RETENTION AGREEMENT
THIS RETENTION AGREEMENT ("Agreement") is effective as of ___________, by and
between PETCO Animal Supplies, Inc. ("PETCO") and ______________ ("Employee").
A. EMPLOYEE is currently employed by PETCO. If the employment is
pursuant to an Offer Letter of Employment ("Offer Letter"), a
copy of the Offer Letter is attached hereto as Exhibit 1.
B. Although PETCO presently anticipates no Change in Control, the
Board of Directors wishes to plan for such a possibility and
to ensure EMPLOYEE's continued dedication and efforts in such
event without undue concern for personal, financial and
employment security.
C. The parties hereto desire to fulfill the above purpose
according to the terms set forth in this Agreement.
AGREEMENT
In consideration of the mutual covenants set forth in this Agreement and other
good and valuable consideration, the sufficiency of which is hereby
acknowledged, the parties hereto agree as follows:
1. DEFINITIONS. The following words and phrases as used in this Agreement
shall have the following respective meanings.
a. CAUSE. A termination of employment for "Cause" is a
termination precipitated by EMPLOYEE's:
(i) failure to substantially perform EMPLOYEE's duties
with PETCO (other than due to incapacity resulting
from physical or mental illness), which failure has
continued for at least 30 days following receipt by
EMPLOYEE of written notice specifying the failure to
substantially perform,
(ii) engagement in conduct that is demonstrably and
materially injurious to PETCO, monetarily or
otherwise, which injurious conduct has continued for
at least 30 days following EMPLOYEE's receipt of
written notice specifying the injurious conduct and
offering EMPLOYEE the opportunity to explain the
conduct to the President/Chief Executive Officer; or
(iii) a material breach by Employee of any provision of
this Agreement or the Offer Letter.
b. CHANGE IN CONTROL. A "Change in Control" shall be deemed to
occur:
(i) if any person or entity other than persons or
entities currently owning more than five percent of
PETCO's securities is or becomes the "beneficial
owner" (as defined in rule 13d-3 of the Securities
Exchange Act of 1934), directly or indirectly, of
securities of PETCO representing 50% or more of the
combined voting power of PETCO's then outstanding
securities;
(ii) upon the approval by PETCO's stockholders and the
consummation of a Transaction; or
(iii) if, during any period, members of the Incumbent Board
cease for any reason to constitute at least a
majority of the Board.
Notwithstanding the foregoing, a Change in Control pursuant to
subparagraphs (ii) and (iii) above shall not be deemed to
occur if immediately following the consummation of a
Transaction or other event approved by the Incumbent Board,
holders of PETCO's voting securities immediately prior to a
Transaction either continue to own at least 50% of the
combined voting power of PETCO's then outstanding voting
securities if PETCO survives the Transaction or then own
voting securities representing at least 50% of the combined
voting power of each surviving entity after a Transaction.
c. GOOD REASON. Termination of employment by EMPLOYEE for "Good
Reason" is a termination of employment due to the occurrence
of any one of the following events or conditions:
(i) a material change in EMPLOYEE's status, title,
position or responsibilities which in the EMPLOYEE's
reasonable judgment represents a substantial
reduction of the status, title, position or
responsibilities in effect immediately prior to the
change;
(ii) the assignment of EMPLOYEE to a position which
requires EMPLOYEE to relocate permanently to a site
outside of San Diego County;
(iii) assigning EMPLOYEE any duties or responsibilities
(other than due to a promotion) which in the
EMPLOYEE's reasonable judgment are inconsistent with
his/her status, title, position or responsibilities;
(iv) any removal of EMPLOYEE from or failure to reappoint
or reelect EMPLOYEE to his/her previously held
position, except in connection with a promotion, the
termination of employment for Cause, as a result of
permanent disability (as determined by EMPLOYEE's
eligibility to receive disability benefits under any
long-term disability plan PETCO may then
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have in effect), as a result of EMPLOYEE's death, or
by EMPLOYEE other than for Good Reason; or
(v) any material breach by PETCO of any provision of this
Agreement or the Offer Letter.
