EXHIBIT 10.5
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT (this "Agreement") is entered into as of
September 3, 1999 by and between TransCore Holdings, Inc., a Delaware
corporation ("Company") and Xxxx X. Xxxxx, an individual resident of the
Commonwealth of Massachusetts ("Employee").
RECITALS
A. Company has entered into a Stock Purchase Agreement (the "Stock
Purchase Agreement") pursuant to which, concurrently with the execution of this
Agreement, the Company is acquiring all of the outstanding capital stock of
Syntonic Technology, Inc., a Delaware corporation d/b/a "Transcore"
("Transcore").
B. The execution of this Agreement is a condition to the closing of the
transactions contemplated by the Stock Purchase Agreement (the "Closing").
NOW, THEREFORE, in consideration of the mutual covenants contained herein
and other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto, intending to be legally bound,
agree as follows:
1. Employment. The Company shall employ Employee, and Employee
accepts employment with the Company, upon the terms and conditions set forth in
this Agreement for the period beginning on the date of the Closing and ending as
provided in Section 4 hereof (the "Employment Period").
2. Position and Duties.
a. Service with Company. During the Employment Period,
Employee shall serve as Executive Vice President and Assistant Secretary of the
Company and Transcore, and shall have the normal and reasonable duties,
responsibilities and authorization commensurate with such position. Employee's
services pursuant to this Agreement shall be performed at the Company's place of
business in Harrisburg, Pennsylvania or at such other facilities of the Company
as the Company and the Employee may agree from time to time; provided, however,
that Employee may refuse in his sole and absolute discretion any change in
location of such facilities by more than 20 miles from the Company's present
Southborough, MA facilities.
b. Performance of Duties.
i. Employee agrees to perform Employee's duties and
responsibilities to the best of Employee's abilities in a reasonably diligent,
trustworthy and businesslike manner. Employee further agrees to devote such
business time, attention and effort to the business and affairs of the Company
as the Employee and the board of directors of the Company (the "Board") mutually
agree is sufficient to perform Employee's duties. Employee hereby confirms that
he is under no contractual commitments inconsistent with his obligations set
forth in this Agreement and that during the term of this Agreement, he will not
render or
perform services for any other corporation, firm, entity or person which are
inconsistent with the provisions of this Agreement. Nothing herein shall prevent
Employee from serving from time to time as a board member, officer or trustee of
(x) any charitable organization or (y) after the first anniversary of the date
hereof, of any other entity that does not compete with the Company or Transcore
(within the meaning of Section 7 below); provided that Employee's time
commitments to any such charitable organization or other entity do not
materially impact on Employee's abilities to perform his duties hereunder.
ii. The Company shall use best efforts to cause its
business to be operated in a professional and ethical manner and in accordance
with all applicable laws. The Company shall treat Employee in a fair and
nondiscriminatory manner, and shall provide Employee with such amenities (e.g.,
office, furnishings, and staff) as are commensurate with his position.
3. Compensation.
a. Base Salary and Bonus. During the Employment Period,
Employee's base salary shall be $175,000 per annum, increased by a factor which
reflects the greater of (i) the rate of change in the Consumer Price Index for
all Urban Consumers (CPI-U, U.S. City Average, All Items) issued by the United
States Department of Labor, Bureau of Labor Statistics, for the preceding twelve
months or (ii) the average annual percentage increase in salaries included in
the preparation of the Company's or Transcore's annual budget (as adjusted, the
"Base Salary"); provided, however, that the maximum amount by which the Base
Salary may be increased pursuant to this first sentence of Section 3(a) shall
not exceed five percent (5%) per annum. The Base Salary shall be paid in regular
installments in accordance with the Company's general payroll practices,
including those related to withholding for taxes, insurance and similar items.
The compensation payable to Employee during each subsequent year during the
Employment Period shall be established by the Board following an annual
performance review, but in no event shall the Base Salary for any subsequent
year be less than the Base Salary in effect for the prior year. Subject to the
criteria set forth below, Employee shall be paid a bonus (the "Performance
Bonus") each year equal to up to but not in excess of 100% of Employees' Base
Salary based on the extent to which the Company meets or exceeds 95% of its
EBITDA targets (after giving effect to the payment of all Performance Bonuses)
for the applicable fiscal year, such targets to be determined annually based
upon the EBITDA targets set forth in the Company's annual business plan for the
applicable fiscal year (as presented by senior management of and approved by the
Board of Directors of the Company (the "EBITDA Target"). The Performance Bonus
shall be paid to Employee which shall be determined by the following criteria:
i. In the event the EBITDA for the applicable fiscal
year after giving effect to the payment of all Performance Bonuses (the "Actual
EBITDA") is less than or equal to 95% of the EBITDA Target, no Performance Bonus
shall be payable.
ii. In the event the Actual EBITDA is greater than 95%
of the EBITDA Target but less than or equal to 100% of the EBITDA Target, the
Performance Bonus shall be payable in amount to be calculated using the
following formula:
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Performance Bonus = [Base Salary /3] x {[(Actual EBITDA / Target EBITDA) - 0.95]
/ 0.05 }.
iii. In the event the Actual EBITDA is greater than 100%
of the EBITDA Target, the Performance Bonus shall be payable in amount equal to
the sum of (a) 33.33% of Base Salary plus (b) an amount to be determined by the
following formula:
.50 x (Actual EBITDA - Target EBITDA) x Employee's Percentage
Employee's Percentage shall be a fraction, the numerator of which shall be
Employee's Base Salary and the denominator of which shall be Employee's Base
Salary plus the Base Salaries of Messrs. Simler, Worthington, Sparks and
Xxxxxxxx (being together with Employee the "Core Management Team"), together
with any other person that at least four members of the Core Management Team
expressly consents (which consent may be granted or withheld in Employee's sole
and absolute discretion) to participation in this bonus program and such other
person's participation is approved by the Board of Directors of the Company. In
no event shall the Performance Bonus exceed, in the aggregate, 100% of
Employee's Base Salary.
