EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT (the "Agreement") dated as of January 31,
2000, by and between MCII Holdings (USA), Inc., a Delaware corporation (the
"Company"), and C. Xxxxxxx Xxxxxxx (the "Executive").
WHEREAS, the Company is engaged in the business of (i)
designing, manufacturing, assembling and marketing of coaches of monocoque or
unitized construction configuration and (ii) the distribution of replacement
parts to the intercity coach and transit bus markets (the "Business"); and
WHEREAS, the Executive has experience in the Business; and
WHEREAS, the Company desires that the Executive serve as Chief
Executive Officer of the Company and the Executive desires to hold such position
under the terms and conditions of this Agreement; and
WHEREAS, the parties desire to enter into this Agreement
setting forth the terms and conditions of the employment relationship of the
Executive with the Company.
NOW, THEREFORE, intending to be legally bound hereby, the
parties agree as follows:
1. EMPLOYMENT. The Company hereby employs the Executive,
and the Executive hereby accepts employment with the Company, upon the terms and
subject to the conditions set forth herein.
2. TERM.
(a) Subject to earlier termination pursuant to
Section 12 hereof, the term of the employment by the Company of the Executive
pursuant to this Agreement (as the same may be extended, the "Term") shall
commence effective January 31, 2000 (the "Effective Date") and terminate on the
second anniversary thereof, unless extended as hereinafter set forth.
(b) Commencing on the first anniversary of the
Effective Date and on each subsequent anniversary thereof, the Term shall
automatically be extended for one (1) additional year unless, not later than
ninety (90) days prior to any such
anniversary date, either party hereto shall have notified the other party hereto
in writing that such extension shall not take effect.
3. POSITION. During the Term, the Executive shall serve
as the Chief Executive Officer of the Company, supervising the conduct of the
business and affairs of the Company and performing such other duties as the
Board of Directors of the Company (the "Company Board") shall determine. The
Executive agrees to serve, without any additional compensation, as a director on
the Company Board and the board of directors of any subsidiary of the Company,
and/or in one or more executive officer positions with any subsidiary of the
Company.
4. DUTIES. During the Term, the Executive shall devote
his full time and attention during normal business hours to the business and
affairs of the Company.
5. SALARY AND BONUS.
(a) During the Term, the Company shall pay to
the Executive a base salary at the rate of $600,000 per year. Commencing on the
first anniversary of the Effective Date and annually thereafter, the Company
Board shall review the base salary and may increase such amount from time to
time as it may deem advisable (such salary, as the same may be increased, the
"Base Salary"). In no event shall the Base Salary be decreased during the Term.
The Base Salary shall be pay able to the Executive in substantially equal
installments in accordance with the Company's normal payroll practices.
(b) For the Company's fiscal year ending
December 31, 2000, and for each fiscal year thereafter, the Executive shall be
eligible to receive an annual cash bonus of up to one hundred percent (100%) of
the Base Salary earned in such year, which shall be awarded by the Company Board
based upon the Company's annual performance as measured against the Company's
achievement of certain performance targets (generally meeting the annual budget
and certain debt reduction targets) established by the Company Board. The annual
bonus may be awarded as part of a bonus plan or other incentive compensation
plan established by the Company Board for the Company's senior executive
officers.
6. VACATION, HOLIDAYS AND SICK LEAVE. During the Term,
the Executive shall be entitled to paid vacation, paid holidays and sick leave
in accordance with the Company's standard policies for its senior executive
officers.
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7. BUSINESS EXPENSES. During the Term, the Executive
shall be reimbursed for all reasonable and necessary business expenses incurred
by him in connection with his employment upon timely submission by the Executive
of receipts and other documentation as required by the Internal Revenue Code of
1986, as amended (the "Code"), and in accordance with the Company's normal
expense reimbursement policies.
8. COMMUTING AND RELOCATION EXPENSES. The Executive
shall be reimbursed for all normal and customary expenses incurred by the
Executive in connection with temporarily commuting to and living near the
Company's headquarters in Chicago, Illinois and subsequently in connection with
relocating his principal residence to the Company's new headquarters (location
to be determined by the Executive in consultation with the Company Board). The
Executive will be reimbursed for up to $100,000 of any loss (inclusive of any
taxes incurred and amounts reimbursed) incurred with respect to the sale of
Executive's present residence in Indiana, in connection with his relocation to
the Company's new headquarters.