d. INCUMBENT BOARD. The "Incumbent Board" consists of the members
of the Board of Directors of PETCO as of the date of this
Agreement, to the extent they continue to serve as Board
members and any individual who becomes a Board member after
the date of this Agreement if (i) his or her election or
nomination as a director was approved by a vote of at least
two-thirds of the then Incumbent Board and such person does
not own more than 20% of PETCO's securities, or (ii) such
individual is a representative of an institutional investor
that either owns less than 20% of PETCO's securities or was
represented on the Board as of the date of this Agreement.
x. XXXXXXXXX PERIOD. The "Severance Period" is the twelve-month
period beginning on the date of termination of EMPLOYEE's
employment or such longer period as offered by the acquiring
company consistent with acquiring company's policies and
practices or industry practices at that time.
f. TRANSACTION. A "Transaction" means a merger or consolidation,
reorganization, distribution of assets to stockholders by
spin-off, split-up or otherwise, a sale or disposition of all
or substantially all of PETCO's assets or a liquidation or
dissolution of PETCO.
2. AT-WILL EMPLOYMENT. Notwithstanding any of the provisions in the
Agreement, EMPLOYEE and PETCO understand and expressly agree that
EMPLOYEE's employment is not for a specified term and that, other than
during the first year following a Change in Control, EMPLOYEE's
employment may be terminated by PETCO or by EMPLOYEE at any time, with
or without notice, and with or without cause. EMPLOYEE and PETCO
expressly agree that this provision is intended by EMPLOYEE and PETCO
to be the complete and final expression of their understanding
regarding the terms and conditions under which EMPLOYEE's employment
may be terminated. EMPLOYEE and PETCO further understand and agree that
no representation contrary to this provision is valid, and that this
provision may not be augmented, contradicted or modified in any way,
except by a writing signed by EMPLOYEE and PETCO's president.
3. SEVERANCE
a. EMPLOYEE shall be entitled to receive from PETCO severance
benefits in the amount provided in subsection b, below, if in
connection with a Change in Control or within one year after a
Change in Control, EMPLOYEE's employment with PETCO is
terminated; provided, however, that EMPLOYEE will not be
entitled to any severance benefits if EMPLOYEE's termination
of employment is
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(i) for Cause, (ii) by reason of permanent disability (as
determined by EMPLOYEE's eligibility to receive
disability benefits under any long-term disability plan
PETCO may then have in effect), (iii) initiated by
EMPLOYEE for other than Good Reason or (iv) by reason of
EMPLOYEE's death. Notwithstanding any other provision of
this Agreement, the consummation of a Transaction in
itself shall not be deemed a termination of employment
entitling EMPLOYEE to severance benefits hereunder even
if such event results in EMPLOYEE being employed by a
different entity which assumes PETCO's obligations under
this Agreement.
b. If EMPLOYEE's services are terminated, entitling EMPLOYEE to
severance benefits pursuant to subsection a, above, EMPLOYEE
shall be entitled to the following benefits:
(i) During the Severance Period, PETCO shall continue to
pay to EMPLOYEE base salary, less applicable
withholding, at the rate and according to the payment
schedule in place immediately prior to the
termination of employment.
(ii) During the Severance Period, PETCO shall continue on
behalf of EMPLOYEE (and EMPLOYEE's dependents and
beneficiaries) life insurance, disability insurance,
and medical, dental, and automobile benefits, if any,
which were being provided to EMPLOYEE at the time of
termination of employment and the expense shall be
allocated between PETCO and EMPLOYEE on the same
basis as prior to the date of termination of
employment. The period of time during which such
payments and continuation of coverage shall occur
under this paragraph will run concurrently with any
separate period of time during which the law requires
continuation coverage. The benefits provided pursuant
to this subsection shall be no less favorable to
EMPLOYEE than the coverage provided to EMPLOYEE under
the plans providing such benefits at the time notice
of termination was given to EMPLOYEE. The obligation
of PETCO under this subsection shall be limited to
the extent that EMPLOYEE obtains any such benefits
pursuant to a subsequent employer's benefit plans, in
which case PETCO may reduce the coverage of any
benefits it is required to provide EMPLOYEE under
this subsection, as long as the aggregate coverage of
the combined benefit plans is no less favorable to
EMPLOYEE, in terms of amounts and deductibles and
costs to EMPLOYEE, than the coverage required to be
provided under this subsection. This subsection shall
not be interpreted so as to limit any benefits to
which EMPLOYEE (or EMPLOYEE's dependents or
beneficiaries) are entitled under any of PETCO's
employee benefit plans, programs or practices
following EMPLOYEE's date of termination of
employment. The provision of continued benefits to
EMPLOYEE under this subsection shall not deprive
EMPLOYEE of any
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independent statutory right to continue benefits
coverage pursuant to sections 601 through 606 of
the Employee Retirement Income Security Act of
1974, as amended; and
(iii) On the date of termination of employment, PETCO shall
pay EMPLOYEE an amount equal to the bonus, if any,
EMPLOYEE would have received had EMPLOYEE remained in
PETCO's employment during the Severance Period. For
purposes of this paragraph, the bonus is calculated
as the greater of the prorata bonus norm or actual
bonus earned.
