EMPLOYMENT AGREEMENT
Exhibit 10.26
This
Agreement is entered into effective as of the 14th day of
August, 2008, by and between Sonic Restaurants, Inc. (the “Corporation”), an
Oklahoma corporation, and E. Xxxxxx Xxxxxx (the “Employee”).
RECITALS
Whereas,
the Employee is currently serving as the President of the Corporation and is an
integral part of its management; and
Whereas,
the Corporation's Board of Directors (the “Board”) has determined that it is
appropriate to reinforce and encourage the continued attention and dedication of
certain key members of the Corporation's management, including Employee, to
their assigned duties without distraction and potentially disturbing
circumstances arising from the possibility of a Change in Control (herein
defined) of Sonic Corp., the parent of the Corporation; and
Whereas,
the Corporation desires to continue the services of Employee, whose experience,
knowledge and abilities with respect to the business and affairs of the
Corporation are extremely valuable to the Corporation; and
Whereas,
the Employee and the Corporation acknowledge that the Employee previously
entered into an Employment Agreement with the Corporation’s affiliate dated
August 18, 2005, which is hereby canceled and superseded in its entirety by this
Agreement; and
Whereas,
the Board of Directors of Sonic Corp. on the 14th day of
August, 2008, ratified and approved this Agreement; and
Whereas,
the parties hereto desire to enter into this Agreement setting forth the terms
and conditions of the continued employment relationship of the Corporation and
Employee.
Now,
therefore, it is agreed as follows:
ARTICLE
I
Term of
Employment
1.1 Term of
Employment. The Corporation shall employ Employee for a period
of one year from the date hereof (the “Initial Term”).
1.2 Extension of Initial
Term. Upon each annual anniversary date of this Agreement,
this Agreement shall be extended automatically for successive terms of one year
each, unless either the Corporation or the Employee gives contrary written
notice to the other not later than the annual anniversary date.
1.3 Termination of Agreement and
Employment. The Corporation may terminate this Agreement and
the Employee’s employment at any time effective upon written notice to the
Employee. The Corporation, in its sole discretion, may terminate this Agreement
without terminating the employment of the Employee. The Employee may
terminate this Agreement and the Employee’s employment only after at least 30
days’ written notice to the Corporation, unless otherwise agreed by the
Corporation.
ARTICLE
II
Duties of the
Employee
Employee
shall serve as the President of the Corporation. Employee shall do
and perform all services, acts, or things necessary or advisable to manage and
conduct the business of the Corporation consistent with such position subject to
such policies and procedures as may be established by the
Board.
ARTICLE
III
Compensation
3.1
Salary. For
Employee's services to the Corporation as the President, Employee shall be paid
a salary at the annual rate of $250,000 (herein referred to as “Salary”),
payable in twenty-four equal installments on the first and fifteenth day of each
month. On the first day of each calendar year during the term of this
Agreement with the Corporation, Employee shall be eligible for an increase in
Salary based on an evaluation of Employee’s performance during the past year
with the Corporation. During the term of this Agreement, the Salary
of the Employee shall not be decreased at any time from the Salary then in
effect unless agreed to in writing by the Employee.
3.2
Bonus. The
Employee shall be entitled to participate in an equitable manner with other
officers of the Corporation in discretionary cash bonuses as authorized by the
Board.
ARTICLE
IV
Employee
Benefits
4.1
Use of Automobile.
The Corporation shall provide Employee with either the use of an automobile for
business and personal use or a cash car allowance in accordance with the
established company car policy of the Corporation. The Corporation
shall pay all expenses of operating, maintaining and repairing the automobile
provided by the Corporation and shall procure and maintain automobile liability
insurance in respect thereof, with such coverage insuring each Employee for
bodily injury and property damage.
4.2
Medical, Life and Disability
Insurance Benefits. The Corporation shall provide Employee
with medical, life and disability insurance benefits in accordance with the
established benefit policies of the Corporation.
4.3
Working
Facilities. Employee shall be provided adequate office space,
secretarial assistance, and such other facilities and services suitable to
Employee’s position and adequate for the performance of Employee’s
duties.
