EXHIBIT 10.23
EXECUTIVE SEVERANCE BENEFITS AGREEMENT
THIS EXECUTIVE SEVERANCE BENEFITS AGREEMENT (this "Agreement") is entered
into by and between XXXXXX INTERACTIVE SYSTEMS, INC., a Delaware corporation
(the "Company") and Xxxx Xxxx ("Executive"), effective December 10, 1999. This
Agreement is intended to provide Executive with the compensation and benefits
described herein upon the occurrence of specific events. Certain capitalized
terms used in this Agreement are defined in Article 6.
The Company and Executive hereby agree as follows:
ARTICLE 1
EMPLOYMENT BY THE COMPANY
1.1 The Company currently employs Executive.
1.2 The Company and Executive wish to set forth the compensation and
benefits which Executive shall be entitled to receive in the event Executive's
employment with the Company is terminated under the circumstances described
herein.
1.3 The duties and obligations of the Company to Executive under this
Agreement shall be in consideration for Executive's past services to the
Company, Executive's continued employment with the Company and Executive's
execution of the general waiver and release described in Section 3.2.
1.4 This Agreement shall supersede any other agreement relating to
Executive's severance from employment with the Company.
ARTICLE 2
SEVERANCE BENEFITS
2.1 Covered Termination Severance Benefits. If following a Change of
Control, Executive's employment terminates due to an Involuntary Termination
Without Cause or a Constructive Termination, such termination of employment will
be deemed a "Covered Termination". A Covered Termination entitles Executive to
receive the following benefits set forth in Sections 2.2 through 2.4 and
Sections 2.9 and 2.10.
2.2 Severance Payment. Executive shall receive a severance payment equal
to twelve (12) months of Base Pay plus Bonus, subject to applicable tax
withholding, payable at such time or times as the Company may elect; provided
that Executive shall not receive such severance payments at a rate slower than
the Company's regularly scheduled payment dates for payroll and bonus. If
Executive is indebted to the Company at his or her date of termination, the
Company reserves the right to offset any severance payment under this Agreement
by the
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amount of such indebtedness. In no event shall payment of any severance payment
be made prior to Executive's date of termination or in the absence of an
effective release pursuant to Section 3.2.
2.3 Acceleration Of Stock Option Vesting. The Executive's stock options
that are unvested on or before the date of occurrence of the Covered Termination
shall accelerate and immediately become vested and exercisable. Notwithstanding
the foregoing, if the Change of Control was a transaction that was accounted for
as a pooling of interests for financial reporting purposes, then the unvested
portion of such stock options shall not accelerate unless the Company receives
reasonable assurances from the Company's independent public accountants (and
from the acquiring party's independent public accountants) that in their good
faith judgement such acceleration will not adversely affect the pooling of
interests accounting treatment of such Change of Control transaction.
2.4 COBRA Continuation. Executive and Executive's covered dependents who
are enrolled in a health or dental plan sponsored by the Company may be eligible
to continue coverage under such health or dental plan (or to convert to an
individual policy), at the time of the Executive's termination of employment
under the Consolidated Omnibus Budget Reconciliation Act of 1985 ("COBRA"). The
Company will notify the individual of any such right to continue health coverage
at the time of termination. The Company will continue to pay its share of
Executive's health insurance premiums until the earlier of: (i) twelve (12)
months after the date of termination, or (ii) such time as the Executive becomes
eligible to participate in another employer's health insurance plan (the "COBRA
Period"); provided that Executive elects to continue coverage under COBRA and
timely pays Executive's portion of the premiums. No provision of this Agreement
will affect the continuation coverage rules under COBRA, except that the
Company's payment of any applicable insurance premiums during the COBRA Period
will be credited as payment by Executive for purposes of Executive's payment
required under COBRA. Therefore, the period during which Executive must elect to
continue the Company's group medical or dental coverage at his or her own
expense under COBRA, the length of time during which COBRA coverage will be made
available to the Executive, and all other rights and obligations of Executive
under COBRA (except the obligation to pay insurance premiums that the Company
pays during the COBRA Period) will be applied in the same manner that such rules
would apply in the absence of this Agreement.
