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EXHIBIT 10.3
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT (this "AGREEMENT"), dated as of the 24th day
of June, 1999, is between I 3S, Inc., a Texas corporation (the Company with
offices at 0000 Xxxxxxxxx Xxxxx, Xxxxxx, Xxxxx 00000, and Xxxxxxx Xxxxxxxx, an
individual, with an address at 0000 Xxxx Xxxxxxx Xxxxx, Xxxxx, Xxxxx 00000
("EXECUTIVE").
WITNESSETH:
WHEREAS, in recognition of the valuable nature of Executive's
management capabilities to the business of Company, Company desires to enter
into this Agreement with Executive to be effective as of the date above first
written (the "EFFECTIVE DATE"); and
WHEREAS, Executive desires to enter into this Agreement with Company
and to be employed by Company in the capacity, for the period, and on the terms
and conditions set forth herein;
NOW THEREFORE, in consideration of the mutual covenants, agreements and
conditions contained herein, the parties hereto intending to be legally bound do
hereby covenant and agree as follows:
1. Employment.
(a) Company hereby agrees to employ Executive, and Executive
hereby agrees to serve Company, as President (subject to approval by
the Board of Directors of Company from time to time hereafter), and,
subject to the direction of the Board of Directors of Company and their
designates, to perform such duties, functions and responsibilities
commensurate with and appropriate to such position, and as the same may
be from time to time set forth in the By-laws of Company or otherwise
delegated to Executive by the Board of Directors of Company or their
designates. As of the effective date of this Agreement, said duties,
responsibilities and functions of Executive are set forth in SCHEDULE A
attached hereto and incorporated herein by reference for all purposes.
(b) Executive shall receive from Company the necessary power
and authority to carry out and discharge such duties, functions and
responsibilities.
(c) Executive shall be a full time employee of Company and
shall devote his commercially reasonable efforts to the performance,
discharge and fulfillment of all such duties, functions and
responsibilities.
(d) Executive will perform his services in Dallas County, Texas,
U.S.A., or at such other location as may be mutually agreed upon
by the Board of Directors of Company, or their designates, and
Executive.
2. Term of Employment.
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(a) Subject to the provisions for termination as hereinafter
provided, the term of employment under this Agreement shall be
effective as of the date first above written and shall continue through
June 30, 2001, provided, however, that beginning on June 30, 2000 and
on June 30 each year thereafter (each such June 30 being referred to as
a "RENEWAL DATE"), the term of this Agreement shall automatically be
extended for an additional one year so that on each Renewal Date the
then remaining unexpired term of this Agreement shall be two years,
unless either party gives the other written notice of non-renewal at
least ninety (90) days prior to any such Renewal Date.
(b) This Agreement shall terminate prior to the expiration of
the initial term or any renewal term of this Agreement upon the
earliest to occur of the following:
(i) the death or permanent disability (as defined in Company's
permanent disability insurance program then in effect covering
Executive) of Executive; provided, however, that Company shall
remain responsible for and shall satisfy its obligations under its
life and permanent disability insurance programs then in effect
covering Executive as are referred to in SCHEDULE B attached hereto
and incorporated herein by reference for all purposes; and further
provided, however, that in addition to Company's obligations to
Executive under its life and permanent disability insurance programs
then in effect covering Executive, Company shall pay (a) to any
beneficiary or beneficiaries designated by the Executive in writing
or, if none, to his estate or other legal representative in the
event of Executive's death, or (b) to Company in the event of his
permanent disability a pro rata portion of the Annual Base Salary to
the last day of the month in which his death occurs and, in lieu of
the maximum bonus provided for in SUBSECTION 3(c), an amount equal
to a pro rata portion (based on the number of months or portions
thereof elapsed to the date of the Executive's death) of the Annual
Incentive Bonus, if any, paid or anticipated to be payable to the
Executive in respect of the then current year of Executive's
employment hereunder;
(ii) as permitted by SECTION 6 hereof by Executive for "Good
Reason" (as hereinafter defined) pursuant to SECTION 6;
(iii) as permitted by Section 7 hereof by Executive upon a
"Change of Control of the Company" (as hereinafter defined pursuant
to SECTION 7; or
(iv) as permitted by SECTION 7 hereof, by Company for "Cause"
(as hereinafter defined) pursuant to SECTION 7.
