EMPLOYMENT AGREEMENT
THIS AGREEMENT, dated as of June 20, 2000, is by and between New Visual
Entertainment, Inc., a Utah corporation ("Employer"), and John Howell
("Executive").
WITNESSETH:
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WHEREAS, Executive desires to enter into the employment of Employer,
and Employer desires to employ Executive provided that, in so doing, it can
protect its confidential information, business, accounts, patronage and
goodwill.
NOW, THEREFORE, in consideration of the foregoing recitals and of the
mutual agreements contained herein, the parties hereto agree as follows:
SECTION 1. POSITION; DUTIES. Executive will serve as an officer of
Employer in the position of Executive Vice President. Executive will report to
the Chief Executive Officer and the Board of Directors of the Employer, and
Executive will perform the duties that the Board of Directors of the Employer
may from time to time reasonably direct. Executive will devote substantially all
of his business time, ability and attention to the business of Employer during
the Term of this Agreement.
SECTION 2. TERM. This Agreement shall commence on July 1, 2000 (the
"Effective Date") and end three (3) years after the Effective Date of this
Agreement (the "Term"), unless terminated earlier pursuant to Section 4 of this
Agreement.
SECTION 3. COMPENSATION. Subject to Section 4, as compensation for
Executive's services, and as compensation for Executive's covenants set forth in
this Agreement, including without limitation Section 5, the Employer agrees as
follows:
(a) BASE SALARY. Employer will pay Executive a base salary
("Base Salary") of $15,000 per year, prorated for any partial pay
period. The Base Salary will be paid in accordance with the Employer's
regular payroll practices.
(b) STOCK OPTIONS. Executive will be granted options to
purchase 210,000 shares of Employer's common stock (the "Stock
Options"), pursuant to (and the terms of which shall be further
specified in) a stock option agreement to be entered into with
Executive substantially in the form of EXHIBIT A hereto (the "Stock
Option Agreement"). The Stock Options shall vest as follows:
On the Effective Date of this Agreement 35,000
September 30, 2000 17,500
December 31, 2000 17,500
March 31, 2001 17,500
June 30, 2001 17,500
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September 30, 2001 17,500
December 31, 2001 17,500
March 31, 2002 17,500
June 30, 2002 17,500
September 30, 2002 17,500
December 31, 2002 17,500
Notwithstanding anything to the contrary in this Agreement or
the Stock Option Agreement, if the employment of Executive is
terminated by the Employer without "Cause" as defined in Section 4(a)
hereof or by Executive for "Good Reason" as defined in Section 4(b)
hereof, the Stock Options shall continue to vest as set forth above. If
Executive is terminated for any other reason, the Stock Options that
have not vested on the Termination Date shall not vest, and the terms
of any applicable stock option agreement shall control the
exercisability thereof.
(c) MISCELLANEOUS. Executive shall be entitled to the
following additional benefits:
(i) Reimbursement of all properly documented business
expenses, in accordance with the Employer's policy, as may be
modified from time to time, for reimbursement of business
expenses; and
(ii) Such other benefits, including health benefits
and participation in Executive benefit plans, made available
to Executives of the Employer generally.
(d) ANNUAL BONUS. Executive may be entitled to receive an
annual bonus at the sole discretion of the Board of Directors of the
Employer. At the Executive's option, the annual bonus, if any, shall be
payable in cash or in an amount of shares of the Employer's common
stock that equals the amount of the bonus based upon the market price
of the Employer's common stock on the date that the bonus is paid.
SECTION 4. TERMINATION; COMPENSATION UPON TERMINATION. Notwithstanding
the provisions of Section 2 of this Agreement, this Agreement and Executive's
employment shall be terminated upon:
(a) THE OCCURRENCE OF CAUSE. For purposes of this Agreement,
Employer shall have "Cause" to terminate the Executive's employment
hereunder only upon:
(i) The willful and continued failure by the
Executive to substantially perform his duties as outlined
hereunder after demand for substantial performance is
delivered by the Board in writing to Executive;
(ii) The engaging by the Executive in criminal
conduct or conduct constituting moral turpitude that is
materially injurious to Employer, monetarily or otherwise;
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(iii) The continued willful insubordination of the
Executive after demand by the Board is delivered to the
Executive, in writing, specifically identifying the
insubordination;
(iv) The embezzlement or misappropriation by the
Executive of the funds of any of Employer or its affiliates;
(v) Acts of dishonesty or other acts (including any
breach of the Executive's covenants contained in this
Agreement) that cause material adverse harm to Employer (other
than as a consequence of good faith decisions made by the
Executive in the normal performance of the Executive's duties
hereunder);
(vi) Executive is convicted of a felony which carries
a minimum prison sentence upon conviction of one (1) year or
longer; and/or
(vii) Executive other wise commits a material breach
of this Agreement.
