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EXHIBIT 10.36
XXXX.XXX, INC.
SERIES C PREFERRED STOCK PURCHASE AGREEMENT
This Series C Preferred Stock Purchase Agreement (the "Agreement") is
made as of the 18th day of January 2000 by and between Xxxx.xxx, Inc., a
California corporation (the "Company"), and the investors listed on Exhibit A
attached hereto (each a "Purchaser" and together the "Purchasers").
The parties hereby agree as follows:
1. PURCHASE AND SALE OF PREFERRED STOCK.
1.1 SALE AND ISSUANCE OF SERIES C PREFERRED STOCK .
(a) The Company shall adopt and file with the Secretary of
State of the State of California on or before the Closing (as defined below) the
Fifth Amended and Restated Articles of Incorporation in the form attached hereto
as Exhibit B (the "Restated Articles").
(b) The Company has, or will have before the Closing (as
defined in Section 1.2(a) below) authorized the sale and issuance of up to
1,378,000 shares of Series C Preferred Stock. Subject to the terms and
conditions of this Agreement, each Purchaser agrees, severally and not jointly,
to purchase at the Closing (as defined below) and the Company agrees to sell and
issue to each Purchaser at the Closing that number of shares of Series C
Preferred Stock set forth opposite each such Purchaser's name on Exhibit A
attached hereto at a purchase price of $8.55 per share. The shares of Series C
Preferred Stock issued to the Purchaser pursuant to this Agreement shall be
hereinafter referred to as the "Stock; and the Stock and the Common Stock
issuable upon conversion of the Stock shall collectively be referred to
hereinafter as the "Securities."
1.2 CLOSING; DELIVERY. The purchase and sale of the Stock shall
take place at the offices of Venture Law Group, 0000 Xxxx Xxxx Xxxx, Xxxxx Xxxx,
Xxxxxxxxxx, at 10:00 a.m., on January __, 2000, or at such other time and place
as the Company and the Purchasers mutually agree upon, orally or in writing
(which time and place are designated as the "Closing"). At the Closing, the
Company shall deliver to each Purchaser a certificate representing the Stock
being purchased thereby against payment of the purchase price therefor by check
payable to the Company, by wire transfer to the Company's bank account, or by
the transfer of other consideration as may be mutually agreed by the Company and
such Purchaser.
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company hereby
represents and warrants to each Purchaser that, except as set forth on a
Schedule of Exceptions attached hereto as Exhibit C, which exceptions shall be
deemed to be representations and warranties as if made hereunder:
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2.1 ORGANIZATION, GOOD STANDING AND QUALIFICATION. The Company is
a corporation duly organized, validly existing and in good standing under the
laws of the State of California and has all requisite corporate power and
authority to carry on its business as now conducted and as proposed to be
conducted in the future. The Company is duly qualified to transact business and
is in good standing in each jurisdiction in which the failure so to qualify
would have a material adverse effect on its business or properties.
2.2 CAPITALIZATION. The authorized capital of the Company
consists, or will consist, immediately prior to the Closing, of:
(a) 22,627,328 shares of Preferred Stock, 7,227,328 of which
shares have been designated Series A Preferred Stock, all of which are issued
and outstanding immediately prior to the Closing, 13,900,000 of which shares
have been designated Series B Preferred Stock, 13,148,347 of which are issued
and outstanding immediately prior to the Closing, and 1,500,000 of which shares
have been designated Series C Preferred Stock, none of which are issued and
outstanding immediately prior to the Closing. The rights, privileges and
preferences of the Preferred Stock are as stated in the Restated Articles. All
of the outstanding shares of Preferred Stock have been duly authorized, fully
paid and are nonassessable and issued in compliance with all applicable federal
and state securities laws.
(b) 36,000,000 shares of Common Stock, 5,802,246 shares of
which are issued and outstanding immediately prior to the Closing. All of the
outstanding shares of Common Stock have been duly authorized, fully paid and are
nonassessable and issued in compliance with all applicable federal and state
securities laws.
(c) The Company has reserved 7,269,159 shares of Common
Stock for issuance to officers, directors, employees and consultants of the
Company pursuant to its 1999 Stock Plan duly adopted by the Board of Directors
and approved by the Company shareholders (the "Stock Plan"). Of such reserved
shares of Common Stock, 3,930,409 shares have been issued pursuant to restricted
stock purchase agreements or exercised options, options to purchase 1,216,250
shares have been granted or are currently outstanding, and 2,098,000 shares of
Common Stock remain available for issuance to officers, directors, employees and
consultants pursuant to the Stock Plan. The Company has reserved 500,000 shares
of Common Stock for issuance to employees of the Company pursuant to its 2000
Employee Stock Purchase Plan duly adopted by the Board of Directors and approved
by the Company shareholders (the "ESPP Plan"). Of such reserved shares of Common
Stock, no shares have been issued and 500,000 shares of Common Stock remain
available for issuance and sale pursuant to the ESPP Plan. Except as set forth
on the Schedule of Exceptions, options and Common Stock granted to employees by
the Company pursuant to the Stock Plan are subject to the following vesting
schedule: 25% of the shares comprising each grant to employees shall vest on the
one-year anniversary of the vesting commencement date for such grant, and
thereafter 1/48th of the shares comprising the grant shall vest on each monthly
anniversary of the vesting commencement date for such grant over the following
36 months. Unvested shares of Common Stock issued to employees pursuant to the
Stock Plan are subject to the Company's right of repurchase at the original
grantee's purchase price.
