CONSULTING AGREEMENT
This
Consulting Agreement (“Agreement”) is entered into this 22nd day of June, 2006,
by and between CarMax, Inc., a Virginia corporation (“CarMax”), and Xxxxxx Xxxxx
(“Xxxxx”), an individual residing in the Commonwealth of Virginia.
RECITAL
CarMax
desires to retain Xxxxx to render certain consulting services to CarMax on
the
terms and conditions set forth in this Agreement, and Xxxxx desires to be
retained by CarMax on such terms and conditions.
AGREEMENT
1. Engagement
and Duties.
During
the Term (defined below), Xxxxx shall provide to CarMax the following consulting
services, in each case at the request of the Board of Directors (“Board”) or the
Chief Executive Officer of CarMax: (i) assist in the transition to a new Chief
Executive Officer, (ii) assist CarMax’s Chief Executive Officer in developing
relationships with key constituencies, including employees, investors and
strategic partners, (iii) assist in the development of business opportunities
for CarMax, (iv) assist in the refinement and execution of CarMax’s business
strategy, and (v) be available for consultation on other matters within Xxxxx’x
knowledge and experience relating to the business of CarMax. Xxxxx shall not
be
required to perform services in excess of 20 hours per month under this
Agreement.
2. Manner
of Performance.
Xxxxx
shall perform all services and duties that reasonably may be required of him
pursuant to the terms hereof to the reasonable satisfaction of CarMax acting
in
its sole discretion. Xxxxx shall not take any action that would be adverse
to
CarMax’s business interests or that may subject Xxxxx, CarMax or any of its
affiliates to civil or criminal liability. Xxxxx agrees to comply in full with
all applicable laws, ethical standards, rules and regulations in the course
of
performing his obligations hereunder. Xxxxx agrees that he will comply with
CarMax’s Code of Conduct and represents that, on the date of this Agreement, he
does not have any interest in any entity that would conflict in any manner
with
the performance of services under this Agreement. Subject to the restrictive
covenants contained in Xxxxx’x Employment Agreement dated August 1, 2004 (the
“Employment Agreement”), including the non-disclosure, non-solicitation and
non-compete covenants, Xxxxx may engage in activities on his own behalf or
on
behalf of entities other than CarMax and its affiliates, and may allocate his
time between his obligations under this Agreement and such other activities
in
any manner Xxxxx xxxxx appropriate, so long as Xxxxx’x obligations under this
Agreement are satisfied.
3. Term.
This
term of this Agreement shall commence on August 22, 2006 (the “Effective Date”)
and shall end on August 21, 2008, unless earlier terminated as provided in
Section 9 of this Agreement (the “Term”).
4. Compensation.
As
compensation for Xxxxx’x performance of his services under this Agreement,
CarMax shall pay Xxxxx $10,000 per month (the “Monthly Fee”) during the Term,
payable in arrears on the last day of the month, provided, however, that
payments for the first
six
months shall be accumulated and paid no earlier than the first day of the
seventh month following the Effective Date. CarMax shall pay a prorated portion
of the Monthly Fee upon termination of this Agreement if such termination occurs
other than at the end of a month. CarMax shall deliver each payment to Xxxxx
within seven calendar days after the end of each month.
5. Benefits.
(a) Health
Benefits.
(i) Xxxxx
has
indicated that he plans to elect to continue his group health benefits (medical
and dental) in accordance with the Consolidated Omnibus Budget Reconciliation
Act of 1986, as amended (such law referred to herein as “COBRA”, and the
continuation of coverage under COBRA referred to herein as “COBRA Coverage”).
Assuming that Xxxxx so elects and subject to Xxxxx’x timely completion of
election forms, COBRA Coverage will begin on the first day of the month
immediately following the month in which Xxxxx’x employment with CarMax ends
and, subject to any change in COBRA or other applicable law and the provisions
of this Agreement, shall remain in effect for a period of up to 18 months
(“COBRA Coverage Period”). The parties acknowledge that the COBRA Coverage
Period and the Term may commence on different dates and that the COBRA Coverage
Period will end prior to the expiration of the Term. If Xxxxx does not elect
to
continue his group health benefits under COBRA, then CarMax shall have no
obligation to Xxxxx with respect to health benefits by virtue of this Agreement.
