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Exhibit 10(r)
CHANGE OF CONTROL AGREEMENT between Rainbow Technologies, Inc., a
Delaware corporation (the "Corporation"), and Xxxxxx Xxxxx (the "Executive"),
dated this first day of January 1998.
W I T N E S S E T H :
WHEREAS, the Corporation and the Executive have entered into an
Employment Agreement; and
WHEREAS, the Corporation wishes to assure both itself and the Executive
of continuity of management in the event of any actual or threatened "Change of
Control" (as defined in Article 2) of the Corporation;
NOW THEREFORE, in consideration of the premises and mutual covenants
herein contained, it is hereby agreed by and between the Corporation and the
Executive as follows:
1. Term. The Corporation agrees to employ Executive, and Executive
agrees to serve, on the terms and conditions stated herein for a one year period
commencing on the effective date of the Change in Control (as defined in Article
2 and hereinafter defined as the "Change Date") said period to be automatically
renewed for successive one year periods thereafter and ending on the earlier to
occur of (a) termination pursuant to the provisions of this Change of Control
Agreement (the "Agreement") or (b) the first day of the month coinciding with or
next following the Executive's 60th birthday.
2. Change of Control. For the purposes of this Agreement a "Change of
Control" shall be deemed to have occurred if: (i) a third person, including a
"group" as defined in Article 13(d)(3) of the Securities Exchange Act of 1934,
becomes the beneficial owner of shares of the Corporation having (a) having 30%
or more of the total number of votes that may be cast for the election of
directors of the Corporation in 1998; and (b) having 25% or more of the total
number of votes that may be cast for the election of directors of the
Corporation in 1999 and thereafter; or (ii) as the result of, or in connection
with, any cash tender or exchange offer, merger of other business combination,
sale of assets or contested election, or any combination of the foregoing
transactions (a "Transaction"), the persons who were directors of the
Corporation before the Transaction shall cease to constitute a majority of the
Board of Directors (the "Board") of the Corporation or any successor to the
Corporation.
3. Position and Duties. The Executive's position (including titles),
authority and responsibilities shall be at least commensurate with the most
significant of those held, exercised and assigned during the 90-day period
immediately preceding the Change Date. The Executive shall be based and the
Executive's services shall be performed at the location at which the Executive
was based immediately preceding the Change Date, except for travel reasonably
required in the performance of the Executive's responsibilities. It is
understood that such position, authority and responsibilities shall not be
regarded as not commensurate merely by virtue of the fact that a successor shall
have acquired all or substantially all of the business and/or assets of the
Corporation as contemplated by Article 11 hereof and that the Executive shall
continue to have a position and authority and responsibilities with respect to
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such successor or affiliated company substantially corresponding to that of the
Executive with respect to the Corporation prior to such acquisition. As used in
this Agreement, the term "affiliated companies" means any company controlling,
controlled by or under common control with the Corporation. Notwithstanding the
duties as described above, Executive agrees that his/her duties may be, from
time to time, revised or modified by the President of the Corporation. The
Executive agrees to devote his/her full business time during normal business
hours to the business and affairs of the Corporation and to use his/her best
efforts to perform faithfully and efficiently the responsibilities assigned to
him hereunder, to the extent necessary to discharge such responsibilities,
except for (i) service on corporate, civic or charitable boards or committees
not significantly interfering with the performance of such responsibilities and
(ii) periods of vacation and sick leave to which Executive is entitled. It is
expressly understood and agreed that the Executive's continuing to serve on any
boards and committees with which Executive is connected, as a member or
otherwise, shall be deemed not to interfere with the performance of the
Executive's services to the Corporation.
4. Compensation and Benefits.
4.1 Base Salary. The Executive shall receive a base salary (the "Base
Salary") at least equal to the Base Salary paid to the Executive by the
Corporation within one year prior to the Change Date. The Base Salary shall be
reviewed at least once each year and shall be increased at any time and from
time to time by action of the President, Board or any committee thereof. The
Base Salary shall be paid in accordance with the Corporation's regular
practices.
