LOAN AGREEMENT
Exhibit
10.2
Loan
Agreement
(“Agreement”)
dated
as of March 30, 2007 between Pure
Vanilla eXchange, Inc.,
a
Nevada corporation (the “Company”),
and
Xxxxxx
X. Xxxxxxx, Xx. (the
“Lender”).
WITNESSETH:
Whereas,
the
Company borrowed $40,000, $8,333.34 and $8,333.34 from Lender on March 15,
2007,
March 21, 2007 and March 23, 2007, respectively, and Lender may make additional
loans to the Company from time to time, (individually, a “Loan”
and,
collectively, the “Loans”):
and
Whereas,
Lender
and the Company have agreed that each such Loan shall be represented by a
Promissory Note, in the form of Exhibit
A
attached
hereto, which shall be delivered by the Company to the Lender in connection
with
each such Loan; and
Whereas,
to
induce the Lender to make each Loan, the Company will issue to the Lender in
connection with each such Loan warrants (the “Warrants”)
exercisable to purchase shares of the Company’s Common Stock, par value $0.001
(“Common
Stock”)
at a
exercise price of $0.80 per share (the “Exercise
Price”),
in
the form attached as Exhibit
B;
Now,
Therefore,
in
consideration of the foregoing premises and the covenants contained herein
and
other good and valuable consideration, the receipt and sufficiency of which
are
hereby acknowledged, the parties hereto agree as follows:
ARTICLE
1
Loans,
Notes and Warrants, Etc.
Section
1.1 Loans,
Notes and Warrants.
(a) Loans.
At any
time on or after the date hereof, and until 5:00 on June 30, 2007, the Lender
may elect to make one or more Loans to the Company. Such election shall be
made
by delivering to the Company a Notice of Election to Make Loan in the form
of
Exhibit
C
to this
Agreement (an “Election
Notice”),
appropriately completed to reflect the amount of the Loan then proposed to
be
made by him, together with the principal amount of such Loan either by (i)
delivering to the Company with such Election Notice a certified or cashier’s
check in the amount of such Loan or (ii) effecting, prior to or concurrently
with the delivery of such Election Notice, a wire transfer in immediately
available funds to an account designated in writing by the Company. If the
Company chooses to accept such Loan, it shall execute such Election Notice
and
return it to the Lender with the other Loan Documents (as hereinafter defined).
The Company my reject any such election, in its sole discretion, in which event
it shall return all tendered documents and funds to the Lender.
(b)
Loan
Documents.
(i) Promptly
(but in any event within three (3) business days) after the receipt of an
Election Notice accompanied by the principal amount of the Loan as provided
in
Section 1.1(a), unless the Company does not elect to receive the Loan proposed
to be made pursuant to such Election Notice, the Company shall deliver to the
Lender (A) one or more Notes, in the form of Exhibit
A
(the
outstanding principal amount of each such Note to be as reasonably requested
by
the Lender) representing the Loan then being made by the Lender, (B) one or
more
Warrants registered in the name of the Lender or his nominee (in such
proportions as may reasonably be requested by the Lender) entitling the Lender
or his nominee, if any, to purchase an aggregate number of shares of Common
Stock that is equal to 25% of the amount of the principal amount of the Loan
then being made by the Lender divided by the Exercise Price, exercisable for
five years from the date upon which the Company accepts the applicable Loan,
and
(C) a certificate of an officer of the Company certifying that the
representations of the Company contained in Section 2.1 of this Agreement were
true and correct when made and continue to be true and correct as of the date
of
such certificate.
(ii) All
of
the shares of Common Stock that may be acquired by the Lender upon exercise
of
the Warrants are referred to in this Agreement as the “Warrant
Shares”.
(iii) The
date
of this Agreement and date upon which the Company has accepted any Loan from
the
Lender are each referred to herein as a “Closing
Date”.
ARTICLE
2
Representations
and Warranties
Section
2.1 Representations
and Warranties of the Company.
The
Company hereby makes the following representations and warranties to the Lender
as of the date hereof and as of the applicable Closing Date:
(a) Organization
and Qualification; Material Adverse Effect.
