EXHIBIT 10.3
EMPLOYMENT AGREEMENT OF ▇▇▇▇ ▇▇▇▇▇
EMPLOYMENT AGREEMENT
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Employment Agreement dated as of May 21, 1997, by and between ▇▇▇▇▇ ▇▇▇▇,
Inc., a Delaware corporation with offices at ▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇
▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ (the "Company") and ▇▇▇▇ ▇▇▇▇▇, residing at ▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ (the "Executive").
WHEREAS, the Executive has been employed by the Company since January 1996;
and
WHEREAS, the Company and the Executive desire to set forth the terms of
Executive's continued employment with the Company, pursuant to the terms and
conditions hereof.
NOW, THEREFORE, the parties hereby agree as follows, for good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged:
1. Employment and Duties.
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(a) The Company hereby employs the Executive, and the Executive hereby
accepts employment by the Company, as Director of Imports of the Company, and
shall report directly to the President of the Company. As such, Executive shall
perform duties and functions and assume and discharge those responsibilities
which are otherwise usually performed by persons holding his title with the
Company and shall perform such other duties as may be assigned to him in good
faith from time to time by the President.
(b) The Executive shall devote his full time to the business and
affairs of the Company, shall use his best efforts to promote the interests of
the Company and its affiliates, and shall discharge his responsibilities in a
diligent and faithful manner, consistent with sound business practices. The
Executive shall not engage in any other employment or business activity, except
the supervision of his private investments.
(c) The Company agrees that during the term hereof the Executive's
duties shall be such as to allow him to live and work in the New York City
metropolitan area, and, except for short-term travel obligations in the ordinary
course of business, the Company shall not assign Executive to a principal place
of work outside the New York City metropolitan area.
2. Compensation.
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(a) Commission. As payment for (i) services to be rendered by the
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Executive during the term hereof and (ii) sales efforts substantially undertaken
prior to Executive's termination and consummated on or before the date which is
six months after such termination, regardless of the reason for such
termination, the Company shall pay the Executive, and the Executive shall
accept, a commission ("Commission") on Gross Profit (as hereinafter defined)
realized by Executive, as follows:
1% commission on 20.0%-22.4% Gross Profit
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2% commission on more than 22.4% up to 24.9% Gross Profit
3% commission on more than 24.9% up to 27.4% Gross Profit
4% commission on more than 27.4% up to 29.9% Gross Profit
5% commission on more than 29.9% up to 32.4% Gross Profit
6% commission on more than 32.4% up to 34.9% Gross Profit
7% commission on more than 34.9% up to 37.4% Gross Profit; and an
additional 1% commission on every incremental portion of 2.4% of Gross
Profit
Commission shall be paid by the Company to the Executive within 25
days of the end of each month in which goods that generate Gross Profit are
shipped to customers of the Company.
(b) Definitions.
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(i) "Gross Profit" with respect to a particular piece of goods sold by
Executive, means (x) the difference between the Sales Price of such piece and
the Cost Per Piece, divided by (y) the Sales Price of such piece.
(ii) "Sales Price" with respect to a particular piece of goods sold by
Executive or, as applicable, the Group (as defined below) means the price at
which the Company sells such piece to a customer less any allowances, discounts,
returns or markdowns taken by such customer with respect to such piece.
(iii) "Cost Per Piece" means the cost of such piece of goods sold by
Executive or, as applicable, the Group (as defined below), F.O.B. including
duty, freight, agent's commission and 5% "workloss" (as reflected in Executive's
cost sheet) with respect to such piece.
(c) Override. In addition to the Commission, Executive shall receive
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from the Company a one percent (1%) override (the "Override") on (i) the
aggregate Sales Prices of the entire Import Sales Group of the Company (the
"Group") realized by the efforts of any person or employee (other than the
Executive) acting for or on behalf of the Company, and (ii) sales generated on
any fabric purchased by the Group (or any employee thereof, including Executive)
outside of the United States but cut/sewn within the United States (as reflected
in "import-fabric" orders). Such Override shall be paid with respect to sales
completed during the term hereof or within six months thereafter, regardless of
the reason for termination, if in such case substantial efforts to achieve such
sales were commenced during his employment.
