EXHIBIT 10.5
EDUCATIONAL MODULES, INC.
STOCK PURCHASE AGREEMENT
Board of Directors August____, 1992
Educational Modules, Inc.
Gentlemen:
The undersigned (the "Purchaser") hereby purchases____shares of the Common
Stock of Educational Modules, Inc., a New York corporation (the "Company") at a
purchase price of $9.00 per share for an aggregate purchase price of $_________.
Summary
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The Company was organized in March, 1969, as a New York corporation.
Pursuant to its Articles of Incorporation, as amended, (the "Articles of
Incorporation"), the Company is authorized to issue 2,000,000 shares of Common
Stock, $.05 par value, of which 437,646 shares are currently outstanding. The
Company is offering for sale up to 36,556 shares of its common stock. Upon
completion of this Offering, assuming all 36,556 shares are sold, there will be
outstanding 474,202 shares of Common Stock and Warrants to purchase an
additional 20,000 shares.
The Offering
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The Company is raising from the sale of the shares $329,004. The shares
will not be registered under the Securities Act of 1933, as amended (the
"Securities Act"), Chapter 517, Florida Statutes, (the "Florida Investor
Protection Act"), or any other state or federal securities laws, on the grounds
that the transaction in which the shares are to be issued qualifies for
applicable exemptions from the securities registration requirements of such
statutes. The exemptions being claimed include, but are not necessarily limited
to, those available under Sections 3(b) and 4(2) of the Securities Act, and
Section 517.061(12) of the Florida Investor Protection Act; and, the reliance by
the Company upon the exemptions from the securities registration requirements of
federal and state securities laws is predicated in part on the representations,
understandings and covenants set forth in this Stock Purchase Agreement.
Company Representations and Warranties
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The Company hereby represents and warrants to each Purchaser as follows:
1. To the best of its knowledge, there is no action, suit, customer
claim, proceeding or investigation at law or in equity or by or before any
governmental instrumentality or other agency now pending or threatened against
or affecting the Company, nor does the Company know of any valid basis therefor
which, if proven, would
be reasonably expected to materially and adversely affect the Company's
business, properties, assets, prospects or condition (financial or otherwise).
2. To the best of its knowledge, the Company is not in default (a) under
its Articles of Incorporation or Bylaws, or any indenture, mortgage, lease,
purchase or sales order, or any other contract, agreement or instrument to which
the Company is a party or by which it or any of its property is bound or
affected or (b) with respect to any order, writ, injunction or decree of any
court or any federal, state, municipal or other domestic or foreign governmental
department, commission, board, bureau, agency or instrumentality. The company
does not know of any condition, event or act which constitutes, or which after
notice, lapse of time, or both, would constitute, a default under any of the
foregoing.
3. To the best of its knowledge, the Company has complied in all material
respects with all federal, state, local and foreign laws, ordinances,
regulations and orders applicable to it, its business or the ownership of its
assets.
4. The execution, delivery and performance by the Company of this
Agreement, have been duly authorized by all requisite corporate action by the
Company; and, this Agreement constitutes the valid and binding obligation of the
Company, enforceable in accordance with its terms, except to the extent that
enforcement hereof is limited by or contrary to (i) bankruptcy, insolvency or
other similar laws affecting the enforcement of creditors' rights generally, or
(ii) general equitable principles. The execution, delivery and performance of
this Agreement, will not (a) violate any provision of present law, statute, rule
or regulation, or any present ruling, writ, injunction, order, judgment or
decree of any court, administrative agency or other governmental body applicable
to the Company or any of its properties or assets or (b) to the best of its
knowledge, conflict with or result in any breach of any of the terms, conditions
or provisions of, or constitute (with due notice or lapse of time, or both) a
default (or give rise to any right of termination, cancellation or acceleration)
under or result in the creation of any lien, security interest, charge or
encumbrance upon any of the properties or assets of the Company under the
Articles of Incorporation or Bylaws, or any note, indenture, mortgage, lease
agreement or other contract, agreement or instrument to which the Company is
presently a party or by which it or any of its property is presently bound or
affected.