The
Company is a corporation duly incorporated and existing in good standing under
the laws of the State of Nevada and has the requisite corporate power to own
its
properties and to carry on its business as now being conducted. The Company
is
duly qualified as a foreign corporation to do business and is in good standing
in every jurisdiction in which the nature of the business conducted or property
owned by it makes such qualification necessary.
(b) Authorization;
Enforcement.
(i) The
Company has all requisite corporate power and authority to enter into and
perform its obligations under this Agreement, the Notes and the Warrants and
to
issue the Warrant Shares in accordance with the terms of the Warrants, (ii)
the
execution and delivery of this Agreement, the Notes and the Warrants by the
Company and the consummation by it of the transactions contemplated hereby,
have
been duly authorized by all necessary corporate action, and no further consent
or authorization of the Company or its Board of Directors (or any committee
or
subcommittee thereof) or stockholders is required, (iii) this Agreement has
been
and the Notes and the Warrants will be duly executed and delivered by the
Company, and (iv) this Agreement, the Notes and the Warrants constitute and
will
constitute, as the case may be, valid and binding obligations of the Company
enforceable against the Company in accordance with their terms, except as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation or similar laws relating to, or
affecting generally the enforcement of creditors’ rights and remedies or by
other equitable principles of general application.
-2-
(c) Issuance
of Shares.
The
Warrant Shares are
duly
authorized and reserved for issuance and,
upon
exercise of the Warrants in accordance with the terms thereof, such Warrant
Shares will be validly issued, fully paid and non-assessable, free and clear
of
any and all liens, claims and encumbrances, and the holders of such Shares
shall
be entitled to all rights and preferences accorded to a holder of the Common
Stock.
(d) No
Conflicts.
The
execution, delivery and performance of this Agreement, the Notes and the
Warrants by the Company, the consummation by the Company of the transactions
contemplated hereby and thereby and the issuance of the Notes and the Warrants
do not and will not (i) result in a violation of the Company’s charter or
by-laws or (ii) conflict with, or constitute a default (or an event which with
notice or lapse of time or both would become a default) under, or give to others
any rights of termination, amendment, acceleration or cancellation of, any
agreement, indenture, patent, patent license or instrument to which the Company
or any of its subsidiaries is a party or (iii) result in a violation of any
federal, state, local or foreign law, rule, regulation, order, judgment or
decree (including federal and state securities laws and regulations) applicable
to the Company or by which any property or asset of the Company is bound or
affected, except (other than in the case of clause (i) above) where such
violation would not reasonably be expected to have a Material Adverse Effect
(as
defined below). For purposes of this Agreement, “Material
Adverse Effect”
shall
mean any adverse effect on the business, operations, properties or financial
condition of the Company and which is (either alone or together with all other
adverse effects) material to the Company taken as a whole. The business of
the
Company is being conducted in material compliance with (i) its charter and
by-laws, and (ii) all applicable laws, ordinances or regulations of any
governmental entity, except (other than in the case of clause (i) above) where
such violation would not reasonably be expected to have a Material Adverse
Effect. Except for filings, consents and approvals required under applicable
state and federal securities laws, the Company is not required under federal,
state, local or foreign law, rule or regulation to obtain any consent,
authorization or order of, or make any filing or registration with, any court
or
governmental agency in order for it to execute, deliver or perform any of its
obligations under this Agreement, the Notes and the Warrants.
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Section
2.2 Representations
and Warranties of the Lender.
The
Lender makes the following representations and warranties to the Company as
of
the date hereof and on each Closing Date:
(a) Authorization;
Enforcement.
(i) The
Lender has the requisite power and authority to enter into and to perform its
under this Agreement and to make the Loans and (ii) this Agreement constitutes
the valid and binding obligation of the Lender enforceable against him in
accordance with its terms, except as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium, liquidation
or
similar laws relating to, or affecting generally the enforcement of creditors’
rights and remedies or by other equitable principles of general
application.
(b) No
Conflicts.
The
execution, delivery and performance of this Agreement and the consummation
by
the Lender of the transactions contemplated hereby do not and will not (i)
conflict with any agreement, indenture or instrument to which the Lender is
a
party, or (ii) result in a material violation of any law, rule, or regulation,
or any order, judgment or decree of any court or governmental agency applicable
to the Lender. The Lender is not required to obtain any consent or authorization
of any governmental agency in order to perform his obligations under this
Agreement.
