Exhibit 10.3
EMPLOYMENT AGREEMENT
--------------------
This Employment Agreement (this "Agreement"), effective on the date hereof,
is entered into in Richardson, Texas by and between @TRACK Communications, Inc.,
a Delaware corporation, with its principal place of business located at 1155 Kas
Drive, Suite 100, Richardson, Texas, 75081 ("Employer"), and W. Michael Smith,
an individual residing 3236 Langley Drive, Plano, Texas, 75025 ("Executive").
NOW, THEREFORE, in consideration of the mutual covenants set forth herein,
Employer and Executive, intending to be legally bound, hereby agree as follows:
1. Employment Relationship. Employer hereby employs Executive, and Executive
-----------------------
hereby accepts such employment, upon the terms and conditions set forth in
this Agreement. Such employment relationship shall continue for the stated
term of this Agreement, as described in Paragraph 8 hereof, unless earlier
terminated pursuant to Paragraph 5 hereof.
2. Position and Responsibilities of Executive. Executive shall be employed as
------------------------------------------
Senior Vice President, Sales and Marketing with job responsibilities
related thereto, and such job responsibilities may be expanded at the sole
discretion of the Chief Executive Officer and/or the Board of Directors of
Employer. Executive shall report to the Chief Executive Officer and/or
Board of Directors of Employer and shall devote such time, skill and
attention to the business of Employer as shall be required for the
efficient management thereof, and shall manage and supervise such business,
and shall devote his full time best efforts to the faithful performance of
his duties on behalf of Employer. If Executive is the Chief Executive
Officer, such Executive shall report to the Board of Directors of the
Company. Executive shall also perform such other duties, and may have job
responsibilities and titles modified from time to time as may be requested
by the Chief Executive Officer and/or the Board of Directors of Employer,
provided such duties and job titles are generally consistent with the level
of responsibility currently held by Executive. Executive's duties shall be
performed at the Employer's corporate headquarters in Richardson, Texas.
The location at which Executive performs his duties shall not be relocated
more than 30 miles from Employer's corporate headquarters on the date
hereof, without Executive's written consent, provided that the Executive
may be required to travel and/or work from time to time on a non-permanent
basis wherever the Employer shall reasonably require. Executive shall not
engage in additional gainful employment of any kind or undertake any role
or position, whether or not for compensation, with any competitor of
Employer during the term of this Agreement without advance written approval
of the Board of Directors of Employer.
3. Compensation. For all services rendered by Executive pursuant to this
------------
Agreement, Employer shall pay to Executive, and Executive shall accept as
full compensation hereunder the following:
a. Salary. Executive shall receive a salary of $14,175.00 per month
------
payable by Employer in semi-monthly amounts in Richardson, Texas.
Executive's salary
shall be subject to all appropriate federal and state withholding
taxes and shall be payable in accordance with the normal payroll
procedures of Employer. Employer shall not reduce Executive's salary
without Executive's written consent. The Company shall review for
potential increase such Executive's annual base salary on or about
January 1 of each calendar year.
b. Benefits and Perquisites. Executive shall be entitled to participate
------------------------
in the Executive benefit plans provided by Employer for all employees
generally, and for executive employees of Employer. Employer shall be
entitled to change such plans from time to time, and the parties
acknowledge that at the initial date of this Agreement the fringe
benefits provided to Executive include a corporate 401(k) plan,
health, dental, life, short and long-term disability insurance for the
Executive, and reimbursement of certain expenses in accordance with
the policies and procedures of Employer.
c. Discretionary Bonuses. The Board of Directors of Employer shall
---------------------
establish a discretionary incentive bonus plan for Executive based on
various targets and performance criteria to be established by the
Board of Directors of Employer. The evaluation of the performance of
Executive as measured by the applicable targets and the awarding of
applicable bonuses, if any, shall be at the sole discretion of the
Board of Directors of Employer. The maximum annual bonus which may be
awarded to Executive shall be in the amount of thirty percent (30%) of
Executive's annual base salary at each calendar year end of Employer
during the term of this Agreement, pro-rated for partial years of
employment. The annual discretionary bonus may be awarded in whole,
in part, based on the level of incentive bonus plan performance
criteria achieved by Executive, in the sole judgement of the Board of
Directors of Employer. If Executive terminates this Agreement prior to
the expiration of the initial one (1) year term or if Employer
terminates this Agreement for Cause as per Paragraph 5(b), the
Executive will not be paid any Discretionary Bonus, in whole or in
part.
d. Stock Options. Employer shall grant to Executive 484,120 stock
-------------
options (the "New Options") pursuant to the @Track Communications,
Inc. Stock Option Plan (the "Plan"); provided, however, that such New
Options shall become vested and exercisable three (3) years from date
of grant. Additionally, if Executive is terminated without cause,
such New Options shall immediately become fully vested and exercisable
for a period of sixty (60) days from such date of termination without
cause. If Executive fails to exercise such New Options within sixty
(60) days of the date of termination, such New Options shall be
forfeited. Executive currently holds 29,200 stock options previously
issued under the Plan of which 15,880 are fully vested and
exercisable. Upon execution of this Agreement, Executive hereby
forfeits any stock options previously issued under the Plan which are
not fully vested and exercisable at the time of the signing of this
Agreement.
