT ON PARENT’S ABILITY TO
OPERATE THE BUSINESS OF THE COMPANY OR ANY COMPANY SUBSIDIARY IN THE SAME MANNER
AS THE BUSINESS OF THE COMPANY AND THE COMPANY SUBSIDIARIES IS CURRENTLY
OPERATED.

 

(B)                                 EACH CONTRACT IS IN FULL FORCE AND EFFECT
AND IS A VALID AND BINDING OBLIGATION OF THE COMPANY, AND NEITHER THE COMPANY
NOR, TO THE KNOWLEDGE OF THE COMPANY, ANY OTHER PARTY THERETO IS IN BREACH OF,
OR DEFAULT UNDER, ANY SUCH CONTRACT, EXCEPT FOR SUCH FAILURES TO BE IN FULL
FORCE AND EFFECT AND SUCH BREACHES AND DEFAULTS THAT, INDIVIDUALLY OR IN THE
AGGREGATE, WOULD NOT REASONABLY BE EXPECTED TO HAVE A COMPANY MATERIAL ADVERSE
EFFECT.  AS OF THE DATE HEREOF, NONE OF THE PARTIES TO ANY OF THE CONTRACTS
IDENTIFIED IN SCHEDULE 6.17 HAS EXPRESSED IN WRITING AN INTENT TO TERMINATE OR
MATERIALLY REDUCE THE AMOUNT OF ITS BUSINESS WITH COMPANY IN THE FUTURE. TRUE
AND CORRECT COPIES OF EACH OF THE CONTRACTS, AND ALL AMENDMENTS AND
MODIFICATIONS THEREOF, HAVE BEEN MADE AVAILABLE TO PARENT.

 

(C)                                  THE COMPANY AND THE COMPANY SUBSIDIARIES
ARE NOT IN BREACH OR VIOLATION OF OR IN DEFAULT IN THE PERFORMANCE OR OBSERVANCE
OF ANY TERM OR PROVISION OF, AND NO EVENT HAS OCCURRED WHICH, WITH NOTICE OR
LAPSE OF TIME OR ACTION BY A THIRD PARTY, COULD RESULT IN A DEFAULT UNDER
(A) THE ARTICLES OF INCORPORATION OR BY-LAWS OF THE COMPANY, AS AMENDED FROM
TIME TO TIME; (B) THE ARTICLES OF INCORPORATION OR BY-LAWS OF ANY COMPANY
SUBSIDIARY, AS AMENDED FROM TIME TO TIME; OR (C) ANY NOTE, BOND, MORTGAGE,
INDENTURE, DEED OF TRUST, LICENSE, FRANCHISE, PERMIT, CONTRACT, LEASE OR OTHER
INSTRUMENT, OBLIGATION OR AGREEMENT OF ANY KIND TO WHICH THE COMPANY OR ANY
COMPANY SUBSIDIARY IS NOW A PARTY OR BY WHICH ANY OF THEM IS BOUND OR TO WHICH
ANY OF THEIR PROPERTY IS SUBJECT, WHICH BREACHES, VIOLATIONS AND/OR DEFAULTS, IN
THE CASE OF CLAUSE (C) OF THIS SECTION 6.17, WOULD HAVE, INDIVIDUALLY OR IN THE
AGGREGATE, A COMPANY MATERIAL ADVERSE EFFECT.

 

SECTION 6.18.  Insurance.  Schedule 6.18 sets forth the current insurance
policies of the Company and the Company Subsidiaries.  Except to the extent
there would be no Company Material Adverse Effect, all of the Company’s and the
Company Subsidiaries’ liability, theft, life, health, fire, title, workers’
compensation and other forms of insurance, surety bonds and umbrella policies,
insuring the Company and the Company Subsidiaries and their directors, officers,
employees, independent contractors, properties, assets and businesses, are valid
and in full force and effect and are, in the reasonable judgment of the Company,
adequate for the business of the Company and the Company Subsidiaries as now
conducted, and there are no pending claims, singly or in the aggregate, in
excess of the limitations of coverage set forth in such policies; provided,
however, there may be an adjustment to workers’ compensation premiums at policy
year’s end, which adjustment shall be paid pursuant to Section 8.10, below.  As
of the date of this Agreement, to the Company’s knowledge, there has been no
threatened termination of, or premium increase with respect to, any such
policies.  The Company has made available to Parent a copy of all insurance
policies and all self-insurance programs and arrangements relating to the
business, assets, and operations of the Company and the Company Subsidiaries. 
With respect to each insurance policy of the Company and the Company
Subsidiaries, (a) such policy will continue to be legal, valid, binding,
enforceable and in full

 

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force and effect on identical terms following the consummation of the
transactions contemplated hereby and (b) neither the Company nor to the
Company’s knowledge any other party to the policy is in breach or default
(including with respect to the payment of premiums or the giving of notices),
and no event has occurred which, with notice or lapse of time, would constitute
such a breach or default, or permit termination, modification, or acceleration,
under such policy.  The Company has timely reported each matter set forth on
Schedule 6.8 to the applicable insurance carrier in accordance with the
requirements of the applicable insurance policy and the applicable insurance
carrier has accepted coverage of such claims.

 

SECTION 6.19.  Brokers and Finders.  Except for Barrington Associates in
accordance with the terms of its agreement with the Company (written or
otherwise), which has previously been provided or disclosed to Parent, neither
the Company, any Company Subsidiary nor any of their officers, agents,
directors, shareholders or employees has employed any investment banker, broker
or finder or incurred any liability for any investment banking fees, financial
advisory fees, brokerage fees, commissions or finder’s fees in connection with
the transactions contemplated hereby.

 

SECTION 6.20.  Certain Transactions.  None of the officers or directors of the
Company or any Company Subsidiary or shareholders of the Company or any of their
affiliates is a party to any transaction with the Company or any Company
Subsidiary (other than for services as an employee, officer or director and
other than transactions between the Company and a Company Subsidiary), including
without limitation, any contract, agreement or other arrangement (i) providing
for the furnishing of services to or by, (ii) providing for rental of real or
personal property to or from, or (iii) otherwise requiring payments to or from,
any such officer, director, or shareholder or any corporation, partnership,
trust or other entity in which any such officer, director or shareholder has an
ownership interest (a “Company Affiliated Transaction”).

 

SECTION 6.21.  Books and Records.  The books of account, minute books, stock
record books, and other records of the Company and the Company Subsidiaries have
been delivered to Parent and have been maintained in accordance with sound
business practices.  The minute books of the Company and the Company
Subsidiaries contain accurate and complete records of all meetings held by, and
corporate action taken by (at all meetings of, or effected by written consent
of), the shareholders of the Company and the Company Subsidiaries and the Boards
of Directors of the Company and the Company Subsidiaries (or any committee
thereof) for at least the past six (6) years, and for at least the past six
(6) years all original issuances and subsequent transfers, repurchases, and
cancellations of stock in the Company or any Company Subsidiary, in each case
through the date hereof, and are in the possession of the Company or the Company
Subsidiaries.  The Company has delivered or made available to Parent true and
complete copies of each document that has been listed in the Company Disclosure
Letter.

 

SECTION 6.22.  Employees.  No officer or director of the Company or any Company
Subsidiary and, to the knowledge of the Company, no employee of the Company or
any Company Subsidiary is a party to, or is otherwise bound by, any agreement or
arrangement,

 

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including any confidentiality, noncompetition, or proprietary rights agreement,
between such officer, director or employee and any other person that in any way
adversely affects or will affect (i) the performance of his or her duties as an
officer, director or employee of the Company or any Company Subsidiary or
(ii) the ability of either the Company or any Company Subsidiary to conduct its
business.

 

SECTION 6.23.  Customers and Suppliers

 

(A)                                  THE COMPANY DISCLOSURE LETTER SETS FORTH AN
ACCURATE LIST OF THE COMPANY’S TWENTY (20) LARGEST CUSTOMERS (ON A CONSOLIDATED
BASIS) BASED ON NET SALES FOR THE FISCAL YEAR ENDED DECEMBER 31, 2004 (“MATERIAL
CUSTOMERS”).  NEITHER THE COMPANY NOR ANY COMPANY SUBSIDIARY HAS BEEN NOTIFIED
THAT ANY MATERIAL CUSTOMER HAS TERMINATED, EXPECTS TO TERMINATE OR IS ACTIVELY
CONSIDERING TERMINATING ITS NORMAL BUSINESS WITH THE COMPANY OR THAT SUCH
CUSTOMER INTENDS TO MODIFY EXISTING AGREEMENTS WITH THE COMPANY OR THE SURVIVING
CORPORATION AFTER THE CLOSING.  AS OF THE DATE HEREOF, TO THE COMPANY’S
KNOWLEDGE, NEITHER THE COMPANY NOR ANY COMPANY SUBSIDIARY HAS ANY OUTSTANDING
MATERIAL DISPUTE, WHICH HAS BEEN COMMUNICATED IN WRITING, CONCERNING ITS
SERVICES WITH ANY MATERIAL CUSTOMER.  AS OF THE DATE HEREOF, NEITHER THE COMPANY
NOR ANY COMPANY SUBSIDIARY HAS ANY WARRANTY OR INDEMNITY LIABILITY FOR ANY
SERVICES TO CUSTOMERS OUTSIDE THE ORDINARY COURSE OF BUSINESS, EXCEPT FOR SUCH
LIABILITIES AS ARE SET FORTH ON SCHEDULE 6.23.

 

(B)                                 THE COMPANY DISCLOSURE LETTER SETS FORTH AN
ACCURATE LIST OF EACH SUPPLIER THAT IN THE YEAR ENDED DECEMBER 31, 2004, WAS ONE
OF THE TEN (10) LARGEST SUPPLIERS OF PRODUCTS AND/OR SERVICES TO THE COMPANY AND
THE COMPANY SUBSIDIARIES, BASED ON AMOUNTS PAID OR PAYABLE (“MATERIAL
SUPPLIERS”).  AS OF THE DATE HEREOF, NEITHER THE COMPANY NOR ANY COMPANY
SUBSIDIARY HAS BEEN NOTIFIED OF ANY OUTSTANDING MATERIAL DISPUTE CONCERNING
PRODUCTS AND/OR SERVICES PROVIDED BY ANY MATERIAL SUPPLIER.  AS OF THE DATE
HEREOF, NEITHER THE COMPANY NOR ANY COMPANY SUBSIDIARY HAS BEEN NOTIFIED THAT
ANY MATERIAL SUPPLIER SHALL NOT CONTINUE AS A SUPPLIER TO THE SURVIVING
CORPORATION AFTER THE CLOSING OR THAT SUCH SUPPLIER INTENDS TO TERMINATE OR
MATERIALLY MODIFY EXISTING AGREEMENTS WITH THE COMPANY OR THE SURVIVING
CORPORATION.

 

SECTION 6.24.  Accounts Receivable.  All accounts receivable of the Company and
the Company Subsidiaries that will be reflected on the Closing Date Balance
Sheet (collectively, the “Accounts Receivable”) represent or will represent
valid obligations arising from sales actually made or services actually
performed in the ordinary course of business.  Except as set forth on
Schedule 6.24 of the Company Disclosure Letter, all accounts, accounts
receivable, notes and notes receivable, including all rights of the Company or
any Company Subsidiaries to payment for services rendered which are payable to
the Company or any Company Subsidiary, including any security held for payment
thereof are reflected properly on the Company’s books and records, and are valid
receivables subject to no setoffs or counterclaims, and are collectible in
accordance with their terms at their recorded amounts, subject to any reserve
for bad debts set forth in the Company Financial Statements.

 

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SECTION 6.25.  Board Recommendation.  The Company’s board of directors has
unanimously, as of the date of this Agreement, (a) determined that this
Agreement and the transactions contemplated hereby, including the Merger, are
advisable and in the best interests of the Company and its shareholders,
(b) approved and adopted this Agreement, including the Merger and the
transactions contemplated hereby, and (c) subject to the other terms and
conditions of this Agreement, resolved to recommend the Merger and approval and
adoption of this Agreement and each of the transactions contemplated hereby by
the Company’s shareholders, and, as of the date of this Agreement, none of the
aforesaid actions by the Company’s board of directors has been amended,
rescinded, or modified.

 

SECTION 6.26.  Disclosure.  No statement, representation or warranty made by the
Company in this Agreement, or in any certificate, statement, list, schedule or
other document furnished or to be furnished to Parent hereunder upon execution
of this Agreement or at the Closing, contains, or when so furnished will
contain, any untrue statement of a material fact, or fails to state, or when so
furnished will fail to state, a material fact necessary in order to make the
statements contained herein or therein, in light of the circumstances in which
they are or will be made and in light of disclosures made elsewhere in this
Agreement and the Schedules (including the Company Disclosure Letter) hereto,
not misleading.

 

The warranties and representations of the Company herein contained shall be true
and correct on the Closing Date and shall survive until the two (2) year
anniversary of the Effective Time, except for (i) the representations and
warranties set forth in Sections 6.11 and 6.12 (solely for wage laws), above,
which shall survive until the three (3) year anniversary of the Effective Time
and (ii) the representations and warranties in Sections 6.1, 6.2, 6.3,
6.4(a) and 6.10 above, which shall survive until the expiration of the relevant
statute of limitations period, if any.

 

ARTICLE VII

 

CONDUCT OF BUSINESS PENDING THE MERGER

 

SECTION 7.1.  Conduct of Business by the Company Pending the Merger.  Except as
otherwise contemplated by this Agreement, after the date hereof and prior to the
Closing Date or earlier termination of this Agreement, unless Parent shall
otherwise agree in writing, the Company shall, and shall cause each Company
Subsidiary to:

 

(A)                                  CONDUCT THEIR RESPECTIVE BUSINESSES IN THE
ORDINARY AND USUAL COURSE OF BUSINESS AND CONSISTENT WITH PAST PRACTICE AND
CONTINUE TO OBSERVE THEIR OBLIGATIONS TO COMPLY WITH THE REQUIREMENTS OF ALL
APPLICABLE LAWS;

 

(B)                                 NOT (I) AMEND OR PROPOSE TO AMEND THE
ARTICLES OF INCORPORATION OR BY-LAWS OF THE COMPANY OR ANY MATERIAL TERM OF ANY
OUTSTANDING SECURITY ISSUED BY, THE COMPANY, (II) AMEND OR PROPOSE TO AMEND THE
ARTICLES OF INCORPORATION OR BY-LAWS OF ANY COMPANY SUBSIDIARY OR ANY MATERIAL
TERM OF ANY OUTSTANDING SECURITY ISSUED BY, ANY COMPANY SUBSIDIARY, (III) SPLIT,
COMBINE OR RECLASSIFY THE COMPANY STOCK OR OTHERWISE CHANGE THE CAPITALIZATION
OR

 

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CAPITAL STRUCTURE OF THE COMPANY OR ANY COMPANY SUBSIDIARY IN ANY MANNER FROM
THE WAY IT EXISTED ON THE DATE HEREOF, OR (IV) DECLARE, SET ASIDE OR PAY ANY
DIVIDEND OR DISTRIBUTION PAYABLE IN CASH, STOCK, PROPERTY OR OTHERWISE, EXCEPT
FOR CASH DISTRIBUTIONS BY A COMPANY SUBSIDIARY TO THE COMPANY;

 

(C)                                  NOT ISSUE, SELL, PLEDGE OR DISPOSE OF, OR
AGREE TO ISSUE, SELL, PLEDGE OR DISPOSE OF OR OTHERWISE CAUSE TO BECOME
OUTSTANDING, ANY ADDITIONAL SHARES OF, OR ANY OPTIONS, WARRANTS OR RIGHTS OF ANY
KIND TO ACQUIRE ANY SHARES OF COMPANY STOCK OR CAPITAL STOCK OF ANY COMPANY
SUBSIDIARY OR ANY DEBT OR EQUITY SECURITIES CONVERTIBLE INTO OR EXCHANGEABLE FOR
COMPANY STOCK CAPITAL STOCK OF ANY COMPANY SUBSIDIARY OR ANY UNITS OR OTHER
RIGHTS THAT ARE TIED TO COMPANY STOCK (E.G., RESTRICTED STOCK UNITS OR STOCK
APPRECIATION RIGHTS) OR CAPITAL STOCK OF ANY COMPANY SUBSIDIARY;

