Exhibit 10.22
EMPLOYMENT AGREEMENT
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This Employment Agreement ("Agreement") made this 1st day of November, 1997
between SONIC AUTOMOTIVE, INC. (formerly named Sonic Auto World, Inc.), its
successors or assigns, subsidiary corporations or affiliates (collectively, the
"Employer") and XXXXXXX X. XXXXXX ("Employee") and SONIC FINANCIAL CORP
("Guarantor").
RECITALS
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WHEREAS, Employer desires to acquire certain of the automobile dealership
assets of Employee within the State of Tennessee; and
WHEREAS, Employer desires to retain the services of Employee in order to
manage the existing dealerships and acquire and manage additional dealerships in
the states of Kentucky, Tennessee, Alabama and Georgia (the "Region").
WHEREAS, Employee is prepared to perform those duties as set forth in this
Agreement.
NOW, THEREFORE, the parties intending to be legally bound agree as follows:
1. Term of Employment. Employer hereby employs Employee, and Employee
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hereby accepts employment from Employer for the period commencing with the
closing of the sale transferring those assets in which Employee has an interest
in various dealerships in the State of Tennessee to Employer (the "Commencement
Date") and ending five (5) years thereafter, unless sooner terminated pursuant
to the provisions of paragraph 5 hereof (the "Employment Period"), It is the
intention of Employer and Employee that the term of this employment coincide
with the term of the Non-Competition Agreement executed in connection with that
certain Asset Purchase Agreement dated June 24, 1997 pursuant to which Employer
shall acquire certain of the automobile dealership assets of Employee.
2. Duties of Employee. Employee shall be employed by Employer as
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Regional Vice President over all of the automobile dealerships in which Employer
acquires a controlling ownership interest and which are located in the Region.
Employee's duties shall include, but not be limited to, acquisitions of
additional automobile dealerships within the Region for Employer. Employee shall
manage and supervise all Employer-owned dealerships within the Region and shall
report directly to the President. Employee shall serve Employer faithfully and
exclusively in the performance of Employee's duties and shall devote his full
time and best efforts to his employment, including the regularly established
working hours and such additional time as the requirements of Employer and the
performance of the Employee's duties require. Employee agrees to observe and
comply with all the rules and regulations of Employer as adopted and furnished
to Employee by Employer's Board of Directors from time to time. Employee
specifically understands that Employer shall have final authority over the terms
and conditions of all acquisitions.
3. Compensation. For all services rendered by Employee under
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this Agreement, he shall be entitled to compensation in accordance with the
following:
(a) Base Salary. During the Employment Period, the Employee
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shall receive an annual base salary ("Annual Base Salary") of ONE
HUNDRED FIFTY THOUSAND AND NO/100 DOLLARS ($150,000.00) which shall be
paid in equal monthly installments in the amount of TWELVE THOUSAND
FIVE HUNDRED AND NO/100 DOLLARS ($12,500.00).
(b) Special Bonus. In addition to the Annual Base Salary as
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hereinabove provided, as long as Employee remains employed with
Employer, the Employer shall pay to the Employee a special bonus
(the "Special Bonus") in recognition of the Employee's
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services. Said Special Bonus shall be two and eight tenths percent
(2.8%) of the annual net profit based on pre-tax earnings of all
dealerships owned by the Employer within the Region, exclusive of any
group or groups of commonly owned dealerships with gross revenues in
excess of three hundred million dollars ($300,000,000) in sales
acquired in a single transaction and/or as a part of a single
transaction by Employer after the Commencement Date (the "Subsequently
Acquired Large Dealerships"). The Special Bonus shall be paid in
monthly installments based on 2.8% of net profit based on pre-tax
earnings as determined from the prior month's manufacturer's monthly
financial statement for each dealership owned by the Employer in the
Region, exclusive of the Subsequently Acquired Large Dealerships. Such
monthly installments shall be subject to a fifteen percent (15%)
retainage which shall be held by Employer. Following the close of
Employer's fiscal year, but in no event later than ninety (90) days
after the close of Employer's fiscal year, payments from or
withholding of such retainage shall be used, in addition to other
funds if necessary, to settle any overpayment or underpayment of
Employee's Special Bonus.
