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Exhibit
10.1
EMPLOYMENT AGREEMENT
This
Employment Agreement (the “Agreement”) made this
12 th day
of October, 2007 and effective as of the 15 th day
of October, 2007 (the “Effective Date”) between
POMEROY IT SOLUTIONS, INC. , a Delaware
Corporation (the “Company”) and KEITH R.
COOGAN (the “Executive”).
W I T N E S S E T H:
WHEREAS , the Company desires to employ the Executive as
President and Chief Executive Officer of the Company;
WHEREAS , the Company and the Executive desire to enter
into the Agreement as to the terms of his employment by the
Company;
NOW THEREFORE, in consideration of the foregoing, of the
mutual promises contained herein and of other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto hereby agree as
follows:
1.
Position/Duties.
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(a)
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Executive
shall serve as the President and Chief Executive Officer of the
Company. In this capacity, Executive shall have such
duties, authorities and responsibilities commensurate with the
duties, authorities and responsibilities of persons in similar
capacities in similar size companies and such other duties and
responsibilities as the Board of Directors of the Company
(“Board”) shall from time to time assign to him
consistent with the Executive’s position as President and
Chief Executive Officer of the Company.
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(b)
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During
the Employment Term (as defined in Section 2), the Executive shall
devote substantially all his business time and efforts to the
business and affairs of the Company and the performance of his
duties hereunder. The Executive, who currently
serves as a member of the Board of Directors of Titanium Metals
Corporation and Kronos Worldwide Inc., shall not accept any other
outside directorships of business enterprises during the Employment
Term without the consent of the Board. In addition,
Executive shall not render services of a business, professional or
commercial nature to any other person, firm or corporation, whether
for compensation or otherwise, during the Employment
Term.
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(c)
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Executive’s
primary workplace shall be the Company’s offices in Hebron,
Kentucky, except for usual and customary travel on the
Company’s business. Pursuant to the provisions of
Section 7(d), Executive will lease temporary housing in the Greater
Cincinnati/Northern Kentucky area during the Employment
Term. Company acknowledges that Executive will be
commuting to Company’s headquarters from Plano, Texas during
the term of this Agreement. Executive shall be permitted
to work in Plano, Texas, for such periods of time as may
be agreed upon by Executive and the Board, but in no event less
than one day each week.
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(d)
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Upon
the Effective Date, Executive shall be appointed a member of the
Company’s Board of Directors to serve without compensation
until the next Annual Shareholders Meeting of the
Company. Thereafter, during the remaining Employment
Term, the Board or, if applicable, a committee thereof, shall
nominate the Executive for re-election as a member of the Board at
the expiration of each then-current term.
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(e)
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Executive
further agrees to serve without additional compensation as an
Officer and Director of any direct or indirect subsidiaries and
affiliates of the Company as the Company, acting through the Board,
may request from time to time. In addition, it is agreed
that the Company may deem the Executive to be an employee of one of
its subsidiaries for payroll purposes but said arrangement shall
not relieve the Company of its obligations hereunder.
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2.
Term of Employment.
This
Agreement shall be in effect beginning on the Effective Date
and terminating upon the earlier of (a) three years, two
months and twenty-one days (October 15, 2007 – January
5, 2011) (the “Initial Term”) or (b) the Date of
Termination as defined in Section 8(g). The period
of time from the Effective Date through the Initial Term and
any Renewal Term, as defined in Section 3, or the Date of
Termination, as applicable, is referred to as the
“Employment Term”.
3.
Renewal Term.
The
term of Executive’s employment and this Agreement shall
automatically 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 the Agreement ninety
(90) days prior to the expiration of the then expiring
term. Executive’s Base Salary for each
Renewal Term shall be negotiated and mutually agreed upon by
and between the Company and Executive; however, in no event
shall Executive’s Base Salary for any Renewal Term be
less than the Base Salary in effect for the prior
year.
4.
Base Salary.
During
each fiscal year of the Company during the Initial Term of
this Agreement, the Company agrees to pay Executive a base
salary (“Base Salary”) at an annual rate of Four
Hundred Eighty Thousand Dollars ($480,000.00). For
the period commencing October 15, 2007 and ending January 5,
2008, Executive shall be paid the sum of Forty Thousand
Dollars ($40,000.00) per month, which amount shall be prorated
for any partial month. Said Base Salary shall be
payable in accordance with the regular payroll practices of
the Company, but not less frequently than
monthly. Executive’s Base Salary shall be
subject to an annual review by the Board or a committee
thereof (and may be increased, but not decreased, from time to
time by the Board).