(d) Draw. The Executive shall be entitled to draw from the Company
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$150,000.00 per year against his Commission to be paid in equal weekly
installments (or such other basis as the Company shall pay its other senior
executives) of $2,884.62 (less required tax and other withholding). Upon any
renewal of this Agreement, in no event shall Executive's draw be less than
eighty percent (80%) of his aggregate compensation (excluding any expense
allowance) in the previous year of the term hereof, provided, that in the event
that Executive's draw is to be adjusted downward, in no event shall such
adjustment be to an amount less than 100% of his aggregate Commission and
Override earned during the previous year of the term hereof. Notwithstanding
anything to the contrary contained in this Agreement, if and to the extent that,
for the period from January 25, 1996 through and including
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January 31, 1997 the Executive's draw exceeds the sum of his entitlements to
Commission and Override then (i) the Company shall forgive such excess and shall
not require Executive to pay or reimburse, and the Company hereby releases
Executive from the payment or reimbursement of, such excess to the Company, and
(ii) for purposes of computing Executive's entitlement to sums due under this
Agreement or otherwise for periods commencing after January 31, 1997, the
Company shall not employ such excess as an offset to any of Executive's
entitlements hereunder. If and to the extent that, commencing February 1, 1997,
the Executive's draw exceeds the sum of his entitlements to Commission and
Override, then such excess shall be returned to the Company by Executive, but
only in the event that Executive terminates his employment with the Company or
Executive is terminated by the Company for Cause (as hereinafter defined) at any
time after January 31, 1998 and, in either event, only to the extent of such
excess since the commencement of the most recent term (whether Initial or
Renewal) of this Employment Agreement. The repayment of such excess shall be
made in a lump sum payable six months after such termination hereof and may be
used by the Company to offset amounts owed by the Company to Executive with
regard to Commission or Override during the period after termination hereof. As
used herein, "Cause" shall mean (i) a nonappealable judicial determination of
Executive's malfeasance or dishonesty with respect to actions related to the
Company, (ii) conviction or plea of guilty or no contest by Executive of (A) any
felony or (B) any crime against the Company or (iii) failure to act upon the
express lawful direction of the President, the Co-Chief Executive Officer of
the Company or the Board of Directors, after 15 days' written notice and
opportunity to cure such failure, so long as such direction (x) is to take
action within Executive's duties and (y) is neither unethical or immoral, in the
reasonable determination of Executive. The Company, in its sole discretion
acting through the Board of Directors, may increase any aspect of Executive's
compensation, provided, that no such increase shall be interpreted as creating
any right to such increase hereunder or any other increases thereafter.
(e) Fringe Benefits. The Company shall provide the Executive with
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perquisites consistent with those provided to other senior executives of the
Company, to the extent so provided, including, without limitation, health
insurance for him and his dependents, disability, life and accident insurance
(such health insurance, disability, life and accident insurance, collectively,
"Insurance"), pension, profit sharing, stock option, stock bonus or other
employee benefit plans. The Company also shall (i) provide Executive with a
monthly expense allowance of $2,000 (the "Expense Allowance") and (ii) in
addition to such amount, reimburse Executive for actual business expenses, to
the extent incurred on behalf of the Company, upon presentation of receipts or
vouchers therefor. Executive also shall be entitled to and shall receive during
the term hereof such vacation, holiday and similar rights and privileges as are
enjoyed generally by senior executives of the Company as of the date hereof;
provided however that Executive shall be entitled to no less than twenty (20)
business days annual vacation. Executive agrees that unused vacation time may
not be carried over or credited to subsequent years.
