Employment Agreement - Navigation Technologies Corp. and T. Russell Shields
EXECUTION COPY
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EMPLOYMENT AGREEMENT
This Agreement is made as of the 24th day of June, 1996, by and between
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Navigation Technologies Corporation, a Delaware corporation ("NavTech"), and T.
Russell Shields, an individual residing in Chicago, Illinois ("Shields"), with
reference to the following:
A This Employment Agreement is being entered into in anticipation of the
merger (the "Merger") contemplated under an Agreement and Plan of
Reorganization of even date herewith between, among other parties, NavTech
and Shields Enterprises, Inc. ("SEI"), pursuant to which SEI will become a
wholly-owned subsidiary of NavTech (the "Plan of Reorganization").
B. Shields is chairman, a director and the majority shareholder of SEI.
As a condition to NavTech entering into the Plan of Reorganization and
consummating the Merger, Shields is entering into this Employment
Agreement.
C. This Employment Agreement shall become effective upon the Effective
Date of the Merger and shall have no effect unless and until such Merger
occurs.
D. Unless otherwise indicated, all capitalized terms used herein shall
have the same meaning as specified in the Plan of Reorganization.
NOW THEREFORE, the parties hereto agree as follows:
1. Services of Shields
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a. Shields will serve as NavTech's Chairman and Chief Executive Officer,
and, as directed by the Board of Directors of NavTech (the "Board"), shall
perform the services that are customary to such office, including, without
limitation, those duties set forth on Exhibit E-1 attached hereto. Shields'
office shall be located in the Chicago, Illinois metropolitan area, and Shields
shall not be required to relocate without his consent.
b. Except as provided in Section 6.a., this Agreement shall terminate on
the earliest to occur of (i) the expiration of four (4) years from the Effective
Date, (ii) Shields' death or Disability (as defined below), and (iii) the
termination of this Agreement by NavTech or Shields as evidenced by a written
notice to that effect.
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c. Shields agrees that:
(i) During the term of this Agreement and for a period of one (1)
year after the termination of this Agreement for any reason, Shields will not,
acting alone or in conjunction with others, directly or indirectly, without the
consent in writing of the Board:
(A) Engage (either as owner, partner, stockholder, employer,
employee, consultant or otherwise) in any business or activity directly in
competition with a business or activity which is related to creating, managing,
adapting, applying, distributing, selling or licensing navigable street map
databases and related database creation, update, access, routing, compiling or
other application software, or any logical extensions thereof, or any other
business conducted during the term of this Agreement by NavTech ( the "NavTech
Businesses"); it being agreed, without limiting any of the foregoing, that
Shields will not directly or indirectly provide software services to any
competitor of NavTech in the NavTech Businesses.
(B) Engage (either as owner, partner, stockholder, employer,
employee, consultant or otherwise) in any business or activity directly in
competition with any business or activity related to the design, development or
support of computer software or systems for third parties, or management
consulting services related thereto, or any other business conducted by SEI
during the term of this Agreement (the "SEI Businesses"); it being agreed,
without limiting any of the foregoing, that Shields will not directly or
indirectly provide software services to any competitor of SEI in the SEI
Businesses.
(C) Induce any customers of NavTech or any of its
subsidiaries to curtail or cancel their business with any of them or induce any
person or entity to do business with any competitor of NavTech or any of its
subsidiaries in competition with the business of NavTech or any of its
subsidiaries.
(D) Solicit or canvass business in connection with the
selling or licensing of navigable street map databases or related software from
any person or entity who was a customer of NavTech or any of its subsidiaries
during the period in which Shields' services are or were provided to NavTech or
any of its subsidiaries; or
(E) Induce, or attempt to influence, any employee of NavTech
or any of its subsidiaries to terminate his/her employment.
The provisions of each of clauses (A), (B), (C), (D) and (E) above are separate
and distinct commitments independent of each of the other clauses. It is agreed
that the ownership of not more than five percent (5%) of the equity securities
of any company having securities listed on an exchange or regularly traded in
the over-the-counter market shall not, in itself, be deemed inconsistent with
subparagraphs 1.c.(i)(A) or (B).
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(ii) Except in the course of providing services hereunder, Shields
shall not, at any time, during the term of this Agreement or thereafter, for any
reason whatsoever, disclose, use, transfer or sell any confidential or
proprietary information of NavTech and its subsidiaries so long as such
information has not otherwise lawfully been disclosed or is not otherwise in the
public domain, except as required by law or pursuant to legal process.
(iii) Shields agrees to cooperate with NavTech by being available
to testify on behalf of NavTech or any subsidiary or affiliate of NavTech in any
proceeding, whether civil, criminal, administrative or investigative, and to
assist NavTech, or any subsidiary or affiliate of NavTech, in any such action,
suit or proceeding, by providing information, and meeting and consulting with
the Board or its representatives or counsel, or representatives or counsel of
NavTech or any subsidiary or affiliate of NavTech, as requested by such Board,
representatives or counsel. NavTech agrees to reimburse Shields for all
expenses and time reasonably incurred in connection with his provision of
testimony or assistance after the termination of Shields' services under this
Agreement.
2. Compensation
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a. So long as Shields continues to perform the services specified in
Section 1 and this Agreement has not terminated, compensation for Shields'
services (inclusive of all compensation paid by any NavTech affiliates) shall
consist of (i) the Base Annual Compensation, (ii) the Senior Executive Bonus
Plan, and (iii) such customary benefits as NavTech may provide to its executive
employees. NavTech shall reimburse Shields for his reasonable expenses incurred
in performing his duties to NavTech hereunder, subject to policies established
by the Board from time to time.
b. The Base Annual Compensation for Shields' services shall be at the
annual rate of Three Hundred and Seventy Five Thousand Dollars ($375,000),
commencing upon the Effective Date. The Base Annual Compensation shall be paid
to Shields by NavTech in twenty-six (26) equal bi-weekly installments each year.
