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EXHIBIT 10.2
EMPLOYMENT AGREEMENT
AGREEMENT made as of September 10, 1998 by and between X. X. Management,
Inc., a Delaware corporation with executive offices at 00000 Xxxxxx Xxxxx, Xx
Xxxx, Xxxxx 00000 (the "Company"), and Xxxxx Xxxxxxxx residing at 000 Xxxx 00xx
Xxxxxx (Xxxxxxxxx 0-X), Xxx Xxxx, Xxx Xxxx 00000 (the "Executive").
W I T N E S S E T H:
WHEREAS, Sun Apparel, Inc., ("Sun") entered into a license agreement, dated
as of August 1, 1995 with Xxxx Xxxxx Xxxxxx, L. P. (as amended to date, the
"License Agreement"), and such license agreement was amended on October 18,
1995, and the license agreement as amended is herein referred to as the "License
Agreement"; and
WHEREAS, pursuant to the License Agreement, Sun has an exclusive license to
manufacture and sell in the United States and its territories and possessions
certain men's and women's apparel bearing the trademark "Polo Jeans Company
Xxxxx Lauren" and certain authorized variations, the manufacturing, selling and
other related activities of Sun under the License Agreement being herein
referred to as the "Polo Jeans Business"; and
WHEREAS, the Executive is a party to the Employment Agreement with the
Company dated as of January 1, 1996 (the "Prior Agreement"); and
WHEREAS, the Company wishes to continue to employ the Executive, and the
Executive wishes to continue the employment with the Company, on the terms and
conditions hereinafter set forth, and Sun is willing to guarantee the
obligations of the Company under this Agreement; and
WHEREAS, the Executive and the Company wish to provide for the termination
of the Prior Agreement.
NOW, THEREFORE, it is agreed as follows:
1. EMPLOYMENT. During the term of this Agreement, Company shall employ
the Executive as the President and the Chief Executive Officer of the Sun
division responsible for the operation of the Polo Jeans Business and the
Executive shall continue to serve as the Executive Vice President of Sun. The
Executive shall report directly to the Chief Executive Officer of Sun, and shall
manage the Polo Jeans Business under the control and direction of Sun's board of
directors (or its executive committee). During the term of this Agreement, and
excluding any periods of vacation and sick leave to which the Executive is
entitled, the Executive agrees to devote all of her business time and attention
to the business affairs of the Xxxx Xxxx Business and Sun, and to perform such
responsibilities in a professional manner. Notwithstanding the foregoing, during
the term of this Agreement, it shall not be a violation of this Agreement for
the Executive to (a) serve on civic or charitable boards or committees; (b)
deliver lectures, fulfill speaking engagements or teach at educational
institutions; (c) attend to personal business, so long as such activities do not
interfere with the performance of the Executive's responsibilities as an
employee of the Company in accordance with this Agreement.
2. TERM. The term of this Agreement shall be for the period commencing on
the date hereof (the "Commencement Date") and ending on December 31, 2001 (the
"Expiration Date"). The Prior Agreement shall terminate effective as of the
Commencement Date and from and after such date the Prior Agreement shall be void
and of no force and effect.
3. SALARY, FRINGE BENEFITS AND ALLOWANCES.
(a) From the Commencement Date until December 31, 1998, the Executive shall
be paid a salary at the annual rate of $421,600.00 plus an advance against her
1998 bonus at the annual rate of $328,400.00.
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Throughout the remaining term of this Agreement, the Executive shall receive a
salary at the annual rate of $750,000. During the term of this Agreement, the
Executive's salary shall be payable at such regular times and intervals as the
Company customarily pays its employees from time to time, but no less frequently
than once a month.
(b) During the term of this Agreement, the Executive shall be eligible to
participate in all savings and retirement plans, practices, policies and
programs to the extent applicable generally to other senior executive employees
of the Company and Sun.
(c) During the term of this Agreement, the Executive and/or the Executive's
family, as the case may be, shall be eligible for participation in and shall
receive all benefits under welfare, fringe and other benefit plans, practices,
policies and programs provided by the Company and Sun (including, without
limitation, medical, prescription drug, dental, disability, accidental death and
travel accident insurance plans and programs) to the extent applicable generally
to other senior executives of the Company and Sun.
