Exhibit 10.4
EMPLOYMENT AGREEMENT
(XXXXXX X. XXXX)
THIS EMPLOYMENT AGREEMENT (this "Agreement") is entered into as of May 5,
2004 by and between TEXAS ROADHOUSE, INC., a Delaware corporation (the
"Company"), and XXXXXX X. XXXX, a resident of the Commonwealth of Kentucky
("Executive").
RECITALS
A. The Company is preparing for an initial public offering of its shares
of Class A Common Stock, $0.001 par value ("Class A Common Stock"), which will
be registered with the Securities and Exchange Commission under the Securities
Act of 1933, as amended (the "IPO").
B. The Company has entered into an agreement to merge with Texas
Roadhouse Management Corp., a Kentucky corporation ("Management Corp."),
effective immediately prior to the closing of the IPO, with the Company as the
surviving corporation.
C. Executive is currently employed by Management Corp. as its President,
pursuant to an Employment Agreement dated March 15, 2000, between Management
Corp. and Executive (the "Prior Employment Agreement").
D. Executive has been appointed as the Chief Executive Officer of the
Company.
E. The Company desires that the employment of Executive, and Executive
wishes such employment, as Chief Executive Officer of the Company following the
IPO, to be governed by the terms and conditions set forth in this Agreement.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing premises and the
respective agreements of the Company and Executive set forth below, the Company
and Executive, intending to be legally bound, agree as follows:
1. EFFECTIVE DATE. The terms and conditions of Executive's
employment hereunder shall become effective upon completion and closing of
the IPO (the "Effective Date"). Notwithstanding the preceding sentence, the
terms and conditions of Executive's employment hereunder shall not become
effective and this Agreement shall immediately terminate if, prior to the
Effective Date, any of the following shall occur: (a) Executive resigns
from his employment with the Company, (b) the death or Disability (as
defined in Section 10 hereof) of Executive, (c) the Company decides not to
proceed with the IPO, (d) if the Company files a Registration Statement on
Form S-1 with the Securities and Exchange Commission relating to an IPO,
the subsequent withdrawal of such Registration Statement prior to its
effectiveness, (e) if the IPO does not close on or prior to September 30,
2004, or (f) Executive's employment is terminated by Management Corp.
Neither Executive nor the Company may revoke or cancel this Agreement prior
to the Effective Date without written agreement of the other party.
2. EMPLOYMENT. Subject to all the terms and conditions of this
Agreement, Executive's period of employment under this Agreement shall be
the period (the "Term") commencing on the Effective Date and ending on the
last day of the twelfth full fiscal quarter following the Effective Date
(the "Third Anniversary Date"), unless the Executive's employment
terminates earlier in accordance with Section 9 hereof. Thereafter, if
Executive continues in the employ of the Company, the employment
relationship shall continue to be at will, terminable by either Executive
or the Company at any time and for any reason, with or without cause, and
subject to such terms and conditions established by the Company from time
to time.
3. POSITION AND DUTIES.
(a) EMPLOYMENT WITH THE COMPANY. While Executive is employed by
the Company during the Term, Executive shall be employed as the Chief
Executive Officer of the Company, and such other titles as the Company may
designate, and shall perform such duties and responsibilities as the
Company shall assign to him from time to time, including duties and
responsibilities relating to the Company's wholly-owned and partially owned
subsidiaries and other affiliates.
(b) PERFORMANCE OF DUTIES AND RESPONSIBILITIES. Executive shall
serve the Company faithfully and to the best of his ability and shall
devote his full working time, attention and efforts to the business of the
Company during his employment with the Company hereunder. While Executive
is employed by the Company during the Term, Executive shall report to the
Chairman of the Company or to such other person as designated by the Board
of Directors of the Company (the "Board"). Executive hereby represents and
confirms that he is under no contractual or legal commitments that would
prevent him from fulfilling his duties and responsibilities as set forth in
this Agreement. During his employment with the Company, Executive shall not
accept other employment or engage in other material business activity,
except as approved in writing by the Board. Executive may participate in
charitable activities and personal investment activities to a reasonable
extent, and he may serve as a director of business organizations as
approved by the Board, so long as such activities and directorships do not
interfere with the performance of his duties and responsibilities
hereunder.
