EXHIBIT 10.16
OPTION AGREEMENT
THIS OPTION AGREEMENT ("Agreement") is made and entered into as of the
21st day of March, 1997, by and between HIREL MARKETING, INC., a Florida
corporation ("HMI") and GROUP 32 CORPORATION, a Florida corporation ("Group
32"), with the joinder of XXXXXX X. XXXXXX and XXXXXXX XXXXXXXX, shareholders in
Group 32 ("Group 32 Shareholders").
W I T N E S S E T H:
WHEREAS, Hirel Holdings, Inc., the parent corporation of HMI ("HHI"), has
previously loaned to Group 32 the sum of Two Hundred Thousand Dollars ($200,000)
("Loan"); and
WHEREAS, in consideration for HHI making the Loan, Group 32 has agreed
that HMI shall have the option, on the terms and conditions set forth herein, to
cause the conveyance of substantially all of the assets of Group 32 to HMI or a
direct or indirect subsidiary of HHI provided that such subsidiary is the
successor to all of the business operations of the computer distribution
division of HMI currently known as "Mac-In-Stock."
NOW, THEREFORE, in consideration of Ten Dollars ($10.00) and other good
and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto, intending to be legally bound, hereby agree as
follows:
1. Recitals; Defined Terms. The foregoing recitals are true and
correct and are hereby incorporated by this reference. Except as otherwise
defined herein, all defined terms shall have the meaning set forth in the
Agreement and Plan of Reorganization ("Plan").
2. Option. As additional consideration for HHI making the Loan, Group 32
hereby grants HMI the option ("Option") to require the reorganization of Group
32 with and into HMI or a direct or indirect subsidiary of HHI
("Reorganization") on substantially the terms and conditions of the Agreement
and Plan of Reorganization attached hereto and made a part hereof as Exhibit A.
The Option shall be exercised by HMI at any time prior to June 1, 1998, by HMI
delivering written notice of such exercise to Group 32 and the Shareholders;
provided that Group 32 and the Shareholders shall not be obligated to consummate
the Reorganization in the event there has been a material adverse change in the
financial condition of the Mac-In-Stock division of HMI as of such date when
compared to the date of this Agreement. Any loans from Hirel Holdings, Inc. to
Group 32 shall be assumed by HMI in connection with the Reorganization. Upon the
consummation of the Reorganization, Xxxxxx Xxxxxx shall enter into an employment
agreement with HMI to become the chief executive officer of HMI at a
compensation rate of $150,000 per annum plus a bonus equal to five percent (5%)
of HMI's audited pre-tax net income for the applicable year.
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3. Adjustment of HMI Shares to Group 32 Shareholders.
(a) The Agreement and Plan of Reorganization contemplates the
issuance to Group 32 of 1,000,000 shares of common stock of HMI in connection
with the Reorganization. The parties agree that the number of shares of HMI
stock to be issued to pursuant to the Reorganization were calculated based upon
the premise that the total number of issued and outstanding shares of HMI Common
Stock immediately prior to the Reorganization would be not greater than 933,000,
and the number of shares of HMI Voting Preferred Stock would be not greater than
the sum of 2,000,000 shares of "Class A Preferred Stock" (as hereinafter
defined), plus an additional number of shares of Class A Preferred Stock equal
to the total amount invested by HHI in HMI from and after this date. For
purposes of calculating the number of shares of Class A Preferred Stock to be
issued to HHI for amounts invested after the date hereof, additional shares
shall be issued at the rate of one share for each dollar invested unless the
source of such funds were from the proceeds of a private placement by HHI of its
common stock at a price discounted from its then current "Fair Market Value" (as
hereinafter defined). In the event the source of such funds was from such a
private placement, then the number of shares of Class A Preferred Stock to be
issued to HHI shall be based upon the product of the number of shares of HHI
common stock sold to fund the investment in HMI, multiplied by the then current
Fair Market Value of the common stock of HHI (notwithstanding that the actual
price at which the HHI common stock was sold may be less than the then Fair
Market Value of such shares as quoted on the NASDAQ Small Cap Market). In the
event that the number of shares of HMI Common Stock issued and outstanding
immediately prior to the Reorganization shall be greater or lesser than 933,000,
the number of shares of HMI stock to be issued to Group 32 shall be adjusted
upward or downward on a pro rata basis.
