EXHIBIT 10.119
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, OR ANY APPLICABLE STATE SECURITIES LAWS. IT MAY
NOT BE SOLD, TRANSFERRED, ASSIGNED, PLEDGED, OR HYPOTHECATED UNLESS AND
UNTIL REGISTERED UNDER SUCH ACT AND APPLICABLE LAWS, OR UNLESS THE
COMPANY HAS RECEIVED AN OPINION OF COUNSEL OR OTHER EVIDENCE,
SATISFACTORY TO THE COMPANY AND ITS COUNSEL, THAT SUCH REGISTRATION IS
NOT REQUIRED.
TRANSFER OF THIS DEBENTURE IS NOT VALID EXCEPT TO THE EXTENT
THAT SUCH TRANSFER HAS BEEN MADE IN COMPLIANCE WITH THE PROVISIONS
REGARDING TRANSFER CONTAINED HEREIN.
CINEMANOW, INC.
CONVERTIBLE SUBORDINATED DEBENTURE
$215,000.000 MARINA DEL REY, CALIFORNIA
FEBRUARY 2, 2000
CinemaNow, Inc., a California corporation (the "Company"), the principal
office of which is located at ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇ ▇▇▇ ▇▇▇,
▇▇▇▇▇▇▇▇▇▇, for value received hereby promises to pay to the order of Trimark
Pictures, Inc., a California corporation, the sum of Two Hundred Fifteen
Thousand Dollars ($215,000), or such lesser amount as shall then equal the
outstanding principal amount hereof and any unpaid accrued interest hereon, as
set forth below, on June 30, 2001 (the "Maturity Date"), subject to the terms
hereof. This Debenture is issued in connection with the Securities Purchase
Agreement between the Company, the Holder and others dated as of January 6,
2000, as the same may from time to time be amended (the "Purchase Agreement").
The following is a statement of the rights of the Holder of this Debenture
and the conditions to which this Debenture is subject, and to which the Holder
hereof, by the acceptance of this Debenture, agrees:
1. DEFINITIONS. As used in this Debenture, the following terms, unless the
context otherwise requires, have the following meanings:
(i) "Company" includes any corporation which shall succeed to or
assume the obligations of the Company under this Debenture.
(ii) "Holder," when the context refers to a holder of this Debenture,
shall mean any person who shall at the time be the registered holder of this
Debenture.
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EXHIBIT 10.119 (CONTINUED)
(iii) "Insolvency Proceeding" means any case or proceeding (x) under
the United States Bankruptcy Code, 11 U.S.C. Sections 101, ET SEQ., or (y) under
any other federal law, or under state law, to reorganize, liquidate, appoint a
trustee for, a receiver for or an assignee for the benefit of creditors of, the
Company, or all or substantially all of the assets of the Company, whether
voluntary or involuntary.
2. INTEREST. This Debenture shall bear interest at the rate of eight percent
(8.00%) per annum (the "Interest Rate") on the principal of this Debenture
outstanding during the period beginning on the date of issuance of this
Debenture and ending on the date when the principal amount of this Debenture has
been paid in full or when the Debenture has been fully converted pursuant to
Section 6 hereof, whichever is earlier. Interest shall be due and payable on the
Maturity Date, or on such earlier date that the Debenture is paid in full or
fully converted pursuant to Section 6 hereof.
