Document:

SEC Connect

 

Exhibit 10.1

 

EXECUTIVE EMPLOYMENT AGREEMENT

 

This Executive Employment Agreement
(“Agreement”) is entered into as of this date of
December 1, 2016, by and between TRACK GROUP, INC., a Delaware
corporation (“Company”) and Derek Cassell, an
individual resident of the State of Illinois
(“Executive”).

 

WHEREAS, Executive has been employed by the Company since
June 2014 and his employment has been governed by the Executive
Employment Agreement dated December 1, 2012 between the Executive
and Emerge Monitoring, Inc., which was acquired by the Company in
June 2014 (the “Emerge Agreement”);

 

WHEREAS, the Company and the Executive are desirous of
continuing Executive’s employment pursuant to the terms of
this Agreement, superseding all previous agreements both oral and
written.

 

NOW,
THEREFORE, the parties hereto agree as follows:

 

1.
Employment. Company hereby
agrees to employ Executive as its President and Executive hereby
accepts such employment in accordance with the terms of this
Agreement and the terms of employment applicable to regular
employees of Company. In the event of any conflict or ambiguity
between the terms of this Agreement and terms of employment
applicable to regular employees, the terms of this Agreement shall
be definitive. Executive’s duties shall be performed at the
Company’s offices in Romeoville, Illinois. The parties
acknowledge that Executive will be required to travel in connection
with the performance of his duties.

 

2.
Duties of Executive. During
the Employment Term as defined in Paragraph 5, Executive will
perform his duties faithfully and to the best of his ability and
will devote his full business efforts and time during normal
working hours to the Company. Executive will report to the Chief
Executive Officer of the Company. Executive shall be responsible
for duties typical of the office held by the Executive including
but not limited to, worldwide sales, customer relations and
operations for the Company’s products and services.
Furthermore, Executive shall perform such other duties and projects
as may be assigned by the Chief Executive Officer of the Company or
the Board of Directors of the Company that are consistent with his
position.

 

3.
Compensation. Executive
shall be paid compensation during the Employment Term as
follows:

 

A. A
base salary of $240,000.00 per calendar year, payable in
installments according to the Company’s regular payroll
schedule. The base salary shall be effective retroactively to
October 1, 2016.

 

B.
Subject to the approval of the Board of Directors, you will be
granted an incentive stock option/warrant to purchase One Hundred
Thousand (100,000) registered shares of Company common stock issued
pursuant to the Company’s 2012 Equity Compensation Plan. The
option/warrant will be issued at an exercise price equal to the
closing sale price of the Company’s common stock as shown on
the OTC as of the date this Agreement is executed and ratified by
the Board of Directors. The option will be subject to the terms and
conditions of the warrant agreement, a copy of which is attached
hereto as Exhibit “A”, and the Company’s 2012
Equity Compensation Plan, which will include, among other things, a
vesting schedule. Vesting shall be as follows: fifty percent (50%)
of the options shall vest on September 30, 2017 and the remaining
options shall vest on September 30, 2018. The warrant agreement
shall contain a cashless exercise provision and piggyback
registrations rights. In the event of Executive’s death,
vested options/warrants shall be exercisable by Executive’s
estate.

 

C.
Executive shall continue as a full participant in any Employee
Bonus Plan and any Equity Compensation Plan instituted by the
Company (“the Plans”). Such Plans shall allow Executive
to earn: (i) a variable cash bonus based on individual and Company
performance and achieving specific Company milestones, and (ii)
additional restricted shares/units of the Company Common Stock
based on individual performance and achieving specific Company
milestones. Details the Plans are set forth on Exhibit
“B” attached hereto.

 

 

-1-

 

 

4. Benefits.

 

A.
Holidays and Personal Time. Executive shall be entitled to paid
holidays and personal time off in accordance with the
Company’s holiday and personal time off policies but not less
than twenty (20) days of each calendar year during the Employment
Term, (as prorated for partial years) with the time and duration of
any specific personal time off mutually and reasonably agreed to by
the parties hereto.

 

B.
Medical, Dental and Group Life Insurance. Company agrees to include
Executive in the group medical, dental and hospital plan of the
Company and provide group life insurance for Executive. These
practices and procedures are subject to change upon mutual
agreement.

 

C.
Expense Reimbursement. Executive shall be entitled to reimbursement
for all reasonable expenses, including travel, temporary housing,
and entertainment, incurred by Executive in the performance of
Executive’s duties, including pre-employment travel expenses
relating to interviewing that have been submitted to the Company.
Executive will maintain records and written receipts and shall
follow all Company policies and procedures for reimbursement of
expenses.

 

5. Term, Termination and Severance.

 

A.
Employment Term of Agreement. The Employment Term of this Agreement
shall commence on October 1, 2016 and shall continue in effect
until terminated by either party in accordance with the provisions
of this Section 5.

 

B.
Termination and Severance:

 

(I)
Definitions:

 

(i)
Cause. For purposes of this Agreement, “Cause” shall
mean (a) Executive’s continued violations of
Executive’s obligations which are demonstrably willful or
deliberate on Executive’s part after there has been delivered
to Executive a written demand for performance from the Company
which describes the basis for the Company’s belief that
Executive has not substantially performed his/her duties, (b)
Executive’s engagement in willful misconduct which is
injurious to the Company or its subsidiaries, (c) Executive’s
commission of a felony, an act of fraud against or the
misappropriation of property belonging to the Company or its
subsidiaries, (d) Executive’s breaching in any material
respect, the terms of any confidentiality or proprietary
information agreement between Executive and the Company, or (e)
Executive’s commission of a material violation of the
Company’s standards of employee conduct.

