Exhibit 10.6
EXECUTIVE COMPENSATION AGREEMENT
THIS EXECUTIVE COMPENSATION AGREEMENT is entered into as of September 13,
1999, and renewed as modified on March 24, 2003 by and between XXXXXX X. XXXXXXX
(the "Employee") and XXXX SYSTEMS, INC., a Delaware corporation (the "Company").
1. Term of Employment.
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(a) Basic Rule. The Company agrees to continue the Employee's employment,
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and the Employee agrees to remain in employment with the Company, from the date
hereof until the date when the Employee's employment terminates pursuant to
Subsection (b), (c) or (d) below.
(b) Early Termination. Subject to Section 6, the Company may terminate the
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Employee's employment by giving the Employee ninety (90) days' advance notice in
writing. The Employee may terminate his employment by giving the Company thirty
(30) days' advance notice in writing. The Employee's employment shall terminate
automatically in the event of his death. Any waiver of notice shall be valid
only if it is made in writing and expressly refers to the applicable notice
requirement of this Section 1.
(c) Cause. The Company may at any time terminate the Employee's employment
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for Cause by giving the Employee notice in writing. For all purposes under this
Agreement, "Cause" shall mean:
(i) A willful act by the Employee which constitutes fraud and which is
injurious to the Company; or
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XXXX SYSTEMS, INC. AND SUBSIDIARIES
(ii) Conviction of, or a plea of "guilty" or "no contest" to, a
felony; or
(iii) Employee's continuing repeated willful failure or refusal to
perform his material duties required by this Agreement which is injurious
to the Company.
No act, or failure to act, by the Employee shall be considered "willful" unless
committed without good faith and without a reasonable belief that the act or
omission was in the Company's best interest. This Agreement may not be
terminated for Cause unless Employee has first been given the opportunity,
together with his counsel, to be heard before the Company's Board of Directors.
(d) Disability. The Company may terminate the Employee's active employment
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due to Disability by giving the Employee ninety (90) days' advance notice in
writing. For all purposes under this Agreement, "Disability" shall mean that
Employee, at the time notice is given, has become eligible to receive immediate
long-term disability benefits under the Company's long-term disability insurance
plan or, if there is no such plan, under the federal Social Security program. In
the event that the Employee resumes the performance of substantially all of his
duties hereunder before the termination of his active employment under this
Subsection (d) becomes effective, the notice of termination shall automatically
be deemed to have been revoked.
(e) Rights Upon Termination. Except as expressly provided in Section 6 or
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provided in subparagraph (f) of this Section 1, upon the termination of the
Employee's employment pursuant to this Section 1, the Employee shall only be
entitled to the compensation, benefits and reimbursements described in Sections
3, 4 and 5 for the period preceding the effective date of the termination. The
payments under this Agreement shall fully discharge all responsibilities of the
Company to the Employee upon the termination of his employment.
(f) In the event that the Company terminates the employment of the Employee
without Cause (as defined in Section 3 of this Agreement), Employee shall be
entitled to the following:
(i) an amount equal to two (2) times the Employee's annual rate of
Base Compensation as in effect at the time of such termination plus two (2)
times the targeted annual bonus, to be paid by the Company on a
semi-monthly basis;
(ii) continuation of the employee benefits provided to Employee
pursuant to Section 4 hereof for a period of two (2) years after such
termination; and
(iii) a period of ninety days (90) to exercise all Incentive Awards
(as defined in Section 6(e) of this Agreement) that are vested at the time
of such termination.
(g) Termination of Agreement. This Agreement shall terminate when all
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obligations of the parties hereunder have been satisfied.
2. Duties and Scope of Employment.
(a) Position. The Company agrees to employ the Employee as its Executive
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Vice President, Secretary and a Director of the company for the term of his
employment under this Agreement. At all times during the term of this Agreement,
Employee shall have powers and duties at least commensurate with his position as
Executive Vice President and Chief Administrative Officer of the Company. The
Employee shall report only to the Chairman of the Company's Board of Directors.
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XXXX SYSTEMS, INC. AND SUBSIDIARIES
(b) Obligations. During the term of his employment under this Agreement,
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the Employee shall devote his full business efforts and time to the Company and
its subsidiaries. The Employee shall not render services to any other for-profit
corporation or entity without the prior written consent of the Company's Board.
