Document:

Exhibit 4.17.1

 

AMENDMENT TO REGISTRATION RIGHTS AGREEMENT

 

THIS AMENDMENT TO
REGISTRATION RIGHTS AGREEMENT (the “Amendment”) is made
as of May 24, 2005, by and between AEROGEN, INC., a Delaware corporation (the “Company”), Xmark Fund
L.P., a Delaware Limited Partnership (“Xmark LP”), Xmark Fund, Ltd., a Cayman
Islands exempted company (together with Xmark LP, the “Lead Investor”) and
the other Investors listed as signatories hereto (“Other investors”).  Capitalized terms  not otherwise defined herein shall have the
meanings ascribed to them in the Registration Rights  Agreement (defined below).

 

WHEREAS,
the Investors and the Company agreed to the purchase and sale of Preferred
Stock and Warrants (the “Securities”)
pursuant to that certain Purchase Agreement dated as of March 11, 2004 (the “Purchase Agreement”)
and agreed to provide the Investors with registration rights set forth in that
certain Registration Rights Agreement dated March 22, 2004 (the “Registration Rights Agreement”);

 

WHEREAS,
the Company filed a Registration Statement as required by the Registration
Rights Agreement and such Registration Statement is currently effective;

 

WHEREAS,
the Registration Rights Agreement provides for the Company to pay liquidated
damages (the “Liquidated
Damages”) to each Holder if sales cannot be made pursuant to the
Registration Statement for any reason except for an Allowed Delay;

 

WHEREAS,
it is the intent of the parties is that the Liquidated Damages apply only to
the Series A-1 Convertible Preferred Stock and not to the Warrants and the
parties wish to clarify the Registration Rights Agreement in this regard; and

 

WHEREAS,
Section 7(a) of the Registration Rights Agreement provides that it may be
amended by a writing signed by the Company and the Requisite Holders, which is
defined by reference to the  Purchase
Agreement as (i) the holders of at least a majority of the then outstanding
shares of Preferred Stock and (ii) the Lead Investor, so long as the Lead
Investor owns at least 80,000 shares of Preferred Stock (appropriately adjusted
for any stock dividend, stock split, reverse stock split, reclassification,
stock combination or other recapitalization occurring after the date of the
Purchase Agreement);

 

NOW, THEREFORE,
for good and valuable consideration, and intending to be legally bound, each of
the Company, the Lead Investor and the Other Investors agree as follows:

 

1.  The
definition of “Holders” shall be amended in its entirety to read as follows:

 

                                                “Holder”
or “Holders” shall mean the Investors,
the Lead Investor and any Affiliate or permitted transferee thereof
who is a subsequent holder of any Preferred Stock.

 

2.
Section 2(c)(i) of the Registration Rights Agreement
shall be amended in its entirety to read as follows:

“(c)                            Effectiveness.

 

 

(i)                                     The
Company shall use its best efforts to have the Registration Statement declared
effective not later than the earlier to occur of (x) the 180th day
immediately following the Signing Date, (y) the 90th day immediately following
the Second Closing Date, or (z) five (5) Business Days following the Company’s
receipt of a no-review letter from the SEC relating to the Registration
Statement; provided, however, if the Registration Statement is
not declared effective within the time period set forth above, the Company
shall continue to use its best efforts to have the Registration Statement
declared effective as soon as possible thereafter.  If (A) the Registration Statement has not
been declared effective by the earlier of (y) or (z) in the preceding sentence,
or (B) after a Registration Statement has been declared effective by the SEC,
sales cannot be made pursuant to such Registration Statement for any reason
(including, without limitation, by reason of a stop order, or the Company’s
failure to update the Registration Statement), but except as excused pursuant
to subsection (ii) below, then the Company will make pro rata payments to each
Holder, as liquidated damages and not as a penalty, in an amount equal to $0.45
multiplied by the number of shares of Preferred Stock held by such Holder, for
each 10-day period or pro rata for any portion thereof following the date (1)
by which such Registration Statement should have been effective as described in
(A) above had the Company used its best efforts to have the Registration
Statement declared effective or (2) sales cannot be made pursuant to such
Registration Statement after it has been declared effective as described in (B)
above (the “Blackout Period”).  Such payments shall be in partial
compensation to the Holders, and shall not constitute the Holders’ exclusive
remedy for such events.  The Blackout
Period shall terminate upon (x) the effectiveness of the Registration Statement
in the case of (A) above; and (y) the Registration Statement again being
available for sales by the Holders in the case of (B) above.  The amounts payable as liquidated damages
pursuant to this paragraph shall be payable in lawful money of the United
States, and amounts payable as liquidated damages shall be paid within two (2)
Business Days of the last day of each 10-day period following the commencement
of the Blackout Period until the termination of the Blackout Period.  For clarity, the liquidated damages payments
referred to above are payable to Holders solely based on the number of shares
of Preferred Stock held, irrespective of 
any Warrants held or the number of shares of Common Stock held from the
exercise of Warrants.  No liquidated
damages shall be payable solely from the failure to maintain an effective
Registration Statement covering the resale of Common Stock held from the
exercise of Warrants.”