 

(ii)
Involuntary Termination Other than for Cause. “Involuntary
Termination Other than for Cause” shall mean (a) without the
Executive’s express written consent, a reduction in
Executive’s job title or reporting relationships, (b) without
the Executive’s express written consent a substantial
reduction in Executive’s duties, authority and
responsibilities, as determined immediately prior to such reduction
or removal of the Executive from such position and
responsibilities, unless the Executive is provided with a
comparable position (i.e., a position of equal or greater
organization level, title, reporting relationship, duties,
authority, compensation and status; (c) without the
Executive’s express written consent, a substantial reduction
in the Executive’s Base Salary, bonus or equity compensation,
or benefits, of greater than ten percent (10%) compared to
Executive’s Base Salary, bonus or equity compensation, or
benefits, in effect immediately prior to such reduction; (e) any
termination of the Executive by the Company without Cause or any
purported termination for which the grounds relied upon by the
Company are not valid.; or (f) the expiration of, or decision of
the Company, to not renew the Employment Term or any extension
term; or

 

II. If
Executive’s employment with the Company terminates as a
result of an Involuntary Termination Other than for Cause, in
addition to Accrued Obligations as defined below, the Executive
shall be entitled to receive the following severance and other
benefits.

 

(i)
Restricted Stock, Warrants and Option Vesting. All Restricted
Stock, Warrants and Options shall become one hundred percent (100%)
vested and fully exercisable and the Company shall have no
repurchase right. All Restricted Stock, Warrants and Options shall
contain a cashless exercise provision for Executive’s
acquisition of the Stock, Warrants and/or Options, and piggyback
registrations rights.

 

 

-2-

 

 

(ii)
Severance Payment. Executive shall receive a cash payment equal to
twelve (12) months of Executive’s Base Annual Salary (at the
Executive’s highest Base Annual Salary) plus annual bonus
compensation, at the time of the Executive’s highest
compensation level, if such bonus is earned prior to his employment
with the Company terminating. The Severance Payment shall be
payable over 26 equal bi-weekly installments over a 52 week period
in accordance with the Company’s regular pay-roll
schedule.

 

(iii)
COBRA Benefits. “COBRA” as used herein shall mean the
Consolidated Omnibus Budget Reconciliation Act of 1986, as amended.
Executive shall receive a lump sum payment in an amount equal to
the cost of COBRA continuation for a period of not less than twelve
(12) months.

 

Accrued
Obligations means (i) any base salary earned but not paid through
the date of termination; (ii) any compensation deferred by
Executive prior to his termination of employment and not paid by
the Company (all of which will be paid in accordance with the terms
of and at the time provided in the underlying deferral
arrangement); (iii) any amounts or benefits owing to Executive
under the then applicable benefit plans of the Company; (iv) any
bonus compensation earned, but not yet paid; and (v) any amounts
owing to Executive for reimbursement of expenses properly incurred
by Executive prior to the date of termination and which are
reimbursable in accordance with Paragraph 4(c).

 

6.
Voluntary Termination; Termination
for Cause. If Executive’s employment with the Company
terminates voluntarily by Executive or for Cause by the Company,
then Executive is not eligible for any benefits under this
Agreement (except as to Accrued Obligations and amounts already
earned and/or stock options, warrants and/or restricted stock
already vested at that time). If Executive voluntarily terminates
his employment with the Company he shall provide written notice to
the Company Chief Executive Officer at least forty-five (45) days
prior to terminating such employment.

 

7.
Disability; Death. If
Executive's employment terminates by reason of the Executive's
death, or by reason of Executive's Disability, then
Executive’s estate or heirs shall be entitled to receive the
Accrued Obligations and Severance Payment and other benefits set
forth in paragraph 5 herein.

 

8.
Proprietary Information.
During the term of this Agreement and thereafter, Executive shall
not, without the prior written consent of the Company’s Board
of Directors, disclose or use for any purpose (except in the course
of his/her employment under this Agreement and in furtherance of
the business of the Company or its subsidiaries) any confidential
information or proprietary data of the Company. As an express
condition of the Executive’s employment with the Company, the
Executive agrees to execute the confidentiality agreement attached
hereto as Exhibit “C”.

 

9.
Non-Competition. Executive
acknowledges that the nature of the Company’s business is
such that if Executive were to become employed by, or substantially
involved in, the business of a competitor the Company during the
twelve (12) months following the termination of Executive’s
employment, would cause substantial and irreparable harm to the
Company. Thus, to protect the Company’s goodwill, trade
secrets and confidential information, Executive agrees and
acknowledges that Executive will not directly or indirectly engage
in (whether as an employee, consultant, agent, proprietor,
principal, partner, stockholder, corporate officer, director or
otherwise), nor have any ownership interest in or participation in
the financing, operation, management or control of, consulting
with, any firm, corporation or business that competes with the
Company in the electronic, GPS or alcohol monitoring of people
within the corrections or law enforcement sectors, such competitors
include but are not limited to, the following entities and their
respective subsidiaries: The Geo Group, Inc., Numerex Corp., 3M
Company, Corrisoft LLC, Outreach Smartphone Monitoring, LLC, and
Securus Technologies. For this purpose, ownership of no more than
one-half of one percent (.5%) of the outstanding voting stock of a
publicly traded corporation shall not constitute a violation of
this provision.