2.5 Company Termination Severance Benefits. In the event Executive's
employment terminates due to an Involuntary Termination Without Cause (a
"Company Termination"), Executive shall be entitled to receive the following
benefits set forth in Sections 2.6 through 2.10; provided, however, that this
Section 2.5 shall expire and be of no further force or effect with respect to
Executive upon the occurrence of a Change of Control.
2.6 Severance Payment. Executive shall receive a severance payment equal
to twelve (12) months of Base Pay, subject to applicable tax withholding,
payable at such time or times as the Company may elect; provided that Executive
shall not receive such severance payments at a rate slower than the Company's
regularly scheduled payment dates for payroll and bonus. If Executive is
indebted to the Company at his or her date of termination, the Company reserves
the right to offset any severance payment under this Agreement by the amount of
such
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indebtedness. In no event shall payment of any severance payment be made prior
to Executive's date of termination or in the absence of an effective release
pursuant to Section 3.2.
2.7 Stock Option Vesting and Exercise Period. Except for the options
listed on Exhibit A hereto, the portion of Executive's stock options that would
have vested on or before the date twelve (12) months from the occurrence of the
Company Termination shall accelerate and immediately become vested and
exercisable and the period during which Executive may exercise any and all stock
options deemed vested as of the date of Executive's termination shall be
extended such that Executive will have twelve (12) months after the date of such
termination to exercise such options.
2.8 COBRA Continuation. Executive and Executive's covered dependents who
are enrolled in a health or dental plan sponsored by the Company may be eligible
to continue coverage under such health or dental plan (or to convert to an
individual policy), at the time of the Executive's termination of employment
under COBRA. The Company will notify the individual of any such right to
continue health coverage at the time of termination. The Company will continue
to pay its share of Executive's health insurance premiums for three (3) months
after the date of termination; provided that Executive elects to continue
coverage under COBRA and timely pays Executive's portion of the premiums. No
provision of this Agreement will affect the continuation coverage rules under
COBRA, except that the Company's payment of any applicable insurance premiums
during such three-month period will be credited as payment by Executive for
purposes of Executive's payment required under COBRA. Therefore, the period
during which Executive must elect to continue the Company's group medical or
dental coverage at his or her own expense under COBRA, the length of time during
which COBRA coverage will be made available to the Executive, and all other
rights and obligations of Executive under COBRA (except the obligation to pay
insurance premiums that the Company pays during such three month period) will be
applied in the same manner that such rules would apply in the absence of this
Agreement.
2.9 Accrued Vacation Pay. In addition to any other amount payable under
this Article 2, Executive will be entitled to receive any accrued vacation pay
in accordance with the Company's vacation pay policy then in effect for
employees generally.
2.10 Mitigation. Except as otherwise specifically provided herein,
Executive shall not be required to mitigate damages or the amount of any payment
provided under this Agreement by seeking other employment or otherwise, nor
shall the amount of any payment provided for under this Agreement be reduced by
any compensation earned by Executive as a result of employment by another
employer or by any retirement benefits received by Executive after the date of
the Covered Termination, Company Termination or otherwise.
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ARTICLE 3
LIMITATIONS AND CONDITIONS ON BENEFITS
3.1 Tax Consequences. The Company shall withhold appropriate federal,
state, local (and foreign, if applicable) income and employment taxes from any
payments hereunder. Executive acknowledges that he or she has been advised by
the Company to consult with a tax advisor or attorney with respect to the tax
consequences, if any, of these amendments to his or her stock option grants.
3.2 Employee Agreement And Release Prior To Receipt Of Benefits. Upon the
occurrence of a Covered Termination or Company Termination, and prior to the
receipt of any benefits under this Agreement on account of such Covered
Termination or Company Termination, Executive shall execute the Employee
Agreement and Release (the "Release") in the form attached hereto as Exhibit B.
Such Release shall specifically relate to all of Executive's rights and claims
in existence at the time of such execution and shall confirm Executive's
obligations under the Company's standard form of proprietary information and
inventions agreement. It is understood that Executive has twenty-one (21)
calendar days to consider whether to execute such Release, and Executive may
revoke such Release within seven (7) calendar days after execution. In the event
Executive does not execute such Release within the twenty-one (21)-day period,
or if Executive revokes such Release within the subsequent seven (7)-day period,
no benefits shall be payable under this Agreement, and this Agreement shall be
null and void.