4.4
Business
Expenses. Employee shall be authorized to incur reasonable
expenses for promoting the business of the Corporation, including expenses for
entertainment, travel, and similar items. The Corporation shall
reimburse Employee for all such expenses upon the presentation by Employee, from
time to time, of an itemized account of such expenditures.
4.5
Vacations. Employee
shall be entitled to an annual paid vacation commensurate with the Corporation's
established vacation policy for officers. The timing of paid
vacations shall be scheduled in a reasonable manner by the
Employee.
4.6
Disability. Upon
disability (as defined herein) of the Employee, the Employee shall be entitled
to receive an amount equal to 50% of Employee’s Salary (in addition to any
disability insurance benefits received pursuant to Section 4.2 herein), such
amount being paid semi-monthly in twelve equal installments.
4.7
Term Life
Insurance. The Corporation shall purchase term life insurance
on the life of the Employee having a face value of four times the Employee’s
Salary (to be changed as salary adjustments are made) or the face value of life
insurance that can be purchased based upon the Employee’s health history with
the Corporation paying the standard premium rate for term insurance under its
then current insurance program at the Employee’s age and assuming good health,
whichever amount is lesser; provided further that, such insurance can be
obtained by the Corporation in a manner which meets the requirements for
deductibility by the Corporation under Section 79 of the Internal Revenue Code
of 1986, or as hereafter amended.
4.8
Compensation
Defined. Compensation shall be defined as all monetary
compensation and all benefits described in Articles III and IV hereunder (as
adjusted during the term hereof).
ARTICLE
V
Termination
5.1
Death. Employee's
employment hereunder shall be terminated upon the Employee's
death.
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5.2
Disability. The
Corporation may terminate Employee's employment hereunder in the event Employee
is disabled and such disability continues for more than 180
days. Disability shall be defined as the inability of Employee to
render the services required of him, with or without a reasonable accommodation,
under this Agreement as a result of physical or mental incapacity.
5.3
Cause.
(a)
The Corporation may terminate Employee's employment hereunder
for cause. For the purpose of this Agreement, “Cause” shall mean (i)
the willful and intentional failure by Employee to substantially perform
Employee’s duties hereunder, other than any failure resulting from Employee's
incapacity due to physical or mental incapacity, or (ii) commission by Employee,
in connection with Employee’s employment by the Corporation, of an illegal act
or any act (though not illegal) which is not in the ordinary course of the
Employee's responsibilities and exposes the Corporation to a significant level
of undue liability. For purposes of this paragraph, no act or failure
to act on Employee's part shall be considered to have met either of the
preceding tests unless done or omitted to be done by Employee without a
reasonable belief that Employee’s action or omission was in the best interest of
the Corporation.
(b)
Notwithstanding the foregoing, Employee shall not be deemed to
have been terminated for cause unless such action is ratified by the affirmative
vote of not less than two-thirds of the entire membership of the Board at a
meeting held within 30 days of such termination (after reasonable notice to
Employee and an opportunity for Employee to be heard by members of the Board)
confirming that Employee was guilty of the conduct set forth in this Section
5.3. Ratification by the board will be effective as of the original
date of termination of Employee.
5.4
Compensation Upon
Termination for Cause or Upon Resignation By Employee. Except
as otherwise set forth in Section 5.7 hereof, if Employee's employment shall be
terminated for Cause or if Employee shall resign Employee’s position with the
Corporation, the Corporation shall pay Employee's Compensation only through the
last day of Employee's employment by the Corporation. The Corporation
shall then have no further obligation to Employee under this
Agreement. If the Board, pursuant to Section 5.3(b), votes to
classify Employee’s termination as “not for cause,” then Employee shall be
compensated pursuant to Section 5.5 below.
5.5
Compensation Upon
Termination Other Than For Cause Or Disability. Except as
otherwise set forth in Section 5.7 hereof, if the Company shall terminate
Employee's employment other than for Cause or Disability, the Company shall
continue to be obligated to pay Employee’s Salary for a period of one year,
beginning on the date of termination, but shall not be obligated to provide any
other benefits described in Articles III and IV hereof, except to the extent
required by law.