4.2 Annual Bonus. In addition to Base Salary, the Executive shall have
an opportunity to earn or be awarded, for each fiscal year during the Term, an
annual bonus ("Annual Bonus") in cash. The Annual Bonus shall be at least equal
to the Annual Bonus, if any, paid or payable to the Executive during the fiscal
year prior to the Change Date or, if the Annual Bonus has been in effect for two
fiscal years prior to the Change Date, then to the average of the two years
immediately prior to the Change Date or, if the Annual Bonus has been in effect
for three or more fiscal years, then to the quotient obtained when the sum of
the bonuses for the three fiscal years immediately prior to the Change Date is
divided by three. Each such Annual Bonus shall be payable no later than 60 days
subsequent to the end of the Corporation's fiscal year. In the event of the
termination of this Agreement for any reason, the Executive shall receive the
Annual Bonus prorated to the date of such termination.
4.3 Incentive, Retirement and Savings Plan. In addition to the Base
Salary and Annual Bonus, Executive shall be entitled to participate in all
incentive, retirement and savings plans and programs ("Incentives"), if any, and
as established by the Corporation from time to time provided Executive meets the
eligibility requirements. All Incentives, provided for the Executive shall be at
least equal to those provided by the Corporation for the Executive under such
plans and programs if and as in effect at any time during the 90-day period
immediately preceding the Change Date or, if more favorable to the Executive, as
in effect at any time thereafter with respect to executives with comparable
responsibilities.
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4.4 Benefit Plans. The Executive and/or Executive's spouse and
dependents, as the case may be, shall be entitled to all benefits under all
medical, dental, vision, disability, executive life, group life, accidental
death and travel accident insurance plans and programs ("Benefit Plans") if any,
and as established from time to time by the Corporation provided the Executive
meets the eligibility requirements therefor. All Benefit Plans shall be at least
equal to those in effect at any time during the 90-day period immediately
preceding the Change Date or, if more favorable to the Executive, as in effect
at any time thereafter with respect to executives with comparable
responsibilities.
4.5 Fringe Benefits. The Executive and/or Executive's spouse and
dependents, as the case may be, shall be entitled to fringe benefits ("Fringe
Benefits"), if any, and as established from time to time by the Corporation
provided the executive meets the eligibility requirements therefor. The
Executive is entitled to Fringe Benefits as in effect during the 90-day period
immediately preceding the Change Date or, if more favorable to the Executive, as
in effect at any time thereafter with respect to executives with comparable
responsibilities.
4.6 Expenses. The Executive shall be entitled to receive prompt
reimbursement for all reasonable expenses incurred or expended by the Executive
in fulfillment of the duties hereunder. The Executive shall provide
documentation of such expenses and be reimbursed in accordance with the policies
and procedures of the Corporation as in effect during the 90-day period
immediately preceding the Change Date or, if more favorable to the Executive, as
in effect at any time thereafter with respect to executives with comparable
responsibilities.
4.7 Office . The Executive shall be entitled to an office and to
administrative assistance commensurate with Executive's responsibilities and
title. The Executive shall be entitled to office and support staff at least
equal to those provided to the Executive during the 90-day period immediately
preceding the Change Date or, if more favorable to the Executive, as provided at
any time thereafter with respect to executives with comparable responsibilities.
4.8 Vacation. The Executive shall be entitled to paid vacation in
accordance with the policies of the Corporation, if any, and as established from
time to time by the Corporation. The Executive shall be entitled to vacation in
accordance with the policies of the Corporation as in effect during the 90-day
period immediately preceding the Change Date or, if more favorable to the
Executive, as in effect at any time thereafter with respect to executives with
comparable responsibilities.
4.9. Benefit Amendments. Nothing herein shall be construed to prevent
the Corporation from amending or altering any plans or programs as long as the
Executive continues to have the opportunity to receive compensation and
benefits, on a before-tax basis, consistent with paragraphs 4.1 through 4.8.
5. Termination.
5.1 Death. The Executive's employment shall terminate automatically upon
the Executive's death ("Death").