This Subsection (b) shall not preclude the Employee from engaging in appropriate
professional, educational, civic, charitable or religious activities or from
devoting a reasonable amount of time to private investments that do not
interfere or conflict with his responsibilities to the Company.
3. Base Compensation. During the term of his employment under this
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Agreement, the Company agrees to pay the Employee as compensation for his
services a base salary at the annual rate of $210,000 or at such higher rate as
the Company may determine from time to time. Such salary shall be payable in
accordance with the Company's standard payroll procedures. Once the Company has
increased such salary, it thereafter shall not be reduced. (The annual
compensation specified in this Section 3, together with any increases in such
compensation that the Company may grant from time to time, is referred to in
this Agreement as "Base Compensation.")
4. Employee Benefits. During the term of his employment under this
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Agreement, the Employee shall be eligible for the fringe benefits, bonuses,
vacations, employee benefit plans and executive compensation programs maintained
by the Company for other senior executives, subject in each case to the
generally applicable terms and conditions of the plan or program in question and
to the determinations of any person or committee administering such plan or
program.
5. Business Expenses. During the term of his employment under this
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Agreement, the Employee shall be authorized to incur necessary and reasonable
travel, entertainment and other business expenses in connection with his duties
hereunder. The Company shall reimburse the Employee for such expenses upon
presentation of an itemized account and appropriate supporting documentation,
all in accordance with the Company's generally applicable policies.
6. Change in Control.
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(a) Definition. For all purposes under this Agreement, "Change in Control"
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shall mean the occurrence of any of the following events after September 13,
1999, the date of this Agreement:
(i) Any "person" (as such term in used in sections 13(d) and 14(d) of
the Securities Exchange Act of 1934, as amended (the "Exchange Act")) by
the acquisition or aggregation of securities is or becomes the beneficial
owner (within the meaning of Rule 13d-3 of the Exchange Act), directly or
indirectly, of securities of the Company representing fifty percent (50%)
or more of the combined voting power of the Company's then outstanding
securities ordinarily (and apart from rights accruing under special
circumstances) having the right to vote at elections of directors (the
"Base Capital Stock"); except that any change in the relative beneficial
ownership of the Company's securities by any person resulting solely from a
reduction in the aggregate number of outstanding shares of Base Capital
Stock, and any decrease thereafter in such person's ownership of
securities, shall be disregarded until such person increases in any manner,
directly or indirectly, such person's beneficial ownership of any
securities of the Company;
(ii) The stockholders of the Company approve a definitive agreement
(A) to merge or consolidate the Company with or into another corporation in
which the holders of the securities of the Company before such merger or
reorganization will not, immediately following such merger or
reorganization, hold as a group on a fully diluted basis both the ability
to elect at least a majority of the directors of the surviving corporation
and at least a majority in value of the surviving corporation's outstanding
equity securities, or (B) to sell or otherwise dispose of all or
substantially all of the assets of the Company or dissolve or liquidate the
Company; or
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(b) Good Reason. For all purposes under this Agreement, "Good Reason" shall
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mean that the Employee:
(i) Has incurred a material reduction in his powers or duties;
(ii) Has incurred one or more reductions in his Base Compensation in
the cumulative amount of five percent (5%) or more; or
(iii) Has been notified that his principal place of work will be
relocated by a distance of 50 miles or more.
(c) Severance Payment. The Employee shall be entitled to receive salary
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continuation payments from the Company (the "Severance Payment") if, during the
term of this Agreement and within the first nine (9) month period after the
occurrence of a Change in Control either:
(i) The Employee voluntarily resigns his employment for Good Reason;
or
(ii) The Company terminates the Employee's employment for any reason
other than Cause or Disability.
The Severance Payments shall be paid by the Company on a semi-monthly
basis; following the date of the employment termination and shall be in an
amount determined under Subsection (d) below. The Severance Pay-out shall be in
lieu of any further payments to the Employee under Section 3 and any further
accrual of benefits under Section 4 with respect to periods subsequent to the
date of the employment termination.
(d) Amount. The amount of the Severance Payments shall in total equal to
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two (2) times the Employee's annual rate of Base Compensation plus targeted
annual bonus incentive, as in effect on the date of the employment termination.