5.
Bonuses.
For
the period October 15, 2007 through January 5, 2008, Executive
shall be paid a bonus of Ninety-Two Thousand Five Hundred
Dollars ($92,500.00), payable on or after January 5, 2008 but
not later than January 15, 2008. The Compensation
Committee will begin work with Executive in December 2007 (and
each ensuing December thereafter) to implement a bonus plan
for Executive with the Company for the next ensuing fiscal
year of the Company. The Executive shall have the
opportunity to earn both a quarterly and annual targeted bonus
measured against financial criteria consisting primarily of
NPBT (as defined below) (as determined by the Board or a
committee thereof), of at least Three Hundred Seventy Thousand
Dollars ($370,000.00), with a potential bonus in excess of
such amount for achievement above target and a reduced bonus
for achievement below target, all in accordance with the
applicable bonus plan. Two-thirds (2/3) of the
potential targeted bonus shall be based on achievement of
quarterly criteria and one-third (1/3) shall be allocated to
annual attainment. The bonus plan shall provide
that under-performance in one quarter can be made up in
subsequent quarters on a year-to-date basis. The
quarterly and annual bonuses payable to Executive during the
Employment Term shall be fully paid in cash.
For
purposes of this Agreement, the Net Profit Before Taxes
(“NPBT”) shall be determined on a consolidated
basis computed without regard to the bonus payable to
Executive pursuant to this Section 5, shall exclude any gains
or losses realized by Company on the sale or other disposition
of its assets other than in the ordinary course of business
and shall exclude any extraordinary one-time charges taken by
the Company. NPBT shall be determined by the
independent accountant regularly retained by the Company,
subject to the foregoing provisions of this subparagraph and
in accordance with generally accepted accounting
principles. Said determination and payment of such
bonus shall be made no later than the fifteenth (15
th ) day
of the third (3 rd )
month following the end of the Company’s taxable year,
and the determination by the accountant shall be final,
binding and conclusive on all parties hereto. In
the event the audited financial statements are not issued
before the fifteenth (15 th ) day
of the third (3 rd )
month following the end of the Company’s taxable year,
Company shall make the payment due hereunder, if any, based on
its best reasonable estimate of any liability hereunder, which
amount shall be recorded and shall be reconciled by both
parties once the audited financial statements are issued but
in no event later than the end of the calendar year in which
the Company’s taxable year ends. Any
quarterly bonus determination shall be determined on a
consolidated basis by the independent accountant regularly
retained by the Company subject to the foregoing provisions of
this paragraph and in accordance with generally accepted
accounting principles. Any amount due hereunder
shall be paid within fifteen (15) days of the filing of Form
10-Q by the Company for the respective quarter, but in no
event later than the fifteenth (15 th ) day
of the third (3 rd )
month following the end of the Company’s taxable
year.
In
the event that Company acquires during any applicable fiscal
year a company that had gross revenues in excess of
Twenty-Five Million Dollars ($25,000,000.00) for its most
recently concluded fiscal year, Company and Executive shall in
good faith determine whether any adjustments to the NPBT
criteria, whether upward or downward, shall be made in order
to reflect the effect of such acquisition on the operations of
the Company.
6.
Equity Awards.
(a)
Stock Options.
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(i)
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Upon
the Effective Date of this Agreement, Executive shall be awarded an
option to acquire Two Hundred Forty (240,000) shares of the common
stock of the Company under the Company’s Amended and Restated
2002 Stock Incentive Plan (“Plan”) at the fair market
value of such common shares as of the date of the
award. For purposes of this Agreement, the fair market
value as of the applicable date shall mean, with respect to the
common shares, the closing sales price of a share of the
Company’s common stock on the over-the-counter market on the
last market trading 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). Seventy-Five
Thousand (75,000) shares shall vest upon the Effective Date of
Executive’s employment and Fifty-Five Thousand (55,000)
shares shall vest on each of the first three annual anniversaries
of the Effective Date. The term of the award set forth above shall
be for a period of five (5) years from the date of such
award. A copy of the Award Agreement is attached hereto
as Exhibit A. The options to be granted incident hereto
shall be non-qualified stock options and shall not be treated by
the Company or the Executive as an incentive stock option for
federal income tax purposes.
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(ii)
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In
the event a Change In Control (as defined in Section 10) occurs
after the six month anniversary of the Effective Date but before
the first annual anniversary of the Effective Date, an additional
Forty-Five Thousand (45,000) shares shall vest immediately prior to
the Change In Control. In the event a Change In Control
occurs on or after the first annual anniversary of the Effective
Date, but before the third (3 rd ) annual
anniversary of the Effective Date, then all Two Hundred Forty
Thousand (240,000) shares shall be fully vested immediately prior
to the Change In Control.