(iv) The above provisions set forth the minimum severance
benefits and do not prohibit better severance
benefits being offered that are consistent with the
acquiring company's policies and practices or
industry practices at that time.
(v) Nothing in this Retention Agreement is meant to
prohibit an employee from continuing to contribute to
his or her 401(k) plan during the Severance Period.
4. ACCELERATION OF OPTIONS. Pursuant to the authority granted to the Board
Committee under Section 4.7 of PETCO's amended and restated 1994 Stock
Option Plan (the "Plan"), in the event of the occurrence of a Change in
Control, all of EMPLOYEE's rights to exercise option(s) granted under
the Plan and held by EMPLOYEE at the time of the Change in Control
shall immediately vest resulting in these option(s) becoming
immediately exercisable for the period specified in the section of the
respective option(s) relating to vesting of options, if the period
specified is less than three months, then three months after which time
the option(s) shall expire.
5. TERM OF AGREEMENT. This Agreement shall continue in full force and
effect until terminated as provided in this section. This Agreement
shall terminate on the earlier of:
a. July 31st of a year after 1996, if the Board of Directors by
the affirmative vote of a majority of its members prior to May
1 of such year and prior to the occurrence or consideration of
a specific Change in Control, has voted to terminate this
Agreement; or
b. if EMPLOYEE's services are terminated prior to the occurrence
of a Change in Control or after the first anniversary of a
Change in Control, the date of such termination of services;
c. if EMPLOYEE's services are terminated upon or within the first
year following a Change in Control under circumstances where
EMPLOYEE would not be entitled to severance benefits pursuant
to this Agreement, the date of such termination of services;
or
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d. after a Change in Control, the date on which any successor to
PETCO has performed all of its obligations under Section 3 of
this Agreement and EMPLOYEE has performed all of EMPLOYEE's
obligations under Section 3 of this Agreement.
6. AGREEMENT NOT TO USE TRADE SECRETS.
a. TRADE SECRETS IN GENERAL. During the course of EMPLOYEE's
employment, EMPLOYEE will have access to various trade secrets
of PETCO. A "Trade Secret" is information, which is not
generally known to the public and, as a result, is of economic
benefit to PETCO in the conduct of its business. EMPLOYEE and
PETCO agree that Trade Secrets shall include, but not be
limited to, all information developed or obtained by PETCO,
comprising the following items, whether or not such items have
been reduced to tangible form (e.g., physical writing): all
methods, technics, processes, ideas, trade names, service
marks, slogans, forms, customer lists, pricing structures,
menus, business forms, recipes, formulas, marketing programs
and plans, layout and design, financial structure, operational
methods and tactics, cost information, the identity of
suppliers or customers of PETCO, customer lists, accounting
procedures, databases, and any document, record or other
information of PETCO relating to the above. Trade Secrets
include not only information belonging to PETCO which existed
before the date of this Agreement, but also information
developed by EMPLOYEE or PETCO or PETCO's employees during the
term of this Agreement and thereafter.
b. RESTRICTION ON USE OF TRADE SECRETS. EMPLOYEE agrees that
EMPLOYEE's use of trade secrets is subject to the following
restrictions during the term of this Agreement and for an
indefinite period thereafter, so long as the Trade Secrets
have not become generally known to the public.
(i) NON-DISCLOSURE. EMPLOYEE will not publish or
disclose, or allow to be published or disclosed,
Trade Secrets to any person who is not an employee of
PETCO unless such disclosure is necessary for the
performance of EMPLOYEE's obligations under this
Agreement. Disclosure to someone who is not an
employee of PETCO must first be authorized in writing
by PETCO's president.