(e) Incentive Programs. If, during the term of this Agreement, a Change in
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Control occurs with respect to the Company, the vesting of all of Employee's
awards heretofore or hereafter granted to him under all stock option, stock
appreciation rights, restricted stock, phantom stock or similar plans or
agreements of the Company ("Incentive Awards") shall be immediately accelerated
regardless of any provisions in such plans or agreements that do not provide for
such acceleration of vesting. In addition, Employee will have at ninety (90)
days following the date his employment is terminated to exercise all of such
Incentive Awards regardless of any provisions in any plans or agreements to the
contrary. This Agreement shall be deemed to be an amendment of such plans or
agreements to the extent required to implement this subsection (e) and preserve
the qualified status of Employee's incentive stock options for the longest time
permitted by applicable law. (To the extent that such plans or agreements
provide for full vesting on an earlier date than does this Agreement, or for
longer post-termination of employment exercise periods, such plans or agreements
shall prevail.)
(f) Insurance Coverage. During the twenty-four (24) month period commencing
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upon a termination of employment described in Subsection (c) above, the Employee
(and, where applicable, his dependents) shall be entitled to continue
participation in the group insurance plans maintained by the Company, including
life, disability and health insurance programs, as if he were still an employee
of the Company. Where applicable, the Employee's salary for purposes of such
plans shall be deemed to be equal to his Base Compensation. To the extent that
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the Company finds it impossible to cover the Employee under its group insurance
policies during such twenty-four (24) month period, the Company shall provide
the Employee with individual policies which offer at least the same level or
coverage and which impose not more than the same costs on him. The foregoing
notwithstanding, in the event that the Employee becomes eligible for comparable
group insurance coverage in connection with new employment, the coverage
provided by the Company under this Subsection (f) shall terminate immediately.
Any group health continuation coverage that the Company is required to offer
under the Consolidated Omnibus Budget Reconciliation Act of 1986 ("COBRA") shall
commence when coverage under this Subsection (f) terminates.
(g) No Mitigation. The Employee shall not be required to mitigate the
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amount of any payment contemplated by this Section 6 (whether by seeking new
employment or in any other manner). Except as expressly provided in Subsection
(f) above, no such payment shall be reduced by earnings that the Employee may
receive from any other source.
7. Limitation on Payments.
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(a) Application. This Section 7 shall apply to the Employee only if, after
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the application of this Section 7, the present value of his aggregate payments
or property transfers from the Company will be greater than the present value of
his payments or property transfers from the Company would have been if:
(i) This Section 7 did not apply; and
(ii) Such present value had been reduced by the amount of the excise
tax described in section 4999 of the Internal Revenue Code of 1986, as
amended (the "Code").
In all other cases, this Section 7 shall not apply to the Employee. All
determinations under this Subsection (a) shall be made by the independent
auditors retained by the Company most recently prior to the Change in Control
(the "Auditors").
(b) Basic Rule. Any provision of this Agreement other than Subsection (a)
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above to the contrary notwithstanding, in the event that the Auditors determine
that any payment or transfer by the Company to or for the benefit of the
Employee, whether paid or payable (or transferred or transferable) pursuant to
the terms of this Agreement or otherwise (a "Payment"), would be nondeductible
by the Company for federal income tax purposes because of the provisions
concerning "excess parachute payments" in section 280G of the Code, then the
aggregate present value of all Payments shall be reduced (but not below zero) to
the Reduced Amount. For purposes of this Section 7, the "Reduced Amount" shall
be the amount, expressed as a present value, which maximizes the aggregate
present value of the Payments without causing any Payment to be nondeductible
(c) Reductions. If the amount of the aggregate payments or property
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transfers to the Employee must be reduced under this Section 7, then the Company
shall direct in which order the payments or transfers are to be reduced, but no
change in the timing of any payment or transfer shall be made without the
Employee's consent. As a result of uncertainty in the application of sections
280G and 4999 of the Code at the time of an initial determination by the
Auditors hereunder, it is possible that a payment will have been made by the
Company that should not have been made (an "Overpayment") or that an additional
payment that will not have been made by the Company could have been made (an
"Underpayment"). In the event that the Auditors, based upon the assertion of a
deficiency by the Internal Revenue Service against the Company or the Employee
that the Auditors believe has a high probability of success, determine that an
Overpayment has been made, such Overpayment shall be treated for all purposes as
a loan to the Employee that he shall repay to the Company, together with
interest at the applicable federal rate specified in section 7872 (f) (2) of the
Code; provided, however, that no amount shall be payable by the Employee to the
Company if and to the extent that such payment would not reduce the amount that
is nondeductible under section 280G of the Code or is subject to an excise tax
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under section 4999 of the Code. In the event that the Auditors determine that an
Underpayment has occurred, such Underpayment shall promptly be paid or
transferred by the Company to, or for the benefit of, the Employee, together
with interest at the applicable federal rate specified in section 7872 (f) (2)
of the Code.
