EXHIBIT 10.4
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT made and entered into as of the 8th day of
August, 1996, by and among DOLLAR FINANCIAL GROUP, INC., a New York
corporation ( DFG or SUBSIDIARY ), DFG HOLDINGS, INC., a Delaware
corporation ( HOLDINGS or PARENT ) (collectively referred to as the
EMPLOYER ) and XXXXXXX XXXXX, who resides at 000 Xxxxxx-Xxxxxxx Xxxx,
Xxxxxxxxx, XX 00000 (the EXECUTIVE ).
W I T N E S S E T H :
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WHEREAS, Employer and Executive are parties to a certain
Employment Agreement, dated as of June 30, 1994 (the Prior
Agreement );
WHEREAS, certain subsequent events, including a change of name by
Employer, make an amendment of the Prior Agreement appropriate; and
WHEREAS, Employer desires to continue to employ Executive and
Executive desires to accept employment by Employer upon the terms and
conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants hereinafter set forth, and intending to be legally bound
hereby, it is hereby agreed as follows:
1. Termination of Prior Agreement. The Prior Agreement is
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hereby terminated, and superseded by this Agreement. The Executive
shall be entitled to his accrued salary under the Prior Agreement,
prorated to the date hereof. With respect to calendar year 1996, no
bonus shall be due or payable under the Prior Agreement. The bonus,
if any, payable Executive for calendar year 1996 shall be determined
under this Agreement.
2. Employment; Term. Employer agrees to employ Executive, and
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Executive agrees to be so employed, in the capacity of Chairman of the
Board and Chief Executive Officer of Employer, for a term commencing
on the date hereof and ending on the later to occur on the third
anniversary of the date hereof and the first anniversary of the date
on which Employer gives written notice of termination of employment to
Executive.
3. Time and Efforts; Place of Performance. Executive shall
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diligently and conscientiously devote substantially his full business
time and attention and best efforts to the business of Employer and
the discharge of his duties hereunder. It is understood that
Executive may serve as an outside director of one
or more not for profit corporations, without violating the terms
hereof, provided that such entities are not principally engaged in
business directly competitive with Employer.
Executive s employment hereunder shall be principally based in
the Philadelphia, Pennsylvania metropolitan area.
4. Base Salary. In partial consideration of the services of
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the Executive, Employer shall pay or cause one or more of its
subsidiary or affiliated corporations to pay to Executive a salary at
an annual rate of $400,000 (the Base Salary ), in equal installments
in accordance with the past payroll practices of Employer, but in no
event less frequently than monthly. The Base Salary may be adjusted
upward annually in the discretion of the board of directors of Parent,
or the authorized committee thereof.
5. Incentive Compensation. As further compensation for the
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services of Executive, Employer shall pay Executive annual cash
bonuses determined as follows and payable within sixty (60) days of
December 31 of the relevant calendar year:
(i) Subject to subparagraph (iv), Executive shall be eligible to
receive with respect to each calendar year during the term hereof a
cash bonus in an amount equal to 60% of the Base Salary paid to
Executive during the relevant calendar year pursuant to the terms of
this Agreement (the Target Bonus Amount ).
(ii) The actual bonus due hereunder for a particular calendar
year shall be determined based upon the achievement by the Employer of
annual EBITDA (income before income taxes, depreciation, amortization,
interest expense, management fees and incentive compensation payments)
and other operating and financial target results for such calendar
year. EBITDA for a year shall be computed from the audited annual
financial statements of Holdings and its subsidiaries for such year.
EBITDA and other targeted operating and financial results for the 1996
calendar year and future calendar years shall be determined in good
faith by the compensation committee of the Board of Directors of the
Employer in consultation with Executive. The parties will use their
best efforts to establish EBITDA targets within 30 days after the date
thereof.
(iii) For so long as Xxxx Xxxxxxxx and/or Xxxxxx X. Xxxx, Xx.
are active members of Employer s board of directors, in calculating
annual bonus amounts, a weight of 66.6% shall be assigned to
achievement of targeted EBITDA results, on the one
hand, and a weight of 33.4% shall be assigned to achievement of other
targeted results, on the other hand, and the bonus shall be determined
on the basis of the percentage of achievement of the blended results.