 

 

-3-

 

 

10.
Right to Advice of
Counsel/Compliance with Code Section 409A. The Executive
acknowledges that he has consulted with counsel and/or tax advisors
and is fully aware of his/her rights and obligations under this
Agreement. Notwithstanding any provision in this Agreement to the
contrary: (i) the relevant provisions of this Agreement shall be
construed in a manner so as to be exempt from or to comply with
Section 409A of the Internal Revenue Code of 1986, as amended from
time to time, and regulations and other interpretative guidance
issued thereunder, including without limitation any regulations or
other guidance that may be issued after the date of this Agreement.
To the extent required to carry out such intent:

 

(a) The
terms used herein will be interpreted to comply with the
requirements of Section 409A, including (without limitation) that a
termination of employment must constitute a “separation from
service,” as such term is defined in Section
409A.

 

(b)
Neither the Company nor Executive shall have the right to
accelerate or defer the delivery of payments except in accordance
with Section 409A.

 

(c)
Executive’s right to receive installment payments will be
treated as a right to receive a series of separate and distinct
payments.

 

(d)
With regard to any provision herein that provides for reimbursement
of costs and expenses or in-kind benefits (i) the right to
reimbursement or in-kind benefits shall not be subject to
liquidation or exchange for another benefit, (ii) the amount of
expenses eligible for reimbursement, or in-kind benefits, provided
during any taxable year shall not affect the expenses eligible for
reimbursement, or in-kind benefits to be provided, in any other
taxable year, and (iii) such payments shall be made on or before
the last day of the taxable year following the taxable year in
which the expense was incurred.

 

(e) No
payment shall be subject to offset by any other payment unless
otherwise permitted by Section 409A.

 

(f)
Notwithstanding any other payment schedule provided herein, if
Executive is identified on the date of termination as a
“specified employee” within the meaning of Section
409A(a)(2)(B), then any payment that is considered nonqualified
deferred compensation subject to Section 409A, and payable on
account of a “separation from service,” will be made on
the date that is the earlier of (A) the expiration of the six
(6)-month period beginning on the date of Executive’s
“separation from service”, and (B) Executive’s
death (the “Delay Period”) to the extent required under
Section 409A. Upon the expiration of the Delay Period, all payments
delayed pursuant to this subsection (whether they would have
otherwise been payable in a single sum or in installments in the
absence of such delay) will be paid to Executive in a lump sum, and
all remaining payments due under this Agreement will be paid or
provided in accordance with the normal payment dates specified for
them herein. For purposes of Section 409A, Executive’s right
to receive any installment payment pursuant to this Agreement will
be treated as a right to receive a series of separate and distinct
payments.

 

11.
Assignment. This Agreement
and all rights under this Agreement shall be binding upon, inure to
the benefit of, and be enforceable by the parties hereto and their
respective personal or legal representatives, executors,
administrators, heirs, distributes, devisees, legatees, successors
and assigns. This Agreement is personal in nature, and neither of
the parties to this Agreement shall, without consent of the other
(which consent will not be unreasonably withheld), assign or
transfer this Agreement or any right or obligation under this
Agreement to any other person or entity. If the Executive should
die while any amounts are still payable to the Executive hereunder,
all such amounts shall be paid in accordance with the terms of this
Agreement to Executive’s devisee, legatee, or other designee
or, if there be no such designee, to the Executive’s
estate.

 

12. Notices. All notices, requests, demands and other
communications called for hereunder shall be in writing and shall
be deemed given (i) on the date of delivery, or if earlier (ii) one
(1) day after being sent by a well-established commercial overnight
service, or (iii) three (3) days after being mailed by registered
or certified mail, return receipt requested, prepaid and addressed
to the parties or their successors at the following addresses, or
at such other addresses as the parties may later designate in
writing:

 

 

-4-

 

 

	
 If to the
Executive:

	
 Derek
Cassell 

	
 

	
 {at
Executive’s most recent address on file with the
Company}

 

	

If to the
Company:

	
 Attn: Chief
Executive Officer

 Track
Group, Inc.

 1215
W. Lakeview Court

 Romeoville,
IL 60446

                                 

   
   Or such other addresses or to the attention of such
other person as the recipient party has previously furnished to the
other party in writing in accordance with this
paragraph.

 

13. Notice of Termination by the Company. Any termination by
the Company of Executive’s employment with the Company shall
be communicated by a notice of termination to Executive at least
forty-five (45) days prior to the date of such termination. Such
notice shall indicate the specific termination provision or
provision in this Agreement relied upon (if any), shall set forth
in reasonable detail the facts and circumstances claimed to provide
a basis for termination under the indicated provisions, and shall
specify the termination date, and shall specify the amounts and
type of compensation and benefits to be provided to Executive as a
result of the termination.

 

14. Waiver. Failure or delay on the part of either party
hereto to enforce any right, power, or privilege hereunder shall
not be deemed to constitute a waiver thereof. Additionally, a
waiver by either party or a breach of any promise hereof by the
other party shall not operate as or be construed to constitute a
waiver of any subsequent waiver by such other party.