c. Override For Subsequently Acquired Large Dealerships. With
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respect to the Subsequently Acquired Large Dealerships, Employee shall
receive an override of one percent (1%) of the annual net profit for
each such dealership (the "Subsequently Acquired Large Dealership
Override"). The Subsequently Acquired Large Dealership Override shall
be paid in monthly installments based on one percent (1%) of net
profit based on pre-tax earnings as determined from the prior month's
manufacturer's monthly financial statement for such dealerships. Such
monthly installments shall be subject to a fifteen percent (15%)
retainage which shall be held by Employer. Following the close of
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Employer's fiscal year, but in no event later than ninety (90)
days after the close of Employer's fiscal year, payments from or
withholding of such retainage shall be used, in additional to other
funds, if necessary, to settle any overpayment or underpayment of the
Subsequently Acquired Large Dealership Override.
(d) Initial Year Bonus. For the twelve months immediately
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following the Commencement Date, Employee shall have the opportunity to
earn an initial year bonus (the "Initial Year Bonus"), calculated as
set forth below. If the net profit based on pre-tax earnings for such
twelve month period for the Region, exclusive of Subsequently Acquired
Large Dealerships, exceeds five million five hundred thousand dollars
($5,500,000), the Employee shall be entitled to an Initial Year Bonus
in the amount of fifty thousand dollars ($50,000). If the net profit
based on pre-tax earnings for such twelve month period for the Region,
exclusive of Subsequently Acquired Large Dealerships, exceeds six
million dollars ($6,000,000), then Employee shall be entitled to an
Initial Year Bonus in the total amount of one hundred thousand dollars
($100,000). Any initial Year Bonus earned by Employee shall be payable
within sixty (60) days of the close of such twelve month period.
(e) In determining pre-tax earning for the purpose of
computing Employee's Special Bonus, the Subsequently Acquired Large
Dealership Override and the Initial Year Bonus, the following shall
apply:
(1) No deduction shall be taken for federal and state
income taxes owed by the dealerships;
(2) No deduction shall be taken for bad debts which have
not been processed through the company's customary credit
approval procedures;
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(3) Pre-tax profits shall be determined before any
management fee expense allocation from Employer;
(4) Overhead expenses or other expenses which have
been incurred by any dealership which are allocated to said
dealership but do not directly relate to the operation of said
dealership or that portion so allocated which is not
reasonably related to the operation of the dealership shall
not be deducted in determining pre-tax profits. To illustrate,
expenses incurred by a parent corporation or an affiliate
which do not have a direct bearing on the operation of the
dealership would be deducted in arriving at Employee's Special
Bonus.
(5) Pre-tax profits shall be determined before
Employee's Special Bonus, the Subsequently Acquired Large
Dealership Override and the Initial Year Bonus.
4. Fringe Benefits. During the Employment Period, Employee shall
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receive with other similarly situated employees of the Employer, all
the fringe benefits of Employer, together with the following additional
fringe benefits;
(a) The use of two luxury demonstrator vehicles annually of
Employee's choice, including all reasonable related expenses such as
insurance, maintenance and gasoline.
(b) Medical insurance coverage for Employee and his
dependents and reimbursement of the Employee for the reasonable costs
of disability insurance with a reasonable monthly benefit for life and
with a waiting period of no more than ninety (90) days. This disability
insurance shall contain other provisions so that it will replace to the
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extent reasonably possible Employee's Base Salary in case Employer
terminates this Agreement upon Employee's disability as set forth
herein.