Notwithstanding the foregoing, Executive shall not be deemed to have
been terminated for Cause unless and until there shall be delivered to him a
copy of a duly adopted resolution of the Employer's Board of Directors finding
that the Employer has "Cause" to terminate Executive as contemplated in this
Section 4(a). If Employer terminates Executive's employment for Cause, Employer
will pay Executive his Base Salary in effect on the date of termination through
the date of termination, prorated for any partial payroll period.
(b) EXECUTIVE'S DEATH. If this agreement is terminated due to
Executive's death, the Employer will pay Executive's estate his Base
Salary in effect on the date of termination through the date of
termination, prorated for any partial payroll period.
(c) EXECUTIVE'S DISABILITY. For purposes of this Agreement,
"Disability" means a disability by reason of the occurrence of any
injury or disease (including mental illness) or a physical or mental
condition that, in the opinion of an appropriate physician, (i) results
in Executive becoming unable adequately to perform his customary duties
for the Employer, either with or without reasonable accommodation, (ii)
has lasted for a consecutive period of at least ninety (90) days, and
(iii) is expected to continue to last for more than an additional
consecutive period of at least ninety (90) days. If Executive's
employment is terminated due to disability, Employer will pay Executive
his Base Salary in effect on the date of termination through the date
of termination, prorated for any partial payroll period.
(d) TERMINATION BY EMPLOYER WITHOUT CAUSE. Employer may
terminate this Agreement and Executive's employment without Cause at
any time, with or without notice. If Employer terminates Executive's
employment without Cause, Employer will pay Executive (i) his Base
Salary in effect on the date of termination through the date of
termination, prorated for any partial payroll period and (ii) a
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severance payment equal to Executive's Base Salary in effect on the
date of termination for the shorter period of (A) that period of time
remaining in the Term of this Agreement or (B) three (3) months.
(e) VOLUNTARY TERMINATION BY EXECUTIVE. Executive may
terminate this Agreement at any time upon delivering thirty (30) days'
written notice to the Employer. If Executive voluntarily terminates
this Agreement, other than for "Good Reason," as hereinafter defined,
Employer will pay Executive his Base Salary in effect on the date of
termination through the date of termination, prorated for any partial
payroll period. On or after the date the Employer receives notice of
Executive's resignation (other than resignation for "Good Reason," as
defined below), the Employer may, at its option, pay Executive his Base
Salary through the effective date of his resignation and terminate his
employment immediately.
(f) TERMINATION BY EXECUTIVE FOR GOOD REASON. Executive may,
within sixty (60) days after the occurrence of "Good Reason," as
defined below, voluntarily terminate his employment for "Good Reason,"
as defined below, upon thirty (30) days written notice thereof to the
Company. If Executive voluntarily terminates this Agreement for "Good
Reason," as defined below, Employer will pay Executive (i) his Base
Salary in effect on the date of termination through the date of
termination, prorated for any partial payroll period and (ii) a
severance payment equal to Executive's Base Salary in effect on the
date of termination for the shorter period of (A) that period of time
remaining in the Term of this Agreement or (B) three (3) months. On or
after the date the Employer receives notice of Executive's resignation
for "Good Reason," as defined below, the Employer may, at its option,
pay the amounts set forth in this Section 4(f) and terminate his
employment immediately. For purposes of this Agreement, "Good Reason"
shall mean the occurrence of any of the following events: (i) a
material reduction in Executive's authority or responsibility, but not
including termination of Executive for "Cause;" (ii) reduction in the
Base Salary payable to Executive; or (iii) the Company otherwise
commits a material breach of this Agreement; provided that "Good
Reason" shall not include the temporary appointment of another person
to fulfill Executive's responsibilities during any period of disability
of Executive.
