EMPLOYMENT AGREEMENT
This
Employment Agreement (the “Agreement”) is made and entered into this
1st
day of
January, 2005, by and between LEVEL 8 SYSTEMS, INC., a Delaware corporation
(the
“Company”), and Xxxx X. Xxxxxxxxx, a resident of the New Jersey (the
“Employee”).
In
consideration of the mutual covenants, promises and conditions set forth in
this
Agreement, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as
follows:
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1.
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Employment.
The Company hereby employs Employee and Employee hereby accepts such
employment upon the terms and conditions set forth in this Agreement.
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2.
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Duties
of Employee.
Employee’s title will be Chief Financial Officer, Chief Operating Officer
and Corporate Secretary and Employee will report directly to the
President
of the Company. Employee will be based in New Jersey, but will travel
to
the Cary, North Carolina office as often as the job requirements
dictate.
Employee agrees to perform and discharge such other duties as may
be
assigned to Employee from time to time by the Company to the reasonable
satisfaction of the Company, and such duties will be consistent with
those
duties regularly and customarily assigned by the Company to the position
of Chief Financial Officer and Secretary. Employee agrees to comply
with
all of the Company's policies, standards and regulations and to follow
the
instructions and directives as promulgated by the President of the
Company. Employee will devote Employee's full professional and
business-related time, skills and best efforts to such duties and
will
not, during the term of this Agreement, be engaged (whether or not
during
normal business hours) in any other business or professional activity,
whether or not such activity is pursued for gain, profit or other
pecuniary advantage, without the prior written consent of the President
of
the Company. This Section will not be construed to prevent Employee
from
(a) investing personal assets in businesses which do not compete
with the
Company in such form or manner that will not require any services
on the
part of Employee in the operation or the affairs of the companies
in which
such investments are made and in which Employee's participation is
solely
that of an investor; (b) purchasing securities in any corporation
whose
securities are listed on a national securities exchange or regularly
traded in the over-the-counter market, provided that Employee at
no time
owns, directly or indirectly, in excess of one percent (1%) of the
outstanding stock of any class of any such corporation engaged in
a
business competitive with that of the Company; or (c) participating
in
conferences, preparing and publishing papers or books, teaching or
joining
or participating in any professional associations or trade group,
so long
as the President of the Company approves such participation, preparation
and publication or teaching prior to Employee’s engaging
therein.
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3.
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Term.
The term of this Agreement will be at-will, and can be terminated
by
either party at any time, with or without cause, subject to the provisions
of Section 4 of this Agreement.
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1
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4.
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Termination.
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(a)
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Termination
by Company for Cause.
The Company may terminate this Agreement and all of its obligations
hereunder immediately, including the obligation to pay Employee severance,
vacation pay or any further benefits or remuneration, if any of the
following events occur:
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(i)
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Employee
materially breaches any of the terms or conditions set forth in this
Agreement and fails to cure such breach within ten (10) days after
Employee's receipt from the Company of written notice of such breach
(notwithstanding the foregoing, no cure period shall be applicable
to
breaches by Employee of Sections 6, 7 or 8 of this
Agreement);
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(ii)
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Employee
commits any other act materially detrimental to the business or reputation
of the Company;
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(iii)
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Employee
engages in dishonest or illegal activities or commits or is convicted
of
any crime involving fraud, deceit or moral turpitude;
or
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(iv)
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Employee
dies or becomes mentally or physically incapacitated or disabled
so as to
be unable to perform Employee's duties under this Agreement even
with a
reasonable accommodation. Without limiting the generality of the
foregoing, Employee's inability adequately to perform services under
this
Agreement for a period of sixty (60) consecutive days will be conclusive
evidence of such mental or physical incapacity or disability, unless
such
inability adequately to perform services under this Agreement is
pursuant
to a mental or physical incapacity or disability covered by the Family
Medical Leave Act, in which case such sixty (60) day period shall
be
extended to a one hundred and twenty (120) day
period.
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(b)
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Termination
by Company Without Cause.
The Company may terminate Employee's employment pursuant to this
Agreement
for reasons other than those stated in Section 4(a) upon at least
thirty
(30) days' prior written notice to Employee. In the event Employee's
employment with the Company is terminated by the Company without
cause,
the Company shall be obligated to pay Employee a lump sum severance
payment equal to six (6) months of Employee’s then base salary payable
within thirty (30) days of the date of termination. Other than the
severance payment set forth in this Section 4(b), Employee will be
entitled to receive no further remuneration and will not be entitled
to
participate in any Company benefit programs following his termination
by
the Company, whether such termination is with or without
cause.
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(c)
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Termination
by Employee for Cause.
