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EXHIBIT 10.4
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement"), is made and entered into as of
the 1st day of July, 2001, by and between Xxxxxx Xxxx Corporation, a Delaware
corporation (the "Company"), and Xxxxxx X. Xxxxxxxx (Executive").
WHEREAS, the Company wishes to retain Executive as an executive employee,
and Executive wishes to be employed by the Company in such capacity, all upon
the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual covenants of parties
hereinafter set forth, and other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the parties hereby agree as
follows:
1. EMPLOYMENT OF EXECUTIVE. The Company engages and employs Executive in an
executive capacity and Executive accepts such employment and agrees to act as an
employee of the Company in accordance with the terms of employment hereinafter
specified. Executive shall hold the office of President and CEO and shall,
subject to the direction and supervision of the Company's of Board of Directors,
(a) have the responsibilities and authority customarily associated with such
office, and (b) perform such other duties and responsibilities as the Company's
Board of Directors shall from time to time assign to him. Executive agrees
diligently and faithfully to serve the Company and to devote his best efforts,
his full business time and his highest talents and skills to the furtherance and
success of the Company's business.
2. COMPENSATION. As full and complete compensation to Executive for all services
to be rendered by Executive hereunder, the Company shall pay Executive as
follows:
(a) The Company shall, during the term of Executive's employment, pay or
cause to be paid to Executive a base salary at the rate of $250,000 per annum.
Such base salary shall be paid in periodic installments at the discretion of
the Company (but not less frequently than monthly) in accordance with the
Company's normal mode of executive salary payment.
(b) The Company may, during the term of Executive's employment, pay or
cause to be paid to Executive an annual bonus of cash, stock or other property
in such amounts as the Company's Board of Directors may determine in their sole
discretion, but not to exceed 75% of Executive's base salary.
3. TERM OF EMPLOYMENT; SEVERANCE.
(a) The term of Executive's employment hereunder (the "Employment Term")
shall commence on the date hereof and shall expire three (3) years after such
date.
(b) Termination of Executive's employment pursuant to this Agreement or
voluntary termination of employment shall not constitute a waiver of any of
Executive's obligations hereunder which survive termination hereof, including
without limitation those arising under paragraphs 5 through 9 inclusive hereof.
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(c) In the event Executive's employment is terminated by the Company
without cause (as hereinafter determined), Executive shall continue to be
entitled to receive those fringe benefits enumerated in paragraph 4 hereof until
the expiration of the original Employment Term and the Company shall pay to
Executive a severance fee equal to the greater of (i) any amount of base salary
remaining until the expiration of the original Employment Term and bonus for
each remaining year of the original Employment Term, which bonus shall be based
on an average of the bonuses received by Executive during the last two fiscal
years prior to such termination without cause (the "Estimated Bonus"), to which
Executive would otherwise be entitled but for such termination, or (ii) twelve
(12) months of Executive's salary and Estimated Bonus; provided, however, that
Executive shall not be entitled to receive any fringe benefits or such severance
fee if Executive breaches any of his obligations arising under paragraphs 7
through 9 hereof. The continuance of Executive's fringe benefits and the payment
by the Company of any severance fee to Executive pursuant to this Agreement
shall be in complete satisfaction and settlement of, and as liquidated damages
for, any and all of Executive's claims, damages or causes of action arising
directly or indirectly from this Agreement. In addition, upon the termination of
Executive's employment by the Company without cause, all options to purchase
shares of common stock of the Company ("Options") that were granted to Executive
and have vested prior to the date of such termination without cause shall remain
exercisable for a period of one (1) year from the date of such termination
without cause.
