EXHIBIT 10.22
TERMS OF AMENDED EMPLOYMENT AND
CHANGE IN CONTROL AGREEMENT
This TERMS OF EMPLOYMENT AND CHANGE
IN CONTROL AGREEMENT (“Agreement”) by and among Lithia
Motors, Inc., an Oregon corporation (the “Employer”),
and Sidney B. DeBoer (“Executive”), is dated as of
January 15, 2009.
1. Terms of Employment .
Employer, either directly or through one of its wholly owned
subsidiaries, employs Executive and Executive accepts that
employment on the terms and conditions contained in this Agreement.
The employment of Executive by Employer is “at will”
and Executive’s employment may be terminated at any time for
any lawful reason or for no reason at all.
2. Termination Related to Change
in Control . A “Change in Control” occurs on the
date: (i) the Employer merges or consolidates with another
entity and as a result less than 50% of the combined voting power
of the resulting entity immediately after the merger or
consolidation is held by persons who were the holders of the
Employer’s voting securities immediately before the merger or
consolidation; (ii) any person, entity, or group of persons or
entities, other than through merger or consolidation, acquires 50%
or more of the total fair market value or total voting power of
Employer’s outstanding stock or acquires substantially all of
the Employer’s assets; (iii) any one person, or more
than one person acting as a group acquires (or has acquired during
the 12-month period ending on the date of the most recent
acquisition by such person or persons) ownership of stock of the
Employer possessing 50% or more of the total voting power of the
stock of the Employer, or (iv) a majority of the
Employer’s Board of Directors is removed from office by a
vote of the Employer’s shareholders over the recommendation
of the Board or replaced during any 12-month period by directors
whose appointment or election is not endorsed by a majority of the
Employer’s board of directors before the date of the
appointment or election. Notwithstanding the preceding, a
“Change in Control” will not be deemed to have occurred
if Sid DeBoer, Lithia Holding Company, LLC or an
“affiliate” of either (as that term is defined by SEC
rules and regulations), owns, votes or controls more than 20% of
the resultant entity, directly or indirectly.
After announcement of a proposed
Change in Control and for a period continuing for one year
following a Change in Control, in the event Employer terminates
Executive’s employment without Cause or Executive terminates
his employment for Good Reason, Executive shall receive (i) 24
months of base salary, based on Executive’s then base salary,
and (ii) continuing health insurance benefits for the shorter
of 24 months or the full COBRA period, (collectively the
“Change in Control Benefit”). Subject to Section 4
(if applicable), the cash Change in Control Benefit shall be paid
in installments over 24 months, starting the first day of the month
following termination, in accordance with Employer’s standard
payroll procedures and subject to statutory payroll deductions.
Further, notwithstanding the terms of any bonus or incentive plan
(unless such plan by its specific terms references this Agreement
and provides to the contrary), Executive is entitled to receive a
pro rata payout under such plans within 30 days of termination
(subject to Section 4, if applicable) based upon the then
performance level achieved under such plans. The pro rata payout
will reflect the proportion of the service period completed by the
Executive prior to termination. Receipt of the Change in Control
Benefit and any pro rata bonus or incentive payment is conditioned
on Executive having executed the Separation Agreement in
substantially the form attached hereto as Exhibit A and the
revocation period having expired without Executive having revoked
the Separation Agreement. Receipt and continued receipt of the
Change in Control Benefit is further conditioned on Executive not
being in violation of any material term of this Agreement or in
violation of any material term of the Separation
Agreement.
“Cause” for termination
of employment means any one or more of the following:
(i) willful misfeasance, gross negligence, or conduct
involving dishonesty in the performance of Executive’s
duties, as determined by the board of directors of Employer;
(ii) conviction of a crime in connection with
Executive’s duties, or of any felony; (iii) conduct
significantly harmful to Employer, as reasonably determined by the
Boards of Directors, including but not limited to intentional
violation of law or of any significant policy or procedure of the
Employer; (iv) refusal or failure to act in accordance with a
stipulation, requirement, or directive of the Boards of Directors
(provided such directive is lawful); or (v) failure to
faithfully or diligently perform any of the duties of
Executive’s employment which are specified in this Agreement,
articulated by the Boards of Directors, or are usual and customary
duties of Executive’s employment, if Executive has not
corrected the problem or formulated a plan for its correction with
the Board (if such failure is not susceptible to immediate
correction) within thirty (30) days after notice to
Executive.
