EMPLOYMENT AGREEMENT
THIS AGREEMENT, made as of this 21st day of October, 1998, by and between
Xxxxxxx X. Xxxxxx, a resident of Ruxton, Maryland (the "Executive"), and
Precision Auto Care, Inc., a Virginia corporation (the "Company").
W I T N E S S E T H:
WHEREAS, the Executive desires to provide his services to the Company and
the Company desires to employ the Executive upon the terms and conditions
hereinafter set forth.
NOW, THEREFORE, in consideration of the premises and the mutual promises,
covenants and agreements contained herein, and intending to be legally bound,
the parties hereby agree as follows:
1. Employment and Term.
The Company will employ the Executive, and the Executive hereby accepts
employment with the Company, for an initial term commencing on October 21, 1998,
and continuing for a period of three (3) years until and including October 20,
2001 (the "Initial Term"), unless such employment is earlier terminated as
provided herein. After expiration of the Initial Term, the Executive's
employment under this Agreement shall continue until terminated as provided
herein.
2. Duties.
The Executive shall serve in the capacity of President and Chief Executive
Officer. He shall also be elected and serve as a member of the Company's Board
of Directors. During the term of his employment hereunder, the Executive shall
devote his full business time and attention to the performance of his duties for
the Company.
3. Compensation.
(a) Base Salary. The Company shall pay the Executive, and the
Executive shall accept, as full compensation for all services rendered
hereunder, a basic salary (the "Base Salary") and the other compensation and
benefits provided hereunder. The Executive's Base Salary effective October 21,
1998, shall be at an annual rate of Two Hundred Thousand Dollars ($200,000),
payable in approximately equal installments at such intervals as are consistent
with the Company's pay periods for salaried executive employees. The Executive's
Base Salary shall be reviewed by the Board of Directors within 90 days of the
date of this Agreement and thereafter no less frequently than once in any
twelve-month period and may be increased, but not decreased regardless of any
change in or diminution of the Executive's duties owed to the Company.
(b) Performance Bonus. The Executive shall participate in bonus
plans and shall be entitled to receive bonuses thereunder, as may be approved by
the Board of Directors in its discretion.
(c) Benefits.
(i) The Executive shall be eligible to participate
in retirement, group insurance, medical, dental, vacation and any other plans or
programs of substantially similar character as are made generally available to
executive employees of the Company which do not duplicate the benefits otherwise
specifically provided in this Agreement. All such benefits are to be provided by
the Company, subject to the terms of any welfare or pension plan sponsored by
the Company.
(ii) Pursuant to the terms of the Company's existing
stock option plans, the Executive shall be granted non-qualified stock options
to purchase 100,000 shares of Common Stock of the Company. The options shall
vest in equal installments of one-third of the total shares granted on each of
the first three anniversaries of the grant date, which shall be October 21,
1998. Accordingly, options to purchase 33,334 shares shall vest and become
exercisable on and after October 21, 1999, options to purchase 33,333 shares
shall vest and become exercisable on and after October 21, 2000 and the
remaining options to purchase 33,333 shares shall vest and become exercisable on
and after October 21, 2001. The exercise price shall be equal to $4.25 which is
the closing price of the Company's Common Stock as of October 21, 1998. The
options shall expire on October 20, 2008 unless they shall otherwise sooner
expire in accordance with the terms of the applicable stock option plans.
(iii) The Company shall reimburse the Executive for
reasonable moving expenses which shall not exceed $15,000.
(iv) The Company shall reimburse the Executive for
all expenses incurred by him in the performance of his duties pursuant to this
Agreement in accordance with the Company's policies concerning the reimbursement
of expenses.
(v) Executive shall receive such other benefits
and/or allowances as are permitted to him from time to time by the Board of
Directors.
(d) Restructuring of Payments. Notwithstanding anything in this
Agreement to the contrary, in the event that, in the opinion of the Company's
auditors, any payments of compensation to be made hereunder would be treated as
"excess parachute payments" within the meaning of section 280G of the Internal
Revenue Code as amended, the Company and the Executive shall use their best
efforts to restructure any of the payments so as to avoid the imposition of
excise tax upon the Executive and the loss of deduction for such payments by the
Company.
