EXHIBIT 10.3
Executive Employment Agreement
------------------------------
This Executive Employment Agreement ("Agreement") is made and entered into as
of October __, 1997 (the "Effective Date") by and between Towing America, Inc.,
a Delaware corporation (the "Company") and Xxxxxx X. Xxxxxxx, an individual
resident of the State of New York ("Executive"), with reference to the
following:
B a c k g r o u n d
A. The Company is a newly formed entity that intends to pursue
consolidation opportunities in the towing services business (the
"Business").
B. Executive has previously served in senior management capacities in
businesses similar to the Business.
C. The Company now desires to retain the full-time services of Executive as
Chief Executive Officer of the Company, and Executive is willing to be
employed by the Company in that capacity on the terms and conditions set
forth in this Agreement.
Now Therefore, the Company and Executive hereby agree as follows:
1. Employment. The Company hereby employs Executive on the terms set forth
----------
herein and Executive hereby accepts such employment, commencing on the date of
filing of a Registration Statement with the Securities Exchange Commission in
connection with the Company's Initial Public Offering (the "Commencement Date")
for a term of three years (the "Employment Term"), unless sooner terminated
under Section 7 below. For purposes of this Agreement, "Initial Public Offering"
of "IPO" means the Company's first firm commitment underwritten offering of its
securities pursuant to a registration statement under the Securities Act of
1933, as amended.
2. Duties. During the period of his employment with the Company hereunder,
------
Executive will be employed as Chief Executive Officer of the Company. In
addition, upon execution of this Agreement, Executive will be elected to the
Board of Directors of the Company. Executive will:
(a) devote his full business time, ability, knowledge and attention, and
give his best effort and skill solely to the Company's business affairs and
interests;
-1-
(b) perform such services and assume such duties and responsibilities
appropriate to the positions identified above as well as those which may from
time to time be reasonably assigned to him by the Board of Directors of the
Company, to whom Executive will directly report; and
(c) in all respects use his best efforts to further, enhance and develop
the Company's business affairs, interests and welfare.
3. Compensation. In consideration of Executive's services to the Company
------------
during the Employment Term, Executive will receive the following:
(a) Commencing upon the consummation of the Initial Public Offering, the
Company will pay Executive a gross base salary of $200,000 per annum during the
Employment term, subject to the review by the Company's underwriters at or
around the time of IPO. Executive's base salary will be paid in equal
installments (pro rated for portions of a pay period) on the Company's regular
pay days and the Company will withhold from such compensation all applicable
federal and state income, social security, and disability and other taxes as
required by applicable laws. The Company may also pay Executive such bonuses as
are determined from time to time by the Board of Directors.
(b) From time to time following the Company's Initial Public Offering,
in the sole discretion of the Company's Board of Directors, stock options to
purchase additional shares of Common Stock of the Company in accordance with a
stock option plan to be adopted by the Company which will contain, among other
things, provisions for vesting of the shares subject to options granted
thereunder.
4. Company Shares. As soon as reasonably practicable after the execution of
--------------
this Agreement, Executive will purchase at fair market value shares of Common
Stock of the Company expected to represent 6% of the outstanding shares on the
consummation of the IPO. If Executive voluntarily terminates his employment
hereunder during the 18 months of the Employment Term, or if Executive is
discharged under Section 7.3 hereof during such 18 month period, then the
Company may, during the 30 day period following such termination, buy back fifty
percent (50%) of the shares purchased pursuant to this Section 4 at the price
Executive paid for such shares. The Company may exercise this right by written
notice to the executive and within five business days of delivery of such notice
Executive shall deliver the certificate(s) representing the shares so
repurchased to the Company's Secretary at the executive offices of the Company
and the Company shall deliver its cashier's or certified check in the amount of
such purchase price to Executive at such offices.