3. EVENTS OF DEFAULT. If any of the events specified in this Section 3 shall
occur (herein individually referred to as an "Event of Default"), the Holder of
the Debenture may, so long as such condition exists and subject to Section 4 and
Section 6.7 hereof, declare the entire principal and unpaid accrued interest
hereon immediately due and payable, by notice in writing to the Company:
(i) The institution by the Company of an Insolvency Proceeding, or the
consent by it to the institution of an Insolvency Proceeding or the filing by it
of a petition or answer or consent seeking an Insolvency Proceeding, or the
taking of corporate action by the Company in furtherance of any such action; or
(ii) If, within sixty (60) days after the commencement of an action
against the Company (and service of process in connection therewith on the
Company) seeking an Insolvency Proceeding, such action shall not have been
resolved in favor of the Company or all orders or proceedings thereunder
affecting the operations or the business of the Company stayed, or if the stay
of any such order or proceeding shall thereafter be set aside, or if, within
sixty (60) days after the appointment without the consent or acquiescence of the
Company of any trustee, receiver or liquidator of the Company or of all or any
substantial part of the properties of the Company, such appointment shall not
have been vacated; or
(iii) Any default of the Company declared in writing under any Senior
Indebtedness (as defined below) that gives the holder thereof the right to
accelerate such Senior Indebtedness; or
(iv) Any declaration in writing that the Company is insolvent,
inadequately capitalized, or is unable to pay its debts as they fall due; or
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EXHIBIT 10.119 (CONTINUED)
(v) Any default in the payment of the principal or interest of this
Debenture when due and payable, whether at maturity, by acceleration or
otherwise, and such default is not cured by the Company within ten (10) business
days; or
(vi) The rendering of a final judgment or judgments (not subject to
appeal) against the Company or any of its subsidiaries in an amount in excess of
$1 million which remains undischarged or unstayed for a period of 60 (sixty)
days after the date on which the right to appeal has expired.
4. SUBORDINATION AND RANKING. The indebtedness evidenced by this Debenture is
hereby expressly subordinated, to the extent and in the manner set forth herein,
in right of payment to the prior payment in full of all the Company's Senior
Indebtedness, as defined herein. For purposes of this Debenture, "Senior
Indebtedness" shall mean all indebtedness and payment obligations of the Company
of whatever nature other than any such obligations in respect of the Company's
Series A Convertible Preferred Stock. The indebtedness evidenced by this
Debenture shall rank PARI PASSU with all payment obligations of the Company in
respect of the Company's Series A Convertible Preferred Stock. By its acceptance
of this Debenture, the Holder of this ▇▇▇▇▇▇▇▇▇ agrees to be bound by the terms
hereof and agrees to execute and deliver such documents as may be reasonably
requested from time to time by the Company or the holder of any Senior
Indebtedness in order to implement the provisions of this Section 4.
5. PREPAYMENT. The Company may at any time prepay in whole or in part the
principal sum of this Debenture, plus accrued interest, without penalty;
provided, however, that the Holder shall have the option to convert such
principal and interest into Common Stock (as defined below) pursuant to Section
6.1 hereof in lieu of accepting prepayment in cash.
6. CONVERSION.
6.1 Conversion at Option of Holder. The Holder of this Debenture shall have the
option, at any time before payment in full of the principal balance of this
Debenture, to convert some or all of the outstanding principal balance of this
Debenture, plus unpaid accrued interest, in accordance with the provisions of
Section 6.4 hereof, into fully paid and nonassessable shares of Common Stock.
6.2 Conversion at Option of Company. The Company shall have the option as of
the Maturity Date, in lieu of cash payment, to convert some or all of the
outstanding principal balance of this Debenture, plus unpaid accrued interest,
in accordance with the provisions of Section 6.4 hereof, into fully paid and
nonassessable shares of Common Stock
6.3 Conversion Upon Event of Default. If an Event of Default occurs, the Holder
of this Debenture shall have the option, as the
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EXHIBIT 10.119 (CONTINUED)
Holder's sole and exclusive remedy for any such default while any of the
Company's Series A Convertible Preferred Stock remains outstanding, at any time
before payment in full of the principal balance of this Debenture, to convert
some or all of the outstanding principal balance of this Debenture, plus unpaid
accrued interest, in accordance with the provisions of Section 6.4 hereof, into
fully paid and nonassessable shares of Common Stock.