4. Protective Covenants. Executive recognizes that his employment by Employer
--------------------
is one of the highest trust and confidence because (i) Executive has become
and/or in the future
will become fully familiar with all aspects of Employer's business during
the period of his employment with Employer, (ii) certain information of
which Executive will gain knowledge during his employment by Employer is
proprietary and confidential information and is of special and peculiar
value to Employer, and (iii) if any such proprietary and confidential
information were imparted to or became known by any person, including
Executive, engaging in a business in competition with that of Employer,
hardship, loss and irreparable injury and damage could result to Employer,
the measurement of which would be difficult if not impossible to ascertain.
Executive further acknowledges that Employer has developed unique skills,
concepts, sales presentations, marketing programs, marketing strategy,
business practices, methods of operation, pricing information, production
cost information, trademarks, licenses, technical information, proprietary
information, computer software programs, tapes and discs concerning its
operations systems, customer lists, customer leads, documents identifying
past, present and future customers, customer profile and preference data,
hiring and training methods, investment policies, financial and other
confidential and proprietary information concerning its operations and
expansion plans ("Trade Secrets"). Therefore, Executive agrees that it is
necessary for Employer to protect its business and that of its affiliates
from such damage, and Executive further agrees that the following covenants
constitute a reasonable and appropriate means, consistent with the best
interest of both Executive and Employer, to protect Employer or its
affiliates against damage due to loss or disclosure of proprietary
information or Trade Secrets and shall apply to and be binding upon
Executive as provided herein:
a. Trade Secrets. Executive recognizes that his position with Employer
-------------
is one of the highest trust and confidence by reason of Executive's
access to and contact with certain Trade Secrets of Employer.
Executive agrees and covenants that, except as may be required by
Employer in connection with this Agreement, or with the prior written
consent of Employer, Executive shall not, either during the term of
this Agreement or at any time thereafter, directly or indirectly, use
for Executive's own benefit or for the benefit of another, or
disclose, disseminate, or distribute to another, except as directed by
Employer or as required for the performance of Executive's duties on
behalf of the Employer, any Trade Secret (whether or not acquired,
learned, obtained, or developed by Executive alone or in conjunction
with others) of Employer or of others with whom Employer has a
business relationship. All Trade Secrets, and all memoranda, notes,
records, drawings, documents, or other writings whatsoever made,
compiled, acquired, or received by Executive at any time during his
employment with Employer, including during the term of this Agreement,
arising out of, in connection with, or related to any activity or
business of Employer, including, but not limited to, the customers,
suppliers, or others with whom Employer has a business relationship,
the arrangements of Employer with such parties, and the pricing and
expansion policies and strategy of Employer, are, and shall continue
to be, the sole and exclusive property of Employer and shall, together
with all copies thereof, any and all documents constituting or
relating to Employer's proprietary information and Trade Secrets, and
all advertising literature, be returned and delivered to Employer by
Executive immediately, without demand, upon the termination of this
Agreement, or at any time upon Employer's demand.
Executive acknowledges that Employer would not employ Executive
or provide Executive access to Employer's Trade Secrets and
proprietary and confidential information but for Executive's covenants
in this Paragraph 4.
Executive represents and warrants that he is not bound by any
agreement with any prior employer or other party that will be breached
by execution and performance of this Agreement, or which would
otherwise prevent him from performing his duties with Employer as set
forth in this Agreement. Executive represents and warrants that he
has not retained any copies of proprietary and confidential
information of any prior employer, and he will not use or rely on any
confidential and proprietary information of any prior employer in
carrying out her duties for Employer.
b. Covenant Not to Compete. In consideration of the numerous mutual
-----------------------
promises contained in the Agreement between Employer and the
Executive, including, without limitation, those involving access to
Trade Secrets and confidential information and training, and in order
to protect Employer's Trade Secrets and the confidential information
and to reduce the likelihood of irreparable damage which would occur
in the event such information is provided to or used by a competitor
of Employer, Executive agrees that during his employment and for an
additional period of twelve (12) months immediately following the
voluntary or involuntary termination of his employment for any reason
whatsoever (the "Non-Competition Term"), Executive will not, without
the prior written consent of Employer (which consent may be withheld
in its sole discretion), enter the employ of any person or entity,
either directly or indirectly either as principal, agent,
representative, shareholder (except owning publicly traded stock for
investment purposes only in which Executive owns less than 5%)
consultant, officer, business partner, associate, Executive or
otherwise, with a place of business in the United States of America
and/or Canada, which sells or offers to sell services and/or products
which compete directly with the services and/or products offered or to
be offered for sale by Employer.
Executive hereby acknowledges that the geographic boundaries,
scope of prohibited activities and the time duration of the provisions
of this Section 4 are reasonable and are no broader than are necessary
to protect the legitimate business interests of the Employer.
The Employer and Executive agree and stipulate that the agreements and
covenants not to compete contained in Paragraph 4 hereof are fair and
reasonable in light of all of the facts and circumstances of the
relationship between Executive and Employer; however, Executive and
Employer are aware that in certain circumstances courts have refused
to enforce certain provisions of agreements not to compete.