The Performance Bonus shall be paid to Employee not later than 5 days following
the issuance of audited financial statements for the end of the fiscal year for
which the Performance Bonus relates. For purposes of this Agreement, EBITDA
shall mean earnings before interest, taxes, depreciation and amortization, all
as determined in accordance with GAAP consistently applied, but without
including as expenses (a) any bank fees, expenses or charges related to any loan
or credit facility (including, without limitation, any fees, expenses or charges
attributable to bank monitoring or auditing), (b) any fees or charges paid or
owed to Science Applications International Corporation for periods prior to the
Closing or KRG Capital Partners or it affiliates or any affiliates of the other
"Investors" or any other intercompany charges or (c) all transaction fees and
expenses related to the transactions contemplated by the Stock Purchase
Agreement, including, without limitation, accounting and due diligence fees and
expenses. In addition, the Employee shall be entitled to such additional bonus
amounts as the Board of Directors of the Company from time to time in its sole
discretion deems appropriate. The EBITDA Target for the Company's fiscal year
ending January 31, 2000 shall be $13,570,000.
b. Participation in Benefit Plans. During the Employment
Period, Employee shall be entitled to participate in all of the Company's normal
benefit plans ("Benefits") which have been established for the other employees
of the Company, including, without limitation, health, dental, life, disability,
vacation, sick leave and other benefits. For purposes of calculating
participation and level of benefits for all Benefits which are based on years of
service, Employee shall receive credit for all prior service with other
employers that has been recognized by Transcore or its parent, Science
Applications International Corporation; provided, however, that such prior
service and any contracts or agreements relating thereto shall not be applicable
for, and Employee shall have no right to receive any payments from the Company
or Transcore with respect to, any severance arrangements other than pursuant to
Section 4(f) hereof. Such Benefits will not vary materially and adversely to
Benefits provided to Employee by Transcore (directly or by means of its parent
company Science Applications International Corporation) prior to the date
hereof.
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c. Expenses and Allowances. During the Employment Period, the
Company shall reimburse Employee for all reasonable out-of-pocket expenses
incurred in the course of performing his duties under this Agreement in
accordance with the Company's customary and normal practices, but subject to the
presentment of appropriate vouchers in accordance with the Company's normal
policies for expense verification. In addition to the foregoing, Employee shall
have an unaccountable expense allowance of $5,000 per annum. Employee shall be
entitled to participate in the TransCore Holdings, Inc. 1999 Stock Option and
Incentive Plan in substantially the amounts presented to the Company
simultaneous with the execution hereof and the Company shall make such awards to
Employee on or before the first anniversary of the date hereof.
4. Term.
a. Duration of Employment. The Employee shall be employed for
an initial period commencing on the date of the Closing and ending on the fifth
anniversary of the Closing (the "Original Term"). The Employment Period shall
terminate prior to the expiration of the Original Term in the event that at any
time during such term:
i. Employee dies;
ii. Employee becomes "disabled" (as defined in Section
4(d)) and the Board notifies Employee in writing of its election to terminate
this Agreement;
iii. The Board elects to terminate this Agreement for
"cause" and notifies Employee in writing of such election and any cure period,
if applicable, shall have expired, without cure by Employee;
iv. The Board elects to terminate this Agreement without
"cause" and notifies Employee in writing of such election, Employee has been
"constructively terminated" or a Change of Control has occurred (as defined in
Section 12(f) below);
v. Employee elects to terminate this Agreement as a
result of (x) the Company's breach in any material respect of its duties
hereunder or under any other material agreement between the Employee on the one
hand and the Company or Transcore or any of their affiliates on the other,
including, without limitation, Company's failure to pay to Employee any amounts
due hereunder or any stock appreciation rights or amounts due to Employee
pursuant to any "Fixed Benefit", "Phantom Stock Options" as such terms are
defined in the TransCore 1999 Employee Retention Plan B or Company's change in
the location where Employee is to perform services in violation of Section 2(a)
above, and failure of the appropriate person to cure such default, if capable of
cure, within 180 days if caused by default (or an effort to avoid default) under
any of the Company or Transcore's bank facilities or otherwise within 30 days of
receipt of notice from Employee of such breach or (y) Company's filing for
bankruptcy protection, reorganization, insolvency, or similar laws or the
Company's assignment for the benefit of its creditors; provided, however, that
Employee may not terminate this agreement under this Section 4(a)(v)(y) if the
Company or Transcore files for Chapter 11 bankruptcy proceedings and within 90
days thereafter affirms its obligations under this Agreement; or
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vi. Employee elects to terminate this Agreement for any
other reason or for no reason, and notifies the Company in writing of such
election.
