SECOND AMENDMENT TO LICENSING AGREEMENT
THIS SECOND AMENDMENT ("Amendment") to Licensing Agreement is dated this 11th
day of June, 1997 by and between QVC, Inc. ("QVC") and Hydron Technologies, Inc.
("HTI").
BACKGROUND
A. On or about December 6, 1993, QVC and HTI entered into a Licensing Agreement
dated as of December 6, 1993 (the "License Agreement") and certain other
agreements and documents executed pursuant thereto (collectively the "Other 1993
Documents").
B. By a certain First Amendment dated as of May 31, 1996 (the "First Amendment")
QVC and HTI modified, in certain respects, their respective rights and duties
under the License Agreement. Hereinafter, the License Agreement, as modified by
the First Amendment, shall be referred to as the "Agreement". Unless otherwise
defined herein, all capitalized terms used in this Second Amendment shall have
the meanings ascribed to them in the Agreement.
C. Concurrently with the execution of the First Amendment, QVC and HTI executed
certain other agreements and documents, a list of which is attached hereto as
Exhibit "A" and incorporated herein by reference, which documents modified, in
certain respects, and supplemented, the Other 1993 Documents (collectively,
together with the Other 1993 Documents, the "First Amendment Documents").
D. Subsequent to the execution and delivery of the First Amendment and Other
First Amendment Documents, QVC has indicated to HTI that it would not make the
minimum purchases required to renew the term of the Agreement, and has requested
HTI to waive such minimum purchase requirement and extend the term of the
Agreement.
E. Subsequent to the execution of the First Amendment and the Other First
Amendment Documents, HTI established a customer service telephone toll free
number (together with all similar numbers established by HTI or its affiliates,
if any, collectively, the "Toll Free Number") which HTI has promoted on the
Programs.
F. QVC has a policy of refraining from the sale or lease of the names, addresses
and identities of its customers and of prohibiting any third parties outside the
control of QVC from using the names, addresses or identities of such customers
for any reason whatsoever, including without limitation, the solicitation of
sales (the "Policy").
G. QVC actively publicizes the Policy to its customers.
H. QVC and HTI have agreed to further modify the Amendment in certain respects.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, QVC and HTI agree as follows:
1. Amendments. The Agreement is hereby amended as follows:
(a) Paragraph 1(a) is hereby amended and restated in its entirety
as follows:
1(a) HTI grants to QVC, and QVC accepts, the following
license, rights and privileges (the License"): (i) the exclusive rights (both
for itself and through any Affiliate, provided that QVC remains obligated under,
and each affiliate agrees in writing to be bound by the terms of this Agreement)
in the Territory (as hereinafter defined) to Promote or cause others to Promote
the Consumer Products via all means and media (except Prestige Retail Channels
of Distribution (as hereinafter defined) and Catalogs (as hereinafter defined)
and (ii) the exclusive right, in the Territory, to use, publish, reproduce and
broadcast the Copyrights and the Trademarks via such means and media in
conjunction with such activities. For purposes of this Agreement, "Consumer
Products" shall mean all now existing or hereafter developed products utilizing
Hydron polymer technology which are or will be available to consumers, not
including prescription drugs, non-prescription drugs, medical devices, and
products specifically targeted to with benefits geared solely for the health
care field (e.g., hand lotion to prevent irritation or allergic reaction with
the use of latex gloves), ocular products, drug delivery systems, and the
products and fields set forth in the annexed Exhibit "A". Nothing herein shall
be construed to prohibit the development, production, marketing, distribution
and/or sale of products containing Hydron polymers by HTI to: (A) the health
care field (i.e., hospitals, other institutional customers, and individual
health care providers such as doctors, dentists and nurses) and (B) shareholders
(whether of record or beneficial) of HTI, for personal use and resale, provided
that the same are not resold by means of Direct Response Television.