5. The issuance, sale and delivery of the Shares have been duly
authorized by all requisite corporate action of the Company, and when issued,
sold and delivered in accordance with this Agreement, the shares of Common Stock
will be validly issued and outstanding, fully paid and nonassessable, and not
subject to preemptive or any other similar rights of the stockholders of the
Company or others except as provided herein or in a document referred to herein.
6. No brokers or finders are being utilized by the Company in connection
with this Offering, and no commissions or fees of any kind will be paid by the
Company to any person in connection with this Offering.
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7. The Company has maintained, and the Company will continue to maintain
at all times, insurance coverage for the Company and its properties to the
extent that the Company reasonably determines to be appropriate under the
circumstances and in accordance with practices in the industry.
8. The Company's audited Fiscal 1991-92 financial statements are attached.
CONDITIONS TO CLOSING OF PURCHASER
As a condition to closing, the Company hereby agrees to the following:
Registration Rights
1. Incidental Registration. If the Company at any time
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proposes for any reason to register any of its securities under the
Securities Act (other than pursuant to a registration statement on Form
X-0, X-00 or S-15 or similar or successor form (collectively, "Excluded
Forms")), it shall at such time promptly give written notice to all
Purchasers of its intention so to do, and, upon the written request, given
within 30 days after receipt of any such notice, of any such Purchase to
register any shares of Common Stock (which request shall specify the shares
intended to be sold or disposed of by such holders and shall state the
intended method of disposition of such shares by the prospective seller),
the Company shall use its best efforts to cause all such shares of Common
Stock to be registered under the Securities Act promptly upon receipt of
the written request of such holders for such registration, all to the
extent requisite to permit the sale or other disposition (in accordance
with the intended methods thereof, as aforesaid) by the prospective seller
or sellers of the Common Stock so registered. In the event that the
proposed registration by the Company is, in whole or in part, an
underwritten public offering of securities of the Company, any request
pursuant to this Section 1 to register Common Stock may specify that such
shares are to be included in the underwriting (a) on the same terms and
conditions as those on which any Common Stock is otherwise being sold
through underwriters under such registration or (b) on terms and conditions
comparable to those normally applicable to offerings of common stock in
reasonably similar circumstances in the event that no shares of Common
Stock are being sold through underwriters under such registration;
provided, however, that if the managing underwriter determines and advises
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in writing that the inclusion of all Common Stock proposed to be included
in the underwritten public offering and other issued and outstanding shares
of Common Stock proposed to be included therein by persons other than those
owned by Purchasers (the "Other Shares") would interfere with the
successful marketing of such securities, then the number of shares of
Common Stock and Other Shares to be included in such underwritten public
offering shall be reduced, pro rata; provided, however, that in no event
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may such reduction have the effect of not permitting at least
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33-1/3 of the shares of Common Stock subject to this Agreement to be included
in the underwritten public offering.
2. Preparation and Filing. If and whenever the Company is under an
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obligation pursuant to the provisions of Section 1 to use its best efforts to
effect the registration of any Common Stock, the Company shall, as expeditiously
as practicable:
(a) prepare and file with the Securities and Exchange Commission
(the "Commission") a registration statement with respect to such securities
and use its best efforts to cause such registration statement to become and
remain effective in accordance with Section 4(b);
(b) prepare and file with to Commission such amendments and
supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to keep such registration
statement effective until the earlier of the date on which (i) all Common
Stock registered pursuant thereto shall have been sold, (ii) the holders of
said Purchaser's Common Stock being so registered agree to terminate said
registration, (iii) the registration rights hereunder terminate and (iv) 90
days from the date such registration statement shall have become effective,
and to comply with the provisions of the Securities Act with respect to the
sale or other disposition of all Common Stock covered by such registration
statement;
(c) furnish to each selling stockholder such number of copies of
a summary prospectus or other prospectus, including a preliminary
prospectus, in conformity with the requirements of the Securities Act, and
such other documents to facilitate the public sale or other disposition of
such Common Stock;
(d) use its best efforts to register or qualify the Common Stock
covered by such registration statement under the securities or "blue sky"
laws of such jurisdictions as each such seller reasonably request
(provided, however, that the Company shall not be required to consent to
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general service of process for all purposes in any jurisdiction where it is