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(d) Except for (a) the conversion privileges of the
outstanding Series A Preferred Stock, the Series B Preferred Stock and the
Series C Preferred Stock to be issued pursuant to this Agreement, (b) the Right
of First Offer set forth in Section 2.3 of the Amended and Restated Investors
Rights Agreement to be entered into by the Company, Xxxx XxXxxxxx, the
Purchasers, the holders of Series A Preferred Stock, the holders of Series B
Preferred Stock, and the holders of Series C Preferred Stock at the Closing, (c)
outstanding options issued pursuant to the Stock Plan, and (d) rights under the
ESPP Plan to purchase shares of Common Stock, there are no outstanding options,
warrants, rights (including conversion or preemptive rights and rights of first
refusal or similar rights) or agreements, orally or in writing, for the purchase
or acquisition from the Company of any shares of its capital stock. Other than
the Amended and Restated Voting Agreement of even date herewith by and among the
Company, Xxxx XxXxxxxx, Xxxxx Xxxxxxxxxx, the holders of Series A Preferred
Stock and the holders of Series B Preferred Stock, the Company is not a party or
subject to any agreement or understanding, and to the best of its knowledge,
there is no agreement or understanding between any persons and/or entities, that
affects or relates to the voting or giving of written consents with respect to
any security or by a director of the Company.
2.3 SUBSIDIARIES. The Company does not currently own or control,
directly or indirectly, any interest in any other corporation, association, or
other business entity. The Company is not a participant in any joint venture,
partnership or similar arrangement.
2.4 AUTHORIZATION. All corporate action on the part of the
Company, its officers, directors and shareholders necessary for the
authorization, execution and delivery of this Agreement and the Amended and
Restated Investors' Rights Agreement, in the form attached hereto as Exhibit D
(the "Investors' Rights Agreement" and collectively with this Agreement, the
"Agreements") and the performance of all obligations of the Company hereunder
and thereunder and the authorization, issuance (or reservation for issuance),
sale and delivery of the Securities has been taken or will be taken prior to the
Closing, and the Agreements, when executed and delivered by the Company, shall
constitute valid and legally binding obligations of the Company, enforceable
against the Company in accordance with their terms except (i) as limited by
applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent
conveyance, and other laws of general application affecting enforcement of
creditors' rights generally, as limited by laws relating to the availability of
specific performance, injunctive relief, or other equitable remedies, or (ii) to
the extent the indemnification provisions contained in the Investors' Rights
Agreement may be limited by applicable federal or state securities laws. The
sale of the Securities is not and will not be subject to any preemptive rights
or rights of first refusal, except for those rights waived or exercised by
certain Purchasers purchasing the Stock set forth on Exhibit A.
2.5 VALID ISSUANCE OF SECURITIES. The Securities that are being
issued to the Purchasers hereunder, when issued, sold and delivered in
accordance with the terms hereof for the consideration expressed herein, will be
duly and validly issued, fully paid and nonassessable and free of restrictions
on transfer other than restrictions on transfer under this Agreement, the
Investors' Rights Agreement and applicable state and federal securities laws.
Based in part upon the representations of the Purchasers in this Agreement and
subject to the provisions of
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Section 2.6 below, the Securities will be issued in compliance with all
applicable federal and state securities laws. The Common Stock issuable upon
conversion of the Stock has been duly and validly reserved for issuance, and
upon issuance in accordance with the terms of the Restated Articles, shall be
duly and validly issued, fully paid and nonassessable and free of restrictions
on transfer other than restrictions on transfer under this Agreement, the
Investors' Rights Agreement and applicable federal and state securities laws and
will be issued in compliance with all applicable federal and state securities
laws.
2.6 GOVERNMENTAL CONSENTS. No consent, approval, order or
authorization of, or registration, qualification, designation, declaration or
filing with, any federal, state or local governmental authority on the part of
the Company is required in connection with the consummation of the transactions
contemplated by this Agreement, except for the filing of the Restated Articles
and filings pursuant to Section 25102(f) of the California Corporate Securities
Law of 1968, as amended, and the rules thereunder, other applicable state
securities laws and Regulation D of the Securities Act of 1933, as amended (the
"Securities Act").
2.7 OFFERING. Subject in part to the truth and accuracy of each
Purchaser's representations set forth in Section 3 of this Agreement, the offer,
sale and issuance of the Securities as contemplated by this Agreement are, to
the Company's knowledge, exempt from the registration requirements of any
applicable state and federal securities laws, and neither the Company nor any
authorized agent acting on its behalf will knowingly take any action hereafter
that would cause the loss of such exemption.
2.8 LITIGATION. There is no action, suit, proceeding or
investigation pending or, to the Company's knowledge, currently threatened
against the Company that questions the validity of the Agreements or the right
of the Company to enter into them, or to consummate the transactions
contemplated hereby or thereby, or that might result, either individually or in
the aggregate, in any material adverse changes in the assets, condition or
affairs of the Company, financially or otherwise, or any change in the current
equity ownership of the Company, nor is the Company aware that there is any
basis for the foregoing. The foregoing includes, without limitation, actions,
suits, proceedings or investigations pending or threatened involving the prior
employment of any of the Company's employees, their use in connection with the
Company's business of any information or techniques allegedly proprietary to any
of their former employers, or their obligations under any agreements with former
employers. The Company is not a party or subject to the provisions of any order,
writ, injunction, judgment or decree of any court or government agency or
instrumentality nor has the Company received any notice thereof. There is no
action, suit, proceeding or investigation by the Company or any of its
subsidiaries currently pending or which the Company or any of its subsidiaries
intends to initiate.
2.9 INTELLECTUAL PROPERTY. To its knowledge, the Company owns or
possesses sufficient legal rights to all patents, trademarks, service marks,
trade names, copyrights, trade secrets, licenses, information and other
proprietary rights and processes necessary for its business as now conducted and
as proposed to be conducted in the future without any conflict with, or
infringement of, the rights of others and believes it can obtain, on
commercially reasonable terms, any additional rights necessary for the conduct
of its business as proposed to be
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conducted. The Company has not received any communications alleging that the
Company has violated or, by conducting its business as currently conducted or as
presently proposed, would violate any of the patents, trademarks, service marks,
tradenames, copyrights, trade secrets or other proprietary rights or processes
of any other person or entity. The Company is not aware that any of its
employees is obligated under any contract (including licenses, covenants or
commitments of any nature) or other agreement, or subject to any judgment,
decree or order of any court or administrative agency, that would interfere with
the use of such employee's best efforts to promote the interest of the Company
or that would conflict with the Company's business as currently conducted or as
proposed to be conducted. Neither the execution or delivery of the Agreements,
nor the carrying on of the Company's business by the employees of the Company,
nor the conduct of the Company's business as proposed, will, to the Company's
knowledge, conflict with or result in a breach of the terms, conditions or
provisions of, or constitute a default under, any contract, covenant or
instrument under which any such employee is now obligated. The Company does not
believe it is or will be necessary to use any inventions, trade secrets or
proprietary information of any of its employees (or persons it currently intends
to hire) made prior to their employment by the Company. The Schedule of
Exceptions includes a list of all patents, copyrights, trademarks and domain
names claimed or owned by the Company and all licenses by the Company of any
intellectual property or technology from third parties.