(c) Investment
Representations.
(i) Access
to Information. The
Lender acknowledges that he has had full and complete access to the books and
records and to the management of the Company. The Lender acknowledges that
the
Company has made available to him the opportunity to examine such documents
from
the Company and to ask questions of, and receive full answers from, the Company
concerning, among other things, the Company, its financial condition, its
management, its prior activities and any other information which the Lender
considers relevant or appropriate in connection with entering into this
Agreement.
(ii) Risks
of Investment.
The
Lender acknowledges that the Notes, the Warrants and the Shares (together,
the
“Securities”)
have
not been registered under the Securities Act of 1933, as amended (the
“Act”).
The
Lender is familiar with the provisions of Rule 144 under the Act and understands
that in the event all of the applicable requirements of Rule 144 are not
satisfied, registration under the Act or some other exemption from the
registration requirements of the Act will be required in order to dispose of
the
Notes, the Warrants and the Shares, and that the Lender may be required to
hold
the Notes, the Warrants and the Shares for a significant period of time prior
to
reselling them. The Lender is capable of assessing the risks of an investment
in
the Securities and is fully aware of the economic risks thereof.
(iii) Investment
Intent.
The
Lender will acquire the Securities for his own account and not with a view
to
distribution in violation of any securities laws. The Lender has no present
intention to sell any of the Securities in violation of federal or state
securities laws and such Lender has no present arrangement (whether or not
legally binding) to sell any of the Securities to or through any person or
entity; provided,
however,
that by
making the representations herein, the Lender does not agree to hold any of
the
Securities for any minimum or other specific term and reserves the right to
dispose of the Securities at any time in accordance with federal and state
securities laws applicable to such disposition.
-4-
(iv) Restricted
Securities. The
Lender acknowledges and understands that the terms of issuance of the Securities
have not been reviewed by the U.S. Securities and Exchange Commission (the
“SEC”)
or by
any state securities authorities and that the Securities will be issued in
reliance on the certain exemptions for non-public offerings under the Act,
which
exemptions depend upon, among other things, the representations made and
information furnished by the Lender, including the bona fide nature of the
Lender’s investment intent as expressed above.
(v) Ability
to Bear Economic Risk. The
Lender is an “accredited investor” as defined in Rule 501 of Regulation D under
the Act, and that he (i) is able to bear the economic risk of his investment
in
the Securities, (ii) is able to hold the Securities for an indefinite period
of
time, (iii) can afford a complete loss of its investment in the Securities
and
(iv) has adequate means of providing for his current needs.
(vi) No
Public Solicitation. At
no
time was the Lender presented with or solicited by any general mailing, leaflet,
public promotional meeting, newspaper or magazine article, radio or television
advertisement, or any other form of general advertising or general solicitation
in connection with the issuance.
(vii) Reliance
by the Company.
The
Lender understands that the Securities will be offered and sold in reliance
on a
transactional exemptions from the registration requirements of federal and
state
securities laws and that the Company is relying upon the truth and accuracy
of
the representations, warranties, agreements, acknowledgments and understandings
of the Lender set forth herein in order to determine the applicability of such
exemptions and the suitability of the Lender to acquire the Securities.
ARTICLE
3
Covenants
Section
3.1 Warrants
on Exercise.
Upon
any partial exercise by the Lender (or then holder of the Warrants) of the
Warrants, the Company shall issue and deliver to the Lender (or holder) within
ten (10) business days of the date on which such Warrants are exercised, a
new
Warrant or Warrants representing the number of adjusted Warrant Shares in
accordance with such Warrants.
-5-
Section
3.2 Replacement
Warrants.
The
Warrants will be exchangeable at the option of the Lender (or then holder of
the
Warrants) at the office of the Company for other Warrants of different
denominations entitling the holder thereof to purchase in the aggregate the
same
number of Warrant Shares as are purchasable under such Warrants. No service
charge will be made for such transfer or exchange.
Section
3.3 Reservation
of Stock Issuable Upon Exercise of the Warrants.