 

15. Severability. Whenever possible, each provision of this
Agreement will be interpreted in such manner as to be effective and
valid under applicable law, but if any provision of this Agreement
is held to be invalid, illegal or unenforceable in any respect
under any applicable law or rule in any jurisdiction, such
invalidity, illegality or unenforceability will not affect any
other provision or any other jurisdiction, but this Agreement will
be reformed, construed and enforced in such jurisdiction as if such
invalid, illegal or unenforceable provision had never been
contained herein.

 

16. Integration. This Agreement, together with any attached
exhibits, represents the entire agreement and understanding between
the parties as to the subject matter herein and supersedes all
prior or contemporaneous agreements whether written or oral. No
waiver, alteration, or modification of any provision of this
Agreement will be binding unless in writing and signed by duly
authorized representatives of the parties hereto. In no way
limiting the foregoing, the parties acknowledge and agree that the
Emerge Agreement is null and void and this Agreement supersedes the
Emerge Agreement.

 

17. Headings. The headings of the paragraphs contained in
this Agreement are for reference purposes only and shall not in any
way affect the meaning or interpretation of any provision of this
Agreement.

 

18. Applicable Law and Dispute Resolution. This Agreement
shall be governed by and construed in accordance with the internal
and substantive laws, and not the choice of law rules, of the State
of Delaware. Any controversy or claim arising out of relating to
this Agreement which cannot be settled by good faith negotiation
between the parties shall be settled by binding arbitration
administered by the American Arbitration Association
(“AAA”) under its Employment Arbitration Rules and
Procedures (such rules and procedures being incorporated herein by
reference). Such arbitration shall be submitted to a single
arbitrator appointed by the AAA. Such arbitrator must be an
attorney with a minimum of 10 years of experience in employment
matters. The prevailing party in the arbitration shall be entitled
to recover its reasonable costs, attorney fees and out of pocket
expenses relating to the arbitration. Both parties agree that the
procedures outlined in this paragraph are the exclusive methods of
dispute resolution. Unless otherwise agreed by the parties any
arbitration shall be held in the Chicago, Illinois metro
area.

 

19. Counterparts. This Agreement may be executed in one or
more counterparts, none of which need contain the signature of more
than one party hereto, and each of which shall be deemed to be an
original, and all of which together shall constitute a single
agreement.

 

20. Tax Withholding. All payments made pursuant to this
Agreement will be subject to withholding of applicable taxes so
long as such withholding is reasonable and consistent with the
Company’s normal practices.

 

-5-

 

 

IN WITNESS WHEREOF, each of the parties has executed this
Agreement, in the case of the Company by their duly authorized
officers, as of the day and year first above written.

 

	
 Track
Group, Inc.

	
 Executive

	
 

	
 

	
 By: /s/                                           

	
  /s/                                    

	
 GuyDubois

	
 Derek
Cassell

	
 Chief Executive
Officer

 Chairman of
the Board

	
  

	
 

 Date:
 

	
 Date:

 

 

 

-6-

 

 

EXHIBIT “A”

Warrant Agreement Form

 

 

 

A-1

 

 

EXHIBIT “B”

Executive Bonus Formula

 

 

 

B-1

 

 

EXHIBIT “C”

Confidentiality Agreement

 

 

 

C-1SEC Connect

Exhibit 10.2

 

[***] INDICATES MATERIAL THAT WAS OMITTED AND FOR WHICH
CONFIDENTIAL TREATEMENT WAS REQUESTED. ALL SUCH OMITTED MATERIAL
WAS FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION
PURSUANT TO THE RULES APPLICABLE TO SUCH CONFIDENTIAL TREATMENT
REQUEST.

 

SERVICE AGREEMENT

Agreement No.

 

This agreement ("Agreement") is made between [***] and Track Group,
Inc. with a place of business at 405 South Main Street, Suite 700,
Salt Lake City, UT 84111 (“Track Group”).

 

This Agreement by the stated parties is effective as of December 7,
2016 (the “Effective Date”).

 

NOW, THEREFORE, in consideration of the mutual covenants herein
contained, the parties agree as follows:

 

1. SERVICES

 

1.1            

Services. Provided that Track Group meets its obligations
and responsibilities as set forth in this Agreement and
Exhibit
A, [***] shall provide the
Monitoring Operations Services and Case Management Services set
forth on Exhibit
A. Exhibit A
is attached hereto and incorporated
herein (the “Services”).

 

1.2            

Service Levels.
[***] shall provide the Services in
accordance with the key performance indicators set forth in
Exhibit
A, (the “KPIs”) and
as described in this Agreement.

 

2. PRICING AND PAYMENT TERMS

 

2.1 Compensation

2.1.1. Monitoring Operations
Services - As consideration for
the Monitoring Operations Services provided hereunder, Track Group
shall pay [***] per day, per active case in accordance with the
pricing schedule set forth in Section I on Exhibit
B, which is attached hereto and
incorporated herein.

 

(a) Reports –
Track Group shall provide the
following reports related to Monitoring Operations
Services:

 

1. Active Case Report
– On a daily basis, [***]
shall, by accessing the Track Group software, run a report (the
“Active Case Report”) setting forth the number of
active cases from the prior day. The Active Case Report shall be
delivered the basis for the billing calculations according to the
Pricing Schedule on Exhibit B
attached hereto.

