EMPLOYMENT AGREEMENT
This Employment Agreement ("Agreement") made this _____day of
_______________, 1997 between SONIC AUTOMOTIVE, INC. its successors or assigns,
subsidiary corporations or affiliates (collectively, the "Employer") and XXXXXX
X. XXXXXX, XX ("Employee") and SONIC FINANCIAL CORP. ("Guarantor").
R E C I T A L S
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; and
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 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 this term of
employment coincide with the term of the Non-Competition Agreement entered in
connection that certain Asset Purchase Agreement dated June 24, 1997, pursuant
to which Employer shall acquire certain of the automobile dealership assets of
Employee.
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2. Duties of Employee. Employee shall be employed by Employer
as Executive Vice President of Sonic Auto World, Inc. Employee's duties shall
include, but not be limited to, acquisitions of additional automobile
dealerships for Employer. Employee shall assist in the management and
supervision of all Employer-owned dealerships. Employee shall serve Employer
faithfully 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. Employer agrees to nominate
Employee for service on Employer's Board of Directors for an initial term and to
favorably recommend to Employer's shareholders that they elect Employee for such
initial term. 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. By
its signature below, Sonic Financial Corp. agrees to vote its shares of stock of
Employer for the election of Employee as a director for the initial term
referred to above.
3. Compensation. For all services rendered by Employee under
this Agreement, he shall be entitled to compensation in accordance with the
following:
(a) Base Salary. During the Employment Period, the
Employee shall receive an annual base salary ("Annual Base Salary") of FOUR
HUNDRED THOUSAND AND NO/100 DOLLARS ($400,000.00) which shall be paid in equal
monthly installments in the amount of THIRTY-THREE THOUSAND THREE HUNDRED
THIRTY-THREE AND THIRTY-THREE/100 DOLLARS ($33,333.33).
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(b) Additional Salary and Bonus. In addition to the
Annual Base Salary as hereinabove provided, Employer shall pay to the Employee
such additional amounts as may be determined and ratified from time to time by
the Compensation Committee of Employer's Board of Directors. In determining such
additional amounts, the Compensation Committee and Employer shall seek to
provide Employee with total compensation in keeping with the market rates for
employees in similar positions, with similar businesses with similar
profitability and performance.
4. Fringe Benefits. During the Employment Period, Employee
shall 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 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
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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 follows:
(a) Death or Disability. The Employee's employment
shall terminate 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,
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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 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;
(vii) Employee's illegal use of controlled
substances.
(c) Good Reason. The Employee's employment may be
terminated by the 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,
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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
and 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 Agreement at any time, for any reason or without any reason. Such
a termination shall be deemed a termination "without cause".
6. Obligations of the Employer Upon Termination. The parties
agree as follows:
(a) Death or Disability. If the Employee's employment
is terminated by reason of the Employee's death or disability during the
Employment Period, Employee or
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Employee's estate shall be paid forty-five percent (45%) of Employee's Annual
Base Salary (i.e., $180,000) 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 for Cause during the Employment Period, the Employee shall be paid
forty-five percent (45%) of his Annual Base Salary (i.e., $180,000), together
with those fringe benefits described in paragraphs 4(a) and 4(b) hereof
throughout the remaining term of this Agreement.
(c) Good Reason. If, during the Employment Period,
the Employee shall terminate employment for Good Reason, he shall be paid
forty-five percent (45%) his Annual Base Salary (i.e., $180,000) 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 without cause, then Employer shall continue to pay Employee
forty-five percent (45%) of his Annual Base Salary (i.e., $180,000) 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 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 eighty percent (80%) 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
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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 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
Areement 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;
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(iii) Interfere or attempt to interfere with
the terms or other aspects of the relationship
between Employer and any person or entity from whom
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
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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 "Phoenix America", Heritage
Insurance Corporation Limited, NEBCO of Cleveland, L.L.C. d/b/a Toyota of
Cleveland, Abra Auto Body and Glass, L.L.C. and Chattanooga Auto Auction,
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 entity 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 "Phoenix America", Heritage Insurance Corporation Limited, NEBCO of
Cleveland, L.L.C. d/b/a Toyota of Cleveland, Abra Auto Body and Glass, L.L.C.
and Chattanooga Auto Auction, L.L.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
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,
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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 considered the provisions of this Agreement and has had the opportunity
for consultation with an 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, 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 parties hereto, and shall not be modified or changed in any
respect except by a writing executed by the parties hereto.
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13. Successors and Assigns. The rights and obligations of
Employee under 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.
14. Notice. All notices required and permitted to be give
hereunder shall 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 Auto World, Inc. Xxxxxx X. Xxxxxxx, Xx.
Attention: Xxxxx Xxxxx Xxxxx, COO 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:
Xxxxxx X. Xxxxxx, Il H. Xxxxx Xxxxx, Esq.
000 Xxxxxxx Xxxxxx Grant, Xxxxxxxxxx & Xxxxxxxx, P.C.
Lookout Xxxxxxxx, XX 00000 0xx Xxxxx, Xxxxxxxx Centre
000 Xxxxxxxx Xxxxxx
Xxxxxxxxxxx, XX 00000
15. Governing Law; Forum. This Agreement shall, in all
respects, be 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
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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 temporarily guaranteeing the obligations of Employer as set forth
herein. Guarantor shall be irrevocably released from this guaranty at such time
as (i) Sonic Auto World, Inc. shall have a net worth of twenty million dollars
($20,000,000), 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 1933, as amended, which initial public offering
results in net proceeds to the issuer of not less than fifty million dollars
($50,000,000).
IN WITNESS WHEREOF, the parties hereto have executed this Agreement to
be effective as of the date first above written.
EMPLOYEE:
(SEAL)
Xxxxxx X. Xxxxxx, XX
EMPLOYER:
SONIC AUTOMOTIVE, INC.
By: ______________________________
Title: _______________________________
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The undersigned joins in the execution of this Agreement for the
purpose of (i) guaranteeing the terms hereof in accordance with the provisions
of paragraph 16 above, and (ii) agreeing to vote its shares for the election of
Employee as a director in accordance with the last sentence of paragraph 2
above.
SONIC FINANCIAL CORP.
By: ____________________________________
Title: ____________________________________
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