Hereinafter, the Consumer Products shall sometimes be referred to as the
"Products" or "Merchandise". The "Territory" shall mean North America, South
America and Central America. "Prestige Retail Channels of Distribution" shall
mean traditional department (e.g., X.X. Xxxxxx) and specialty stores, specialty
boutiques, and beauty salons, but shall exclude all other channels of
distribution, including without limitation, discount stores, drug stores,
warehouse stores, superstores, and retail outlet stores. "Catalog" shall mean
printed promotional materials offering Consumer Products for sale to consumers
(other than direct response print advertisements for Consumer Products in third
party publications), including supplements, amendments and additions thereto,
consisting of one or
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more pages, in tangible or electronic form, including Internet sites, which
contains a listing or schedule of one or more products with descriptions
thereof, who may purchase Consumer Products listed in a Catalog by mail,
telephone, facsimile, e-mail and the aforementioned Internet sites; Catalog
Sales include sales generated from product sampling in stadium or arena signage
and advertising and radio advertising for any such Catalogs, sports "half-time
reports," and the promotion through the aforementioned Internet sites of
Hydron's catalogs. Nothing in this provision shall be construed to prevent HTI
from advertising the availability of its catalog through printed advertisements.
QVC and HTI acknowledge and agree that Consumer Products integrating Hydron
Polymer technology shall only be Promoted under the "Hydron" trademark.
(b) Paragraph 3(a) is amended and restated in its entirety as
follows:
3. (a) (i) The initial term of this Agreement shall commence upon
September 1, 1993 and end on May 31, 1997. The first renewal term of this
Agreement shall commence upon June 1, 1997 and end upon May 31, 1999 (the "First
Renewal Term"). Upon the expiration of the First Renewal Term, this Agreement
shall automatically continually renew for additional two (2) year terms (each, a
"Renewal Term") unless: (i) during the applicable Renewal Term, Net Purchases
(as defined below) were less than the applicable Minimum Amount (as defined
below); (ii) HTI provides QVC with written notice, during the thirty (30) day
period following the last day of any Renewal Term, of HTI's intent to terminate
the Agreement unless QVC cures such deficiency; and (iii) QVC fails to cure such
deficiency by the thirtieth (30th) day following the receipt of such notice by
QVC. The "Minimum Amount" shall mean Thirty Million Dollars ($30,000,000) with
respect to the First Renewal Term, and, with respect to each Renewal Term
thereafter, one hundred twenty (120%) percent of the Minimum Amount applicable
to the immediately preceding two (2) year term. "Net Purchases" shall mean the
aggregate of all Purchase Orders for Products issued by QVC or any of its
affiliates (except Purchase Orders issued by the joint venture formed by QDirect
Ventures. Inc. and Hydron Direct, Inc. as of May 31, 1996 ("Hydromercial
Partners") for the purpose of promoting the Consumer Products by means of a
certain infomercial, as the same may be modified from time to time) to HTI
during the applicable period, exclusive of credits, returns, allowances, taxes,
freight, shipping and handling charges, provided that such Purchase Orders are
paid in accordance with their terms.
(ii) Notwithstanding the foregoing, in the event that Net
Purchases during the period from June 1, 1997 until May 31, 1998 do not equal or
exceed Twelve Million Five Hundred Thousand Dollars ($12,500,000), this
Agreement shall terminate, provided that (i) HTI provides QVC with written
notice, no later than July 1, 1998, HTI's intent to terminate the Agreement
unless QVC cures such deficiency by
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August 1, 1998; and (ii) QVC does not issue additional Purchase Orders by the
thirtieth (30th) day following the receipt of such notice by QVC (the "Deadline
Date") such that Net Purchases for the period from June 1, 1997 through the
Deadline Date equal or exceed Twelve Million Five Hundred Thousand Dollars
($12,500,000). Any Purchase Order(s) issued for the purpose of curing any
deficiency in the applicable Minimum Amount shall be included in calculating Net
Purchases solely for the period in which such deficiency occurred.
(iii) Notwithstanding the foregoing, in the event that Net
Purchases during the first one year period of any Renewal Term of this Agreement
(each, an "Interim Period") do not equal or exceed forty-two (42%) percent of
the applicable Minimum Amount (the "Minimum Interim Amount"), this Agreement
shall terminate, provided that (i) HTI provides QVC with written notice, no
later than thirty (30) days following the last day of the Interim Period, of
HTI's intent to terminate the Agreement unless QVC cures such deficiency; and
(ii) QVC does not cure such deficiency by the thirtieth (30th) day following the
receipt of such notice by QVC. Any Purchase Order(s) issued for the purpose of
curing any deficiency in the applicable Minimum Amount shall be included in
calculating Net Purchases solely for the period in which such deficiency
occurred.