5.6 Compensation Upon
Non-Renewal of Agreement. Except as otherwise set forth in
Section 5.7 hereof, if the Company shall give notice to Employee in accordance
with Section 1.2 hereof that this Agreement will not be renewed but Employee’s
employment is not terminated, the Company shall continue to be obligated to pay
Employee’s Compensation for a period of one year beginning on the date notice of
non-renewal is given.
5.7
Termination of Employee or
Resignation by Employee for Good Reason. If at any time within
the first twelve months subsequent to a Change in Control, the Employee’s
employment with the Corporation is terminated other than as provided for in
Section 5.1, 5.2 or 5.3 hereof, or the Corporation violates any provision of
this Agreement or Employee shall resign Employee's employment for Good Reason
(as defined herein), the Corporation shall be obligated to pay to Employee a
lump sum payment upon the effective date of such termination or resignation or
breach (as determined in Employee's sole discretion), in an amount equal to two
times the Employee's compensation payable under paragraph 5.5 above, but in no
event to exceed an amount equal to $1.00 less than three (3) times the mean
average annual compensation paid to Employee by the Corporation and any of its
subsidiaries during the five calendar years ending before the date on which the
Change in Control occurred (or if Employee was not employed for that entire five
year period, then the mean average annual compensation paid to employee during
such shorter period, with the Employee's compensation annualized for any
calendar year during which the employee was not employed for the entire calendar
year); provided, however, that if the lump-sum severance payment under this
Section 5.7, either alone or together with any other payments or compensation
which Employee has a right to receive from the Corporation, would constitute a
“parachute payment” (as defined in Section 280G (or any equivalent term defined
in any successor or equivalent provision) of the Internal Revenue Code of 1986,
as amended (the “Code”)), then such lump-sum severance payment shall be reduced
to the largest amount as will result in no portion of the lump-sum severance
payment under this Section 5.7 being subject to the excise tax imposed by
Section 4999 (or any successor or equivalent provision) of the
Code. For the purpose of this Section 5.7, the Employee's annual
compensation from the Corporation and its subsidiaries for a given year shall
equal Employee’s compensation as reflected on Employee’s Form W-2 for that year
(unless the Employee was not employed for the entire calendar year, in which
case Employee’s Form W-2 compensation for such year shall be
annualized). The determination of any reduction in lump-sum severance
payment under this Section 5.7 pursuant to the foregoing provision shall be
conclusive and binding on the Corporation. Notwithstanding any other
provision of this Section 5.7, Employee may elect to have the lump sum severance
payment hereunder paid in equal monthly installments over a period not to exceed
12 consecutive months.
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“Good
Reason” shall mean any of the following which occur during the term of this
Agreement without Employee's express written consent:
In the
Event of a Change in Control:
(a)
the assignment to Employee of duties inconsistent with Employee's
position, office, duties, responsibilities and status with the Corporation
immediately prior to a Change in Control; or, a change in Employee's titles or
offices as in effect immediately prior to a Change in Control; or, any removal
of Employee from or any failure to reelect Employee to any such position or
office, except in connection with the termination of Employee’s employment by
the Corporation for Disability or Cause or as a result of Employee's death or by
Employee other than for Good Reason as set forth in this Section 5.7(a); or
(b)
a reduction by the Corporation in Employee's
Salary as in effect as of the date of this Agreement or as the same may be
increased from time-to-time during the term of this Agreement or the
Corporation's failure to increase (within twelve months of the Employee's last
increase in Salary) Employee's Salary after a Change in Control in an amount
which at least equals, on a percentage basis, the highest percentage increase in
salary for all officers of the Corporation or any parent or affiliated company
effected in the preceding twelve months; or
(c)
the failure of the Corporation to provide
Employee with the same fringe benefits (including, without limitation, life
insurance plans, medical or disability plans, retirement plans, incentive plans,
stock option plans, stock purchase plans, stock ownership plans, or bonus plans)
that were provided to Employee immediately prior to the Change in Control, or
with a package of fringe benefits that, if one or more of such benefits varies
from those in effect immediately prior to such Change in Control, is in
Employee's sole judgment substantially comparable in all material respects to
such fringe benefits taken as a whole; or
(d)
relocation of the Corporation's principal
executive offices to a location outside of Oklahoma City, Oklahoma, or
Employee's relocation to any place other than the location at which Employee
performed Employee’s duties prior to a Change in Control, except for required
travel by Employee on the Corporation's business to an extent substantially
consistent with Employee's business travel obligations at the time of the Change
in Control; or
(e)
any failure by the Corporation to provide Employee
with the same number of paid vacation days to which Employee is entitled at the
time of the Change in Control; or
(f)
the failure of a successor to the Corporation to assume
the obligation of this Agreement as set forth in Section 7.1
herein.
