EXHIBIT 10.6
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT is made as of April 1, 1998 by and between
Coastal Acquisition, L.L.C., a Virginia limited liability company ("Company")
and Xxxxxxx X. XxXxxxxx ("Executive").
WHEREAS, Executive is the sole shareholder of Coastal Credit Corporation,
CCC GA, Inc., CCC DEL, Inc., CCC JAC, Inc., CCC AM, Inc., CCC SC, Inc. and
Coastal Credit Corporation of Florida (each individually referred to as a
"Coastal Group Member" and collectively referred to as the "Coastal Group"); and
WHEREAS, contemporaneous with the execution and delivery of this Agreement,
and pursuant to that certain Asset Purchase Agreement by and among the
Executive, the Coastal Group and the Company dated as of January 26, 1998 (the
"Asset Purchase Agreement"), the Coastal Group is transferring and selling, and
the Company is acquiring, substantially all of the assets of the Coastal Group,
and Coastal Credit Corporation ("Coastal Credit") is acquiring a 25% membership
interest in the Company in consideration for a $1,250,000 capital contribution.
In connection with the transactions contemplated by the Asset Purchase
Agreement, and as a condition thereto, the Executive and the Company are
required to execute and deliver this Agreement.
NOW, THEREFORE, the parties agree as follows:
1. Definitions. The terms defined in this Section 1 shall have the
respective meanings indicated below for all purposes of this Agreement.
(a) Affiliate. "Affiliate" of a Person means a Person that directly or
indirectly through one or more intermediaries, controls, is controlled by,
or is under common control with, the first Person. "Control" means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management policies of a Person, whether through the
ownership of voting securities, by contract, as trustee or executor, or
otherwise.
(b) Cause. "Cause" shall mean any one or more of the following:
i. engaging in a material dishonest act, including without
limitation any material misrepresentation or intentional omission to
state a material fact to the Managers, willful breach of fiduciary
duty, misappropriation or fraud against the Company or any Affiliate
of the Company;
ii. any indictment or similar charge against Executive by a
governmental authority alleging the commission of a felony, or a
guilty plea or no-contest plea by Executive to a felony;
iii. material failure by Executive to follow the Company's
general policies, directives or orders applicable to officers of the
Company
after failing to cure prior similar failures within fifteen (15) days
of receiving written notice thereof from the Managers;
iv. intentional destruction or theft of the Company's property or
falsification of the Company's documents;
v. a breach by Executive of the provisions of Section 13; or
vi. a material breach by Executive of any other provision of this
Agreement and the failure by Executive to cure such breach within
thirty (30) days of the date on which the Company gives Executive
notice thereof.
(c) Date of Termination. "Date of Termination" shall mean in the case
of Executive's death, the date of death, in the case of Disability, thirty
(30) days after Notice of Termination is given (provided Executive shall
not have returned to the full-time performance of his duties during such
thirty (30) day period), and in all other cases, the date specified in the
Notice of Termination, which shall be at least thirty (30) days after the
date of the Notice of Termination, unless the termination is by the Company
for Cause.
(d) Disability. "Disability" shall occur if as a result of Executive's
incapacity due to physical or mental illness, Executive shall have been
absent from the full-time performance of his duties with the Company for
three (3) consecutive months.
(e) Good Reason. "Good Reason" shall mean any one or more of the
following bases for termination of Executive's employment by Executive:
i. the removal of Executive as a Manager of Company without
Cause;
ii. the assignment to Executive of any duties inconsistent in any
material respect with Executive's position, authority, duties or
responsibilities as contemplated by Section 5(a) of this Agreement,
excluding for this purpose an isolated, insubstantial or inadvertent
action not taken in bad faith and which is remedied by the Company
promptly after receipt of notice thereof given by the Executive;
iii. an action of Company that requires Executive to move from
his permanent place of residence;
iv. the Company's failure to set Executive's compensation at the
minimum salary and bonus described in Section 6 hereof for the first
Renewal Term of this Agreement (as such term is defined in Section 3
below); or
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v. during the Initial Term hereof (as such term is defined in
Section 3 below), a termination in connection with Coastal Credit's
decision to exercise its put option based on its vote against an
action approved by the members of the Company under Section 3.1 of the
Company's Amended and Restated Operating Agreement (the "Operating
Agreement").
(f) Notice of Termination. Any termination of Executive's employment
by either the Company or Executive, except for a termination based on
Executive's death, shall be Communicated by a written Notice of
Termination.
(g) Person. "Person" shall mean any natural person, corporation,
partnership, association, limited liability company, trust, governmental
authority, or other entity.
(h) Retirement. "Retirement" shall mean termination of Executive's
employment after Executive has attained age 65.
2. Employment. The Company hereby employs Executive and Executive hereby
accepts employment with the Company for the Term of this Agreement set forth in
Section 3 below, in the position and with the duties and responsibilities set
forth in Sections 4 and 5 below, and upon the other terms and conditions
hereinafter stated.