-2-
5. Change of Control. In the event of any Change of Control of the Company,
-----------------
then (i) any and all of Executive's stock options that are unvested as of the
effective date of such Change of Control will become vested immediately prior to
such event and (ii) Executive will receive from the Company an aggregate payment
equal to three (3) times his gross base salary, payable in accordance with the
provisions of Section 3(a) above; provided however, that in the event that the
Company determines, in its sole discretion, that any portion of the same
constitutes an excess parachute payment under ss280G of the Internal Revenue
Code of 1986, as amended, then the Company will have no obligation to provide
such portion to the Executive. For purposes of this Agreement, a "Change of
Control" means (a) the sale of all or substantially all of the assets of the
Company to any person or entity that, prior to such sale, did not control, was
not under common control with, or was not controlled by, the Company, or (b) a
merger or consolidation or other reorganization in which the Company is not the
surviving entity or becomes owned entirely by another entity, unless at least
fifty percent (50%) of the outstanding voting securities of the surviving or
parent corporation, as the case may be, immediately following such transaction
are beneficially held by such persons and entities in the same proportion as
such persons and entities beneficially held the outstanding voting securities of
the Company immediately prior to such transaction, or (c) the sale or other
change of beneficial ownership of at least fifty percent (50%) of the
outstanding voting securities of the Company to any person or "group" as that
term is defined under the Securities Exchange Act of 1934, as amended.
6. Benefits and Reimbursements.
---------------------------
6.1 Executive will, during the Employment Term, have the right to receive
such benefits as are generally made available to full-time executive officers of
the Company, including the right to participate in any retirement plan or
executive bonus plan that the Company may create. In addition, or inclusive of
such benefits, the Company will provide Executive with the following:
(a) the opportunity to apply for coverage under the Company's medical,
life and disability plans, if any. If the Executive is accepted for coverage
under such plans, the Company will provide to Executive and his immediate
family such coverage on the same terms as is customarily provided by the
Company to the plan participants as modified from time to time.
(b) in addition to normal holidays recognized by the Company, Executive
will be entitled to three weeks paid vacation annually, provided that any
vacation may be taken by Executive at any time Executive deems appropriate,
upon consultation with the Board of Directors, which
-3-
may determine that the best interests of the Company require otherwise.
6.2 The Company will reimburse Executive for travel and other out-of-pocket
expenses reasonably incurred by Executive in the performance of his duties
hereunder, provided that all such expenses will be reimbursed only (i) upon the
presentation by Executive to the Company of such documentation as may be
reasonably necessary to substantiate that all such expenses were incurred in the
performance of his duties, and (ii) if such expenses are consistent with all
policies of the Company in effect from time to time as to the kind and amount of
such expenses.
7. Termination of Employment.
-------------------------
7.1 Expiration of the Term of Agreement. This Agreement will terminate
-----------------------------------
automatically upon the expiration of the Employment Term. On or about three
months prior to the date of such termination, the Company will provide Executive
with written notice of non-renewal of this Agreement.
7.2 Death or Permanent Disability of Executive. This Agreement will
------------------------------------------
terminate upon the death or permanent disability of Executive. Executive will be
deemed permanently disabled for the purpose of this Agreement if, in the good
faith determination of the Board of Directors, based on sound medical advice,
Executive has become physically or mentally incapable of performing his duties
hereunder for a continuous period of one hundred eighty (180) days, in which
event Executive will be deemed permanently disabled upon the expiration of such
one hundred eighty (180) day period.
7.3 Executive's Discharge for Cause. The Company will have the right to
-------------------------------
terminate Executive's employment hereunder for "Cause" at any time effective
upon its giving of written notice setting forth with particularity the facts and
circumstances constituting such Cause. For such purposes, "Cause" means the
occurrence of one or more of the following: (i) the commission by Executive of
any act materially detrimental to the Company, including fraud, embezzlement,
theft, bad faith, gross negligence, recklessness or willful misconduct; (ii)
incompetence or repeated failure or refusal to perform the duties required by
this Agreement and as may be assigned to Executive by the Company's Board of
Directors from time to time; (iii) conviction of a felony or of any crime of
moral turpitude to the extent materially detrimental to the Company; (iv) any
material misrepresentation by Executive to the Company regarding the operation
of the business; or (v) breach of any covenant of this Agreement, provided that
the action or conduct described in clauses (ii) or (v) above will constitute
"Cause" only if such action or conduct continues after the Company has provided
Executive with written notice thereof and a reasonable opportunity (to be not
less than 30 days) to cure the same.