(ii) NON-REMOVAL. EMPLOYEE will not remove any Trade
Secrets from the office of PETCO or the premises of
any facility in which PETCO is performing services,
or allow such removal, unless permitted in writing by
PETCO's president.
(iii) PROHIBITION AGAINST UNFAIR COMPETITION. At any time
after the termination of EMPLOYEE's employment with
PETCO for any reason, EMPLOYEE will not engage in
competition with PETCO while making use of the Trade
Secrets of PETCO.
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c. SOLICITATION OF EMPLOYEES. EMPLOYEE will be called upon to
work closely with employees of PETCO in performing services
under this Agreement. EMPLOYEE expressly agrees that EMPLOYEE
will not, during EMPLOYEE's employment with PETCO and for one
year thereafter, solicit or take away any employee of PETCO.
In addition, all information about such employees which
becomes known to EMPLOYEE during the course of EMPLOYEE's
employment with PETCO, and which is not otherwise known to the
public, is a Trade Secret of PETCO and shall not be used by
EMPLOYEE in soliciting or taking away employees of PETCO at
any time during or after termination of EMPLOYEE's employment
with PETCO.
d. COMPETITION DURING EMPLOYMENT. During EMPLOYEE's employment
with PETCO, EMPLOYEE will not render services or give advice
to, affiliate with (as employee, partner, consultant or
otherwise) or invest or acquire any interest in, in whole or
in significant part, any other person or organization which is
engaged in or about to become engaged in franchising,
developing, owning or operating a retail store specializing in
pet food supplies and/or services (a "Conflicting
Organization"). EMPLOYEE shall not, however, be prohibited
from investing in securities of any Conflicting Organization
that is listed on a national securities exchange or traded on
the NASDAQ stock market, providing that EMPLOYEE does not own,
or have the right to acquire, more than three percent of the
outstanding voting securities of such company.
e. RETURN OF PROPERTY. Upon the termination of EMPLOYEE's
employment for any reason, EMPLOYEE shall immediately deliver
to PETCO all originals and copies of documents, records,
computer disks, hard copy printouts of computer disks,
software programs, keys, security access cards, credit cards,
financial information, procedures, proposals, reports,
computers, and other items and information within EMPLOYEE's
possession or control, belonging to PETCO or in any way
related to the business of PETCO or the services EMPLOYEE
performed for PETCO, including, but not limited to, any and
all of PETCO's Trade Secrets.
f. VIOLATIONS OF TRADE SECRETS, SOLICITATION, COMPETITION CLAUSES
AND/OR RETURN OF PROPERTY. EMPLOYEE agrees and acknowledges
that the violation of any of the provisions contained in
Section 6 would cause irreparable injury to PETCO, that the
remedy at law for any violation or threatened violation
thereof would be inadequate and PETCO shall be entitled to
temporary and permanent injunctive or other equitable relief
without the necessity of proving actual damages. EMPLOYEE
agrees that such relief shall be available in a court of law
regardless of the arbitration provision contained in Section
14 of this Agreement. In any proceeding by PETCO to enforce
any of the provisions contained in Section 6, the prevailing
party shall be entitled to reimbursement of all costs and
reasonable attorneys' fees incurred in such litigation.
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7. SUCCESSORS. This Agreement shall bind, and then be enforced by, any
successor (whether direct or indirect, by purchase, merger,
consolidation or otherwise) to all or substantially all of the business
or assets of PETCO, in the same manner and to the same extent that
PETCO would be obligated under or entitled to enforce this Agreement if
no succession had taken place. In the case of any Transaction in which
a successor would not by the foregoing provision or by operation of law
be bound by this Agreement, PETCO shall use its best efforts to require
such successor expressly and unconditionally to assume and agree to
perform PETCO's obligations under this Agreement, in the same manner
and to the same extent that PETCO would be required to perform if no
such succession had taken place unless PETCO previously arranged to
establish an escrow to satisfy its obligations thereunder.
8. ENTIRE AGREEMENT. Except as otherwise provided for in this Agreement,
this Agreement, together with the Offer Letter, if any, represents the
only agreement among the parties concerning the subject matter hereof
and supersedes all prior agreements whether written or oral, relating
thereto; provided, however, that the terms of the option(s) granted to
EMPLOYEE under the Plan are not superseded except to the extent that
this Agreement provides severance compensation and benefits which are
greater than under the Offer Letters and that this Agreement restricts
competition with PETCO for a longer period than under the option(s) or
the Offer Letters in either of which case the provision of this
Agreement shall govern.
