Contract
This CHANGE OF CONTROL AGREEMENT (this ?Agreement?) is made
by and between THE PEP BOYS - MANNY, MOE & XXXX, a Pennsylvania corporation
(the "Company"), and ____________ (the "Executive"), dated as of _____________.
WHEREAS, the Company and Executive previously entered into that
certain Employment Agreement, dated as of ___________ (the ?Original Agreement?),
which sets forth certain of the terms and conditions of the Executive?s employment
with the Company in the event of any ?Change of Control,? and certain compensation
that will be paid to the Executive if the Executive?s employment is terminated in
connection with a Change of Control;
WHEREAS, the Company and Executive desire to amend the Original
Agreement so that it complies with the requirements of section 409A of the Internal
Revenue Code of 1986, as amended (the ?Code?), and the final regulations issued
thereunder, as well as to make certain other changes; and
IT IS, THEREFORE, AGREED:
1. Operation of Agreement.
(a) The "Effective Date" shall be the date during the "Change
of Control Period" (as defined in Section 1(b) hereof) on which a Change of Control
occurs. Anything in this Agreement to the contrary notwithstanding, if the Executive's
employment with the Company is terminated within twelve (12) months prior to the
date on which a Change of Control occurs, and the Executive can reasonably
demonstrate that such termination (i) was at the request of a third party who has taken
steps reasonably calculated to effect a Change of Control or (ii) otherwise arose in
connection with a Change of Control, then for all purposes of this Agreement the
"Effective Date" shall mean the date immediately prior to the date of such termination.
(b) The "Change of Control Period" is the period commencing
on the date hereof and ending on the second anniversary of such date; provided,
however, that commencing on the date one year after the date hereof, and on each
annual anniversary of such date (such date and each annual anniversary thereof is
hereinafter referred to as the "Renewal Date"), the Change of Control Period shall be
automatically extended so as to terminate two years from such Renewal Date, unless
at least sixty (60) days prior to the Renewal Date the Company shall give notice that
the Change of Control Period shall not be so extended.
2. Change of Control. For the purpose of this Agreement, a "Change
of Control" shall be deemed to have taken place if:
(a) individuals who, on the date hereof, constitute the Board of
Directors (the "Board") of the Company (the "Incumbent Directors") cease for any
reason to constitute at least a majority of the Board, provided that any person becoming
a director subsequent to the date hereof, whose election or nomination for election
was approved by a vote of at least two-thirds of the Incumbent Directors then on the
Board (either by a specific vote or by approval of the proxy statement of the Company
in which such person is named as a nominee for director, without written objection to
such nomination) shall be an Incumbent Director; provided, however, that no
individual initially elected or nominated as a director of the Company as a result of an
actual or threatened election contest with respect to directors or as a result of any other
actual or threatened solicitation of proxies or consents by or on behalf of any person
other than the Board shall be deemed to be an Incumbent Director;
(b) any "Person" (as such term is defined in Section 3(a)(9) of
the Securities Exchange Act of 1934 (the "Exchange Act") and as used in Sections
13(d)(3) and 14(d)(2) of the Exchange Act) is or becomes a "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of
the Company representing 20% or more of the combined voting power of the
Company's then outstanding securities eligible to vote for the election of the Board (the
"Voting Securities"); provided, however, that the event described in this Section 2(b)
shall not be deemed to be a Change of Control by virtue of any of the following
acquisitions: (i) by the Company or any subsidiary of the Company in which the
Company owns more than 50% of the combined voting power of such entity (a
"Subsidiary"), (ii) by any employee benefit plan (or related trust) sponsored or
maintained by the Company or any Subsidiary, (iii) by any underwriter temporarily
holding the Company's Voting Securities pursuant to an offering of such Voting
Securities, (iv) pursuant to a Non-Qualifying Transaction (as defined in Section 2(c)
hereof), or (v) pursuant to any acquisition by Executive or any group of persons
including Executive (or any entity controlled by Executive or any group of persons
including Executive);
(c) the consummation of a merger, consolidation, statutory
share exchange or similar form of corporate transaction involving the Company or any
of its Subsidiaries that requires the approval of the Company's stockholders, whether
for such transaction or the issuance of securities in the transaction (a "Business
Combination"), unless immediately following such Business Combination: (i) more
than 50% of the total voting power of (A) the Company resulting from such Business
Combination (the "Surviving Company"), or (B) if applicable, the ultimate parent
Company that directly or indirectly has beneficial ownership of 100% of the voting