 

(D)                                 NOT (I) INCUR OR BECOME CONTINGENTLY LIABLE
WITH RESPECT TO ANY MATERIAL INDEBTEDNESS FOR BORROWED MONEY OTHER THAN (X)
BORROWINGS IN THE ORDINARY COURSE OF BUSINESS, OR (Y) BORROWINGS TO REFINANCE
EXISTING INDEBTEDNESS, (II) REDEEM, PURCHASE, ACQUIRE OR OFFER TO PURCHASE OR
ACQUIRE ANY SHARES OF COMPANY COMMON STOCK OR ANY OPTIONS, WARRANTS OR RIGHTS TO
ACQUIRE ANY COMPANY STOCK OR ANY SECURITY CONVERTIBLE INTO OR EXCHANGEABLE FOR
COMPANY STOCK, EXCEPT IN ACCORDANCE WITH CERTAIN STOCK RESTRICTION AGREEMENTS
CURRENTLY IN EFFECT BY AND BETWEEN THE COMPANY AND CERTAIN PERSONS, (III) EXCEPT
FOR BUDGETED CAPITAL EXPENDITURES RELATED TO EQUIPMENT PURCHASES AND TENANT
IMPROVEMENTS THAT HAVE BEEN PREVIOUSLY DISCLOSED TO PARENT, MAKE ANY ACQUISITION
OF ANY ASSETS AND EXPENDITURES FOR FIXED OR CAPITAL ASSETS OTHER THAN
EXPENDITURES SET FORTH ON THE COMPANY DISCLOSURE LETTER (IN EACH CASE, AFTER
CONSULTATION WITH PARENT) OR EXPENDITURES IN THE ORDINARY COURSE OF BUSINESS
WHICH, IN SUCH CASES OF $100,000 OR MORE IN THE AGGREGATE, SHALL BE ON TERMS
REASONABLY ACCEPTABLE TO PARENT, (IV) SELL, PLEDGE, DISPOSE OF OR ENCUMBER ANY
ASSETS OR BUSINESSES OTHER THAN SALES OF INVENTORY AND SALES OF ASSETS IN THE
ORDINARY COURSE OF BUSINESS WHICH, IN SUCH CASES INVOLVING $100,000 OR MORE IN
THE AGGREGATE, SHALL BE ON TERMS REASONABLY ACCEPTABLE TO PARENT, OR (V) ENTER
INTO ANY CONTRACT, AGREEMENT, COMMITMENT OR ARRANGEMENT WITH RESPECT TO ANY OF
THE FOREGOING;

 

(E)                                  USE ALL COMMERCIALLY REASONABLE EFFORTS TO
PRESERVE INTACT THEIR RESPECTIVE BUSINESS ORGANIZATIONS AND GOODWILL, KEEP
AVAILABLE THE SERVICES OF THEIR RESPECTIVE PRESENT OFFICERS AND KEY EMPLOYEES,
AND PRESERVE THE GOODWILL AND BUSINESS RELATIONSHIPS WITH CUSTOMERS, VENDORS AND
OTHERS HAVING BUSINESS RELATIONSHIPS WITH THEM AND NOT ENGAGE IN ANY ACTION,
DIRECTLY OR INDIRECTLY, WITH THE INTENT TO ADVERSELY IMPACT THE TRANSACTIONS
CONTEMPLATED BY THIS AGREEMENT;

 

(F)                                    NOT ENTER INTO OR AMEND ANY EMPLOYMENT,
COLLECTIVE BARGAINING, SEVERANCE, RETIREMENT, DEFERRED COMPENSATION, BONUS,
CHANGE OF CONTROL, OR SPECIAL PAY ARRANGEMENT WITH RESPECT TO TERMINATION OF
EMPLOYMENT, CHANGE IN THE TERMS OF EMPLOYMENT OR OTHER SIMILAR ARRANGEMENTS OR
AGREEMENTS WITH ANY DIRECTORS, OFFICERS OR EMPLOYEES TO INCREASE THE BENEFITS
PROVIDED OR TO PROVIDE ADDITIONAL OR NEW BENEFITS TO ANY SUCH PERSON;

 

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(G)                                 NOT ADOPT, ACCELERATE, ENTER INTO OR AMEND
ANY SEVERANCE, BONUS, PROFIT SHARING, COMPENSATION, STOCK OPTION, PENSION,
RETIREMENT, DEFERRED COMPENSATION, HEALTH CARE, RETIREE MEDICAL, CHANGE OF
CONTROL,  EMPLOYMENT OR OTHER EMPLOYEE BENEFIT PLAN, AGREEMENT, TRUST, FUND OR
ARRANGEMENT FOR THE BENEFIT OR WELFARE OF ANY EMPLOYEE OR RETIREE, EXCEPT AS
REQUIRED BY THE TERMS THEREOF OR AS REQUIRED TO COMPLY WITH CHANGES IN
APPLICABLE LAW AND NOT INCREASE THE WAGES OF ANY DIRECTORS, OFFICERS OR
EMPLOYEES EXCEPT IN THE ORDINARY COURSE AND CONSISTENT WITH PAST PRACTICE;

 

(H)                                 MAINTAIN WITH ADEQUATELY CAPITALIZED
INSURANCE COMPANIES INSURANCE COVERAGE FOR THEIR ASSETS AND THEIR BUSINESSES IN
SUCH AMOUNTS AND AGAINST SUCH RISKS AND LOSSES AS ARE CONSISTENT WITH PAST
PRACTICE; AND

 

(I)                                     NOT ENTER INTO ANY COMPANY AFFILIATED
TRANSACTION.

 

(J)                                     NOT TRANSFER TO ANY THIRD PERSON
OWNERSHIP OF MATERIAL COMPANY INTELLECTUAL PROPERTY;

 

(K)                                  NOT CHANGE ANY METHOD OF ACCOUNTING OR
ACCOUNTING PRACTICE BY THE COMPANY OR ANY COMPANY SUBSIDIARY, EXCEPT FOR ANY
SUCH CHANGE REQUIRED BY REASON OF A CHANGE IN GAAP OR WITH PRIOR AGREEMENT WITH
THE COMPANY’S AUDITOR;

 

(L)                                     NOT COMMENCE A LAWSUIT OTHER THAN: 
(I) FOR THE ROUTINE COLLECTION OF BILLS; OR (II) IN SUCH CASES WHERE THE COMPANY
IN GOOD FAITH DETERMINES THAT FAILURE TO COMMENCE A SUIT WOULD RESULT IN A
MATERIAL IMPAIRMENT OF A VALUABLE ASPECT OF THE COMPANY’S BUSINESS, PROVIDED THE
COMPANY CONSULTS WITH PARENT PRIOR TO FILING SUCH SUIT;

 

(M)                               NOT EXTEND AN OFFER OF EMPLOYMENT TO A
CANDIDATE FOR AN OFFICER POSITION OF VICE PRESIDENT OR ABOVE OR ANY POSITION
WITH ANNUAL COMPENSATION EQUAL TO OR GREATER THAN $80,000 WITHOUT PRIOR
CONSULTATION WITH PARENT;

 

(N)                                 NOT ENTER INTO ANY JOINT VENTURE,
PARTNERSHIP, LIMITED LIABILITY COMPANY, OR OPERATING AGREEMENT WITH ANY PERSON;

 

(O)                                 NOT ACQUIRE OR AGREE TO ACQUIRE BY MERGING
OR CONSOLIDATING WITH, OR BY PURCHASING ANY EQUITY INTEREST IN OR A PORTION OF
THE ASSETS OF, OR BY ANY OTHER MANNER, ANY BUSINESS OR ANY CORPORATION,
PARTNERSHIP, ASSOCIATION, OR OTHER BUSINESS ORGANIZATION OR DIVISION THEREOF, OR
OTHERWISE ACQUIRE OR AGREE TO ACQUIRE ANY ASSETS THAT ARE MATERIAL, INDIVIDUALLY
OR IN THE AGGREGATE, TO THE BUSINESS OF THE COMPANY;

 

(P)                                 NOT BREACH, MATERIALLY MODIFY, MATERIALLY
AMEND, OR TERMINATE ANY OF THE CONTRACTS, OR WAIVE, RELEASE, OR ASSIGN ANY
MATERIAL RIGHTS OR CLAIMS UNDER ANY OF THE CONTRACTS, EXCEPT AS EXPRESSLY
REQUIRED BY THIS AGREEMENT OR EXCEPT IN THE ORDINARY COURSE OF BUSINESS;

 

(Q)                                 NOT SETTLE, COMPROMISE, OR OTHERWISE
TERMINATE ANY LITIGATION, CLAIM, INVESTIGATION, OR OTHER SETTLEMENT NEGOTIATION;

 

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(R)                                    NOT ENTER INTO ANY CONTRACT THAT WOULD
REQUIRE THE COMPANY OR ANY COMPANY SUBSIDIARY TO EXPEND A SUM IN EXCESS OF
$100,000;

 

(S)                                  NOT ADOPT A PLAN OF COMPLETE OR PARTIAL
LIQUIDATION, DISSOLUTION, MERGER, CONSOLIDATION, RESTRUCTURING,
RECAPITALIZATION, OR OTHER REORGANIZATION (OTHER THAN THE MERGER);

 

(T)                                    NOT PAY OR MAKE ANY ACCRUAL OR
ARRANGEMENT FOR PAYMENT OF ANY PENSION, RETIREMENT ALLOWANCE, OR OTHER EMPLOYEE
BENEFIT PURSUANT TO ANY EXISTING PLAN, AGREEMENT, OR ARRANGEMENT TO ANY OFFICER,
DIRECTOR, OR EMPLOYEE OR PAY OR AGREE TO PAY OR MAKE ANY ACCRUAL OR ARRANGEMENT
FOR PAYMENT TO ANY OFFICERS, DIRECTORS, OR EMPLOYEES OF COMPANY OF ANY AMOUNT
RELATING TO UNUSED VACATION DAYS, EXCEPT PAYMENTS, ARRANGEMENTS, AND ACCRUALS
MADE IN THE ORDINARY COURSE OF BUSINESS CONSISTENT WITH PAST PRACTICE OR
OTHERWISE REQUIRED BY LAW OR BY THE TERMS OF A COMPANY PLAN;

 

(U)                                 EXCEPT AS REQUIRED OR PERMITTED UNDER THIS
AGREEMENT, NOT KNOWINGLY TAKE ANY ACTION THAT WOULD OR IS REASONABLY LIKELY TO
(I) MAKE ANY REPRESENTATION OR WARRANTY OF THE COMPANY CONTAINED HEREIN
INACCURATE, (II) RESULT IN ANY OF THE CONDITIONS TO THE MERGER SET FORTH IN
ARTICLE IX NOT BEING SATISFIED, OR (III) IMPAIR THE ABILITY OF THE COMPANY TO
CONSUMMATE THE MERGER IN ACCORDANCE WITH THE TERMS HEREOF; AND

 

(V)                                 NOT AUTHORIZE, COMMIT, OR AGREE TO TAKE ANY
OF THE FOREGOING ACTIONS EXCEPT AS OTHERWISE PERMITTED BY THIS AGREEMENT.

 

SECTION 7.2.  Control of the Company’s Operations.  Nothing contained in this
Agreement shall give to Parent, directly or indirectly, rights to control or
direct the Company’s operations prior to the Effective Time.  Prior to the
Effective Time, the Company shall exercise, consistent with and subject to the
terms and conditions of this Agreement, complete control and supervision of its
operations.

 

SECTION 7.3.  Acquisition Transactions.  After the date hereof and prior to the
Effective Time or earlier termination of this Agreement, the Company shall not,
and shall not permit any of its directors, officers, employees or affiliates, or
any investment banker, financial advisor, attorney, accountant, or other
advisor, agent, or representative, to take or cause or permit any person to
take, directly or indirectly, any of the following actions with any party other
than Parent and its designees:  (a) initiate, solicit, seek or participate in,
directly or indirectly, any negotiations, discussions, inquiries or the making
or implementation of any proposal or offer (including, without limitation, any
proposal or offer to the Company Shareholders) to acquire all or any part of the
business or substantial properties of the Company or any Company Subsidiary or
any portion of any class of the Company Stock, whether by merger, purchase of
assets, tender offer or otherwise (each of the foregoing, a “Restricted
Transaction”), whether for cash, securities or any other consideration or
combination thereof except for the transactions contemplated herein;
(ii) disclose, in connection with a Restricted Transaction, any nonpublic
information not customarily disclosed to any person other than Parent or its
representatives concerning the Company’s business or properties or afford to any
person other than Parent or its

 

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representatives access to its properties, books, or records, except in the
ordinary course of business or as required by law or pursuant to a governmental
request for information; (iii) enter into or execute any agreement relating to a
Restricted Transaction; or (iv) make or authorize any public statement,
recommendation, or solicitation in support of any Restricted Transaction or any
offer or proposal relating to a Restricted Transaction other than with respect
to the Merger.  In the event that the Company or any Company Subsidiary is
contacted by any third party expressing an interest in discussing a Restricted
Transaction, the Company will promptly, but in no event later than twenty-four
(24) hours following the Company’s knowledge of such contact, notify Parent in
writing of such contact and the identity of the party so contacting the Company
or any Company Subsidiary and shall promptly, but in no event later than
twenty-four (24) hours, advise Parent of any material modification or proposed
modification thereto.

 

SECTION 7.4.  Employees.  The Company will cooperate as reasonably requested to
allow Parent to interview and recruit employees of the Company or any Company
Subsidiary.  Parent and the Company will work together on developing appropriate
communications to employees in connection with the transactions contemplated by
this Agreement.  All communications by the Company or any Company Subsidiary to
employees of the Company or any Company Subsidiary pertaining to potential
employment after the Closing or termination of employment in connection with the
transaction contemplated by this Agreement must be approved in advance by
Parent.

 

ARTICLE VIII

 

ADDITIONAL AGREEMENTS

 

SECTION 8.1.  Access to Information

 

(A)                                  FROM THE DATE OF THIS AGREEMENT THROUGH THE
CLOSING, THE COMPANY WILL (I) GIVE PARENT AND ITS REPRESENTATIVES, EMPLOYEES,
COUNSEL AND ACCOUNTANTS REASONABLE ACCESS TO THE PROPERTIES, BOOKS AND RECORDS
OF THE COMPANY AND THE COMPANY SUBSIDIARIES, AND (II) CAUSE ITS DIRECTORS,
OFFICERS, EMPLOYEES AND ADVISORS (INCLUDING, WITHOUT LIMITATION, ITS
ACCOUNTANTS, ATTORNEYS AND FINANCIAL ADVISORS) AND THE OFFICERS AND ADVISORS OF
THE COMPANY SUBSIDIARIES TO FURNISH PARENT AND ITS DESIGNATED REPRESENTATIVES
WITH FINANCIAL AND OPERATING DATA AND OTHER INFORMATION WITH RESPECT TO THE
COMPANY AND THE COMPANY SUBSIDIARIES FOR THE PURPOSE OF PERMITTING PARENT, TO: 
(A) REVIEW THE FINANCIAL STATEMENTS OF THE COMPANY, (B) VERIFY THE ACCURACY OF
THE REPRESENTATIONS AND WARRANTIES OF THE COMPANY CONTAINED IN THIS AGREEMENT,
(C) CONFIRM COMPLIANCE BY THE COMPANY WITH THE TERMS OF THIS AGREEMENT, AND
(D) PREPARE FOR THE CONSUMMATION OF THE TRANSACTIONS CONTEMPLATED BY THIS
AGREEMENT.

