EXHIBIT 10.7
EMPLOYMENT AGREEMENT
THIS EXECUTIVE EMPLOYMENT AGREEMENT (this "Agreement") dated as of
September 5, 2003, is by and between Isolagen Technologies, Inc., a Delaware
corporation (together with its subsidiaries, the "Company" or "Isolagen"), and
Xxxxxxx Xxxxxxxx (the "Employee" or "Xxxxxxxx").
W I T N E S S E T H:
WHEREAS, the Employee desires to serve the Company as its Chief
Executive Officer and President; and WHEREAS, the Company desires to employ
Xxxxxxxx as Chief Executive Officer and President of Isolagen;
NOW THEREFORE in consideration of the mutual benefits to be derived
from this Agreement, the Company and the Employee hereby agree as follows:
1. Term of Employment; Office and Duties.
(a) Commencing on the date of execution of this Agreement
(the "Employment Date"), and for an initial term ending July 31, 2006, the
Company shall employ the Employee as a senior executive of the Company with the
title of Chief Executive Officer and President, with the duties and
responsibilities prescribed for such offices in the Bylaws of the Company and
such additional duties and responsibilities consistent with such positions as
may from time to time be assigned to the Employee by the Board of Directors.
Employee agrees to perform such duties and discharge such responsibilities in
accordance with the terms of this Agreement. This Agreement shall be renewed for
an additional one (1) year term, by the mutual written agreement of the Employee
and the Company at least thirty (30) days prior to its expiration.
(b) The Employee shall devote the substantially all of
his working time to the business and affairs of the Company other than during
vacations of four weeks per year and periods of illness or incapacity; provided,
however, that nothing in this Agreement shall preclude the Employee from
devoting time required: (i) for serving as a director or officer of any
organization or entity not in a competing business with the Company, and any
other businesses in which the Company becomes involved; (ii) delivering lectures
or fulfilling speaking engagements; or (iii) engaging in charitable and
community activities provided that such activities do not interfere with the
performance of his duties hereunder.
2. Compensation and Benefits.
For all services rendered by the Employee in any capacity during the
period of Employee's employment by the Company, including without limitation,
services as an executive officer or member of any committee of the Board of
Directors or any subsidiary, affiliate or division thereof, from and after the
Effective Date the Employee shall be compensated as follows:
(a) Base Salary. The Company shall pay the Employee a
fixed salary ("Base Salary") at a rate of Three Hundred Thousand Dollars
($300,000) per year. The Board of Directors may periodically review the
Employee's Base Salary and may determine to increase the Employee's salary, in
accordance with such policies as the Company may hereafter adopt from time to
time, if it deems appropriate. Base Salary will be payable in accordance with
the customary payroll practices of the Company.
(b) Bonus.
Employee will be entitled to receive an annual bonus ("the "Annual Bonus"),
payable each year subsequent to the issuance of final audited financial
statements, but in no case later than 120 days after the end of the Company's
most recently completed fiscal year. The final determination on the amount of
the Annual Bonus will be made by the Compensation Committee of the Board of
Directors, based primarily on mutually agreed upon criteria. The Compensation
Committee may also consider other more subjective factors in making its
determination. The targeted amount of the Annual Bonus shall be 40% of the
Employee's base salary. The actual Annual Bonus for any given period may be
higher or lower than 40%.
Fringe Benefits.
(i) The Employee shall be entitled to
participate in such disability, health and life insurance and other fringe
benefit plans or programs, including a Section 401(k) retirement plan, of the
Company established from time to time by the Board of Directors, if any, to the
extent that his position, tenure, salary, age, health and other qualifications
make him eligible to participate, subject to the rules and regulations
applicable thereto. At a minimum, the Employee shall be entitled to the
following benefits:
(ii) Contemporaneous with the execution of this
Agreement, the Employee will be granted a non-qualified stock option (the
"Employment Option") to purchase 300,000 shares of the Company's Common Stock,
par value $.001 per share (the "Common Stock") with an exercise price of equal
to the average closing transaction price on the ten trading days preceding the
grant. The term of the Employment Option will be for a period of ten (10) years
from the date of grant. The shares eligible for purchase under the Employment
Option xxxxx xxxx ratably over the last six calendar quarters of this Agreement,
provided, however, that if Employee's employment with the Company is terminated
(i) without "Cause" or (ii) "For Good Reason," all unvested portions of the
Employment Option shall vest immediately upon such termination, and shall
provide for cashless exercise.
