EMPLOYMENT AGREEMENT
AGREEMENT made as of the 1st day of January, 1996, by and between
ENVIROTEST SYSTEMS CORP., a Delaware corporation with an office at 000
Xxxxxxxx Xxx, Xxxxxxxxx, Xxxxxxxxxx 00000 (hereinafter referred to as the
"Company"), and XXXXX XXXXXX, an individual residing at 5072 Placita Xxxx,
Xxxxxx, Xxxxxxx 00000 (hereinafter referred to as the "Employee").
W I T N E S S E T H:
WHEREAS, the Company desires to retain the services of the Employee, and
the Employee desires to be employed by the Company, upon the terms and
conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and agreements hereinafter contained, the parties hereby agree as follows:
1. EMPLOYMENT AND TERM.
(a) The Company shall employ the Employee, and the Employee shall
serve the Company, upon the terms and conditions hereinafter set forth.
(b) The employment of the Employee by the Company hereunder shall
commence as of the date hereof and, unless sooner terminated in the manner as
herein provided, shall terminate on the third anniversary hereof (the
"Term"); PROVIDED, HOWEVER, that the Term shall automatically be extended for
two (2) years on the terms and conditions provided herein unless either party
shall give the other party no less than 90 days' written notice prior to the
expiration of the applicable term of employment.
2. DUTIES. During the Term, the Employee shall serve as Vice President
- Marketing of the Company, faithfully and to the best of his ability, and
perform such duties and have such responsibilities and authority as are
consistent with (i) his position and status as Vice President -Marketing of
the Company and (ii) the practices and policies of the Company generally
applicable to executive employment arrangements. The Employee shall report
directly to the President and Chief Executive Officer of the Company.
3. SALARY. During the first year of the Term of his employment
hereunder, the Company shall pay to the Employee a salary for his services at
a rate of $182,000 per annum, payable in accordance with the regular payroll
practices of the Company. For the second and third years of the Term, and if
the Term is extended for an additional period as provided in Paragraph 1(b)
of this Agreement, then during each subsequent year after the first year of
the Term the Company shall pay a salary for the Employee's service at a rate
of the previous year's salary for the immediately preceding year, increased
by the greater of (i) five percent (5.0%) or (ii) the aggregate
monthly percentage increase in the Consumer Price Index for all Urban
Consumers (CPI-U) for the United States, All Items (1982-1984 = 100),
published by the U.S. Department of Labor, after taking into account any
revisions, for the most recent twelve months for which the Consumer Price
Index data is published prior to the first day of such additional year.
4. BONUS ARRANGEMENT; STOCK OPTIONS.
(a) In addition to the salary provided for in Paragraph 3 of this
Agreement, the Employee is eligible to participate in the Company's bonus and
other compensation plans for the Company's employees of like classification
during the term of employment hereunder. Employee shall not be eligible for
payment under such a plan if his employment is terminated for cause.
(b) In the event that a "change of control" of the Company occurs
during the Term, one hundred percent (100%) of all options granted to the
Employee prior to the date on which such change of control occurs shall vest
upon such change of control and may be exercised by the Employee at any time
during the ninety (90) day period commencing upon the date such change of
control occurs. Change of control shall have the meaning set forth in
Exhibit I hereto.
5. EMPLOYEE BENEFITS AND PERQUISITES. During the Term, the Company
will provide to the Employee the following benefits and/or perquisites:
(a) The Employee shall be a participant in all benefit programs
provided for the Company's management executives of like classification,
including, but not limited to, insurance, retirement, tax-deferred plans,
health and other benefit plans (including the Medical Reimbursement Program)
for which he qualifies.
(b) The Employee shall be entitled to receive fringe benefits and
perquisites (other than the above-mentioned employee benefit plans and
programs) in the aggregate substantially equivalent to those provided to the
Company's management executives of like classification, including vacation
time and reasonable sick leave.
(c) The Employee shall be entitled to an insurance policy on his
life in the amount of $1 million for a beneficiary named by the Employee.
(d) During the Term, the Company shall furnish to the Employee an
automobile of the Company's reasonable choice. The Company shall pay for all
expenses associated with the use, operation and enjoyment of the automobile
(including insurance coverage but exclusive of gasoline expense).
(e) It is understood that, at the Company's request, the Employee
will be relocating to the Company's headquarters in Sunnyvale, California.
