1
Exhibit 10.28
EMPLOYMENT AGREEMENT dated as of May 20, 1998 (the
"Agreement") by and between The Speed Merchant, Inc., a
California corporation d/b/a the Speed Merchant and Competition
Parts Warehouse (the "Company"), and Ray C. Barney (the
"Executive").
INTRODUCTION
Executive was instrumental in the growth and development of the
Company and is expected to make significant future contributions to the
profitability, growth and financial strength of the Company.
Simultaneously with the execution of this Agreement, The J.H.
Heafner Company, Inc., a North Carolina corporation ("Heafner"), is purchasing
100% of the outstanding shares of capital stock of the Company pursuant to a
Stock Purchase Agreement dated as of March 11, 1998 (the "Stock Purchase
Agreement") among Heafner and the Company's stockholders.
Executive and the Company have agreed that it is in their respective
best interests to enter into an agreement providing for the Company's employment
of Executive following the consummation of the transactions contemplated in the
Stock Purchase Agreement, on the terms and subject to the conditions set forth
herein.
In consideration of (i) the purchase and sale of the shares of the
Company's outstanding capital stock, (ii) the Executive's agreement to provide
the services set forth in this Agreement, and (iii) the mutual commitments
contained in this Agreement, the Company and Executive agree as follows:
1. Effective Date. This Agreement shall be effective on the date
hereof (the "Effective Date").
2. Duties. The Company hereby agrees to employ Executive, and
Executive hereby assumes such employment, as chief operating officer of the
Company (with duties equivalent to a Heafner division chief operating officer)
for the "Term of Employment" (defined below). In this capacity, Executive shall
perform such duties consistent with the duties of a senior executive of the
Company as the Board of Directors of the Company (the "Board") shall from time
to time determine, which duties shall, during the period beginning on the
Effective Date and ending on the first-year anniversary of the Effective Date,
be consistent with the intentions expressed in the Stock
2
Purchase Agreement. The duties to be performed by Executive shall be performed
primarily in California, subject to reasonable travel requirements on behalf of
the Company. Executive shall devote substantially all of his working time and
attention to such duties. Executive in each of these capacities agrees to use
his best efforts during the Term of Employment to protect, encourage and promote
the interests of the Company and its affiliates and to aid in the integration of
the Company's business and operations with those of Heafner and its affiliates.
Executive shall report to the Chief Executive Officer of Heafner or such other
person as the Board may designate from time to time. As used herein, the phrase
"Term of Employment" shall mean the period commencing on the Effective Date and
ending on the third anniversary of the Effective Date.
3. Compensation.
(a) Base Salary. During the Term of Employment, the Company
agrees to pay to Executive a salary at the rate of $145,385 per annum, payable
in bi-weekly installments or otherwise in accordance with the normal payroll
procedures of the Company. Such annual salary shall be subject to annual review
and may be adjusted upward from time to time in the sole discretion of the
Board. The Executive's annual salary, including any periodic adjustments made
from time to time, shall be referred to in this Agreement as "Base Salary."
(b) Bonuses. (i) Executive shall be entitled to receive from
the Company a bonus (the "Stay Put Bonus") in the amount of $600,000, payable in
two installments as follows: $300,000 on the one-year anniversary of the
Effective Date, $200,000 on the two-year anniversary of the Effective Date and
$100,000 on the three-year anniversary of the Effective Date. The Company shall
pay Executive interest on the unpaid balance of the Stay Put Bonus at a rate of
8% per annum for the period from and including the Effective Date to but
excluding the date payment is made under this Section 3(b)(i). Such interest
payments shall be made annually at the same time as the payment of the annual
installment of the Stay Put Bonus and, for purposes of this Agreement, shall
constitute a part of the Stay Put Bonus.
(ii) Executive shall be entitled to participate in Heafner's
annual executive bonus plan or any similar or successor annual bonus plan of
Heafner and to receive an annual performance bonus (the "Performance Bonus")
from Heafner in accordance with the terms thereof and as approved by the Board
of Directors of Heafner.
