EXHIBIT 10.7
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT is made this 1st day of January, 2002,
between Portfolio Recovery Associates, L.L.C., a Delaware limited liability
company with its principal place of business in the City of Norfolk, Virginia
("Company") and Xxxxxx X. Xxxxxxxxxxx ("Employee").
IN CONSIDERATION of the mutual covenants contained herein and for other
considerations the receipt and sufficiency of which are acknowledged, the
parties agree as follows:
1. POSITION AND RESPONSIBILITIES.
The Company hereby hires Employee as its President. Subject to the LLC
Agreement (as defined herein), he shall be vested with such authority and
responsibilities as may be conferred upon him by the Management Committee of the
Company (the "Management Committee") and which are appropriate and customary to
his office. He shall report to and act under the direction of the Management
Committee. The Employee accepts such employment and agrees to diligently and
faithfully exercise the authority and discharge the responsibility of his office
to the best of his ability, devoting substantially all of his business time,
attention, and services to the affairs of the Company. Except with the consent
of the Management Committee, the Employee shall not engage in any other pursuits
for compensation while serving as an officer of the Company.
2. PLACE OF PERFORMANCE.
The principal place of employment of Employee shall be at the Company's
principal executive offices in Norfolk, Virginia or where such offices may be
relocated within a twenty-five (25) mile radius of Norfolk, Virginia (the
"Metropolitan Area"). Notwithstanding the foregoing, Employee may be required to
travel beyond the Metropolitan Area as may be reasonably required to perform his
duties hereunder.
3. COMPENSATION.
(a) Base Salary. The Employee shall be paid a base salary at
the rate of $190,000 per year, which shall be paid in approximately equal
installments consent with the Company's payroll policy, as it may exist from
time to time ("Base Salary"). Following the first anniversary of the
Commencement Date (as defined herein) and for each anniversary thereafter during
the Employment Period (as defined herein), Base Salary shall be increased
annually by no less than 4% over the immediately preceding year's Base Salary.
(b) Management Bonus Program. The performance of the business
shall be reviewed at the end of each operating year and compared to such goals
as are set forth in the business plan for that year as developed and presented
by the Operating Member of the Company and approved by its Management Committee
(the "Business Plan"). If the results of
operations for the year achieve the net profitability goals for the year
specified in the approved Business Plan, a bonus equal to no less than forty
percent (40%) of the Employee's Base Salary shall be paid to him (the "Bonus").
If the results of operations for the year exceed the net profitability goals of
the approved Business Plan, the amount of the Employee's Bonus may be increased
in recognition of the degree to which performance exceeded such goals, and the
Employee's contribution to such superior performance results as determined in
the sole discretion of the Management Committee. If the results of operations
for the year fail to achieve such net profitability goals, the amount (if any)
of the Employee's Bonus shall be within the absolute discretion of the
Management Committee.
(c) Benefits. The Employee shall be entitled to a benefits
package consisting of: (i) four (4) weeks paid annual vacation and (ii) such
other employee benefits programs as may be offered by the Company to other
employees, provided that he shall not be entitled to participate in any
incentive bonus program adopted for non-management level employees during the
time the Management Bonus Program is in effect. In addition, the Company shall
reimburse Employee for reasonable business expenses incurred by Employee upon
appropriate documentation and in accordance with Company policies for senior
executives, as they may exist from time to time. The Company shall reimburse
Employee for his reasonable legal fees incurred with respect to the preparation
of this Agreement; provided that, such reimbursement shall not exceed $5,000.
(d) Warrants. The Employee was granted warrants to acquire
equity interests in the Company in accordance with the terms set forth in
Exhibit A to the Employment Agreement between the Employee and the Company dated
March 31, 1999.
