Document:

exv10w1

 

Exhibit 10.1

EMPLOYMENT AGREEMENT

     THIS EMPLOYMENT AGREEMENT (this “Agreement”) is made and entered into as
of July 1, 2003 (the “Effective Date”), by and between Nextel Communications,
Inc., a Delaware corporation (the “Company”), and Timothy M. Donahue (the
“Executive”).

WITNESSETH:

     WHEREAS, the Executive is an employee of the Company and serves the
Company as the President and Chief Executive Officer and as a member of the
Board of Directors of the Company;

     WHEREAS, the Executive and the Company are parties to an Employment
Agreement dated February 1, 1996, as amended by an Addendum to Employment
Agreement dated March 24, 1997 (the “Prior Employment Agreement”), and the
Executive and the Company desire to enter into this new employment agreement
which will supersede the Prior Employment Agreement; and

     NOW, THEREFORE, in consideration of the premises and of the covenants and
agreements set forth herein and for other good and valuable consideration, the
sufficiency and receipt of which are hereby acknowledged, the Company and the
Executive agree as follows:

     1. Employment.

             (a) The Company will continue to employ the Executive and the Executive
will continue to be employed by the Company upon the terms and conditions set
forth herein.

             (b) The employment relationship between the Company and the Executive
shall be governed by the general employment policies and practices of the
Company, including without limitation, those relating to the Company’s Code of
Corporate Conduct, confidential information and avoidance of conflicts, except
that when the terms of this Agreement differ from or are in conflict with the
Company’s general employment policies or practices, this Agreement shall
control.

     2. Term. Subject to termination under Section 9, the Executive’s
employment shall be for an initial term of three (3) years commencing on the
Effective Date and shall continue through the third anniversary of the
Effective Date (the “Employment Term”); provided, however, that
at the end of the initial Employment Term and on each succeeding anniversary of
the Effective Date, the Employment Term will be automatically extended by an
additional year, unless twelve (12) months prior to the end of the initial
Employment Term or any such succeeding anniversary date either the Executive or
the Company has given the other written notice of nonrenewal.

 

 

     3. Position and Duties of the Executive.

             (a) The Executive shall serve as the President and Chief Executive Officer
of the Company, and agrees to serve as an officer of any Subsidiary as may be
requested from time to time by the Board of Directors of the Company (the
“Board”). The Executive shall report directly to the Board. In such capacity
as President and Chief Executive Officer of the Company, the Executive shall
exercise general day-to-day supervisory responsibility and operational and
management authority over the affairs of the Company and its Subsidiaries. For
purposes of this Agreement, “Subsidiary” shall mean any entity, corporation,
partnership (general or limited), limited liability company, entity, firm,
business organization, enterprise, association or joint venture in which the
Company directly or indirectly controls 50% or more of the voting interest.

             (b) Subject to the provisions of Section 9, during the Employment Term,
the Company agrees to use its reasonable best efforts to cause the Executive to
be renominated as a director of the Company (a “Director”). If so elected, the
Executive shall serve as a Director of the Company; and if elected, the
Executive shall also serve as (i) a member of any committee of the Board,
whether now existing or hereafter created, and (ii) a member of the board of
directors of any Subsidiary or affiliate of the Company.

             (c) Throughout the Employment Term, the Executive shall, except as may
from time to time be otherwise agreed in writing by the Company and during
reasonable vacations as set forth in Section 7 hereof and authorized leave,
devote his best efforts, full attention and energies during his normal working
time to the business of the Company, the responsibilities provided for the
President and Chief Executive Officer in the Company’s By-laws, and such other
related duties and responsibilities as may from time to time be reasonably
prescribed by the Board or any committee or person delegated by the Board, in
each case, within the framework of the Company’s policies and objectives.

             (d) Throughout the Employment Term and provided that such activities do
not contravene the provisions of Sections 3(a) and (b) or Section 10, 11, 13
and 14 hereof and provided further the Executive does not engage in any other
substantial business activity for gain, profit or other pecuniary advantage
which materially interferes with the performance of his duties hereunder, the
Executive may participate in any governmental, educational, charitable or other
community affairs and serve as a member of the governing board of any such
organization or private or public for profit companies, subject in each case to
the prior approval of the Board. The Executive may retain all fees and other
compensation from any such service and the Company shall not reduce his
compensation by the amount of such fees.

     4. Compensation.

             (a) Base Salary. During the Employment Term the Company shall pay
to the Executive a base salary of not less than one million dollars
($1,000,000) per annum (the “Base Salary”), payable at the times and in the
manner consistent with the Company’s general policies regarding compensation of
senior executive employees. The Base Salary will be reviewed not less than
annually by the Compensation Committee of the Board (the “Compensation
Committee”) and may be increased (but not decreased) in the Compensation
Committee’s sole

 

 

discretion. The Base Salary shall be payable in accordance with the
Company’s normal payroll schedule. The Executive’s position shall be
classified as pay grade EX4 or better (as adjusted for any changes to the
Company’s system of classifying employees by salary grade level implemented
subsequent to the Effective Date).

             (b) Incentive Compensation. The Executive will continue to be
eligible to participate in any short-term and long-term incentive compensation
plans, annual bonus plans and such other management incentive programs or
arrangements of the Company approved by the Board that are generally available
to the Company’s senior executives, including, but not limited to, the Nextel
Communications, Inc. Cash Compensation Deferral Plan, as may be amended from
time to time.

             (i) Annual Performance Bonus. During the Employment
Term, the Executive shall be entitled to participate in an annual
bonus plan (the “Bonus Plan”), with such opportunities as may be
determined by the Compensation Committee (“Target Bonuses”);
provided, however, that effective for the bonus year
ending December 31, 2003, and thereafter during the Employment
Term, the Executive will participate in the Bonus Plan at a minimum
annual Target Bonus opportunity of 150% of his Base Salary and
shall be entitled to receive full payment of any award under the
Bonus Plan determined pursuant to such Bonus Plan (a “Bonus
Award”).

             (ii) Long-Term Performance Bonus. During the
Employment Term, the Executive shall be entitled to participate in
the Nextel Long-Term Incentive Plan effective January 1, 2002, or
any successor plan, program, agreement or arrangement (the “LTIP”),
with such opportunities, if any, as may be determined by the
Compensation Committee (“Target Award Opportunities”);
provided, however, that for the 2004-2005 LTIP
performance period, the Executive will participate in the LTIP at a
minimum Target Award Opportunity of two million seven hundred
thousand dollars ($2,700,000).

             (iii) Incentive bonuses, if earned, shall be paid when
incentive compensation is customarily paid to the Company’s senior
executives in accordance with the terms of the applicable plans,
programs or arrangements.

             (iv) Pursuant to the Company’s applicable incentive or bonus
plans as in effect from time to time, the Executive’s incentive
compensation during the term of this Agreement may be determined
according to criteria intended to qualify under Section 162(m) of
the Internal Revenue Code of 1986, as amended (the “Code”).

             (c) Equity Compensation. The Executive shall continue to be
eligible to participate in the Nextel Communications, Inc. Amended and Restated
Incentive Equity Plan (as amended and restated as of November 16, 2000), as may
be further amended from time to time, (the “Incentive Equity Plan”).

 

 

             (i) Deferred Shares. Effective as of August 11, 2003,
the Board will award to the Executive 1,000,000 Deferred Shares (as
such term is defined in the Incentive Equity Plan) of common stock
of the Company, par value $.001 per share (“Common Stock”), (the
“Deferred Shares Award”). Subject to the terms and conditions of
the deferred shares award agreement evidencing such grant,
one-third (1/3) of the Deferred Shares Award shall vest and become
nonforfeitable on each of the first three (3) anniversaries of the
Effective Date.

