EXECUTIVE EMPLOYMENT AGREEMENT
Exhibit
10.4
THIS EXECUTIVE EMPLOYMENT AGREEMENT (this
“Agreement”)
is made and entered this 20th day of December, 2018 (the
“Effective
Date”) between cbdMD LLC, a North Carolina limited
liability company whose principal place of business is 0000 Xxxxxx
Xxxx, Xxxxxxxxx, XX 00000 (the “Company”)
and R. Xxxxx Xxxxxxx, an individual whose address is [●] (the
“Executive”).
RECITALS
WHEREAS, the Company is a manufacturer
and distributor of a variety of cannabidiol (CBD) based products
(the “Business”).
WHEREAS, the Company is a wholly-owned
subsidiary of Level Brands, Inc., a North Carolina corporation (the
“Parent”).
WHEREAS, the Executive served as a
manager and the principal executive officer of Cure Based
Development, LLC (“Cure”),
an entity acquired by the Parent pursuant to the terms and
conditions of that certain Agreement and Plan of Merger dated
December 3, 2018 (the “Merger
Agreement”) by and among the Parent, AcqCo LLC, the
Company and Cure (the “Mergers”).
WHEREAS, pursuant to the term of the
Merger Agreement, at the closing of the Mergers, the Executive was
appointed to the Parent’s Board of Directors (the
“Parent
Board”).
WHEREAS, the Company desires to employ
the Executive and the Executive desires to be employed by the
Company pursuant to the terms of this Agreement.
WHEREAS, the Executive, by virtue of the
Executive'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.
NOW, THEREFORE, in consideration of the
mutual agreements herein made, the Company and the Executive do
hereby agree as follows:
1. Recitals.
The above recitals are true, correct, and are herein incorporated
by reference.
2. Employment.
The Company hereby employs the Executive, and the Executive 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
Executive will serve as Chief Executive Officer of the Company and
in this capacity, shall have such duties and responsibilities
consistent with Executive’s title(s), status, and position as
the Company’s Chief Executive Officer. The Executive will
report to the Chief Executive Officer of the Parent.
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b. Time
Devoted. Throughout the term of the Agreement, the Executive
shall devote substantially all of the Executive's business time and
attention to the business and affairs of the Company consistent
with the Executive's position with the Company, except for
reasonable vacations and except for illness or incapacity, but
nothing in the Agreement shall preclude the Executive from engaging
in a business other than the Business of the Company which does not
compete with the Company, upon prior notice to the Audit Committee
of the Parent’s Board of Directors, and provided that such
activities do not interfere with the regular performance of the
Executive's duties and responsibilities under this
Agreement.
c. Corporate
Policies. The Executive 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 Parent’s xxxxxxx xxxxxxx and code of ethics
polities.
4. Term.
The initial term (“Initial
Term”) of employment hereunder will commence on the
Effective Date and end on the fifth (5th) 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
consent exchanged at least sixty (60) days before the expiration of
the Initial Term or any 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 Executive shall be paid a base salary (“Base
Salary”), payable in accordance with the Company's
policies from time to time for senior executives, at an annual rate
of one hundred and eighty thousand dollars ($180,000). 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 Parent (the “Parent Compensation
Committee”) in connection with reviews of
Executive’s performance, which such reviews shall occur no
less frequently than annually.
b. Discretionary
Bonus.
(1) The
Parent Compensation Committee shall review the Executive's
performance on an annual basis, and in connection with such annual
review, the Executive may be entitled to receive an annual
discretionary bonus (the “Annual
Discretionary Bonus”) in such amount as may be
determined by the Parent Board, upon recommendation of the Parent
Compensation Committee, in its sole discretion. So long as the
Executive is a member of the Parent Board, he shall abstain from
participation in the deliberations of the Parent Board with respect
to the Annual Discretionary Bonus.