4. TERM
The period of employment of Employee by the Company hereunder
(the "Employment Period") shall commence on the date hereof (the "Commencement
Date") and shall continue through the third anniversary thereof; provided, that,
commencing on the third anniversary of the Commencement Date and each
anniversary thereafter, the Employment Period shall be automatically extended
for one (1) additional year unless either party shall notify the other party at
least ninety (90) days prior to the expiration of the Employment Period that it
intends to let the Agreement expire. The Employment Period may be sooner
terminated by either party in accordance with Section 5 of this Agreement.
In an event of a Change of Control, the period of employment
shall be automatically extended by 24 months from the date of the event.
For purposes of this Agreement, a Change in Control shall mean
a reorganization or recapitalization of the Company, whether by merger, sale of
substantially all of its assets except in the ordinary course of business, share
exchange or sale, or other form or structure of transaction which when given
effect will result in Xxxxxx, Xxxxxx & Co., L.P. and its affiliates ceasing to
hold at least a majority of the outstanding Units. In the event of an impending
Change
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in Control, the Company shall provide Employee as much advance notice as
administratively possible prior to such Change in Control.
5. TERMINATION.
Employee's employment hereunder may be terminated during the
Employment Period under the following circumstances:
(a) Death. Employee's employment hereunder shall terminate
upon his death.
(b) Disability. If, as a result of Employee's incapacity due
to physical or mental illness, Employee shall have been substantially unable to
perform his duties hereunder for an entire period of six (6) consecutive months
or nine (9) months in any twelve (12) month period, and within thirty (30) days
after written Notice of Termination is given after such period, Employee shall
not have returned to the substantial performance of his duties on a full-time
basis, the Company shall have the right to terminate Employee's employment
hereunder for "Disability", and such termination in and of itself shall not be,
nor shall it be deemed to be, a breach of this Agreement.
(c) Cause. The Company shall have the right to terminate
Employee's employment for Cause, and such termination in and of itself shall not
be, nor shall it be deemed to be, a breach of this Agreement. For purposes of
this Agreement, the Company shall have "Cause" to terminate Employee's
employment upon Employee's:
(i) conviction of, or plea of guilty or nolo contendere to, a
felony; or
(ii) willful and continued failure to use reasonable best
efforts to substantially perform his duties hereunder (other than such
failure resulting from Employee's incapacity due to physical or mental
illness or subsequent to the issuance of a Notice of Termination by
Employee for Good Reason) or to obey the lawful written directives of
the Management Committee after demand for substantial performance is
delivered by the Company in writing that specifically identifies the
manner in which the Company believes Employee has not used reasonable
best efforts to substantially perform his duties; or
(iii) willful misconduct (including, but not limited to, a
willful breach of the provisions of Section 9) that is economically
injurious to the Company or to any entity in control of, controlled by
or under common control with the Company ("Affiliates").
(d) Good Reason. Employee may terminate his employment for
"Good Reason" within thirty (30) days after Employee has actual knowledge of the
occurrence, without the written consent of Employee, of one of the following
events that has not been cured within thirty (30) days after written notice
thereof has been given by Employee to the Company:
(i) the relocation of the Company's principal executive
offices or Employee's own office to a location beyond the Metropolitan
Area; or
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(ii) the Company's failure to provide any material payments
due to be provided to Employee.
Employee's right to terminate his employment hereunder for Good Reason shall not
be affected by his incapacity due to physical or mental illness. Employee's
continued employment during the thirty (30) day period referred to above in this
paragraph (d) shall not constitute consent to, or a waiver of rights with
respect to, any act or failure to act constituting Good Reason hereunder.
(e) Without Cause. The Company shall have the right to
terminate Employee's employment hereunder without Cause by providing Employee
with a Notice of Termination, and such termination shall not in and of itself
be, nor shall it be deemed to be, a breach of this Agreement.
(f) Without Good Reason. Employee shall have the right to
terminate his employment hereunder without Good Reason by providing the Company
with a Notice of Termination, and such termination shall not in and of itself
be, nor shall it be deemed to be, a breach of this Agreement.
