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EXHIBIT 10.5
EMPLOYMENT AGREEMENT
This Employment Agreement (the "Agreement") is made and entered into
this 27th day of January, 1998, by and between MEDAPHIS CORPORATION, a Delaware
corporation (the "Company"), and Xxxxx X. Xxxxxx, a resident of the State of
Georgia (the "Employee").
Statement of Background Information
The Company renders to hospitals, physicians, and/or other healthcare
organizations and providers: (a) billing services, accounts receivable
management services, collection services, electronic claims services, financial
management services, and practice and facilities management services: (b)
eligibility verification and certification for Medicaid, Medicare and other
healthcare assistance programs; (c) filing and other medical claims
securitization services; (d) medical coverage information services; and (e)
medical and insurance claims monitoring and tracking services (collectively the
"Processing Business").
The Company also: (a) develops, markets and licenses to hospitals,
integrated healthcare delivery systems, and other healthcare providers and other
end users (collectively "Providers"), (i) strategic, operational and financial
information systems and services and decision support tools for healthcare
providers, (ii) software systems which provide claims and reimbursement services
and electronic claims processing, and (iii) software applications which assist
Providers with automated scheduling and resource management (the items discussed
in Sections (a)(i), (a)(ii) and (a)(iii) of this paragraph are referred to as
"Systems"), which Systems include, but are not limited to, nurse scheduling and
management information systems, operating room patient scheduling and surgery
information systems, enterprise wide patient scheduling and resource management
systems, enterprise-wide employee scheduling and management information systems
and related software interfaces to other information systems; and (b) provides
to Providers installation and support services related to the Company's Systems
(the "Systems Business").
The Company also renders professional services with respect to the
development of computer software, algorithms, design, documentation, and related
materials, and the development, design, deployment, and operation of local and
wide area computer networks, all in conjunction with the sale, design,
deployment, operation and maintenance of custom computer processing systems for
improvement of operational efficiency or functionality through the use of image
storage and processing, work flow technology, optical character recognition or
other related technologies (the "System Integration Business") (the Processing
Business, the Systems Business, the Systems Integration Business and any other
distinct business segment in which the Company engages during Employee's
employment are collectively referred to herein as the "Business").
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:
1. Employment. The Company hereby employs Employee and Employee hereby
accepts such employment upon the terms and conditions set forth in this
Agreement. For purposes of Sections 7 and 8 of this Agreement,
"employment" shall mean any period of time during which the Company is
paying the Employee salary, wages, or any other amounts, whether or not
the Employee is currently performing services for the Company at the
time of such payment.
2. Duties of Employee. Employee's title will be Senior Vice President,
Human Resources. Employee agrees to perform and discharge such duties
as may be assigned to Employee from time to time by the Company to the
reasonable satisfaction of the Company. Employee also agrees to comply
with all of the Company's
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policies, standards and regulations and to follow the instructions and
directives of Employee's superiors within the Company, as promulgated
by the officers 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 Xxxx Xxxxx Xxxxxxx, or his designee, which consent will not
be unreasonably withheld. 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 or teaching, so long as Xxxx Xxxxx Xxxxxxx, or his
designee, approves such participation, preparation and publication or
teaching prior to Employee's engaging therein, which approval will not
be unreasonably withheld.
3. Term. The term of this Agreement will be for a two (2) year period of
time, commencing as of February 1, 1998 and expiring on January 31,
2000, subject to earlier termination as provided for in Section 4 of
this Agreement. Following the initial two (2) year term of this
Agreement, the terms of this Agreement will continue to remain in
effect for additional terms of one (1) year, unless either party gives
notice of the intent to terminate this Agreement at least ninety (90)
days prior to the expiration of the original term or any renewal term
of this Agreement.
4. Termination.
(a) Termination by Company for Cause. Notwithstanding anything
contained in Section 3 to the contrary, the Company may terminate this
Agreement and all of its obligations hereunder immediately if any of
the following events occur:
(i) 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);
(ii) Employee engages in dishonest or illegal activities or commits or
is convicted of any crime involving fraud, deceit or moral turpitude;
or
(iii) Employee dies or becomes mentally or physically incapacitated or
disabled so as to be unable to perform Employee's duties under this
Agreement. Without limiting the generality of the foregoing, Employee's
inability to adequately 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
to adequately 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.
(b) Termination by Company Without Cause. Notwithstanding anything
contained in Section 3 to the contrary, the Company may terminate
Employee's employment pursuant to this Agreement without cause upon at
least thirty (30) days' prior written notice to Employee. In the event
Employee's employment with
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the Company is terminated by the Company without cause, Employee will
be entitled to receive salary continuation and health benefit
continuation (at the salary and health benefit levels set forth below
in Paragraph 5) for the balance of the term of this Agreement, or nine
(9) months of salary continuation, whichever amount is greater. If
Employee is terminated without cause under this Paragraph of the
Agreement, Employee will not be entitled to any other consideration or
be considered an employee of the Company for any other purposes,
including the vesting of stock options, beyond Employee's termination
date.