5.8. Change in
Control. For the purposes of this Agreement, the phrase
“change in control” shall mean any of the following events:
(a)
Any consolidation or merger of Sonic Corp. in which
Sonic Corp. is not the continuing or surviving corporation or pursuant to which
shares of Sonic Corp.’s capital stock would convert into cash, securities or
other property, other than a merger of Sonic Corp. in which the holders of Sonic
Corp.’s capital stock immediately prior to the merger have the same
proportionate ownership of capital stock of the surviving corporation
immediately after the merger;
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(b)
Any sale, lease, exchange or other transfer (whether in one
transaction or a series of related transactions) of all or substantially all of
the assets of Sonic Corp.;
(c)
The stockholders of Sonic Corp. approve any plan or proposal for the
liquidation or dissolution of Sonic Corp.;
(d)
Any person (as used in Section 13(d) and 14(d)(2) of the
Securities and Exchange Act of 1934, as amended (the “Exchange Act”)) becomes
the beneficial owner (within the meaning of Rule 13D-3 under the Exchange Act)
of 50% or more of Sonic Corp.’s outstanding capital stock;
(e)
During any period of two consecutive years, individuals
who at the beginning of that period constitute the entire Board of Directors of
Sonic Corp. cease for any reason to constitute a majority of the Board of
Directors unless the election or the nomination for election by Sonic Corp.’s
stockholders of each new director received the approval of the Board of
Directors by a vote of at least two-thirds of the directors then and still in
office and who served as directors at the beginning of the period;
or
(f)
Sonic Corp. becomes a subsidiary of any other
corporation.
ARTICLE
VI
Obligation
to Mitigate Damages; No Effect
on Other Contractual
Rights
6.1
Mitigation. The
Employee shall not have any obligation to mitigate damages or the amount of any
payment provided for under this Agreement by seeking other employment or
otherwise. However, all payments required under the terms of this Agreement
shall cease 30 days after the acceptance by the Employee of employment by
another employer; provided that, this limitation shall not apply to payments due
under paragraph 5.7, above.
6.2
Other Contractual
Rights. The provisions of this Agreement, and any payment
provided for hereunder shall not reduce any amount otherwise payable, or in any
way diminish Employee's existing rights, or rights which would accrue solely as
a result of passage of time under any employee benefit plan or other contract,
plan or arrangement of which Employee is a beneficiary or in which Employee
participates.
ARTICLE
VII
Successors to the
Corporation
7.1
Assumption. The
Corporation will require any successor or assignee (whether direct or indirect,
by purchase, merger, consolidation or otherwise) of all or substantially all of
the business and/or assets of the Corporation, by agreement in form and
substance reasonably satisfactory to Employee, to expressly, absolutely and
unconditionally assume and agree to perform this Agreement in the same manner
and to the same extent that the Corporation would be required to perform it if
no such succession or assignment had taken place. Any failure by the
Corporation to obtain such agreement prior to the effectiveness of any such
succession or assignment shall be a material breach of this
Agreement.
7.2
Employee's
Successors and Assigns. This Agreement shall inure to the
benefit of and be enforceable by Employee's personal and legal representatives,
executors, administrators, successors, heirs, distributees, devisees and
legatees. If Employee should die while any amounts are still payable
to Employee hereunder, all such amounts, unless otherwise provided herein, shall
be paid in accordance with the terms of this Agreement to Employee's devisee,
legatee or other designee or, if there is no such designee, to Employee's
estate.