(iii) The vesting of the Employment Option shall
accelerate and vest immediately upon a change in control of the Company as
defined in Rule 405 of the Securities Act of 1933 or upon sale of substantially
all of the assets of the Company or the merger out of existence of the Company.
(d) Withholding and Employment Tax. Payment of all
compensation hereunder shall be subject to customary withholding tax and other
employment taxes as may be required with respect to compensation paid by an
employer/corporation to an employee.
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(e) Disability. The Company shall, to the extent such
benefits can be obtained at a reasonable cost, provide the Employee with
disability insurance benefits of at least sixty percent (60%) of his gross Base
Salary per month. In the event of the Employee's Disability (as hereinafter
defined), the Employee and his family shall continue to be covered by all of the
Company's life, medical, health and dental plans, at the Company's expense, to
the extent such benefits can be obtained at a reasonable cost, for the lesser of
the term of such Disability (as hereinafter defined) or eighteen (18) months, in
accordance with the terms of such plans.
(f) Death. The Company shall, to the extent such benefits
can be obtained at a reasonable cost, provide the Employee with life insurance
benefits in the amount of at least Two Million Dollars ($2,000,000) In the event
of the Employee's death, the Employee's family shall continue to be covered by
all of the Company's medical, health and dental plans, at the Company's expense,
to the extent such benefits can be obtained at a reasonable cost, for eighteen
(18) months following the Employee's death in accordance with the terms of such
plans.
(g) Vacation. Employee shall receive four (4) weeks of
vacation annually, administered in accordance with the Company's existing
vacation policy.
3. Business Expenses.
The Company shall pay or reimburse all reasonable travel and
entertainment expenses incurred by the Employee in connection with the
performance of his duties under this Agreement, including reimbursement for
attending out-of-town meetings of the Board of Directors in accordance with such
policies and procedures as the Company may from time to time establish for
senior officers and as required to preserve any deductions for federal income
taxation purposes to which the Company may be entitled and subject to the
Company's normal requirements with respect to reporting and documentation of
such expenses. The Company shall also pay or reimburse any and all expenses
incurred by the Employee for Employee's automobile (including lease payments,
maintenance, and gasoline), provided that lease payments shall not exceed $1,500
per month, as well as all expenses incurred by the Employee for Employee's
cellular telephone including monthly service charges, equipment purchase,
maintenance and all other ancillary charges including, but not limited to,
providing equipment for text messaging, paging, and wireless communications.
4. Termination of Employment.
Notwithstanding any other provision of this Agreement, Employee's
employment with the Company may be terminated upon written notice to the other
party as follows:
(a) By the Company, in the event of the Employee's death
or Disability (as hereinafter defined) or for Cause (as hereinafter defined).
For purposes of this Agreement, "Cause" shall mean either: (i) the indictment
of, or the bringing of formal charges against, Employee by a governmental
authority of competent jurisdiction for charges involving criminal fraud or
embezzlement; (ii) the conviction of Employee of a crime involving an act or
acts of
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dishonesty, fraud or moral turpitude by the Employee, which act or acts
constitute a felony;; (iii) Employee having willfully caused the Company,
without the approval of the Board of Directors, to fail to abide by either a
valid contract to which the Company is a party or the Company's Bylaws; (iv)
Employee having committed acts or omissions constituting gross negligence or
willful misconduct with respect to the Company; (v) Employee having committed
acts or omissions constituting a material breach of Employee's duty of loyalty
or fiduciary duty to the Company or any material act of dishonesty or fraud with
respect to the Company which are not cured in a reasonable time, which time
shall be 30 days from receipt of written notice from the Company of such
material breach; or (vi) Employee having committed acts or omissions
constituting a material breach of this Agreement which are not cured in a
reasonable time, which time shall be 30 days from receipt of written notice from
the Company of such material breach. A determination that Cause exists as
defined in clauses (iv), (v), (vi) or () (as to this Agreement) of the preceding
sentence shall be made by at least a majority of the members of the Board of
Directors. For purposes of this Agreement, "Disability" shall mean the inability
of Employee, in the reasonable judgment of a physician appointed by the Board of
Directors, to perform his duties of employment for the Company or any of its
subsidiaries because of any physical or mental disability or incapacity, where
such disability shall exist for an aggregate period of more than 120 days in any
365-day period or for any period of 90 consecutive days. The Company shall by
written notice to the Employee specify the event relied upon for termination
pursuant to this Section 4(a), and Employee's employment hereunder shall be
deemed terminated as of the date of such notice. In the event of any termination
under this Subsection 4(a), the Company shall pay all amounts then due to the
Employee under Section 2(a) of this Agreement for any portion of the payroll
period worked but for which payment had not yet been made up to the date of
termination, and, if such termination was for Cause, the Company shall have no
further obligations to Employee under this Agreement, and any and all options
granted hereunder shall terminate according to their terms. In the event of a
termination due to Employee's Disability or death, the Company shall comply with
its obligations under Sections 2(e) and 2(f).