(c) Prompt reimbursement for all reasonable employment,
travel, entertainment and other business related expenses incurred by
the Employee in accordance with the most favorable policies, practices
and procedures of the Employer and its affiliated companies in effect
for the Employee at any time during the ninety (90) day period
immediately preceding the Commencement Date or, if more favorable to
the Employee, as in effect generally at any time thereafter with
respect to other peer executives of the Employer and its affiliated
companies.
(d) An office of a size and with furnishings and other
appointments, and an exclusive personal secretary and other assistants
at least equal to the most favorable policies, practices and procedures
of the Employer and its affiliated companies in effect for the Employee
at any time during the ninety (90) day period immediately preceding the
Commencement Date or, if more favorable to the Employee, as provided
generally at any time thereafter with respect to other peer executives
of the Employer and its affiliated companies.
(e) An annual paid vacation in accordance with the most
favorable policies, practices and procedures of the Employer and its
affiliated companies as in effect for the Employee at any time during
the ninety (90) day period immediately preceding the Commencement Date
or, if more favorable to the Employee, as in effect generally at any
time thereafter with respect to other peer executives of the Employer
and its affiliated companies.
5. Termination of Employment. This Agreement shall terminate as
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follows:
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(a) Death or Disability. The Employee's employment shall terminate
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automatically upon the Employee's death during the Employment Period. If the
Employer determines in good faith that the Employee becomes unable to perform
the essential functions of his position, with or without reasonable
accommodation, then Employer shall give to the Employee written notice of its
intention to terminate the Employee's employment. In such event, the Employee's
employment with the Employer shall terminate effective on the thirtieth (30th)
day after receipt of such notice by the Employee (the "Disability Effective
Date") provided that, within the thirty (30) days after such receipt, the
Employee shall not have returned to full time performance of the Employee's
duties.
(b) Cause. The Employer may terminate the Employee's employment at any
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time, without notice and with immediate effect for Cause. For purposes of this
Agreement "Cause" shall mean
(i) a material breach by the Employee of the Employee's obligations
as set forth herein (other than due to disability) which material breach is
not remedied within five (5) business days after receipt of written notice
from the Employer specifying such a breach;
(ii) the conviction of the Employee of a felony;
(iii) actions by Employee involving moral turpitude;
(iv) willful failure of Employee to comply with reasonable directives
of Employer's Board of Directors;
(v) chronic absenteeism of Employee;
(vi) willful misconduct of Employee resulting in damage to Employer;
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(vii) Employee's illegal use of controlled substances.
(c) Good Reason. The Employee's employment may be terminated by the
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Employee during the Employment Period for good reason. For purposes of this
Agreement, "Good Reason" shall mean:
(i) the assignment to the Employee of any duties materially
inconsistent in any respect with the Employee's position (including status,
offices, titles and reporting requirements), authority, duties or
responsibilities as contemplated by this Agreement or any other action by
the Employer which results in a substantial diminution in such position,
authority, duties or responsibilities, excluding for this purpose,
isolated, unsubstantial arid inadvertent action not taken in bad faith and
which is remedied by the Employer promptly after receipt of written notice
thereof given by the Employee;
(ii) any failure by the Employer to comply with any of the material
provisions of this Agreement other than isolated, insubstantial and
inadvertent failure not occurring in bad faith and which is remedied by the
Employer promptly after receipt of notice thereof given by the Employee;
(iii) the Employer's requiring the Employee to be based at any office
or location other than in Tennessee;
(iv) any failure of the Employer to comply with and satisfy the
provisions of paragraph 7 of this Agreement.
(d) Without Cause. Either Employee or Employer may terminate this
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Agreement at any time, for any reason or without any reason. Such a termination
shall be deemed a termination "without cause".
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6. Obligations of the Employer Upon Termination. The parties agree
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as follows:
(a) Death or Disability. If the Employee's employment is
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terminated by reason of the Employee's death or disability during the
Employment Period, Employee or Employee's estate shall be paid the
Employee's Annual Base Salary together with those fringe benefits
described in paragraphs 4(a) and 4(b) hereof through the remaining term
of this Agreement.