not then qualified) and do any and all other acts or things which may be
necessary or advisable to enable such seller to consummate the public sale
or other disposition in such jurisdictions of such securities;
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(e) notify each seller of Common Stock covered by such registration
statement, at any time when a prospectus relating thereto covered by such
registration statement is required to be delivered under the Securities Act
within the appropriate period mentioned in Section 3(b), of the happening
of any event as a result of which the prospectus included in such
registration statement, as then in effect, includes an untrue statement of
a material fact or omits to state a material fact required to be stated
therein or necessary to make the statements therein not misleading in the
light of the circumstances then existing and, at the request of such
seller, prepare and furnish to such seller a reasonable number of copies of
a supplement to or an amendment of such prospectus as may be necessary so
that, as thereafter delivered to the purchasers of such shares, such
prospectus shall not include an untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary to make
the statements therein not misleading in the light of the circumstances
then existing; and
(f) furnish, at the request of any holder or holders requesting
registration of Common Stock pursuant to Section 1, on the date that such
Common Stock is delivered to the underwriters for sale in connection with
such registration, if such securities are being sold through underwriters,
or, if such securities are not being sold through underwriters, on the date
that the registration statement with respect to such securities become
effective, (i) an opinion, dated such date, of the counsel representing the
Company for the purposes of such registration, in form and substance as is
customarily given to underwriters in an underwritten public offering,
addressed to the underwriters, if any, and to the Company; and (ii) a
letter dated such date, from the independent certified public accountants
of the Company, in form and substance as is customarily given by
independent certified public accountants to underwriters in an underwritten
public offering, addressed to the underwriters, if any, and to the holder
or holders making such request.
3. Expenses. All expenses incurred by the Company, in complying with
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Section 2, including, without limitation, all registration and filing fees
(including all expenses incident to filing with the National Association of
Securities Dealers, Inc.), fees and expenses of complying with securities and
"blue sky" laws, printing expenses and fees and disbursements of counsel,
including with respect to each registration
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effected pursuant to Section 1, and the Company's independent certified public
accounts (but excluding the compensation of regular employees of the Company
which shall be paid in any event by the Company) shall be paid by the Company.
In the case of a registration under Section 1, the selling stockholders will
bear all incremental costs that would not be incurred except for the exercise by
the Purchasers of their rights under Section 1.
4. Indemnification. In the event of any registration of any Common Stock
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under the Securities Act pursuant to Section 1, the Company shall indemnify and
hold harmless the seller of such shares, each broker or any other person acting
on behalf of such seller and each other person, if any, who controls any of the
foregoing persons, within the meaning of the Securities Act, against any losses,
claims, damages or liabilities, joint or several, to which any of the foregoing
persons may become subject under the Securities Act or otherwise, insofar as
such losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon an untrue statement or alleged untrue statement
of a material fact contained in any registration statement under which such
Common Stock was registered under the Securities Act, any preliminary prospectus
or final prospectus contained therein, or any amendment or supplement thereto,
or any document prepared and/or furnished by the Company incident to the
registration or qualification of any Common Stock, or arise out of or are based
upon the omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not misleading
or, with respect to any prospectus, necessary to make the statements therein in
light of the circumstances under which they were made not misleading, or any
violation by the Company of the Securities Act or state securities or "blue sky"
laws applicable to the Company and relating to action or inaction required of
the Company in connection with such registration or qualification under such
state securities or blue sky laws; and shall reimburse such seller, such
underwriter, broker or other person acting on behalf of such seller and each
such controlling person for any legal or any other expenses reasonably incurred
by any of them in connection with investigating or defending any such loss,
claim, damage, liability or action; provided, however, that the Company shall
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not be liable in any such can to the extent that any such loss, claim, damage or
liability arises out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission made in said registration statement,
said preliminary prospectus or said prospectus or said amendment or supplement
or any document incident to the registration or qualification of any Common
Stock in reliance upon and in conformity with written information furnished to
the Company through an instrument duly executed by such seller or such
underwriter specifically for use in the preparation thereof.
