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Exhibit 10.20
 
 

 
DANIEL S. SHUGAR
 
AMENDED AND RESTATED EMPLOYMENT AGREEMENT
 
This Agreement amends and restates the employment agreement entered into as of
November 1, 2005 (the “Effective Date”) by and between PowerLight Corporation, a
California corporation (the “Company”) and Daniel S. Shugar (“Executive”) to
reflect the proposed acquisition of the Company by SunPower Corporation, a
Delaware corporation (“SunPower”) and merger (the “Merger”) of the Company with
and into Pluto Acquisition Corporation LLC, a Delaware LLC (“PowerLight LLC”)
pursuant to the Agreement and Plan of Merger dated November 15, 2006 among the
Company, SunPower, PowerLight LLC and Thomas L. Dinwoodie as Shareholders’
Representative.  This Agreement as amended and restated shall be effective as of
one business day following the date the Merger is consummated (the “Amendment
Date”), and if the Merger does not occur such amendments shall be without
effect.  After the Amendment Date, all references to the Company shall be to
PowerLight LLC.
 
1.      Duties and Scope of Employment.
 
(a)           Positions and Duties.  As of the Amendment Date, Executive will
serve as President of the Company, a subsidiary of SunPower.  Executive will
render such business and professional services in the performance of his duties,
consistent with Executive’s position within the Company, as will reasonably be
assigned to him by the Chief Executive Officer of the Company (the
“Supervisor”).  The period of Executive’s employment under this Agreement is
referred to herein as the “Employment Term.”
 
(b)           Obligations.  During the Employment Term, Executive will devote
Executive’s full business efforts and time to the Company.  Executive
acknowledges that the performance of his duties may require reasonable business
travel.  For the duration of the Employment Term, Executive agrees not to
actively engage in any other employment, occupation, or consulting activity for
any direct or indirect remuneration without the prior approval of the Supervisor
(which approval will not be unreasonably withheld); provided, however, that
Executive may, without the approval of the Supervisor, serve in any capacity
with any civic, educational, or charitable organization, provided such services
do not interfere with Executive’s obligations to the Company.
 
2.      At-Will Employment.  Executive and the Company agree that Executive’s
employment with the Company constitutes “at-will” employment.  Executive and the
Company acknowledge that, notwithstanding the term described in Section 3, this
employment relationship may be terminated at any time, upon written notice to
the other party, with or without good cause or for any or no cause, at the
option either of the Company or Executive.  However, as described in this
Agreement, Executive may be entitled to severance benefits depending upon the
circumstances of Executive’s termination of employment.  Upon the termination of
Executive’s employment with the Company for any reason, in addition to the
severance compensation provided elsewhere in this Agreement, Executive will be
entitled to payment of all accrued but unpaid vacation, expense reimbursements,
and other benefits due to Executive through his termination date under any
Company-provided or paid plans, policies, and arrangements.  Executive agrees to
resign from all positions that he holds with the Company (other than his
position, if any, as a member of the Board of Directors of  SunPower (the
“Board”)) immediately following the termination of his employment if the
Supervisor so requests.

 
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3.      Term of Agreement.  This Agreement will have an initial term of three
years commencing on the Effective Date.  On the third anniversary of the
Effective Date, and on each three-year anniversary thereafter, this Agreement
automatically will renew for an additional three-year term unless the Company
provides Executive with notice of non-renewal at least 120 days prior to the
date of automatic renewal.
 
4.      Compensation.
 
(a)           Base Salary.  Commencing as of the date when the Company
implements its Company-wide salary increases for 2007, the Company will pay
Executive an initial monthly salary of $20,278.17 as compensation for his
services (the “Base Salary”).  The Base Salary will not be subject to further
increase as a result of SunPower’s separate implementation of its own
company-wide salary increases for 2007.  The Base Salary will be paid
periodically in accordance with SunPower’s normal payroll practices and be
subject to the usual, required withholding.  Executive’s salary will be subject
to review, and adjustments will be made based upon SunPower’s standard
practices.
 
