EMPLOYMENT AGREEMENT
Exhibit 10.2
Execution copy
THIS EMPLOYMENT AGREEMENT (this
“Agreement”)
is made and entered this 22nd day of July, 2021 (the
“Effective
Date”) between cbdMD, Inc., a North Carolina
corporation whose principal place of business is 0000 Xxx Xxx
Xxxxxxxxx, Xxxxxxxxx, XX 00000 (the “Company”)
and Xxxx X. Xxxxxxxx III, an individual whose address is
0000 Xxxx Xxx Xxxx, Xxxxxxxxx, XX
28270(the “Employee”)
(each a “Party”
and collectively the “Parties”).
RECITALS
WHEREAS, the Company is a manufacturer
and distributor of a variety of cannabidiol (CBD) based products
(the “Business”).
WHEREAS, the Employee served as Chief
Executive Officer of Twenty Two Capital, LLC (“Twenty Two
Capital”), an entity that sold certain assets to the
Company pursuant to the terms and conditions of that certain Asset
Purchase Agreement dated July 22, 2021 by and among Twenty Two
Capital, the Company, Vieo Design, LLC, Xxxxxxx X. Xxxxxxx and
the Employee (the “APA”).
WHEREAS, the Company desires to employ
the Employee and the Employee desires to be employed by the Company
pursuant to the terms of this Agreement and the execution of this
Agreement is a condition to closing the APA.
WHEREAS, the Employee, by virtue of the
Employee’s employment with the Company, will become familiar
with the manner, methods, trade secrets and other confidential
information pertaining to the Company’s business, including
the Company’s client base.
WHEREAS, this Agreement shall supersede
any prior service agreement between the Company and the Employee
and render prior consulting contracts null and void.
NOW, THEREFORE, in consideration of the
mutual agreements herein made, the Company and the Employee do
hereby agree as follows:
1. Recitals.
The above recitals are true, correct, and are herein incorporated
by reference.
2. Employment.
The Company hereby agrees to employ the Employee, and the Employee
hereby accepts employment with the Company, upon the terms and
conditions hereinafter set forth.
3. Authority and Power
During Employment Period.
(a) Duties and
Responsibilities. During the term of this Agreement, the
Employee will serve as Chief Revenue Officer of the Company and in
this capacity, shall have such duties and responsibilities
consistent with Employee’s title(s), status, and position as
the Company’s Chief Revenue Officer. The Employee will
initially report to Xxxxx Xxxxxxx, the Company’s Co-Chief
Executive Officer.
(b) Time
Devoted. Throughout the term of the Agreement, the Employee
shall devote substantially all of the Employee’s business
time and attention to the business and affairs of the Company
consistent with the Employee’s position with the Company,
except for reasonable vacations and except for illness or
incapacity, but nothing in the Agreement shall preclude the
Employee from engaging in a business other than the Business of the
Company which does not compete with the Company, upon notice to the
Audit Committee of the Board of Directors of the Company, provided
that such activities do not interfere with the regular performance
of the Employee’s duties and responsibilities under this
Agreement.
(c) Corporate
Policies. The Employee shall abide by all corporate
governance and employment policies of the Company which may be
adopted or modified from time to time including, but not limited
to, the Company’s xxxxxxx xxxxxxx and code of ethics
policies.
4. Term. The
initial term (“Initial
Term”) of employment hereunder will commence on the
Effective Date and end on the second (2nd) anniversary of the
Effective Date and may be extended for additional one (1) year
periods (each a “Renewal
Term”) upon mutual consent of the Parties by written
notice given by the Company to the Employee at least thirty (30)
days before the expiration of the Initial Term or the Renewal Term,
as the case may be, unless this Agreement shall have been
terminated pursuant to Section 6 of this Agreement. When used
herein, ‘Term”
shall mean the Initial Term and any Renewal Term(s).
5. Compensation and
Benefits.
(a) Salary. The
Employee shall be paid a base salary (“Base
Salary”), payable in accordance with the
Company’s policies from time to time for Employees, at an
annual rate of One Hundred Eighty Thousand dollars ($180,000).