4. COMPENSATION.
(a) BASE SALARY. While Executive is employed by the Company
during the Term, the Company shall pay to Executive a base salary at the
rate of Five Hundred Thousand and no/100 Dollars ($500,000.00) per fiscal
year, less deductions and withholdings, which base salary shall be paid in
accordance with the Company's normal payroll policies and procedures.
(b) INCENTIVE BONUS. Commencing with the first full fiscal
quarter following the Effective Date and for each full fiscal quarter
thereafter that Executive is employed by the Company during the Term,
Executive shall be eligible for a quarterly incentive bonus in an amount up
to Seventy Five Thousand and no/100 Dollars ($75,000.00), based upon
achievement of defined goals established by the Compensation
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Committee of the Board and in accordance with the terms of any incentive
plan of the Company in effect from time to time (the "Incentive Bonus").
The level of achievement of the objectives each fiscal quarter and the
amount payable as Incentive Bonus shall be determined in good faith by the
Compensation Committee. Any Incentive Bonus earned for a fiscal quarter
shall be paid to Executive on or before the 90th day following the last day
of such fiscal quarter.
(c) STOCK OPTIONS. Pursuant to the First Amended and Restated
Equity Incentive Plan of the Company, as of the Effective Date, Executive
shall be granted options to purchase 165,000 shares of Class A Common Stock
at an exercise price equal to the price per share at which shares of Class
A Common Stock are offered to the public in the IPO. The options shall vest
in accordance with the following schedule:
DATE AMOUNT VESTING
---- --------------
First Anniversary of the Effective Date 24,000 shares
Second Anniversary of Effective Date 24,000 shares
Third Anniversary of Effective Date 117,000 shares
If a share dividend, share split or share combination shall occur
with respect to the Common Shares of Texas Roadhouse Holdings LLC, a
Kentucky limited liability company, shall occur prior to the closing of the
IPO, or such Common Shares are exchanged for shares of Class A Common Stock
in connection with the IPO on a basis other than one-to-one, the amounts
set forth in this Section 4(c) shall be correspondingly adjusted.
(d) BENEFITS. While Executive is employed by the Company during
the Term, Executive shall be entitled to participate in all employee
benefit plans and programs of the Company that are available to executive
officers generally to the extent that Executive meets the eligibility
requirements for each individual plan or program. The Company provides no
assurance as to the adoption or continuance of any particular employee
benefit plan or program, and Executive's participation in any such plan or
program shall be subject to the provisions, rules and regulations
applicable thereto.
(e) EXPENSES. While Executive is employed by the Company during
the Term, the Company shall reimburse Executive for all reasonable and
necessary out-of-pocket business, travel and entertainment expenses
incurred by him in the performance of his duties and responsibilities
hereunder, subject to the Company's normal policies and procedures for
expense verification and documentation.
(f) VACATIONS AND HOLIDAYS. Executive shall be entitled to be
absent from his duties for the Company by reason of vacation for a period
of four weeks per calendar year. Executive shall coordinate his vacation
schedule with the Company so as not to impose an undue burden on the
Company. In addition, Executive shall be entitled to such national and
religious holidays as the Board shall approve for all of its employees from
time to time.
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5. AFFILIATED ENTITIES. As used in Sections 6, 7 and 8 of this
Agreement, "Company" shall include the Company and each corporation,
limited liability company, partnership, or other entity that is controlled
by the Company, or is under common control with the Company (in each case
"control" meaning the direct or indirect ownership of 50% or more of all
outstanding equity interests).
6. CONFIDENTIAL INFORMATION. Except as required in the performance
of Executive's duties as an employee of the Company or as authorized in
writing by the Board, Executive shall not, either during Executive's
employment with the Company or at any time thereafter, use, disclose or
make accessible to any person any confidential information for any purpose.
