IOWA TELECOMMUNICATIONS SERVICES,
INC.
THIS AGREEMENT
(this “ Agreement ”) is made and entered into
this 24 th
day of September, 2009, by and
between IOWA TELECOMMUNICATIONS SERVICES, INC., an Iowa corporation
(the “ Company ”) and ALAN L. WELLS, an Iowa
resident (“ Executive ”).
WHEREAS, the
Company and the Executive desire to enter this Agreement to embody
the agreement between the parties relating to the terms and
conditions of Executive’s employment as President and Chief
Executive Officer of the Company.
NOW, THEREFORE, in
consideration of the mutual promises herein contained, the Company
and the Executive agree as follows:
1.
Employment . The Company hereby employs Executive and
Executive hereby accepts employment for a term commencing on the
date hereof (the “ Effective Date ”), and ending
December 31, 2012, at which time this Agreement shall be
automatically extended for successive terms of one year each unless
terminated effective at the end of the then current term by either
party upon at least one hundred eighty (180) days advance
written notice to the other party prior to the end of the then
current term (as so extended, the “ Term ”);
provided , however , that either Executive or the
Company may terminate the employment of Executive during the Term
in accordance with Section 6 and subject to the right of
Executive to receive payments and other benefits that may be due
pursuant to Section 8.
2.
Duties . Executive shall serve as President and Chief
Executive Officer of the Company and shall have ultimate
responsibility to the Company’s Board of Directors (the
“ Board of Directors ”) for the strategic
position of the Company in the telecommunications industry.
Executive agrees to devote his full time and best efforts to the
Company’s business and affairs and to the performance of the
following services and such other services as may be assigned to
him from time to time by the Board of Directors:
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(a)
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provide direction, oversight and
general management to the staff of the Company and the
Company’s subsidiaries;
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(b)
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assist the Board of Directors in
development of the Company’s strategic planning through
evaluation of opportunities, analysis of operational methodologies
and competitive analysis;
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(c)
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identify, research and quantify new
products and services which will assist in expanding the
Company’s strategic position;
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(d)
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communicate regularly and
effectively to the Board of Directors regarding the Company’s
economic, operational and strategic position in the
telecommunications industry;
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(e)
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Executive shall fully comply with
all applicable laws, rules and regulations, the failure to fully
comply with which could reasonably be expected to have a material
adverse effect upon the Company; and
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(f)
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perform such other duties as may be
assigned by the Board of Directors which are consistent with the
position of President/CEO.
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Notwithstanding
the above, Executive shall be free to devote reasonable time and
attention to personal, public and charitable affairs so long as
such activities do not interfere with his full-time employment
hereunder and which do not violate any other provision of this
Agreement. Executive, at all times during his employment with the
Company, shall comply with the Company’s reasonable
standards, regulations and policies as determined or set forth by
the Board of Directors from time to time and as applicable and
communicated to all employees and/or executive employees of the
Company.
3.
Compensation . As compensation for all services
rendered under this Agreement, Executive shall be paid the
following:
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(a)
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Base Salary . Executive shall receive an annual
base salary of not less than $420,000 (which is Executive’s
current base salary), subject to review at least annually by the
Compensation Committee for possible increases but not reductions as
provided in Section 3(c) (as so adjusted, the “ Base
Salary ”). The Base Salary shall be payable bi-weekly or
semi-monthly in accordance with the Company’s normal payroll
processes and procedures.
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(b)
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Bonus .
