EMPLOYMENT AGREEMENT
THIS AGREEMENT made as of the ______ day of _________, 1999, by and between
XXXXXXX COMPUTER RESOURCES, INC., a Delaware corporation ("Company"), and XXXXXX
X. XXXXXXXXX ("Employee").
W I T N E S S E T H :
WHEREAS, the Company entered into a Stock Purchase Agreement ("Purchase
Agreement") of even date pursuant to which it purchased one hundred percent
(100%) of the outstanding stock of Acme Data Systems, Inc., an Ohio corporation
("ADS"); and
WHEREAS, Employee owned fifty percent (50%) of the outstanding stock of ADS
prior to the closing of the Purchase Agreement;
WHEREAS, Employee, as an inducement for and in consideration of Company entering
into the Purchase Agreement, has agreed to enter into and execute this
Employment Agreement pursuant to Article VIII thereof; and
WHEREAS, Company desires to engage the services of Employee, pursuant to the
terms, conditions and provisions as hereinafter set forth.
NOW, THEREFORE, in consideration of the foregoing premises and the mutual
covenants herein set forth, the parties hereby covenant and agree as follows:
1. Employment. The Company agrees to employ the Employee, and the Employee
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agrees to be employed by the Company, upon the following terms and conditions.
2 Term. The initial term of Employee's employment pursuant to this
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Agreement shall begin on the 20th day of August, 1999, and shall continue for a
period of four (4) years, four (4) months and sixteen (16) days, ending January
5, 2004 unless terminated earlier pursuant to the provisions of Section 10,
provided that Sections 8, 9, 10(b), if applicable, and 11, if applicable, shall
survive the termination of such employ-ment and shall expire in accordance with
the terms set forth therein.
3. Renewal Term. The term of Employee's employment shall automatically
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renew for additional consecutive renewal terms of one (1) year unless either
party gives written notice of his/its intent not to renew the terms of this
Agreement sixty (60) days prior to expiration of the then expiring term.
4. Duties. Employee shall serve as Branch Manager for the Company's
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Columbus, Ohio Division. Employee shall be responsible to and report directly
to the officers of Company. Employee shall at all time have such powers and
authorities as shall be reasonably required to discharge such duties in an
efficient manner together with such facilities and services as are appropriate
to his position. Employee shall devote his best efforts and substantially all
his time during normal business hours to the diligent, faithful and loyal
discharge of the duties of his employment and towards the proper, efficient and
successful conduct of the Company's affairs. Employee fur-ther agrees to
refrain during the term of this Agreement from making any sales of competing
services or products or from profiting from any transaction involving computer
services or products for his account without the express written consent of
Company.
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5. Compensation. For all services rendered by the Employee under this
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Agreement (in addition to other monetary or other benefits referred to herein),
compensation shall be paid to Employee as follows:
(a) Base Salary: During the period August 20, 1999 through January 5,
2000, Employee shall be paid the sum of Eight Thousand Three Hundred Thirty
Three and 33/100 Dollars ($8,333.33) per month. Compensation due for a period
of less than one month shall be prorated for such period on the basis of a
thirty-day month. During each year of the initial term of this Agreement,
Employee shall be paid an annual base salary of One Hundred Thousand Dollars
($100,000.00). Said base salary shall be payable in accordance with the
historical payroll practices of the Company.
(b) Annual Cash Bonus - Columbus Division: In addition to Employee's
base salary as set forth in Section 5(a) above, for the period commencing
January 6, 2000 and ending January 5, 2001, Employee shall be entitled to a cash
bonus and incentive stock option award in the event Employee satisfies certain
economic criteria pertaining to the Company's Columbus Division as follows (the
economic criteria will be filled in by the parties in January, 2000 in
accordance with the provisions of Section 5(b)(vi)):
(i) Gross sales of Company's Columbus Division greater than
$_____________ but not less than $_____________ with net profit before taxes
("NPBT") greater than _%, equals $25,000.00 cash bonus plus 5,000 incentive
stock options;
(ii) Gross sales of Company's Columbus Division greater than
$_____________ but less than $_____________ with NPBT greater than _% equals
$35,000.00 cash bonus plus 7,000 incentive stock options;
(iii) Gross sales of Company's Columbus Division greater than
$_____________ with NPBT greater than _% equals $50,000.00 cash bonus plus
10,000 incentive stock options.
