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Form Of Consulting and Non-Compete Agreement

This is an actual contract by Advance Stores.

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Sectors: Retail
Governing Law: Virginia , View Virginia State Laws
Effective Date: April 15, 1998
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EXHIBIT 10.25


CONSULTING AND NON-COMPETITION AGREEMENT
----------------------------------------


THIS CONSULTING AND NON-COMPETITION AGREEMENT (the "Agreement") is made and entered into as of the 15th day of April, 1998 by and among Advance Holding Corporation, a Virginia corporation (the "Corporation"), Advance Stores Company, Incorporated, a Virginia corporation ("ASCI") and Nicholas F. Taubman ("Consultant").


W I T N E S S E T H:


WHEREAS, the Corporation, AHC Corporation, a Virginia corporation ("Investor"), FS Equity Partners III, L.P., a Delaware limited Partnership, FS Equity Partners IV, L.P. (collectively, "FS Equity Partners"), and FS Equity International, L.P., a Delaware limited partnership (collectively with FS Equity Partners, "Guarantor"), have entered into an Agreement and Plan of Merger, dated as of March 4, 1998 (the "Merger Agreement"), pursuant to which Investor has, effective as of the time of execution and delivery of this Agreement, merged with and into the Corporation with the Corporation as the surviving corporation in the merger (the "Merger"); and


WHEREAS, pursuant to the Merger Agreement, (a) Consultant and the Arthur Taubman Trust dated July 13, 1964 (the "1964 Trust") became the owners of a total of 1,750,000 shares of common stock of the Corporation as of the effective time of the Merger (the "Effective Time") and (b) Consultant and the 1964 Trust have been granted at the Effective Time options to purchase in the aggregate 500,000 shares of common stock of the Corporation; and


WHEREAS, ASCI, a wholly-owned subsidiary of the Corporation, is engaged in the highly competitive business of retail marketing and sale of automotive parts, accessories and services, with stores in 12 states as of the date hereof; and


WHEREAS, Consultant is recognized as a leading company owner and executive with significant expertise in the retail automotive parts and accessories industry. Consultant's industry experience and knowledge is greatly valued by the Corporation and would be extremely valuable to competitors of ASCI. Accordingly, Guarantor is unwilling to cause Investor to consummate the Merger unless Consultant enters into this Agreement, which is a material inducement to Guarantor to cause Investor to merge with and into the Corporation; and


WHEREAS, pursuant to the Merger Agreement, it is a condition to the Corporation's and Investor's respective obligations


to consummate the Merger that Consultant and the Corporation enter into this Agreement as of the Effective Time; and


WHEREAS, each of Consultant and the Corporation are sophisticated parties experienced in business transactions of this type, and fully understand (a) the ramifications of the non-competition, non-solicitation and confidentiality provisions of this Agreement and (b) that the laws of each state with respect to the enforceability of such provisions vary. The parties are specifically selecting the internal laws of the Commonwealth of Virginia to govern this Agreement in order that it be enforceable against all of them; and


WHEREAS, to provide Guarantor with the full value of its investment in the Corporation through the Merger, particularly the goodwill of the Corporation represented thereby, in consideration of the Corporation's entering into a consulting relationship with Consultant with a three-year term, and as a material inducement to the Corporation to enter into this Agreement and to consummate the transactions contemplated hereby, the Merger Agreement requires that the Consultant execute and deliver this consulting and noncompetition agreement with the Corporation immediately effective upon the effective date of the Merger and that the obligation of Investor to consummate the Merger is conditioned upon the Consultant entering into this Agreement; and


WHEREAS, in consideration for the payments to be made to Consultant pursuant hereto and the covenants of Consultant hereunder, each of the Corporation and Consultant desires to enter into this Agreement;


NOW, THEREFORE, in consideration of the mutual terms and conditions set forth below, and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows:


1. Consulting Services and Term.
----------------------------


(a) Term. Consultant shall make himself available to render
---- consulting services, on the terms and conditions set forth in this Agreement, for the period beginning at the Effective Time and ending on the third anniversary thereof (the "Term").


(b) Nature and Time of Rendering Services. During the Term,
------------------------------------- Consultant shall render such services as may be requested from time to time by the Board of Directors of the Corporation (the "Board") and/or the Chief Executive Officer of the Corporation, subject to the following provisions of this


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Section 1(b). Consultant's services shall be performed at such time and locations as shall be mutually convenient to Consultant and the Corporation; provided, however, that in no event shall Consultant be required to render - -------- ------- consulting services hereunder (i) for more than twenty (20) hours in any one week during the period from the Effective Time to the six-month anniversary thereof, (ii) for more than ten (10) hours in any one week during the period from the day following the six-month anniversary of the Effective Time to the one-year anniversary thereof, (iii) for more than ten (10) hours in any month during the period from the day following the one-year anniversary of the Effective Time to the two-year anniversary thereof or (iv) for more than five (5) hours in any month during the period from the day following the two-year anniversary of the Effective Time through the remainder of the Term; and provided, further, that Consultant shall be excused from rendering consulting - -------- ------- services hereunder during reasonable vacation periods. For purposes of determining the number of hours of service rendered during the periods covered by clauses (iii) and (iv) above, Consultant shall be deemed to have rendered the greater of (x) five hours and (y) the actual number of hours of service rendered, on any day during which he is required to render consulting services hereunder.


