EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT, dated as of June 29, 2001, by and between XXXXXX
XXXXXX RETAIL, INC., a Delaware corporation with offices at 00-00 Xxxxxxx
Xxxxxx, Xxxx Xxxxxx Xxxx, X.X. 00000 (the "Corporation"), and XXXX XXXXXXXXX, an
individual residing at 00 Xxxxx Xxxxxxx, Xxx. #0000, Xxx Xxxx, Xxx Xxxx 00000
("Employee").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Corporation, a wholly-owned retail subsidiary of Xxxxxx
Xxxxxx, Ltd. (the "Parent Corporation") operates, on behalf of the Parent
Corporation, various Xxxxx Xxxxxx(R) and Xxxxx Xxxxx(R) retail stores as well as
the Parent Corporation's outlet stores, e-commerce websites and production of
shoes for the Parent Corporation's wholesale division (the "Wholesale
Division").
WHEREAS, subject to the terms and considerations hereinafter set forth,
the Corporation wishes to employ Employee in the positions set forth herein and
Employee wishes to accept such employment.
NOW, THEREFORE, in consideration of the foregoing premises and the
mutual promises, terms, provisions and conditions set forth in this Agreement,
the receipt and sufficiency of which are hereby acknowledged, the parties hereby
agree as follows:
Section 1. EMPLOYMENT. The Corporation hereby employs Employee and
Employee hereby accepts such employment subject to the terms and conditions set
forth in this Agreement.
Section 2. DUTIES. During the Term, Employee shall serve as
President of the Corporation and shall perform such duties as may be assigned to
him from time to time by the Chief Executive Officer of the Parent Corporation.
During the Term of this Agreement, Employee shall devote substantially all of
his business time and efforts to the performance of his duties hereunder unless
otherwise authorized by the Chief Executive Officer of the Parent Corporation.
Employee shall not engage in any other significant business activity that would
detract from his ability to perform services to the Corporation.
Section 3. TERM OF EMPLOYMENT. The term of Employee's employment,
unless sooner terminated as provided herein, shall be for a period of three (3)
years commencing July 1, 2001 and ending on June 30, 2004 (as may be extended
from time to time, the "Term").
Section 4. COMPENSATION OF EMPLOYEE.
4.1 BASE SALARY. The Corporation shall pay to Employee an
annual base salary for his services hereunder of: (i) Three Hundred Thousand
Dollars ($300,000) until June 30, 2002, (ii) Three Hundred Twenty Five Thousand
Dollars ($325,000) from July 1, 2002 through June 30, 2003, and (iii) Three
Hundred Fifty Thousand Dollars ($350,000) from July 1, 2003 through June 30,
2004, less such deductions as shall be required to be withheld by applicable law
and regulations. Employee's base salary, as in effect at any time, is
hereinafter referred to as the "Base Salary." Employee's Base Salary shall be
paid in substantially equal installments on a basis consistent with the
Corporation's payroll practices for employees in similar positions.
4.2 ADDITIONAL COMPENSATION.
(a) Options. Subject to the approval by the stockholders
of the most recent amendment to the Parent Corporation's 1999 Stock Plan (as
amended, the "1999 Plan") and subject to availability of shares under such 1999
Plan or any other qualified or non-qualified stock incentive plan designated by
the Board of Directors of the Parent Corporation and approved by the
stockholders of the Parent Corporation, the Employee shall receive an option to
purchase 34,000 shares of Common Stock of the Parent Corporation on July 15,
2001 and an option to purchase 33,000 shares of Common Stock of the Parent
Corporation every July 15th of each year thereafter (each, an "Annual Option")
during the Term (each, a "Grant Date"). The Annual Options shall vest quarterly
commencing on the Grant Date and on the last day of each fiscal quarter
thereafter. The exercise price shall be equal to the average closing bid price
of the Parent Corporation's shares of Common Stock as reported by the Nasdaq
Stock Market or such other exchange on which the Common Stock of the Parent
Corporation shall be listed on, during the five (5) business day period (i)
before the Grant Date, or (ii) on July 15th of the year in which the Grant Date
shall occur, if the Grant Date shall not be July 15th. The vested Annual Options
shall be exercisable at any time after the Grant Date for a period of [seven
(7)] years following the Grant Date.