Therefore, in furtherance of, and not in derogation of the provisions
of Paragraph 4, Employer and Executive agree that in the event a court
should decline to enforce the provisions of Paragraph 4, that
Paragraph 4 shall be deemed to be modified or reformed to restrict
Executive's competition with Employer or
its affiliates to the maximum extent, as to time, geography and
business scope, which the court shall find enforceable; provided,
however, in no event shall the provisions of Paragraph 4 be deemed to
be more restrictive to Executive than those contained herein.
c. Non-Solicitation. Executive agrees that during his employment, and
-----------------
for a period of twelve (12) months following the termination of his
employment for any reason whatsoever, that neither he nor any
individual, partner(s), limited partnership, corporation or other
entity or business with which he is in any way affiliated, including,
without limitation, any partner, limited partner, director, officer,
shareholder, Executive, or agent of any such entity or business, will
(i) request, induce or attempt to influence, directly or indirectly,
any employee of Employer to terminate their employment with Employer
or (ii) employ any person who as of the date of this Agreement was, or
after such date, is an employee of Employer. Executive further agrees
that during the period beginning with the commencement of Executive's
employment with Employer and ending twelve (12) months after the
termination of Executive's employment with Employer for any reason
whatsoever, he shall not, directly or indirectly, as an Executive,
agent, consultant, stockholder, director, partner or in any other
individual or representative capacity of Employer or of any other
person, entity or business, solicit or encourage any present or future
customer, supplier, contractor, partner or investor of the Employer to
terminate or otherwise alter his, her or its relationship with
Employer.
d. Work Product. For purposes of this Paragraph 4, "Work Product" shall
------------
mean all intellectual property rights, including all trade secrets,
U.S. and international copyrights, patentable inventions, discoveries
and other intellectual property rights in any programming, design,
documentation, technology, or other work product that is created in
connection with Executive's work. In addition, all rights in any
preexisting programming, design, documentation, technology, or other
Work Product provided to Employer during Executive's employment shall
automatically become part of the Work Product hereunder, whether or
not it arises specifically out of my "Work." For purposes of this
Agreement, "Work" shall mean (1) any direct assignments and required
performance by or for the Employer, and (2) any other productive
output that relates to the business of the Employer and is produced
during the course of Executive's employment or engagement by Employer.
For this purpose, Work may be considered present even after normal
working hours, away from Employer's premises, on an unsupervised
basis, alone or with others. Unless otherwise approved in writing by
the Board of Directors of Employer, this Agreement shall apply to all
Work Product created in connection with all Work conducted before or
after the date of this Agreement.
Employer shall own all rights in the Work Product. To this end, all
Work Product shall be considered work made for hire for Employer. If
any of the Work Product may not, by operation of law or agreement, be
considered Work made by Executive for hire for the Employer (or if
ownership of all rights therein do not
otherwise vest exclusively in the Employer immediately), Executive
agrees to assign, and upon creation thereof does hereby automatically
assign, with further consideration, the ownership thereof to the
Employer. Executive hereby irrevocably relinquishes for the benefit of
Employer and its assigns any moral rights in the Work Product
recognized by applicable law. Employer shall have the right to obtain
and hold, in whatever name or capacity it selects, copyrights,
registrations, and any other protection available in the Work Product.
Executive agrees to perform upon the request of Employer, during or
after Executive's Work or employment, such further acts as may be
necessary or desirable to transfer, perfect, and defend the Employer's
ownership of the Work Product, including by (1) executing,
acknowledging, and delivering any requested affidavits and documents
of assignment and conveyance, (2) obtaining and/or aiding in the
enforcement of copyrights, trade secrets, and (if applicable) patents
with respect to the Work Product in any countries, and (3) providing
testimony in connection with any proceeding affecting the rights of
the Employer in any Work Product.
Executive warrants that Executive's Work for Employer does not and
will not in any way conflict with any remaining obligations Executive
may have with any prior employer or contractor. Executive also agrees
to develop all Work Product in a manner that avoids even the
appearance of infringement of any third party's intellectual property
rights.
e. Survival of Covenants. Each covenant of Executive set forth in this
---------------------
Paragraph 4 shall survive the termination of this Agreement and shall
be construed as an agreement independent of any other provision of
this Agreement, and the existence of any claim or cause of action of
Executive against Employer whether predicated on this Agreement or
otherwise shall not constitute a defense to the enforcement by
Employer of said covenant. No modification or waiver of any covenant
contained in Paragraph 4 shall be valid unless such waiver or
modification is approved in writing by the Board of Directors of
Employer.
f. Remedies. In the event of breach or threatened breach by Executive of
--------
any provision of this Paragraph 4, Employer shall be entitled to
relief by temporary restraining order, temporary injunction, or
permanent injunction or otherwise, in addition to other legal and
equitable relief to which it may be entitled, including any and all
monetary damages which Employer may incur as a result of said breach,
violation or threatened breach or violation. Employer may pursue any
remedy available to it concurrently or consecutively in any order as
to any breach, violation, or threatened breach or violation, and the
pursuit of one of such remedies at any time will not be deemed an
election of remedies or waiver of the right to pursue any other of
such remedies as to such breach, violation, or threatened breach or
violation, or as to any other breach, violation, or threatened breach
or violation.