(c) Paragraph 5(c) of the Agreement is hereby supplemented by the
following language to be inserted at the end of paragraph 5(c):
Notwithstanding the foregoing, no royalties shall accrue on
any Net Sales achieved through Prestige Retail Channels of Distribution during
the period commencing on the effective date of this Second Amendment and ending
on the date Net Purchases made after May 31, 1997 reach Twelve Million Five
Hundred Thousand Dollars ($12,500,000).
2. The Agreement is hereby supplemented by the addition of the following
new paragraphs:
27. (a) For purposes of this Agreement, "QVC Confidential
Information" means all names, addresses and identities of any individuals that
have purchased products from QVC at any time during the term of this Agreement
except (i) any such individuals who contacted HTI prior to June 1, 1997; (ii)
individuals included in any customer list purchased by HTI from any third party;
(iii) any customers of QVC who independently contacted HTI in response to any
promotion of any Catalog authorized by this Agreement; and (iv) any customer of
QVC who
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purchased products, including without limitation, Consumer Products, from HTI
prior to purchasing any Consumer Products from QVC.
(b) HTI shall not use or disclose any QVC Confidential
Information to any person or entity whatsoever at any time during the term of
this Agreement or thereafter. HTI shall use not less than the same degree of
care to avoid disclosure of such QVC Confidential Information as HTI uses for
HTI Confidential Information. HTI shall use reasonable efforts to ensure that
QVC Confidential Information and all materials relating to QVC at the premises
of HTI or in the control of HTI shall be stored at locations and under such
conditions as to prevent the use and unauthorized disclosure or duplication of
such information and materials.
(c) The restrictions on disclosure of QVC Confidential
Information shall not apply to any QVC Confidential Information which: (i) is
independently developed by HTI or its affiliated companies or lawfully received
free of restriction from another source having the right to so furnish such
information including any customer lists obtained by HTI other than as a result
of its relationship with QVC pursuant to this Agreement; (ii) becomes generally
available to the public without breach of this paragraph 27 by HTI or its
affiliated companies; (iii) at the time of disclosure to HTI was known to such
party or its affiliated companies free of restriction; or (iv) HTI is required
to disclose pursuant to subpoena or other governmental mandatory process
provided that before making such disclosure HTI shall give QVC adequate
opportunity to interpose an objection or take action to assure confidential
handling of such QVC Confidential Information.
(d) All QVC Confidential Information disclosed to or compiled
by HTI, whether in tangible or intangible form, shall be and remain property of
QVC. All such QVC Confidential Information in tangible form shall be returned to
QVC promptly upon written request and shall not thereafter be retained in any
form by HTI. The rights and obligations of the parties under this
Confidentiality Agreement shall survive any such return of Confidential
Information.
(e) HTI agrees to: (i) maintain accurate books and records
with respect to: (A) all telephone calls to and from the telephone lines used in
connection with the Toll Free Number and (B) the names and addresses of all
individuals to whom HTI has sold any products, including without limitation
Consumer Products at its address set forth in the first paragraph of this Second
Amendment; (ii) inquire of each caller to the Toll Free Number the source (if
any) from which such caller became aware of the Consumer Products; and (iii)
maintain accurate written records of each caller's response to such inquiry.
(f) HTI agrees to refrain from the use and disclosure of any
Confidential Information during the term of this Agreement and thereafter for
any purpose
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whatsoever. Upon the expiration or termination of this Agreement, an independent
third party shall conduct a comparison of all names, addresses and other data
compiled by HTI concerning its customer base and the customer names contained in
the database of QVC (a "Reconciliation"). In the event that such Reconciliation
reveals names and/or addresses common to QVC and HTI, then in such event, such
names shall be purged from the database of HTI, provided that, (i) such
customers contacted HTI after March 1, 1997; (ii) such customers purchased
Consumer Products from QVC prior to purchasing products, including Consumer
Products from HTI; (iii) such customers were not included in any customer list
purchased by HTI from any third party unless such customers are identified in
subparagraph (ii) above; or (iv) such customers independently contacted HTI in
response to any promotion of any Catalog authorized by this Agreement unless
such customers are identified in subparagraph (ii) above.