(2) The
Parent Compensation Committee shall commence each annual review by
the last business day of January of the following year. The Annual
Discretionary Bonus, if any, shall be paid to the Executive by the
last business day of February of the following year, or, if no
Annual Discretionary Bonus is awarded, the Parent Compensation
Committee shall so notify the Executive in writing of such
determination by the last business day of February of the following
year. For example, the Parent Compensation Committee review for the
year ending December 31, 2019 shall commence no later than January
31, 2020, and, assuming an Annual Discretionary Bonus is to be
awarded, the Executive shall be paid the Annual Discretionary Bonus
for the year ending December 31, 2019 on or before February 28,
2020. The Annual Discretionary Bonus, if any, may be paid to the
Executive in the form of cash, equity awards made under the
Parent’s 2015 Equity Compensation Plan or a combination
thereof, as determined by the Parent Compensation Committee in its
sole discretion.
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c. Executive
Benefits. The Executive shall be entitled to participate in
all benefit programs of the Company currently existing or hereafter
made available to executive 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.
d. Vacation.
During each fiscal year of the Company, the Executive shall be
entitled to such amount of vacation consistent with the Executive's
position and length of service to the Company.
e. Business
Expense Reimbursement. During the Term of employment, the
Executive shall be entitled to receive proper reimbursement for all
reasonable, out of-pocket expenses incurred by the Executive (in
accordance with the policies and procedures established by the
Parent) in performing services hereunder, provided the Executive
properly accounts therefor.
f. Clawback
Provisions. Notwithstanding any other provisions in this
Agreement to the contrary, any incentive-based compensation, or any
other compensation, paid to the Executive 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. Death.
This Agreement will terminate upon the death of the
Executive.
b. Disability.
(1) The
Executive's employment will terminate in the event of his
disability, upon the first day of the month following the
determination of disability as provided below. Following such a
termination, the Executive shall be entitled to compensation in
accordance with the Company's disability compensation practice for
senior executives, including any separate arrangement or policy
covering the Executive, but in all events the Executive shall
continue to receive his Base Salary, at the annual rate in effect
immediately prior to the commencement of disability, for three (3)
months after the termination. Any amounts provided for in this
Section 6b shall not be offset by other long-term disability
benefits provided to the Executive by the Company or Social
Security.
(2) “Disability,”
for the purposes of this Agreement, shall be deemed to have
occurred if (A) the Executive is unable, by reason of a physical or
mental condition, to perform his duties under this Agreement for an
aggregate of ninety (90) days in any 12-month period or (B) the
Executive has a guardian of the person or estate appointed by a
court of competent jurisdiction. Anything herein to the contrary
notwithstanding, if, following a termination of employment due to
disability, the Executive becomes re-employed, whether as an
executive or a consultant, any compensation, annual incentive
payments or other benefits earned by the Executive from such
employment shall be offset against any compensation continuation
due to the Executive hereunder.
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c. Termination
by the Company For Cause.
(1) Nothing
herein shall prevent the Company from terminating Executive for
Cause, as hereinafter defined. The Executive shall continue to
receive compensation only for the period ending with the date of
such termination as provided in this Section 6c. Any rights and
benefits the Executive 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, gross neglect or misrepresentation, embezzlement or
dishonesty against the Company; (B) committing or participating in
any other injurious act or omission wantonly, willfully, recklessly
or in a manner which was grossly negligent against the Company; (C)
engaging in a criminal enterprise involving moral turpitude; (D)
conviction for a felony under the laws of the United States or any
state thereof; (E) 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 Parent's securities may
be listed or quoted for trading; (F) violation of the
Parent’s and/or the Company's corporate governance policies;
or (G) 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 Executive a notice of termination
stating that the Executive committed one of the types of conduct
set forth in Section 6c(2) of this Agreement and specifying the
particulars thereof and the Executive shall be given a thirty (30)
day period to cure such conduct set forth in Section
6c(2).
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d. Voluntary
Termination. If the Executive terminates the Executive's
employment on the Executive'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 Executive shall be limited to the same rights and
benefits as provided in connection with a termination for Cause as
provided in Section 6c.
7. Covenant
Not To Compete and Non-Disclosure of
Information.
a. Covenant
Not To Compete. The Executive 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 Parent Board, the Executive agrees to the
following:
(1) That
during the Restricted Period (as hereinafter defined) and within
the Restricted Area (as hereinafter defined), the Executive 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
Executive 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 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
Executive 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 or indirectly 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 Executive or the Competitive
Business employs or seeks to employ such person) employed by the
Company.
b. Non-Disclosure
of Information. The Executive 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 Executive hereunder. In light of the highly
competitive nature of the industry in which the Company's Business
is conducted, the Executive agrees that all Proprietary
Information, heretofore or in the future obtained by the Executive
as a result of the Executive's association with the Company shall
be considered confidential.