Thereafter, a weight of 100% shall be assigned to achievement of
targeted EBITDA results, and other targeted results shall have no
bearing on the calculation of Executive s cash bonus.
(iv) (a) In the event the Employer achieves 100% of targeted
results, the bonus payable shall be equal to the Target Bonus Amount
for such calendar year.
(b) In the event the Employer achieves results in excess of
targeted results, the bonus payable shall be in an amount equal to the
Target Bonus Amount for such calendar year plus an amount (the
Incremental Bonus Amount ) equal to two (2%) percent of the Target
Bonus Amount for each one (1%) percent by which actual results
exceeded targeted results. In no event shall the Incremental Bonus
Amount be in an amount in excess of 40% of Executive s Base Salary for
the relevant calendar year.
(c) In the event that actual results amounting to between
80% and 100% of targeted results are achieved, the bonus payable shall
be equal to the Target Bonus Amount for such calendar year less an
amount equal to two (2%) percent of the Target Bonus Amount for each
one (1%) percent by which actual results were less than targeted
results.
(d) In the event that actual results amount to less than
80% of targeted results, no cash bonus shall be payable.
(v) In connection with the calculation of the bonus payable to
Executive for a given year, the EBITDA of entities acquired during the
relevant calendar year shall be included in the relevant calendar year
in the relevant calculations from the date of acquisition, net of an
appropriate capital charge for additional equity capital employed.
(vi) In the event Executive s employment is terminated by reason
of Cause (as herein defined), or the Executive s resignation (other
than a resignation pursuant to Section 9(c)), no bonus for the year in
which termination or resignation occurs shall be payable. If
Executive s employment terminates for any other reason, Executive s
bonus for the year in which termination occurs shall be calculated on
the basis of the Employer s results for the full fiscal year in which
termination occurs, but his bonus shall be prorated based upon the
number of days in such year in which he was employed by Employer.
6. Stock Options. A. Executive is hereby granted non
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-qualified options to acquire up to 2,625 shares of the common stock
of Parent at a price of $1,000 per share (the Options ). Common
stock of Parent is referred to herein as Shares . The Options will
be exercisable by payment of the exercise price in cash or Shares
owned by the Executive (at fair market value). The Options shall have
the following terms and provisions:
(i) Term of ten (10) years from June 30, 1994, provided,
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however, that in the event of termination of employment of the
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Employee for any reason whatsoever, the Options will terminate unless
exercised within 60 days following the date on which termination
occurs.
(ii) Vesting in equal monthly increments over three (3)
years, commencing with the month of July, 1994. All Options shall
become immediately vested upon the occurrence of any of the following:
termination of Executive s employment without Cause; Change of Control
(as herein defined) of Parent; sale of equity securities of Parent in
a public offering; sale by Parent of substantially all the assets or
stock of Subsidiary; or death of Executive during his employment
hereunder or disability of Executive resulting in termination of his
employment with Employer.
On August 8, 1996, Parent and its stockholders have executed an
Amended and Restated Shareholders Agreement (the Shareholders
Agreement ). All Shares issuable upon the exercise of the Options
shall be subject to the terms of the Shareholders Agreement. The
Options are personal to the Employee and are non-transferable, except
that upon the Employee s death, the Options shall be transferable to
his personal representative.