(f) Participation in Bonus Pool. The Board of Directors shall include
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Executive in the distribution of an aggregate, to all executives of the Company
who may participate, of twelve and one-half percent (12-1/2%) of the excess
above $1,000,000 of the net income before taxes of the Company for each fiscal
year of the Company during the term hereof (the "Bonus Pool"), payable once
annually at such time as the Board of Directors shall determine, provided, that
in no event shall the amount in the Bonus Pool be less than $100,000 if the net
income before taxes of the Company for such fiscal
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year has equaled or exceeded $ 1,000,000. That portion of the Bonus Pool which
shall be payable to Executive shall be in the sole discretion of the Board of
Directors, provided, that Executive shall not receive less than one-half of the
amount payable to the Company's President. Notwithstanding the foregoing,
Executive shall receive a minimum annual bonus equal to $7,500 in the Initial
Term and an amount equal to one-half of the bonus paid to the President in any
Renewal Term (the "Minimum Bonus").
(g) Options. The parties acknowledge that the Company awarded to
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Executive, on August 16, 1996, 50,000 incentive stock options (the "August
Options") under the 1996 Incentive Stock Option Plan of ▇▇▇▇▇ ▇▇▇▇, Inc. (the
"Option Plan"). The exercise price of the Options originally was $2.00, but the
Securities and Exchange Commission required an increase in the exercise price of
the August Options to $3.00 in connection with the Company's contemplated
initial public offering. Executive agrees to execute and deliver an amendment to
the Incentive Stock Option Agreement respecting the August Options which
increases the exercise price to $3.00. As a result of the change in the option
price with respect to the August Options, the parties agreed that the August
Options would be deemed to be vested 16,667 on August 16, 1996 and 33,334 on
April 1, 1997, and such amendment to the Incentive Stock Option Agreement
respecting the August Options will reflect such change. The Company acknowledges
that the August Options are fully vested on the date hereof. The parties further
acknowledge that the Company awarded to Executive, on February 1, 1997, 50,000
incentive stock options (the "February Options") under the Option Plan at an
exercise price of $5.00 per share. The February Options became effective on
March 19, 1997 and vest one-third on March 19, 1998, one-third on March 19, 1999
and one-third on March 19, 2000. Executive acknowledges that he has not
exercised any of the August Options. The Company also agrees that it will use
its best efforts to cause the Board of Directors to grant to Executive, on April
1, 1998, an additional 70,000 stock options (the "1998 Options") at 100% of the
then market value and otherwise in accordance with the Option Plan and vesting
over a three year period in accordance with the Option Plan. The Company will
also use its best efforts, subject to applicable tax and other legal
requirements, to cause the vesting of the 1998 Options to be accelerated and be
exercisable in full for the 90-day period following any termination of Executive
without Cause. The Company also agrees that, in the event that any of the 1998
Options are not granted for any reason other than the termination of Executive's
employment hereunder prior to April 1, 1998, the Company will, to the extent
permitted by applicable law, issue to Executive nonqualified stock options to
purchase such non-granted shares of Common Stock at 100% of the then market
value of the Common Stock, which options shall be granted outside the Option
Plan. The parties agree that any Stock Option Agreements concerning any stock
options granted to the Executive under the Option Plan or otherwise shall
include a provision permitting Executive to exercise options with payment in the
form of shares of common stock of the Company, or so-called "cashless exercise."
If applicable law prohibits or restricts any of the foregoing, the parties agree
to negotiate in good faith a reasonably comparable form of compensation to
Executive.
(h) Certain Covenants. The Company agrees that, during the term
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hereof, it will (i) retain Executive in at least the position of Director of its
Import Sales Group and (ii) not reduce Executive's compensation below the levels
specified herein. The Company agrees not to reduce or remove any perquisites,
emoluments of office or title or benefits enjoyed by the Executive on the date
hereof, except to the extent such are enjoyed by the President and are reduced
or removed to the same extent with respect to the President.