(b)           Annual Bonus.  Executive shall be eligible to participate in
SunPower’s Key Employee Bonus Plan (“KEBP”).  Executive’s target bonus will be
determined from time to time by the Supervisor in accordance with the KEBP
(“Target Bonus”); provided, however, that Executive’s initial Target Bonus shall
be 50% of the Base Salary.  The actual bonus paid may be higher or lower than
the Target Bonus for over- or under-achievement of goals as determined by the
Supervisor.  Executive’s annual bonus, if any, will be payable each quarter
and/or year upon completion of a performance review by the Supervisor.
 
(c)           Equity Compensation.  Executive may be entitled to participate in
SunPower’s equity incentive programs, as determined from time to time by the
Board and/or its compensation committee (including being considered in
connection with SunPower’s annual evergreen equity incentive granting program
commencing in 2007).
 
(d)           Additional Compensation.  The Company shall provide Executive with
a vehicle which shall be, at the Company’s discretion, either owned or leased by
the Company for Executive’s business and personal use.

 
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5.      Employee Benefits.  During the Employment Term, Executive will be
eligible to participate in accordance with the terms of all SunPower employee
benefit plans, policies, and arrangements that are applicable to other senior
executives of  SunPower, as such plans, policies, and arrangements may exist
from time to time.
 
6.      Expenses.  The Company will reimburse Executive for reasonable travel,
entertainment, and other expenses incurred by Executive in the furtherance of
the performance of Executive’s duties hereunder, in accordance with SunPower’s
expense reimbursement and other policies as in effect from time to time.
 
7.      Severance.
 
(a)           Termination Without Cause or Resignation for Good Reason .  If
Executive’s employment is terminated by the Company without Cause or by
Executive for Good Reason, then, subject to Section 8, Executive will receive:
(i) a lump-sum payment equal to Executive’s monthly Base Salary in effect
immediately prior to the date of Executive’s employment termination
(“Termination Date”) multiplied by twenty-four (24), (ii) in the event the
Termination Date following a completed fiscal year for which Executive’s annual
bonus relating to such prior completed fiscal year has not been paid as of the
Termination Date, a lump-sum payment equal to the actual bonus that would have
been paid for such  completed fiscal year (iii) a lump-sum payment equal to
Executive’s Target Bonus in effect immediately prior to the Termination Date
divided by twelve (12) and multiplied by the number of whole calendar months
between the commencement of the then current fiscal year and the Termination
Date, and (iv) Company-paid coverage for Executive and Executive’s eligible
dependents under the Company’s Benefit Plans for twenty-four (24) months, or, if
earlier, until Executive is eligible for similar benefits from another employer
(provided Executive validly elects to continue coverage under applicable law).
 
(b)           Voluntary Termination without Good Reason; Termination for
Cause.  If Executive’s employment with the Company terminates voluntarily by
Executive without Good Reason or is terminated for Cause by the Company, then
(i) all further vesting of Executive’s outstanding equity awards will terminate
immediately, (ii) all payments of compensation by the Company to Executive
hereunder will terminate immediately (except as to amounts already earned), and
(iii) Executive will be paid all expense reimbursements and other benefits due
to Executive through his termination date under any Company-provided or paid
plans, policies, and arrangements.
 
(c)           Termination due to Death or Disability.  If Executive’s employment
terminates by reason of death or disability, then (i) Executive will be entitled
to the payments described in Section 7(a)(ii) and (iii) above, (ii) all
provisions regarding forfeiture, restrictions on transfer, and the Company’s or
SunPower’s (as applicable) rights of repurchase, in each case otherwise
applicable to shares of restricted stock held by such Executive pursuant to the
Equity Restriction Agreement between Executive and the Company, dated of even
date herewith, shall lapse as of the effective date of such termination (iii)
Executive will be entitled to receive other benefits only in accordance with the
Company’s then applicable plans, policies, and arrangements, and (iv)
Executive’s outstanding equity awards will terminate if and to the extent
provided under the applicable award agreement(s).  For purpose of this Section
7(c) only, the term disability shall refer to Executive’s failure to perform the
essential functions of Executive’s position for a period of six (6) months, with
or without reasonable accommodation, due to a disability, which, in the opinion
of a qualified physician, is reasonably likely to be continuous or permanent for
the  remainder of Executive’s life.
 