9. OTHER BENEFITS. During the Term, the Executive shall
be eligible to participate fully in all health, welfare and pension programs,
plans and arrangements generally available to senior executives of the Company.
10. STOCK OPTION PLAN. The Company will provide for the
grant of options ("Options") to the Executive to purchase an aggregate of 33,694
shares of the Company's Common Stock, par value $.01 per share (the "Common
Stock") at an exercise price of $204.918 per share, which represents
approximately 2% of the Company's fully diluted shares, pursuant to the terms of
the Stock Option Agreement, attached hereto as EXHIBIT A. The Company will
revisit the number of Options granted to the Executive in connection with its
fiscal year 2001 budget and long-term forecast process, with the intention of
confirming that Options granted to the Executive are expected to reasonably
yield $20 to $25 million in value over a three-to-five year period if such
long-term forecasts are achieved, targeting EBITDA levels of at least $200
million.
11. EQUITY INVESTMENT.
(a) During the 60 day period ending on July 30,
2000, the Executive shall be entitled to purchase up to 2,928 shares of Common
Stock of the Company from the Company, on the terms set forth in this Section
11, at a price of $204.918 per share. The Executive may purchase the shares with
a combination of cash and common stock of Cummins Engine Company at current
market value. The Company will work with the Executive to accomplish the stock
swap portion of such
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transactions on a tax efficient basis to the extent practicable, and at no
additional cost to the Company.
(b) The Company agrees to loan the Executive up
to $600,000 to purchase an additional 2,928 shares of Common Stock prior to July
30, 2000, at a purchase price of $204.918 per share, subject to the terms of the
Promissory Note and Security Agreement among the Company and the Executive,
attached hereto as EXHIBIT B.
(c) The Executive acknowledges and agrees that
all shares of Common Stock acquired by him pursuant to this Agreement or
otherwise, shall be subject to the restrictions set forth in Sections 4.01,
4.02, 4.03, 4.04, 7.01 and Article V of the Stockholders Agreement dated as of
June 16, 1999, among the Company, JLL, CIBC Argosy, CMF, Xxxx and Xx. Xxxxxx
Xxxxx Xxxxxx, attached hereto as EXHIBIT C, as if the Executive was a party
thereto.
12. TERMINATION OF AGREEMENT. The Executive's employment
by the Company pursuant to this Agreement shall not be terminated prior to the
end of the Term hereof except as set forth in this Section 12.
(a) BY MUTUAL CONSENT. The Executive's employment
pursuant to this Agreement may be terminated at any time by the mutual written
agreement of the Company and the Executive.
(b) DEATH. The Executive's employment by the Company
pursuant to this Agreement shall be terminated upon the death of the Executive,
in which event the Executive's spouse or heirs shall receive, when the same
would have been paid to the Executive, (i) all Base Salary and benefits to be
paid or provided to the Executive under this Agreement through the Date of
Termination (as defined in Section 12(g) hereof) and (ii) the Base Salary and
health benefits to be paid or provided to the Executive under this Agreement for
one (1) year following the Date of Termination.
(c) DISABILITY. The Executive's employment by the
Company pursuant to this Agreement may be terminated by written notice to the
Executive by the Company or to the Company by the Executive in the event that
(i) the Executive becomes unable to perform his normal duties by reason of
physical or mental illness or accident for any six (6) consecutive month period,
or (ii) the Company receives written opinions from both a physician for the
Company and a physician for the Executive that the Executive will be so
disabled. In the event that this Agreement is terminated pursuant to this
Section 12(c), the Executive shall be entitled to receive,
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when the same would have been paid to the Executive, (i) all Base Salary and
benefits to be paid or provided to the Executive under this Agreement through
the Date of Termination and (ii) the Base Salary and health benefits to be paid
or provided to the Executive under this Agreement for one (1) year following the
Date of Termination. The amounts payable to the Executive under this Section
12(c) shall be reduced by the proceeds of any short or long-term disability
payments to which the Executive may be entitled during such period.
