Exhibit 10.3
xxxxxxx.xxx, inc.
EMPLOYMENT AGREEMENT
This employment agreement ("Agreement") is entered into as of the date
specified on the signature page ("Effective Date") by and between
xxxxxxx.xxx, inc., a Delaware corporation located at 000 Xxxxxxx Xxxxxx, 0xx
xxxxx, Xxx Xxxxxxxxx, Xxxxxxxxxx 00000 ("Company") and the individual
specified on the signature page ("Employee").
RECITALS
R1. Employee is currently serving as Vice President, Secretary and General
Counsel of the Company.
R2. The parties desire to memorialize the employment relationship of
Employee with the Company.
R3. The Board of Directors of the Company ("Board") has approved and
authorized the entry into this Agreement with Employee.
R4. The parties hereby enter into this Agreement setting forth the terms
and conditions for the employment relationship of Employee with the
Company.
TERMS & CONDITIONS
1. EMPLOYMENT. From the Effective Date through the term of this
Agreement Employee is employed as Vice President, Secretary and General
Counsel of the Company and of any subsidiary or other affiliate that
it may acquire. Employee shall render executive, policy and other
management services to the Company and subsidiaries/affiliates of the
type customarily performed by persons serving in similar executive
officer capacities. Employee shall devote substantially all of his
working time and his best efforts to the Company and his position, which
shall include such duties as the Board may from time to time reasonably
direct that are reasonably consistent with Employee's education,
experience and background. During the term of this Agreement, there
shall be no material increase or decrease in the duties and
responsibilities of Employee otherwise than as provided herein, unless
the parties otherwise agree in writing.
2. COMPENSATION.
2.1 SALARY. The Company agrees to pay Employee from the
Effective Date at an annual rate equal to ONE HUNDRED FIFTY
THOUSAND dollars ($150,000), with such subsequent increases
in salary during the term of this Agreement as may be
determined by the Compensation Committee of the Board;
PROVIDED, HOWEVER, that during the first three years following
the effective date of the registration statement with respect
to the initial public offering of the Company's stock,
Employee's salary hereunder shall not exceed to ONE HUNDRED
FIFTY THOUSAND dollars ($150,000) per annum without the approval
of the Compensation Committee. In determining salary increases,
the Compensation Committee may compensate Employee for increases
in the cost of living and may also provide for performance
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or merit increases. The salary of Employee shall not be
decreased at any time during the term of this Agreement from
the amount then in effect, unless Employee otherwise agrees in
writing. Participation in deferred compensation, bonus,
discretionary bonus, retirement and other employee benefit
plans in the fringe benefits shall not reduce the salary
payable to Employee under this Section 2.1. The salary under
this Section 2.1 shall be payable to Employee not less
frequently than monthly. Employee shall not be entitled to
receive fees for serving as a director of the Company or of any
subsidiary or affiliate of the company or for serving as a
member of any committee of any such board of directors.
2.2 ANNUAL BONUS. In addition to his salary under Section 2.1
above, the Company shall pay to Employee an annual bonus of
FIFTY PERCENT (50%) of his salary under such subsection. The
annual bonus shall be payable in January following each
calendar year during the term of this Agreement and shall be
prorated for any partial years.
3. DISCRETIONARY AND PERFORMANCE INCENTIVE BONUSES. During the term of
this Agreement, Employee shall be entitled to participate in an
equitable manner with all other executive employees of the Company in
such discretionary bonuses as may be authorized, declared and paid by
the Compensation Committee to its executive employees. The Company will
adopt an incentive bonus plan providing for the payment of annual
performance incentive bonuses to Employee and other executive officers
based upon the increase in the Company's operating profit or other
appropriate performance objectives. The incentive bonus arrangement
will provide Employee with an opportunity to earn additional incentive
compensation in an amount up to THREE PERCENT (3%) of the annual
increase in the Company's net income before taxes as reported in the
Company's audited annual financial statement (for fiscal year 1999, net
income shall be determined on a pro forma basis). No other compensation
provided for in this Agreement shall be deemed a substitute for
Employee's right to participate in such bonuses.
4. INSURANCE, RETIREMENT AND EMPLOYEE BENEFIT PLANS, FRINGE BENEFITS;
BUSINESS EXPENSES.
