REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (this "Agreement"), dated as of
April 28, 2000, is made and entered into by and between Telenetics Corporation,
a California corporation ("Company"), and Xxxxxx X. Xxxxxxxx ("Holder").
RECITALS
A. Holder may be issued certain shares (the "Shares") of the Company's
common stock, no par value per share (the "Common Stock"), pursuant to the terms
and conditions of that certain Promissory Note dated of even date herewith
executed by the Company in favor of Holder (the "Note") and that certain Asset
Purchase Agreement dated as of April 21, 2000 between the Company, Holder and
Racon, Inc., a Washington corporation (the "Purchase Agreement").
X. Xxxxxx may be issued the Shares of Common Stock upon conversion of
the amounts owed under the Note into Common Stock pursuant to the terms of
conversion described in the Note.
C. The Company desires to provide Holder with registration rights with
respect to the Shares issuable to Holder upon conversion of the Note upon the
terms and conditions hereinafter set forth.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing premises and the
mutual covenants and conditions hereinafter set forth, the parties hereto hereby
agree as follows:
1. DEFINITIONS.
1.1 "COMMON STOCK" shall mean the Common Stock, no par value per share,
of the Company.
1.2 "EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
amended.
1.3 "SHARES" shall have the meaning set forth in the Recitals to this
Agreement.
1.4 "REGISTRABLE SECURITIES" shall mean (i) the Shares and (ii) any
securities issued or issuable with respect to such Shares by way of a stock
dividend or stock split or in connection with a combination of shares,
recapitalization, merger, consideration or other reorganization. As to any
particular Registrable Securities, once issued, such shares shall cease to be
Registrable Securities when (a) such shares shall have been registered under the
Securities Act, the registration statement with respect to the sale of such
shares shall have become effective under the Securities Act and such shares
shall have been disposed of pursuant to such effective registration statement,
(b) such shares shall have been distributed pursuant to Rule 144 (or any similar
provision relating to the disposition of securities then in force) under the
Securities Act, (c) such shares shall have been otherwise transferred, new
certificates or other evidences of ownership for them not bearing a legend
restricting further transfer and not subject to any stop-transfer order or other
restrictions on transfer shall have been delivered by the Company and subsequent
disposition of such shares shall not require registration or qualification of
such shares under the Securities Act or any state securities laws then in force,
or (d) such shares shall cease to be outstanding.
1.5 "REGISTRATION EXPENSES" shall have the meaning set forth in Section
2.4.
1.6 "SEC" shall mean the Securities and Exchange Commission.
1.7 "SECURITIES ACT" shall mean the Securities Act of 1993, as amended.
2. INCIDENTAL REGISTRATION.
2.1 REGISTRATION RIGHTS. If the Company at any time proposes to
register any of its securities under the Securities Act (other than a
registration on Form S-4 or registration on Form S-8 in connection with the
Company's stock option plan that would require qualification in California of
the shares of common stock covered by such registration, or any successor or
similar forms or a registration in connection with any merger of the Company
with and into a company subject to the reporting requirements of the Exchange
Act), whether or not for sale for its own account, in a manner which would
permit registration of the Registrable Securities for sale to the public under
the Securities Act, the Company shall offer Holder the opportunity to include in
such registration statement any or all of its Registrable Securities. The
Company will use its best efforts to effect the registration under the
Securities Act of the Registrable Securities which the Company has been so
requested to register by Holder, to the extent requisite to permit the
disposition (in accordance with such intended methods thereof) of the
Registrable Securities so to be registered; PROVIDED, that if such registration
involves an underwritten offering, Holder (and any other non-Company participant
in such registration) must offer and sell the Registrable Securities in a manner
as contemplated in the registration statement and as reasonably determined by
the Company and the underwriters selected by the Company. The Company will pay
all Registration Expenses (as hereinafter defined) in connection with each
registration of Registrable Securities effected pursuant to this Section 2.