6.4 Conversion Price and Procedure. The number of shares of the common stock of
the Company, no par value ("Common Stock") into which this Debenture may be
converted pursuant to Section 6.1, 6.2 or 6.3 shall be determined by dividing
the aggregate outstanding principal amount to be converted, together with all
accrued but unpaid interest to the date of conversion, by the Conversion Price
(as defined herein) in effect at the time of such conversion. The "Conversion
Price" shall be an amount equal to $0.675 per share, subject to adjustment as
hereinafter provided.
Before the Holder shall be entitled to convert this Debenture into shares
of Common Stock, it shall surrender this Debenture, duly endorsed, at the office
of the Company together with written notice in the form of the Notice of
Conversion attached to this Debenture of the election to convert all or some of
the same pursuant to Section 6.1 or 6.3, and shall state therein the name or
names in which the certificate or certificates for shares of Common Stock is to
be issued. At its expense, the Company shall, as soon as practicable thereafter,
issue and deliver to such Holder a certificate or certificates for the number of
shares of such Common Stock to which the Holder shall be entitled upon such
conversion (bearing such legends as are required by applicable state and federal
securities laws in the opinion of counsel to the Company), together with any
other securities and property to which the Holder is entitled upon such
conversion under the terms of this Debenture, including a check payable to the
Holder for any cash amounts payable for fractional shares, as described in
Section 6.5 below. In addition, if the Holder has converted only part of the
Debenture, the Company will issue to the Holder a new debenture for the amount
not converted with otherwise the same terms as the Debenture. In the event of
any conversion of this Debenture into Common Stock pursuant to Section 6.1, 6.2
or 6.3, such conversion shall be deemed to have been made immediately before the
close of business on the date of such surrender of the Debenture to be
converted. On and after such deemed conversion date, the Holder entitled to
receive the shares of such Common Stock issuable upon such conversion shall be
treated for all purposes as the record holder of such shares and shall be bound
by the terms of the Purchase Agreement.
If the Company is the subject of any of the proceedings described in paragraphs
(i) or (ii) of Section 3 of this Debenture, no stay, injunction, restraining
order or similar law, rule or order shall be effective as against the Holder for
purposes of this Section 6; PROVIDED that if any such stay, injunction,
restraining order or similar law, rule or order is effective against the Holder,
the Company expressly agrees to waive, modify or release such stay, injunction,
restraining order or
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EXHIBIT 10.119 (CONTINUED)
similar law, rule or order to permit the Holder to effect the conversion
provided in this Section 6, and to execute and prosecute all pleadings,
memoranda, affidavits, certificates, instruments and other documents necessary
or appropriate in the discretion of the Holder to effect such waiver,
modification, or release.
6.5 No Fractional Shares. No fractional shares of Common Stock shall be issued
upon conversion of all of the outstanding principal balance of this Debenture
into Common Stock. In lieu of the Company issuing any fractional shares to the
Holder upon the conversion of this Debenture into Common Stock, the Company
shall pay to the Holder the amount of outstanding principal that is not so
converted, such payment to be in the form as provided above.
6.6 No Further Obligations. Upon conversion of all of the outstanding principal
balance of this Debenture, together with all accrued but unpaid interest to the
date of conversion, the Company shall be forever released from all its
obligations and liabilities under this Debenture.
6.7 Remedies. The remedy contained in Section 6.3 of this Debenture shall be
the Holder's sole and exclusive remedy for any Event of Default or other
default under this Debenture (other than a default under the Company's
obligations to the Holder pursuant to the PARI PASSU ranking with payment
obligations in respect of the Company's Series A Convertible Preferred Stock
described in Section 4 above) while any of the Company's Series A Convertible
Preferred Stock remains outstanding, and the Holder hereof expressly
acknowledges and agrees that it shall have no right to commence any suit,
action, proceeding, or case, including an Insolvency Proceeding, in any court
or administrative or arbitral body for any relief or remedy except to enforce
the Holder's rights under Sections 4 and 6.3 while any of the Company's
Series A Convertible Preferred Stock remains outstanding.