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3. Term of Employment. The term of employment of the Executive
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hereunder, which commenced in January 1996, shall continue for the one year
period commencing on the date hereof (the "Initial Term"), provided that this
Agreement shall be deemed renewed on a year to year basis (each a "Renewal
Term") on the same terms as shall have been effective at the end of the
immediately preceding term, whether the Initial Term or a Renewal Term, in the
event that neither party gives the other written notice of its intent to
terminate this Agreement at least 60 days prior to the expiration of the Initial
Term or Renewal Term, as the case may be. Notwithstanding the foregoing, either
party may terminate this Agreement for any reason upon 90 days written notice to
the other, provided, that the Company may terminate this Agreement without
notice for Cause.
4. Non-Competition; Confidentiality: Inventions.
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(a) The Executive shall not, at any time during the period of his
employment by the Company or (i) within six months after termination of his
employment, if termination is a result of termination for Cause or termination
by the Executive, or (ii) within 90 days after termination of employment, if
termination is a result of the expiration of the Initial Term or any Renewal
Term, or termination not for Cause by the Company (such period, as applicable,
the "Restriction Period"), in either case directly or indirectly, solicit or
permit any business of which he is an owner, partner, shareholder or executive
to solicit any employee of the Company or any of its affiliates to leave its
employ or join the employ of another, then or at a later time, except that this
covenant shall not apply to efforts and activities of the Executive concerning
▇▇▇▇▇ ▇▇▇▇▇▇▇▇, if she shall be an employee of the Company at such time.
(b) The Executive shall not, at any time during the period of his
employment by the Company or during the Restriction Period, in either case
directly or indirectly, engage in or be interested (as owner, member, partner,
shareholder, employee, director, officer, manager, agent, consultant or
otherwise) in any firm, business or company which engages in any business which
competes, directly or indirectly, with the business of the Company; provided
that the ownership of five percent or less of a publicly-traded class of
securities shall not be deemed a violation of the foregoing covenant.
(c) The Executive shall not, directly or indirectly, either during the
term of this Agreement or thereafter, disclose to any person, firm or Company or
use (except in the regular course of the Company's business) any confidential
information of any type that he shall have acquired as a result of his
employment with the Company, unless such information (i) has been first
published voluntarily and intentionally by the Company, (ii) such disclosure is
required by law, or (iii) such information (A) is or becomes generally available
to the public other than as a result of disclosure by the Executive in violation
of this Agreement or (B) was lawfully within the Executive's possession or
independently developed or documented by the Executive prior to its being
furnished to him by the Company. Promptly after termination of his employment
hereunder, the Executive will surrender to the Company any and all lists,
manuals, books and records of or relating to the business of the Company, all
copies of the former, whether in use or not, and all other property belonging to
the Company.
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(d) The Executive agrees to make prompt and complete disclosure of
every invention (whether or not patentable), process, product, apparatus, plan,
system or improvement which he conceives or makes, and any patent application
which he files, during the period of his employment by the Company or during the
Restriction Period, which pertain to the Company's present or then contemplated
field of business. The Executive further agrees that every said invention,
process, product, apparatus, plan, system, improvement and filing which relates
to the Company's present or then contemplated field of business shall be the
sole and exclusive property of the Company but without expense to himself, he
will execute any and all proper applications for patents, copyrights and
trademarks, assignments and other instruments which the Company shall deem
necessary or convenient to perfect its title in said property or to otherwise
protect its interest therein in the United States or foreign countries, and
render aid and assistance to the Company in any litigation or other proceeding
pertaining to said property.
(e) The provisions contained in this Section 4 as to the time periods,
scope of activities, persons or entities affected, and territories restricted
shall be deemed divisible so that, if any provision contained in this Section is
determined to be invalid or unenforceable, such provisions shall be deemed
modified so as to be valid and enforceable to the full extent lawfully
permitted. The parties agree that the restrictions contained in this Section 4
shall not be applicable from and after such time as the Company shall not be in
material compliance with the terms hereof, including with respect to its
obligations under Section 5 hereof.