             (ii) Stock Options. (A) The Board will grant to the
Executive in calendar year 2004 an option to purchase a minimum of
250,000 shares of Common Stock (the “2004 Option Award”). Subject
to the terms and conditions of the option agreement evidencing such
grant, one-half (1/2) of the 2004 Option Award shall vest and
become exercisable on each of the first two (2) anniversaries of
the date of grant; provided, however, that if the
second half of the 2004 Option Award has not vested on or before
June 30, 2006, such installment shall vest on June 30, 2006. (B)
The Board will grant to the Executive in calendar year 2005 an
option to purchase a minimum of 250,000 shares of Common Stock (the
“2005 Option Award”). Subject to the terms and conditions of the
option agreement evidencing such grant, the 2005 Option Award shall
vest on the first anniversary of the date of grant;
provided, however, that if the 2005 Option Award has
not vested on or before June 30, 2006, such installment shall vest
on June 30, 2006.

     5. Benefits.

             (a) During the Employment Term, the Company shall make available to the
Executive, on no less favorable terms and conditions than those available to
other senior executives and subject to the terms and conditions of the
applicable plans, participation for the Executive and his eligible dependents
in (i) Company-sponsored group health, major medical, pension and profit
sharing, 401(k) and employee welfare benefit plans, programs and arrangements
(the “Employee Plans”) and such other usual and customary benefits in which
senior executives of the Company participate from time to time, and (ii) such
fringe benefits and perquisites as may be made available to senior executives
of the Company as a group, including, but not limited to, long-term disability
insurance, life insurance coverage and the Nextel Communications, Inc. Change
of Control Retention Bonus and Severance Pay Plan, or any successor plan,
program, agreement or arrangement (the “Change of Control Plan”).

             (b) The Executive acknowledges that the Company may change its benefit
programs from time to time which may result in certain benefit programs being
amended or terminated for its senior executives generally.

     6. Expenses. The Company shall pay or reimburse the Executive for
reasonable and necessary business expenses incurred by the Executive in
connection with his duties on behalf of the Company in accordance with the
Company’s Travel and Expense Policy and any other of its expense policies
applicable to senior executives of the Company, following submission by the
Executive of reimbursement expense forms in a form consistent with such expense
policies.

 

 

     7. Vacation. In addition to such holidays, sick leave, personal
leave and other paid leave as is allowed under the Company’s policies
applicable to senior executives generally, the Executive shall be entitled to
twenty (20) days of vacation per 12-month period and subject to the terms and
conditions of the Company’s vacation policy applicable to senior executives.
The duration of such vacations and the time or times when they shall be taken
will be determined by the Executive in consultation with the Company.

     8. Place of Performance. In connection with his employment by the
Company, the Executive shall be based at the principal executive offices of the
Company in the vicinity of Fairfax County, Virginia, except for travel
reasonably required for Company business.

     9. Termination.

             (a) Termination by the Company for Cause or Resignation by the
Executive Without Good Reason. If, prior to the expiration of the
Employment Term, the Executive’s employment is terminated by the Company for
Cause, as defined in Section 9(d), or if the Executive resigns from his
employment hereunder without Good Reason, as defined in Section 9(f), the
Executive shall not be eligible to receive Base Salary or to participate in any
Employee Plans with respect to future periods after the date of such
termination or resignation except for the right to receive vested benefits
under any Employee Plan in accordance with the terms of such Employee Plan.
Conditioned upon the Executive delivering to the Company a release in a form
reasonably satisfactory to the Company with all periods for revocation expired,
the Executive shall be entitled to receive a pro rata portion of any earned but
unpaid Bonus Award and LTIP Target Award Opportunity, if any, to which he would
otherwise be entitled for the Company’s fiscal year during which his
termination of employment occurs (but not for any later years) in accordance
with the then existing terms of such cash incentive compensation, which shall
not be payable until the Compensation Committee has determined that any
incentive targets have been achieved and the subsequent designated payout date
has arrived.

             (b) Termination by the Company Without Cause or Resignation by the
Executive for Good Reason. If, prior to the expiration of the Employment
Term, the Executive’s employment is terminated by the Company without Cause or
the Executive terminates his employment hereunder for Good Reason, conditioned
upon the Executive delivering to the Company a release in a form reasonably
satisfactory to the Company with all periods for revocation expired,
notwithstanding any provision in the terms of any incentive compensation plan
or agreement to the contrary, the Executive shall be entitled to:

             (i) receive from the Company his Base Salary then in effect
for two (2) years (the “Severance Period”), payable through
periodic payments with the same frequency as the Company’s payroll
schedule following the termination of the Executive’s employment;

             (ii) for the Severance Period, continue participation in the
Company’s health care, life and long-term disability plans,
substantially on the same basis that the Executive participated in
such health care, life and long-term disability plans prior to the
termination of his employment; provided, however,
that benefits

 

 

otherwise receivable by the Executive pursuant to this Section
9(b)(ii) shall be applied against the maximum period of
continuation coverage provided under Section 4980B of the Code
(“COBRA Coverage”);

             (iii) (A) receive full payment of the Bonus Award for the
Company’s fiscal year during which his termination of employment
occurs, (B) receive full payment of the Bonus Award for the next
fiscal year following the fiscal year during which his termination
of employment occurs and (C) receive payment of a pro rata portion
of the Bonus Award for the second year following the fiscal year in
which the Executive’s employment terminates (such pro rata formula
shall be determined based on the number of months of service
provided by the Executive during the fiscal year in which his
termination of employment occurs), in each case at the greater of
the annual Target Bonus or actual performance for such fiscal year
in accordance with the then existing terms of such cash incentive
compensation, which shall not be payable until the Compensation
Committee has determined that any incentive targets have been
achieved and the subsequent designated payout date has arrived;

             (iv) receive full payment of any Target Award Opportunity to
which he would otherwise be entitled for the LTIP performance
period during which his termination of employment occurs (but not
for any later years) at the greater of target or actual performance
for such LTIP performance period in accordance with the then
existing terms of the LTIP, which shall not be payable until the
Compensation Committee has determined that any incentive targets
have been achieved and the subsequent designated payout date has
arrived; and

             (v) accelerated vesting of any unvested Deferred Shares Award,
restricted shares and stock options, including the 2004 Stock
Option Award and the 2005 Stock Option Award, granted to the
Executive which have not otherwise vested and any vested stock
options shall remain outstanding and exercisable for the Employment
Term (including any prior extensions thereof).

          Notwithstanding the foregoing, if the Executive terminates his employment
for Good Reason due to the relocation of the Executive’s principal place of
work, as set forth in Section 9(f)(iii), in lieu of payments set forth under
Section 9(b)(i), (ii), (iii), (iv) and (v), the Executive shall be entitled to
receive the compensation and benefits provided under Sections 9(b)(i), (ii) and
(iii) for a maximum period of twelve (12) months.