 

(B)                                 PARENT AND SUBSIDIARY SHALL HOLD AND SHALL
CAUSE PARENT’S AND SUBSIDIARY’S REPRESENTATIVES TO HOLD, AND THE COMPANY AND CLP
RESOURCES SHALL HOLD AND SHALL CAUSE THE COMPANY’S REPRESENTATIVES TO HOLD, IN
STRICT CONFIDENCE ALL NON-PUBLIC DOCUMENTS AND INFORMATION FURNISHED TO PARENT
AND SUBSIDIARY OR TO THE COMPANY, AS THE CASE MAY BE, IN CONNECTION WITH THE
TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT.  NOTWITHSTANDING THE

 

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foregoing (i) Parent and the Company may disclose such information as may be
necessary in connection with seeking Parent Required Statutory Approvals, the
Company Required Statutory Approvals and the Company Common Shareholder
Approval, and (ii) each of Parent, Subsidiary and the Company may disclose any
information that it is required by Law or judicial or administrative order to
disclose.

 

SECTION 8.2.  Company Common Shareholder Approval.  The Company shall, as
promptly as practicable, submit the Merger and the transactions contemplated
hereby, together with all information and documents relating to the terms of the
Merger in form and substance necessary to satisfy all requirements of the NRS,
for approval by the Company Common Shareholders (including without limitation
the Investor Shareholders as required by Section 9.1(a), below) and shall use
reasonable efforts to obtain such shareholder approval and adoption of this
Agreement and the transactions contemplated hereby by holders of not less than
eighty-five percent (85%) of the Company Common Stock (the “Company Common
Shareholder Approval”).

 

SECTION 8.3.  Expenses and Fees.  Each party hereto agrees to bear its own
expenses incurred in connection with the consummation of the transactions
contemplated by this Agreement.  Notwithstanding the foregoing to the contrary,
Parent and/or the Surviving Corporation agree to bear all fees incurred in
connection with the HSR Act filing, if required.

 

SECTION 8.4.  Agreement to Cooperate.  Subject to the terms and conditions
herein provided, each of the parties hereto shall use all commercially
reasonable efforts to take, or cause to be taken, all actions and to do, or
cause to be done, all things necessary, proper or advisable pursuant to all
agreements, contracts, indentures or other instruments to which the parties
hereto are a party, or under any applicable Laws to consummate and make
effective the transactions contemplated by this Agreement, including using its
commercially reasonable efforts to (i) obtain all necessary or appropriate
waivers, consents and approvals from lenders, landlords, security holders or
other parties whose waiver, consent or approval is required to consummate the
Merger, (ii) effect all necessary registrations, filings and submissions, and
(iii) lift any injunction or other legal bar to the Merger (and, in such case,
to proceed with the Merger as expeditiously as possible).

 

SECTION 8.5.  Public Statements.  The parties (i) shall consult with each other
prior to issuing any press release or any written public statement with respect
to this Agreement or the transactions contemplated hereby, and (ii) shall not
issue any such press release or written public statement prior to such
consultation, except as may be required by Law.  The parties hereto agree to
keep confidential and not to disclose the terms and conditions of this
Agreement, including the amount of the Merger Consideration, except as may be
required by Law, or by any listing agreement with, or the policies of, the New
York Stock Exchange.

 

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SECTION 8.6.  Indemnification of Directors and Officers and Controlling Persons

 

(A)                                  FOR A PERIOD OF SIX (6) YEARS AFTER THE
EFFECTIVE TIME, PARENT SHALL OR SHALL CAUSE THE SURVIVING CORPORATION TO, TO THE
EXTENT PERMITTED BY APPLICABLE LAW, INSURE AND GUARANTY THAT THE PROVISIONS WITH
RESPECT TO INDEMNIFICATION BY THE COMPANY AND THE COMPANY SUBSIDIARIES EXISTING
IN FAVOR OF ANY OF THE PRESENT AND FORMER DIRECTORS AND OFFICERS OF THE COMPANY
AND THE COMPANY SUBSIDIARIES (ALL OF THE FOREGOING, TOGETHER WITH THEIR
RESPECTIVE HEIRS AND REPRESENTATIVES, THE “INDEMNIFIED PARTIES”), AS SET FORTH
IN THE COMPANY’S AND THE COMPANY SUBSIDIARIES’ ARTICLES OF INCORPORATION OR
BY-LAWS, AS IN EFFECT ON THE DATE OF THIS AGREEMENT, SHALL SURVIVE THE
TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT AND THAT SUCH ARTICLES OF
INCORPORATION OR BY-LAWS SHALL NOT BE AMENDED, REPEALED OR MODIFIED IN ANY
MANNER AS TO ADVERSELY AFFECT THE RIGHTS OF SUCH INDEMNIFIED PARTIES WITH
RESPECT TO INDEMNIFICATION UNDER THE ARTICLES OF INCORPORATION AND BY-LAWS AS
SUCH RIGHTS EXIST ON THE DATE OF THIS AGREEMENT; PROVIDED HOWEVER THAT NEITHER
PARENT NOR THE SURVIVING CORPORATION SHALL BE REQUIRED TO INDEMNIFY ANY
INDEMNIFIED PARTY IN CONNECTION WITH ANY PROCEEDING (OR PORTION THEREOF) TO THE
EXTENT INVOLVING ANY CLAIM INITIATED BY SUCH INDEMNIFIED PARTY UNLESS THE
INITIATION OF SUCH PROCEEDING (OR PORTION THEREOF) WAS AUTHORIZED BY THE BOARD
OF DIRECTORS OF THE COMPANY OR UNLESS SUCH ACTION IS BROUGHT BY SUCH INDEMNIFIED
PARTY TO ENFORCE RIGHTS UNDER THIS SECTION 8.6; PROVIDED FURTHER THAT ANY
DETERMINATION REQUIRED TO BE MADE WITH RESPECT TO WHETHER AN INDEMNIFIED PARTY’S
CONDUCT COMPLIES WITH THE STANDARDS SET FORTH UNDER APPLICABLE LAW, OR SUCH
ARTICLES OF INCORPORATION AND BY-LAWS, AS THE CASE MAY BE, SHALL BE MADE BY
INDEPENDENT LEGAL COUNSEL SELECTED BY PARENT AND REASONABLY ACCEPTABLE TO SUCH
INDEMNIFIED PARTY.  IN THE EVENT ANY OF THE INDEMNIFIED PARTIES WHO ARE COMPANY
SHAREHOLDERS ARE NAMED AS DEFENDANTS IN ANY ACTION BROUGHT BY A THIRD PARTY AS A
RESULT OF THE SERVICES PROVIDED BY SUCH INDEMNIFIED PARTY TO THE COMPANY OR THE
COMPANY SUBSIDIARIES AND IF SUCH ACTION RELATES TO A BREACH OF THE
REPRESENTATIONS AND WARRANTIES SET FORTH IN ARTICLE VI OF THIS AGREEMENT OR ANY
OTHER MATTER FOR WHICH PARENT AND THE SURVIVING CORPORATION ARE ENTITLED TO
INDEMNIFICATION PURSUANT TO ARTICLE X OF THIS AGREEMENT, PARENT AND THE
SURVIVING CORPORATION SHALL PROVIDE SUCH INDEMNIFIED PARTIES WITH
INDEMNIFICATION AS PROVIDED IN THE ARTICLES OF INCORPORATION AND BY-LAWS
DESCRIBED ABOVE; PROVIDED, HOWEVER, THAT PARENT AND THE SURVIVING CORPORATION
SHALL BE ENTITLED TO INDEMNIFICATION AND REIMBURSEMENT FUNDED BY THE INDEMNITY
ESCROW FOR ANY AMOUNTS SO PAID.

 

(B)                                 IF THE SURVIVING CORPORATION OR ANY OF ITS
SUCCESSORS OR ASSIGNS (I) REORGANIZES OR CONSOLIDATES WITH OR MERGES INTO ANY
OTHER PERSON AND IS NOT THE RESULTING, CONTINUING OR SURVIVING CORPORATION OR
ENTITY OF SUCH CONSOLIDATION OR MERGER OR (II) LIQUIDATES, DISSOLVES OR
TRANSFERS ALL OR SUBSTANTIALLY ALL OF ITS PROPERTIES AND ASSETS TO ANY PERSON,
THEN, AND IN EACH SUCH CASE, PROPER PROVISION WILL BE MADE SO THAT THE
SUCCESSORS AND ASSIGNS OF THE SURVIVING CORPORATION ASSUME THE OBLIGATIONS SET
FORTH IN THIS SECTION 8.6.

 

(C)                                  ANYTHING TO THE CONTRARY NOTWITHSTANDING,
NOTHING IN THIS SECTION 8.6 SHALL LIMIT THE RIGHT OF PARENT FROM ASSERTING ITS
RIGHTS TO INDEMNIFICATION FROM THE COMPANY COMMON SHAREHOLDERS UNDER ARTICLE X,
BELOW.

 

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(D)                                 THIS SECTION 8.6 SHALL SURVIVE THE CLOSING
OF ANY OF THE TRANSACTIONS CONTEMPLATED HEREBY, IS INTENDED TO BENEFIT THE
INDEMNIFIED PARTIES (EACH OF WHICH SHALL BE ENTITLED TO ENFORCE THIS SECTION 8.6
AGAINST THE SURVIVING CORPORATION AS A THIRD PARTY BENEFICIARY OF THIS
AGREEMENT), AND SHALL BE BINDING ON ALL SUCCESSORS AND ASSIGNS OF THE SURVIVING
CORPORATION.

 

SECTION 8.7.  Notification of Certain Matters.  Each of the Company, Parent and
Subsidiary agrees to give prompt notice to each other of, and to use their
respective commercially reasonable efforts to prevent or promptly remedy (i) the
occurrence or failure to occur or the impending or threatened occurrence or
failure to occur, of any event which occurrence or failure to occur would be
likely to cause any of its representations or warranties in this Agreement to be
untrue or inaccurate in any material respect at any time from the date hereof to
the Effective Time, and (ii) any material failure on its part to comply with or
satisfy any covenant, condition or agreement to be complied with or satisfied by
it hereunder.

 

SECTION 8.8.  Execution of Additional Documents.  From time to time, as and when
reasonably requested by a party hereto, each party hereto shall execute and
deliver, or cause to be executed and delivered, all such documents,
certificates, agreements, instruments and other writings and shall take, or
cause to be taken, all such further or other actions as such other party may
reasonably deem necessary or desirable to consummate the transactions
contemplated by this Agreement.

 

SECTION 8.9.  Tax Matters.

 

(A)                                  PARENT SHALL PREPARE AND FILE OR CAUSE TO
BE PREPARED AND FILED ALL TAX RETURNS OF THE COMPANY WHICH ARE FILED AFTER THE
CLOSING DATE.  PARENT SHALL PREPARE THE TAX RETURNS RELATING TO ANY PERIODS
PRIOR TO THE CLOSING DATE IN A MANNER CONSISTENT WITH PRIOR YEARS, EXCEPT AS
OTHERWISE REQUIRED BY APPLICABLE LAWS.  UPON THE REQUEST OF THE SHAREHOLDER
REPRESENTATIVES, PARENT SHALL PERMIT THE SHAREHOLDER REPRESENTATIVES A
REASONABLE OPPORTUNITY TO REVIEW AND COMMENT ON SUCH TAX RETURNS (I) AT LEAST
TEN (10) DAYS PRIOR TO FILING FOR INCOME TAX RETURNS AND (II) A REASONABLE
AMOUNT OF TIME AFTER SUCH TAX RETURNS HAVE BEEN PREPARED AND PRIOR TO FILING,
WHICH MAY BE LESS THAN TEN (10) DAYS, FOR ANY OTHER TAX RETURNS.

 

(B)                                 PARENT SHALL HAVE THE EXCLUSIVE AUTHORITY
AND SHALL BE RESPONSIBLE FOR THE CORRECT AND TIMELY FILING OF ALL TAX RETURNS OF
THE SURVIVING CORPORATION FOR ALL PERIODS AFTER THE CLOSING DATE (“POST-CLOSING
TAX PERIODS”).

 

(C)                                  IF THERE IS AN ADJUSTMENT FOR ANY PERIOD
ENDING ON OR PRIOR TO THE CLOSING DATE (“PRE-CLOSING TAX PERIOD”) WHICH RESULTS
IN AN INCREASE OR DECREASE IN TAXES FOR SUCH PERIOD THAT IS REALIZED BY PARENT
ON OR BEFORE THE SECOND ANNIVERSARY OF THE CLOSING DATE, THEN ALL REFUNDS OF AND
DEFICIENCIES IN TAXES ARISING FROM SUCH ADJUSTMENT SHALL BE FOR THE ACCOUNT OF
THE COMPANY COMMON SHAREHOLDERS.  ANY DEFICIENCIES IN TAXES FOR PRE-CLOSING TAX
PERIODS SHALL BE SUBJECT TO SECTION 6.10 AND ARTICLE X OF THIS AGREEMENT. 
WITHIN FIFTEEN (15) DAYS OF RECEIPT, THE SURVIVING CORPORATION SHALL PAY OVER TO
THE SHAREHOLDER REPRESENTATIVES (TO DISTRIBUTE TO THE

 

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Participating Shareholders) any refund of Taxes attributable to any Pre-Closing
Tax Period that is realized prior to the second anniversary of the Closing
Date.  If there is an adjustment for any Pre-Closing Tax Period which results in
an increase or decrease in Taxes for such period that is realized by Parent
after the second anniversary of the Closing Date, then all refunds of and
deficiencies in Taxes arising from such adjustment shall be for the account of
Parent.  Parent shall be responsible and liable for the timely payment of all
Taxes imposed on or with respect to the properties, income and operations of
Company for all Post-Closing Tax Periods.

 

(D)                                 PARENT SHALL HAVE THE SOLE RIGHT TO CONTROL
ANY AUDIT OR EXAMINATION BY ANY TAXING AUTHORITY, INITIATE ANY CLAIM FOR REFUND
OR AMEND ANY TAX RETURN, AND CONTEST, RESOLVE AND DEFEND AGAINST ANY ASSESSMENT
FOR ADDITIONAL TAXES, NOTICE OF TAX DEFICIENCY OR OTHER ADJUSTMENT OF TAXES OF,
OR RELATING TO, THE SURVIVING CORPORATION; PROVIDED, HOWEVER, THAT TO THE EXTENT
THAT THERE IS A TAX AUDIT OR TAX CONTEST RELATING TO TAXES THAT WILL RESULT IN A
CLAIM SUBJECT TO INDEMNIFICATION PURSUANT TO ARTICLE X, PARENT SHALL (I) GIVE
NOTICE TO THE SHAREHOLDER REPRESENTATIVES OF SUCH TAX AUDIT OR TAX CONTEST AND
OF THE MATTERS THAT COULD GIVE RISE TO INDEMNIFICATION, (II) ALLOW THE
SHAREHOLDER REPRESENTATIVES TO COMMENT ON SUCH MATTERS AND PROVIDE TO THE
SHAREHOLDER REPRESENTATIVES INFORMATION REASONABLY REQUESTED BY THE SHAREHOLDER
REPRESENTATIVES FOR PURPOSES OF EVALUATING SUCH MATTERS, (III) TO THE EXTENT
COMMENTS FROM THE SHAREHOLDER REPRESENTATIVES ARE RECEIVED, REASONABLY AND IN
GOOD FAITH CONSIDER SUCH COMMENTS, AND (IV) ALLOW THE SHAREHOLDER
REPRESENTATIVES AND THEIR COUNSEL, AT THE SOLE EXPENSE OF THE SHAREHOLDER
REPRESENTATIVES, TO PARTICIPATE IN ANY PROCEEDINGS RELATING TO SUCH MATTERS,
PROVIDED THAT PARENT AND THE SHAREHOLDER REPRESENTATIVES SHALL JOINTLY CONTROL
THE CONDUCT OF SUCH PROCEEDINGS ON TERMS MUTUALLY AGREEABLE TO PARENT AND THE
SHAREHOLDER REPRESENTATIVES.  PARENT SHALL NOT ENTER INTO ANY SETTLEMENT OF ANY
CONTEST OR OTHERWISE COMPROMISE ANY ISSUE THAT MAY HAVE AN ADVERSE EFFECT ON THE
TAX LIABILITY OF THE COMPANY SHAREHOLDERS OR THE COMPANY FOR ANY PRE-CLOSING TAX
PERIOD WITHOUT THE PRIOR WRITTEN CONSENT OF THE SHAREHOLDER REPRESENTATIVES,
WHICH CONSENT SHALL NOT BE UNREASONABLY WITHHELD OR DELAYED.