Commencing on the Effective Date, the Base Salary thereafter may be
increased, but not decreased, from time to time, by the
Compensation Committee of the Board of Directors of the Company
(the “Company
Compensation Committee”) in connection with reviews of
Employee’s performance, which such reviews shall occur no
less frequently than annually.
(b) Discretionary
Bonus.
(1) The
Company Compensation Committee shall review the Employee’s
performance on an annual basis, based on the Company’s
September 30 fiscal year end and in connection with such annual
fiscal year review, the Employee may be entitled to receive an
annual discretionary bonus (the “Annual
Discretionary Bonus”) in such amount up to 40% of the
Employee’s Base Salary as may be determined by Xxxxx Xxxxxxx,
the Company’s Co-Chief Executive Officer, upon recommendation
of the Company Compensation Committee, in its sole
discretion.
(2) The
Company Compensation Committee shall commence each annual fiscal
year review by the last business day of October the following year.
The Annual Discretionary Bonus, if any, shall be paid to the
Employee by the last business day of December of the following
fiscal year, or, if no Annual Discretionary Bonus is awarded, the
Company Compensation Committee shall so notify the Employee in
writing of such determination by the last business day of December
of the following fiscal year. For example, the Company Compensation
Committee review for the year ending September 30, 2021 shall
commence no later than October 31, 2021, and, assuming an Annual
Discretionary Bonus is to be awarded, the Employee shall be paid
the Annual Discretionary Bonus for the year ending
September 30, 2021 on or before December 30, 2021. The Annual
Discretionary Bonus, if any, shall be paid to the Employee in the
form of cash.
(c) Performance
Bonus. During the Term, the Employee will be eligible for a
one time cash performance bonus of One Hundred Sixty Thousand
($160,000) Dollars (the “Performance
Bonus”) payable in cash upon the Company reporting
Total Net Sales equal or exceeding Sixteen Million ($16,000,000)
Dollars for any fiscal quarterly period prior to September 30, 2022
(“Performance Bonus
Period”). For this purposes of this Agreement,
“Total Net
Sales” shall be the Company’s total net sales as
reported on its consolidated statement of income included in its
consolidated financial statements appearing in its Quarterly Report
on Form 10-Q or Annual Report on Form 10-K for any period ending
prior to June 30, 2022. Total Net Sales shall exclude all
sales and/or revenues generated in Japan.
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(d) Employee
Benefits. The Employee shall be entitled to participate in
all benefit programs of the Company currently existing or hereafter
made available to Employee and/or salaried employees including, but
not limited to, stock option plans, pension and other retirement
plans, group life insurance, hospitalization, surgical and major
medical coverage, sick leave, salary continuation, vacation and
holidays, long-term disability, and other fringe benefits. The
Employee shall be eligible to participate in the Company’s
2021 Equity Compensation Plan commencing June 30, 2022 as
determined and in the sole discretion of the Company’s
Compensation Committee.
(e) Vacation.
During each fiscal year of the Company, the Employee shall be
entitled to such amount of vacation as set forth in the Company
Handbook, as provided to the Employee prior to the Effective Date,
consistent with the Employee’s position and length of service
to the Company.
(f) Business Expense
Reimbursement. During the Term of employment, the Employee
shall be entitled to receive proper reimbursement for all
reasonable, out of-pocket expenses incurred by the Employee (in
accordance with the policies and procedures established by the
Company) in performing services hereunder, provided the Employee
properly accounts therefor.
(g) Clawback
Provisions. Notwithstanding any other provisions in this
Agreement to the contrary, any incentive-based compensation, or any
other compensation, paid to the Employee pursuant to this Agreement
or any other agreement or arrangement with the Company which is
subject to recovery under any law, government regulation or stock
exchange listing requirement, will be subject to such deductions
and clawback as may be required to be made pursuant to such law,
government regulation or stock exchange listing requirement (or any
policy adopted by the Company pursuant to any such law, government
regulation or stock exchange listing requirement).
6. Termination.
(a) Termination by the
Company For Cause.
(1) The
Company may terminate the Term and Employee’s employment for
Cause, as hereinafter defined. The Employee shall continue to
receive compensation only for the period ending with the date of
such termination as provided in this Section 6(a). Any rights and
benefits the Employee may have in respect of any other compensation
shall be determined in accordance with the terms of such other
compensation arrangements or such plans or programs.