If this Agreement is terminated pursuant to subsections (i) or (ii) of
this Section 4(a) or pursuant to subsections (iii) or (v) where no rights or
ability to cure exists, such termination shall be effective immediately, subject
to the survival of certain provisions identified herein, including, without
limitation, those provisions in Section 4(f) below. If this Agreement is
terminated pursuant to subsection (iii) or (v) of this Section 4(a) where notice
is required with an opportunity to cure, such termination shall be effective
thirty (30) days after delivery of the notice of termination if such breach has
not been cured. In all other cases, the agreement shall terminate on the date
specified in the notice of termination, but not earlier than thirty (30) days
following delivery of such notice.
b. "Cause" Defined. As used in this Agreement, the term
"cause" shall mean:
i. Employee has breached the provisions of Sections 5,
6, 7 or 8 of this Agreement in any material respect, which is likely to have a
material adverse impact on the Company;
ii. Employee has engaged in willful and material
misconduct, including willful and material failure to perform Employee's duties
as an employee of the Company as required under this Agreement and has failed to
"cure" such default within thirty (30) days after receipt by Employee of written
notice from the Company specifying in reasonable detail Employee's failure or
misconduct;
iii. Employee has committed fraud, willful and material
misappropriation which would have a material adverse affect on the Company, or
embezzlement in connection with the Company's business; or
iv. Employee has been convicted of or has pleaded nolo
contendere to a felony involving moral turpitude, which shall not include any
traffic related felonies.
In the event that the Company terminates Employee's employment for "cause"
pursuant to subsection (iii) of Section 4(a) and Employee objects in writing to
the Board's determination that there was proper "cause" for such termination
within thirty (30) days after Employee is notified of such termination, the
matter shall be resolved by arbitration in accordance with the provisions of
Section 9(a). If Employee fails to object to any such determination of "cause"
by the Company in writing within such thirty (30) day period, he shall be deemed
to have waived his right to object to that determination, If such arbitration
determines that there was not proper "cause" for termination, such termination
shall be deemed to be a termination pursuant to subsection (iv) of Section 4(a).
c. Effect of Termination. Notwithstanding any termination of
this Agreement, Employee, in consideration of his employment hereunder to the
date of such termination, shall remain bound by the provisions of this Agreement
which specifically relate to
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periods, activities or obligations upon or subsequent to the termination of
Employee's employment.
i. If this Agreement terminates by reason of Section
4(a)(ii), Company shall pay to Employee all monies owing to Employee in
accordance with Section 4(f)(i) below for the Non-Competition Period and
Employee shall be bound by the provisions of Sections 7 and 8 of this Agreement
during the Non-Competition Period.
ii. If this Agreement terminates by reason of Section
4(a)(iv) or (v), Company shall pay to Employee all monies owing to Employee in
accordance with Section 4(f) (ii) or (iii) below, as applicable, and Employee
shall be bound by the provisions of Sections 7 and 8 for a period of 24 months
following the date of termination.
iii. If this Agreement shall expire in accordance with
its terms without renewal and Employee elects to terminate his employment under
Section 4(f)(iv)(y) below, Company shall pay to Employee all monies owing to
Employee in accordance with Section 4(f)(iv) below and Employee shall be bound
by the provisions of Sections 7 and 8 for a period of 12 months following the
date of termination.
iv. If this Agreement terminates by reason of Section
4(a)(i), (iii) or (vi), Company shall pay to Employee all monies owing to
Employee in accordance with Section 4(f)(v) below, and if such termination is by
reason of Section 4(a)(iii) or (vi) Employee shall be bound by the provisions of
Sections 7 and 8 during the Non-Competition Period.
If the Company, Transcore or any of their affiliates fail to make any payments
owed to Employee under this Agreement or any other agreement subsequent to
termination, within 10 business days of the due date of any such payment, or the
Company fails to provide the Benefits to Employee required hereunder following
termination and fails to reinstate such Benefits retroactively within 15
business days of receipt by Company of notice from Employee describing same,
Employee may, in his sole and absolute discretion, pursue all legal and
equitable rights and remedies against the Company, Transcore or any of their
affiliates, as the case may be, to collect such payments which shall accelerate
and be due immediately and enforce such Benefits; provided further, that in
addition to and not in lieu of the other remedies set forth herein, Employee
shall not be bound by the provisions of Sections 7 and 8 of this Agreement
during any period where the Company is in default under any of its payment
obligations hereunder.
d. "Disabled" Defined. As used in this Agreement, the term
"disabled" means any mental or physical condition which renders Employee unable
to perform the essential functions of his position, with reasonable
accommodation, for a period in excess of 180 consecutive days or more than 270
days during any period of 365 calendar days.
e. Surrender of Records and Property. Upon termination of
Employee's employment with the Company, Employee shall deliver promptly to the
Company all records, manuals, books, blank forms, documents, letters, memoranda,
notes, notebooks, reports, data, tables, calculations or copies thereof, which
are the property of the Company or which relate in any way to the business,
products, practices or techniques of the Company, and all other property, trade
secrets and confidential information of the Company, including but not
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limited to, all documents which in whole or in part contain any trade secrets or
confidential information of the Company, which in any of these cases are in
Employee's possession or under Employee's control.
f. Wage Continuation.