3.3 Limitation on Competitive Activities. During the twelve (12) month
period after the occurrence of a Covered Termination or Company Termination,
Executive will not directly or indirectly (whether for compensation or without
compensation), as an individual proprietor, partner, stockholder, officer,
employee, consultant, director, joint venturer, investor, lender, or in any
other capacity whatsoever (other than as the holder of not more than one percent
(1%) of the total outstanding stock of a publicly held company), engage in any
business activity that is competitive with the business of the Company
("Competitive Activity"). For purposes of this Agreement, "Competitive Activity"
shall be deemed to include, without limitation, obtaining employment, performing
work or providing services to SAP, PeopleSoft, Oracle, Hyperion or QSP (or any
related corporation, partnership or other related entity). These Competitive
Activities are prohibited in addition to any limitations on Executive's
activities set forth in his Proprietary Information Agreement with the Company,
and they are considered by the parties hereto to constitute a reasonable
restriction for the purpose of protecting the business of the Company. However,
if any such limitation is found by a court of competent jurisdiction to be
unenforceable because it extends for too long a period or over too great a range
of activities or in too broad a geographic area, it shall be interpreted to
extend only over the maximum period of time, range of activities or geographic
area as to which it may be enforceable. If Executive does not comply with any of
the foregoing, no benefits shall be payable under this Agreement, any benefits
previously paid to Executive pursuant to this Agreement shall be repaid or
surrendered to the Company, and this Agreement shall be null and void.
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ARTICLE 4
OTHER RIGHTS AND BENEFITS
4.1 Nonexclusivity. Nothing in this Agreement shall prevent or limit
Executive's continuing or future participation in any benefit, bonus, incentive
or other plans, programs, policies or practices provided by the Company and for
which Executive may otherwise qualify, nor shall anything herein limit or
otherwise affect such rights as Executive may have under other agreements with
the Company. Except as otherwise expressly provided herein, amounts which are
vested benefits or which Executive is otherwise entitled to receive under any
plan, policy, practice or program of the Company at or subsequent to the date of
a Covered Termination or Company Termination shall be payable in accordance with
such plan, policy, practice or program.
4.2 Certain Reductions in Payments.
(a) Anything in this Agreement to the contrary notwithstanding, in
the event that any payment, distribution or other benefit provided by the
Company to or for the benefit of Executive (whether paid or payable or provided
or to be provided pursuant to the terms of this Agreement or otherwise) (a
"Payment") would (i) constitute a "parachute payment" within the meaning of
Section 280G of the Internal Revenue Code of 1986 ("the Code") and (ii) but for
this Section 4.2, be subject to the excise tax imposed by Section 4999 of the
Code (the "Excise Tax"), then, in accordance with this Section 4.2, such
Payments shall be reduced to the maximum amount that would result in no portion
of the Payments being subject to the Excise Tax, but only if and to the extent
that such a reduction would result in Executive's receipt of Payments that are
greater than the net amount Executive would receive (after application of the
Excise Tax) if no reduction is made. The amount of required reduction, if any,
shall be the smallest amount so that the Executive's net proceeds with respect
to the Payments (after taking into account payment of any Excise Tax and all
federal, state and local income, employment or other taxes) shall be maximized.
If, notwithstanding any reduction described in this Section 4.2 (or in the
absence of any such reduction), the Internal Revenue Service (the "IRS")
determines that a Payment is subject to the Excise Tax (or subject to a
different amount of the Excise Tax than determined by the Company or the
Executive), then Section 4.2(c) shall apply. If the Excise Tax is not eliminated
pursuant to this Section 4.2, Executive shall pay the Excise Tax.