 

SECTION 8.10.  WORKER’S COMPENSATION INSURANCE

 

(A)                                  ON THE CLOSING DATE THE COMPANY WILL HAVE
IN PLACE INSURANCE WITH A WORKERS’ COMPENSATION CARRIER TO COVER WORKERS’
COMPENSATION CLAIMS THAT EXCEED THE RETAINED SELF-INSURED RISK OF $750,000 PER
OCCURRENCE.  THE PARTIES ACKNOWLEDGE THAT THE WORKERS’ COMPENSATION CARRIER
MAKES PREMIUM ADJUSTMENTS AT THE END OF THE POLICY YEAR.  THE ADJUSTMENT RESULTS
IN EITHER ADDITIONAL PREMIUM PAYMENTS OR A PARTIAL REFUND.  PARENT AND THE
SURVIVING CORPORATION EXPRESSLY AGREE THAT THEY WILL PAY ANY PREMIUM INCREASE
AND COMPANY AGREES THAT PARENT WILL RETAIN ANY REFUNDS ATTRIBUTABLE TO BUSINESS
CONDUCTED IN THE STATE OF WASHINGTON FOR THE POLICY YEARS BEGINNING ON JULY 1,
2004, AND DECEMBER 1, 2005 FOR ALL OTHER STATES.

 

(B)                                 ON MARCH 1, 2007, THE COMPANY ACTUARIAL
REVIEWER WILL PREPARE AND DELIVER TO PARENT AN ACTUARIAL REVIEW OF THE SURVIVING
CORPORATION’S WORKERS’ COMPENSATION CLAIMS PAID AND RESERVES HELD FOR WORKERS’
COMPENSATION CLAIMS (THE “ULTIMATES”) FOR THE POLICY YEARS BEGINNING NOVEMBER 1,
2000, NOVEMBER 1, 2001, NOVEMBER 1, 2002 AND DECEMBER 1, 2003, AND FOR THE
PORTION OF THE POLICY YEAR BEGINNING DECEMBER 1, 2004 THROUGH THE CLOSING

 

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Date.  For purposes of this Section 8.10, for the policy years beginning
November 1, 2000, November 1, 2001 and November 1, 2002, the Ultimates will be
calculated for the amounts below the retained $250,000 deductible per occurrence
and for the policy year beginning December 1, 2003, and for the portion of the
policy year beginning December 1, 2004 through the Closing Date, the Ultimates
will be calculated for the amounts below the retained $750,000 deductible per
occurrence.  The March 1, 2007, actuarial review will be calculated by using
loss run information known through December 31, 2006.  The actuarial review will
use the same methods employed by Deloitte Consulting LLP in its March 2005
report using the High-Selected Ultimates which report was effective as of
December 31, 2004 and was used to compute the Ultimates for the policy years
beginning November 1, 2000, November, 1, 2001, November 1, 2002 and December 1,
2003 and for December 2004.  The cost of such actuarial review will be paid by
Parent.  If Parent does not believe that the Company Actuarial Reviewer used the
proper calculation methods, then Parent must put the Shareholder Representatives
on notice of such position within ten (10) days of receipt of the report.  If
Parent puts the calculation method in dispute, such dispute will be resolved
pursuant to the dispute resolution procedures set forth in Section 10.3(d),
starting with the attempt in good faith to resolve the matter within 30 days
and, if unsuccessful, proceeding to arbitration.  If Parent does not put the
calculation method in dispute, then the Participating Shareholders will pay
Parent (i) the amount, if any, by which the amount of the Ultimates calculated
by the Company Actuarial Reviewer using loss run information known through
December 31, 2006 exceeds the amount of the Ultimates calculated by Deloitte
Consulting LLP as of December 31, 2004, for the policy years beginning
November 1, 2000, November, 1, 2001, November 1, 2002 and December 1, 2003, plus
(ii) the amount, if any, by which the amount of the Ultimates calculated by the
Company Actuarial Reviewer using loss run information known through December 31,
2006 for actual occurrences arising during the portion of the policy year
beginning December 1, 2004 through the Closing Date exceeds the Stub Amount.  If
such excess amount is $250,000 or less, then the Participating Shareholders will
not be required to pay Parent any amount pursuant to this Section 8.10.  Such
payment, if any, will be made by the release of funds from the Indemnity Escrow
to Parent and will be subject to the Liability Cap contained in Article X,
below.  If Parent puts the calculation method in dispute the parties agree that
such payment, if any, will be made by the release of funds from the Indemnity
Escrow to Parent within ten (10) days following resolution of the dispute. 
Parent agrees that for at least two (2) years following the Closing it will
continue to retain the Company’s third party administrator as of the Closing
Date to administer claims existing for the policy years beginning November 1,
2000, November 1, 2001, November 1, 2002 and December 1, 2003, and for the
portion of the policy year beginning December 1, 2004 through the Closing Date. 
The third party administrator shall continue to hold reserves and adjust the
reserves and settle workers’ compensation claims in a commercially reasonable
manner, consistent with past practices.  If the Company’s third party
administrator withdraws its services or is otherwise removed, then Parent and
the Shareholder Representatives shall mutually agree upon a replacement third
party administrator, which shall continue to adjust the reserves and settle
workers’ compensation claims in a commercially reasonable manner, consistent
with past practices of the prior third party administrator.

 

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(C)                                  ON MARCH 1, 2007, THE PARENT ACTUARIAL
REVIEWER WILL PREPARE AND DELIVER TO THE SHAREHOLDER REPRESENTATIVES AN
ACTUARIAL REVIEW CALCULATED BY USING LOSS RUN INFORMATION KNOWN THROUGH
DECEMBER 31, 2006.  THE REVIEW SHALL CONTAIN A CALCULATION OF THE ULTIMATES FOR
THE POLICY YEARS BEGINNING NOVEMBER 1, 2000, NOVEMBER 1, 2001, NOVEMBER 1, 2002
AND DECEMBER 1, 2003, AND FOR THE PORTION OF THE POLICY YEAR BEGINNING
DECEMBER 1, 2004 THROUGH THE CLOSING DATE.  THE COST OF SUCH ACTUARIAL REVIEW
WILL BE PAID  BY PARENT.  IF THE SHAREHOLDER REPRESENTATIVES DO NOT BELIEVE THAT
THE PARENT ACTUARIAL REVIEWER USED THE PROPER CALCULATION METHODS THEN THE
SHAREHOLDER REPRESENTATIVES MUST PUT PARENT ON NOTICE OF SUCH POSITION WITHIN
TEN (10) DAYS OF RECEIPT OF THE REPORT.  IF THE SHAREHOLDER REPRESENTATIVES PUT
THE CALCULATION METHOD IN DISPUTE, SUCH DISPUTE WILL BE RESOLVED PURSUANT TO THE
DISPUTE RESOLUTION PROCEDURES SET FORTH IN SECTION 10.3(D), STARTING WITH THE
ATTEMPT IN GOOD FAITH TO RESOLVE THE MATTER WITHIN 30 DAYS AND, IF UNSUCCESSFUL,
PROCEEDING TO ARBITRATION.  IF THE ULTIMATES CALCULATED BY THE PARENT ACTUARIAL
REVIEWER USING LOSS RUN INFORMATION KNOWN THROUGH DECEMBER 31, 2006 ARE LESS
THAN THE SUM OF THE AMOUNT OF THE ULTIMATES CALCULATED BY DELOITTE CONSULTING,
LLP AS OF DECEMBER 31, 2004 FOR THE POLICY YEARS BEGINNING NOVEMBER 1, 2000,
NOVEMBER 1, 2001, NOVEMBER 1, 2002 AND DECEMBER 1, 2003, PLUS THE STUB AMOUNT,
THEN WITHIN TEN (10) DAYS AFTER DELIVERY OF THE REVIEW, PARENT WILL DELIVER TO
THE PAYING AGENT FOR DISTRIBUTION TO THE PARTICIPATING SHAREHOLDERS CASH IN THE
AMOUNT OF SUCH DIFFERENCE.  IF THE SHAREHOLDER REPRESENTATIVES PUT THE
CALCULATION IN DISPUTE PARENT WILL DELIVER THE PAYMENT, IF ANY, WITHIN TEN
(10) DAYS FOLLOWING RESOLUTION OF THE DISPUTE.  ANY AMOUNTS THAT ARE OWED BY
PARENT TO THE PARTICIPATING SHAREHOLDERS PURSUANT TO THIS SECTION 8.10(C) WILL
BE OFFSET AGAINST ANY AMOUNTS PARENT IS ENTITLED TO RECEIVE FROM THE INDEMNITY
ESCROW PURSUANT TO SECTION 8.10(B).

 

(D)                                 FOR ANY CALCULATION REQUIRED IN SECTIONS
8.10(B) OR (C), ABOVE, THE DEATH OF MR. JORDON ANDERSON SHALL NOT BE TAKEN INTO
ACCOUNT AND ALL ULTIMATES RELATED TO SUCH DEATH SHALL BE EXCLUDED.

 

ARTICLE IX

 

CONDITIONS

 

SECTION 9.1.  Conditions to Each Party’s Obligation to Effect the Merger. 
Unless waived by the parties in writing, the respective obligations of each
party to effect the Merger shall be subject to the fulfillment at or prior to
the Closing of the following conditions:

 

(A)                                  THIS AGREEMENT AND THE TRANSACTIONS
CONTEMPLATED HEREBY, AS APPROPRIATE, SHALL HAVE BEEN APPROVED AND ADOPTED BY THE
REQUISITE VOTE OF THE COMPANY COMMON SHAREHOLDERS UNDER APPLICABLE LAW AND SUCH
REQUISITE VOTE SHALL INCLUDE THE APPROVAL OF BAIRD CAPITAL PARTNERS II LIMITED
PARTNERSHIP, BCP II AFFILIATES FUND LIMITED PARTNERSHIP AND WILLIAM BLAIR
CAPITAL PARTNERS VI, LP (THE “INVESTOR SHAREHOLDERS”);

 

(B)                                 NO PRELIMINARY OR PERMANENT INJUNCTION OR
OTHER ORDER OR DECREE BY ANY FEDERAL OR STATE COURT WHICH PREVENTS THE
CONSUMMATION OF THE MERGER SHALL HAVE BEEN ISSUED AND

 

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remain in effect (each party agreeing to use its commercially reasonable efforts
to have any such injunction, order or decree lifted);

 

(C)                                  NO ACTION SHALL HAVE BEEN TAKEN, AND NO LAW
SHALL HAVE BEEN ENACTED, BY ANY GOVERNMENTAL AUTHORITY IN THE UNITED STATES
WHICH WOULD PREVENT THE CONSUMMATION OF THE MERGER OR MAKE THE CONSUMMATION OF
THE MERGER ILLEGAL;

 

(D)                                 ALL MATERIAL GOVERNMENTAL WAIVERS, CONSENTS,
ORDERS AND APPROVALS, DOMESTIC OR FOREIGN, LEGALLY REQUIRED FOR THE CONSUMMATION
OF THE MERGER AND THE TRANSACTIONS CONTEMPLATED HEREBY SHALL HAVE BEEN OBTAINED
AND BE IN EFFECT AT THE EFFECTIVE TIME, INCLUDING, WITHOUT LIMITATION, THE
FILING OF THE ARTICLES OF MERGER WITH THE SECRETARY OF STATE OF THE STATE OF
NEVADA;

 

(E)                                  THE SHAREHOLDER REPRESENTATIVES (ON BEHALF
OF THE COMPANY COMMON SHAREHOLDERS), PARENT AND THE ESCROW AGENT SHALL HAVE
ENTERED INTO THE ESCROW AGREEMENT, WHICH IS ATTACHED HERETO AS
EXHIBIT 9.1(E) (THE “ESCROW AGREEMENT”);

 

(F)                                    THERE SHALL NOT BE ANY PENDING ACTION,
PROCEEDING OR INVESTIGATION BEFORE ANY GOVERNMENTAL AUTHORITY OR ANY OTHER
PERSON (I) CHALLENGING OR SEEKING MATERIAL DAMAGES IN CONNECTION WITH THE
MERGER, OR (II) SEEKING TO RESTRAIN, PROHIBIT OR LIMIT THE EXERCISE OF FULL
RIGHTS OF OWNERSHIP OR OPERATION BY PARENT OR ITS SUBSIDIARIES OF ALL OR ANY
PORTION OF THE BUSINESS OR ASSETS OF THE COMPANY OR ANY COMPANY SUBSIDIARY,
WHICH IN EITHER CASE IS REASONABLY LIKELY TO HAVE A COMPANY MATERIAL ADVERSE
EFFECT OR A MATERIAL ADVERSE AFFECT ON THE SURVIVING CORPORATION, IN EACH CASE,
TAKEN AS A WHOLE;

 

(G)                                 THE COMPANY SHALL HAVE REDEEMED ALL OF THE
COMPANY PREFERRED STOCK FROM THE COMPANY PREFERRED SHAREHOLDERS PURSUANT TO
SECTION 2.3, ABOVE;

 

(H)                                 THE SHAREHOLDER REPRESENTATIVES (ON BEHALF
OF THE COMPANY COMMON SHAREHOLDERS), THE COMPANY, PARENT AND THE PAYING AGENT
SHALL HAVE ENTERED INTO THE PAYING AGENT AGREEMENT, WHICH IS ATTACHED HERETO AS
EXHIBIT 9.1(H) (THE “PAYING AGENT AGREEMENT”);

 

(I)                                     THE COMPANY SHALL HAVE DISTRIBUTED THE
ESTIMATED CLOSING CASH IN CONNECTION WITH THE REDEMPTION OF THE COMPANY
PREFERRED STOCK PURSUANT TO SECTION 2.3(B), ABOVE; AND

 

(J)                                     THE COMPANY SHALL HAVE OBTAINED THE
COMPANY COMMON SHAREHOLDER APPROVAL.

