October 21, 1998
PERSONAL AND CONFIDENTIAL
Xx. Xxxx X. Xxxxxx
00000 Xxxxx Xxxxx
Xxxxx Xxxx, Xxxxxxxx 20141
Dear Xxx:
This letter sets forth the agreement between Precision Auto Care, Inc.
(the "Company") and you concerning your resignation as a director and the
Company's President and Chief Executive Officer and your rendering of services
to the Company on a part-time basis, as more fully set forth herein. This letter
contains the entire agreement and, except as otherwise provided herein,
supersedes all prior agreements, arrangements, understandings, whether written
or oral, regarding your rendering of services to the Company and your
compensation therefor. Without limiting the generality of the foregoing, except
as provided in paragraphs 3 and 5 below the terms of your prior employment
agreements are terminated and shall not have any further effect.
1. You agree to resign, effective immediately from your position as
director, President and Chief Executive Officer of the Company and from any
other position or capacity in which you are currently serving the Company and
any of its subsidiaries, except that you will continue to provide services to
the Company in accordance with and subject to the limitations of paragraph 2 of
this letter.
2. From and after the date of this Agreement through October 21, 1999, you
agree to provide services to the Company as an advisor in connection with
special projects assigned to you by the Board of Directors or the Company's
Chief Executive Officer, appropriate to your former position with the Company.
Any such services that you provide to the Company shall not interfere with any
full or part-time employment that you may now or hereafter have or with any
other business ventures or opportunities with which you may now or hereafter be
involved, including the search for and/or investigation for such employment,
ventures or opportunities. It is understood that this paragraph does not require
the Company to request, or you to provide, any
Xx. Xxxx X. Xxxxxx
October 21, 1998
Page 2
minimum or maximum number of hours of services. The Company expects that these
services will be provided from your current or future home and/or at locations
other than the headquarters of the Company within commuting distance of your
home. You shall render services hereunder to the Company in the capacity of an
independent contractor.
3. You have agreed to provide these services for compensation from the
Company of $10,000 per month during the term of this letter, without regard to
the quantity or quality of such services. In addition, the Company shall
reimburse you for any expenses incurred by you in providing such services. The
first monthly payment shall be due November 21, 1998. We will also continue your
present health benefits through October 31, 1999. You will receive your bonus
for the fiscal year ended June 30, 1998 (which we both agree is in the amount of
$100,000) in eight equal monthly installments which shall be payable to you
commencing November 21, 1998. Amounts payable to you shall be net of applicable
withholding taxes.
4. Except as provided in the following sentence, you agree that you hereby
forfeit all of your rights to and in any and all stock options granted to you
under the Company's option plans, your previous employment agreements or
otherwise, and that you shall not have the ability to exercise any of such
options following the date of this letter. Notwithstanding the foregoing, you
will be entitled to exercise the options set forth on Exhibit A to this letter
at the corresponding exercise prices until the close of business on October 21,
1999. Following that date, all of those options shall expire and you shall not
be entitled to exercise them or have any other rights in respect of them
following that date.
5. The Company and you hereby agree that the provisions relating to
confidential information and competitive activities set forth in Sections 4, 5
and 6 of the Employment Agreement between you and the Company dated June 17,
1998 shall remain in full force and effect and shall remain fully enforceable
against you and the Company in accordance with their terms. The covenants
contained in Section 5(a) of the Employment Agreement relating to competitive
activities shall expire on October 21, 2000.
6. You agree that you will cooperate with the Company in collecting the
loan the Company extended to PAISA, Inc., Xxxxxx Xxxxx and Xxxxxxx Xxxxx in the
original principal amount of $500,000 on or about June 25, 1998 (the "PAISA
Loan"). In the event that the PAISA Loan and all accrued interest thereon is
repaid in full by June 21, 1999, the term of this letter shall be extended by
six months and the Company will (A) continue to pay you $10,000 per month until
April 21, 2000, (B) continue your present health benefits until April 30, 2000,
and (C) permit you to exercise the options set forth on Exhibit A to this letter
until the close of business on April 21, 2000.
7. You agree that the terms, provisions and conditions of this letter, and
the negotiations in connection therewith, are strictly confidential and shall
not be disclosed to any person or entity except to the extent required by law,
including rules and regulations of the Securities and Exchange Commission. You
shall return to the Company any and all documents
Xx. Xxxx X. Xxxxxx
October 21, 1998
Page 3
belonging to the Company and, consistent with the terms of Section 4 of your
current Employment Agreement, shall maintain the confidentiality of any and all
confidential or trade secret material with which you have come into contact as
a result of your service to the Company.
8. By agreeing to accept the provisions of this letter, you hereby release
any and all claims that you now have or may hereafter have against the Company,
its officers, directors, agents or employees, directly or indirectly related to
the matters set forth herein, or otherwise related to your employment with and
service to the Company, except to receive the benefits described herein.
Notwithstanding the foregoing, this release shall not affect any rights you may
have to seek indemnification from time to time from the Company in accordance
with the Company's charter or bylaws, to the extent to which you become subject
to legal proceedings and would be entitled to indemnification thereunder in
respect of matters which involve actions you took in your capacity as an officer
or director of the Company, and the Company shall provide such indemnification
to the full extent permitted by its existing charter and bylaws.
9. Upon your acceptance of the provisions of this letter, the Company
hereby releases any and all claims that it now has or may hereafter have against
you, directly or indirectly related to the matters set forth herein, or
otherwise related to your employment with or service to the Company, except to
receive the services on the terms described herein. Notwithstanding the
foregoing, in the event that the Company advances or provides you with fees and
expenses pursuant to indemnification from the Company in accordance with the
Company's charter or bylaws, and it is later determined that you do not meet the
legal standards or requirements in order to receive indemnification from the
Company under Virginia law, the Company shall be entitled to seek the return of
any amounts it may have advanced or provided to you.
10. The terms and conditions contained in this letter may be changed or
amended only by written agreement executed by you and the Company. In the event
any portion of this letter is deemed for any reason to be unenforceable, such
unenforceability shall be strictly limited, and all other provisions shall
remain in full force and effect.
Xx. Xxxx X. Xxxxxx
October 21, 1998
Page 4
Please indicate your acceptance of and agreement with the foregoing
provisions, and your acknowledgement that this letter sets forth all of the
terms and conditions applicable to your resignation as director and President
and Chief Executive Officer of the Company and your continued
employment/consulting relationship with the Company, by signing and dating this
letter in the space indicated below and returning a copy to me.
Very truly yours,
PRECISION AUTO CARE, INC.
By:__________________________________
Xxxx X. Xxxxxxxxx
AGREED AND ACCEPTED AS OF
THIS _____ DAY OF OCTOBER 1998.
By:____________________________
Xxxx X. Xxxxxx
EXHIBIT A
Options to purchase 80,338 shares of common stock with an exercise price of
$7.05 per share.
Options to purchase 7,920 shares of common stock with an exercise price of $8.00
per share.
Options to purchase 4,842 shares of common stock with an exercise price of
$10.00 per share.