In the event there occurs a Change in Control (as defined below)
of the
Company, Employee shall have the right
to
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2
resign
his employment and will be entitled to a lump sum severance payment equal to
twelve (12) months of Employee’s then base salary payable within thirty (30)
days of the date of termination and an additional severance payment of 250,000
shares of the Company’s common stock. The stock award will not subject to any
customary adjustments for stock splits, stock dividends and the like undertaken
by the Company. In addition, all Employee’s then outstanding but unvested stock
options shall vest one hundred percent (100%). Employee shall have thirty (30)
days from the date written notice is given to Employee about the announcement
and closing of a transaction resulting in a Change in Control of the Company
to
resign or this Section 4(c) shall not apply. In the event Employee resigns
from
the Company for any other reason, Employee will not be entitled to receive
or
accrue any further Company benefits or other remuneration under this Agreement,
and Employee specifically agrees that he will not be entitled to receive any
severance pay.
For
purposes of this Section 4, a Change in Control shall be deemed to have occurred
if any of the following occur:
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(i)
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the
merger of consolidation of the Company with or into another unaffiliated
entity, or the merger of another unaffiliated entity into the Company
or
another subsidiary thereof with the effect that immediately after
such
transaction the stockholders of the Company immediately prior to
such
transaction hold less than fifty percent (50%) of the total voting
power
of all securities generally entitled to vote in the election of directors,
managers or trustees of the entity surviving such merger or
consolidation;
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(ii)
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the
sale or transfer of more than fifty-one percent (51%) of the Company’s
then outstanding voting stock (other than a restructuring event which
results in the continuation of the Company’s business by an affiliated
entity) to unaffiliated person or group (as such term is used in
Section
13(d)(3) of the Securities Exchange Act of 1934, as amended);
or
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(iii)
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the
adoption by the stockholders of the Company of a plan relating to
the
liquidation or dissolution of the
Company.
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5. Compensation
and Benefits.
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(a)
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Annual
Salary.
During the term of this Agreement and for all services rendered by
Employee under this Agreement, the Company will pay Employee a base
salary
of Two Hundred Thousand Dollars ($200,000.00) per annum in equal
bi-monthly installments. Such annual salary will be subject to adjustments
by any increases given in the normal course of
business.
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(b)
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Incentive
Compensation.
Employee shall be eligible to receive incentive compensation in the
form
of a cash bonus, the amount of such cash bonus
is
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3
explained
on Exhibit C, upon the Company reaching sales goals for the calendar year as
set
forth in the operating plan for the Company which was approved by the Board
of
Directors. Said bonus will be payable after the annual accounts have been
presented to the Compensation Committee. Exhibit C attached hereto provides
the
benchmarks associated with achieving the Incentive Compensation.
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6.
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Vacation.
Employee shall be eligible for four (4) weeks of paid vacation annually,
provided that such vacation is scheduled at such times that do not
interfere with the Company’s legitimate business
needs.
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7.
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Other
Benefits.
Employee will be entitled to such fringe benefits as may be provided
from
time-to-time by the Company to its employees, including, but not
limited
to, group health insurance, life and disability insurance, and any
other
fringe benefits now or hereafter provided by the Company to its employees,
if and when Employee meets the eligibility requirements for any such
benefit. The Company reserves the right to change or discontinue
any
employee benefit plans or programs now being offered to its employees;
provided, however, that all benefits provided for employees of the
same
position and status as Employee will be provided to Employee on an
equal
basis.
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8.
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Business
Expenses.
Employee will be reimbursed for all reasonable expenses incurred
in the
discharge of Employee's duties under this Agreement pursuant to the
Company's standard reimbursement
policies.
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9.
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Withholding.
The Company will deduct and withhold from the payments made to Employee
under this Agreement, state and federal income taxes, FICA and other
amounts normally withheld from compensation due
employees.
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10.
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Non-Disclosure
of Proprietary Information.
Employee recognizes and acknowledges that the Trade Secrets (as defined
below) and Confidential Information (as defined below) of the Company
and
its affiliates and all physical embodiments thereof (as they may
exist
from time-to-time, collectively, the “Proprietary Information”) are
valuable, special and unique assets of the Company's and its affiliates'
businesses. Employee further acknowledges that access to such Proprietary
Information is essential to the performance of Employee's duties
under
this Agreement. Therefore, in order to obtain access to such Proprietary
Information, Employee agrees that, except with respect to those duties
assigned to him by the Company, Employee shall hold in confidence
all
Proprietary Information and will not reproduce, use, distribute,
disclose,
publish or otherwise disseminate any Proprietary Information, in
whole or
in part, and will take no action causing, or fail to take any action
necessary to prevent causing, any Proprietary Information to lose
its
character as Proprietary Information, nor will Employee make use
of any
such information for Employee's own purposes or for the benefit of
any
person, firm, corporation, association or other entity (except the
Company) under any circumstances.