-4-
7.4 The Company's Right to Terminate At Will. Subject to the payment to
----------------------------------------
Executive of the applicable severance payments as provided in Section 7.5 below,
the Company will have the right (in addition to its right of termination under
Section 7.1 above), exercisable at any time during the term of this Agreement,
to terminate Executive's employment with the Company without "Cause" (as defined
in Section 7.3 above), immediately upon written notice to Executive.
7.5 Compensation Upon Termination.
-----------------------------
(a) Upon termination of Executive's employment pursuant to this Section
7, Executive will be entitled to only: (i) the compensation provided for in
Section 3(a) hereof for the period of time ending with the date of termination;
(ii) compensation for any unused vacation that Executive may have accrued, as
well as all earned benefits, up to and including the date of termination; (iii)
"COBRA" benefits to the extent required by applicable law; and (iv)
reimbursement for such expenses as Executive may have properly incurred on
behalf of the Company as provided in Section 7.2 above prior to the date of
termination. Notwithstanding the foregoing, if the Executive's employment is
terminated pursuant to Section 7.1 or 7.4 above, Executive will have the right
to retain the coverage provided in Section 6.1(a) above, at no charge to
Executive, for a period of two years following the effective date of such
termination.
(b) If the Company terminates Executive's employment pursuant to Section
7.4 above only, in addition to the amounts payable in Section 7.5(a) above,
Executive will be entitled to receive a severance payment in the following
amount: (i) if such termination occurs during the last six months of the
Employment Term, Executive will be entitled to receive an amount equal to the
aggregate base salary paid to Executive by the Company pursuant to Section 3(a)
above during a period of time equal to the difference between six months and the
period between Executive's notice of termination and the effective date of
termination; or (ii) if such termination occurs at any time other than during
the last six months of the Employment Term, Executive will be entitled to
receive an amount equal to the aggregate base salary paid to Executive by the
Company pursuant to Section 3(a) above during the preceding six month period, or
lesser period beginning on the Commencement Date and ending on the effective
date of termination.
(c) The payments set forth in this Section 7.5 will fully discharge all
responsibilities of the Company to Executive under this Agreement or relating to
or arising out of the termination of Executive's employment.
8. Unfair Competition by Executive.
-------------------------------
-5-
8.1 Executive agrees that all trade secrets, confidential or proprietary
information with respect to the activities and businesses of the Company,
including, without limitation, personnel information, secret processes, know-
how, customer lists, databases, ideas, techniques, processes, inventions
(whether patentable or not), and other technical plans, business plans,
marketing plans, product plans, forecasts, contacts, strategies and information
(collectively "Proprietary Information") which were learned by Executive in the
course of his employment by the Company, and any other Proprietary Information
received, developed or learned by Executive hereafter in the course of his
future employment by or in association with the Company, are confidential and
will be kept and held in confidence and trust as a fiduciary by Executive.
Executive will not use or disclose Proprietary Information of the Company except
as necessary in the normal course of the business of the Company for its sole
and exclusive benefit, unless Executive is compelled so to disclose under
process of law, in which case Executive will first notify the Company promptly
after receipt of a demand to so disclose.