(iii) Executive shall be entitled to a bonus (the "Incentive
Bonus") during the Term of Employment as follows:
(A) The Incentive Bonus for the 12-month period ending on the first
anniversary of the Effective Date shall be in an amount to be calculated
by the Company based on the formula set forth in Exhibit A, provided, that
in no event shall such Incentive Bonus be less than $103,678. In the event
that the formula set forth in Exhibit A yields an amount in excess of
$103,678, then any Synergy
-2-
3
Bonus payable to the Executive shall be reduced by the amount of such
excess. Such bonus shall be paid in quarterly installments commencing on
the date three months after the Effective Date and ending on the
first-year anniversary of the Effective Date. It is understood and agreed
that, if the quarterly figures necessary to calculate the Executive's
Incentive Bonus for the period in which the Effective Date falls or any
prior period are not yet available as of the Effective Date, the
Executive's Incentive Bonus for such period shall be calculated on the
basis of estimated quarterly figures and subsequent Incentive Bonus
payments shall be adjusted to the extent necessary based on actual
quarterly figures for the period in question.
(B) The Incentive Bonus for the 12-month period ending on the second
anniversary of the Effective Date shall be in an amount determined
pursuant to a formula agreed to in advance by the Board and Executive.
Such bonus shall be paid in accordance with normal bonus practices adopted
by the Company from time to time.
(iv) On the one-year anniversary of the Effective Date,
Executive may be entitled to an incentive bonus (the "Synergy Bonus") as more
fully described in Exhibit B to this Agreement. Such bonus shall be paid in
accordance with normal bonus payment practices adopted by the Company from time
to time, but shall no in event be paid later than 30 days from and after the
date of calculation. Any Synergy Bonus payable to the Executive shall be payable
in cash or, at the election of the Executive, (x) in shares of common stock of
Heafner having a fair market value equal to the amount of the Synergy Bonus or
(y) options or warrants to acquire the number of shares of common stock of
Heafner referred to in clause (x).
(c) Equity Incentives. During the Term of Employment,
Executive shall be eligible to participate in the J.H. Heafner Company 1997
Stock Option (the "Stock Plan") and to receive grants of options to purchase
common stock, par value $0.01 per share, of Heafner. Such grants may be awarded
from time to time pursuant to the Stock Plan in the sole discretion of the
Compensation Committee of the Board of Directors of Heafner.
4. Benefits. Unless Executive's employment is terminated earlier
pursuant to Section 5, during the Term of Employment:
(a) Executive shall be eligible to participate in group health
and welfare insurance programs available to senior executives of Heafner with
similar responsibilities from time to time.
(b) Executive shall be eligible to participate in life and
long-term disability insurance programs, pension and retirement programs,
incentive
-3-
4
compensation programs, and other fringe benefit programs, if any, available to
senior executives of Heafner with similar responsibilities from time to time.
(c) Executive shall be entitled to four weeks vacation with
pay, subject to such increases (but not decreases) as are adopted by the Company
from time to time for senior executives of Heafner with similar
responsibilities.
(d) The Company will reimburse Executive for reasonable
business expenses incurred in performing Executive's duties and promoting the
business of the Company and its affiliates, including, but not limited to,
reasonable entertainment expenses, and travel and lodging expenses, following
presentation of documentation in accordance with Heafner's business expense
policies.
5. Termination of Employment.
(a) Termination Without Cause. Notwithstanding anything to the
contrary in this Agreement, whether express or implied, the Company may at any
time terminate Executive's employment for any reason other than Cause (defined
below) by giving Executive at least 60 days' prior written notice of the
effective date of termination. In the event of such termination, Executive shall
be entitled to receive (i) his Base Salary through the last day of the Term of
Employment, payable in accordance with Section 3(a) above, (ii) his Stay Put
Bonus through the last day of the Term of Employment, payable in accordance with
Section 3(b)(i) above, (iii) his Incentive Bonus through the 12-month period
ending on the first-year anniversary of the Effective Date, payable in
accordance with Section 3(b)(iii) above, (iv) his Synergy Bonus through the
12-month period ending on the first-year anniversary of the Effective Date,
payable in accordance with Section 3(b)(iv) above, and (v) any accrued but
unpaid Performance Bonus or Incentive Bonus in respect of a fiscal year ended
prior to the effective date of termination. The Executive shall continue to be
bound by provisions of Section 6 at all times during the Covenant Period (as
defined in Section 6).
(b) Termination for Cause. The Company shall have the right to
terminate Executive's employment at any time for Cause by giving Executive
written notice of the effective date of termination (which effective date may be
the date of such notice). For purposes of this Agreement, "Cause" shall mean (i)
a proven or admitted act of fraud, misappropriation or embezzlement by the
Executive that is detrimental to the Company or (ii) the Executive's conviction
of or plea of guilty or nolo contendere to a felony. The Company shall have no
further obligation hereunder from and after the effective date of termination
for Cause (other than (i) to make payment of the Executive's Synergy Bonus
through the 12-month period ending on the first-year anniversary of the
Effective Date, payable in accordance with Section 3(b)(iv) above, and (ii) to
make payment of any accrued but unpaid Base Salary to the effective date of
termination and accrued but unpaid Performance Bonus or Incentive Bonus in
respect of fiscal years ending prior to the effective date of termination). The
Executive shall continue to be
-4-
5
bound by provisions of Section 6 at all times during the Covenant Period (as
defined in Section 6).