SECTIONS 6, 7, 8, 11 AND 12 shall survive the termination of this
Agreement.
3. Compensation.
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(a) In consideration for all of the services to be rendered by
Executive to Company, Company shall pay Executive an annual base salary
of Two Hundred Twenty Thousand Dollars ($220,000.00), subject to such
annual increases as approved by the Board of Directors or any
authorized committee thereof (the "COMPENSATION COMMITTEE"), but no
less than the increase in the U.S. government's Consumer Price Index,
all markets, for the prior twelve months (such annual base salary, as
it may be increased from time to time hereafter, being herein referred
to as the "ANNUAL BASE SALARY").
(b) The Annual Base Salary shall be paid to Executive in periodic
installments throughout the year in accordance with Company's normal
and customary pay policy for executive officers of Company.
(c) In addition to the Annual Base Salary to be paid pursuant to
SUBSECTION 3(a) of this Agreement, during the term of this Agreement or
any renewal or extension, the Company shall pay to the Executive as
incentive compensation annual bonuses in accordance with the incentive
bonus plan(s) adopted from time to time by the Board or the
Compensation Committee of the Board, as the case may be. Such plan,
among other things, shall establish a maximum bonus equal to 50% of the
Executive's Annual Base Salary.
(d) The amount of the Annual Base Salary and any other amounts
payable pursuant to this Agreement are gross amounts due by Company to
Executive hereunder, and Company shall have the right to deduct
therefrom all taxes and other amounts which may be required to be
deducted or withheld by law (including, but not limited to, federal
income tax withholding and social security payments), whether such law
is now in effect or becomes effective after the date of this Agreement.
(e) Company has adopted certain equity-based incentive compensation
plans (collectively, the "PLAN") providing for annual or other periodic
awards to key employees of, among other things, options to purchase the
Company's common stock. The Executive has previously been granted under
the Plan options to purchase 350,000 shares of the Company's Class A
Common Stock, no par value ("COMMON STOCK"). Upon the execution of this
Agreement, the Company shall grant Executive an option or options to
purchase 650,000 shares of Common Stock under the Plan. The exercise
price of such newly granted options shall be $18.80 per share, the
current fair market value. To the extent possible, such options shall
be "incentive stock options." Such options shall vest upon the earlier
of (i) an initial public offering; (ii) a Change of Control of the
Company (as hereinafter defined); or (iii) one-third of the options to
be granted hereunder at the end of each year of the three-year period
commencing upon the date of this Agreement.
(f) In addition to the foregoing, in the event that Company grants
stock options or similar incentives to its officers and employees from
time to time hereafter, Executive shall be allowed to participate in
any such future stock options or
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similar incentives on such terms as are approved by the Board of
Directors of Company or the Compensation Committee and are offered to
other executive officers of Company.
4. Executive Benefits and Business Expenses.
(a) During the term hereof, Executive shall be entitled to
participate in such employee benefit plans and programs maintained by
the Company for the benefit of its executive officers, and to
participate in applicable new or amended programs, including, but not
limited to, medical, dental, health, life, accident and disability
insurance programs, savings for retirement plans, bonus, stock option
plans, and any other incentive compensation plans.
(b) Executive shall be reimbursed for any necessary business
expenses reasonably incurred by Executive in carrying out Executive's
duties, functions and responsibilities hereunder except for expenses
related to local business travel (excluding taxi fares to and from the
airport and parking and toll charges).
(c) Executive shall receive a cash allowance of $650 per month to
cover all costs of local business travel, excluding taxi fares to and
from the airport and parking and toll charges.
5. Vacation and Sick Leave Time.
Executive shall be entitled to annual vacation and sick leave time
pursuant to the plan or policy currently in effect, or as hereafter may be
amended, available for other executive officers of Company. Vacation time shall
accrue monthly at a rate equal to four (4) weeks paid vacation every year
throughout the term of this Agreement.