(2) “Cause”
shall mean (A) committing or participating in an injurious act of
fraud, misrepresentation, embezzlement or material dishonesty
against the Company; ; (B) engaging in a criminal enterprise
involving moral turpitude; (C) conviction for a felony under the
laws of the United States or any state thereof; (D) violation of
any Federal or state securities laws, rules or regulations, or any
rules or regulations of any stock exchange or other market on which
the Company’s securities may be listed or quoted for trading;
(E) Employee’s material failure to comply with the
Company’s corporate governance policies that have been
previously communicated or otherwise made available to Employee, as
they may be in effect from time to time; or (F) any assignment of
this Agreement in violation of Section 14 of this
Agreement.
(3) Notwithstanding
anything else contained in this Agreement, this Agreement will not
be deemed to have been terminated for Cause unless and until there
shall have been delivered to the Employee a notice of termination
stating that the Employee committed one of the types of conduct set
forth in Section 6(a)(2) of this Agreement and specifying the
particulars thereof and the Employee shall be given a thirty (30)
day period to cure such conduct set forth in Section
6(a)(2).
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(b) Termination by the
Company Without Cause.
(1) This
Agreement is “at will”. Either Party may terminate this
Agreement with or without cause at any time upon giving the other
Party thirty (30) days’ prior written notice. During such
thirty (30) day period, the Employee shall continue to perform the
Employee’s duties pursuant to this Agreement. Notwithstanding
any such termination, the Company shall continue to pay to the
Employee the Base Salary and Employee Benefits he would be entitled
to receive under this Agreement through the date of termination in
accordance with the Company’s regular payroll policies and
shall have no other payment obligations except as expressly
provided herein.
(2) In
the event that the Employee’s employment with the Company is
terminated pursuant to this Section 6(b), the Employee’s
stock options and/or restricted shares granted to the Employee
during the Term (to the extent not fully vested as of the
termination date), shall become fully vested as of the termination
date, and the Employee shall be permitted to exercise such options
for up to twelve (12) months following the termination
date.
(c) Voluntary
Termination. If the Employee terminates the Employee’s
employment on the Employee’s own volition prior to the
expiration of the Term of this Agreement, including any renewals
thereof, such termination shall constitute a voluntary termination
and in such event the Employee shall be limited to the same rights
and benefits as provided in connection with a termination for Cause
as provided in Section 6(a).
7. Covenant Not To
Compete and Non-Disclosure of Information.
(a) Covenant Not To
Compete. The Employee acknowledges and recognizes the highly
competitive nature of the Company’s Business and the
goodwill, continued patronage, and the names and addresses of the
Company’s Clients (as hereinafter defined) constitute a
substantial asset of the Company having been acquired through
considerable time, money and effort. Accordingly, in consideration
of the execution of this Agreement, and as except as may
specifically otherwise approved by the Company’s Board of
Directors, the Employee agrees to the following:
(1) That
during the Restricted Period (as hereinafter defined) and within
the Restricted Area (as hereinafter defined), the Employee will
not, individually or in conjunction with others, directly or
indirectly, engage in any Business Activities (as hereinafter
defined), whether as an officer, director, proprietor, employer,
partner, independent contractor, investor (other than as a holder
solely as an investment of less than four and ninety-nine one
hundreds percent (4.99%) of the outstanding capital stock of a
publicly traded company), consultant, advisor, agent or
otherwise.
(2) That
during the Restricted Period and within the Restricted Area, the
Employee will not, directly or indirectly, compete with the Company
by soliciting, inducing or influencing any of the Company’s
Clients which have a business relationship with the Company and
with whom Employee had Material Contact at the time during the
Restricted Period to discontinue or reduce the extent of such
relationship with the Company.
(3) That
during the Restricted Period and within the Restricted Area, the
Employee will not (A) directly or indirectly recruit, solicit or
otherwise influence any employee or agent of the Company to
discontinue such employment or agency relationship with the
Company, or (B) employ or seek to employ, or cause or permit any
business which competes directly with the Business Activities of
the Company (the “Competitive
Business”) to employ or seek to employ for any
Competitive Business any person who is then (or was at any time
within two (2) years prior to the date Employee or the Competitive
Business employs or seeks to employ such person) employed by the
Company. Nothing in Section 7(a)(1) and (3), however, shall
prohibit Employee for a period of forty-five (45) days from the
Effective Date from engaging in the sale, manufacture, or
distribution of Delta 8 products pursuant to transition services
for Decoy Holdings, LLC.