For purposes of this Agreement, "Fair Market Value" means as to any
security the average of the closing prices of such security's sales on all
domestic securities exchanges on which such security may at the time be listed,
or, if there have been no sales on any such exchange on any day, the average of
the highest bid and lowest asked prices on all such exchanges at the end of such
day, or, if on any day such security is not so listed, the average of the
representative bid and asked prices quoted in the NASDAQ System as of 4:00 P.M.,
New York time, on such day, or, if on any day such security is not quoted in the
NASDAQ System, the average of the highest bid and lowest asked prices on such
day in the domestic over-the-counter market as reported by the National
Quotation Bureau, Incorporated, or any similar successor organization, in each
such case averaged over a period of 21 days consisting of the day as of which
"Fair Market Value" is being determined and the 20 consecutive business days
prior to such day; provided that if such security is listed on any domestic
securities exchange the term "business days" as used in this sentence means
business days on which such exchange is open for trading.
(b) The "Class A Preferred Stock" shall mean voting stock having a
redemption value of one dollar per share bearing a cumulative dividend of 10%
per annum that may be redeemed at any time (in whole but not in part) for its
redemption value plus any accrued and unpaid dividends with respect thereto,
that is convertible into shares of HMI Common Stock, at the option of the
holders thereof, at the conversion rate specified below if (i) the Class A
Preferred Stock is not
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redeemed prior to December 31, 1998, and (ii) the pre-tax net earnings of the
computer software division of HMI that was previously conducted as the business
of Group 32 ("Group 32 Division") for the fiscal year ended December 31, 1998 is
not at least $1,000,000 (after the payment of any amounts owed to Xxxxxx Xxxxxx
under his employment agreement with HMI). As a condition precedent for HMI to
redeem the Class A Preferred Stock, (i) Xxxxxxx Xxxxxxxxxx must be released from
any guarantees of the obligations of HMI and (ii) any loans made by HHI to Group
32 prior to the date of exercise of the Option must have been repaid in full.
The Class A Preferred Stock shall be convertible into shares of HMI Common Stock
based upon the following conversion rate formula: (i) if the pre-tax net
earnings of the Group 32 Division for the fiscal year ended December 31, 1998
are less than $500,000, each share of Class A Preferred Stock shall be
convertible into four shares of HMI Common Stock and (ii) if the pre-tax net
earnings of the Group 32 Division for the fiscal year ended December 31, 1998
are greater than $500,000, for each increment of $100,000 in excess of $500,000
of pre-tax net earnings of the Group 32 Division in such period, the conversion
rate shall decrease by 20% on a dollar for dollar proportionate basis based upon
a conversion rate of two shares of HMI Common Stock for each share of Class A
Preferred Stock if such pre-tax net earnings are exactly $500,000. For example,
if the pre-tax net earnings are $600,000, each share of Class A Preferred Stock
shall be convertible into 1.6 shares of HMI Common Stock if the pre-tax net
earnings are $750,000, each share of Class A Preferred Stock shall be
convertible into 1 share of HMI Common Stock, and if the pre-tax net earnings
are $900,000, each share of Class A Preferred Stock shall be convertible into .4
shares of HMI Common Stock. If the pre-tax earnings are between the foregoing
intervals, the conversion ratio shall be interpolated based upon the foregoing.
In the event that the Class A Preferred Stock is not redeemed by HMI on or
before July 1, 1999, the holders of the Class A Preferred Stock shall have the
right ("Put Right") to require HMI to purchase such shares by providing HMI with
written notice of their exercise of such Put Right at a cash price per share
equal to the redemption value of such shares plus any accrued and unpaid
dividends. HMI shall be obligated to repurchase the shares of Class A Preferred
Stock for which the Put Right is exercised within one hundred twenty (120) days
of the exercise of the Put Right.