(c) Termination on Account of Death. In the event of
Executive's death while in the employ of the Company, Executive's employment by
the Company shall be deemed to have been terminated as of the date of death, and
the Company shall pay to the Executive's designated beneficiaries (i) his Base
Salary through the date of Executive's death, payable in accordance with Section
3(a) above, (ii) his Stay Put Bonus through the last day of the Term of
Employment, (iii) his Synergy Bonus through the 12-month period ending on the
first-year anniversary of the Effective Date, payable in accordance with Section
3(b)(iv) above, and (iv) any accrued but unpaid Performance Bonus or Incentive
Bonus in respect of a fiscal year ended prior to the effective date of
termination.
(d) Voluntary Termination by Executive. Executive shall have
the right to terminate Executive's employment at any time for any reason upon 60
days' written notice to the Company. In the event that Executive's employment
with the Company is voluntarily terminated by Executive, the Company shall have
no further obligation hereunder from and after the effective date of termination
of Executive's voluntary termination (other than (i) to make payment of the
Executive's Synergy Bonus through the 12-month period ending on the first-year
anniversary of the Effective Date, payable in accordance with Section 3(b)(iv)
above, and (ii) to make payment of any accrued but unpaid Base Salary to the
effective date of termination and accrued but unpaid Performance Bonus or
Incentive Bonus in respect of fiscal years ending prior to the effective date of
termination). The Executive shall continue to be bound by provisions of Section
6 at all times during the Covenant Period (as defined in Section 6).
(e) Termination on Account of Disability. (i) 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, he shall receive (1)
all compensation payable to him under the Company's disability plan or program
or other similar plan during such period until this Agreement is terminated as
hereinafter provided in this Section 5(e), (2) that portion of his Base Salary
equal to the positive difference between (A) his Base Salary at the rate in
effect at the commencement of any such period and (B) the compensation payable
to him under Section 5(e)(1) above, (3) his Stay Put Bonus, if any, payable
during such period, (4) his Synergy Bonus, if any, payable during such period,
and (5) payment of all accrued but unpaid Performance Bonus or Incentive Bonus
in respect of fiscal years or periods ended prior to the commencement of any
such period.
(ii) If, as a result of Executive's incapacity due to physical
or mental illness (as determined in good faith by a physician acceptable to the
Company and the Executive), Executive shall have been unable to perform the
essential functions of his position with the Company for 90 days during any
twelve (12) month period or if a physician acceptable to the Company advises the
Company that it is likely that Executive will be unable to perform the essential
functions of his position for 90 days during the
-5-
6
succeeding twelve (12) month period, his employment may be terminated for
"Disability" on 20 days' prior written notice by the Company to the Executive.
In the event that Executive's employment shall be so terminated, the Company
shall pay to Executive or to the Executive's designated beneficiaries (1) his
Stay Put Bonus through the last day of the Term of Employment, payable in
accordance with Section 3(b)(i) above, (2) his Synergy Bonus through the
12-month period ending on the first-year anniversary of the Effective Date,
payable in accordance with Section 3(b)(iv) above, and (3) any accrued but
unpaid Performance Bonus or Incentive Bonus in respect of a fiscal year ended
prior to the effective date of termination. In addition, Executive shall be
entitled to receive benefits under the Company's retirement, insurance, and
other compensation and benefit plans and programs then in effect, in accordance
with the terms of such programs. The Executive shall continue to be bound by
provisions of Section 6 at all times during the Covenant Period (as defined in
Section 6).
(f) Termination by Executive for Good Reason. Executive shall
have the right to terminate Executive's employment at any time for Good Reason
by giving the Company 60 days advance written notice of the effective date of
termination (which effective date may be the date of such notice). For purposes
of this Agreement, "Good Reason" shall mean:
(i) the material breach by the Company of a material term of
this Agreement and, if such breach is capable of being cured, the failure
to cure such breach within 30 days of receipt of notice of such breach;
(ii) the Company's requiring Executive's ongoing and regular
services to be performed at a location other than in Northern California,
except for travel reasonably required in the performance of Executive's
responsibilities;
(iii) the reduction by the Company of the Executive's Base
Salary during the Term of Employment;
(iv) the modification of the position and responsibilities of
the Executive in such a manner as would be inconsistent with those of a
president or chief executive officer of a corporate division; or
(v) the inability of the Executive and the Company to agree in
good faith (no more than 30 days before the first-year anniversary of the
Effective Date) on an Incentive Bonus arrangement for the twelve-month
period commencing on the first-year anniversary of the Effective Date that
is satisfactory to the Executive.