(b) All determinations required to be made under this Section 4.2
shall be made by the Company's independent auditors. Such auditors shall provide
detailed supporting calculations both to the Company and Executive. Any such
reasonable determination by the Company's independent auditors shall be binding
upon the Company and Executive. The Executive shall determine which and how much
of the Payments, including without limitation any option acceleration benefits
provide under this Agreement or any option ("Option Benefits"), as the case may
be, shall be eliminated or reduced consistent with the requirements of this
Section 4.2, provided that, if Executive does not make such determination within
ten (10) business days of the receipt of the calculations made by the Company's
independent auditors, the Company shall elect which and how much of the Option
Benefits or other Payments, as the case may be, shall be eliminated or reduced
consistent with the requirements of this Section 4.2, and then the Company shall
notify Executive promptly of such election. Within five (5) business
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days thereafter, the Company shall pay to or distribute to or for the benefit of
Executive such amounts as are then due to Executive under this Agreement.
(c) As a result of the uncertainty in the application of Section 280G
of the Code at the time of the initial determination by the Company's
independent auditors hereunder, it is possible that Option Benefits or other
Payments, as the case may be, will have been made by the Company which should
not have been made ("Overpayment") or that additional Option Benefits or other
Payments, as the case may be, which will not have been made by the Company could
have been made ("Underpayment"), in each case, consistent with the calculations
required to be made hereunder. In the event that the Company's independent
auditors, based upon the assertion of a deficiency by the IRS against Executive
or the Company which the Company's independent auditors believe has a high
probability of success, determine that an Overpayment has been made, any such
Overpayment paid or distributed by the Company to or for the benefit of
Executive shall be treated for all purposes as a loan ab initio to Executive
which Executive shall repay to the Company together with interest at the
applicable federal rate provided for in Section 7872(f)(2) of the Code;
provided, however, that no such loan shall be deemed to have been made and no
amount shall be payable by Executive to the Company if and to the extent such
deemed loan and payment would not either reduce the amount on which Executive is
subject to tax under Section 1 and Section 4999 of the Code or generate a refund
of such taxes. In the event that the Company's independent auditors, based upon
controlling precedent or other substantial authority, determine that an
Underpayment has occurred, any such Underpayment shall be promptly paid by the
Company to or for the benefit of Executive together with interest at the
applicable federal rate provided for in Section 7872(f)(2) of the Code.
ARTICLE 5
TRANSFERABILITY OF BENEFITS
5.1 No benefit hereunder shall be subject to sale, transfer, assignment,
pledge, encumbrance or charge, and any attempt to do so shall be void.
ARTICLE 6
DEFINITIONS
For purposes of this Agreement, the following terms are defined as follows:
6.1 "Base Pay" means Executive's base pay (excluding overtime, bonuses,
draws, commission, and other forms of additional compensation and benefits), at
the rate in effect during the last regularly scheduled payroll period
immediately preceding any termination of Executive's employment.
6.2 "Board" means the Board of Directors of the Company.
6.3 "Bonus" means the average of the amount of Executive's bonus for the
previous two (2) fiscal years of the Company.
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6.4 "Cause" means termination of Executive's employment with the Company
for any of the following reasons as determined in good faith by the Board:
(a) an intentional act which materially injures the Company;
(b) an intentional refusal or failure to follow lawful and reasonable
directions of the Board or an individual to whom Executive reports (as
appropriate);
(c) a willful and habitual neglect of duties; or
(d) a conviction of a felony involving moral turpitude which is
reasonably likely to inflict or has inflicted material injury on the Company.
6.5 "Change of Control" means that the Company (a) merges or combines with
any other company or entity and the Company is not the surviving corporation, or
the stockholders of the Company immediately prior to the merger or consolidation
do not hold a majority of the shares of the resulting corporation; (b) sells all
or substantially all its assets to any other company or entity; or (c) has forty
percent (40%) or more of its stock acquired by a person and/or affiliates of
such person.
6.6 "Constructive Termination" means that Executive voluntarily terminates
employment after any of the following are undertaken without Executive's express
written consent:
(a) the assignment to Executive of any duties or responsibilities
which result in a diminution or adverse change of Executive's position, status
or circumstances of employment; provided, however, that a mere change in
Executive's title or reporting relationship shall not constitute a Constructive
Termination;
(b) a reduction by the Company in Executive's Base Pay;
(c) a relocation of Executive's business office to a location more
than thirty (30) miles from the location at which Executive performs duties as
of the date of this Agreement, except for required travel by Executive on the
Company's business to an extent substantially consistent with Executive's
business travel obligations;
(d) any breach by the Company of any provision of this Agreement or
any other material agreement between Executive and the Company concerning
Executive's employment; or
(e) any failure by the Company to obtain the assumption of this
Agreement by any successor or assign of the Company.