8. Successors.
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(a) Company's Successors. The Company shall require any successor (whether
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direct or indirect and whether by purchase, lease, merger, consolidation,
liquidation or otherwise) to all or substantially all of the Company's business
and/or assets, by an agreement in substance and form satisfactory to the
Employee, to assume this Agreement and to agree expressly to perform this
Agreement in the same manner and to the same extent as the Company would be
required to perform it in the absence of a succession. The Company's failure to
obtain such agreement prior to the effectiveness of a succession shall be a
breach of this Agreement and shall entitle the Employee to all of the
compensation and benefits to which he would have been entitled hereunder if the
Company had involuntarily terminated his employment without Cause immediately
after such succession becomes effective. For all purposes under this Agreement,
the term "Company" shall include any successor to the Company's business and/or
assets which executes and delivers the assumption agreement described in this
Subsection (a) or which becomes bound by this Agreement by operation of law.
(b) Employee's Successors. This Agreement and all rights of the Employee
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hereunder shall inure to the benefit of, and be enforceable by, the Employee's
personal or legal representatives, executors, administrators, successors, heirs,
distributees, devisees and legatees.
9. Restrictive Covenants.
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(a) For purposes of this Agreement, the following terms shall have the
following respective meanings:
"Competing Business" means a business that, wholly or partly, directly or
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indirectly, is engaged in providing, selling or marketing enterprise-wide
business systems and related services to companies installing client-server
software products.
"Competitive Position" means: (A) Employee's direct or indirect equity
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ownership (excluding ownership of less than one percent (1%) of the outstanding
common stock of any publicly held corporation) or control of any portion of any
Competing Business; (B) Employee serving as a director, officer, consultant,
lender, joint venturer, partner, agent, advisor or independent contractor of or
to any Competing Business; or (C) any employment arrangement between Employee
and any Competing Business whereby Employee is required to perform services for
the Competing Business substantially similar to those that Employee performed
for the Company.
"Restricted Territory" means the United States of America and Canada.
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(b) Employee agrees that he will not, without the prior written consent of
the Board, either directly or indirectly, alone or in conjunction with any other
person or entity, accept, enter into or attempt to enter into a Competitive
Position in the Restricted Territory at any time during his employment with the
Company or, in the event the Company terminates the employment of the Employee
without Cause, for a period of two (2) years thereafter.
(c) Employee agrees that he will not, without the prior written consent of
the Board, either directly or indirectly, alone or in conjunction with any other
person or entity, solicit, entice or induce any customer of the Company (or any
actively sought or prospective customer of the Company) for or on behalf of any
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Competing Business at any time during his employment with the Company or, in the
event the Company terminates the employment of the Employee without Cause, for a
period of two (2) years thereafter.
(d) Employee agrees that he will not, without the prior written consent of
the Board, either directly or indirectly, alone or in conjunction with any other
person or entity, solicit or attempt to solicit any "key or material" employee,
consultant, contractor or other personnel of the Company to terminate, alter or
lessen that party's affiliation with the Company or to violate the terms of any
agreement or understanding between such employee, consultant, contractor or
other person and the Company at any time during his employment with the Company
or, in the event the Company terminates the employment of the Employee without
Cause, for a period of two (2) years thereafter. For purposes of this subsection
(d), "key or material" employees, consultants, contractors or other personnel
shall mean those such persons or entities who have direct access to or have had
substantial exposure to Confidential Information or Trade Secrets.
(e) The provisions of Subsections (b), (c) and (d) of this Section 9 shall
not apply if, following the occurrence of a Change in Control, (i) the Employee
voluntarily resigns his employment with the Company for any reason or (ii) the
Company terminates the Employee's employment for any reason.