2.10 COMPLIANCE WITH OTHER INSTRUMENTS.
(a) The Company is not in violation or default of any
provisions of its Restated Articles or Bylaws or of any instrument, judgment,
order, writ, decree or contract to which it is a party or by which it is bound
or, to its knowledge, of any provision of federal or state statute, rule or
regulation applicable to the Company. The execution, delivery and performance of
the Agreements and the consummation of the transactions contemplated hereby or
thereby will not result in any such violation or be in conflict with or
constitute, with or without the passage of time and giving of notice, either a
default under any such provision, instrument, judgment, order, writ, decree or
contract or an event which results in the creation of any lien, charge or
encumbrance upon any assets of the Company or nonrenewal of any permit, license,
authorization or approval applicable to the Company, its business or operations
or any of its assets or properties.
(b) To its knowledge, the Company has avoided every
condition, and has not performed any act, the occurrence of which would result
in the Company's loss of any right granted under any license, permit,
authorization, distribution agreement or other agreement.
2.11 AGREEMENTS; ACTION.
(a) Except for agreements explicitly contemplated by the
Agreements, there are no agreements, understandings or proposed transactions
between the Company and any of its officers, directors, members of their
immediate families, affiliates, or any affiliate thereof.
(b) Except for agreements explicitly contemplated by the
Agreements, there are no agreements, understandings, instruments, contracts,
proposed transactions, judgments, orders, writs, or decrees to which the Company
is a party or by which it is bound that
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involve (i) obligations (contingent or otherwise) of, or payments to, the
Company in excess of $50,000, (ii) the license of any patent, copyright, trade
secret or other proprietary right to or from the Company, (iii) the grant of
rights to manufacture, produce, assemble, license, market, or sell its products
to any other person or affect the Company's exclusive right to develop,
manufacture, assemble, distribute, market or sell its products or services, or
(iv) indemnification by the Company with respect to infringement of proprietary
rights.
(c) The Company has not (i) declared or paid any dividends,
or authorized or made any distribution upon or with respect to any class or
Series of its capital stock, (ii) incurred any indebtedness for money borrowed
or incurred any other liabilities individually in excess of $50,000 nor, in the
case of indebtedness and/or liabilities individually less than $50,000, in
excess of $100,000 in the aggregate, (iii) made any loans or advances to any
person, other than ordinary advances for travel expenses, or (iv) sold,
exchanged or otherwise disposed of any of its assets or rights, other than the
sale of its inventory in the ordinary course of business.
(d) For purposes of subsections (b) and (c) above, all
indebtedness, liabilities, agreements, understandings, instruments, contracts
and proposed transactions involving the same person or entity (including persons
or entities the Company has reason to believe are affiliated therewith) shall be
aggregated for the purpose of meeting the individual minimum dollar amounts of
such subsections.
(e) The Company is not a party to and is not bound by any
contract, agreement or instrument, or subject to any restriction under its
Restated Articles or Bylaws that, to its knowledge, adversely affects its
business as now conducted and as proposed to be conducted in the future, its
properties or its financial condition.
(f) The Company has not engaged in the past three (3) months
in any discussion (i) with any representative of any corporation or corporations
regarding the merger of the Company with or into any such corporation or
corporations, (ii) with any representative of any corporation, partnership,
association or other business entity or any individual regarding the sale,
conveyance or disposition of all or substantially all of the assets of the
Company or a transaction or Series of related transactions in which more than
fifty percent (50%) of the voting power of the Company would be disposed of, or
(iii) regarding any other form of liquidation, dissolution or winding up of the
Company.
2.12 DISCLOSURE. The Company has fully provided the Purchasers with
all the information that the Purchasers have requested for deciding whether to
acquire the Securities and all information that the Company believes is
reasonably necessary to enable the Purchasers to make such a decision, including
certain financial projections. No representation or warranty of the Company
contained in this Agreement and the exhibits attached hereto, any certificate
furnished or to be furnished to Purchasers at the Closing, or other information
furnished to the Purchasers (when read together) contains any untrue statement
of a material fact or omits to state a material fact necessary in order to make
the statements contained herein or therein not misleading in light of the
circumstances under which they were made. To the extent the financial
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projections were prepared by management of the Company, such financial
projections were prepared in good faith. The assumptions applied in preparing
such projections appeared reasonable to management as of the date thereof and as
of the date hereof. The Purchasers understand that actual results may differ
substantially from those projections.
2.13 NO CONFLICT OF INTEREST. The Company is not indebted (or
committed to make loans or extend or guarantee credit), directly or indirectly,
to any of its employees, officers or directors or to their respective spouses or
children, in any amount whatsoever other than in connection with expenses or
advances of expenses incurred in the ordinary course of business or relocation
expenses of employees nor is the Company contemplating such indebtedness as of
the date of this Agreement. None of the Company's employees, officers or
directors, or any members of their immediate families, are, directly or
indirectly, indebted to the Company (other than in connection with purchases of
the Company's stock) or, to the Company's knowledge, have any direct or indirect
ownership interest in any firm or corporation with which the Company is
affiliated or with which the Company has a business relationship, or any firm or
corporation which competes with the Company nor is the Company contemplating
such indebtedness as of the date of this Agreement, except that employees,
officers, directors and/or shareholders of the Company may own stock in (but not
exceeding two percent of the outstanding capital stock of) any publicly traded
company that may compete with the Company. To the Company's knowledge, none of
the Company's officers, directors or shareholders or any members of their
immediate families are, directly or indirectly, interested in any material
contract with the Company, nor does any such person own, directly or indirectly,
in whole or in part, any material tangible or intangible property that the
Company uses or contemplates using in the conduct of its business. The Company
is not a guarantor or indemnitor of any indebtedness of any other person, firm
or corporation.