(b) By the Company, in the absence of Cause, for any
reason and in its sole and absolute discretion, provided that in such event the
Company shall, as liquidated damages or severance pay, or both, continue to pay
to Employee the Base Salary (at a monthly rate equal to the rate in effect
immediately prior to such termination) for the longer of the remaining term
through July 31, 2006 or eighteen months from the date of termination (the
"Termination Payments"). In addition, the Company will pay to Employee a minimum
bonus, payable as severance within 120 days after the close of the Company's
most recent fiscal year for which an annual bonus hereunder has not yet been
determined as of the date of termination, in an amount equal to the greater of
(i) $70,000 or (ii) the amount of Annual Bonus determined in accordance with the
provisions of Section 2(b)(i) hereof, pro rated for that portion of the fiscal
year during which the Employee served as Chief Executive Officer and President.
(c) By the Employee for "Good Reason," (as the Employee
shall determine in good faith) which shall be deemed to exist: (i) if the
Company's Board of Directors fails to elect or reelect the Employee to, or
removes the Employee from, any of the offices referred to in Section 1(a); (ii)
if you are assigned any duties materially inconsistent with the duties or
responsibilities as contemplated by this Agreement or any other action by the
Company that results in a material diminution in such position, authority,
duties, or responsibilities, excluding
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for this purpose a change in title or an isolated, insubstantial, and
inadvertent action not taken in bad faith and which is remedied by the Company
promptly after receipt of notice thereof given by you (but not excluding changes
resulting from a sale of the Company, whether by merger, tender offer or
otherwise) provided that Employee shall act within 30 days of any such
diminution in the scope of his duties, responsibilities, authority or position;
(iii) if the Company shall have continued to fail to comply with any material
provision of this Agreement after a 30-day period to cure (if such failure is
curable) following written notice to the Company of such non-compliance; (iv)
upon a change in control of the Company as defined in Rule 405 of the Securities
Act of 1933 or upon sale of substantially all of the assets of the Company or
the merger out of existence of the Company; or (v) if the Company requires that
you be based at any office or location other than one located in the Houston
metropolitan area. In the event of any termination under this Section 4(c), the
Company shall, as liquidated damages or severance pay, or both, pay the
Termination Payments to Employee. In addition, the Company will pay to Employee
a minimum bonus, payable as severance within 120 days after the close of the
Company's most recent fiscal year for which an annual bonus hereunder has not
yet been determined as of the date of termination, in an amount equal to the
greater of (i) $70,000 or (ii) the amount of Annual Bonus determined in
accordance with the provisions of Section 2(b)(i) hereof, pro rated for that
portion of the fiscal year during which the Employee served as Chief Executive
Officer and President pursuant to this Agreement. Finally, any and all unvested
options granted hereunder shall immediately vest.
(d) During any period in which Employee is obligated not
to compete with the Company pursuant to Section 5 hereof (unless Employee was
terminated for Cause), Employee and his family shall continue to be covered by
the Company's life, medical, health and death plans. Such coverage shall be at
the Company's expense to the same extent as if Employee were still employed by
the Company. In the event of a termination pursuant to Sections 4(b) or 4(c),
the Company shall provide to Employee, at the Company's expense, outplacement
services of a nature customarily provided to a senior executive. Notwithstanding
the foregoing, the obligations of the Company pursuant to this Section 4(d)
shall remain in effect no longer than the term of the Termination Payments.
