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EXHIBIT 10.23
UNITED AUTO GROUP, INC.
375 FIFTH AVENUE
NEW YORK, NEW YORK 10152
As of August 3, 1999
Samuel X. DiFeo
141 Lorraine Avenue
Spring Lake, N.J. 10152
Dear Sam:
This letter sets forth our mutual agreement regarding (i) the terms and
conditions on which Samuel X. DiFeo (hereinafter sometimes the "Executive") will
continue to serve as President and Chief Operating officer of United Auto Group,
Inc. (the "Company") and (ii) the rights, entitlements and obligations of the
Executive and the Company, respectively, upon the termination of the Executive's
current employment as President and Chief Operating Officer of the Company
("President"), as set forth in Section 2 hereafter.
1. TERM, PAYMENTS AND BENEFITS. In consideration for services to be
rendered by the Executive as President for the Term (defined below), the Company
hereby agrees to compensate the Executive, in consideration for such service and
without regard to such other compensation and benefits to which the Executive
has been entitled pursuant to the Executive's existing agreements and
understandings with the Company, and to otherwise provide benefits to the
Executive as follows:
(a) Term. The Executive shall continue to serve as President of the
Company, through December 31, 1999, subject to the Company's right to extend the
Executive's service as President of the Company through May 31, 2000 upon
written notice of the Company's election to so extend the Executive's employment
as President hereunder, such notice to be delivered by the Company to the
Executive on or before December 1, 1999.
(b) Compensation. As President of the Company, the Executive shall be
compensated at the rate of $360,000 per annum, together with such bonus as the
Company shall determine to be appropriate for services rendered by the Executive
as President of the Company during any applicable period in light of the
Executive's contribution to the Company during such period and additional
factors deemed relevant by the Company.
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Samuel X. DiFeo
August 3, 1999
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(c) Stock Options. The Company shall confirm the immediate vesting
(i.e., August 3, 1999) of all options held by the Executive to purchase shares
of voting common stock, par value $0.0001 per share (the "Common Stock") of the
Company, which options shall thereafter be exercisable at any time after August
3, 1999, through and including the termination of the exercise period
attributable to each option as set forth below, notwithstanding any agreements
to the contrary. Such immediate vesting and exercise rights shall apply to all
options previously granted to the Executive, including without limitation, as
follows:
(i) 20,000 shares at the exercise price of $10.00 per share
pursuant to Stock Option Agreement dated as of April 23,
1996, with an exercise termination date of April 23,
2006;
(ii) 21,267 shares at the exercise price of $30.00 per share
pursuant to Option Certificate dated as of October 28,
1996, with an exercise termination date of October 28,
2061;'
(iii) 20,000 shares at the exercise price of $17.00 per share
pursuant to Stock Option Agreement dated as of May 14,
1997, with an exercise termination date of May 14, 2007;
(iv) 100,000 shares at the exercise price of $17.50 per share
pursuant to Stock Option Agreement dated as of April 13,
1998, with an exercise termination date of April 13,
2008; and
(v) 120,000 shares at the exercise price of $7.0625 per
share pursuant to Stock Option Agreement dated as of
March 3, 1999, with an exercise termination date of
March 3, 2009.
2. TERMINATION OF EMPLOYMENT.
(a) Termination of Employment. The Executive's employment as President
of the Company shall be deemed terminated upon the occurrences of any of the
following (each a "Termination Event"):
(i) Immediately upon the death of the Executive.
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Samuel X. DiFeo
August 3, 1999
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(ii) By the Company at any time after the Permanent Disability
of the Executive, subject to compliance by the Company with the Americans With
Disabilities Act, and by the Executive at any time after his Permanent
Disability.
(iii) By the Company at any time for Cause.
(iv) By the Company at any time without Cause.
(v) By the Executive's voluntary resignation.
(b) Cause. For purposes hereof, Cause shall mean: (i) active
participation by the Executive in fraudulent conduct, (ii) conviction of, or a
guilty plea to, a felony (iii) a deliberate act or series of deliberate acts
which results in material injury to the business, operations or business
reputation of the Company, (iv) an act or series of acts of dishonesty,
recklessness or gross-negligence which results in material injury to the
business operations or business reputation of the Company or (v) the Executive's
willful and continued failure to perform any of his material duties as President
which results in material injury to the business operations or business
reputation of the Company; provided, however there shall not be Cause in the
case of (x) clause (iii) or (iv) if the Executive promptly and diligently, after
receipt of written notice form the Company, takes such action which causes the
Company, in its reasonable judgment, to believe that such act or series of acts
would not likely result in material injury to the business, operations or
business reputation of the Company, or that any such injury, if already
incurred, has been rectified, or (y) clause (v), if the Executive promptly and
diligently, after receipt of written notice form the Company, discontinues his
failure to perform and rectifies any injury which resulted form his failure to
perform. Any repetition of any such deliberate, or substantially similar, act,
or such willful, or substantially similar, failure to perform, shall be Cause
without any further opportunity to cure.