 

3.
Section 2(a)(ii) of the Registration Rights Agreement shall be amended in its
entirety to read as follows:

 

“(ii)                            Additional
Registrable Securities.  Upon the
written demand of the Lead Investor and upon any change in the “Series A-1
Conversion Price” (as that term is defined in the Certificate of Designations)
or the number of “Warrant Shares” (as that term is defined in the Warrants)
purchasable under the Warrants such that additional shares of Common Stock
become issuable upon conversion of the outstanding Series A-1 Preferred Stock
or exercise of such Warrants, the Company shall prepare and file with the SEC
one or more Registration Statements on Form S-3 (or, if Form S-3 is not then
available to the Company, on such form of Registration Statement as is then
available, subject to the Requisite Holders’ consent, to effect a registration
for resale of such additional shares of Common Stock (the “Additional
Shares”)) covering the resale of the Additional Shares, but only
to the extent the Additional Shares are not at the time covered by an effective
Registration Statement.  Such
Registration Statement shall include the

 

 

plan of distribution attached
hereto as Exhibit A.  Such
Registration Statement also shall cover, to the extent allowable under the 1933
Act and the rules promulgated thereunder (including Rule 416), such
indeterminate number of additional shares of Common Stock resulting from stock
splits, stock dividends or similar transactions with respect to the Additional
Shares.  The Registration Statement (and
each amendment or supplement thereto, and each request for acceleration of
effectiveness thereof) shall be provided in accordance with Section 3(c) to the
Holders and their counsel prior to its filing or other submission.  If a Registration Statement covering the
Additional Shares is required to be filed under this Section 2(a)(ii) and is
not filed with the SEC within ten (10) days of the request of any Holder, the
Company will make pro rata payments to each Holder, as liquidated damages and
not as a penalty, in an amount equal to $0.45 multiplied by the number of
shares of Preferred Stock held by such Holder, for each 10-day period or pro
rata for any portion thereof following the date by which such Registration
Statement should have been filed for which no Registration Statement is filed
with respect to the Additional Shares. 
The amounts payable as liquidated damages pursuant to this paragraph shall
be payable in lawful money of the United States, and amounts payable as
liquidated damages shall be paid within two (2) Business Days of the last day
of each such 10-day period during which the Registration Statement should have
been filed for which no Registration Statement was filed with respect to the
Additional Shares.  For clarity, any
liquidated damages payable hereunder are payable to Holders solely based on the
number of shares of Preferred Stock held. 
No liquidated damages shall be payable solely from the failure to
maintain an effective Registration Statement covering the resale of Common
Stock held from the exercise of Warrants.”

 

4.                                      Counterparts.  This Amendment may be executed in two or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.

 

5.                                      Severability.  If any term, provision, covenant or
restriction of this Amendment is held by a court of competent jurisdiction or
other authority to be invalid, void or unenforceable, the remainder of the
terms, provisions, covenants and restrictions of this Amendment shall remain in
full force and effect and shall in no way be affected, impaired or invalidated.

 

 

IN WITNESS WHEREOF, the parties hereto have executed this AMENDMENT as of the
date set forth in the first paragraph hereof.

 

 

	
  COMPANY:

  	
   

  	
  LEAD INVESTOR:

  
	
   

  	
   

  	
   

  
	
  AEROGEN, INC.

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
  /s/ Robert S. Breuil

  	
   

  	
  By:

  	
  /s/ Mitchell D. Kaye

  
	
   

  	
  Robert S. Breuil

  	
   

  	
   

  	
  Mitchell D. Kaye

  
	
   

  	
  Chief Financial Officer

  	
   

  	
   

  	
  Chief Investment Officer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  OTHER INVESTORS:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
  /s/ Carl Gordon

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Name (please print):
  Carl Gordon

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Title (if applicable):
  Partner, Orbimed

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  OTHER INVESTORS:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  HEALTHCAP IV, L.P.

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
  /s/ Peder Fredrikson

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By: HealthCap IV GP SA

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Name: Peder Fredrikson

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Title: Director

  	
   

  	
   

  
						

 

 

	
  OTHER INVESTORS:

  	
   

  	
   

  	 

	
   

  	
   

  	
   

  	 

	
  HEALTHCAP IV BIS,
  L.P.