i. If Employee's employment with the Company is
terminated pursuant to subsection (ii) of Section 4(a), the Company shall
continue to pay to Employee his Base Salary (less any payments received by
Employee or his beneficiaries from any disability income provided to him by the
Company) and any Performance Bonus for all periods prior to termination (pro
rated for such year) and continuing with respect to the Base Salary through the
Non-Competition Period (as defined below), and the Company shall continue to
provide health insurance (the extension of which shall limit or remove any COBRA
obligations to the extent the traditional terms thereunder are reduced by such
additional benefit), dental, disability and all other Benefits existing on the
date of termination (on substantially the same terms as those in place at
termination) for Employee until the Final Payment Date. For purposes of this
Agreement, "Final Payment Date" shall mean the earlier of (a) two (2) years from
the date of termination of employment, or (b) the end of the Original Term or
any extension term, if agreed.
ii. If Employee's employment with the Company is
terminated pursuant to subsection (iv) or (v) of Section 4(a) (other than as the
result of a Change of Control), the Company shall continue to pay to Employee
his Base Salary and any Performance Bonus for all periods prior to termination
(pro rated for such year) and continue to pay Employee at a rate of two times
his Base Salary for a period of 24 months following Employee's termination, and
the Company shall continue to provide health insurance (the extension of which
shall limit or remove any COBRA obligations to the extent the traditional terms
thereunder are reduced by such additional benefit), dental, disability and all
other Benefits existing on the date of termination (on substantially the same
terms as those in place at termination) for Employee for a period of 24 months
following Employee's termination.
iii. If Employee's employment with the Company is
terminated pursuant to Section 4(a)(iv) as the result of a Change of Control,
the Company shall continue to pay to Employee his Base Salary and any
Performance Bonus for all periods prior to termination (pro rated for such year)
and continue to pay Employee at a rate of one and one-half times his Base Salary
for a period of 24 months following Employee's termination, and the Company
shall continue to provide health insurance (the extension of which shall limit
or remove any COBRA obligations to the extent the traditional terms thereunder
are reduced by such additional benefit), dental, disability and all other
Benefits existing on the date of termination (on substantially the same terms as
those in place at termination) for Employee for a period of 24 months following
Employee's termination.
iv. If this Agreement shall expire in accordance with
its terms without renewal, the Company shall continue to pay to Employee his
Base Salary and any Performance Bonus for all periods prior to termination (pro
rated for such year) and Employee may elect, within 30 days subsequent to the
expiration of this Agreement, either to (x) continue with the Company as an "at
will" employee upon terms mutually acceptable to Employee and the
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Company in which event Employee will have no obligations under Sections 7 or 8
of this Agreement or (y) terminate his employment with the Company, in which
case the Company shall continue to pay Employee at a rate of one and one-half
times his Base Salary for a period of 6 months following Employee's termination.
In the event of termination under Section (4)(f)(iv)(y), Employee shall be bound
by the provisions of Sections 7 and 8 for a period of 12 months following the
date of such termination.
v. If this Agreement is terminated pursuant to
subsection (i), (iii) or (vi) of Section 4(a), Employee's right to his Base
Salary, Performance Bonuses for all periods after termination and benefits shall
terminate on the effective date of termination, except as may otherwise be
required by applicable law; provided that any amounts owed to Employee on that
date for Base Salary and Performance Bonuses shall be paid to Employee within
thirty (30) days of termination.
g. Other Benefits. All of Employee's rights to any other
employee benefit hereunder (except as described above or pursuant to law)
accruing after the termination of the Employment Period shall cease upon such
termination. Upon termination of this Agreement for any reason whatsoever,
Employee shall have the right to receive any accrued but unused comprehensive
leave or vacation time and any and all Benefits and expense reimbursements due
employee pursuant to Sections 3(b) and 3(c) as of termination.
0 h. Notice of Intent to Renew. Not later than twelve 12 months
prior to the expiration of this Agreement by its terms, the Company shall notify
Employee in writing of its intent to negotiate an extension or new agreement
with Employee.
i. "Constructive Termination" Defined. For purposes of this
Agreement, "constructive termination" shall mean the assignment to Employee of
any duties inconsistent in any respect with Employee's position (including
status, offices, titles and reporting requirements), authority, duties or
responsibilities as contemplated by Section 2(a) of this Agreement, or any other
action by the Company which results in a diminution in such position, authority,
duties or responsibilities, excluding for this purpose an isolated,
insubstantial and inadvertent action not taken in bad faith and which is
remedied by the Company promptly after receipt of notice thereof given by
Employee.