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(i) Executive shall receive an annual bonus
equal to a percentage of Executive’s Base Salary contingent
upon Executive’s attainment of at least the
“threshold” level of performance goals as established
by the Compensation Committee (the “ Compensation
Committee ”) of the Board of Directors in its sole and
absolute discretion. The “target” bonus shall be 100%
of Executive’s Base Salary and the “maximum”
bonus shall be 200% of Executive’s Base Salary (i.e., in no
event shall Executive’s bonus exceed 200% of
Executive’s Base Salary). One-half of such potential bonus
shall be based on the Company’s “Adjusted EBITDA”
(as defined below) performance goals to be determined by the
Compensation Committee on an annual basis. If the Company’s
Adjusted EBITDA is between the “threshold” and
“target” levels, the Adjusted EBITDA-based portion of
Executive’s bonus shall equal a prorated portion (on a
straight line basis) of between 0% and 50% of Executive’s
Base Salary. If the Company’s Adjusted EBITDA is between the
“target” and “maximum” levels, the Adjusted
EBITDA-based portion of Executive’s bonus shall
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equal a
prorated portion (on a straight line basis) of between 50% and 100%
of Executive’s Base Salary. The other half of such potential
bonus shall be determined by the Compensation Committee in its sole
and absolute discretion. For purposes of this Agreement, “
Adjusted EBITDA ” shall mean the Company’s
earnings before income taxes, depreciation and amortization, as
adjusted pursuant to the same formula used by the Company in
connection with the bonus compensation plans of the other senior
executives of the Company. The Adjusted EBITDA thresholds required
to earn a bonus at each given level shall be provided to Executive
no later than the first ninety (90) days of the fiscal year to
which such formula relates, except that the thresholds for 2009
shall be as previously provided to Executive. The bonus for any
fiscal year will be earned and accrued if Executive is employed by
the Company on the last day of such fiscal year, regardless of
whether Executive’s employment terminates thereafter due to
Executive’s death or “Disability”, termination by
the Company without “Cause” or by Executive for
“Good Reason,” or the term expires because the Company
has given notice of nonrenewal pursuant to Section 1 hereof;
provided that such bonus shall be forfeited if, prior to the date
the bonus is paid, Executive’s employment with the Company is
terminated by the Company for “Cause” or by Executive
without “Good Reason” or if the Term expires because
Executive has given notice of nonrenewal pursuant to Section 1
hereof and Executive does not remain employed on an
“at-will” basis through the date the bonus is
paid.
(ii) Except for any portion of the bonus
paid in restricted stock pursuant to paragraph (iii) below,
the bonus shall be payable in cash after the last day of the fiscal
year to which the bonus criteria relate promptly following the
availability of financial statements for such fiscal year, but in
no event later than the last day of the following fiscal
year.
(iii) Bonus amounts in excess of 100% of
Executive’s Base Salary may, in the sole and absolute
discretion of the Compensation Committee be paid in Company
restricted stock valued at the fair market value as of the date of
grant in accordance with the Company’s 2005 Equity Incentive
Plan, or other equity compensation plans which may be adopted in
the future, and vesting over three years as follows: 50% on the
second anniversary and 50% on the third anniversary of the last day
of the fiscal year to which the bonus criteria relates, subject to
accelerated vesting immediately upon any of the following events:
(A) if Executive’s employment with the Company is
terminated by the Company without “Cause” (as defined
in Section 6), (B) if Executive’s employment with
the Company is terminated due to Executive’s death or
“Disability” (as defined in Section 7),
(C) if Executive’s employment with the Company is
terminated by Executive for “Good Reason” (as defined
in Section 6), or (D) if the Term shall expire because
the Company has given notice of nonrenewal pursuant to
Section 1 hereof. The date of grant of each such
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restricted
stock grant shall be promptly following the availability of
financial statements for such fiscal year, but in no event later
than the last day of the following year. Such grant shall be made
if the Executive is employed by the Company on the date of grant or
if the Executive is entitled to accelerated vesting under Clause
(A), (B), (C) or (D) above. Unless and until such shares
of restricted stock are forfeited, dividends payable to common
shareholders of record of the Company on or after the grant date of
such restricted stock shall be paid to Executive whether or not
such shares are vested.