The Board shall have the right, but no obligation, to increase the Base Annual
Compensation from time to time, as it sees fit.
c. Shields will also be eligible to participate in the Senior Executive
Bonus Plan to be established by NavTech in 1996 and continued for Shields during
the entire term of this Agreement. Shields' target bonus each year will be
fifty percent (50%) of his Base Annual Compensation, subject to his achievement
of applicable milestones and objectives. For each year, any such bonus will be
paid to Shields on a bi-weekly basis during the following year. Such milestones
and objectives shall be established annually by the Board and shall refer to
financial and other data determinable as of the end of each fiscal year of
NavTech. A determination as to whether such milestones and objectives have been
met shall be made by the Board within ninety (90) days after the end of each
such fiscal year, and such bonus, if any, shall be deemed earned as of the end
of the fiscal year for which the objectives and milestones were set. The
aggregate amount of any bi-weekly payments which would have been due during such
ninety (90) day period had such determination been made on the last date of the
fiscal year shall be paid in a lump
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sum immediately following such determination. For the year 1996, the bonus will
not be linked to any milestones or objectives but will be fifty percent (50%) of
the Base Annual Compensation paid to Shields by NavTech between the Effective
Date and December 31, 1996.
d. NavTech will grant non-qualified options to Shields to purchase ten
(10) million shares of NavTech common stock with an exercise price of One Dollar
and Seventy Cents ($1.70) per share, which options shall vest as follows: (i)
options to acquire 1,250,000 shares of NavTech common stock shall vest on
January 1, 1997 and (ii) options to acquire the remaining 8,750,000 shares of
NavTech common stock shall vest in forty-two (42) equal monthly installments
starting on February 1, 1997. Shields will not be eligible to be considered for
grants of additional stock options until August 1, 2000. Except as otherwise
provided in subsections 2.e. and 2.f. below, any vested options may be exercised
up to, but not including, the tenth (10th) anniversary of the date of grant of
such options. NavTech shall enter into an option agreement with Shields
substantially in the form of Exhibit E-2 to this Agreement. In the event of any
inconsistency between such option agreement and this Agreement, this Agreement
shall control.
e. If NavTech terminates Shields' employment for Cause (as defined
below), or Shields' employment terminates due to his death or Disability (as
defined below), or Shields terminates his employment with NavTech other than as
a result of a NavTech Breach (as defined below), NavTech shall not be required
to pay any compensation for termination, and Shields shall not thereafter
continue to participate in any benefit plans of NavTech or its subsidiaries,
except to the extent required by law, provided that Shields shall be entitled to
receive any bonus earned but unpaid as of the date of such termination over the
period such bonus would have been paid to Shields had Shields' employment not
been so terminated. If NavTech terminates Shields' employment for Cause as a
result of an act or omission which involves dishonesty or criminal conduct
directed against NavTech or any of its subsidiaries, all vesting of options
shall cease, and all vested but unexercised options shall terminate, effective
upon such termination of employment. If NavTech terminates Shields' employment
for Cause for reasons other than those described in the foregoing sentence, all
vesting of options shall cease effective upon such termination, and all vested
but unexercised options shall terminate ninety (90) days after such termination
of employment. In the event Shields' employment terminates due to his death or
Disability, or Shields terminates his employment with NavTech other than as a
result of a NavTech Breach, all vested but unexercised stock options may be
exercised in accordance with their terms, but all vesting shall cease as of the
date of such termination of employment.
f. In the event that Shields' employment is terminated by NavTech without
Cause or by Shields as a result of a NavTech Breach, NavTech will provide
Shields with the following: severance pay equal to one (1) year Base Annual
Compensation; any earned and unpaid bonus as of the date of such termination
with such bonus to be paid over the period it would have been paid to Shields
had Shields not been terminated; continuation of Shields' normal benefits for a
one (1) year period after the date of termination; continuation of vesting of
Shields' non-qualified stock options for a period of one (1) year from the date
of termination; and continuation of the right to exercise all vested options in
accordance with their terms. In the event of such a
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termination, the foregoing shall be Shields' sole and exclusive remedy and
Shields shall not be entitled to any other or further payments, compensation or
benefits from NavTech.
g. For purposes of this Agreement, "Cause" shall mean any act of or
omission by Shields in the conduct of Shields' duties and responsibilities which
constitutes gross negligence or willful misconduct, or any act of or omission by
Shields outside the course of Shields' duties and responsibilities which
involves dishonesty or criminal conduct adverse to NavTech or any of its
subsidiaries or to Shields' value to NavTech as an officer. In the event the
Board believes it has Cause to terminate Shields' employment, it shall give
written notice to Shields stating the specific grounds constituting Cause. In
the event that the Cause alleged constitutes any act or omission in the conduct
of Shields' duties and responsibilities which constitutes gross negligence or
willful misconduct, Shields shall have an opportunity within five (5) days after
receiving such notice to meet with the Board to discuss such allegations of
Cause, and a period of not less than ten (10) days to cure such Cause. Shields
shall not be entitled to any notice or any opportunity to cure any termination
for Cause based on any act or omission outside the course of Shields' duties and
responsibilities which involves dishonesty or criminal conduct adverse to
NavTech or any of its subsidiaries or to Shields' value to NavTech as an
officer. A "NavTech Breach" shall mean a continued material failure of NavTech
to comply with the terms of this Agreement, and such failure continues for a
period of ten (10) days following notice of such failure by Shields to the
Board. Any such notice shall specifically state the grounds which Shields
alleges constitutes a NavTech Breach. "Disability" shall mean Shields'
incapacity due to physical or mental illness as certified in writing by a
physician selected by Shields and reasonably acceptable to NavTech (it being
understood that (i) such physician shall be deemed to be reasonably acceptable
to NavTech if, within a period of fifteen (15) days after Shields notifies
NavTech of the name of such physician, NavTech does not object to the use of
such physician, and (ii) if Shields fails to select a physician within fifteen
(15) days after a written request from NavTech to do so, NavTech shall have the
right to select the physician to examine Shields).