(f) change of control where the company (i) merges or combines with
any other company or entity in a manner which produces a change of control; (ii)
sells all or substantially all its assets to any other company or entity; (iii)
has forty percent (40%) or more of its stock acquired by a person and/or
affiliates of such person.
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6.7 "Covered Termination" means an Involuntary Termination Without Cause
or a Constructive Termination.
6.8 "Involuntary Termination Without Cause" means Executive's dismissal or
discharge other than for Cause. The termination of Executive's employment as a
result of Executive's death or disability will not be deemed to be an
Involuntary Termination Without Cause.
ARTICLE 7
GENERAL PROVISIONS
7.1 Employment Status. This Agreement does not constitute a contract of
employment or impose upon Executive any obligation to remain as an employee, or
impose on the Company any obligation (i) to retain Executive as an employee,
(ii) to change the status of Executive as an at-will employee, or (iii) to
change the Company's policies regarding termination of employment.
7.2 Notices. Any notices provided hereunder must be in writing, and such
notices or any other written communication shall be deemed effective upon the
earlier of personal delivery (including personal delivery by facsimile) or the
third day after mailing by first class mail, to the Company at its primary
office location and to Executive at Executive's address as listed in the
Company's payroll records. Any payments made by the Company to Executive under
the terms of this Agreement shall be delivered to Executive either in person or
at the address as listed in the Company's payroll records.
7.3 Severability. Whenever possible, each provision of this Agreement will
be interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Agreement is held to be invalid, illegal or
unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability will not affect
any other provision or any other jurisdiction, but this Agreement will be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provisions had never been contained herein.
7.4 Waiver. If either party should waive any breach of any provisions of
this Agreement, he or it shall not thereby be deemed to have waived any
preceding or succeeding breach of the same or any other provision of this
Agreement.
7.5 Complete Agreement. This Agreement, including Exhibits, constitutes
the entire agreement between Executive and the Company and is the complete,
final, and exclusive embodiment of their agreement with regard to this subject
matter, wholly superseding all written and oral agreements with respect to
payments and benefits to Executive in the event of employment termination. It is
entered into without reliance on any promise or representation other than those
expressly contained herein.
7.6 Duration of Agreement. This Agreement shall terminate upon the date of
Executive's termination of employment with the Company. Notwithstanding the
foregoing, this
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Agreement shall not terminate or expire with respect to Executive if Executive
becomes entitled to receive payments and benefits set forth in Section 2 until
Executive shall have received such payments and benefits in full.
7.7 Amendment or Termination of Agreement. Notwithstanding anything in
Section 7.6 to the contrary, this Agreement may be changed or terminated upon
the mutual written consent of the Company and Executive. The written consent of
the Company to a change or termination of this Agreement must be signed by an
executive officer of the Company after such change or the Board has approved
termination.
7.8 Counterparts. This Agreement may be executed in separate counterparts,
any one of which need not contain signatures of more than one party, but all of
which taken together will constitute one and the same Agreement.
7.9 Headings. The headings of the Articles and Sections hereof are
inserted for convenience only and shall not be deemed to constitute a part
hereof or to affect the meaning thereof.
7.10 Successors and Assigns. This Agreement is intended to bind and inure
to the benefit of and be enforceable by Executive and the Company, and their
respective successors, assigns, heirs, executors and administrators, except that
Executive may not assign any duties hereunder and may not assign any rights
hereunder without the written consent of the Company, which consent shall not be
withheld unreasonably.
7.11 Choice of Law. All questions concerning the construction, validity and
interpretation of this Agreement will be governed by the law of the State of
California, without regard to such state's conflict of laws rules.
7.12 Non-Publication. The parties mutually agree not to disclose publicly
the terms of this Agreement except to the extent that disclosure is mandated by
applicable law or to respective advisors (e.g., attorneys, accountants).
