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EXHIBIT 10.6
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT (this "Agreement") is made by and between Towne
Services, Inc., a Georgia corporation (the "Company"), and XXXXX X. XXXXXX, an
individual resident of Georgia (the "Executive"), as of this 15th day of
January, 1997.
The Company desires to employ the Executive as its President and Chief
Operating Officers. The Board of Directors of the Company (the "Board")
recognizes that the Executive's contribution to the growth and success of the
Company is substantial. The Board desires to provide for the employment of the
Executive which the Board has determined will reinforce and encourage the
dedication of the Executive to the Company and will promote the best interests
of the Company and its stockholders. The Executive is willing to serve the
Company on the terms and conditions herein provided.
In consideration of the foregoing, the mutual covenants contained herein,
and other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto, intending to be legally bound,
hereby agree that on the Effective Date:
1. Employment. The Company shall employ the Executive, and the
Executive shall serve the Company, as President and Chief Operating Officer upon
the terms and conditions set forth herein. The Executive shall have such
authority and responsibilities consistent with his position and which may be set
forth in the Company's bylaws or assigned by the Board from time to time. The
Executive shall devote his full business time, attention, skill and efforts to
the performance of his duties hereunder, except during periods of illness or
periods of vacation and leaves of absence consistent with Company policy. The
Executive may devote reasonable periods of time to serve as a director or
advisor to other organizations, to perform charitable and other community
activities, and to manage his personal investments; provided, however, that such
activities do not materially interfere with the performance of his duties
hereunder and are not in conflict or competitive with, or adverse to, the
interests of the Company.
2. Term. Unless earlier terminated as provided herein, the Executive's
employment under this Agreement shall be for a continuing term (the "Term") of
two years, which shall be extended automatically (without further action of the
Company or the Executive) each day for an additional day so that the remaining
term shall continue to be two years; provided, however, that either party (in
the case of the Company, by the Required Vote if the Initial Public Offering has
not yet occurred) may at any time, by written notice to the other, fix the Term
to a finite term of two years, without further automatic extension, commencing
with the date of such notice.
3. Compensation and Benefits.
a. The Company shall pay the Executive a salary at a rate of not less
than $100,000 per annum in accordance with the salary payment practices of the
Company. The Board (or an appropriate committee of the Board) shall review the
Executive's salary at least annually and may increase the Executive's base
salary if it determines in its sole discretion that an
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increase is appropriate. The Company shall also pay to the Executive same amount
of directors' fees, if any, that are paid to any of the directors.
b. The Executive shall participate in a management incentive program
and shall be eligible to receive quarterly bonus payments based upon achievement
of targeted levels of performance and such other criteria as the Board (or an
appropriate committee of the Board) shall establish from time to time pursuant
to that program. In addition, the Board shall annually consider the Executive's
performance and determine if any additional bonus is appropriate.
c. The Executive shall participate in the Company's stock option plan
and be eligible for the grant of stock options, restricted stock and other
awards thereunder.
d. The Executive shall participate in all retirement, welfare,
deferred compensation, life and health insurance, and other benefit plans or
programs of the Company now or hereafter applicable to the Executive or
applicable generally to employees of the Company or to a class of employees that
includes senior executives of the Company; provided, however, that during any
period during the Term that the Executive is subject to a Disability, and during
the 365-day period of physical or mental infirmity leading up to the Executive's
Disability, the amount of the Executive's compensation provided under this
Section 3 shall be reduced by the sum of the amounts, if any, paid to the
Executive for the same period under any disability benefit or pension plan of
the Company or any of its subsidiaries.
e. The Company shall provide to the Executive an automobile owned or
leased by the Company of a make and model appropriate to the Executive's status
or an automobile allowance of $520.00 per month, at the Company's election. The
Company shall also reimburse all reasonable expenses incurred by the Executive
in connection with the operation and maintenance of the automobile, including
for gasoline, insurance, tires and similar items.
f. The Company shall reimburse the Executive's reasonable expenses for
dues and capital assessments for country and dining club memberships currently
held by the Executive; provided, however, that if the Executive during the term
of his employment with the Company ceases his membership in any such clubs and
any bonds or other capital payments made by the Company are repaid to the
Executive, the Executive shall pay over such payments to the Company.
g. The Company shall reimburse the Executive for travel, seminar, and
other expenses related to the Executive's duties which are incurred and
accounted for in accordance with the historic practices of the Company.