(iv) For purposes of this Section 5(b), the term "Gross Sales"
shall mean the gross sales of equipment, software and services by Company's
Columbus Division or any other Columbus Division operated by any subsidiary of
Company, determined on a consolidated basis during the applicable period. In
making said gross sales determination, all gains and losses realized on the sale
or other disposition of Company's or any subsidiary's Columbus Division's assets
not in the ordinary course shall be excluded. In addition, any gross sales of
Company's or its subsidiary's Columbus Division relating to any acquisitions
that are closed in such year shall be excluded. All refunds or returns which
are made during such period shall be subtracted along with all accounts
receivable derived from such sales that are written off during such period in
accordance with Company's Columbus Divisions's accounting system. Such gross
sales and NPBT of Company's Columbus Division shall be determined by the
Company's internally generated accounting statements determined on a
consolidated basis in the manner set forth above and in accordance with
generally accepted accounting principles. During the period commencing January
6, 2000 and ending January 5, 2001, a combined 1.5% MAS royalty fee and .3%
AdFund fee on gross sales by Company's Columbus Division shall be made incident
to said NPBT determination. For each subsequent fiscal year for which Employee
may be entitled to a bonus hereunder, the parties shall, in good faith, agree
upon MAS royalty and AdFund fees to be charged hereunder based on the level of
services and support being provided by the Company to its Columbus Division.
Provided, however, such MAS royalty and AdFund fees shall be 1.5% and .3%,
respectively, if the parties are unable to come to an agreement for such year.
Any cash bonus amount determined under Section 5 (b) shall be payable to
Employee within thirty (30) days of the determination. For purposes of this
Section, the term "Company's Columbus Division" shall be the business acquired
by Company from Seller under the Purchase Agreement including any part of the
business that is operated by Company's wholly-owned subsidiary, Xxxxxxx Select
Integration Solutions, Inc. and shall include Company's operations in Columbus,
Ohio that existed prior to the closing of the Purchase Agreement.
(v) Any award of the incentive stock options to acquire the common
stock of Company shall be made fifty percent (50%) in the shares of the Company
and fifty percent (50%) in the shares of the Company's subsidiary (Xxxxxxx
Select Integration Solutions, Inc.) if it is a publicly traded entity at such
time, as of January 5, 2001 or any other applicable date, which shall mean with
respect to such shares, the average between the high and low bid and asked
prices for such shares on the over-the-counter market on the last business day
prior to the date on which the value is to be determined (or the next preceding
date on which sales occurred if there were no sales on such date). In the event
the stock of Xxxxxxx Select Integration Solutions, Inc. is not publicly traded
as of January 5, 2001, Company shall have the right to award 100% in the shares
of the Company (in lieu of 50%) or shall have the right to pay to Employee, in
cash, the fair market value of such 50% of the stock options of the Company
determined under the Black Scholes method of valuation of stock options. Any
options awarded shall be subject to a vesting period determined by the Board of
Directors of the Company, but in no event shall said vesting period be greater
than five (5) years.
(vi) The parties agree that in January, 2000, January, 2001,
January, 2002 and January, 2003, they will negotiate in good faith, the level of
gross sales and NPBT of Company's Columbus Division for the aforementioned cash
bonus and incentive stock option award to be earned for such years, which gross
sales and NPBT criteria shall be predicated upon Company's Columbus Division's
goals, projections and budgets established at the outset of such fiscal year.
(c) In addition to Employee's base salary as set forth in Section 5(a)
and any annual cash bonus/incentive stock option award that Employee may be
entitled to under Section 5(b) based on Company's Columbus Division's
performance, Employee shall be entitled to a cash bonus and incentive deferred
compensation and an incentive stock option award for the year 2000 in the event
Employee satisfies certain economic criteria pertaining to Company's performance
during the fiscal year 2000, as follows (the economic criteria will be filled in
by the parties in January of 2000 in accordance with the provisions of Section
5(c)(vi)).