3. Term. This Agreement is for the two-year period commencing on the date
hereof (the "Commencement Date") and terminating on the second anniversary of
the Commencement Date, or upon Executive's earlier death, termination by reason
of Disability or termination by either party pursuant to Section 10 (the
"Initial Term"). The Initial Term shall be automatically extended for successive
one-year periods (each a "Renewal Term," with the Initial Term and any Renewal
Terms collectively referred to herein as the "Term"), unless at least ninety
(90) days prior to the end of the Initial Term or any Renewal Term, either
party, by a written notice delivered to the other party, elects not to have the
Term automatically extended.
4. Position. Executive shall serve as President and Chief Executive Officer
of the Company.
5. Duties and Responsibilities.
The Company hereby engages Executive as a full-time executive employee
and Executive accepts such employment, on the terms and subject to the
conditions set forth in this Agreement. During the Term, Executive shall
devote all of his business time and best efforts to, and shall perform
faithfully, loyally and efficiently, his duties as President of the Company
and shall exercise such powers and fulfill such responsibilities as may be
duly assigned to or vested in him by the Operating Agreement or by the
Managers of the Company (the "Managers") consistent with the
responsibilities of the President.
During the Term, Executive will not engage in other employment or
consulting work or any trade or business for his own account or on behalf
of any
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other Person. Notwithstanding the foregoing, Executive may (i) serve on
such corporate, civic, industry or charitable boards or committees as are
approved by the Managers and (ii) manage his own and his immediate family's
personal investments, provided that the activities permitted by clauses (i)
and (ii) above shall not, individually or in the aggregate, interfere in
any material respect with the performance of Executive's responsibilities
hereunder.
6. Salary/Bonus. For all services rendered by Executive under this
Agreement, the Company shall pay to Executive an aggregate annual base salary of
$240,000, payable, in equal installments, at least monthly, in accordance with
the Company's regular payroll procedures. The Company shall review possible
increases in Executive's salary at least annually, with any such increases
subject to the determination of the Managers in their sole discretion.
Executive will be eligible for an annual performance bonus. During the
Initial Term, Executive's bonus shall equal twelve percent (12%) of the
Company's Net Pre-Tax Income in excess of $500,000. For purposes of this
Agreement, "Net Pre-Tax Income" shall mean net income of the Company before
provision for federal or state taxes and after related party expenses and
allocated overhead, all as determined in accordance with generally accepted
accounting principles consistently applied. All items of related party expenses
and allocated overhead subtracted from net income shall also require the
unanimous approval of the Managers, which shall not be unreasonably withheld.
During any Renewal Term hereof, the amount of such annual bonus shall be based
on goals to be determined by the Managers by reference to the annual budget
approved by the Managers.
Notwithstanding anything to the contrary in the foregoing, Executive shall
be entitled to terminate his employment under this Agreement for Good Reason at
the expiration of the Initial Term or during the first two months of the first
Renewal Term hereof if the Managers fail to set his compensation at or above the
following minimum levels for such first Renewal Term: $250,000 base salary and
annual performance bonus equal to eight percent (8%) of the Company's Net
Pre-Tax Income in excess of $500,000.
7. Employee Benefits. The Company shall provide or cause to be provided to
Executive and to Executive's dependents, at the Company's expense, all
disability, medical and dental benefits provided to other executives of the
Company. During any waiting period for insurance eligibility, COBRA insurance
costs for Executive and Executive's dependents will be paid by the Company. In
addition, the Company shall pay the Executive $800 per month as an automobile
allowance to cover the cost of Executive's use of an automobile for Company
purposes. During the Term of this Agreement, Executive shall maintain insurance
in connection with the automobile as required by state law and such other
insurance as is reasonably satisfactory to the Company. If the terms of such
insurance policy allow it, the Company shall be named as an additional insured
on all such coverage.
8. Vacation. Executive shall be entitled to four (4) weeks vacation during
each consecutive twelve month period of employment beginning on the Commencement
Date and each anniversary thereof. In the event that the full vacation is not
taken by Executive during
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any such period, no vacation time shall accrue for use in future periods, except
as approved by the Managers.
9. Business Expenses. Executive will be reimbursed for all reasonable
ordinary and necessary business expenses incurred by Executive in connection
with Executive's employment (to be supported by receipts and other documentation
as required by the Internal Revenue Code of 1986, as amended, and in conformance
with the Company's normal procedures).
10. Termination. Either the Company or Executive may terminate the
employment of Executive at any time prior to the expiration of the Term of this
Agreement, with or without Cause or Good Reason.
11. Payments During Disability and Upon Termination or Expiration.
Executive or his estate shall be entitled to the following during a period of
Disability, upon Executive's death, upon termination of Executive's employment
by Executive or the Company, or if the Term of this Agreement is not extended by
reason of notice given by either party pursuant to Section 3 hereof, as the case
may be:
During any period that Executive fails to perform his full-time duties
with the Company as a result of incapacity due to physical or mental
illness, until such time as Executive returns to the full-time performance
of his duties or the Date of Termination if Executive's employment is
terminated for Disability, Executive shall continue to receive his base
salary at the rate in effect at the commencement of any such period minus
any disability benefits received by him under any insurance or disability
plan of the Company. If terminated for Disability, Executive shall
additionally be entitled to receive the severance compensation provided for
in subsections 11(c)(ii) and (iii) hereof.