In the event of such termination, Executive shall be entitled to receive (i) his
Base Salary through the last day of the Term of Employment, payable in
accordance with Section 3(a) above, (ii) his Stay Put Bonus through the last day
of the Term of Employment, payable
-6-
7
in accordance with Section 3(b)(i) above, (iii) his Incentive Bonus through the
12-month period ending on the first-year anniversary of the Effective Date,
payable in accordance with Section 3(b)(iii) above, (iv) his Synergy Bonus
through the 12-month period ending on the first-year anniversary of the
Effective Date, payable in accordance with Section 3(b)(iv) above, and (v) any
accrued but unpaid Performance Bonus or Incentive Bonus in respect of a fiscal
year ended prior to the effective date of termination. The Executive shall
continue to be bound by provisions of Section 6 at all times during the Covenant
Period (as defined in Section 6).
6. Confidential Information; Non-Competition.
(a) Confidential Information. (i) Executive recognizes and
hereby acknowledges that, as a senior executive of the Company, he will learn
of, and be exposed to, confidential business information concerning the Company
Group's information, ideas, know how, trade secrets, processes, computer
software, methods, practices, techniques, technical plans, customer lists,
pricing techniques and information, marketing plans, financial information, and
all other compilations of information that relate to the Company Group's
business and its current and prospective customers ("Confidential Information").
Executive recognizes and hereby acknowledges that such Confidential Information
is a valuable asset of the Company Group. Executive agrees to safeguard such
Confidential Information for the exclusive benefit of the Company Group and
agrees that he will not disclose, distribute or publish such Confidential
Information to any person, company, business or corporation, provided that
Confidential Information shall not include information that is or becomes
generally available to the public (other than as a result of a disclosure in
violation of this Agreement by Executive or by a person who received such
information from Executive in violation of this Agreement). "Company Group"
means the Company, Heafner and their respective subsidiaries and affiliates.
(ii) Executive agrees that he will promptly and fully
disclose to the Company all inventions, ideas, software, trade secrets or
know-how (whether patentable or copyrightable or not) made or conceived by
Executive (either solely or jointly with others) and all tangible work product
derived therefrom (collectively, the "Ideas") during the period in which
Executive is employed under this Agreement. Executive agrees that all such Ideas
shall be and remain the sole and exclusive property of the Company. On the
request of the Company, Executive shall, during and after the Term of
Employment, without charge to the Company but at the expense of the Company,
assist the Company in any reasonable way to vest in the Company title to all
such Ideas, and to obtain any patents, trademarks or copyrights thereon in all
countries throughout the world. In this regard, the parties shall executive and
deliver any and all documents that the Company may reasonably request.
(b) Use of Confidential Information for Another Employer.
Executive acknowledges and recognizes his possession of Confidential Information
and acknowledges the highly competitive nature of business of the Company Group.
-7-
8
Accordingly, in order further to protect the Confidential Information of the
Company Group from disclosure or use, Executive agrees that, during the period
commencing on the Effective Date and ending on the later of (i) the third
anniversary of the Effective Date and (ii) the one-year anniversary of the
effective date of termination of Executive's employment with the Company (the
"Covenant Period"), he will not, for any reason whatsoever, either individually
or as an officer, director, stockholder, partner, agent or principal or another
business or firm, (i) directly or indirectly engage in the States of Arizona,
California, New Mexico, Nevada, Oregon, Utah and Washington in any Competing
Business, or (ii) assist others in engaging in any Competing Business in the
manner described in clause (i). "Competing Business" means any business that is
competitive with the business of the members of the Company Group (including,
without limitation, the wholesale or retail tires or automotive parts
businesses).
(c) Solicitation of Customers. Executive agrees that during
the course of his employment with the Company, he will learn of and be exposed
to confidential business information and trade secrets of the Company Group
concerning the Company Group's customers. Executive further agrees that, should
he seek to divert, take away, or solicit any of the customers of the Company
Group with respect to which he has learned and/or been exposed to such
confidential information, he will of necessity make use of or disclose such
confidential information, to the irreparable detriment of the Company Group.