Upon the occurrence of an Event of Default, if none of the Company's Series
A Convertible Preferred Stock remains outstanding, the Holder may, so long as
such condition exists, declare the entire principal and interest hereon
immediately due and payable and, in addition, may pursue any and all other
rights and remedies available to it.
7. CONVERSION PRICE ADJUSTMENTS.
7.1 Reclassification, Merger, Sale of Assets, etc. In case of any
reclassification, capital reorganization, or change of the outstanding Common
Stock of the Company (other than as a result of a subdivision, combination or
stock dividend), or in case of any consolidation of the Company with, or merger
of the Company into, another corporation or other business organization (other
than a
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EXHIBIT 10.119 (CONTINUED)
consolidation or merger in which the holders of the outstanding voting stock of
the Company immediately before the consummation of such transaction shall,
immediately after such transaction, hold, as a group, at least a majority of the
voting securities of the surviving or successor entity), or in case of any sale
or conveyance to another corporation or other business organization of the
property of the Company, as an entirety or substantially as an entirety, at any
time before the payment or conversion in full ("Full Payment") of the principal
and interest under this Debenture, then, as a condition of such
reclassification, reorganization, change, consolidation, merger, sale or
conveyance, lawful provision shall be made and duly executed documents
evidencing the same from the Company or its successor shall be delivered to the
Holder of this Debenture, so that the Holder of this Debenture shall have the
right before Full Payment to convert pursuant to Section 6.1 the outstanding
principal and unpaid accrued interest under this Debenture into the kind and
amount of shares of stock and other securities and property receivable upon such
reclassification, reorganization, change, consolidation, merger, sale or
conveyance by a holder of the number of shares of Common Stock of the Company
which might have been acquired by the Holder of this Debenture upon full
conversion of such principal and interest immediately before such
reclassification, reorganization, change, consolidation, merger, sale or
conveyance, and in any such case appropriate provisions shall be made with
respect to the rights and interest of the Holder of this Debenture to the end
that the provisions hereof shall thereafter be applicable in relation to any
shares of stock, and other securities and property thereafter deliverable upon
conversion pursuant to Section 6.1 of outstanding principal and unpaid accrued
interest hereunder.
7.2 Split, Subdivision or Combination of Shares. If the Company shall at any
time before Full Payment of this Debenture subdivide its outstanding Common
Stock, by split-up or otherwise, or combine its outstanding Common Stock, or
issue additional shares of its capital stock in payment of a stock dividend in
respect of its Common Stock, the number of shares issuable on the conversion
pursuant to Section 6.1, 6.2 or 6.3 of the outstanding principal and unpaid
accrued interest under this Debenture shall forthwith be proportionately
increased in the case of a subdivision or stock dividend, or proportionately
decreased in the case of a combination, and the Conversion Price then applicable
to shares covered by the outstanding principal and unpaid accrued interest of
this Debenture shall forthwith be proportionately decreased in the case of a
subdivision or stock dividend, or proportionately increased in the case of a
combination.
7.3 Adjustments for Dividends in Stock or Other Securities or Property. If
before Full Payment of this Debenture, the holders of the securities as to which
conversion rights under this Debenture exist at the time shall receive, or, on
or after the record date fixed for the determination of eligible stockholders,
shall have become entitled to receive, without payment therefor, other or
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EXHIBIT 10.119 (CONTINUED)
additional stock or other securities or property (other than cash) of the
Company by way of dividend, then and in each case, this Debenture shall
represent the right to acquire upon conversion pursuant to Section 6.1, 6.2 or
6.3 of outstanding principal or unpaid accrued interest, in addition to the
number of shares of the security receivable upon full conversion of such
principal and interest, and without payment of any additional consideration
therefor, the amount of such other or additional stock or other securities or
property (other than cash) of the Company that such holder would hold on the
date of such conversion had it been the holder of record of the security
receivable upon full conversion of outstanding principal or unpaid accrued
interest under this Debenture on the record date of such dividend, giving effect
to all adjustments called for during such period by the provisions of this
Section 7.