4. Termination.
a. The Executive's employment under this Agreement may be terminated
prior to the end of the Term only as follows:
(i) upon the death of the Executive;
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(ii) by the Company (pursuant to the Required Vote if the Initial
Public Offering has not yet occurred) due to the Disability of the
Executive upon delivery of a Notice of Termination to the Executive;
(iii) by the Company (pursuant to the Required Vote if the
Initial Public Offering has not yet occurred) for Cause upon delivery
of a Notice of Termination to the Executive; and
(iv) by the Executive for any reason upon delivery of a Notice of
Termination to the Company.
b. If the Executive's employment with the Company shall be terminated
during the Term (i) by reason of the Executive's death, or (ii) by the Company
for Disability or Cause, the Company shall pay to the Executive (or in the case
of his death, the Executive's estate) within fifteen days after the Termination
Date a lump sum cash payment equal to the Accrued Compensation and, if such
termination is other than by the Company for Cause, the Pro Rata Bonus.
c. If the Executive's employment with the Company shall be terminated
by the Company in violation of this Agreement or by the Executive for any reason
after a Change in Control, in addition to other rights and remedies available in
law or equity, the Executive shall be entitled to the following:
(i) the Company shall pay the Executive in cash within fifteen
days of the Termination Date an amount equal to all Accrued
Compensation and the Pro Rata Bonus;
(ii) the Company shall pay to the Executive in cash at the end of
each of the thirty-six consecutive 30-day periods following the
Termination Date an amount equal to one-twelfth of the sum of the Base
Amount and the Bonus Amount.
(iii) for the period from the Termination Date through the date
of the Executive's death (the "Continuation Period"), the Company
shall at its expense on behalf of the Executive and his dependents and
beneficiaries the life insurance, disability, medical, dental and
hospitalization benefits provided (x) to the Executive at any time
during the 90-day period prior to the Change in Control or at any time
thereafter or (y) to other similarly situated executives who are in
the employ of the Company during the Continuation Period. The coverage
and benefits (including deductibles and costs) provided in this
Section 4(c)(iii) during the Continuation Period shall be no less
favorable to the Executive and his dependents and beneficiaries than
the most favorable of such coverages and benefits during any of the
periods referred to in clauses (x) and (y) above. The Company's
obligation hereunder with respect to the foregoing benefits shall be
limited to the extent that the Executive obtains any such benefits
pursuant to a subsequent employer's benefit plans, in which case the
Company may reduce the
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coverage of any benefits it is required to provide the Executive
hereunder as long as the aggregate coverages and benefits of the
combined benefit plans is no less favorable to the Executive than the
coverages and benefits required to be provided hereunder. This
subsection (iii) shall not be interpreted so as to limit any benefits
to which the Executive or his dependents or beneficiaries may be
entitled under any of the Company's employee benefit plans, programs
or practices following the Executive's termination of employment,
including without limitation, retiree medical and life insurance
benefits; and
(iv) the restrictions on any outstanding incentive awards
(including stock options) granted to the Executive under any stock
option or other incentive plan or arrangement shall lapse and such
incentive award shall become 100% vested, all stock options and stock
appreciation rights granted to the Executive shall become immediately
exercisable and shall become 100% vested, and all stock options
granted to the Executive shall become 100% vested.
d. The Executive shall not be required to mitigate the amount of any
payment provided for in this Agreement by seeking other employment or otherwise
and no such payment shall be offset or reduced by the amount of any compensation
or benefits provided to the Executive in any subsequent employment except as
provided in Section 4(c)(iii).
e. In the event that any payment or benefit (within the meaning of
Section 280G(b)(2) of the Internal Revenue Code of 1986, as amended (the
"Code")) to the Executive or for his benefit paid or payable or distributed or
distributable pursuant to the terms of this Agreement or otherwise in connection
with, or arising out of, his employment with the Company or a change in
ownership or effective control of the Company or of a substantial portion of its
assets (a "Payment" or "Payments"), would be subject to the excise tax imposed
by Section 4999 of the Code or any interest or penalties are incurred by the
Executive with respect to such excise tax (such excise tax, together with any
such interest and penalties, are hereinafter collectively referred to as the
"Excise Tax"), then the Executive will be entitled to receive an additional
payment (a "Gross-Up Payment") in an amount such that after payment by the
Executive of all taxes (including any interest or penalties, other than interest
and penalties imposed by reason of the Executive's failure to file timely a tax
return or pay taxes shown due on his return, imposed with respect to such taxes
and the Excise Tax), including any Excise Tax imposed upon the Gross-Up Payment,
the Executive retains an amount of the Gross-Up Payment equal to the Excise Tax
imposed upon the Payments.
f. The severance pay and benefits provided for in this Section 4 shall
be in lieu of any other severance or termination pay to which the Executive may
be entitled under any Company severance or termination plan, program, practice
or arrangement. The Executive's entitlement to any other compensation or
benefits shall be determined in accordance with the Company's employee benefit
plans and other applicable programs, policies and practices then in effect.