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4. Confidentiality.
While employed by the Company under this Agreement and at all times
thereafter, the Executive shall not, without the prior written consent of the
Company, divulge to any third party or use for his own benefit or the benefit of
any third party, or for any purpose other than the exclusive benefit of the
Company, any confidential or proprietary business or technical information
revealed, obtained or developed in the course of his employment with the Company
or his duties performed for the Company or which is otherwise the property of
the Company or any of its subsidiaries or affiliated companies; provided that,
nothing contained herein shall restrict the Executive's use or disclosure of
such information (i) in the proper course of conduct of the Company's business,
(ii) known generally to the public (other than that which he may have disclosed
in breach of this Agreement) or (iii) as required by law so long as the
Executive gives the Company prior notice of such required disclosure and
cooperates with the Company in keeping the information confidential unless
precluded from doing so by legal authority.
5. Covenant Not to Compete.
(a) The Executive shall not, within any geographical area while
employed by the Company or while performing duties for the Company hereunder,
and within the United States of America for two (2) years thereafter, directly
or indirectly engage or become interested in (as owner, stockholder, partner,
co-venturer, director, officer, employee, agent, consultant or otherwise) any
business that engages in an auto care or manufacturing business of a type
conducted by the Company or any of its subsidiaries during the term of this
Agreement. Notwithstanding the foregoing, the Company recognizes that the
Executive has been employed by companies engaged in petroleum marketing and
refining businesses and nothing contained herein shall prohibit the Executive
from engaging or being involved in a business which principally markets or
refines petroleum products and which may incidentally engage in businesses
competitive with business conducted by the Company or a Subsidiary during the
term of this Agreement so long as Executive's duties principally involve the
petroleum marketing and refining aspects of such a business. In addition, the
Executive may hold as a passive investment up to five percent (5%) of the
outstanding securities of any class of any publicly-held entity that engages in
the auto care industry.
(b) It is the desire and the intent of the parties that the
provisions of this Section 5 shall be enforceable to the fullest extent
permissible under applicable law and public policy. Accordingly, if this Section
5 or any portion thereof shall be adjudicated to be invalid or unenforceable,
the length and scope of this Section 5 shall be reduced to the extent necessary
so that this covenant may be enforced to the fullest extent possible under
applicable law.
6. Enforcement.
(a) Injunctive Relief. The parties recognize that, in the event of
any breach by the Executive of any of the provisions of Section 4 or 5 hereof,
the Company will suffer continuing and irreparable harm for which the Company
will not have an adequate remedy at law. The Executive hereby waives any and all
right to assert any claim or defense that the Company has an adequate remedy at
law for any such breach. In recognition thereof, the Company and the Executive
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hereby agree that, in the event of any such breach, the Company will be entitled
to seek injunctive relief or any other appropriate remedy to enforce such
provisions. The parties further agree that this Section 6 shall not in any way
limit remedies at law or in equity otherwise available to the Company. In the
event the Company seeks injunctive relief and is unsuccessful on the merits, or
terminates such action prior to entry of a judgment or other ruling on the
merits, other than a termination of such action due to a settlement agreement
between the Company and the Executive, the Company shall reimburse the Executive
for his reasonable attorneys' fees.
(b) Arbitration. In the event of any dispute between the parties
under or relating to this Agreement or relating to the Executive's employment by
the Company, such dispute shall be submitted to and settled by arbitration in
the Commonwealth of Virginia in accordance with the Employment Dispute
Resolution Rules of the American Arbitration Association then in effect, by an
arbitrator or arbitrators selected in accordance with said rules. The
arbitrator(s) shall have the right and authority to determine how their award or
decision as to each issue and matter in dispute may be implemented or enforced.