2.2 EFFECTIVE REGISTRATION STATEMENT. A registration pursuant to this
Section 2 will not be deemed to have been effected unless the registration
statement relating thereto has become effective under the Securities Act;
PROVIDED, HOWEVER, that if, after such registration statement has become
effective, the offering of Registrable Securities pursuant to such registration
is interfered with by any stop order, injunction or other order or requirement
of the SEC or other governmental agency or court, such registration will be
deemed not to have been effected.
2.3 PRIORITY IN INCIDENTAL REGISTRATION. If a registration pursuant to
this Agreement involves an underwritten offering and the managing underwriter
advises the Company in writing that, in its opinion, the number of securities
which the Company, Holder and any other persons intend to include in such
registration exceeds the number which would have an adverse effect on such
offering, including the price at which such securities can be sold, the Company
will include in such registration (i) first, all the securities the Company
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proposes to sell for its own account, (ii) second, a number of such securities
equal to the number, in the opinion of such underwriters, which can be sold
without having the adverse effect referred to above, such amount to be allocated
pro rata among Holder and other persons having similar registration rights on
the basis of the relative number of securities Holder and other persons have
requested or are required to be included in such registration.
2.4 REGISTRATION EXPENSES. As used in this Agreement, "Registration
Expenses" shall mean all expenses incident to the Company's performance of or
compliance with this Agreement, including, without limitation, all SEC, stock
exchange, National Association of Securities Dealers, Inc. or Nasdaq
registration and filing fees and expenses, fees and expenses of compliance with
securities or blue sky laws (including, without limitation, reasonable fees and
disbursements of counsel for the Company in connection with blue sky
qualification of the Registrable Securities), rating agency fees, printing
expenses, messenger and delivery expenses, fees and disbursements of counsel for
the Company and all independent certified public accountants (including the
expenses of any annual audit, special audit or "cold comfort" letters required
by or incident to such performance and compliance), securities acts liability
insurance (if the Company so desires), the reasonable fees and expenses of any
special experts retained by the Company in connection with such registration,
and fees and expenses of other persons retained by the Company.
3. REGISTRATION PROCEDURE. In effecting the registration of the Registrable
Securities as provided in this Agreement, the Company shall, at its sole
expense:
(a) Prepare and file with the SEC a registration statement
with respect to the Registrable Securities and use its best efforts to
cause such registration statement to become effective; provided,
however, that before filing with the SEC a registration statement or
prospectus or any amendments or supplements thereto, the Company will
(i) furnish to counsel selected by Holder copies of all such documents
proposed to be filed, which documents will be subject to the review of
such counsel, and (ii) notify Holder of any stop order issued or
threatened by the SEC and take all reasonable actions required to
prevent the entry of such stop order or to remove it if entered;
(b) Prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in
connection with such registration statement as may be necessary to keep
such registration statement effective until the date when all
Registrable Securities covered by such registration statement have been
sold, and comply with the provisions of the Act with respect to the
disposition of all the Registrable Securities covered by such
registration statement during such period;
(c) Furnish to Holder copies of the registration statement,
each amendment and supplement thereto (in each case including all
exhibits thereto), the prospectus included in such registration
statement (including each preliminary prospectus and including a
sufficient number of copies of the final prospectus) in conformity with
the requirements of the Securities Act and such other documents as
Holder may reasonably request in order to facilitate the disposition of
the Registrable Securities owned by Holder;
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(d) Use its best efforts to register or qualify the
Registrable Securities under such other securities or blue sky laws of
such jurisdictions as shall be reasonably requested by Holder and do
any and all other acts and things which may be reasonably necessary or
advisable to enable Holder to consummate the disposition in such
jurisdictions of the Registrable Securities owned by Holder; provided,
that the Company shall not be required in connection therewith or as a
condition thereto to (i) qualify generally to do business in any
jurisdiction where it would not otherwise be required to qualify but
for this paragraph (d), (ii) subject itself to taxation in any such
jurisdiction, or (iii) file a general consent to service of process in
any such jurisdiction;
(e) Use its best efforts to cause the Registrable Securities
covered by such registration statement to be registered with or
approved by such other governmental agencies or authorities as may be
necessary by virtue of the business and operations of the Company to
enable Holder to consummate the disposition of such Registrable
Securities;
(f) Immediately notify Holder at any time when a prospectus
relating thereto is required to be delivered under the Securities Act,