securities eligible to elect directors of the Surviving Company (the "Parent Company"),
is represented by the Company's Voting Securities that were outstanding immediately
prior to such Business Combination (or, if applicable, is represented by shares into
which the Company's Voting Securities were converted pursuant to such Business
Combination), and such voting power among the holders thereof is in substantially the
same proportion as the voting power of the Company's Voting Securities among the
holders thereof immediately prior to the Business Combination, (ii) no person (other
than any employee benefit plan (or related trust) sponsored or maintained by the
Surviving Company or the Parent Company), is or becomes the beneficial owner,
directly or indirectly, of 20% or more of the total voting power of the outstanding voting
securities eligible to elect directors of the Parent Company (or, if there is no Parent
Company, the Surviving Company) and (iii) at least a majority of the members of the
board of directors of the Parent Company (or, if there is no Parent Company, the
Surviving Company) following the consummation of the Business Combination were
Incumbent Directors at the time of the Board's approval of the execution of the initial
agreement providing for such Business Combination (any Business Combination
which satisfies all of the criteria specified in (i), (ii) and (iii) above shall be deemed to
be a "Non-Qualifying Transaction");
(d) a sale of all or substantially all of the Company's assets;
(e) the stockholders of the Company approve a plan of
complete liquidation or dissolution of the Company; or
(f) such other events as the Board may designate.
Notwithstanding the foregoing, a Change of Control of the Company
shall not be deemed to occur solely because any person acquires beneficial
ownership of more than 20% of the Company's Voting Securities as a result of the
acquisition of the Company's Voting Securities by the Company which reduces the
number of the Company's Voting Securities outstanding; provided, that if after such
acquisition by the Company such person becomes the beneficial owner of additional
Company Voting Securities that increases the percentage of outstanding Company
Voting Securities beneficially owned by such person by more than one percent (1%) of
the Company?s outstanding Voting Securities, a Change of Control of the Company
shall then occur.
3. Employment Period. The Company hereby agrees to continue the
Executive in its employ, for the period commencing on the Effective Date and ending
on the date ___ (__) year(s) after such date (the "Employment Period").
4. Position and Duties.
(a) As of the date hereof, the Executive is employed as
________ and as such the Executive is responsible for the oversight and management
of the ________________. During the Employment Period, (i) the Executive's position
(including status, offices, titles and reporting requirements), authority, duties and
responsibilities shall be at least comparable in all material respects with the most
significant of those held, exercised and assigned at any time during the ninety (90) day
period immediately preceding the Effective Date and (ii) the Executive's services shall
be performed at the location where the Executive was employed immediately
preceding the Effective Date or at an office or location less than twenty (20) miles from
such location.
(b) Excluding periods of vacation, sick leave and disability to
which the Executive is entitled, the Executive agrees to devote reasonable attention
and time during normal business hours to the business and affairs of the Company
and, to the extent necessary to discharge the responsibilities assigned to the Executive
hereunder, to use the Executive's reasonable best efforts to perform faithfully and
efficiently such responsibilities. The Executive may (i) serve on corporate, civic or
charitable boards or committees, (ii) deliver lectures, fulfill speaking engagements or
teach at educational institutions and (iii) manage personal investments, so long as
such activities do not significantly interfere with the performance of the Executive's
responsibilities. It is expressly understood and agreed that to the extent that any such
activities have been conducted by the Executive prior to the Effective Date, the
continued conduct of such activities (or the conduct of activities similar in nature and
scope thereto) subsequent to the Effective Date shall not thereafter be deemed to
interfere with the performance of the Executive's responsibilities to the Company.
5. Compensation.
(a) Base Salary. During the Employment Period, as
consideration for services rendered, the Company shall pay to the Executive a base
salary at an annual rate at least equal to the annual rate of base salary paid to the
Executive by the Company, and any affiliated companies, during the ninety-day period
immediately preceding the month in which the Effective Date occurs ("Base Salary")
payable over the calendar year at the regular pay periods of the Company. During the
Employment Period, Base Salary shall be reviewed by the Board (or the Compensation
Committee thereof) at least annually and shall be increased, but not decreased, at any
time and from time to time as shall be consistent with increases in Base Salary
awarded by the Company in the ordinary course of business to other key executives.