Any decision or award shall be final and conclusive on the parties; there shall
be no appeal therefrom other than for claimed bias, fraud or misconduct by the
arbitrator(s); judgment upon any award or decision may be entered in any court
of competent jurisdiction in the Commonwealth of Virginia or elsewhere; and the
parties hereto consent to the application by any party in interest to any court
of competent jurisdiction for confirmation or enforcement of such award. The
party against whom a decision or award is made shall pay the fees of the
American Arbitration Association. Notwithstanding the foregoing, the Company, at
its sole option, shall be entitled to elect to enforce its rights contemplated
by Section 6(a) hereof relating to breaches of Section 4 or 5 hereof by
arbitration pursuant to a proceeding commenced by the Company in a court of
competent jurisdiction in lieu of an arbitration proceeding.
7. Termination of Employment.
(a) Death. The Executive's employment hereunder shall terminate in
the event of Executive's death. Except for any salary and benefits accrued,
vested and unpaid as of the date of any such termination and except for any
benefits to which the Executive or his heirs or personal representatives may be
entitled under and in accordance with the terms of any employee benefit plan,
policy or program maintained by the Company, the Company shall be under no
further obligation hereunder to the Executive or his heirs or personal
representatives, and the Executive or his heirs and personal representatives no
longer shall be entitled to receive any payments or any other rights or benefits
under this Agreement.
(b) Disability. The Company may terminate the Executive's employment
hereunder for "Disability," if an independent physician mutually selected by the
Executive or his representative and the Board of Directors or its designee has
determined that the Executive has been substantially unable to render to the
Company services of the character contemplated by Section 2 of this Agreement,
by reason of a physical or mental illness or other condition continuing for more
than one hundred twenty (120) consecutive days or for shorter periods
aggregating more than one hundred eighty (180) days in any period of twelve (12)
consecutive months (excluding in each case days on which the Executive was on
vacation). In the event of such Disability, the Executive shall be entitled to
receive any salary and benefits accrued, vested and unpaid as of the date of any
such
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termination and any benefits to which the Executive may be entitled under and
in accordance with the terms of any employee benefit plan, policy or program
maintained by the Company. The Company shall be under no further obligation
hereunder to the Executive, and the Executive no longer shall be entitled to
receive any other payments, rights or benefits under this Agreement.
(c) Termination by the Company for Cause. The Company may terminate
the Executive's employment hereunder for "Cause." For purposes of this
Agreement, "Cause" shall mean any of the following:
(i) The Executive's willful misconduct or gross
negligence;
(ii) The Executive's conscious disregard of his
obligations hereunder;
(iii) The Executive's conscious violation of any material
provision of the Company's by-laws or of its other stated policies, standards or
regulations; or
(iv) A determination that the Executive has
demonstrated a dependence upon any addictive substance, including alcohol,
controlled substances, narcotics or barbiturates.
In the event that the Company terminates the Executive's employment for
Cause, the Executive shall be entitled to receive a severance benefit of two (2)
months' Base Salary in effect at the time of termination. The Executive shall
not be entitled to receive any other payments or any other rights or benefits
under this Agreement (except for any salary and benefits accrued, vested and
unpaid as of the date of any such termination) or otherwise and the Company
shall be under no further obligation hereunder to the Executive. Following any
termination for Cause, the Company shall have such rights and remedies as may be
available to it for any breach of this Agreement or otherwise.
(d) Termination by the Company other than for Cause. The Company may
terminate the Executive's employment hereunder at any time for any other reason,
provided that the Company has given the Executive ninety (90) days' written
notice of termination, termination being effective upon expiration of the notice
period. In the event of such termination, the Executive shall be entitled to
receive a severance benefit equal to Base Salary at the rate in effect at the
time of termination for the remainder of the Initial Term or for eighteen (18)
months, whichever is greater, and shall also be entitled to receive any salary
and benefits accrued, vested and unpaid as of the date of any such termination
and any benefits to which the Executive may be entitled under and in accordance
with the terms of any employee benefit plan, policy or program maintained by the
Company. Upon the Executive's receipt of such severance benefit, salary and
benefits, the Company shall be under no further obligation hereunder to the
Executive and the Executive no longer shall be entitled to receive any payments
or any other rights or benefits under this Agreement or otherwise.