(i) Gross sales of Company greater than $______________ but less
than or equal to $_______________ with NPBT greater than ____% equals $10,000.00
cash plus 3,000 incentive stock options;
(ii) Gross sales of Company greater than $______________ but less
than or equal to $______________ with NPBT greater than ____% equals $20,000.00
cash plus 5,000 incentive stock options;
(iii) Gross sales of Company greater than $______________ with
NPBT greater than ____% equals $30,000.00 cash plus 7,000 incentive stock
options.
(iv) For purposes of this Section, the term "Gross Sales" shall
mean the gross sales of equipment, software and services by Company during the
applicable period, determined on a consolidated basis. In making said gross
sales determination, all gains and losses realized on the sale or other
disposition of Company's assets not in the ordinary course shall be excluded.
All refunds or returns which are made during such period shall be subtracted
along with all accounts receivable derived from such sales that are written off
during such period in accordance with Company's accounting system. Such Gross
Sales and net pre-tax margin of Company shall be determined by the Chief
Financial Officer of the Company in accordance with generally accepted
accounting principles and such determination shall be final, binding and
conclusive upon all parties hereto. All amounts due Employee under Section 5(c)
(other than the award of any incentive stock options) will constitute incentive
deferred compensation which shall be payable to Employee according to the terms
and the Incentive Deferred Compensation Agreement attached hereto and
incorporated herein as Exhibit B. Any incentive deferred compensation shall be
fully vested over a five-year period, vesting 20% per year of employment from
the effective date of this Agreement.
(v) Any award of the incentive stock options to acquire the common
stock of Company shall be made fifty percent (50%) in the shares of the Company
and fifty percent (50%) in the shares of the Company's subsidiary (Xxxxxxx
Select Integration Solutions, Inc.) if it is a publicly traded entity at such
time, as of January 5, 2001 or any other applicable date, which shall mean with
respect to such shares, the average between the high and low bid and asked
prices for such shares on the over-the-counter market on the last business day
prior to the date on which the value is to be determined (or the next preceding
date on which sales occurred if there were no sales on such date). In the event
the stock of Xxxxxxx Select Integration Solutions, Inc. is not publicly traded
as of January 5, 2001, Company shall have the right to award 100% in the shares
of the Company (in lieu of 50%) or shall have the right to pay to Employee, in
cash, the fair market value of such 50% of the stock options of the Company
determined under the Black Scholes method of valuation for stock options. Any
options awarded shall be subject to a vesting period determined by the Board of
Directors of the Company, but in no event shall said vesting period be greater
than five (5) years.
(vi) The parties agree that in January, 2000, January, 2001,
January, 2002 and January, 2003, they will negotiate in good faith the
implementation of economic criteria for the earning of incentive deferred
compensation and incentive stock option award for Employee for each of the
pertinent fiscal years of this Agreement which will be predicated upon the
attainment of Company's goals, projections and budgets established at the outset
for such fiscal year which shall be consistent with the goals set forth for
senior management of Company for such year(s). The incentive deferred
compensation and incentive stock option awards shall be predicated on the
structure (as to amounts) used for the incentive deferred
compensation/incentive stock option award of Company for the year 2000.
(vii) Company will deliver to Employee copies of the reports of
any determination made hereunder by Company for the subject period, along with
any documentation reasonably requested by Employee. Within fifteen (15) days
following delivery to Employee of such report, Employee shall have the right to
object in writing to the results contained in such determination. If timely
objection is not made by Employee to such determination, such determination
shall become final and binding for purposes of this Agreement. If a timely
objection is made by Employee, and the Company and Employee are able to resolve
their differences in writing within fifteen (15) days following the expiration
of the initial 15-day period, then such determination shall become final and
binding as it pertains to this Agreement. If timely objection is made by
Employee to Company, and Employee and Company are unable to resolve their
differences in writing within fifteen (15) days following the expiration of the
initial 15-day period, then all disputed matters pertaining to the report shall
be submitted and reviewed by the Arbitrator ("Arbitrator"), which shall be an
independent accounting firm selected by Company and Employee. If Employee and
Company are unable to promptly agree on the accounting firm to serve as the
Arbitrator, each shall select, by not later than fifteen (15) days following the
expiration of the initial fifteen (15) day period, one accounting firm and the
two selected accounting firms shall then be instructed to select promptly a
third accounting firm, such third accounting firm to serve as the Arbitrator.