             (c) Termination by Death or Disability. If the Executive dies or
becomes Disabled, as defined in Section 9(e), prior to the expiration of the
Employment Term, the Executive’s employment will terminate and the Executive,
or in the case of death, notwithstanding any provisions in the terms of any
incentive compensation plan or agreement to the contrary, the Executive’s
beneficiary, or if none, the Executive’s estate, shall be entitled to:

             (i) receive an amount equal to 12 months Base Salary payable
through periodic payments with the same frequency as the Company’s
payroll schedule;

 

 

             (ii) in the case of Disability, continue participation in any
health care and life plans for a period of 12 months or in the
event of the Executive’s death, receive any health care benefits
under the terms of the Employee Plans;

             (iii) receive a pro rata portion of the Executive’s Bonus
Award and LTIP Target Award Opportunity, if any, for the Company’s
fiscal year in which the Executive’s death or Disability occurs
(but not for any later years) payable in accordance with the then
existing terms of such cash incentive compensation, which shall not
be payable until the Compensation Committee has determined that any
incentive targets have been achieved and the subsequent designated
payout date has arrived; and

             (iv) accelerated vesting of any unvested Deferred Shares
Award, restricted shares and stock options, including the 2004
Stock Option Award and the 2005 Stock Option Award, and exercise of
any unexercised vested stock options for a period of one (1) year
following termination due to the Executive’s death or Disability;

provided, however, if the Executive also becomes entitled to
receive benefits under a long-term disability plan (“LTD Plan”) now or
hereafter paid for by the Company, then the Executive’s death or disability
benefits under Section 9(c)(i) (calculated on a monthly basis) shall be reduced
by the amount of the benefits paid under such LTD Plan.

(d) Cause. For purposes of this Agreement, “Cause” shall
mean:

             (i) any act or omission constituting a material breach by the
Executive of any provisions of this Agreement or the willful
failure by the Executive to perform his duties hereunder (other
than any such failure resulting from the Executive’s Disability),
after demand for performance is delivered by the Company that
identifies the manner in which the Company believes the Executive
has not performed his duties, if, within thirty (30) days of such
demand, the Executive fails to cure any such failure capable of
being cured;

             (ii) any intentional act or misconduct materially injurious to
the Company or any Subsidiary, financial or otherwise, or the
misappropriation, fraud, embezzlement or conversion by the
Executive of the Company’s or any of its Subsidiary’s property in
connection with Executive’s duties or in the course of Executive’s
employment with the Company;

             (iii) the conviction or plea of no contest of the Executive
for any felony or the indictment of the Executive for any felony
involving fraud, moral turpitude, embezzlement or theft in
connection with the Executive’s duties or in the course of the
Executive’s employment with the Company;

             (iv) the commission of any intentional or knowing violation of
any antifraud provision of the federal or state securities laws or
the Board reasonably believes that the Executive has committed any
of the acts referred to in this Section 9(d)(iv);

 

 

             (v) there is a final, non-appealable order in a proceeding
before a court of competent jurisdiction or a final order in an
administrative proceeding finding that the Executive committed any
willful misconduct or criminal activity (excluding traffic
violations or other minor offenses) which commission is materially
inimical to the interests of the Company or any Subsidiary, whether
for his personal benefit or in connection with his duties for the
Company or any Subsidiary;

             (vi) current alcohol or prescription drug abuse affecting work
performance;

             (vii) current illegal use of drugs; or

             (viii) violation of the Company’s Code of Corporate Conduct.

     For purposes of this Agreement, no act or failure to act on the part of
the Executive shall be deemed “intentional” if it was due primarily to an error
in judgment or negligence, but shall be deemed “intentional” only if done or
omitted to be done by the Executive not in good faith and without reasonable
belief that the Executive’s action or omission was in the best interest of the
Company. Notwithstanding the foregoing, the Executive shall not be deemed to
have been terminated for “Cause” hereunder unless and until there shall have
been delivered to the Executive written notice of termination by the Company
along with a copy of a resolution duly adopted by the affirmative vote of not
less than a majority of the Board then in office (excluding the Executive if
the Executive is then a member of the Board) at a meeting of the Board called
and held for such purpose, after reasonable notice to the Executive and an
opportunity for the Executive, together with the Executive’s counsel (if the
Executive chooses to have counsel present at such meeting), to be heard before
the Board, finding that, in the good faith opinion of the Board, the Executive
had committed an act constituting “Cause” as herein defined and specifying the
particulars thereof in detail.

(e) Disability. For purposes of this Agreement, “Disability” or
“Disabled” shall mean:

             (i) the Executive’s incapacity due to physical or mental
illness to substantially perform his duties and the essential
functions of his position on a full-time basis for at least six (6)
months in any 12-month period as determined by the Board in its
reasonable discretion, and within thirty (30) days after a notice
of termination is thereafter given by the Company, the Executive
shall not have returned to the full-time performance of the
Executive’s duties; or

             (ii) the Executive becomes eligible to receive benefits under
the Company’s LTD Plan, as defined in Section 9(c);

provided, however, if the Executive shall not agree with a
determination to terminate his employment because of Disability, the question
of the Executive’s disability shall be subject to the certification of a
qualified medical doctor agreed to by the Company and the Executive. The costs
of such qualified medical doctor shall be paid for by the Company.

 

 

(f) Good Reason. For purposes of this
Agreement, “Good Reason” shall mean:

             (i) the Company’s material breach of this Agreement (after
failure to cure in thirty (30) days);

             (ii) the assignment of the Executive without his consent to a
position, responsibilities or duties of a materially lesser status
or degree of responsibility than his position, responsibilities or
duties at the Effective Date; or

             (iii) relocation of the Executive’s principal place of work
more than thirty (30) miles without the Executive’s consent.

          (g) No Mitigation Obligation. The Executive will not be required
to mitigate the amount of any payment made pursuant to Section 9 of this
Agreement by seeking other employment or otherwise. Except as otherwise
provided by applicable law, the Executive’s coverage under the Company’s
welfare benefit plans will terminate when the Executive becomes eligible for
coverage under any employee benefit plan made available by another employer and
covering the same type of benefits. The Executive shall notify the Company
within thirty (30) days after becoming eligible for coverage of any such
benefits.

          (h) Forfeiture. Notwithstanding the foregoing, any right of the
Executive to receive termination payments and benefits hereunder shall be
forfeited to the extent of any amounts payable after any breach of Section 10,
11, 12, 13, 14 or 16 by the Executive.

          10. Confidential Information; Statements to Third Parties.

          (a) During the Employment Term and on a permanent basis upon and following
termination of the Executive’s employment, the Executive acknowledges that:

             (i) all information, whether reduced to writing (or in a form
from which information can be obtained, translated, or derived
into reasonably usable form) or maintained in the mind or memory
of the Executive and whether compiled or created by the Company,
which derives independent economic value from not being readily
known to or ascertainable by proper means by others who can obtain
economic value from the disclosure or use of such information, of
a proprietary, private, secret or confidential nature concerning
the Company’s business, business relationships or financial
affairs (collectively, “Proprietary Information”) shall be the
exclusive property of the Company, and by way of illustration, but
not limitation, shall include inventions, products, processes,
methods, techniques, formulas, compositions, compounds, projects,
developments, sales strategies, plans, research data, clinical
data, financial data, personnel data, computer programs, customer
and supplier lists, trade marks, service marks, copyrights
(whether registered or unregistered), artwork, and contacts at or
knowledge of customers or prospective customers of the Company;
and

 

 

             (ii) the Proprietary Information of the Company gained by the
Executive during the Executive’s association with the Company was
or will be developed by and/or for the Company through substantial
expenditure of time, effort and money and constitutes valuable and
unique property of the Company and that reasonable efforts have
been put forth by the Company to maintain the secrecy of its
Proprietary Information, that such Proprietary Information is and
will remain the sole property of the Company, and that any
retention or use by the Executive of Proprietary Information after
the termination of the Executive’s services for the Company will
constitute a misappropriation of the Company’s Proprietary
Information.

          (b) The Executive further acknowledges and agrees that he will take all
affirmative steps reasonably necessary or required by the Company to protect
the Proprietary Information from inappropriate disclosure during and after his
employment with the Company.