(g) Notwithstanding anything to the contrary contained in this
Agreement, subsequent to the expiration or termination of this Agreement, HTI is
free to sell to any and all of such purged customers only if such purged
customers independently contact HTI, whether as the result of HTI's advertising,
marketing or otherwise following the expiration or termination of this
Agreement.
(h) HTI represents that as of March 1, 1997, it has compiled
not more than 50,000 names in its customer database, that such names are the
result of its promotional efforts described in paragraph 27(i) below, and that
not more than 10,500 names in its database are customers of QVC. HTI further
represents that as of the date hereof, HTI has sold products to not more than
8,000 individuals. HTI further represents that it has no information in its
possession regarding the names, addresses and identities of QVC's customers as
of the date hereof, except (A) any names it may have in its possession as a
result of unsolicited calls to HTI from QVC's customers and (B) approximately
280 names delivered to HTI by QVC for the purpose of implementing a continuity
promotion conducted by Hydromercial Partners. Hydron further represents that the
names, addresses and identities of its customers are contained in, and will
continue to be compiled and maintained in its database located at its
headquarters. HTI further represents that it has not maintained records that
would allow HTI to determine the whether any of the customers in its database
were or are QVC customers. QVC acknowledges that the absence of such information
shall not constitute a breach of this Agreement.
(i) HTI represent that its promotional efforts with respect to
Consumer Products have been limited to: (a) advertisements and sampling programs
which took place in stadiums and sports arenas; (b) advertisements placed in
national magazines, Exito (Spanish language newspaper published in Miami,
Florida), USA Today (national newspaper) and on the Internet for its Catalog;
(c) the mailing of its Catalog to (i) its shareholders, (ii) individuals whose
names it obtained from American Express, (iii) season ticket holders for the
Miami Dolphins and
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Miami Heat; (iv) individuals who responded to advertisements referenced in
(i)(a) and (b) above and (v) radio advertising on WIOD (Hollywood, Florida) and
(d) the promotional efforts described in Exhibit "B" attached hereto and
incorporated herein by reference. HTI has disclosed to QVC and QVC acknowledges
that HTI has sent not more than 10,500 Catalogs to QVC customers, which
customers contacted HTI as a result of the mention of the Toll Free Number on
the Programs prior to the date of this Agreement, or otherwise.
(j) QVC shall not have any liability or responsibility for
errors or omissions in, or any business decisions made by HTI in reliance on,
any QVC Confidential Information.
(k) HTI acknowledges that the QVC Confidential Information is
valuable and unique and that any breach by HTI of its obligations under this
paragraph 27 would result in irreparable harm to QVC and that monetary damages
would be insufficient to compensate QVC for such breach. In the event of any
breach of this paragraph 27 by HTI, QVC will be entitled to immediate injunctive
relief by any court of competent jurisdiction in addition to any other relief to
which QVC may be entitled. HTI further acknowledges that any breach of this
paragraph 27 with respect to the Confidential Information would diminish the
credibility of the Policy and damage the reputation of QVC. Notwithstanding the
foregoing, if QVC learns of any isolated incident which appears to constitute an
intentional breach of this paragraph 27 and provided that such incident involves
less than ten (10) customer names during any six (6) month period, QVC agrees to
provide HTI with notice of such incident and the opportunity to provide QVC with
evidence that such incident does not constitute a breach of this Agreement, no
later than ten (10) business days following the receipt of such notice by HTI,
prior to the enforcement of its rights pursuant to this Agreement.
(l) For purposes of allowing QVC to verify HTI's compliance
with this paragraph 27, HTI grants to QVC the right to audit the records of HTI
maintained pursuant to paragraph 27, once annually during the term of this
Agreement and the two (2) year period thereafter, during the hours of 9:00 a.m.
until 5:00 p.m., local time, at QVC's expense provided that QVC has notified HTI
of its intention to conduct such an audit at least thirty (30) days in advance.