 

2. [***] Staff Report
- On a daily basis, [***]
shall, by accessing the Track Group software, run a report (the
“[***] Staff Report”) showing the activity of [***]
staff, on an individual basis, within Tracker Pal (Track
Group’s proprietary web-based software service) from the
prior day.

 

(b) Records –
Track Group shall keep and maintain at
its regular place of business separate and complete books and
records of the information relied upon to create the Active Case
Reports and [***] Staff Reports. Track Group shall maintain such
books and records, including information stored in databases or
other computer systems, for a period of one (1) year from the date
of final payment under this Agreement. [***] or its duly authorized
agents or representatives shall have the right to inspect said
books and records at Track Group’s premises during Track
Group’s regular business hours upon reasonable prior notice
to Track Group.

 

2.1.2. Case Management Services
- As consideration for the Case
Management Services provided hereunder, Track Group shall pay [***]
per month, per active case in accordance with the pricing set forth
in Section II on Exhibit
B.

 

2.1.3. Software
Development – [***] shall
bill software development at a rate of [***] per
hour.

 

2.1.4. Sales and Use Taxes
– Notwithstanding Section
2.3 below, all pricing set forth in Sections 2.1.1, 2.1.2, 2.1.3
and Exhibit B shall be inclusive of all sales and use taxes, and
Track Group shall not be responsible or liable for any additional
taxes or fees.

 

 

 

-1-

 

 

[***] INDICATES MATERIAL THAT WAS OMITTED AND FOR WHICH
CONFIDENTIAL TREATEMENT WAS REQUESTED. ALL SUCH OMITTED MATERIAL
WAS FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION
PURSUANT TO THE RULES APPLICABLE TO SUCH CONFIDENTIAL TREATMENT
REQUEST.

 

2.2. Billing – [***]
shall invoice Track Group monthly for services
rendered.  Payment shall be made by Track Group to [***]
within thirty (30) days of the invoice date. Interest on any amount
which is past due shall accrue at the rate of 1.5% per month, or if
such rate exceeds the maximum rate allowed by law, then at such
maximum rate, and shall be payable on demand.

 

2.3. Taxes – Except with
respect to [***]’s net income and any sales or use taxes,
Track Group will pay, as the same respectively come due, all taxes
and governmental charges of any kind whatsoever together with any
interest or penalties that may at any time be lawfully assessed or
levied against or with respect to the equipment or services
provided hereunder.

 

3. ADMINISTRATIVE FEE

 

Upon
execution of this Agreement, Track Group will invoice [***] for a
one-time administrative fee of $60,000. Fifty percent (50%) shall
be due within fifteen (15) days of the Effective Date and fifty
percent (50%) shall be due thirty (30) days thereafter. In the
event this Agreement is terminated for convenience by Track Group
within the first six (6) months following the Effective Date, Track
Group shall refund the administrative fee in full.

 

4. TERMINATION OF PRIOR AGREEMENT

 

Upon execution of this Agreement, the Services Agreement dated
January 7, 2009 between [***], as successor in interest to [***],
and Track Group, as successor in interest to [***], shall terminate
at the end of the day on December 6, 2016.

 

5. INDEMNIFICATION

 

5.1 Both Parties Indemnification. Each Party shall defend and indemnify the other
and their respective officers, directors, employees, suppliers,
licensors, contractors, advisors and agents against and from any
loss, debt, liability, damage, obligation, claim, demand, judgment
or settlement of any nature or kind, known or unknown, liquidated
or unliquidated, including without limitation, all reasonable costs
and expenses incurred including all reasonable litigation costs and
attorneys’ fees arising out of or relating to claims,
complaint, action, proceeding or suit of a third party (including
any investigation or inquiry by a governmental agency or
authority), that arise from or relate to, in whole or part, (i) the
negligence or willful misconduct of or (ii) breach of this
Agreement by the indemnifying Party, its employees, agents,
contractors, licensors or suppliers. The indemnities provided for
herein shall survive the termination of this
Agreement.

 

5.2 Track Group Indemnification. Track Group shall defend and indemnify [***] and
its respective officers, directors, employees, subsidiaries,
suppliers, licensors, contractors and agents against and from any
loss, debt, liability, damage, obligation, claim, demand, judgment
or settlement of any nature or kind, known or unknown, liquidated
or unliquidated, including without limitation, all reasonable costs
and

 

expenses incurred including all reasonable arbitration and/or
litigation costs and attorneys’ fees arising out of or
relating to claims, complaint, action, proceeding or suit of a
third party (including any investigation by a governmental agency
or authority), that arise from or relate to, in whole or in part,
Track Group’s electronic monitoring equipment, web-based
software (i.e. TrackerPAL, TrackerPAL Mobile), or analytics
software. Track Group’s indemnification of [***] pursuant to
this Section 5.2 shall not apply if the claims, complaint, action,
proceeding or suit of a third party arises from or relates solely
to software that is not part of Track Group’s products and
services referenced in this Section 5.2.