(g) TERMINATION BY EXECUTIVE OR EMPLOYEE AFTER CHANGE OF
CONTROL. Within one (1) year after the occurrence of a "Change of
Control," as defined below, Employer may terminate Executive's
employment and this Agreement without Cause and, upon thirty (30) days'
written notice to Employer, Executive may terminate his employment and
this Agreement for Good Reason (as defined in Section 4(f) above). If
Executive's employment and this Agreement is terminated pursuant to
this Section 4(g), Employer will pay Executive (i) his Base Salary in
effect on the date of termination through the date of termination,
prorated for any partial payroll period and (ii) a severance payment
equal to Executive's Base Salary in effect on the date of termination
and the amount Executive would have received under Section 3(b) of this
Agreement for a period of one (1) year. On or after the date the
Employer receives notice of Executive's termination under this Section
4(g), the Employer may, at its option, pay the amounts set forth in
this Section 4(g) and terminate Executive's employment immediately.
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This Section 4(g) shall not apply if, after a Change of Control, the
Employer has Cause (as defined in Section 4(a) above) to terminate
Executive's employment or Executive does not have Good Reason (as
defined in Section 4(f) above) to terminate his employment. For
purposes of this Agreement, a "Change of Control" shall be deemed to
exist upon the occurrence of any of the following: (i) the Employer is
merged or consolidated or reorganized into or with another corporation,
and as result of such merger, consolidation, or reorganization less
than a majority of the combined voting power of the then-outstanding
securities of such corporation or entity immediately after such
transaction is held in the aggregate by the holders of Voting Stock (as
hereafter defined) of the Employer immediately prior to such
transaction; (ii) the Employer sells or otherwise transfers all or
substantially all of its assets to any other corporation or legal
person, less than a majority of the combined voting power of the
then-outstanding securities of such corporation or legal person
immediately after such sale or transfer is held in the aggregate by the
holders of the Voting Stock of the Employer immediately prior to such
sale or transfer, (iii) if during any period of twenty-four (24) months
following a merger, tender offer, consolidation, sale of assets, or
contested election, at least a majority of the Board of Directors of
the Employer shall cease to be "Continuing Directors." For purposes of
this Section 4(g), "Continuing Directors" shall mean directors of the
Employer prior to such transaction or who subsequently became directors
and whose election or nomination for election by the stockholders of
the Employer was approved by a vote of at least two-thirds (2/3) of the
directors then still in office prior to such transaction. The term
"Voting Stock" shall mean, for purposes of this Section 4(g), the
then-outstanding securities entitled to vote generally in the election
of directors of the Employer.
SECTION 5. PROPRIETARY AND CONFIDENTIAL INFORMATION.
(a) Executive acknowledges that he has become familiar with,
and during the Term of this Agreement, Employer agrees that it will
provide access to Executive and make Executive familiar with, various
trade secrets and confidential information consisting of, among other
things: trade secrets, methods of operation and production, patents,
techniques, designs, processes, technologies, compilations of
information, past, present and prospective customer lists, records,
copyrights, and specifications that are owned and commercially
beneficial and valuable to the Employer, including any compilation of
various trade secrets or data derived from such information
(collectively, the "Proprietary Information"). The Proprietary
Information does not include information which (i) at the time it is
disclosed by the Executive was already in the public domain or (ii) is
required to be disclosed by applicable law, regulation or judicial or
regulatory process.
(b) Executive agrees that Executive will not disclose, either
during Executive's employment with the Employer or at any time after
Executive's termination, for whatever reason, any Proprietary
Information to any person or entity, except in the course of
Executive's duties on behalf of the Employer, and that, similarly,
Executive will not, at any time, use such information for the benefit
of any person or entity other than the Employer. Executive agrees that
upon Executive's termination of employment, Executive will deposit with
or return to the Employer all copies (in any media, including, without
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limitation, electronic storage media) of documents, records, notebooks
or any other information or documentation of the Employer's Proprietary
Information, and all derivatives thereof, whether the Proprietary
Information or documentation was developed or prepared by Executive or
by others. Executive acknowledges that this covenant of nondisclosure
is an integral term of this Agreement and is given in consideration of
Executive's employment and the other consideration granted in this
Agreement.