4.1 OTHER BENEFITS AND PREREQUISITES. Employee shall be entitled
to participate in any plan of the Company relating to stock
options, restricted stock, employee stock purchase or ownership,
pension, thrift, profit sharing, group life insurance, medical
coverage, education or other retirement or employee benefit
plans or arrangements that the Company has adopted or may adopt
for the benefit of its employees or executive officers.
Employee shall also be entitled to participate in, or enjoy the
benefit of, any other fringe benefits or prerequisites that are
now or may be or become applicable to the Company's executive
employees.
4.2 BUSINESS EXPENSES. During the term of Employee's employment
by the Company, the Company shall promptly reimburse Employee
for all reasonable and customary expenses incurred by Employee
in performing services for the Company, including all expenses
of travel and living expenses while away from home on business
or at the request of and in the service of the Company,
provided that such expenses are incurred and accounted for in
accordance with the policies
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and procedures established by the Company. Employee shall be
entitled to first or business class for all business air
travel. Employee shall be entitled to parking expenses,
excluding violations, when on the job, be it at the office or
while on business trips. Employee shall be entitled to a
reasonable per diem for living expenses while in San Francisco.
4.3 DIRECTOR & OFFICER INSURANCE; LEGAL MALPRACTICE INSURANCE: At
all times during the term of this Agreement the Company shall
maintain in full force and effect a director and office
insurance policy with a national insurance underwriter insuring
Employee for his acts and ommissions in his capacity as an
Officer and Director of the Company, with coverage under such
policy of not less than ONE MILLION dollars ($1,000,000). At
all times during the term of this Agreement the Company shall
maintain in full force and effect a legal malpractice
insurance policy with a national insurance underwriter
insuring Employee for his acts and ommissions in his capacity
as legal counsel to the Company, with coverage under such
policy of not less than ONE MILLION dollars ($1,000,000).
5. TERM. The initial term of employment under this Agreement shall be
from the date of this Agreement until December 31, 2001. This
Agreement shall be automatically renewed for an additional three-year
term, unless either Employee of the Company gives contrary written
notice to the other party hereto not less than 180 days before the
scheduled expiration of the initial term of this Agreement. Each term
and all such renewal terms are collectively referred to herein as the
term of this Agreement.
6. VOLUNTARY ABSENCES; VACATIONS. Employee shall be entitled, without
loss of pay, to be absent voluntarily for reasonable periods of time
from the performance of the duties and responsibilities under this
Agreement. All such voluntary absences shall count as paid vacation
time, unless the Board otherwise approves. Employee shall be entitled
to an annual paid vacation of at least six weeks per year or such
longer period as the Board may approve. The timing of paid vacations
shall be scheduled in a reasonable manner by Employee.
7. TERMINATION OF EMPLOYMENT. Employee's employment may be terminated
without any breach of this Agreement only under the following
circumstances:
7.1 DEATH. Employee's Employment shall terminate upon his death.
7.2 DISABILITY. The Company may terminate Employee's employment
because of disability. For this purpose, "Disability" shall mean
the inability of Employee to perform his duties under this
Agreement because of physical or mental illness or incapacity for
a continuous period of six months during which Employee shall
have been absent from his duties under this Agreement on a
substantially full-time basis.
7.3 CAUSE. The Company may terminate Employee's employment for
Cause. For purposes of this Agreement, the Company shall have
"Cause" to terminate Employee's employment only in the event of
(a) the willful and continued failure by Employee to
substantially perform his duties hereunder (other than any such
failure resulting from Employee's inability to
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perform such duties as a result of physical or mental illness or
incapacity or any such actual or anticipated failure after the
delivery of a Notice of Termination, as defined in Section 7.5,
by Employee for Good Reason, as defined in Section 7.4.2) after
delivery to Employee of a written demand for substantial
performance that specifically identifies the manner in which the
Company believes that Employee has not substantially performed his
duties and a reasonable opportunity to cure; (b) willful
misconduct by Employee that causes substantial and material injury
to the business and operations of the Company, the continuation of
which, in the reasonable judgment of the Board, will continue to
substantiallyand materially injure the business and operations of
the Company in the future; or (b) conviction of Employee of a
felony. No act or failure to act shall be considered "willful" for
this purpose unless done, or omitted to be done, by Employee other
than in good faith and other than with a reasonable belief that
his action or omission was in the best interests of the Company.