"Confidential Information" means information proprietary to the Company or
its suppliers or prospective suppliers and not generally known (including
trade secret information) about the Company's suppliers, products,
services, personnel, customers, recipes, pricing, sales strategies,
technology, computer software code, methods, processes, designs, research,
development systems, techniques, finances, accounting, purchasing, and
plans. All information disclosed to Executive or to which Executive obtains
access, whether originated by Executive or by others, during the period of
Executive's employment by the Company (whether before, during, or after the
Term), shall be presumed to be Confidential Information if it is treated by
the Company as being Confidential Information or if Executive has a
reasonable basis to believe it to be Confidential Information. Executive
acknowledges that the above-described knowledge and information constitutes
a unique and valuable asset of the Company and represents a substantial
investment of time and expense by the Company, and that any disclosure or
other use of such knowledge or information other than for the sole benefit
of the Company would be wrongful and would cause irreparable harm to the
Company. During Executive's employment with the Company, Executive shall
refrain from committing any acts that would materially reduce the value of
such knowledge or information to the Company. The foregoing obligations of
confidentiality shall not apply to any knowledge or information that (i) is
now or subsequently becomes generally publicly known, or (ii) is required
to be disclosed by law or legal process, other than as a direct or indirect
result of the breach of this Agreement by Executive. Executive acknowledges
that the obligations imposed by this Section 6 are in addition to, and not
in place of, any obligations imposed by applicable statutory or common law.
7. NONCOMPETITION COVENANT.
(a) AGREEMENT NOT TO COMPETE. During Executive's employment with
the Company (whether before, during, or after the Term) and during the
Restricted Period (as defined below), Executive shall not, directly or
indirectly, on his own behalf or on behalf of any person or entity other
than the Company, including without limitation as a proprietor, principal,
agent, partner, officer, director, stockholder, employee, member of any
association, consultant or otherwise, engage in any business that is then
competitive with the business of the Company, including without limitation
any business that operates one or more restaurants that utilize a
steakhouse or roadhouse concept.
(b) AGREEMENT NOT TO HIRE. Except as required in the performance
of Executive's duties as an employee of the Company, during Executive's
employment with
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the Company (whether before, during, or after the Term) and during the
Restricted Period, Executive shall not, directly or indirectly, hire,
engage or solicit or induce or attempt to induce to cease working for the
Company, any person who is then an employee of the Company or who was an
employee of the Company during the six (6) month period immediately
preceding Executive's termination of employment with the Company.
(c) AGREEMENT NOT TO SOLICIT. Except as required in the
performance of Executive's duties as an employee of the Company, during
Executive's employment with the Company (whether before, during, or after
the Term) and during the Restricted Period, Executive shall not, directly
or indirectly, solicit, request, advise, induce or attempt to induce any
vendor, supplier or other business contact of the Company to cancel,
curtail, cease doing business with, or otherwise adversely change its
relationship with the Company.
(d) RESTRICTED PERIOD. "Restricted Period" hereunder means the
period commencing on the last day of Executive's employment with the
Company and ending on the date that is two years following the last day of
the Term.
(e) ACKNOWLEDGMENT. Executive hereby acknowledges that the
provisions of this Section 7 are reasonable and necessary to protect the
legitimate interests of the Company and that any violation of this Section
7 by Executive shall cause substantial and irreparable harm to the Company
to such an extent that monetary damages alone would be an inadequate remedy
therefor. Therefore, in the event that Executive violates any provision of
this Section 7, the Company shall be entitled to an injunction, in addition
to all the other remedies it may have, restraining Executive from violating
or continuing to violate such provision.
(f) BLUE PENCIL DOCTRINE. If the duration of, the scope of or
any business activity covered by any provision of this Section 7 is in
excess of what is determined to be valid and enforceable under applicable
law, such provision shall be construed to cover only that duration, scope
or activity that is determined to be valid and enforceable. Executive
hereby acknowledges that this Section 7 shall be given the construction
that renders its provisions valid and enforceable to the maximum extent,
not exceeding its express terms, possible under applicable law.
(g) PERMITTED EQUITY OWNERSHIP. Ownership by Executive, as a
passive investment, of less than 2.5% of the outstanding shares of capital
stock of any corporation listed on a national securities exchange or
publicly traded in the over-the-counter market shall not constitute a
breach of this Section 7.