It is understood and agreed by the Company that the Employee because of his
family's preference to remain in Arizona does not intend to relocate his
family to Sunnyvale. In lieu of the standard relocation package it is agreed
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that the Company will pay the Employee a relocation grant of money equal to
the estimated cost of relocation per the Company's standard relocation policy
for an employee of Xx. Xxxxxx'x position of Vice President. It will then be
Xx. Xxxxxx'x responsibility to secure and fund living accommodations in the
Sunnyvale area. Attachment I provides the agreed upon estimate of relocation
costs which Xx. Xxxxxx would likely incur if he were to relocate his primary
residence from Arizona to the Sunnyvale area. It is agreed that this total
amount of money will be paid to Xx. Xxxxxx in three equal annual installments
effective with the date of the agreement. In the event of the death or
termination under Paragraph 8(b) of this agreement or departure because of
permanent disability per Paragraph 6 of this agreement it is agreed that Xx.
Xxxxxx or his estate will receive the agreed upon total of the estimated
relocation costs.
6. PERMANENT DISABILITY. In the event of the permanent disability (as
hereinafter defined) of the Employee during the Term, the Company shall have
the right, upon written notice to the Employee, to terminate his employment
hereunder, effective upon the giving of such notice. Upon such termination,
the Company shall be discharged and released from any further obligations
under this Agreement, except for the obligation to pay salary and other
benefits pursuant to Paragraph 8(b) of this Agreement. Disability benefits
due under applicable plans and programs of the Company shall be determined
under the provisions of such plans and programs. For purposes of this
Paragraph 6, "permanent disability" shall be defined as any physical or
mental disability or incapacity which renders the Employee unable to execute
his duties hereunder for 180 consecutive days or an aggregate period of more
than 210 days in any twelve (12) month period.
7. DEATH. In the event of the death of the Employee during the Term,
the salary and other benefits to which the Employee is entitled pursuant to
Paragraph 8(b) hereof shall be paid to the beneficiary so designated by the
Employee by written notice to the Company or, failing such designation, to
his estate. The Employee shall have the right to name, from time to time,
any one person as beneficiary hereunder or, with the consent of the Board, he
may make other forms of designation of beneficiary or beneficiaries. The
Employee's designated beneficiary or personal representative, as the case may
be, shall accept the payments provided for in this Paragraph 7 in full
discharge and release of the Company of and from any further obligations
under this Agreement. Any other benefits due under applicable plans and
programs of the Company shall be determined under the provisions of such
plans and programs.
8. TERMINATION AND EXPIRATION OF EMPLOYMENT.
(a) The Employee's employment hereunder may be terminated by the
Company for "cause" at any time. Termination of employment for "cause" shall
mean termination upon (1) the willful failure by the Employee to materially
perform his duties with the Company or to follow the instructions of the
Board (other than any such failure resulting from his incapacity due to
physical or mental illness), (2) the willful engaging by the Employee in
conduct that is materially injurious to the Company, monetarily or otherwise,
(3) the commission of any act of fraud, theft or dishonesty by the Employee
against the Company, (4) the conviction of the Employee of (or the pleading
by the Employee of NOLO CONTENDERE to) any felony, fraud or embezzlement or
(5) any
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willful breach by the Employee of the terms of this Agreement, unless any
such breach of this Agreement by the Employee that is capable of being
corrected is corrected in all material respects within thirty (30) days
following written notification by the Company to the Employee that the
Company intends to terminate the employment of the Employee hereunder by
reason of a willful breach of this Agreement for cause as specified in such
written notice to the Employee.
If the Employee is terminated for "cause," the Company shall have no
further obligations under this Agreement, except for the obligation to pay
all salary and other benefits earned but unpaid to the date of termination,
and all options granted to the Employee and not exercised prior to the date
of such termination shall be extinguished on the date of such termination.
(b) If (i) the Company terminates the employment of the Employee
during the Term other than for "cause" (as defined in Paragraph 8(a) of this
Agreement), or (ii) during the Term there is a change in control of the
Company and the successor entity (or purchaser) does not accept an assignment
of this Agreement, or (iii) the terms of the Employee's employment are
materially adversely changed or his duties and responsibilities are
materially diminished, following a change of control or otherwise (including,
by way of example and not by limitation, by reason of the Employee ceasing to
be a Vice President-Marketing of the Company), whereupon, in the case of this
clause (iii), the Employee shall have the right to consider his employment
hereunder to have been terminated by the Company by giving written notice to
the Company within 10 business days after the date on which the Employee
believes that such adverse change has occurred, the action(s) constituting
such adverse change or diminution, and the fact that he is terminating this
Agreement pursuant to this Paragraph 8(b)(iii), then (A) the Company shall
retain Employee and Employee agrees to serve as a consultant to the Company
for the longer of the remainder of the term or eighteen (18) months
("Consulting Period"); (B) the Employee's options shall vest as set forth in
Section 4(b) above; and (C) the Employee shall be entitled to continue to
receive (1) on the same schedule as was in existence prior to such
termination, payment of his base salary and all other benefits to which he is
entitled for the Consulting Period and (2) the pro rata portion of any bonus
earned by the Employee for the fiscal year in which the termination occurred.