Employee shall not be deemed to have been terminated for Cause
unless Employee shall have been provided with (i) a reasonable
notice setting forth the reasons that the Company believes
constitute Cause for the termination of his employment; (ii) a
Notice of Termination as defined in Section 7.5, from the Board
finding that, in the reasonable good faith opinion of the Board,
Cause for the termination exists and specifying the particulars
thereof in reasonable detail.
7.4 TERMINATION BY EMPLOYEES. Employee may terminate his
employment (a) for Good Reason by giving ten days prior written
notice to the Company or (b) at any time by giving 120 days prior
written notice to the Company.
7.4.1 GOOD REASON. For purposes of this Section, "Good
Reason" shall mean (a) the assignment to Employee of any
duties inconsistent with Employee's status or any
substantial adverse alteration in the nature or status of
Employee's responsibilities; (b) any change in Employee's
reporting responsibility such that Employee is required to
report other than exclusively to the Chief Executive
Officer; (c) any purported termination of Employee's
employment by the Company that is not effected pursuant to
a Notice of Termination satisfying the requirements of
Section 7.5 hereof; (d) any other failure by the Company
to comply with any material provision of this Agreement
which failure continues for more than ten days after
written notice of such noncompliance from Employee; or (e)
any notices given by the Company to Employee under Section
5 hereof that this Agreement will not be renewed on any
anniversary date.
7.5 NOTICE OF TERMINATION. Any termination of Employee's
employment by the Company or by Employee (other than termination
pursuant to Section 7.1 or 7.2 hereof) shall be communicated to
the other party by a written Notice of Termination. Any Notice
of Termination given by a party shall specify the particular
termination provision of this Agreement relied upon by such
party and shall set forth in reasonable detail the facts and
circumstances relied upon as
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providing a basis for the termination under the provision so
specified.
7.6 TERMINATION DATE. The Termination Date shall mean (a) if
Employee's employment is terminated by his death, the date
of his death; (b) if Employee's employment is terminated
pursuant to Section 7.2 hereof, the date specified in the Notice
of Termination, which shall be after the expiration of the
six-month period specified in that subsection; (c) if Employee's
employment is terminated by the Company for Cause, the date
specified in the Notice of Termination; or (d) if Employee's
employment is terminated for any other reason, sixty days
following the date on which the Notice of Termination is given.
8. COMPENSATION UPON TERMINATION OF EMPLOYMENT.
8.1 TERMINATION BECAUSE OF DEATH FOR CAUSE OR WITHOUT GOOD
REASON. If Employee's employment is terminated because of his
death, by the Company for Cause or by Employee other than for
Good Reason, the Company shall pay Employee his salary and a
pro rata portion of the bonus specified in Section 2(b) (based
upon the bonus paid in respect of the preceding year) through
the Termination Date of the Company shall have no further
obligation to Employee hereunder.
8.2 TERMINATION BECAUSE OF DISABILITY. If Employee's employment
is terminated by the Company because of Disability under
Section 7.2 hereof the Company shall pay Employee an annual
disability benefit equal to the excess of (a) 60 percent of his
salary at the rate in effect under Section 2.1 hereof on the
Termination Date plus 60 percent of the bonus amount specified
in Section 2.1 hereof (based upon the bonus paid in respect of
the preceding year) over (b) the amount of the long term
disability benefit that is payable to Employee under any policy
of disability insurance provided for Employee by the Company at
its expense. The disability benefit shall be paid for such
period as is determined by the Board of Directors for the
Company's senior executives but shall not be less than the
remainder of the scheduled term of employment.