2.14 RIGHTS OF REGISTRATION AND VOTING RIGHTS. Except as
contemplated in the Investors' Rights Agreement, the Company has not granted or
agreed to grant any registration rights, including piggyback rights, to any
person or entity. Except as contemplated in the Voting Agreement dated as of
November 5, 1999 between the Company, Xxxx XxXxxxxx, Xxxxx Xxxxxxxxxx and
certain purchasers of the Company's Series A Preferred Stock and/or Series B
Preferred Stock, to the Company's knowledge, no shareholder of the Company has
entered into any agreements with respect to the voting of capital shares of the
Company.
2.15 TITLE TO PROPERTY AND ASSETS. The Company owns its property
and assets free and clear of all mortgages, liens, loans and encumbrances,
except such encumbrances and liens which arise in the ordinary course of
business and do not materially impair the Company's ownership or use of such
property or assets. With respect to the property and assets it leases, the
Company is in compliance with such leases and, to its knowledge, holds a valid
leasehold interest free of any liens, claims or encumbrances.
2.16 BALANCE SHEET. The Company's Balance Sheet as of September 30,
1999 set forth in its audited financial statements contained in its Registration
Statement on Form S-1 as filed with the Securities and Exchange Commission on
December 9, 1999 (the "Balance Sheet") has been prepared in accordance with
generally accepted accounting principles and fairly
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presents the financial condition of the Company as of the date indicated
therein, subject to normal year-end audit adjustments. Except as set forth in
the Balance Sheet, the Company has no material liabilities, contingent or
otherwise, other than (i) liabilities incurred in the ordinary course of
business subsequent to September 30, 1999 that are not material, individually or
in the aggregate, and (ii) obligations under contracts and commitments incurred
in the ordinary course of business and not required under generally accepted
accounting principles to be reflected in the Balance Sheet, which, in both
cases, individually or in the aggregate are not material to the financial
condition or operating results of the Company. Except as disclosed to the
Purchasers, the Company is not a guarantor or indemnitor of any indebtedness of
any other person, firm or corporation. The Company maintains and will continue
to maintain a standard system of accounting established and administered in
accordance with generally accepted accounting principles.
2.17 EMPLOYEE BENEFIT PLANS. The Company does not have any Employee
Benefit Plan as defined in the Employee Retirement Income Security Act of 1974.
2.18 LABOR AGREEMENTS AND ACTIONS. The Company is not bound by or
subject to (and none of its assets or properties is bound by or subject to) any
written or oral, express or implied, contract, commitment or arrangement with
any labor union, and no labor union has requested or, to the knowledge of the
Company, has sought to represent any of the employees, representatives or agents
of the Company. There is no strike or other labor dispute involving the Company
pending, or to the knowledge of the Company threatened, which could have a
material adverse effect on the assets, properties, financial condition,
operating results, or business of the Company (as is presently conducted and as
it is proposed to be conducted), nor is the Company aware of any labor
organization activity involving its employees. The Company is not aware that any
officer or key employee, or that any group of key employees, intends to
terminate their employment with the Company, nor does the Company have the
present intention to terminate the employment of any of the foregoing. The
employment of each officer and employee of the Company is terminable at the will
of the Company. To its knowledge, the Company has complied in all material
respects with all applicable state and federal equal employment opportunity laws
and with other laws related to employment. The Company is not a party to or
bound by any currently effective employment contract, deferred compensation
agreement, bonus plan, incentive plan, profit sharing plan, retirement agreement
or other employee compensation plan or agreement.
2.19 CONFIDENTIAL INFORMATION AND INVENTION ASSIGNMENT AND EMPLOYEE
STOCK PURCHASE AGREEMENTS. Each current and former employee, consultant and
officer of the Company has executed agreements with the Company regarding
confidentiality and proprietary information (the "Confidential Information and
Invention Assignment Agreement") and any stock purchases. No current employee,
officer or consultant of the Company has excluded works or inventions made prior
to his or her employment with the Company from his or her assignment of
inventions pursuant to such employee, officer or consultant's Confidential
Information and Invention Assignment Agreement. The Company is not aware that
any of its employees or consultants is in violation thereof, and the Company
will use its best efforts to prevent any such
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violation. The Company as taken reasonable security measures to maintain the
confidentiality of the Company's proprietary information.
2.20 PERMITS. The Company has all franchises, permits, licenses and
any similar authority necessary for the conduct of its business, the lack of
which could materially and adversely affect the business, properties, prospects,
or financial condition of the Company. The Company believes it can obtain,
without undue burden or expense, any similar authority for the conduct of its
business as planned to be conducted. The Company is not in default in any
material respect under any of such franchises, permits, licenses or other
similar authority.
2.21 CORPORATE DOCUMENTS. The Restated Articles and Bylaws of the
Company are in the form provided to counsel for the Purchasers.
2.22 MANUFACTURING AND MARKETING RIGHTS. The Company has not
granted exclusive rights to develop, manufacture, produce, assemble, license,
market, distribute or sell its products or services to any other person or
entity and is not bound by any agreement that affects the Company's exclusive
right to develop, manufacture, produce, assemble, license, distribute, market or
sell its products, services or any other products that use its proprietary
information. 2.23 TAX RETURNS, PAYMENTS AND ELECTIONS. The Company has filed all
tax returns and reports (including information returns and reports) as required
by law. These returns and reports are true and correct in all material respects.