 

5.3 Procedure for Indemnification. The indemnified party promptly shall notify the
indemnifying party of any claims that are subject to
indemnification. The indemnified party shall have the right, at its
own expense, to participate either directly or through counsel in
any arbitration, litigation or settlement negotiations. The
indemnified party shall provide reasonable assistance and
cooperation in such defense at the indemnifying party’s
expense. The indemnifying party shall not agree to any settlement
without the written consent of the indemnified party and such
consent shall not be unreasonably withheld. The indemnification
provided herein shall survive the termination of this
Agreement.

 

 

 

-2-

 

 

[***] INDICATES MATERIAL THAT WAS OMITTED AND FOR WHICH
CONFIDENTIAL TREATEMENT WAS REQUESTED. ALL SUCH OMITTED MATERIAL
WAS FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION
PURSUANT TO THE RULES APPLICABLE TO SUCH CONFIDENTIAL TREATMENT
REQUEST.

 

6. LIMITATION OF LIABILITY

 

6.1. Limitation of Liability. Except as set forth in Section 5, in no event
shall either party be liable to the other for (i) any indirect,
special, exemplary, incidental or consequential damages of any kind
(including without limitation, lost profits or revenues); or (ii)
any punitive damages arising by virtue of any dealings between the
parties. Except as set forth in Exhibit A, Section 2.3,
[***]’s aggregate liability for damages (if any) of any kind
or nature arising out of or in connection with this Agreement will
not exceed the fees paid by Track Group for the services performed
by [***] under this Agreement during the 12-month period
immediately preceding the date of the loss.

 

7. INSURANCE

 

Each party shall procure and maintain insurance of the kinds and in
the minimum amounts enumerated below.

 

7.1. Worker’s
Compensation Insurance as required by the laws of the state in
which the services are to be performed, and Employer’s
Liability Insurance covering all employees acting within the course
and scope of their employment.

 

7.2. Commercial General
Liability Insurance written on ISO occurrence form GC 0001 10/93 or
equivalent, covering premises operations, fire damage, independent
contractors, products and completed operations, blanket contractual
liability, bodily injury, with minimum limits as
follows:

(1)
$3,000,000 each occurrence;

(2)
$3,000,000 general aggregate;

(3)
$3,000,000 products and completed operations aggregate;
and

(4)
$100,000 any one fire.

If any aggregate limit in a party’s primary and excess
coverage is reduced below $1,000,000 because of claims made or
paid, such party shall immediately obtain additional insurance to
restore the full aggregate limit and furnish to the other party a
certificate or other document satisfactory to the other party
showing compliance with this provision.

 

7.3. Automobile Liability
Insurance covering any auto (including owned, hired and non-owned
autos) with a minimum limit as follows: $1,000,000 each accident
combined single limit.

 

7.4. Professional Liability
Insurance (if applicable) with minimum limits of liability of not
less than $3,000,000.

 

7.5. Each party shall provide
certificates showing insurance coverage required by this contract
to the other party within 7 business days of the effective date of
this Agreement, but in no event later than the commencement of the
services or delivery of the goods under this Agreement. At any time
during the term of this contract, a party may make a written
request from the other party for certificates showing continuing
insurance coverage in compliance with the provisions of this
section, and the other party shall thereupon within 10 days supply
such certificates.

 

8. CONFIDENTIALITY OF AGREEMENT

 

Unless disclosure is required pursuant to court order, subpoena or
other regulatory authority, neither party shall disclose the terms
or existence of this Agreement without first obtaining the written
consent of the other party.

 

 

 

-3-

 

 

[***] INDICATES MATERIAL THAT WAS OMITTED AND FOR WHICH
CONFIDENTIAL TREATEMENT WAS REQUESTED. ALL SUCH OMITTED MATERIAL
WAS FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION
PURSUANT TO THE RULES APPLICABLE TO SUCH CONFIDENTIAL TREATMENT
REQUEST.

 

9. CONFIDENTIALITY

 

9.1. Each party acknowledges
that they will receive from the other party confidential
information and trade secrets relating to the other party’s
business (“Confidential Information”) in the course of
performing its obligations under this Agreement. Accordingly, the
parties hereby agree not to disclose or permit any third person or
entity access to the Confidential Information without the other
party’s prior written permission, unless disclosure is
required pursuant to court order, subpoena or other regulatory
authority. The parties further agree to insure that each
party’s employees participating in the performance of such
party’s obligations hereunder are advised of the confidential
nature of the Confidential Information and to insure by agreement
that they are prohibited from disclosing Confidential Information.
Confidential Information shall not include information in the
public domain, information properly received by the parties from a
third party, or information independently
developed.

 

9.2. Each party’s
obligations under this section shall survive any expiration or
termination of this Agreement.

 

10. OWNERSHIP OF CASE MANAGEMENT SOFTWARE SYSTEM

 

[***] shall retain all ownership and intellectual property
interests in all parts of the System (as defined below) and Updates
(as defined below), including title, copyright, patent rights,
trademarks, trade secrets and any other proprietary rights and
protections, whether currently existing or hereafter developed or
acquired, and whether or not perfected, including all applications,
disclosures and registrations with respect thereto. [***] shall not
have any ownership interests in data supplied by Track Group. All
rights owned by [***] that are not expressly granted by this
Agreement, including the right to derivative works, are reserved to
[***]. All rights, powers and privileges which arise out of this
Agreement are, and shall remain at all times, the sole and
exclusive property of [***]. Nothing contained in this Agreement
shall be deemed to convey to Track Group any title, ownership or
intellectual property interest in the System, Software or
Updates.