5. Non-Competition.
During the period of Employee's employment hereunder and during the
period, if any, during which payments are required to be made to the Employee by
the Company pursuant to Sections 4(b) or 4(c), the Employee shall not, within
any state in which the Company or any subsidiary of the Company is duly
qualified to do business, or in any state in which the Company is then providing
services or marketing its services (or engaged in active discussions to provide
such services), or within a one hundred (100) mile radius of any such state,
directly or indirectly own any interest in, manage, control, participate in,
consult with, render services for, or in any manner engage in any business
engaged in any business engaged in by the Company (unless the Board of Directors
shall have authorized such activity and the Company shall have consented thereto
in writing). Investments in less than five percent of the outstanding securities
of any class of a corporation subject to the reporting requirements of Section
13 or Section 15(d) of the Securities Exchange Act of 1934, as amended, shall
not be prohibited by this Section 5. At the
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option of Employee and so long as Employee shall have executed the mutual
release required under Section 4(d), Employee's obligations under this Section 5
arising after the termination of Employee shall be suspended during any period
in which the Company fails to pay to him Termination Payments required to be
paid to him pursuant to this Agreement. The provisions of this Section 5 are
subject to the provisions of Section 14 of this Agreement.
6. Inventions and Confidential Information.
The parties hereto recognize that a major need of the Company is to
preserve its specialized knowledge, trade secrets, and confidential information.
The strength and good will of the Company is derived from the specialized
knowledge, trade secrets, and confidential information generated from experience
with the activities undertaken by the Company and its subsidiaries. The
disclosure of this information and knowledge to competitors would be beneficial
to them and detrimental to the Company, as would the disclosure of information
about the marketing practices, pricing practices, costs, profit margins, design
specifications, analytical techniques, and similar items of the Company and its
subsidiaries. The Employee acknowledges that the proprietary information,
observations and data obtained by him while employed by the Company concerning
the business or affairs of the Company are the property of the Company. By
reason of his being a senior executive of the Company, the Employee has or will
have access to, and has obtained or will obtain, specialized knowledge, trade
secrets and confidential information about the Company's operations and the
operations of its subsidiaries, which operations extend throughout the United
States. Therefore, subject to the provisions of Section 14 hereof, the Employee
hereby agrees as follows, recognizing that the Company is relying on these
agreements in entering into this Agreement:
(i) During the period of Employee's employment
with the Company and for five (5) years thereafter, the Employee will not use,
disclose to others, or publish or otherwise make available to any other party
any inventions or any confidential business information about the affairs of the
Company, including but not limited to confidential information concerning the
Company's products, methods, engineering designs and standards, analytical
techniques, technical information, customer information, employee information,
and other confidential information acquired by him in the course of his past or
future services for the Company. Employee agrees to hold as the Company's
property all books, papers, letters, formulas, memoranda, notes, plans, records,
reports, computer tapes, printouts, software and other documents, and all copies
thereof and therefrom, in any way relating to the Company's business and
affairs, whether made by him or otherwise coming into his possession, and on
termination of his employment, or on demand of the Company, at any time, to
deliver the same to the Company within twenty four (24) hours of such
termination or demand.
(ii) During the period of Employee's employment
with the Company and for eighteen (18) months thereafter, (a) the Employee will
not directly or indirectly through another entity induce or otherwise attempt to
influence any employee of the Company to leave the Company's employ and (b) the
Employee will not directly or indirectly hire or cause to be hired or induce a
third party to hire, any such employee (unless the Board of Directors shall have
authorized such employment and the Company shall have consented thereto in
writing) or in any way interfere with the relationship between the Company and
any employee thereof and (c)
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induce or attempt to induce any customer, supplier, licensee, licensor or other
business relation of the Company to cease doing business with the Company or in
any way interfere with the relationship between any such customer, supplier,
licensee or business relation of the Company.