5. Trade Secrets. The Executive shall not, at any time, either during
the Term of his employment or after the Termination Date, if such Termination is
for Cause or at the
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Executive's election for any reason prior to a Change in Control, use or
disclose any Trade Secrets of the Company, except in fulfillment of his duties
as the Executive during his employment, for so long as the pertinent information
or data remain Trade Secrets, whether or not the Trade Secrets are in written or
tangible form.
6. Successors; Binding Agreement.
a. This Agreement shall be binding upon and shall inure to the benefit
of the Company, its Successors and Assigns and the Company shall require any
Successors and Assigns to expressly assume and agree to perform this Agreement
in the same manner and to the same extent that the Company would be required to
perform it if no such succession or assignment had taken place.
b. Neither this Agreement nor any right or interest hereunder shall be
assignable or transferable by the Executive, his beneficiaries or legal
representatives, except by will or by the laws of descent and distribution. This
Agreement shall inure to the benefit of and be enforceable by the Executive's
legal personal representative.
7. Fees and Expenses. The Company shall pay all legal fees and related
expenses (including but not limited to the costs of experts, accountants and
counsel) incurred by the Executive as they become due as a result of (a) the
Executive's termination of employment (including all such fees and expenses, if
any, incurred in contesting or disputing any such termination of employment) and
(b) the Executive seeking to obtain or enforce any right or benefit provided by
this Agreement; provided, however, that the total cost of the Executive's
representation shall not exceed $30,000.
8. Notice. For the purposes of this Agreement, notices and all other
communications provided for in the Agreement (including the Notice of
Termination) shall be in writing and shall be deemed to have been duly given
when personally delivered or sent by certified mail, return receipt requested,
postage prepaid, addressed to the respective addresses last given by each party
to the other; provided, however, that all notices to the Company shall be
directed to the attention of the Board with a copy to the Secretary of the
Company. All notices and communications shall be deemed to have been received on
the date of delivery thereof.
9. Settlement of Claims. The Company's obligation to make the payments
provided for in this Agreement and otherwise to perform its obligations
hereunder shall not be affected by any circumstances, including, without
limitation, any set-off, counterclaim, recoupment, defense or other right which
the Company may have against the Executive or others. The Company may, however,
withhold from any benefits payable under this Agreement all federal, state,
city, or other taxes as shall be required pursuant to any law or governmental
regulation or ruling.
10. Modification and Waiver. No provisions of this Agreement may be
modified, waived or discharged unless such waiver, modification or discharge is
agreed to in writing and signed by the Executive and the Company. No waiver by
any party hereto at any time of any breach by the other party hereto of, or
compliance with, any condition or provision of
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this Agreement to be performed by such other party shall be deemed a waiver of
similar or dissimilar provisions or conditions at the same or at any prior or
subsequent time.
11. Governing Law; Arbitration. This Agreement shall be governed by
and construed and enforced in accordance with the laws of the State of Georgia
without giving effect to the conflict of laws principles thereof. Any
controversy, claim or dispute arising out of or relating to this Agreement, or
any breach thereof, including without limitation any dispute concerning the
scope of this arbitration clause, shall be settled by arbitration.
12. Severability. The provisions of this Agreement shall be deemed
severable and the invalidity or unenforceability of any provision shall not
affect the validity or enforceability of the other provisions hereof.
13. Entire Agreement. This Agreement constitutes the entire agreement
between the parties hereto and supersedes all prior agreements, if any,
understandings and arrangements, oral or written, between the parties hereto
with respect to the subject matter hereof.