4. Approval of Agreement and Plan.
(a) Group 32 hereby makes the following representations and
warranties to HMI, each of which Group 32 represents to be true and correct on
the date hereof and (except as Group 32 may notify the President of HMI in
writing prior to the Closing) shall be deemed made again as of the Closing Date
and represented by Group 32 to be true and correct on the Closing Date:
(i) The execution and delivery of this Agreement and the Plan
by Group 32 and the performance of all Group 32's obligations hereunder and
under the Plan have been duly authorized and approved by all requisite corporate
action on the part of Group 32 pursuant to applicable Law. Group 32 has the
power and authority to execute and deliver this Agreement and to perform all its
obligations hereunder and under the Plan. This Agreement and each of the other
documents, instruments and agreements executed by Group 32 in connection
herewith constitute the valid and legally binding agreements of Group 32,
enforceable against Group 32 in accordance with its terms, except that: (i)
enforceability may be limited by applicable bankruptcy, insolvency,
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reorganization, moratorium or similar laws of general application affecting the
enforcement of the rights and remedies of creditors; and (ii) the availability
of equitable remedies may be limited by equitable principles.
(ii) Neither the execution, delivery nor performance of this
Agreement or any other documents, instruments or agreements executed by Group 32
in connection herewith, nor the consummation of the transactions contemplated
hereby: (i) constitutes a violation of or default under (either immediately,
upon notice or upon lapse of time) the Articles of Incorporation or Bylaws of
Group 32, any provision of any Contract to which Group 32 or its Assets may be
bound, any Judgment or any Law; or (ii) will or could result in the creation or
imposition of any Encumbrance upon, or give to any third person any interest in
or right to, the capital stock of Group 32 or any of the Assets of Group 32; or
(iii) will or could result in the loss or adverse modification of, or the
imposition of any fine or penalty with respect to, any license, permit or
franchise granted or issued to, or otherwise held by or for the use of, Group
32.
(iii) The execution, delivery and performance by Group 32 of
this Agreement and the consummation by Group 32 of the transactions contemplated
hereby, including the adoption of the Plan, do not require any Consent that has
not been received prior to the date hereof.
(b) HMI hereby makes the following representations and warranties to
Group 32, each of which HMI represents to be true and correct on the date hereof
and (except as HMI may notify Group 32 in writing prior to the Closing) shall be
deemed made again as of the Closing Date and represented by HMI to be true and
correct on the Closing Date:
(i) The execution and delivery of this Agreement and the Plan
by HMI and the performance of all HMI's obligations hereunder and under the Plan
have been duly authorized and approved by all requisite corporate action on the
part of HMI pursuant to applicable Law. HMI has the power and authority to
execute and deliver this Agreement and to perform all its obligations hereunder.
This Agreement and each of the other documents, instruments and agreements
executed by HMI in connection herewith constitute the valid and legally binding
agreements of HMI, enforceable against HMI in accordance with their terms,
except that: (i) enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws of general application
affecting the enforcement of the rights and remedies of creditors; and (ii) the
availability of equitable remedies may be limited by equitable principles.
(ii) Neither the execution, delivery nor performance of this
Agreement or any other documents, instruments or agreements executed by HMI
executed in connection herewith, nor the consummation of the transactions
contemplated hereby: (i) constitutes a violation of or default under (either
immediately, upon notice or upon lapse of time) the Articles of Incorporation or
Bylaws of HMI, any provision of any Contract to which HMI or its Assets may be
bound, any Judgment to which HMI is bound or any Law applicable to HMI; or (ii)
result in the creation or imposition of any Encumbrance upon, or give to any
third person any interest in or right to, any other
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capital stock of HMI or any of the Assets of HMI; or (iii) result in the loss or
adverse modification of, or the imposition of any fine or penalty with respect
to, any license, permit or franchise granted or issued to, or otherwise held by
or for the use of, HMI.
(iii) The execution, delivery and performance by HMI of this
Agreement and the consummation by HMI of the transactions contemplated hereby do
not require any Consent that has not been received prior to the date hereof.
5. Termination and Remedies.
(a) If, prior to the Closing Date, a party hereto shall materially
breach or default in the full and timely performance and satisfaction of any of
its representations and warranties or obligations under this Agreement, and such
breach or default is not cured on or before the fifth (5th) day after the date
notice is given by the nondefaulting party to the defaulting party specifying
the nature of such breach or default (or on or before the Closing Date if
sooner), then the nondefaulting party may terminate this Agreement immediately
upon notice to the defaulting party.