 

“System” means, collectively: (a) the Software;
(b) the server(s) presently located in [***] on which [***]
has installed the Software for use by [***] and its customers;
(c) all documentation and materials (whether written, printed,
electronic or in another format) made available to Track Group that
relate to or describe the System; and (d) all equipment and
connections maintained by [***] to allow [***] and its customers to
access the System.

 

 

“Software” means (a) the software programs,
including third-party software programs, provided by [***] pursuant
to this Agreement in connection with the System, including in
connection with either the Monitoring Operations Services or the
Case Management Services, (b) all firmware, operating systems,
network transport and protocols, interpreters, and administration,
management and database systems and applications used to support
the functionality of the foregoing, and (c) all Updates to any
of the foregoing or otherwise provided by [***] under this
Agreement.

 

“Updates” means any new releases, improvements,
modifications, upgrades, updates, fixes and additions to the System
that [***] issues from time to time to correct deficiencies,
improve or extend capabilities, comply with applicable law, and/or
to meet then-current industry-accepted specifications or
standards.

 

11. TERM OF AGREEMENT

 

The term of this Agreement shall be three (3) years beginning on
the Effective Date and ending December 6, 2019 (the
“Term”). Thereafter, this Agreement, its terms and
conditions, and authorized amendments shall renew automatically for
succeeding periods of one (1) year each on the anniversary of the
Effective Date unless otherwise terminated as provided for herein.
Either party hereto may terminate this Agreement for convenience
upon one hundred and twenty (120) days written notice to the other
party.

 

 

 

-4-

 

 

[***] INDICATES MATERIAL THAT WAS OMITTED AND FOR WHICH
CONFIDENTIAL TREATEMENT WAS REQUESTED. ALL SUCH OMITTED MATERIAL
WAS FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION
PURSUANT TO THE RULES APPLICABLE TO SUCH CONFIDENTIAL TREATMENT
REQUEST.

 

12. CANCELLATION

 

Either party hereto may, in the event of a breach by the other
party of a material provision of this Agreement, serve written
notice to the offending party, of its intent to terminate this
Agreement. The offending party shall have forty-five (45) days from
the date of the notice to cure the deficiency (the “Cure
Period”). In the event that the offending party is unable to
cure the breach within the Cure Period, then the Agreement will
terminate upon the expiration of the Cure Period.

 

13. GENERAL

 

13.1. Applicable Law –
This Agreement shall be governed by and construed in accordance
with the laws of the State of Illinois.

 

13.2. Assignment – This
Agreement shall not be transferred or assigned by either party
without the prior written consent of the other party, which consent
shall not be unreasonably withheld or delayed.

 

13.3. Entire Agreement –
This Agreement represents the entire agreement between the parties
with respect to the subject matter hereof, and supersedes all other
prior agreements, representations and understandings, oral and
written.

 

13.4. Relationship of Parties
– The relationship of [***] and its successors in interest,
on the one hand, and Track Group and its successors in interest, on
the other hand, is that of independent contractors, and not one of
principal and agent, joint venture or partnership. Neither party
shall have any authority to create or assume, in the name or on
behalf of the other party, any obligation, express or implied, nor
to act or purport to act as the agent or the legally empowered
representative of the other party for any purpose
whatsoever.

 

13.5. Notices – Any
notice required to be given hereunder shall be deemed to have been
given either when served personally or when sent by a recognized
overnight currier service – signature required, certified
U.S. mail addressed to the parties at the addresses set forth
above.

 

13.6. Each party represents and
warrants to the other that it has the full right, power and
authority to enter into and perform this Agreement and that
execution and performance of this Agreement will not place such
party in violation of any other agreement or legal
obligation.

 

13.7. Force Majeure - Neither
party shall be liable to the other party for any delay in
performance or nonperformance which is due to causes beyond such
party’s control, including, but not limited to, war, fire,
floods, sabotage, civil unrest, strikes, embargoes or delays, acts
of God, acts of third parties, acts of governmental authority or
any agent or commission thereof, accident, breakdown of equipment,
telecommunications services – both wireless and wire systems,
differences with employees or similar or dissimilar causes beyond
such party’s reasonable control.

 

13.8. If any provision of this
Agreement is held invalid, void or unenforceable under any
applicable statute or rule of law, it shall be deemed omitted, and
the balance of this Agreement shall be enforceable in accordance
with its terms.

 

13.9. The Parties desire to
resolve disputes arising out of or relating to this Agreement
without litigation.

 

13.9.1 Billing Disputes.
Track Group shall have the right to
dispute [***] invoices, provided Track Group has paid all
undisputed amounts in full when due. Track Group shall submit all
disputes to [***] within forty-five (45) days of the invoice in
question. If Track Group does not submit its dispute before the end
of the forty-five (45) day period, then Track Group waives the
right to dispute the charges. Track Group will submit all disputes
via a written statement containing reasonably sufficient detail
together with supporting documentation. Both parties shall use good
faith efforts to resolve the dispute within forty-five (45) days
from the date the dispute was delivered to [***] from Track Group.
At the end of such forty-five (45) day period, or after [***] makes
a decision on the dispute, whichever comes first, either party may
file to immediately commence arbitration in accordance with Section
13.9.2 of this Agreement. Once [***] makes a decision on the
dispute, the disputed amount shall be due or credited on the next
invoice.