of the happening of any event as a result of which the prospectus
included in such registration statement contains an untrue statement of
a material fact or omits to state any material fact required to be
stated therein or necessary to make the statements therein not
misleading and the Company will promptly prepare and furnish to Holder
a supplement or amendment to such prospectus so that, as thereafter
delivered to the purchasers of such Registrable Securities, such
prospectus will not contain an untrue statement of a material fact or
omit to state any material fact required to be stated therein or
necessary to make the statements therein not misleading;
(g) Enter into such customary agreements and take all such
other actions as Holder reasonably requests in order to expedite or
facilitate the disposition of such Registrable Securities, including
customary indemnification;
(h) Make available for inspection by Holder and any attorney,
accountant or other agent retained by Holder (collectively, the
"Inspectors"), all financial and other records, pertinent corporate
documents and properties of the Company as shall be reasonably
necessary to enable them to exercise their due diligence
responsibility, and cause the Company's officers, directors and
employees to supply all information reasonably requested by any such
Inspector in connection with such registration statement; and
(i) Otherwise use its best efforts to comply with all
applicable rules and regulations of the SEC and all applicable laws and
regulations including, but not limited to, the Securities Act and the
Exchange Act.
The Company may require Holder to furnish to the Company such
information regarding the distribution of such Registrable Securities as the
Company may from time to time reasonably request in writing.
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Holder agrees that, upon receipt of any notice from the Company of the
happening of any event of the kind described in paragraph 3(f), Holder will
forthwith discontinue disposition of Registrable Securities, pursuant to the
registration statement covering such Registrable Securities until Holder's
receipt of the copies of the supplemented or amended prospectus contemplated by
paragraph 3(f), and, if so directed by the Company, Holder will deliver to the
Company (at the Company's expense) all copies, other than permanent file copies
then in Holder's possession, of the prospectus covering such Registrable
Securities current at the time of receipt of such notice. In the event the
Company shall give any such notice, the period mentioned in paragraph 3(b) shall
be extended by the greater of (i) three months or (ii) the number of days during
the period from and including the date of the giving of such notice pursuant to
paragraph 3(f) to and including the date when Holder shall have received the
copies of the supplemented or amended prospectus contemplated by paragraph 3(f).
Any statements or documents required to be provided to Holder by
Company or Company's counsel shall be provided promptly and in any event no
later than seven (7) days from the date thereof. Company or its counsel shall
keep the Holder informed from time to time on the progress of the registration
statement relating to the Registrable Securities, and in any event shall notify
Holder promptly in writing that a registration statement affecting the
Registrable Securities or any portion thereof has become effective, and in any
event no later than 72 hours of such filing becoming effective.
4. INDEMNIFICATION.
4.1 INDEMNIFICATION BY THE COMPANY. In connection with the registration
of the Registrable Securities under the Securities Act pursuant to this
Agreement, the Company will, and it hereby does, indemnify and hold harmless, to
the full extent permitted by law, Holder, each other person who participates as
an underwriter in the offering or sale of such securities and each other person,
if any, who controls Holder or any such underwriter within the meaning of the
Securities Act, against any and all losses, claims, damages or liabilities,
joint or several, and expenses (including any amounts paid in any settlement
effected with the Company's prior written consent) to which Holder or any such
underwriter or controlling person may become subject under the Securities Act,
common law or otherwise, insofar as such losses, claims, damages or liabilities
(or actions or proceedings in respect thereof) or expenses arising out of or are
based upon (i) any untrue statement or alleged untrue statement of any material
fact contained in any registration statement under which such securities were
registered under the Securities Act, any preliminary, final or summary
prospectus contained therein, or any amendment or supplement thereto, or (ii)
any omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, and
the Company will reimburse Holder and each such underwriter and controlling
person for any legal or any other expenses reasonably incurred by them in
connection with investigating or defending such loss, claim, liability, action
or proceedings; provided, that the Company shall not be liable in any such case
to the extent that any such loss, claim, damage, liability (or action or
proceeding in respect thereof) or expenses arises out of or is based upon any
untrue statement or alleged untrue statement or omission or alleged omission
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made in such registration statement or amendment or supplement thereto or in any
such preliminary, final or summary prospectus in reliance upon and in conformity
with written information furnished to the Company through an instrument duly
executed by Holder or underwriter or controlling person specifically stating