8.3 TERMINATION WITHOUT CAUSE OR WITH GOOD REASON. If (a) in
breach of this Agreement, the Company shall terminate
Employee's employment other than for Cause or because of
Disability or (b) Employee shall terminate his employment for
Good Reason; then:
8.3.1 The Company shall pay Employee his salary and a pro
rata portion of the bonus specified in Section 2.1 hereof
(based upon the bonus paid in respect of the preceding
year) through the Termination Date and all other unpaid
and pro rata amounts to which Employee is entitled as of
the Termination Date under any compensation plan or
program of the Company, including, without limitation,
any incentive performance bonus and all accrued vacation
time;
8.3.2 The Company shall pay as liquidated damages to
Employee, an in lieu of any further salary payments
hereunder for periods after the Termination Date,
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Employee's then current salary (payable in installments
in accordance with the Company's normal payroll
practices) for the remainder of the scheduled term of
employment and the product of (a) the sum of (i)
Employee's annual bonus specified in Section 2.1
hereof (based upon the bonus paid in respect of the
preceding year) and (ii) the maximum annual bonus amount
that could have been paid to Employee under the
Company's performance incentive bonus plan for the year
in which the Termination Date occurs, and (b) the number
of years (and any fraction of a year) remaining in the
term of this Agreement under Section 5 hereof as of the
Termination Date, which amount shall be payable in equal
monthly installments during the remainder of the
scheduled term of employment;
8.3.3 In addition to the liquidated amounts that are payable
to Employee, the following shall apply: (a) Employee
shall continue to participate in, and accrue benefits
under, all retirement, pension, profit sharing, employee
stock ownership, thrift and other deferred compensation
plans of the Company for the remaining term of this
Agreement as if the termination of employment of
Employee had not occurred (with Employee being deemed to
receive annually for the purposes of such plans
Employee's then current salary and bonus (at the time of
his termination) under Sections 2.1 and 2.2 of this
Agreement), except to the extent that such continued
participation and accrual is expressly prohibited by
law, or to the extent such plan constitutes a "qualified
plan" under Section 401 of the Internal Revenue Service
Code of 1986, as amended ("Code"), by the terms of the
plan, in which case the Company shall provide Employee
a substantially equivalent, unfunded, non-qualified
benefit; (b) Employee shall be entitled to continue to
receive all other employee benefits and then existing
fringe benefits referred to in Sections 4.1 and 4.2
hereof for the remaining term of this Agreement as if
the termination of employment had not occurred; and (c)
all insurance or other provisions for indemnification,
defense or hold-harmless of officers or directors of the
Company that are in effect on the date the Notice of
Termination is sent to Employee shall continue for the
benefit of Employee with respect to all of his acts and
omissions while an officer or director as fully and
completely as if such termination had not occurred, and
until the final expiration or running of all periods of
limitation against action which may be applicable to
such acts or omissions; and
8.3.4 The liquidated amount and other benefits provided for
in this Section 8.3 shall not be reduced by any
compensation or benefits that Employee may receive for
other employment with another employer or through
self-employment after termination of employment with the
Company.
8.4 COST OF ENFORCEMENT. In the event the employment of
Employee is terminated by the Company because of Disability or
without Cause, or by Employee for Good Reason, and the
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Company fails to make timely payment of the amounts owed to
Employee under this Agreement, Employee shall be entitled to
reimbursement for all reasonable costs, including attorney's
fees, incurred in Employee in taking action to collect
such amounts or otherwise to enforce this Agreement, plus
interest on such amounts at the rate of one percent above
the prime rate (defined as the base rate on corporate loans
at large U.S. money center commercial banks as published by
THE WALL STREET JOURNAL), compounded monthly, for the period
from the date of employment termination until payment is made
to Employee. Such reimbursement and interest shall be
in addition to all rights to which Employee is otherwise
entitled under this Agreement.
8.5 PARACHUTE PAYMENT LIMITATION. If any payment or benefit to
Employee under this Agreement would be considered a
"parachute payment" within the meaning of Section 280(g)(b)(2)
of the Code and if, after reduction for any applicable federal
excise tax imposed by Section 4999 of the Code ("Excise Tax")
and federal income tax imposed by the Code, Employee's net
proceeds of the amounts payable and the benefits provided
under this Agreement would be less than the amount of
Employee's net proceeds resulting from the payment of the
Reduced Amount described below, after reduction for
federal income taxes, then the amount payable and the
benefits provided under this Agreement shall be limited to
the Reduced Amount. The "Reduced Amount" shall be the
largest amount that could be received by Employee under this
Agreement such that no amount paid to Employee under this
Agreement and any other agreement, contract or understanding
heretofore or hereafter entered into between Employee and the
Company ("Other Agreements") and any formal or informal plan
or other arrangement heretofore or hereafter adopted by the
Company for the direct or indirect provision of compensation
to Employee (including groups or classes or participants or
beneficiaries of which Employee is a member), whether or not
such compensation is deferred, is in cash, or is in the form
of a benefit to or for Employee ("Benefit Plan") would be
subject to the Excise Tax. In the event that the amount
payable to Employee shall be limited to the Reduced Amount,
then Employee shall have the right, in Employee's sole
discretion, to designate those payments or benefits under
this Agreement, any other Agreements, and/or Benefit Plank,
that should be reduced or eliminated so as to avoid having
the payment to Employee under this Agreement be subject to
the Excise Tax.