 

 

 

-5-

 

 

[***] INDICATES MATERIAL THAT WAS OMITTED AND FOR WHICH
CONFIDENTIAL TREATEMENT WAS REQUESTED. ALL SUCH OMITTED MATERIAL
WAS FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION
PURSUANT TO THE RULES APPLICABLE TO SUCH CONFIDENTIAL TREATMENT
REQUEST.

 

13.9.2 Arbitration. Except for
an action seeking a temporary restraining order or an injunction
relating to the purposes of this Agreement, or suit to compel
compliance with this dispute resolution process, the Parties agree
to use the following alternative dispute resolution procedures as
the sole remedy with respect to any controversy or claim arising
out of or relating to this Agreement or its breach. At the written
request of either Party, each Party will appoint a knowledgeable
representative to meet and negotiate in good faith to resolve any
dispute arising out of or relating to this Agreement. The
representatives shall have the discretion to determine the
location, format, frequency and duration of their negotiations, and
to utilize other alternative dispute resolution procedures such as
mediation to assist in the negotiations. All discussions and
correspondence among the representative shall be treated as
confidential information developed for the purposes of settlement,
exempt from discovery, and shall not be admissible in the
arbitration described below or in any lawsuit without the written
agreement of the Parties. If the negotiations do not resolve the
dispute within thirty (30) days of the initial written request, the
dispute shall be submitted to binding arbitration by a single
arbitrator experienced in the matters at issue and selected by the
American Arbitration Association (“AAA”). The Parties
acknowledge that this Agreement and any dispute shall be governed
by the Commercial Arbitration Rules of the AAA, such rules being
incorporated herein by reference. Any court with jurisdiction may
enter judgment upon the award rendered by the arbitrator. The
arbitration shall be held in Cook County, Illinois or such other
location as is mutually agreed upon by the Parties. The Parties
agree that the arbitration shall proceed ex-parte in the event that a party, after being duly
notified refuses to participate in the arbitration. The prevailing
party shall be entitled to all reasonable costs and
attorneys’ fees related to the Dispute resolution process
described herein including, but not limited to, the arbitration.
The parties agree that any such arbitration must be completed by
the arbitrator and parties within 120 days after appointment of the
arbitrator.

 

13.10. No rule of construction
requiring interpretation against the draftsman hereof shall apply
in the interpretation of this Agreement.

 

14. ENTIRE AGREEMENT

 

The representations made in this Agreement constitute the entire
agreement. No prior or contemporaneous negotiations,
understandings, or agreements shall be valid unless in writing and
signed by authorized representatives of each party.

 

15. COUNTERPARTS

 

This Agreement may be executed in any number of and by the
different parties hereto on separate counterparts, each of which
when so executed shall be deemed to be an original, and such
counterparts shall together constitute but one and the same
instrument.

 

16. RATIFICATION BY TRACK GROUPAUDIT COMMITTEE

 

The parties agree that the Track Group signature below is subject
to ratification by the Audit Committee of the Track Group Board of
Directors (“Ratification”). Notwithstanding the
foregoing, the parties further agree that the terms of this
Agreement shall govern the relationship of the parties and that
Track Group without regard to Ratification shall pay any fees
incurred for services provided by [***] under this Agreement. In
addition, in the event that the Audit Committee of the Track Group
Board of Directors fails to ratify this Agreement within 60
calendar days of the Effective Date, Track Group must abide by the
provisions of Section 11 with regard to termination for
convenience.

 

[Signatures on Following Page]

 

 

 

-6-

 

 

 

IN WITNESS
WHEREOF, the parties have
(subject to ratification of the Track Group, Inc. Audit Committee
of its Board of Directors) executed this Agreement by their duly
authorized representatives, effective as of the latest date set
forth below.

 

 

	

TRACK GROUP, INC.

	

[***]

	

 

By: ________________________Date_________

 

Printed Name: ____________________________

 

Printed Title: _____________________________

	

 

By:_________________________Date________

 

Printed Name: ____________________________

 

Printed Title: _____________________________

RATIFIED
AND APPROVED

 

Track
Group, Inc.

 

 

By:        
_________________________________                                                                          
Date:_________________

Karen
Macleod, Director and Chairman

Track
Group Audit Committee

 

 

 

-7-

 

 

[***] INDICATES MATERIAL THAT WAS OMITTED AND FOR WHICH
CONFIDENTIAL TREATEMENT WAS REQUESTED. ALL SUCH OMITTED MATERIAL
WAS FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION
PURSUANT TO THE RULES APPLICABLE TO SUCH CONFIDENTIAL TREATMENT
REQUEST.

 

 

EXHIBIT A – SERVICES

 

[***]

 

 

A-1

 

 

[***] INDICATES MATERIAL THAT WAS OMITTED AND FOR WHICH
CONFIDENTIAL TREATEMENT WAS REQUESTED. ALL SUCH OMITTED MATERIAL
WAS FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION
PURSUANT TO THE RULES APPLICABLE TO SUCH CONFIDENTIAL TREATMENT
REQUEST.

 

 

EXHIBIT
B – PRICING

[***]

 

 

B-1

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