(d) BY THE COMPANY FOR CAUSE. The Executive's
employment pursuant to this Agreement may be terminated by written notice to the
Executive ("Notice of Termination") upon the occurrence of any of the following
events (each of which shall constitute "Cause" for termination): (i) the
Executive commits any act of gross negligence, incompetence, fraud or wilful
misconduct causing harm to the Company, (ii) the conviction of the Executive of
a felony, (iii) the Executive intentionally obtains personal gain, profit or
enrichment at the expense of the Company or from any transaction in which the
Executive has an interest which is adverse to the interest of the Company unless
the Executive shall have obtained the prior written consent of the Company
Board, (iv) the Executive acts in a manner which the Executive intends to be
materially detrimental or damaging to the Company's reputation, business
operations or relations with its employees, suppliers or customers, or (v) any
material breach by the Executive of this Agreement, including, without
limitation, a material breach of Section 16 hereof, which breach remains
uncorrected for a period of fifteen (15) days after receipt by the Executive
of written notice from the Company setting forth the breach. In the event the
Executive's employment is terminated pursuant to this Section 12(d), the
Executive shall be entitled to receive all Base Salary and benefits to be
paid or provided to the Executive under this Agreement through the Date of
Termination and no more. All Options (whether vested or not) will be
forfeited.
(e) BY THE COMPANY WITHOUT CAUSE. The Executive's
employment pursuant to this Agreement may be terminated by the Company at any
time without Cause by delivery of a Notice of Termination to the Executive. In
the event that the Executive's employment is terminated pursuant to this Section
12(e), the Executive shall be entitled to receive his Base Salary and health
benefits for a period of two years following the Date of Termination; PROVIDED,
HOWEVER, that if the Company has met its annual budget for the latest 12 months
immediately prior to such termination, Executive shall also be entitled to
receive an amount equal to two times his last annual bonus, fifty (50%) percent
of which shall be payable on the first anniversary of the Date of Termination
and the balance shall be payable on the second anniversary of the Date of
Termination.
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(f) BY THE EXECUTIVE. The Executive's employment
pursuant to this Agreement may be terminated by the Executive at any time by
delivery of a Notice of Termination to the Company. In the event that this
agreement is terminated pursuant to this Section 12(f), the Executive shall be
entitled to receive all Base Salary and benefits to be provided to the Executive
under this Agreement through the Date of Termination.
(g) DATE OF TERMINATION. The Executive's Date of
Termination shall be (i) if the Executive's employment is terminated pursuant to
Section 12(b), the date of his death, (ii) if the Executive's employment is
terminated pursuant to Section 12(c), the last day of the six-month period
referred to in Section 12(c) or the date of the second physician's opinion
received pursuant to Section 12(c)(ii), (iii) if the Executive's employment is
terminated pursuant to Section 12(d), the date on which a Notice of Termination
is given, (iv) if the Executive's employment is terminated pursuant to Section
12(e), thirty (30) days after the date the Notice of Termination is given or
(v) if the Executive's employment is terminated pursuant to Section 12 (f),
ninety (90) days after the date the Notice of Termination is given; PROVIDED,
HOWEVER, that the Company may shorten or lengthen such period in the event of a
termination pursuant to Section 12(e) or 12(f), in which event, the Executive's
Date of Termination shall be such period of time after the Notice of Termination
as the Company Board shall determine.
13. REPURCHASE PROVISION. In the event that the
Executive's employment is terminated without Cause pursuant to Section 12(e),
the Executive may, by written notice to the Company at any time within sixty
(60) days following the Date of Termination, request the Company to purchase up
to 5,856 shares of Common Stock acquired pursuant to Section 11, at a price of
$204.918 per share. Unless prohibited by applicable law or any order or credit
or other agreement in effect or if such repurchase would, in the good faith
judgment of the Company Board, be detrimental to the Company's financial
position, the Company shall be required to purchase such shares within sixty
(60) days following receipt of such notice. In the event the Company is so
prohibited from repurchasing such shares, or the Company Board determines that
such repurchase would be detrimental to the
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Company's financial position, the Company will use its commercially reasonable
efforts to effect such repurchase as promptly as reasonably practicable.
