SEVERANCE PAY AGREEMENT FOR KEY EMPLOYEE

Exhibit 10.6

SEVERANCE PAY AGREEMENT

FOR KEY EMPLOYEE

Reference is made to that certain agreement entered into as of April 21, 2003, as amended on December 20, 2006, and November 14, 2007, (collectively the “Agreement”) between Xxxxxx Automotive Group, Inc. and its subsidiaries and affiliates (“Xxxxxx” or the “Company”) and Xxxxxx Xxxxxxx (“Executive”), a key employee of Xxxxxx, which provides for an agreed-upon compensation in the event of a Termination (as such term is defined in this Agreement) of Executive’s employment with Xxxxxx. The parties hereto agree to amend and restate such Agreement as hereinafter provided, as of April 29, 2009.

1. Severance Pay Arrangement

If a Termination of Executive’s employment occurs at any time during Executive’s employment, Xxxxxx will pay Executive 12 months of Executive’s base salary as of the date of Termination as Severance Pay (as such term is defined in this Agreement). Payment (subject to required withholding) will be made by Xxxxxx to Executive in a lump sum within 30 days of Termination.

If Executive participates in a bonus compensation plan at the date of Termination, the Company shall pay Executive a pro rata bonus for the year of the Termination equal to the amount of the bonus that Executive would have received if Executive’s employment not been terminated during such year, multiplied by the percentage of such year that has expired through the date of Termination. Such bonus shall be paid at such time as bonuses are paid under the bonus compensation plan to the Company’s other employees whose employment has not terminated in such year.

In addition, for 12 months following the date of Termination, Executive shall be entitled to continue to participate at the same level of coverage and Executive contribution in any health, dental, disability and life insurance plans, as may be amended from time to time, in which Executive was participating immediately prior to the date of Termination. Such participation will terminate 30 days after Executive has obtained other employment under which Executive is covered by equal benefits. Executive agrees to notify Xxxxxx promptly upon obtaining such other employment. At the end of 12 months, Executive, at his or her option, may elect to obtain COBRA coverage in accordance with the terms and conditions of applicable law and Xxxxxx’x standard policy.

Notwithstanding anything herein to the contrary, if Executive is determined to be a “specified employee” within the meaning of Section 409A of the Internal Revenue

Code of 1986, as amended (the “Code”) and if one or more of the payments or benefits to be received by Executive pursuant to this Agreement would be considered deferred compensation subject to Section 409A of the Code, then no such payment shall be made or benefit provided until six (6) months following Executive’s date of Termination.

The amounts payable under this Section 1, to the extent modified under Section 2, shall constitute “Severance Pay” under this Agreement.

2. Change of Control Arrangement

In the event that a Termination occurs at any time within two years after a “Change of Control,” which is defined in accordance with the definition of such term in Xxxxxx’x 2002 Equity Incentive Plan, as such plan may be amended from time to time, then (1) the term “12 months” in the first and third paragraphs of Section 1 of this Agreement shall be replaced with “36 months” and (2) the term “one year” in Section 6 of this Agreement shall be replaced with “36 months.”