HTI agrees that within the thirty (30) days following the execution of this
Amendment, a designee of QVC may review HTI's database to verify the
representations and warranties made by HTI pursuant to this Amendment, and that
in the event that any such representations are found to be materially untrue,
QVC shall have the right, but not the obligation, to nullify this Amendment, at
its sole option. With respect to HTI's representation regarding the number of
customers in its database, the number of individuals to whom it has sold
Consumer Products, the number of names in its database who may be customers of
QVC, and the number of names in its database who may be customers of QVC who
received Catalogs, any representation that is
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demonstrated to exceed the number of names represented by more than ten percent
(10%) of such number as of the date such representation was made, shall be
considered materially untrue.
28. QVC agrees that it shall:
(a) devote four (4) hours per calendar month to the Promotion
of Consumer Products, which hours shall include one regularly-scheduled Program
per calendar month of two (2) hours in duration (the "Scheduled Hours"), on the
tenth (10th) of each month from 6:00 p.m. to 8:00 p.m. eastern time, or during
equal or better time, provided, however, that QVC shall have the right to
terminate its obligations under this paragraph 28(a) upon ninety (90) days
written notice to HTI;
(b) conduct three (3) sample test programs for Consumer
Products to be selected by HTI and QVC, which programs shall consist of: (i) the
purchase by QVC of samples of Consumer Products at a price equal to the sum of:
(A) one hundred and ten percent (110%) of HTI's direct cost of such Products
("Direct Cost") and (B) five percent (5%) of Direct Cost; (ii) the shipping of
such samples to individuals designated by QVC; and (iii) the monitoring of sales
of Consumer Products by QVC arising as a result of the foregoing. QVC shall make
reasonable efforts to conduct the above-described sample programs within the
three (3) month period following the execution of this Amendment.
29. HTI agrees that it shall:
(a) Refrain from promoting any Toll Free Number, any Catalog
and any Internet site on the Programs.
(b) Commencing as of June 1, 1997, HTI agrees to refrain from
soliciting QVC customers for sales, even if QVC customers call any Toll Free
Number and will to refrain from adding such customers to HTI's database unless
such customers request a catalog from HTI. Notwithstanding anything to the
contrary set forth in this Agreement, HTI, however, shall not be prohibited from
selling any products through Prestige Channels of Distribution and Catalogs, to
QVC customers who are in possession of an HTI catalog or who independently
contact HTI for the purpose of purchasing Consumer Products or from promoting
its Catalog as authorized by this Agreement.
30. Notwithstanding anything to the contrary contained in this
Agreement, QVC acknowledges that there are none, and shall be no restrictions
imposed by QVC on HTI, Xxxxxx Xxxxxx, or Xxxxxxx Xxx in connection with the
means of promotion of HTI catalogs, so
8
long as such promotion does not violate this Agreement including without
limitation, paragraph 6 of this Agreement.
3. Ratification of Existing Agreements. Except as expressly modified by
this Second Amendment, all agreements entered into between QVC and HTI and or
their respective affiliates, as amended through the date hereof, including
without limitation, the Agreement and the Other First Amendment Documents shall
remain in full force and effect, and QVC and HTI each hereby ratify their
respective representations, warranties, covenants, and other obligations
thereunder.
4. Representations and Warranties.
(a) Each of HTI and QVC represent, warrant and covenant, that: (i)
it possesses the full power and exclusive right to enter into this Agreement;
(ii) the execution, delivery and performance of this Amendment does not violate
any agreement to which it is a party or any instrument, judgment, order or award
of any court or arbitrator or any applicable law, rule or regulation; (iii) all
of the representations, warranties and covenants set forth in the Agreement are
true and correct as of the date hereof. The representations, warranties and
covenants set forth in this Amendment, as well as any terms of the Agreement
which by their nature imply survivorship, shall survive the expiration or
termination of this Agreement. Each of QVC and HTI shall provide the other with
any and all documents reasonably required or requested by QVC at any time and
from time to time to support the representations and warranties contained in
this Amendment and in the Agreement.
5. Effectiveness. This Amendment shall become effective upon the execution
of this Amendment by a duly authorized representative of each of QVC and HTI.