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4
For
purposes of this Agreement, the term “Trade Secrets” means information,
including, but not limited to, any technical or nontechnical data, formula,
pattern, compilation, program, device, method, technique, drawing, process,
financial data, financial plan, product plan, list of actual or potential
customers or suppliers, or other information similar to any of the foregoing,
which derives economic value, actual or potential, from not being generally
known to, and not being readily ascertainable by proper means by, other persons
who can derive economic value from its disclosure or use. For purposes of this
Agreement, the term “Trade Secrets” does not include information that Employee
can show by competent proof (i) was known to Employee and reduced to writing
prior to disclosure by the Company (but only if Employee promptly notifies
the
Company of Employee’s prior knowledge); (ii) was generally known to the public
at the time the Company disclosed the information to Employee; (iii) became
generally known to the public after disclosure by the Company through no act
or
omission of Employee; or (iv) was disclosed to Employee by a third party having
a bona fide right both to possess the information and to disclose the
information to Employee. The term “Confidential Information” means any data or
information of the Company, other than trade secrets, which is valuable to
the
Company and not generally known to competitors of the Company. The provisions
of
this Section 6 will apply to Trade Secrets for so long as such information
remains a trade secret and to Confidential Information during Employee’s
employment with the Company and for a period of two (2) years following any
termination of Employee’s employment with the Company for whatever
reason.
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11.
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Non-Solicitation
Covenants.
Employee agrees that during Employee's employment by the Company
and for a
period of one (1) year following the termination of Employee's employment
for whatever reason, Employee will not, directly or indirectly, on
Employee's own behalf or in the service of or on behalf of any other
individual or entity, divert, solicit or attempt to divert or solicit
any
individual or entity (i) who is a client of the Company at any time
during
the six (6)-month period prior to Employee's termination of employment
with the Company (“Client”), or was actively sought by the Company as a
prospective client, and (ii) with whom Employee had material contact
while
employed by the Company to provide similar services or products as
such
provided by Employee for the Company to such Clients or prospects.
Employee further agrees and represents that during Employee's employment
by the Company and for a period of one (1) year following any termination
of Employee's employment for whatever reason, Employee will not,
directly
or indirectly, on Employee's own behalf or in the service of, or
on behalf
of any other individual or entity, divert, solicit or hire away,
or
attempt to divert, solicit or hire away, to or for any individual
or
entity which is engaged in providing similar services or products
to that
provided by the Company, any person employed by the Company for whom
Employee had supervisory responsibility or with whom Employee had
material
contact while employed by the Company, whether or not such employee
is a
full-time employee or temporary employee of the Company, whether
or not
such employee is employed pursuant to written agreement and whether
or not
such employee is employed for a determined period or at-will. For
purposes
of this Agreement, “material contact” exists between Employee and a Client
or potential Client when (1) Employee established
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5
and/or
nurtured the Client or potential Client; (2) the Client or potential Client
and
Employee interacted to further a business relationship or contract with the
Company; (3) Employee had access to confidential information and/or marketing
strategies or programs regarding the Client or potential Client; and/or (4)
Employee learned of the Client or potential Client through the efforts of the
Company providing Employee with confidential Client information, including
but
not limited to the Client’s identify, for purposes of furthering a business
relationship.
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12.
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Existing
Restrictive Covenants.
Except as provided in Exhibit B, Employee has not entered into any
agreement with any employer or former employer (a) to keep in confidence
any confidential information or (b) to not compete with any former
employer. Employee represents and warrants that Employee's employment
with
the Company does not and will not breach any agreement which Employee
has
with any former employer to keep in confidence confidential information
or
not to compete with any such former employer. Employee will not disclose
to the Company or use on its behalf any confidential information
of any
other party required to be kept confidential by
Employee.
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13.
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Return
of Proprietary Information.
Employee acknowledges that as a result of Employee's employment with
the
Company, Employee may come into the possession and control of Proprietary
Information, such as proprietary documents, drawings, specifications,
manuals, notes, computer programs, or other proprietary material.
Employee
acknowledges, warrants and agrees that Employee will return to the
Company
all such items and any copies or excerpts thereof, and any other
properties, files or documents obtained as a result of Employee's
employment with the Company, immediately upon the termination of
Employee's employment with the
Company.
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14.
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Proprietary
Rights.
