EMPLOYMENT
AGREEMENT
This Agreement is entered into
effective as of the 15 th day of December, 2008, by and between Sonic
Corp. (the “Corporation”), a Delaware corporation, and
Clifford Hudson (the “Employee”).
RECITALS
Whereas, the Employee is currently
serving as the Chief Executive Officer of the Corporation and is an
integral part of its management; and
Whereas, the Employee and the
Corporation acknowledge that they previously entered into an
Employment Agreement dated August 20, 1996, which is hereby
canceled and superseded in its entirety by this Agreement;
and
Whereas, the Corporation's Board of Directors
(the “Board”) has determined that it is appropriate to
reinforce and encourage the continued attention and dedication of
certain key members of the Corporation's management, including
Employee, to their assigned duties without distraction and
potentially disturbing circumstances arising from the possibility
of a Change in Control (herein defined) of the Corporation;
and
Whereas, the Corporation desires to continue the
services of Employee, whose experience, knowledge and abilities
with respect to the business and affairs of the Corporation are
extremely valuable to the Corporation; and
Whereas, the parties hereto desire to enter into
this Agreement setting forth the terms and conditions of the
continued employment relationship of the Corporation and
Employee.
Now, therefore, it is agreed as
follows:
ARTICLE I
1.1
Term of Employment . The Corporation shall employ
Employee for a period of two years from the date hereof (the
“Initial Term”).
1.2
Extension of Initial Term . Upon each anniversary
date of this Agreement, this Agreement shall be extended
automatically for an additional one year period to maintain
successive terms of two years each, unless either the Corporation
or the Employee gives contrary written notice to the other not
later than the anniversary date. As used herein,
“Term” shall mean the Initial Term together with any
renewal term(s) pursuant to this Section 1.2
1.3
Termination of Agreement and Employment . The
Corporation may terminate this Agreement and the Employee’s
employment at any time effective upon written notice to the
Employee. The Employee may terminate this Agreement and
the Employee’s employment only after at least 30 days’
written notice to the Corporation, unless otherwise agreed by the
Corporation.
ARTICLE II
Duties of the
Employee
Employee shall serve as the Chief
Executive Officer of the Corporation. Employee shall do
and perform all services, acts, or things necessary or advisable to
manage and conduct the business of the Corporation consistent with
such position subject to such policies and procedures as may be
established by the Board.
ARTICLE III
Compensation
3.1
Salary . For Employee's services to the
Corporation as the Chief Executive Officer, Employee shall be paid
a salary at the annual rate of $610,000 (herein referred to as
“Salary”), payable in twenty-four equal installments on
the first and fifteenth day of each month. On the first
day of each calendar year during the term of this Agreement with
the Corporation, Employee shall be eligible for an increase in
Salary based on an evaluation of Employee’s performance
during the past year with the Corporation. During the
term of this Agreement, the Salary of the Employee shall not be
decreased at any time from the Salary then in effect unless agreed
to in writing by the Employee.
3.2
Bonus . The Employee shall be entitled to
participate in an equitable manner with other officers of the
Corporation in discretionary cash bonuses as authorized by the
Board. Such bonuses shall be paid not later than the
15th day of the third month following the later of the end of the
Corporation’s tax year or the Employee’s tax year in
which the bonuses are no longer subject to a substantial risk of
forfeiture (within the meaning of Section 409A of the Internal
Revenue Code of 1986, as amended (the
“Code”)).
ARTICLE IV
Employee
Benefits
4.1
Use of Automobile . The Corporation shall provide Employee
with either the use of an automobile for business and personal use
or a cash car allowance in accordance with the established company
car policy of the Corporation. The Corporation shall pay
all expenses of operating, maintaining and repairing the automobile
and shall procure and maintain automobile liability insurance in
respect thereof, with such coverage insuring each Employee for
bodily injury and property damage. Reimbursement of
automobile-related expenses shall be made as soon as practicable
after the request for reimbursement is submitted, but in no event
later than the last day of the calendar year next following the
calendar year in which such expense was
incurred. Additionally, neither the provision of in-kind
benefits nor the reimbursement of expenses in any one calendar year
shall affect the level or amount of in-kind benefits to be
provided, or the expenses eligible for reimbursement, in any other
calendar year. The Employee’s right to
reimbursement or in-kind benefits under this Section 4.1 is not
subject to liquidation or exchange for another benefit.
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4.2
Medical, Life and Disability Insurance Benefits
. The Corporation shall provide Employee with medical,
life and disability insurance benefits in accordance with the
established benefit policies of the Corporation.
4.3
Working Facilities . Employee shall be provided
adequate office space, secretarial assistance, and such other
facilities and services suitable to Employee’s position and
adequate for the performance of Employee’s duties.
4.4
Business Expenses . Employee shall be authorized
to incur reasonable expenses for promoting the business of the
Corporation, including expenses for entertainment, travel, and
similar items. The Corporation shall reimburse Employee
for all such expenses upon the presentation by Employee, from time
to time, of an itemized account of such
expenditures. Reimbursement shall be made as soon as
practicable after the request for reimbursement is submitted, but
in no event later than the last day of the calendar year next
following the calendar year in which such expense was
incurred. Additionally, the reimbursement of expenses in
any one calendar year shall not affect the expenses eligible for
reimbursement in any other calendar year. The
Employee’s right to reimbursement under this Section 4.4 is
not subject to liquidation or exchange for another
benefit.
4.5
Vacations . Employee shall be entitled to an
annual paid vacation commensurate with the Corporation's
established vacation policy for officers. The timing of
paid vacations shall be scheduled in a reasonable manner by the
Employee.