The Company has paid all taxes and other assessments due. The Company has not
elected pursuant to the Code to be treated as a Subchapter S corporation or a
collapsible corporation pursuant to Section 1362(a) or Section 341(f) of the
Code, nor has it made any other elections pursuant to the Code (other than
elections that relate solely to methods of accounting, depreciation or
amortization) that would have a material adverse effect on the Company, its
financial condition, its business as presently conducted or proposed to be
conducted or any of its properties or material assets. The Company has never had
any tax deficiency proposed or assessed against it and has not executed any
waiver of any statute of limitations on the assessment or collection of any tax
or governmental charge. None of the Company's federal income tax returns and
none of its state income or franchise tax or sales or use tax returns has ever
been audited by governmental authorities. Since the date of the Balance Sheet,
the Company has not incurred any taxes, assessments or governmental charges
other than in the ordinary course of business and the Company has made adequate
provisions on its books of account for all taxes, assessments and governmental
charges with respect to its business, properties and operations for such period.
The Company has withheld or collected from each payment made to each of its
employees, the amount of all taxes (including, but not limited to, federal
income taxes, Federal Insurance Contribution Act taxes and Federal Unemployment
Tax Act taxes) required to be withheld or collected therefrom, and has paid the
same to the proper tax receiving officers or authorized depositories.
2.24 SECTION 83(B) ELECTIONS. To the best of the Company's
knowledge, all individuals who have purchased unvested shares of the Company's
Common Stock have timely filed elections under Section 83(b) of the Code and any
analogous provisions of applicable state tax laws.
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2.25 BROKERS. The Company has no contract, arrangement or
understanding with any broker, finder or similar agent with respect to the
transactions contemplated by this Agreement.
2.26 INSURANCE. The Company has in full force and effect fire and
casualty insurance policies, with extended coverage, sufficient in amount
(subject to reasonable deductibles) to allow it to replace any of its properties
that might be damaged or destroyed and to satisfy its contractual obligations.
The Company has in full force and effect products liability and errors and
omissions insurance in amounts customary for companies similarly situated.
2.27 YEAR 2000. To the Company's knowledge, each hardware and
software product and other computer and information technology used by the
Company in its business (collectively, the "Software") will accurately receive,
provide and process date and time data (including, but not limited to,
calculating, comparing and sequencing) from, into and between the twentieth and
twenty-first centuries, including, without limitation, leap year calculations,
without a decrease in the functionality of the Software so that the Software
will not malfunction, cease to function or provide invalid or incorrect results
as a result of date or time data, to the extent that other information
technology, used in combination with the information technology being acquired,
properly exchanges date and/or time data with it. To the Company's knowledge,
the Software is designed to be used prior to, during and after the calendar year
2000 A.D. and will operate during each such time period without error relating
to date or time data, specifically including any error relating to, or the
product of, date data which represents or references different centuries or more
than one century. Without limiting the generality of the foregoing, to the
Company's knowledge, the Software (a) will not abnormally end or provide invalid
or incorrect results as a result of date or time data, specifically including
date or time data which represents or references different centuries or more
than one century, (b) has been designed to ensure year 2000 compatibility,
including, but not limited to, date and time data century recognition,
calculations which accommodate same century and multi-century formulas and date
values, and date data interface values that reflect the century, and (c)
includes "Year 2000 Capabilities," meaning that the Software (i) will manage and
manipulate data involving dates or time, including single century formulas and
multi-century formulas, and will not cause an abnormally ending scenario within
the application or generate incorrect values or invalid results involving such
dates, (ii) provides that all date-related user interface functionalities and
data fields include the indication of century, and (iii) provides that all
date-related data interface functionalities include the indication of century.
2.28 COMPLIANCE WITH LAWS. To its knowledge, the Company is not in
violation of any applicable statute, rule, regulation, order or restriction of
any domestic or foreign government or any instrumentality or agency thereof in
respect of the conduct of its business or the ownership of its properties which
violation would materially and adversely affect the business, assets,
liabilities, financial condition operations or prospects of the Company. To the
best of the Company's knowledge, the Company is not in violation of any
applicable statute, law or regulation relating to the environment or
occupational health and safety, and to the best of the Company's knowledge, no
material expenditures are or will be required in order to comply with any such
existing statute, law or regulation.
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2.29 OBLIGATIONS OF MANAGEMENT. To the best of the Company's
knowledge, each of the Company's Chief Executive Officer, President and Chief
Financial Officer is currently devoting one hundred percent (100%) of his or her
business time to the conduct of the business of the Company. The Company is not
aware that any such officer or key employee of the Company is planning to work
less than full time at the Company in the future.
2.30 USE OF PROCEEDS. The Company will use proceeds from the sale
of the Stock for working capital purposes. Such proceeds shall not be used to
repay indebtedness to any shareholders of the Company.
2.31 CHANGES. Since September 30, 1999, there has not been:
(a) any change in the assets, liabilities, financial
condition or operating results of the Company from that reflected in the Balance
Sheet, except changes in the ordinary course of business that have not been or
are expected to be, in the aggregate, materially adverse;
(b) any waiver or compromise by the Company of a valuable
right or of a material debt owed to it;
(c) any material change in any compensation arrangement or
agreement (including salary, bonus, insurance or pension benefits) with any
employee, officer, director or shareholder;
(d) any change or amendment to any of the governing
documents of the Company (including the Restated Articles and Bylaws of the
Company), except as contemplated hereunder; or
(e) any arrangement or commitment by the Company to do any
of the things described in this Section 2.31.
2.32 SIGNIFICANT CUSTOMERS AND SUPPLIERS. No customer or supplier
that was significant to the Company during the period from February 17, 1999 to
the date hereof has terminated, materially reduced or threatened to terminate or
materially reduce its purchases from, or provision of products or services to,
the Company, as the case may be.
2.33 ALL TERMS. The Agreements, together with the Restated
Articles, Series A Preferred Stock Purchase Agreement dated as of April 22,
1999, Series B Preferred Stock Purchase Agreement dated as of June 18, 1999,
Series B Preferred Stock and Convertible Note Purchase Agreement dated as of
November 5, 1999, Amended and Restated Right of First Refusal and Co-Sale
Agreement dated as of November 5, 1999 and Amended and Restated Voting Agreement
dated as of November 5, 1999, contain all terms relating to the issuances of
Series A Preferred Stock and Series B Preferred Stock and the relationships
among the holders of such stock, except as set forth in the Schedule of
Exceptions.