7.13 Construction of Agreement. In the event of a conflict between the text
of the Agreement and any summary, description or other information regarding the
Agreement, the text of the Agreement shall control.
In Witness Whereof, the parties have executed this Agreement on the day and
year written above.
XXXXXX INTERACTIVE SYSTEMS, INC. [EXECUTIVE]
By:
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Name:
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Title:
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Exhibit A: Excluded Options
Exhibit B: Employee Agreement and Release
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Exhibit A
EXCLUDED OPTIONS
Grant 950676
Grant 950675
Grant 950876
Grant 950877
Exhibit B
EMPLOYEE AGREEMENT AND RELEASE
I understand and agree completely to the terms set forth in the foregoing
agreement.
I hereby confirm my obligations under the Xxxxxx Interactive Systems,
Inc.'s (the "Company") proprietary information and inventions agreement.
In granting the release herein, I acknowledge that I understand that I am
waiving the benefit of any provision of law in any jurisdiction to the following
effect: "A general release does not extend to claims which the creditor does
not know or suspect to exist in his favor at the time of executing the release,
which if known by him must have materially affected her settlement with the
debtor." (California Civil Code section 1542). I hereby expressly waive and
relinquish all rights and benefits under that section and any law or legal
principle of similar effect in any jurisdiction with respect to the release of
unknown and unsuspected claims granted in this Agreement.
Except as otherwise set forth in this Agreement, I hereby release, acquit
and forever discharge the Company, its parents and subsidiaries, and its and
their respective officers, directors, agents, servants, employees, shareholders,
successors, assigns and affiliates, of and from any and all claims, liabilities,
demands, causes of action, costs, expenses, attorneys fees, damages, indemnities
and obligations of every kind and nature, in law, equity, or otherwise, known
and unknown, suspected and unsuspected, disclosed and undisclosed (other than
any claim for indemnification I may have as a result of any third party action
against me based on my employment with the Company), arising out of or in any
way related to agreements, events, acts or conduct at any time prior to the date
I execute this Agreement, including but not limited to: all such claims and
demands directly or indirectly arising out of or in any way connected with my
employment with the Company or the termination of that employment, including but
not limited to, claims of intentional and negligent infliction of emotional
distress, any and all tort claims for personal injury, claims or demands related
to salary, bonuses, commissions, stock, stock options, or any other ownership
interests in the Company, vacation pay, fringe benefits, expense reimbursements,
severance pay, or any other form of compensation; claims pursuant to any
federal, state or local law or cause of action including, but not limited to,
the federal Civil Rights Act of 1964, as amended; the federal Age Discrimination
in Employment Act of 1967, as amended ("ADEA"); the federal Employee Retirement
Income Security Act of 1974, as amended; the federal Americans with Disabilities
Act of 1990; the California Fair Employment and Housing Act, as amended; tort
law; contract law; wrongful discharge; harassment; discrimination; fraud;
defamation; emotional distress; and breach of the implied covenant of good faith
and fair dealing; provided, however, that nothing in this paragraph shall be
construed in any way to release the Company from its obligation to indemnify me
pursuant to the Company's indemnification agreement.
I acknowledge that I am knowingly and voluntarily waiving and releasing any
rights I may have under ADEA. I also acknowledge that the consideration given
for the waiver and release in the preceding paragraph hereof is in addition to
anything of value to which I was already entitled. I further acknowledge that I
have been advised by this writing, as required by the ADEA, that: (A) my waiver
and release do not apply to any rights or claims that may arise on or after the
date I execute this Agreement; (B) I have the right to consult with an attorney
prior to executing this Agreement; (C) I have twenty-one (21) days to consider
this Agreement (although I may choose to voluntarily execute this Agreement
earlier); (D) I have seven (7) days following the execution of this Agreement by
the parties to revoke the Agreement; and (E) this Agreement shall not be
effective until the date upon which the revocation period has expired, which
shall be the eighth day after this Agreement is executed by me, provided that
the Company has also executed this Agreement by that date (the "Effective
Date").
XXXXXX INTERACTIVE SYSTEMS, INC. [EXECUTIVE]
By:
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Title: Date:
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