h. NavTech shall indemnify Shields with respect to his performance of
services hereunder to the full extent allowed under the General Corporation Law
of the State of Delaware.
3. Proprietary Information and Inventions
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a. Subject to the exceptions identified in Section 3.c., Shields'
interest in:
(i) Any and all inventions, improvements and ideas (whether or not
patentable or copyrightable) which Shields has made or conceived, or which he
may make or conceive, either solely or jointly with others, at any time during
the term of the Shields Engagement Agreement, dated September 1, 1994, or this
Agreement; and
(ii) Any suggestion, proposal, writing, drawing and the like of any
sort whatsoever, including any interest in any copyright, which Shields creates
or assists in creating during his engagement with or provision of services to
NavTech;
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which is related to NavTech's Businesses (including the businesses of its
subsidiaries), contemplated businesses of which Shields is aware, or logical
extensions thereof, will be the exclusive property of NavTech, its successors,
assignees, or nominees.
(The items specified above in this Section 3.a. are hereinafter collectively
called "Proprietary Subject Matter"). Shields shall fully and promptly disclose
to NavTech all Proprietary Subject Matter made or conceived during the term of
Shields' employment. Shields shall not knowingly or intentionally assign or
otherwise relinquish any rights in such Proprietary Subject Matter to any third
party without the prior written consent of the Board.
b. At the request and expense of NavTech, but without further
compensation to Shields beyond the provisions of this Agreement, Shields shall
promptly consent to such acts and execute, acknowledge and deliver all such
papers, including without limitation patent and copyright applications, as may
be necessary or desirable in the sole discretion of NavTech, to obtain, to
protect, to maintain, or to vest in NavTech the entire right, title and interest
in and to Proprietary Subject Matter, and in and to any patent applications,
patents, copyright applications, copyrights, investors' certificates or other
proprietary rights of any kind relating thereto, in all countries of the world;
including rendering such assistance as NavTech may request in any future
contemplated or pending litigation, Patent Office proceeding, or other
proceeding.
c. (i) The Board may from time to time except from the provisions of
Sections 3.a. and 3.b. hereof Shields' rights in Proprietary Subject Matter upon
a determination by the Board that such would not adversely affect, or materially
contribute to an adverse effect on, the results of operations or the financial
condition or prospects of NavTech or any of its subsidiaries. Any such
determination of the Board shall be by majority vote not including Shields or
directors that have been designated by or are affiliated with Shields.
(ii) The exception set forth in Section 3.c.(i) notwithstanding,
Shields will not assert against NavTech any claim for infringement or
misappropriation of any excepted Proprietary Subject Matter.
d. Shields will not knowingly or negligently disclose, or cause others to
disclose to NavTech or any of its subsidiaries, or induce NavTech or any of its
subsidiaries to use, any information or material which is the property of other
individuals or companies and which there is any reason to believe is of
proprietary or confidential nature, except with the consent of the owners of
such information or material.
e. Since the services which Shields is rendering to NavTech will include,
and Shields shall have access to, NavTech's knowledge and information of private
or confidential or secret nature, Shields shall not during, or after, the term
of this Agreement, except as reasonably required in the normal course of
NavTech's business or as authorized in writing by the Board, publish, disclose
or make use of, or authorize anyone else to publish, to disclose or otherwise
made use of, any such knowledge or information, whether of a technical or of a
non-technical
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nature, which in any way relates to the design, construction, manufacture or
sale of NavTech's services or products.
f. All documents, written information and other terms including but not
limited to notes, sketches, manuals, blueprints, notebooks, products, tools,
fixtures, records and information relating to the services or products of
NavTech or its subsidiaries, made or obtained by Shields through Shields'
provision of services to, or employment by, NavTech, will be the exclusive
property of NavTech and shall be delivered by Shields to NavTech upon
termination of this Agreement (whether such termination is caused by an act of
NavTech or by Shields or by any other act), or any other time as requested by
NavTech. Subject to the confidentiality provisions of Section 3.e. hereof,
Shields may retain copies of such papers as necessary for the sole purpose of
protecting his legal interests.
4. Board of Directors
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NavTech agrees to use its best efforts to achieve Shields' election to its
Board during the period Shields owns beneficially (as defined by the Securities
Act of 1934 and the rules and regulations promulgated thereunder) ten percent
(10%) or more of the outstanding shares of voting common stock of NavTech. For
purposes of this Section 4, shares of NavTech owned beneficially by Shields'
Family (as defined below) or any trusts for the benefit of members of Shields'
Family shall be treated as owned beneficially by Shields. "Shields' Family"
shall mean Shields' spouse and siblings, and all descendants of Shields, his
spouse and siblings.