If (1) Executive's employment is terminated by Executive without Good
Reason; (2) Executive's employment is terminated by the Company for Cause;
or (3) this Agreement is terminated by reason of Executive's notice of
non-renewal, as provided in Section 3 hereof, then Company shall pay
Executive his full base salary through the Date of Termination at the rate
in effect at the time Notice of Termination is given, plus all other
amounts or benefits to which Executive is entitled through such date under
any plan, arrangement or practice in effect at the time of such
termination, minus any amounts owed by Executive to the Company. Executive
shall not be entitled to receive any bonus applicable to the period in
which termination occurs, and the Company shall have no further obligations
to Executive under this Agreement (other than under COBRA and for vested
and accrued benefits and accrued and unpaid vacation); provided, however,
if Executive's employment is terminated by reason of Executive's notice of
nonrenewal, Executive shall be paid a pro rata portion of his performance
bonus, if any based on the number of months, including portions thereof,
during which Executive was employed during the fiscal year in which his
employment was terminated, based on the performance of the company for said
fiscal year as reflected in the Company's financial statements for said
fiscal year.
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(c) If (1) Executive's employment is terminated by reason of
Executive's death; (2) Executive's employment is terminated by the Company
other than for Cause; (3) Executive's employment is terminated by the
Executive for Good Reason (except as provided below); or (4) this Agreement
is terminated by reason of the Company's notice of non-renewal, then
Executive shall be entitled to the following:
i. the Company shall pay to Executive any unpaid base salary
through the Date of Termination at the rate in effect at the time
Notice of Termination is given, no later than the fifth day following
the Date of Termination;
ii. Executive shall be entitled to any other compensation and
benefits granted under this Agreement, except any performance bonus,
for a period equal to the longer of: (a) one year from the Date of
Termination, or (b) if the Date of Termination occurs within the first
year of the Initial Term, the remainder of the Initial Term. Such
benefits shall be determined in accordance with the Company's employee
benefit plans and other applicable programs, policies and practices
then in effect as though Executive was still then in the employ of the
Company. The provisions of this Agreement, and any payment provided
for hereunder, shall not reduce any amounts otherwise payable, or in
any way diminish Executive's existing rights, or rights which accrue
solely as a result of the passage of time under any benefit plan,
employment agreement or other contract, plan or arrangement; and
iii. Executive shall be entitled to receive a pro rata portion of
his performance bonus, if any, based on the number of months,
including portions thereof, during which Executive was employed during
the fiscal year in which his employment was terminated, based on the
performance of the Company for said fiscal year as reflected in the
Company's financial statements for said fiscal year.
If Executive terminates his employment for Good Reason based on Section
1(e)(4) hereof, then Executive shall only be entitled to receive the
compensation provided for in subsections 11(c)(i) and (iii) hereof.
(d) If Executive's employment shall be terminated by reason of
Executive's Retirement, then Executive shall be entitled to receive the
compensation provided for in subsections 11(c)(i) and (iii) hereof.
12. Coastal Credit's Membership Interest. In connection with the Coastal
Group's sale of its assets to the Company pursuant to the Asset Purchase
Agreement, at the closing of the transaction contemplated by the Asset Purchase
Agreement, Coastal Credit shall contribute $1,250,000 to the capital of the
Company, and the Company shall issue a 25% membership interest in the Company to
Coastal Credit, which interest may be transferred to an Affiliate of Coastal
Credit in connection with a merger, consolidation, liquidation or other
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restructuring of Coastal Credit. The membership interest in the Company held by
Coastal Credit or its Affiliate at any time during the term of this Agreement is
hereinafter referred to as the "Coastal Credit Membership Interest" and Coastal
Credit or the Affiliate which holds such interest is sometimes hereinafter
referred to as the "CCMI Holder." Such Coastal Credit Membership Interest shall
be subject to the following terms and conditions:
(a) Executive's Unconditional Put Option at Expiration of Initial
Term. To the extent permitted under applicable law and subject to the
provisions of any agreement with the Company's lenders, the bring-along
rights set forth in the Company's Operating Agreement, or any other
agreement approved in writing by XxXxxxxx or the CCMI Holder, the CCMI
Holder shall have the right (the "Initial Term Unconditional Put Right"),
at its sole option and election and for any reason, to require the Company
to redeem sixty percent (60%) of the Coastal Credit Membership Interest
held by such CCMI Holder at the end of the Initial Term (the "60%
Interest"), subject to the following terms and conditions:
i. The CCMI Holder must deliver written notice of its intention
to exercise the Initial Term Unconditional Put Right to the Company at
its principal office at least six but not more than seven months prior
to the expiration of the Initial Term.
ii. The closing of the redemption sale shall take place at the
Company's offices, or at such other place as the parties may agree,
and at a time (during ordinary business hours) and date fixed by the
Company, which shall be on or before ten (10) business days after the
expiration of the Initial Term. The redemption shall be effective as
of the expiration of the Initial Term (the "Exercise Date"), and all
rights of the CCMI Holder to the redeemed portion of the Coastal
Credit Membership Interest, except for the right to receive its
redemption price therefor in accordance herewith, shall cease as of
the Exercise Date. The closing of the redemption sale shall otherwise
comply with the terms set forth in Section 12(c) below.
iii. The purchase price for the 60% Interest shall be $750,000,
payable at the closing of the redemption sale in immediately available
funds.
iv. As of the Exercise Date, and provided that the $750,000
payment for the 60% Interest is made pursuant to the terms of (ii) and
(iii) above, the capital account associated with the remaining Coastal
Credit Membership Interest (the "Reconstituted Capital Account") shall
be computed in accordance with the following procedure:
(1) Solely for purposes of this Section 12(a), the Coastal
Credit Membership Interest shall be treated as consisting of two
separate Interests held by unrelated parties (the "Class A
Interest" and the "Class B Interest").