10. Confidentiality.
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(a) For purposes of this Agreement, the following terms shall have the
following respective meanings:
"Confidential Information" means all valuable proprietary and
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confidential business information belonging to or pertaining to the Company
and its affiliates and subsidiaries, other than "Trade Secrets" (as defined
below), that is not generally known by or available to the competitors of
the Company but is generally known only to the Company and those of its
employees, independent contractors, customers or agents to whom such
information must be confided for internal business purposes.
"Trade Secrets" means the "trade secrets" of the Company as defined
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under applicable law.
(b) In recognition of the Company's need to protect its legitimate business
interests, Employee hereby covenants and agrees that he shall regard and treat
each item of information or data constituting a Trade Secret or Confidential
Information as strictly confidential and wholly owned by the Company and that he
will not use, distribute, disclose, reproduce or otherwise communicate any such
item of information or data to any person or entity for any purpose other than
in connection with his performance of his obligations under this Agreement. The
covenant contained in the preceding sentence shall apply: (i) with respect to
Confidential Information, at all times Employee is employed by the Company and
for a period of three (3) years thereafter; and (ii) with respect to Trade
Secrets, at all times such data or information constitutes a "trade secret"
under applicable law.
11. Miscellaneous Provisions.
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(a) Notice. Notices and all other communications contemplated by this
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Agreement shall be in writing and shall be deemed to have been duly given when
personally delivered or when mailed by U.S. registered or certified mail, return
receipt requested and postage prepaid. In the case of the Employee, mailed
notices shall be addressed to him at the home address which he most recently
communicated to the Company in writing. In the case of the Company, mailed
notices shall be addressed to its corporate headquarters, and all notices shall
be directed to the attention of its Secretary.
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(b) Waiver. No provision of this Agreement shall be modified, waived or
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discharged unless the modification, waiver or discharge is agreed to in writing
and signed by the Employee and by an authorized officer of the Company (other
than the Employee). No waiver by either party of any breach of, or of compliance
with, any condition or provision of this Agreement by the other party shall be
considered a waiver of any other condition or provision or of the same condition
or provision at another time.
(c) Whole Agreement; Amendment. No agreements, representations or
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understandings (whether oral or written and whether express or implied) which
are not expressly set forth in this Agreement have been made or entered into by
either party with respect to the subject matter hereof. This Agreement shall not
be modified or amended except by an instrument in writing signed by or on behalf
of the parties hereto.
(d) No Setoff; Withholding Taxes. There shall be no right of setoff or
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counterclaim, with respect to any claim, debt or obligation, against payments to
the Employee under this Agreement. All payments made under this Agreement shall
be subject to reduction to reflect taxes required to be withheld by law.
(e) Choice of Law. The validity, interpretation, construction and
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performance of this Agreement shall be governed by the laws of the State of
Georgia.
(f) Severability. The invalidity or unenforceability of any provision or
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provisions of this Agreement shall not effect the validity or enforceability of
any other provision hereof, which shall remain in full force and effect.
(g) Arbitration. Except as otherwise provided in this Agreement, any
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controversy or claim arising out of or relating to this Agreement, or the breach
thereof, shall be settled by arbitration in Atlanta, Georgia in accordance with
the Commercial Arbitration Rules of the American Arbitration Association.
Judgment on the award rendered by the arbitrator may be entered in any court
having jurisdiction thereof. All fees and expenses of the arbitrator and such
Association shall be paid as determined by the arbitrator.
(h) No Assignment. The rights of any person to payments or benefits under
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this Agreement shall not be made subject to option or assignment, either by
voluntary or involuntary assignment or by operation of law, including (without
limitation) bankruptcy, garnishment, attachment or other creditor's process, and
any action in violation of this Subsection (h) shall be void.
(i) Counterparts. This Agreement may be executed in counterparts, each
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of which shall for all purposes be deemed an original, and all of such
counterparts shall together constitute one and the same agreement.
IN WITNESS WHEREOF, each of the parties has executed this Agreement, in the
case of the Company by its duly authorized officer, as of the day and year first
above written.
/s/ Xxxxxx X. Xxxxxxx
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Xxxxxx X. Xxxxxxx
XXXX SYSTEMS, INC.
By:
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Title:
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