Accordingly, Executive promises that, during the Covenant Period, he will not,
directly or indirectly, either for himself or for any other person, firm,
company or corporation, divert, take away or solicit, or attempt to divert, take
away or solicit any businesses or individuals that were customers of the Company
Group during the period in which Executive was employed by the Company.
(d) Solicitation of Employees. Executive agrees and
acknowledges that the Company Group has expended large sums in the recruitment,
training and development of its employees and that the continued employment of
such persons by the Company Group constitutes a substantial benefit to the
Company Group. Executive further agrees and acknowledges that the business of
the Company Group could be severely disrupted and injured in the event that
another person, firm, company or corporation were to attempt to induce any or
all of the Company Group's employees to terminate their employment with the
Company Group. Accordingly, Executive promises and covenants that, during the
Covenant Period, he will not, directly or indirectly, either for himself or for
any other person, firm, company or corporation, contact or communicate with any
employee of any member of the Company Group for the purpose of inducing or
otherwise encouraging such employee to terminate his or her employment with the
Company, provided, however, that this Section 6(d) shall not preclude the
Executive from giving an employment reference at the request of a prospective
employer of such employee.
(e) Acknowledgment. Executive acknowledges that he is entering
into the covenants contained in this Section 6, inter alia, due to his status as
a
-8-
9
signatory to the Stock Purchase Agreement and his position, prior to the
Effective Date, as a stockholder of the Company.
7. Miscellaneous. This Agreement shall also be subject to the
following provisions:
(a) It is the desire and intent of the parties hereto that the
provisions of this Agreement shall be enforced to the fullest extent permissible
under the laws and public policies applied in each jurisdiction in which
enforcement is sought. Accordingly, although Executive and the Company consider
the restrictions contained in this Agreement to be reasonable for the purposes
of preserving the Company Group's goodwill and proprietary rights, if any
particular provision of this Agreement shall be adjudicated to be invalid or
unenforceable, such provision shall be deemed amended to delete therefrom the
portion thus adjudicated to be invalid or unenforceable, such deletion to apply
only with respect to the operation of such provision in the particular
jurisdiction in which such adjudication is made. It is expressly understood and
agreed that although the Company and Executive consider the restrictions
contained in Section 6 to be reasonable, if a final determination is made by a
court of competent jurisdiction that the time or territory or any other
restriction contained in this Agreement is unenforceable against Executive or
Company, the provisions of this Agreement shall be deemed amended to apply as to
such maximum time and territory and to such maximum extent as such court may
judicially determine or indicate to be enforceable.
(b) The parties acknowledge that the Company's damages at law
would be an inadequate remedy for the breach by Executive of any provision of
Section 6, and agree in the event of such breach that the Company may obtain
temporary and permanent injunctive relief restraining Executive from such
breach, and, to the extent permissible under the applicable statutes and rules
of procedure, a temporary injunction may be granted immediately upon the
commencement of any such suit. Nothing contained in this Agreement shall be
construed as prohibiting the Company from pursuing other remedies available at
law or equity for such breach or threatened breach of Section 6 of this
Agreement.
(c) Executive represents and warrants to the Company that he
has the authorization, power and right to deliver, execute, and fully perform
his obligations under this Agreement in accordance with its terms. The Company
has the authorization, power and right to deliver, execute and fully perform its
obligations under this Agreement in accordance with its terms.
(d) This Agreement contains a complete statement of all the
arrangements between the parties with respect to Executive's employment by the
Company; this Agreement supersedes all prior and existing negotiations and
agreements concerning Executive's employment; and this Agreement can only be
changed or modified pursuant to a written instrument duly executed by each of
the parties hereto.
-9-
10
(e) All compensation payable hereunder shall be subject to
such withholding taxes and deductions as may be required by law.
(f) This Agreement shall be binding upon and inure to the
benefit of the successors and permitted assigns of the Company, provided that
the Company shall not assign this Agreement to any person or entity other than
an affiliate of the Company without the prior written consent of Executive.
Except as expressly provided herein, Executive may not sell, transfer, assign,
or pledge any of his rights or interests pursuant to this Agreement. This
Agreement is for the sole benefit of the parties hereto and not for the benefit
of any third party, provided that the parties agree that Heafner shall be an
intended third party beneficiary of all of the provisions of this Agreement,
including, without limitation, the covenants contained in Section 6 and Section
7(h).