SECTION 6. NONCOMPETITION.
(a) Executive agrees that prior to the termination of this
Agreement and for a period of two (2) years after the termination of
Executive's employment, Executive shall not, without the prior written
consent of the Employer, which consent may be withheld in the
Employer's sole discretion, engage, whether for compensation or not, as
an individual proprietor, owner, partner, stockholder, officer,
director, executive, agent, investor, consultant, sales representative
or in any other capacity whatsoever in any activity or endeavor that
involves the management, administration, manufacturing, designing,
marketing, selling or purchasing operations in the development and
distribution of 3D films or videos, the provision of producer services,
audio-visual rentals, sales, installations, staging services and
turnkey solutions for productions, concerts, corporate events, or trade
shows, multimedia, the development or use of high bandwidth technology,
animation or in any other business in which the Employer is involved,
within fifty (50) miles of any area in which the Employer sold or
provided products or services in the twenty-four (24) months
immediately preceding the termination of Executive's employment.
Additionally, Executive agrees that prior to the termination of this
Agreement and for a period of two (2) years after termination of
Executive's employment, Executive will not, directly or indirectly,
attempt to solicit or conduct business with any person or entity that
is a client, customer or active prospect of the Employer at any time in
the twenty-four (24) months immediately preceding the termination of
Executive's employment if such business would be in competition with
the Employer's business. Executive acknowledges Executive's duty, both
by contract and common law, not to interfere with contractual
relationships and not to use proprietary and confidential information
about customers or clients of the Employer for the advantage of any
person or entity other than the Employer.
(b) Executive further agrees, during Executive's employment
and after Executive's termination for whatever reason, notwithstanding
any allegation of breach of this Agreement, not to solicit, influence
or attempt to influence, directly or indirectly, any employee of the
Employer to terminate his or her employment or other contractual
relationship with the Employer for any reason including, without
limitation, working for a competitor.
(a) The covenants of the Executive contained in this Section 6
will be construed as independent of any other provision in this
Agreement, and the existence of any claim or cause of action by the
Executive against the Employer will not constitute a defense to the
enforcement by the Employer of said covenants. Executive further agrees
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that notwithstanding any other alleged breach of this Agreement, the
provisions of this Section 6 will be valid and binding upon Executive.
(b) The Executive understands that the covenants contained in
this Section 6 are essential elements of the transactions contemplated
by this Agreement and, but for the agreement of the Executive to this
Section 6, the Employer would not have agreed to enter into such
transactions.
(c) Executive further agrees and acknowledges that this
Agreement (i) is reasonable as to length of time, scope and geographic
area for purposes of protecting the commercial advantages enjoyed by
the Employer, (ii) will not interfere with Executive's ability to
pursue a proper livelihood in the event of termination of Executive's
employment with the Employer, (iii) does not impose a greater restraint
than is necessary to protect the goodwill or business interests of the
Employer and (iv) is more than adequately paid for in the consideration
derived by Executive under this Agreement.
(d) The Employer and Executive also agree that the court under
Section 17(a) or arbitrators under Section 17(b) will have jurisdiction
to modify any provisions of this covenant of noncompetition in
accordance with the court's or arbitrators' respective ruling as to
reasonableness or scope of application and that, consistent with
Section 12 of this Agreement, this Agreement shall remain enforceable
as modified or amended in the jurisdiction where this Agreement is so
modified or amended.