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3. REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS. Each Purchaser,
severally and not jointly, hereby represents and warrants to the Company that:
3.1 AUTHORIZATION. Such Purchaser has full power and authority to
enter into the Agreements. The Agreements, when executed and delivered by the
Purchaser and the other parties hereto and thereto that are required to enter
into the Agreements, will constitute valid and legally binding obligations of
the Purchaser, enforceable in accordance with their terms, except (a) as limited
by applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent
conveyance, and any other laws of general application affecting enforcement of
creditors' rights generally, and as limited by laws relating to the availability
of a specific performance, injunctive relief, or other equitable remedies, and
(b) to the extent the indemnification provisions contained in the Investors'
Rights Agreement may be limited by applicable federal or state securities laws.
3.2 PURCHASE ENTIRELY FOR OWN ACCOUNT. This Agreement is made with
the Purchaser in reliance upon the Purchaser's representation to the Company,
which by the Purchaser's execution of this Agreement, the Purchaser hereby
confirms, that the Securities to be acquired by the Purchaser will be acquired
for investment for the Purchaser's own account, not as a nominee or agent, and
not with a view to the resale or distribution of any part thereof, and that the
Purchaser has no present intention of selling, granting any participation in, or
otherwise distributing the same. By executing this Agreement, the Purchaser
further represents that the Purchaser does not presently have any contract,
undertaking, agreement or arrangement with any person to sell, transfer or grant
participations to such person or to any third person, with respect to any of the
Securities. The Purchaser has not been formed for the specific purpose of
acquiring the Securities.
3.3 DISCLOSURE OF INFORMATION. The Purchaser has had an
opportunity to discuss the Company's business, management, financial affairs and
the terms and conditions of the offering of the Stock with the Company's
management and has had an opportunity to review the Company's facilities. The
Purchaser understands that such discussions, as well as any other written
information delivered by the Company to the Purchaser, were intended to describe
the aspects of the Company's business which it believes to be material. The
foregoing, however, does not limit or modify the representations and warranties
of the Company in Section 2 of this Agreement or the right of the investors to
rely thereon.
3.4 RESTRICTED SECURITIES. The Purchaser understands that the
Securities have not been, and will not be, registered under the Securities Act,
by reason of a specific exemption from the registration provisions of the
Securities Act which depends upon, among other things, the bona fide nature of
the investment intent and the accuracy of the Purchaser's representations as
expressed herein. The Purchaser understands that the Securities are "restricted
securities" under applicable U.S. federal and state securities laws and that,
pursuant to these laws, the Purchaser must hold the Securities indefinitely
unless they are registered with the Securities and Exchange Commission and
qualified by state authorities, or an exemption from such registration and
qualification requirements is available. The Purchaser acknowledges that the
Company has no obligation to register or qualify the Securities for resale
except as set forth in the Investors' Rights Agreement. The Purchaser further
acknowledges that if an exemption from registration or
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qualification is available, it may be conditioned on various requirements
including, but not limited to, the time and manner of sale, the holding period
for the Securities, and on requirements relating to the Company which are
outside of the Purchaser's control, and which the Company is under no obligation
and may not be able to satisfy.
3.5 NO PUBLIC MARKET. The Purchaser understands that no public
market now exists for any of the securities issued by the Company, and that the
Company has made no assurances that a public market will ever exist for the
Securities.
3.6 LEGENDS. The Purchaser understands that the Securities, and
any securities issued in respect of or exchange for the Securities, may bear one
or all of the following legends:
(a) "THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AND HAVE BEEN ACQUIRED FOR
INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR
DISTRIBUTION THEREOF. NO SUCH SALE OR DISTRIBUTION MAY BE EFFECTED WITHOUT AN
EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL IN A
FORM SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER
THE SECURITIES ACT OF 1933."
(b) Any legend set forth in the other Agreements.
(c) Any legend required by the Blue Sky laws of any state to
the extent such laws are applicable to the shares represented by the certificate
so legended.
3.7 QUALIFIED INSTITUTIONAL INVESTOR. The Purchaser is a qualified
institutional investor as defined in Rule 144A of the rules and regulations
promulgated under the Securities Act.
4. CONDITIONS OF THE PURCHASERS' OBLIGATIONS AT CLOSING. The
obligations of each Purchaser to the Company under this Agreement are subject to
the fulfillment, on or before the Closing, of each of the following conditions,
unless otherwise waived:
4.1 REPRESENTATIONS AND WARRANTIES. The representations and
warranties of the Company contained in Section 2 shall be true and correct on
and as of the Closing with the same effect as though such representations and
warranties had been made on and as of the date of the Closing.
4.2 PERFORMANCE. The Company shall have performed and complied
with all covenants, agreements, obligations and conditions contained in this
Agreement that are required to be performed or complied with by it on or before
the Closing.
4.3 COMPLIANCE CERTIFICATE. The President of the Company shall
deliver to the Purchasers at the Closing a certificate certifying that the
conditions specified in Sections 4.1
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and 4.2 have been fulfilled, and stating that there shall have been no adverse
change in the business, affairs, prospects, operations, properties, assets or
condition of the Company since the date of the Balance Sheet.
4.4 QUALIFICATIONS. All authorizations, approvals or permits, if
any, of any governmental authority or regulatory body of the United States or of
any state that are required in connection with the lawful issuance and sale of
the Securities pursuant to this Agreement shall be obtained and effective as of
the Closing.
4.5 PROCEEDINGS AND DOCUMENTS. All corporate and other proceedings
in connection with the transactions contemplated at the Closing and all
documents incident thereto shall be reasonably satisfactory in form and
substance to Purchasers' special counsel, which shall have received all such
counterpart original and certified or other copies of such documents as it has
reasonably requested. This may include, without limitation, good standing
certificates and certification by the Company's Secretary regarding the
Company's Restated Articles and Bylaws and Board of Director and shareholder
resolutions relating to this transaction.
4.6 OPINION OF COMPANY COUNSEL. The Purchasers shall have received
from Venture Law Group, counsel for the Company, an opinion, dated as of the
Closing, in substantially the form of Exhibit E.