The
Company shall at all times reserve and keep available out of its authorized
but
unissued shares of Common Stock, solely for the purpose of effecting the
exercise of the Warrants such number of its shares of Common Stock as shall
from
time to time be sufficient to effect the full exercise of the Warrants, and
if
at any time the number of authorized but unissued shares of Common Stock shall
not be sufficient to effect the exercise of all the then outstanding Warrants
and the conversion of all then outstanding Notes, the Company will take such
corporate action as may, in the opinion of its counsel, be necessary to increase
its authorized but unissued shares of Common Stock to such number of shares
as
shall be sufficient for such purpose, including without limitation engaging
in
best efforts to obtain the requisite shareholder approval.
Section
3.4 Registration
Rights.
(a) Right
to Piggy Back.
If, at
any time, the Company proposes or is required to register any of its equity
securities under the Act (other than pursuant to registrations on Form S-4
or
Form S-8 or such form or similar form(s) solely for registration of securities
in connection with an employee benefit plan or dividend reinvestment plan or
a
merger, consolidation or acquisition) whether for its own account or the account
of other security holders, the Company shall give prompt written notice of
its
intention to do so to the holder of each Registrable Securities (as defined
below). Upon the written request of any holder, made within 15 days following
the receipt of any such written notice (which request shall specify the maximum
number of Registrable Securities intended to be disposed of by such holder
and
the intended method of distribution thereof), the Company shall use, subject
to
Sections 3.4(c) and 3.4(e) hereof, its best efforts to cause all such
Registrable Securities, the holders of which have so requested the registration
thereof, to be registered under the Act (with the securities which the Company
at the time proposes to register) to permit the sale or other disposition by
the
holders (in accordance with the intended method of distribution thereof) of
the
Registrable Securities to be so registered. There is no limitation on the number
of such piggyback registrations pursuant to the preceding sentence which the
Company is obligated to effect.
(b) Registrable
Securities.
For
purposes of this Agreement, the term “Registrable
Securities”
means
(i) shares of Common Stock issued or issuable upon exercise of the Warrants
and
(ii) any securities received by way of a stock split or as a dividend with
respect to such shares and any security into which such shares may hereafter
be
changed or for which such shares may be exchanged (by way of reorganization,
recapitalization, merger, consolidation or otherwise). As to any particular
Registrable Securities, such securities will cease to be Registrable Securities
when (i) they have been effectively registered under the Act and disposed of
in
accordance with the registration statement covering them, or (ii) they may
be
transferred pursuant to Rule 144 under the Act (or any successor to such
rule).
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(c) Abandonment
or Delay.
If, at
any time after giving written notice of its intention to register any equity
securities and prior to the effective date of the registration statement filed
in connection with such registration, the Company shall determine for any reason
not to register or to delay registration of such equity securities, the Company
may, at its election, give written notice of such determination to all holders
of record of Registrable Securities and (i) in the case of a determination
not
to register, shall be relieved of its obligation to register any Registrable
Securities in connection with such abandoned registration, without prejudice,
however, to the rights of holders under Section 3.4, and (ii) in the case of
a
determination to delay such registration of its equity securities, permitted
to
delay the registration of such Registrable Securities for the same period as
the
delay in registering such other equity securities.
(d) Holder’s
Right to Withdraw.
Any
holder shall have the right to withdraw its request for inclusion of its
Registrable Securities in any registration statement pursuant to this Section
3.4 by giving written notice to the Company of its request to withdraw;
provided, however, that (i) such request must be made in writing prior to the
earlier of the execution of the underwriting agreement or the execution of
the
custody agreement with respect to such registration and (ii) such withdrawal
shall be irrevocable and, after making such withdrawal, a holder shall no longer
have any right to include Registrable Securities in the registration as to
which
such withdrawal was made.
(e) Cutbacks.
(i)
If the
managing underwriter of any underwritten offering shall inform the Company
by
letter of its belief that the number of Registrable Securities requested to
be
included in a registration under this Section 2.2 would materially adversely
affect such offering, then the Company will include in such registration, first,
the securities being included in such registration by the holder(s) of
securities initiating such registration pursuant to the terms of any contractual
demand registration rights that may be granted to any person other than pursuant
to this Agreement (or, if the Company initiates the registration, the securities
being included in such registration by the Company), and second, Registrable
Securities requested to be included in such registration and any other
securities of the Company the holders of which have been granted piggy back
registration rights, pro rata based on the number of shares that such holders
of
Registrable Securities and such other securities have requested for inclusion
(without regard to whether such other piggy back registration rights were
granted before or after the date hereof).