 
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(d)           Sole Right to Severance.  This Agreement is intended to represent
Executive’s sole entitlement to severance payments and benefits in connection
with the termination of his employment.  To the extent Executive is entitled to
receive severance or similar payments and/or benefits under any other Company
plan, program, agreement, policy, practice, or the like, severance payments and
benefits due to Executive under this Agreement will be so reduced.
 
(e)           Timing of Payments.  If, as of the Termination Date, Executive is
a “specified employee” within the meaning of Treasury Regulation §1.409A, as
determined by SunPower’s legal counsel, the lump-sum payments specified in
Sections 7(a) and 7(b) (and the amounts still due under Section 9(b))shall be
paid on the first business day on or after the six-month anniversary of the
Termination Date, or, if earlier, on notification of Executive’s death.
 
8.      Conditions to Receipt of Severance; No Duty to Mitigate.
 
(a)           Separation Agreement and Release of Claims.  The receipt of any
severance pursuant to Section 7 will be subject to Executive signing and not
revoking a separation agreement and release of claims in a form reasonably
acceptable to the Company.  Such agreement will provide (among other things) the
provisions of Section 8(c).  No severance will be paid or provided until the
separation agreement and release agreement becomes effective.
 
(b)           Nonsolicitation.  In the event of a termination of Executive’s
employment that otherwise would entitle Executive to the receipt of severance
pursuant to Section 7, Executive agrees that, during the one (1) year period
following the Termination Date, Executive, directly or indirectly, whether as
employee, owner, sole proprietor, partner, director, member, consultant, agent,
founder, co-venturer or otherwise, will (i) not solicit, induce, or influence
any person to modify his or her employment or consulting relationship with the
Company or SunPower (the “No-Inducement”), and (ii) not solicit business from
any of the Company’s or SunPower’s substantial customers and users (the
“No-Solicit”).  If Executive breaches the No-Inducement or the No-Solicit, in
addition to any other rights or remedies available to the Company and SunPower,
all continuing payments and benefits to which Executive otherwise may be
entitled pursuant to Section 7 and/or Section 9(a) will cease immediately.
 
(c)           Nondisparagement.  In the event of a termination of Executive’s
employment that otherwise would entitle Executive to the receipt of severance
pursuant to Section 7, Executive agrees to refrain from any disparagement,
criticism, defamation, slander of the Company or SunPower, its directors, its
executive officers, or its employees, or tortious interference with the
contracts and relationships of the Company or SunPower.  The foregoing
restrictions will not apply to any statements that are made truthfully in
response to a subpoena or other compulsory legal process.

 
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(d)           No Duty to Mitigate.  Executive will not be required to mitigate
the amount of any payment contemplated by this Agreement, nor will any earnings
that Executive may receive from any other source reduce any such payment.
 
9.      Acceleration of Vesting Upon Change of Control.
 
(a)           If Executive’s employment is terminated by the Company without
Cause or by Executive for Good Reason, and the termination is in Connection with
a Change of Control, then, subject to Section 8, (x) all of such Executive’s
unvested options granted from and after the date the Merger is consummated will
become fully vested and exercisable as of the date of such termination of
employment and remain exercisable for the time period otherwise applicable to
such options following such termination of employment pursuant to the applicable
option plan and option agreement and (y) all provisions regarding forfeiture,
restrictions on transfer, and the Company’s or SunPower’s (as applicable) rights
of repurchase, in each case otherwise applicable to shares of restricted stock
held by such Executive and granted from and after the date the Merger is
consummated, shall lapse as of the effective date of such termination of
employment.
 
(b)           Section 280G Limitation.  If any payment or benefit Executive
would receive pursuant to Section 7 and/or Section 9(a), but determined without
regard to any additional payment required under this Section 9(b),
(collectively, the “Payment”) would (i) constitute a “parachute payment” within
the meaning of Section 280G of the Internal Revenue Code of 1986, as amended
(the “Code”), and (ii) be subject to the excise tax imposed by Section 4999 of
the Code or any interest or penalties payable with respect to such excise tax
(such excise tax, together with any such interest and penalties, are hereinafter
collectively referred to as the “Excise Tax”), then Executive’s benefits under
this Agreement shall be either:  (1) delivered in full, or (2) delivered as to
such lesser extent which would result in no portion of such benefits being
subject to the Excise Tax, whichever of the foregoing amounts, taking into
account the applicable federal, state and local income taxes and the Excise Tax,
results in the receipt by Employee on an after-tax basis, of the greatest amount
of benefits, notwithstanding that all or some portion of such benefits may be
taxable under Section 4999 of the Code.
 