ARTICLE
VIII
Restrictions on
Employee
8.1 Confidential
Information. During the term of the Employee’s employment and
for a period of twelve months thereafter, the Employee shall not divulge or make
accessible to any party any Confidential Information, as defined below, of Sonic
Corp. or any of its subsidiaries, except to the extent authorized in writing by
the Corporation or otherwise required by law. The phrase
“Confidential Information” shall mean the unique, proprietary and confidential
information of the Sonic Corp. and its subsidiaries, consisting of: (1)
confidential financial information regarding Sonic Corp. or its subsidiaries,
(2) confidential recipes for food products; (3) confidential and copyrighted
plans and specifications for interior and exterior signs, designs, layouts and
color schemes; (4) confidential methods, techniques, formats, systems,
specifications, procedures, information, trade secrets, sales and marketing
programs; (5) knowledge and experience regarding the operation and franchising
of Sonic drive-in restaurants; (6) the identities and locations of Sonic’s
franchisees, Sonic drive-in restaurants, and suppliers to Sonic’s franchisees
and drive-in restaurants; (7) knowledge, financial information, and other
information regarding the development of franchised and company-store
restaurants; (8) knowledge, financial information, and other information
regarding potential acquisitions and dispositions; and (9) any other
confidential business information of Sonic Corp. or any of its subsidiaries. The
Employee shall give the Corporation written notice of any circumstances in which
Employee has actual notice of any access, possession or use of the Confidential
Information not authorized by this Agreement.
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8.2
Restrictive
Covenant. During the term of Employee’s employment, the
Employee shall not engage in or have any interest, directly or indirectly, in
any business competing with the business being conducted by Sonic Corp. or any
of its subsidiaries, without the Corporation’s prior written
consent. For the six month period immediately following the
termination of Employee’s employment, the Employee shall not engage in or have
any interest, directly or indirectly, in any fast food restaurant business that
has a menu similar to that of a Sonic drive-in restaurant (such as hamburgers,
hot dogs, onion rings and similar items customarily sold by Sonic drive-in
restaurants), or which has an appearance similar to that of a Sonic drive-in
restaurant (such as color pattern, use of canopies, use of speakers and menu
housings for ordering food, or other items that are customarily used by a Sonic
drive-in restaurant), and which operates such restaurants within a three mile
radius of any Sonic drive-in restaurant.
ARTICLE
IX
Miscellaneous
9.1
Indemnification. To
the full extent permitted by law, the Board shall authorize the payment of
expenses incurred by or shall satisfy judgments or fines rendered or levied
against Employee in any action brought by a third-party against Employee
(whether or not the Corporation is joined as a party defendant) to impose any
liability or penalty on Employee for any act alleged to have been committed by
Employee while employed by the Corporation unless Employee was acting with gross
negligence or willful misconduct. Payments authorized hereunder shall
include amounts paid and expenses incurred in settling any such action or
threatened action.
9.2
Resolution of
Disputes. The following provisions shall apply to any
controversy between the Employee and Sonic Corp. and its subsidiaries and the
Employee (including any director, officer, employee, agent or affiliate of Sonic
Corp. and its subsidiaries) whether or not relating to this
Agreement.
(a)
Arbitration. The
parties shall resolve all controversies by final and binding arbitration in
accordance with the Rules for Commercial Arbitration (the “Rules”) of the
American Arbitration Association in effect at the time of the execution of this
Agreement and pursuant to the following additional provisions:
(1)
Applicable
Law. The Federal Arbitration Act (the “Federal Act”), as
supplemented by the Oklahoma Arbitration Act (to the extent not inconsistent
with the Federal Act), shall apply to the arbitration and all procedural matters
relating to the arbitration.
(2)
Selection of
Arbitrators. The parties shall select one arbitrator within 10
days after the filing of a demand and submission in accordance with the
Rules. If the parties fail to agree on an arbitrator within that
10-day period or fail to agree to an extension of that period, the arbitration
shall take place before an arbitrator selected in accordance with the
Rules.