(b) Cause. If the Employee's employment shall be terminated
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for Cause during the Employment Period, Employee shall be paid the
Employee's Annual Base Salary together with those fringe benefits
described in paragraph 4(a) and 4(b) hereof throughout the remaining
term of this Agreement.
(c) Reason. If, during the Employment Period, the Employee
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shall terminate employment for Good Reason, he shall be paid his Annual
Base Salary together with those fringe benefits described in paragraphs
4(a) and 4(b) hereof throughout the remaining term of this Agreement.
(d) Without Cause. If Employee's employment is terminated
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without cause, then Employer shall continue to pay Employee his Annual
Base Salary together with those fringe benefits described in paragraphs
4(a) and 4(b) hereof throughout the remaining term of this Agreement.
7. Stock Option. If and when Employer completes an initial public
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offering of its common stock pursuant to an effective registration statement
under the Securities Act of 1933, as amended (the "IPO"), Employee shall be
eligible to participate in a stock option plan to be adopted by Employer for its
employees at such time (the "Stock Option Plan"). Employee's initial grant under
the Stock Option Plan shall be in an amount equal to at least
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forty percent (40%) of the highest number of options granted to any employee of
Employer pursuant to Employer's initial round of grants under the Stock Option
Plan. The exercise price of such initial options shall be the fair market value
of the shares of the common stock on the date of such initial grant, it being
the intention of Employer to set such initial exercise price at the same price
per share of Employer's common stock sold in the IPO. Any grants of options
thereafter under the Stock Option Plan shall be at the discretion of Employer's
Board of Directors. The terms and conditions of any options granted to Employee
pursuant to the Stock Option Plan shall otherwise be governed by the provisions
of the Stock Option Plan.
8. Restrictive Covenants. For purposes of this Agreement, "Restrictive
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Covenants" mean the provisions of this paragraph 8. It is stipulated and agreed
that Employer is engaged in the business of owning and operating automobile
and/or truck dealerships, which business includes, without limitation, the
marketing and selling of new and used vehicles and the servicing of automobiles
and trucks (the "Business"). It is further stipulated and agreed that as a
result of Employee's employment by Employer, and as a result of Employee's
continued employment hereunder, Employee has and will have access to valuable,
highly confidential, privileged and proprietary information relating to
Employer's Business, including, without limitation, existing and future
inventory information, customer lists, sales methods and techniques, costs and
costing methods, pricing techniques and strategies, sales agreements with
customers, profits and product line profitability information, unpublished
present and future marketing strategies and promotional programs, and other
information regarded by Employer as proprietary and confidential (the
"Confidential Information"). It is further acknowledged that the unauthorized
use or disclosure by Employee of any of the Confidential Information would
seriously damage Employer in its Business.
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In consideration of the provisions of this paragraph 8, the compensation
and benefits referred to in paragraphs 3 and 4 hereof, which Employee
acknowledges are legally sufficient to support enforceability by the Employer of
the Restrictive Covenants against Employee, Employee agrees as follows:
(a) During the term of this Agreement and after its termination or
expiration for any reason, Employee will not, without Employer's prior
written consent, use, divulge, disclose, furnish or make accessible to any
third person, company or other entity, any aspect of the Confidential
Information (other than as required in the ordinary discharge of Employee's
duties hereunder).