(g) Expiration of the Term. Unless the Company and the
Employee agree to continue the employment on an at will basis pending
negotiation of a new employment agreement, Employee's employment shall terminate
upon the expiration of the Employment Period and such expiration shall not be
deemed to be a termination by the Company without Cause.
6. TERMINATION PROCEDURE.
(a) Notice of Termination. Any termination of Employee's
employment by the Company or by Employee during the Employment Period (other
than termination pursuant to Section 5(a)) shall be communicated by written
Notice of Termination to the other party hereto in accordance with Section 12.
For purposes of this Agreement, a "Notice of Termination" shall mean a notice
which shall indicate the specific termination provision in this Agreement relied
upon and shall set forth in reasonable detail the facts and circumstances
claimed to provide a basis for termination of Employee's employment under the
provision so indicated.
(b) Date of Termination. "Date of Termination" shall mean (i)
if Employee's employment is terminated by his death, the date of his death, (ii)
if Employee's employment is terminated pursuant to Section 5(b), thirty (30)
days after Notice of Termination (provided that Employee shall not have returned
to the substantial performance of his duties on a full-time basis during such
thirty (30) day period), (iii) if Employee's employment is terminated pursuant
to Section 5(g), the date of expiration, and (iv) if Employee's employment is
terminated for any other reason, the date on which a Notice of Termination is
given or any later date (within thirty (30) days after the giving of such
notice) set forth in such Notice of Termination.
7. COMPENSATION UPON TERMINATION OR DURING DISABILITY.
In the event Employee is disabled or his employment terminates
during the Employment Period, the Company shall provide Employee with the
payments and benefits set forth below. Employee acknowledges and agrees that the
payments set forth in this Section 7
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constitute liquidated damages for any claim of breach of contract under this
Agreement as it relates to termination of his employment during the Employment
Period. In order to receive any of the payments set forth below, prior to the
payments of such amounts, Employee shall execute and agree to be bound by an
agreement relating to the waiver and general release of any and all claims
(other than claims for the compensation and benefits payable under Section 7
hereof) arising out of or relating to Employee's employment and termination of
employment (the "Release"). Such Release must be made in a form that is
reasonably satisfactory to the Company, and shall run in favor of the Company
and its affiliates, and their respective officers, directors, employees, agents,
successors and assigns.
(a) Termination by Company without Cause or by Employee for
Good Reason. If Employee's employment is terminated by the Company without Cause
or by Employee for Good Reason:
(i) the Company shall pay to Employee (A) his Base Salary and
accrued vacation pay through the Date of Termination, as soon as
practicable following the Date of Termination, (B) the greater of a
lump-sum payment equal to two (2) times Employee's then current Base
Salary or the minimum Base Salary due under the remaining Employment
Period and (C) the greater of a lump-sum payment equal to two (2) times
the amount of the Bonus, if any, paid to Employee in the year
immediately prior to the year of termination or the target Bonus due
under the remaining Employment Period. Such payment under clauses (B)
and (C) hereof shall be made as soon as administratively feasible
following the Date of Termination and execution of a valid Release, but
in no event more than forty-five (45) days following the execution of
such Release;
(ii) the Company shall provide a reasonable allowance for
outplacement services, not to exceed $7,500;
(iii) For the longer of twelve (12) months or the remaining
Employment Period following such termination, the Company shall
continue to provide Employee with the same level of medical benefits
upon substantially the same terms and conditions (including
contributions required by Employee for such benefits) as existed
immediately prior to Employee's termination; provided, that, if
Employee cannot continue to participate in the Company's plans
providing such benefits, the Company shall reimburse Employee the cost
of obtaining such benefits as if continued participation had been
permitted. Notwithstanding the foregoing, in the event Employee becomes
re-employed with another employer and becomes eligible to receive
comparable benefits from such employer, the benefit described in this
clause (iii) shall cease; and
(iv) Employee shall be entitled to any other rights,
compensation and/or benefits as may be due to Employee in accordance
with the terms and provisions of any agreements, plans or programs of
the Company.