(d) The Executive shall be entitled to an aggregate of four (4) weeks paid
vacation during each calendar year of the term of this Agreement, prorated for
1998 from the Commencement Date until December 31, 1998. The Executive shall
also be entitled to the benefits of the Company's and Sun's policies relating to
sick leave and holidays.
(e) The Executive shall have all expenses reasonably incurred by her on
behalf of the Company reimbursed by the Company in accordance with the Company's
standard policy and practice. For transcontinental and overseas travel on
Company business, the Executive shall be entitled to business class travel (or
first class travel when business class in not available).
4. BONUS.
(a) Not later than ninety (90) days immediately following the end of 1998,
the Executive shall receive a bonus with respect to the 1998 calendar year,
calculated in accordance with the methodology set forth in Exhibit C hereto.
(b) As soon as practical and in any event not later than ninety (90) days
immediately following the end of each of 1999, 2000 and 2001, the Company shall
deliver to Executive a statement setting forth in reasonable detail its
calculation of the net sales and EBITDA of the Polo Jeans Business for each such
year, calculated in accordance with generally accepted accounting principles
("GAAP") as applied by Sun consistent with past practices through June 30, 1998.
The Company shall pay to the Executive a bonus for each such year based on a
combined achievement of net sales and EBITDA growth, determined in accordance
with Exhibit B hereto. For the purposes of this paragraph, EBITDA shall mean the
net income, before extraordinary items (as defined in accordance with GAAP) of
income, gain, loss and expense and before all income taxes and other taxes now
or hereafter in effect that are assessed on income and interest expense and
finance charges, and before charges for depreciation and amortization.
(c) The Executive shall have the right to dispute the amount of any bonus
paid to her by giving the Company written notice within thirty (30) days after
she receives the bonus statement set forth in paragraph (b) above. If she does
so:
(i) within fifteen (15) days after the Company receives such notice,
the Company will cause Sun to furnish the Executive (and her authorized
representatives) with access to such of the books and records of the Polo
Jeans Business (and of Sun and its subsidiaries) as pertain to the
calculation of the bonus in dispute, and the Executive shall within ten
(10) days thereafter inform the Company of the amount of the bonus to which
she believes she is entitled; and
(ii) if such dispute is not resolved by the parties within thirty (30)
days after the date of the Executive's notice, such dispute shall be
submitted by either party to an independent accounting firm reasonably
acceptable to both parties, to determine the proper bonus in accordance
with this Agreement, and the costs of such firm shall be borne and paid by
the party who calculated a bonus with a greater differential in dollars
from the bonus determined by such firm.
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5. TERMINATION OF EMPLOYMENT.
(a) The Company may terminate the Executive's employment for Cause (as
defined below) before the Expiration Date. If the Executive's employment is
terminated for Cause or if she resigns during the term of this Agreement without
Good Reason (as defined below), neither the Company nor Sun shall have any
additional obligations to the Executive under this Agreement.
(b) If the Executive's employment terminates before the Expiration Date
because of her death or Disability, the Company shall pay her or her duly
appointed personal representatives, as the case may be, (i) an amount equal to
her monthly salary during each of the six (6) months following her death or
Disability, but in no event beyond the Expiration Date, and (ii) the amount that
would have been payable to her with respect to the fiscal year in which she dies
or becomes Disabled pursuant to Section 4, prorated for the portion of such year
before her death or Disability, which shall be paid not later than one hundred
twenty (120) days after the end of such year. If the Executive ceases to have a
Disability at any time while precluded from competing with the Company in
accordance with Section 8(a), the Executive shall within 30 days thereof so
advise the Company in writing. In such event, the Company shall have the option,
but not the obligation, to reemploy Executive pursuant to the terms of this
Agreement for a term equal in length to the period from the commencement of the
Disability to the Expiration Date, provided that no later than 30 days after
receipt of such notice from the Executive, the Company notifies the Executive in
writing that it is exercising such option. The Company shall have the right to
have Executive submit to a reasonable examination by a qualified physician of
its choosing (and receive a report from such physician on the state of the
Executive's health) during such 30 day period and Executive agrees to make
herself available for such examination. Except as set forth in this paragraph
(b) and Section 8 and payment to Executive of unpaid salary and reimbursable
expenses accrued to the date of Executive's termination, if any, neither the
Company nor Sun shall have any additional obligations to the Executive under
this Agreement in the event of Executive's termination of employment under this
paragraph (b).