Executive hereby acknowledges that Executive's agreement to be bound
by the protective covenants set forth in this Paragraph 4 was a
material inducement for Employer entering into this Agreement,
agreeing to pay Executive the compensation and benefits set forth
herein, and providing Executive access to Employer's Trade Secrets and
other confidential information.
5. Termination. The employment relationship between Executive and Employer
-----------
created hereunder shall terminate before the expiration of the stated term
of this Agreement upon the occurrence of any one of the following events:
a. Death or Permanent Disability. The employment relationship shall be
-----------------------------
terminated effective on the death or permanent disability of the
Executive. However, Executive shall be entitled to leaves of absence
from the Company in accordance with the policy of the Company
generally applicable to executives for illness or temporary
disabilities for a period or periods not exceeding six (6) months in
any calendar year, and his status as an Executive shall continue
during such periods. However, if the Executive qualifies for short
term disability payments under Employer's standard short term
disability plan during such leave, Executive shall apply to receive
such short term disability payments. Employer shall supplement such
short term disability payments during the first three (3) months of
any such six (6) month period so that Executive receives such monthly
amounts when combined with the short term disability payments to equal
Executive's monthly compensation as set forth in paragraph 3(a) of
this Agreement. However, during the last three (3) months of any such
six (6) month period, Executive shall accept payments under Employer's
standard short term disability plan in lieu of any salary payments set
forth in Section 3(a) above. If Executive is incapacitated due to
physical or mental illness and such incapacity prevents Executive from
satisfactorily performing his duties for the Company on a full time
basis for six (6) months or more during a single fiscal year,
Executive shall be deemed to have experienced a permanent disability
and the Company may terminate this Agreement upon thirty (30) days
written notice. In the event that Employer terminates this Agreement
on the basis of the Executive's permanent disability, the Executive
shall be entitled to a cash payment equal to the Executive's annual
salary as of the date of termination. The Company shall make such
payment within thirty (30) days of such termination.
b. Termination for Cause. The following events, which for purposes of
---------------------
this Agreement shall constitute "cause" for termination:
i. Any act of fraud, misappropriation or embezzlement by Executive
with respect to any aspect of Employer's business;
ii. The breach by Executive of any provision of Paragraphs 1, 2 or 4
(including but not limited to a refusal to follow lawful
directives of the Board of Directors of Employer or their
designees which are not inconsistent with the duties of
Executive's position and the provisions of this Agreement) of
this Agreement;
iii. The conviction of Executive by a court of competent jurisdiction
of a felony or of a crime involving moral turpitude;
iv. The intentional and material breach by the Executive of any non-
disclosure or non-competition/non-solicitation provision of any
agreement to which the Executive and Employer or any of its
subsidiaries are parties; or
v. The intentional and continual failure by the Executive to perform
in all material respects his duties and responsibilities (other
than as a result of death or disability) and the failure of the
Executive to cure the same in all material respects within thirty
(30) days after written notice thereof from Employer;
vi. The illegal use of drugs by Executive during the term of this
Agreement that, in the determination of the Board of Directors of
Employer, substantially interferes with Executive's performance
of his duties hereunder;
vii. acceptance of employment with any other employer except upon
written permission of the Board of Directors of Employer.
c. Termination by Employer with Notice. Employer may terminate this
-----------------------------------
Agreement without cause at any time upon thirty (30) days written
notice to Executive, during which period Executive shall not be
required to perform any services for Employer other than to assist
Employer in training his successor and generally preparing for an
orderly transition; PROVIDED, HOWEVER, that Executive shall be
entitled to compensation upon such termination as provided in
Paragraph 6(a), (b), (c) and (d) below.
6. Compensation Upon Termination. Upon the termination of Executive's
-----------------------------
employment under this Agreement before the expiration of the stated term
hereof for any reason, Executive shall be entitled to:
a. the salary earned by him before the effective date of termination as
provided in Paragraph 3(a) hereof (including salary payable during any
applicable notice period), prorated on the basis of the number of full
days of service rendered by Executive during the salary payment period
to the effective date of termination;
b. any accrued, but unpaid, vacation benefits; and
c. any previously authorized but unreimbursed business expenses.
If Executive's employment hereunder terminates because of the death or
permanent disability of Executive, all amounts that may be due to her under
this
Paragraph 6 or Paragraph 5(a) shall be paid to him or his administrators,
personal representatives, heirs and legatees, as may be appropriate.
d. Additional Compensation and Benefits Upon Termination Without Cause.
-------------------------------------------------------------------
If Executive's employment hereunder terminates without cause pursuant
to Paragraph 5(c) above, Employer shall provide to Executive in
addition to the amounts set forth in Subparagraphs 6(a), 6(b) and 6(c)
above:
i. a cash payment equal to monthly salary payments for the duration
of the Initial Term of this Agreement or any Renewal Term as set
forth in Paragraph 8 below when and as such salary payments would
have been come due had the Executive's employment not have been
terminated; provided, however, that such payment shall under no
circumstances be less than an amount equal to six (6) months of
monthly salary for such Executive.
ii. continued medical insurance benefits, at Employer's expense, for
a period of twelve (12) months.