(b) Cause, by Employee without Good Reason or upon Expiration
of the Employment Period. If Employee's employment is terminated by the company
for Cause or by Employee (other than for Good Reason) or upon expiration of the
Employment Period:
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(i) the Company shall pay Employee his Base Salary and, to the
extent required by law or the Company's vacation policy, his accrued
vacation pay through the Date of Termination, as soon as practicable
following the Date of Termination; provided, that, if the Employee's
termination of employment occurs do to an expiration of the Employment
Period initiated by a notice provided to Employee by the Company under
Section 4 of the Agreement, notwithstanding the foregoing and in lieu
thereof, the Company shall pay to Employee (A) his Base Salary and
accrued vacation pay through the Date of Termination, as soon as
practicable following the Date of Termination, (B) a lump-sum payment
equal to one-half (0.5) times Employee's then current Base Salary and
(C) a lump-sum payment equal to one-half (0.5) times the amount of the
Bonus, if any, paid to Employee in the year immediately prior to the
year of termination. Such payment under clauses (B) and (C) hereof
shall be made as soon as administratively feasible following the Date
of Termination and execution of a valid Release, but in no event more
than forty-five (45) days following the execution of such Release; and
(ii) Employee shall be entitled to any other rights,
compensation and/or benefits as may be due to Employee in accordance
with the terms and provisions of any agreements, plans or programs of
the Company.
(c) Disability. During any period that Employee fails to
perform his duties hereunder as a result of incapacity due to physical or mental
illness ("Disability Period"), Employee shall continue to receive his full Base
Salary set forth in Section 3(a) until his employment is terminated pursuant to
Section 5(b); provided that, any such amounts shall be off-set, on a dollar for
dollar basis, for each dollar Employee receives by any disability insurance or
social security benefit. In the event Employee's employment is terminated for
Disability pursuant to Section 5(b):
(i) the Company shall pay to Employee (A) his Base Salary and
accrued vacation pay through the Date of Termination, off-set, on a
dollar for dollar basis, for each dollar Employee receives by any
disability insurance or social security benefit, as soon as practicable
following the Date of Termination and (B) a Bonus, for the year in
which the Date of Termination occurs, pro-rated to the Date of
Termination and payable at the same time as bonuses are customarily
paid; and
(ii) Employee shall be entitled to any other rights,
compensation and/or benefits as may be due to Employee in accordance
with the terms and provisions of any agreements, plans or programs of
the Company.
(d) Death. If Employee's employment is terminated by his
death:
(i) the Company shall pay in a lump sum to Employee's
beneficiary, legal representatives or estate, as the case may be,
Employee's (A) Base Salary through the Date of Termination and (B)
Bonus, for the year in which the Date of Termination occurs, pro-rated
to the Date of Termination and payable at the same time as bonuses are
customarily paid; and
(ii) Employee's beneficiary, legal representatives or estate,
as the case may be,
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shall be entitled to any other rights, compensation and benefits as may
be due to any such persons or estate in accordance with the terms and
provisions of any agreements, plans or programs of the Company.
8. MITIGATION.
Except as otherwise noted above, Employee shall not be
required to mitigate amounts payable under this Agreement by seeking other
employment, and there shall be no offset against amounts due Employee under this
Agreement on account of subsequent employment except as specifically provided
herein.
9. CONFIDENTIAL INFORMATION; OWNERSHIP OF DOCUMENTS; NON-COMPETITION.
(a) Confidential Information. Employee shall hold in a
fiduciary capacity for the benefit of the Company all trade secrets and
confidential information, knowledge or data relating to the Company and its
businesses and investments, which shall have been obtained by Employee during
Employee's employment by the Company and which is not generally available public
knowledge (other than by acts by Employee in violation of this Agreement).