(f) The Executive acknowledges that the provisions of this Section 4
are reasonable and necessary for the protection of the Company and that the
Company will be irrevocably damaged if such covenants are not specifically
enforced. Accordingly, the Executive agrees that the Company will be entitled to
injunctive relief for the purpose of restraining the Executive from violating
such covenants in addition to any other relief to which the Company may be
entitled under this Agreement.
5. Termination. (a) Termination upon Death, Disability, by Executive
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or by the Company. The Executive's employment shall terminate upon expiration of
the Initial Term or any Renewal Term of this Agreement as provided in Section 3
or upon the death of the Executive, and may be terminated immediately by the
Company if the Executive suffers a Disability or in case of Cause, or may be
terminated upon 90 days' advance written notice by the Company without Cause, or
may be terminated by the Executive upon 90 days' advance written notice. The
parties may agree to waive any such notice in a writing executed by both
parties, upon which this Agreement and Executive's employment shall terminate.
"Disability" shall mean such physical or mental disability or incapacity of the
Executive as, in the good faith determination of the Board of Directors, has
prevented him from performing substantially all his duties hereunder during any
period of 90 consecutive days or 120 days in any six-month period.
(b) Consequences of Termination by the Company other than for Cause or
as a Result of Death or Disability. In the event of the termination of
Executive's employment by the Company for any reason other than Cause, including
without limitation death or Disability, he shall receive (i) in one lump sum
upon the date of such termination, the balance of all minimum draw payments
which had accrued and not been paid through the date of such termination, (ii)
in advance at the beginning of each month of the Restriction Period, his minimum
monthly draw payment as in effect
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on the date of termination, so long as Executive shall be in material compliance
with his obligations hereunder, including those obligations set forth in Section
4 hereof, (iii) in one lump sum upon the date of such termination, all accrued
but unpaid portions of the Expense Allowance through such termination ("Expense
Allowance Accruals"), (iv) a payment, in partial compensation for the agreements
set forth in Section 4, equal to $2,000 per month payable in advance at the
beginning of each month of the Restriction Period, so long as Executive shall be
in material compliance with his obligations hereunder, including those
obligations set forth in Section 4 hereof, (v) upon payment to other executives
of the Company, all Bonus Pool payments approved by the Board of Directors but
not yet paid ("Approved Bonuses"), (vi) upon payment to other executives of the
Company, a portion of the Bonus Pool payment next announced and paid, pro-rated
based upon the portion of the fiscal year during which Executive was employed,
the portion of the Bonus Pool to be paid to Executive being no less (adjusted
for such proportion of the fiscal year) than the portion of the previous year's
Bonus Pool (the "Accrued Bonus"), (vii) in one lump sum upon the date of such
termination, any reimbursement of business expenses in excess of the Expense
Allowance and (viii) a one-time lump sum severance payment equal to (A) $78,000,
less (B) $2,000 multiplied by the sum of (x) total number of complete months
which have passed under the term hereof and (y) the total number of months in
the Restriction Period. Notwithstanding the foregoing, in the event of death or
Disability, all amounts payable hereunder shall be reduced to the extent of the
after-tax benefit of any life or disability insurance proceeds payable to
Executive or his representative under insurance policies with respect to which
the premiums either are paid for by the Company or reimbursed to Executive. The
parties agree that any termination by Executive as a result of the Company's
breach of any material term hereof, after notice from Executive to the Company
and reasonable opportunity for the Company to cure such breach, shall be treated
for purposes of consequences of termination thereof as if the Company had
terminated the Executive without Cause.
(c) Consequences of Termination by Executive or by the Company for
Cause. In the event of a termination of the Executive's employment by the
Company for Cause, or in the event of termination by Executive, he shall receive
(i) in one lump sum, the balance of all accrued but unpaid minimum draw and
Expense Allowance Accruals, provided, that certain funds may be required to be
returned to the Company six months after such termination in accordance with
Section 2(d), (ii) his minimum draw and Expense Allowance for an additional
three months after such termination, so long as Executive otherwise shall be in
material compliance with the terms hereof, including without limitation, Section
4 hereof, (iii) Approved Bonuses and (iv) any reimbursement of business expenses
in excess of the Expense Allowance. In addition, Executive shall be required to
return to the Company all excess payments (if any) as provided in Section 2(d)
at the time set forth therein.