(ii) In
connection with the COBRA Coverage and for the duration of the COBRA Coverage
Period, Xxxxx shall be responsible for an amount equal to what Xxxxx would
have
otherwise paid if he had remained an active employee of CarMax (“Xxxxx
Premium”), and CarMax shall be responsible for the remaining costs, including
the COBRA administration fee, relative to Xxxxx’x COBRA Coverage (“CarMax
Premium”). Xxxxx, however, shall be responsible for remitting full payment in an
amount that represents the sum of the Xxxxx Premium and the CarMax Premium
to
the COBRA administrator in accordance with COBRA requirements. The parties
shall
mutually determine the process by which Xxxxx receives reimbursement from CarMax
for the CarMax Premium remitted by Xxxxx. CarMax shall advise Xxxxx of the
Xxxxx
Premium amount and the CarMax Premium amount, and shall also advise Xxxxx of
any
changes in these amounts during the COBRA Coverage Period as soon as such
amounts are determined. Xxxxx acknowledges that the Xxxxx Premium is subject
to
increase during the COBRA Coverage Period.
(iii) Xxxxx
agrees to complete all COBRA election forms in accordance with COBRA
requirements. Xxxxx further agrees that his failure to complete such election
forms or his failure to remit the Xxxxx Premium and the CarMax Premium to the
COBRA administrator in accordance with COBRA requirements will result in
cancellation of the COBRA Coverage and agrees that, once cancelled, CarMax
shall
have no further obligation hereunder with respect to Xxxxx’x health benefits.
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(iv) If
Xxxxx
obtains coverage independently or obtains or becomes eligible for coverage
under
another/other group health plan(s) (including, but not limited to, those of
a
subsequent employer) that provide(s) for substantially equal or greater benefits
to Xxxxx as the COBRA Coverage, Xxxxx shall notify CarMax immediately and the
COBRA Coverage, and CarMax’s obligations with respect thereto, shall terminate
on the last day of the month in which the new coverage commenced. If Xxxxx
and/or his beneficiaries become entitled to COBRA for a period beyond the COBRA
Coverage Period, Xxxxx and/or his beneficiaries, as applicable, shall be
responsible for any premium, including any COBRA administration fee, relative
to
such COBRA coverage.
(b) Pension
and BRP Plans. Xxxxx’x benefits under the CarMax, Inc. Pension Plan and CarMax,
Inc. Benefit Restoration Plan shall be paid in accordance with the terms
prescribed by those plans.
6. Expenses.
CarMax
shall reimburse Xxxxx for all reasonable expenses incurred by him in connection
with the performance of his services under this Agreement within 30 days
following his delivery of an accounting of those expenses to CarMax in
accordance with CarMax’s then-current travel and business expense
policy.
7. Independent
Contractor Status.
CarMax
is retaining Xxxxx in the capacity of an independent contractor and not as
an
employee or agent of CarMax or any of its affiliates. Xxxxx shall not be
authorized at any time to execute any transaction on behalf of CarMax or any
of
its affiliates. Nothing in this Agreement shall create, or shall be construed
as
creating, any form of partnership, joint venture, employer-employee
relationship, or other affiliation that would permit Xxxxx to bind CarMax or
any
of its affiliates with respect to any matter or would cause CarMax or any of
its
affiliates to be liable for any action of Xxxxx. Neither CarMax nor Xxxxx will
represent to any third party that Xxxxx’x engagement by CarMax hereunder is in
any capacity other than as an independent contractor. Except as provided in
Section 5 of this Agreement, CarMax shall not be obligated to maintain any
insurance for Xxxxx, including, but not limited to, medical, dental, vision,
life, disability, workers compensation or unemployment compensation
insurance.
8. Taxes.
Xxxxx
hereby acknowledges and agrees that, as an independent contractor, he shall
bear
sole responsibility for operating his business, including payments of all taxes
and all other governmental payments required for anyone to operate a business,
including without limitation, the payment of all federal, state and local income
taxes, self-employment FICA (social security) taxes, and unemployment and
workers compensation insurance payments.
9. Termination.
Xxxxx’x
services hereunder will terminate upon the occurrence of any of the following
events:
(a) Xxxxx
dies;
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(b) CarMax,
by written notice to Xxxxx, terminates this Agreement due to Xxxxx’x Disability
(as defined below);
As
used
in this Agreement, the term “Disability” shall mean that, for a period of at
least 60 days during any six consecutive month period on account of a mental
or
physical condition, Xxxxx is unable to perform the essential functions of his
services under this Agreement. The determination of Xxxxx’x Disability shall be
made (i) by a medical physician selected or agreed to by CarMax or (ii) by
CarMax in its reasonable discretion. All costs relating to the determination
of
whether Xxxxx has incurred a Disability shall be paid by CarMax. Xxxxx shall
submit to any examination that is reasonably required by an examining physician
for purposes of determining whether a Disability exists.