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“Good Reason” for
Executive’s resignation means (i) any one or more of the
following occurs without Executive’s consent: (A) a
material diminution of Executive’s base compensation (unless
consistent with an across the board pay reduction for all senior
management and not in excess of 20%); (B) a material change in
the geographic location at which Executive must perform services
for the Employer; (C) a material diminution in the
Executive’s authority, duties or responsibilities as its
relates to the Employer’s operations acquired, or
(D) any other action or inaction by Employer that constitutes
a material breach of this Agreement; (ii) Executive provides
notice to Employer of the existence of the condition within 90 days
of the initial existence of the condition; (iii) Employer has
30 days following receipt of such notice to remedy the condition
and fails to do so; and (iv) Executive resigns within twelve
months of such event occurring.
3. “Excess Parachute
Payment” Restrictions; Limitation on Change in Control
Benefit . If the benefits under Section 2, either alone or
together with other payments or compensation benefits to which
Executive is entitled to receive from Employer, would constitute an
“excess parachute payment” as defined in
Section 280G of the Internal Revenue Code of 1986, as amended
(the “Code”), these benefits shall be reduced to the
largest amount that will result in no portion of the benefits being
subject to the excise tax imposed by Section 4999 of the Code.
If any Change in Control Benefit exceeds the amount that might be
paid without invoking Section 280G, the Executive is given the
right to decide which particular benefits will be reduced in order
to comply with this section. The determination of the amount of
reduction in the benefits required pursuant to the foregoing
provisions, shall be made by mutual agreement of Employer and
Executive or if no agreement is possible, by Employer’s
accountants.
4. 409A . Notwithstanding any
provision of this Agreement to the contrary, if, at the time of
Executive’s “separation of service” with the
Employer, he or she is a “specified employee” as such
terms are defined in Section 409A of the Internal Revenue Code
and regulations promulgated thereunder, and one or more of the
payments or benefits received or to be received by Executive
pursuant to this Agreement would constitute “deferred
compensation” subject to Section 409A, no such payment
or benefit will be provided under this Agreement until the earlier
of: (a) the date that is six (6) months following
Executive’s termination of employment with the Employer, or
(b) the Executive’s death, unless the payment or
distribution is exempt from the application of Section 409A.
In the event any of Executive’s benefits that are paid in
installments under this Agreement are subject to the six-month
delay set forth in this Section 4, the first installment
payment shall be made in the seventh month following termination of
employment and shall equal the aggregate installment payments
Executive would have received during the first six months plus the
payment Executive is otherwise entitled to receive for the seventh
month.
5. Restrictive Covenants
.
(a) Non-Solicitation of Lithia
Employees . Except as may be consented to in writing by
Employer and signed by its Chief Executive Officer or President,
until a period of time expiring 24 months following
Executive’s separation of service, Executive will not,
directly or indirectly, employ or offer employment to, or assist or
be affiliated with any other person in employing, any persons
employed by Employer or any of its subsidiaries in a management
position (AVP or manager or higher) on or after the date hereof
(“Managers”), and will not, either directly or
indirectly, solicit, induce, recruit or encourage any Managers to
leave their employment, attempt to solicit, induce, recruit or
encourage any Managers to leave their employment, or cause or
encourage any person to directly or indirectly solicit, induce,
recruit or encourage Managers to leave their employment, either for
him or herself or for any other person or entity, unless such
person has not been employed by Employer or any of its subsidiaries
for at least six months.
For purposes of this paragraph, the
terms “solicit, induce, recruit and encourage” means,
direct and indirect communications of any kind and nature, directed
specifically to an individual for the purpose of causing the person
to leave their employment with Employer, but does not include
general advertisement or notice of job opportunities within an
industry. For purposes of this Agreement, the term
“affiliated with” includes Executive’s ownership
of 3% or more of the equity of any person, lending money to any
person, or serving as an executive officer, director, manager or
consultant to any person.
(b) Non Competition .
Executive will not be “affiliated with” (as that term
is defined in Section 5(a) above) any person or company having
a retail automotive location within 50 miles of any dealership of
Employer at the time of separation of service, for 24 months
following a separation of service for which Executive is eligible
for payments under Section 2 of this Agreement.
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(c) No Disparagement .
Executive shall not take any action or make any statement that
disparages Employer, its operation, business, or reputation, or any
of its officers or directors, or their reputation, and shall not
encourage or induce any third parties to disparage such persons
(“Disparaging Acts”) for a period of three
(3) years following a separation of service.