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(b) Non-Disclosure of
Information. The Employee acknowledges that the
Company’s trade secrets, private or secret processes, methods
and ideas, as they exist from time to time, customer lists and
information concerning the Company’s sources, products,
services, pricing, formula, training methods, development,
technical information, marketing activities and procedures, credit
and financial data concerning the Company and/or the
Company’s Clients, and (the “Proprietary
Information”) are valuable, special and unique assets
of the Company, access to and knowledge of which are essential to
the performance of the Employee hereunder. In light of the highly
competitive nature of the industry in which the Company’s
Business is conducted, the Employee agrees that all Proprietary
Information, heretofore or in the future obtained by the Employee
as a result of the Employee’s association with the Company
shall be considered confidential.
In
recognition of this fact, the Employee agrees that the Employee,
during the Restricted Period, will not use or disclose any of such
Proprietary Information for the Employee’s own purposes or
for the benefit of any person or other entity or organization
(except the Company) under any circumstances unless such
Proprietary Information has been publicly disclosed generally or,
unless upon written advice of legal counsel reasonably satisfactory
to the Company, the Employee is legally required to disclose such
Proprietary Information. Documents (as hereinafter defined)
prepared by the Employee or that come into the Employee’s
possession during the Employee’s association with the Company
are and remain the property of the Company, and when this Agreement
terminates, such Documents shall be returned to the Company at the
Company’s principal place of business, as provided in the
Notice provision (Section 10) of this Agreement.
(c) Documents.
“Documents”
shall mean all original written, recorded, or graphic matters
whatsoever, and any and all copies thereof, including, but not
limited to: papers; books; records; tangible things;
correspondence; communications; telex messages; memoranda;
work-papers; reports; affidavits; statements; formulas; summaries;
analyses; evaluations; client records and information; agreements;
agendas; advertisements; instructions; charges; manuals; brochures;
publications; directories; industry lists; schedules; price lists;
client lists; statistical records; training manuals; computer
printouts; books of account, records and invoices reflecting
business operations; all things similar to any of the foregoing
however denominated. In all cases where originals are not
available, the term “Documents” shall also mean
identical copies of original documents or non-identical copies
thereof.
(d) Company’s
Clients. The “Company’s
Clients” shall be deemed to be any persons,
partnerships, companies, professional associations or other
organizations for or with whom
the Company or Twenty-Two Capital, prior to the APA, has performed
Business Activities, including, but
not limited to, suppliers or vendors with whom the Company or
Twenty-Two Capital, prior to the APA, has done or is endeavoring to
do business.
(e) Restrictive
Period. The “Restrictive
Period” shall be deemed to be one (1) year following
termination of this Agreement.
(f) Restricted
Area. The “Restricted
Area” shall be deemed to mean anywhere in the United
States that Employee worked, represented the Company, had
responsibilities on behalf of the Company or had Material Contact
with the Company’s Clients during any portion of the twelve (12) months prior
to the termination of Employee’s employment.
(g) Business
Activities. “Business
Activities” shall be deemed to include the Business,
and any additional activities which the Company or any of its
affiliates may engage in, as conducted by Employee for or on behalf
of the Company during any portion
of the twelve (12) months prior to the termination of
Employee’s employment.
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(h) Material
Contact shall be deemed to mean any interaction during the
twelve (12) months prior to the termination of Employee’s
employment between Employee and any Company Client (i) with whom or
which Employee dealt on behalf of the Company (ii) whose dealings
with the Company were coordinated or supervised by Employee, or
(iii) about whom Employee obtained Proprietary Information in the
ordinary course of business as a result of Employee’s
association with the Company.