9. CONFIDENTIALITY; INJUNCTIVE RELIEF.
(a) Recognizing that the knowledge, information and relationship
with customers, suppliers and agents, and the knowledge of the Company's
business methods, systems, plans and policies which he may hereafter receive
or obtain as an employee of the Company, are valuable and unique assets of
the Company, the Employee agrees that, during and after the Term, he shall
not (otherwise than pursuant to his duties hereunder) disclose, without the
prior written approval of the Board, any such knowledge or information
pertaining to the Company, its business, personnel or policies, to any
person, firm, corporation or other entity, for any reason or purpose
whatsoever. The provisions of this Paragraph 9(a) shall not apply to (i)
information which is or shall become generally known to the public or the
trade, or information which is or shall become available in trade or other
publications (except by reason of the Employee's breach of his obligations
hereunder) and (ii) information which the Employee is required to disclose by
law or by a governmental entity
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or by an order of a court of competent jurisdiction or pursuant to a subpoena
from such a court or agency. If the Employee is required by law or a court
order to disclose such information, he shall notify the Company of such
requirement and provide the Company an opportunity to contest such law or
court order.
(b) The Employee acknowledges that the services to be rendered by
him are of a special, unique and extraordinary character and, in connection
with such services, he will have access to confidential information vital to
the Company's business. By reason of this, the Employee consents and agrees
that if he violates any of the provisions of this Agreement with respect to
confidentiality, the Company would sustain irreparable harm and, therefore,
in addition to any other remedies which the Company may have under this
Agreement or otherwise, the Company shall be entitled to apply to any court
of competent jurisdiction for an injunction restraining the Employee from
committing or continuing any such violation of this Agreement, and the
Employee shall not object to any such application.
10. REPRESENTATION, WARRANTY AND COVENANT OF THE EMPLOYEE. The
Employee represents, warrants and covenants to the Company that he is not and
will not during the Term become a party to any agreement, contract or
understanding, whether employment or otherwise, which would in any way
restrict or prohibit him from undertaking or performing his employment in
accordance with the terms and conditions of this Agreement.
11. REPRESENTATION AND WARRANTY OF THE COMPANY. The Company
represents and warrants that this Agreement constitutes a valid and legally
binding obligation of the Company, enforceable in accordance with the terms
herein set forth, except to the extent that the enforceability of this
Agreement may be affected by bankruptcy, insolvency, reorganization,
moratorium, or similar laws affecting creditors' rights and remedies
generally and subject, as to enforceability, to general principles of equity,
including principles of commercial reasonableness, good faith and fair
dealing (regardless of whether enforcement is sought in a proceeding at law
or equity).
12. DEDUCTIONS AND WITHHOLDING. The Employee agrees that the Company
shall withhold from any and all payments required to be made to the Employee
pursuant to this Agreement, all federal, state, local and/or other taxes
which the Company determines are required to be withheld in accordance with
applicable statutes and/or regulations from time to time in effect.
13. ENTIRE AGREEMENT. This Agreement, together with the other
agreements specifically referred to herein, sets forth the entire agreement
and understanding of the parties, and cancels and supersedes any and all
prior agreements and understandings (whether written or oral) between the
parties hereto, with respect to the employment of the Employee by the
Company, and no statement, representation, warranty or covenant has been made
by either party with respect thereto except as expressly set forth herein.
14. NOTICES. All notices, requests, demands and other communications
hereunder shall be in writing and shall be delivered personally or sent by
registered or certified mail, return receipt
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requested, to the other party hereto at his or its address as set forth at
the beginning of this Agreement. Either party may change the address to which
notices, requests, demands and other communications hereunder shall be sent
by sending written notice of such change of address to the other party.