9. ASSIGNMENT. This Agreement shall not be assignable by EMPLOYEE. Any and
all assignments of this Agreement or any interest therein by EMPLOYEE
shall be void.
10. NO WAIVER. Any waiver of any term or condition of this Agreement by
either party shall not operate as a waiver of any continued breach of
such term or condition, or any other term or condition, nor shall any
failure to enforce a provision of this Agreement operate as a waiver of
such provision or of any other provision of this Agreement.
11. CAPTIONS. The captions and headings of this Agreement are for
convenience only and shall in no way limit or otherwise affect any of
the terms or provisions contained herein.
12. SEVERABILITY. Should any provision of this Agreement, or its
application, to any extent be held invalid or unenforceable, the
remainder of this Agreement and its application, excluding such invalid
or unenforceable provisions shall not be affected by such exclusion and
shall continue to be valid and enforceable to the fullest extent
permitted by law or equity.
13. GOVERNING LAW. This Agreement shall for all purposes be governed and
interpreted in accordance with the laws of the State of California.
14. ARBITRATION. Any dispute arising out of or relating to this Agreement
or the alleged breach of it, or the making of this Agreement, including
claims of fraud in the inducement, shall be discussed between the
disputing parties in a good faith effort to arrive at a mutual
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settlement of any such controversy. If, the dispute cannot be resolved,
it shall be settled by binding arbitration. Judgment upon the award
rendered by the arbitrator may be entered in any court having
jurisdiction thereof. Arbitration will be conducted pursuant to the
provisions of this Agreement, and the Commercial Arbitration Rules of
the American Arbitration Association, unless such rules are
inconsistent with the provisions of this Agreement. Limited civil
discovery shall be permitted for the production of documents and taking
of depositions. Unresolved discovery disputes may be brought to the
attention of the arbitrator who may dispose of such dispute. The
arbitrator shall have the authority to award any remedy or relief that
a court of this state could order or grant. The arbitrator may award to
the prevailing party, if any, as determined by the arbitrator, all of
its costs and fees, including the arbitrator's fees, administrative
fees, travel expenses, out-of-pocket expenses and reasonable attorneys'
fees. Unless otherwise agreed by the parties, the place of any
arbitration proceedings shall be San Diego County, California.
15. AMENDMENTS. No amendment or modification of these terms or conditions
of this Agreement shall be valid unless in writing and signed by the
parties hereto.
16. COUNTERPARTS. This Agreement may be executed in counterparts, and if so
executed, each such counterpart shall have the force and effect of an
original.
17. NOTICES. Any notice required or permitted to be given under this
Agreement shall be sufficient, if in writing, sent by mail to his/her
residence in the case of the EMPLOYEE, or hand delivered to the
EMPLOYEE, or to PETCO's principal office (corporate office) in the case
of PETCO.
18. CONSTRUCTION. This Agreement shall not be construed against any party
on the grounds that such party drafted the Agreement or caused it to be
drafted.
19. AUTHORITY TO SIGN. Each individual signing this Agreement directly and
expressly warrants that he/she has been given and has received and
accepted authority to sign and execute the Agreement on behalf of the
party for whom it is indicated he/she has signed, and further has been
expressly given and received and accepted authority to enter into a
binding agreement on behalf of such party with respect to the matters
contained herein and as stated herein.
20. ACKNOWLEDGMENT. EMPLOYEE acknowledges that EMPLOYEE has been advised by
PETCO to consult with independent counsel of EMPLOYEE's own choice, at
EMPLOYEE's expense, concerning this Agreement, that EMPLOYEE has had
the opportunity to do so, and that EMPLOYEE has taken advantage of that
opportunity to the extent that EMPLOYEE desires. EMPLOYEE further
acknowledges that EMPLOYEE has read and understands this Agreement, is
fully aware of its legal effect, and has entered into it freely based
on EMPLOYEE's own judgement.
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IN WITNESS HEREOF, the parties have executed this Agreement as of the date set
forth above.
PETCO ANIMAL SUPPLIES, INC.
By: /s/ XXXXX X. XXXXXX
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Xxxxx X. Xxxxxx
Its: Chairman, President and CEO
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EMPLOYEE
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