3. Definition of Termination Triggering Severance Pay

A “Termination” triggering the Severance Pay set forth above in Sections 1 and 2 is defined as a termination of Executive’s employment with Xxxxxx, which constitutes a “separation from service” from the Company (within the meaning of Section 409A(a)(2)(A)(i) of the Code, and Treasury Regulation Section 1.409A-1(h)) (1), by Xxxxxx without Cause (as such term is defined in this Agreement), or (2) by Executive because of (x) a material change in the geographic location at which Executive must perform Executive’s services (which shall in no event include a relocation of Executive’s current principal place of business to a location less than 50 miles away), (y) a material diminution in Executive’s base compensation, or (z) a material diminution in Executive’s authority, duties, or responsibilities (collectively “Good Reason”); provided that no termination shall be deemed to be for Good Reason unless (i) Executive provides the Company with written notice setting forth the specific facts or circumstances constituting Good Reason within ninety (90) days after the initial existence of the occurrence of such facts or circumstances, (ii) the Company has failed to cure such facts or circumstances within thirty (30) days of its receipt of such written notice, and (iii) the effective date of the termination for Good Reason occurs no later than one hundred fifty (150) days after the initial existence of the facts or circumstances constituting Good Reason. For avoidance of doubt, a Termination shall not include either (1) a termination of Executive’s employment by Xxxxxx for Cause or due to Executive’s, death, disability (as such term is defined in this Agreement), retirement or voluntary resignation; or (2) the transfer of Executive from Xxxxxx to any of its affiliates, until such time as Executive is no longer employed by Xxxxxx or any of its affiliates. If Executive is transferred to an affiliate of Xxxxxx, references to “Xxxxxx” herein shall be deemed to include the applicable affiliate to which Executive is transferred.

For the purposes of this Agreement, the definition of “Cause” is: (a) Executive’s gross negligence or serious misconduct (including, without limitation, any criminal, fraudulent or dishonest conduct) that is or may be injurious to Xxxxxx; or (b) Executive being convicted of, or entering a plea of nolo contendere to, any crime that constitutes a felony or involves moral turpitude; or (c) Executive’s breach of Sections 4, 5 or 6 below; or (d) Executive’s willful and continued failure to perform Executive’s duties on behalf of Xxxxxx; or (e) Executive’s material breach of a written policy of Xxxxxx.

For purposes of this Agreement, the definition of “disability” is a physical or mental disability or infirmity that prevents the performance by Executive of his or her duties lasting (or likely to last, based on competent medical evidence presented to Xxxxxx) for a continuous period of six (6) months or longer.

4. Confidential Information and Nondisclosure Provision

As a condition to the receipt of the Severance Pay payments and benefits described in Sections 1 and 2 above, during and after employment with Xxxxxx, Executive shall agree not to disclose to any person (other than to an employee or director of Xxxxxx, or to Xxxxxx’x attorneys, accountants and other advisors or except as may be required by law) and not use to compete with Xxxxxx any confidential or proprietary information, knowledge or data that is not in the public domain that was obtained by Executive while employed by Xxxxxx regarding Xxxxxx or any products, improvements, customers, methods of distribution, sales, prices, profits, costs, contracts, suppliers, business prospects, business methods, techniques, research, trade secrets or know-how of Xxxxxx (collectively, “Confidential Information”). In the event that Executive’s employment terminates for any reason, Executive will deliver to Xxxxxx on or before the date of Termination all documents and data of any nature pertaining to Executive’s work with Xxxxxx and will not take any documents or data or any reproduction, or any documents containing or pertaining to any Confidential Information. Executive agrees that in the event of a breach by Executive of this provision, Xxxxxx shall be entitled to inform all potential or new employers of such breach and to cease payments and benefits that would otherwise be made pursuant to Sections 1 and 2 above, as well as to obtain injunctive relief and damages which may include recovery of amounts paid to Executive under this Agreement.

5. Non-Solicitation of Employees

As a condition to the receipt of the Severance Pay payments and benefits described in Sections 1 and 2 above, Executive agrees that during employment with Xxxxxx and for one year following termination of Executive’s employment for any reason, Executive shall not directly or indirectly solicit for employment or employ any person who, at any time during the 12 months preceding the last day of Executive’s employment, is or was employed by Xxxxxx or induce or attempt to persuade any Executive of Xxxxxx to terminate their employment relationship. Executive agrees that in the event of a breach by Executive of this provision, Xxxxxx shall be entitled to

inform all potential or new employers of such breach and to cease payments and benefits that would otherwise be made pursuant to Sections 1 and 2 above, as well as to obtain injunctive relief and damages which may include recovery of amounts paid to Executive under this Agreement.

