EXHIBIT 10.5
EMPLOYMENT AGREEMENT
THIS EXECUTIVE EMPLOYMENT AGREEMENT (this "Agreement") is made and entered
into as of this 28th day of August, 2003 by and between iSecureTrac CORPORATION,
a Delaware corporation, having its principal offices at 0000 Xxxxx 000xx Xxxxxx,
Xxxxx, XX 00000 (hereinafter referred to as the "Company"), and XXXX X.
XXXXXXXXX, AN INDIVIDUAL RESIDING AT 0000 XXXXXXX XXXXX, XXXXXXXXXX,
XXXXXXXXXXXX 00000 (hereinafter referred to as the "Executive"). This Agreement
shall be effective as of August 28, 2003 ("Effective Date").
WITNESSETH:
WHEREAS, the Executive has demonstrated unique qualifications to act in an
executive capacity for the Company, and the Company expects that Executive's
contribution will be substantial and meritorious; and
NOW THEREFORE, in consideration of the foregoing, the mutual covenants
contained herein, and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties agree as follows:
1. EMPLOYMENT. The Company agrees to employ the Executive, and the
Executive agrees to accept such employment, all in accordance with the terms of
this Agreement.
2. CAPACITY AND DUTIES. The Executive shall serve as President and General
Manager of Tracking Systems Corporation (TSC), a wholly owned subsidiary of the
Company and serve in such other offices as he may be appointed or elected to
from time to time. The Executive shall perform the duties assigned to him by the
Chairman of the board of directors of the Company (the "Board") and the
President of the Company to the best of his ability in a diligent, trustworthy,
businesslike, and efficient manner for the purposes of advancing the business of
the Company and, to this end, will devote his full time and attention to the
business of the Company. Furthermore, Executive shall comply with the Company's
rules and regulations as may be set forth in the Company's Employee Handbook, or
similar document. In the event Executive observes unlawful acts or practices by
the Company, he shall promptly notify the President of the Company or the
Chairman of the Board of Directors, as he may deem appropriate. If the Executive
is elected as a director of the Company or as a director of any of the Company's
affiliates or subsidiaries, the Executive will fulfill his duties as such
director without any additional compensation.
3. TERM. The term of Executive's employment hereunder (the "Employment
Period") shall commence on the "Effective Date and continue on an indefinite
basis, unless earlier terminated hereunder.
4. COMPENSATION.
(a) BASE SALARY. For all services rendered by the Executive under
this Agreement, the Company shall pay the Executive an annual salary of
One Hundred Seventy Thousand dollars, payable in semi-monthly installments
beginning August 16, 2003 ("Salary").
(b) EXPENSES. To the extent not otherwise paid for by the Company,
the Company will reimburse the Executive for reasonable and necessary
expenses incurred in promoting the Company's business, including expenses
for travel and entertainment, such reimbursement to be made periodically
upon presentation of appropriate receipts or other substantiation.
(c) PLANS. The Executive will be permitted to participate in such
pension, profit sharing, bonus, life insurance, hospitalization, major
medical, vacation and other employee benefit plans of the Company that may
be in effect from time to time, to the extent that the Executive is
eligible under the terms of those plans. Unless stated otherwise in this
Agreement, Executive's benefits under any such plans shall be the same as
those extended to other employees of the Company and as may be published
by the Company from time to time.
(d) TAXES, ETC. All compensation payable to Executive hereunder is
stated in gross amount and shall be subject to all applicable withholding
taxes and other normal payroll deductions and any other amounts required
by law to be withheld.
(e) QUARTERLY BONUSES. Executive shall receive a bonus of $10,000
for each of the third and fourth fiscal quarters for 2003 (each a
"Quarterly Bonus"), PROVIDED THAT TSC meets or exceeds, on an un-audited
basis, the following revenue targets projected for said fiscal quarters
(each a "Quarterly Target"):
3rd Quarter, 2003: $860,861
4th Quarter, 2003: $884,253
In the event TSC's actual revenue for a fiscal quarter is less than
the corresponding Quarterly Target, the corresponding Quarterly Bonus
shall be reduced by the same percentage by which actual revenue was less
than the corresponding Quarterly Target.