(ii) If,
in
connection with a financing of the Company in an amount exceeding $5,000,000
(a
“Substantial
Financing”),
the
investor or investors object to the inclusion of the Registrable Securities
in a
registration statement of securities of the issued in connection with such
financing, the Lender or holders agree to either waive their rights to have
their Warrant Shares included in such registration statement unless they agree
to a lock-up of the Warrant Shares for a period set by the investors not
exceeding 9 months from the effective date of the registration
statement.
-7-
(iii) If
the
aggregate number of shares of the Company’s common stock included in a
registration statement filed to register securities issued or issuable in a
Substantial Financing exceeds the number of securities which the Securities
and
Exchange Commission, by rule or administrative practice, will be permitted
to be
registered at one time (the “Registration
Maximum”),
the
Lender or holders agree that such number of Registrable Securities may be,
pro
rata with other securities registered for other holders who have been granted
piggy back rights, removed from the registration statement until the
Registration Maximum is reached.
ARTICLE
4
Legend
and Stock
Each
Note, each certificate representing Warrants and any shares of Common Stock
issued upon exercise of the Warrants shall be stamped or otherwise imprinted
with a legend substantially in the following form:
THESE
SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR ANY
STATE SECURITIES LAWS. THEY MAY NOT BE TRANSFERRED, ASSIGNED, SOLD OR OFFERED
FOR SALE EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SAID
ACT
AND ANY APPLICABLE STATE SECURITIES LAW OR AN OPINION OF COUNSEL, IN FORM
AND
SUBSTANCE REASONABLY ACCEPTABLE TO THE ISSUER, THAT REGISTRATION IS NOT REQUIRED
BECAUSE OF AN APPLICABLE EXEMPTION FROM SUCH REGISTRATION
REQUIREMENTS.
The
Company agrees to reissue Notes or Warrants, and to issue or reissue
certificates representing Warrant Shares, as the case may be, without the legend
set forth above, at such time as (i) the holder thereof is permitted to dispose
of such Notes, Warrants and/or Shares pursuant to Rule 144 under the Act, or
(ii) such Notes, Warrants and/or Shares are sold to a purchaser or purchasers
who (in the opinion of counsel to the seller or such purchaser(s), in form
and
substance reasonably satisfactory to the Company and its counsel) are able
to
dispose of such shares publicly pursuant to an effective registration or
exemption.
Unless
the Warrant Shares are registered under the Act, certificates representing
such
hares shall bear a legend in the same form as the legend indicated above.
Nothing herein shall limit the right of any holder to pledge these securities
pursuant to a bona fide margin account or lending arrangement.
-8-
ARTICLE
5
Miscellaneous
Section
5.1 Stamp
Taxes.
The
Company shall pay all stamp and other taxes and duties levied in connection
with
the issuance of the Notes, Warrants and/or the Shares.
Section
5.2 Entire
Agreement; Amendment.
This
Agreement, together with the Notes, the Warrants and the agreements and
documents executed in connection herewith and therewith, contains the entire
understanding of the parties with respect to the matters covered hereby and
thereby, supercedes any prior understanding, memoranda or other written or
oral
agreements between or among any of them respecting the matters covered hereby
and thereby and, except as specifically set forth herein or therein, neither
the
Company nor the Lender makes any representation, warranty, covenant or
undertaking with respect to such matters. No provision of this Agreement may
be
waived or amended other than by a written instrument signed by the party against
whom enforcement of any such amendment or waiver is sought.
Section
5.3 Notices.
Any
notice or other communication required or permitted to be given hereunder shall
be in writing by mail, facsimile or personal delivery and shall be effective
upon actual receipt of such notice. The addresses for such communications shall
be given to the Company at 000
Xxxxx
Xxxxxx, Xxx Xxxx, XX 00000 and
to
the Lender at the address shown on the signature page to this Agreement. Either
party hereto may from time to time change its address for notices by giving
at
least 10 days written notice of such changed address to the other party
hereto.