Except as may be required or appropriate in connection with his carrying out his
duties under this Agreement, Employee shall not, without the prior written
consent of the Company or as may otherwise be required by law or any legal
process, or as is necessary in connection with any adversarial proceeding
against the Company (in which case Employee shall use his reasonable best
efforts in cooperating with the Company in obtaining a protective order against
disclosure by a court of competent jurisdiction), communicate or divulge any
such trade secrets, information, knowledge or data to anyone other than the
Company and those designated by the Company or on behalf of the Company in the
furtherance of its business or to perform duties hereunder.
(b) Removal of Documents: Rights to Products. All records,
files, drawings, documents, models, equipment, and the like relating to the
Company's business, which Employee has control over shall not be removed from
the Company's premises without its written consent, unless such removal is in
the furtherance of the Company's business or is in connection with Employee's
carrying out his duties under this Agreement and, if so removed, shall be
returned to the Company promptly after termination of Employee's employment
hereunder, or otherwise promptly after removal if such removal occurs following
termination of employment. Employee shall assign to the Company all rights to
trade secrets and other products relating to the Company's business developed
by him alone or in conjunction with others at any time while employed by the
Company.
(c) Nonsolicitation. During the Employment Period and for two
(2) years after Employee's employment is terminated for any reason, Employee
will not, directly or indirectly, solicit the customers, suppliers or key
employees of the Company to terminate their relationship with the Company (or to
modify such relationship in a manner that is adverse to the interests of the
Company), or to violate any valid contracts they may have with the Company.
(d) Noncompetition. During the Employment Period and for one
(1) year after Employee's employment is terminated for any reason (other than
pursuant to Sections 5(d)
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and 5(e)), Employee will not, directly or indirectly, own, manage, operate,
control, be employed by, or perform services for any business, howsoever
organized and in whatsoever form, that engages in the same or a similar line of
business as the Company, as determined from its latest Business Plan, and which
is located in the market area of the Company existing on the date of termination
of Employee's employment with Company.
(e) Blue Pencil. If, at any time, the provisions of this
Section 9 shall be determined to be invalid or unenforceable, by reason of
being vague or unreasonable as to area, duration or scope of activity, this
Section 9 shall be considered divisible and shall become and be immediately
amended to only such area, duration and scope of activity as shall be determined
to be reasonable and enforceable by the court or other body having jurisdiction
over the matter and Employee agrees that this Section 9 as so amended shall be
valid and binding as though any invalid or unenforceable provision had not been
included herein.
(f) Injuctive Relief. In the event of a breach or threatened
breach of this Section 9, Employee agrees that the Company shall be entitled to
injunctive relief in a court of appropriate jurisdiction to remedy any such
breach or threatened breach, Employee acknowledging that damages would be
inadequate and insufficient.
(g) Continuing Operation. Except as specifically provided in
this Section 9, the termination of Employee's employment or of this Agreement
shall have no effect on the continuing operation of this Section 9.
10. LIMITATION OF LIABILITY AND INDEMNITY.
The limitation of liability and indemnity provisions of
Section 3.8(b)(c) and (d) of the LLC Agreement are a contractual benefit to the
Employee and are a material consideration for his employment.
11. GOVERNING LAW; LEGAL FEES AND EXPENSES.
This Agreement, the employment relationship contemplated
herein and any claim arising from such relationship, shall be governed by and
construed in accordance with the laws of the State of New York, without regard
to its conflicts of laws rules. If any contest or dispute shall arise between
the Company and Employee regarding the provisions of this Agreement, each party
shall be responsible for the payment of its own legal fees and expenses relating
to such claim or dispute regardless of outcome.
12. NOTICES.
All notices hereunder shall be in writing and shall be
delivered in person or mailed by first-class mail with adequate postage affixed,
as follows:
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If to the Company, to:
Portfolio Recovery Associates, L.L.C.
c/o Xxxxxx, Xxxxxx & Co., L.P.