5. Governing Law; Arbitration; Injunctive and Other Relief
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This Agreement shall be governed by and construed and enforced in
accordance with the laws of the State of Delaware applicable to agreements made
and to be performed entirely in Delaware. Each party hereby irrevocably
consents to the exclusive jurisdiction of the federal and state courts located
in Chicago, Illinois with respect to any actions which may arise in connection
with this Agreement and are not required by this Section 5 to be arbitrated.
Except as provided in this Section 5, any controversy or claim arising out of or
relating to this Agreement, or the breach thereof, shall be settled by
arbitration administered by the American Arbitration Association in accordance
with its Commercial Arbitration Rules, and judgment on the award rendered by the
arbitrators may be entered in any court having jurisdiction thereof.
Within fifteen (15) days after the commencement of arbitration, NavTech and
Shields shall each select one person to act as arbitrator and the two selected
shall select a third arbitrator within ten (10) days of their appointment. If
the arbitrators so selected are unable or fail to agree upon the third
arbitrator, or if either party fails to appoint an arbitrator, such arbitrator
or arbitrators shall be selected by the American Arbitration Association.
Each of the parties to this Agreement acknowledges that a breach of this
Agreement may cause the other party irreparable harm which may not be adequately
compensated by money
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damages. Therefore, in the event of a breach or threatened breach by a party,
injunctive or other equitable relief will be available to the other party, and
any arbitrator acting pursuant to this Agreement shall have the authority to
provide such injunctive or other equitable relief. Remedies provided herein are
not exclusive, except as provided in Section 2.f.
The arbitrators shall have the authority to award such remedies or relief
that a court of the State of Delaware could order or grant in an action governed
by Delaware law, including, without limitation, specific performance of any
obligation created under this Agreement, the issuance of an injunction, or the
imposition of sanctions for abuse or frustration of the arbitration process.
The arbitration proceedings shall be conducted in Chicago, Illinois.
Notwithstanding the foregoing, any party may bring and pursue an action in
any Federal or State court located in Chicago, Illinois seeking provisional
relief, including a temporary restraining order or preliminary injunction,
pending an arbitration proceeding. Any provisional relief obtained shall be
discontinued once the arbitrators have assumed jurisdiction and ordered such
discontinuance.
6. Miscellaneous
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a. Survival. Notwithstanding anything in this Agreement to the contrary,
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Sections 1.c., 2(e), 2(f), 2(h), 3, 4, 5 and 6 shall survive any termination of
this Agreement.
b. Successors and Assigns. The provisions hereof shall inure to the
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benefit of, and be binding upon, the successors, assigns, heirs, executors and
administrators of the parties hereto.
c. Entire Agreement; Effective Date; Amendment. This Agreement and the
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Exhibit hereto together constitute the full and entire understanding and
agreement between the parties with regard to the subjects hereto and thereof.
None of this Agreement and the Exhibit hereto or any term hereof or thereof may
be amended, waived, discharged or terminated, except by a written instrument
signed by both of the parties hereto. This Agreement shall become effective
upon the Effective Date of the Merger and shall have no effect unless and until
such Merger occurs. This Agreement and the Exhibit hereto shall, upon their
effectiveness, supersede the Shields' Engagement Agreement and the Proprietary
Information and Invention Agreement, each dated as of September 1, 1994.
d. Notices, etc. All notices and other communications required or
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permitted hereunder shall be in writing and shall be mailed by certified or
registered mail, postage prepaid, delivered either by hand or by messenger, or
transmitted by electronic telecopy (fax) addressed:
If to NavTech, at:
Navigation Technologies Corporation
Attn: General Counsel
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10400 W. Higgins Road, Suite 400
Rosemont, Illinois 60018
Fax: (847) 699-6556
With copies to:
Martin L. Budd, Esquire
Day, Berry & Howard
One Canterbury Green
Stamford, CT 06901-2047
Fax: (203) 977-7301
Philips Electronics North America Corp.
Attn: Samuel J. Rozel, Esquire
Senior V.P., Secretary and General Counsel
100 East 42nd Street
New York, NY 10017
Fax: (212) 850-7304
If to Shields, at:
T. Russell Shields
160 E. Pearson #3108
Chicago, Illinois 60611
Fax: (312) 266-1194
with a copy to:
Marshall E. Eisenberg, Esquire
Neal, Gerber and Eisenberg
Two North LaSalle Street
Suite 2200
Chicago, Illinois 60602
Fax: (312) 269-1747
or at such other address as any party shall have furnished to the others in
writing. All such notices and other written communications shall be effective
(i) if mailed, seven (7) days after mailing (if mailed from outside the United
States, such mailing must be by airmail and said seven (7) days shall be
fourteen (14) days), (ii) if delivered, upon delivery, or (iii) if faxed, one
(1) business day after transmission and acknowledgment of receipt by telephone
or fax.
f. Delays or Omissions. No delay or omission to exercise any right,
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power or remedy accruing to either party hereto upon any breach or default of
the other party under this
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Agreement shall impair any such right, power or remedy of such party nor shall
it be construed to be a waiver of any such breach or default, or an acquiescence
therein, or any similar breach or default thereafter occurring. No waiver of any
single breach or default shall be deemed a waiver of any other breach or default
theretofore or thereafter occurring. Any waiver, permit, consent or approval of
any kind or character on the part of any party hereto of any breach or default
under this Agreement or any waiver on the part of any party hereto of any
provisions or conditions of this Agreement must be made in writing and shall be
effective only to the extent specifically set forth in such writing. All
remedies, either under this Agreement or by law or otherwise afforded to any
party, shall be cumulative and not alternative.
