EXHIBIT 10.3
Executive Employment Agreement
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This Executive Employment Agreement ("Agreement") is made and entered into
as of July 20, 1998 (the "Effective Date") by and between Hospitality Design &
Supply, Inc., a Delaware corporation (the "Company") and Xxxxx X. Xxxxxxx, an
individual resident of the State of California ("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 restaurant equipment distribution
business (the "Business").
B. Executive has previously served in senior management capacities with
other businesses.
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
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herein and Executive hereby accepts such employment effective immediately (the
"Commencement Date"). The term of this employment shall be for three years
following the date of filing of a Registration Statement with the Securities
Exchange Commission in connection with the Company's Initial Public Offering
for a term (the "Employment Term") of three years unless sooner terminated under
Section 7 below. For purposes of this Agreement, "Initial Public Offering" 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,
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Executive will be employed as Chief Executive Officer of the Company and
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;
(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
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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 until
the conclusion of the
Employment Term. 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 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.
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(a) Executive shall as soon as reasonably practicable after the
execution of this Agreement purchase at the fair market value shares of Common
Stock of the Company expected to represent 4% of the outstanding shares on the
consummation of the Initial Public Offering. If Executive voluntarily
terminates his employment hereunder prior to the commencement of the Employment
Term, or if Executive is discharged under Section 7.3 hereof prior to the
commencement of the Employment Term, then the Company may, during the 30 day
period following such termination, repurchase such shares at the price paid by
Executive; if Executive voluntarily terminates his employment hereunder during
the first 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, repurchase one-half of such shares at
the price paid by Executive. The Company may exercise its repurchase 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.
(b) As soon as reasonably practicable after the consummation of the
Company's first sale of its Common Stock to private investors, in one
transaction or a series of transactions, the Company will grant to Executive an
option to purchase at the then fair market value shares of Common Stock of the
Company expected to represent an additional 2% of the outstanding shares on the
consummation of the Initial Public Offering. Such option will vest (i.e. become
exercisable) as follows: One-half of the option will vest as of the
commencement of the Employment Term and the remainder of the option will vest
upon the completion of the first 18 months of the Employment Term.
5. CHANGE OF CONTROL. In the event of any Change of Control of the
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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 if Executive ceases for any
reason to be employed by the Company within six (6) months following the date of
such Change of Control; 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 (S)280G of the Internal Revenue Code of 1986, as
amended, then the Company will have no obligation to provide such portion to
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
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control, was not under common control with, or was not controlled by, the
Company, or (b) the Company's merger or consolidation with or into another
entity, regardless of which entity survives such merger or consolidation, 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
acquisition of at least fifty percent (50%) of the outstanding voting securities
of the Company by any person, or any "group" as contemplated under Section 13(d)
of the Securities Exchange Act of 1934, as amended.
6. BENEFITS AND REIMBURSEMENTS.
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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, 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 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 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.
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7.1 EXPIRATION OF THE TERM OF AGREEMENT. This Agreement will terminate
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automatically upon the expiration of the Employment Term.
7.2 DEATH OR PERMANENT DISABILITY OF EXECUTIVE. This Agreement will
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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 independent 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
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terminate Executive's employment hereunder for "Cause" at any time effective
upon its giving of written
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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) 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 that is not a felony
but that the Board of Directors determines materially adversely affects the
business, reputation or prospects of 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.
7.4 THE COMPANY'S RIGHT TO TERMINATE AT WILL. Subject to the payment to
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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.
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(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, 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 an amount
equal to the aggregate base salary that otherwise would have been payable to
Executive by the Company pursuant to Section 3(a) above during the remainder of
the Employment Term.
(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.
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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,
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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 Employment Term, 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, or in a
similar capacity, of any corporation, partnership or other 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 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, provided such
investment does not represent more than one percent of the aggregate outstanding
securities of such issuer.
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
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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
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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 (S)2870, 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
(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
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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
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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.
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12.1 Governing Law; Interpretation. This Agreement will be governed by the
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substantive laws of the State of California 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.
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12.2 Assignment. This Agreement is personal to Executive and he may not
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assign any of his rights or delegate any of his obligations hereunder.
12.3 Notices. Any notice, request, claim or other communication required
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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, 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
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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
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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
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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
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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.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed as of the day and year first above written.
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Company: Executive:
HOSPITALITY DESIGN & SUPPLY, INC.
By: /s/ Xxxx Xxxxxx By: /s/ Xxxxx Xxxxxxx
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Name: Xxxx Xxxxxx Name: Xxxxx X. Xxxxxxx
Title: President
Address: 0000 Xxxxxxx Xxxxxx #000 Address: 000 Xxx Xxxxxx
Xxx Xxxxxxxxx, XX 00000 Xxxxxxxxx Xxxxx, XX 00000
Fax: (000) 000-0000 Fax: (000) 000-0000
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