(b) Signing Bonus. The Corporation shall pay to the
Employee a one-time cash bonus equal to One Hundred Thousand Dollars ($100,000),
of which Fifty Thousand Dollars ($50,000) shall be payable on July 1, 2001 and
Fifty Thousand Dollars ($50,000) shall be payable on October 1, 2001, provided
that Employee shall be employee by the Corporation on such date.
(c) Annual Cash Bonus. Within ninety (90) days following
the end of each calendar year beginning December 31st, 2001 and every calendar
year thereafter during the Term, the Corporation shall pay Employee an annual
cash bonus equal to (i) three percent (3%) of the increase in the Corporation's
earnings before interest and tax ("EBIT") for such fiscal year over the EBIT of
the prior fiscal year based on audited financial statements of the Corporation
for such fiscal year and (ii) one percent (1%) of the increase in the EBIT
allocable to the Parent Corporation's Wholesale Division for such fiscal year
over the EBIT of the Wholesale Division for the prior fiscal year based on
audited financial statements of the Parent Corporation for such fiscal year (the
"Annual Cash Bonus"), provided, however, in no event shall the Annual Cash Bonus
exceed the Base Salary for such year. The determination of EBIT for any fiscal
year shall give effect to all bonuses (including the bonus provided for in this
Section 4.2) accrued or payable for such fiscal year to Employee and all other
employees of the Corporation or the Parent Corporation, respectively.
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(d) Incentive Bonus. Employee shall receive a bonus as
follows: (i) Ten Thousand Dollars ($10,000) if there is an increase of the total
sales of the Comparable Stores in any given calendar quarter over the same
calendar quarter in the immediately preceding year equal to or greater than ten
percent (10%), or, alternatively, (ii) if the increase of the total sales of the
Comparable Stores in any given calendar quarter over the same calendar quarter
in the immediately preceding year is equal to or greater than twenty percent
(20%), Twenty Thousand Dollars ($20,000). Each bonus received by Employee
pursuant to this Section 4.2(d) is hereinafter referred to as an "Incentive
Bonus." The Incentive Bonus shall be paid within forty-five (45) days from the
end of such calendar quarter. In no event shall the total aggregate of
Employee's Incentive Bonuses exceed Eighty Thousand Dollars ($80,000) in any
given calendar year. As used herein, "Comparable Stores" shall mean those retail
stores which are owned and operated by the Company in both relevant calendar
quarters.
4.3 EXPENSES. During the Term, the Corporation shall promptly
reimburse Employee for all reasonable and necessary travel expenses and other
disbursements incurred by Employee on behalf of the Corporation in performance
of Employee's duties hereunder, assuming Employee has received prior approval
for such travel expenses and disbursements by the Corporation to the extent
possible, consistent with corporate policy relating to reimbursement of business
expenses as in effect from time to time and as such policy may be amended from
time to time.
4.4 AUTOMOBILE ALLOWANCE. The Corporation shall, at the
direction of Employee, either reimburse Employee for, or directly pay the costs
of, Employee's use of an automobile in connection with the performance of his
duties hereunder during the Term of this Agreement and all usual expenditures in
connection therewith; i.e., fuel, insurance, parking, customary maintenance and
repairs, etc., provided, however, that expenses either reimbursed or paid
pursuant to this Section shall not exceed Seven Hundred and Fifty Dollars ($750)
for any month.
4.5 BENEFITS. During the Term, Employee shall be entitled to
participate in such pension, profit sharing, group insurance, option plans,
hospitalization, and group health and benefit plans and all other benefits and
plans as the Corporation provides to employees in similar positions.
Section 5. TERMINATION.
5.1 DEATH OR TOTAL DISABILITY.
(a) Death. This Agreement shall terminate upon the death
of Employee; provided, however, that the Corporation shall continue to pay to
the estate of Employee the Base Salary as set forth in Section 4.1 hereof for
the twelve (12) month period immediately subsequent to the date of Employee's
death.
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(b) Total Disability. Subject to Section 6.2 hereof, in
the event Employee is discharged due to a "Total Disability" (as defined in
Section 6.1 below), then this Agreement shall be deemed terminated and the
Corporation shall be released from all obligations to Employee with respect to
this Agreement, except obligations accrued prior to such termination and as
provided in Section 6.2 hereof.