g. Separability. In case any provision of this Agreement shall be
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invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
Shields and NavTech acknowledge that the restrictive covenants herein have been
negotiated in good faith and they believe that such restrictive covenants are
reasonable and are not more restrictive or broader than are necessary to protect
the interests of the parties hereto, and would not achieve their intended
purpose if they were on different terms or for periods of time shorter than the
periods of time provided herein or applied in more restrictive geographical
areas than are provided herein. Each party further acknowledges and agrees that
the NavTech Businesses and SEI Businesses, respectively, are highly competitive,
that NavTech would not enter into this Agreement but for the covenants contained
in Section 1.c., and that such covenants are essential to protect the value of
the NavTech Businesses and SEI Businesses, respectively. Shields and NavTech
acknowledge and confirm that competition by Shields would likely cause
irreparable injury to NavTech and its subsidiaries. If, however, it shall be
determined at any time by any arbitrator or court of competent jurisdiction that
this Agreement, as written, is unenforceable because the restrictions set forth
herein are unreasonable, the parties hereto agree that such portions as shall
have been determined to be unreasonably restrictive shall thereupon be deemed so
amended as to make such restrictions reasonable in the determination of such
arbitrator or court, and the said covenants, as so modified, shall be
enforceable between the parties to the same extent as if such amendments had
been made prior to the date of any alleged breach of said covenants.
h. Titles and Subtitles. The titles of the paragraphs of this Agreement
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are for convenience of reference only and are not to be considered in construing
this Agreement.
i. Counterparts. This Agreement may be executed in counterparts, each of
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which shall be an original, but all of which together shall constitute one
instrument. Each party may execute a separate counterpart which taken together
shall constitute as fully binding an agreement as if both executed the same
counterpart.
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IN WITNESS WHEREOF, each of the parties has executed this Agreement as of
the date first above written.
T. RUSSELL SHIELDS
/s/ T. Russell Shields
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NAVIGATION TECHNOLOGIES
CORPORATION
By:/s/ Navigation Technologies Corporation
----------------------------------------
Title:
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EXHIBIT E-1
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TO EMPLOYMENT AGREEMENT
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Chairman and Chief Executive Officer
President and Chief Operating Officer
Job Responsibilities
In order to clarify the provision of the By-laws describing the duties of the
Chairman and Chief Executive Officer, on the one hand, and the President and
Chief Operating Officer, on the other hand, the Board hereby states more
explicitly the duties and responsibilities of each.
The Chairman and CEO is responsible for the long term entrepreneurial
vision for NavTech, and for representing NavTech in high level situations
with customers, partners, and throughout the industry.
. He reports to the Board.
. He provides long-term strategic vision and technical direction to
NavTech via the President and the Board.
. He develops and maintains senior level strategic customer
relationships.
. He works throughout the industry in a market development and
company spokesman role.
The President and COO is responsible for the planning, operation and
performance of NavTech.
. He reports directly to the Board, and shall be a member thereof.
. He is responsible for the development of the strategic and
operational plans (including budgets) for NavTech.
. He is responsible for the implementation of NavTech's plans,
including profit and loss performance under the budgets of
NavTech.
. He is responsible for all personnel decisions for the
organization, other than officers of NavTech which are to be
elected by the Board. All employees, excluding the Office of the
Chairman, report directly (or through normal reporting
hierarchies) to the President.
. He is responsible for the sales efforts of NavTech.
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. If SEI is acquired, it shall report to the President.
The Chairman and the President will have joint responsibilities for and
work together to:
. Develop corporate partner relationships.
. Set long term goals for NavTech and formulate marketplace
strategies.
. Develop agendas for Board meetings.
. Secure financing and communicate with Wall Street and investors
regarding NavTech's performance.
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EXHIBIT E-2
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TO EMPLOYMENT AGREEMENT
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SHIELDS OPTION AGREEMENT
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NAVIGATION TECHNOLOGIES CORPORATION
STOCK OPTION AGREEMENT
Unless otherwise defined herein, the terms defined in the 1996 Stock Option
Plan (the "Plan") and Optionee's Employment Agreement dated June 24, 1996 (the
"Employment Agreement") shall have the same defined meanings in this Option
Agreement.
I. NOTICE OF STOCK OPTION GRANT
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T. Russell Shields
160 E. Pearson #3108
Chicago, IL 60611
You have been granted an option to purchase Common Stock of the Company,
subject to the terms and conditions of the Plan, Employment Agreement and this
Option Agreement, as follows:
Grant Number --------------------------
Exercise Price per Share $1.70
Total Number of Shares Granted 10,000,000
Total Exercise Price $17,000,000
Type of Option: Incentive Stock Option
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X Supplemental Stock Option
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Date of Grant:
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The Date of Grant of this Option is June 17, 1996. This Option shall
become effective upon the Effective Date of the Merger and shall have no effect
unless and until such Merger occurs.
Term/Expiration Date:
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This Option shall expire ten years after the Date of Grant.
Vesting Schedule:
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This Option may be exercised, in whole or in part, in accordance with the
following schedule:
1,250,000 of the Shares subject to the Option shall vest on January 1, 1997
and 8,750,000 of the Shares subject to the Option shall vest in forty-two (42)
equal monthly installments beginning on February 1, 1997.