6. Termination. In the event of (a) termination by the Company or any
successor of the Executive's employment hereunder without Cause, or (b)
Executive terminates his employment for Good Reason, then Executive shall be
entitled to receive: (i) 24 equal monthly installments beginning on the date of
such termination an amount (the "TERMINATION AMOUNT") equal to (x) the sum of
one-twelfth of the then Annual Base Salary plus (y)100% of the maximum bonus
provided in SUBSECTION 3(b); (ii) Executive's outstanding stock options and any
stock subject to restricted stock purchase agreements shall accelerate and fully
vest; and (iii) to the extent permitted by law, accounts under any Company
deferred compensation plans or arrangements shall accelerate and fully vest,
including as to any amounts contributed by the Company for the year in which the
termination occurs.
For the purpose of this Agreement, "GOOD REASON" is defined as (a) the
significant reduction of the Executive's title, duties, authority or
responsibilities, relative to the Executive's title, duties, authority or
responsibilities as in effect immediately prior to such reduction; (b) a
reduction by the Company in the Base Salary or bonus target amount of the
Executive as in effect immediately prior to such reduction; (c) the relocation
of the Executive to a facility or a location more than thirty (30) miles from
the Executive's then present location for a period in
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excess of 120 days, without the Executive's express written consent; (d) any
material breach of this Agreement by the Company, or (e) any act or set of facts
or circumstances which would, under Texas case law or statute, constitute a
constructive termination of the Executive.
7. Change of Control. In the event of a Change of Control of the
Company, at the option of the Executive, (a) the term of employment shall
terminate, (b) Executive's outstanding stock options and any stock subject to
restricted stock purchase agreements shall accelerate and fully vest, and (c)
the Company shall pay Executive an amount equal to two times the sum of (i) the
Annual Base Salary as in effect as of the date immediately prior to such Change
of Control, plus (ii) 100% of Executive's maximum bonus provided for in
SUBSECTION 3(c).
For this purpose, "CHANGE OF CONTROL OF THE COMPANY" is defined as:
(a) Any "person" (as such term is used in Sections 13(d) and 14(d)
of the Securities Exchange Act of 1934, as amended) becomes the
"beneficial owner" (as defined in Rule 13d-3 under said Act), directly
or indirectly, of securities of the Company representing 50% or more of
the total voting power represented by the Company's then outstanding
voting securities; or
(b) A change in the composition of the Board of Directors of the
Company occurring within a two-year period, as a result of which fewer
than a majority of the directors are Incumbent Directors. "INCUMBENT
DIRECTORS" means directors who either (i) are directors of the Company
as of the date hereof, or (ii) are elected, or nominated for election,
to the Board of Directors of the Company with the affirmative votes of
at least a majority of the Incumbent Directors at the time of such
election or termination (but shall not include an individual whose
election or nomination is in connection with an actual or threatened
proxy contest relating to the election of directors to the Company); or
(c) The consummation of a merger or consolidation of the Company
with any other corporation other than a merger or consolidation which
would result in the voting securities of the Company outstanding
immediately prior thereto continuing to represent (either by remaining
outstanding or by being converted into voting securities of the
surviving entity) at least fifty percent (50%) of the total voting
power represented by the voting securities of the Company or such
surviving entity outstanding immediately after such merger or
consolidation; or
(d) The consummation of the sale or disposition by the Company of
all or substantially all of the Company's assets.
8. Golden Parachute Gross-Up for Taxes. In the event that the
benefits provided for in this Agreement or otherwise payable to the Executive
constitute "parachute payments" within the meaning of Section 280G of the
Internal Revenue Code of 1986, as amended (the "CODE") or any successor
provision and as a result are subject to the excise tax imposed by Section 4999
of
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the Code or any successor provision, then the Executive shall receive (a) a
lump-sum cash payment from the Company sufficient to pay such excise tax, and
(b) an additional lump-sum cash payment from the Company sufficient to pay the
excise tax and all federal and state income taxes arising from the payments made
by the Company to Executive pursuant to this sentence. Unless the Company and
the Executive otherwise agree in writing, the determination of Executive's tax
liability arising from such taxes, and the amount required to be paid under this
SECTION 8, shall be made in writing by the Accountants. For purposes of making
the calculations required by this SECTION 8, the Accountants may make reasonable
assumptions and approximations concerning applicable taxes and may rely on
reasonable, good faith interpretations concerning the application of Sections
280G and 4999 of the Code or any successor provision. The Company and the
Executive shall furnish to the Accountants such information and documents as the
Accountants may reasonably request in order to make a determination under this
SECTION 8. The Company shall bear all costs the Accountants may reasonably incur
in connection with any calculations contemplated by this SECTION 8.