          (c) The Executive further agrees that all files, letters, memoranda,
reports, records, data, sketches, drawings, laboratory notebooks, program
listings, or other written, photographic, electronic, or other tangible
material containing or constituting Proprietary Information, whether created
by the Executive or others, which shall come into his custody or possession,
regardless of medium, shall be and are the exclusive property of the Company to
be used by him only in the performance of his duties for the Company. All such
materials or copies thereof and all tangible things and other property of the
Company in the Executive’s custody or possession shall be delivered to the
Company (to the extent the Executive has not already returned) in good
condition, on or before five (5) business days subsequent to the earlier of:
(i) a request by the Company or (ii) the Executive’s termination of employment
for any reason or Cause, including for nonrenewal of this Agreement,
disability, termination by the Company or termination by the Executive. After
such delivery, the Executive shall not retain any such materials or portions or
copies thereof or any such tangible things and other property and shall execute
any statements or affirmations of compliance under oath that the Company may
require.

          (d) The Executive further agrees that his obligation not to disclose or to
use information and materials of the types set forth in Sections 10(a), 10(b)
and 10(c) above, and his obligation to return materials and tangible property,
set forth in Section 10(c) above, also extends to such types of information,
materials and tangible property of customers of the Company, consultants for
the Company, suppliers to the Company, or other third parties who may have
disclosed or entrusted the same to the Company or to the Executive.

          (e) The Executive further acknowledges and agrees that he will continue to
keep in strict confidence, and will not, directly or indirectly, at any time,
disclose, furnish, disseminate, make available, use or suffer to be used in any
manner any Proprietary Information of the Company without limitation as to when
or how the Executive may have acquired such Proprietary Information and that he
will not disclose any Proprietary Information to any person or entity other
than appropriate employees of the Company or use the same for any purposes
(other than in the performance of his duties as an employee of the Company)
without written approval of the Board, either during or after his employment
with the Company.

 

 

          (f) Further the Executive acknowledges that his obligation of
confidentiality will survive, regardless of any other breach of this Agreement
or any other agreement, by any party hereto, until and unless such Proprietary
Information of the Company has become, through no fault of the Executive,
generally known to the public. In the event that the Executive is required by
law, regulation, or court order to disclose any of the Company’s Proprietary
Information, the Executive will promptly notify the Company prior to making any
such disclosure to facilitate the Company seeking a protective order or other
appropriate remedy from the proper authority. The Executive further agrees to
cooperate with the Company in seeking such order or other remedy and that, if
the Company is not successful in precluding the requesting legal body from
requiring the disclosure of the Proprietary Information, the Executive will
furnish only that portion of the Proprietary Information that is legally
required, and the Executive will exercise all legal efforts to obtain reliable
assurances that confidential treatment will be accorded the Proprietary
Information.

          (g) The Executive’s obligations under this Section 10 are in addition to,
and not in limitation or preemption of, all other obligations of
confidentiality which the Executive may have to the Company under the Company’s
policies, general legal or equitable principles or statutes and which will
remain in full force and effect following the termination of the Executive’s
employment.

          (h) During the Employment Term and following his termination of
employment:

             (i) the Executive shall not, directly or indirectly, make or
cause to be made any statements to any third parties criticizing or
disparaging the Company, any of its Subsidiaries or any affiliates
of the Company or its Subsidiaries (collectively, the “Company
Group”) or commenting on the character or business reputation of
the Company Group. The Executive further hereby agrees that,
without the prior written consent of the Board, unless otherwise
required by law, the Executive shall not (A) publicly comment in a
manner adverse to the Company Group concerning the status, plans or
prospects of the business of the Company Group or (B) publicly
comment in a manner adverse to the Company Group concerning the
status, plans or prospects of any existing, threatened or potential
claims or litigation involving the Company Group; and

             (ii) the Company shall comply with its policies regarding
public statements with respect to the Executive;

provided, however, that nothing herein shall be interpreted to
preclude honest and good faith reporting by the Executive to appropriate
Company or legal enforcement authorities.

(i) The Executive acknowledges and agrees that a violation of the
foregoing provisions of this Section 10 that results in material detriment to
the Company would cause irreparable harm to the Company, and that the Company’s
remedy at law for any such violation would be inadequate. In recognition of
the foregoing, the Executive agrees that, in addition to any other relief
afforded by law or this Agreement, including damages sustained by a breach of

 

 

this Agreement and any forfeitures under Section 9(h), and without the
necessity or proof of actual damages, the Company shall have the right to
enforce this Agreement by specific remedies, which shall include, among other
things, temporary and permanent injunctions, it being the understanding of the
undersigned parties hereto that damages, the forfeitures described above and
injunctions shall all be proper modes of relief and are not to be considered as
alternative remedies.

     11. Non-Competition. In consideration of the Company entering into
this Agreement, for a period commencing on the Effective Date and for a period
ending two (2) years after the Executive’s termination of employment for any
reason or Cause, including for nonrenewal of this Agreement, disability,
termination by the Company or termination by the Executive:

          (a) the Executive hereby covenants and agrees that he shall not, directly
or indirectly, individually or on behalf of any other person or entity do or
suffer any of the following, engage or be interested in (whether as owner,
stockholder, investor, partner, lender, consultant, employee, agent, director
or otherwise) in any business, activity or enterprise which is then competing
with or planning to compete with the business of any division or operation of
the Company Group within any United States territory or state, in which the
Company Group is conducting the business of providing wireless local area
network (e.g., “802.11” or “Wi-Fi” wireless services) or any other business
authorized by the Federal Communications Commission (“FCC”) to provide
“commercial mobile radio service” as that term is defined by the FCC (47 C.F.R.
§ 20.3), (the “Territory”), provided, however, that the
Executive’s ownership of less than one percent (1%) of any class of stock in a
publicly traded corporation shall not be deemed a breach of this Section 11;
and

          (b) the Executive acknowledges that due to his unique and special
contributions to the Company Group in his positions as specified in Section 3,
he will be privy to and ultimately responsible for every type of Proprietary
Information generated by the Company Group, so that his employment in any
capacity for a competing business will create an unreasonable and real risk of
disclosure, inevitable or otherwise, of Proprietary Information. The Executive
further acknowledges that due to his talents, skills and experience, the
restrictions contained herein are reasonable and will not deprive him of his
ability to obtain commensurate employment or work in a non-competing business
activity or enterprise, and will not impose an undue hardship on him.

     12. Election to Extend Non-Competition and Non-Solicitation
Covenants. If the Executive’s employment terminates pursuant to Section
9(b), and the Executive has delivered a release to the Company as provided in
Section 9(b), the Executive may elect to extend the covenants set forth in
Sections 11(a) and (b) and Sections 13(a), (b), (c) and (d) (the
“Non-Competition and the Non-Solicitation Covenants”) for one additional year
(the “Extension Period”) by giving the Company written notice of such election
to extend no later than ninety (90) days prior to the expiration of the
Severance Period. The Executive must elect to extend all of the
Non-Competition and the Non-Solicitation Covenants simultaneously and may not
select extension of some, but not all, of such covenants. In consideration of
the Executive’s election to extend the Non-Competition and Non-Solicitation
Covenants, subject to Section 20, the Executive shall be entitled to:

 

 

          (a) receive from the Company an amount equal to his annual Base Salary as
of his termination date, for the Extension Period, payable through periodic
payments with the same frequency as the Company’s payroll schedule during the
Extension Period;

          (b) for the Extension Period, continue participation in the Company’s
health care, life and long-term disability plans, substantially on the same
basis that the Executive participated in such health care, life and long-term
disability plans prior to the termination of his employment; provided,
however, that benefits otherwise receivable by the Executive pursuant to
this Section 12(b) shall be applied against the maximum period of continuation
coverage provided under Section 4980B of the Code (“COBRA Coverage”), if any;

          (c) receive an amount equal to the full payment of the Bonus Award for the
Extension Period, which shall be equal to (i) the Bonus Award for any remainder
of the second year following the fiscal year in which the Executive’s
employment terminates that the Executive would not have otherwise received
pursuant to Section 9(b)(iii)(C) and (ii) any applicable pro rata portion of
any Bonus Award for the third year following the fiscal year in which the
Executive’s employment terminates (such pro rata formula shall be determined
based on the number of months of service provided by the Executive during the
fiscal year in which his termination of employment occurs), in each case at the
greater of the annual Target Bonus or actual performance for such fiscal
year(s) in accordance with the then existing terms of such cash incentive
compensation, which shall not be payable until the Compensation Committee has
determined that any incentive targets have been achieved and the subsequent
designated payout day has arrived.