8. INTELLECTUAL PROPERTY.
(a) DISCLOSURE AND ASSIGNMENT. As of the Effective Date,
Executive hereby transfers and assigns to the Company (or its designee) all
right, title, and interest of Executive in and to every idea, concept,
invention, and improvement (whether patented, patentable or not) conceived
or reduced to practice by Executive whether solely
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or in collaboration with others while he is employed by the Company, and
all copyrighted or copyrightable matter created by Executive whether solely
or in collaboration with others while he is employed by the Company that
relates to the Company's business (collectively, "Creations"). Executive
shall communicate promptly and disclose to the Company, in such form as the
Company may request, all information, details, and data pertaining to each
Creation. Every copyrightable Creation, regardless of whether copyright
protection is sought or preserved by the Company, shall be a "work made for
hire" as defined in 17 U.S.C. Section 101, and the Company shall own all
rights in and to such matter throughout the world, without the payment of
any royalty or other consideration to Executive or anyone claiming through
Executive.
(b) TRADEMARKS. All right, title, and interest in and to any and
all trademarks, trade names, service marks, and logos adopted, used, or
considered for use by the Company during Executive's employment (whether or
not developed by Executive) to identify the Company's business or other
goods or services (collectively, the "Marks"), together with the goodwill
appurtenant thereto, and all other materials, ideas, or other property
conceived, created, developed, adopted, or improved by Executive solely or
jointly during Executive's employment by the Company and relating to its
business shall be owned exclusively by the Company. Executive shall not
have, and will not claim to have, any right, title, or interest of any kind
in or to the Marks or such other property.
(c) DOCUMENTATION. Executive shall execute and deliver to the
Company such formal transfers and assignments and such other documents as
the Company may request to permit the Company (or its designee) to file and
prosecute such registration applications and other documents it deems
useful to protect or enforce its rights hereunder. Any idea, invention,
copyrightable matter, or other property relating to the Company's business
and disclosed by Executive prior to the first anniversary of the effective
date of Executive's termination of employment shall be deemed to be
governed by the terms of this Section 8 unless proven by Executive to have
been first conceived and made after such termination date.
(d) NON-APPLICABILITY. Executive is hereby notified that this
Section 8 does not apply to any invention for which no equipment, supplies,
facility, Confidential Information, or other trade secret information of
the Company was used and which was developed entirely on Executive's own
time, unless (i) the invention relates (A) directly to the business of the
Company or (B) to the Company's actual or demonstrably anticipated research
or development, or (ii) the invention results from any work performed by
Executive for the Company.
9. TERMINATION OF EMPLOYMENT.
(a) Executive's employment with the Company shall terminate
immediately upon:
(i) Executive's receipt of written notice from the
Company of the termination of his employment;
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(ii) the Company's receipt of Executive's written
resignation from the Company;
(iii) Executive's Disability (as defined below); or
(iv) Executive's death.
(b) The date upon which Executive's termination of employment
with the Company occurs shall be the "Termination Date."
10. PAYMENTS UPON TERMINATION OF EMPLOYMENT.
(a) If Executive's employment with the Company is terminated by
reason of:
(i) Executive's abandonment of his employment or
Executive's resignation for any reason (whether or
not such resignation is set forth in writing or
otherwise communicated to the Company);
(ii) termination of Executive's employment by the Company
for Cause (as defined below); or
(iii) termination of Executive's employment by the Company
without Cause following expiration of the Term; or
the Company shall pay to Executive his then-current base salary through the
Termination Date.
(b) If Executive's employment with the Company is terminated by
the Company effective prior to the expiration of the Term for any reason
other than for Cause (as defined below), then the Company shall pay to
Executive, subject to Section 10(i) of this Agreement:
(i) his then-current base salary through the Termination
Date;
(ii) any earned and unpaid annual Incentive Bonus for the
fiscal quarter immediately preceding the fiscal
quarter in which the Termination Date occurs; and
(iii) a crisp $100 xxxx from W. Xxxx Xxxxxx.
Any amount payable to Executive pursuant to Section 10(b)(ii) shall be paid
to Executive by the Company in the same manner and at the same time that
Incentive Bonus payments are made to current employees of the Company, but
no earlier than the first normal payroll date of the Company following the
expiration of all applicable rescission periods provided by law.