(c) Change in Control. In the event there is a change in control of
Medaphis Corporation, and (i) Employee's employment is terminated as a
direct result of such change of control, or (ii) Employee suffers a
material change in the terms and conditions of his employment (defined
as (a) a material reduction (greater than 10%) in Employee's then
current base salary; (b) a change in Employee's existing work location
to a work location more than 50 miles from Employee's existing work
location, except for required travel on the Company's business to an
extent consistent with Employee's then present business travel
obligations; or (c) an assignment to any duties inconsistent in a
material adverse respect with Employee's then current position, duties,
or responsibilities, other than an insubstantial and inadvertent act
that is remedied by the Company promptly after receipt of notice
thereof given by Employee) within one (1) year of such change in
control, Employee will be entitled to receive a payment equal to the
greater of (1) nine (9) months of salary continuation at Employee?s
then current base salary, or (2) those payments due and owing to
Employee under the remaining term of this Agreement, whichever is
greater. For purposes of this Agreement, a "change in control" of
Medaphis Corporation shall be deemed to occur upon any of the
following:
(i) a consolidation or merger of Medaphis Corporation with or into any
other corporation, or any other entity or person, other than a
wholly-owned subsidiary of Medaphis Corporation, excluding any
transaction in which stockholders of Medaphis Corporation prior to the
transaction will maintain voting control or own at least 50% of the
resulting entity after the transaction;
(ii) any corporate reorganization, including an exchange offer, in
which Medaphis Corporation shall not be the continuing or surviving
entity resulting from such reorganization, excluding any transaction in
which stockholders of the Medaphis Corporation prior to the transaction
will maintain voting control or own at least 50% of the resulting
entity after the transaction; or
(iii) the sale of a substantial portion of Medaphis Corporation?s
assets, which shall be deemed to occur on the date that any one person,
or more than one person acting as a group, acquires (or has acquired
during the 12-month period ending on the date of the most recent
acquisition by such person or persons) assets from Medaphis Corporation
that (a) have a total fair market value equal to more than 50% of the
total fair market value of all the assets of Medaphis Corporation,
immediately prior to such acquisition or acquisitions, or (b)
represents a majority of the common stock of any (1) subsidiary of
Medaphis Corporation, the revenues of which, in the most recent fiscal
year, represent more than 75% of the consolidated gross revenues of
Medaphis Corporation and its subsidiaries. Notwithstanding the
foregoing, a transfer of assets or common stock in a subsidiary by
Medaphis Corporation will not be treated as a sale of a substantial
portion of Medaphis Corporation?s assets if the assets are transferred
to an entity, 50% or more of the total value or voting power of which
is owned, directly or indirectly, by Medaphis Corporation.
5. Compensation and Benefits.
a) 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)
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per annum in equal bi-weekly installments. Such annual salary will be
subject to adjustments by any increases given in the normal course of
business.
b) Incentive Compensation. Employee shall be eligible to participate in
the Medaphis Corporation and its Subsidiary Corporations Incentive
Compensation Plan at a participation category of fifty percent (50%) of
Employee's base salary, payable at the discretion of the Medaphis
Corporation Board of Directors.
c) Stock Options. As soon as reasonably practicable after the signing
of this Agreement, and subject to the approval of the Compensation
Committee of the Board of Directors of Medaphis Corporation, the
Company will cause Medaphis to issue to Employee, effective as of the
date approved by the Compensation Committee of the Board of Directors
of Medaphis Corporation, options to purchase One Hundred Thousand
(100,000) shares of Medaphis Common Stock pursuant to the terms and
conditions of the Amended and Restated Medaphis Corporation
Non-Qualified Stock Option Plan ("Stock Option Plan"), as amended. Such
options will vest at the rate of thirty-three and one-third percent
(33.33%) per year for a three-year period beginning on the starting
date of this Agreement, subject to the terms and conditions of the
Stock Option Plan. Such options shall vest in full immediately upon the
occurrence of certain change in control events outlined in the Stock
Option Plan. Employee shall be considered for additional grants of
options to purchase shares of Medaphis common stock in a manner which
is consistent with other senior officers of the Company. However,
nothing in this Agreement shall give rise to a contractual right to
Employee to receive grants of additional stock options of Medaphis.