The Arbitrator shall consider only the disputed matters pertaining to the
determination and shall act promptly to resolve all disputed matters. A
decision with respect to all disputed matters shall be final and binding upon
Company and Employee. The expenses of Arbitration shall be borne one-half by
Employee and one-half by Company. Each party shall be responsible for his/its
own attorney and accounting fees.
6. Fringe Benefits. During the term of this Agreement, Employee shall be
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entitled to the following benefits:
(a) Health Insurance - Employee shall be provided with the standard
family medical health and insurance coverage maintained by Company on its
employees. Company and Employee shall each pay fifty percent (50%) of the cost
of such coverage.
(b) Vacation - Employee shall be entitled each year to a vacation of
three weeks during which time his compensa-tion will be paid in full. Provided,
however, such weeks may not be taken consecutively without the written consent
of Company.
(c) Retirement Plan - Employee shall participate, after meeting
eligibility requirements, in any qualified retirement plans and/or welfare plans
maintained by the Company during the term of this Agreement.
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(d) Other Company Programs - Employee shall be eligible to participate
in any other plans or programs implemented by the Company for all of its
employees with duties and responsibilities similar to Employee.
(e) Employee shall be responsible for any and all taxes owed, if any,
on the fringe benefits provided to him pursuant to this Section 6.
7. Expenses. During the term of this Agreement, Employee shall be entitled
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to receive prompt reimbursement for all reasonable and customary travel and
entertainment expenses or other out-of-pocket business expenses incurred by
Employee in fulfilling the Employee's duties and responsibilities hereunder,
including, all expenses of travel and living expenses while away from home on
business or at the request of and in the service of the Company, provided that
such expenses are incurred and accounted for in accordance with the reasonable
policies and procedures established by the Company.
8. Non-Competition. Employee expressly acknowledges the provisions of
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Article VII of the Purchase Agreement relating to Employee's Covenant Not to
Compete with Company. Accordingly, such provisions of Article VII are
incorporated herein by reference to the extent as if restated in full herein.
In addition to the consideration received under this Agreement, Employee
acknowledges that as one of the owners of the common stock of ADS, he has
received substantial consideration pursuant to such Purchase Agreement and that
as an inducement for, and in consideration of, Company entering into the
Purchase Agreement and Company entering into this Agreement, Employee has agreed
to be bound by such provisions of Article VII of the Pur-chase Agreement.
Accordingly, such provisions of Article VII and Exhibit D and the restrictions
on Employee thereby imposed shall apply as stated therein.
9. Non-Disclosure and Assignment of Confidential Information. The Employee
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acknowledges that the Company's trade secrets and confidential and proprietary
information, including without limitation:
(a) unpublished information concerning the Company's:
(i) research activities and plans,
(ii) marketing or sales plans,
(iii) pricing or pricing strategies,
(iv) operational techniques,
(v) customer and supplier lists, and
(vi) strategic plans;
(b) unpublished financial information, including unpublished
information concerning revenues, profits and profit margins;
(c) internal confidential manuals; and
(d) any "material inside information" as such phrase is used for
purposes of the Securities Exchange Act of 1934, as amended;
all constitute valuable, special and unique proprietary and trade secret
information of the Company. In recognition of this fact, the Employee agrees
that the Employee will not disclose any such trade secrets or confidential or
proprietary information (except (i) information which becomes publicly available
without violation of this Agreement, (ii) information of which the Employee did
not know and should not have known was disclosed to the Employee in violation of
any other person's confidentiality obligation, and (iii) disclosure required in
connection with any legal process), nor shall the Employee make use of any such
information for the benefit of any person, firm, operation or other entity
except the Company and its subsidiaries or affiliates. The Employee's
obligation to keep all of such information confidential shall be in effect
during and for a period of five (5) years after the termination of his
employment; provided, however, that the Employee will keep confidential and will
not disclose any trade secret or similar information protected under law as
intangible property (subject to the same exceptions set forth in the
parenthetical clause above) for so long as such protection under law is
extended.