(c)           The accounting firm engaged by the Company for general audit
purposes as of the day prior to the effective date of the Change of Control
shall perform the foregoing calculations.  If the accounting firm so engaged by
the Company is also serving as accountant or auditor for the individual, entity
or group which will control the Company upon the occurrence of a Change of
Control, the Company shall appoint a nationally recognized accounting firm other
than the accounting firm engaged by the Company for general audit purposes to
make the determinations required hereunder.  The Company shall bear all expenses
with respect to the determinations by such accounting firm required to be made
hereunder.
 
(d)           The accounting firm engaged to make the determinations hereunder
shall provide its calculations, together with detailed supporting documentation,
to the Company and Executive within thirty (30) calendar days after the date on
which such accounting firm has been engaged to make such determinations or such
other time as requested by the Company or Executive.  Any good faith
determinations of the accounting firm made hereunder shall be final, binding,
and conclusive upon the Company and Executive.

 
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10.    Definitions.
 
(a)           Benefit Plans.  For purposes of this Agreement, “Benefit Plans”
means plans, policies, or arrangements that SunPower sponsors (or participates
in) and that immediately prior to Executive’s termination of employment provide
Executive and Executive’s eligible dependents with medical, dental, or vision
benefits.  Benefit Plans do not include any other type of benefit (including,
but not by way of limitation, financial counseling, disability, life insurance,
or retirement benefits).  A requirement that the Company provide Executive and
Executive’s eligible dependents with (or reimburse for) coverage under the
Benefit Plans will not be satisfied unless the coverage is no less favorable
than that provided to Executive and Executive’s eligible dependents immediately
prior to Executive’s termination of employment; provided, however, that the
Company may reduce coverage under the Benefit Plans if such reduction is
applicable to all other senior executives of SunPower and its
subsidiaries.  Subject to the immediately preceding sentence, the Company may,
at its option, satisfy any requirement that the Company provide (or reimburse
for) coverage under any Benefit Plan by instead providing (or reimbursing for)
coverage under a separate plan or plans providing coverage that is no less
favorable or by paying Executive a lump-sum payment which is, on an after-tax
basis, sufficient to provide Executive and Executive’s eligible dependents with
equivalent coverage under a third party plan that is reasonably available to
Executive and Executive’s eligible dependents.
 
(b)           Cause.   For purposes of this Agreement, “Cause” means (i) acts or
omissions constituting gross negligence or willful misconduct on the part of
Executive with respect to Executive’s obligations or otherwise relating to the
business of Company, (ii) Executive’s (A) felony conviction of, or felony plea
of nolo contendere for, fraud, misappropriation or embezzlement, or a felony
crime of moral turpitude, or (B) conviction of fraud, misappropriation or
embezzlement, (iii) Executive’s violation or breach of any fiduciary duty, or
(iv) Executive’s violation or breach of any contractual duty to the Company
which duty is material to the performance of the Executive’s duties or results
in material damage to the Company or its business; provided that if any of the
foregoing events is capable of being cured, the Company will provide notice to
Executive describing the nature of such event and Executive will thereafter have
thirty (30) days to cure such event.
 