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(c)
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Restricted Stock
. Executive shall
receive, upon the Effective Date, a one-time grant of 100,000
shares of restricted stock under the Company’s 2005 Stock
Incentive Plan (the “ 2005 Plan ”) vesting over
three years as follows: 33 1 / 3 % on the first anniversary of the
Effective Date; 33 1 / 3 % on the second anniversary of the
Effective Date; 33 1 / 3 % on the third anniversary of the
Effective Date; and, subject to accelerated vesting immediately
upon any of the following events: (i) if Executive’s
employment with the Company is terminated by the Company without
Cause “in connection with a Change of Control” (as
defined below), or (ii) if Executive’s employment is
terminated by Executive for Good Reason “in connection with a
Change of Control;” provided that, if another Company
executive receives a restricted stock grant under the 2005 Plan
that accelerates upon such executive’s death or disability,
then Executive’s restricted stock grant under this Section
3(c) shall also accelerate upon the occurrence of the same such
event(s) with respect to Executive. Unless and until such shares of
restricted stock are forfeited, dividends payable to shareholders
of record of the Company on or after the grant date of such
restricted stock shall be paid to Executive whether or not such
shares are vested.
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For purposes of
this Agreement, a “ Change of Control ” of the
Company shall be deemed to have occurred if:
(1) any
“person” (as such term is used in Sections 13(d) and
14(d) of the Securities Exchange Act of 1934 (the “Exchange
Act”)) is or becomes the “beneficial owner” (as
defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, of securities of the Company representing 50% or more
of the combined voting power (with respect to the election of
directors) of the Company’s then outstanding
securities;
(2) at any time
after the execution of this Agreement, individuals who as of the
date of the execution of this Agreement constitute the Board of
Directors (and any new director whose election to the Board or
nomination for election to the Board by the Company’s
shareholders was approved by a vote of at least two-thirds (2/3) of
the members of the Board of Directors then still in office) cease
for any reason to constitute a majority of the Board;
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(3) the
consummation of a merger or consolidation of the Company with or
into any other corporation, other than a merger or
consolidation which results 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 or a parent company of the
surviving entity) more than 50% of the combined voting power (with
respect to the election of directors) of the securities of the
Company or of such surviving entity or parent company thereof
outstanding immediately after such merger or consolidation;
or
(4) the
consummation of a plan of complete liquidation of the Company or of
an agreement for the sale or disposition by the Company of all or
substantially all of the Company’s business or
assets.
For purposes of
this Agreement, termination of Executive’s employment shall
be considered “ in connection with a Change of Control
” if such termination occurs (i) upon or after a Change
of Control and prior to the second anniversary of a Change of
Control, (ii) after the Company enters into an agreement for a
transaction, the consummation of which would result in a Change of
Control, and before termination or expiration of such agreement, or
(iii) after a third party announces a tender or exchange offer
or proxy contest that, if completed, would result in a Change of
Control and before expiration or termination of such offer or
contest.
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(d)
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Review of Base Salary and Restricted
Stock . The
Compensation Committee will review and evaluate, in its sole and
absolute discretion, increases to the Executive’s Base Salary
and potential additional grants to Executive under the
Company’s 2005 Stock Incentive Plan, or other equity
compensation plans which may be adopted in the future, on an annual
basis. Without limitation of the Compensation Committee’s
discretion, such review is expected to consider factors including
Executive’s contributions to the success and prosperity of
the Company during the previous year, the then current and
projected financial condition of the Company, general economic and
market conditions, and the need to remain competitive with regard
to compensation for senior executives within the telecommunications
industry.
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4.
Business Expense Reimbursement . During the Term,
Executive shall be entitled to prompt reimbursement by the Company
for all reasonable, ordinary and necessary travel, entertainment
and other business related expenses incurred by Executive (in
accordance with the policies and procedures established by the
Company from time to time) in the performance of his duties and
responsibilities under this Agreement, including expenditures for
professional meetings, seminars, training, business travel and
social membership at the Des Moines Golf and Country Club or
similar business luncheon club; provided , however ,
that Executive shall properly account for such expenses in
accordance with federal, state and local tax requirements and the
Company’s policies and procedures; and provided, further,
that in the case of taxable reimbursements or in-kind benefits that
are subject to Section 409A of the Internal Revenue Code: such
reimbursements or in-
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kind benefits
shall be pursuant to an objectively determinable nondiscretionary
definition of expenses eligible for reimbursement or the in-kind
benefits to be provided; the amount of such expenses that are
eligible for reimbursement, or in-kind benefits provided, during
Executive’s taxable year may not affect the expenses eligible
for reimbursement, or in-kind benefits to be provided, in any other
taxable year; the reimbursement must be paid to Executive promptly
following Executive’s submission of the expense report, but
no later than the last day of the Executive’s taxable year
following the taxable year in which the expense was incurred; and
the right to reimbursement or in-kind benefits is not subject to
liquidation or exchange for another benefit.