(c) The Company may terminate the Executive's employment before the
Expiration Date without Cause, and the Executive may terminate her employment
before the Expiration Date for Good Reason upon thirty (30) days written notice
to the Company. If the Executive's employment is so terminated by the Company
without Cause, or by the Executive for Good Reason, and provided that the
Company does not exercise its election pursuant to Section 8(a)(ii) hereof, the
Company will pay her severance pay in the amount of (i) $750,000 in twelve (12)
equal monthly installments commencing on a date one month following the date of
termination, and (ii) not later than one hundred twenty (120) days after the end
of such year, the greater of (A) the amount that would have been payable to her
pursuant to Section 4 with respect to the year in which the Executive's
employment was terminated, prorated for the portion of such year before her
termination or (B) the amount that was paid to her pursuant to Section 4 with
respect to the prior year. If the Executive's employment is so terminated by the
Company without Cause or by the Executive for Good Reason, the Company shall
reimburse the Executive for up to $10,000 of executive outplacement services,
and shall provide the health care and other benefits set forth in Section 3(b),
all for a period of one year from the effective date of termination. Except as
set forth in this paragraph (c) and Section 8 and payment to Executive of unpaid
salary and reimbursable expenses accrued to the date of Executive's termination,
if any, neither the Company nor Sun shall have any additional obligations to the
Executive under this Agreement in the event of Executive's termination of
employment under this paragraph (c).
(d) As used herein:
(i) the term "Cause" shall mean the Executive's commission of an act
of fraud or dishonesty or a crime involving money or other property of the
Company; the Executive's conviction of a felony or a plea of guilty or nolo
contendere to an indictment for a felony that damages the Company in any
manner; if, in carrying out her duties hereunder, the Executive engages in
conduct that constitutes willful misconduct or gross negligence; or a
material breach by the Executive of this Agreement. Any act or failure to
act on the part of the Executive which is based upon authority given
pursuant to a resolution duly adopted by the Board or authorized in writing
by the Chief Executive Officer of the Company or of Sun or other officer to
whom the Executive reports, or based upon the advice of counsel for the
Company or Sun shall not
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constitute cause as used herein. For purposes of this provision only, a
breach shall be "material" if it is demonstrably injurious to the Company
or Sun, their affiliates or any of their respective business units,
financially or otherwise.
(ii) the term "Good Reason" shall mean any one of the following:
(1) a material breach of the Company's or Sun's obligations under
this Agreement, which breach has not been cured within five (5) business
days after the Company's receipt of written notice from the Executive of
such breach;
(2) a reduction in the Executive's then annual base salary;
(3) the relocation of the Company's principal executive offices (or
the Executive's office) to a location outside the borough of Manhattan
in New York City;
(4) the failure to pay the Executive any undisputed portion of the
Executive's compensation, including any payments due under Sections 3 or
4 of the Agreement, within thirty (30) days after the date such
compensation or payment is due;
(5) the failure to continue in effect any compensation or benefit
plan in which the Executive is participating unless either (i) an
equitable arrangement (embodied in an ongoing substitute or alternative
plan) has been made with respect to such plan; or (ii) the failure to
continue the Executive's participation therein (or in such substitute or
alternative plan) does not discriminate against the Executive, both with
respect to the amount of benefits provided and the level of the
Executive's participation, relative to other similarly situated
participants;
(6) a reduction in the Executive's title and status as President
and Chief Executive Officer of the Company or Executive Vice President
of Sun; or any change in the Executive's status as reporting directly to
the Chief Executive Officer of Sun; or the assignment to the Executive
of any duties materially inconsistent with the Executive's position
(including, without limitation, status, offices, titles and reporting
requirements), authority, duties or responsibilities as contemplated by
Section 1 of this Agreement, or any other action by the Company or Sun
which results in a material diminution in such position, authority,
duties or responsibilities, excluding for this purpose any action not
taken in bad faith and which is remedied by the Company or Sun no later
than thirty (30) days after written notice by the Executive;
(7) the termination of the License Agreement, unless the acts or
omissions of the Executive directly caused such termination.