5.2 Disability. The Corporation may terminate the Executive's
employment, after having established the Executive's "Disability" (as defined
below), by giving to the Executive notice of its intention to
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terminate Executive's employment effective on the 90th day after such notice
(the "Disability Effective Date") if within such 90-day period the Executive
fails to return to full-time performance of Executive's duties. For purposes of
this Agreement, "Disability" means disability which after the expiration of more
than 26 weeks after its commencement is determined to be total and permanent by
a physician selected by the Corporation or its insurers providing disability
insurance to the Company and consented to by the Executive or Executive's legal
representative (such consent not to be withheld unreasonably).
5.3 Cause. The Corporation may terminate the Executive's employment for
Cause ("Cause"). For purposes of this Agreement, "Cause" means (i) an act or
acts of dishonesty on the Executive's part which result in or are intended to
result in Executive's substantial personal enrichment at the expense of the
Corporation or (ii) repeated violations by the Executive of Executive's
obligations under Article 3 of this Agreement, which violations are demonstrably
willful and deliberate on the Executive's part and which were intended to result
in or have resulted in material injury to the Corporation.
5.4 Without Cause. The President or the Board may terminate the
Executive's employment without cause ("Without Cause") upon 60 days notice.
5.5 Good Reason. The Executive may terminate his/her employment for Good
Reason ("Good Reason"). For purposes of this Agreement "Good Reason" is defined
as set forth in Articles 5.5.1 through 5.5.5 below:
5.5.1 Adverse Change. Without the express written consent of the
Executive, (i) the assignment to the Executive of any duties inconsistent in any
substantial respect with the Executive's position, authority or responsibilities
as contemplated by Article 3 of this Agreement, or (ii) any other substantial
adverse change in such position including titles, authority or responsibilities.
5.5.2 Failure to Comply. Any failure by the Corporation to comply
with any of the provisions of Article 4 of this Agreement, other than an
insubstantial and inadvertent failure remedied by the Corporation promptly after
receipt of notice thereof given by the Executive.
5.5.3 Change of Location. The Corporation's requiring the Executive
to be based or to perform services at any office or location other than that at
which the Executive is based immediately prior to the Change Date, except for
travel reasonably required in the performance of the Executive's
responsibilities.
5.5.4 Unpermitted Termination. Any purported termination by the
Corporation of the Executive's employment otherwise than as permitted by this
Agreement, it being understood that any such purported termination shall not be
effective for any purpose of this Agreement.
5.5.5 Failure to Assume. Any failure by the Corporation to obtain
the assumption and agreement to perform this Agreement by a successor as
contemplated by Article 11.
5.5.6 Determination of Good Reason. For the purposes of this
Article 5.5, any determination of "Good Reason" shall be made solely by the
Corporation's independent auditors.
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5.5.7 Good Faith. In the event that the Executive shall in good
faith give a "Notice of Termination," as hereinafter defined in paragraph 5.8
hereof, for Good Reason and it shall thereafter be determined that Good Reason
did not exist, the employment of the Executive shall, unless the Corporation and
the Executive shall otherwise mutually agree, be deemed to have terminated, at
the date of the giving of such purported Notice of Termination. In such event
the Executive shall be deemed to have elected Voluntary Retirement and shall be
entitled to receive only those payments and benefits which he would have been
entitled to receive at such date under Article 6.4 of this Agreement.
5.6 Voluntary Retirement. At any time after the effective date of the
Agreement, the Executive may terminate his/her employment by electing voluntary
retirement ("Voluntary Retirement").
5.7 Notice of Termination. Any termination by the Corporation for Cause,
or by the Executive for Good Reason or election of Voluntary Retirement shall be
communicated by Notice of Termination to the other party hereto given in
accordance with Article 12. For purposes of this Agreement, a "Notice of
Termination" means a written notice which (i) indicates the specific termination
provision in this Agreement relied upon, (ii) sets forth in reasonable detail
the facts and circumstances claimed to provide a basis for termination of the
Executive's employment under the provision so indicated and (iii) if the
termination date is other than the date of receipt of such notice, specifies the
termination date of this Agreement which date shall be in accordance with the
specific termination provision of this Agreement relied upon.