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(2) The capital account of the Class A Interest shall be the
capital account of the Coastal Credit Membership Interest as
computed in accordance with the terms of the Operating Agreement
from the inception of the Company to the Exercise Date, with the
following adjustments: (a) disregard additional capital
contributions (if any) made with respect to the Coastal Credit
Membership Interest after the initial $1,250,000 capital
contribution; (b) take into account any changes to the Percentage
Interest of the Class A Interest arising from additional capital
contributions made by other Members of the Company (including
capital contributions deemed made by the hypothetical Member
purchasing the Class B Interest) or partial or complete
redemptions of the Interests of other Members; and (c) without
reduction for the $750,000 to be paid for the 60% Interest.
(3) The capital account of the Class B Interest shall be
computed in accordance with the terms of the Operating Agreement,
as if the Class B Interest were initially issued to an unrelated
party upon the first additional capital contribution of the CCMI
Holder, from the date of such deemed issuance to the Exercise
Date, and shall be adjusted to reflect any subsequent capital
contributions of the CCMI Holder, and any change in the
Percentage Interest of such Class B Interest arising from the
additional capital contribution, or distribution in partial or
complete redemption, of any of the other Members, but shall not
be reduced by the $750,000 to be paid for the 60% Interest.
(4) The Reconstituted Capital Account of the Coastal Credit
Membership Interest on the Exercise Date shall then equal the sum
of (x) 40% of the capital account of the Class A Interest plus
(y) 100% of the capital account of the Class B Interest.
(5) The computation of the capital accounts of the Class A
Interest and Class B Interest shall take into account changes in
Percentage Interests (as defined in the Operating Agreement) and
resulting changes in allocation of profits or losses, and in
distributions to the Members (including the hypothetical Member
holding the Class B Interest) resulting from additional capital
contributions by or complete or partial redemptions of the
Members, at the time and in the manner set forth in the Operating
Agreement.
v. On the Exercise Date, the Percentage Interest of the remaining
Coastal Credit Membership Interest (the "Remaining Interest") shall be
reduced to the sum of 40% of the Percentage Interest of the Class A
Interest plus 100% of the Percentage Interest of the Class B Interest,
the Percentage Interests of the other members) of the Company shall be
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increased on a pro rata basis by the change in the CCMI Holder's
Percentage Interest in accordance with their proportionate Percentage
Interests, and Schedule A of the Operating Agreement shall be revised
to reflect such adjusted Percentage Interests.
vi. On the Exercise Date, the capital accounts of the other
Member(s) of the Company shall be increased (or decreased) on a pro
rata basis in accordance with such other Members' proportionate
Percentage Interests by the amount by which (x) the Reconstituted
Capital Account, as computed under subsection (iv) above, is less than
(or greater than) (y) the actual capital account for the Coastal
Credit Membership Interest immediately prior to the Exercise Date less
$750,000.
(b) Executive's Unconditional Put Option at or After Fifth Anniversary
Date. To the extent permitted under applicable law and subject to the
provisions of any agreement with the Company's lenders, the bring-along
rights set forth in the Company's Operating Agreement, or any other
agreement approved in writing by XxXxxxxx or the CCMI Holder, in the event
the Initial Term Unconditional Put Right has not been exercised, and only
in such event, from and after the fifth anniversary of the Commencement
Date, the CCMI Holder shall have the right (the "Five Year Unconditional
Put Right"), at its sole option and election, for any reason, and
regardless of whether Executive is still employed by the Company, to
require the Company to redeem any portion or all of the Coastal Credit
Membership Interest then held by such CCMI Holder, subject to the following
terms and conditions:
i. Prior to the exercise of the Five Year Unconditional Put
Right, the Company, or any corporation or other entity into which the
Company has been converted or reorganized, shall not have sold,
exchanged or otherwise disposed (other than by such conversion or
reorganization) of substantially all of its assets, or made a public
offering of its Interests or other equity securities which have been
registered under the Securities Act of 1933, as amended, or any
successor statute.
ii. The CCMI Holder may exercise its right to require redemption
pursuant to this Section 12(b) by delivering written notice of its
intention to exercise the Five Year Unconditional Put Right to the
Company at its principal office, identifying the Percentage Interest
of the Coastal Group Membership Interest sought to be redeemed (the
"Section 12(b) Put Notice").
iii. Unless the closing must be delayed in order to obtain the
appraisals contemplated in Section 12(b)(v) below or unless the
Company's lender has not approved the redemption, the closing of the
redemption sale shall take place at the Company's offices, or at such
other place as the parties may agree, and at a time (during ordinary
business hours) and date fixed by the Company (the "Closing Date"),
but in any
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event within (60) days after receipt of the Section 12(b) Put Notice.