(e) Termination by the Executive for Good Reason. Notwithstanding
anything herein to the contrary, the Executive shall be entitled to terminate
his employment hereunder for
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"Good Reason" without breach of this Agreement. For purposes of this Agreement,
"Good Reason" shall exist in the event of any of the following:
(i) A change in the Executive's place of employment
outside of a 100-mile radius of Loudoun County, Virginia;
(ii) A material diminution in title or a substantial
elimination of the duties and responsibilities of the Executive;
(iii) A failure of the Executive to be elected to the
Company's Board of Directors, or, once elected, his removal therefrom other than
in connection with a termination of his employment hereunder;
(iv) A material breach by the Company of its
obligations hereunder; or
(v) The Executive shall cease to be the President
and Chief Executive Officer of the Company following a "change in control" of
the Company. For purposes of this Section 7(e)(v), a "change in control of the
Company" shall mean (A) the acquisition, directly or indirectly, by any "person"
(as such term is defined in Section 13(d) and 14(d) of the Securities Exchange
Act of 1934 as in effect on the date hereof), of voting power over voting shares
of the Company that would entitle holders thereof to cast at least twenty
percent (20%) of the votes that all shareholders would be entitled to cast in
the election of directors of the Company; or (B) during any period of two
consecutive years during the Initial Term of this Agreement, individuals who at
the beginning of such period constitute the Company Board of Directors cease for
any reason to constitute at least a majority thereof, unless the election of
each director who is not a director at the beginning of such period shall have
been approved in advance by directors representing at least a majority of the
directors then in office who are directors at the beginning of such period. For
the purpose of this Section 7(e)(v), "President and Chief Executive Officer of
the Company" shall mean that after a change in control of the Company has
occurred, you are the President and Chief Executive Officer of (1) the Company,
if it is the surviving entity in any merger, share exchange, acquisition or
other business combination with the Company, (2) the successor entity to the
Company in any merger, share exchange, consolidation, acquisition or other
business combination with the Company, or (3) any entity that beneficially owns
a majority of the voting stock of the Company.
In the event of such termination by the Executive, the Executive shall
nonetheless be entitled to receive a severance benefit equal to Base Salary at
the rate in effect at the time of termination for the remainder of the Initial
Term or for eighteen (18) months, whichever is greater. Except for such
severance benefit and except for any salary and benefits accrued, vested and
unpaid as of the date of such termination, the Executive no longer shall be
entitled to receive any payments or any other rights or benefits under this
Agreement, and the Company shall have no further obligation hereunder or
otherwise to the Executive following any such termination.
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(f) Termination by the Executive for other than Good Reason. The
Executive may terminate his employment hereunder at any time for any other
reason, provided the Executive has given the Company one hundred eighty (180)
days' written notice of termination, termination being effective upon expiration
of the notice period. In the event of such termination, the Executive shall be
entitled to receive any salary and benefits accrued, vested and unpaid as of the
date of any such termination and any benefits to which the Executive may be
entitled under and in accordance with the terms of any employee benefit plan,
policy or program maintained by the Company. The Company shall be under no
further obligation hereunder to the Executive and the Executive no longer shall
be entitled to receive any other payments, rights or benefits under this
Agreement or otherwise.
(g) Pro-Rata Bonus. Whenever, pursuant to this Section 7, the
Executive is entitled, upon the termination of his employment, to receive
"salary...accrued, vested and unpaid as of the date of any such termination",
the amount due him may include a pro-rata performance bonus, if it would be
appropriate to calculate a pro-rata portion of a performance bonus in accordance
with the provisions of any bonus plan which may have been implemented in
accordance with Section 3(b) hereof.
8. Place of Employment. The Company agrees that the principal location at
which the Executive is to render his services hereunder will be within a
100-mile radius of Loudoun County, Virginia.
9. Withholding. Notwithstanding anything herein to the contrary, all
payments required to be made hereunder by the Company to the Executive, or his
estate or beneficiaries, shall be subject to the withholding of such amounts as
the Company may reasonably determine it should withhold pursuant to any
applicable law or regulation.
10. Survival. This Agreement shall survive any termination of the
Executive's employment hereunder unless otherwise provided herein.