14. Headings. 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.
15. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
19. Definitions. For purposes of this Agreement, the following terms
shall have the following meanings:
a. "Accrued Compensation" shall mean an amount which shall include all
amounts earned or accrued through the Termination Date but not paid as of the
Termination Date including (i) base salary, (ii) reimbursement for reasonable
and necessary expenses incurred by the Executive on behalf of the Company during
the period ending on the Termination Date, and (iii) bonuses and incentive
compensation (other than the Pro Rata Bonus).
b. "Act" shall mean the Securities Act of 1933, as amended.
c. "Base Amount" shall mean the greater of the Executive's annual base
salary (i) at the rate in effect on the Termination Date or (ii) at the highest
rate in effect at any time during the 90-day period prior to the Change in
Control, and shall include all amounts of his base salary that are deferred
under the qualified and non-qualified employee benefit plans of the Company or
any other agreement or arrangement.
d. "Board" shall have the meaning set forth in the recitals.
e. "Bonus Amount" shall mean the greater of (i) the most recent annual
bonus paid or payable to the Executive, or, if greater, the annual bonus paid or
payable for the full fiscal
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year ended prior to the fiscal year during which a Change in Control occurred or
(ii) the average of the annual bonuses paid or payable during the three full
fiscal years ended prior to the Termination Date or, if greater, the three full
fiscal years ended prior to the Change in Control (or, in each case, such lesser
period for which annual bonuses were paid or payable to the Executive).
f. The termination of the Executive's employment shall be for "Cause"
if it is a result of:
(v) any act that (A) constitutes, on the part of the Executive,
fraud, dishonesty, gross malfeasance of duty, or conduct grossly
inappropriate to the Executive's office, and (B) is demonstrably
likely to lead to material injury to the Company or resulted or was
intended to result in direct or indirect gain to or personal
enrichment of the Executive; or
(vi) the conviction (from which no appeal may be or is timely
taken) of the Executive of a felony;
provided, however, that in the case of clause (i) above, such conduct shall not
constitute Cause:
(x) unless (A) there shall have been delivered to the Executive a
written notice setting forth with specificity the reasons that the
Board believes the Executive's conduct constitutes the criteria set
forth in clause (i), (B) the Executive shall have been provided the
opportunity to be heard in person by the Board (with the assistance of
the Executive's counsel if the Executive so desires), and (C) after
such hearing, the termination is evidenced by a resolution adopted in
good faith by either two-thirds of the members of the Board (other
than the Executive), or, if the Initial Public Offering has not yet
occurred, then by all the members of the Board of Directors (other
than the Executive); or
(y) if such conduct (A) was believed by the Executive in good
faith to have been in or not opposed to the interests of the Company,
and (B) was not intended to and did not result in the direct or
indirect gain to or personal enrichment of the Executive.
g. A "Change in Control" shall mean the occurrence during the Term of
any of the following events:
(i) An acquisition (other than directly from the Company) of any
voting securities of the Company (the "Voting Securities") by any
"Person" (as the term person is used for purposes of Section 13(d) or
14(d) of the Securities Exchange Act of 1934 (the "1934 Act"))
immediately after which such Person has "Beneficial Ownership" (within
the meaning of Rule 13d-3 promulgated under the 0000 Xxx) of 20% or
more of the combined voting power of the Company's then outstanding
Voting Securities; provided, however, that in determining whether a
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Change in Control has occurred, Voting Securities which are acquired
in a "Non-Control Acquisition" (as hereinafter defined) shall not
constitute an acquisition which would cause a Change in Control. A
"Non-Control Acquisition" shall mean an acquisition by (1) an employee
benefit plan (or a trust forming a part thereof) maintained by (x) the
Company or (y) any corporation or other Person of which a majority of
its voting power or its equity securities or equity interest is owned
directly or indirectly by the Company (a "Subsidiary"), (2) the
Company or any Subsidiary, or (3) any Person in connection with a
"Non-Control Transaction" (as hereinafter defined).
(ii) The individuals who, as of the date of this Agreement, are
members of the Board (the "Incumbent Board") cease for any reason to
constitute at least two-thirds of the Board; provided, however, that
if the election, or nomination for election by the Company's
stockholders, of any new director was approved by a vote of at least
two-thirds of the Incumbent Board, such new director shall, for
purposes of this Agreement, be considered as a member of the Incumbent
Board; provided, further, however, that no individual shall be
considered a member of the Incumbent Board if such individual
initially assumed office as a result of either an actual or threatened
"Election Contest" (as described in Rule 14a-11 promulgated under the
0000 Xxx) or other actual or threatened solicitation of proxies or
consents by or on behalf of a Person other than the Board (a "Proxy
Contest") including by reason of any agreement intended to avoid or
settle any Election Contest or Proxy Contest; or
(iii) Approval by stockholders of the Company of:
(A) (1) After the Initial Public Offering, a merger,
consolidation or reorganization involving the
Company, unless
(x) the stockholders of the Company, immediately
before such merger, consolidation or
reorganization, own, directly or indirectly,
immediately following such merger, consolidation
or reorganization, at least two-thirds of the
combined voting power of the outstanding voting
securities of the corporation resulting from such
merger or consolidation or reorganization (the
"Surviving Corporation") in substantially the same
proportion as their ownership of the Voting
Securities immediately before such merger,
consolidation or reorganization, and
(y) the individuals who were members of the Incumbent
Board immediately prior to the execution of the
agreement providing for such merger, consolidation
or reorganization constitute at least two-thirds
of the
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members of the board of directors of the Surviving
Corporation;
(A) transaction described in clauses (x) and (y) shall
herein be referred to as a "Non-Control Transaction"); or
(2) Prior to the Initial Public Offering, a merger,
consolidation or reorganization involving the Company,
unless the transaction is approved by the Required
Vote.