j. Vesting. Any shares of Class B-1 Convertible Preferred
Stock of the Company (the "Class B Shares") held by Employee shall vest (A) 100%
at the time of termination of employment pursuant to Section 4(a)(iv) or (v),
and (B) partially on a pro rata basis in the event of termination of employment
pursuant to Sections 4(a)(i) or (ii) or in the event such termination occurs
after the second anniversary of the date hereof Sections 4(a) (iii) or (vi), in
each case as follows: In the event of Employee's termination of service to
Company or any of its Affiliates prior to the Measurement Date (as defined
below), on Employee's date of termination a portion of the Class B Shares held
by Employee shall vest equal to the product (rounded to the nearest whole
number) of (l) the number of Class B Shares held by Employee multiplied by (2) a
fraction, the numerator of which shall be the number of weeks of service
provided by Employee to the Company or any of its Affiliates between the date of
grant of the Class B Shares to Employee and the date of termination of Employee
and the denominator of which shall be the number of weeks between the date of
grant of the Class B Shares to Employee
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and the Measurement Date. The "Measurement Date" shall mean the earlier of (x)
the closing of a "Public Offering" as defined in the Certificate of Designation
for the Class B Shares, (y) a "Fundamental Change," a "Change of Ownership" or a
"Liquidation Event," each as defined in the Certificate of Designation for the
Class B Shares or (z) five years from the date of grant of the Class B Shares to
Employee. In the event of termination of employment pursuant to Sections
4(a)(iii) or (vi) prior to the second anniversary of the date hereof, none of
the Class B Shares held by Employee shall vest. All stock options granted to
Employee under the Transcore Holdings, Inc. 1999 Stock Option and Incentive Plan
(the "SOP") shall vest (A) 100% at the time of termination of employment
pursuant to Section 4(a)(iv) or (v), and (B) in all other situations shall
remain vested in accordance with the terms of such SOP. All stock appreciation
rights, fixed benefits or similar options, warrants or rights to be granted to
Employee under the Transcore 1999 Employee Retention Plan B or the Transcore
Holdings, Inc. 1999 Stock Appreciation Rights Plan (collectively, the "Other
Plans") (other than the Class B Shares and stock options previously described
above) will vest (A) 100% at the time of termination of employment pursuant to
Section 4(a)(i), (ii), (iv) or (v), and (B) partially on a pro rata basis in the
event of termination of employment pursuant to Section 4(a)(iii) or (vi). In
addition, if Employee is entitled to terminate his employment pursuant to
Section 4(a)(v) above, all stock options, stock appreciation rights, fixed
benefits or similar options, warrants or rights granted to Employee under any of
the Other Plans, the SOP or the Restricted Stock Agreement of even date herewith
between the Company and the Employee (the "Restricted Stock Agreement"),
including the Class B Shares, shall vest 100% upon occurrence of the event
outlined in Section 4(a)(v). The vesting provisions in this Employment Agreement
shall control to the extent that the provisions hereof are inconsistent with any
other vesting provisions under the SOP, the Other Plans or the Restricted Stock
Agreement. The provisions of this Section shall survive termination of this
Agreement for any reason. Except as expressly set forth herein with respect to
the Class B Shares, no vested options, stock appreciation rights, phantom stock
options or similar rights or options granted under the Other Plans, the SOP or
the Restricted Stock Agreement will be subject to forfeiture.
5. Confidential Information. As used herein, the term "Confidential
Information" shall mean all information disclosed to Employee or known by
Employee as a consequence of or through Employee's employment by the Company
(including, without limitation, information belonging to third parties or
companies affiliated with or related to the Company in the Company's possession)
not generally known in the trade or industry in which such information is used,
about the Company's products, processes, services, customers, marketing strategy
and business plans. Employee agrees that it will not disclose any Confidential
Information to any unauthorized person without the prior written consent of the
Board except (i) as required by law, (ii) to professionals engaged by the
Company or TransCore, such as attorneys, accountants or other advisors, (iii) as
required by court order, (iv) in the ordinary course of the Company's business
to a third party, including, without limitation, to the Company's customers
under appropriate confidentiality provisions or (v) to a regulatory or
governmental agency or authority in connection with the Company's business.
Confidential Information shall not include matters which become generally known
in the trade or industry in which such information is used other than as a
result of Employee's acts or omissions to act. Employee shall deliver to the
Company at the termination of the Employment Period, or at any other time as the
Company may request, all memoranda, notes, plans, records, computer tapes and
software and other documents and data (and copies thereof) relating to the
Confidential
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Information or the business of the Company, or any subsidiary of the Company,
which Employee may then possess or have under Employee's control.
6. Ventures. If during the Employment Period Employee is engaged in
or associated with the planning or implementing of any project, program or
venture involving the Company and a third party or parties, all rights in such
project, program or venture shall belong to the Company. Except as formally
approved by the Board, Employee shall not be entitled to any interest in such
project, program or venture or to any commission, finder's fee or other
remuneration in connection therewith other than the compensation to be paid to
Employee as provided in this Agreement.
7. Covenant not to Compete.
a. Agreement Not to Compete. During the period of time
commencing on the Closing and continuing until the earlier to occur of (i) the
second anniversary of the end of the Employment Period or (ii) any shorter
period as prescribed by the subparagraphs of Section 4(c) or 4(f)(iv) hereof
(the "Non-Competition Period"), Employee agrees not to, directly or indirectly,
engage in competition with the Company in any manner or capacity (e.g., as an
advisor, principal, agent, partner, officer, director, stockholder, employee, or
otherwise) in the toll collection systems, traffic management systems or any
other business operated or conducted by TransCore during the term of Employee's
employment principally involved in serving or supporting the transportation
market; provided, however, that the effectiveness of this Section 7 shall be
conditioned upon the payment by the Company to the Employee of any amounts
prescribed in a subparagraph to Section 4(f), to the extent applicable.