9. CONFIDENTIALITY. In consideration of the willingness of the
Company to employ Employees and the compensation to be paid and
benefits to be received therefor, any for other good and valuable
consideration, the receipt and adequacy of which is hereby
acknowledged, Employee agrees as follows:
9.1 THE COMPANY OWNS ALL OF EMPLOYEES' WORK. All improvements,
discoveries, inventions, designs, documents, licenses and
patents, or other data devised, conceived, made, developed,
obtained, filed, perfected, acquired, or first reduced to
practice, in whole or in part, or in the regular cause of
employment by Employee during the term of this Agreement, and
related in any way to the business, including development and
research, of the Company or any subsidiary
7.
or affiliate engaged in business substantially similar to that
of the Company, shall be promptly disclosed to the Company.
Employee hereby assigns and transfers to the Company all his
right, interest and title thereto, and such improvements,
discoveries, inventions, designs, documents, licenses and
patents, or other data shall become the property of the
Company. During the term of this Agreement and at any time
thereafter, upon request of the Company, Employee will join
and render assistance in any proceedings and execute any
papers necessary to file and prosecute applications for,
and to acquire, maintain and enforce, letters patent,
trademarks, registrations and/or copyrights, both domestic
and foreign, with respect to such improvements, discoveries,
inventions, designs, documents, licenses and patents, or other
data as required for vesting and maintaining title to same in
the Company.
9.2 NON-DISCLOSURE OF CONFIDENTIAL INFORMATION. Employee agrees
and acknowledges that the term "Confidential and Proprietary
Information" shall mean any and all information not in the
public domain, in any form, emanating from or relating to the
Company and its subsidiaries and affiliates, including, but
not limited to, trade secrets, technical information, costs,
designs, drawings, processes, systems, methods of operation
and procedures, formulae, test data, know-how, improvements,
price lists, financial data, code books, invoices and other
financial statements, computer programs, discs and printouts,
sketches, and plans (engineering, architectural or otherwise),
customer list, telephone numbers, names, addresses,
information about equipment and processes (including
specifications and operating manuals), or any other
complication of information written or unwritten that is used
in the business of the Company or any subsidiary or affiliate
that gives the Company or any subsidiary of affiliate any
opportunity to obtain an advantage over competitors of the
Company who do not know or use such information. Employee
agrees and acknowledges that all Confidential and Proprietary
Information, in any form, and all copies and extracts thereof,
is and are shall remain the sole and exclusive property of the
Company and, upon termination of his employment with the
Company, Employee hereby agrees to return to the Company
the originals and all copies of any Confidential and
Proprietary Information provided to or acquired by Employee
during the period of his employment. Except as ordered by a
court of competent jurisdiction, Employee expressly agrees
never to disclose to any person (except to other Company
employees, and then only on a "need to know" bases) or entity
any Confidential an Proprietary Information either during the
term of this Agreement or at any time after termination of his
employment, except with the express written authorization and
consent of the Company.
9.3 CUSTOMER & CLIENT INFORMATION. Employee understands and
acknowledges that each customer and client of the Company or
its subsidiaries or affiliates will disclose information that
will be within the Company's control in connection with the
Company's furnishing of services to its customers and clients.
Employee covenants and agrees to hold such information in the
strictest confidence and shall treat such information in the
same manner and be obligated by the
8.
provisions of this Agreement as if such information were
Confidential and Proprietary Information, as defined in
Section 9.2 hereof.