5.2 TERMINATION FOR CAUSE; EMPLOYEE'S RESIGNATION. In the
event Employee is discharged "For Cause" (as defined below) or in the event
Employee resigns, then upon such occurrence, this Agreement shall be deemed
terminated and the Corporation shall be released from all obligations to
Employee with respect to this Agreement, except obligations accrued prior to
such termination.
5.3 TERMINATION OTHER THAN FOR CAUSE. In the event Employee
is discharged other than "For Cause" or due to his death or "Total Disability,"
then the Corporation shall pay the following amount to Employee: (i) the amount
of compensation that is accrued and unpaid through the date of termination
pursuant to Section 4 of this Agreement and (ii) the product of (A) Employee's
Base Salary on the date of such termination plus the Annual Cash Bonus paid (or
payable) to Employee for the fiscal year ending on the December 31 immediately
preceding the date of such termination multiplied by (B) the number of years
(and fractions of years) remaining on the Term. Such amount shall be paid to
Employee by the Corporation in two (2) installments as follows: (i) fifty
percent (50%) on January 1st immediately following the date of such termination,
and (ii) the remaining fifty percent (50%) balance one (1) year after.
5.4 "FOR CAUSE". As used herein, the term "For Cause" shall
mean:
(a) the conviction of, or pleading guilty or nolo
contendere to, any crime, whether or not involving the Corporation or the Parent
Corporation, constituting a felony in the jurisdiction involved, which the Board
of Directors of the Parent Corporation, in its sole discretion, determines may
have an injurious effect on the Corporation or the Parent Corporation;
(b) the conviction of any crime involving moral
turpitude; or
(c) gross negligence or willful misconduct in the
conduct of Employee's duties or willful or repeated failure or refusal to
perform such duties as may be delegated to Employee by the Chief Executive
Officer of the Parent Corporation (or, if no Chief Executive Officer of the
Parent Corporation exists, by the Board of Directors of the Parent Corporation)
which are consistent with Employee's position, and that as to any conduct
concerning this subsection (c), such conduct is not corrected by Employee within
fourteen (14) days following receipt by Employee of written notice from the
Chief Executive Officer of the Parent Corporation (or, if no Chief Executive
Officer of the Parent Corporation exists, from the Board of Directors of the
Parent Corporation), such notice to state with specificity the nature of the
breach, failure or refusal, gross negligence or willful misconduct related to
Employee's employment with the Corporation.
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5.5 TERMINATION UPON CHANGE OF CONTROL.
(a) If, during the period commencing 120 days prior to a
Change of Control and ending on the first anniversary of a Change of Control,
Employee's employment shall have been terminated by the Corporation (other than
For Cause), the Corporation shall make a lump sum cash payment to Employee
within ten (10) days of the date of termination in an amount equal to (i) the
amount of compensation that is accrued and unpaid through the date of
termination pursuant to Section 4 of this Agreement and (ii) the product of (A)
Employee's Base Salary on the date of such termination plus the Annual Cash
Bonus paid (or payable) to Employee for the fiscal year ending on the December
31st, immediately preceding the date of such termination, multiplied by (B) the
number of years (and fraction of years) remaining on the Term; provided,
however, in the no event will the amount payable pursuant to this Section 5.5(a)
be less than the Base Salary so received by Employee for the twelve (12) month
period immediately preceding the date of such termination.
(b) In the event that any payment (or portion thereof)
to Employee under Section 5.5(a) is determined to constitute an "excess
parachute payment," under Sections 280G and 4999 of the Internal Revenue Code of
1986, as amended, the following calculations shall be made:
(i) The after-tax value to Employee of the payments
under Section 5.5(a) without any reduction; and
(ii) the after-tax value to Employee of the payments
under Section 5.5(a) as reduced to the maximum amount (the
"Maximum Amount") which may be paid to Employee without any
portion of the payments constituting an "excess parachute
payment".
If after applying the agreed upon calculations set forth above, it is
determined that the after-tax value determined under Section 5.5(b)(ii)
above is greater than the after-tax value determined under Section
5.5(b)(i) above, the payments to Employee under Section 5.5(a) shall be
reduced to the Maximum Amount.