Notwithstanding the foregoing, Employee shall not be in violation of this
Section 7(a) in the event Employee becomes an advisor, agent, officer, employee
or otherwise assumes a role or position with a third party which engages in
competition with the Company (a "Third Party Competitor") that would, if such
competitive activity was undertaken directly by Employee, result in a violation
of this Section 7(a) if (x) the business or operations of such Third Party
Competitor that would, if undertaken directly by Employee, be in violation of
this Section 7(a) (the "Competitive Operations") is responsible for producing
less than 10% of the total revenues or net income of such Third Party Competitor
and (y) Employee is not employed by or engaged by and otherwise does not provide
any work for or services to the Competitive Operations of such Third Party
Competitor.
b. Geographic Extent of Covenant. The obligations of Employee
under Section 7(a) shall apply to any geographic area in which the Company has
engaged in business during the Employment Period through customer relations,
production, promotional, sales or marketing activity, or otherwise.
c. Limitation on Covenant. Ownership by Employee, as a passive
investment, of less than five percent (5%) of the outstanding shares of capital
stock of any corporation listed on a national securities exchange or publicly
traded in the over-the-counter market shall not constitute a breach of this
Section 7.
d. Indirect Competition. During the Non-Competition Period,
Employee agrees not to, directly or indirectly, assist or encourage any other
person in carrying
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out, directly or indirectly, any activity that would be prohibited by the above
provisions of this Section 7 if such activity were carried out by Employee,
either directly or indirectly; and in particular, Employee agrees not to,
directly or indirectly, induce any employee of the Company to carry out,
directly or indirectly, any such activity.
8. Non-Solicitation. During the Non-Competition Period Employee
agrees not to, directly or indirectly:
a. induce or attempt to induce any employee of the Company or
any subsidiary to leave the employ of the Company or such subsidiary;
b. hire any person who was one of the twenty most senior
employees (based on rank and responsibility) of the Company (on a consolidated
basis accounting for all subsidiaries of the Company) at any time during the
Employment Period if such person was employed by the Company or a subsidiary of
the Company at any time during the one year period prior to such hiring;
c. induce or attempt to induce any customer, supplier,
licensee or other business relation of the Company or any subsidiary to
withdraw, curtail or cease doing business with the Company or any such
subsidiary.
Notwithstanding the foregoing, nothing herein shall preclude Employee from
pursuing opportunities with another senior officer of the Company or TransCore
in the event (i) Employee is terminated pursuant to Section 4(a)(iv) or Employee
terminates his or her employment pursuant to Sections 4(a)(iv) or 4(a)(v) and
(ii) such other senior officer is terminated without cause or terminates his
employment as the result of a "change of control" or "constructive termination"
pursuant to the terms of such senior officer's employment agreement with the
Company (a "Terminated Officer Employment Agreement") or such senior officer
terminates his or her employment following a breach by the Company or TransCore,
as the case may be, of the terms of such senior officer's Terminated Officer
Employment Agreement for which any opportunity for cure has expired.
9. Settlement of Disputes.
a. Arbitration. Except as provided in Section 9(c), any claims
or disputes of any nature between the Company and Employee arising from or
related to the performance, breach, termination, expiration, application, or
meaning of this Agreement or any matter relating to Employee's employment and
the termination of that employment by the Company shall be resolved exclusively
by arbitration in Philadelphia, Pennsylvania, in accordance with the Commercial
Arbitration Rules of the American Arbitration Association sitting in
Philadelphia, Pennsylvania (the "AAA"). The arbitration will be conducted by
three persons, one to be selected by Employee, one to be selected by the Company
and the other to be selected by the two arbitrators selected by the Employee and
the Company. Each party will select their arbitrator within 30 days of the
initiation of proceedings or the AAA will select an arbitrator for that person
at random. The fees of the arbitrators and other costs incurred by Employee and
the Company in connection with such arbitration shall be paid by the party who
is unsuccessful in such arbitration.
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b. Binding Effect. The decision of the arbitrators shall be
final and binding upon both parties. Judgment of the award rendered by the
arbitrators may be entered in any court having jurisdiction thereof. In the
event of a submission of any dispute to arbitration, each party shall, not later
than thirty (30) days prior to the date set for hearing, provide to the other
party and to the arbitrators a copy of all exhibits upon which the party intends
to rely at the hearing and a list of all persons each party intends to call at
the hearing.
c. Resolution of Certain Claims - Injunctive Relief. Section
9(a) shall have no application to claims by the Company asserting a violation of
Sections 5, 6, 7 or 8 or seeking to enforce, by injunction or otherwise, the
terms of Sections 5, 6, 7 or 8. Such claims may be maintained by the Company in
a lawsuit subject to the terms of this Section 9(c). Employee agrees that, in
addition to, but not to the exclusion of any other available remedy, the Company
shall have the right to enforce the provisions of Sections 5, 6, 7 or 8 by
applying for and obtaining temporary and permanent restraining orders or
injunctions from a court of competent jurisdiction without the necessity of
filing a bond therefor, and the prevailing party in any such litigation shall be
entitled to recover its reasonable attorneys' fees and costs from the
non-prevailing party.
d. Venue. Any action at law, suit in equity, or judicial
proceeding arising directly, indirectly, or otherwise in connection with, out
of, related to or from this Agreement or any provision hereof, shall be
litigated only in Philadelphia, Pennsylvania. Employee waives any right the
Employee may have to transfer or change the venue of any litigation brought
against Employee by the Company.
e. Severability. To the extent any provision of this Agreement
shall be invalid or unenforceable, it shall be considered deleted herefrom and
the remainder of such provision and of this Agreement shall be unaffected and
shall continue in full force and effect. In furtherance and not in limitation of
the foregoing, should the restrictions stated herein, or the duration or
geographical extent of, or business activities covered by any provision of this
Agreement be in excess of that which is valid and enforceable under applicable
law, then the parties hereto agree that the maximum period, scope or
geographical area reasonable under such circumstances shall be substituted for
the stated period, scope or area. Employee acknowledges the uncertainty of the
law in this respect and expressly stipulates that this Agreement be given the
construction which rendered its provisions valid and enforceable to the maximum
extent (not exceeding its express terms) possible under applicable law.