SECTION 7. ASSIGNMENT OF INVENTIONS. Executive hereby assigns and
agrees to assign to Employer, its successors, assigns or nominees, all of
Executive's rights to any discoveries, inventions and improvements, whether
patentable or not, made, conceived or suggested, either solely or jointly with
others, by Executive while in the Employer's employ, whether in the course of
Executive's employment, with the use of Employer's time, material or facilities,
or that is in any way within or related to the existing or contemplated scope of
Employer's business. Upon request by Employer with respect to any such
discoveries, inventions or improvements, Executive will execute and deliver to
Employer, at any time during or after Executive's employment, all appropriate
documents for use in applying for, obtaining and maintaining such domestic and
foreign patents as Employer may desire, and all proper assignments therefor,
when so requested, at the expense of Employer, but without further or additional
consideration. Executive acknowledges that to the extent permitted by law, all
work papers, reports, documentation, drawings, photographs, negatives, tapes and
masters therefor, prototypes and other materials (hereinafter, "items"),
including, without limitation, any and all such items generated and maintained
on any form of electronic media, generated by Executive during Executive's
employment with Employer will be considered a "work made for hire" and that
ownership of any and all copyrights in any and all such items shall belong to
Employer. The item will recognize Employer as the copyright owner, will contain
all proper copyright notices, e.g., "(creation date) New Visual Entertainment,
Inc., All Rights Reserved," and will be in condition to be registered or
otherwise placed in compliance with registration or other statutory requirements
throughout the world.
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SECTION 8. EXECUTIVE'S ACKNOWLEDGMENTS AND REPRESENTATIONS. Executive
represents and warrants that he is free to enter into this Agreement and to
perform each of the terms and covenants of it. Executive represents and warrants
that he is not restricted or prohibited, contractually or otherwise, from
entering into and performing this Agreement, and that his execution and
performance of this Agreement is not a violation or breach of any other
agreement between Executive and any other person or entity.
SECTION 9. ATTORNEYS' FEES AND COSTS. If any action in arbitration or
at law or in equity is necessary to enforce or interpret the terms of this
Agreement, the prevailing party will be entitled to reasonable attorneys' fees,
costs and necessary disbursements in addition to any other relief to which he or
it may be entitled.
SECTION 10. WAIVER OF BREACH. The actual or apparent waiver by either
party to this Agreement of a breach of any provision of this Agreement will not
operate or be construed as an actual or constructive waiver of that breach or
any subsequent breach by any party. Waivers are not effective unless in writing
and signed by the party granting the waiver.
SECTION 11. MULTIPLE COUNTERPARTS. This Agreement may be executed in
counterparts, each of which for all purposes is to be deemed an original, and
all of which constitute, collectively, one agreement. In making proof of this
Agreement, it will not be necessary to produce or account for more than one
counterpart of this Agreement. Furthermore, a photocopy of any counterpart will
be valid and have the same effect as an original.
SECTION 12. SEVERABILITY AND SAVINGS CLAUSE. If any one or more of the
provisions or subjects contained in this Agreement is for any reason held to be
invalid, illegal or unenforceable in any respect, such invalidity, illegality or
unenforceability will not affect the validity and enforceability of any other
provisions or subjects of this Agreement, and it is the intention of the parties
that there shall be substituted for such invalid, illegal or unenforceable
provision a provision as similar to such provision as may be possible and yet be
valid, legal and enforceable. Further, should any provisions of this Agreement
ever be reformed or rewritten by a judicial or arbitration body, those
provisions as rewritten will be binding on Executive and the Employer as if
contained in the original Agreement.
SECTION 13. SUCCESSORS; SURVIVAL; AFFILIATES. This Agreement and the
rights and obligations under this Agreement will be binding upon and inure to
the benefit of the parties to this Agreement and their respective legal
representatives, and will also bind and inure to the benefit of any successor of
the Employer by merger or consolidation or any assignee of all or substantially
all of the Employer's assets. Except to any such successor or assignee of the
Employer, neither this Agreement nor any rights or benefits under this Agreement
may be assigned by either party to this Agreement. Each covenant on the part of
Executive contained in Section 5 shall be construed as an agreement independent
of any other provision of this Agreement and shall survive the termination of
this Agreement. The existence of any claim or cause of action of Executive
against the Employer, whether predicated on this Agreement or otherwise, shall
not constitute a defense to the enforcement by the Employer of any such
covenant. The protective covenants in Sections 5, 6 and 7 shall also inure to
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the benefit of the Employer's affiliates (as hereinafter defined) and these
covenants shall be enforceable against Executive by each of such affiliates as
third party beneficiaries. An "affiliate" of the Employer is any person or
entity that directly, or indirectly through one or many intermediaries, controls
or is controlled by, or is under common control with, the Employer.
