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Exhibit
10.1
EMPLOYMENT AGREEMENT
This
Employment Agreement (the “Agreement”) made this
10 th day
of December, 2007 and effective as of the 10th day of
December, 2007 (the “Effective Date”) between
POMEROY IT SOLUTIONS, INC. , a Delaware
Corporation (the “Company”) and
CHRISTOPHER C. FROMAN (the
“Executive”).
W I T N E S S E T H:
WHEREAS , the Company desires to employ the Executive as
Senior Vice President of Sales and Marketing 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 Senior Vice President of Sales and Marketing of
the Company and shall report to the President/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 President/Chief Executive Officer of the
Company or the Board of Directors of the
Company(“Board”) shall from time to time assign to him
consistent with the Executive’s position as Senior
Vice President of Sales and Marketing 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. 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.
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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 (3)
years, twenty-seven (27) days (December 10 ,
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 Two
Hundred Seventy-Five Thousand Dollars
($275,000.00). For the period commencing December
10, 2007 and ending January 5, 2008, Executive shall be paid
the sum of Twenty-Two Thousand Nine Hundred and Sixteen and
67/100 Dollars ($22,916.67) 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 President/Chief Executive
Officer of the Company in conjunction with the Compensation
Committee of the Board (and may be increased, but not
decreased, from time to time incident thereto ).
5.
Bonuses.
Each
year during the Initial Term commencing January 6, 2008 and
ending January 5, 2009, 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) and “SGMD” (as defined below) (as
determined by the President/Chief Executive Officer of the
Company in conjunction with the Compensation Committee of the
Board)), of at least Three Hundred Thousand Dollars
($300,000.00), 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. Fifty (50%) percent of any potential bonus
will be predicated upon the attainment of NPBT and Fifty (50%)
percent will be predicated upon the attainment of SGMD. 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. Executive shall be guaranteed his quarterly
bonus for the period commencing December 10, 2007 and ending
April 5, 2008 based upon One Hundred (100%) percent
achievement, resulting in a bonus payment of Ninety-Two
Thousand Seven Hundred Forty Two Dollars ($92,742.00), payable
on or after April 5, 2008 but not later than April 15,
2008.
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.
For
purposes of this Agreement, the term “Sales Gross Margin
Dollars (SGMD”) shall mean the sales gross profit of the
Company during the applicable period, as reflected on its
financial statements on a consolidated basis. In
making said sales gross profit determination, all gains and
losses realized on the sale or disposition of Company’s
assets not in the ordinary course shall be
excluded The SGMD shall be determined by the
independent accountant regularly retained by the Company
according to the foregoing provisions of this paragraph and in
accordance with generally accepted accounting principles Said
determinations and payment of any 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 determinations 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 any 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 determinations 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 and
SGMD 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 One Hundred Thousand (100,000) 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). Twenty-Five
Thousand (25,000) shares shall vest upon the Effective Date of
Executive’s employment and Twenty-Five Thousand (25,000)
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
during the Initial Term of this Agreement, then all One Hundred
Thousand (100,000) 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 eligible for an additional stock option grant at
the sole discretion of the President/Chief Executive Officer of the
Company in conjunction with the Compensation Committee of the
Board.
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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 Twenty-Five Thousand (25,000) shares
of restricted stock under the Plan. Said restricted
stock shall vest and the restrictions thereon shall lapse in full
on the fourth (4 th ) annual
anniversary of the Effective Date. In the event a Change In Control
occurs during the Initial Term of this Agreement, One Hundred
Percent (100%) of such restricted stock shall fully vest and the
restrictions thereon shall lapse immediately prior to the Change In
Control. In the event that Company does not renew this
Agreement at the expiration of the Initial Term of this Agreement
pursuant to the provisions of Section 3, 100% of such restricted
stock shall fully vest and the restrictions thereon shall lapse
immediately upon the expiration of the Initial Term of this
Agreement. A copy of the Restricted Stock Award
Agreement is attached hereto as Exhibit B. (ii)In
addition, on each annual anniversary of the Effective Date,
Executive shall be eligible for an additional award of restricted
stock under the Plan at the sole discretion of the President/Chief
Executive Officer of the Company in conjunction with the
Compensation Committee of the Board.
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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 affected 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 (or for such shorter period as pertains to
Section 7(d) and Section 7(f), 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
three (3) 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 President/Chief Executive Officer.
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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 Seven Hundred Fifty Thousand Dollars
($750,000.00). 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 Seven Hundred Fifty
Thousand Dollars ($750,000.00) 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 Seven Hundred Fifty Thousand
Dollars ($750,000.00) 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 . Commencing January 1, 2008 and
continuing on the first day of each month thereafter until the
earlier of (i) December 1, 2008 or (ii) Executive’s
relocation to the Greater Cincinnati/Northern Kentucky area,
Company shall provide Executive with a housing allowance of Two
Thousand Five Hundred Dollars ($2,500.00) per month to be paid on
the first of every month during such period.
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(e)
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Automobile Allowance . Company shall provide
Executive with an automobile allowance of Nine Hundred and 00/100
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 . Commencing January 1, 2008 and
continuing on the first day of each month thereafter until the
earlier of (i) December1 1, 2008 or (ii) Executive’s
relocation to the Greater Cincinnati/Northern Kentucky area,
Company shall provide Executive with a travel allowance of Three
Thousand Nine Hundred Dollars ($3,900.00) per month to be paid on
the first of every month during such period.
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(g)
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Relocation Allowance . In connection with Executive
relocating to the Greater Cincinnati/Northern Kentucky metropolitan
area, Company shall reimburse Executive for relocation expenses
incurred by Executive in connection with such relocation in an
amount not to exceed Seventy-Five Thousand Dollars
($75,000.00). Specifically, the Company shall reimburse
Executive concurrent with his relocation for the cost of physical
packing and moving expenses for household good and vehicles, house
hunting travel, and closing costs (including sales commissions) on
the sale of Executive’s current residence and incident to the
purchase of his new residence in the Greater Cincinnati/Northern
Kentucky metropolitan area. Executive shall provide Company with
receipts and other documentation substantiating such costs,
including but not limited to copies of all settlement statements or
other closing documents that substantiate Executive’s claim
for reimbursement under this Section 7(g). In the event
Executive would voluntarily terminate his employment with Company
without Good Reason pursuant to Section 8(f), within one year from
the date of his relocation to the Greater Cincinnati/Northern
Kentucky metropolitan area, Executive shall reimburse the Company
in full for all expenses for which the Company provided
reimbursement to Executive pursuant to this Section
7(g).
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(h)
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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, 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 Five Thousand Dollars ($5,000.00); 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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(i)
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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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(j)
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Executive
shall be responsible for all taxes owed, if any, on the fringe
benefits provided to him pursuant to this Section 7.
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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 thirty (30)
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
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