7.4 No Impairment. The Company will not, by amendment of its Articles of
Incorporation or through any reorganization, transfer of assets, consolidation,
merger, dissolution, issuance or sale of securities or any other voluntary
action, avoid or seek to avoid the observance or performance of the terms to be
observed or performed hereunder by the Company, but will at all times in good
faith assist in the carrying out of all the provisions of this Section 7 and in
the taking of all such action as may be necessary or appropriate in order to
protect the rights of the Holder against impairment.
7.5 Notices of Record Date, etc. In the event of:
(i) Any taking by the Company of a record of the holders of any class
of securities of the Company for the purpose of determining the holders thereof
who are entitled to receive any dividend (other than a cash dividend payable out
of earned surplus at the same rate as that of the last such cash dividend
theretofore paid) or other distribution, or any right to subscribe for, purchase
or otherwise acquire any shares of stock of any class or any other securities or
property, or to receive any other right; or
(ii) Any capital reorganization of the Company, any reclassification
or recapitalization of the capital stock of the Company or any transfer of all
or substantially all of the assets of the Company to any other person or any
consolidation or merger involving the Company; or
(iii) Any voluntary or involuntary dissolution, liquidation or winding
up of the Company;
the Company will mail to the Holder at least twenty (20) days before the
earliest date specified therein, a notice specifying: (a) the date on which any
such record is to be taken for the purpose of such dividend, distribution or
right, and the amount and character of such dividend, distribution or right; and
(b) the date
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EXHIBIT 10.119 (CONTINUED)
on which any such reorganization, reclassification, transfer, consolidation,
merger, dissolution, liquidation or winding up is expected to become effective
and the record date for determining stockholders entitled to vote thereon.
7.6 RESERVATION OF STOCK ISSUABLE UPON CONVERSION. 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 conversion of the Debenture
such number of its shares of Common Stock as shall from time to time be
sufficient to effect the conversion of the Debenture; and if at any time the
number of authorized but unissued shares of Common Stock shall not be sufficient
to effect the conversion of the entire outstanding principal amount, in addition
to such other remedies as shall be available to the Holder of this Debenture,
the Company will use its best efforts to 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
purposes.
8. Assignment. Subject to the restrictions on transfer described in Section 10
below, the rights and obligations of the Company and the Holder of this
Debenture shall be binding upon and benefit the successors, assigns, heirs,
administrators and transferees of the parties; provided however, that, except in
connection with a sale of all or substantially all of the Company's assets and a
related assumption of the Company's liabilities, the Company will not assign
this Debenture without the prior written consent of the Holder, which consent
shall not be unreasonably withheld.
9. Waiver and Amendment. Any provision of this Debenture may be amended,
waived or modified upon the written consent of the Company and the Holder of the
Debenture.
10. Transfer of this Debenture or Securities Issuable on Conversion Hereof. The
Holder may not offer, sell or otherwise dispose of this Debenture without the
prior written consent of the Company, which consent shall not be unreasonably
withheld, except to an affiliate of the Holder (as that term is defined in the
Securities Act of 1933, as amended (the "Securities Act")). With respect to any
offer, sale or other disposition of this Debenture or Common Stock into which
such Debenture may be converted, the Holder will give prior written notice to
the Company thereto, describing briefly the manner thereof, together with a
written opinion of such ▇▇▇▇▇▇'s counsel, to the effect that such offer, sale or
other distribution may be effected without registration or qualification (under
any federal or applicable state law then in effect). Such opinion shall be
reasonably satisfactory in form and substance to the Company and the Company's
counsel. Promptly upon receiving such notice and opinion, and provided that the
Company has determined to consent to such sale or other disposition with respect
to the Debenture, the Company, as promptly as practicable,
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EXHIBIT 10.119 (CONTINUED)
shall notify such Holder that such Holder may sell or otherwise dispose of this
Debenture or such Common Stock, all in accordance with the terms of the notice
delivered to the Company. If a determination has been made pursuant to this
Section 10 that the opinion of counsel for the Holder is not reasonably
satisfactory to the Company or the Company's counsel or that the Company will
not consent to such sale or other disposition with respect to the Debenture, the
Company shall so notify the Holder promptly after such determination has been
made. Each Debenture thus transferred and each certificate representing the
Common Stock thus transferred shall bear a legend as to the applicable
restrictions on transferability in order to ensure compliance with the
Securities Act, unless in the opinion of counsel for the Company such legend is
not required in order to ensure compliance with the Securities Act. The Company
may issue stop transfer instructions to its transfer agent in connection with
such restrictions.