4.7 BYLAWS. As of the Closing, the Bylaws of the Company shall
provide that the Board of Directors of the Company shall consist of five (5)
persons, which number shall not be changed by an amendment to the Restated
Articles or the Bylaws without consent of holders of seventy percent (70%) of
the outstanding shares of Preferred Stock.
4.8 BOARD OF DIRECTORS. As of the Closing, the Board shall be
comprised of five (5) directors: one representative designated by Xxxxxx Capital
Management, one representative designated by Hummer Winblad Venture Partners,
one director designated by Xxxxxx.xxx, the Company's Chief Executive Officer,
and Xxxx Xxxxxxxx.
4.9 INVESTORS' RIGHTS AGREEMENT. The Company, each Purchaser, the
holders of Series A Preferred Stock, the holders of Series B Preferred Stock and
Xxxx XxXxxxxx shall have executed and delivered the Investors' Rights Agreement
in substantially the form attached as Exhibit D.
4.10 RESTATED ARTICLES. The Company shall have filed the Restated
Articles with the Secretary of State of California on or prior to the Closing
Date, and shall deliver a copy of such filed Restated Articles to each Purchaser
at Closing.
4.11 CONFIDENTIAL INFORMATION AND INVENTION ASSIGNMENT AND EMPLOYEE
STOCK PURCHASE AGREEMENTS. The Company and each of its employees and consultants
shall have entered into the Company's standard form Confidential Information and
Invention Assignment Agreement, in substantially the form provided to the
Purchasers' legal counsel. Each holder of Common Stock of the Company shall have
entered into an Employee Stock Purchase Agreement, in substantially the form
provided to the Purchasers' legal counsel.
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4.12 SECURITIES COMPLIANCE. The Company shall have taken all
actions necessary to comply with any federal or state securities laws applicable
to the transactions contemplated hereunder that are required to be taken prior
to the Closing.
4.13 STOCK CERTIFICATES. The Company shall have delivered to each
Purchaser a duly executed stock certificate evidencing the Stock purchased by
such Purchaser hereunder.
5. CONDITIONS OF THE COMPANY'S OBLIGATIONS AT CLOSING. The obligations
of the Company to each Purchaser under this Agreement are subject to the
fulfillment, on or before the Closing, of each of the following conditions,
unless otherwise waived:
5.1 REPRESENTATIONS AND WARRANTIES. The representations and
warranties of each Purchaser contained in Section 3 shall be true and correct in
all material respects on and as of the Closing with the same effect as though
such representations and warranties had been made on and as of the Closing.
5.2 PERFORMANCE. All covenants, agreements and conditions
contained in this Agreement to be performed by the Purchasers on or prior to the
Closing shall have been performed or complied with in all material respects.
5.3 QUALIFICATIONS. All authorizations, approvals or permits, if
any, of any governmental authority or regulatory body of the United States or of
any state that are required in connection with the lawful issuance and sale of
the Stock pursuant to this Agreement shall be obtained and effective as of the
Closing.
6. MISCELLANEOUS.
6.1 SURVIVAL OF WARRANTIES. Unless otherwise set forth in this
Agreement, the warranties, representations and covenants of the Company and the
Purchasers contained in or made pursuant to this Agreement shall survive the
execution and delivery of this Agreement and the Closing and shall in no way be
affected by any investigation of the subject matter thereof made by or on behalf
of the Purchasers or the Company.
6.2 TRANSFER; SUCCESSORS AND ASSIGNS. The terms and conditions of
this Agreement shall inure to the benefit of and be binding upon the respective
successors and assigns of the parties (including transferees of any securities).
Nothing in this Agreement, express or implied, is intended to confer upon any
party other than the parties hereto or their respective successors and assigns
any rights, remedies, obligations, or liabilities under or by reason of this
Agreement, except as expressly provided in this Agreement. The parties agree
that the Purchaser may assign their rights and obligations under this Agreement
to any of their affiliates (as defined in Rule 501 of Regulation D promulgated
under the Securities Act of 1933, as amended) or to any successors to the
Purchasers or such affiliates.
6.3 GOVERNING LAW. This Agreement and all acts and transactions
pursuant hereto and the rights and obligations of the parties hereto shall be
governed, construed and
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interpreted in accordance with the laws of the State of California, without
giving effect to principles of conflicts of law.
6.4 COUNTERPARTS. This Agreement may be executed in two or more
counterparts and may be executed by facsimile, any of which shall be deemed an
original and all of which together shall constitute one instrument.
6.5 TITLES AND SUBTITLES. The titles and subtitles used in this
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
6.6 NOTICES. Any notice required or permitted by this Agreement
shall be in writing and shall be deemed sufficient upon delivery, when delivered
personally or by overnight courier or sent by fax (with confirmation of
successful electronic transmission), or forty-eight (48) hours after being
deposited in the U.S. mail, as certified or registered mail, with postage
prepaid, addressed to the party to be notified at such party's address as set
forth on the signature page or Exhibit A hereto, or as subsequently modified by
written notice, and
(a) if to the Company, with a copy to:
Venture Law Group
0000 Xxxx Xxxx Xxxx
Xxxxx Xxxx, XX 00000
Attn: Xxxx X. Xxxxxxxx
Tel: 000-000-0000
Fax: 000-000-0000
(b) if to Catalyst Investments, L.L.C., with a copy to:
_______________________________
_______________________________
_______________________________
Attn: _________________________
Tel: _________________________
Fax: _________________________
6.7 FINDER'S FEE. Each party represents that it neither is nor
will be obligated for any finder's fee or commission in connection with this
transaction. Each Purchaser agrees to indemnify and to hold harmless the Company
from any liability for any commission or compensation in the nature of a
finder's fee (and the costs and expenses of defending against such liability or
asserted liability) for which each Purchaser or any of its officers, employees,
or representatives is responsible. The Company agrees to indemnify and hold
harmless each Purchaser from any liability for any commission or compensation in
the nature of a finder's fee (and the costs and expenses of defending against
such liability or asserted liability) for which the Company or any of its
officers, employees or representatives is responsible.