(b) Group 32's Obligations under this Agreement are unique, and each
party hereby expressly acknowledges that, in the event of a breach or default in
the full and timely performance and satisfaction of any such obligation, it
would be extremely difficult to measure the resulting damages. Accordingly, in
the event of any breach or default by Group 32, then HMI shall be entitled, in
addition to all other rights and remedies which it may have at law or in equity,
to xxx for and receive the remedy of specific performance, and Group 32 waives
the defense that a remedy in damages is adequate.
6. Indemnification.
(a) In addition to, and not in lieu of, any right or remedy
available to HMI at law or in equity (which, in the case of Group 32's material
breach of this Agreement shall be deemed to include rescission), Group 32 hereby
indemnifies and holds harmless HMI and its officers and directors from and
against any and all Proceedings, Judgments, Obligations, losses, damages,
deficiencies, settlements, assessments, charges, costs and expenses (including
without limitation reasonable attorneys' fees, paralegals' fees, investigation
expenses, court costs, interest and penalties) arising out of or in connection
with, or caused by, directly or indirectly, any or all of the following
("Indemnified Matter"):
(i) Any misrepresentation, breach or failure of any warranty
or representation made by Group 32 in this Agreement or pursuant hereto;
(ii) Any failure or refusal by Group 32 to satisfy or perform
any covenant or agreement; and
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(iii) Any failure by Group 32 to duly and timely file with the
appropriate governmental agencies all Tax and other returns and reports required
by any Law to be filed by it, and Group 32's failure to prepare and properly
complete all such returns and reports.
(b) With respect to each separate matter or series of matters
against which a party ("Indemnitee") is indemnified under this Section 6:
(i) Upon Indemnitee's receipt of written documents pertaining
to the Proceeding or otherwise underlying such matter or series of matters, or,
if such matter or series of matters does not involve a third party claim, after
Indemnitee first learns of such matter or series of matters and the amount
demanded or claimed in connection therewith, Indemnitee shall give written
notice to Group 32 of and copies of such documents and information as it shall
have so received.
(ii) After a final agreement is reached or a final Judgment is
rendered with respect to such matter or series of matters or the amount owing by
Group 32 pursuant to this Article XI as a result of such matter or series of
matters, is otherwise determinable in whole or in part, Indemnitee shall give
notice to Group 32 of the amount owing by Group 32 ("Indemnification Amount")
with respect to such matter or series of matters ("Indemnification Payment
Notice").
(iii) Group 32 shall pay the Indemnification Amount to
Indemnitee (or to such Person as Indemnitee instructs) within ten (10) days
after the Indemnification Payment Notice was given.
7. Additional Loans. Any funds advanced by HMI to Group 32 between the
date of this Agreement and the date on which there is a closing under the Plan
of Reorganization shall be made on the same terms and conditions as the Loans,
including being secured under the terms of that certain Security Agreement dated
February 19, 1997, between Group 32 Corporation and HG32 Incorporated (whose
interest in such Security Agreement has been transferred to HMI).
8. Miscellaneous.
(a) Notices. All notices, requests, demands and other communications
hereunder shall be deemed to have been duly given if the same shall be in
writing and shall be delivered personally or sent by registered or certified
mail, postage prepaid, and addressed as set forth below:
If to Group 32: Group 32 Corporation
0000 Xxxxxxx Xxxx, Xxx Xxxxx
Xxxxxxxxxx, Xxxxxxx 00000
With a copy to:
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If to HMI: Hirel Marketing, Inc.
000 X.X. 00xx Xxxxxxx
Xxxxxxx Xxxxx, Xxxxxxx 00000
Attn: Xxxxxxx Xxxxxx, President
With a copy to: Xxxxx, McClosky, Smith, Xxxxxxxx & Xxxxxxx, P.A.
000 Xxxx Xxxxxxx Xxxxxxxxx
00xx Xxxxx
Xx. Xxxxxxxxxx, Xxxxxxx 00000
Attn: Xxxxxx X. Xxxx, Esq.