(f) ANNUAL BONUS FOR 2003. Executive shall receive a bonus of
$20,000 for fiscal 2003 ("Annual Performance Bonus"), PROVIDED THAT TSC
meets or exceeds, on an un-audited basis, the following revenue target
projected for fiscal 2003 ("Annual Target"):
$3,413,145
In the event TSC's actual revenue for fiscal 2003 is less than the
Annual Target, the Annual Performance Bonus shall be reduced by the same
percentage by which actual revenue for fiscal 2003 was less than the
Annual Target.
(g) ANNUAL BONUS AFTER 2003. After 2003, Executive and the Board
shall agree, on an annual basis to a bonus plan ("Annual Bonus Plan")
under which Executive may earn certain bonuses up to fifty percent (50%)
of his annual salary. The Annual Bonus Plan shall be reasonable and
attainable and shall contain measurable quarterly and annual goals. The
Annual Bonus Plan shall be determined by the Compensation Committee of the
Board of Directors in consultation with Executive and shall be reviewed
for reasonability with respect to any changed circumstances effecting
Executive's ability to achieve the quarterly and annual goals.
Furthermore, the Annual Bonus Plan for Executive shall be, at a minimum,
at the level of any Senior Vice President in terms of earnable bonuses. In
the event the Annual Bonus Plan is not acceptable to Executive, he may
appeal any perceived deficiencies to the full Board and the Board shall
thereupon make the final determination as to the contents of the Annual
Bonus Plan.
5. STOCK INCENTIVES.
(a) The Company's stockholders approved the Company's 2001 Omnibus
Equity Incentive Plan (the "Plan") on June 15, 2001. Subject to the terms
and conditions of the Plan, the Company hereby grants to the Executive
options to purchase in the aggregate 250,000 shares of the Company's
common stock (the "Options"). The Options will furthermore be subject to
the terms and conditions described in the applicable notice of grant of
stock option and stock option agreement and the vesting requirements set
forth in this Section 5. The exercise price of each of these Options shall
be a sum equal to eighty-five percent (85%) of the average daily closing
price of the Company's common stock on the so-called OTC Bulletin Board or
other nationally recognized exchange for the first full week immediately
preceding the date on which the Options were granted pursuant to this
Section 5 (the "Exercise Price"). The Options shall vest and become
exercisable with respect to the first 10,417 shares subject thereto when
the Executive completes one month of continuous service from July __, 2003
and with respect to an additional 10,417 shares subject thereto when
Executive completes each month of continuous service thereafter until all
250,000 shares have vested or until termination of employee's service. In
lieu of the foregoing Options, the Company may grant Executive Options not
subject to the Plan, but on the same or similar terms.
(b) IN ADDITION TO THE OPTIONS GRANTED ABOVE, the Company hereby
grants Executive options to purchase 250,000 shares of the Company's
common stock (the "Performance Options") at an exercise price of $0.47
(forty seven cents) per share. The Performance Options shall vest and
become exercisable on March 31, 2004 as follows: 100% of the Performance
Options in the event the audited financial statements of Transaction
Systems Corporation (TSC) for the fiscal year 2003 report actual revenue
to have met or exceeded the Annual Target. In the event TSC's actual
revenue for fiscal 2003 is less than the Annual Target, the Performance
Options shall be reduced by the same percentage by which actual revenue
for fiscal 2003 was less than the Annual Target.
(c) The Company shall, within a reasonable period not to exceed six
months, register the shares underlying the Options issued to Executive if
such shares are not already registered. The term "registered" for the
purposes of this Section 5(c) refers to a registration effected by
preparing and filing a registration statement in compliance with the
Securities Act of 1933, as amended, and the declaration or ordering of
effectiveness of such registration statement.