(g) All notices, requests and other communications to the
Company or the executive shall be in writing (including facsimile or similar
writing) and shall be given,
if to the Executive, to:
Ray C. Barney
216 Fieldcrest Court
Danville, CA 94506
Facsimile: ____________
with a copy to:
Jackson Tufts Cole & Black, LLP
60 South Market Street, Suite 1000
San Jose, CA 95110
Attention: Richard Scudellari
Facsimile: (408) 998-4889
if to the Company, to:
The Speed Merchant, Inc.
1140 Campbell Avenue
San Jose, California 95126
Facsimile: _____________
Attention: _____________
with a copy to:
The J.H. Heafner Company, Inc.
814 East Main Street
-10-
11
P.O. Box 837
Lincolnton, North Carolina 28093-0837
Facsimile: (704) 732-6480
Attention: General Counsel
or such other address or telecopy as such party may specify for the purpose by
notice to the other parties. Each such notice, request or other communication
shall be effective (i) if given by facsimile, when such facsimile is transmitted
to the telecopy number specified in this Section 7(g) and the appropriate
facsimile confirmation is received or (ii) if given by any other means, when
delivered at the address specified in this Section 7(g).
(h) Executive acknowledges and agrees that the Company shall
be entitled, at Heafner's request and to the extent that Heafner's rights of
set-off contained in the Stock Purchase Agreement would be ineffective to grant
to Heafner the practical realization of the benefits intended to be granted
thereby, to set off or to apply all or a portion of the unpaid Synergy Bonus (to
the extent any remains unpaid) and then the unpaid Stay-Put Bonus against any
obligations of Executive to Heafner or its affiliates now or hereafter existing
under Article V of the Stock Purchase Agreement as set forth therein. In the
event the Company intends to set-off any amount payable to the Executive in
respect of the Synergy Bonus against any such obligations, the Company shall
notify the Executive no later than the date on which such amount is payable.
(i) (i) No provision of this Agreement may be waived unless
such waiver is in writing and signed by the party against whom the waiver is to
be effective.
(ii) No failure or delay by any party in exercising any right,
power or privilege hereunder shall operate as a waiver nor shall any single or
partial exercise thereof preclude any other or further exercise thereof or the
exercise of any other right, power or privilege.
(j) THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF CALIFORNIA.
(k) EACH OF THE PARTIES TO THIS AGREEMENT AGREES TO BE BOUND
BY THE PROVISIONS SET FORTH IN EXHIBIT C TO THIS AGREEMENT. EACH OF EXECUTIVE
AND THE COMPANY HEREBY IRREVOCABLY AND UNCONDITIONALLY SUBMITS TO THE EXCLUSIVE
JURISDICTION OF THE UNITED STATES DISTRICT COURT IN SAN JOSE OR THE SUPERIOR
COURT OF THE STATE OF CALIFORNIA, COUNTY OF SANTA CLARA FOR THE PURPOSES OF ALL
LEGAL PROCEEDINGS WHICH ARE NOT GOVERNED BY EXHIBIT B AND WHICH ARISE OUT OF OR
RELATE TO THIS AGREEMENT, AND EACH OF EXECUTIVE AND THE COMPANY AGREES NOT TO
COMMENCE ANY
-11-
12
LEGAL PROCEEDING RELATED THERETO EXCEPT IN SUCH COURT. EACH OF EXECUTIVE AND THE
COMPANY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY
OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE IN ANY SUCH
COURT OR ANY CLAIM THAT A LEGAL PROCEEDING COMMENCED IN SUCH COURT HAS BEEN
BROUGHT IN AN INCONVENIENT FORUM.
(Signature page follows.)
-12-
13
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
on its date.
EXECUTIVE: THE SPEED MERCHANT, INC.
By: /s/ J. MICHAEL GAITHER
------------------------------
/s/ RAY C. BARNEY Name:
- ----------------------------- Title:
Ray C. Barney
-13-
14
Exhibit A to Employment Agreement
Executive Incentive BonusFormula(1) Fiscal 1997 Total Compensation
- --------- ----------------------- ------------------------------
Arthur C. Soares 8.5% of Net Income $528,506
Ray C. Barney 1.5% of Net Income $243,678
Elizabeth Roberts 5% of Net Income (pre-tax) $344,180
(1) Bonuses are paid within 45 days after the end of each fiscal quarter.