The Employer shall pay the severance amounts referenced in this
Paragraph 6(d) within thirty (30) days of the date of termination. Such
payments shall be subject to the "gross up" provisions of Annex A hereto.
Executive shall have no obligation to mitigate any severance obligation of
Employer under this Agreement by seeking new employment. Employer shall
not be entitled to set off or reduce any severance payments owed to
Executive under this Agreement by the amount of earnings or benefits
received by Executive in future employment. The provisions of Paragraphs
4, 5 and 6 hereof shall survive the termination of the employment
relationship hereunder and this Agreement.
7. Compensation Upon Change in Control.
-----------------------------------
a. For purposes of the Agreement, "Change of Control" means the
-------------------
occurrence of any of the following events:
i. any "person" or "group" as such terms are used under Sections
13(d) and 14(d) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), other than Employer or a current
shareholder or option holder, any trustee or any other fiduciary
holding securities under an Executive benefit plan of Employer,
or any corporation owned, directly or indirectly, by the
stockholders of Employer in substantially the same proportions as
their ownership of Common Stock of Employer, becomes the
"beneficial owner" (as defined in Rule 13d-3 under the Exchange
Act), of securities of Employer representing thirty-five percent
(35%) or more of the combined voting power of Employer's voting
securities then-outstanding;
ii. during any period of two (2) consecutive years, individuals who
at the beginning of such period constituted the Board of
Directors of Employer cease for any reason to constitute a
majority thereof (unless the election,
or nomination for election by Employer's stockholders, of such
director was approved by a vote of at least two-thirds (2/3) of
the directors then still in office who either were directors at
the beginning of such period or whose election or nomination for
election was previously so approved);
iii. Employer completes a merger or consolidation of Employer with
another corporation, other than (A) a merger or consolidation
which would result in the voting securities of Employer
outstanding immediately prior thereto continuing to represent
(either by remaining outstanding or by being converted into
voting securities of the surviving entity) more than eighty
percent (80%) of the combined voting power of the voting
securities of Employer or such surviving entity outstanding
immediately after such merger or consolidation, or (B) a merger
or consolidation effected to implement a recapitalization of
Employer (or similar transaction) in which no "person" (as herein
above defined), excluding a current shareholder or option holder,
acquires more than thirty percent (35%) of the combined voting
power of Employer's then-outstanding voting securities; or
iv. the stockholders of Employer approve a plan of complete
liquidation of Employer or any agreement for the sale or
disposition by Employer of all or substantially all of Employer's
assets.
b. For purposes of this Agreement, "Good Reason" means the occurrence of
-------------
any of the following events:
i. the reduction of the Executive's job title, position or
responsibilities without the Executive's prior written consent;
ii. the change of the location where the Executive is based to a
location which is more than fifty (50) miles from his present
location without the Executive's prior written consent; or
iii. any reduction of the Executive's annual base salary and bonus
from the highest annual base salary and bonus actually paid to
Executive during the two (2) years immediately preceding the
Change of Control.
Executive shall give Employer fifteen (15) business days notice of an
intent terminate this Agreement for "Good Reason" as defined in this
Paragraph 7, and provide the Employer with ten (10) business days
after receipt of such notice from Executive to remedy the alleged
violation of subparagraphs 7(b)(i)(ii), or (iii).
c. Benefits Upon Change in Control.
-------------------------------
i. Severance Benefits. If the Executive's employment with Employer
------------------
is terminated (i) by Employer (or by the acquiring or successor
business entity following a Change of Control) other than for
Cause or death, or
(ii) by the Executive for Good Reason, in either event within a
period beginning one hundred and eighty (180) days before, and
ending two (2) years after, the date of a Change of Control (the
"Change Period"), the Executive shall receive a cash severance
benefit in an amount equal to the sum of:
(1) 200% of the Executive's highest annual cash base salary in
effect within two (2) years immediately preceding the Change
of Control; plus
(2) the greater of: a) the average of the Executive's annual
bonuses paid for the two (2) calendar years immediately
preceding the Change of Control or b) $35,000.
In addition, for eighteen (18) months following the date of
termination of the Executive's employment in circumstances in
which a severance payment is due hereunder, Employer shall
provide the Executive, at Employer's expense, health and other
welfare benefits that are not less favorable to the Executive
than those to which he was entitled immediately prior to the
Change in Control. Provided however, Employer shall have no
obligation to provide Executive with any compensation under this
Paragraph 7 if Executive is in breach or violation of any of the
covenants contained in Paragraph 4, which are applicable to the
Executive at the time of the severance payment.
ii. Form of Payment. The amount of the severance benefit provided in
---------------
Paragraph 7(c)(i) hereof shall be paid to Executive thirty (30)
days after termination.