Upon a cash exercise of the Options (in full or in part),
Employer will lend to Executive (the Option Loan ) an amount equal to
the exercise price of the Options (or the portion thereof actually
exercised). Such Option Loan shall be repayable upon the third
anniversary of the date of advance. Interest on the unpaid principal
balance thereof shall accrue at a fixed rate equal to the Prime Rate
charged by PNC at the time of exercise of the Option plus two (2%),
payable upon maturity. Such Option Loan will be collateralized by a
pledge of the Shares acquired pursuant to the subject exercise of the
Options. The recourse of the Employer to collect the Option Loan, and
any interest accrued thereon, shall be limited to such pledged Shares
and Employer shall have no further recourse against Executive in order
to collect any such amounts. In the event that Employer forecloses
upon the collateral, Executive shall retain the benefit of the
amount by which the value of the collateral exceeds the principal and
interest due on the Option Loan. If after exercise of the Options
Parent shall exercise a right, or have an obligation, under the
Shareholders Agreement, to purchase the Shares which were subject to
the Option, the principal amount of the Option Loan, and all accrued
interest thereon, shall be offset against the purchase price of said
Shares, with such offset being applied against installments on account
of the purchase price coming due under the Shareholders Agreement in
the order of maturity.
B. In addition to the Option, Executive is hereby granted
additional options (the Additional Options ) to acquire up to 1,125
shares of the common stock of Parent at an exercise price as described
below. The term of the Additional Options shall be ten (10) years
from June 30, 1994; provided, however, that if a Liquidity Event (as
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herein defined) shall not theretofore have occurred, the term of the
Additional Options shall automatically be extended for an additional
ten years. The Additional Options are personal to the Employee and
are non-transferable, except that upon the Employee s death, the
Additional Options shall be transferable to his personal
representative.
The initial exercise price of the Additional Options was $1,000
per share. On each of June 30, 1995 and June 30, 1996 the exercise
price increased by 40% over the exercise price applicable for the
prior year. On each of June 30, 1997 and June 30, 1998, the exercise
price shall increase by 40% over the exercise price applicable for the
prior year. From and after June 30, 1999, the exercise price shall be
$5,000 per share. The Additional Options will be exercisable by
payment of the exercise price in cash or common stock of Parent (at
fair market value).
The Additional Options are immediately vested. However, the
Additional Options are exercisable only (I) in the event of a Change
of control or Holdings shall make an initial public offering of its
shares of common stock (each, a Liquidity Event ), and (ii) if, at
the time of occurrence of such Liquidity Event, the Executive s
employment with the Employer shall not have been terminated by reason
of his resignation (other than a resignation pursuant to Section 9(e))
or discharge for Cause. The Shares subject to the Additional Options
shall not be subject to the Shareholders Agreement.
C. In addition to the Options and the Additional Options,
Executive is hereby granted supplemental options (the Supplemental
Options ) to acquire up to 1,575 shares of the common stock of the
Parent at an exercise price of $1,600 per share. Further, the
Supplemental Options shall be exercisable
only in the event that at the time of exercise, Xxxxx, Xxxx and Xxxxx
realized an internal rate of return of 35% or greater on its equity
investment in Employer made concurrent with the execution of this
Agreement in connection with the acquisition of Any-Kind Check Cashing
Centers, Inc. and related transactions. The Supplemental Options
shall otherwise be subject to the terms and conditions applicable to
the Options as set forth in this paragraph 6, provided, however, that
the term shall be ten (10) years from the date hereof and vesting in
equal monthly increments over three (3) years shall commence with the
month of August, 1996.
D. During the three year period commencing on June 30, 1994,
with the concurrence of the Employee (which shall not unreasonably be
withheld), Holdings may grant options to acquire up to 1,200 Shares to
persons who, at the time of grant, are employees of the Employer or
one of its subsidiaries (the Employee Options ). The Employee
Options shall be in substantially the same form and shall contain
substantially the same terms as the Options and the Additional
Options, and shall be issued in the same proportion to each such
employee as the Options and Additional Options are granted hereunder
to the Executive. Each grant of an Employee Option shall result in a
reduction of the number of Shares subject to the Option and the
Additional Option in an amount equal to 52.5% and 22.5%, respectively,
of the number of Shares subject to such Employee Option. In addition,
to the extent Employee Options covering fewer than 1,200 Shares have
been issued on or prior to the third anniversary of June 30, 1994, the
number of Shares subject to the Options and the Additional Options
shall, effective as of the day following the third anniversary of the
date hereof, be further reduced by the Reduction Amount (as herein
defined). The Reduction Amount shall be an amount determined by
subtracting from 1,200 the number of Shares subject to Employee
Options actually granted, and multiplying the resulting number by
37.5%. The Reduction Amount shall be allocated 70% to the Options and
30% to the Additional Options. It is understood that, pursuant to a
Subscription Agreement of June 30, 1994, Holdings has granted to WPG
Corporate Development Associates IV L.P. and WPG Corporate Development
Associates IV (Overseas), Ltd. options to purchase Shares in an amount
equal, in the aggregate, to 50% of the Reduction Amount. For the
purposes of this paragraph D, Employee Options which are granted but
subsequently forfeited (regardless of when forfeited) shall be deemed
not to have been granted.