-14-
15
Exhibit B to Employment Agreement
SYNERGY BONUS PLAN
Executive shall be entitled to be paid a Synergy Bonus pursuant to the terms set
forth in this Exhibit B. For purposes of calculating Executive's Synergy Bonus,
if any, targeted EBITDA of the Company shall be $6,400,000 for the 12-month
period ending on the one-year anniversary of the Effective Date (the "Target
Period"). The actual EBITDA calculations shall be made on a pro forma basis
without giving effect to any acquisitions or dispositions of assets, stock or
businesses by the Company occurring during the Target Period or to the
acquisition by Phoenix of the Arizona Business (as defined in the Stock Purchase
Agreement), and shall be adjusted to the extent necessary in accordance with
Section 3.11(a) of the Stock Purchase Agreement. These pro forma actual EBITDA
calculations shall be subject to the approval of the Board acting in good faith.
The Company shall pay to Executive the amount, if any, due to Executive as
Synergy Bonus promptly upon the Company's receipt of the Company's accountant's
opinion with respect to the Company's financial statements for the Target Period
(but in no event later than 120 days after the end of such Target Period).
The amount of the Synergy Bonus, if any, shall be equal to (i) the sum of (A) 85
percent of 50 percent of the excess of actual EBITDA during the Target Period
over targeted EBITDA plus (B) 85 percent of 50 percent of the amount of any net
cost savings achieved with respect to members of the Company Group (other than
the Company) during the Target Period (1) that are the identifiable result of
any potential cost savings described on Schedule I attached to this Exhibit B
and (2) that otherwise result from the transactions contemplated by the Stock
Purchase Agreement (as determined in good faith by the Board of Directors of
Heafner, which determination shall be open to good faith dispute by the
Executive in accordance with the arbitration provisions contained in Exhibit C)
minus (ii) the amount of any reductions made in accordance with Section
3(b)(iii)(A).
For purposes of calculating the Synergy Bonus, (x) the Company shall be
accounted for on a stand-alone basis using the accounting principles applied in
preparing the Closing Date Balance Sheet (as defined in the Stock Purchase
Agreement) and (y) no corporate-level overhead costs incurred by Heafner shall
be allocated to the Company.
"EBITDA" shall mean earnings before interest, taxes, depreciation and
amortization.
16
Schedule I to Synergy Bonus Plan
List of Quantifiable Synergies:
Distribution Synergy
1/wk vs daily delivery for Winston
Reduction of Winston Inventory - Cost of Money
Elimination of Winston Distribution Centers
Elimination of Winston Wholesale Division
Purchasing Synergy
Tires, Wheels, Auto Parts, Equipment
Other Synergy
Performance Software Opportunities (Wheel Wizard)
17
EXHIBIT C
TO EMPLOYMENT AGREEMENT
DISPUTE RESOLUTION PROCEDURE
1. Scope of Arbitration. The parties to the Employment Agreement
will submit to final and binding arbitration as the sole and exclusive remedy
for all claims for damages arising out of, involving, or relating to (a) the
Employment Agreement or any amendment thereto or (b) the events giving rise to
the Employment Agreement, including any and all non-contractual claims for
damages related to the Employment Agreement or the events giving rise to it
(including claims for fraudulent inducement of contract). Notwithstanding the
foregoing, the dispute resolution procedure set forth in this Exhibit B does not
apply to claims for injunctive or other equitable relief pursuant to the express
terms of the Employment Agreement or any other agreement entered into in
connection with the Employment Agreement.
2. Notice of Dispute. Any party shall give the other parties written
notice of the existence and nature of any dispute proposed to be arbitrated
pursuant to this Exhibit B (the "Written Notice"). Such Written Notice must be
served on the other parties as described below. The party serving Written Notice
shall be referred to as the "Claiming Party." The party to whom the claims are
directed shall be referred to as the "Responding Party."
3. Appointment of Arbitrators. Each party shall appoint one person
to serve as an arbitrator within seven days of receipt of the Written Notice.
The two arbitrators thus appointed shall within seven days of their appointment
together select a third arbitrator with such knowledge and expertise as
necessary to serve as chairman of the panel of arbitrators, and this person
shall serve as chairman. The three arbitrators shall determine all matters,
including the panel's final decision with respect to the claims presented in the
arbitration, by majority vote. If the two arbitrators selected by the parties
are unable to agree upon the appointment of the third arbitrator within seven
days of their appointment, both shall give written notice of such failure to
agree to the parties, and if the parties fail to agree upon the selection of
such third arbitrator within five days thereafter, such third arbitrator shall
be appointed from, and pursuant to the rules for commercial arbitration of, the
American Arbitration Association. Prior to appointment, each arbitrator shall
agree to conduct such arbitration in strict accordance with the terms of this
Exhibit B.