(i) Covenants as
Essential Elements of this Agreement. It is understood by
and between the Parties hereto that the foregoing covenants
contained in Sections 7(a) and (b) are essential elements of this
Agreement, and that but for the agreement by the Employee to comply
with such covenants, the Company would not have agreed to enter
into this Agreement. Such covenants by the Employee shall be
construed to be agreements independent of any other provisions of
this Agreement. The existence of any other claim or cause of
action, whether predicated on any other provision in this
Agreement, or otherwise, as a result of the relationship between
the Parties shall not constitute a defense to the enforcement of
such covenants against the Employee. To the extent that the covenants contained in this
Section 7 may later be deemed by a court to be too broad to be
enforced with respect to their duration or with respect to any
particular activity or geographic area, the court making such
determination shall have the power to reduce the duration or scope
of the provision, and to add or delete specific words or phrases to
or from the provision. The provision as modified shall then be
enforced.
(j) Survival After
Termination of Agreement. Notwithstanding anything to the
contrary contained in this Agreement, the covenants in Sections
7(a) and (b) shall survive the termination of this Agreement and
the Employee’s employment with the Company.
(k) Remedies.
(1) The
Employee acknowledges and agrees that the Company’s remedy at
law for a breach or threatened breach of any of the provisions of
Section 7(a) or (b) herein, as determined by a court of competent
jurisdiction, would be inadequate and the breach shall be per se
deemed as causing irreparable harm to the Company. In recognition
of this fact, in the event of a breach by the Employee of any of
the provisions of Section 7(a) or (b), as determined by a court of
competent jurisdiction, the Employee agrees that, in addition to
any remedy at law available to the Company, including, but not
limited to monetary damages, all rights of the Employee to payment
or otherwise under this Agreement and all amounts then or
thereafter due to the Employee from the Company under this
Agreement may be terminated and the Company, without posting any
bond, may be entitled to obtain equitable relief in the form of
specific performance, a temporary restraining order, temporary or
permanent injunction or any other equitable remedy which may then
be available to the Company.
8. Indemnification.
The Employee shall be covered by the Articles of Incorporation and
Bylaws of the Company with respect to matters occurring on or prior
to the date of termination of the Employee’s employment with
the Company, subject to all the provisions of North Carolina and
Federal law, the Articles of Incorporation, the Company and the
Bylaws of the Company then in effect. Such reasonable expenses,
including attorneys’ fees, that may be covered by these
indemnification provisions shall be paid by the Company on a
current basis in accordance with such provision, the
Company’s Articles of Incorporation, Bylaws and North
Carolina law. To the extent that any such payments by the Company
pursuant to these provisions may be subject to repayment by the
Employee pursuant to the provisions of the Articles of
Incorporation and/or Bylaws, or pursuant to North Carolina or
Federal law, such repayment shall be due and payable by the
Employee to the Company within twelve (12) months after the
termination of all proceedings, if any, which relate to such
repayment and to the Company’s affairs for the period prior
to the date of termination of the Employee’s employment with
the Company and as to which Employee has been covered by such
applicable provisions.
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9. Withholding.
Anything to the contrary notwithstanding, all payments required to
be made by the Company hereunder to the Employee or the
Employee’s estate or beneficiaries shall be subject to the
withholding of such amounts, if any, relating to tax and other
payroll deductions as the Company may reasonably determine it
should withhold pursuant to any applicable law or regulation. In
lieu of withholding such amounts, the Company may accept other
arrangements pursuant to which it is satisfied that such tax and
other payroll obligations will be satisfied in a manner complying
with applicable law or regulation.
10. Notices. Any
notice required or permitted to be given under the terms of this
Agreement shall be sufficient if in writing and if sent postage
prepaid by registered or certified mail, return receipt requested;
by overnight delivery; by courier; or by confirmed telecopy, in the
case of the Employee to the Employee’s last place of business
or residence as shown on the records of the Company, or in the case
of the Company to its principal office as set forth in the first
paragraph of this Agreement, or at such other place as it may
designate.
11. Waiver.
Unless agreed in writing, the failure of either Party, at any time,
to require performance by the other of any provisions hereunder
shall not affect its right thereafter to enforce the same, nor
shall a waiver by either Party of any breach of any provision
hereof be taken or held to be a waiver of any other preceding or
succeeding breach of any term or provision of this Agreement. No
extension of time for the performance of any obligation or act
shall be deemed to be an extension of time for the performance of
any other obligation or act hereunder.