6. Representations and Warranties of Executive. Executive represents
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and warrants to the Company that (a) Executive is under no contractual or other
restriction or obligation which is inconsistent with the execution, delivery and
performance under this Agreement or the other rights of the Company hereunder,
and (b) Executive is under no physical or mental disability that would hinder
his performance of duties under this Agreement.
7. Miscellaneous.
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(a) This Agreement shall be governed by and be construed in accordance
with the law of
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the State of Delaware applicable to contracts made and to be performed in that
state.
(b) Neither the Company nor the Executive may assign its or his rights
or obligations under this Agreement, or a participation in such rights and
obligations, to any person by operation or law or otherwise without the prior
written consent of the other.
(c) All notices and other communications under this Agreement shall be
in writing and shall be considered given only when delivered personally against
written receipt therefor, mailed by registered mail (return receipt requested),
or sent by expedited or overnight delivery service with return receipt, or sent
by telecopier with confirmed receipt, to the party to receive notice at the
addresses first set forth above, or such other address as either party may, upon
ten (10) days' written notice, direct.
(d) Each of the parties hereto shall hereafter, at the request of
either party hereto, execute and deliver such further documents and agreements,
and do such further acts and things as may be necessary or expedient to carry
out the provisions of this Agreement.
(e) The failure of a party to insist upon strict adherence to any term
of this Agreement on any occasion shall not be considered a waiver or deprive
that party of the right thereafter to insist upon strict adherence to that term
or any other term of this Agreement. Any waiver must be in writing.
(f) This Agreement constitutes a complete statement of all of the
arrangements between the parties as of the date hereof with respect to the
matters contemplated hereby, supersedes all prior agreements and understandings
between them, and cannot be changed or terminated orally.
(g) The headings in this Agreement are intended solely for convenience
of reference and shall not be given any effect in the construction or
interpretation of this Agreement.
(h) This Agreement shall inure to the benefit of, and be binding upon,
the heirs and personal representatives of the Executive and any successor to the
Company including, but not limited to, any successor by merger or consolidation
to the Company's business and assets, to the extent assigned in accordance with
the terms hereof.
(i) In the event of a dispute among the parties hereto arising out of
this Agreement, the parties agree to submit their dispute to the Center for
Public Resources ("CPR") for resolution by a Judicial Panel. The parties agree
to work with the CPR and the Judicial Panel selected in exploring and
implementing appropriate alternative dispute resolution procedures whereby the
parties can reach an early and effective resolution of their dispute. If a
resolution of the dispute is not reached within sixty days after the parties
submit their dispute to a Judicial Panel for resolution or if any party to the
dispute believes that the findings and opinions of the Judicial Panel are not
satisfactory, any party to the dispute may proceed with litigation and pursue
any and all appropriate legal remedies permitted by law, and the findings and
opinions of the Judicial Panel shall not be binding on any party to the dispute
or admissible in any proceeding. The parties agree that any legal action, suit
or proceeding arising out of relating to this Agreement which is not resolved
pursuant to this Paragraph 7(i) shall be instituted in any
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state or federal court in the State of New York.
(j) The parties agree that, irrespective of the execution and delivery
hereof, the terms of this Agreement shall not become effective until formal
approval thereof has been obtained by the Board of Directors of the Company.
IN WITNESS WHEREOF, the undersigned have set their hands hereto as of
the date first above written.
▇▇▇▇▇ ▇▇▇▇, INC.
By: /s/ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
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▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, President
/s/ ▇▇▇▇ ▇▇▇▇▇
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▇▇▇▇ ▇▇▇▇▇
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