(d) Notwithstanding any provision to the contrary contained herein,
Executive acknowledges and agrees that by signing this Agreement he agrees
not to sell any of the Company's Equity Securities (whether acquired
pursuant to this agreement or otherwise) at a time when applicable laws,
Company policies or an agreement between the Company and its underwriters
prohibit such sale. Executive further acknowledges and agrees that this
restriction will apply, to any position that he may now, or in the future
hold with the Company, whether as an employee, consultant or director of
the Company or any subsidiary of the Company. Company policies restricting
such sale shall no longer apply upon termination of Executive's employment
with the Company.
6. TERMINATION BY COMPANY.
6.1 TERMINATION FOR CAUSE. The Company shall not terminate
Executive's employment hereunder for any reason during the first twelve
(12) calendar months following the Effective Date of this Agreement
("Initial Period"), except for "good cause". For purposes of this Section
6.1, the term "good cause" shall mean (i) willful misconduct; (ii)
dishonesty; (iii) conviction of a felony; (iv) theft; (v) unethical
business conduct; (vi) illegal substance abuse; (vii) the failure of
Executive, for any reason, within thirty (30) days after receipt by
Executive of written notice thereof from the Company, to correct, cease,
or otherwise alter any bona fide and documented insubordination, failure
to comply with instructions, or other action or omission to act that
materially or adversely affect its business or operations.
6.2 EMPLOYMENT AT WILL. Executive acknowledges that except during
the Initial Period, he is an employee-at-will. At any time following the
Initial Period, the Company shall have the right, at any time, for any
reason or for no reason at all, to terminate Executive's employment upon
ninety (90) days written notice to Executive.
7. TERMINATION BY EXECUTIVE. Executive has the right to terminate his
employment under this Agreement for any reason or without reason upon thirty
(30) days prior written notice to the Company.
8. EFFECT OF RESIGNATION. Upon the termination of Executive's employment
with the Company for any reason, Executive shall be deemed to have automatically
resigned from any position he may hold with the Company, including any offices
or board memberships with the Company and/or its affiliates or subsidiaries.
Such resignation shall be deemed effective immediately without the requirement
that a written resignation be delivered. The Executive shall execute any
agreements to further effectuate such resignations that are reasonably requested
by the Company.
9. COMPENSATION AFTER TERMINATION. Executive shall be paid his full Salary
for the entire Initial Period, regardless of whether Executive's employment with
the Company is terminated by the Company or Executive terminates his employment
with the Company at any time during the Initial Period. In the event Executive's
employment with the Company is terminated, for any reason, after the Initial
Period, he shall be entitled to his pro-rata annual compensation following his
date of termination up to extent of the notice period, plus any accrued but
unused vacation time up to the date of termination. In addition, he shall be
entitled to those stock options which have vested or will vest up to the extent
of the notice period
10. CONFIDENTIAL INFORMATION. The Executive acknowledges that he has had
and will have access to certain information related to the business, operations,
future plan and customers of the Company, the disclosure or use of which could
cause the Company substantial losses and damages. Accordingly, during the term
of this Agreement and for one (1) calendar year thereafter, Executive shall keep
secret and retain in the strictest confidence, and shall not, without the prior
written consent of the Board, furnish, make available, or disclose to any third
party or use for the benefit of himself or for the benefit of any third party,
any Confidential Information. "Confidential Information" shall mean files, trade
secrets or other confidential information concerning the business, supplier,
customers, computer software or its applications, financial data, methods,
procedures, systems, practices, policies, operations, financing, or services of
the Company and, in addition, such other information not generally known in the
business that is disclosed to Executive or known by him as a consequence of his
employment by the Company, whether or not pursuant to this Agreement; provided,
however, that Confidential Information shall not include any information which
is in the public domain or becomes known in the industry through no wrongful act
on the part of Executive. Furthermore, Confidential Information, for purposes of
this Agreement, shall not include any information which is the personal
knowledge of Executive based on his experience.