4. Initial Meeting of the Arbitrators. Within seven days of the
selection of the third arbitrator, the arbitrators shall conduct an initial
meeting with the parties (the "Initial Meeting"). All meetings between the
arbitrators, or between the arbitrators and the parties, including the Initial
Meeting, may be conducted by telephone, with the exception of the arbitration
hearing at which evidence is presented. At the Initial Meeting, the parties and
the arbitrators shall agree upon a schedule for the arbitration proceedings,
with dates no later than the deadlines provided in Section 7 below. The
18
statement of claim, the response to the statement of claim and counterclaims (if
any), and the response to the counterclaims (if any) (collectively, the
"Pleadings") shall be submitted to each arbitrator on the date they are served,
unless service occurs prior to appointment of all three arbitrators. If service
of any of the Pleadings occurs prior to the appointment of any of the
arbitrators, copies of any such Pleadings shall be submitted to such arbitrator
promptly after such arbitrator's appointment.
5. Conduct of the Arbitration. No more than eleven months shall pass
between the selection of the third arbitrator and the release of a decision by
the arbitration panel. Any arbitration held pursuant to this Exhibit B shall
take place in New York City, New York. The law of the State of New York shall
supply the substantive law of the arbitration proceedings, and any claims or
counterclaims alleged pursuant to federal law shall be adjudicated as if pled in
a federal court in New York. All proceedings, including discovery, depositions,
and the arbitration hearings shall be governed by the Federal Rules of Civil
Procedure and the Civil Rules of the United States District Court for the
Southern District of New York, unless such rules conflict with the provisions of
this Exhibit B, in which case the provisions of this Exhibit B control.
6. Motions. The parties may make applications to the panel of
arbitrators regarding issues of discovery, procedure and privilege. Any such
motions shall be made to and resolved by the arbitrators as soon as practicable.
No party shall be permitted to file any motions for dismissal of claims
(including dismissal based upon failure to join an indispensable party), or for
summary judgment, concerning the claims or counterclaims asserted in any
arbitration under this Exhibit B.
7. Schedule of Arbitration Proceedings. At the Initial Meeting, the
parties and the arbitrators shall agree to a schedule that conforms with the
following deadlines:
Event Deadline Not Later Than
----- -----------------------
Service of a statement of Seven days after service of the Written Notice
claim by the Claiming Party
Service of response to the 14 days after receipt of the statement of
statement of claim and claim
counterclaims (if any) by
the Responding Party
Service of response to Seven days after receipt of counterclaims (if
counterclaims (if any) by any)
the Claiming Party
19
Commencement of document One day after service of response to the
discovery statement of claim
Commencement of deposition 75 days after service of the statement of
discovery claim
Completion of all discovery 200 days after service of the statement of
claim
Commencement of the 28 days after completion of discovery
arbitration hearing
Issuance of a decision by 14 days after receipt of the last hearing
the arbitrators transcript by the arbitrators. All sessions of
the arbitration hearings shall be promptly
transcribed and transcripts shall be promptly
provided to the parties and the arbitrators.
8. Decision Binding on the Parties. Unless the parties agree
otherwise in writing, the arbitrators' decision shall become binding on the
parties at such time as the decision is confirmed by order of the Supreme Court
of the State of New York, County of New York. The parties hereby irrevocably and
unconditionally submit to the jurisdiction of such court for any and all
proceedings relating to such confirmation. Any award ordered shall be paid
within 10 days of confirmation of the arbitrators' decision.
9. Cost of Arbitration Proceeding. Except as provided herein, the
costs incurred by the parties in conjunction with an arbitration proceeding
pursuant to this Exhibit B, including attorney's fees, fees paid to experts, and
fees for obtaining transcripts shall be paid or reimbursed in accordance with
the provisions of Article V of the Employment Agreement. In the event that the
arbitrators determine that no party is entitled to indemnification by any other
party, then (a) each party shall pay its own expenses, including attorney's
fees, fees paid to experts, fees for obtaining transcripts, expenses of
witnesses called solely by that party, and all fees charged by the arbitrator
appointed by such party and (b) the parties shall each pay fifty percent of all
remaining expenses of the arbitration proceeding.
10. Extensions of Time. The parties may jointly agree, in writing,
to extend any of the deadlines set forth in Section 7 above.
11. Service of Documents. Any process, notice, memorandum, motion,
demand, or other paper or communication, or application to the panel of
arbitrators shall be deemed to have been sufficiently served or submitted if (a)
personally delivered, or (b) sent by a nationally recognized overnight courier
service.