“Disparaging Acts” means any statement, communication
or publication, oral or written, regardless of whether such
statement, communication or publication is true, made about such
persons or their reputation, that is vilifying and/or derogatory in
nature and that reasonably would be expected to result in a
negative perception of such person, or that otherwise may have a
material adverse effect on such person or their
reputation.
(d) Disclosure of Confidential
Information . During the course of Executive’s employment
with Employer, Executive will have access to and become familiar
with certain proprietary and confidential information of Employer
and its subsidiaries not known to the public generally, or by its
actual or potential competitors (“Confidential
Information”). Executive acknowledges that such information
constitutes valuable, special, and unique assets of
Employer’s business, even though such information may not be
of a technical nature and may not be protected under trade secret
or related laws.
“Confidential
Information” means any company proprietary information,
technical data, trade secrets or know-how, including, but not
limited to research, strategic and marketing plans, product plans,
products, services, markets, processes, policies, financial or
other business information disclosed to, or discovered by,
Executive either directly or indirectly, during Executive’s
employment with the Employer. Executive further understand that
Confidential Information does not include any of the foregoing
items which has become publicly known and made generally available
through no wrongful act or omission of his/her or of others who
were under confidentiality obligations as to the item or items
involved or improvements or new versions thereof.
For a period of three (3) years
following a separation of employment, Executive will not, without
the prior written approval from an authorized officer of Employer,
directly or indirectly (i) reveal, report, publish, disclose
or transfer any Confidential Information, other than information
that constitutes “trade secrets” under applicable state
law (“Company Trade Secrets”), to any person, firm,
corporation or entity, or (ii) use any Confidential
Information for any purpose or for the benefit of any person, firm,
corporation or entity. Further, for so long as such information
remains Company Trade Secrets under applicable state laws,
Executive shall not, without the prior written approval from an
authorized officer of the Employer, directly or indirectly
(i) reveal, report, publish, disclose or transfer any
information that constitutes Company Trade Secrets to any person,
firm, corporation or entity, or (ii) use any of the Company
Trade Secrets for any purpose or for the benefit of any person,
firm, corporation or entity.
(e) Injunctive
Relief . Executive acknowledges that it may be impossible to
measure in money the damages that will accrue to Employer if
Executive fails to observe the covenants in this Section 5
(the “Restrictive Covenants”); therefore, in addition
to any action at law for damages, the Restrictive Covenants may be
enforced by an injunction to prohibit the restricted activity.
Executive hereby waives the claim or defense that an adequate
remedy at law is available to Employer. Nothing set forth herein
shall prohibit Employer from pursuing all remedies available to
it.
(f) Reasonableness . The
parties agree that this Agreement in its entirety, and in
particular the Restrictive Covenants, is reasonable both as to time
and as to area. The parties additionally agree (i) that the
Restrictive Covenants are necessary for the protection of
Employer’s business and goodwill; (ii) that the
Restrictive Covenants are not any greater than are reasonably
necessary to secure Employer’s business and goodwill; and
(iii) that the degree of injury to the public due to the loss
of the service and skill of Executive or the restrictions placed
upon Executive’s opportunity to make a living with
Executive’s skills upon enforcement of said restraints, does
not and will not warrant non-enforcement of said restraints. The
parties agree that if any portion of the Restrictive Covenants is
adjudged unreasonably broad, then the parties authorize said court
or arbitrator to narrow same so as to make it reasonable, given all
relevant circumstances, and to enforce the same.
(g) Return of Property . If
and when Executive ceases for any reason to be employed by
Employer, Executive must return to Employer all keys, pass cards,
identification cards and any other property of Employer. At the
same time, Executive also must return to Employer all originals and
copies (whether in hard copy, electronic or other form) of any
documents, drawings, notes, memoranda, designs, devices, diskettes,
tapes, manuals, and specifications which constitute proprietary
information or material of Employer. The obligations in this
paragraph include the return
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of documents and other materials that may be in
Executive’s desk at work, Executive’s car or place of
residence, or in any other location under Executive’s
control.
(h) Creative Work . Executive
agrees that all creative work and work product, including but not
limited to all technology, business management tools, processes,
software, patents, trademarks, and copyrights developed by
Executive during employment with Employer, regardless of when or
where such work or work product was produced, constitutes work made
for hire, all rights of which are owned by Employer. Executive
hereby assigns to the Employer all rights, title, and interest,
whether by way of copyrights, trade secret, trademark, patent, or
otherwise, in all such work or work product, regardless of whether
the same is subject to protection by patent, trademark, or
copyright laws.
(i) Survival . This
Section 5 shall survive the termination of this A