14. REPRESENTATIONS.
(a) The Company represents and warrants that this
Agreement has been authorized by all necessary corporate action of the Company
and is a valid and binding agreement of the Company enforceable against both in
accordance with its terms.
(b) The Executive represents and warrants that he is
not a party to any agreement or instrument which would prevent him from entering
into or performing his duties in any way under this Agreement.
15. ASSIGNMENT; BINDING AGREEMENT. This Agreement is a
personal contract and the rights and interests of the Executive hereunder may
not be sold, transferred, assigned, pledged, encumbered, or hypothecated by him,
except as otherwise expressly permitted by the provisions of this Agreement.
This Agreement shall inure to the benefit of and be enforceable by the Executive
and his personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees. If the Executive should
die while any amount would still be payable to him hereunder had the Executive
continued to live, all such amounts, unless otherwise provided herein, shall be
paid in accordance with the terms of this Agreement to his devisee, legatee or
other designee or, if there is no such designee, to his estate.
16. CONFIDENTIALITY; NON-COMPETITION; OWNERSHIP OF WORKS.
(a) Executive acknowledges that: (i) the Business is
intensely competitive and that Executive's employment by the Company will
require that Executive have access to and knowledge of confidential information
of the Company, including, but not limited to, the identity of the Company's
customers, the identity of the representatives of customers with whom the
Company has dealt, the kinds of services provided by the Company to customers
and offered to be performed for potential customers, the manner in which such
services are performed or offered to be performed, the service needs of actual
or prospective customers, pricing information, information concerning the
creation, acquisition or disposition of products and services, creative ideas
and concepts, computer software applications and other programs, research data,
personnel information and other trade secrets (the "Confidential Information");
(ii) the direct or indirect disclosure of any such Confidential Information
would place the Company at a competitive disadvantage and
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would do damage, monetary or otherwise, to the Company's business; and (iii) the
engaging by Executive in any of the activities prohibited by this Section 16 may
constitute improper appropriation and/or use of such Confidential Information.
Executive expressly acknowledges the trade secret status of the Confidential
Information and that the Confidential Information constitutes a protectable
business interest of the Company. Accordingly, the Company and Executive agree
as follows:
(b) For purposes of this Section 16, the Company
shall be construed to include the Company and its parents and subsidiaries
engaged in the Business.
(c) During Executive's employment with the Company,
and for a period of two years following the termination of Executive's
employment by expiration of the Term or otherwise, Executive shall not, directly
or indirectly, whether individually, as a director, stockholder, owner, partner,
employee, principal or agent of any business, or in any other capacity, make
known, disclose, furnish, make available or utilize any of the Confidential
Information, other than in the proper performance of the duties contemplated
herein, or as expressly permitted herein, or as required by a court of competent
jurisdiction or other administrative or legislative body; PROVIDED THAT, prior
to disclosing any of the Confidential Information as required by a court or
other administrative or legislative body, Executive shall promptly notify the
Company so that the Company may seek a protective order or other appropriate
remedy. Executive agrees to return all documents or other materials containing
Confidential Information, including all photocopies, extracts and summaries
thereof, and any such information stored electronically on tapes, computer
disks or in any other manner to the Company at any time upon request by the
Company and immediately upon the termination of his employment for any reason.
(d) During Executive's employment with the Company,
Executive shall not engage in Competition (as defined in Section 16(h) hereof)
with the Company.
(e) For a period of two (2) years following the
termination of Executive's employment, whether upon expiration of the Term or
otherwise, Executive shall not engage in Competition with the Company in any
locality or region of the Western Hemisphere in which the Company had operations
at the time of Executive's termination, or in which, during the six (6) month
period prior to Executive's termination, the Company had made substantial plans
with the intention of establishing operations in such locality or region;
PROVIDED THAT, it shall not be a violation of this sub-paragraph for Executive
to become the registered or beneficial owner of up to one percent (1%) of any
class of the capital stock of a competing
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corporation registered under the Securities Exchange Act of 1934, as amended,
provided that Executive does not actively participate in the business of such
corporation until such time as this covenant expires.