(c)           Change of Control.  For purposes of this Agreement, “Change of
Control” means (i) a sale of all or substantially all of the Company’s or
SunPower’s assets, (ii) any merger, consolidation, or other business combination
transaction of the Company or SunPower with or into another corporation, entity,
or person, other than a transaction in which the holders of at least a majority
of the shares of voting capital stock of the Company or SunPower outstanding
immediately prior to such transaction continue to hold (either by such shares
remaining outstanding or by their being converted into shares of voting capital
stock of the surviving entity) a majority of the total voting power represented
by the shares of voting capital stock of the Company or SunPower (or the
respective surviving entity) outstanding immediately after such transaction,
(iii) the direct or indirect acquisition (including by way of a tender or
exchange offer) by any person, or persons acting as a group, of beneficial
ownership or a right to acquire beneficial ownership of shares representing a
majority of the voting power of the then outstanding shares of capital stock of
the Company or SunPower, (iv) a contested election of directors, as a result of
which or in connection with which the persons who were directors before such
election or their nominees cease to constitute a majority of the Board, or (v) a
dissolution or liquidation of the Company or SunPower.  Notwithstanding anything
to the contrary in the foregoing, any pro rata distribution (or retirement and
pro rata issuance) of shares of SunPower stock held by SunPower’s corporate
parent, Cypress Semiconductor, Inc. (“Cypress”) to the existing public
shareholders of Cypress (in proportion to their shareholdings of Cypress) shall
not constitute a Change of Control.

 
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(d)           Disability.  For purposes of this Agreement, Disability shall have
the same defined meaning as in the Company’s long-term disability plan.
 
(e)           Good Reason.  For purposes of this Agreement, “Good Reason” means
the occurrence of any of the following without Executive’s express prior written
consent: (i) a material reduction in Executive’s position (other than as a
result of a change of the Company from a subsidiary to a division of SunPower)
or duties after the Amendment Date, (ii) a material breach of this Agreement,
which the Company has not cured within thirty (30) days after receipt of written
notice of such breach from Executive, (iii) a reduction in Executive’s Base
Salary and Target Bonus excluding a reduction that is applied to substantially
all of the Company’s and SunPower’s other senior executives; provided, however,
that for purposes of this clause (iii) whether a reduction in Target Bonus has
occurred shall be determined without any regard to any actual bonus payments
made to Executive, (iv) a material reduction in the aggregate level of benefits
made available to Executive other than a reduction that also is applied to
substantially all of the Company’s and SunPower’s other senior executives, or
(v) a relocation of Executive’s primary place of business for the performance of
his duties to the Company to a location that is more than thirty-five (35) miles
from the Company’s current business location in Berkeley, California.
 
(f)           In Connection with a Change of Control.  For purposes of this
Agreement, a termination of Executive’s employment with the Company is “in
Connection with a Change of Control” if Executive’s employment terminates during
the period beginning three (3) months prior to a Change of Control and ending
eighteen (18) months following a Change of Control.
 
11.     Indemnification and Insurance.  Executive will be covered under the
Company’s insurance policies and, subject to applicable law, will be provided
indemnification to the maximum extent permitted by the Company’s bylaws and
Articles of Incorporation, with such insurance coverage and indemnification to
be in accordance with the Company’s standard practices for senior executive
officers but on terms no less favorable than provided to any other Company
senior executive officer or director.
 
12.     Confidential Information.  Executive acknowledges that the Employee
Proprietary Information and Inventions Agreement between Executive and the
Company (the “Confidential Information Agreement”) will continue in
effect.  During the Employment Term, Executive agrees to execute any updated
versions of the Company’s form of Confidential Information Agreement (any such
updated version also referred to as the “Confidential Information Agreement”) as
may be required of substantially all of the Company’s executive officers.
 
13.    Assignment.  This Agreement will be binding upon and inure to the benefit
of (a) the heirs, executors, and legal representatives of Executive upon
Executive’s death, and (b) any successor of the Company.  Any such successor of
the Company will be deemed substituted for the Company under the terms of this
Agreement for all purposes.  For this purpose, “successor” means any person,
firm, corporation, or other business entity which at any time, whether by
purchase, merger, or otherwise, directly or indirectly acquires all or
substantially all of the assets or business of the Company.  None of the rights
of Executive to receive any form of compensation payable pursuant to this
Agreement may be assigned or transferred except by will or the laws of descent
and distribution.  Any other attempted assignment, transfer, conveyance, or
other disposition of Executive’s right to compensation or other benefits will be
null and void.