 

SECTION 9.2.  Additional Conditions to Obligation of the Company to Effect the
Merger.  Unless waived by the Company in writing, the obligation of the Company
to effect the Merger shall be subject to the fulfillment at or prior to the
Closing of the following additional conditions:

 

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(A)                                  PARENT AND SUBSIDIARY SHALL HAVE PERFORMED
IN ALL MATERIAL RESPECTS THEIR AGREEMENTS CONTAINED IN THIS AGREEMENT REQUIRED
TO BE PERFORMED ON OR PRIOR TO THE CLOSING DATE AND THE REPRESENTATIONS AND
WARRANTIES OF PARENT AND SUBSIDIARY CONTAINED IN THIS AGREEMENT SHALL BE TRUE
AND CORRECT IN ALL MATERIAL RESPECTS ON AND AS OF THE DATE MADE AND ON AND AS OF
THE CLOSING DATE, EXCEPT FOR THOSE REPRESENTATIONS AND WARRANTIES WHICH ADDRESS
MATTERS ONLY AS OF A PARTICULAR DATE (WHICH SHALL REMAIN TRUE AND CORRECT AS OF
SUCH DATE), AS IF MADE AT AND AS OF SUCH DATE, AND THE COMPANY SHALL HAVE
RECEIVED A CERTIFICATE OF PARENT SIGNED BY AN AUTHORIZED OFFICER OF PARENT, IN
FORM AND SUBSTANCE REASONABLY SATISFACTORY TO THE COMPANY, TO THAT EFFECT;

 

(B)                                 ALL WAIVERS, CONSENTS, ORDERS,
AUTHORIZATIONS, AND APPROVALS REQUIRED TO BE OBTAINED, AND ALL FILINGS REQUIRED
TO BE MADE BY PARENT AND/OR SUBSIDIARY FOR THE AUTHORIZATION, EXECUTION AND
DELIVERY OF THIS AGREEMENT AND THE CONSUMMATION BY PARENT AND SUBSIDIARY OF THE
TRANSACTIONS CONTEMPLATED HEREBY SHALL HAVE BEEN OBTAINED AND MADE BY PARENT AND
SUBSIDIARY, INCLUDING, WITHOUT LIMITATION PARENT REQUIRED STATUTORY APPROVALS,
EXCEPT WHERE THE FAILURE TO OBTAIN THE WAIVERS, CONSENTS, ORDERS, AUTHORIZATIONS
OR APPROVALS REQUIRED TO BE OBTAINED OR ANY FILINGS REQUIRED TO BE MADE WOULD
NOT HAVE A PARENT MATERIAL ADVERSE EFFECT, TAKEN AS A WHOLE;

 

(C)                                  PARENT SHALL HAVE DELIVERED OR CAUSE TO BE
DELIVERED TO THE COMPANY (OR, IN THE CASE OF CLAUSE (I), BELOW, TO THE PAYING
AGENT AND IN THE CASE OF CLAUSE (II), BELOW, TO THE ESCROW AGENT) THE FOLLOWING:

 

(I)                                     THE REMAINING REDEMPTION PAYMENT, ON
BEHALF OF THE SURVIVING CORPORATION, AS SPECIFIED IN SECTION 2.3, ABOVE, AND THE
MERGER PAYMENT FUND AS SPECIFIED IN SECTION 4.4(B), ABOVE;

 

(II)                                  THE ADJUSTMENT ESCROW AND THE INDEMNITY
ESCROW AS SPECIFIED IN SECTION 4.4(B), ABOVE;

 

(III)                               A CERTIFICATE FROM AN AUTHORIZED OFFICER OF
PARENT, IN A FORM SATISFACTORY TO THE COMPANY, SETTING FORTH THE RESOLUTIONS OF
THE BOARD OF DIRECTORS OF PARENT AUTHORIZING THE EXECUTION OF THIS AGREEMENT AND
ALL AGREEMENTS, DOCUMENTS AND INSTRUMENTS TO BE EXECUTED IN CONNECTION HEREWITH
AND THE TAKING OF ANY AND ALL ACTIONS DEEMED NECESSARY OR ADVISABLE TO
CONSUMMATE THE TRANSACTIONS CONTEMPLATED HEREIN;

 

(IV)                              THE CERTIFICATE OF PARENT REQUIRED TO BE
DELIVERED PURSUANT TO SECTION 9.2(A), ABOVE; AND

 

(V)                                 A LEGAL OPINION OF PRESTON GATES & ELLIS
LLP, DATED THE CLOSING DATE, COVERING SUCH MATTERS AS ARE CUSTOMARY FOR
TRANSACTIONS OF THIS NATURE IN FORM AND CONTENT ACCEPTABLE TO THE COMPANY AND
ITS COUNSEL IN THE FORM ATTACHED HERETO AS EXHIBIT 9.2(C)(V);

 

(VI)                              A CERTIFICATE FROM AN AUTHORIZED OFFICER OF
SUBSIDIARY, IN A FORM SATISFACTORY TO THE COMPANY, SETTING FORTH THE RESOLUTIONS
OF THE BOARD OF DIRECTORS OF SUBSIDIARY AND A CONSENT OF THE SOLE SHAREHOLDER OF
SUBSIDIARY AUTHORIZING THE EXECUTION

 

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OF THIS AGREEMENT AND ALL AGREEMENTS, DOCUMENTS AND INSTRUMENTS TO BE EXECUTED
IN CONNECTION HEREWITH AND THE TAKING OF ANY AND ALL ACTIONS DEEMED NECESSARY OR
ADVISABLE TO CONSUMMATE THE TRANSACTIONS CONTEMPLATED HEREIN;

 

(VII)                           THE ESCROW AGREEMENT, DULY EXECUTED BY PARENT
AND THE ESCROW AGENT; AND

 

(VIII)                        THE PAYING AGENT AGREEMENT, DULY EXECUTED BY
PARENT AND THE PAYING AGENT.

 

(D)                                 NO GOVERNMENTAL AUTHORITY SHALL HAVE
PROMULGATED ANY STATUTE, RULE OR REGULATION WHICH, WHEN TAKEN TOGETHER WITH ALL
SUCH PROMULGATIONS, WOULD MATERIALLY IMPAIR THE VALUE OF THE MERGER TO THE
COMPANY COMMON SHAREHOLDERS.

 

(E)                                  THE PRINCIPAL TERMS OF THE MERGER SHALL
HAVE BEEN DULY APPROVED BY THE COMPANY COMMON SHAREHOLDERS IN ACCORDANCE WITH
APPLICABLE LAW.

 

SECTION 9.3.  Additional Conditions to Obligations of Parent and Subsidiary to
Effect the Merger.  Unless waived by Parent and Subsidiary in writing, the
obligations of Parent and Subsidiary to effect the Merger shall be subject to
the fulfillment at or prior to the Closing of the following additional
conditions:

 

(A)                                  THE COMPANY SHALL HAVE PERFORMED IN ALL
MATERIAL RESPECTS ITS AGREEMENTS CONTAINED IN THIS AGREEMENT REQUIRED TO BE
PERFORMED ON OR PRIOR TO THE CLOSING DATE AND THE REPRESENTATIONS AND WARRANTIES
OF THE COMPANY CONTAINED IN THIS AGREEMENT SHALL BE TRUE AND CORRECT IN ALL
MATERIAL RESPECTS ON AND AS OF THE DATE MADE AND ON AND AS OF THE CLOSING DATE,
EXCEPT FOR THOSE REPRESENTATIONS AND WARRANTIES WHICH ADDRESS MATTERS ONLY AS OF
A PARTICULAR DATE (WHICH SHALL REMAIN TRUE AND CORRECT AS OF SUCH DATE), AS IF
MADE AT AND AS OF SUCH DATE, AND PARENT SHALL HAVE RECEIVED A CERTIFICATE OF THE
COMPANY SIGNED BY AN AUTHORIZED OFFICER OF THE COMPANY, IN FORM AND SUBSTANCE
REASONABLY SATISFACTORY TO PARENT, TO THAT EFFECT;

 

(B)                                 SINCE THE DATE HEREOF, THERE SHALL HAVE BEEN
NO CHANGES THAT CONSTITUTE, AND NO EVENT OR EVENTS SHALL HAVE OCCURRED, WHICH,
TAKEN AS A WHOLE, HAVE RESULTED IN OR CONSTITUTE OR MAY BE REASONABLY EXPECTED
TO RESULT IN OR CONSTITUTE, MONETARY LOSS RELATING TO THE FINANCIAL CONDITION,
BUSINESS, PROPERTIES, ASSETS OR OPERATIONS OF THE COMPANY AND THE COMPANY
SUBSIDIARIES WHICH EXCEEDS $500,000;

 

(C)                                  ALL WAIVERS, CONSENTS, ORDERS,
AUTHORIZATIONS, AND APPROVALS REQUIRED TO BE OBTAINED, AND ALL FILINGS REQUIRED
TO BE MADE BY THE COMPANY FOR THE AUTHORIZATION, EXECUTION AND DELIVERY OF THIS
AGREEMENT AND THE CONSUMMATION BY THE COMPANY OF THE TRANSACTIONS CONTEMPLATED
HEREBY SHALL HAVE BEEN OBTAINED AND MADE BY THE COMPANY, EXCEPT WHERE THE
FAILURE TO OBTAIN THE WAIVERS, CONSENTS, ORDERS, AUTHORIZATIONS, OR APPROVALS
REQUIRED TO BE OBTAINED OR ANY FILINGS REQUIRED TO BE MADE, TAKEN AS A WHOLE,
WOULD NOT RESULT IN OR BE REASONABLY EXPECTED TO RESULT IN MONETARY LOSS
RELATING TO THE FINANCIAL CONDITION, BUSINESS,

 

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PROPERTIES, ASSETS OR OPERATIONS OF THE COMPANY AND THE COMPANY SUBSIDIARIES
WHICH EXCEEDS $500,000;

 

(D)                                 NO GOVERNMENTAL AUTHORITY SHALL HAVE
PROMULGATED ANY STATUTE, RULE OR REGULATION WHICH, WHEN TAKEN TOGETHER WITH ALL
SUCH PROMULGATIONS, WOULD MATERIALLY IMPAIR THE VALUE TO PARENT OF THE MERGER;

 

(E)                                  THE COMPANY SHALL HAVE DELIVERED OR CAUSED
TO BE DELIVERED TO PARENT AND SUBSIDIARY AT OR PRIOR TO THE CLOSING THE
FOLLOWING:

 

(I)                                     THE CERTIFICATE OF THE COMPANY REQUIRED
TO BE DELIVERED PURSUANT TO SECTION 9.3(A), ABOVE;

 

(II)                                  CONSTRUCTIVE POSSESSION OF THE COMPLETE
BOOKS AND RECORDS RELATING TO THE BUSINESS OF THE COMPANY AND THE COMPANY
SUBSIDIARIES;

 

(III)                               PARENT SHALL HAVE RECEIVED AN OPINION FROM
THE LAW FIRM OF GODFREY & KAHN, S.C., INDEPENDENT COUNSEL TO THE COMPANY,
EFFECTIVE AS OF THE CLOSING DATE, COVERING SUCH MATTERS AS ARE CUSTOMARY FOR
TRANSACTIONS OF THIS NATURE IN FORM AND CONTENT ACCEPTABLE TO PARENT IN THE FORM
ATTACHED HERETO AS EXHIBIT 9.3(E)(III);

 

(IV)                              A CERTIFICATE FROM AN AUTHORIZED OFFICER OF
THE COMPANY, IN A FORM REASONABLY SATISFACTORY TO PARENT, SETTING FORTH THE
RESOLUTIONS OF THE BOARD OF DIRECTORS OF THE COMPANY AND THE COMPANY COMMON
SHAREHOLDERS (TOGETHER WITH THE INVESTOR SHAREHOLDERS) AUTHORIZING THE MERGER
AND THE EXECUTION OF THIS AGREEMENT AND ALL AGREEMENTS, DOCUMENTS AND
INSTRUMENTS TO BE EXECUTED IN CONNECTION HEREWITH AND THE TAKING OF ANY AND ALL
ACTIONS DEEMED NECESSARY OR ADVISABLE TO CONSUMMATE THE TRANSACTIONS
CONTEMPLATED HEREIN;

 

(V)                                 RESIGNATIONS OF ALL INCUMBENT OFFICERS AND
DIRECTORS OF THE COMPANY AND THE COMPANY SUBSIDIARIES FROM THEIR POSITION AS
SUCH EFFECTIVE AS OF THE CLOSING, EXCEPT AS PARENT SHALL OTHERWISE DESIGNATE;

 

(VI)                              THE ESCROW AGREEMENT, DULY EXECUTED BY THE
COMPANY, THE SHAREHOLDER REPRESENTATIVES AND THE ESCROW AGENT;

 

(VII)                           THE PAYING AGENT AGREEMENT, DULY EXECUTED BY THE
COMPANY, THE SHAREHOLDER REPRESENTATIVES AND THE PAYING AGENT;

 

(VIII)                        AN EMPLOYMENT AGREEMENT, IN A FORM REASONABLY
SATISFACTORY TO PARENT, BETWEEN THE COMPANY AND THE INDIVIDUALS SET FORTH ON
SCHEDULE 9.3(E)(VIII), DULY EXECUTED BY THE COMPANY;

 

(IX)                                A NON-COMPETITION AGREEMENT AND RELEASE, IN
THE FORM ATTACHED AS EXHIBIT 9.3(E)(IX)(A), BETWEEN THE COMPANY AND THE
INDIVIDUALS SET FORTH ON SCHEDULE 9.3(E)(IX)(A),

 

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DULY EXECUTED BY ALL PARTIES TO SUCH AGREEMENT; AND A NON-SOLICITATION AGREEMENT
AND RELEASE, IN THE FORM ATTACHED AS EXHIBIT 9.3(E)(IX)(B), BETWEEN THE COMPANY
AND THE PERSONS SET FORTH ON SCHEDULE 9.3(E)(IX)(B), DULY EXECUTED BY THE
PARTIES TO SUCH AGREEMENTS;

 

(X)                                   [INTENTIONALLY OMITTED]; AND

 

(XI)                                A GOOD STANDING CERTIFICATE FOR THE COMPANY
FROM THE SECRETARY OF STATE OF THE STATE OF NEVADA AND EACH OTHER JURISDICTION
WHERE THE COMPANY IS QUALIFIED TO DO BUSINESS, OTHER THAN THE STATE OF TEXAS,
AND GOOD STANDING CERTIFICATES FOR EACH COMPANY SUBSIDIARY FROM THE SECRETARY OF
STATE OF THE STATE OF DELAWARE AND EACH OTHER JURISDICTION WHERE SUCH COMPANY
SUBSIDIARY IS QUALIFIED TO DO BUSINESS, OTHER THAN THE STATE OF MASSACHUSETTS,
EACH DATED AS OF A DATE WITHIN TEN (10) DAYS PRECEDING THE CLOSING DATE, EXCEPT
FOR GOOD STANDING CERTIFICATES FROM SECRETARY OF STATE OF CALIFORNIA AND
VERMONT, WHICH ARE DATED AS OF MAY 6, 2005 AND MAY 2, 2005, RESPECTIVELY.