If the Closing must be delayed to complete the appraisal process or
obtain the Company's lender's approval, the Closing Date shall be
within sixty (60) days of either obtaining the appraisal or approval,
as applicable. All rights of the CCMI Holder to the Coastal Credit
Membership Interest, or to such lesser Percentage Interest thereof
which is to be redeemed, except for the right to receive its
redemption price and Deferral Compensation, if any, in accordance
herewith, shall cease on the Closing Date. The closing of the
redemption sale shall otherwise comply with the terms set forth in
Section 12(c)(ii) below.
iv. The purchase price for the Coastal Group Membership Interest
redeemed pursuant to this Section 12(b) shall be payable at the
closing of the redemption sale in immediately available funds. Unless
one of the parties shall object as provided in subsection (v) below,
the price shall be five times the Net Pre-Tax Income of the Company
(as defined in Section 6 of this Agreement) for the four fiscal
quarters immediately preceding the date of the Section 12(b) Put
Notice, multiplied by the Percentage Interest in the Company
represented by that portion of the Coastal Credit Membership Interest
subject to the redemption transaction.
v. If either the Company or the CCMI Holder delivers a written
notice to the other party on or before 30 days after the date of the
Section 12(b) Put Notice, objecting to basing the purchase price on
the formula set forth in subsection (iv) above, the purchase price for
the Percentage Interest to be redeemed shall be the then fair market
value of such Percentage Interest, without application of a minority
interest discount, blockage premium or any other adjustment based on
the voting power represented by the Percentage Interest, as of the end
of the calendar month immediately preceding the date of the Section
12(b) Put Notice, as determined by appraisal in the following manner.
The Company and the CCMI Holder shall in good faith attempt to jointly
select a third party, nationally recognized, independent certified
business appraiser experienced in business valuations to perform the
appraisal. If the parties fail to agree on a single appraiser, the
Company and the CCMI Holder shall each select an appraiser who will in
turn select a third independent competent appraiser, and the third
appraiser's appraisal of such fair market value shall be conclusive.
If either party has not served written notice on the other party of
its appointment of an appraiser on or before 30 days after the
delivery of the objection notice, the first appraiser will be the only
appraiser, and shall prepare the appraisal which will be conclusive on
both parties. In the event the two appraisers are unable to agree on a
third appraiser within fifteen (15) days after each party's appraiser
has been identified to the other party, each selected appraiser shall
prepare an appraisal, and the average of such two appraisals shall be
conclusive on both parties. The parties shall equally share the cost
of all such appraisals.
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All appraisals must be prepared on or before 30 days after an
appraiser has been instructed to prepare an appraisal.
vi. If the CCMI Holder exercises the Five Year Unconditional Put
Right for more than fifty percent (50%) of the Percentage Interest
represented by the Coastal Credit Membership Interest then held by the
CCMI Holder, then such action shall be deemed, at the Company's option
after discussion with Executive of his desires to remain as an
employee of the Company, termination of Executive's employment by
Executive without Good Reason.
vii. If the Company's redemption of the Coastal Group Membership
Interest pursuant to this Section 12(b) is delayed because the
Company's lender has not consented to the redemption, then the Company
shall pay Executive additional compensation (the "Deferral
Compensation") under Section 6 or 11 above, as applicable, from the
date which is sixty (60) days after the date of the Section 12(b) Put
Notice until the date of the Company's Release Notice (as such term is
defined in Section 12(c)(iii) below). The Deferral Compensation shall
be payable monthly to coincide with payment dates under the Company's
normal payroll practices, and shall be calculated as follows: (x) the
percentage rate equal to the weighted average annual interest rate on
all privately-held subordinated debentures and notes issued by the
Company and outstanding on the date of the Section 12(b) Put Notice,
which shall be weighted based on the respective principal amounts
outstanding, (y) divided by twelve, and (z) multiplied by the
redemption price determined in paragraph 12(b)(iv) or (v), as the case
may be. The Deferral Compensation shall be adjusted to reflect any
partial months during the payment period.
(c) Executive's Other Put Options.
i. To the extent permitted under applicable law and subject to
the provisions of any agreement with the Company's lenders, the
bring-along rights set forth in the Operating Agreement, or the terms
of any other agreement approved in writing by XxXxxxxx or the CCMI
Holder, in the event the Initial Term Unconditional Put Right is not
exercised, and only in such event, the CCMI Holder shall have the
right, at its sole option and election, to require the Company to
redeem all, but not less than all, of the Coastal Credit Membership
Interest at the redemption price calculated in accordance with
Schedule A hereto, in the following events:
(1) the Company's termination of Executive's employment
without Cause;
(2) the Executive's Retirement, Disability or death;
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(3) the Executive's termination of his employment with Good
Reason;
(4) the termination of this Agreement by reason of the
Company's notice of non-renewal; or
(5) a dissenting vote by the CCMI Holder as a Member of the
Company under Section 3.1 of the Operating Agreement.
ii. The CCMI Holder may exercise its right to require redemption
pursuant to this Section 12(c) by delivering written notice to the Company
at its principal office within sixty (60) days after the Date of
Termination, stating that the CCMI Holder elects to require the Company to
redeem all, but not less than all, of the Coastal Credit Membership
Interest in accordance with the provisions of this Section 12(c) (the
"Section 12(c) Put Notice"). Unless deferred pursuant to subsection (iii)
below, the closing of the redemption sale shall take place at the Company's
offices, or at such other place as the Company and the CCMI Holder may
agree, and at a time (during ordinary business hours) and date fixed by the
Company (the "Closing Date"), but in any event within sixty (60) days after
receipt of the Section 12(c) Put Notice.