(d) In the event Executive's employment is terminated with cause, the
Company shall have no further obligations hereunder or otherwise with respect to
Executive's employment from and after the date of such termination, except for
the payment of Executive's base salary accrued through the date of such
termination. For purposes of this Agreement, "cause" for termination shall be
deemed to exist upon (i) a determination by the Company's Board of Directors
that Executive has committed an act of fraud, embezzlement or other act of
dishonesty which would reflect adversely on the integrity of the Company or if
Executive is convicted of any criminal statute involving breach of fiduciary
duty or moral turpitude; (ii) a reasonable determination by the Company's Board
of Directors that Executive has failed to discharge his duties in a reasonably
satisfactory manner which failure is not cured by Executive within thirty (30)
days after delivery of written notice to Executive specifying the nature of such
failure; (iii) the death of Executive; (iv) a mental or physical disability of
Executive which renders Executive, in the reasonable opinion of the Company's
Board of Directors, unable to effectively perform his duties hereunder for a
substantially continuous period of one hundred eighty (180) days; or (v) the
voluntary termination of Executive's employment hereunder other than as a result
of a breach of the Company's obligations hereunder.
(e) In the event Executive's employment is terminated by the Company
pursuant to a Change in Control (as that term is defined in that certain
Termination and Change in Control Agreement dated of even date herewith between
the Company and Executive (the "Change in Control Agreement")), the Company
shall pay to Executive a severance fee equal to the greater of (i) the amount
Executive would be entitled to receive under paragraph 3(c) of this Agreement
for a termination without cause, or (ii) the amount Executive would be entitled
to receive pursuant to a Change in Control under the Change in Control
Agreement.
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(f) In the event Executive's employment is not renewed by the Company upon
the expiration of the Employment Term for a term (the "Renewal Term") of at
least two (2) years, Executive shall, upon (i) the expiration of the Renewal
Term, if any, or (ii) the Employment Term in the event there is no Renewal Term,
or (iii) upon Executive's voluntary termination within 60 days of the Company's
failure to renew his employment on substantially the same terms as set forth
herein for at least two (2) years, continue to receive those fringe benefits
enumerated in paragraph 4 hereof for a period of twelve (12) months, and the
Company shall pay to Executive a severance fee equal to twelve (12) months of
Executive's salary and the Estimated Bonus; provided, however, that Executive
shall not be entitled to receive any fringe benefits or such severance fee if
Executive breaches any of his obligations arising under paragraphs 7 through 9
hereof. In addition, all Options that were granted to Executive and have vested
prior to the expiration of the Renewal Term shall remain exercisable for a
period of one (1) year from the expiration of the Renewal Term.
(g) In the event any payments or benefits received by the Executive upon
his termination of employment (which payments shall include, without
limitation, the vesting of an option or other non-cash benefit or property),
whether pursuant to the terms of this Agreement or any other plan, arrangement,
or agreement with the Company or any affiliated company (collectively, the
"Total Payments") would be subject (in whole or in part) to the excise tax
imposed by Section 4999 of the Internal Revenue Code of 1986, as amended (the
"Code"), or any similar tax as may hereafter be imposed (the "Excise Tax"), the
following provisions shall apply:
(i) In the event that the Total Payments cause the Executive's
"parachute payments" within the meaning of Section 280G(b)(2) of the Code
to equal or to exceed three times the Executive's "base amount" within the
meaning of Section 280G(b)(3) of the Code (the "Trebled Base Amount") by an
amount which is not greater than 10% of the Trebled Base Amount, the Total
Payments shall be reduced (or eliminated) such that no portion of the Total
Payments is subject to the Excise Tax. Reductions shall be made first to
those Total Payments arising under the terms of this Agreement.
(ii) In the event that the Total Payments cause the parachute
payments to exceed 110% of the Trebled Base Amount, the Company shall pay
to the Executive at the time specified below, an additional amount
determined as set forth below (the "Gross-up Payment"). The Gross-up
Payment shall be made with respect to the amount which equals 100% of the
Executive's "excess parachute payments" subject to the Excise Tax. The
Gross-up Payment shall be an amount such that the net amount retained by
Executive with respect to the Total Payments after reduction for any Excise
Tax on the Total Payments and any federal, state and local income or
employment tax and Excise Tax payable by the Executive on the Gross-up
Payment hereunder (provided that such amount is actually paid when due)
shall be equal to the amount of the Total Payments that the Executive would
retain if the Total Payments did not constitute parachute payments.