iii. Gross-Up Payments. Anything in this Agreement to the contrary
-----------------
notwithstanding, in the event that a severance payment is made
under this Agreement and it shall be determined (as hereafter
provided) that any payment (other than the Gross-Up Payments
provided for herein) or distribution by Employer or any of its
affiliates to or for the benefit of the Executive, whether paid
or payable or distributed or distributable pursuant to the terms
of this Agreement or otherwise pursuant to or by reason of any
other agreement, policy, plan, program or arrangement, or the
lapse or termination of any restriction on, or the vesting or
exercisability of any of the foregoing (a "Payment"), excluding,
however, any stock option or right in respect of restricted
stock, would be subject to the excise tax imposed by Section 4999
of the Internal Revenue Code of 1986, as amended (the "Code") (or
any successor provision thereto), by reason of being considered
"contingent on a change in ownership or control" of Employer,
within the meaning of Section 280G of the Code (or any successor
provision thereto) or to any similar tax imposed by state or
local law, or any interest or penalties with respect to such tax
(such tax or taxes, together with any such interest and
penalties, being hereafter collectively
referred to as the "Excise Tax"), then the Executive shall be
entitled to receive an additional payment or payments
(collectively, a "Gross-Up Payment"); provided, however, that no
------------------
Gross-Up Payment shall be made with respect to the Excise Tax, if
any, imposed upon (i) any stock option, including without
limitation any incentive stock option, as defined by Section 422
of the Code ("ISO") granted prior to the execution of this
Agreement or (ii) any stock appreciation or similar right,
whether or not limited, granted in tandem with an ISO described
in clause (i). The Gross-Up Payment shall be in an amount such
that, after payment by the Executive of all taxes (including any
interest or penalties imposed with respect to such taxes),
including an Excise Tax imposed upon the Gross-Up Payment, the
Executive retains an amount of the Gross-Up Payment equal to the
Excise Tax imposed upon the Payment. The procedural provisions
relating to Gross-Up Payments set forth in Annex A hereto are
hereby incorporated herein by this reference.
d. No Mitigation or Offset. The Executive shall not be required to
-----------------------
mitigate the amount of any payment provided for in this Paragraph 7 of
this Agreement by seeking other employment or otherwise. Employer
shall not be entitled to set off or reduce any severance payments owed
to Executive under Paragraph 7 by the amount of earnings or benefits
received by Executive in future employment.
e. Transaction Exclusion. Employer and Executive agree that the
---------------------
provisions of this Paragraph 7 shall not apply to the @Track
Communications, Inc. and Minor Planet transaction of June 20, 2001.
8. Term. This Agreement shall be binding and enforceable against Employer and
----
Executive immediately upon its execution by both such parties. The stated
term of this Agreement and the employment relationship created hereunder
shall begin on June 20, 2001 (with Executive to be bound by confidentiality
and other provisions set forth in Paragraph 4 herein to the extent
confidential information is provided to Executive prior to such date), and
shall remain in effect for one (1) year thereafter, unless sooner
terminated in accordance with Paragraph 5 hereof. This Agreement shall be
deemed to be renewed for a month-to-month term after its initial term
("Renewal Term"), unless the parties execute an express written renewal
agreement which specifies a different term or either party exercises its
right to terminate the Agreement pursuant to the provisions herein.
Following the expiration of the Initial Term, Executive may terminate the
Agreement only upon six (6) months prior written notice to Employer, except
for a termination by Executive for Good Reason under Section 7 (b).
a. Notwithstanding any provision of this Agreement to the contrary, the
parties' respective rights and obligations under Paragraphs 3, 4, 6
and 7 shall survive any termination or expiration of this Agreement or
the termination of the Executive's employment for any reason
whatsoever.
9. Remedies. Each of the parties to this Agreement will be entitled to enforce
--------
its rights under this Agreement specifically, to recover damages by reason
of any breach of any
provision of this Agreement and to exercise all other rights existing in
its favor. Notwithstanding Paragraph 10 below, the parties hereto agree and
acknowledge that money damages may not be an adequate remedy for any breach
of the provisions of this Agreement and that any party may in its sole
discretion apply to any court of law or equity of competent jurisdiction
for specific performance and/or injunctive relief in order to enforce or
prevent any violations of the provisions of this Agreement.
10. Arbitration. Except as Provided in Paragraph 9 above, any controversy or
-----------
claim arising out of or relating to this Agreement or relating to
Executive's rights, compensation and responsibilities as an Executive shall
be determined by arbitration in Dallas County, Texas in accordance with the
rules of the American Arbitration Association then in effect. The
arbitration shall be submitted to a single arbitrator selected in
accordance with the American Arbitration Association's procedures then in
effect for the selection of employment arbitrators. The parties shall
split the cost of the arbitrator. The arbitrator shall have the authority
to award any remedy that could be awarded by a court of competent
jurisdiction. This Paragraph 10 shall survive termination of this
Agreement for any reason.
11. Assignment. This Agreement is personal to Executive and may not be
----------
assigned in any way by Executive without the prior written consent of
Employer. This Agreement shall not be assignable or delegable by Employer,
other than to an affiliate of Employer; provided, however, that in the
event of the acquisition, merger or consolidation of Employer, the
obligations of Employer hereunder shall be binding upon the surviving or
resulting entity of such acquisition, merger or consolidation. The rights
and obligations under this Agreement shall inure to the benefit of and
shall be binding upon the heirs, legatees, administrators and personal
representatives of Executive and upon the successors, representatives and
assigns of Employer.