8.2 Executive and the Company acknowledge that: (i) each covenant and
restriction contained in Sections 8.1 and 9 of this Agreement is necessary,
fundamental, and required for the protection of the Company's business; (ii)
such relate to matters which are of a special, unique, and extraordinary
character that gives each of them a special, unique, and extraordinary value;
and (iii) a breach of any such covenant or restriction will result in
irreparable harm and damage to the Company which cannot be compensated
adequately by a monetary award. Accordingly, it is expressly agreed that, in
addition to all other remedies available at law or in equity, and
notwithstanding anything to the contrary in Section 11 below, the Company will
be entitled to the immediate remedy of a temporary restraining order,
preliminary injunction, or such other form of injunctive or equitable relief as
may be used by any court of competent jurisdiction to restrain or enjoin any of
the parties hereto from breaching any such covenant or restriction, or otherwise
specifically to enforce the provisions contained in Sections 8.1 and 9 of this
Agreement.
8.3 Except for activities expressly permitted by the prior written approval
of the Board of Directors of the Company, during the term of this Agreement, the
Executive will not: (a) engage in business independent of the Executive's
employment by the Company that requires any substantial portion of the
Executive's time; (b) serve as an officer, general partner or member in any for-
profit corporation, partnership or firm; (c) serve as a director of any
corporation, partnership of firm having the Business as its principal
enterprise; or (d) directly, indirectly or through any Affiliate, invest in,
participate in or acquire an interest in any entity engaged in the Business. For
purposes of this Agreement, the terms: (i) "Affiliate" means as to any Person,
each other Person that directly or indirectly (through one (1) or
-6-
more intermediaries) controls, is controlled by or is under common control with
such person; and (ii) "Person" means an individual, corporation, partnership,
limited liability company, association, joint stock company, trust, associate
(as defined in regulations promulgated by the Securities Exchange Commission) or
other legally recognizable entity. The limitation in this paragraph will not
prohibit any investment by the Executive in securities that are listed on a
public exchange or the National Association of Securities Dealers Automated
Quotation National Market System and issued by a company, firm, corporation,
partnership, trust or other entity involved in the Business or otherwise.
8.4 During the term of this Agreement and for a period of one year
following its termination for any reason, Executive will not contact or solicit
any employees of the Company for the purposes of hiring them.
9. Proprietary Matters. Executive expressly understands and agrees that any
-------------------
and all improvements, inventions, discoveries, processes, or know-how that are
generated or conceived by Executive during the term of this Agreement, whether
so generated or conceived during Executive's regular working hours or otherwise,
will be the sole and exclusive property of the Company, and Executive will,
whenever requested to do so by the Company (either during the term of this
Agreement or thereafter), execute and assign any and all applications,
assignments and/or other instruments and do all things which the Company may
deem necessary or appropriate in order to apply for, obtain, maintain, enforce
and defend patents, copyrights, trade names or trademarks of the United States
or of foreign countries for said improvements, inventions, discoveries,
processes, or know-how, or in order to assign and convey or otherwise make
available to the Company the sole and exclusive right, title, and interest in
and to said improvements, inventions, discoveries, processes, know-how,
applications, patents, copyrights, trade names or trademarks, subject to
California Labor Code ss2870, which reads as follows:
"(a) Any provision in an employment agreement which provides that an
employee shall assign, or offer to assign, any of his or her rights in an
invention to his or her employer shall not apply to an invention that the
employee developed entirely on his or her own time without using the
employer's equipment, supplies, facilities, or trade secret information
except for those inventions that either:
(1) Relate at the time of conception or reduction to practice of the
invention to the employer's business, or actual or demonstrably anticipated
research or development of the employer; or
-7-
(2) Result from any work performed by the employee for the employer.
(b) To the extent a provision in an employment agreement purports to
require an employee to assign an invention otherwise excluded from being
required to be assigned under subdivision (a), the provision is against the
public policy of this state and is unenforceable."
10. Key-Person Insurance. Executive agrees to make himself available and to
--------------------
undergo, at the Company's request and expense, any physical examination or other
procedure necessary to allow the Company to obtain a key-person insurance policy
on Executive. If the Company obtains such policy, it will maintain the policy at
its expense and all proceeds will be the sole property of the Company.