 
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14.    Notices.  All notices, requests, demands, and other communications called
for hereunder will be in writing and will be deemed given (a) on the date of
delivery if delivered personally, (b) one day after being sent by a well
established commercial overnight service, or (c) four days after being mailed by
registered or certified mail, return receipt requested, prepaid and addressed to
the parties or their successors at the following addresses, or at such other
addresses as the parties may later designate in writing:
 
If to the Company:

Attn: Chief Executive Officer
SunPower Corporation
3939 North First Street
San Jose, CA 95134

 
If to Executive, at the last known residential address on file with the Company.

 
15.    Severability.  If any provision hereof becomes or is declared by a court
of competent jurisdiction to be illegal, unenforceable, or void, this Agreement
will continue in full force and effect without said provision.
 
16.    Arbitration.  The Parties agree that any and all disputes arising out of
the terms of this Agreement, their interpretation, and any of the matters herein
released, shall be subject to binding arbitration in Alameda County before the
American Arbitration Association under its National Rules for the Resolution of
Employment Disputes, supplemented by the California Code of Civil
Procedure.  The Parties agree that the prevailing party in any arbitration shall
be entitled to injunctive relief in any court of competent jurisdiction to
enforce the arbitration award.  The Parties hereby agree to waive their right to
have any dispute between them resolved in a court of law by a judge or
jury.  This paragraph will not prevent either party from seeking injunctive
relief (or any other provisional remedy) from any court having jurisdiction over
the Parties and the subject matter of their dispute relating to Executive’s
obligations under this Agreement and the Confidentiality Information Agreement.
 
17.     Integration and Existing Agreement.  All of the Company’s and
Executive’s respective rights and obligations under the original Agreement dated
as of the Effective Date shall continue in effect and survive the amendments
made herein with respect to all periods and events occurring through the date
the Merger is consummated.  This Agreement as amended and restated, together
with the Confidential Information Agreement and Executive’s equity award
agreements, represents the entire agreement and understanding between the
parties as to the subject matter herein and supersedes all prior or
contemporaneous agreements whether written or oral, except as provided for in
the preceding sentence.  In the event of any conflict between this Agreement and
the Confidential Information Agreement or Executive’s equity award agreements,
this Agreement shall prevail.  No waiver, alteration, or modification of any of
the provisions of this Agreement will be binding unless in writing that
specifically references this Section and is signed by duly authorized
representatives of the parties hereto.  Notwithstanding the preceding sentence,
both the Company and Executive agree to amend this Agreement with respect to the
timing of payments if the Board determines that an amendment is necessary to
prevent the imposition of additional tax liability under Section 409A of the
Internal Revenue Code of 1986, as amended.

 
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18.    Waiver of Breach.  The waiver of a breach of any term or provision of
this Agreement, which must be in writing, will not operate as or be construed to
be a waiver of any other previous or subsequent breach of this Agreement.
 
19.    Survival.  The Confidential Information Agreement, and the Company’s and
Executive’s responsibilities under Sections 6, 7, 8, 9, 10, 11, 14, 15, 16, 17,
19 and 22 will survive the termination of this Agreement.
 
20.     Headings.  All captions and Section headings used in this Agreement are
for convenient reference only and do not form a part of this Agreement.
 
21.    Tax Withholding.  All payments made pursuant to this Agreement will be
subject to withholding of applicable taxes.
 
22.    Governing Law.  This Agreement will be governed by the laws of the State
of California (with the exception of its conflict of laws provisions).
 
23.    Acknowledgment.  Executive acknowledges that he has had the opportunity
to discuss this matter with and obtain advice from his private attorney, has had
sufficient time to, and has carefully read and fully understands all the
provisions of this Agreement, and is knowingly and voluntarily entering into
this Agreement.
 
24.    Counterparts.  This Agreement may be executed in counterparts, and each
counterpart will have the same force and effect as an original and will
constitute an effective, binding agreement on the part of each of the
undersigned.
 
* * * * *

 
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IN WITNESS WHEREOF, each of the parties has executed this Agreement, in the case
of the Company by a duly authorized officer, as of November 15, 2006.
 
COMPANY:
EXECUTIVE:

PowerLight LLC

By:  SunPower Corporation, its sole member

By:
/s/ Emmanuel T. Hernandez
 
/s/ Daniel Shugar
Name:
Emmanuel T. Hernandez
 
Daniel Shugar
Its:
Chief Financial Officer
   

 

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