     Notwithstanding the foregoing, without limiting the applicability of
Section 9(h) or in any way affecting the right of the Company to seek equitable
remedies thereunder, in the event that the Executive breaches any of the
provisions of Sections 10, 11, 12, 13, 14 or 16, or engages in any activity
that would constitute a breach save for the Executive’s action being in a state
where Section 11 or 13 is not enforceable as a matter of law, then the
Company’s obligation to pay any remaining payments under this Section 12 that
have not already been paid to the Executive shall be terminated and within ten
(10) days of notice of such termination of payment, Executive shall return to
the Company the cash equivalent of all payments made and benefits provided
under this Section 12.

     13. Non-Solicitation. In consideration of the Company entering
into this Agreement, for a period commencing on the Effective Date and for a
period ending two (2) years after the Executive’s termination of employment for
any reason or Cause, including for nonrenewal of this Agreement, disability,
termination by the Company or termination by the Executive, the Executive
hereby covenants and agrees that he shall not, directly or indirectly,
individually or on behalf of any other person or entity do or suffer any of the
following:

          (a) hire or employ or assist in hiring or employing any person who has
been an employee, representative or agent of any member of the Company Group at
any time during the Executive’s employment or solicit, aid, induce or attempt
to solicit, aid, induce or persuade, directly or indirectly, such person to
leave his or his employment with any member of the Company Group to accept
employment with any other person or entity;

 

 

          (b) directly or indirectly induce any person who is an employee, officer
or agent of the Company Group, or any of its affiliated, related or subsidiary
entities to terminate such relationship; or

          (c) solicit any customer of the Company Group, or any person or entity
whose business the Company Group had solicited during the one hundred and
eighty (180) day period prior to termination of the Executive’s employment,
within the Territory for purposes of business which is competitive to the
Company Group.

          (d) For purposes of this Section 13, the term “solicit or persuade”
includes, but is not limited to, (i) initiating communications with an employee
of the Company Group relating to possible employment, (ii) offering bonuses or
additional compensation to encourage an employee of the Company Group to
terminate his or her employment, and (iii) referring employees of the Company
Group to personnel or agents employed by competitors, suppliers or customers of
the Company Group.

     14. Developments.

             (a) The Executive acknowledges and agrees that he will make full and
prompt disclosure to the Company of all inventions, improvements, discoveries,
methods, developments, software, mask works, and works of authorship, whether
patentable or copyrightable or not, (i) which relate to the Company’s business
and have heretofore been created, made, conceived or reduced to practice by the
Executive or under his direction or jointly with others, and not assigned to
prior employers, or (ii) which have utility in or relate to the Company’s
business and are created, made, conceived or reduced to practice by the
Executive or under his direction or jointly with others during his employment
with the Company, whether or not during normal working hours or on the premises
of the Company (all of the foregoing of which are collectively referred to in
this Agreement as “Developments”).

             (b) The Executive further agrees to assign and does hereby assign to the
Company (or any person or entity designated by the Company) all of the
Executive’s rights, title and interest worldwide in and to all Developments and
all related patents, patent applications, copyrights and copyright
applications, and any other applications for registration of a proprietary
right. However, this Section 14(b) shall not apply to Developments that the
Executive developed entirely on his own time without using the Company’s
equipment, supplies, facilities, or trade secret information and that does not,
at the time of conception or reduction to practice, have utility in or relate
to the Company’s business, or actual or demonstrably anticipated research or
development. The Executive understands that, to the extent this Agreement
shall be construed in accordance with the laws of any state or country which
precludes a requirement in an employee agreement to assign certain classes of
inventions made by an employee, this Section 14(b) shall be interpreted not to
apply to any invention which a court rules or the Company agrees falls within
such classes.

             (c) The Executive further agrees to cooperate fully with the Company, both
during and after his employment with the Company, with respect to the
procurement, maintenance and enforcement of copyrights, patents and other
intellectual property rights (both in the United States and other countries)
relating to Developments; provided, however, that the

 

 

Executive shall not be required to incur or pay any costs or expenses in
connection with the rendering of such cooperation. The Executive will sign all
papers, including, without limitation, copyright applications, patent
applications, declarations, oaths, formal assignments, assignments of priority
rights, and powers of attorney, and do all things that the Company may
reasonably deem necessary or desirable in order to protect its rights and
interests in any Development.

             (d) The Executive further acknowledges and agrees that if the Company is
unable, after reasonable effort, to secure the Executive’s signature on any
such papers, any executive officer of the Company shall be entitled to execute
any such papers as the Executive’s agent and attorney-in-fact, and the
Executive hereby irrevocably designates and appoints each executive officer of
the Company as his agent and attorney-in-fact to execute any such papers on the
Executive’s behalf, and to take any and all actions as the Company may deem
necessary or desirable in order to protect its rights and interests in any
Development, under the conditions described in this sentence.

          15. Remedies. The Executive and the Company agree that the
covenants contained in Sections 10, 11, 12, 13 and 14 are reasonable under the
circumstances, and further agree that if in the opinion of any court of
competent jurisdiction any such covenant is not reasonable in any respect, such
court will have the right, power and authority to sever or modify any provision
or provisions of such covenants as to the court will appear not reasonable and
to enforce the remainder of the covenants as so amended. The Executive
acknowledges and agrees that the remedy at law available to the Company for
breach of any of the Executive’s obligations under Sections 10, 11, 12, 13 and
14 would be inadequate and that damages flowing from such a breach may not
readily be susceptible to being measured in monetary terms. Accordingly, the
Executive acknowledges, consents and agrees that, in addition to any other
rights or remedies that the Company may have at law, in equity or under this
Agreement, upon adequate proof of the Executive’s violation of any such
provision of this Agreement, the Company will be entitled to immediate
injunctive relief and may obtain a temporary order restraining any threatened
or further breach, without the necessity of proof of actual damage. Without
limiting the applicability of this Section 15 or in any way affecting the right
of the Company to seek equitable remedies hereunder, in the event that the
Executive breaches any of the provisions of Sections 10, 11, 12, 13 and 14 or
engages in any activity that would constitute a breach save for the Executive’s
action being in a state where any of the provisions of Sections 10, 11, 12, 13,
14 or this Section 15 is not enforceable as a matter of law, then the Company’s
obligation to pay any remaining severance compensation and benefits that has
not already been paid to Executive pursuant to Section 9 shall be terminated
and within ten (10) days of notice of such termination of payment, Executive
shall return all severance compensation and the value of such benefits.