Any increase in Base Salary shall not serve to limit or reduce any other obligation to
the Executive under this Agreement. Executive's Base Salary shall not be reduced
after any such increase. As used in this Agreement, the term "affiliated companies"
includes any company controlling, controlled by or under common control with the
Company.
(b) Bonus Plan. During the Employment Period, the Executive
shall receive an annual bonus (a "Bonus") at least equal to the greater of (i) the
average annual dollar bonus amount that was earned by the Executive under the
Company's Annual Incentive Bonus Plan, as amended and restated as of December
9, 2003 (or any predecessor or successor plan, policy or arrangement thereto) (the
"Bonus Plan") for the three completed fiscal years of the Company (each a "Fiscal
Year") immediately prior to the Effective Date, or (ii) Executive's Target (as defined in
the Bonus Plan) bonus amount under the Bonus Plan for the Fiscal Year which
includes the Effective Date or, if no target has been set with respect to Executive for
such Fiscal Year, the Target bonus amount for the immediately preceding Fiscal Year
(in either case, based on Executive's target percentage of Base Salary established
pursuant to the Bonus Plan). The Bonus shall be paid to the Executive as soon as
practicable after the Fiscal Year for which the Bonus applies, but not later than April 30
following the end of such Fiscal Year.
(c) Employee Benefit Plans. In addition to the Base Salary and
Bonus payable as hereinabove provided, the Executive shall be entitled to participate
during the Employment Period in all incentive programs, savings, pension and
retirement plans and programs applicable to other key executives, and to receive use
of an automobile of comparable value to automobiles provided to other key executives
(or to receive the same automobile allowance as is provided to other key executives).
In no event shall such plans and programs, in the aggregate, provide the Executive
with compensation, benefits and reward opportunities less favorable than the most
favorable of those provided by the Company and its affiliated companies for the
Executive under such plans and programs as in effect at any time during the ninety-
day period immediately preceding the Effective Date or, if more favorable to the
Executive, as provided at any time thereafter with respect to other key executives.
(d) Welfare Benefit Plans. During the Employment Period, the
Executive and/or the Executive's family, as the case may be, shall be eligible for
participation in and shall receive all benefits under each welfare benefit plan of the
Company, including, without limitation, all medical, supplemental medical,
prescription, dental, disability, salary continuance, life, accidental death and travel
accident insurance plan and programs of the Company and its affiliated companies, in
each case not less favorable than those in effect at any time during the ninety-day
period immediately preceding the Effective Date which would be most favorable to the
Executive or, if more favorable to the Executive, as in effect at any time thereafter with
respect to other key executives.
(e) Expenses. During the Employment Period, the Executive
shall be entitled to receive prompt reimbursement for all reasonable expenses incurred
by the Executive in the performance of his duties hereunder, which reimbursement
shall be paid to the Executive over a period that is no longer than that required under
the Company?s reimbursement policy as in effect at any time during the ninety-day
period immediately preceding the Effective Date which would be most favorable to the
Executive or, if more favorable to the Executive, as in effect at any time thereafter with
respect to other key executives.
(f) Office and Support Staff. During the Employment Period,
the Executive shall be entitled to an office or offices of a size and with furnishings and
other appointments, and to secretarial and other assistance, at least equal to those
provided to the Executive at any time during the ninety-day period immediately
preceding the Effective Date, or, if more favorable to the Executive, as provided at any
time thereafter with respect to other key executives.
(g) Vacation. During the Employment Period, the Executive
shall be entitled to paid vacation in accordance with the most favorable policies of the
Company as in effect at any time during the ninety-day period immediately preceding
the Effective Date or, if more favorable to the Executive, as in effect at any time
thereafter with respect to other key executives.
6. Termination. This Agreement shall terminate under the following
circumstances:
(a) Expiration of the Employment Period. This Agreement shall
terminate automatically upon the expiration of the Employment Period.
(b) Death or Disability. This Agreement shall terminate
automatically upon the Executive's death. The Company may terminate this
Agreement, after having established the Executive's Disability (pursuant to the
definition of "Disability" set forth below), by giving to the Executive written notice of its
intention to terminate the Executive's employment. In such a case, the Executive's
employment with the Company shall terminate effective on the 180th day after receipt
of such notice (the "Disability Effective Date"), provided that, within 180 days after such
receipt, the Executive shall not have returned to full performance of the Executive's
duties. For purposes of this Agreement, "Disability" means personal injury, illness or
other cause which, after the expiration of not less than 180 days after its
commencement, renders the Executive unable to perform his duties with substantially
the same level of quality as immediately prior to such incident and such disability is
determined to be total and permanent by a physician selected by the Company or its
insurers and acceptable to the Executive or the Executive's legal representative (such
agreement as to acceptability not to be withheld unreasonably).