11. INVENTIONS. Each Invention shall belong exclusively to the Company.
The Executive acknowledges that all of the Inventions are works made for hire
and the property of the Company, including any copyrights, patents, or other
intellectual property rights pertaining thereto. If it is determined that any
such works are not works made for hire, the Executive hereby assigns to the
Company all of the Executive's right, title, and interest, including all rights
of copyright, patent, and other intellectual property rights, to or in such
Inventions. The term "Invention" shall mean any idea, invention, technique,
modification, process, or improvement (whether patentable or not), any
industrial design (whether registerable or not), any mask work, however fixed or
encoded, that is suitable to be fixed, embedded or programmed in a semiconductor
product (whether recordable or not), and any work of authorship (whether or not
copyright protection may be obtained for it) created, conceived, or developed by
the Executive, either solely or in conjunction with others, during the
Employment Period, or a period that includes a portion of the Employment Period,
that relates in any way to, or is useful in any manner in, the business then
being conducted or proposed to be conducted by the Company, and any such item
created by the Executive, either solely or in conjunction with others, following
termination of the Executive's employment with the Company, that is based upon
or uses Confidential Information. Furthermore, the Executive covenants that he
will promptly:
(a) disclose to the Company in writing any Invention;
(b) assign to the Company or to a party designated by the Company, at
the Company's request and without additional compensation, all of
the Executive's right to the Invention for the United States and all
foreign jurisdictions;
(c) execute and deliver to the Company such applications, assignments,
and other documents as the Company may request in order to apply for
and obtain patents or other registrations with respect to any
Invention in the United States and any foreign jurisdictions;
(d) sign all other papers necessary to carry out the above obligations;
and
(e) give testimony and render any other assistance in support of the
Company's rights to any Invention.
12. RETURN OF COMPANY MATERIALS UPON TERMINATION. Executive acknowledges
that all price lists, manuals, catalogs, binders, customer lists and other
customer information, supplier lists, financial information, and other records
or documents containing Confidential Information prepared by Executive or coming
into Executive's possession by virtue of Executive's employment by the Company
is and shall remain the property of the Company upon termination of Executive's
employment hereunder. Executive shall immediately return all such items in his
possession to the Company, together with all copies thereof.
13. RIGHT TO INJUNCTIVE RELIEF. The Executive agrees and acknowledges that
a violation of the covenants contained in Sections 8, 10, 11 and 12 of this
Agreement will cause irreparable damage to the Company, and that it is and will
be impossible to estimate or determine the damage that will be suffered by the
Company in the event of a breach by the Executive of any such covenant.
Therefore, the Executive further agrees that in the event of any violation or
threatened violation of such covenants, the Company shall be entitled as a
matter of course to an injunction out of any court of competent jurisdiction
restraining such violation or threatened violation by the Executive, such right
to an injunction to be cumulative and in addition to whatever other remedies the
Company may have.
14. REPRESENTATION BY THE EXECUTIVE. The Executive hereby represents and
warrants that the execution of this Agreement and the performance of his duties
and obligations hereunder will not breach or be in conflict with any other
agreement to which he is a party or by which he is bound, and that he is not now
subject to any covenant against competition or similar covenant which would
affect the performance of his duties hereunder.
15. COVENANT OF NON-COMPETITION. Executive agrees that he shall not,
during the Employment Period and for a period of twelve (12) months thereafter,
engage in any business or activities, whether directly or indirectly, which is
competitive with the Company.
16. ASSIGNMENT. This Agreement is personal and shall in no way be subject
to assignment by the Executive or the Company without the permission of the
other provided, however, that the Company shall have the right to assign all or
any part of its rights or obligations under this Agreement to (i) any affiliate
or subsidiary of the Company, or (ii) the purchaser of all or substantially all
of the assets of the Company.