10. Parachute Limitations
a. Certain Additional Payments by the Company. Anything in
this Agreement to the contrary notwithstanding and except as set forth below, in
the event it shall be determined that any payment, vesting or distribution by
the Company to or for the benefit of the Employee (whether paid or payable,
vesting or distributed or distributable pursuant to the terms of this Agreement,
the SOP, any Other Plan, the Restricted Stock Agreement or otherwise, but
determined without regard to any additional payments required under this Section
10) (a "Payment") would be subject to the excise tax imposed by Section 4999 of
the Code or any interest or penalties are incurred by the Employee with respect
to such excise tax (such excise tax, together with any such interest and
penalties, are hereinafter collectively referred to as the
12
"Excise Tax"), then the Employee shall be entitled to receive an additional
payment (a "Gross-Up Payment") in an amount such that after payment by the
Employee of all taxes (including any interest or penalties imposed with respect
to such taxes), including, without limitation, any income taxes (and any
interest and penalties imposed with respect thereto) and Excise Tax imposed upon
the Gross-Up Payment, the Employee retains an amount of the Gross-Up Payment
equal to the Excise Tax imposed upon the Payments. This Agreement expressly
modifies or excludes application of Section 8 of the Stock Appreciation Rights
Agreement and Section 8 of the Restricted Stock Agreement and any similar
provision of the SOP, Other Plans, and any other agreement. The provisions of
this Section shall survive termination of this Agreement for any reason.
b. Determination of Payments. Subject to the provisions of
Section 10(c), all determinations required to be made under this Section 10,
including whether and when a Gross-Up Payment is required and the amount of such
Gross-Up Payment and the assumptions to be utilized in arriving at such
determination, shall be made by such certified public accounting firm as may be
designated by the Company (the "Accounting Firm") which shall provide detailed
supporting calculations both to the Company and the Employee within 15 business
days of the receipt of notice from the Employee that there has been a Payment,
or such earlier time as is requested by the Company. All fees and expenses of
the Accounting Firm shall be borne solely by the Company. Any Gross-Up Payment,
as determined pursuant to this Section 10, shall be paid by the Company to the
Employee within five days of the receipt of the Accounting Firm's determination.
Any determination by the Accounting Firm shall be binding upon the Company and
the Employee. As a result of the uncertainty in the application of Section 4999
of the Code at the time of the initial determination by the Accounting Firm
hereunder, it is possible that Gross-Up Payments which will not have been made
by the Company should have been made ("Underpayment"), consistent with the
calculations required to be made hereunder. In the event that the Company
exhausts its remedies pursuant to Section 10(c) and the Employee thereafter is
required to make a payment of any Excise Tax, the Accounting Firm shall
determine the amount of the Underpayment that has occurred and any such
Underpayment plus interest, penalties and federal and state income taxes thereon
shall be promptly paid by the Company to or for the benefit of the Employee.
c. Procedures re the Internal Revenue Service. In the event
the Internal Revenue Service ("IRS") subsequently challenges the Excise Tax
computation herein described, then the Employee shall notify the Company in
writing of any claim by the IRS that, if successful, would require the payment
by the Employee of additional Excise Taxes. Such notification shall be given no
later than ten days after the Employee receives written notice of such claim
(provided, however, that failure to provide such notice to Company within such
ten-day period will not relieve the Company of its obligations under this
Section 10 except to the extent such failure prejudices Company's rights
hereunder). The Employee shall not pay such claim prior to the expiration of the
30-day period following the date on which the Employee gives notice to the
Company (or such shorter period ending on the date that any payment of taxes
with respect to such claim is due). If the Company notifies the Employee in
writing prior to the expiration of such period that it desires to contest such
claim and that it will bear the costs and provide the indemnification as
required by this Section, the Employee shall cooperate with the Company in good
faith in order effectively to contest such claim and permit the Company to
participate in any proceedings relating to such claim. In the event a final
determination is made
13
with respect to the IRS claim, or in the event the Company chooses not to
further challenge such claim, then the Company shall reimburse the Employee for
the additional Excise Tax owed to the IRS in excess of the Excise Tax calculated
by the Accounting Firm. The Company shall also reimburse the Employee for all
interest and penalties related to the underpayment of such Excise Tax. The
Company will also reimburse the Employee for all federal and state income tax
and employment taxes thereon.
11. Representations.
a. Employee's Representations. Employee hereby represents and
warrants to the Company that (i) the execution, delivery and performance of this
Agreement by Employee does not and will not conflict with, breach, violate or
cause a default under any contract, agreement, instrument, order, judgment or
decree to which Employee is a party or by which Employee is bound, (ii) Employee
is not a party to or bound by any employment agreement, covenant not to compete
or confidentiality agreement other than those relating to Transcore or its
affiliates with any other person or entity, and (iii) upon the execution and
delivery of this Agreement by the Company, this Agreement shall be the valid and
binding obligation of Employee, enforceable in accordance with its terms.
b. Company's Representations. Company hereby represents and
warrants to the Employee that (i) the execution, delivery and performance of
this Agreement by the Company does not and will not conflict with, breach,
violate or cause a default under any contract, agreement, instrument, order,
judgment, or decree to which the Company is a party or by which the Company is
bound, and (ii) upon the execution and delivery of this Agreement by the
Employee, this Agreement shall be the valid and binding obligation of the
Company, enforceable in accordance with its terms.