At the closing of such redemption sale, the Company shall deliver to the CCMI
Holder, in immediately available funds, the redemption price for the Coastal
Credit Membership Interest and the CCMI Holder shall deliver to the Company the
certificates) (if any) representing the Coastal Credit Membership Interest
and/or such other documents of assignment as the Company reasonably determines
are necessary to consummate the redemption and to demonstrate that the
certificates and the Coastal Credit Membership Interest represented thereby are
free and clear of any lien, claim or encumbrance thereon, except for
restrictions under the Operating Agreement. All rights of the CCMI Holder to the
Coastal Credit Membership Interest, except for the right to receive its
redemption price and the Put Deferral Compensation, if any, therefor in
accordance herewith, shall cease on the Closing Date.
iii. In the event that the Company cannot redeem the Coastal Group
Membership Interest because of restrictions in an agreement with the
Company's lenders, then the Company shall promptly advise the CCMI Holder
of such restrictions, and shall also deliver written notice to the CCMI
Holder of the expiration or waiver of such restrictions within ten days
after it learns of the same (the "Release Notice"). The Company's delivery
of the Release Notice pursuant to this subsection shall be treated as the
delivery of a Section 12(c) Put Notice in accordance with Section 12(c)(ii)
above for the purpose of establishing the Closing Date for the redemption
sale, and the Company shall thereafter be required to purchase, and the
CCMI Holder shall be required to sell, the Coastal Group
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Membership Interest in accordance with the provisions of Section 12(c)(ii).
The redemption price thereof shall be the same as that which would have
been paid pursuant to Schedule A hereof if such redemption had not been
delayed.
iv. If the Company's redemption of the Coastal Group Membership
Interest pursuant to this Section 12(c) is delayed pursuant to subsection
(iii) above, the Company shall pay Executive additional compensation under
Section 11 above (or, in the event of the exercise of a put pursuant to
Section 12(c)(1)(E) above which is not accompanied by Executive's
termination of employment with the Company, under Section 6 above),
commencing sixty (60) days from the date of the Company's receipt of the
CCMI Holder's Put Notice (the "Deferral Commencement Date") until the date
of the Company's Release Notice (the "Put Deferral Compensation"). The Put
Deferral Compensation shall be payable monthly to coincide with payment
dates under the Company's normal payroll practices, and shall be calculated
from the Deferral Commencement Date until such a date that is six (6)
months from that date (the "Initial Penalty Period") as follows: (x) the
percentage rate equal to the weighted average annual interest rate on all
privately-held subordinated debentures and notes issued by the Company and
outstanding on the Date of Termination, which shall be weighted based on
the respective principal amounts outstanding, (y) divided by twelve, and
(z) multiplied by the redemption price payable pursuant to Schedule A
hereof. If the Release Notice is not received on or before the expiration
of the Initial Penalty Period, then from the end of the Initial Penalty
Period until a date that is six (6) months after the end of the Initial
Penalty Period (the "Secondary Penalty Period"), the Put Deferral
Compensation shall be calculated by increasing the percentage rate
determined in (x) above by four percent (4%). If the Release Notice is not
received on or before the secondary Penalty Period, then from the end of
the Secondary Penalty Period, the Put Deferral Compensation shall be
calculated by increasing the percentage rate determined in (x) above, by
eight percent (8%). The Put Deferral Compensation shall be adjusted to
reflect any partial months during the payment period.
v. From and after the Company's receipt of the CCMI Holder's Put
Notice under this Section 12(c), the Company agrees to indemnify, defend
and hold harmless the Executive from and against any loss, claims, damages,
expenses, liabilities or costs (including reasonable attorneys' fees)
(collectively, "Claims") suffered or incurred by the Executive in his
capacity as Guarantor under that Limited Guaranty made by Executive to
General Electric Capital Corporation in connection with that Assumption and
Amendment Agreement #2 dated of even date herewith among GECC, the Company
and certain Coastal Group Members; provided, that Executive delivers
written notice of any Claim to the Company within 10 days of his incurring
or suffering the same.