(iii) For purposes of determining whether any of the Total Payments
will be subject to the Excise Tax and the amount of any Excise Tax:
(a) The Total Payments shall be treated as "parachute
payments" within the meaning of Section 280G(b)(2) of the Code,
and all "excess
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parachute payments" within the meaning of Section 280G(b)(1) of
the Code shall be treated as subject to the Excise Tax, unless,
and except that to the extent that, in the written opinion of
independent legal counsel, compensation consultants or auditors
of nationally recognized standing ("Independent Advisors")
selected by the Company and reasonably acceptable to Executive,
the Total Payments (in whole or in part) do not constitute
parachute payments, or such excess parachute payments (in whole
or in part) represent reasonable compensation for services
actually rendered within the meaning of Section 280G(b)(4) of the
Code in excess of the base amount within the meaning of Section
280G(b)(3) of the Code or are otherwise not subject to the Excise
Tax;
(b) The amount of the Total Payments which shall be treated
as subject to the Excise Tax shall be equal to the lesser of (i)
the total amount of the Total Payments or (ii) the total amount
of excess parachute payments within the meaning of Section
280G(b)(1) of the Code (after applying Section 3(g)(iii)(a)
above); and
(c) The value of any non-cash benefits or any deferred
payment or benefit shall be determined by the Independent
Advisors in accordance with the principles of Sections 280G(d)(3)
and (4) of the Code.
In the event that the Excise Tax is subsequently determined
to be less than the amount taken into account hereunder at the
time the Gross-up Payment is made, Executive shall repay to the
Company at the time that the amount of such reduction in Excise
Tax is finally determined (but, if previously paid to the taxing
authorities, not prior to the time the amount of such reduction
is refunded to Executive or otherwise realized as a benefit by
Executive) the portion of the Gross-up Payment that would not
have been paid if such Excise Tax had been applied to initially
calculating the Gross-up Payment, plus interest on the amount of
such repayment at the rate provided in Section 1274(b)(2)(B) of
the Code. In the event that the Excise Tax is determined to
exceed the amount taken into account hereunder at the time the
Gross-up Payment is made (including by reason of any payment the
existence or amount of which cannot be determined at the time of
the Gross-up Payment), the Company shall make an additional
Gross-up Payment and shall indemnify and hold Executive harmless
in respect of such excess (plus any interest and penalties
payable with respect to such excess) at the time that the amount
of such excess is finally determined.
The Gross-up Payment provided for above shall be paid on the
30th day (or such earlier date as the Excise Tax becomes due and
payable to the taxing authorities) after it has been determined that
the Total Payments (or any other portion thereof) are subject to the
Excise Tax; provided, however, that if the amount of such Gross-up
Payment or portion thereof cannot be finally determined on or before
such day, the Company shall pay to Executive on such day an estimate,
as
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determined by the Independent Advisors, of the minimum amount of such
payments and shall pay the remainder of such payments (together with
interest at the rate provided in Section 1274(b)(2)(B) of the Code),
as soon as the amount thereof can be determined. In the event that the
amount of the estimated payments exceeds the amount subsequently
determined to have been due, such excess shall constitute a loan by
the Company to Executive, payable on the fifth day after demand by the
Company (together with interest at the rate provided in Section
1274(b)(2)(B) of the Code). If more than one Gross-up Payment is made,
the amount of each Gross-up Payment shall be computed so as not to
duplicate any prior Gross-up Payment.