     16. Continued Availability and Cooperation.

             (a) In the event of termination of the Executive’s employment, the
Executive shall cooperate fully with the Company and with the Company’s counsel
in connection with any present and future actual or threatened litigation or
administrative proceeding involving the Company that relates to events,
occurrences or conduct occurring (or claimed to have occurred) during the
period of the Executive’s employment by the Company. This cooperation by the
Executive will include, but not be limited to:

 

 

             (i) making himself reasonably available for interviews and
discussions with the Company’s counsel as well as for depositions
and trial testimony;

             (ii) if depositions or trial testimony are to occur, making
himself reasonably available and cooperating in the preparation
therefor as and to the extent that the Company or the Company’s
counsel reasonably requests;

             (iii) refraining from impeding in any way the Company’s
prosecution or defense of such litigation or administrative
proceeding; and

             (iv) cooperating fully in the development and presentation of
the Company’s prosecution or defense of such litigation or
administrative proceeding.

             (b) The Executive will be reimbursed by the Company for reasonable travel,
lodging, telephone and similar expenses, as well as reasonable attorneys’ fees
(if independent legal counsel is necessary), incurred in connection with any
cooperation, consultation and advice rendered under this Agreement after the
Executive’s termination of employment. The Executive shall not unreasonably
withhold the Executive’s availability for such cooperation, consultation and
advice.

     17. Dispute Resolution.

          (a) Any dispute between the parties under this Agreement will be resolved
(except as provided below) through informal arbitration by a single arbitrator
selected under the rules of the American Arbitration Association for
arbitration of employment disputes conducted in Fairfax County, Virginia. Each
party will be entitled to present evidence and argument to the arbitrator. The
arbitrator will have the right only to interpret and apply the provisions of
this Agreement and may not change any of its provisions, except as expressly
provided in Section 24 and only in the event the Company has not brought an
action in a court of competent jurisdiction to enforce the covenants in
Sections 10, 11, 12 13 or 14. The arbitrator will permit reasonable
pre-hearing discovery of facts, to the extent necessary to establish a claim or
a defense to a claim, subject to supervision by the arbitrator. The
determination of the arbitrator will be conclusive and binding upon the parties
and judgment upon the same may be entered in any court having jurisdiction
thereof. The arbitrator will give written notice to the parties stating the
arbitrator’s determination, and will furnish to each party a signed copy of
such determination. The expenses of arbitration will be borne equally by the
Company and the Executive or as the arbitrator equitably determines consistent
with the application of state or federal law; provided, however,
that the Executive’s share of such expenses will not exceed the maximum
permitted by law. Any arbitration or action pursuant to this Section 17 will
be governed by and construed in accordance with the substantive laws of the
Commonwealth of Virginia and, where applicable, federal law, without giving
effect to the principles of conflict of laws of such Commonwealth.

          (b) Notwithstanding Section 17(a), the Company will not be required to
seek or participate in arbitration regarding any actual or threatened breach of
the Executive’s covenants in Sections 10, 11, 12 13 or 14, but may pursue its
remedies, including injunctive relief, for such breach in a court of competent
jurisdiction in Fairfax County, Virginia, or in the

 

 

sole discretion of the Company, in a court of competent jurisdiction where the Executive has
committed or is threatening to commit a breach of the Executive’s covenants,
and no arbitrator may make any ruling inconsistent with the findings or rulings
of such court.

          18. Other Agreements. The provisions of this Agreement supersede
the provisions of the Prior Employment Agreement. No agreements other than the
agreements evidencing any grants of stock options, deferred shares and
restricted shares or representations, oral or otherwise, express or implied,
with respect to the subject matter hereof have been made by either party which
are not expressly set forth in this Agreement. To the extent there is a Change
of Control (as defined in the Change of Control Plan) of the Company,
compensation and benefits payable under this Agreement upon a termination of
the Executive’s employment will be reduced dollar for dollar (but not below
zero) by any compensation and benefits payable under the Change of Control
Plan, it being the intent that the Executive receive the greatest of the
compensation and benefits provided under the Change of Control Plan or this
Agreement.

          19. Indemnification. The Company shall, to the fullest extent to
which it is empowered to do so by the General Corporation Law of Delaware, or
any other applicable laws, as from time to time in effect, and in the manner
therein provided, indemnify and hold harmless the Executive, through the
duration of the Employment Term and all statutory periods during which any such
claim may be brought or asserted, from and against any actual, threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
administrative, investigative or otherwise, to which Executive is or is
threatened to be made a party by reason of the fact that he is or was a
director, officer, employee or agent of the Company. The Executive will be
further covered by the indemnification and limitations on liability of officers
and directors provided under the Company’s Certificate of Incorporation and
By-laws and any separate agreement between the Company and the Executive and/or
any officers and directors indemnification insurance policy now or hereafter
paid for by the Company.

          20. Withholding of Taxes. The Company may withhold from any
amounts payable under this Agreement all federal, state, city or other taxes as
the Company is required to withhold pursuant to any law or government
regulation or ruling.

          21. Successors and Binding Agreement.

             (a) The Company will require any successor (whether direct or indirect, by
purchase, merger, consolidation, reorganization or otherwise) to all or
substantially all of the business or assets of the Company, by agreement in
form and substance satisfactory to the Executive, expressly to assume and agree
to perform this Agreement in the same manner and to the same extent the Company
would be required to perform if no such succession had taken place. This
Agreement will be binding upon and inure to the benefit of the Company and any
successor to the Company, including without limitation any persons acquiring
directly or indirectly all or substantially all of the business or assets of
the Company whether by purchase, merger, consolidation, reorganization or
otherwise (and such successor shall thereafter be deemed the “Company” for the
purposes of this Agreement), but will not otherwise be assignable, transferable
or delegable by the Company.

 

 

             (b) This Agreement will inure to the benefit of and be enforceable by the
Executive’s personal or legal representatives, executors, administrators,
successors, heirs, distributees and legatees.

             (c) This Agreement is personal in nature and neither of the parties hereto
shall, without the consent of the other, assign, transfer or delegate this
Agreement or any rights or obligations hereunder except as expressly provided
in Sections 21(a) and 21(b). Without limiting the generality or effect of the
foregoing, the Executive’s right to receive payments hereunder will not be
assignable, transferable or delegable, whether by pledge, creation of a
security interest, or otherwise, other than by a transfer by the Executive’s
will or by the laws of descent and distribution and, in the event of any
attempted assignment or transfer contrary to this Section 21(c), the Company
shall have no liability to pay any amount so attempted to be assigned,
transferred or delegated.

     22. Notices. For all purposes of this Agreement, all
communications, including without limitation notices, consents, requests or
approvals, required or permitted to be given hereunder will be in writing and
will be deemed to have been duly given when hand delivered or dispatched by
electronic facsimile transmission (with receipt thereof confirmed), or five (5)
business days after having been mailed by United States registered or certified
mail, return receipt requested, postage prepaid, or three (3) business days
after having been sent by a nationally recognized overnight courier service
such as Federal Express or UPS, addressed to the Company (to the attention of
the Senior Vice President and General Counsel of the Company) at its principal
executive offices and to the Executive at his principal residence, or to such
other address as any party may have furnished to the other in writing and in
accordance herewith, except that notices of changes of address shall be
effective only upon receipt.

     23. Governing Law. The validity, interpretation, construction and
performance of this Agreement will be governed by and construed in accordance
with the substantive laws of the Commonwealth of Virginia, without giving
effect to the principles of conflict of laws of such State.

     24. Validity/Severability. If any provision of this Agreement or
the application of any provision hereof to any person or circumstances is held
invalid, unenforceable or otherwise illegal, the remainder of this Agreement
and the application of such provision to any other person or circumstances will
not be affected, and the provision so held to be invalid, unenforceable or
otherwise illegal will be reformed to the extent (and only to the extent)
necessary to make it enforceable, valid or legal. To the extent any provisions
held to be invalid, unenforceable or otherwise illegal cannot be reformed, such
provisions are to be stricken herefrom and the remainder of this Agreement will
be binding on the parties and their successors and assigns as if such invalid
or illegal provisions were never included in this Agreement from the first
instance.