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Before Common Stock held by any prospective seller shall be included in any
registration pursuant to this Agreement, such prospective seller and any
underwriter acting on its behalf shall have agreed to indemnify and hold
harmless (in the same manner and to the same extent as set forth in the
preceding paragraph) the Company, each director of the Company, each officer of
the Company who shall sign such registration statement and any person who
controls the Company within the meaning of the Securities Act, with respect to
any untrue statements or omission from such registration statement, any
preliminary prospectus or final prospectus contained therein, or any amendment
or supplement thereto, if such untrue statement or omission was made in reliance
upon and in conformity with written information furnished to the Company through
an instrument duly executed by such seller or such underwriter specifically for
use in the preparation of such registration statement, preliminary prospectus,
final prospectus or amendment or supplement; provided that the maximum amount of
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liability in respect of such indemnification shall be limited, in the case of
each prospective seller of Common Stock, to an amount equal to the net proceeds
actually received by such prospective seller from the sale of Common Stock
effected pursuant to such registration.
Promptly after receipts by and indemnified party of notice of the
commencement of any action involving a claim referred to in the preceding
paragraphs of this Section 4, such indemnified party will, if a claim in respect
thereof is made against an indemnifying party, give written notice to the latter
of such claim and/or the commencement of such action. In case any such action is
brought against an indemnified party, 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 notice from
the indemnifying party to such indemnified party of its election so to assume
the defense thereof, the indemnified party shall be responsible for any legal or
other expenses subsequently incurred by the latter in connection with the
defense thereof, provided that if any indemnified party shall have reasonably
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concluded that there may be one or more legal defenses available to the
indemnifying party, or that such claim or litigation involves or could have an
effect upon matters beyond the scope of the indemnity agreement provided in this
Section 4, the indemnifying party shall not have the right to assume defense of
such action on behalf of such indemnified party and such indemnifying party
shall reimburse such indemnified party and any person controlling such
indemnified party for that portion of to fees and expenses of any counsel
retained by the indemnified party which are reasonably related to the matters
covered by the indemnity agreement provided in this Section 4.
The indemnifying party shall not make my settlement of any claims
indemnified against hereunder without the written consent of the
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indemnified party or parties, which consent shall not be unreasonably withheld.
Notwithstanding the foregoing provisions of this Section 4, if pursuant to
an underwritten public offering the Company, the selling shareholders and the
underwriters enter into an underwriting or purchase agreement relating to such
offering which contains provisions of indemnification, this Section 4 shall
be deemed inoperative for purposes of such offering.
5. Securities Act Registration Statements. Except for securities of the
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Company registered on Excluded Forms, the Company shall not file any
registration statement under the Securities Act covering any securities unless
it shall first have given each Purchaser written notice thereof. The Company
further covenants that each Purchaser shall have the right, at any time when it
may be deemed by the Company to be a controlling person of the Company, to
participate in the preparation of such registration statement and to request the
insertion therein of material furnished to the Company in writing which in such
Purchaser's judgment should be included. In connection with any registration
statement referred to in this Section 5, the Company will indemnify, to the
extent permitted by law, each Purchaser, their partners, officers and directors
and each person, if any, who controls such Purchaser within the meaning of
Section 15 of the Securities Act, against all losses, claims, damages,
liabilities and expenses caused by any untrue statement or alleged untrue
statement of a material fact contained in any registration statement or
prospectus or any preliminary prospectus or any amendment thereto or supplement
thereto or caused by 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, except insofar as such losses, claims, damages,
liabilities or expenses are caused by any untrue statement or alleged untrue
statement or omission contained in written information furnished to the Company
by such Purchaser expressly for use in such registration statement. If, in
connection with any such registration statement, such Purchaser shall furnish
written information to the Company expressly for use in the registration
statement, such Purchaser will indemnify to the extent permitted by law the
Company, the directors, each of its officers who sign such registration
statement and each person, if any, who controls the Company within the meaning
of the Securities Act against all losses, claims, damages, liabilities and
expenses caused by any untrue statement or alleged untrue statement of a
material fact or any omission or alleged omission of a material fact required to
be stated in the registration statement or prospectus or any preliminary
prospectus or any amendment thereof or supplement thereto or necessary to make
the statement therein not misleading, buy only to the extent that such untrue
statement or alleged untrue statement or such omission or alleged omission is
contained in information so furnished in writing by such Purchaser for
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use therein. Any Purchaser selling Common Stock pursuant to a registration
statement filed by the Company shall furnish to the Company and such other
parties as the Company may designate such information and execute such
documents regarding the Common Stock held by and to be sold or otherwise
disposed of by such Purchaser as the Company shall request.