(8) any purported termination by the Company or Sun of the
Executive's employment otherwise than as expressly permitted in this
Agreement; or
(9) any failure by the Company to comply with and satisfy Section
10 of this Agreement.
(iii) the terms "Disabled" or "Disability" shall mean the Executive's
physical or mental incapacity that renders her incapable, even with a
reasonable accommodation by the Company, of performing the essential
functions of the duties required of her by this Agreement for one hundred
twenty (120) or more consecutive days.
(e) The Executive shall have no obligation to seek other employment or
otherwise mitigate the Company's obligations to make payments under this Section
5, and the Company's obligations shall not be reduced by the amount, if any, of
other compensation or income earned or received by the Executive after the
effective date of her termination.
6. COMPANY PROPERTY. Any trade name or xxxx, program, discovery, process,
design, invention or improvement which the Executive makes or develops which
relates, directly or indirectly, to the business of the Company or of Sun or
their affiliates, or her employment by the Company, shall be considered as "made
for hire" and shall belong to the Company and shall be promptly disclosed to the
Company. During the Executive's employment and thereafter, the Executive shall,
without additional compensation, execute and
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deliver to or as requested by the Company any instruments of transfer and take
such other action as the Company may reasonably request to carry out the
provisions hereof, including filing, at the Company's sole expense, trademark,
patent or copyright applications for any trade name or xxxx, invention or
writing covered hereby and assigning such applications to the Company.
7. CONFIDENTIAL INFORMATION. The Executive shall not, either during the
term of her employment by the Company or thereafter, disclose to anyone or use
(except, in each case, in the performance of her responsibilities hereunder and
in the regular course of the Company's business), any information acquired by
the Executive in connection with or during the period of her employment by the
Company, with respect to any confidential, proprietary or secret aspect of the
affairs of the Company, Sun or any of their affiliates, including but not
limited to the requirements of and terms of dealings with existing or potential
licensors, designers, suppliers and customers and methods of doing business, all
of which the Executive acknowledges are confidential and proprietary to the
Company, Sun or any of their affiliates, as the case may be.
8. COMPETITION; RECRUITMENT.
(a) The Executive shall not, at any time during her employment by the
Company, and during the following periods and under the following circumstances,
engage or become interested (as an owner, stockholder, partner, director,
officer, employee, consultant or otherwise) in any business which then competes,
directly or indirectly, with the business conducted by Sun or any of its
subsidiaries or affiliates,
(i) in the event of a termination by the Company for Cause or
Disability or by the Executive other than for Good Reason, from the date of
termination until the first anniversary of the Expiration Date;
(ii) in the event of a termination by the Company other than for Cause
or Disability or by the Executive for Good Reason, for a one-year period
commencing upon the date of termination, at the election of the Company,
exercised (A) at the beginning of such year, in the event of termination
other than for Cause or Disability or (B) within thirty (30) days of
Executive's notice of termination pursuant to Section 5(c) in the event of
termination by the Executive for Good Reason, provided, however, that in
each case with respect to such year (if elected), the Company shall pay the
Executive, in lieu of the amounts set forth in Section 5(c): (X) an amount
equal to the annual salary set forth in Section 3(a) hereof, payable in
twelve (12) equal monthly installments commencing on a date one month
following the date of termination; (Y) not later than one hundred twenty
(120) days after the end of the calendar year in which Executive's
employment was terminated, the amount that would have been payable to her
pursuant to Section 4 with respect to such calendar year, prorated for the
portion of such calendar year before her termination; and (Z) not later
than one hundred twenty (120) days after the end of such calendar year, an
amount equal to the annual bonus that would have been payable to her
pursuant to Section 4 with respect to such calendar year;
(iii) in the event of a termination due to the expiration of the term
of this Agreement, for a one-year period commencing upon the expiration of
the term of this Agreement, at the election of the Company, exercised no
later than one hundred and twenty (120) days prior to the beginning of such
year, provided that, during each month of such year, the Company pays the
Executive one-twelfth of the annual salary set forth in Section 3(a) hereof
and one-twelfth of the annual bonus set forth in Section 4 hereof with
respect to calendar year 2001.