7. Indemnification.
The Company will indemnify (and advance the costs of defense of) the
Employee (and his legal representatives) to the fullest extent permitted by the
laws of the state in which the Company is incorporated, as in effect at the time
of the subject act or omission, or by the Certificate of Incorporation and
Bylaws of the Company, as in effect at such time or on the date of this
Agreement, whichever affords greater protection to the Employee, and the
Employee shall be entitled to the protection of any insurance policies the
Company may elect to maintain generally for the benefit of its executive
officers, against all judgments, damages, liabilities, costs, charges and
expenses whatsoever incurred or sustained by him or his legal representative in
connection with any action, suit or proceeding to which he (or his legal
representatives or other successors) may be made a party by reason of his being
or having been an officer of the Company or any of its subsidiaries except that
the Company shall have no obligation to indemnify Employee for liabilities
resulting from conduct of the Employee with respect to which a court of
competent jurisdiction has made a final determination that Employee committed
gross negligence or willful misconduct.
8. Litigation Expenses.
In the event of any litigation or other proceeding between the Company
and the Employee with respect to the subject matter of this Agreement and the
enforcement of the rights hereunder and such litigation or proceeding results in
final judgment or order in favor of the Employee, which judgment or order is
substantially inconsistent with the positions asserted by the Company in such
litigation or proceeding, the losing party shall reimburse the prevailing party
for all of his/its reasonable costs and expenses relating to such litigation or
other proceeding, including, without limitation, his/its reasonable attorneys'
fees and expenses.
9. Consolidation; Merger; Sale of Assets; Change of Control.
Nothing in this Agreement shall preclude the Company from combining,
consolidating or merging with or into, transferring all or substantially all of
its assets to, or entering into a partnership or joint venture with, another
corporation or other entity, or effecting any other kind of corporate
combination provided that the corporation resulting from or surviving such
combination, consolidation or merger, or to which such assets are transferred,
or such partnership or joint venture assumes this Agreement and all obligations
and undertakings of the Company hereunder. Upon such a consolidation, merger,
transfer of assets or formation of such partnership or joint venture, this
Agreement shall inure to the benefit of, be assumed by, and be binding upon such
resulting or surviving transferee corporation or such partnership or joint
venture, and the term "Company," as used in this Agreement, shall mean such
corporation, partnership or joint venture or other entity, and this Agreement
shall continue in full force and effect and shall entitle the Employee and his
heirs, beneficiaries and representatives to exactly the same compensation,
benefits, perquisites, payments and other rights as would have been their
entitlement had such
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combination, consolidation, merger, transfer of assets or formation of such
partnership or joint venture not occurred.
10. Survival of Obligations.
Sections 4, 5, 6, 7, 8, 9, 11, 12 and 14 shall survive the termination
for any reason of this Agreement (whether such termination is by the Company, by
the Employee, upon the expiration of this Agreement or otherwise).
11. Employee's Representations.
The Employee hereby represents and warrants to the Company that (i) the
execution, delivery and performance of this Agreement by the Employee do not and
shall not conflict with, breach, violate or cause a default under any contract,
agreement, instrument, order, judgment or decree to which the Employee is a
party or by which he is bound, (ii) the Employee is not a party to or bound by
any employment agreement, noncompete agreement or confidentiality agreement with
any other person or entity and (iii) upon the execution and delivery of this
Agreement by the Company, this Agreement shall be the valid and binding
obligation of the Employee, enforceable in accordance with its terms. The
Employee hereby acknowledges and represents that he has consulted with legal
counsel regarding his rights and obligations under this Agreement and that he
fully understands the terms and conditions contained herein.
12. Company's Representations.
The Company hereby represents and warrants to the Employee that (i) the
execution, delivery and performance of this Agreement by the Company do not and
shall not conflict with, breach, violate or cause a default under any contract,
agreement, instrument, order, judgment or decree to which the Company is a party
or by which it is bound and (ii) upon the execution and delivery of this
Agreement by the Employee, this Agreement shall be the valid and binding
obligation of the Company, enforceable in accordance with its terms.
13. Enforcement.
Because the Employee's services are unique and because the Employee has
access to confidential information concerning the Company, the parties hereto
agree that money damages would not be an adequate remedy for any breach of this
Agreement. Therefore, in the event of a breach or threatened breach of this
Agreement, the Company may, in addition to other rights and remedies existing in
its favor, apply to any court of competent jurisdiction for specific performance
and/or injunctive or other relief in order to enforce, or prevent any violations
of, the provisions hereof (without posting a bond or other security).