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(iii)
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In
addition, on each annual anniversary of the Effective Date,
Executive shall be awarded an option to acquire Seventy-Five
Thousand (75,000) shares of the common stock of the Company at the
fair market value of such common shares as of the date of the
award. Eighteen Thousand Seven Hundred and Fifty
(18,750) of such shares shall vest at the time of the award of such
option and Eighteen Thousand Seven Hundred and Fifty (18,750)
shares shall vest on each of the first three annual anniversaries
of such grant. The term of such award shall be for a
period of five (5) years from the date of grant of each such
award. In the event a Change In Control occurs before
the third (3 rd ) annual
anniversary of the date of such grant, then all Seventy-Five
Thousand (75,000) shares shall be fully vested immediately prior to
the Change In Control. Any subsequent annual award shall
be subject to these terms.
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(b)
Restricted Stock.
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(i)
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Upon
the Effective Date of this Agreement, the Company shall grant
Executive an equity award of Eighty Thousand (80,000) shares of
restricted stock under the Plan. Said restricted stock
shall vest and the restrictions thereon shall lapse in full on the
third (3 rd ) annual
anniversary of the Effective Date. In the event a Change In Control
occurs after the six month anniversary of the Effective Date, but
before the first annual anniversary of the Effective Date, Fifty
Percent (50%) of said restricted stock shall vest and the
restrictions thereon shall lapse immediately prior to the Change In
Control. In the event a Change In Control occurs on or
after the first annual anniversary of the Effective Date, but
before the third (3 rd ) annual
anniversary of the Effective Date, One Hundred Percent (100%) of
such restricted stock shall fully vest and the restrictions thereon
shall lapse immediately prior to the Change In
Control. A copy of the Restricted Stock Award Agreement
is attached hereto as Exhibit B.
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(ii)
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In
addition, Executive shall receive on the second annual anniversary
of the Effective Date (the “Grant Date”), a grant of
restricted shares that shall be based on the increase in the per
share value of the Company’s common stock from the Effective
Date to the Grant Date based on the following
formula: Executive shall be entitled to One Thousand
(1,000) restricted shares for each ten (10) cent per share increase
in the fair market value of the Company’s common stock from
the Effective Date to the Grant Date. For purposes of
this Agreement, the fair market value of the common stock as of the
Effective Date shall be the fair market value utilized for the
strike price for the stock option award made to Executive under
Section 6(a)(i). For purposes of this Agreement, the
fair market value as of the Grant Date shall be determined by
taking the average of the closing sales prices of a share of the
Company’s common stock as reported for each of the market
trading days within the ninety (90) day period (ending on the first
market trading date prior to the Grant Date) preceding the Grant
Date.
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For
example, if the fair market value of the common stock of
Company on the Effective Date was Eight Dollars ($8.00) per
share and the fair market value on the Grant Date was Eleven
Dollars ($11.00) per share, Executive would be entitled to a
grant of Thirty Thousand (30,000) restricted shares ($11.00 -
$8.00 = $3.00 ÷ .10 x 1,000 = 30,000 shares of
restricted stock), which restricted shares shall be fully
vested and shall not be subject to any risk of forfeiture on
or after such second annual anniversary of the Effective
Date.
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(iii)
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Notwithstanding
anything herein to the contrary, in the event of the death,
Disability, termination by the Company with Cause or resignation by
the Executive without Good Reason or in the event of a Change In
Control as defined in Section 10 occurring prior to the second
annual anniversary of the Effective Date, Executive shall not be
entitled to a grant of performance restricted shares pursuant to
Section 6(b)(ii), it being the intent of the parties that Executive
must be employed by the Company on the second annual anniversary of
the Effective Date in order for any performance restricted shares
to be issued under Section 6(b)(ii). Notwithstanding
anything contained herein, if Executive’s employment is
terminated by the Company without Cause or by Executive for Good
Reason prior to the second annual anniversary of the Effective
Date, Executive shall be granted the performance restricted shares
described in Section 6(b)(ii) on the second annual anniversary of
the Effective Date; provided that in lieu of issuing such
restricted shares, the Company shall have the option to pay
Executive an amount in cash equal to the fair market value of such
restricted shares as of the second annual anniversary of the
Effective Date. Any payment in lieu of issuing
restricted shares shall be made on the second annual anniversary of
the Effective Date.