(3)
Location of
Arbitration. The arbitration shall take place in Oklahoma
City, Oklahoma, and the arbitrator shall issue any award at the place of
arbitration. The arbitrator may conduct hearings and meetings at any
other place agreeable to the parties or, upon the motion of a party, determined
by the arbitrator as necessary to obtain significant testimony or
evidence.
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(4)
Enforcement of
Award. The prevailing party shall have the right to enter the
award of the arbitrator in any court having jurisdiction over one or more of the
parties or their assets. The parties specifically waive any right
they may have to apply to any court for relief from the provisions of this
Agreement or from any decision of the arbitrator made prior to the
award.
(b)
Attorneys' Fees and
Costs. The prevailing party to the arbitration shall have the
right to an award of its reasonable attorneys' fees and costs (including the
cost of the arbitrator) incurred after the filing of the demand and
submission. If the Corporation or any of its subsidiaries prevails,
the award shall include an amount for that portion of the administrative
overhead reasonably allocable to the time devoted by the in-house legal staff of
Sonic Corp. or any subsidiary.
(c)
Excluded
Controversies. At the election of the Corporation or its
subsidiaries, the provisions of this Section 9.2 shall not apply to any
controversies relating to the enforcement of the covenant not to compete or the
use and protection of the trademarks, service marks, trade names, copyrights,
patents, confidential information and trade secrets of Sonic Corp. or its
subsidiaries, including (without limitation) the right of the Corporation or its
subsidiaries to apply to any court of competent jurisdiction for appropriate
injunctive relief for the infringement of the rights of Sonic Corp. or its
subsidiaries.
(d)
Other
Rights. The provisions of this Section 9.2 shall not prevent
the Corporation, its subsidiaries, or the Employee from exercising any of their
rights under this agreement, any other agreement, or under the common law,
including (without limitation) the right to terminate any agreement between the
parties or to end or change the party’s legal relationship.
9.3
Entire
Agreement. This Agreement constitutes the entire agreement of
the parties with regard to the subject matter of this Agreement and replaces and
supersedes all other written and oral agreements and statements of the parties
relating to the subject matter of this Agreement.
9.4
Notices. Any
notices required or permitted to be given under this Agreement shall be
sufficient if in writing and sent by mail to Employee’s residence, in the case
of Employee, or to its principal office, in the case of the
Corporation.
9.5
Waiver of
Breach. The waiver by any party hereto of a breach of any
provision of this Agreement shall not operate or be construed as a waiver of any
subsequent breach by any party.
9.6
Amendment. No
amendment or modification of this Agreement shall be deemed effective unless or
until executed in writing by the parties hereto.
9.7
Validity. This
Agreement, having been executed and delivered in the State of Oklahoma, its
validity, interpretation, performance and enforcement will be governed by the
laws of that state.
9.8
Section
Headings. Section and other headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
9.9
Counterpart
Execution. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute but one and the same instrument.
9.10 Exclusivity. Specific
arrangements referred to in this Agreement are not intended to exclude
Employee's participation in any other benefits available to executive personnel
generally or to preclude other compensation or benefits as may be authorized by
the Board from time to time.
9.11 Partial
Invalidity. If any provision in this Agreement is held by a
court of competent jurisdiction to be invalid, void, or unenforceable, the
remaining provisions shall nevertheless continue in full force without being
impaired or invalidated in any way.
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In
witness whereof, the Corporation has caused this Agreement to be executed and
its seal affixed hereto by its officers thereunto duly authorized; and the
Employee has executed this Agreement, as of the day and year first above
written.
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The
Corporation:
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Sonic
Restaurants, Inc.
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By:
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/s/ Xxxxx X. Xxxx
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Xxxxx
X. Xxxx, Vice President
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Attest:
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/s/ Xxxxxxx X. Xxxxxxx
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Xxxxxxx
X. Xxxxxxx, Secretary
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The
Employee:
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/s/ E. Xxxxxx Xxxxxx
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E.
Xxxxxx
Xxxxxx
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