(f) For a period of two (2) years after he ceases to
be employed hereunder by the Company, whether upon expiration of the Term or
otherwise, Executive agrees that he will not, directly or indirectly, for his
benefit or for the benefit of any other person, firm or entity, do any of the
following:
i) solicit from any customer doing business
with the Company as of Executive's termination, business of the same or
of a substantially similar nature to the business of the Company with
such customer;
ii) solicit from any known potential
customer of the Company business of the same or of a substantially
similar nature to that which has been the subject of a known written or
oral bid, offer or proposal by the Company, or of substantial
preparation with a view to making such a bid, proposal or offer, within
six (6) months prior to Executive's termination; or
iii) recruit or solicit the employment or
services of, or hire, any person who has remained continuously employed
from the date of termination of Executive's employment through the date
of the recruitment or solicitation.
(g) The Executive will make full and prompt
disclosure to the Company of all inventions, improvements, formulas, data,
programs, processes, ideas, concepts, discoveries, methods, developments,
software, and works of authorship, whether or not copyrightable, trademarkable
or patentable, which are created, made, conceived or reduced to practice by the
Executive, either alone, under his direction or jointly with others during the
period of his employment with the Company, whether or not during normal working
hours or on the premises of the Company, which (i) relate to the actual or
anticipated business, activities or research of the Company, or (ii) result from
or are suggested by work performed by the Executive for the Company, or (iii)
result, to any extent, from use of the Company's premises or property (all of
which are collectively referred to in this Agreement as "Works"). All Works
shall be the sole property of the Company, and, to the extent that the Company
is not already considered the owner thereof as a matter of law, the Executive
hereby assigns to the Company, without further compensation, all his right,
title and interest in and to such Works and any and all related intellectual
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property rights (including, but not limited to, patents, patent
applications, copyrights, copyright applications, and trademarks) in the Western
Hemisphere and elsewhere.
(h) For purposes of this Agreement, "Competition" by
Executive shall mean Executive's engaging in, or otherwise directly or
indirectly being employed by or acting as a consultant or lender to, or being a
director, officer, employee, principal, agent, stockholder, member, owner or
partner of, or permitting his name to be used in connection with, the activities
of any other business or organization anywhere in the Western Hemisphere which
competes, directly or indirectly, with the Business of the Company; PROVIDED,
however, that Executive shall not be deemed to have engaged in Competition with
the Company if he obtains post-termination employment with an entity which
competes with the Business of the Company, so long as Executive's employment
with the competitor is limited to division(s) or portion(s) of the competitor's
business which do not compete with the Business of the Company and will not
require him to violate any other provision of this Section 16.
(i) The parties recognize that the purpose of this
Section 16 is to avoid harm to the Company by Executive providing confidential
information to, or becoming employed by, its competitors, and not to
artificially limit his employment options in the future. In addition to the
other subsections of this Section 16, the parties agree: (A) that Executive is
not barred from obtaining post-termination employment with an entity that does
not directly engage in Competition with the Company; and (B) that the
restrictions of Section 16 shall not apply to information which is or becomes
publicly known by lawful means, or comes into Executive's possession from
sources not under an obligation of confidentiality to the Company.
(j) Executive acknowledges that the services to be
rendered by him to the Company are of a special and unique character, which
gives this Agreement a peculiar value to the Company, the loss of which may not
be reasonably or adequately compensated for by damages in an action at law, and
that a breach or threatened breach by him of any of the provisions contained in
this Section 16 will cause the Company irreparable injury. Executive therefore
agrees that the Company shall be entitled, in addition to any other right or
remedy, to a temporary, preliminary and permanent injunction, without the
necessity of proving the inadequacy of monetary damages or the posting of any
bond or security, enjoining or restraining Executive from any such violation or
threatened violations.
(k) Executive further acknowledges and agrees that
due to the uniqueness of his services and confidential nature of the information
he will possess,
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the covenants set forth herein are reasonable and necessary for the protection
of the business and goodwill of the Company.