(B) A complete liquidation or dissolution of the Company; or
(C) An agreement for the sale or other disposition of all or
substantially all of the assets of the Company to any
Person (other than a transfer to a Subsidiary), unless
such sale or disposition occurs prior to the Initial
Public Offering and is approved by the Required Vote.
(iv) Notwithstanding anything contained in this Agreement to the
contrary, if the Executive's employment is terminated prior to a
Change in Control and the Executive reasonably demonstrates that such
termination (A) was at the request of a third party who has indicated
an intention or taken steps reasonably calculated to effect a Change
in Control and who effectuates a Change in Control (a "Third Party")
or (B) otherwise occurred in connection with, or in anticipation of, a
Change in Control which actually occurs, then for all purposes of this
Agreement, the date of a Change in Control with respect to the
Executive shall mean the date immediately prior to the date of such
termination of the Executive's employment.
h. "Continuation Period" shall have the meaning ascribed to it in
Section 4(c)(iii).
i. "Disability" shall mean a physical or mental infirmity which
impairs the Executive's ability to substantially perform his duties with the
Company for a period of 180 consecutive days, as determined by an independent
physician selected with the approval of both the Company and the Executive.
j. "Notice of Termination" shall mean a written notice of termination
from the Company or the Executive which specifies an effective date of
termination, indicates the specific termination provision in this Agreement
relied upon, and sets forth in reasonable detail the facts and circumstances
claimed to provide a basis for termination of the Executive's employment under
the provision so indicated.
k. "Initial Public Offering" shall mean the closing of the first
public offering of the Company's Common Stock registered under the Act in which
aggregate proceeds to the
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Company, net of all underwriting discounts and commissions and other expenses of
issuance and distribution as stated in the prospectus relating to such offering,
are equal to at least $10,000,000.
l. "Pro Rata Bonus" shall mean an amount equal to the Bonus Amount
multiplied by a fraction the numerator of which is the number of days in the
fiscal year through the Termination Date and the denominator of which is 365.
m. Any action under this Agreement which requires a "Required Vote"
shall require approval of at least two-thirds of the members of the Board of
Directors.
n. "Successors and Assigns" shall mean a corporation or other entity
acquiring all or substantially all the assets and business of the Company
(including this Agreement), whether by operation of law or otherwise.
o. "Termination Date" shall mean, in the case of the Executive's
death, his date of death, and in all other cases, the date specified in the
Notice of Termination.
p. "Trade Secrets" shall mean any information, including but not
limited to technical or non-technical data, a formula, a pattern, a compilation,
a program, a device, a method, a technique, a drawing, a process, financial
data, financial plans, product plans, information on customers, or a list of
actual or potential customers or suppliers, which: (i) derives economic value,
actual or potential, from not being generally known to, and not being readily
ascertainable by proper means by, other persons who can obtain economic value
from its disclosure or use, and (ii) is the subject of efforts that are
reasonable under the circumstances to maintain its secrecy.
IN WITNESS WHEREOF, the Company has caused this Agreement to be executed
and its seal to be affixed hereunto by its officers thereunto duly authorized,
and the Executive has signed and sealed this Agreement, effective as of the date
first above written.
TOWNE SERVICES, INC.
ATTEST:
By: /s/ Xxxxx X. Xxxxxxxx, Xx. By: /s/ Xxxx X. Xxxxxxx
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Name: Xxxxx X. Xxxxxxxx, Xx. Name: Xxxx X. Xxxxxxx
Title: Chief Financial Officer Title: Chairman of the Board and
Chief Executive Officer
(CORPORATE SEAL)
EXECUTIVE
/s/ Xxxxx X. Xxxxxx
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XXXXX X. XXXXXX
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