5.
Employee Benefits . The Company shall provide such
pension, life insurance, disability insurance, health insurance and
other benefits, including a deferred compensation plan, to
Executive as the Company provides for the Company’s senior
executive officers generally, including the following:
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(a)
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Vacation . Executive shall receive five
weeks’ paid vacation each year, plus all holidays in
accordance with the Company’s policies in effect from time to
time. Executive shall not be entitled to carry unused vacation
forward from one employment year to the next. Executive shall not
be entitled to compensation in any form in lieu of use of vacation
and/or holiday time off.
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(b)
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Vehicle . During the Term, Executive shall
be entitled to the use of a leased or Company-owned vehicle.
Executive may select a new car when permitted by the Compensation
Committee of the Board of Directors. Any new car selected by
Executive shall have a cost not materially greater than the then
current cost of a new car that is of comparable make and model to
Executive’s current car provided by the Company. Executive
may use the vehicle for personal as well as business purposes, and
Executive’s spouse may also use and operate the vehicle.
Executive shall assume any tax liability arising from non-business
use. Executive shall maintain the vehicle in accord with the
manufacturer’s or lessor’s maintenance schedule, and
the Company shall pay all costs associated with required
maintenance, repair and use of the vehicle.
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(c)
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401(k) Plan . Executive shall be entitled to
participate in the Company’s 401(k) defined contribution
retirement plan up to the amounts permitted by applicable
laws.
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(d)
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Deferred Compensation
Plan . In
accordance with the Company’s Deferred Compensation Plan, for
each calendar year during the Term, the Company will credit
Executive’s deferred compensation account with the difference
between 3% of Executive’s base salary and annual cash bonus
compensation for that calendar year, and the amount of the
Company’s contributions (other than matching contributions
and elective deferrals) made to Executive’s account under the
Iowa Telecom Savings Plan for that calendar year. In addition, the
Company shall also credit Executive’s deferred compensation
account with the matching contribution that Executive would have
received
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if
Executive’s deferrals under the Company’s Deferred
Compensation Plan had instead been made to the Iowa Telecom Savings
Plan, without regard to the annual compensation limits then in
effect under Section 401(a)(17) of the Internal Revenue Code
or any other Code section or rule. Furthermore, the Company will
also credit Executive’s deferred compensation account in a
dollar amount equal to five percent (5%) of the sum of
Executive’s base salary and annual cash bonus. Such deferrals
shall all be credited to Executive’s deferred compensation
account during the year in accordance with the Company’s
payroll cycles, and shall vest immediately. No amendment to the
Deferred Compensation Plan shall make the economic benefits of the
plan less favorable to Executive except as required by law.
Following a Change of Control, payment under the Deferred
Compensation Plan will not be accelerated (such as, for example, in
an immediate lump sum as a result of plan termination) without
Executive’s written consent.
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(e)
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Limit on Other
Compensation . Notwithstanding the foregoing, the
amount of the Company’s matching or discretionary
contributions for Executive’s account under the
Company’s defined contribution retirement plans and deferred
compensation plans shall not exceed $100,000 per year.