5.6 "CHANGE OF CONTROL". As used herein, the term "Change of
Control" shall mean:
(a) When any "person" as defined in Section 3(a)(9) of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and as
used in Section 13(d) and 14(d) thereof including a "group" as defined in
Section 13(d) of the Exchange Act, but excluding the Corporation, the Parent
Corporation or any subsidiary or any affiliate of the Corporation or the Parent
Corporation or any employee benefit plan sponsored or maintained by the
Corporation, the Parent Corporation or any subsidiary of the Corporation or the
Parent Corporation (including any trustee of such plan acting as trustee),
becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act)
of securities of the Corporation or the Parent Corporation representing a
majority of the combined voting power of the Corporation's or the Parent
Corporation's then outstanding securities; or
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(b) When, during any period of twenty-four (24)
consecutive months, the individuals who, at the beginning of such period,
constitute the Board of Directors of the Parent Corporation (the "Incumbent
Directors") cease for any reason other than death to constitute at least a
majority thereof provided, however, that a director who was not a director at
the beginning of such 24-month period shall be deemed to have satisfied such
24-month requirement (and be an Incumbent Director) if such director was elected
by, or on the recommendation of or with the approval of, at least two-thirds of
the directors who then qualified as Incumbent Directors either actually (because
they were directors at the beginning of such 24-month period) or through the
operation of this proviso; or
(c) The occurrence of a transaction requiring
stockholder approval for the acquisition of the Corporation or of the Parent
Corporation by an entity other than the Corporation, the Parent Corporation or a
subsidiary or an affiliated company of the Corporation or the Parent Corporation
through purchase of assets, or by merger, or otherwise.
Section 6. DISABILITY.
6.1 TOTAL DISABILITY. In the event that after Employee has
failed, due to a disability, to have performed his regular and customary duties
for a period of ninety (90) consecutive days or for any one hundred eighty (180)
days out of any three hundred and sixty (360) day period, and before Employee
has become "Rehabilitated" (as hereinbelow defined) a majority of the members of
the Board of Directors of the Parent Corporation may vote to determine that
Employee is mentally or physically incapable or unable to continue to perform
such regular and customary duties of employment and upon the date of such
majority vote, Employee shall be deemed to be suffering from a "Total
Disability." As used herein, the term "Rehabilitated" shall mean such time as
Employee is willing, able and commences to devote his time and energies to the
affairs of the Corporation to the extent and in the manner that he did so prior
to his disability.
6.2 PAYMENT DURING DISABILITY. In the event Employee is
unable to perform his duties hereunder by reason of a disability, prior to the
time such disability is deemed a Total Disability in accordance with the
provisions of Section 6.1 above, the Corporation shall continue to pay Employee
his Base Salary pursuant to Section 4.1 during the continuance of any such
disability. Upon a determination of any Total Disability pursuant to the
provisions of Section 6.1 above, the Corporation shall pay to Employee his Base
Salary pursuant to Section 4.1 for the twelve (12) month period immediately
subsequent to the date of determination of Total Disability.
Section 7. VACATIONS. Employee shall be entitled to a vacation of
three (3) weeks per year, during which period his Base Salary shall be paid in
full. Employee shall take his vacation at such time or times as Employee and the
Corporation or Chief Executive Officer of the Parent Corporation shall determine
is mutually convenient.
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Section 8. DISCLOSURE OF CONFIDENTIAL INFORMATION. Employee
recognizes that he has had and will continue to have access to secret and
confidential information regarding the Corporation, the Parent Corporation or
any of their affiliates, including, but not limited to, confidential information
and trade secrets concerning the Corporation's or the Parent Corporation's (or
any of their affiliate's) working methods, processes, business and other plans,
programs, designs, products, know-how, costs, marketing, promotion, sales
activities, trading, investment, credit and financial data, manufacturing
processes, financing methods, profit formulas, customer names, customer
requirements and supplier names. Employee acknowledges that such information is
of great value to the Corporation and the Parent Corporation, is the sole
property of the Corporation or the Parent Corporation, and has been and will be
acquired by him in confidence. In consideration of the obligations undertaken by
the Corporation or the Parent Corporation herein, Employee will not, at any
time, during or after his employment hereunder, reveal, divulge or make known to
any person, any information acquired by Employee during the course of his
employment, which is treated as confidential by the Corporation or the Parent
Corporation, including but not limited to its customer list, and not otherwise
in the public domain. The provisions of this Section 8 shall survive Employee's
employment hereunder.