 

ARTICLE X

 

INDEMNITY

 

SECTION 10.1.  Indemnification of Parent and Subsidiary After Effective Time. 
From and after the Effective Time, the Indemnity Escrow shall be available to
defend, indemnify and hold harmless Parent and the Surviving Corporation and any
of their affiliates, directors, officers, agents and employees from and against
any and all actual, out-of-pocket damages, losses, liabilities, deficiencies,
actions, demands, claims, suits, judgments, costs and expenses (including
reasonable attorneys’ and accountants’ fees, but excluding incidental, punitive,
speculative, lost opportunity, multiple of profits and consequential or special
damages of any nature) (collectively “Losses”) of or against Parent and/or the
Surviving Corporation resulting from:  (a) any misrepresentation or breach of
representation or warranty on the part of the Company in this Agreement or in
any document or agreement executed and/or delivered by the Company or the
Company Shareholders pursuant hereto, which shall be determined in each case
without giving effect to any materiality limitations or references to Company
Material Adverse Effect set forth therein; (b) any breach or nonfulfillment of
any agreement or covenant contained herein or in any certificate, document or
instrument delivered on the part of the Company or the Company Shareholders;
(c) any amounts due to Parent in excess of the Adjustment Escrow not covered by
the Participating Shareholders pursuant to Section 4.5(b); (d) any amounts due
by the Surviving Corporation or Parent, including costs and expenses, in respect
of Company Common Shareholders who exercise dissenter rights in excess of the
Distribution Share relating to such shareholders; (e) any amounts paid by Parent
or the Surviving Corporation that Parent and the Surviving Corporation are
entitled to recover pursuant to Section 8.6(a); and (f) any amounts paid by the
Surviving Corporation or its affiliates after Closing in connection with the
following pending lawsuits: CLP v. ConWest Group and Bealle/Ellwood v. CLP and
any amounts paid by the Surviving Corporation or its affiliates after Closing in
connection with the death of Mr. Jordon Anderson (collectively with CLP v.
ConWest and

 

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Bealle/Ellwood v. CLP, the “Pending Claims”), irrespective of disclosure
thereof.  In addition to the preceding sentence, the Indemnity Escrow shall be
used to pay any amounts owed by the Participating Shareholders to Parent
pursuant to Section 8.10(b), which payments shall be governed by
Section 8.10(b) and not this Article X, except as specifically provided in
Section 8.10(b).  Any claim for indemnification under this Section 10.1 shall be
satisfied in accordance with the procedures set forth in this Article X.  No
claim for indemnification made by Parent and/or the Surviving Corporation shall
be payable unless the Shareholder Representatives shall have received a Claim
Notice on or before the expiration of the Indemnity Escrow Period except for
breaches of Sections 6.11 and 6.12 (solely for wage laws), above, for which a
Claim Notice may be filed until the three (3) year anniversary of the Closing
Date and except for Pending Claims, claims  for fraud or breaches of Sections
6.1, 6.2, 6.3, 6.4(a) and 6.10, above, for which a Claim Notice may be filed
until the expiration of the relevant statute of limitations period, if any.

 

SECTION 10.2.  Indemnification of the Company Common Shareholders.  From and
after the Effective Time, Parent and Subsidiary shall jointly and severally
defend, indemnify and hold harmless the Participating Shareholders from and
against any and all Losses resulting from:  (a) any misrepresentation or breach
of warranty on the part of Parent and/or Subsidiary in this Agreement or in any
document or agreement executed and/or delivered by Parent and/or Subsidiary
pursuant hereto, which shall be determined in each case without giving effect to
any materiality limitations or references to material adverse effect set forth
therein; and (b) any breach or nonfulfillment of any agreement or covenant
contained herein or in any certificate, document or instrument delivered
hereunder on the part of Parent and/or Subsidiary.  No claim for indemnification
made by the Participating Shareholders shall be payable unless Parent shall have
received a Claim Notice on or before the expiration of the Indemnity Escrow
Period except for claims for fraud or breaches of Sections 5.1 and 5.2, above,
for which a Claim Notice may be filed until the expiration of the relevant
statute of limitations period, if any.

 

SECTION 10.3.  Procedure Relative to Indemnification

 

(A)                                  IN THE EVENT THAT ANY PARTY HERETO SHALL
CLAIM THAT IT IS ENTITLED TO BE INDEMNIFIED PURSUANT TO THE TERMS OF THIS
ARTICLE X, SUCH PARTY (THE “CLAIMING PARTY”) SHALL NOTIFY THE PARTY AGAINST
WHICH THE CLAIM IS MADE (THE “INDEMNIFYING PARTY”) IN WRITING (A “CLAIM NOTICE”)
OF SUCH CLAIM PROMPTLY AFTER THE CLAIMING PARTY RECEIVES NOTICE OF ANY LEGAL
PROCEEDING OR OTHERWISE HAS RECEIVED NOTICE OF ANY CLAIM OF A THIRD PARTY (A
“THIRD PARTY CLAIM”) THAT MAY REASONABLY BE EXPECTED TO RESULT IN A CLAIM FOR
INDEMNIFICATION BY THE CLAIMING PARTY AGAINST THE INDEMNIFYING PARTY.  THE CLAIM
NOTICE SHALL SPECIFY THE BREACH OF WARRANTY, REPRESENTATION, AGREEMENT OR
COVENANT CLAIMED BY THE CLAIMING PARTY AND THE LOSSES INCURRED BY, OR IMPOSED
UPON, THE CLAIMING PARTY ON ACCOUNT THEREOF.  IF SUCH LOSSES ARE LIQUIDATED IN
AMOUNT, THE CLAIM NOTICE SHALL SO STATE AND SUCH AMOUNT SHALL BE DEEMED THE
AMOUNT OF THE CLAIM OF THE CLAIMING PARTY.  IF SUCH LOSSES ARE NOT LIQUIDATED,
THE CLAIM NOTICE SHALL SO STATE AND, IN SUCH EVENT, A CLAIM SHALL BE DEEMED
ASSERTED AGAINST THE INDEMNIFYING PARTY ON BEHALF OF THE CLAIMING PARTY, BUT NO
PAYMENT SHALL BE MADE ON ACCOUNT THEREOF UNTIL THE CLAIM IS DEFINITIVELY
RESOLVED.

 

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(B)                                 THE FOLLOWING PROVISIONS SHALL APPLY TO
CLAIMS OF THE CLAIMING PARTY WHICH ARE BASED UPON A THIRD PARTY CLAIM (INCLUDING
ANY FORM OF LEGAL PROCEEDING OR ASSESSMENT INSTITUTED BY A GOVERNMENTAL
AUTHORITY):

 

(I)                                     THE INDEMNIFYING PARTY SHALL HAVE THE
RIGHT, UPON RECEIPT OF THE CLAIM NOTICE AND AT ITS EXPENSE, TO DEFEND SUCH THIRD
PARTY CLAIM IN ITS OWN NAME OR, IF NECESSARY, IN THE NAME OF THE CLAIMING
PARTY.  THE CLAIMING PARTY SHALL COOPERATE WITH AND MAKE AVAILABLE TO THE
INDEMNIFYING PARTY SUCH ASSISTANCE AND MATERIALS AS MAY BE REASONABLY REQUESTED
OF THE CLAIMING PARTY, AND THE CLAIMING PARTY SHALL HAVE THE RIGHT, AT THE
CLAIMING PARTY’S EXPENSE, TO PARTICIPATE IN THE DEFENSE.  THE INDEMNIFYING PARTY
SHALL HAVE THE RIGHT TO SETTLE AND COMPROMISE SUCH THIRD PARTY CLAIM ONLY WITH
THE PRIOR WRITTEN CONSENT OF THE CLAIMING PARTY (WHICH CONSENT SHALL NOT BE
UNREASONABLY WITHHELD OR DELAYED).

 

(II)                                  REGARDLESS OF WHETHER THE INDEMNIFYING
PARTY ELECTS TO DEFEND THE THIRD PARTY CLAIM, THE INDEMNIFYING PARTY SHALL ALSO
HAVE THE RIGHT WITHIN 30 DAYS FROM RECEIPT OF THE CLAIM NOTICE TO NOTIFY THE
CLAIMING PARTY THAT THE INDEMNIFYING PARTY DISPUTES THE MERITS OF THE THIRD
PARTY CLAIM AND/OR THAT THE THIRD PARTY CLAIM IS THE SUBJECT OF INDEMNIFICATION
HEREUNDER.  SUCH DISPUTE SHALL NOT AFFECT THE INDEMNIFYING PARTY’S RIGHT TO
DEFEND THE THIRD PARTY CLAIM UNDER SUBSECTION (I), ABOVE.  ANY SUCH DISPUTE
SHALL BE RESOLVED PURSUANT TO THE DISPUTE RESOLUTION PROCEDURES SET FORTH IN
SECTION 10.3(D), BELOW.

 

(III)                               IN THE EVENT THE INDEMNIFYING PARTY SHALL
NOTIFY THE CLAIMING PARTY THAT THE INDEMNIFYING PARTY DOES NOT WISH TO DEFEND,
OR FAILS TO ADEQUATELY DEFEND, SUCH THIRD PARTY CLAIM, THEN THE CLAIMING PARTY
SHALL HAVE THE RIGHT TO CONDUCT A DEFENSE AGAINST SUCH THIRD PARTY CLAIM IN SUCH
MANNER AS IT MAY DEEM APPROPRIATE AND SEEK INDEMNIFICATION PURSUANT TO THIS
ARTICLE X AS TO ANY LOSSES.

 

(C)                                  UPON RECEIPT OF A CLAIM NOTICE THAT DOES
NOT INVOLVE A THIRD PARTY CLAIM, THE INDEMNIFYING PARTY SHALL HAVE 30 DAYS FROM
THE RECEIPT OF SUCH CLAIM NOTICE TO NOTIFY THE CLAIMING PARTY THAT THE
INDEMNIFYING PARTY DISPUTES SUCH CLAIM.  IF THE INDEMNIFYING PARTY DOES NOT
TIMELY NOTIFY THE CLAIMING PARTY OF SUCH DISPUTE, THEN THE AMOUNT OF SUCH CLAIM
SHALL BE DEEMED, CONCLUSIVELY, A LIABILITY OF THE INDEMNIFYING PARTY HEREUNDER. 
IF THE INDEMNIFYING PARTY DOES TIMELY NOTIFY THE CLAIMING PARTY OF SUCH DISPUTE,
THEN SUCH DISPUTE SHALL BE RESOLVED PURSUANT TO THE DISPUTE RESOLUTION
PROCEDURES SET FORTH IN SECTION 10.3(D), BELOW.

 

(D)                                 IN THE EVENT THE INDEMNIFYING PARTY TIMELY
NOTIFIES THE CLAIMING PARTY OF A DISPUTE WITH RESPECT TO A CLAIM PURSUANT TO
SECTION 10.3(B)(II) OR SECTION 10.3(C), ABOVE, THE CLAIMING PARTY SHALL HAVE
30 DAYS AFTER RECEIVING NOTICE OF SUCH DISPUTE TO RESPOND IN A WRITTEN STATEMENT
TO THE OBJECTION OF THE INDEMNIFYING PARTY.  IF AFTER SUCH 30-DAY PERIOD THERE
REMAINS A DISPUTE AS TO ANY SUCH CLAIM, THEN THE CLAIMING PARTY AND THE
INDEMNIFYING PARTY SHALL ATTEMPT IN GOOD FAITH FOR A PERIOD NOT TO EXCEED 30
ADDITIONAL DAYS TO AGREE UPON THE RIGHTS OF THE RESPECTIVE PARTIES WITH RESPECT
TO SUCH CLAIM.  IF THE PARTIES SHOULD SO AGREE, A MEMORANDUM SETTING FORTH

 

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SUCH AGREEMENT SHALL BE PREPARED AND SIGNED BY BOTH PARTIES AND DELIVERED TO THE
ESCROW AGENT.  IF THE PARTIES DO NOT AGREE WITHIN SUCH ADDITIONAL 30-DAY PERIOD,
THEN THE MATTER SHALL BECOME AN “ARBITRABLE CLAIM” AND SHALL BE SUBMITTED TO
ARBITRATION PURSUANT TO THE FOLLOWING PROCEDURES:

 

(I)                                     ANY ARBITRABLE CLAIM UNDER THIS
AGREEMENT SHALL BE SUBMITTED TO FINAL AND BINDING ARBITRATION IN DENVER,
COLORADO, WHICH ARBITRATION SHALL, EXCEPT AS HEREIN SPECIFICALLY STATED, BE
CONDUCTED IN ACCORDANCE WITH THE COMMERCIAL ARBITRATION RULES OF THE AMERICAN
ARBITRATION ASSOCIATION (THE “AAA RULES”) THEN IN EFFECT; PROVIDED, HOWEVER,
THAT IN THE EVENT OF AN ARBITRATION, THE ARBITRATION PROVISIONS OF THIS
AGREEMENT SHALL GOVERN OVER ANY CONFLICTING RULES WHICH MAY NOW OR HEREAFTER BE
CONTAINED IN THE AAA RULES.

 

(II)                                  THE FINAL DECISION OF THE ARBITRATOR SHALL
BE FURNISHED IN WRITING TO PARENT AND THE SHAREHOLDER REPRESENTATIVES AND SHALL
CONTAIN THE ARBITRATOR’S CONCLUSIONS AND RATIONALE FOR THOSE CONCLUSIONS, SHALL
BE BASED ON APPLICABLE LAW, AND SHALL CONSTITUTE A CONCLUSIVE DETERMINATION OF
THE ISSUE IN QUESTION, BINDING UPON THE PARTIES TO THIS AGREEMENT AND THE
PARTICIPATING SHAREHOLDERS.  THE ARBITRATOR SHALL HAVE THE AUTHORITY TO GRANT
ANY EQUITABLE AND LEGAL REMEDIES THAT WOULD BE AVAILABLE IN A JUDICIAL
PROCEEDING INSTITUTED TO RESOLVE AN ARBITRABLE CLAIM.  ANY JUDGMENT UPON THE
AWARD RENDERED BY THE ARBITRATOR MAY BE ENTERED IN ANY COURT HAVING JURISDICTION
OVER THE SUBJECT MATTER THEREOF.

 

(III)                               ANY SUCH ARBITRATION SHALL BE CONDUCTED
BEFORE A SINGLE ARBITRATOR, WHO WILL BE COMPENSATED FOR HIS OR HER SERVICES, AS
PROVIDED BELOW IN SECTION 10.3(D)(V), AT A RATE TO BE DETERMINED BY THE PARTIES
OR PURSUANT TO THE AAA RULES, BUT BASED UPON REASONABLE HOURLY OR DAILY
CONSULTING RATES FOR THE ARBITRATOR IN THE EVENT PARENT AND THE SHAREHOLDER
REPRESENTATIVES ARE NOT ABLE TO AGREE UPON HIS OR HER RATE OF COMPENSATION.

 

(IV)                              PARENT AND THE SHAREHOLDER REPRESENTATIVES
SHALL SELECT THE ARBITRATOR BY MUTUAL AGREEMENT PROMPTLY FOLLOWING INITIATION OF
ARBITRATION IN ACCORDANCE WITH THE AAA RULES; PROVIDED, HOWEVER, THAT IN THE
EVENT PARENT AND THE SHAREHOLDER REPRESENTATIVES ARE UNABLE TO REACH SUCH
AGREEMENT WITHIN TWENTY (20) DAYS OF INITIATION, THE AAA SHALL HAVE THE
AUTHORITY TO SELECT AN ARBITRATOR FROM A LIST OF ARBITRATORS WHO ARE PARTNERS IN
A NATIONALLY OR REGIONALLY RECOGNIZED FIRM OF INDEPENDENT CERTIFIED PUBLIC
ACCOUNTANTS FROM THE MANAGEMENT ADVISORY SERVICES DEPARTMENT (OR COMPARABLE
DEPARTMENT OR GROUP) OF SUCH FIRM OR WHO ARE PARTNERS IN A MAJOR LAW FIRM;
PROVIDED, HOWEVER, THAT SUCH ACCOUNTING FIRM OR LAW FIRM CANNOT BE A FIRM THAT
HAS WITHIN THE LAST THREE (3) YEARS RENDERED, OR IS THEN RENDERING, SERVICES TO
ANY PARTY HERETO OR, IN THE CASE OF A LAW FIRM, APPEARED WITHIN THE LAST THREE
(3) YEARS, OR IS THEN APPEARING, AS COUNSEL OF RECORD IN OPPOSITION TO ANY PARTY
HERETO.  ANY ARBITRATOR SELECTED TO SERVE SHALL BE QUALIFIED BY TRAINING AND
EXPERIENCE FOR THE MATTERS FOR WHICH SUCH ARBITRATOR IS DESIGNATED TO SERVE.

 

(V)                                 EXCEPT AS PROVIDED HEREIN, THE PREVAILING
PARTY IN ANY ARBITRATION SHALL BE ENTITLED TO AN AWARD OF REASONABLE ATTORNEYS’
FEES AND CHARGES AND/OR COSTS OF

 

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ARBITRATION, AND ALL COSTS OF ARBITRATION, INCLUDING THOSE PROVIDED FOR ABOVE,
WILL BE PAID BY THE LOSING PARTY, SUBJECT IN EACH CASE TO A DETERMINATION BY THE
ARBITRATOR AS TO WHICH PARTY IS THE PREVAILING PARTY AND THE AMOUNT OF SUCH FEES
AND COSTS TO BE PAID BY THE LOSING PARTY.