6. Covenant Not to Compete

As a condition to the receipt of the Severance Pay payments and benefits described in Sections 1 and 2 above, while Executive is employed by Xxxxxx and for one year following termination of Executive’s employment for any reason (subject to the next paragraph), Executive shall not directly or indirectly engage in, participate in, represent or be connected with in any way, as an officer, director, partner, owner, employee, agent, independent contractor, consultant, proprietor or stockholder (except for the ownership of a less than 5% stock interest in a publicly-traded corporation) or otherwise, any business or activity which competes with the business of Xxxxxx unless expressly consented to in writing by the Chief Executive Officer of Xxxxxx (collectively, “Covenant Not To Compete”).

In the event that Executive’s employment ends for any reason, the provisions of the Covenant Not To Compete shall remain in effect for 12 months following the date of Termination except that the prohibition above on “any business or activity which competes with the business of Xxxxxx” shall be limited to AutoNation, Inc., Sonic Automotive, Inc., Lithia Motors, Inc., Penske Automotive Group, Inc., f/k/a/ United Auto Group, Inc., Group One Automotive Inc., and other competitive groups of similar size. Executive shall disclose in writing to Xxxxxx the name, address and type of business conducted by any proposed new employer of Executive if requested in writing by Xxxxxx. Executive agrees that in the event of a breach by Executive of this Covenant Not To Compete, Xxxxxx shall be entitled to inform all potential or new employers of such breach and to cease payments and benefits that would otherwise be made pursuant to Sections 1 and 2 above, as well as to obtain injunctive relief and damages which may include recovery of amounts paid to Executive under this Agreement.

7. Parachute Payment Limitation

Notwithstanding anything in this agreement to the contrary, if any severance pay or benefits payable under this agreement (without the application of this Section 7), either alone or together with other payments, awards, benefits or distributions (or any acceleration of any payment, award, benefit or distribution) pursuant to any agreement, plan or arrangement with Xxxxxx or any of its affiliates (the “Total Payments”), would constitute a “parachute payment” (as defined in Section 280G of the Code, then the following shall occur:

(a) tax counsel selected by Xxxxxx’x independent auditors and acceptable to Executive shall compute the net present value to Executive of all the Total Payments after reduction for the excise taxes imposed by Code Section 4999

and for any normal income taxes that would be imposed on Executive if such Total Payments constituted Executive’s sole taxable income; and

(b) said tax counsel shall next compute the maximum Total Payments that can be provided without any such Total Payments being characterized as “Excess Parachute Payments” (as defined in Code Section 280G) and reduce the result by the amount of any normal income taxes that would be imposed on Executive if such reduced Total Payments constituted Executive’s sole taxable income.

If the result derived in clause (a) above is greater than the result derived in clause (b) above by more than 10% of the result derived in clause (b) above, then Xxxxxx shall pay Executive the full amount of the Total Payments without reduction. If the result derived from clause (a) above is not greater than the result derived in clause (b) above by more than 10% of the result derived in clause (b) above, then Xxxxxx shall pay Executive the maximum Total Payments possible without any such Total Payments being characterized as Excess Parachute Payments. The determination of how such Total Payments will be reduced shall be made by Executive in good faith after consultation with Xxxxxx.

GENERAL PROVISIONS

A. Employment is At Will

Executive and Xxxxxx acknowledge and agree that Executive is an “at will” employee, which means that either Executive or Xxxxxx may terminate the employment relationship at any time, for any reason, with or without cause or notice, and that nothing in this Agreement shall be construed as an express or implied contract of employment.

B. Execution of Release

As a condition to the receipt of the Severance Pay payments and benefits described in Sections 1 and 2 above, Executive agrees to execute a release of all claims arising out of Executive’s employment or Termination including but not limited to any claim of discrimination, harassment or wrongful discharge under local, state or federal law.