(c) Permanent Disability. For the purposes hereof, Permanent
Disability shall be determined as follows:
(i) Determination. The Executive's "Permanent Disability" shall
be deemed to have occurred one (1) day after (x) one hundred fifty (150) days in
the aggregate during any consecutive twelve (12) month period, or (y) one
hundred fifty (150) consecutive days that, in either case, the Executive, by
reason of his physical or mental disability or illness, shall have been unable
to discharge fully his duties as President.
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Samuel X. DiFeo
August 3, 1999
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(ii) Resolution of Disagreement. If either the Company or the
Executive, after receipt of notice of the executive's Permanent Disability from
the other, disagrees that the Executive's Permanent Disability shall have
occurred, the Executive shall promptly submit to a physical examination by, or
at the direction of, the chief of medicine of any major accredited hospital in
the New York, New York metropolitan area and, unless such physician shall issue
a written statement to the effect that, in such physician's opinion, based on
such physician's diagnosis, the Executive is capable of resuming his employment
and devoting his full time and energy to discharging fully his duties hereunder
within thirty (30) days after the date of such statement, such Permanent
Disability shall be deemed to have occurred on a date determined in accordance
with Section 2(c)(i) above.
3. SEVERANCE COMPENSATION.
(a) Termination By Death. If the Executive's employment is terminated
by death, the Executive's estate shall be entitled to receive (v) any unpaid
salary and other compensation and benefits accrued and earned by the Executive
through the date of the Executive's death, including a pro rata share of any
bonus applicable to the calendar year in which death occurs, (w) severance
compensation, within ninety (90) days after the date of death, in a lump sum
payment equal to Eight Hundred Thousand ($800,000) Dollars, (x) any amounts
owing in accordance with the terms of any profit sharing, retirement and other
benefit plans in which the Executive is a participant, (y) any other benefits
to which the Executive is then entitled, payable within ninety (90) days after
the date of death, accrued up to and including the date of the Executive's death
and (z) benefits, if any, provided by any insurance policies to Executive or
Executive's estate in accordance with their terms.
(b) Termination for Cause. If the Executive's employment is
terminated by the Company for Cause, the Company shall not have any other or
further obligations to the Executive under this Agreement, except (w) as may be
provided in accordance with the terms of any profit sharing, retirement and
other benefit plans to which the Executive is a participant (x) as to that
portion of any unpaid salary and other compensation and benefits accrued and
earned by the Executive through the date of such termination, (y) any other
benefits to which the Executive is then entitled, payable within ninety (90)
days after the date of such termination, accrued up to and including the date of
such termination and (z) as to the benefits, if any, provided by any insurance
policies in accordance with their terms.
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Samuel X. DiFeo
August 3, 1999
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(c). Termination without Cause or For Permanent Disability.
(i) If the Executive's employment is terminated by the Company
without Cause, the Executive shall be entitled to receive (v) salary and other
compensation and benefits payable to the Executive hereunder through December
31, 1999 or such later date to which the term of employment hereunder shall have
been extended (the "Contract Term Expiration Date"), together with any bonus
applicable to the calendar year in which such termination occurs that would have
been payable to the Executive had such termination not occurred (w) the benefit
of the Consulting Agreement (the "Consulting Agreement") a copy of which is
attached hereto as Exhibit A (x) any amounts owing in accordance with the terms
of any profit sharing, retirement and other benefit plans in which the Executive
is a participant (y) any other benefits to which the Executive is entitled,
payable within ninety (90) days after the Contract Term Expiration Date, accrued
up to and including the Contract Term Expiration Date and (z) benefits, if any,
provided by any insurance policies in accordance with their terms.
(ii) If the Executive's employment is terminated because of his Permanent
Disability, the Executive shall be entitled to receive (v) salary and other
compensation and benefits payable to the Executive hereunder through December
31, 1999 or such later date to which the term of employment hereunder shall have
been extended (the "Contract Term Expiration Date"), together with any bonus
applicable to the calendar year in which such termination occurs that would have
been payable to the Executive had such termination not occurred, (w) the benefit
of the Consulting Agreement, (x) any amounts owing in accordance with the terms
of any profit sharing, retirement and other benefit plans in which the Executive
is a participant, (y) any other benefits to which the Executive is entitled,
payable within ninety (90) days after the Contract Term Expiration Date, accrued
up to and including the Contract Term Expiration Date and (z) benefits, if any,
provided by any insurance policies to Executive or Executive's estate in
accordance with their terms.