10. COVENANT NOT TO COMPETE. During the term of employment and for a
period of TWO (2) years after the termination of Employee's
employment by the Company, Employee shall not directly or indirectly
own, manage, operate, control or be employed by or participate in the
ownership, management, operation or control of any business in the area
which is the type and character engaged in and competitive with that of
the Employer. Employee shall not, during the term of this Agreement,
have any other paid employment other than with a subsidiary of
affiliate of the Company, except with the Prior approval of the Board.
11. AMENDMENTS OR ADDITIONS; ACTION BY BOARD. No amendments or
additions to the Agreement shall be binding unless in writing and
signed by all parties thereto. The prior approval by a majority
affirmative vote of the full Board shall be required in order for the
Company to authorize any amendments or additions to this Agreement, to
give any consents or waivers of provisions of this Agreement, or to take
any other action under this Agreement including any Notice of
Termination.
12. MISCELLANEOUS.
12.1 NOTICES. Any notice required or permitted hereunder shall be
given in writing and shall be personally delivered or mailed by
first class registered or certified mail, postage prepaid,
return-receipt-requested, or transmitted by facsimile, telegram
or telex, addressed to the Company or Employee at the address set
forth on the signature page of this Agreement, or at such other
addresses as such party may designate by five business day advance
written notice to the other party. Each notice or communication
that shall have been transmitted in the manner described above, or
that shall have been delivered to a telegraph company, shall be
deemed sufficiently given, served, sent or received for
purposes at such time as it is sent to the addressee (with the
return receipt, delivery receipt or (with respect to a telex) the
answer back being deemed conclusive, but not exclusive, evidence
of such sending) or at such time as delivery is refused by the
addressee upon presentation.
12.2 SEVERABILITY. Nothing in this Agreement shall be construed so
as to require the commission of any act contrary to law and
wherever there is any conflict between any provision of this
Agreement and any law, statute, ordinance, order or regulation,
the latter shall prevail, but in such event any necessary action
will be taken to bring it within applicable legal requirements.
If any provision of this Agreement should be held invalid or
unenforceable, the remaining provisions shall be unaffected by
such a holding.
12.3 COMPLETE AGREEMENT. This Agreement contains the entire
Agreement and understanding between the parties relating to the
subject matter hereof, and supersedes any prior understandings,
agreements or representations by or between the parties, written
or oral, relating to the subject matter hereof.
9.
12.4 SUCCESSORS OR ASSIGNS. This Agreement and the rights and
obligations of the parties hereto shall bind and inure to the
benefit of any successor or successors of the Company by way of
reorganization, merger or consolidation and any
assignee of all or substantially all of its business assets,
but except as to any such successor or assignee of the
Company, neither this Agreement nor any rights or benefits
hereunder may be assigned by the Company or Employee.
However, in the event of death of Employee all rights to
receive payments hereunder shall become rights or benefits
hereunder may be assigned by the Company or Employee.
However, in the event of the death of Employee all rights to
receive payments hereunder shall become rights of Employee's
estate.
12.5 SECTION HEADINGS. The section heading used in this
Agreement are included solely for convenience and shall not
affect, or be used in connection with, the interpretation
of this Agreement.
12.6 GOVERNING LAW. This Agreement shall be governed and
construed in accordance with the laws of the State of Delaware.
12.7 ARBITRATION: All disputes between the parties arising under
this Agreement shall be finally decided through binding
arbitration before Judicial Arbitration & Mediation Services,
Inc. ("JAMS/ENDISPUTE") in San Francisco, California, and
judgment on any arbitration award may be entered in any court
having jurisdiction over the parties or their assets.
IN WITNESS WHEREOF, the parties have executed and delivered this Agreement as
of this date, January 1, 1999
COMPANY: EMPLOYEE:
By: /s/ Xxxxxxx X. Grotto By: /s/ Xxx X. Xxxxxxxxxx
--------------------- ---------------------
Name: Xxxxxxx X. Grotto Name: Xxx X. Xxxxxxxxxx
Title: President & CEO SSN: ###-##-####
By: /s/ Xxx X. Xxxxxxxxxx
-------------------------
Name: Xxx X. Xxxxxxxxxx
Title: Secretary General Counsel
10.