11. NOTICES. Unless otherwise provided, all notices and other communications
required or permitted under this Debenture shall be in writing and shall be
mailed by United States first-class mail, postage prepaid or delivered
personally by hand or by a nationally recognized courier addressed to the party
to be notified at the address indicated for such person on the signature page
hereof, or at such other address as such party may designate by ten (10) days'
advance written notice to the other parties hereto. All such notices and other
written communications shall be effective on the date of mailing or delivery.
12. NO STOCKHOLDER RIGHTS. Nothing contained in this Debenture shall be
construed as conferring upon the Holder or any other person the right to vote or
to consent or to receive notice as a stockholder in respect of meetings of
stockholders for the election of directors of the Company or any other matters
or any rights whatsoever as a stockholder of the Company, and no dividends or
interest shall be payable or accrued in respect of this Debenture or the
interest represented hereby or the Common Stock obtainable hereunder until, and
only to the extent that, this Debenture shall have been converted.
13. GOVERNING LAW. This Debenture shall be governed by and construed in
accordance with the laws of the State of California, excluding that body of law
relating to conflict of laws.
14. HEADINGS; REFERENCES. All headings used herein are used for convenience
only and shall not be used to construe or interpret this Debenture. Except where
otherwise indicated, all references herein to Sections refer to Sections hereof.
[SIGNATURE PAGE FOLLOWS]
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EXHIBIT 10.119 (CONTINUED)
IN WITNESS WHEREOF, the Company has caused this Debenture to be executed
this 2nd day of February, 2000.
CINEMANOW, INC.
By: /s/
------------------------------------
Name: ▇▇▇▇ ▇▇▇▇▇▇
Title: CHIEF EXECUTIVE OFFICER
Address: ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇ ▇▇▇ ▇▇▇, ▇▇ ▇▇▇▇▇
AGREEMENT OF HOLDER:
The undersigned ▇▇▇▇▇▇ agrees to be bound by the terms and conditions of the
foregoing Debenture, including without limitation the provisions of Section 4
("Subordination and Ranking") above.
TRIMARK PICTURES, INC.
By: /s/
--------------------------------------
Name: ▇▇▇▇ ▇▇▇▇▇▇▇▇
Title: CHIEF FINANCIAL OFFICER
Address: ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇ ▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
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EXHIBIT 10.119 (CONTINUED)
NOTICE OF CONVERSION
(To Be Signed Upon Conversion of Debenture)
CinemaNow, Inc.
Attn: President
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇ ▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
The undersigned, the Holder of the foregoing Debenture, hereby surrenders
such Debenture for conversion into shares of Common Stock of CinemaNow, Inc.
equivalent in amount of $______ principal amount of such Debenture plus all
unpaid accrued interest through the date of such conversion, and requests
that the certificates for such shares be issued in the name of, and delivered
to _____________________________, whose address is ___________________________.
If the principal amount requested for conversion is less than the full
outstanding principal amount of the Debenture, the Holder requests that the
Company issue to the Holder a new debenture for the amount not converted with
the same terms as the Debenture.
Dated:__________________________
TRIMARK PICTURES, INC.
By: _______________________________
Name: ____________________________
Title: _____________________________
Address: ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇ ▇▇▇ ▇▇▇, ▇▇ ▇▇▇▇▇
11