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(c) If Executive's employment with the Company is terminated
effective prior to the expiration of the Term by reason of Executive's
death or Disability, the Company shall pay to Executive or his beneficiary
or his estate, as the case may be, his then-current base salary through the
Termination Date, any earned and unpaid quarterly Incentive Bonus for the
fiscal quarter preceding the fiscal quarter in which the Termination Date
occurs and a pro-rated portion of any quarterly Incentive Bonus for the
fiscal quarter in which the Termination Date occurs, based on the number of
days during such fiscal quarter that Executive was employed by the Company,
payable in the same manner and at the same time that Incentive Bonus
payments are made to current employees of the Company.
(d) Cause. "Cause" hereunder shall mean:
(i) an act or acts of dishonesty undertaken by Executive
and intended to result in substantial gain or
personal enrichment of Executive at the expense of
the Company;
(ii) unlawful conduct or gross misconduct that is willful
and deliberate on Executive's part and that, in
either event, is materially injurious to the Company;
(iii) the conviction of Executive of a felony;
(iv) material and deliberate failure of Executive to
perform his duties and responsibilities hereunder or
to satisfy his obligations as an officer or employee
of the Company, which failure has not been cured by
Executive within ten days after written notice
thereof to Executive from the Company; or
(v) material breach of any terms and conditions of this
Agreement by Executive not caused by the Company,
which breach has not been cured by Executive within
ten days after written notice thereof to Executive
from the Company.
(e) "Disability" hereunder shall mean the inability of
Executive to perform on a full-time basis the duties and responsibilities
of his employment with the Company by reason of his illness or other
physical or mental impairment or condition, if such inability continues for
an uninterrupted period of 45 days or more during any 360-day period. A
period of inability shall be "uninterrupted" unless and until Executive
returns to full-time work for a continuous period of at least 30 days.
(f) In the event of termination of Executive's employment, the
sole obligation of the Company hereunder shall be its obligation to make
the payments called
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for by Sections 10(a), 10(b), or 10(c) hereof, as the case may be, and the
Company shall have no other obligation to Executive or to his beneficiary
or his estate, except as otherwise provided by law.
(g) Notwithstanding any other provision hereof, the Company
shall not be obligated to make any payments under Section 10(b)(ii) or
(iii) of this Agreement unless Executive has signed a full release of
claims against the Company, in a form and scope to be prescribed by the
Board, all applicable consideration periods and rescission periods provided
by law shall have expired, and Executive is in strict compliance with the
terms of this Agreement as of the dates of the payments.
11. RETURN OF PROPERTY. Upon termination of Executive's employment
with the Company, Executive shall deliver promptly to the Company all
records, files, manuals, books, forms, documents, letters, memoranda, data,
customer lists, tables, photographs, video tapes, audio tapes, computer
disks and other computer storage media, and copies thereof, that are the
property of the Company, or that relate in any way to the business,
products, services, personnel, customers, prospective customers, suppliers,
practices, or techniques of the Company, and all other property of the
Company (such as, for example, computers, cellular telephones, pagers,
credit cards, and keys), whether or not containing Confidential
Information, that are in Executive's possession or under Executive's
control.
12. REMEDIES. Executive acknowledges that it would be difficult to
fully compensate the Company for monetary damages resulting from any breach
by him of the provisions of Sections 6, 7, and 8 hereof. Accordingly, in
the event of any actual or threatened breach of any such provisions, the
Company shall, in addition to any other remedies it may have, be entitled
to injunctive and other equitable relief to enforce such provisions, and
such relief may be granted without the necessity of proving actual monetary
damages.
13. MISCELLANEOUS.
(a) GOVERNING LAW. This Agreement shall be governed by, subject
to, and construed in accordance with the laws of the Commonwealth of
Kentucky without regard to conflict of law principles. Any action relating
to this Agreement shall only be brought in a court of competent
jurisdiction in the Commonwealth of
Kentucky, and the parties consent to
the jurisdiction, venue and convenience of such courts.