5.8 Date of Termination. For purposes of this Agreement, the "Date of
Termination" shall mean the date the President receives the Notice of
Termination or any later date specified therein, as the case may be.
Notwithstanding any contrary provision contained in this Agreement, (i) if the
Executive is terminating this Agreement in order to elect Voluntary Retirement,
the Date of Termination shall not be the date of receipt of such Notice of
Termination but shall be a date specified therein, which date shall be not less
than 120 days after giving such Notice of Termination; (ii) if the Executive's
employment is terminating due to Disability, the Date of Termination shall be
the Disability Effective Date; (iii) if the Executive's employment terminates
due to the Executive's death, the Date of Termination shall be the date of
death; and (iv) if the Executive's employment is terminated Without Cause, the
Date of Termination shall not be the date of receipt of such Notice of
Termination but shall be a date specified therein, which date shall be not less
than 60 days after giving such Notice of Termination.
6. Obligations of the Corporation upon Termination.
6.1 Death. If the Executive's employment is terminated by reason of the
Executive's death, except as described in the next sentence, this Agreement
shall terminate without further obligations to the Executive's legal
representatives under this Agreement other than those obligations accrued
hereunder at the date of his/her death. Anything in this Agreement to the
contrary notwithstanding, the Executive's spouse and dependents shall be
entitled to continue to receive the benefits under Benefit Plans and Fringe
Benefits for 18 months subsequent to the Date of Termination.
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6.2 Cause. If the Executive's employment shall be terminated for Cause,
the Corporation shall pay the Executive his/her Base Salary and any other
accrued obligations through the Date of Termination. Corporation shall have no
further obligations to the Executive under this Agreement.
6.3 Voluntary Retirement. The Corporation shall have no further
obligation to the Executive under this Agreement. If the Executive elects
Voluntary Retirement, the Corporation shall pay the Executive his/her Base
Salary and any accrued obligations through the Date of Termination.
6.4 Good Reason, Without Cause, and Disability. If the Board shall
terminate the Executive's employment either Without Cause or for Disability, or
if the Executive shall terminate his/her employment for Good Reason:
6.4.1 Payments. The Corporation shall pay to the Executive the
aggregate of the amounts determined pursuant to Articles 6.4.1(i) and 6.4.1(ii):
(i) if not therefore paid, the Base Salary and any accrued
obligations through the Date of Termination to be paid within 30 days after the
Date of Termination;
(ii) 150% of the Executive's "Base Amount". Base Amount is the
aggregate of the Base Salary and Annual Bonus paid or due to Executive in the
fiscal year prior to the year in which the termination occurred. Said 150% of
the Base Amount shall be paid to the Executive as follows: (a) 100% in 12 equal
monthly installments commencing within 30 days after the Date of Termination;
and (b) 50% in a lump sum payment in cash on the one year anniversary of the
Date of Termination.
6.4.2 Stock Options. All stock options and stock appreciation
rights granted to the Executive which are not exercisable at the Date of
Termination, shall become fully exercisable as of the Date of Termination, with
the exercise terms per the termination of employment section of the stock option
plan(s).
6.4.3 Benefits. For 12 months subsequent to the Date of
Termination, the Corporation shall continue Benefit Plans and Fringe Benefits to
the Executive and/or Executive's spouse and dependents. For COBRA purposes, the
Date of Termination will be the qualifying event and the Corporation will pay 12
months of insurance premiums.
7. Non-exclusivity of Rights. Nothing in this Agreement shall prevent or
limit the Executive's continuing or future participation in any benefit, bonus,
incentive or other plan or program provided by the Corporation or any of its
affiliated companies and for which the Executive may qualify, nor shall anything
herein limit or otherwise affect such rights as the Executive may have under any
stock option or other Agreements with the Corporation or any its affiliated
companies. Amounts which are vested benefits or which the Executive is otherwise
entitled to receive under any plan or program of the Corporation or any of its
affiliated companies at or subsequent to the Date of Termination shall be
payable in accordance with such plan or program.