9. Breach by Company; Nonexclusive Remedy.
(a) In the event of a material breach of this Agreement by Company
which remains uncured after written notice thereof by Executive to
Company and the expiration of thirty (30) days opportunity to cure such
breach, Company shall be obligated to pay Executive as liquidated
damages, and not as a penalty, in a lump sum or on an annuity basis, at
Executive's sole option, an amount equal to the Termination Amount. It
is acknowledged and agreed to by the parties hereto that because actual
damages would be difficult to ascertain in the event that Company
materially breaches this Agreement, the amount of liquidated damages
provided for herein is reasonable and appropriate to remedy any such
breach and to compensate Executive for any damages incurred by him
hereunder.
(b) In the event that Company, or its successor or assigns, fails to
perform or breaches this Agreement in any material respect and
Executive shall file any judicial action for enforcement of this
Agreement and successfully recovers compensation or damages, Executive
shall be entitled to recover an additional amount as interest at ten
percent (10%) per annum on the amount owed from the date such amount
was due and payable, together with all actual expenses and attorneys'
fees reasonably incurred by Executive in obtaining legal advice
regarding his rights under this Agreement and in prosecuting and
disposing of such action.
(c) The provisions of this SECTION 6 shall not constitute the
exclusive remedy of Executive for Company's breach of this Agreement.
10. Breach by Executive.
(a) In the event that Executive willfully and materially breaches
this Agreement, Company may terminate this Agreement, at the option of
Company, (i) effective thirty (30) days after Company gives written
notice of such termination to
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Executive, or (ii) effective upon payment of thirty (30) days' pay in
lieu of notice; provided, however, that Company shall pay to Executive
all cash and non-cash compensation then accrued under this Agreement to
the date of such termination.
(b) A material breach of this Agreement by Executive, in either case
that is materially detrimental to Company as determined in good faith
by the Board of Directors of the Company, shall be deemed to have
occurred upon the happening of any of the following events (for
"CAUSE"), and the continuation thereof for a period of twenty (20) days
after notice of such breach from the Company is received by Executive,
to-wit:
(i) Executive's wanton or willful misconduct in the
performance or discharge of any of Executive's duties, functions and
responsibilities hereunder; or
(ii) Executive's conviction of any felony offense during the
term of this Agreement that adversely affects his ability to perform
and discharge his duties under this Agreement; or
(iii) Executive's breach of any of Executive's material
obligations hereunder, including, without limitation, Executive's
obligations under SECTIONS 11 AND 12 hereof.
In the event Company elects to terminate Executive pursuant to this
SECTION 7, Company shall give written notice to Executive specifically stating
each fact and reason which is the basis for such termination. Following such
termination, Company shall have no further obligation to Executive under this
Agreement except for accrued and unpaid cash and non-cash compensation payments
then due and owing to Executive.
11. Covenant not to Compete.
(a) Executive covenants and agrees that Executive will not during
the term of this Agreement and for a period of two (2) years following
the termination of this Agreement, directly or indirectly in the United
States of America or Canada, as a principal, partner, agent, consultant
or otherwise of any person, partnership, corporation or other entity,
engage in or be financially interested in any business or group of
affiliated or unaffiliated businesses (other than Company) that engages
in a business which is competitive with any material line or business
in which the Company or its affiliates then currently engages or which
the Company or its affiliates are then currently developing.
(b) Company and Executive hereby agree that in the event that either
the length of, time or geographical area set forth herein is deemed too
restrictive by any court of competent jurisdiction, the court may
reduce such restriction to those which it deems reasonable under the
circumstances. This SECTION 11 shall not prohibit Executive from
investing in less than five percent (5%) of any class of equity
security of a company that
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has a class of equity security registered pursuant to Section 12(b) or
12(g) of the Securities Exchange Act of 1934.