(b) The Executive shall not, at any time during her employment by the
Company and thereafter until the second anniversary of the expiration of the
term of this Agreement, or, in the event of a termination by the Company other
than for Cause or Disability or by the Executive for Good Reason, until the
second anniversary of the date of such termination, (i) recruit, solicit for
employment, hire or engage, or assist any person or entity in recruiting,
soliciting for employment, hiring or engaging, any employee or consultant of the
Company, Sun or any of their subsidiaries or affiliates or any person who was an
employee or consultant of the Company, Sun or any of their subsidiaries or
affiliates within one year before the termination of the Executive's employment,
or (ii) negotiate or enter into, or assist any person or entity in negotiating
or entering into, a contract (oral or written) with any (x) manufacturers of, or
(y) contractors for, apparel whose facilities are in Mexico and who have
manufactured products for or contracted for products with the Company, Sun or
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any of their subsidiaries or affiliates or whose output, at the termination of
the Executive's employment, is substantially earmarked to make the Licensed
Products or other products for the Company, Sun or any of their subsidiaries or
affiliates; provided that, subject to subsection (a) of this Section 8, nothing
herein shall prevent the Executive, after her employment by the Company
terminates, from accepting employment from an employer which, prior to such
termination, was doing business with such manufacturer or contractor
independently of any relationship with or actions by the Executive.
(c) The one-year period set forth in sub-paragraph (a)(i) or (a)(ii) (if
elected) of this section, whichever is applicable, shall be extended for an
additional one-year period, at the election of the Company, exercised no later
than one hundred and eighty (180) days prior to the beginning of such additional
year, provided that, in each case during each month of such additional year (if
elected), the Company pays the Executive one-twelfth of the annual salary set
forth in Section 3(a) hereof and, if subparagraph (a)(ii) applied to the period
prior to the extension, (i) one-twelfth of the annual bonus set forth in Section
4 hereof with respect to the full year in which the Executive's employment was
terminated and (ii) an additional amount of $416,666.67.
(d) For the longer of any period applicable under this Section 8 or a
period of three years immediately following the date of termination, (i) the
Company, Sun and their respective affiliates shall not disparage the Executive
and (ii) the Executive shall not disparage the Company, Sun or their respective
affiliates, officers or directors.
(e) The Executive acknowledges that these provisions are necessary for the
protection of the Company, Sun and their subsidiaries and affiliates and are not
unreasonable, because the Executive would be able to recruit and hire personnel
other than employees of the Company, Sun and any of their subsidiaries and
affiliates and contract with manufacturers and contractors other than those
described in subsection (b). The Executive further agrees that a breach of
Section 6, 7 or 8 of this Agreement shall result in the immediate cessation of
any payments pursuant to this section and Section 5(c) hereof, if applicable.
The duration and the scope of these restrictions on the Executive's activities
are divisible, so that if any provision of this Section is held or deemed to be
invalid, that provision shall be automatically modified to the extent necessary
to make it valid. The ownership of less than 5% of the stock of a publicly owned
company which competes with the Company, Sun or any of their subsidiaries or
affiliates, in and of itself, shall not be considered a violation of the
provisions of this Section 8.
9. NOTICES. Any notice or other communication to the Company or to the
Executive under this Agreement shall be in writing and shall be considered given
when mailed by certified mail, return receipt requested, to such party at its or
her address first above written (or at such other address as such party may
specify by written notice to the other party). A copy of any notice or other
communication given to the Company or any notice or other communication to Sun
shall be given to Sun in writing by certified mail, return receipt requested,
addressed to Sun at 00000 Xxxxxx Xxxxx, Xx Xxxx, Xxxxx 00000, and 000 Xxxx 00xx
Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, both to the attention of Xx. Xxxx Xxxxxxxx.