 

(VI)                              THE ARBITRATOR CHOSEN IN ACCORDANCE WITH THESE
PROVISIONS SHALL NOT HAVE THE POWER TO ALTER, AMEND, OR OTHERWISE AFFECT THE
TERMS OF THESE ARBITRATION PROVISIONS OR THE PROVISIONS OF THIS AGREEMENT, THE
ESCROW AGREEMENT, OR ANY OTHER DOCUMENTS THAT ARE EXECUTED IN CONNECTION
THEREWITH.

 

(VII)                           ARBITRATION UNDER THIS SECTION 10.3(D) SHALL BE
THE SOLE AND EXCLUSIVE REMEDY OF THE PARTIES FOR ANY ARBITRABLE CLAIM ARISING
OUT OF THIS AGREEMENT.

 

SECTION 10.4.  Losses Net of Insurance and Tax Benefits.  With respect to any
matter covered by this Article X, the Claiming Party shall use reasonable
efforts to assert all claims under all applicable insurance policies of the
Claiming Party and any indemnification claim shall be net of any insurance
proceeds received by the Claiming Party specifically relating to such claim and,
to the extent that insurance proceeds are collected by the Claiming Party after
an indemnification claim has been paid, the Claiming Party shall distribute such
insurance proceeds to the Indemnifying Party (or in the case of the
Participating Shareholders, such proceeds will be distributed to the Shareholder
Representatives to distribute to the Participating Shareholders).  Nothing in
this Agreement shall obligate Parent or the Surviving Corporation to acquire or
maintain insurance coverage relating to events that occurred prior to the
Closing.  In addition, the amounts for which an Indemnifying Party shall be
liable under this Article X shall be net of any tax benefit realized or certain
of being realized by the Claiming Party as a result of the facts and
circumstances giving rise to the liability of the Indemnifying Party.

 

SECTION 10.5.  Limits on Indemnification Claims.

 

(A)                                  NOTWITHSTANDING ANYTHING CONTAINED IN THIS
AGREEMENT TO THE CONTRARY, THE PARTICIPATING SHAREHOLDERS SHALL NOT BE OBLIGATED
TO INDEMNIFY PARENT AND THE SURVIVING CORPORATION WITH RESPECT TO ANY LOSSES
PURSUANT TO SECTION 10.1, ABOVE OR OTHERWISE IN THIS AGREEMENT, UNLESS AND UNTIL
THE AGGREGATE AMOUNT OF LOSSES FROM A SINGLE CLAIM OF INDEMNIFICATION EXCEEDS
TWENTY THOUSAND DOLLARS ($20,000) (THE “DE MINIMIS AMOUNT”) (AND THEN THE
PARTICIPATING SHAREHOLDERS SHALL BE OBLIGATED TO PROVIDE INDEMNIFICATION WITH
RESPECT TO THE FULL AMOUNT OF LOSSES RELATING TO SUCH CLAIM IN EXCESS OF THE
BASKET AMOUNT) AND UNLESS AND UNTIL THE AGGREGATE LOSSES FROM ALL CLAIMS, EACH
IN EXCESS OF THE DE MINIMIS AMOUNT (PROVIDED THAT IF THE LOSSES ASSOCIATED WITH
A CLAIM EXCEED THE DE MINIMIS AMOUNT, THE FULL AMOUNT OF LOSSES SHALL BE
INCLUDED IN DETERMINING WHETHER THE BASKET AMOUNT HAS BEEN EXCEEDED), EXCEED, IN
THE AGGREGATE, TWO HUNDRED FIFTY THOUSAND DOLLARS ($250,000) (THE “BASKET
AMOUNT”), AND THEN THE PARTICIPATING SHAREHOLDERS’ OBLIGATION TO PROVIDE SUCH
INDEMNIFICATION SHALL BE ONLY TO THE EXTENT SUCH LOSSES EXCEED THE BASKET
AMOUNT.  NOTWITHSTANDING ANYTHING IN THIS AGREEMENT TO THE CONTRARY, LOSSES THAT
ARISE FROM SUBSTANTIALLY SIMILAR FACTS OR TRANSACTIONS THAT ARE THE SAME TYPES
OF CLAIMS, SHALL BE DEEMED TO BE PART OF A SINGLE CLAIM FOR PURPOSES OF
CALCULATING THE DE

 

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minimis Amount.  Subject to the next following sentence, in no event shall the
Participating Shareholders’ obligation to provide Parent and/or the Surviving
Corporation indemnification for Losses under Section 10.1, above or otherwise in
this Agreement, including Separate Losses, exceed, in the aggregate, Seven
Million Dollars ($7,000,000) (the “Liability Cap”).  Notwithstanding the
foregoing provisions of this Section 10.5, the Basket Amount and Liability Cap
shall not apply with respect to any claims (i) for fraud, (ii) brought as a
result of any breach of the representations and warranties contained in Sections
6.1, 6.2, 6.3 and 6.4(a), above or (iii) relating to Section 10.1(d); provided
that each Participating Shareholder’s liability for such claims to the extent
the Losses exceed the Liability Cap will be proportionate to the ratio between
such Participating Shareholder’s Distribution Share and the aggregate
Distribution Shares received by all Participating Shareholders.

 

(B)                                 NOTWITHSTANDING ANYTHING CONTAINED IN THIS
AGREEMENT TO THE CONTRARY, (I) ANY LOSSES THAT RESULT FROM A BREACH OF
SECTION 6.12 TO THE EXTENT SUCH LOSSES ARISE FROM NON-COMPLIANCE WITH WAGE AND
HOUR LAWS BY THE COMPANY PRIOR TO THE CLOSING DATE (“SEPARATE LOSSES”) SHALL NOT
BE INCLUDED IN THE BASKET AMOUNT UNDER SECTION 10.5(A); (II) THE PARTICIPATING
SHAREHOLDERS SHALL NOT BE OBLIGATED TO INDEMNIFY PARENT AND THE SURVIVING
CORPORATION WITH RESPECT TO ANY SEPARATE LOSSES PURSUANT TO SECTION 10.1, ABOVE,
UNLESS AND UNTIL THE AGGREGATE SEPARATE LOSSES FROM ALL CLAIMS, EACH IN EXCESS
OF THE DE MINIMIS AMOUNT (PROVIDED THAT IF THE SEPARATE LOSSES ASSOCIATED WITH A
CLAIM EXCEED THE DE MINIMIS AMOUNT, THE FULL AMOUNT OF SEPARATE LOSSES SHALL BE
INCLUDED IN DETERMINING WHETHER THE SEPARATE BASKET AMOUNT HAS BEEN EXCEEDED),
EXCEED, IN THE AGGREGATE, TWO HUNDRED FIFTY THOUSAND DOLLARS ($250,000) (THE
“SEPARATE BASKET AMOUNT”), AND THEN THE PARTICIPATING SHAREHOLDERS’ OBLIGATION
TO PROVIDE SUCH INDEMNIFICATION SHALL BE ONLY TO THE EXTENT SUCH SEPARATE LOSSES
EXCEED THE SEPARATE BASKET AMOUNT; AND (III) SUBJECT TO THE NEXT FOLLOWING
SENTENCE, IN NO EVENT SHALL THE PARTICIPATING SHAREHOLDERS’ OBLIGATION TO
PROVIDE PARENT AND/OR THE SURVIVING CORPORATION INDEMNIFICATION FOR SEPARATE
LOSSES UNDER SECTION 10.1, ABOVE, EXCEED, IN THE AGGREGATE, THREE MILLION
DOLLARS ($3,000,000) (THE “SEPARATE LIABILITY CAP”).  NOTWITHSTANDING THE
FOREGOING PROVISIONS OF THIS SECTION 10.5, THE SEPARATE BASKET AMOUNT AND
SEPARATE LIABILITY CAP SHALL NOT APPLY WITH RESPECT TO ANY CLAIMS FOR FRAUD;
PROVIDED THAT EACH PARTICIPATING SHAREHOLDER’S LIABILITY FOR SUCH CLAIMS TO THE
EXTENT THE LOSSES EXCEED THE SEPARATE LIABILITY CAP WILL BE PROPORTIONATE TO THE
RATIO BETWEEN SUCH PARTICIPATING SHAREHOLDER’S DISTRIBUTION SHARE AND THE
AGGREGATE DISTRIBUTION SHARES RECEIVED BY ALL PARTICIPATING SHAREHOLDERS.  ANY
DISPUTE BETWEEN PARENT ON THE ONE HAND AND THE SHAREHOLDER REPRESENTATIVES ON
THE OTHER AS TO WHETHER OR NOT A LOSS QUALIFIES AS A SEPARATE LOSS WILL BE
RESOLVED PURSUANT TO THE DISPUTE RESOLUTION PROCEDURES SET FORTH IN
SECTION 10.3(D), STARTING WITH THE ATTEMPT IN GOOD FAITH TO RESOLVE THE MATTER
WITHIN 30 DAYS AND, IF UNSUCCESSFUL, PROCEEDING TO ARBITRATION.

 

(C)                                  IN NO EVENT SHALL PARENT’S OR SUBSIDIARY’S
OBLIGATION TO PROVIDE THE PARTICIPATING SHAREHOLDERS INDEMNIFICATION FOR LOSSES
UNDER SECTION 10.2, ABOVE, EXCEED, IN THE AGGREGATE, THE LIABILITY CAP;
PROVIDED, HOWEVER, THAT THE LIABILITY CAP SHALL NOT APPLY WITH RESPECT TO ANY
CLAIMS FOR FRAUD OR BROUGHT AS A RESULT OF ANY BREACH OF THE REPRESENTATIONS AND
WARRANTIES CONTAINED IN SECTIONS 5.1 AND 5.2, ABOVE.

 

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SECTION 10.6.  Sole Remedy.  Notwithstanding anything contained in this
Agreement to the contrary, the sole remedy for any and all claims of the nature
described in Section 10.1 or otherwise in this Agreement, other than for
(a) Payable Claims  for fraud or arising from breaches of Sections 6.1, 6.2,
6.3, 6.4(a), 6.10, 6.11 and/or 6.12 (solely for wage laws), above, but subject
to the limitations contained in this Article X, (b) any amounts due to Parent in
excess of the Adjustment Escrow not covered by the Participating Shareholders
pursuant to Section 4.5(b) and (c) any amounts due by the Surviving Corporation
or Parent, including costs and expenses, in respect of Company Common
Shareholders who exercise dissenter rights in excess of the Distribution Share
relating to such shareholders, shall be the right to set-off Payable Claims
against the Indemnity Escrow pursuant to the Escrow Agreement.  Any amounts due
under (a), (b) or (c) shall first be paid with funds from the Indemnity Escrow
pursuant to this Section 10.6; provided, however, in the event the Indemnity
Escrow is exhausted pursuant to this Section 10.6 or paid to the Participating
Shareholders pursuant to the Escrow Agreement before a Payable Claim arises,
Parent and/or the Surviving Corporation may pursue any and all remedies
available to them at law or in equity with respect to any such Payable Claim to
enforce the indemnification provisions of Section 10.1, above, subject to the
provisions of this Article X.  Any claims for indemnification made in good faith
by Parent and/or the Surviving Corporation in writing prior to the expiration of
the Indemnity Escrow Period, and the right of indemnity with respect thereto,
shall survive until resolved or judicially determined pursuant to the provision
of this Article X.  Holders of Company Stock prior to the Closing will not have
any right of contribution from the Surviving Corporation for liabilities for
such holders’ obligations pursuant to this Article X.

 

SECTION 10.7.  Payable Claims.  Notwithstanding anything contained in this
Agreement to the contrary, any indemnity claim made by Parent and/or the
Surviving Corporation that has been Definitively Resolved (as defined below) is
referred to herein as a “Settled Claim.”  For purposes hereof, a “Payable Claim”
shall mean (a) a Settled Claim only in the event and to the extent that (i) such
Settled Claim exceeds the De minimis Amount (provided that if a Settled Claim
exceeds the De minimis Amount, Parent shall be entitled to indemnification for
all Losses relating to such Settled Claim in excess of the Basket Amount) and
(ii) the amount of Losses related to such Settled Claim, together with the
accumulated amount of Losses (each in excess of the De minimis Amount; provided
that if a Settled Claim exceeds the De minimis Amount, all Losses relating to
such Settled Claim shall be included in determining whether the Basket Amount
has been exceeded) related to all previously Settled Claims exceeds the Basket
Amount; or (b) a Settled Claim that exceeds the De minimis Amount and arises
from breaches of Sections 6.1, 6.2, 6.3 and/or 6.4(a), above.  For purposes
hereof, any claim for indemnification hereunder shall be deemed to have been
“Definitively Resolved” when any of the following events has occurred:

 

(A)                                  A CLAIM IS SETTLED BY MUTUAL AGREEMENT OF
PARENT, THE SURVIVING CORPORATION AND THE SHAREHOLDER REPRESENTATIVES, A
SETTLEMENT IS REACHED BY THE SHAREHOLDER REPRESENTATIVES PURSUANT TO THE SECOND
SENTENCE OF SECTION 10.3(B)(I), ABOVE, OR A SETTLEMENT IS REACHED BY PARENT
AND/OR THE SURVIVING CORPORATION PURSUANT TO SECTION 10.3(B)(III), ABOVE;

 

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(B)                                 A FINAL JUDGMENT, ORDER OR AWARD OF A COURT
OF COMPETENT JURISDICTION OR ARBITRATOR DECIDING SUCH CLAIM HAS BEEN RENDERED,
AS EVIDENCED BY A CERTIFIED COPY OF SUCH JUDGMENT, PROVIDED THAT SUCH JUDGMENT
IS NOT APPEALABLE OR THE TIME FOR TAKING AN APPEAL HAS EXPIRED; OR

 

(C)                                  THIRTY (30) DAYS HAVE ELAPSED SINCE THE
SHAREHOLDER REPRESENTATIVES’ INITIAL RECEIPT OF A CLAIM NOTICE AND NEITHER
PARENT NOR THE SURVIVING CORPORATION HAS RECEIVED, ON OR BEFORE THAT DATE, A
WRITTEN NOTICE FROM THE SHAREHOLDER REPRESENTATIVES DISPUTING SUCH CLAIM IN
WHOLE OR IN PART.

 

SECTION 10.8.  Treatment of Indemnity Payments.  Any indemnity payments made
pursuant to this Article X shall, to the extent permitted by applicable Law, be
treated for tax reporting purposes as an adjustment to the Merger Consideration.

 

SECTION 10.9.  Assignment; Reimbursement.  If any of the Losses for which an
Indemnifying Party is responsible or allegedly responsible under this Article X
are recoverable or potentially recoverable against any third party at the time
that payment is due hereunder, the Claiming Party shall assign any and all
rights that it may have to recover such Losses to the Indemnifying Party or, if
such rights are not assignable for any reason, the Claiming Party shall attempt
in good faith to collect any and all such Losses on account thereof from such
third party for the benefit of the Indemnifying Party.  The Claiming Party shall
reimburse the Indemnifying Party for any and all Losses paid by the Indemnifying
Party to the Claiming Party pursuant to this Agreement to the extent such amount
is subsequently paid to the Claiming Party by any person other than the
Indemnifying Party; provided that any costs or expenses incurred by the Claiming
Party in connection with receiving such payment from a person other than the
Indemnifying Party shall be deducted from the amount that is reimbursed to the
Indemnifying Party.