that it is for use in the preparation thereof; and provided, further, that the
Company will not be liable to Holder or any person who participates as an
underwriter in the offering or sale of Registrable Securities or any other
person, if any, who controls such underwriter within the meaning of the
Securities Act, under the indemnity agreement in this Section 4.1 with respect
to any preliminary prospectus as then amended or supplemented as the case may
be, to the extent that any such loss, claim, damage or liability of Holder,
underwriter or controlling person results from the fact that Holder or
underwriter or controlling person sold Registrable Securities to a person to
whom there was not sent or give, at or prior to the written confirmation of such
sale, a copy of the final prospectus (including any documents incorporated by
reference therein), whichever is most recent, if the Company has previously
furnished copies thereof to Holder or underwriter or controlling person and such
final prospectus, as then amended or supplemented, has corrected any such
misstatement or omission. Such indemnity shall remain in full force and effect
regardless of any investigation made by or on behalf of Holder or any
underwriter or controlling person and shall survive the transfer of such
securities by Holder.
4.2 INDEMNIFICATION BY HOLDER. The Company may require, as a condition
to including the Registrable Securities in any registration statement filed in
accordance with this Agreement, that the Company shall have received an
undertaking reasonably satisfactory to it from Holder or any underwriter, to
indemnify and hold harmless (in the same manner and to the same extent as set
forth in Section 4.1) the Company and its controlling persons and all other
prospective sellers and their respective controlling persons with respect to any
statement or alleged statement in or omission or alleged omission from such
registration statement, any preliminary, final or summary prospectus contained
therein, or any amendment or supplement, if such statement or alleged statement
or omission or alleged omission was made in reliance upon and in conformity with
written information furnished to the Company through an instrument duly executed
by Holder or underwriter specifically stating that it is for use in the
preparation of such registration statement, preliminary, final or summary
prospectus or amendment or supplement, or a document incorporated by reference
into any of the foregoing. Such indemnity shall remain in full force and effect
regardless of any investigation made by or on behalf of the Company or Holder
and shall survive the transfer of such securities by Holder; provided, however,
that Holder shall not be liable to the Company under this Section 4.2 for any
amounts exceeding the product of the purchase price per Registrable Security and
the number of Registrable Securities being sold pursuant to such registration
statement or prospectus by Holder.
4.3 NOTICES OF CLAIMS, ETC. Promptly after receipt by an indemnified
party hereunder of written notice of the commencement of any action or
proceeding with respect to which a claim for indemnification may be made
pursuant to this Section 4, such indemnified party will, if a claim in respect
thereof is to be made against an indemnifying party, promptly give written
notice to the latter of the commencement of such action; provided, that the
failure of any indemnified party to give notice as provided herein shall not
relieve the indemnifying party of its obligations under the preceding
subsections of this Section 4, except to the extent that the indemnifying party
is actually materially prejudiced by such failure to give notice. In case any
such action is brought against an indemnified party, unless in such indemnified
party's reasonable judgment a conflict of interest between such indemnified and
indemnifying parties may exist in respect of such claim, the indemnifying party
will be entitled to participate in and to assume the defense thereof, jointly
with any other indemnifying party similarly notified to the extent that it may
wish, with counsel reasonably satisfactory to such indemnified party, and after
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notice from the indemnifying party to such indemnified party of its election so
to assume the defense thereof, the indemnifying party will not be liable to such
indemnified party for any legal or other expenses subsequently incurred by the
latter in connection with the defense thereof, unless in such indemnified
party's reasonable judgment a conflict of interest between such indemnified and
indemnifying parties arises in respect of such claim after the assumption of the
defense thereof, and the indemnifying party will not be subject to any liability
for any settlement made without its consent (which consent shall not be
unreasonably withheld). No indemnifying party will consent to entry of any
judgment or enter into any settlement which does not include as an unconditional
term thereof the giving by the claimant or plaintiff to such indemnified party
of a release from all liability in respect to such claim or litigation. An
indemnifying party who is not entitled to, or elects not to, assume the defense
of a claim will not be obligated to pay the fees and expenses of more than one
counsel for all parties indemnified by such indemnifying party with respect to
such claim, unless in the reasonable judgment of any indemnified party a
conflict of interest may exist between such indemnified party and any other of
such indemnified parties with respect to such claim, in which event the
indemnifying party shall be obligated to pay the fees and expenses of such
additional counsel or counsels.