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(d) Company's Call Options. In the event the Initial Term
Unconditional Put Right has not been exercised, and only in such event, the
Company shall have the right, at its sole option and election, to redeem
all, but not less than all, of the Coastal Credit Membership Interest held
by the CCMI Holder at the redemption price calculated in accordance with
Schedule A hereto, in the following events: (i) the Executive's termination
of his employment for any reason except for Good Reason; or (ii) the
Company's termination of Executive's employment for Cause. The Company may
exercise its redemption right by delivering written notice to Executive on
or before sixty (60) days after the Date of Termination, stating that the
Company elects to redeem all, but not less than all, of the Coastal Credit
Membership Interest in accordance with the provisions of this Section. The
closing of the redemption sale shall take place in accordance with the
terms set forth in Section 12(c) above. All rights of the CCMI Holder to
the Coastal Credit Membership Interest, except for the right to receive its
redemption price therefor in accordance herewith, shall cease on the
Closing Date.
Executive, as sole equity owner of Coastal Credit and any Affiliate which
may hold the Coastal Credit Membership Interest, shall cause Coastal Credit
or any such Affiliate to comply with the provisions of this Section 12.
Executive represents and warrants to the Company that, for as long as the
CCMI Holder is a Member of the Company, he will not transfer any interest
or issue additional securities in such CCMI Holder to a third party unless
he first obtains the Company's written consent thereto, which consent shall
not be unreasonably withheld.
13. Non-Compete; Confidentiality. Executive acknowledges and agrees that,
during the Term hereof and for a period of two years after the Date of
Termination or expiration of the Term of this Agreement, he is subject to the
non-compete covenants set forth in Section 6(I) of the Asset Purchase Agreement.
Notwithstanding the foregoing or anything in any other agreement (written or
oral) between the parties to the contrary, if Executive's employment is
terminated by the Company other than for Cause, by Executive for Good Reason, or
if this Agreement is terminated by reason of the Company's notice of
non-renewal, then Executive shall only be subject to the non-compete covenants
set forth in Section 6(I) of the Asset Purchase Agreement for as long as the
Company pays to Executive the salary and benefits set forth in this Agreement.
(a) Except as provided in the next two sentences, Executive covenants
and agrees that all information, knowledge or data of or pertaining to the
Company or any of its Affiliates, or pertaining to any other Person with
which they or any of them may do business during the Term and which is not
generally known in the relevant trade or industry (and whether relating to
methods, merchandising, processes, techniques, discoveries, pricing, sales
practices, marketing or any other proprietary matters) (the "Company
Information") shall be kept secret and confidential at all times during and
after the termination or expiration of this Agreement and shall not be used
or divulged by him outside the
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scope of his employment as contemplated by this Agreement, except as the
Managers of the Company may otherwise expressly authorize. In the event
that Executive is requested in a judicial, administrative or governmental
proceeding to disclose any of the Company Information, Executive will
promptly so notify the Company so that the Company may seek a protective
order at the Company's expense or other appropriate remedy and/or waive
compliance with this Agreement. If such protective order or other remedy is
not obtained or the Company waives compliance with this Agreement and
disclosure of any of the Company Information is required, Executive may
furnish the material so required to be furnished, but Executive will
furnish only that portion of the Company Information which is legally
required and will exercise his best efforts to obtain a protective order or
other reliable assurance that confidential treatment will be accorded the
Company Information furnished.
14. Non-Solicitation/No-Hire. Executive agrees and acknowledges that the
services of Executive pursuant to this Agreement are unique and extraordinary,
and that the Company and its Affiliates will be dependent upon Executive for the
development and growth of their business and related functions. If Executive's
employment with the Company is terminated for any reason, Executive agrees, for
a period of two years following the Date of Termination or expiration of the
Term of this Agreement, not to conduct or participate (directly or indirectly,
including through one or more Affiliates) in:
(a) Hiring, attempting to hire or assisting any other Person in hiring
or attempting to hire, or inducing to leave the employ of the Company, any
employee or officer of the Company, or any person who was an employee or
officer of the Company within the six-month period prior to the Date of
Termination or expiration of the Term of this Agreement; provided, however,
that Executive may seek to hire Xxxx Xxxxx, if she is still employed by the
Company, at any time after six months following the Date of Termination or
expiration of the Term of this Agreement;
(b) Soliciting the business on behalf of himself or any other person
with respect to a Competitive Business (as defined in Section 6(H)(1) of
the Asset Purchase Agreement) of the Company or Regions First of either:
(i) any vehicle dealers who were clients of the Company or the Coastal
Group during the 12-month period prior to the Date of Termination (a
"Specific Client"); or (ii) any Person whose business Executive (on behalf
of the Company or otherwise) solicited by multiple contacts during the
six-month period prior to the Date of Termination (a "Specific Contact");
or
(c) Any activity for any Specific Client or Specific Contact which is
the same as or similar to those activities Executive performed for the
Company during the three-year period prior to the Date of Termination.
Executive agrees that if Executive acts in violation of this Section, the
number of days Executive is in such violation will be added to any periods of
limitation on Executive's activities specified herein. In addition, Executive
agrees that during the duration of this
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Agreement and during the period of limitation on Executive's activities
specified in this Section, Executive shall promptly deliver a true and correct
copy of this Agreement to any prospective employer or business partner of
Executive.
15. Monies Owed to the Company. Upon the termination of Executive's
employment with the Company, Executive hereby authorizes the Company to deduct
from Executive's final wages or other monies due to Executive all debts or
financial obligations owed to the Company by Executive.