11. Resolution of Disputes. The parties will attempt in good faith
----------------------
promptly by negotiations to resolve any dispute or controversy arising out of or
relating to this Agreement or to the employment or termination of Executive by
the Company. If a party intends to be accompanied at a negotiation meeting by an
attorney, the other party will be given at least three working days' notice of
such intention and may also be accompanied by an attorney. All negotiations
pursuant to this clause are confidential and will be treated as compromise and
settlement negotiations for purposes of the Federal Rules of Evidence and state
rules of evidence.
12. Miscellaneous.
-------------
12.1 Governing Law; Interpretation. This Agreement will be governed by the
-----------------------------
substantive laws of the State of New York applicable to contracts entered into
and fully performed in such jurisdiction. The headings and captions of the
Sections of this Agreement are for convenience only and in no way define, limit
or extend the scope or intent of this Agreement or any provision hereof. This
Agreement will be construed as a whole, according to its fair meaning, and not
in favor of or against any party, regardless of which party may have initially
drafted certain provisions set forth herein.
12.2 Assignment. This Agreement is personal to Executive and he may not
----------
assign any of his rights or delegate any of his obligations hereunder without
first obtaining the prior written consent of the Board of Directors of the
Company.
12.3 Notices. Any notice, request, claim or other communication required or
-------
permitted hereunder will be in writing and will be deemed to have been duly
given if delivered by hand or if sent by certified mail,
-8-
postage and certification prepaid, to Executive at his residence (as noted in
the Company's records), or to the Company at its address as set forth below its
signature on the signature page of this Agreement, or to such other address or
addresses as either party may have furnished to the other in writing in
accordance herewith.
12.4 Severability. If any provision of this Agreement or the application of
------------
any such provision to either of the parties is held by a court of competent
jurisdiction to be contrary to law, such provision will be deemed amended to the
extent necessary to comply with such law, and the remaining provisions of this
Agreement will remain in full force and effect unless the result would be
manifestly unjust or would deprive either party of the benefit of its bargain.
12.5 Entire Agreement; Amendments. This Agreement and any other exhibits
----------------------------
and attachments hereto constitutes the final and complete expression of all of
the terms of the understanding and agreement between the parties hereto with
respect to the subject matter hereof, and this Agreement replaces and supersedes
any and all prior or contemporaneous negotiations, communications,
understandings, obligations, commitments, agreements or contracts, whether
written or oral, between the parties respecting the subject matter hereof.
Except as provided in Section 12.4 above, this Agreement may not be modified,
amended, altered or supplemented except by means of the execution and delivery
of a written instrument mutually executed by both parties.
12.6 Attorneys' Fees. If it becomes necessary for any party to initiate
---------------
legal action or any other proceeding to enforce, defend or construe such party's
rights or obligations under this Agreement, the prevailing party will be
entitled to its reasonable costs and expenses, including attorneys' fees,
incurred in connection with such action or proceeding.
13. EXECUTIVE ACKNOWLEDGMENT. EXECUTIVE ACKNOWLEDGES THAT HE HAS BEEN
------------------------
GIVEN THE OPPORTUNITY TO CONSULT WITH LEGAL COUNSEL CONCERNING THE RIGHTS AND
OBLIGATIONS ARISING UNDER THIS AGREEMENT, THAT HE HAS READ AND UNDERSTANDS
EACH AND EVERY PROVISION OF THIS AGREEMENT, AND THAT HE IS FULLY AWARE OF THE
LEGAL EFFECT AND IMPLICATIONS OF THIS AGREEMENT.
-9-
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed as of the day and year first above written.
Company: Executive:
Towing America, Inc. Xxxxxx X. Xxxxxxx
By:____________________________ By:____________________________
Name:__________________________ Name:__________________________
Title:_________________________ Title:_________________________
Address:_______________________ Address:_______________________
_______________________ _______________________
Fax: _______________________ Fax: _______________________
-10-