4.4 OTHER INDEMNIFICATION. Indemnification similar to that specified in
the preceding Sections 4.1, 4.2 and 4.3 (with appropriate modifications) shall
be given by the Company and Holder with respect to any required registration or
other qualification of securities under any federal or state law or regulation
of governmental authority other than the Securities Act.
5. RULE 144. The Company hereby covenants that the Company shall file in a
timely manner all reports required to be filed by it under the Securities Act
and the Exchange Act (to the extent the Company is subject to the Exchange Act)
and the rules and regulations adopted by the SEC thereunder, and it will take
such further action as Holder may reasonably request, all to the extent required
from time to time to enable Holder to sell Registrable Securities without
registration under the Securities Act within the limitation of the exemptions
provided by (i) Rule 144 under the Securities Act, as such rule may be amended
from time to time, or (ii) any similar rule or regulation hereafter adopted by
the SEC relating to the disposition of securities. Upon the request of Holder,
the Company will deliver to Holder a written statement as to whether it has
complied with such requirements, in addition, the Company hereby agrees that for
a period of nine months following the date on which a registration statement
filed pursuant to this Agreement shall have become effective, the Company shall
not deregister such securities under Section 12 of the Exchange Act (even if
then permitted to do so pursuant to the Exchange Act and the rules and
regulations promulgated thereunder).
6. NO INCONSISTENT AGREEMENTS. The Company will not hereafter enter into any
agreement with respect to any of its securities which is inconsistent with the
rights granted to Holder in this Agreement.
7. REMEDIES. The Company acknowledges and agrees that in the event of any breach
of this Agreement by it, Holder would be irreparably harmed and could not be
made whole by monetary damages. The Company accordingly agrees to waive the
defense in any action for specific performance that a remedy at law would be
adequate and that Holder, in addition to any other remedy to which they may be
entitled at law or in equity, shall be entitled to compel specific performance
of this Agreement in any action instituted in any court of the United States or
any state thereof having subject matter jurisdiction for such action.
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8. SALE WITHOUT REGISTRATION. At the time of any transfer of any Registrable
Securities which shall not be registered under the Securities Act, the Company
may require, as a condition of allowing such transfer, that Holder or the
transferee furnish to the Company: (a) such information as is reasonably
necessary in order to establish that such transfer may be made without
registration under the Securities Act; and (b) at the expense of Holder or the
transferee, an opinion of counsel, satisfactory in form and substance to the
Company, to the effect that such transfer may be made without registration under
the Securities Act; provided, that nothing contained in this Section 8 shall
relieve the Company from complying with any request for registration,
qualification or compliance made pursuant to these registration rights
provisions.
9. GENERAL PROVISIONS.
9.1 WAIVERS. No action taken pursuant to this Agreement, including any
investigation by or on behalf of any party hereto, shall be deemed to constitute
a waiver by the party taking such action or compliance with any representation,
warranty, covenant, or agreement contained herein or in any ancillary document.
The waiver by any party hereto of a breach of any provision of this Agreement
shall not operate or be construed as a waiver of any other or subsequent breach.
The waiver by any party of any of the conditions precedent to its respective
obligations under this Agreement shall not preclude it from seeking redress for
breach of this Agreement.