12. Severability and Reformation. The parties hereto intend all provisions of
----------------------------
this Agreement to be enforced to the fullest extent permitted by law. If,
however, any provision of this Agreement is held to be illegal, invalid, or
unenforceable under present or future law, such provision shall be fully
severable, and this Agreement shall be construed and enforced as if such
illegal, invalid, or unenforceable provision were never a part hereof, and
the remaining provisions shall remain in full force and effect and shall
not be affected by the illegal, invalid, or unenforceable provision or by
its severance.
13. Notices. All notices and other communications required or permitted to be
-------
given hereunder shall be in writing and shall be deemed to have been duly
given if delivered personally, mailed by certified mail (return receipt
requested) or sent by overnight delivery service, cable, telegram,
facsimile transmission or telex to the parties at the following addresses
or at such other addresses as shall be specified by the parties by like
notice:
If to Employer: J. Raymond Bilbao
Senior Vice President, General Counsel & Secretary
1155 Kas Drive, Suite 100
Richardson, Texas 75081
If to Executive: W. Michael Smith
3236 Langley Drive
Plano, Texas, 75025
Notice so given shall, in the case of notice so given by mail, be deemed to
be given and received on the fourth calendar day after posting, in the case
of notice so given by overnight delivery service, on the date of actual
delivery and, in the case of notice so given by cable, telegram, facsimile
transmission, telex or personal delivery, on the date of actual
transmission or, as the case may be, personal delivery.
14. Further Actions. Whether or not specifically required under the terms of
---------------
this Agreement, each party hereto shall execute and deliver such documents
and take such further actions as shall be necessary in order for such party
to perform all of his or its obligations specified herein or reasonably
implied from the terms hereof.
15. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
-------------
ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS, WITHOUT GIVING EFFECT TO
THE CONFLICT OF LAWS (RULES) OR CHOICE OF LAWS (RULES) THEREOF.
16. Entire Agreement and Amendment. This Agreement contains the entire
------------------------------
understanding and agreement between the parties, and supersedes any other
agreement between Executive and Employer, whether oral or in writing, with
respect to the subject matter hereof.. This Agreement may not be altered,
amended, or rescinded, nor may any of its provisions be waived, except by
an instrument in writing signed by both parties hereto or, in the case of
an asserted waiver, by the party against whom the waiver is sought to be
enforced. Any modification of this Agreement may only be signed on behalf
of Employer by the General Counsel and Secretary of Employer and approved
by the Board of Directors of Employer.
17. Counterparts. This Agreement may be executed in counterparts, with the
------------
same effect as if both parties had signed the same document. All such
counterparts shall be deemed an original, shall be construed together and
shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
EMPLOYER:
@TRACK COMMUNICATIONS, INC.
By: /s/ Jana Ahlfinger Bell Dated: 6-21-01
--------------------------
JANA AHLFINGER BELL,
President & Chief Executive Officer
EXECUTIVE:
/s/ W. Michael Smith
- ------------------------------------
Annex A
-------
GROSS-UP PAYMENT PROCEDURAL PROVISIONS
(a) Subject to the provision of Paragraph (e) hereof, all determinations
required to be made under Paragraph 6 of the Agreement, including whether an
Excise Tax is payable by the Executive and the amount of such Excise Tax and
whether a Gross-Up Payment is required to be paid by Employer to the Executive
and the amount of such Gross-Up Payment, if any, shall be made by a Top 5
accounting firm (the "Accounting Firm") selected by the Executive in her sole
discretion. The Executive shall direct the Accounting Firm to submit its
determination and detailed supporting calculations to both Employer and the
Executive within thirty (30) calendar days after the Termination Date, if
applicable, and any such other time or times as may be requested by Employer or
the Executive. If the Accounting Firm determines that any Excise Tax is payable
by the Executive, Employer shall pay the required Gross-Up Payment to the
Executive within fifteen (15) business days after receipt of such determination
and calculations with respect to any Payment to the Executive. If the
Accounting Firm determines that no Excise Tax is payable by the Executive, it
shall, at the same time as it makes such determination, furnish Employer and the
Executive an opinion that the Executive has substantial authority not to report
any Excise Tax on her federal, state or local income or other tax return. As a
result of the uncertainty in the application of Section 4999 of the Code (or any
successor provision thereto) and the possibility of similar uncertainty
regarding applicable state or local tax law at the time of any determination by
the Accounting Firm hereunder, it is possible that Gross-Up Payments which shall
not have been made by Employer should have been made (an "Underpayment"),
consistent with the calculations required to be made hereunder. In the event
that Employer exhausts or fails to pursue its remedies pursuant to Paragraph (e)
hereof and the Executive thereafter is required to make a payment of any Excise
Tax, the Executive shall direct the Accounting Firm to determine the amount of
the Underpayment that has occurred and to submit its determination and detailed
supporting calculations to both Employer and the Executive as promptly as
possible. Any such Underpayment shall be promptly paid by Employer to, or for
the benefit of, the Executive within fifteen (15) business days after receipt of
such determination and calculations.
(b) Employer and the Executive shall each provide the Accounting Firm
access to and copies of any books, records and documents in the possession of
Employer or the Executive, as the case may be, reasonably requested by the
Accounting Firm, and otherwise cooperate with the Accounting Firm in connection
with the preparation and issuance of the determinations and calculations
contemplated by Paragraph (a) hereof. Any determination by the Accounting Firm
as to the amount of the Gross-Up Payment shall be binding upon Employer and the
Executive.