  	
   

  	
   

  	 

	
   

  	
   

  	
   

  	 

	
   

  	
   

  	
   

  	 

	
  By:

  	
  /s/ Peder Fredrikson

  	
   

  	
   

  	 

	
   

  	
   

  	
   

  	
   

  	 

	
  By: HealthCap IV GP SA

  	
   

  	
   

  	 

	
   

  	
   

  	
   

  	 

	
  Name: Peder Fredrikson

  	
   

  	
   

  	 

	
   

  	
   

  	
   

  	 

	
  Title: Director

  	
   

  	
   

  	 

	
   

  	
   

  	
   

  	 

	
   

  	
   

  	
   

  	 

	
  OTHER INVESTORS:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  HEALTHCAP IV KB BY
  HEALTHCAP IV GP

  AB

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
  /s/ Staffan Lindstrand    /s/ Magnus Persson

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Name: Staffan Lindstrand

  Magnus Persson

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Title: Partners

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  OTHER INVESTORS:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  ODLANDER,
  FREDRIKSON & CO AB AS A

  MEMBER OF AND ON BEHALF OF ALL

  MEMBERS, IF ANY, OF THE OFCO CLUB IV

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
  /s/ Staffan Lindstrand    /s/ Magnus Persson

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Name: Staffan Lindstrand

  Magnus Persson

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Title: PartnersExhibit 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

  	
   

  
	
  SECTION 4.10.
  Lost Certificates

  	
   

  
	
  ARTICLE V

  	
   

  
	
  SECTION 5.1.
  Organization and Qualifications

  	
   

  
	
  SECTION 5.2.
  Authority; Non-Contravention; Approvals

  	
   

  
	
  SECTION 5.3.
  Litigation

  	
   

  
	
  SECTION 5.4.
  Brokers and Finders

  	
   

  
	
  ARTICLE VI

  	
   

  
	
  SECTION 6.1.
  Organization and Qualification

  	
   

  
	
  SECTION 6.2.
  Capitalization

  	
   

  
	
  SECTION 6.3.
  Subsidiaries

  	
   

  
	
  SECTION 6.4.
  Authority; Non-Contravention; Approvals.

  	
   

  
	
  SECTION 6.5.
  Company Financial Statements

  	
   

  
	
  SECTION 6.6.
  Absence of Undisclosed Liabilities

  	
   

  
	
  SECTION 6.7.
  Absence of Certain Changes or Events

  	
   

  
	
  SECTION 6.8.
  Absence of Litigation

  	
   

  
	
  SECTION 6.9.
  No Violation of Law

  	
   

  
	
  SECTION 6.10.
  Taxes

  	
   

  

 

i

 

	
  SECTION 6.11.
  Employee Benefits Plans; ERISA.

  	
   

  
	
  SECTION 6.12.
  Labor and Employment Matters

  	
   

  
	
  SECTION 6.13.
  Environmental Matters

  	
   

  
	
  SECTION 6.14.
  Condition of and Title to Assets

  	
   

  
	
  SECTION 6.15.
  Company Common Shareholder Approval

  	
   

  
	
  SECTION 6.16.
  Trademarks and Intellectual Property Compliance

  	
   

  
	
  SECTION 6.17.
  Contracts and Other Agreements; Compliance

  	
   

  
	
  SECTION 6.18.
  Insurance

  	
   

  
	
  SECTION 6.19.
  Brokers and Finders

  	
   

  
	
  SECTION 6.20.
  Certain Transactions

  	
   

  
	
  SECTION 6.21.
  Books and Records

  	
   

  
	
  SECTION 6.22.
  Employees

  	
   

  
	
  SECTION 6.23.
  Customers and Suppliers

  	
   

  
	
  SECTION 6.24.
  Accounts Receivable

  	
   

  
	
  SECTION 6.25.
  Board Recommendation

  	
   

  
	
  SECTION 6.26.
  Disclosure

  	
   

  
	
  ARTICLE VII

  	
   

  
	
  SECTION 7.1.
  Conduct of Business by the Company Pending the Merger

  	
   

  
	
  SECTION 7.2.
  Control of the Company’s Operations

  	
   

  
	
  SECTION 7.3.
  Acquisition Transactions

  	
   

  
	
  SECTION 7.4.
  Employees

  	
   

  
	
  ARTICLE VIII

  	
   

  
	
  SECTION 8.1.
  Access to Information

  	
   

  
	
  SECTION 8.2.
  Company Common Shareholder Approval

  	
   

  
	
  SECTION 8.3.
  Expenses and Fees

  	
   

  
	
  SECTION 8.4.
  Agreement to Cooperate

  	
   

  
	
  SECTION 8.5.
  Public Statements

  	
   

  
	
  SECTION 8.6.
  Indemnification of Directors and Officers and Controlling Persons

  	
   

  
	
  SECTION 8.7.
  Notification of Certain Matters

  	
   

  
	
  SECTION 8.8.
  Execution of Additional Documents

  	
   

  
	
  SECTION 8.9.
  Tax Matters.