12. Confidentiality, Proprietary Information and Trade Secrets.
(a) During the term of this Agreement and for a period of two (2)
years after the termination of this Agreement, Executive shall not use
for his personal benefit, or disclose, communicate or divulge to, or
use for the direct or indirect benefit of any person, firm, association
or company other than Company, any material referred to in SUBSECTIONS
12(f), (g) AND (h), or any proprietary information regarding the
business methods, business, policies, procedures, techniques, research
or development projects or results, trade secrets or other knowledge or
processes of, or developed by, Company or any names and addresses of
customers or clients or any data on or relating to past, present or
prospective customers or clients or any other confidential information
relating to or dealing with the business operations or activities of
Company, made known to Executive or learned or acquired by Executive
while employed by Company.
(b) During the term of this Agreement and for a period of two (2)
years after the termination of this Agreement, Executive shall not,
directly or indirectly, in any geographic area served by Company or its
affiliates induce or attempt to influence any employee of Company or
its affiliates to terminate his or her employment with Company or its
affiliates or to hire any such employee of Company or its affiliates.
(c) Executive acknowledges and agrees that the restrictions
contained in SECTION 11 hereof and in SUBSECTIONS 12(a) AND (b) (the
"RESTRICTIONS"), in view of the nature of the business in which Company
is engaged, are reasonable and necessary in order to protect the
legitimate business interests of Company, and that any violation
thereof would result in irreparable harm to Company, and Executive
therefore further acknowledges and agrees that, in the event Executive
violates, or threatens to violate, any of such Restrictions, Company
shall be entitled to obtain from any court of competent jurisdiction,
without the posting of any bond or other security, preliminary and
permanent injunctive or equitable relief as well as damages and an
equitable accounting of all earnings, profits and other benefits
arising from such violation, which rights shall be cumulative and in
addition to any other rights or remedies at law or in equity to which
Company may be entitled.
(d) If any Restriction, or any part thereof, is determined in any
judicial or administrative proceeding to be invalid or unenforceable,
the remainder of the Restrictions shall not thereby be affected and
shall be given full effect, without regard to the invalid provisions.
(e) If Executive violates any of the Restrictions, the restrictive
period shall not run in favor of Executive from the time of the
commencement of any such violation until such time as such violation
shall be cured by Executive to the satisfaction of Company.
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(f) It is recognized that Executive will have access to certain
confidential information of Company and its affiliates, and that such
information constitutes valuable, special and unique property of
Company and its affiliates. Executive shall not at any time during the
term of this Agreement and for a period of two years after the
termination of this Agreement disclose any such confidential
information to any party for any reason or purpose except as may be
made in the normal cause of business of Company and for its benefit.
(g) All advertising, sales, and other materials or articles,
including, without limitation, data processing reports, customer sales
analyses, invoices, or any other materials or data of any kind
furnished to Executive by Company or developed by Executive on behalf
of Company or at Company's direction or for Company's use or otherwise
in connection with Executive's employment hereunder, are and shall
remain the sole, exclusive and confidential property of Company. In the
event that Company requests the return of such materials at any time
during, upon or after the termination of Executive's employment,
Executive shall immediately deliver the same, and any and all copies
thereof, to Company.
(h) For purposes of this Agreement, Confidential Information shall
include the Company's trade secrets and proprietary information,
techniques, sketches, drawings, know-how, processes, apparatus,
equipment, algorithms, software programs, software source documents and
formulae related to the current, future and proposed products and
services of the Company, and/or the Company's parents, subsidiaries,
customers and/or vendors, whether delivered in written (or other
tangible) form or verbally, and includes, without limitation,
information concerning research, design details and specifications,
financial data, procurement requirements, customer lists, business
forecasts and purchasing, sales, merchandising, development and
marketing plans, but shall exclude (i) confidential information that
was in the public domain at the time it was communicated to the
Executive; (ii) confidential information that enters the public domain
subsequent to the time it was communicated to Executive through no
fault of the Executive; or (iii) confidential information that was in
Executive's possession free of any obligation of confidence at the time
it was communicated to Executive.
13. Representations and Warranties of Executive. Except for restrictions
heretofore disclosed in writing by Executive to Company, Executive represents
and warrants to Company that (a) there are no restrictions, agreements or
understandings whatsoever to which Executive is a party which would prevent or
make unlawful the execution or performance of this Agreement or his employment
hereunder; (b) his execution of this Agreement and his employment hereunder
shall not constitute a breach of any contract, agreement or understanding to
which he is a party or by which he may be bound; and (c) he is free and able to
execute and perform this Agreement in all respects.