(c) The federal, state and local income or other tax returns filed by
the Executive shall be prepared and filed on a consistent basis with the
determination of the Accounting Firm with respect to the Excise Tax payable by
the Executive. The Executive shall make proper payment of the amount of any
Excise Payment, and at the request of Employer, provide to Employer true and
correct copies (with any amendments) of her federal income tax return as filed
with the Internal Revenue Service and corresponding state and local tax returns,
if relevant, as filed with the applicable taxing authority, and such other
documents reasonably requested by Employer, evidencing such payment. If prior
to the filing of the Executive's federal income tax
return, or corresponding state or local tax return, if relevant, the Accounting
Firm determines that the amount of the Gross-Up Payment should be reduced, the
Executive shall within fifteen (15) business days pay to Employer the amount of
such deduction.
(d) The fees and expenses of the Accounting Firm for its services in
connection with the determinations and calculations contemplated by Paragraph
(a) hereof shall be paid by Employer. If such fees and expenses are initially
paid by the Executive, Employer shall reimburse the Executive the full amount of
such fees and expenses within fifteen (15) business days after receipt from the
Executive of a statement therefor and reasonable evidence of her payment
thereof.
(e) The Executive shall notify Employer in writing of any claim by the
Internal Revenue Service or any other taxing authority that, if successful,
would require the payment by Employer of a Gross-Up Payment. Such notification
shall be given as promptly as practicable but no later than ten (10) business
days after the Executive actually receives notice of such claim and the
Executive shall further apprise Employer of the nature of such claim and the
date on which such claim is requested to be paid (in each case, to the extent
known by the Executive). The Executive shall not pay such claim prior to the
earlier of (i) the expiration of the thirty (30) calendar-day period following
the date on which he gives such notice to Employer and (ii) the date that any
payment of amount with respect to such claim is due. If Employer notifies the
Executive in writing prior to the expiration of such period that it desires to
contest such claim, the Executive shall:
(i) provide Employer with any written records or documents in her
possession relating to such claim reasonably requested by Employer;
(ii) take such action in connection with contesting such claim as
Employer shall reasonably request in writing from time to time, including
without limitation accepting legal representation with respect to such
claim by an attorney competent in respect of the subject matter and
reasonably selected by Employer;
(iii) cooperate with Employer in good faith in order effectively to
contest such claim, and
(iv) permit Employer to participate in any proceedings relating to
such claim;
provided, however, that Employer shall bear and pay directly all costs and
- ------------------
expenses (including interest and penalties) incurred in connection with such
contest and shall indemnify and hold harmless the Executive, on an after-tax
basis, for and against any Excise Tax or income tax, including interest and
penalties with respect thereto, imposed as a result of such representation and
payment of costs and expenses. Without limiting the foregoing provisions of
this Paragraph (e), Employer shall control all proceedings taken in connection
with the contest of any claim contemplated by this Paragraph (e) and, at its
sole option, may pursue or forego any and all administrative appeals,
proceedings, hearings and conferences with the taxing authority in respect of
such claim (provided, however, that the Executive may participate therein at her
own cost and expense) and may, at its option, either direct the Executive to pay
the tax claimed and sue for a refund or contest the claim in any permissible
manner, and the Executive agrees to
prosecute such contest to a determination before any administrative tribunal, in
a court of initial jurisdiction and in one or more appellate courts, as Employer
shall determine; provided, however, that if Employer directs the Executive to
------------------
pay the tax claimed and sue for a refund, Employer shall advance the amount of
such payment to the Executive on an interest-free basis and shall indemnify and
hold the Executive harmless, on an after-tax basis, from any Excise Tax or
income or other tax, including interest or penalties with respect thereto,
imposed with respect to such advance; and provided further, however, that any
-------------------------
extension of the statute of limitations relating to payment of taxes for the
taxable year of the Executive with respect to which the contested amount is
claimed to be due is limited solely to such contested amount. Furthermore,
Employer's control of any such contested claim shall be limited to issues with
respect to which a Gross-Up Payment would be payable hereunder and the Executive
shall be entitled to settle or contest, as the case may be, any other issue
raised by the Internal Revenue Service or any other taxing authority.
(f) If, after the receipt by the Executive of an amount advanced by
Employer pursuant to Paragraph (e) hereof, the Executive receives any refund
with respect to such claim, the Executive shall (subject to Employer's complying
with the requirements of Paragraph (e) hereof) promptly pay to Employer the
amount of such refund (together with any interest paid or credited thereon after
any taxes applicable thereto). If, after the receipt by the Executive of an
amount advanced by Employer pursuant to Paragraph (e) hereof, a determination is
made that the Executive shall not be entitled to any refund with respect to such
claim and Employer does not notify the Executive in writing of its intent to
contest such denial or refund prior to the expiration of thirty (30) calendar
days after such determination, then such advance shall be forgiven and shall not
be required to be repaid and the amount of any such advance shall offset, to the
extent thereof, the amount of Gross-Up Payment required to be paid by Employer
to the Executive pursuant to this Paragraph 7(c)(iii) of the Agreement.
__________________