15. ASSIGNABILITY, BINDING EFFECT AND SURVIVAL. This Agreement shall
inure to the benefit of and shall be binding upon the heirs, executors,
administrators, successors and legal representatives of the Employee, and
shall inure to the benefit of and be binding upon the Company and its
successors and assigns. Notwithstanding the foregoing, the obligations of
the Employee may not be delegated and, except as expressly provided in
Paragraph 7 hereof relating to the designation of beneficiaries, the Employee
may not assign, transfer, pledge, encumber, hypothecate or otherwise dispose
of this Agreement, or any of his rights hereunder, and any such attempted
delegation or disposition shall be null and void and without effect. The
provisions of Paragraphs 6, 7, 8, 9, 21 and 22 hereof shall survive
termination of this Agreement.
16. AMENDMENT. This Agreement shall not be altered, modified, amended
or terminated except by written instrument signed by each of the parties
hereto. Waiver by either party hereto of any breach hereunder by the other
party shall not operate as a waiver of any other breach, whether similar to
or different from the breach waived.
17. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA WITHOUT REGARD TO THE
PRINCIPLES OF CONFLICTS OF LAW.
18. PARAGRAPH HEADINGS. The paragraph headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
19. 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.
20. ARBITRATION. The parties agree that any disputes that may arise in
connection with, arising out of or relating to this Agreement, or any dispute
that relates in any way, in whole or in part, to the Employee's employment
with the Company, the termination of that employment or any other dispute by
and between the parties or their successors or assigns, will be submitted to
binding arbitration in Los Angeles, California according to the rules and
procedures of the American Arbitration Association and California Code of
Civil Procedure Section 1283.05. The parties agree that each will bear his
or its own attorney's fees and costs in connection with any such arbitration
and each party will pay half of any costs associated with the arbitration.
This arbitration obligation
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extends to any and all claims that may arise by and between the parties or
their successors, assigns or affiliates, and expressly extends to, without
limitation, claims or causes of action for wrongful termination, impairment
of ability to compete in the open labor market, breach of an express or
implied contract, breach of any collective bargaining agreement, breach of
the covenant of good faith and fair dealing, breach of fiduciary duty, fraud,
misrepresentation, defamation, slander, infliction of emotional distress,
disability, loss of future earnings, and claims under the California
Constitution, the United States Constitution, and applicable state and
federal fair employment laws, federal equal employment opportunity laws, and
federal and state labor statutes and regulations, including, but not limited
to, the Civil Rights Act of 1964, as amended, the Fair Labor Standards Act,
as amended, the Americans With Disabilities Act of 1990, the Rehabilitation
Act of 1973, as amended, the Employee Retirement Income Security Act of 1974,
as amended, and the Age Discrimination in Employment Act of 1967.
21. CONSULTING SERVICES.
(a) For a period of one (1) year after the Employee ceases to be
employed by the Company (the "Additional Consulting Period"), at the
discretion of the Company (which discretion should be exercised within 30
days following the end of the Term), the Company may elect to retain Employee
and Employee agrees to serve as a consultant to the Company. During the
Additional Consulting Period, Employee shall be available to provide such
consulting services to the Company as the Company may reasonably desire.
(b) During the Additional Consulting Period, if the Company has elected
to retain the Employee to serve as a consultant to the Company, the Employee
shall receive consulting fees in an amount equal to Employee's base salary
then in effect, less any appropriate deductions, that shall be paid in
accordance with the Company's ordinary payroll practices.
22. NONCOMPETITION. During (i) the Term of this Agreement, (ii) the
Consulting Period, if any, under Paragraph 8(b) hereof, and (iii) the
Additional Consulting Period, if the Company has elected to retain the
Employee to serve as a consultant to the Company, the Employee shall not,
directly or indirectly, without the prior written consent of the Company,
provide consultation services or otherwise provide services to (whether as an
employee or a consultant, with or without pay), own, manage, operate, join,
control, participate in, or be connected with (as a stockholder, partner, or
otherwise), any business, individual, partner, firm, corporation, or other
entity that is then a competitor of the Company, including any entity engaged
in the business of providing vehicle emissions testing services or services
directly related thereto that comprise a material portion of the Company's
business or any other business that is definitely planned by or that is under
development by the Company or any of its affiliates during the Employee's
employment (if Employee is currently employed) or at the time of the
Employee's date of termination (each such competitor a "Competitor of the
Company"); PROVIDED, HOWEVER, that the "beneficial ownership" by the
Employee, either individually or as a member of a "group" (as such terms are
used in Section 13(d) of the Securities Exchange Act of 1934 (the "Exchange
Act") and
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Regulation 13D under the Exchange Act) of not more than five percent (5%) of
the voting stock of any publicly held corporation shall not alone constitute
a violation of this Agreement.