Executive shall notify the Company in writing of any claim by
the Internal Revenue Service that, if successful, would require the
payment by the Company of the Gross-up Payment. Such notification
shall be given as soon as practicable but no later than ten (10)
business days after Executive is informed in writing of such claim and
shall apprise the Company of the nature of such claim and the date on
which such claim is requested to be paid. Executive shall not pay such
claim prior to the expiration of the 30-day period following the date
on which it gives such notice to the Company (or such shorter period
ending on the date that any payment of taxes with respect to such
claim is due). If the Company notifies Executive in writing prior to
the expiration of such period that it desires to contest such claim,
Executive shall:
(i) give the Company any information reasonably requested by the
Company relating to such claim;
(ii) take such action in connection with contesting such claim as
the Company shall reasonably request in writing from time to
time, including, without limitation, accepting legal
representation with respect to such claim by an attorney
reasonably selected by the Company;
(iii) cooperate with the Company in good faith in order
effectively to contest such claim; and
(iv) permit the Company to participate in any proceedings
relating to such claim;
provided, however, that the Company shall bear and pay directly all
costs and expenses (including additional interest and penalties)
incurred in connection with such contest and shall indemnify and hold
Executive harmless, on an after-tax basis, for any Excise Tax or
income or employment tax (including interest and penalties with
respect thereto) imposed as a result of such representation and
payment of costs and expenses. Without limitation on the foregoing
provisions of this Section 3(g), the Company shall control all
proceedings taken in connection with such contest and, at its sole
option, may pursue or forgo any and all administrative appeals,
proceedings, hearings and conferences with the taxing authority in
respect of such
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claim and proceedings, hearings and conferences with the taxing
authority in respect of such claim and may, at its sole option, either
direct Executive to pay the tax claimed and xxx for a refund or
contest the claim in any permissible manner, and Executive agrees to
prosecute such contest to a determination before any administrative
tribunal, in a court of initial jurisdiction and in one or more
appellate courts, as the Company shall determine; provided, however,
that if the Company directs Executive to pay such claim and xxx for a
refund, the Company shall advance the amount of such payment to
Executive, on an interest-free basis, and shall indemnify and hold
Executive harmless, on an after-tax basis, from any Excise Tax or
income or employment (including income or employment or interest or
penalties with respect thereto) imposed with respect to such advance
or with respect to any imputed income with respect to such advance;
and further provided that any extension of the statute of limitations
relating to payment of taxes for the taxable year of Executive with
respect to which such contested amount is claimed to be due is limited
solely to such contested amount. Furthermore, the Company's control of
the contest shall be limited to issues with respect to which a
Gross-up Payment would be payable hereunder and the Executive shall be
entitled to settle or contest, as the case may be, any other issue
raised by the Internal Revenue Service or any other taxing authority.
If, after the receipt by Executive of an amount advanced by the
Company pursuant to this Section 3(g), Executive becomes entitled to
receive any refund with respect to such claim, Executive shall
(subject to the Company's complying with the requirements of this
Section 3(g)) promptly pay to the Company the amount of such refund
(together with any interest paid or credited thereon after taxes
applicable thereto). If, after the receipt by Executive of an amount
advanced by the Company pursuant to this Section 3(g), a determination
is made that Executive shall not be entitled to any refund with
respect to such claim and the Company does not notify Executive in
writing of its intent to contest such denial of refund prior to the
expiration of thirty (30) days after such determination, then such
advance shall be forgiven and shall not be required to be repaid and
the amount of such advance shall offset, to the extent thereof, the
amount of Gross-up Payment required to be paid.
4. FRINGE BENEFITS.
(a) During the Employment Term, Executive shall be entitled to participate
in all health insurance and retirement benefit programs normally available to
other executives of the Company holding positions similar to that of Executive
hereunder (subject to all applicable eligibility rules thereof), as from time to
time in effect. Executive shall also receive the benefits listed on Exhibit A
hereto.
(b) Executive shall be entitled to paid vacation according to the
normal vacation schedule for other executive employees. Executive shall make
good faith efforts to schedule such vacations so as to least conflict with the
conduct of the Company's business and shall give the Company adequate advance
notice of his planned absences.
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(c) The Company shall reimburse Executive for all business-related
expenses incurred by Executive at the Company's direction. Executive shall
submit to the Company expense reports in compliance with established Company
guidelines.
5. INVENTIONS. Executive agrees, on behalf of himself, his heirs and personal
representatives, that he will promptly communicate, disclose and transfer to the
Company free of all encumbrances and restrictions (and will execute and deliver
any papers and take any action at any time deemed necessary by the Company to
further establish such transfer) all inventions and improvements relating to
Company's business originated or developed by Executive solely or jointly with
others during the term of his employment hereunder. Such inventions and
improvements shall belong to the Company whether or not they are patentable and
whether or not patent applications are filed thereon. Such transfer shall
include all patent rights (if any) to such inventions or improvements in the
United States and in all foreign countries. Executive further agrees, at the
request of Company, to execute and deliver, at any time during the term of his
employment hereunder or after termination thereof, all assignments and other
lawful papers (which will be prepared at the Company's expense) relating to any
aspect of the prosecution of such patent applications and rights in the United
States and foreign countries.