14. Successors.
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(a) This Agreement shall inure to the benefit of and be binding upon
Company and Executive. This Agreement and the benefits and obligations
of Company hereunder may be assigned by Company to any person acquiring
all or substantially all of the assets or all of the issued and
outstanding equity securities of Company; provided, however, that
Company shall remain jointly and severally liable to Executive with
such assignee for the fulfillment of Company's obligations under this
Agreement, or to any corporation with which Company may be merged or
consolidated.
(b) This Agreement shall inure to the benefit of and be binding upon
Executive and Executive's executors, administrators, trustees, heirs
and legal representatives. Because Executive's duties, functions,
responsibilities, and services hereunder are special, personal and
unique in nature, Executive shall not transfer, sell or assign, by
operation of law or otherwise, Executive's obligations under this
Agreement.
15. Waivers. Neither the failure nor any delay on the part of either
party hereto to exercise any right, remedy, power or privilege (collectively,
"RIGHT") under this Agreement shall operate as a waiver, abandonment or release
thereof; nor shall any single or partial exercise of any Right preclude any
other or further exercise of the same or of any other Right, nor shall any
waiver of any Right with respect to any occurrence be construed as a waiver of
such Right with respect to any other occurrence.
16. Severability. If any provision of this Agreement shall be held to
be invalid or unenforceable, such invalidity or unenforceability shall not
affect or impair the validity or enforceability of the remaining provisions of
this Agreement, which provisions shall remain in full force and effect and the
parties hereto shall continue to be bound thereby.
17. Entire Agreement. This Agreement contains the entire agreement
between the parties relating to the subject matter hereof and supersedes all
previous agreements and understandings between the parties, whether written or
oral, with respect to the subject matter hereof. This Agreement shall not be
modified, altered or amended except by a writing executed by both parties.
18. Notices. Any notice or other communication provided for in this
Agreement or contemplated hereby shall be sufficiently given if given in writing
and delivered personally or by certified mail, return receipt requested, and
addressed, in the case of the Company, to the Company at:
I 3S, Inc.
0000 Xxxxxxxxx Xxxxx
Xxxxxx, Xxxxx 00000
and in the case of Executive, to the address set forth in the introductory
paragraph. Notice shall be effective when so delivered personally. Either party
may designate a different address by giving notice of change of address in the
manner provided above.
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19. Construction of Agreement. This Agreement shall be governed by,
construed and enforced in accordance with the laws of the State of Texas.
[Balance of page intentionally left blank]
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
and as of the day and year above first written,
"Company"
I 3S, INC.
By: /s/ XXXXX X. XXXXX
----------------------------------------
Printed Name: Xxxxx X. Xxxxx
-----------------------
Title: Chief Executive Officer and
Chairman
------------------------------
"Executive"
/s/ XXXXXXX XXXXXXXX
----------------------------------------
Xxxxxxx Xxxxxxxx
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SCHEDULE A
TO
EMPLOYMENT AGREEMENT BY
AND BETWEEN I 3S, INC., AS COMPANY,
AND
XXXXXXX XXXXXXXX, AS EXECUTIVE
DESCRIPTION OF FUNCTIONS, DUTIES AND RESPONSIBILITIES OF EXECUTIVE
Executive shall oversee and have the primary responsibility within the
Company for all corporate and operational matters of the Company, including
without limitation, the (i) development and management of I3S' strategic
relationships, including its high speed data services' partnerships, data
communications services, and Internet applications alliances; (ii) corporate
affairs, including corporate finance, legal, financial reporting, and strategic
planning; and (iii) corporate operations, including internal business operations
and P&L management.
Schedule A, Description of Functions, Duties and Responsibilities of Executive -
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SCHEDULE B
TO
EMPLOYMENT AGREEMENT
BY AND BETWEEN
I 3S, INC., AS COMPANY
AND
XXXXXXX XXXXXXXX, AS EXECUTIVE
EXECUTIVE OFFICER BENEFITS OF COMPANY
1. Life insurance
2. Medical insurance
3. Dental insurance
Schedule B, Executive Officer Benefits of Company - Solo Page