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Termination Period:
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Except as otherwise provided herein, to the extent that the Option has not
vested at the date of your termination, such unvested portion of the Option
shall terminate. In the event that your Continuous Status as an Employee or
Consultant terminates for Cause as a result of an act or omission which involves
dishonesty or criminal conduct directed against the Company or any of its
subsidiaries, the Option shall terminate as of the date of your termination. In
the event that your Continuous Status as an Employee or Consultant terminates
for Cause for reasons other than those described in the foregoing sentence, the
Option, to the extent vested, shall terminate ninety (90) days after the date of
your termination. In the event that your Continuous Status as an Employee or
Consultant terminates due to your death, Disability (as defined in the
Employment Agreement), or voluntary termination other than as a result of a
NavTech Breach, the Option, to the extent vested, shall terminate upon
expiration of its term. In the event that your Continuous Status as an Employee
or Consultant is terminated either by the Company without Cause or by you as a
result of a NavTech Breach, your Option shall continue to vest for one (1) year
from the date of termination and the Option, to the extent vested, shall
terminate upon expiration of its term. In no event may this Option be exercised
later than the Term/Expiration Date as provided above.
II. AGREEMENT
---------
1. Grant of Option. The Plan Administrator of the Company hereby grants
---------------
to the Optionee named in the Notice of Grant attached as Part I of this
Agreement (the "Optionee") an option (the "Option") to purchase the number of
Shares, as set forth in the Notice of Grant, at the exercise price per share set
forth in the Notice of Grant (the "Exercise Price"), subject to the terms and
conditions of the Plan and Employment Agreement, which are incorporated herein
by reference. Subject to Section 15(c) of the Plan, in the event of a conflict
between the terms and conditions of the Plan and the terms and conditions of
this Option Agreement, the terms and conditions of the Plan shall prevail. In
the event of any conflict between the terms and conditions of the Employment
Agreement and the terms and conditions of this Option Agreement, the terms and
conditions of the Employment Agreement shall prevail. In the event of a
conflict between the terms and conditions of the Plan and the terms and
conditions of the Employment Agreement, the terms and conditions of the
Employment Agreement shall prevail.
If designated in the Notice of Grant as an Incentive Stock Option
("ISO"), this Option is intended to qualify as an Incentive Stock Option under
Section 422 of the Code. However, if this Option is intended to be an Incentive
Stock Option, to the extent that it exceeds the $100,000 rule of Code Section
422(d) it shall be treated as a Supplemental Stock Option ("SSO").
2
<PAGE>
2. Exercise of Option.
------------------
(a) Right to Exercise. This Option is exercisable during its term in
-----------------
accordance with the Vesting Schedule set out in the Notice of Grant and the
applicable provisions of the Plan and this Option Agreement. In the event of
Optionee's death, Disability or other termination of Optionee's employment or
consulting relationship, the exercisability of the Option is governed by the
applicable provisions of the Plan and this Option Agreement.
(b) Method of Exercise. This Option is exercisable by delivery of an
------------------
exercise notice, in the form attached as Exhibit A (the "Exercise Notice"),
which shall state the election to exercise the Option, the number of Shares in
respect of which the Option is being exercised (the "Exercised Shares"), and
such other representations and agreements as may be required by the Company
pursuant to the provisions of the Plan. The Exercise Notice shall be signed by
the Optionee and shall be delivered in person or by certified mail to the
Secretary of the Company. The Exercise Notice shall be accompanied by payment
of the aggregate Exercise Price as to all Exercised Shares. This Option shall be
deemed to be exercised upon receipt by the Company of such fully executed
Exercise Notice accompanied by such aggregate Exercise Price.
No Shares shall be issued pursuant to the exercise of this Option
unless such issuance and exercise complies with all relevant provisions of law
and the requirements of any stock exchange or quotation service upon which the
Shares are then listed. Assuming such compliance, for income tax purposes the
Exercised Shares shall be considered transferred to the Optionee on the date the
Option is exercised with respect to such Exercised Shares.
3. Method of Payment. Payment of the aggregate Exercise Price shall be
-----------------
by any of the following, or a combination thereof, at the election of the
Optionee:
(a) cash; or
(b) check; or
(c) delivery of a properly executed exercise notice together with such
other documentation as the Administrator and the broker, if applicable, shall
require to effect an exercise of the Option and delivery to the Company of the
sale or loan proceeds required to pay the exercise price; or
(d) surrender of other Shares which (i) in the case of Shares acquired
upon exercise of an option, have been owned by the Optionee for more than six
(6) months on the date of surrender, and (ii) have a Fair Market Value on the
date of surrender equal to the aggregate Exercise Price of the Exercised Shares.
4. Non-Transferability of Option. This Option may not be transferred in
-----------------------------
any manner otherwise than by will or by the laws of descent or distribution and
may be exercised during the
3
<PAGE>
lifetime of Optionee only by the Optionee. The terms of the Plan and this
Option Agreement shall be binding upon the executors, administrators, heirs,
successors and assigns of the Optionee.
5. Term of Option. This Option may be exercised only within the term set
--------------
out in the Notice of Grant, and may be exercised during such term only in
accordance with the Plan and the terms of this Option Agreement.
6. Tax Consequences. Some of the federal and state tax consequences
----------------
relating to this Option, as of the date of this Option, are set forth below.
THIS SUMMARY IS NECESSARILY INCOMPLETE, AND THE TAX LAWS AND REGULATIONS ARE
SUBJECT TO CHANGE. THE OPTIONEE SHOULD CONSULT A TAX ADVISER BEFORE EXERCISING
THIS OPTION OR DISPOSING OF THE SHARES.
Exercising the Option.