10. BINDING NATURE OF AGREEMENT. The Company shall use its best efforts
to require any successor (whether direct or indirect, by purchase, merger,
consolidation or otherwise) to all or substantially all of the business or
assets of the Company expressly to assume and agree to perform this Agreement in
the same manner and to the same extent that the Company would be required to
perform if no such succession had taken place. For the purposes hereof, the term
"Company" shall mean the Company as defined in the opening Section of this
Agreement and any successor or assignee of the Company, which provides employees
and services to Sun in connection with the Polo Jeans Business. In the event the
Company is successful in having any such successor agree to assume this
Agreement, such successor or assignee shall execute and deliver an agreement to
be bound by all the terms and provisions of this Agreement by operation of law.
11. INDEMNIFICATION. The Company shall indemnify the Executive and hold
the Executive harmless, to the maximum extent permitted by applicable law, from
and against all claims, actions, suits, proceedings, loss, damage, liability,
costs, charges and expenses, including reasonable attorneys' fees and costs
arising in connection with the Executive's performance of her duties hereunder
or her status as an employee, officer,
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director or agent of the Company or Sun, in accordance with the Company's
indemnity policies for its senior executives.
12. MISCELLANEOUS.
(a) Since a breach of the provisions of this Agreement would injure the
Company or Sun irreparably, the Company or Sun may, in addition to its other
remedies, obtain an injunction or other comparable relief restraining any
violation or further violation of this Agreement, and no bond, security or other
undertaking shall be required of the Company or Sun in connection therewith.
(b) The provisions of this Agreement are separable, and if any provision of
this Agreement is invalid or unenforceable, the remaining provisions shall
continue in full force and effect.
(c) This Agreement constitutes the entire understanding and agreement
between the parties, supersedes all other existing agreements between them
(including the Prior Agreement) and cannot be amended unless such amendment is
in writing and signed by the both parties to this Agreement.
(d) This Agreement shall be governed by and construed in accordance with
the laws of the State of New York (other than its choice of laws rules), where
it has been entered and where it is to be performed. The parties hereto consent
to the exclusive jurisdiction of any federal or state court in the State of New
York to resolve any dispute arising under this Agreement or otherwise.
(e) The headings in this Agreement are solely for convenience of reference
and shall not affect its interpretation.
(f) The failure of either party to insist on 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. For any waiver of a provision of this
Agreement to be effective, it must be in writing and signed by the party against
whom the waiver is claimed.
(g) The obligations of the Executive and the Company hereunder shall
survive the termination of the term of this Agreement and the Executive's
employment hereunder to the extent necessary to give full effect to the
provisions of this Agreement.
13. CONDITION PRECEDENT. This Agreement, and all of its terms and
provisions, are conditioned upon the closing of the Agreement and Plan of Merger
by and among Xxxxx Apparel Group, Inc. ("Xxxxx"), Sun Acquisition Corp., Sun and
Sun's shareholders (the "Merger Agreement"), and shall become binding upon the
parties hereto only in such event. This Agreement, and all of its terms and
provisions, shall be of no force and effect in the absence of a closed Merger
Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
signed as of the date first above written.
X. X. MANAGEMENT, INC.
By:
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Name:
Title:
Xxxxx Xxxxxxxx
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EXHIBIT A
GUARANTY
The undersigned corporation, in consideration of the promises made by the
Executive for the benefit of the undersigned corporation, hereby guarantees the
due and punctual performance of the obligations of the Company, other than
collection, in accordance with the provisions of the within Employment
Agreement. This guaranty is a primary obligation of Sun. The Executive may
enforce this Guaranty against Sun without any prior enforcement of the
obligations of the Company under the Employment Agreement. For the purposes of
this Guaranty, the terms "Executive", "Company", "Employment Agreement" and
"Sun" shall have the same meaning as set forth in the Employment Agreement dated
September 10, 1998 between R.L. Management, Inc. and Xxxxx Xxxxxxxx.
DATED: As of
SUN APPAREL, INC.
By:
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Xxxx X. Xxxxxxxx
President