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8. Full Settlement. The Corporation's obligation to make the payments
provided for in this Agreement and otherwise to perform its obligations
hereunder shall not be affected by any circumstances, including, without
limitation, any set-off, counterclaim, recoupment, defense or other right which
the Corporation may have against the Executive or others. In no event shall the
Executive be obligated to seek other employment by way of litigation of the
amounts payable to the Executive under any of the provisions of this Agreement.
The Corporation agrees to pay, to the full extent permitted by law, all legal
fees and expenses which the Executive may reasonably incur as a result of any
contest (regardless of the outcome thereof) by the Corporation or others of the
validity or enforceability of, or liability under, any provision of this
Agreement.
9. Confidential Information. The Executive shall hold in a fiduciary
capacity for the benefit of the Corporation all secret or confidential
information, knowledge or data relating to the Corporation or any of its
affiliated companies, and their respective businesses, which shall have been
obtained by the Executive during Executive's employment by the Corporation or
any of its affiliated companies and which shall not be public knowledge. After
termination of the Executive's employment with the Corporation, he shall not,
without the prior written consent of the Corporation, communicate or divulge any
such information, knowledge or data to anyone other than the Corporation and
those designated by it. In no event shall an asserted violation of the
provisions of this Article 9 constitute a basis for deferring or withholding any
amounts otherwise payable to the Executive under this Agreement.
10. Covenant Not to Compete. In view of the fulfillment of Executive's
obligations hereunder and (i) the unique and valuable services it is expected
Executive will render to the Corporation, (ii) Executive's knowledge of the
clients, trade secrets, and other proprietary information relating to the
business of the Corporation and its customers and suppliers, and (iii) similar
knowledge Executive has regarding the Corporation, and in consideration of the
compensation to be received hereunder and as a condition to the performance by
Corporation of its obligations under this Agreement, Executive agrees that if
this Agreement is terminated due to Disability, Good Reason, a Change of Control
or for Without Cause that for the period of one (l) year after the Date of
Termination the Executive shall not directly or indirectly through any other
person, firm or Corporation:
(i) Compete with or be engaged in the same business or "participate in"
any other business or organization which during such one year period competes
with or is engaged in the same business as the Corporation, which business, for
the purposes of this Agreement, will be limited to the area of "software
execution control," "network license management control," and "data access
control" within the computer industry, in any geographical area in which the
Corporation conducts such business except that in each case the provisions of
this Article 10 will not be deemed to be breached merely because Executive owns
not more than 5% of the outstanding common stock of a publicly owned
corporation, or by membership upon any board of directors of a publicly owned
corporation where Executive attained such position during the Term and such
position was deemed not to interfere with the terms of this Agreement. The term
"participate in" shall mean: "directly or indirectly, for Executive's own
benefit or for, with, or through any other person, firm, or corporation, own,
manage, operate, control, loan
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money to, or participate in the ownership, management, operation, or control of,
or be connected as a director, officer, employee, partner, consultant, agent,
independent contractor, or otherwise with, or acquiesce in the use of
Executive's name." Executive will not directly or indirectly reveal the name of,
solicit or interfere with, or endeavor to entice away from Corporation any of
its customers or employees. Executive will not directly or indirectly employ any
person who, at any time up to such cessation, was an employee of the
Corporation, within a period of one year after such person leaves the employ of
such Corporation. Executive agrees that the provisions of this Article 10 are
necessary and reasonable to protect the Corporation in the conduct of its
business. If any restriction contained in this Article 10 shall be deemed to be
invalid, illegal, or unenforceable by reason of the extent, duration, or
geographical scope thereof, or otherwise, then the court making such
determination shall have the right to reduce such extent, duration, geographical
scope, or other provisions hereof, and in its reduced form such restriction
shall then be enforceable in the manner contemplated hereby.
10.1 Breach. If Executive commits a breach of any of the provisions of
this Article 10, Corporation shall have the right and remedy to have such
provisions specifically enforced by any court having equity jurisdiction. The
foregoing right and remedy shall be in addition to any other remedy (including
without limitation damages) to which Corporation may be entitled.