---------------------
(i) Supplemental Stock Option. The Optionee may incur regular
-------------------------
federal income tax and state income tax liability upon exercise of a SSO. The
Optionee will be treated as having received compensation income (taxable at
ordinary income tax rates) equal to the excess, if any, of the Fair Market Value
of the Exercised Shares on the date of exercise over their aggregate Exercise
Price. If the Optionee is an Employee or a former Employee, the Company will be
required to withhold from his or her compensation or collect from Optionee and
pay to the applicable taxing authorities an amount in cash equal to a percentage
of this compensation income at the time of exercise, and may refuse to honor the
exercise and refuse to deliver Shares if such withholding amounts are not
delivered at the time of exercise.
(ii) Incentive Stock Option. If this Option qualifies as an ISO,
----------------------
the Optionee will have no regular federal income tax or state income tax
liability upon its exercise, although the excess, if any, of the Fair Market
Value of the Exercised Shares on the date of exercise over their aggregate
Exercise Price will be treated as an adjustment to alternative minimum taxable
income for federal tax purposes and may subject the Optionee to alternative
minimum tax in the year of exercise. In the event that the Optionee undergoes a
change of status from Employee to Consultant, any Incentive Stock Option of the
Optionee that remains unexercised shall cease to qualify as an Incentive Stock
Option and will be treated for tax purposes as a Supplemental Stock Option on
the ninety-first (91st) day following such change of status.
(b) Disposition of Shares.
---------------------
(i) SSO. If the Optionee holds SSO Shares for at least one year,
---
any gain realized on disposition of the Shares will be treated as long-term
capital gain for federal income tax purposes.
(ii) ISO. If the Optionee holds ISO Shares for at least one year
---
after exercise and two years after the grant date, any gain realized on
disposition of the Shares will be treated as long-term capital gain for federal
income tax purposes. If the Optionee disposes of ISO
4
<PAGE>
Shares within one year after exercise or two years after the grant date, any
gain realized on such disposition will be treated as compensation income
(taxable at ordinary income rates) to the extent of the excess, if any, of the
lesser of (A) the difference between the Fair Market Value of the Shares
acquired on the date of exercise and the aggregate Exercise Price, or (B) the
difference between the sale price of such Shares and the aggregate Exercise
Price. Any additional gain will be taxed as capital gain, short-term or long-
term depending on the period that the ISO Shares were held.
(c) Notice of Disqualifying Disposition of ISO Shares. If the
-------------------------------------------------
Optionee sells or otherwise disposes of any of the Shares acquired pursuant to
an ISO on or before the later of (i) two years after the grant date, or (ii)
one year after the exercise date, the Optionee shall immediately notify the
Company in writing of such disposition. The Optionee agrees that he or she may
be subject to income tax withholding by the Company on the compensation income
recognized from such early disposition of ISO Shares by payment in cash or out
of the current earnings paid to the Optionee.
7. Entire Agreement; Governing Law. The Plan and the Employment
-------------------------------
Agreement are incorporated herein by reference. The Plan, the Employment
Agreement, and this Option Agreement constitute the entire agreement of the
parties with respect to the subject matter hereof and supersede in their
entirety all prior undertakings and agreements of the Company and Optionee with
respect to the subject matter hereof, and may not be modified adversely to the
Optionee's interest except by means of a writing signed by the Company and
Optionee. This agreement is governed by Delaware law except for that body of
law pertaining to conflict of laws.
8. Arbitration. Optionee agrees that any claim, dispute or controversy
-----------
arising out of, relating to, or in connection with this stock option agreement
shall be settled by binding arbitration pursuant to the Commercial Arbitration
Rules and the Supplemental Procedures for Large, Complex Disputes of the
American Arbitration Association by one arbitrator appointed in accordance with
said rules and procedures. The arbitrator may grant injunctions or other
relief in such dispute or controversy. The decision of the arbitrator shall be
final, conclusive and binding on the parties to the arbitration. Judgment may
be entered on the award of the arbitration in any court having jurisdiction
thereof.
(a) The arbitrator shall apply Delaware law to the merits of any
dispute or claim, without reference to rules of conflicts of law. The
arbitration proceedings shall be governed by federal arbitration law, without
reference to state arbitration law.
(b) The Company and optionee shall each pay one-half of the costs and
expenses of such arbitration, and each shall separately pay its counsel fees
and expenses.
(c) Optionee understands that nothing in this Section 8 modifies
optionee's at-will status. Either optionee or the Company can terminate the
employment relationship at any time, with or without cause.
9. NO GUARANTEE OF EMPLOYMENT. OPTIONEE ACKNOWLEDGES AND AGREES THAT THE
--------------------------
VESTING OF SHARES PURSUANT TO THE VESTING SCHEDULE
5
<PAGE>
HEREOF IS EARNED ONLY BY CONTINUING SERVICE AS AN EMPLOYEE OR CONSULTANT AT THE
WILL OF THE COMPANY (AND NOT THROUGH THE ACT OF BEING HIRED, BEING GRANTED AN
OPTION OR PURCHASING SHARES HEREUNDER). OPTIONEE FURTHER ACKNOWLEDGES AND
AGREES THAT THIS AGREEMENT, THE TRANSACTIONS CONTEMPLATED HEREUNDER AND THE
VESTING SCHEDULE SET FORTH HEREIN DO NOT CONSTITUTE AN EXPRESS OR IMPLIED
PROMISE OF CONTINUED ENGAGEMENT AS AN EMPLOYEE OR CONSULTANT FOR THE VESTING
PERIOD, FOR ANY PERIOD, OR AT ALL, AND SHALL NOT INTERFERE WITH OPTIONEE'S
RIGHT OR THE COMPANY'S RIGHT TO TERMINATE OPTIONEE'S EMPLOYMENT OR CONSULTING
RELATIONSHIP AT ANY TIME, WITH OR WITHOUT CAUSE.