9.2 NOTICES. All notices and other communications which are required or
may be given under this Agreement shall be in writing and shall be deemed to
have been duly given if delivered personally, by courier service, telecopied, or
mailed by registered or certified mail, postage prepaid, return receipt
requested, to the party to whom the same is so delivered or mailed:
(a) if to the Company:
Telenetics Corporation
00000 Xxxxxx Xxxxx
Xxxx Xxxxxx, XX 00000
Attn: Xxxxxxx X. Armani
Fax: 000-000-0000
With a copy to:
Xxxxx & Xxxxxx, L.L.P.
000 Xxxxx Xxxxxxxxx, Xxxxx 0000
Xxxxx Xxxx, Xxxxxxxxxx 00000
Attn: Xxxxx X. Xxxxxxx, Esq.
Fax: 000-000-0000
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(b) if to Holder:
Xxxxxx X. Xxxxxxxx
[ADDRESS]
With a copy to:
Bucknell Xxxxxxx Sato & Xxxxxxx, LLP
0000 Xxxxxxx Xxx., Xxx. 000
Xxxxxxx, XX 00000
Attn: Xxxxx X. Xxxxxxx, Xx., Esq.
Fax: 000-000-0000
or to such other address as any of the above shall have specified by notice
hereunder. Notices delivered personally, by mail or telecopied shall be deemed
communicated as of actual receipt.
9.3 ENTIRE AGREEMENT; AMENDMENTS. This Agreement, together with the
Note and Purchase Agreement constitute the entire agreement among the parties
hereto with respect to the subject matter hereof, and supersedes any and all
prior agreements and undertakings, oral or written, concerning the subject
matter hereof. This Agreement may not be changed or terminated orally, and may
only be changed or terminated by a writing signed by the party against whom such
change or termination is sought.
9.4 BINDING EFFECT; BENEFITS. This Agreement shall inure to the benefit
of and shall be binding upon and enforceable by the parties hereto and their
respective heirs, legal representatives, successors, and assigns. Except as set
forth in the prior sentence, nothing in this Agreement, expressed or implied, is
intended to or shall confer on any person other than the parties hereto any
rights, remedies, obligations, or liabilities under or by reason of this
Agreement.
9.5 HEADINGS. The section and other headings contained in this
Agreement are for reference purposes only and shall not affect the meaning or
interpretation of this Agreement.
9.6 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which, when executed, shall be deemed to be an original
and all of which together shall be deemed to be one and the same instrument.
9.7 RULES OF CONSTRUCTION. In this Agreement, unless the context
otherwise requires, words in the singular include the plural, and in the plural
include the singular, and words of the masculine gender include the feminine and
the neuter, and, when the sense so indicates, words of the neuter gender may
refer to any gender.
9.8 ASSIGNMENT. For purposes of this Agreement, the term "Holder" shall
include any heir, successor or assign who obtains any Registrable Securities
from the Holder listed on the signature page hereof.
9.9 GOVERNING LAW; VENUE. The validity, performance, and enforcement of
this Agreement shall be governed by the laws of the State of California. Any
action commenced hereunder shall be conducted before a court of appropriate
jurisdiction in Orange County, California.
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9.10 COOPERATION. The parties agree to execute such further documents
and take such further actions as necessary to carry out the provisions of this
Agreement and to fully accomplish its purpose and intent.
9.11 ATTORNEYS' FEES. The prevailing party in any proceedings arising
in connection with this Agreement shall be entitled to reimbursement for his or
its reasonable costs incurred in connection therewith, including attorneys'
fees.
9.12 SET-OFF. Each party hereto shall be entitled to set-off against
any amount it may owe to any other party under this Agreement or any other
agreement executed in connection herewith any and all amounts that are due to
that party by such other party under or in connection with the terms of this
Agreement.
9.13 TIME OF ESSENCE. Time is of essence in connection with the
performance of this Agreement.
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IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement on the day and date first above written.
TELENETICS CORPORATION
By: /S/ Xxxxxxx X. Armani
---------------------------------
Xxxxxxx X. Armani
HOLDER:
/S/ Xxxxxx X. Xxxxxxxx
------------------------------------
Xxxxxx X. Xxxxxxxx, an individual
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