(b) Entire Agreement. This Agreement, including the Exhibits and
Schedules attached hereto and the documents delivered pursuant hereto, sets
forth all the promises, covenants, agreements, conditions and understandings
between the parties hereto with respect to the subject matter hereof, and
supersedes all prior and contemporaneous agreements, understandings, inducements
or conditions, expressed or implied, oral or written, except as herein
contained. No changes of or modifications or additions to this Agreement shall
be valid unless the same shall be in writing and signed by the parties hereto.
(c) Binding Effect; Assignment. This Agreement shall be binding upon
the parties hereto, their beneficiaries, heirs and administrators. No party may
assign or transfer its interests herein, or delegate its duties hereunder,
without the written consent of the other parties.
(d) Amendment. The parties hereby irrevocably agree that no
attempted amendment, modification, or change (collectively, "Amendment") of this
Agreement shall be valid and effective, unless the parties shall unanimously
agree in writing to such Amendment.
(e) No Waiver. No waiver of any provision of this Agreement shall be
effective, unless it is in writing and signed by the party against whom it is
asserted, and any such written waiver shall only be applicable to the specific
instance to which it relates and shall not be deemed to be a continuing or
future waiver.
(f) Gender and Use of Singular and Plural. All pronouns shall be
deemed to refer to the masculine, feminine, neuter, singular or plural, as the
identity of the party or parties or their personal representatives, successors
and assigns may require.
(g) Counterparts. This Agreement and any amendments may be executed
in one or more counterparts, each of which shall be deemed an original and all
of which together will constitute one and the same instrument.
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(h) Headings. The article and section headings contained in this
Agreement are inserted for convenience only and shall not affect in any way the
meaning or interpretation of the Agreement.
(i) Governing Law. This Agreement shall be construed in accordance
with the laws of the State of Florida and any proceeding arising between the
parties in any manner pertaining or related to this Agreement shall, to the
extent permitted by law, be held in Broward County, Florida.
(j) Further Assurances. The parties hereto will execute and deliver
such further instruments and do such further acts and things as may be
reasonably required to carry out the intent and purposes of this Agreement.
(k) Arbitration.
(i) The parties hereto agree that the arbitration procedure
set forth below shall be the sole and exclusive method for resolving and
remedying claims hereunder (the "Disputes"). Nothing in this Section 8(k) shall
prohibit a party hereto from instituting litigation to enforce any Final
Determination (as defined below). The parties hereby agree and acknowledge that,
except as otherwise provided in this Section 8(k), the arbitration procedures
and any Final Determination hereunder shall be governed by, and shall be
enforced pursuant to the Florida Arbitration Code.
(ii) In the event that any party asserts that there exists a
Dispute, such party shall deliver a written notice to each other party involved
therein specifying the nature of the asserted Dispute and requesting a meeting
to attempt to resolve the same. If no such resolution is reached within ten
business days after delivery of such notice, the party delivering such notice
(the "Disputing Person") may, within 45 business days after delivery of such
notice, commence arbitration hereunder by commencing arbitration proceedings
under the Commercial Arbitration Rules of the American Arbitration Association
and delivering to each other party involved therein a notice of arbitration (a
"Notice of Arbitration"). Such Notice of Arbitration shall specify the matters
as to which arbitration is sought, the nature of any Dispute, the claims of each
party to the arbitration and shall specify the amount and nature of damages, if
any, sought to be recovered as a result of any alleged claim, and any other
matters required by the Commercial Arbitration Rules of the American Arbitration
Association as in effect from time to time to be included therein.
(iii) The arbitrator(s) will be selected in accordance with
the Commercial Arbitration Rules of the American Arbitration Association. Each
party shall submit a proposed arbitration award (including proposed findings of
fact) within fifteen (15) days of the conclusion of the arbitration hearing. The
arbitrator shall select one of the proposed arbitration awards (including
proposed findings of fact) in its entirety and both parties shall be bound by
its terms. The cost of the arbitration will be divided equally between each
party.