(b) During the term of this Agreement and for a period of two years
after the date of the expiration or termination of this Agreement for any
reason (the "Restrictive Period"), Employee shall not, directly or
indirectly:
(i) Employ or solicit the employment of any person who at any
time during the twelve (12) calendar months immediately preceding the
termination or expiration of this Agreement for any reason was
employed by Employer;
(ii) Provide or solicit the provision of products or services,
similar to those provided by Employer to any person or entity within
the "Restricted Territory," as hereinafter defined, who purchased or
leased automobiles, trucks, or services from Employer at any time
during the twelve (12) calendar months immediately preceding the
termination or expiration of this Agreement for any reason;
(iii) Interfere or attempt to interfere with the terms or other
aspects of the relationship between Employer and any person or entity
from whom
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Employer has purchased automobiles, trucks, parts, supplies, inventory
or services at any time during the twelve (12) calendar months
immediately preceding the termination or expiration of this Agreement
for any reason;
(iv) Engage in competition with Employer or its respective
successors and assigns by engaging, directly or indirectly, in a
business involving the sale or leasing of automobiles or trucks or
which is otherwise substantially similar to the Business, within the
"Restricted Territory," as hereinafter defined; or
(v) Provide information to, solicit or sell for, organize or own
any interest in (either directly or thorough any parent, affiliate or
subsidiary corporation, partnership, or other entity), or become
employed or engaged by, or act as agent for, any person, corporation
or other entity that is directly or indirectly engaged in a business
in the "Restricted Territory," as hereinafter defined, which is
substantially similar to the Business or competitive with Employer's
business; provided, however, that nothing herein shall preclude the
Employee from holding not more than three percent (3%) of the
outstanding shares of any publicly held company which may be so
engaged in a trade or business identical or similar to the Business of
the Employer. As used herein, "Restricted Territory" means the
Standard Metropolitan Statistical Areas, as determined by the United
States Office of Management and Budget, for Houston, Texas; Charlotte,
North Carolina; Chattanooga, Tennessee; and Nashville, Tennessee. (c)
Notwithstanding anything to the contrary contained in this Agreement,
paragraphs 8(b)(ii), 8(b)(iv) and 8(b)(v) shall not preclude Employee
from maintaining his investment in NEBCO of Cleveland, L.L,C. d/b/a
Toyota of
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Cleveland and Abra Auto Body and Glass, L.L.C., so long as Employee
does not, directly or indirectly, engage in the active management of
or participate in the operation of such entities during the term of
this Agreement or the Restrictive Period, subject to the last sentence
of this paragraph 8(c). Notwithstanding the foregoing sentence,
Employee shall be permitted to engage in the active management and/or
participate in the operation of NEBCO of Cleveland, L.L.C. d/b/a
Toyota of Cleveland and Abra Auto Body and Glass, LL.C. in the event
that Employee's employment with Employer is terminated "without cause"
by Employer.
9. Remedies. It is stipulated that a breach by Employee of the
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Restrictive Covenants would cause irreparable damage to Employer. Employer, in
addition to any other rights or remedies which Employer may have, shall be
entitled to an injunction restraining Employee from violating or continuing any
violation of such Restrictive Covenants. Such right to obtain injunctive relief
may be exercised at the option of Employer, concurrently with, prior to, after
or in lieu of, the exercise of any other rights or remedies which Employer may
have as a result of any such breach or threatened breach. Employee agrees that
upon breach of any of the Restrictive Covenants, Employer shall be entitled to
an accounting and repayment of all profits, royalties, compensation, and/or
other benefits that Employee directly or indirectly has realized or may realize
as a result of, or in connection with, any such breach. Employee further agrees
that the Restrictive Period shall be extended by a period of time equal to any
period of time in which any Employee is in violation of the Restrictive
Covenants.
10. Acknowledgment of Reasonableness. Employee has carefully read and
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considered the provisions of this Agreement and has had the opportunity for
consultation with an
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attorney of Employee's choice and agrees that the restrictions set forth herein
are fair and reasonably required for the protection of Employer. In the event
that any provision relating to the Restrictive Period, the Restricted Territory
or the scope of the restrictions shall be declared by a court of competent
jurisdiction to exceed the maximum period of time, geographical area or scope
that such court deems reasonable and enforceable under applicable law, such time
period, geographical area or scope of restriction held reasonable and
enforceable by the court shall thereafter be the Restricted Period, Restricted
Territory and/or scope under this Agreement.