  	
   

  
	
  SECTION 8.10.
  Worker’s Compensation Insurance

  	
   

  
	
  ARTICLE IX

  	
   

  
	
  SECTION 9.1.
  Conditions to Each Party’s Obligation to Effect the Merger

  	
   

  
	
  SECTION 9.2.
  Additional Conditions to Obligation of the Company to Effect the Merger

  	
   

  
	
  SECTION 9.3.
  Additional Conditions to Obligations of Parent and Subsidiary to Effect the
  Merger

  	
   

  
	
  ARTICLE X

  	
   

  
	
  SECTION 10.1.
  Indemnification of Parent and Subsidiary After Effective Time

  	
   

  
	
  SECTION 10.2.
  Indemnification of the Company Common Shareholders

  	
   

  
	
  SECTION 10.3.
  Procedure Relative to Indemnification

  	
   

  
	
  SECTION 10.4.
  Losses Net of Insurance and Tax Benefits

  	
   

  

 

ii

 

	
  SECTION 10.5.
  Limits on Indemnification Claims.

  	
   

  
	
  SECTION 10.6.
  Sole Remedy

  	
   

  
	
  SECTION 10.7.
  Payable Claims

  	
   

  
	
  SECTION 10.8.
  Treatment of Indemnity Payments

  	
   

  
	
  SECTION 10.9.
  Assignment; Reimbursement

  	
   

  
	
  ARTICLE XI

  	
   

  
	
  SECTION 11.1.
  Termination

  	
   

  
	
  SECTION 11.2.
  Effect of Termination

  	
   

  
	
  SECTION 11.3.
  Break-up Fee

  	
   

  
	
  SECTION 11.4.
  Amendment

  	
   

  
	
  SECTION 11.5.
  Waiver

  	
   

  
	
  ARTICLE XII

  	
   

  
	
  SECTION 12.1.
  Shareholder Representatives

  	
   

  
	
  SECTION 12.2.
  Company Disclosure Letter

  	
   

  
	
  SECTION 12.3.
  Notices

  	
   

  
	
  SECTION 12.4.
  Interpretation

  	
   

  
	
  SECTION 12.5.
  Miscellaneous

  	
   

  
	
  SECTION 12.6.
  Governing Law; Jurisdiction

  	
   

  
	
  SECTION 12.7.
  Counterparts

  	
   

  
	
  SECTION 12.8.
  Successors in Interest

  	
   

  
	
  SECTION 12.9.
  Exhibits and Schedules

  	
   

  
	
  SECTION 12.10.
  Severability

  	
   

  
	
  SECTION 12.11.
  No Joint Venture

  	
   

  
	
  SECTION 12.12.
  Specific Performance

  	
   

  

 

iii

 

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

 

“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 

 

7

 

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).

 

8

 

“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 

 

9

 

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 

 

10

 

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.

 

11

 

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 

 

12

 

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 

 

13

 

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 

 

14

 

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 

 

15

 

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.

 

16

 

(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.

 

17

 

 

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 

 

18

 

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,

 

19

 

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:

 

20

 

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.

 

21

 

(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 

 

22

 

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.

 

23

 

(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 

 

24

 

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 

 

25

 

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 

 

26

 

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 

 

27

 

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.

 

28

 

(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 

 

29

 

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.

 

30

 

(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.

 

31

 

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 

 

32

 

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.

 

33

 

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

 

34

 

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 

 

35

 

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 

 

36

 

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,

 

37

 

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.

 

38

 

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 

 

39

 

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;

 

40

 

(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;

 

41

 

(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

 

42

 

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 

 

43

 

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.

 

44

 

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.

 

45

 

(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 

 

46

 

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 

 

47

 

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.

 

48

 

(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 

 

49

 

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:

 

50

 

(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 

 

51

 

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,

 

52

 

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),

 

53

 

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 

 

54

 

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.

 

55

 

(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 

 

56

 

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 

 

57

 

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 

 

58

 

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.

 

59

 

 

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;

 

60

 

(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 

 

61

 

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 

 

62

 

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

 

63

 

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:

 

64

 

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.

 

65

 

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.

 

66

 

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)

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00085-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00085-of-00352.parquet"}]]