Further, Medaphis has no obligation to Employee to create parity with
any other Medaphis executives with respect to any options granted to
such other executives.
d) 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.
e) 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.
f) 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.
g) Signing Bonus. Upon execution of this Agreement, the Company will
pay Employee a signing bonus in the amount of Twenty-Five Thousand
Dollars ($25,000.00). Employee will be eligible to receive an
additional Twenty-Five Thousand Dollars ($25,000.00) following the
first anniversary date of Employee's commencement of employment with
the Company. In the event Employee voluntarily resigns for any reason
during the initial year of his employment with the Company, Employee
agrees that he will repay the initial Twenty-Five Thousand Dollar
signing bonus.
6. 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.
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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.
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.
7.A. Non-Competition Covenant. During Employee's employment by the Company
and for a period of two (2) years 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, compete with the Company
within the Geographical Area (as hereinafter defined). The term
"compete" means to engage in, have any equity or profit interest in,
make any loan to or for the benefit of, or render any services of any
kind to, directly or indirectly, on Employee's own behalf or in the
service of or on behalf of any other individual or entity, either as a
proprietor, employee, agent, independent contractor, consultant,
director, officer, partner or stockholder (other than a stockholder of
a corporation listed on a national securities exchange or whose stock
is 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) of any business which provides Business products or
services. For purposes of this Agreement, the term "Geographical Area"
means the territory located within a seventy-five (75) mile radius of
each facility for which Employee has management responsibility during
Employee's employment with the Company.
B. Non-Solicitation of Clients Covenant. Employee agrees that during
Employee's employment by the Company and for a period of two (2) years
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 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
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Employee had material contact while employed by the Company to provide
Business services or products to such Clients or prospects.
C. Construction. The parties hereto agree that any judicial authority
construing all or any portion of this Section 7 or Section 8 below may,
if it chooses, sever any portion of the Geographical Area, client base,
prospective relationship or prospect list or any prohibited business
activity from the coverage of such Section and to apply the provisions
of such Section to the remaining portion of the Geographical Area, the
client base or the prospective relationship or prospect list, or the
remaining business activities not so severed by such judicial
authority. In addition, it is the intent of the parties that the
judicial authority may, if it chooses, replace each such severed
provision with a provision as similar in terms to such severed
provision as may be possible and be legal, valid and enforceable. It is
the intent of the parties that Sections 7 and 8 be enforced to the
maximum extent permitted by law. In the event that any provision of
either such Section is determined not to be specifically enforceable,
the Company shall nevertheless be entitled to bring an action to seek
to recover monetary damages as a result of the breach of such provision
by Employee.
8. Non-Solicitation of Employees Covenant. Employee further agrees and
represents that during Employee's employment by the Company and for a
period of two (2) years 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 Business services or products, 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.
9. Existing Restrictive Covenants. 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.
10. 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.
11. 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
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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.
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 Proprietary Information 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 which 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.
12. Remedies. Employee agrees and acknowledges that the violation of any of
the covenants or agreements contained in Sections 6, 7, 8, 9, 10 and 11
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.
13. Notices. Any notice or communication under this Agreement will be in
writing and sent by registered or certified mail addressed to the
respective parties as follows:
If to the Company: If to Employee:
Medaphis Corporation
0000 Xxxxxxxxxx Xxxxxxx Xxxxx X. Xxxxxx
Suite 300 0000 Xxxxx Xxxx Xxxx
Xxxxxxx, XX 00000 Xxxxxxxx Xxxx, XX 00000
Attn: General Counsel
14. Severability. Subject to the application of Section 7(C) to the
interpretation of Sections 7 and 8, 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.
15. 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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16. Binding Effect. This Agreement will be binding upon the parties and
their respective heirs, representatives, successors, transferees and
permitted assigns.
17. Assignment. This Agreement is one for personal services and will not be
assigned by Employee. The Company may assign this Agreement to its
parent company or to any of its subsidiaries or affiliated companies;
provided that the parent or any subsidiary or affiliate fulfills the
obligations of the Company under this Agreement.
18. Governing Law. This Agreement is entered into and will be interpreted
and enforced pursuant to the laws of the State of Georgia. 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 court located in the geographical area comprised
by the United States District Court for the Northern District of
Georgia 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 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.
19. Surviving Terms. Sections 6, 7, 8, 9, 10, 11 and 12 of this Agreement
shall survive termination of this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first above written.
COMPANY: EMPLOYEE:
MEDAPHIS CORPORATION
By:/s/ Xxxxxxxx X. X. Xxxxx /s/ Xxxxx X. Xxxxxx
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Xxxxx X. Xxxxxx
Title: Executive Vice President
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THIS AGREEMENT IS NOT VALID AND BINDING UPON THE COMPANY UNTIL SIGNED BY XXXXX
X. XXXXXXXX OR XXXXXXXX X. X. XXXXX, ESQ.
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EXHIBIT A
INVENTIONS
Employee represents that there are no Inventions.
/s/ KPC
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Employee Initials
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