E. Holdings agrees that it will not claim a deduction for
federal income tax purposes resulting from the grant (but not the
exercise) of the Options and the Additional Options to the Executive.
F. The exercise price, and the number of shares subject to the
Options and the Additional Options, are subject to equitable
adjustment to take into account stock dividends, stock splits,
recapitalizations and other dilutive events, all as reasonably
determined in good faith by the Company s board of directors.
7. Benefits. Executive shall be eligible to participate in all
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fringe benefit programs of Employer offered from time to time to its
senior management employees (including, without limitation, auto
allowance, life insurance, disability insurance, dental and medical
coverage, profit sharing, pension, 401(k), and vacation), but in no
event shall the total package of benefits be less than that accruing
to Executive as of the date hereof pursuant to the Prior Agreement.
8. Expenses. Employer will reimburse Executive for all
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reasonable, ordinary and necessary expenses (including travel)
incurred by him in carrying out his duties under this Agreement.
Employer acknowledges the business value to the Employer of such
expenditures. Executive shall present Employer from time to time with
an itemized statement of such expenses in such form as the Employer
may request.
9. Termination.
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(a) Executive s employment under this Agreement may be
terminated without further liability by Employer at any time for Cause
(defined, for purposes of this Agreement, as (I) Executives willful
refusal, after written notice by Employer, to cure within a period of
30 days any continuing material breach hereof or (ii) a final non-
appealable adjudication in a criminal or civil proceeding that
Executive has committed a fraud or felony relating to or adversely
affecting this employment).
(b) Employer may terminate Executive s employment hereunder
at anytime, including upon the occurrence of the disability of
Executive, upon 90 days written notice to Executive, upon payment of
a severance benefit (the Severance Benefit ) equal to the sum of (i)
two (2) years of Base Salary at the then current rate and (ii) the
cash bonus received by Executive for the most recently completed
calendar year, payable in 24 equal consecutive monthly installments on
the first day of each month, commencing with the month after the month
in which termination occurs. Payment of the Severance Benefit shall
be Executive s sole remedy in the event of the Employer's
termination of this Agreement for any reason. Executive will
cooperate in order to allow Employer to purchase disability insurance
regarding Executive in order to fund its obligation hereunder.
(c) If there is a Change of Control, Executive may elect to
terminate his employment hereunder within 90 days of such change, in
which case he shall be entitled to receive from Employer a cash
payment equal to the Severance Benefit.
(d) In the event Executive shall be indicted for a crime
not involving the Employer or any of its subsidiaries, subject to
giving the Executive a full opportunity to make a presentation to the
Board of Directors, the Employer shall have the right to terminate the
employment of the Executive pursuant to this paragraph (d). If it
does so, it shall continue to pay the Executive s Base Salary until
the first to occur of (I) conviction of the felony or a lesser
included offense or a plea of nolo contendere by the Executive, or
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(ii) the Executive s acquittal. In the event of the Executive s
acquittal, Executive shall be entitled to his Severance Benefit,
commencing as of the date of such acquittal, but the amount paid to
him pursuant to this paragraph (d) shall be credited toward the
Severance Benefit. In the event of a conviction or plea of nolo
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contendere, Executive shall immediately repay the amount paid
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pursuant to this paragraph (d), and, if not immediately repaid and
without limiting Employer s other remedies, Employer shall have the
right to offset said sum against monies due to the Executive by reason
of the purchase of shares or options of Holdings formerly owned by
Executive and purchased by Holdings.