     25. Survival of Provisions. Notwithstanding any other provision of
this Agreement, the parties’ respective rights and obligations under Sections
10, 11, 12 ,13, 14, 15, 16, 17 and 19 will survive any termination or
expiration of this Agreement or the termination of the Executive’s employment
for any reason whatsoever.

     26. Representations.

 

 

             (a) The Executive hereby represents that he is not subject to any
restriction of any nature whatsoever on his ability to enter into this
Agreement or to perform his duties and responsibilities hereunder, including,
but not limited to any covenant not to compete with any former employer, any
covenant not to disclose or use any non-public information acquired during the
course of any former employment or any covenant not to solicit any customer of
any former employer.

             (b) The Executive hereby represents that, except as he has disclosed in
writing to the Company, he is not bound by the terms of any agreement with any
previous employer or other party to refrain from using or disclosing any trade
secret or confidential or proprietary information in the course of the
Executive’s employment with the Company or to refrain from competing, directly
or indirectly, with the business of such previous employer or any other party.

             (c) The Executive further represents that, to the best of his knowledge,
his performance of all the terms of this Agreement and as an employee of the
Company does not and will not breach any agreement with another party,
including without limitation any agreement to keep in confidence proprietary
information, knowledge or data the Executive acquired in confidence or in trust
prior to his employment with the Company, and that he will not knowingly
disclose to the Company or induce the Company to use any confidential or
proprietary information or material belonging to any previous employer or
others.

     27. Amendment; Waiver. This Agreement may not be modified, amended
or waived in any manner except by an instrument in writing signed by both
parties hereto. No waiver by either party hereto at any time of any breach by
the other party hereto or compliance with any condition or provision of this
Agreement to be performed by such other party will be deemed a waiver of
similar or dissimilar provisions or conditions at the same or at any prior or
subsequent time.

     28. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same agreement.

     29. Headings. Unless otherwise noted, the headings of sections
herein are included solely for convenience of reference and shall not control
the meaning or interpretation of any of the provisions of this Agreement.

 

 

     IN WITNESS WHEREOF, the Company has caused this Agreement to be signed by
an officer pursuant to the authority of its Board, and the Executive has
executed this Agreement, as of the day and year first written above.

	 	 

	 	NEXTEL COMMUNICATIONS, INC.

	 	By: /s/ William E. Conway, Jr. 

William E. Conway, Jr.

Chairman of the Board of Directors

	 	/s/ Timothy M. Donahue 

Timothy M. Donahue<PAGE>
                                                                   EXHIBIT 10.29

                        SEPARATION AGREEMENT AND RELEASE

         This is a Separation Agreement and Release ("Separation Agreement")
between XATA Corporation (the "Company") and William P. Flies ("Employee"),
providing for Employee's separation from employment with the Company.

         A. Employee and the Company are parties to an Executive Employment
         Agreement dated October 1, 2002 ("Employment Agreement") pursuant to
         which Employee serves as the Company's Chief Technology Officer ("CTO")
         and as Chairman of the Board of Directors of the Company.

         B. The Employment Agreement contains certain provisions relating to
         confidentiality, competition, enticement, inventions and related items,
         and Company property that survive the termination of Employee's
         employment with the Company. These provisions are listed in Paragraph
         15, below, and are referred to in this Separation Agreement as
         Continuing Obligations under the Employment Agreement.

         C. The Company and Employee have decided to terminate the Employment
         Agreement, except for the Continuing Obligations and the employment
         relationship that currently exists between them.

         D. The Company desires to provide Employee valuable economic benefits
         that Employee is not otherwise entitled to receive in order to assist
         Employee and to achieve an amicable and peaceful termination of
         Employee's employment with the Company.

        NOW, THEREFORE, in consideration of the foregoing premises and for good
and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the Company and Employee make the following Separation Agreement
and Release:

         1. Termination of Employment. Pursuant to 30 days' advance written
notice of termination under Sections 4.3 and 4.7 of the Employment Agreement,
Employee's employment with the Company will terminate effective June 20, 2003
(the "Termination Date"). As of the Termination Date, Employee will have no
further job duties with the Company. The Company will pay Employee for all
services rendered to the Company through the Termination Date, for all submitted
expenses reimbursable under the Company's policies, and for all accrued vacation
or paid time off pursuant to the Company's regular payroll schedule and
procedures. Between the date of this Separation Agreement and the Termination
Date, Employee will perform his duties under the Employment Agreement at a
location or locations other than the principal executive office of the Company
in Burnsville, Minnesota.

         2. Severance Payments. From the Termination Date through September 30,
2004, the Company will pay Employee an amount equivalent to the salary Employee
would have received if employed by the Company for the same period, including
any bonus compensation due in accordance with Exhibit A to the Employment
Agreement. Payments shall be made pursuant to the Company's regular payroll
schedule and procedures and mandatory withholdings shall be made in accordance
with documents on file with the Company as of the Termination Date. The
Company's obligation to make these severance payments is contingent upon
Employee's execution of this Separation Agreement, the expiration of the
rescission period set forth in Paragraph 9 below without a rescission and
nullification, and Employee's compliance with all terms of this Separation
Agreement and the Continuing Obligations under the Employment Agreement.

         3. Health, Dental and Life Insurance Continuation Rights and Payment of
Premiums. After the Termination Date, Employee will be provided the opportunity
for group health, dental and life insurance continuation under applicable laws.
If Employee elects to continue such group health, dental and life insurance
coverage, the Company will pay its portion of the premiums for such coverage on
the same basis as now paid by the Company through September 30, 2004, or until
Employee is eligible for such coverage through another employer, whichever is
earlier, subject to the conditions set forth in this Paragraph. After September
30, 2004, all expenses for such insurance continuation shall be paid by
Employee. This agreement of the Company to pay its portion of premiums for such
continued insurance coverage through September 30, 2004 is subject to the
execution and delivery of this Separation Agreement by Employee to the Company
and completion of the rescission period provided in Paragraph 10 below without
rescission and nullification, and is further subject to Employee's compliance
with the provisions of this Separation Agreement and the Continuing Obligations
under the Employment Agreement.

                                       19
<PAGE>

         4. Other Benefits. Employee will receive the additional benefits listed
below. All other benefits not specifically mentioned in this Separation
Agreement and Release will cease as of the Termination Date, including, but not
limited to, any entitlement to any bonuses, incentive payments, or other
compensation or benefits.

                  (a) The Company will reimburse Employee for outplacement
         expenses up to $10,000, which amount shall be payable for services
         provided within the first 12 months following the Termination Date upon
         submission to the Company of appropriate documentation evidencing
         Employee's payment for such services.

                  (b) All unvested stock options, consisting of those options
         described on Schedule A, attached, shall be fully vested and
         exercisable, commencing July 1, 2003, without regard to whether any
         applicable performance criteria have been satisfied by Employee. Such
         options shall remain exercisable for a period of 90 days after the
         Termination Date, in accordance with the terms of said options.

                  (c) Employee shall retain all rights in his account under the
         Company's 401(k) Plan, although the Company will make no additional
         contributions.

         5. Non-Disparagement. Employee agrees that Employee will not disparage
or criticize the Company or any of its owners, shareholders, officers,
directors, managers, employees or agents in any manner. The Company agrees that
no officer of the Company shall disparage or criticize Employee in any manner.
Nothing in this paragraph shall limit the right of Employee or any
representative of the Company to give truthful testimony in a court of competent
jurisdiction or to a governmental agency, when required to do so by subpoena,
court order, law or administrative regulation.