17. ENFORCEABILITY. If any portion or provision of this Agreement shall to
any extent be declared illegal or unenforceable by a duly authorized court of
competent jurisdiction, then the remainder of this Agreement, or the application
of such portion or provision in circumstances other than those as to which it is
so declared illegal or unenforceable, shall not be affected thereby, and each
portion and provision of this Agreement shall be valid and enforceable to the
fullest extent permitted by law.
18. NOTICES. All notices and communications required or permitted to be
given hereunder shall be given by delivering the same in hand or by mailing the
same by certified or registered mail, return receipt requested, postage prepaid,
as follows:
If sent to the Company, to: iSecureTrac Corporation
Attn: Xxx Xxxxx, President
0000 Xx. 000xx Xxxxxx
Xxxxx, Xxxxxxxx 00000
Facsimile No.: (000) 000-0000
With a copy to: Xxxx Xxxxx
iSecureTrac Corporation
0000 Xx. 000xx Xxxxxx
Xxxxx, Xxxxxxxx 00000
If to the Executive: Xxxx X. Xxxxxxxxx
0000 Xxxxxxx Xxxxx
Xxxxxxxxxx, XX 00000
With a copy to: Xxxx Xxxxxx
Xxxxxxxx Xxxxxxxx, P.C.
0000 Xxxxxxx Xxxxx Xxxx
Xxxx Xxxx, XX 00000
And a further copy to: Xxxx X. Xxxxxxx
Xxxxx, Smith, Gardner, et al.
0000 Xxxx Xxxxx Xxxx
Xxxxx 000
Xxxxx, XX 00000-0000
or such other address as either party shall have furnished to the other by like
notice. Notices shall be effective as of the date of such delivery or mailing.
19. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement and
understanding between the parties in relation to the subject matter hereof and
there are no promises, representations, conditions, provisions or terms related
thereto other than those set forth in this Agreement. This Agreement supersedes
all previous understandings, agreements and representations between the Company
and the Executive regarding the Executive's employment by the Company, written
or oral.
20. GOVERNING LAW; JURISDICTION. This Agreement shall be construed under
and be governed in all respects by the internal laws, and not the laws
pertaining to choice or conflicts of law, of the State of Nebraska. Any actions
or proceedings seeking to enforce any provision of this Agreement shall be
brought only in the federal or state courts situated in Xxxxxxx County, Nebraska
and each of the Parties hereby consents to the exclusive jurisdiction of such
courts and waives any objection to venue or personal jurisdiction.
21. WAIVER; AMENDMENT. No waiver in any instance by any party of any
provision of this Agreement shall be deemed a waiver by such party of such
provision in any other instance or a waiver of any other provision hereunder in
any instance. This Agreement cannot be modified except by written amendment to
this Agreement duly executed by both parties. Any oral agreements or
understandings between Executive and the Company intended to modify the terms of
this Agreement shall be null and void.
22. COUNTERPARTS. This Agreement may be executed in multiple counterparts,
each of which shall be deemed an original, but all of which taken together shall
constitute one in the same Agreement.
23. HEADINGS. INTERPRETATION. The descriptive headings in this Agreement
are inserted for convenience of reference only and are not intended to be part
of or affect the meaning or interpretation of this Agreement. The use of the
word "including" in this Agreement shall be by way of example rather than by
limitation.
24. SURVIVAL. Sections 8, 10, 11, 12, 13 and 14 shall survive and continue
in full force and effect in accordance with their terms and conditions
notwithstanding any termination of the Executive's employment hereunder.
IN WITNESS WHEREOF, Company has caused its duly authorized officers to
execute this Agreement, and Executive has executed this Agreement as of the day
and year first above written.
iSecureTrac CORPORATION
/s/ Xxxxxxx X. May
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Xxxxxxx X. May, Chairman
EXECUTIVE:
/s/ Xxxx X. Xxxxxxxxx
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