(c) CarMax
terminates this Agreement for Cause (as defined below):
As
used
in this Agreement, the term “Cause” shall mean:
(i) Xxxxx’x
conviction of (or plea of guilty or nolo contendere to) (A) any felony or (B)
any misdemeanor involving fraud or dishonesty in connection with the performance
of his services under this Agreement or moral turpitude or Xxxxx’x entry into a
consent decree (or similar arrangement) with any governmental agency or office;
or
(ii) the
willful failure of Xxxxx during the Term to substantially perform his services
under this Agreement (other than any such failure resulting from illness or
Disability); or
(iii) Xxxxx
has
willfully engaged in misconduct which has, or can reasonably be expected to
have, a material adverse effect on CarMax or its business.
For
purposes of this Section 9(c), the Board, in its reasonable discretion, shall
determine whether any action or failure to act by Xxxxx is deemed willful;
provided, however, that no act or failure to act on Xxxxx’x part shall be
considered willful unless Xxxxx acted in bad faith or without a reasonable
belief that Xxxxx’x act or omission was in the best interest of
CarMax.
(d) CarMax
terminates this Agreement for any reason other than for Cause or Disability,
which CarMax may do at any time;
(e) Xxxxx
voluntarily terminates his services due to a material default by CarMax in
the
performance of any of its obligations under this Agreement, which default
remains unremedied by CarMax for a period of 15 days following its receipt
of
written notice thereof from Xxxxx (“Good Reason”); or
(f) Xxxxx
voluntarily terminates his services for any reason other than Good Reason,
which
Xxxxx may do at any time with at least 30 days’ advance notice.
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10. Effects
of Termination.
(a) Upon
termination of Xxxxx’x services hereunder for any reason, CarMax shall promptly
pay Xxxxx that portion of the Monthly Fee earned by him under Section 4 of
this
Agreement during the then-current month and unpaid through the effective date
of
termination.
(b) If
Xxxxx’x services are terminated under Section 9(b), 9(d) or 9(e) of this
Agreement, then CarMax shall perform all of its obligations with respect to
Xxxxx'x health
benefits as described in Section 5(a) as and when they would have been performed
had his services not been terminated; provided, however, CarMax shall not be
required to so perform unless Xxxxx has performed all of his obligations
described in Section 5(a).
(c) If
Xxxxx’x services are terminated under Section 9(a), 9(c) or 9(f) of this
Agreement, then CarMax shall have no further obligations with respect to Xxxxx’x
health benefits as described in Section 5(a) effective as of the date of
termination, including, but not limited to, obligations with respect to any
CarMax Premium. If Xxxxx’x services are terminated under Section 9(c) or 9(f)
and if CarMax has advanced funds to Xxxxx as reimbursement for CarMax Premium
amounts due pursuant to Section 5(a), then Xxxxx shall return such advanced
funds to CarMax within 10 days of the date of termination.
11. Non-Disclosure
of Confidential Information.
Xxxxx
will not make any unauthorized use, publication or disclosure, during and after
the Term, of any information generated or acquired by him during the performance
of his services under this Agreement, including, but not limited to, information
of a confidential or trade secret nature (“Confidential Information”).
Confidential Information includes information not generally known by or
available to the public about or belonging to CarMax or belonging to other
persons to whom CarMax may have an obligation to maintain information in
confidence. Authorization for disclosure of Confidential Information may be
obtained only through CarMax’s General Counsel or designee. Xxxxx will not
disclose to CarMax, or induce CarMax to use, any confidential or trade secret
information or material belonging to others.
12. Ownership
of Intellectual Property Rights.
Xxxxx
hereby assigns, transfers, and conveys to CarMax all right, title and interest
in any and all Intellectual Property (as defined herein) that he may create
in
direct response to a request made in writing by CarMax to create and that he
agrees in writing to create, whether as a sole inventor or originator or as
a
joint inventor or originator with another or others, during the Term.
“Intellectual Property” is defined to mean information of a technical or a
business nature, such as ideas, discoveries, inventions, improvements, trade
secrets, know-how, machines, manufacturing processes, product designs, formulae,
theses, books, computer programs, drawings, lectures, illustrations,
photographs, writings and other works of authorship, customer lists, sales,
profits, financial figures, marketing plans, business methods and the like,
that
are related to the business of CarMax or its affiliates. During and after the
Term, at the request and expense of CarMax, Xxxxx shall execute, acknowledge,
make and deliver to CarMax any and all documents which may be necessary or
desirable to secure for the benefit of CarMax adequate patent and other property
rights in the United States and all foreign countries with respect to any
Intellectual Property owned by or assigned to CarMax under this Agreement.
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13. Restrictive
Covenants.
Xxxxx
acknowledges and agrees that he will comply with the non-competition,
non-solicitation and non-disclosure covenants contained in Articles 8, 9 and
10
of his Employment Agreement during the Term, which Articles shall remain in
full
force and effect in accordance with their terms.