10. Termination.
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(a) The Employee's employment with the Company may be terminated at any
time as follows:
(i) By Employee's death;
(ii) By Employee's physical or mental disability which renders
Employee unable to perform his duties hereunder;
(iii) By the Company, for cause upon three (3) day's written
notice to Employee. For purposes of this Agreement, the term "cause" shall mean
termination upon: (i) the engaging by Employee in conduct which is demonstrably
and materially injurious to the Company, monetarily or otherwise, including but
not limited to any material misrepresentation related to the performance of his
duties; (ii) the conviction of Employee of a felony or other crime involving
theft or fraud, (iii) Employee's gross neglect, gross misconduct or gross
insubordination in carrying out his duties hereunder resulting, in either case,
in material harm to the Company; or (iv) any material breach by Employee of this
Agreement. Notwithstanding the foregoing, Employee shall not be deemed to have
been terminated for cause under (i) and (iv) above, unless and until there has
been delivered to him a copy of the resolution of an officer of the Company,
finding that Employee engaged in the conduct set forth above in this section and
specifying the particulars thereof in detail, and Employee shall not have cured
or abated such conduct to the reasonable satisfaction of the Company within
fifteen (15) days of receipt of such resolution. This provision shall be
applicable solely to the extent the conduct to which the alleged breach relates
is susceptible to being cured in the reasonable determination of such officer.
(b) Compensation upon Termination: In the event of termination of
employment, the Employee or his estate, in the event of death, shall be entitled
to his annual base salary and other benefits provided hereunder to the date of
his termination. In addition, Employee shall be entitled to receive any bonus
accrued to the date of his termination of employment as provided in Sections
5(b) and 5(c), which shall be payable (if applicable) pursuant to the terms
thereof.
11. Disability. In the event that Employee becomes temporarily disabled
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and/or totally and permanently disabled, physically or mentally, which renders
him unable to perform his duties hereunder, Employee shall receive one hundred
percent (100%) of his base annual salary (in effect at the time of such
disability) for a period of one (1) year following the initial date of such
disability (offset by any payments to the Employee received pursuant to
disability benefit plans, if any, maintained by the Company.) Such payments
shall be payable in twelve consecutive equal monthly installments and shall
commence thirty (30) days after the determination by the physicians of such
disability as set forth below.
For purposes of this Agreement, Employee shall be deemed to be temporarily
disabled and/or totally and permanently disabled if attested to by two qualified
physicians, (one to be selected by Company and the other by Employee) competent
to give opinions in the area of the disabled Employee's physical and/or mental
condition. If the two physicians disagree, they shall select a third physician,
whose opinion shall control. Employee shall be deemed to be temporarily
disabled and/or totally and permanently disabled if he shall become disabled as
a result of any medically determinable impairment of mind or body which renders
it impossible for such Employee to perform satisfactorily his duties hereunder,
and the qualified physician(s) referred to above certify that such disability
does, in fact, exist. The opinion of the qualified physician(s) shall be given
by such physician(s), in writing directed to the Company and to Employee. The
physician(s) decision shall include the date that disability began, if possible,
and the 12th month of such disability, if possible. The decision of such
physician(s) shall be final and conclusive and the cost of such examination
shall be paid by Company.
12. Severability. In case any one (1) or more of the provisions or part of
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a provision contained in this Agreement shall be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provision or part of a provision of this Agreement.
In such a situation, this Agreement shall be reformed and construed as if such
invalid, illegal or unenforceable provision, or part of a provision, had never
been contained herein, and such provision or part shall be reformed so that it
will be valid, legal and enforceable to the maximum extent possible.