(e) For purposes of this Agreement, a Change of Control
shall be deemed to have occurred if and when :
(1) WPG Corporate Development Associates IV, L.P., WPG
Corporate Development Associates IV (Overseas), L.P.,
Pegasus Partners, L.P., PAG Dollar Investors LLC and
General Electric Capital Corporation, collectively,
shall cease to own equity securities having at least
51% of the voting power of Holdings other than by
reason of, or as a result of, a public offering of
Holdings shares; provided, however, that shares of
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Holdings held by (I) any liquidating trust for any of
said parties, (ii) the partners, members or
stockholders of any of said parties, (iii) the
partners, members or stockholders of any of said
parties in the event of the liquidation of such
parties, or (iv) any
venture capital or management buy out fund sponsored by
Xxxxx, Xxxx & Xxxxx shall not be deemed to constitute a
Change of Control for the purposes of this subparagraph
(1);
(2) the Company becomes a subsidiary of another
unaffiliated corporation or shall be merged or
consolidated into another unaffiliated corporation; or
(3) all or substantially all of the Company s assets shall
have been sold to an unaffiliated party or parties.
(f) Executive shall not be required to seek
alternative employment following the payment to him of any Severance
Benefit hereunder and in no event shall any compensation earned or
amounts paid to Executive in any such alternate employment serve to
mitigate Employer s severance obligations to Executive hereunder.
10. Restrictive Covenant. In consideration of Employer s grant
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of options to Executive, and its covenant to pay a Severance Benefit,
each as contained herein, without prior written consent of the Board
of Directors of Employer, Executive agrees that he will not for a
period of two (2) years following the termination of Executive s
employment with Employer for any reason whatsoever, (or to such lesser
extent and for such lesser period as may be deemed enforceable by a
court of competent jurisdiction, it being the intention of the parties
that this Section 10 shall be so enforced): (a) directly or
indirectly engage in the same state or territory of the United States
in any business in direct competition with the primary business
conducted by Employer at the time of termination, either as employee,
independent contractor, 5% or greater owner, partner, lender or
stockholder; and further provided, that the foregoing shall not be
construed to prohibit ownership of less than 2% of the outstanding
shares of any public corporation); (b) solicit, canvass, or accept any
business for any other company, or business similar to any business of
Employer, from any past, present or future (as defined below) customer
of Employer; (c) directly or indirectly induce or attempt to influence
any employee of Employer to terminate his employment; or (d) directly
or indirectly request any present or future ( future , as used herein,
shall mean at or prior to the time of termination of employment)
entities with whom Employer has significant business relationships to
curtail or cancel their business with Employer. In addition and
without limiting the foregoing, upon the
termination of the Executive s employment by the Employer for any
reason, whether before or after the expiration of the term of his
employment, Executive shall not at any time directly or indirectly
disclose to any person, firm or corporation any trade, technical or
technological secrets, any details of organization or business
affairs, or any names of past or present customers of Employer. For
the purposes of this Section 10, the term Employer shall be deemed
to include Employer and all of its subsidiaries.
11. Inventions. All inventions, discoveries, improvements,
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processes, formulae and data relating to Employer s business that
Executive may make, conceive or learn during the term of his
employment by the Employer (whether before, during or after the term
of this Agreement, whether during working hours or otherwise, or
within six months following the termination of his employment for any
reason) shall be the exclusive property of Employer. Executive agrees
to make prompt disclosure to the board of directors of Employer of all
such inventions, etc., and to do at Employer s expense all lawful
things necessary or useful to assist Employer in securing their full
enjoyment and protection. In the event of any breach or threatened
breach of the provisions of this Section 11 or the preceding Section
10, Employer may apply to any court of competent jurisdiction to
enjoin such breach. Any such remedy shall be in addition to
Employer s remedies at law under such circumstances.