14. Return
of Property.
Before
the end of the Term, Xxxxx shall return all equipment and property in his
possession that belongs to CarMax, including all files and programs stored
electronically or otherwise that relate or refer to CarMax, and all original
and
copies of documents, notes, memoranda or any other written materials that relate
or refer to CarMax, including material that constitutes Confidential
Information, other than information or documents relating to Xxxxx’x CarMax
compensation or benefit plans or programs in which he participates or
participated.
15. Dispute
Resolution.
Except
for actions initiated by CarMax to enjoin a breach by, and/or recover damages
from, Xxxxx related to any violation of Section 11 of this Agreement or of
any
of the restricted covenants referenced in Section 13 of this Agreement, which
CarMax may bring in an appropriate court of law or equity, the parties agree
that any dispute, claim or controversy arising out of or relating to this
Agreement, or the breach, termination or invalidity thereof, shall be resolved
by arbitration administered by the American Arbitration Association and
conducted in accordance with its Commercial Arbitration Rules then in effect,
and judgment on the award rendered by the arbitrator may be entered in any
court
having jurisdiction thereof, subject to the following:
(a) The
place
of arbitration shall be Richmond, Virginia. The law to be applied shall be
the
law of the Commonwealth of Virginia, without regard to its conflict of laws
rules, or federal law, as applicable.
(b) The
arbitrator shall render a reasoned written opinion together with a decision
and
may, to the extent deemed proper and consistent with applicable law, award
costs
to the prevailing party. The arbitrator may not, however, make an award relative
to damages specifically excluded by this Agreement.
(c) Except
as
provided in paragraph (b) above, each party shall be responsible for its own
arbitration costs and expenses. Each party shall pay one-half of the fees and
expenses of the arbitrator.
16. Severability.
If any
provision of this Agreement is held by a court of competent jurisdiction to
be
invalid, void or unenforceable, the remaining provisions shall nevertheless
continue in full force and effect.
17. Ambiguities
in this Agreement.
The
parties acknowledge that this Agreement has been drafted, prepared, negotiated
and agreed to jointly, and to the extent that any ambiguity should appear,
now
or at any time in the future, latent or apparent, such ambiguity shall not
be
resolved or construed against either party.
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18. Notices.
All
notices and other communications hereunder shall be in writing. Any notice
or
other communication hereunder shall be deemed duly given if it is sent by
registered or certified mail, return receipt requested, postage prepaid, and
addressed to the intended recipient as set forth:
If
to
Xxxxx, to his current residence address maintained in CarMax’s
records.
If
to
CarMax, to:
CarMax,
Inc.
00000
Xxxxxxxx Xxxxx Xxxxxxx
Xxxxxxxx,
Xxxxxxxx 00000-0000
Attention:
General Counsel
Any
party
may send any notice or other communication hereunder to the intended recipient
at the address set forth using any other means (including personal delivery,
expedited courier, messenger services, telecopy, ordinary mail or electronic
mail), but no such notice or other communication shall be deemed to have been
duly given unless and until it is actually received by the intended recipient.
Any party may change the address to which notices and other communications
hereunder are to be delivered by giving the other party notice in the manner
set
forth herein.
19. Counterpart
Agreements.
This
Agreement may be executed in multiple counterparts, whether or not all
signatories appear on these counterparts, and each counterpart shall be deemed
an original for all purposes.
20. Choice
of Law.
This
Agreement shall be deemed performable by all parties in the Commonwealth of
Virginia, and the construction and enforcement of this Agreement shall be
governed by Virginia law without regard to its conflict of laws
rules.
21. Entire
Agreement.
This
Agreement sets forth the entire agreement between the parties, and, except
as
otherwise provided herein, fully supersedes any and all prior agreements,
understandings, or representations between the parties pertaining to the subject
matter of this Agreement, except that the parties agree that those provisions
of
Xxxxx’x Employment Agreement that contemplate performance subsequent to the
cessation of Xxxxx’x employment thereunder, including but not limited to
Articles 8, 9 and 10 of the Employment Agreement, shall continue in full force
and effect.
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22. Binding
Effect of Agreement.
This
Agreement shall be binding upon Xxxxx, CarMax and their heirs, administrators,
representatives, executors, successors and permitted assigns.
The
parties have duly executed this Agreement as of the date first written
above.
CARMAX,
INC.
/s/
Xxxxxx X. Xxxxxxxx
Xxxxxx
X.
Xxxxxxxx
President
and Chief Executive Officer
/s/
Xxxxxx Xxxxx
XXXXXX
XXXXX
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