11. Surrender of Books and Records. Employee acknowledges that all files,
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records, lists, designs, specifications, books, products, plans and other
materials owned or used by Employer in connection with conduct of its business
shall at all times remain the property of Employer, and that upon termination or
expiration of this Agreement for any reason, Employee will immediately surrender
to Employer all such materials.
12. Entire Agreement. This Agreement contains the entire agreement of the
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parties hereto, and shall not be modified or changed in any respect except by a
writing executed by the parties hereto.
13. Successors and Assigns. The rights and obligations of Employee under
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this Agreement shall inure to the benefit of Employer, its successors and
assigns, and shall be binding upon Employee and his respective successors, heirs
and assigns. Employer shall have the right to assign, transfer, or convey this
Agreement to its affiliated companies, successor entities, or assignees or
transferees of substantially all of Employer's business activities. This
Agreement, being personal in nature to the Employee, may not be assigned by
Employee without Employer's prior written consent.
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14. Notice. All notices required and permitted to be give hereunder shall
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be in writing and shall be deemed to have been given when mailed by certified or
registered mail, return receipt requested, addressed to the intended recipient
as follows or at such other address as is provided by either party to the other:
If to Employer: With a copy to:
Sonic Automotive, Inc. Xxxxxx X. Xxxxxxx, Xx.
Attention: Xxxxx Xxxxx Xxxxx, CEO Parker, Poe, Xxxxx & Xxxxxxxxx, L.L.P.
P.O. Box 18747 0000 Xxxxxxxxx Xxxxx
Xxxxxxxxx, XX 00000 000 Xxxxx Xxxxxxx Xxxxxx
Xxxxxxxxx, XX 00000
If to Employee: With a copy to:
Xxxxxxx X. Xxxxxx H. Xxxxx Xxxxx, Esq.
x/x Xxxx Xxxxxxxxxx, Xxx. Xxxxx, Xxxxxxxxxx & Xxxxxxxx, P.C.
Grant, Xxxxxxxxxx & Xxxxxxxx, P.C. 0xx Xxxxx, Xxxxxxxx Xxxxxx
0xx Xxxxx, Xxxxxxxx Centre 000 Xxxxxxxx Xxxxxx
000 Xxxxxxxx Xxxxxx Xxxxxxxxxxx, XX 00000
Xxxxxxxxxxx, XX 00000
15. Governing Law; Forum. This Agreement shall, in all respects, be
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governed by and construed according to the laws of the State of North Carolina.
Any dispute or controversy arising out of or relating to this Agreement shall
also be governed by the laws of the State of North Carolina. Any suit or other
proceeding arising out of or relating to this Agreement shall be instituted and
maintained in the state courts of Mecklenburg County, North Carolina, and the
parties hereby waive any objection to such jurisdiction and venue and
irrevocably submit to the jurisdiction of such court in any such action or
proceeding. Each party shall bear its own costs and expenses, including without
limitation, attorneys' fees, in connection with any such suit or proceeding.
16. Guaranty. Guarantor joins in this Agreement for the purpose of
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temporarily guaranteeing the obligations of Employer as set forth herein.
Guarantor shall be irrevocably
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released from this guaranty at such time as (i) Sonic Auto World, Inc. shall
have a net worth of $20 million, or (ii) Sonic Auto World, Inc. shall complete
an initial public offering of its common stock pursuant to an effective
registration statement under the Securities Act of 1993, as amended, which
initial public offering results in net proceeds to the issuer of not less than
$50 million.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement to be
effective as of the date first above written.
EMPLOYEE:
/s/ Xxxxxxx X. Xxxxxx (SEAL)
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Xxxxxxx X. Xxxxxx
EMPLOYER:
SONIC AUTOMOTIVE, INC.
By: /s/ B. Xxxxx Xxxxx
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Title: B. Xxxxx Xxxxx
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