6. EXPOSURE TO PROPRIETARY INFORMATION.
(a) Executive acknowledges and agrees that during the course of his
employment by Company, he will be in continuous contact with customers,
suppliers and others doing business with the Company throughout the world.
Executive further acknowledges that the performance of his duties hereunder will
expose him to data and information concerning the business and affairs of the
Company, including but not limited to information relative to the Company's
proprietary rights and technology, patents, financial statements, sales
programs, pricing programs, profitability analyses and profit margin
information, customer buying patterns, needs and inventory levels, supplier
identities and other related matters, and that all of such data and information
(collectively "the Proprietary Information") is vital, sensitive, confidential
and proprietary to Company.
(b) In recognition of the special nature of his employment hereunder,
including but not limited to his special access to the Proprietary Information,
and in consideration of his employment, Executive agrees to the covenants and
restrictions set forth in paragraphs 7 through 9 inclusive hereof. As used in
this Agreement, the term "Company" shall include, where applicable, any parent,
subsidiary, sub-subsidiary, or affiliate of Company.
7. USE OF PROPRIETARY INFORMATION. Executive acknowledges that the Proprietary
Information constitutes a protectible business interest of Company, and
covenants and agrees that during the term of his employment hereunder and after
the termination of such employment, he shall not, directly or indirectly,
whether individually, as a director, stockholder, owner, partner, employee or
agent of any business, or in any other capacity, make known, disclose, furnish,
make available or utilize any of the Proprietary Information, other than in the
proper performance of his duties during the term of his employment hereunder.
Executive's obligations under this paragraph with respect to particular
Proprietary Information shall terminate only at such time (if any) as the
Proprietary Information in question becomes generally known to the public other
than through a breach of Executive's obligations hereunder.
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8. RESTRICTION AGAINST COMPETITION AND EMPLOYING OR SOLICITING COMPANY
EMPLOYEES, CUSTOMERS OR SUPPLIERS. Executive covenants and agrees that during
the term hereof and for the one (1) year period immediately following the
effective date of any termination of his employment hereunder (the "Termination
Date"), he shall not, directly or indirectly, whether individually, as a
director, stockholder, partner, owner, employee or agent of any business, or in
any other capacity, (i) engage in a business substantially similar to that which
is conducted by the Company in any market area in which such business is
operated; (ii) solicit any party who is or was a customer or supplier of the
Company on the Termination Date or at any time during the six month period
immediately prior thereto for the sale or purchase of any type or quantity of
products sold by or used in the business of the Company on the Termination Date
or at any time within such six month period; or (iii) solicit for employment any
person who was or is an employee of the Company on the Termination Date or at
any time during the twelve month period immediately prior thereto.
9. RETURN OF COMPANY MATERIALS UPON TERMINATION. Executive acknowledges that all
price lists, sales manuals, catalogs, binders, customer lists and other customer
information, supplier lists, financial information, and other records or
documents containing Proprietary Information prepared by Executive or coming
into his possession by virtue of his employment by the Company is and shall
remain the property of the Company and that upon termination of his employment
hereunder, Executive shall return immediately to the Company all such items in
his possession, together with all copies thereof.
10. EQUITABLE REMEDIES.
(a) Executive acknowledges and agrees that the covenants set forth in
paragraphs 5 through 9 inclusive hereof are reasonable and necessary for the
protection of the Company's business interests, that irreparable injury will
result to the Company if Executive breaches any of the terms of said covenants,
and that in the event of Executive's actual or threatened breach of any such
covenants, the Company will have no adequate remedy at law. Executive
accordingly agrees that in the event of any actual or threatened breach by him
of any of said covenants, the Company shall be entitled to immediate injunctive
and other equitable relief, without bond and without the necessity of showing
actual monetary damages. Nothing contained herein shall be construed as
prohibiting the Company from pursuing any other remedies available to it for
such breach or threatened breach, including the recovery of any damages which it
is able to prove.
(b) Each of the covenants in paragraphs 5 through 9 inclusive hereof shall
be construed as independent of any other covenants or other provisions of this
Agreement.