C. Alternative Dispute Resolution

Any disputes arising under or in connection with this Agreement shall be resolved by binding arbitration before an arbitrator (who shall be an attorney with at least ten years’ experience in employment law) in the city where Executive is located and in accordance with the rules and procedures of the American Arbitration Association. Each party may choose to retain legal counsel and shall pay its own attorneys’ fees, regardless of the outcome of the arbitration. Executive may be required to pay a filing fee limited to the equivalent cost of filing in the court of jurisdiction. Xxxxxx will pay

the fees and costs of conducting the arbitration. Judgment upon the award rendered by the arbitrator may be entered in any court of jurisdiction.

D. Other Provisions

This Agreement shall be binding upon the heirs, executors, administrators, successors and assigns of Executive and Xxxxxx, including any successor to Xxxxxx.

The provisions of Sections 4, 5 and 6 shall survive the termination of this Agreement.

The headings and captions are provided for reference and convenience only and shall not be considered part of this Agreement.

Any notice or other communication required or permitted to be delivered under this Agreement shall be (i) in writing, (ii) delivered personally, by nationally recognized overnight courier service or by certified or registered mail, first-class postage prepaid and return receipt requested, (iii) deemed to have been received on the date of delivery or on the third business day after mailing, and (iv) addressed as follows (or to such other address as the party entitled to notice shall later designate in accordance with these terms):

If to Xxxxxx:		Xxxxxx Automotive Group, Inc.
		c/o General Counsel
		0000 Xxxxxxxx Xxxxxxx, Xxxxx 000
		Xxxxxx, XX 00000
If to Executive:		To the most recent address of Executive set forth in the personnel records of Xxxxxx.

This Agreement supersedes any and all agreements between Xxxxxx and Executive relating to payments upon Termination of employment or Severance Pay and may only be modified in a writing signed by Xxxxxx and Executive.

This Agreement shall be governed by and construed in accordance with the laws of the State of New York.

All payments hereunder shall be subject to any required withholding of federal, state, local and foreign taxes pursuant to any applicable law or regulation.

If any provision of this Agreement shall be held invalid or unenforceable, such holding shall not affect any other provisions, and this Agreement shall be construed and enforced as if such provisions had not been included. No provision of this Agreement shall be waived unless the waiver is agreed to in writing and signed by Executive and the Chief Executive Officer of Xxxxxx. No waiver by either party of any breach of, or of compliance with, any condition or provision of this Agreement

by the other party shall be considered a waiver of any other condition or provision or of the same condition or provision at another time.

The parties hereto acknowledge and agree that, to the extent applicable, this Agreement shall be interpreted in accordance with, and incorporate the terms and conditions required by, Section 409A of the Code and the Department of Treasury regulations and other interpretive guidance issued thereunder. Notwithstanding any provision of this Agreement to the contrary, in the event that Xxxxxx determines that any amounts payable hereunder will be immediately taxable to Executive under Section 409A of the Code and related Department of Treasury guidance, Xxxxxx and Executive shall cooperate in good faith to (x) adopt such amendments to this Agreement and appropriate policies and procedures, including amendments and policies with retroactive effect, that they mutually determine to be necessary or appropriate to preserve the intended tax treatment of the benefits provided by this Agreement, to preserve the economic benefits of this Agreement and to avoid less favorable accounting or tax consequences for Xxxxxx and/or (y) take such other actions as mutually determined to be necessary or appropriate to exempt the amounts payable hereunder from Section 409A of the Code or to comply with the requirements of Section 409A of the Code and thereby avoid the application of penalty taxes thereunder.

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This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original but all of which together will constitute one and the same instrument.

AGREED TO AS OF April 29, 2009:

BY EXECUTIVE:		BY XXXXXX:
		XXXXXX AUTOMOTIVE GROUP, INC.
/s/ Xxxxxx X. Xxxxxxx		/s/ Xxxxxxx Xxxxxxx
Print Name: Xxxxxx X. Xxxxxxx		Print Name and Title: Xxxxxxx Xxxxxxx, President & CEO