         6. No Other Remuneration. Employee agrees that Employee is not entitled
to any remuneration from the Company, except as provided in this Separation
Agreement. This includes back pay, sick pay, vacation pay, bonuses, incentive
compensation, separation pay or any other compensation.

         7. Release of the Company. Employee releases and discharges the Company
and its past, present and future shareholders, directors, managers, officers,
employees and agents, and their affiliated entities, and its or their successors
and assigns, to the fullest extent allowable by law, of and from any and all
claims pertaining to Employee's employment with the Company or the termination
of Employee's employment, whether in law or in equity, contract or tort, known
or unknown, that arose prior to the date of execution of this Separation
Agreement by Employee. This release includes, but is not limited to, any and all
claims for payment of wages, commissions, bonuses or other compensation or
benefits; discrimination under Title VII of the Civil Rights Act of 1964, as
amended, the Americans with Disabilities Act, the Age Discrimination in
Employment Act, as amended, the Minnesota Human Rights Act, and any other
violation of any federal, state or local civil rights laws based on protected
status; breach of contract; breach of fiduciary duty; fraud or
misrepresentation; expense reimbursement; defamation; intentional or negligent
infliction of emotional distress; breach of a covenant of good faith and fair
dealing; promissory estoppel; negligence; wrongful termination of employment;
any other unlawful employment practices; or recovery under any other theory,
whether legal or equitable, in tort, contract or equity. This release includes
all present losses and all future developments therefrom.

         Employee promises not to sue any party or person that Employee released
above from any claim that arose prior to the date of this Separation Agreement
relating to Employee's employment or the termination thereof. Employee further
promises that Employee will not seek or accept individual remedies or damages on
any action or administrative proceeding filed with the Equal Employment
Opportunity Commission or other governmental agency.

         Employee acknowledges and agrees that Employee is being provided
consideration for the waiver of Employee's rights and claims pursuant to this
Separation Agreement which is in addition to anything of value to which Employee
is already entitled.

         8. Review Period and Representation. Employee understands that Employee
has twenty-one (21) days from the day that Employee receives this Separation
Agreement, not counting the day upon which Employee receives it, to consider
whether Employee wishes to sign this Separation Agreement. Employee acknowledges
that if Employee signs this Separation Agreement before the end of the
twenty-one (21) day period, it will be Employee's personal, voluntary decision
to do so. The parties agree that modifications to this Separation Agreement,
whether material or immaterial, do not restart the running of the twenty-one
(21) day period.

         Employee understands and acknowledges that Employee has been advised to
consult with Employee's own attorney prior to signing this Separation Agreement
and has or could have done so. Employee acknowledges the decision whether to
sign this Separation Agreement is Employee's own voluntary decision made with
full knowledge.

                                       20
<PAGE>

         9. Rescission Period. Within seven (7) calendar days after signing this
Separation Agreement, Employee has the right to rescind that portion of the
Separation Agreement that releases claims pursuant to the Age Discrimination in
Employment Act. Within fifteen (15) calendar days after signing this Separation
Agreement, Employee has the right to rescind that portion of the Separation
Agreement that releases claims pursuant to the Minnesota Human Rights Act. To be
effective, the rescission must be in writing and delivered within the relevant
time period to John G. Lewis, CFO, XATA Corporation, 151 East Cliff Road, Suite
10, Burnsville, MN 55337. If delivered by mail, the rescission must be
postmarked within the relevant rescission period and sent by certified mail,
return receipt requested to the above address.

        Employee understands and agrees that if Employee exercises any right of
rescission, the Company may at its option either nullify this Separation
Agreement in its entirety or keep it in effect as to all claims not rescinded in
accordance with the rescission provisions. In the event the Company opts to
nullify the entire Separation Agreement, the Separation Agreement will be null
and void in its entirety. Neither Employee nor the Company will have any rights
or obligations whatsoever under this Separation Agreement. Employee understands
and agrees that Employee will not be entitled to receive the payments or other
benefits provided in Paragraph 2 or Paragraph 4 or any of the other benefits of
this Separation Agreement. A rescission, however, will not and does not affect
the termination of Employee's employment with the Company as of the date set
forth in Paragraph 1.

         10. No Admission of Liability by the Company. Employee acknowledges
that the payment of consideration for this Separation Agreement by the Company
is not to be construed as an admission of any liability on the part of the
Company or any of its shareholders, directors, managers, officers, employees or
agents. Such liability is expressly denied by the Company and its shareholders,
directors, managers, officers, employees and agents.

         11. Confidentiality. Employee acknowledges that the Company may file
this Separation Agreement as a part of one or more reports filed with the U.S.
Securities and Exchange Commission.

         12. Return of Property. Employee shall return all property belonging to
the Company, including any keys and all documents containing Confidential
Information, as defined in the Employment Agreement, not later than the
Termination Date.

         13. Voluntary Agreement. The Company and Employee enter into this
Separation Agreement voluntarily, after having had the opportunity to review it
and consult with advisors of their choice.

         14. Representations. Employee acknowledges that Employee has not relied
upon any statements made by the Company, its agents, or its attorneys in
entering into this Separation Agreement.

         15. Entire Agreement; Continuing Obligations under the Employment
Agreement. This Separation Agreement supersedes any and all prior agreements
between the Company and Employee, except for the Continuing Obligations under
the Employment Agreement. This Separation Agreement and the Continuing
Obligations under the Employment Agreement contain all the agreements between
Employee and the Company.

         The following sections of the Employment Agreement survive the
termination of the Employment Agreement and are acknowledged by Employee as
continuing obligations in accordance with their terms ("Continuing
Obligations"):

                                       21
<PAGE>

<Table>
<Caption>
   Section of
Employment Agreement                    Title                      Continues Until:
--------------------        ------------------------------        ------------------------------
<S>                         <C>                                   <C>
5.1                         Confidential Information              Indefinite

5.2                         Non-Competition                       One year from Termination Date

5.3                         Non-Enticement                        One year from Termination Date

5.4                         Non-Customer Interference             One year from Termination Date

5.5                         Non-Merger Interference               One year from Termination Date

5.6                         Interpretation                        Indefinite

5.7                         Remedies                              Indefinite

6.1                         Disclosure and Assignment of          One year from Termination Date
                            Inventions and Other Works
</Table>

         16. Amendment. This Separation Agreement and Release may not be
modified, altered or changed in any way except by written agreement signed by
both parties.

         17. Successors and Assigns. This Separation Agreement is personal to
Employee and may not be assigned by Employee without the written agreement of
the Company. The rights and obligation of this Separation Agreement shall inure
to the successors and assigns of the Company.

         18. Governing Law and Jurisdiction. This Separation Agreement and
Release will be governed by the laws of the State of Minnesota, without giving
effect to the principles of conflicts of laws thereof. The federal and state
courts located in the State of Minnesota shall have exclusive jurisdiction
regarding all disputes arising under this Separation Agreement or relating
hereto. Employee hereby consents to personal jurisdiction by the federal and
state courts located in the State of Minnesota in the event of any dispute
arising under this Separation Agreement or relating hereto.

         19. Counterparts. This Separation Agreement may be executed in several
counterparts, each of which shall be deemed to be an original, and all such
counterparts together shall constitute but one and the same instrument.

Dated: June 11, 2003                 /s/ William P. Flies
       -------------                 -----------------------------
                                     William P. Flies

                                     XATA Corporation

Dated: June 11, 2003                 By /s/ Craig S. Fawcett
       -------------                    ---------------------------------
                                        Its  Chief Executive Officer
                                        ---------------------------------

                                       22

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