11. Successors.
11.1 Assignment by Executive. This Agreement is personal to the
Executive and without the prior written consent of the Corporation shall not be
assignable by the Executive otherwise than by will or the laws of descent and
distribution. This Agreement shall inure to the benefit of and be enforceable by
the Executive's legal representatives.
11.2 Assignment by Corporation. Notwithstanding anything in this
Agreement, Executive agrees that this Agreement may be assigned by the
Corporation.
11.3 Binding Effect. This Agreement shall inure to the benefit of and be
binding upon the Corporation and its successors. The Corporation shall require
any successor to all or substantially all of the business and/or assets of the
Corporation, whether directly or indirectly, by purchase, merger, consolidation,
acquisition of stock, or otherwise, by an agreement in form and substance
satisfactory to the Executive, expressly to assume and agree to perform this
Agreement in same manner and to the same extent as the Corporation would be
required to perform if no such succession had taken place.
12. Miscellaneous.
12.1 Modifications. This Agreement sets forth the entire understanding
of the parties with respect to the subject matter hereof, and may be modified
only by a written instrument duly executed by each party.
12.2 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of California, without reference to
principles of conflict of laws. This Agreement may not be amended or modified
otherwise than by a written agreement
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executed by the parties hereto or their respective successors and legal
representatives.
12.3 Notice. All notices and other communications hereunder shall be in
writing and shall be given by hand delivery to the other party or by registered
or certified mail, return receipt requested, postage prepaid, addressed as
follows:
If to the Executive:
Xxxxxx Xxxxx
--------------------------
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If to the Corporation:
Rainbow Technologies, Inc.
00 Xxxxxxxxxx
Xxxxxx, XX 00000
or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notice and communications shall be effective
when actually received by the addressees.
12.4 Equitable Relief. Since a breach of the provisions of this
Agreement, particularly with respect to Article 10, could not adequately be
compensated by money damages, the Corporation shall be entitled, in addition to
any other right and remedy available to it, to an injunction restraining such
breach or a threatened breach, and in either case no bond or other security
shall be required in connection therewith, and Executive hereby consents to the
issuance of such injunction.
12.5 Relationship of Parties. Except for authority granted to Executive
by the Board in order to enable Executive to fulfill the obligations set forth
in this Agreement, nothing contained in this Agreement shall authorize, empower,
or constitute Executive the agent of the Corporation in any manner; authorize or
empower Executive to assume or create any obligation or responsibility
whatsoever, express or implied, on behalf of or in the name of the Corporation.
12.6 Waiver. Any waiver by any party of a breach of any provision of
this Agreement shall not operate as or be construed to be a waiver of any other
breach of such provision or any breach of any other provision of this Agreement.
The failure of a party to insist upon strict adherence to any term of this
Agreement on one or more occasions shall not be a waiver or deprive the party of
the right hereunder to insist upon strict adherence to that term or any other
term of this Agreement. Any waiver must be in writing and signed by the waiving
party.
12.7 Separability. If any provision of this Agreement is invalid,
illegal, or unenforceable, the balance of this Agreement shall remain in effect,
and if any provision is inapplicable to any person or circumstance, it shall
nevertheless remain applicable to all other persons and circumstances.
12.8 Headings. The headings in this Agreement are solely for convenience
of reference and shall be given no effect in the construction or interpretation
of this Agreement.
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12.9 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
12.10Withholdings. The Executive agrees that the Corporation shall
withhold from any and all payments required to be made to Executive pursuant to
this Agreement all federal, state, local and/or other taxes or contributions
which the Corporation determines are required to be withheld in accordance with
applicable statutes and/or regulations from time to time in effect provided,
however, that such withholding shall be consistent with the calculations made by
the Corporation.
IN WITNESS WHEREOF, the Executive has hereunto set his/her hand and,
pursuant to the authorization from its Board of Directors, the Corporation has
caused these presents to be executed in its name on its behalf as of the day and
year first above written.
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Xxxxxx Xxxxx
ATTEST:
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Rainbow Technologies, Inc.
Xxxxxx X. Xxxxxx
President