(d) Involuntary Resignation. If the Executive resigns from all offices
and directorships of the Company and all entity affiliates of the Company for
any of the reasons set forth in clauses (i) through (viii) of this Section
3(d), such resignation shall be deemed to be an "Involuntary Resignation," and
the Executive shall be entitled to receive the same severance compensation and
other benefits as are provided for in Section 3(c) above.
(i) The Company materially changes the Executive's duties and
responsibilities as President without his prior written consent, which consent
may be granted or withheld by the Executive in his absolute and sole discretion.
The Executive
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Samuel X. DiFeo
August 3, 1999
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shall be deemed to have consented to any proposal of the Board of Directors of
the Company calling for a material change in his duties and responsibilities
only if he shall give written notice of his consent thereto to the Board of
Directors of the Company within thirty (30) days after receipt of such written
proposal. If the Executive shall have failed to give such consent, the Company
shall have the opportunity to withdraw such proposed material change by written
notice to the Executive given within ten (10) days after the end of such thirty
(30) day period.
(ii) The Executive's place of employment is located or
relocated more than fifty (50) road miles from either 375 Park Avenue, New York,
New York or Jersey City, New Jersey
(iii) The Company, without the Executive's prior written
consent, reduces the Executive's current base salary of $360,000.
(iv) The Company imposes requirements on the Executive, or
gives instructions or directions to the Executive, which are: (x) contrary to or
in violation of (a) rules, principles, or codes of professional responsibility
or (b) law (as set forth in written statutes or regulations thereunder), which
the Executive is obligated to follow; (y) such that compliance by the Executive
with such requirements, instructions or directions would likely (a) have a
material adverse effect on the Executive or (b) cause the Executive to suffer
substantial liability, and (z) not withdrawn by the Company after written
request by the Executive, which written request sets forth the Executive's
complete explanation as to why he believes the requirements, instructions or
directions should be withdrawn.
(v) There occurs a material breach by the Company of any of
its obligations under this Agreement or any other agreement between the
Executive and the Company regarding the Executive's compensation, benefits or
otherwise, which breach has not been cured in all material respects within
thirty (30) days after the Executive gives written notice thereof to the
Company, which notice sets forth in reasonable detail the nature and
circumstances of such breach.
(vi) The Company or any majority owned subsidiary of the
Company violates a federal for state criminal law involving moral turpitude
which would likely (a) have a material adverse effect on the Executive or (b)
cause the Executive to suffer substantial liability, and the Executive was
unaware of such unlawful activity at the time of its occurrence.
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Samuel X. DiFeo
August 3, 1999
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(vii) The Executive resigns upon the occurrence of a "change
in control," such change occurring after August 3, 1999.
(viii) In the event of termination of the Executive by the
Company within six (6) months following a "change in control," other than a
termination by the Company for Cause.
The term "change in control" means the first to occur of the following
events:
A. The acquisition by any person, entity or "group" within the
meaning of ss.13(d) or 14(d) of the Securities Exchange Act of 1934 (the
"Exchange Act") of beneficial ownership (within the meaning of Rule 13d-3
promulgated under the Exchange Act) of twenty-five (25%) percent or more of
either the then outstanding equity interests in the Company or the combined
voting power of the then outstanding voting securities entitled to vote
generally in the election of the Board of Directors; or
B. The Company's stockholders approve an agreement to merge or
consolidate with another corporation or other entity resulting (whether
separately or in connection with a series of related transactions) in a change
in ownership of twenty percent (20%) or more of the voting control of, or
beneficial rights to, the voting capital stock of the Company, or an agreement
to sell or otherwise dispose of all or substantially all of the Company's assets
(including, without limitation a plan of liquidation or dissolution), or
otherwise approve of a fundamental alteration in the nature of the Company's
business;
provided, however, that the term "change of control" shall specifically not
include the announced transaction whereby Penske Capital Partners and its
affiliates are acquiring interests in the Company.
(e) Voluntary Resignation. If the Executive voluntarily resigns,
the Executive's employment shall be terminated. In the event of such voluntary
resignation, the Executive shall be entitled to (w) any unpaid salary and other
compensation and benefits accrued and earned by the Executive through the date
of such termination, including a pro rata portion of any bonus applicable to the
calendar year in which such termination occurs, (x) any amounts owing in
accordance with the terms of any profit sharing, retirement and other benefit
plans in which the Executive is a participant, (y) other benefits to which the
Executive is entitled, payable within ninety (90) days after the date of such
termination, accrued to and including the date of such termination, and (z)
benefits, if any, provided by any insurance policies in accordance with their
terms.
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Samuel X. DiFeo
August 3, 1999
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4. SEVERANCE AGREEMENTS.