OPTIONEE HAS READ AND UNDERSTANDS SECTION 8, WHICH DISCUSSES
ARBITRATION. OPTIONEE UNDERSTANDS THAT BY SIGNING THIS AGREEMENT, OPTIONEE
AGREES TO SUBMIT ANY CLAIMS ARISING OUT OF, RELATING TO, OR IN CONNECTION WITH
THIS AGREEMENT TO BINDING ARBITRATION, AND THAT THIS ARBITRATION CLAUSE
CONSTITUTES A WAIVER OF OPTIONEE'S RIGHT TO A JURY TRIAL AND RELATES TO THE
RESOLUTION OF ALL DISPUTES RELATING TO ALL ASPECTS OF THIS RELATIONSHIP.
By your signature and the signature of the Company's representative below,
you and the Company agree that this Option is granted under and governed by the
terms and conditions of the Plan and this Option Agreement. Optionee has
reviewed the Plan and this Option Agreement in their entirety, has had an
opportunity to obtain the advice of counsel prior to executing this Option
Agreement and fully understands all provisions of the Plan and Option
Agreement. Optionee hereby agrees to accept as binding, conclusive and final
all decisions or interpretations of the Administrator upon any questions
relating to the Plan and Option Agreement. Optionee further agrees to notify
the Company upon any change in the residence address indicated below.
OPTIONEE: NAVIGATION TECHNOLOGIES
CORPORATION
/s/ T. Russell Shields /s/ Navigation Technologies Corporation
----------------------- ---------------------------------------
Signature By
T. Russell Shields
----------------------- ---------------------------------------
Print Name Title
Residence Address:
160 E. Pearson, #3108
Chicago, IL 60611
6
<PAGE>
CONSENT OF SPOUSE
-----------------
The undersigned spouse of Optionee has read and hereby approves the terms
and conditions of the Plan and this Option Agreement. In consideration of the
Company's granting his or her spouse the right to purchase Shares as set forth
in the Plan and this Option Agreement, the undersigned hereby agrees to be
irrevocably bound by the terms and conditions of the Plan and this Option
Agreement and further agrees that any community property interest shall be
similarly bound. The undersigned hereby appoints the undersigned's spouse as
attorney-in-fact for the undersigned with respect to any amendment or exercise
of rights under the Plan or this Option Agreement.
____________________________________
Spouse of Optionee
<PAGE>
EXHIBIT A
---------
NAVIGATION TECHNOLOGIES CORPORATION
EXERCISE NOTICE
Navigation Technologies Corporation
740 East Arques Avenue
Sunnyvale, California 94086-3833
Attention: Secretary
1. Exercise of Option. Effective as of today, ________________, 199__,
------------------
the undersigned ("Purchaser") hereby elects to purchase ______________ shares
(the "Shares") of the Common Stock of Navigation Technologies Corporation (the
"Company") under and pursuant to the 1996 Stock Plan (the "Plan") and the Stock
Option Agreement dated _____________, 19___ (the "Option Agreement"). The
purchase price for the Shares shall be $_____________, as required by the
Option Agreement.
2. Delivery of Payment. Purchaser herewith delivers to the Company the
-------------------
full purchase price for the Shares.
3. Representations of Purchaser. Purchaser acknowledges that Purchaser
----------------------------
has received, read and understood the Plan and the Option Agreement and agrees
to abide by and be bound by their terms and conditions.
4. Rights as Shareholder. Until the issuance (as evidenced by the
---------------------
appropriate entry on the books of the Company or of a duly authorized transfer
agent of the Company) of the stock certificate evidencing such Shares, no right
to vote or receive dividends or any other rights as a shareholder shall exist
with respect to the Optioned Stock, notwithstanding the exercise of the Option.
A share certificate for the number of Shares so acquired shall be issued to the
Optionee as soon as practicable after exercise of the Option. No adjustment
will be made for a dividend or other right for which the record date is prior
to the date the stock certificate is issued, except as provided in Section 13
of the Plan.
5. Tax Consultation. Purchaser understands that Purchaser may suffer
----------------
adverse tax consequences as a result of Purchaser's purchase or disposition of
the Shares. Purchaser represents that Purchaser has consulted with any tax
consultants Purchaser deems advisable in connection with the purchase or
disposition of the Shares and that Purchaser is not relying on the Company for
any tax advice.
<PAGE>
6. Entire Agreement; Governing Law. The Plan, Optionee's Employment
-------------------------------
Agreement dated June 24, 1996 (the "Employment Agreement") and the Option
Agreement are incorporated herein by reference. This Agreement, the Plan, the
Employment Agreement and the Option Agreement constitute the entire agreement
of the parties with respect to the subject matter hereof and supersede in their
entirety all prior undertakings and agreements of the Company and Purchaser
with respect to the subject matter hereof, and may not be modified adversely to
the Purchaser's interest except by means of a writing signed by the Company and
Purchaser. This agreement is governed by Delaware law except for that body of
law pertaining to conflict of laws.
Submitted by: Accepted by:
PURCHASER: NAVIGATION TECHNOLOGIES CORPORATION
----------------------- ----------------------------
Signature By
T. Russell Shields
----------------------- ----------------------------
Print Name Title
Address: Address:
------- -------
160 E. Pearson, #3108 740 East Arques Avenue
Chicago, IL 60611 Sunnyvale, California 94086-3833
2