(b) JURISDICTION AND LAW. Executive and the Company consent to
jurisdiction of the courts of the Commonwealth of
Kentucky and/or the
federal district courts, Western District of
Kentucky, for the purpose of
resolving all issues of law, equity, or fact, arising out of or in
connection with this Agreement. Any action involving claims of a breach of
this Agreement shall be brought in such courts. Each party consents to
personal jurisdiction over such party in the state and/or federal courts of
Kentucky and hereby waives any defense of lack of personal jurisdiction or
FORUM NON CONVENIENS. Venue, for the purpose of all such suits, shall be in
Jefferson County, Commonwealth of
Kentucky.
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(c) ENTIRE AGREEMENT. Except for any written stock option
agreement and related agreements between Executive and the Company, this
Agreement contains the entire agreement of the parties relating to
Executive's employment with the Company and supersedes all prior agreements
and understandings with respect to such subject matter including without
limitation the Prior
Employment Agreement, and the parties hereto have made
no agreements, representations or warranties relating to the subject matter
of this Agreement that are not set forth herein. As of the Effective Date,
the Prior
Employment Agreement shall terminate and be of no further force
or effect; provided, however, any obligations of Executive or the Company
arising under the Prior
Employment Agreement prior to the Effective Date
shall survive such termination.
(d) NO VIOLATION OF OTHER AGREEMENTS. Executive hereby
represents and agrees that neither (i) Executive's entering into this
Agreement, (ii) Executive's employment with the Company, nor (iii)
Executive's carrying out the provisions of this Agreement, will violate any
other agreement (oral, written or other) to which Executive is a party or
by which Executive is bound.
(e) AMENDMENTS. No amendment or modification of this Agreement
shall be deemed effective unless made in writing and signed by the parties
hereto.
(f) NO WAIVER. No term or condition of this Agreement shall be
deemed to have been waived, except by a statement in writing signed by the
party against whom enforcement of the waiver is sought. Any written waiver
shall not be deemed a continuing waiver unless specifically stated, shall
operate only as to the specific term or condition waived and shall not
constitute a waiver of such term or condition for the future or as to any
act other than that specifically waived.
(g) ASSIGNMENT. This Agreement shall not be assignable, in whole
or in part, by either party without the prior written consent of the other
party, except that the Company may, without the consent of Executive,
assign its rights and obligations under this Agreement (i) to any entity
with which the Company may merge or consolidate, or (ii) to any corporation
or other person or business entity to which the Company may sell or
transfer all or substantially all of its assets. After any such assignment
by the Company, the Company shall be discharged from all further liability
hereunder and such assignee shall thereafter be deemed to be the "Company"
for purposes of all terms and conditions of this Agreement, including this
Section 13.
(h) COUNTERPARTS. This Agreement may be executed in any number
of counterparts, and such counterparts executed and delivered, each as an
original, shall constitute but one and the same instrument.
(i) SEVERABILITY. Subject to Section 7(f) hereof, to the extent
that any portion of any provision of this Agreement shall be invalid or
unenforceable, it shall be considered deleted herefrom and the remainder of
such provision and of this Agreement shall be unaffected and shall continue
in full force and effect.
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(j) SURVIVAL. The terms and conditions set forth in Sections 5,
6, 7, 8, 9, 11, 12, and 13 of this Agreement, and any other provision that
continues by its terms, shall survive expiration of the Term or termination
of Executive's employment for any reason.
(k) CAPTIONS AND HEADINGS. The captions and paragraph headings
used in this Agreement are for convenience of reference only and shall not
affect the construction or interpretation of this Agreement or any of the
provisions hereof.
(l) NOTICES. Any notice required or permitted to be given under
this Agreement shall be sufficient if in writing and either delivered in
person or sent by first class certified or registered mail, postage
prepaid, if to the Company, at the Company's principal place of business,
and if to Executive, at his home address most recently filed with the
Company, or to such other address or addresses as either party shall have
designated in writing to the other party hereto.
IN WITNESS WHEREOF, Executive and the Company have executed this Agreement
as of the date set forth in the first paragraph.
TEXAS ROADHOUSE, INC.
By:
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W. Xxxx Xxxxxx, Chairman
XXXXXX X. XXXX
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