Section
5.4 Indemnity.
Each
party shall indemnify each other party against any loss, cost or damages
(including reasonable attorney’s fees but excluding consequential damages)
incurred as a result of such party’s breach of any representation, warranty,
covenant or agreement in this Agreement; or incurred as a result of the
enforcement of this indemnity.
Section
5.5 Waivers.
No
waiver by either party of any default with respect to any provision, condition
or requirement of this Agreement shall be deemed to be a continuing waiver
in
the future or a waiver of any other provision, condition or requirement hereof,
nor shall any delay or omission of any party to exercise any right hereunder
in
any manner impair the exercise of any such right accruing to it
thereafter.
Section
5.6 Headings.
The
headings herein are for convenience only, do not constitute a part of this
Agreement and shall not be deemed to limit or affect any of the provisions
hereof.
Section
5.7 Successors
and Assigns.
This
Agreement shall be binding upon and inure to the benefit of the parties and
their successors and assigns.
-9-
Section
5.8 No
Third Party Beneficiaries.
This
Agreement is intended for the benefit of the parties hereto and their respective
permitted successors and assigns and is not for the benefit of, nor may any
provision hereof be enforced by, any other person.
Section
5.9 Governing
Law.
This
Agreement shall be governed by and construed and enforced in accordance with
the
laws of the State of New York, without giving effect to conflicts of laws
principles.
Section
5.10 Survival.
The
representations and warranties and the agreements and covenants of the Company
and the Lender contained herein shall survive the Closing.
Section
5.11 Execution.
This
Agreement may be executed in two or more counterparts, all of which shall be
considered one and the same agreement, it being understood that both parties
need not sign the same counterpart.
IN
WITNESS WHEREOF,
the
parties hereto have caused this Agreement to be duly executed as of the date
first above written.
| COMPANY: | |||
| PURE VANILLA EXCHANGE, INC. | |||
| By: | /s/ Xxxxxx Xxxxxx | ||
| Name: Xxxxxx Xxxxxx | |||
| Title: CEO | |||
| LENDER: | |||
| /s/ Xxxxxx X. Xxxxxxx | |||
| XXXXXX X. XXXXXXX, XX. | |||
| Arnone, Lowth, Xxxxxxx, Xxxxxx & Xxxxxxxxx | |||
| 000 Xxxxxxxxxxx Xxxx | |||
| Xxxxxxxx, XX 00000 | |||
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EXHIBITS
AND SCHEDULES
|
Exhibit
A
|
Form
of Note
|
|
Exhibit
B
|
Form
of Warrant
|
|
Exhibit
C
|
Form
of Notice of Election to Make Loan
|
Exhibit
A
Form
of Note
Exhibit
B
Form
of Warrant
Exhibit
C
Notice
of Election to Make Loan
Pure
Vanilla eXchange, Inc.
000
Xxxxx
Xxxxxx
Xxx
Xxxx,
XX 00000
Gentlemen:
Reference
is made to a Loan Agreement dated as of March 29, 2007 (the “Agreement”)
between Pure Vanilla Exchange, Inc., a Delaware corporation (the “Company”),
and
the undersigned.
Pursuant
to Section 1.1(a)(ii) of the Agreement, the undersigned proposes to make a
Loan
to the Company in the principal amount of $_______.
a. In
connection therewith, the undersigned is delivering to the Company the sum
of
$100,000 (check one)
[__]
by
wire transfer to the account of the Company
[__]
by
delivery to the Company of a certified or cashier’s check in such amount,
concurrently with the delivery of this notice.
b. The
undersigned confirms that each of the representations and warranties contained
in Section 2.2 of the Agreement is true and correct with respect to the
undersigned as of the date of this Notice.
IN
WITNESS WHEREOF, the undersigned has executed this Notice of Election to Make
Loan on ____________, 2007.
| Lender: | |||
| Xxxxxx X. Xxxxxxx, Xx. | |||
| Address: | Arnone, Lowth, Xxxxxxx, | ||
| Xxxxxx & Xxxxxxxxx | |||
| 000 Xxxxxxxxxxx Xxxx | |||
| Xxxxxxxx, XX 00000 | |||