000 Xxxx Xxxxxx
Xxx Xxxx, XX 00000
Attn: Xxxxx Xxxxxxx
If to the Employee, to:
Xxxxxx X. Xxxxxxxxxxx
0000 Xxxxxxxxxx Xxxxx
Xxxxxxxx Xxxxx, XX 00000
13. LLC AGREEMENT.
The term "LLC Agreement" as used herein shall mean the Amended
and Restated Limited Liability Company Agreement of the Company dated as of the
date hereof. All capitalized terms appearing in the text of this Agreement shall
have the same meanings as they have in the LLC Agreement to the extent not
defined herein.
14. SUCCESSORS; BINDING AGREEMENT.
(a) Company's Successors. The Company may assign or transfer
this Agreement; provided, that, the Company will require any successor to 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 assignment or
transfer had taken place.
(b) Employee's Successors. No rights or obligations of
Employee under this Agreement may be assigned or transferred by Employee other
than his rights to payments or benefits hereunder, which may be transferred only
by will or the laws of descent and distribution. Upon Employee's death, this
Agreement and all rights of Employee hereunder shall inure to the benefit of and
be enforceable by Employee's beneficiary or beneficiaries, personal or legal
representative, or estate, to the extent any such person succeeds to Employee's
interests under this Agreement. Employee shall be entitled to select and change
a beneficiary or beneficiaries to receive any benefit or compensation payable
hereunder following Employee's death by giving the Company written notice
thereof. In the event of Employee's death or a judicial determination of his
incompetence, reference in this Agreement to Employee shall be deemed, where
appropriate, to refer to his beneficiar(y)(ies), estate or other legal
representative(s). If Employee should die following his Date of Termination
while any amounts would still be payable to him hereunder if he had continued to
live, all such amounts unless otherwise provided herein shall be paid in
accordance with the terms of this Agreement to such person or persons so
appointed in writing by Employee, or otherwise to his legal representatives or
estate.
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15. MISCELLANEOUS.
No provisions of this Agreement may be amended, modified, or
waived unless such amendment or modification is agreed to in writing signed by
Employee and by a duly authorized officer of the Company, and such waiver is set
forth in writing and signed by the party to be charged. No waiver by either
party hereto at any time of any breach by the other party hereto of any
condition or provision of 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. No agreements or representations,
oral or otherwise, express or implied, with respect to the subject matter hereof
have been made by either party which are not set forth expressly in this
Agreement. The respective rights and obligations of the parties hereunder shall
survive Employee's termination of employment and the termination of this
Agreement to the extent necessary for the intended preservation of such rights
and obligations.
16. VALIDITY.
The invalidity or unenforceability of any provision or
provisions of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement, which shall remain in full force and
effect.
17. COUNTERPARTS.
This Agreement may be executed in one or more counterparts,
each of which shall be deemed to be an original but all of which together will
constitute one and the same instrument.
18. ENTIRE AGREEMENT.
This Agreement sets forth the entire agreement of the parties
hereto in respect of the subject matter contained herein and supersede all prior
agreements, promises, covenants, arrangements, communications, representations
or warranties, whether oral or written, by any officer, employee or
representative of any party hereto in respect of such subject matter. Any prior
agreement of the parties hereto in respect of the subject matter contained
herein is hereby terminated and cancelled.
19. WITHHOLDING.
All payments hereunder shall be subject to any required
withholding of Federal, state and local taxes pursuant to any applicable law or
regulation.
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20. SECTION HEADINGS.
The section headings in this Employment Agreement are for
convenience of reference only, and they form no part of this Agreement and shall
not affect its interpretation.
"Company":
PORTFOLIO RECOVERY ASSOCIATES, L.L.C.
By: /s/ Josh Brain
------------------------------------
Name: Josh Brain
Title: Capital Manager
"Employee":
By: /s/ Xxxxxx X. Xxxxxxxxxxx
------------------------------------
Xxxxxx X. Xxxxxxxxxxx
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