During the course of Employee's employment with the Company, Employee
may
make, develop or conceive of useful processes, machines, compositions
of
matter, computer software, algorithms, works of authorship expressing
such
algorithm, or any other discovery, idea, concept, document or improvement
which relates to or is useful to the Company's Business (the
“Inventions”), whether or not subject to copyright or patent protection,
and which may or may not be considered Proprietary Information. Employee
acknowledges that all such Inventions will be “works made for hire” under
United States copyright law and will remain the sole and exclusive
property of the Company. Employee also hereby assigns and agrees
to assign
to the Company, in perpetuity, all right, title and interest Employee
may
have in and to such Inventions, including without limitation, all
copyrights, and the right to apply for any form of patent, utility
model,
industrial design or similar proprietary right recognized by any
state,
country or jurisdiction. Employee further agrees, at the Company's
request
and expense, to do all things and sign all documents or instruments
necessary, in the opinion of the Company, to eliminate any ambiguity
as to
the ownership of, and rights of the Company to, such Inventions,
including
filing copyright and patent registrations and defending and enforcing
in
litigation or otherwise all such rights.
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6
Employee
will not be obligated to assign to the Company any Invention made by Employee
while in the Company's employ which does not relate to any business or activity
in which the Company is or may reasonably be expected to become engaged, except
that Employee is so obligated if the same relates to or is based on
ProprietaryInformation to which Employee will have had access during and by
virtue of Employee's employment or which arises out of work assigned to Employee
by the Company. Employee will not be obligated to assign any Invention which
may
be wholly conceived by Employee after Employee leaves the employ of the Company,
except that Employee is so obligated if such Invention involves the utilization
of Proprietary Information obtained while in the employ of the Company. Employee
is not obligated to assign any Invention that relates to or would be useful
in
any business or activities in which the Company is engaged if such Invention
was
conceived and reduced to practice by Employee prior to Employee's employment
with the Company. Employee agrees that any such Invention is set forth on
Exhibit “A” to this Agreement.
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15.
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Remedies.
Employee agrees and acknowledges that the violation of any of the
covenants or agreements contained in Sections 10, 11 and 14 of this
Agreement would cause irreparable injury to the Company, that the
remedy
at law for any such violation or threatened violation thereof would
be
inadequate, and that the Company will be entitled, in addition to
any
other remedy, to temporary and permanent injunctive or other equitable
relief without the necessity of proving actual damages or posting
a
bond.
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16.
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Severability.
In case one or more of the provisions contained in this Agreement
is for
any reason held to be invalid, illegal or unenforceable in any respect,
the parties agree that it is their intent that the same will not
affect
any other provision in this Agreement, and this Agreement will be
construed as if such invalid or illegal or unenforceable provision
had
never been contained herein. It is the intent of the parties that
this
Agreement be enforced to the maximum extent permitted by
law.
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17.
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Entire
Agreement.
This Agreement embodies the entire agreement of the parties relating
to
the subject matter of this Agreement and supersedes all prior agreements,
oral or written, regarding the subject matter hereof. No amendment
or
modification of this Agreement will be valid or binding upon the
parties
unless made in writing and signed by the
parties.
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18.
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Governing
Law.
This Agreement is entered into and will be interpreted and enforced
pursuant to the laws of the State of New Jersey. The parties hereto
hereby
agree that the appropriate forum and venue for any disputes between
any of
the parties hereto arising out of this Agreement shall be any federal
court in the state where the Employee has his principal place of
residence
and each of the parties hereto hereby submits to the personal jurisdiction
of any such court. The foregoing shall not limit the rights of any
party
to obtain execution of judgment in any other jurisdiction. The parties
further agree, to the extent permitted by law, that a final and
unappealable judgment against either of them in any action or proceeding
contemplated above shall be conclusive and may be enforced in
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any
other
jurisdiction within or outside the United States by suit on the judgment, a
certified exemplified copy of which shall be conclusive evidence of the fact
and
amount of such judgment.
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19.
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Surviving
Terms.
Sections 4, 10, 11, 14, 15 and 18 of this Agreement shall survive
termination of this Agreement.
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IN
WITNESS WHEREOF, the parties have executed this Agreement as of the day and
year
first above written.
COMPANY: EMPLOYEE:
XXXXX
0
SYSTEMS, INC.
By:
____________________________ _______________________________
Name: Xxxx
X.
Xxxxxxxxx
Title:
8
EXHIBIT
A
INVENTIONS
Employee
represents that there are no Inventions.
_________________
Employee
Initials
9
EXHIBIT
B
EXISTING
RESTRICTIVE COVENANTS
10
EXHIBIT
C
VARIABLE
COMPENSATION
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Revenue
Range
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From
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To
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Variable
Compensation
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|||||
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Tier
1
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$
6,000,000
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$
8,499,999
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$
50,000
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||||
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Tier
2
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$
8,500,000
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$
12,499,999
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$
75,000
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Tier
3
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$
12,500,000
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$
100,000
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Performance
significantly in excess of Tier 3 will achieve an addition reward
at the
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discretion
of the Compensation Committee
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