(c) In the event of any judicial determination that any of the covenants
set forth in paragraphs 5 through 9 inclusive hereof is not fully enforceable,
it is the intention and desire of the parties that the court treat said
covenants as having been modified to the extent deemed necessary by the court to
render them reasonable and enforceable, and that the court enforce them to such
extent.
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11. LIFE INSURANCE. The Company may at its discretion and at any time apply for
and procure as owner and for its own benefit and at its own expense, insurance
on the life of Executive in such amounts and in such form or forms as the
Company may choose. Executive shall cooperate with the Company in procuring such
insurance and shall, at the request of Company, submit to such medical
examinations, supply such information and execute such documents as may be
required by the insurance company or companies to whom the Company has applied
for such insurance. Executive shall have no interest whatsoever in any such
policy or policies, except that, upon the termination of Executive's employment
hereunder, Executive shall have the privilege of purchasing any such insurance
from the Company for an amount equal to the actual premiums thereon previously
paid by Company.
12. NOTICES. Any notice required or permitted pursuant to the provisions of this
Agreement shall be deemed to have been properly given if in writing and when
sent by United States mail, certified or registered, postage prepaid, when sent
by facsimile or when personally delivered, addressed as follows:
If to Company:
Xxxxxx Xxxx Corporation
Xxxxx Creek Corporate Center
00 Xxxx Xxxxxxx Xxxxxx, Xxxxx 000
Xxxxx, Xxxxxxxxxxxx 00000
Attention: Xxxxxxx Xxxxx
With a copy to:
Xxxxxx Xxxxxx & Zavis
000 Xxxx Xxxxxx Xxxxxx
Xxxxx 0000
Xxxxxxx, Xxxxxxxx 00000-0000
Attention: Xxxxx X. Xxxxxxx, Esq.
If to Executive:
Xxxxxx X. Xxxxxxxx
XX Xxx 000
Xxxxx, XX 00000
Each party shall be entitled to specify a different address for the
receipt of subsequent notices by giving written notice thereof to the other
party in accordance with this paragraph.
13. WAIVER OF BREACHES. No waiver of any breach of any of the terms, provisions
or conditions of this Agreement shall be construed or held to be a waiver of any
other breach, or a waiver of, acquiescence in or consent to any further or
succeeding breach thereof.
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14. ASSIGNMENT. This Agreement shall not be assignable by either party without
the written consent of the other; provided, however, that this Agreement shall
be assignable to any corporation or entity which purchases the assets of or
succeeds to the business of the Company (a "Successor Employer"), and the
Company agrees to cause this Agreement to be assumed by any Successor Employer
as a condition to such purchase or succession. Subject to the foregoing, this
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective heirs, personal representatives, successors and assigns.
15. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with laws and judicial decisions of the State of Pennsylvania.
16. SEVERABILITY. If any term or provision of this Agreement shall be held to be
invalid or unenforceable, the remaining terms and provisions hereof shall not be
affected thereby.
17. MISCELLANEOUS. Paragraph headings herein are for convenience only and shall
not affect the meaning or interpretation of the contents hereof. This Agreement
contains the entire agreement between the parties hereto with respect to the
subject matter hereof and supersedes all prior agreements and understandings
between the parties and all prior obligations of the Company with respect to the
employment of Executive by the Company or the payment to Executive of
compensation of any kind whatsoever. No supplement or modification of this
Agreement shall be binding unless in writing and signed by both parties hereto.
This agreement may be executed in multiple counterparts, each of which shall be
deemed enforceable without production of the others.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
as of the date first hereinabove set forth.
___________________________________
Xxxxxx X. Xxxxxxxx
XXXXXX XXXX CORPORATION
By:________________________________
Title:_____________________________
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Exhibit A
BENEFITS
Health/prescription, dental, and vision insurance equal to that provided for all
other full-time exempt Xxxxxx Xxxx Corporation employees.
Life insurance in the amount of $50,000
Short term disability insurance equal to that provided for all other full-time
exempt Xxxxxx Xxxx Corporation employees.
Long term disability benefits at 40% of salary
Supplemental long term disability benefits
Three weeks annual vacation
Six days annual personal leave
Eleven holidays each year
401K Plan
Employee Incentive Compensation Plan
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