12. Completeness and
Modification. This Agreement constitutes the entire
understanding between the Parties hereto superseding all prior and
contemporaneous agreements or understandings among the Parties
hereto concerning the Agreement. This Agreement may be amended,
modified, superseded or canceled, and any of the terms, covenants,
representations, warranties or conditions hereof may be waived,
only by a written instrument executed by the Parties or, in the
case of a waiver, by the Party to be charged.
13. Counterparts.
This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original but all of which shall constitute
but one agreement.
14. Binding
Effect/Assignment. This Agreement shall be binding upon the
Parties hereto, their heirs, legal representatives, successors and
assigns. This Agreement shall not be assignable by the Employee but
shall be assignable by the Company in connection with the sale,
transfer or other disposition of its business or to any of the
Company’s affiliates controlled by or under common control
with the Company.
15. Governing
Law. This Agreement shall become valid when executed and
accepted by the Company. The Parties agree that it shall be deemed
made and entered into in the State of North Carolina and shall be
governed and construed under and in accordance with the laws of the
State of North Carolina. Anything in this Agreement to the contrary
notwithstanding, the Employee shall conduct the Employee’s
business in a lawful manner and faithfully comply with applicable
laws or regulations of the state, city or other political
subdivision in which the Employee is located.
16. Further
Assurances. All Parties hereto shall execute and deliver
such other instruments and do such other acts as may be necessary
to carry out the intent and purposes of this
Agreement.
17. Headings.
The headings of the sections are for convenience only and shall not
control or affect the meaning or construction or limit the scope or
intent of any of the provisions of this Agreement.
18. Survival.
Any termination of this Agreement shall not, however, affect the
ongoing provisions of this Agreement which shall survive such
termination in accordance with their terms.
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19. Severability.
The invalidity or unenforceability, in whole or in part, of any
covenant, promise or undertaking, or any section, subsection,
paragraph, sentence, clause, phrase or word or of any provision of
this Agreement shall not affect the validity or enforceability of
the remaining portions thereof.
20. Enforcement.
Should it become necessary for any Party to institute legal action
to enforce the terms and conditions of this Agreement, the
successful Party will be awarded reasonable attorneys’ fees
at any such trial or appellate levels, expenses and
costs.
21. Venue. The
Company and Employee acknowledge and agree that the U.S. District
Court for the State of North Carolina, or if such court lacks
jurisdiction, the State of North Carolina(or its successor) in and
for Mecklenburg County, North Carolina, shall be the venue and
exclusive proper forum in which to adjudicate any case or
controversy arising either, directly or indirectly, under or in
connection with this Agreement and the Parties further agree that,
in the event of litigation arising out of or in connection with
this Agreement in these courts, they will not contest or challenge
the jurisdiction or venue of these courts.
22. Construction.
This Agreement shall be construed within the fair meaning of each
of its terms and not against the Party drafting the
document.
23. Role of
Counsel. The Employee acknowledges his understanding that
this Agreement was prepared at the request of the Company by Nason,
Yeager, Gerson, Harris & Fumero, P.A., its counsel, and that
such firm did not represent the Employee in conjunction with this
Agreement or any of the related transactions. The Employee, as
further evidenced by his signature below, acknowledges that he has
had the opportunity to obtain the advice of independent counsel of
his choosing prior to his execution of this Agreement and that he
has availed himself of this opportunity to the extent he deemed
necessary and advisable.
THE EMPLOYEE ACKNOWLEDGES THAT THE EMPLOYEE HAS READ ALL OF THE
TERMS OF THIS AGREEMENT, UNDERSTANDS THE AGREEMENT, AND AGREES TO
ABIDE BY ITS TERMS AND CONDITIONS.
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IN WITNESS WHEREOF, the Parties have
executed this Agreement as of the Effective Date.
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Witness:
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THE COMPANY:
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_______________________________
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By:
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/s/ Xxxxxx X.
Xxxxxxxxxx
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Name:
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Xxxxxx X.
Xxxxxxxxxx
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Its:
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Co-CEO
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Witness:
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THE
EMPLOYEE
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_______________________________
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By:
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/s/ Xxxx X. Xxxxxxxx
III
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_______________________________
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Xxxx X. Xxxxxxxx
III
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