Section 9. COVENANT NOT TO COMPETE.
(a) Employee recognizes that the services to be
performed by him hereunder are special, unique and extraordinary. The parties
confirm that it is reasonably necessary for the protection of the Corporation
and the Parent Corporation that Employee agree, and accordingly, Employee does
hereby agree that, except as provided in Section 9(c) below, he shall not,
directly or indirectly, at any time during the Restricted Period within the
Restricted Area (as such terms are defined in Section 9(d) below), engage in any
Competitive Business (as defined in Section 9(d) below), either on his own
behalf or as an officer, director, stockholder, partner, principal, trustee,
investor, consultant, associate, employee, owner, agent, creditor, independent
contractor, co-venturer of any third party or in any other relationship or
capacity.
(b) Employee hereby agrees that he will not, directly or
indirectly, for or on behalf of himself or any third party, at any time during
the Restricted Period (i) solicit any customers of the Corporation, the Parent
Corporation or of any of their subsidiaries or (ii) solicit, employ or engage,
or cause, encourage or authorize, directly or indirectly, to be employed or
engaged, for or on behalf of himself or any third party, any employee or agent
of the Corporation, the Parent Corporation or any of their subsidiaries.
(c) This Section 9 shall not be construed to prevent
Employee from owning, directly and indirectly, in the aggregate, an amount not
exceeding one percent (1 %) of the issued and outstanding voting securities of
any class of any corporation whose voting capital stock is traded on a national
securities exchange or in the over-the-counter market.
(d) The term "Restricted Period," as used in this
Section 9, shall mean the period of Employee's actual employment hereunder plus
twelve (12) months after the date Employee is no longer employed by the
Corporation. The term "Restricted Area" as used in this Section 9 shall mean
anywhere in the
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world. The term "Competitive Business" as used in this Agreement shall mean the
design, manufacture, sale, marketing or distribution of (i) branded or designer
footwear, apparel, accessories and other products in the categories of products
sold by, or under license from, the Corporation or any of its affiliates, (ii)
jewelry and other giftware, (iii) cosmetics, fragrances and other health and
beauty care items, (iv) housewares, furniture, home furnishings and related
products and (v) other branded products related to fashion, cosmetics or
lifestyle.
(e) The provisions of this Section 9 shall survive the
termination of Employee's employment as provided hereunder.
Section 10. REASONABLENESS OF COVENANTS. Employee acknowledges that
he has carefully read and considered all the terms and conditions of this
Agreement, including the restraints imposed upon him pursuant to Sections 8 and
9 hereof. Employee agrees that said restraints are necessary for the reasonable
and proper protection of the Corporation, the Parent Corporation and its
subsidiaries and affiliates, and that each and every one of the restraints is
reasonable in respect to subject matter, length of time, geographic area and
otherwise. Employee further acknowledges that, in the event any provision of
Sections 8 and 9 hereof shall be determined by any court of competent
jurisdiction to be unenforceable by reason of its being extended over too great
a time, too large a geographic area, too great a range of activities or
otherwise, such provision shall be deemed to be modified to permit its
enforcement to the maximum extent permitted by law.
Section 11. MISCELLANEOUS.