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(a)
Termination for Cause . The Company shall have the right to
terminate Executive’s employment for “Cause,”
effective upon approval by the Company’s Board of Directors
pursuant to Section 21 and upon thirty (30) days written
notice to Executive. Such notice shall state in reasonable detail
the nature of the Cause, and, if such stated Cause is of the type
described in paragraphs (iii) or (vi) below, during such
thirty (30) day period Executive shall have the opportunity to
cure the stated Cause. Unless Executive cures such stated Cause
described in paragraphs (iii) or (vi) below,
Executive’s employment shall terminate at the end of such
thirty (30) day period, but without prejudice to
Executive’s right to contest the existence of such Cause or
to contest the fact that the Cause has not been cured. For the
purposes of this Agreement, “ Cause ” shall mean
only:
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(i)
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a
conviction of Executive of, or a guilty or nolo contendere plea by
Executive with respect to, any crime punishable as a felony or
involving moral turpitude, or any bar against Executive from
serving as a director, officer or employee of any publicly-traded
company;
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(ii)
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any
act of dishonesty either involving his employment or which is
harmful to the Company or any subsidiary, or to employees of the
Company or any subsidiary;
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(iii)
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any
failure of Executive to materially comply with this Agreement or
with the reasonable policies, regulations and directives of the
Company as in effect from time to time;
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(iv)
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any
act or omission on the part of Executive which is clearly and
materially harmful to the reputation or business of the Company,
including, but not limited to, conduct which is inconsistent with
federal and state laws respecting harassment of, or discrimination
against, one or more of the Company’s employees;
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(v)
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any
material violation by Executive of the provisions of any
confidentiality and/or non-compete agreement between the Company
and Executive; or
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(vi)
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any
willful failure to perform the duties described in Section 2
hereof, unless occasioned by illness, injury or
“Disability” as defined in Section 7.
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(b)
Termination for Convenience . The Company shall have the
right to terminate Executive’s employment for convenience and
without Cause, effective upon thirty (30) days written notice
to Executive.
(c)
Resignation for Good Reason . Executive shall have the right
to terminate his employment with the Company for “Good
Reason,” effective upon thirty (30) days written notice
to the Company. Such notice shall state in reasonable detail the
nature of the Good Reason and, during such thirty (30) day
period, the Company shall have the opportunity to cure the stated
Good Reason. Unless the Company cures such stated Good Reason,
Executive’s employment shall terminate at the end of such
thirty (30) day period, but without prejudice to the
Company’s right to contest the existence of such Good Reason
or to contest the fact that the Good Reason has not been cured. Any
such resignation shall be for “ Good Reason ”
only if due to one or more of the following
circumstances:
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(i)
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any
material breach by the Company of this Agreement, including without
limitation, any failure by the Company to pay any amount that is
due under this Agreement or to take any action that is required
under this Agreement, or any reduction in Executive’s Base
Salary or in the bonus plan described in Section 3(b) of this
Agreement;
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(ii)
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any
action that materially diminishes Executive’s position,
authority, duties or responsibilities as Chief Executive Officer of
the Company, including without limitation a requirement that
Executive report to anyone other than the Board of Directors of the
Company, the creation of a new executive position reporting
directly to the Board of Directors (except as required by law) or a
change by the Company whereby any executive position which reports
to Executive thereafter reports directly to the Board of Directors
(except as required by law); for purposes of this paragraph, if the
Company becomes a direct or indirect subsidiary of an ultimate
parent company in an unbroken chain of companies ending with the
Company, with each company (other than the
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Company) owning stock possessing
fifty percent or more of the total combined power of all classes of
stock in one of the other companies in the chain, and if Executive
is not the Chief Executive Officer of such parent company or is
required to report to anyone other than the Board of Directors of
such parent company, that shall be considered to be an action that
materially diminishes Executive’s position and gives rise to
a “Good Reason” event;
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(iii)
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any
requirement that Executive regularly render his services at a
location other than one that is within forty-five (45) miles
of Newton, Iowa, other than necessary business travel occasioned by
the performance of the duties described in Section 2; provided,
however, that Executive may refuse to render his services from such
other location and need not actually render his services from such
other location in order to invoke the protection of this paragraph
(iii), it being sufficient that the Company has required the
Executive to perform his services fr
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