14. Severability.
In case any one or more of the provisions or part of a provision
contained in this Agreement shall for any reason be held to be invalid, illegal
or unenforceable in any respect in any jurisdiction, such invalidity, illegality
or unenforceability shall be deemed not to affect any
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other jurisdiction or any other provision or part of a provision of this
Agreement, nor shall such invalidity, illegality or unenforceability affect the
validity, legality or enforceability of this Agreement or any provision or
provisions hereof in any other jurisdiction; and this Agreement shall be
reformed and construed in such jurisdiction as if such provision or part of a
provision held to be invalid or illegal or unenforceable had never been
contained herein and such provision or part reformed so that it would be valid,
legal and enforceable in such jurisdiction to the maximum extent possible. In
furtherance and not in limitation of the foregoing, the Company and the Employee
each intend that the covenants contained in Sections 5 and 6 shall be deemed to
be a series of separate covenants, one for each county of the State of Texas and
one for each and every other state, territory or jurisdiction of the United
States and any foreign country set forth therein. If, in any judicial
proceeding, a court shall refuse to enforce any of such separate covenants, then
such unenforceable covenants shall be deemed eliminated from the provisions
hereof for the purpose of such proceedings to the extent necessary to permit the
remaining separate covenants to be enforced in such proceedings. If, in any
judicial proceeding, a court shall refuse to enforce any one or more of such
separate covenants because the total time, scope or area thereof is deemed to be
excessive or unreasonable, then it is the intent of the parties hereto that such
covenants, which would otherwise be unenforceable due to such excessive or
unreasonable period of time, scope or area, be enforced for such lesser period
of time, scope or area as shall be deemed reasonable and not excessive by such
court.
15. Entire Agreement; Amendment.
Except as otherwise set forth in this Agreement, this Agreement
contains the entire agreement between the Company and the Employee with respect
to the subject matter hereof and thereof. This Agreement may not be amended,
waived, changed, modified or discharged except by an instrument in writing
executed by or on behalf of the party against whom enforcement of any amendment,
waiver, change, modification or discharge is sought. No course of conduct or
dealing shall be construed to modify, amend or otherwise affect any of the
provisions hereof.
16. Notices.
All notices, requests, demands and other communications hereunder shall
be in writing and shall be deemed to have been duly given if physically
delivered, delivered by express mail or other expedited service or upon receipt
if mailed, postage prepaid, via registered mail, return receipt requested,
addressed as follows:
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(a) To the Company: (b) To the Employee:
and to: Isolagen Technologies, Inc., Xxxxxxx Xxxxxxxx
000 Xxxxxx
Xxxxx 000
Xxxxxxx, XX 00000
Xxxxxxxx Xxxxxx, LLP
0000 X. Xxxxxx, X.X., Xxxxx 000
Xxxxxxxxxx, X.X. 00000
Attn: Xxxxx Xxxxxxxxx Xxxxxxxxx, Esquire
and/or to such other persons and addresses as any party shall have specified in
writing to the other.
17. Assignability.
This Agreement shall not be assignable by either party and shall be
binding upon, and shall inure to the benefit of, the heirs, executors,
administrators, legal representatives, successors and assigns of the parties. In
the event that all or substantially all of the business of the Company is sold
or transferred, then this Agreement shall be binding on the transferee of the
business of the Company whether or not this Agreement is expressly assigned to
the transferee.
18. Governing Law.
This Agreement shall be governed by and construed under the laws of the
State of Texas.
19. Waiver and Further Agreement.
Any waiver of any breach of any terms or conditions of this Agreement
shall not operate as a waiver of any other breach of such terms or conditions or
any other term or condition, nor shall any failure to enforce any provision
hereof operate as a waiver of such provision or of any other provision hereof.
Each of the parties hereto agrees to execute all such further instruments and
documents and to take all such further action as the other party may reasonably
require in order to effectuate the terms and purposes of this Agreement.
20. Headings of No Effect.
The paragraph headings contained in this Agreement are for reference
purposes only and shall not in any way affect the meaning or interpretation of
this Agreement.
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IN WITNESS WHEREOF, the parties hereto have executed this Employment
Agreement as of the date first above written.
COMPANY:
ISOLAGEN TECHNOLOGIES, INC.
By: __________________________________
EMPLOYEE:
______________________________________
Xxxxxxx Xxxxxxxx
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