11.1 ENFORCEMENT OF COVENANTS. The parties hereto agree that
Employee is obligated under this Agreement to render personal services during
the Term of a special, unique, unusual, extraordinary and intellectual
character, thereby giving this Agreement peculiar value, and in the event of a
breach of any covenant of Employee herein, the injury or imminent injury to the
value and goodwill of the Corporation's or the Parent Corporation's business
could not be reasonably or adequately compensated in damages in an action at
law. Employee therefore agrees that the Corporation and/or the Parent
Corporation, in addition to any other remedies available to it, shall be
entitled to seek specific performance, preliminary and permanent injunctive
relief or any other equitable remedy against Employee, without the posting of a
bond, in the event of any breach or threatened breach by Employee of any
provision of this Agreement (including, but not limited to, the provisions of
Sections 8 and 9). Without limiting the generality of the foregoing, if Employee
breaches any provision of Section 8 or 9 hereof, such breach will entitle the
Corporation and/or the Parent Corporation to enjoin Employee from disclosing any
Confidential Information to any competing business, to enjoin such competing
business from receiving Employee or using any such Confidential Information,
and/or to enjoin Employee from rendering personal services to or in connection
with such competing business. The rights and remedies of the parties hereto are
cumulative and shall not be exclusive, and each party shall be entitled to
pursue all legal and equitable rights and remedies and to secure performance of
the obligations and duties of the other under this Agreement, and the
enforcement of one or more of such rights and remedies by a party shall in no
way preclude such party from pursuing, at the same time or subsequently, any and
all other rights and remedies available to it.
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11.2 SEVERABILITY. The invalidity or partial invalidity of one
or more provisions of this Agreement shall not invalidate any other provision of
this Agreement. If any portion or provision of this Agreement shall to any
extent be declared illegal or unenforceable by a court of competent
jurisdiction, the remainder of this Agreement, or the application of such
portion or provision in circumstances other than those as to which it is so
declared illegal or unenforceable, shall not be affected thereby, and each
portion and provision of this Agreement shall be valid and enforceable to the
fullest extent permitted by law.
11.3 ASSIGNMENTS. Neither Employee nor the Corporation may
assign or delegate any of their rights or duties under this Agreement without
the express written consent of the other, except the Corporation may transfer
its rights and duties in connection with a sale of all or substantially all of
its assets or in connection with a business combination (subject to Section 5.5
hereof).
11.4 ENTIRE AGREEMENT; AMENDMENT. This Agreement constitutes
and embodies the full and complete understanding and agreement of the parties
with respect to Employee's employment by the Corporation, supersedes all prior
understandings and agreements, whether oral or written, between Employee and the
Corporation, and shall not be amended, modified or changed except by an
instrument in writing executed by Employee and by an expressly authorized
officer of the Corporation.
11.5 WAIVER. No waiver of any provision hereof shall be
effective unless made in writing and signed by the waiving party. The failure of
either party to require the performance of any term or obligation of this
Agreement, or the waiver by either party of any breach of this Agreement, shall
not prevent any subsequent enforcement of such term or obligation or be deemed a
waiver of any subsequent breach.
11.6 BINDING EFFECT. This Agreement shall inure to the benefit
of, be binding upon and enforceable against, the parties hereto and their
respective successors, heirs, beneficiaries and permitted assigns.
11.7 HEADING. The headings contained in this Agreement are for
convenience of reference only and shall not affect in any way the meaning or
interpretation of this Agreement.
11.8 NOTICES. Any and all notices, requests, demands and other
communications required or permitted to be given hereunder shall be in writing
and shall be deemed to have been duly given when personally delivered, sent by
registered or certified mail, return receipt requested, postage prepaid, or by
private overnight mail service (e.g. Federal Express) to the party at the
address set forth above or to such other address as either party may hereafter
give notice of in accordance with the provisions hereof. Notices shall be deemed
given on the sooner of the date actually received or the third business day
after sending.
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11.9 GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York without giving
effect to such State's conflicts of laws principles and each of the parties
hereto irrevocably consents to the jurisdiction and venue of the federal and
state courts located in the State of New York, County of New York.
11.10 COUNTERPARTS. This Agreement may be executed
simultaneously in two or more counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the same
instrument.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date set forth above.
Corporation:
XXXXXX XXXXXX RETAIL, INC.
By: /s/ XXXXXX XXXXXX
--------------------------------------
Name: Xxxxxx Xxxxxx
Title: Chief Executive Officer
Employee:
/s/ XXXX XXXXXXXXX
-----------------------------------------
Xxxx Xxxxxxxxx
Acknowledged and Understood:
Parent Corporation:
XXXXXX XXXXXX, LTD.
By: /s/ XXXXXX XXXXXX
--------------------------------------
Name: Xxxxxx Xxxxxx
Title: Chief Executive Officer
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