12. Notices. Any notice given hereunder shall be in writing and
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delivered or mailed by certified mail or overnight courier service
(with proof of delivery) and addressed to the appropriate party at the
address set forth below or at such other address as the party shall
designate from time to time in a notice; and if to Employer, with a
copy to Altheimer & Xxxx, 00 X. Xxxxxx Xxxxx, Xxxxxxx, XX 00000,
Attention: Xxxxx X. Xxxxxxxxxx, Esquire
Xxxxxxx Xxxxx Dollar Financial Group.
000 Xxxxxx-Xxxxxxx Xxxx 0000 Xxxxxxxxx Xxxxxx, Xxxxx 000
Xxxxxxxxx, XX 00000 Xxxxxx, XX 00000
Attention: President
13. Binding Effect. This Agreement shall inure to the benefit
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of and be binding upon Employer, its successors and assigns.
Executive acknowledges that these services are unique and personal.
Accordingly, Executive may not assign any of his rights or delegate
any of his duties or obligations under this Agreement.
14. Waiver. Failure to insist in any one or more instances on
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strict compliance with the terms of this Agreement shall not be deemed
a waiver. Waiver of a breach of any provision of this Agreement shall
not be construed as a waiver of any subsequent breach.
15. Governing Law; Disputes. This Agreement is made and
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delivered in, and shall be construed in accordance with the
substantive laws of, the Commonwealth of Pennsylvania and the United
States of America without regard to conflict of law principles. Any
claims, controversies, demands, disputes or differences between or
among the parties hereto arising out of, or by virtue of, or in
connection with, or otherwise relating to this Agreement shall be
submitted to and settled by arbitration conducted in Philadelphia,
Pennsylvania before one or three arbitrators, each of whom shall be
knowledgeable in the field of employment law. Such arbitration shall
otherwise be conducted in accordance with the rules then obtaining of
the American Arbitration Association. The parties hereto agree to
share equally the responsibility for all fees of the arbitrators,
abide by any decision rendered as final and binding, and waive the
right to appeal the decision or otherwise submit the dispute to a
court of law for a jury or non-jury trial. The parties hereto
specifically agree that neither party may appeal or subject the award
or decision of any such arbitrator to appeal or review in any court of
law or in equity or by any other tribunal, arbitration system or
otherwise. Judgment upon any award granted by such an arbitrator may
be enforced in any court having jurisdiction thereof.
16. Severability. In the event that any provision of this
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Agreement shall be determined to be invalid by a court of competent
jurisdiction, such determination shall in no way affect the validity
or enforceability of any other provisions hereof.
17. Entire Agreement; Miscellaneous. The parties acknowledge
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and agree that they are not relying on any representations, oral ro
written, other than those expressly contained herein. This Agreement
supersedes all proposals, oral or written, all negotiations,
conversations or discussions between the parties and all course of
dealing. All prior understandings and agreements between the parties
regarding employment matters are hereby merged in this Agreement,
which alone is the complete and exclusive statement of their
understanding as to employment. No waiver or modification of this
Agreement shall be valid unless the same shall be in writing and
signed by the party sought to be charged therewith. Time is of the
essence in this Agreement and each and every provision
hereof. This is a personal services agreement; no agency,
partnership, joint venture or other joint relationship is created
hereby. The parties acknowledge that they each participated in
drafting this Agreement, and there shall be no presumption against any
party on the ground that such party was responsible for preparing this
Agreement or any part hereof. Paragraph headings are for convenience
of reference only and are not intended to create substantive rights or
obligations.
IN WITNESS WHEREOF, this Agreement has been duly executed by the
undersigned as of the day and year first above written.
DFG HOLDINGS, INC. DOLLAR FINANCIAL GROUP, INC.
By:/s/ Xxxxxx X. Xxxxxxxx, Xx. By:/s/ Xxxxxx X. Xxxxxxxx, Xx.
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( Employer ) ( Employer )
/s/ Xxxxxxx X. Xxxxx
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Xxxxxxx X. Xxxxx
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