Right of First Refusal (Purchasers)
1. Generally. The Company shall not issue, sell or exchange,
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agree to issue, sell or exchange, or reserve or set aside for issuance,
sale or exchange, any (i) shares of Common Stock, Preferred Stock or any
other equity security of the Company, (ii) any debt security or
capitalized lease with an equity feature of the Company or (iii) any
option, warrant or other right to subscribe for, purchase or otherwise
acquire any equity security or any such debt security or capitalized lease
of the Company (except as may be issued to banks or leasing companies in
order to obtain financing or secure leases of equipment), at a price equal
to or less than $9.00 per share unless in each case the Company shall have
first offered to sell to the Purchasers as a group such Purchasers'
Proportionate Percentage of such securities (the "Offered Securities"), at
a price and on such other terms as shall have been specified by the Company
in writing delivered to the Purchasers (the "Offer"), which Offer by its
terms shall remain open and irrevocable for a period of 20 days from the
date it is delivered by the Company to the Purchasers.
2. Notice of Acceptance. Notice of the Purchasers' intention to
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accept, in whole or in part, an Offer shall be evidenced by a writing
signed by a representative of the Purchasers and delivered to the Company
prior to the end of the 20-day period of such Offer, setting forth such
portion of the Offered Securities the Purchasers elect to purchase (the
"Notice of Acceptance").
3. Refused Securities. In the event that Notices of Acceptance
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are not given by the Purchasers in respect of all the Offered Securities,
the Company shall have 90 days from the expiration of the foregoing 20-day
period, to sell all or any part of such Offered Securities a to which a
Notice of Acceptance has not been given by the Purchasers (the "Refused
Securities") to any other person or persons, but only upon terms and
conditions in all respects, including without limitation, unit price and
interest rates, which are no more favorable, in the aggregate, to such
other person or persons or less favorable to the Company that those set
forth in the Offer. Upon the closing, which shall include full payment to
the Company of the sale to such other person or persons of all the Refused
Securities, the Purchasers did purchase from the Company, and the Company
shall sell to the Purchasers the Offered Securities in respect of which
Notices of
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Acceptance were delivered to the Company by the Purchasers, at the terms
specified in the Offer.
4. Excluded Securities. The rights of to Purchasers shall not
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apply to the following securities (the "Excluded Securities"):
(i) Common stock issued as a stock dividend or
upon any stock split or other subdivision or combination of shares of
Common Stock;
(ii) Common Stock issued to the public pursuant
to an effective registration statement filed with the Securities and
Exchange Commission; and
(iii) Securities issued pursuant to the acquisition of another
corporation by the Company by merger, stock acquisition, purchase of
substantially all of the assets or otherwise whereby the Company owns
at least 51% of the voting power of such other corporation after such
transaction.
(iv) Stock Option or similar plan.
5. Proportionate Percentage. "Proportionate Percentage" shall
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mean, as to a Purchaser, that percentage figure which expresses the ratio
which (x) the number of shares of outstanding Common Stock then owned by
such Purchaser bears to (y) the aggregate number of shares of all
outstanding Common Stock then outstanding.
Right of First Refusal (Xxxxxxx Xxxxx & Associates, Inc.)
As consideration for Xxxxxxx Xxxxx & Associates, Inc. performing consulting
services to the Company, the Company hereby grants to Xxxxxxx Xxxxx &
Associates, Inc. for a period ending May 31, 1996 the right of first refusal in
managing and/or underwriting any securities offerings, mergers, acquisitions,
tender offers, recapitalizations and reorganizations providing such offering is
on the same bona fide terms and conditions as the Company could obtain
elsewhere.