 

ARTICLE XI

 

TERMINATION, AMENDMENT AND WAIVER

 

SECTION 11.1.  Termination.  This Agreement may be terminated by the mutual
consent of the parties, or at any time prior to the Closing Date, whether before
or after approval of the Merger by the Company Common Shareholders, as follows:

 

(A)                                  THE COMPANY SHALL HAVE THE RIGHT TO
TERMINATE THIS AGREEMENT:

 

(I)                                     IF THE MERGER IS NOT COMPLETED BY
MAY 27, 2005, OTHER THAN ON ACCOUNT OF DELAY OR DEFAULT ON THE PART OF THE
COMPANY;

 

(II)                                  IF THE MERGER IS ENJOINED BY A FINAL,
NONAPPEALABLE ORDER OF A U.S. COURT HAVING JURISDICTION NOT ENTERED AT THE
REQUEST OR WITH THE SUPPORT OF THE COMPANY OR ANY OF ITS AFFILIATES OR
ASSOCIATES; OR

 

(III)                               IF PARENT (A) HAS BREACHED ANY
REPRESENTATION, WARRANTY OR COVENANT IN ANY MATERIAL RESPECT, AND (B) DOES NOT
CURE SUCH DEFAULT IN ALL MATERIAL

 

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RESPECTS WITHIN 30 DAYS AFTER WRITTEN NOTICE OF SUCH DEFAULT IS GIVEN TO PARENT
BY THE COMPANY.

 

(B)                                 PARENT SHALL HAVE THE RIGHT TO TERMINATE
THIS AGREEMENT:

 

(I)                                     IF THE MERGER IS NOT COMPLETED BY
MAY 27, 2005, OTHER THAN ON ACCOUNT OF DELAY OR DEFAULT ON THE PART OF PARENT OR
SUBSIDIARY;

 

(II)                                  IF THE MERGER IS ENJOINED BY A FINAL,
NONAPPEALABLE ORDER OF A U.S. COURT HAVING JURISDICTION NOT ENTERED AT THE
REQUEST OR WITH THE SUPPORT OF PARENT, SUBSIDIARY OR ANY OF THEIR AFFILIATES OR
ASSOCIATES; OR

 

(III)                               IF THE COMPANY (A) HAS BREACHED ANY
REPRESENTATION, WARRANTY OR COVENANT IN ANY MATERIAL RESPECT, AND (B) DOES NOT
CURE SUCH DEFAULT IN ALL MATERIAL RESPECTS WITHIN 30 DAYS AFTER WRITTEN NOTICE
OF SUCH DEFAULT IS GIVEN TO THE COMPANY BY PARENT.

 

SECTION 11.2.  Effect of Termination.  In the event of termination of this
Agreement by either Parent or the Company as provided in Section 11.1 above,
this Agreement shall forthwith become void and there shall be no further
obligation on the part of the Company, Parent, Subsidiary, the Shareholder
Representatives, or their respective officers or directors (except as set forth
in this Section 11.2 and in Sections 8.1(b) and 8.3, the Break-Up Fee in
Section 11.3 and any confidentiality agreement, all of which shall survive the
termination); provided, however, that nothing in this Section 11.2 shall relieve
any party from liability for any breach of this Agreement.

 

SECTION 11.3.  Break-up Fee.  The Company agrees to pay Parent a termination fee
in the amount of One Million Five Hundred Thousand Dollars ($1,500,000) (the
“Break-up Fee”) if the Merger is not consummated because the Company
Shareholders do not approve the Merger after the Company has received a proposal
with respect to an Acquisition Transaction and within 12 months following
termination of this Agreement, the Company or the Company Shareholders
consummate an Acquisition Transaction.  To the extent the Company becomes
obligated to pay a termination fee hereunder, the Company agrees to pay such fee
to Parent within ten (10) business days of consummation of the Acquisition
Transaction that triggers such obligation.  In such event, Parent shall, in
addition to the amount of such termination fee, be entitled to receive any
additional costs and expenses incurred to collect such amount, including
attorneys fees, and any unpaid amount shall bear interest at the maximum rate
permitted by applicable law.

 

SECTION 11.4.  Amendment.  This Agreement may not be amended except in writing
signed on behalf of each of the parties hereto and in compliance with applicable
Law.

 

SECTION 11.5.  Waiver.  At any time prior to the Effective Time, any party
hereto may (a) extend the time for the performance of any of the obligations or
other acts of the other parties hereto, (b) waive any inaccuracies in the
representations and warranties contained herein

 

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or in any document delivered pursuant thereto, and (c) waive compliance with any
of the agreements or conditions contained herein.  Any such extension or waiver
shall not be deemed to be continuing or to apply to any future obligation or
requirement of any party hereto provided herein.  Any agreement on the part of a
party hereto to any such extension or waiver shall be valid if set forth in an
instrument in writing signed on behalf of such party.

 

ARTICLE XII

 

GENERAL PROVISIONS

 

SECTION 12.1.  Shareholder Representatives

 

(A)                                  IN THE EVENT THE MERGER IS APPROVED,
EFFECTIVE UPON SUCH VOTE, AND WITHOUT FURTHER ACT OF ANY COMPANY COMMON
SHAREHOLDER, THE SHAREHOLDER REPRESENTATIVES SHALL BE APPOINTED AS AGENTS AND
ATTORNEYS-IN-FACT FOR EACH PARTICIPATING SHAREHOLDER OF THE COMPANY, FOR AND ON
BEHALF OF THE PARTICIPATING SHAREHOLDERS, TO GIVE AND RECEIVE NOTICES AND
COMMUNICATIONS, TO COMPROMISE, SETTLE OR DEFEND ANY CLAIMS, TO AGREE TO,
NEGOTIATE, ENTER INTO SETTLEMENTS AND COMPRISES OF, AND COMMENCE LITIGATION AND
COMPLY WITH ORDERS OF COURTS WITH RESPECT TO SUCH CLAIMS, AND TO TAKE ALL
ACTIONS NECESSARY OR APPROPRIATE IN THE JUDGMENT OF THE SHAREHOLDER
REPRESENTATIVES FOR THE ACCOMPLISHMENT OF THE FOREGOING.  A DECISION, ACT,
CONSENT OR INSTRUCTION OF THE SHAREHOLDER REPRESENTATIVES SHALL BE MADE BY THE
UNANIMOUS CONSENT OF THE SHAREHOLDER REPRESENTATIVES AND SHALL CONSTITUTE A
DECISION OF ALL OF THE PARTICIPATING SHAREHOLDERS AND SHALL BE FINAL, BINDING
AND CONCLUSIVE UPON EACH OF SUCH PARTICIPATING SHAREHOLDER, THE PAYING AGENT AND
THE ESCROW AGENT, AND PARENT MAY RELY UPON ANY SUCH DECISION, ACT, CONSENT OR
INSTRUCTION OF THE SHAREHOLDER REPRESENTATIVES AS BEING THE DECISION, ACT,
CONSENT OR INSTRUCTION OF EACH AND EVERY SUCH PARTICIPATING SHAREHOLDER.

 

(B)                                 THE SHAREHOLDER REPRESENTATIVES SHALL BE
REIMBURSED OUT OF THE INDEMNITY ESCROW PURSUANT TO THE TERMS OF THE ESCROW
AGREEMENT FOR THEIR REASONABLE OUT-OF-POCKET EXPENSES (WHICH SHALL INCLUDE
DOCUMENTED LEGAL AND ACCOUNTING EXPENSES) INCURRED IN CONNECTION WITH SERVING AS
THE SHAREHOLDER REPRESENTATIVES UNDER THIS AGREEMENT.

 

(C)                                  THE SHAREHOLDER REPRESENTATIVES SHALL NOT
BE HELD LIABLE BY THE PARTICIPATING SHAREHOLDERS FOR ACTIONS TAKEN IN THEIR
CAPACITY AS THE SHAREHOLDER REPRESENTATIVES PURSUANT TO THIS AGREEMENT, EXCEPT
IN THE CASE OF THE SHAREHOLDER REPRESENTATIVES’ WILLFUL MALFEASANCE OR GROSS
NEGLIGENCE.  THE SHAREHOLDER REPRESENTATIVES SHALL NOT BE REQUIRED TO INCUR ANY
EXPENSES IN PERFORMING THEIR DUTIES AND EXERCISING THEIR RIGHTS UNDER THIS
AGREEMENT IF THE SHAREHOLDER REPRESENTATIVES REASONABLY BELIEVE THAT SUCH
EXPENSES WILL NOT BE REIMBURSED FROM THE INDEMNITY ESCROW PURSUANT TO THE TERMS
OF THE ESCROW AGREEMENT.

 

SECTION 12.2.  Company Disclosure Letter.  The capitalized terms used in the
Company Disclosure Letter, unless otherwise defined therein, have the meaning
specified in this Agreement.  The section references referred to in the Company
Disclosure Letter are to the applicable sections of this Agreement.  For
convenience, disclosures under one section or

 

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subsection may be cross-referenced to one or more other sections or subsections
and shall not be construed as to limit the effectiveness of such disclosure.  If
a document or matter is disclosed in any section of the Company Disclosure
Letter, it shall be deemed to have been disclosed with respect to all sections
of this Agreement, provided the relevance of the disclosure to a particular
section is reasonably apparent.  Disclosure of a matter in the Company
Disclosure Letter shall not be deemed to be an acknowledgment that such matter
is material or outside the ordinary course.  To the extent the Company
Disclosure Letter discloses facts not required to be disclosed thereby, such
facts are disclosed for information purposes only.  Any attachments to the
Company Disclosure Letter are incorporated by reference and made a part of each
disclosure in which reference to such disclosure is made.  Summaries of or
reference to actual documents in the Company Disclosure Letter are qualified in
their entirety by reference to such documents.

 

SECTION 12.3.  Notices.  All notices and other communications hereunder shall be
in writing and shall be deemed given if delivered personally, mailed by
registered or certified mail postage prepaid (return receipt requested), sent
prepaid via reputable overnight courier or express service or sent via facsimile
transmission actually received by the receiving equipment to the parties at the
following addresses (or at such other address for a party as shall be specified
by like notice):

 

If to Parent or Subsidiary, to:

Labor Ready, Inc.

1015 A Street

Tacoma, WA 98402-5113

Attention: General Counsel

Facsimile Number: (800) 773-4747

 

with a copy to:

 

Preston Gates & Ellis LLP

925 Fourth Avenue

Seattle, Washington 98104

Attention: Richard Dodd

Facsimile Number: (206) 623-7022

 

If to the Company or the Shareholder Representatives, to:

 

Baird Capital Partners

777 East Wisconsin Avenue

Milwaukee, WI 53202

Attention: Dave Pelisek

Facsimile Number: (414) 298-7490

 

and:

 

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William Blair Capital Partners

303 West Madison, Suite 2500

Chicago, IL 60606

Attention: Robert Blank

Facsimile Number (312) 210-0703

 

with a copy to:

 

Godfrey & Kahn, S.C.

780 North Water Street

Milwaukee, Wisconsin 53202-3590

Attention: John A. Dickens

Facsimile Number: (414) 273-5198

 

SECTION 12.4.  Interpretation.  The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.  In this Agreement, unless a contrary
intention appears (i) the words “herein,” “hereof” and “hereunder” and other
words of similar impact refer to this Agreement as a whole and not to any
particular Article, Section or other subdivision, and (ii) reference to any
Article or Section means such Article or Section hereof.  No provision of this
Agreement shall be interpreted or construed against any party hereto solely
because such party or its legal representative drafted such provision.

 

SECTION 12.5.  Miscellaneous.  This Agreement (including the documents and
instruments referred to herein) (a) constitutes the entire agreement and
supersedes all other prior agreements and understandings, both written and oral,
among the parties, or any of them, with respect to the subject matter hereof,
(b) is not intended to confer upon any other person any rights or remedies
hereunder (except as expressly provided herein), and (c) each party to this
Agreement shall accept service of process by certified mail, return receipt
requested.

 

SECTION 12.6.  Governing Law; Jurisdiction.  THIS AGREEMENT SHALL BE GOVERNED IN
ALL RESPECTS, INCLUDING VALIDITY, INTERPRETATION AND EFFECT, BY THE LAWS OF THE
STATE OF DELAWARE REGARDLESS OF THE LAWS THAT MIGHT OTHERWISE GOVERN UNDER
APPLICABLE PRINCIPLES OF CONFLICTS OF LAWS.  THE PARTIES HERETO AGREE TO THE
EXCLUSIVE VENUE OF THE FEDERAL COURTS PRESIDING IN DENVER, COLORADO.

 

SECTION 12.7.  Counterparts.  This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original, but all of which
shall constitute one and the same agreement.  Each of the parties agrees to
accept and be bound by facsimile signatures hereto.

 

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SECTION 12.8.  Successors in Interest.  This Agreement shall be binding upon and
inure solely to the benefit of the parties hereto and their respective
successors and permitted assigns, and nothing in this Agreement, express or
implied, is intended to confer upon any other person any rights or remedies of
any nature whatsoever under or by reason of this Agreement other than the
Company Shareholders and except as described in Section 8.6(d), above.  No party
hereto may assign either this Agreement or any of its rights, interests or
obligations hereunder without the prior written approval of each other party.

 

SECTION 12.9.  Exhibits and Schedules.  All Exhibits and Schedules referred to
in this Agreement shall be attached hereto and are incorporated by reference
herein.

 

SECTION 12.10.  Severability.  If any term or other provision of this Agreement
is invalid, illegal or incapable of being enforced by any rule of law or public
policy, all other conditions and provisions of this Agreement shall nevertheless
remain in full force and effect so long as the economic or legal substance of
the transactions contemplated hereby is not affected in any manner adverse to
any party.  Upon such determination that any term or other provision is invalid,
illegal or incapable of being enforced, the parties hereto shall negotiate in
good faith to modify this Agreement so as to effect the original intent of the
parties as closely as possible in an acceptable manner to the end that the
transactions contemplated hereby are fulfilled to the extent possible.

 

SECTION 12.11.  No Joint Venture.  Nothing contained in this Agreement will be
deemed or construed as creating a joint venture or partnership between any of
the parties hereto.  No party is by virtue of this Agreement authorized as an
agent, employee, or legal representative of any other party.  No party will have
the power to control the activities and operations of any other and their status
is, and at all times, will continue to be, that of independent contractors with
respect to each other.  No party will have any power or authority to bind or
commit any other.  No party will hold itself out as having any authority or
relationship in contravention of this Section.

 

SECTION 12.12.  Specific Performance.  The parties acknowledge and agree that
any breach of the terms of this Agreement would give rise to irreparable harm
for which money damages would not be an adequate remedy and accordingly the
parties agree that, in addition to any other remedies, each shall be entitled to
enforce the terms of this Agreement by a decree of specific performance without
the necessity of proving the inadequacy of money damages as a remedy.

 

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IN WITNESS WHEREOF, Parent, Subsidiary, the Company and the Shareholder
Representatives have caused this Agreement to be executed by their respective
officers thereunto duly authorized as of the date first written above.

 

 

PARENT:

 

LABOR READY, INC.

 

 

 

By:

 

 

 

 

(Title)

 

 

 

 

 

 

SUBSIDIARY:

 

LABOR READY ACQUISITION SUB II,
INC.

 

 

 

By:

 

 

 

 

(Title)

 

 

 

 

COMPANY:

 

CLP HOLDINGS CORP.

 

 

 

 

 

By:

 

 

 

 

Noel S. Wheeler, Chief Executive Officer and President

 

 

 

 

SHAREHOLDER REPRESENTATIVES:

 

 

 

BAIRD CAPITAL PARTNERS
MANAGEMENT COMPANY, LLC

 

 

 

 

 

By:

 

 

 

 

(Title)

 

 

 

 

WILLIAM BLAIR CAPITAL PARTNERS
VI, L.L.C.

 

 

 

 

 

By:

 

 

 

 

(Title)

 

 

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