16. Remedies. Executive understands and agrees that the Company will be
irreparably damaged in the event that Sections 13 or 14 of this Agreement are
violated. Executive agrees that the Company shall be entitled (in addition to
any other remedy to which it may be entitled, at law or in equity) to an
injunction to redress breaches of such Sections of this Agreement and to
specifically enforce the terms and provisions thereof.
17. Successors and Assigns. This Agreement is a personal contract, and the
rights and interests of Executive hereunder and under the awards and plans
referred to herein may not be sold, transferred, assigned, pledged, encumbered,
or hypothecated by him, except as may be expressly permitted by the provisions
of such awards or plans and that payments due Executive hereunder shall be
payable to his heirs or fiduciaries upon his death. Except as may be expressly
provided otherwise herein, this Agreement shall be binding upon the Company and
inure to the benefit of the Company and its Affiliates, and its successors and
assigns, including (but not limited to) any corporation or other entity which
may acquire all or substantially all of the Company's assets or business or into
or with which the Company or an Affiliate may be consolidated or merged.
18. Jurisdiction and Governing Law. Any controversy or claim arising out of
or relating to this Agreement, or any breach thereof shall be governed by and
construed in accordance with the laws of the Commonwealth of Virginia, without
giving effect to principles of conflicts of laws thereof.
19. Entire Agreement. This Agreement, the Asset Purchase Agreement and the
Operating Agreement contain all the understandings between the parties hereto
pertaining to the matters referred to herein, and supersede all undertakings and
agreements, whether oral or in writing, previously entered into by them with
respect thereto; Company and Executive are not relying on any such prior
agreements or understandings in entering into this Agreement. No representations
or warranties of any kind or nature relating to the Company or any Affiliate or
their respective businesses, assets, liabilities, operations, future plans or
prospects have been made by or on behalf of the Company or any Affiliate to
Executive, nor have any representations or warranties of any kind or nature been
made by Executive to the Company or any Affiliate.
20. Amendment or Modification, Waiver. No provision of this Agreement may
be amended or waived unless such amendment or waiver is agreed to in writing,
signed by Executive and by a duly authorized officer of the Company. No waiver
by any party hereto of any breach by another party hereto of any condition or
provision of this Agreement to be performed by such other party shall be deemed
a waiver of a similar or dissimilar condition or provision at the same time, any
prior time or any subsequent time.
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21. Notices. Any notice to be given hereunder shall be in writing and
delivered personally or by overnight courier or sent by registered or certified
mail, postage prepaid, return receipt requested, addressed to the party
concerned at the address indicated below or to such other address as such party
may subsequently give notice of hereunder in writing:
To:
Xxxxxxx. X. XxXxxxxx
2442 Ship's Watch Court
Xxxxxxxx Xxxxx, Xxxxxxxx 00000
With a copy to:
Xx. Xxxxxx X. Xxxxxx
Xxxxx & Stant, P.C.
Xxx Xxxxxxxx Xxxxxx
Xxxxxxxx Xxxxx, Xxxxxxxx 00000
Facsimile: (000) 000-0000
To:
Coastal Acquisition, L.L.C.
00 Xxxxxxxxx Xxxx
Xxxxxxx Xxxxx, Xxx Xxxxxx 00000-0000
Attention: Xxxxxxx X. Xxxxx
Facsimile: (000) 000-0000
With a copy to:
Lord, Bissell & Brook
000 Xxxxx XxXxxxx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000
Attention: Xxxxx X. Xxxxx
Facsimile: (000) 000-0000
Any notice delivered personally shall be deemed given on the date delivered, any
notice transmitted by fax machine shall be deemed delivered upon receipt of
confirmation of fax transmission, any notice delivered by overnight courier
shall be deemed given the day after deposit with a courier, and any notice sent
by registered or certified mail, postage prepaid, return receipt requested,
shall be deemed given three days after mailing.
22. Severability. If any provision of this Agreement or the application of
any such provision to any party or circumstances shall be determined by any
court of competent jurisdiction to be invalid and unenforceable to any extent,
the remainder of this Agreement or the application of such provision to such
person or circumstances other than those to which it is so determined to be
invalid and unenforceable, shall not be affected thereby, and each provision
hereof shall be validated and shall be enforced to the fullest extent permitted
by law.
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23. Survivorship. The respective rights and obligations of the parties
hereunder shall survive any termination of this Agreement to the extent
necessary to the intended preservation of such rights and obligations.
24. Headings. All descriptive headings of sections and paragraphs in this
Agreement are intended solely for convenience, and no provision of this
Agreement is to be construed by reference to the heading of any section or
paragraph.
25. Withholding Taxes. All payments to Executive under this Agreement shall
be reduced by any applicable federal, state or city withholding taxes.
This Agreement may be executed in counterparts, each of which shall be
deemed an original and all of which together shall be one and the Same
agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
COASTAL ACQUISITION, L.L.C.
By: /s/ Xxxxxxx X. Xxxxx
----------------------------------------
Xxxxxxx X. Xxxxx, Manager
/s/ Xxxxxxx X. XxXxxxxx
----------------------------------------
Xxxxxxx X. XxXxxxxx
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