4.6
Disability . Upon disability (as defined herein)
of the Employee, the Employee shall be entitled to receive up to
six months’ of Employee’s Salary (less any deductions
required by law) payable in twelve equal installments of 1/24 of
the Salary, with the first installment occurring on the first
regularly scheduled payroll date following the determination of
disability and the remaining installments occurring on a
semi-monthly basis thereafter, provided that such disability
payments shall continue only so long as the disability continues,
and provided further that each such disability payment shall be
reduced by any benefit payment the Employee is entitled to receive
under the Corporation’s group disability insurance plans
during the corresponding payroll period..
4.7
Term Life Insurance . The Corporation shall
purchase term life insurance on the life of the Employee having a
face value of four times the Employee’s Salary (to be changed
as salary adjustments are made) or the face value of life insurance
that can be purchased based upon the Employee’s health
history with the Corporation paying the standard premium rate for
term insurance under its then current insurance program at the
Employee’s age and assuming good health, whichever amount is
lesser; provided further that, such insurance can be obtained by
the Corporation in a manner which meets the requirements for
deductibility by the Corporation under Section 79 of the Internal
Revenue Code of 1986, or as hereafter amended.
4.8
Compensation Defined . Compensation shall be
defined as all monetary compensation and all benefits described in
Articles III and IV hereunder (as adjusted during the term
hereof).
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ARTICLE V
Termination
5.1
Separation from Service . For purposes of this
Agreement, the terms “terminate,”
“terminated” and “termination” with respect
to the Employee’s employment mean a termination of the
Employee’s employment that constitutes a “separation
from service” within the meaning of the default rules of
Section 409A of the Code.
5.2
Death . Employee's employment hereunder shall be
terminated upon the Employee's death.
5.3
Disability . The Corporation may terminate
Employee's employment hereunder in the event Employee is disabled
and such disability continues for more than 180
days. Disability shall be defined as the inability of
Employee to render the services required of him, with or without a
reasonable accommodation, under this Agreement as a result of
physical or mental incapacity.
5.4
Cause .
(a) The
Corporation may terminate Employee's employment hereunder for
cause. For the purpose of this Agreement,
“Cause” shall mean (i) the willful and intentional
failure by Employee to substantially perform Employee’s
duties hereunder, other than any failure resulting from Employee's
incapacity due to physical or mental incapacity, or (ii) commission
by Employee, in connection with Employee’s employment by the
Corporation, of an illegal act or any act (though not illegal)
which is not in the ordinary course of the Employee's
responsibilities and exposes the Corporation to a significant level
of undue liability. For purposes of this paragraph, no
act or failure to act on Employee's part shall be considered to
have met either of the preceding tests unless done or omitted to be
done by Employee not in good faith without a reasonable belief that
Employee’s action or omission was in the best interest of the
Corporation.
(b) Notwithstanding
the foregoing, Employee shall not be deemed to have been terminated
for cause unless and until there shall have been delivered to
Employee a copy of a resolution, duly adopted by the affirmative
vote of not less than two-thirds of the entire membership of the
Board at a meeting held within 30 days of such termination (after
reasonable notice to Employee and an opportunity for Employee to be
heard by members of the Board) confirming that Employee was guilty
of the conduct set forth in this Section 5.3.
5.5
Compensation Upon Termination for Cause or Upon Resignation By
Employee . Except as otherwise set forth in
Section 5.7 hereof, if Employee's employment shall be
terminated for Cause or if Employee shall resign Employee’s
position with the Corporation, the Corporation shall pay Employee's
Compensation only through the last day of Employee's employment by
the Corporation. The Corporation shall then have no
further obligation to Employee under this Agreement.
5.6
Compensation Upon Termination Other Than For Cause Or
Disability . Except as otherwise set forth in
Section 5.8 hereof, if the Corporation shall terminate Employee's
employment other than for Cause or Disability, the Corporation
shall continue to be obligated to pay two years of
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Employee’s Salary (payable in forty-eight
equal installments, with the first installment occurring on the
first regularly scheduled payroll date following the date of
termination, and the remaining installments occurring on a
semi-monthly basis thereafter), but shall not be obligated to
provide any other benefits described in Articles III and IV hereof,
except to the extent required by law.
5.7
Compensation Upon Non-Renewal of Agreement.
Except as otherwise set forth in Section 5.7 hereof, if
the Company shall give notice to Employee in accordance with
Section 1.2 hereof that this Agreement will not be renewed but
Employee’s employment is not terminated, the Company shall
continue to be obligated to pay Employee’s Salary for a
period of two years beginning on the date notice of non-renewal is
given, on regularly scheduled payroll dates, but shall not be
obligated to provide any other benefits described in Articles III
and IV hereof, except to the extent required by law.
5.8
Termination of Employee or Resignation by Employee for Good
Reason . If at any time within the first twelve
months subsequent to a Change in Control, the Employee’s
employment with the Corporation is terminated other than as
provided for in Section 5.1, 5.2 or 5.3 hereof, or the Corporation
violates any provision of this Agreement or Employee shall resign
Employee's employment for Good Reason (as defined herein), the
Corporation shall be obligated to pay to Employee a severance
payment in an amount equal to one and one-half times the Employee's
compensation payable under paragraph 5.6 above, but in no event to
exceed an amount equal to $1.00 less than three (3) times the mean
average annual compensation paid to Employee by the Corporation and
any of its subsidiaries during the five calendar years ending
before the date on which the Change in Control occurred (or if
Employee was not employed for that entire five year period, then
the mean average annual compensation paid to employee during such
shorter period, with the Employee's compensation annualized for any
calendar year during which the employee was not employed for the
entire calendar year); provided, however, that if the severance
payment under this Section 5.7, either alone or together with any
other payments or compensation which Employee has a right to
receive from the Corporation, would