(c) Compensation. The Corporation or ASCI shall pay Consultant an
------------ annual consulting and noncompetition fee equal to $300,000 payable in equal monthly installments. The annual fee may, at the option of the Board, be subject to annual increases upon review by the Board. Any such review will be made after completion of the Corporation's fiscal year, and shall be at the sole discretion of the Board.


(d) Expense Reimbursement. Consultant shall be reimbursed in
--------------------- accordance with the generally applicable policies of the Corporation as adopted by the Board from time to time for his reasonable travel, entertainment, business, meeting and similar expenditures, incurred for the benefit of the Corporation and subject to approval of the Chief Executive Officer of the Corporation or the Board. As an additional condition to the reimbursement of such expenses by the Corporation to Consultant, Consultant shall provide the Corporation with copies of all available invoices and receipts, and otherwise account to the Corporation in sufficient detail and with adequate documentation to allow the Corporation to confirm the business nature of the expenses and claim an income tax deduction for such paid items, if such items are deductible.


(e) Bonus Program and Other Benefits. Consultant shall be eligible to
-------------------------------- participate in a manner commensurate with


-3-


the senior management executives of the Corporation in all benefits or other programs available, to the extent such exist or are sponsored by the Corporation. Without limiting the generality of the foregoing, Consultant shall participate in an incentive bonus program which shall provide for a payout to Consultant of a minimum of $300,000 annually upon the achievement of targeted annual earnings goals for the Corporation determined by the Board and applicable to the senior management executives of the Corporation no later than the first quarter of each fiscal year.


(f) COBRA Benefits. Consultant shall have the option to convert and
-------------- continue his health insurance on or after the Effective Time as may be required or authorized by law under the Consolidated Omnibus Budget Reconciliation Act of 1985, and shall be entitled after the Effective Time to participate in all health, accident, disability or other insurance policies and programs provided to retirees of the Corporation generally for which he is eligible. Consultant acknowledges and agrees that, except as set forth in this Agreement, no other health, accident, disability or other insurance policies (other than directors' and officers' insurance as provided in the Indemnity Agreement between the Corporation and Consultant) will be provided for him by the Corporation after the Effective Time.


(g) Taxes. Consultant agrees to accept liability, to the extent
----- Consultant is liable under the law, for the payment of all federal and state taxes or contributions for unemployment insurance or old age pensions or annuities or social security payments which in each case are measured by payments to Consultant for the performance of his obligations under this Agreement. Consultant further agrees to comply with all valid administrative regulations applicable to Consultant respecting liability for such taxes and contributions. Consultant and the Corporation each agree that (i) the services provided by Consultant pursuant to this Section 1 are services provided by an independent contractor, (ii) the consideration described in this Section 1 is the entire consideration for the services to be rendered by Consultant pursuant to this Section 1 and for Consultant's noncompetition covenants pursuant to Section 2 and (iii) except as otherwise required by a "determination" within the meaning of Section 1313(a) of the Internal Revenue Code of 1986, as amended, each of Consultant and the Corporation will take no action inconsistent with the treatments described in clauses (i) and (ii).


2. Non-Competition.
---------------


(a) General. During the Term, Consultant shall not directly or
------- indirectly carry on or participate in any business


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in competition with the Business (whether conducted by the Corporation or ASCI or any subsidiary or controlled Affiliate of the Corporation or ASCI, all of whom collectively are sometimes called the "Protected Entities"). The "Business" as used in this Section 2 means the sale of automotive parts and accessories at retail or wholesale or by catalogue and the rendering of services relating thereto. In furtherance and not in limitation of the foregoing covenant, Consultant shall not, subject to the last proviso of Section 2(d), carry on or participate in the business of selling automotive parts or accessories or rendering services relating thereto including, without limitation, carrying on or participating in the business of any chain of retail automotive parts and accessories stores, any chain of automotive service facilities, any wholesale or catalog operation or retail chain that is engaged as a significant line of business in the distribution or sale of automotive parts or accessories or rendering services relating thereto. For purposes of this Section 2, a significant line of business is one that constitutes 10% or more of consolidated revenues.


(b) Agreement Not to Compete Nationally. Consultant acknowledges that
----------------------------------- the Corporation intends to extend ASCI's business operations throughout the United States of America. Therefore, during the Term, Consultant agrees that he shall not directly or indirectly carry on or participate in the Business anywhere within the United States of America.


(c) Agreement Not to Compete Where the Corporation Does Business.
------------------------------------------------------------ Independent of the preceding provision, Consultant agrees that, during the Term, Consultant shall not directly or indirectly carry on or participate in the Business
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