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(iv)
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Executive
acknowledges that the grants of restricted shares made or to be
made hereunder shall be in lieu of any other grant of restricted
shares that may be made to senior management as part of their pay
plan.
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(c)
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Adjustments to Number of Shares . The provisions of
this Section 6 shall be appropriately adjusted for any stock
splits, reverse splits, stock dividends, combinations or
reclassifications of the Company’s common stock, or any other
similar increases or decreases in the number of issued shares of
such common stock effected without receipt of consideration by the
Company.
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(d)
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Representations and Warranties of the Company . The
Company represents and warrants to Executive that (i) the
shares he acquires pursuant to options and restricted stock awards
as provided for in this Agreement will be issued under the Plan;
(ii) the Plan and the options and restricted stock awards to
be made hereunder are covered under a Form S-8 registration
statement (the effectiveness of which shall continue to be
maintained so that Executive can resell the shares he receives
pursuant to options and restricted stock awards pursuant to this
Agreement on a current basis once exercised or vested, as
applicable), (iii) there are currently, and will continue to
be, adequate shares available under the Plan for the issuance of
stock pursuant to all options and the restricted stock awards
provided for in this Agreement; and (iv) the Plan permits the
contemplated provisions of such grants.
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7.
Fringe Benefits.
During
the Employment Term, Executive shall be entitled to the
following benefits:
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(a)
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Insurance . Executive shall be provided with
standard medical, health, and other insurance coverage in
accordance with the plans from time to time maintained by the
Company for its senior management employees.
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(b)
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Vacation . Executive shall be entitled each year to
four (4) weeks of vacation, during which his compensation will be
paid in full; provided, however, Executive shall not take more than
two weeks of vacation consecutively without the prior written
consent of the Board.
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(c)
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Insurance During the Term of Employment Agreement
. Company shall maintain on the life of the Executive,
provided he is insurable at standard rates, a term life insurance
policy in the amount of One Million Dollars
($1,000,000.00). Executive shall have the right to
designate the beneficiary of such policy. Executive
agrees to take any and all physicals that are necessary incident to
the issuance and/or renewal of said policy. In addition,
Executive agrees to take any and all physicals necessary incident
to the procurement of Key Man insurance upon his life by
Company. In the event that Executive is not insurable at
standard rates during the term of this Agreement, but Executive is
able to procure rated coverage, Executive has the right to procure
coverage at a lower amount of insurance, the cost of which is
equivalent to the standard term rate cost of One Million Dollars
($1,000,000.00) in coverage. In the event Executive is
not insurable, then Company shall, within thirty (30) days
following the date that Executive is determined to be uninsurable,
pay Executive an amount equal to the projected cost of the
contemplated term insurance of One Million Dollars ($1,000.000.00)
at standard rates. In the event that Executive should
die prior to the insurance being obtained hereunder or in the event
insurance cannot be obtained for medical reasons, Company shall
have no obligation to Executive or his beneficiary for payment of
any of the death benefit amount upon Executive’s
death. Company and Executive agree to use diligent
efforts after the Effective Date to obtain the coverage upon
Executive’s life hereunder.
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(d)
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Housing Allowance . Company shall provide Executive
with a housing allowance of up to Two Thousand Five Hundred Dollars
($2,500.00) per month to be paid on the first of every
month. The Executive shall enter into a lease agreement
that shall provide housing for Executive near the Company’s
headquarters during the Employment Term, provided that the term of
such lease shall not exceed six months at any time. In
the event the Executive terminates his employment with the Company
following a Change In Control or with Good Reason, or the Company
terminates his employment with the Company without Cause, and he
thereafter vacates the leased premises, the Company shall reimburse
the Executive for any lease termination expense or for all
remaining obligations under the lease within ten (10) days after
the date Executive submits such expenses to the
Company.
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(e)
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Automobile Allowance . Company shall provide
Executive with an automobile allowance of Nine Hundred Dollars
($900.00) per month to be paid on the first of every
month.
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(f)
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Travel Allowance . Company shall provide Executive
with a travel allowance of Four Thousand Five Hundred Dollars
($4,500.00) per month to be paid on the first of every
month.