Co-Sale Rights
Xx. Xxxxxxx hereby covenants and agrees that he (a "Co-Selling
Shareholders") will give ten (10) days written notice to each Purchaser in the
event that he proposes to sell in other than (i) a registered offering or other
than (ii) a sale pursuant to Rule 144 or other than (iii) an employee or officer
of the Company, an amount of Common Stock which together with all prior or
contemporaneous sales of Common Stock by such Co-Selling Shareholder and
affiliates (as defined in the Securities Act) of such person in the aggregate
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exceeds 10% of the number of shares of Common Stock held collectively by such
Co-Selling Shareholder and affiliates on the date hereof or 20% taking into
consideration shares sold to officers and employees of the Company. Upon
written notice of such Co-Selling Shareholder given within ten (10) days
after receipt of such notice, each Purchaser (individually and not as a class)
shall be permitted, but not required, to participate with such Co-Selling
Shareholder in any such sale. This provision shall terminate as to a Purchase
on any date on which it or any Affiliate ceases to own any of the Company's
Securities.
Xxxxx Xxxxxxxx shall also be deemed a "Co-Selling Shareholder" for
purposes of this paragraph in the event that Xx. Xxxxxxxx shall acquire more
than 10% of the outstanding Common Stock of the Company, in which event he shall
be bound by the same terms and conditions of co-sale as Xx. Xxxxxxx. For
purposes of determining whether Xx. Xxxxxxxx owns 10% of the outstanding stock
of the company, all shares sold by Xx. Xxxxxxxx during a period of twelve months
preceeding the date of the calculation shall be included.
The Company covenants and represents that it will not register a
transfer of Common Stock on the registration books of the Company which has been
sold in contravention of this Section. If Xx. Xxxxxxx makes a sale of Common
Stock in contravention of this Section, he shall be deemed to hold the proceeds
of such sale on a resulting trust in favor of the Purchasers in an amount equal
to that which the Purchasers would have been entitled to receive on such sale
pursuant to the provisions of this Section and shall immediately pay over to the
Purchasers such amount in exchange for transfer of Common Stock at the highest
price per share received by such Original Shareholder. Any costs associated with
such sale will be prorated among the selling shareholders.
Miscellaneous
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1. Information Rights: Purchasers will receive quarterly unaudited
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financial statements, annual audited financial statements, budgets, and interim
information of any events or happenings which the Company deems to be material
as long as they continue to be shareholders in the Company. This provision will
terminate upon consummation of a public offering.
2. Non-Disclosure, Non-Competition Agreements. Xx. Xxxxxxx and
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Xx. Xxxxxxxx will sign non-disclosure and non-competition agreements effective
during, and for a period of one year after termination of their employment with
the Company. This provision will terminate upon the sale of the Company.
3. Notices. Any notice required hereunder shall be given in
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writing and shall be sent by registered or certified mail, return receipt
requested to the parties hereto at their addresses as set forth in the books and
records of the Company.
4. Binding Effect. This Agreement shall be binding upon the
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parties, their heirs, legal representatives, successors and assigns. Any rights
of a Stockholder under this
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Agreement shall be assigned by such Stockholder to any transferee of the
Stockholder's Stock.
5. Governing Law. This Agreement shall be interpreted under the
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laws of the State of New York and the venue of any litigation shall be in a
court of competent jurisdiction in Monroe County of New York.
6. Amendment. This Agreement may be amended, altered or revoked at
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any time upon the mutual agreement of the Company and all of the Purchasers.
7. Counterpart Execution. This Agreement may be executed in two or
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more identical counterparts, each of which need be signed by only one of the
parties hereto, and all of such counterparts together shall constitute an
Agreement.
8. Purchaser's Legal Action. In the event of legal action brought
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against the Company on the Agreement by a Purchaser, such recovery will be
limited to the Purchaser's costs for their shares plus New York State statutory
interest on judgments. In addition, if the Company is successful in the defense
of any such litigation, the Purchaser shall bear the Company's legal expenses.
9. The Purchaser Representation and Warranty attached hereto is
incorporated herein and made a part hereof.
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, Purchaser
Agreed to and
accepted by
EDUCATIONAL MODULES, INC.
BY:
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Xxxx X. Xxxxxxx, CEO
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