13. Governing Law. This Agreement shall be governed and construed under the
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laws of the State of Ohio and shall not be modified or discharged, in whole or
in part, except by an agreement in writing signed by the parties.
14. Notices. All notices, requests, demands and other communications
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relating to this Agreement shall be in writing and shall be deemed to have been
duly given if delivered personally or mailed by certified or registered mail,
return receipt re-quested, postage prepaid to the following addresses (or to
such other address for a party as shall be specified by notice pursuant hereto):
If to Company, to: Pomeroy Computer Resources, Inc.
0000 Xxxxxxxxxx Xxxx
Xxxxxx, Xxxxxxxx 00000
With a copy to: Xxxxx X. Xxxxx III, Esq.
Xxxxxxxxx & Dreidame Co., L.P.A.
000 Xxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxxxxx, Xxxx 00000
If to Employee, to: the Employee's residential address, as
set forth in the Company's records
15. Enforcement of Rights. The parties expressly recognize that any breach
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of this Agreement by either party is likely to result in irrevocable injury to
the other party and agree that such other party shall be entitled, if it so
elects, to institute and prosecute proceedings in any court of competent
jurisdiction in Franklin County, Ohio, either at law or in equity, to obtain
damages for any breach of this Agreement, or to enforce the specific performance
of this Agreement by each party or to enjoin any party from activities in
violation of this Agreement. Should either party engage in any activities
prohibited by this Agreement, such party agrees to pay over to the other party
all compensation, remuneration, monies or property of any sort received in
connection with such activities. Such payment shall not impair any rights or
remedies of any non-breaching party or obligations or liabilities of any
breaching party pursuant to this Agreement or any applicable law.
16. Entire Agreement. This Agreement and the Purchase Agreement referred to
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herein contain the entire understanding of the parties with respect to the
subject matter contained herein and may be altered, amended or superseded only
by an agreement in writing, signed by the party against whom enforcement of any
waiver, change, modification, extension or discharge is sought.
17. Parties in Interest.
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(a) This Agreement is personal to each of the parties hereto. No party
may assign or delegate any rights or obligations hereunder without first
obtaining the written consent of the other party hereto; provided, however, that
nothing in this Section 16 shall preclude (i) Employee from designating a
beneficiary to receive any benefit payable hereunder upon his death, or (ii)
executors, administrators, or legal representatives of Employee or his estate
from assigning any rights hereunder to person or persons entitled thereto.
Notwithstanding the foregoing, this Agreement shall be binding upon and inure to
the benefit of any successor corporation of Company
(b) The Company will require any successor (whether direct or indirect,
by purchase, merger, consolidation or otherwise) to all or substantially all of
the assets of the Company or the business with respect to which the duties and
responsibilities of Employee are principally related, to expressly assume and
agree to perform this Agreement in the same manner and to the same extent that
Company would have been required to perform it if no such succession had taken
place. As used in this Agreement "Company" shall mean the Company as
hereinbefore defined and any successor to its business and/or assets as
aforesaid which executes and delivers the assumption agreement provided for in
this Section 16 or which otherwise becomes bound by all the terms and provisions
of this Agreement by operation of law.
18. Representations of Employee. Employee represents and warrants that he
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is not party to or bound by any agreement or contract or subject to any
restrictions including without limitation any restriction imposed in connection
with previous employment which prevents Employee from entering into and
performing his obligations under this Agreement.
19. Counterparts. This Agreement may be executed simulta-neously in several
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counterparts, each of which shall be deemed an original part, which together
shall constitute one and the same instrument.
IN WITNESS WHEREOF, this Agreement has been executed effec-tive as of the day
and year first above written.
WITNESSES: COMPANY:
XXXXXXX COMPUTER RESOURCES, INC.
__________________________
__________________________ By:_________________________________
Xxxxxxx X. Xxxxxxx
Chief Financial Officer
EMPLOYEE:
__________________________
__________________________ ____________________________________
XXXXXX X. XXXXXXXXX
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