SECTION 14. ENTIRE AGREEMENT. This Agreement supersedes any and all
other agreements, either oral or in writing, between the parties with respect to
Executive's employment by the Employer and contains all of the covenants and
agreements between the parties with respect to such employment. This Agreement
can only be changed by the parties in writing, executed by the party against
whom enforcement of any modifications may be sought.
SECTION 15. GOVERNING LAW. This Agreement will be governed by and
construed in accordance with the substantive laws of the State of California
without regard to conflict of law provisions.
SECTION 16. NOTICES. Any notice under this Agreement will be in writing
and will be deemed to have been duly given when delivered personally or three
(3) days after such notice is deposited in the United States mail, registered,
postage prepaid, and addressed, to the Employer, at its principal office, or to
Executive at Executive's last permanent address as shown on the Employer's
records.
SECTION 17. REMEDIES.
(a) INJUNCTIVE RELIEF. Executive agrees that a breach or
threatened breach, based on reasonable and good faith evidence of a
breach on Executive's part, of any covenant contained in Sections 5, 6
or 7 will cause irreparable damage to the Employer. For that reason,
Executive further agrees that the Employer is entitled as a matter of
right to an injunction from any court of competent jurisdiction,
restraining any further violation of any of such covenants by
Executive, Executive's future employers, Executives, partners, agents
or any person or entity related, directly or indirectly, to Executive.
The right to an injunction is in addition to whatever other remedies
the Employer may have, including specifically the recovery of damages.
Venue for any action under this Section 17(a) shall be in the state or
federal courts located in San Diego County, California.
(b) ARBITRATION. Except to the extent provided in Section
15(a) above, any controversy of any nature whatsoever, including but
not limited to tort claims, statutory claims or contract disputes,
between the parties to this Agreement (including their directors,
officers, executives, agents, successors, assigns, heirs, executors and
beneficiaries) relating to the formation, execution, interpretation,
breach or enforcement of this Agreement, or relating to any other
matter arising from Executive's employment with the Employer, shall be
submitted to arbitration before the American Arbitration Association
("AAA"), in accordance with their rules then in effect and the
substantive law of the State of California and the United States. The
arbitration shall be held in San Diego County, California. Each of the
parties to this Agreement shall appoint one person as an arbitrator to
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hear and determine such disputes, and if they should be unable to
agree, then the two arbitrators shall choose a third arbitrator from a
panel made up of experienced arbitrators selected pursuant to the
procedures of the AAA and, once chosen, the third arbitrator's decision
shall be final, binding and conclusive upon the parties to this
Agreement. The arbitrators may not award punitive or exemplary damages
for tort, contract or other common law claims, but will have the power
to award such damages to the extent permitted by an applicable statute
and to award prejudgment interest and attorneys' fees to the prevailing
party. The award of the arbitration panel may be confirmed by any state
or federal court of competent jurisdiction located in San Diego County,
California, and may be challenged only upon the grounds provided in
Section 10 of the Federal Arbitration Act, Title 9, United States Code.
This agreement to arbitrate shall survive the execution of this
Agreement. THE RIGHT TO ARBITRATE IS INTEGRAL TO AND NOT SEVERABLE FROM
THIS AGREEMENT. THE PARTIES ACKNOWLEDGE THAT THEY HAVE READ THIS
ARBITRATION AGREEMENT AND KNOWINGLY CONSENT TO ITS CONSEQUENCES,
INCLUDING THE WAIVER OF THE RIGHT TO LITIGATE CERTAIN DISPUTES. The
expenses of such arbitration will be borne by the losing party or in
such proportion as the arbitrators decide. A material or anticipatory
breach of any section of this Agreement will not release either party
from the obligations of this Section 17.
[SIGNATURE PAGE TO FOLLOW]
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The parties hereto have executed the Agreement as of the date first
mentioned above.
NEW VISUAL ENTERTAINMENT, INC.
By: /s/ Ray Willenberg, Jr.
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Ray Willenberg, Jr., Chief Executive Officer
/s/ John Howell
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John Howell
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