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6.8 ATTORNEY'S FEES. If any action at law or in equity (including
arbitration) is necessary to enforce or interpret the terms of any of the
Agreements, the prevailing party shall be entitled to reasonable attorney's
fees, costs and necessary disbursements in addition to any other relief to which
such party may be entitled.
6.9 AMENDMENTS AND WAIVERS. Any term of this Agreement may be
amended or waived (either generally or in a particular instance and either
retroactively or prospectively) only with the written consent of the Company and
the holders of at least 70% of the Stock (or the Common Stock issuable upon
conversion of the Stock). Any amendment or waiver effected in accordance with
this Section 6.9 shall be binding upon the Purchasers and each transferee of the
Stock (or the Common Stock issuable upon conversion thereof), each future holder
of all such securities, and the Company. Notwithstanding the foregoing, this
Agreement (including Exhibit A hereto) may be amended with only the written
consent of the Company to include additional purchasers of Series C Preferred
Stock at a subsequent closing as "Purchasers."
6.10 SEVERABILITY. If one or more provisions of this Agreement are
held to be unenforceable under applicable law, the parties agree to renegotiate
such provision in good faith. In the event that the parties cannot reach a
mutually agreeable and enforceable replacement for such provision, then (a) such
provision shall be excluded from this Agreement, (b) the balance of the
Agreement shall be interpreted as if such provision were so excluded and (c) the
balance of the Agreement shall be enforceable in accordance with its terms.
6.11 DELAYS OR OMISSIONS. No delay or omission to exercise any
right, power or remedy accruing to any party under this Agreement, upon any
breach or default of any other party under this Agreement, shall impair any such
right, power or remedy of such non-breaching or non-defaulting party nor shall
it be construed to be a waiver of any such breach or default, or an acquiescence
therein, or of or in any similar breach or default thereafter occurring; nor
shall any waiver of any single breach or default be deemed a waiver of any other
breach or default theretofore or thereafter occurring. Any waiver, permit,
consent or approval of any kind or character on the part of any party of any
breach or default under this Agreement, or any waiver on the part of any party
of any provisions or conditions of this Agreement, must be in writing and shall
be effective only to the extent specifically set forth in such writing. All
remedies, either under this Agreement or by law or otherwise afforded to any
party, shall be cumulative and not alternative.
6.12 ENTIRE AGREEMENT. This Agreement, and the documents referred
to herein constitute the entire agreement between the parties hereto pertaining
to the subject matter hereof, and any and all other written or oral agreements
relating to the subject matter hereof existing between the parties hereto are
expressly canceled.
6.13 CORPORATE SECURITIES LAW. THE SALE OF THE SECURITIES WHICH ARE
THE SUBJECT OF THIS AGREEMENT HAS NOT BEEN QUALIFIED WITH THE COMMISSIONER OF
CORPORATIONS OF THE STATE OF CALIFORNIA AND THE ISSUANCE OF THE SECURITIES OR
THE PAYMENT OR RECEIPT OF ANY PART OF
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THE CONSIDERATION THEREFOR PRIOR TO THE QUALIFICATION IS UNLAWFUL, UNLESS THE
SALE OF SECURITIES IS EXEMPT FROM THE QUALIFICATION BY SECTION 25100, 25102 OR
25105 OF THE CALIFORNIA CORPORATIONS CODE. THE RIGHTS OF ALL PARTIES TO THIS
AGREEMENT ARE EXPRESSLY CONDITIONED UPON THE QUALIFICATION BEING OBTAINED UNLESS
THE SALE IS SO EXEMPT.
6.14 CONFIDENTIALITY. Each party hereto agrees that, except with
the prior written permission of the other party, it shall at all times keep
confidential and not divulge, furnish or make accessible to anyone any
confidential information, knowledge or data concerning or relating to the
business or financial affairs of the other parties to which such party has been
or shall become privy by reason of this Agreement, discussions or negotiations
relating to this Agreement, the performance of its obligations hereunder or the
ownership of Stock purchased hereunder ("Confidential Information"); provided,
however, that (a) Confidential Information shall not include (i) information
that is or becomes available to the general public other than as a result of
disclosure by any Purchaser, (ii) information known to any Purchaser prior to
discussions or negotiations related to this Agreement as demonstrated by
tangible evidence of such prior knowledge by such Purchaser, or (iii) general
knowledge of the Company's industry not specifically related to the Company's
business. The provisions of this Section 6.14 shall be in addition to, and not
in substitution for, the provisions of any separate nondisclosure agreement
executed by the parties hereto with respect to the transactions contemplated
hereby.
6.15 EXCULPATION AMONG PURCHASERS. Each Purchaser acknowledges that
it is not relying upon any person, firm or corporation, other than the Company
and its officers and directors, in making its investment or decision to invest
in the Company. Each Purchaser agrees that no Purchaser nor the respective
controlling persons, officers, directors, partners, agents, or employees of any
Purchaser shall be liable to any other Purchaser for any action heretofore or
hereafter taken or omitted to be taken by any of them in connection with the
purchase of the Securities.
6.16 AGGREGATION OF STOCK. All shares of stock held or acquired by
affiliated entities or persons hereunder shall be aggregated together for the
purpose of determining the availability of rights under this Agreement.
[SIGNATURE PAGE FOLLOWS]
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The parties have executed this Series C Preferred Stock Purchase Agreement
as of the date first written above.
COMPANY:
XXXX.XXX, INC.
By: /s/ XXXXX XXXXXXXXXX
-----------------------------------
Name: Xxxxx Xxxxxxxxxx
-----------------------------------
(print)
Title: CEO
----------------------------------
Address: 000 Xxxxxxx Xxxxxx
Xxx Xxxxxxxxx, XX 00000
Tel: (000) 000-0000
Fax: (000) 000-0000
PURCHASER:
CATALYST INVESTMENTS, L.L.C.
By: The Xxxx Disney Company, its sole
member
By: /s/ XXXXXX X. XXXXXX
------------------------------------
Xxxxxx X. Xxxxxx
Senior Executive Vice President and
Chief Financial Officer
Address: 000 Xxxxx Xxxxx Xxxxx Xxxxxx
Xxxxxxx, XX 00000