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(iv) The arbitration shall be conducted under the Commercial
Arbitration Rules of the American Arbitration Association as in effect from time
to time, except as modified by the agreement of all of the parties to this
Agreement. The arbitrator(s) shall use their best efforts to conduct the
arbitration so that a final result, determination, finding, judgment and/or
award (the "Final Determination") is made or rendered no later than ninety (90)
business days after the delivery of the Notice of Arbitration nor later than
twenty (20) days following conclusion of the arbitration hearing. The Final
Determination must be signed by the arbitrator. The Final Determination shall be
final and binding on all parties and there shall be no appeal from or
reexamination of the Final Determination, except for fraud, perjury, evident
partiality or misconduct by an arbitrator prejudicing the rights of any party
and to correct manifest clerical errors.
(v) The parties to such arbitration may enforce any Final
Determination in any state or federal court having jurisdiction over the
dispute.
(l) Litigation. If any party hereto is required to engage in
litigation or arbitration against any other party hereto, either as plaintiff or
as defendant, in order to enforce or defend any of its or his rights under this
Agreement, and such litigation results in a final judgment in favor of such
party ("Prevailing Party"), then the party or parties against whom said final
judgment is obtained shall reimburse the Prevailing Party for all direct,
indirect or incidental expenses incurred by the Prevailing Party in so enforcing
or defending its or his rights hereunder, including, but not limited to, all
attorneys' fees, paralegals' fees and all sales tax thereon, and all court costs
and other expenses incurred throughout all negotiations, trials or appeals
undertaken in order to enforce the Prevailing Party's rights hereunder.
(m) Remedies. Each of the parties acknowledges and agrees that in
the event that a party hereto shall violate any of the restrictions or fail to
perform any of the obligations hereunder, the other parties will be without
adequate remedy at law and will therefore be entitled to enforce such
restrictions or obligations by temporary or permanent injunctive or mandatory
relief obtained in an action or proceeding instituted in any court of competent
jurisdiction without the necessity of proving damages and without prejudice to
any other remedies it may have at law or in equity.
(n) Confidentiality. Except for discussions of the transactions
contemplated by this Agreement among the parties hereto and their respective
representatives and counsel participating in this transaction, each party hereto
shall, unless all other parties hereto shall otherwise agree, keep confidential
and not, directly or indirectly, disclose to any person the existence of this
Agreement, the transaction contemplated by this Agreement or any of the terms
thereof, or the fact that HMI and Group 32 have entered into discussions or
negotiations for any purpose whatsoever, and each party hereto shall use its
good faith efforts to cause its employees, agents, officers, directors and
representatives to abide by the foregoing restrictions on disclosure.
THIS SPACE INTENTIONALLY BLANK
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date and year set forth above.
GROUP 32 CORPORATION
____________________________ By:________________________________
----------------------------
HIREL MARKETING, INC.
____________________________ By:________________________________
----------------------------
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JOINDER
The undersigned, as shareholders of Group 32, hereby join in the foregoing
Agreement for the purpose of representing and warrantying to HMI the following:
(a) Each of the Shareholders has reviewed the Plan, and by the
execution of this Joinder to the Agreement each of the Shareholders hereby
approves the Plan, and waives any of the procedural requirements set forth in
Section 607.1202, Florida Statutes;
(b) The Shareholders agree to execute and deliver such further
instruments and do such further acts and things as may be reasonably required to
carry out the intent and purposes of this Agreement in their capacity as
directors, officers and shareholders of Group 32, including, but not limited to,
executing any consents in lieu of a directors' and/or shareholders' meeting. The
Shareholders each hereby appoint HMI, with full power of substitution, each of
their true and lawful proxy, in the name, place and stead of each such
Shareholder, with the power from time to time to execute, acknowledge, make,
swear to, verify, deliver, record, publish and/or file any shareholder consents
required of the Shareholders pursuant to applicable law to carry out the intent
of this Agreement or the Plan, including, but not limited to, Section 607.1202,
Florida Statutes. The foregoing grant of authority is an Irrevocable Proxy
coupled with an interest in favor of HMI and shall be irrevocable unless and
until this Agreement or the Plan is terminated.
(c) Xxxxxx agrees that upon the consummation of the Reorganization
he will enter into an employment agreement with HMI on the compensation terms
described in Section 2 of this Agreement and in accordance with the form of
Employment Agreement attached as an exhibit to the Plan of Reorganization.
XXXXXX X. XXXXXX
XXXXXXX XXXXXXXX
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