(a) Resignation from Office. Upon the occurrence of any
Termination Event, the Executive shall be deemed to have thereupon resigned
immediately from all offices and directorships held by the Executive in the
Company and all affiliates of the Company, and the Executive shall sign and
deliver to the Company and all entity affiliates of the Company, as the case may
be, written resignations from all such offices and directorships.
(b) Consulting Agreement. Upon the occurrence of a Termination
Event as set forth in Sections 3(c)(i) or (ii) or 3(d), or if a Termination
Event as set forth in Sections 3(c)(i) or (ii) or 3(d) has not occurred prior to
the Contract Term Expiration Date, upon the Contract Term Expiration Date
(unless the Executive's employment has been terminated by the Company for Cause
or the Executive has voluntarily resigned from the Company prior to the Contract
Term Expiration Date), the Executive shall continue to be employed as a
consultant by the Company in accordance with the terms and conditions of that
certain Consulting Agreement.
(c) Press Release. Upon the occurrence of a Termination Event, the
form of press release confirming the termination of the Executive as President
shall be subject to the mutual agreement of the Executive and the Company. Any
statements by the Company or the Executive to third parties or to employees of
the Company regarding the termination of the Executive's employment as President
shall be consistent with such press release or subject to the mutual agreement
of the Executive and the Company.
(d) Non-Compete. Upon the termination of the Executive as
contemplated hereunder, the Executive shall be under no obligation to seek other
employment and there shall be no offset against amounts due the Executive
hereunder, under the Consulting Agreement or under any other agreement between
the Executive and the Company, on account of any remuneration attributable to
any subsequent or additional employment the Executive may obtain; provided,
however, the Executive shall not seek or accept employment in the automotive
industry for so long as the Consulting Agreement is in effect without the prior
written consent of the Company, which consent shall not be unreasonably withheld
or delayed, and, provided further, that any such permitted subsequent employment
shall have no effect on the Executive's rights and entitlements under this
Agreement, the Consulting Agreement or any other agreement between the Executive
and the Company or the Company's rights with respect to the Executive's
responsibility to maintain the confidentiality of this letter agreement and
confidential data of the Company, its affiliates, and its suppliers and
manufacturers.
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Samuel X. DiFeo
August 3, 1999
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(e) Confidentiality. The Executive and the Company hereby agree
that for so long as this letter agreement is otherwise confidential, neither the
Executive nor the Company will disclose the fact of this letter or any of its
terms or provisions to any person without the prior written consent of the other
party hereto; provided, however, that nothing herein shall prohibit disclosure
of such information to the extent required by law, nor prohibit disclosure by
the Executive to any legal or financial consultant, member of the Executive's
immediate family or prospective employer, if such person first agrees to be
bound by the confidentiality provisions of this Section 4(e). Notwithstanding
the foregoing, it is acknowledged by the parties hereto that this letter may be
filed by the Company with the Securities and Exchange Commission pursuant to
applicable law.
5. GENERAL PROVISIONS.
(a) This letter may be executed in any number of counterparts,
each of which when so executed and delivered shall constitute an original and
which all together shall constitute one agreement, with such counterparts being
deliverable by facsimile with the original being transmitted by overnight
courier.
(b) This letter shall bind and inure to the benefit of the
Executive's and the Company's respective successors and permitted assigns.
(c) This letter may not be amended, waived or modified, in whole
or in part, except by a writing signed by each of the Executive and the Company.
(d) This letter shall be construed and enforced in accordance
with, and shall be governed by, the laws of the State of New York without giving
effect to that State's choice of law principles.
(e) Any disputes arising under or in connection with this letter
shall, at the election of either the Executive or the Company, be resolved by
binding arbitration, to be held in New York City in accordance with the rules
and procedures of the American Arbitration Association. Judgment upon the award
rendered by the arbitrator(s) may be entered in any court having jurisdiction
thereof. The Company shall pay all costs and expenses (including reasonable
attorneys fees) as incurred by the Executive with any such arbitration or
litigation, unless the Executive is the unsuccessful party. Pending the
resolution of any arbitration or court proceeding, the Company shall continue
payment of all amounts due the Executive under this letter and all benefits to
which the Executive is entitled at the time the dispute arises.
(f) This Agreement constitutes the entire agreement between the
parties with respect to the subject matter hereof and shall supercede all prior
agreements
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Samuel X. DiFeo
August 3, 1999
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entered into between the parties with respect to the subject matter hereof,
including, without limitation, any terms or conditions of the Option Agreements
that conflict with any of the terms and conditions set forth in this Agreement.
If the forgoing is acceptable to you, please sign, date and return the
attached copy of this letter to the undersigned by hand or by express mail.
Sincerely,
UNITED AUTO GROUP, INC.
By: [SIG]
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AGREED:
/s/ Samuel X. DiFeo
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Samuel X. DiFeo
Date: 8-6-99
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