(l) If any one or more of the provisions contained in
this Agreement shall be held to be excessively broad as to duration, activity or
subject, such provisions shall be construed by limiting and reducing them so as
to be enforceable to the fullest extent permitted by law.
17. ENTIRE AGREEMENT. This Agreement contains all the
understandings between the parties hereto pertaining to the matters referred to
herein, and supersedes any other undertakings and agreements, whether oral or in
writing, previously entered into by them with respect thereto. The Executive
represents that, in executing this Agreement, he does not rely and has not
relied upon any representation or statement not set forth herein made by the
Company with regard to the subject matter or effect of this Agreement or
otherwise.
18. AMENDMENT OR MODIFICATION, WAIVER. No provision of
this Agreement may be amended or waived, unless such amendment or waiver is
agreed to in writing, signed by the Executive and by a duly authorized officer
of the Company. No waiver by any party hereto of any breach by another party
hereto of any condition or provision of this Agreement to be performed by such
other party shall be deemed a waiver of a similar or dissimilar condition or
provision at the same time, any prior time or any subsequent time.
19. NOTICES. Any notice to be given hereunder shall be in
writing and shall be deemed given when delivered personally, sent by courier or
facsimile or registered or certified mail, postage prepaid, return receipt
requested, addressed to the party concerned at the address indicated below or to
such other address as such party may subsequently give notice hereunder in
writing:
To the Executive at:
Mr. C. Xxxxxxx Xxxxxxx
4 N 000 Xxxxx Xxxx Xxxx
Xx. Xxxxxxx, XX 00000
with copies to:
Littler Xxxxxxxxx
000 Xxxxx XxXxxxx Xxxxxx
Xxxxx 0000
00
Xxxxxxx, Xxxxxxxx 00000-0000
Attention: Xxxx X. Xxxxxxx, Esquire
To the Company at:
MCII Holdings (USA) Inc.
00 Xxxx Xxxx Xxxx
Xxx Xxxxxxx, Xxxxxxxx 00000
Attention: General Counsel
with copies to:
Xxxxxx Xxxxxxxxxx & Xxxx
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxx X. Xxxxxxxx
and
Skadden, Arps, Slate, Xxxxxxx & Xxxx LLP
Xxx Xxxxxx Xxxxxx
X.X. Xxx 000
Xxxxxxxxxx, Xxxxxxxx 00000
Attention: Xxxxxx X. Xxxxxx, Esquire
Any notice delivered personally or by courier under this
Section 20 shall be deemed given on the date delivered and any notice sent by
facsimile or registered or certified mail, postage prepaid, return receipt
requested, shall be deemed given on the date transmitted by facsimile or mailed.
20. SEVERABILITY. If any provision of this Agreement or
the application of any such provision to any party or circumstances shall be
determined by any court of competent jurisdiction to be invalid and
unenforceable to any extent, the remainder of this Agreement or the application
of such provision to such person or circumstances other than those to which it
is so determined to be invalid and unenforceable, shall not be affected thereby,
and each provision hereof shall be validated and shall be enforced to the
fullest extent permitted by law.
21. SURVIVORSHIP. The respective rights and obligations
of the parties hereunder shall survive any termination of this Agreement to the
extent necessary to the intended preservation of such rights and obligations.
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22. GOVERNING LAW. This Agreement will be governed by and
construed in accordance with the laws of the State of Delaware, without regard
to the principles of conflicts of law thereof.
23. HEADINGS. All descriptive headings of sections and
paragraphs in this Agreement are intended solely for convenience, and no
provision of this Agreement is to be construed by reference to the heading of
any section or para graph.
24. WITHHOLDING. All payments to the Executive under this
Agreement shall be reduced by all applicable withholding required by federal,
state or local law.
25. COUNTERPARTS. This Agreement may be executed in
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, the parties hereto have executed this
Employment Agreement on April __, 2000 to be effective as of the Effective Date.
MCII HOLDINGS (USA) INC.
By: _____________________________________
Name:
Title:
C. XXXXXXX XXXXXXX
___________________________________________