12. Miscellaneous.
a. Governing Law. This Agreement is made under and shall be
governed by and construed in accordance with the laws of the Commonwealth of
Pennsylvania, without regard to conflict of law principles.
b. Prior Agreements. This Agreement contains the entire
agreement of the parties relating to the employment of Employee by the Company
and the ancillary matters discussed herein and supersedes all prior agreements
and understandings with respect to such matters, and the parties hereto have
made no agreements, representations or warranties relating to such employment or
ancillary matters which are not set forth herein.
c. Withholding Taxes. The Company may withhold from any
benefits payable under this Agreement all federal, state, city or other taxes as
shall be required pursuant to any law or governmental regulation or ruling.
d. Amendments. No amendment or modification of this Agreement
shall be deemed effective unless made in writing and signed by the parties
hereto.
e. No Waiver. No term or conditions of this Agreement shall be
deemed to have been waived, nor shall there by any estoppel to enforce any
provisions of this
14
Agreement, except by a statement in writing signed by the party against whom
enforcement of the waiver or estoppel is sought. Any written waiver shall not be
deemed a continuing waiver unless specifically stated, shall operate only as to
the specific term or condition waived and shall not constitute a waiver of such
term or condition for the future or as to any act other than that specifically
waived.
f. Assignment; "Change of Control" Defined. This Agreement
shall not be assignable, in whole or in part, by either party without the
written consent of the other party. A "Change in Control" shall be deemed an
assignment of this Agreement without the prior written consent of Employee
specifically referencing this Section 12(f), which consent may be granted or
withheld in Employee's sole and absolute discretion. For purposes of this
Agreement, a "Change in Control" shall mean (i) the acquisition, directly or
indirectly, of 50% or more of the common stock or preferred stock of the Company
or Transcore by a person or affiliated group other than a person controlled by
KRG Capital Partners, L.L.C. (together with its affiliates, "KRG"), (ii) the
sale, disposition or other transfer by KRG, directly or indirectly, of 33.33% or
more of its equity ownership position in the Company as of the date of this
Agreement (based upon actual shares of capital stock held and not relative
ownership percentage), (iii) the cessation of the ability of KRG to designate at
least three members of the Board of Directors of the Company (assuming the
number of members of the Board of Directors remains at seven), or (iv)
consummation by the Company or Transcore of a reorganization, merger or
consolidation or sale or other disposition of all or substantially all of the
assets of the Company or Transcore (a "Corporate Transaction"); excluding,
however, a Corporate Transaction (x) pursuant to which all or substantially all
of the original investors and/or their affiliates will beneficially own,
directly or indirectly, more than 50% of the outstanding shares of common or
preferred stock of any surviving entity resulting from the Corporate Transaction
or (y) any Corporate Transaction approved by a majority of the Core Management
Team.
g. Notices. Any notice provided for in this Agreement shall be
in writing and shall be personally delivered by nationally recognized overnight
courier service to the recipient at the address indicated below.
Notices to Employee:
Xxxx X. Xxxxx
000 Xxxxxxx Xxxx
Xxxxxxxxx, XX 00000
Notices to the Company:
TransCore Holdings, Inc.
x/x XXX Xxxxxxx Xxxxxxxxxxx
0000 Xxxxxxxx Xxxxxx,
Xxxxx One, Suite 1500
Xxxxxx, Xxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxxxxx, Managing Director
15
or such other address or to the attention of such person as the recipient party
shall have specified by prior written notice to the sending party. Any notice
under this Agreement shall be deemed to have been given one (1) business day
after the date such notice was properly deposited, prepaid, with such overnight
courier service for delivery the following business day. Any notice of
termination of Employee's employment by the Company shall indicate the specific
termination provision in this Agreement relied upon and shall set forth in
reasonable detail the facts and circumstances claimed to provide a basis for
termination of the Employee's employment under the provision so indicated.
h. Counterparts. This Agreement may be simultaneously executed
in any number of counterparts, and such counterparts executed and delivered,
each as an original, shall constitute one and the same instrument.
i. Captions and Headings. The captions and paragraph headings
used in this Agreement are for convenience of reference only, and shall not
affect the construction or interpretation of this Agreement or any of the
provisions hereof.
j. Expenses. The Company shall reimburse Employee for all
reasonable legal fees and expenses of Employee associated with the negotiation,
execution and delivery of this Agreement and any other documents between
Employee on the one hand and Company, Transcore or any of their affiliates on
the other; provided, however, that "reasonable legal fees and expenses" of the
Employee shall be based on the understanding that Employee (in conjunction with
certain other key employees of Transcore) have collectively engaged one law firm
for its legal advice an the matters and documentation referred to above and any
additional counsel shall be approved by the Company in advance.
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, Employee and the Company have executed this Agreement
as of the date set forth in the first paragraph above.
THE COMPANY
TRANSCORE HOLDINGS, INC.
By: /s/
-------------------------------
Name:
--------------------------
Title:
-------------------------
EMPLOYEE:
/s/ Xxxx X. Xxxxx
-----------------
Xxxx X. Xxxxx