[THIS SPACE INTENTIONALLY LEFT BLANK]
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6. Counterparts. This Amendment may be executed in counterparts, which,
taken together, shall constitute one and the same Amendment.
IN WITNESS WHEREOF, and intending to be legally bound hereby, the parties have
executed this Second Amendment as of the date first above written.
QVC, Inc. Hydron Technologies, Inc.
By: /s/ Xxxx X. Xxxxxxx By: /s/ Xxxxxx Xxxxxx
------------------------- -------------------------
Xxxxxx Xxxxxx
Its: Senior Vice President President
------------------------
Acknowledged and agreed to:
as to par. 30 only
/s/ Xxxxxx Xxxxxx
-------------------------
Xxxxxx Xxxxxx
Date: 6/11/97
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EXHIBIT "A"
Other 1993 Documents
(See Attached)
Closing Documents
1. Amendment to Licensing Agreement dated December 6, 1993 by and between QVC
and HTI
a) "Exhibit A"
b) "Schedule 1";
2. Letter Agreement dated July 22, 1996 between QVC and HTI;
3. Exercise Notice, Series "A" Warrant dated as of May 31, 1996 executed by
QVC, Inc. (200,000 shares of HTI common stock, par value $.01/share);
4. Warrant Certificate, Series "A" Warrant dated as of December 6, 1993
executed by HTI in favor of QVC (200,000 shares of HTI common stock, par
value $.01/share);
5. Exercise Notice, Series "B" Warrant dated as of May 31, 1996 executed by
QVC, Inc. (300,000 shares of HTI common stock, par value $.01/share);
6. Warrant Certificate, Series B Warrant dated as of December 6, 1993
executed by HTI in favor of QVC (300,000 shares of HTI common stock, par
value $.01/share);
7. Check dated July 19, 1996 drawn on the account of QVC payable to the order
of HTI in the sum of One Million Two Hundred Fifty Thousand Dollars
($1,250,000.00);
8. Warrant Purchase Agreement dated as of May 31, 1996 by and between QVC and
HTI;
9. Series "C" Warrant dated as of May 31, 1996 executed by HTI in favor of
QVC (250,000 shares, HTI common stock, par value $.01/share);
10. Termination Letter dated as of May 31, 1996, executed by DTR in favor of
QVC;
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11. Withdrawal Notice dated as of May 31, 1996, executed by DTR;
12. Reconciliation of books and records of the joint venture formed by
QDirect, HDirect and DTR pursuant to a Letter Agreement dated January 17,
1995 by and among QDirect, HDirect and DTR;
13. Joint Venture Agreement dated as of May 31, 1996 by and between QVC and
HTI;
14. Stock Certificate, 500,000 shares, HTI common stock (par value $.01/share)
issued to QVC.
ii
HYDRON TECHNOLOGIES, INC.
Scheduled Events: Charity and Community Involvement
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Date/Time/ Event Name and Date/Time/Place Event Name and
Place Coordinators Coordinators
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February 15, Miss Boca Raton March 9, Sunday at Comprehensive AID's
Saturday at Scholarship Pageant 11:30 a.m., Boca Center Program 4th Annual Saks
7:00 p.m, The Elks Lodge/Boca Marriott, Military Trail, Fifth Avenue Fashion
Olympic Ballet/Miss America Boca Luncheon Event
Heights
Performing Arts Audience: 850 Audience: 300
Theater, Boca
Raton
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February 19, Hall of Champions, March 18, Tuesday at Boca Hoops Youth
Wednesday at Greater Miami FAU Gymnasium, Glades Basketball Program
6:00 p.m., Miami Chamber of Rd, Boca
Airport Hilton Commerce, 1997 Audience: 500
& Towers, 1501 Lifetime Contribution
Blue Lagoon to Sports
Dr., Miami
Audience: 500
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February 27, Marlboro Grand Prix April 2, Wednesday at The South Florida Chapter
Thursday, of Miami Charity 6:00 p.m., Fontainebleau of the American Society
6:30 p.m. Celebration Hilton Hotel, Miami, FL for Technion Israel
Vizcaya, Miami, Institute of Technology
Audience: 500
Audience: 115
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May 3-4, Sat & Sun.
Shell, Sea & Air Show
Ft. Lauderdale, FL
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