It is further expressly agreed that the Company will or would suffer
irreparable injury if the Employee were to compete with the Company or any
subsidiary or affiliate of the Company in violation of this Agreement and
that the Company would by reason of such competition be entitled to
injunctive relief in a court of appropriate jurisdiction, and the Employee
further consents and stipulates to the entry of such injunctive relief in
such a court prohibiting the Employee from competing with the Company or any
subsidiary or affiliates of the Company in violation of this Agreement.
IN WITNESS WHEREOF, the parties hereto set their hands as of the day and
year first above written.
ENVIROTEST SYSTEMS CORP.
By: /s/ Xxxxxxx X. Xxxxxxxxx
-------------------------------------
Its: Chairman of the Board of Directors
/s/ Xxxxx Xxxxxx
------------------------------------------
Xxxxx Xxxxxx, Individually
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EXHIBIT I
"Change of Control" means (i) any sale, transfer or other conveyance
(other than to the Company or a wholly owned Subsidiary of the Company),
whether direct or indirect, of all or substantially all of the assets of the
Company, on a consolidated basis, in one transaction or a series of related
transactions, if, immediately after such transaction, any "person" or "group"
becomes the "beneficial owner," directly or indirectly, of more than 50% of
the total voting power entitled to vote in the election of directors,
managers or trustees of the transferee, (ii) any "person" or "group" is or
becomes the "beneficial owner," directly or indirectly, of more than 50% of
the total voting power of the Voting Stock then outstanding, or (iii) during
any period of 24 consecutive months, individuals who at the beginning of such
period constituted the Board of Directors of the Company (together with any
new directors whose election by such Board or whose nomination for election
by the shareholders of the Company was approved by a vote of a majority of
the directors then still in the office who were either directors at the
beginning of such period or whose election or nomination for election was
previously so approved), cease for any reason to constitute a majority of the
Board of Directors of the Company then in office.
For purposes of this definition, (i) the terms "person" and "group" shall
have the meanings used for purposes of Rules 13d and 13d-5 of the Exchange
Act, whether or not applicable; PROVIDED that no Excluded Person and no
person or group controlled by Excluded Persons shall be deemed to be a
"person" or "group" and (ii) the term "BENEFICIAL OWNER" shall have the
meaning used in Rules 13d-3 and 13d-5 under the Exchange Act, whether or not
applicable, except that a person shall be deemed to have "beneficial
ownership" of all shares that any such person has the right to acquire,
whether such right is exercisable immediately or only after the passage of
time or upon the occurrence of certain events.
"Voting Stock" means the Capital Stock of the Company having generally
the right to vote in the election for a majority of the directors of the
Company.
"Excluded Person" means any beneficial holder of 5% or more of any class
of common stock of the Company outstanding immediately prior to the
consummation of the initial underwritten public offering by the Company of
3,400,000 shares of the Company's Class A Common Stock in April 1993.
ATTACHMENT I
X. XXXXXX
ESTIMATED COST OF RELOCATION
Projected sale price of Tucson house based on current market and
real estate agent input = $525,000
HOME SALE COSTS
Commission @ 6% = $31,500
Other Sale Expenses @ 1% of sell price = $5,250
NEW HOUSE PURCHASE COSTS
Assume purchase cost of $600,000
Assume 20% down payment; mortgage amount = $480,000
Loan Fee (2%) = $9,600 (Not subject to gross up)
Assume other purchase costs @ 1% of purchase price = $6,000
FURNITURE/VEHICLE MOVE
= $10,000
60 DAY TEMPORARY LIVING
2 months apartment rental @ $2,500 = $5,000
Meals @ $30 day x 3 (use $75 total) = $4,500
AIRFARE TO SAN XXXX
($114x3) = $542
HOUSE HUNTING TRIPS (2)
Airfare ($238 RDTP x 4) = $952
Hotel and meal expense for 2 total 10 days - $1,850
TOTAL EXPENSES SUBJECT TO GROSS UP = $65,052
GROSS UP @ 35% = $ 100,080
ADD LOAN FEE OF 9,600
ADD 1 MONTH SALARY 15,000
=========
$ 124,680