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(g)
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Expenses . During the Employment Term,
Executive shall be entitled to receive prompt reimbursement for all
reasonable and customary travel and entertainment expenses or other
out-of-pocket business expenses incurred by Executive in preparing
for and fulfilling the Executive’s duties and
responsibilities hereunder, including all expenses for
(i) travel while away from home on business or at the request
or in the service of the Company (but excluding any commuting
expenses covered by Section 7(f)), (ii) mobile phone service,
(iii) email, fax and long distance communications expenses in
respect of the Executive’s home office in Plano, Texas, and
(iv) legal fees and expenses related to the negotiation and
preparation of this Agreement and the documents referred to herein
in an amount not to exceed Twenty Thousand Dollars ($20,000.00);
provided that such expenses are incurred and accounted for in
accordance with the policies and procedures established by the
Company. Executive shall use reasonable best efforts to
take advantage of advance purchase pricing for airplane
tickets. Amounts reimbursable pursuant to this
subparagraph (g) shall be paid upon the earlier of (i) thirty (30)
days after Executive’s submission of a request for
reimbursement and (ii) the fifteenth (15 th ) day of
the third (3 rd ) month of
the Company’s fiscal year following the year in which the
expense was incurred.
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(h)
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Benefit Plans . Executive shall participate, after
meeting eligibility requirements, in any qualified retirement plans
and/or welfare plans maintained by the Company during the
Employment Term.
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8.
Termination.
Executive’s
employment hereunder and the Employment Term shall be
terminated under the first of the following to
occur:
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(a)
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Death . The Executive’s employment hereunder
shall automatically terminate upon the death of the
Executive.
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(b)
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Disability . The Executive’s employment
hereunder shall terminate upon written notice by the Company to the
Executive, of termination due to Disability. For
purposes of this Agreement, “Disability” or
“Disabled” shall mean the Executive’s incapacity
due to physical or mental illness to substantially perform his
duties and the essential functions of his position, with or without
reasonable accommodation on a full-time basis for One Hundred
Eighty (180) days (including weekends and holidays) in any Three
Hundred Sixty-Five (365) day period. The existence or
non-existence of a physical or mental injury, infirmity or
incapacity shall be determined by an independent physician mutually
agreed to by the Company and the Executive (provided that neither
party shall unreasonably withhold their consent).
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(c)
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Cause . The Company may terminate the Executive’s
employment hereunder for Cause. For purposes of this
Agreement, the Company shall have “Cause” to terminate
the Executive’s employment hereunder upon:
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(i)
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The
conviction of Executive of a felony or other crime involving theft,
misappropriation of funds, fraud or moral turpitude;
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(ii)
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The
engaging by Executive 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, misappropriation, fraud,
including with respect to the Company’s accounting and
financial statements, embezzlement or conversion by Executive of
the Company’s or any of its subsidiaries’ property in
connection with Executive’s duties or in the course of the
Executive’s employment with the Company;
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(iii)
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Executive’s
gross negligence or gross misconduct in carrying out his duties
hereunder resulting, in either case, in material harm to the
Company; or
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(iv)
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Any
act or omission constituting a material breach by the Executive of
any material provision of this Agreement.
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Notwithstanding
the foregoing, in the event the basis for a termination for
Cause is under subsections 8(c)(iii) or (iv) above, Executive
shall not be deemed to have been terminated for Cause unless
and until there shall have been delivered to him a copy of a
resolution of the Board asserting that he has engaged in the
conduct set forth above in Sections 8(c)(iii) or (iv) (as
interpreted and enforced consistently with the Company’s
treatment of all other executives and senior management) and
specifying the particulars thereof in detail, and Executive
shall not have cured such conduct to the reasonable
satisfaction of the Board within thirty (30) days after
receipt of such resolution.
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(d)
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Without Cause . Upon written notice by the Company
to the Executive of an involuntary termination without Cause, other
than for death or Disability.
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(e)
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Good Reason . Upon written notice by the Executive
to the Company of the termination of his employment hereunder for
Good Reason. “Good Reason” shall mean
Executive’s resignation from employment within ninety (90)
days after the occurrence of one of the events hereinafter
enumerated; provided, however, that Executive must provide written
notice to the Company within thirty (30) days after the occurrence
of the event allegedly constituting Good Reason and the Company
shall have thirty (30) days after such notice is given to
cure: (i) a material diminution in Executive’s
authority, duties or responsibilities without Executive’s
written consent; (ii) a material diminution in
Executive’s Base Salary or targeted annual bonus
at any time during the Employment Term without Executive’s
written consent; (iii) a requirement that Executive report to an
officer or employee of the Company instead of reporting directly to
the Board and (iv) any other action or inaction that constitutes a
material breach by Company of this Agreement.
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(f)
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Voluntary Termination . If Executive terminates
employment with Company without Good Reason, Executive agrees to
provide the Com
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