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In
recognition of this fact, the Executive agrees that the Executive,
during the Restricted Period, will not use or disclose any of such
Proprietary Information for the Executive'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 Executive is legally required to disclose such
Proprietary Information. Documents (as hereinafter defined)
prepared by the Executive or that come into the Executive's
possession during the Executive'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 Cure, prior to the Mergers, has performed Business
Activities, including, but not limited
to, suppliers or vendors with whom the Company or Cure, prior to
the Mergers, 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 the United
States.
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 during any
portion of the twelve (12) months prior to the termination
of Executive's employment.
h. Covenants
as Essential Elements of this Agreement. It is understood by
and between the parties hereto that the foregoing covenants
contained in Sections 7a and b are essential elements of this
Agreement, and that but for the agreement by the Executive to
comply with such covenants, the Company would not have agreed to
enter into this Agreement. Such covenants by the Executive 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 Executive. 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.
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i. Survival
After Termination of Agreement. Notwithstanding anything to
the contrary contained in this Agreement, the covenants in Sections
7a and b shall survive the termination of this Agreement and the
Executive's employment with the Company.
j. Remedies.
(1) The
Executive acknowledges and agrees that the Company's remedy at law
for a breach or threatened breach of any of the provisions of
Section 7a or b herein 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 Executive
of any of the provisions of Section 7a or b, the Executive agrees
that, in addition to any remedy at law available to the Company,
including, but not limited to monetary damages, all rights of the
Executive to payment or otherwise under this Agreement and all
amounts then or thereafter due to the Executive from the Company
under this Agreement may be terminated and the Company, without
posting any bond, shall be entitled to obtain, and the Executive
agrees not to oppose the Company's request for equitable relief in
the form of specific performance, temporary restraining order,
temporary or permanent injunction or any other equitable remedy
which may then be available to the Company.
(2) The
Executive acknowledges that the granting of a temporary injunction,
temporary restraining order or permanent injunction merely
prohibiting the use of Proprietary Information would not be an
adequate remedy upon breach or threatened breach of Section 7a or b
and consequently agrees, upon proof of any such breach, to the
granting of injunctive relief prohibiting any form of competition
with the Company. Nothing herein contained shall be construed as
prohibiting the Company from pursuing any other remedies available
to it for such breach or threatened breach.
8. Indemnification.
The Executive shall be covered by the Articles of Organization and
Operating Agreement of the Company with respect to matters
occurring on or prior to the date of termination of the Executive's
employment with the Company, subject to all the provisions of North
Carolina and Federal law, the Articles of Organization the Company
and the Operating Agreement 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 Organization, Operating Agreement 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 Executive
pursuant to the provisions of the Articles of Organization and/or
Operating Agreement, or pursuant to North Carolina or Federal law,
such repayment shall be due and payable by the Executive 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 Executive's employment with the Company and as to which
Executive 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 Executive or the
Executive'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 Executive to the Executive'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 Executive
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 Executive shall conduct the Executive'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 Executive is located.
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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.
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 all
trial and appellate levels, expenses and costs.
21. Venue.
The Company and Executive 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 Executive acknowledges his understanding
that this Agreement was prepared at the request of the Company by
Xxxxxxxx Law Group LLP, its counsel, and that such firm did not
represent the Executive in conjunction with this Agreement or any
of the related transactions. The Executive, 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 EXECUTIVE ACKNOWLEDGES THAT THE EXECUTIVE HAS READ ALL OF THE
TERMS OF THIS AGREEMENT, UNDERSTANDS THE AGREEMENT, AND AGREES TO
ABIDE BY ITS TERMS AND CONDITIONS.
[signature
page follows]
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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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cbdMD LLC
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_____________________________
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Manager
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By:
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/s/ Xxxx X.
Xxxxxxx
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Xxxx X. Xxxxxxx, |
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Chief Financial Officer and |
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Chief Operating Officer |
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Witness:
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THE
EXECUTIVE
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_____________________________
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/s/
R.
Xxxxx Xxxxxxx
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_____________________________
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R. Xxxxx
Xxxxxxx
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