11. Miscellaneous.
(a) Successors and Assigns. The Company may assign this Agreement
to, and only to, an entity which is owned more than fifty percent (50%),
directly or indirectly, by the Company, and any person or entity which acquires
all or substantially all of the Company's business, and, subject to the
foregoing, upon such assignment this Agreement shall inure to the benefit of and
be binding upon such entity. This Agreement shall not be assignable by the
Executive and shall inure to the benefit of and be binding upon him and his
personal representative and other legal representatives. It is understood that
this Section 11(a) shall not affect the right of the Executive to terminate his
employment for "Good Reason" pursuant to Section 7(e) hereof.
(b) Notice. Any notice or communication required or permitted under
this Agreement shall be made in writing or sent by certified or registered mail,
return receipt requested and postage prepaid, addressed as follows:
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If to the Executive:
Xxxxxxx X. Xxxxxx
0000 Xxxxxxx Xxxx
Xxxxxx, Xxxxxxxx 00000
If to the Company:
Precision Auto Care, Inc.
000 Xxxxxx Xxxxx, X.X.
X.X. Xxx 0000
Xxxxxxxx, Xxxxxxxx 00000
Attention: Xxxxxx Xxxxxxxx, Esq.
or to such other address as either party may from time to time duly specify by
notice given to the other party in the manner specified above. Notice shall be
deemed given when received by the other party, including by his or its agent.
(c) Entire Agreement; Amendments. This Agreement contains the entire
agreement and understanding of the parties relating to the subject matter hereof
and supersedes all prior discussions, agreements and understandings relating
thereto between them. This Agreement may not be changed or modified, except by
an agreement in writing executed by the Company, with the approval of its Board
of Directors or its designee, and by the Executive.
(d) Waiver. The waiver of a breach of any term or provision of this
Agreement shall not operate as or be construed to be a waiver of any other or
subsequent breach of this Agreement.
(e) Governing Law. All questions concerning the construction,
validity, enforcement and interpretation of this Agreement, and the performance
of the obligations imposed by this Agreement, shall be governed by the laws of
the Commonwealth of Virginia applicable to contracts made and wholly to be
performed in such state, without regard to choice of law principles.
(f) Severability. In the event that any one or more of the
provisions contained in this Agreement shall, for any reason, be held to be
invalid, illegal or unenforceable, in any respect, such invalidity, illegality
or unenforceability shall not affect any other provision of the Agreement. Such
invalid, illegal or unenforceable provision(s) shall be deemed modified to the
extent necessary to make it (them) valid, legal and enforceable.
(g) Indemnification. The Executive shall be entitled to the benefit
of the indemnification provided by the Charter and the Bylaws of the Company;
provided that the Company shall be permitted to amend such provisions from time
to time so long as the Executive, to the extent permitted by applicable law, is
afforded indemnification at least as favorable as that provided by the Charter
and Bylaws as in effect on the date hereof.
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(h) Captions. All captions and section headings used herein are for
convenient reference only and do not form a part of this Agreement.
(i) Counterparts. This Agreement may be executed in counterparts,
each of which shall constitute one and the same Agreement.
(j) Computation of Time. In computing any period of time pursuant to
this Agreement, the day of the act, event or default from which the designated
period of time begins to run shall be included, unless it is a Saturday, Sunday,
or a legal holiday, in which event the period shall begin to run on the next day
which is not a Saturday, Sunday, or legal holiday. Likewise, if the period of
time concludes on a Saturday, Sunday or a legal holiday, the period shall run
until the end of the next day thereafter which is not a Saturday, Sunday, or
legal holiday.
(k) Pronouns and Plurals. All pronouns and any variations thereof
shall be deemed to refer to the masculine, feminine, neuter, singular, or plural
as the identity of the person or persons may require.
12. Executive's Legal Fees. The Company shall reimburse Executive for the
reasonable legal fees incurred by him in connection with the negotiation and
execution of this Agreement.
IN WITNESS WHEREOF, the parties have executed and delivered this Agreement
as of the day and year first above written.
PRECISION AUTO CARE, INC.
By:___________________________
Name: Xxxx X. Xxxxxxxxx
Title: Chairperson of the Board
______________________________
Xxxxxxx X. Xxxxxx
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