(c) With or Without Cause. The Company may terminate the
Executive's employment with or without "Cause." For purposes of this Agreement,
"Cause" means (i) the willful and continued failure of Executive to perform
substantially his duties with the Company (other than any such failure resulting from
Executive's incapacity due to physical or mental illness or any such failure subsequent
to Executive being delivered a Notice of Termination without Cause by the Company
or delivering a Notice of Termination for Good Reason to the Company) after a written
demand for substantial performance is delivered to Executive by the Board which
specifically identifies the manner in which the Board believes that Executive has not
substantially performed Executive's duties and the Executive has failed to cure such
failure to the reasonable satisfaction of the Board; (ii) the willful engaging by Executive
in gross negligence or willful misconduct which is demonstrably and materially
injurious to the Company or its affiliates; or (iii) Executive's conviction of or pleading
guilty or no contest to a felony. For purpose of this Section 6(c), no act or failure to act
by Executive shall be considered "willful" unless done or omitted to be done by
Executive in bad faith and without reasonable belief that Executive's action or
omission was in the best interests of the Company or its affiliates. Any act, or failure to
act, based upon authority given pursuant to a resolution duly adopted by the Board,
based upon the advice of counsel for the Company or upon the instructions of the
Company's chief executive officer or another senior officer of the Company shall be
conclusively presumed to be done, or omitted to be done, by Executive in good faith
and in the best interests of the Company. Cause shall not exist unless and until the
Company has delivered to Executive, along with the Notice of Termination for Cause,
a copy of a resolution duly adopted by three-quarters (3/4) of all members of the Board
(excluding Executive if Executive is a Board member) at a meeting of the Board called
and held for such purpose (after reasonable notice to Executive and an opportunity for
Executive, together with counsel, to be heard before the Board), finding that in the
good faith opinion of the Board an event set forth in clauses (i) - (iii) above has
occurred and specifying the particulars thereof in detail. The Board must notify
Executive of any event constituting Cause within ninety (90) days following the
Board's knowledge of its existence or such event shall not constitute Cause under this
Agreement.
(d) With or Without Good Reason. The Executive's
employment may be terminated by the Executive with or without Good Reason. For
purposes of this Agreement, "Good Reason" means:
(i) A material diminution in the Executive?s authority, duties or
responsibilities as compared with the Executive's authority, duties or responsibilities
with the Company immediately prior to the Effective Date; provided, however, that
Good Reason shall not be deemed to occur upon a change in authority, duties or
responsibilities that is solely and directly a result of the Company no longer being a
publicly traded entity and does not involve any other event set forth in this Section 6(d);
(ii) A material diminution in the authority, duties, or
responsibilities of the supervisor to whom the Executive is required to report
immediately prior to the Effective Date;
(iii) A material change in the geographic location at which the
Executive must perform services for the Company, which for this purposes shall mean
the Company requiring the Executive to be based at any office or location other than
that described in Section 4(a)(ii) hereof, except for travel required in the performance of
the Executive's responsibilities which shall be no more extensive than the customary
travel requirements of Executive prior to the Effective Date; or
(iv) Any other action or inaction that constitutes a material
breach of this Agreement by the Company;
provided, however, that a termination by Executive for Good Reason shall be effective
only if (i) the Executive has provided a Notice of Termination to the Company within 90
days after the initial existence of the event constituting Good Reason that an event
constituting Good Reason has occurred, (ii) within 30 days following the delivery of
such Notice of Termination by Executive to the Company, the Company has failed to
cure the circumstances giving rise to Good Reason and (iii) the Executive resigns from
employment prior to the end of the Employment Period.
Any termination by the Company with or without Cause or by the Executive with or
without Good Reason shall be communicated by Notice of Termination to the other
party hereto given in accordance with Section 13(d) hereof. For purposes of this
Agreement, a "Notice of Termination" means a written notice which (x) indicates the
specific termination provision in this Agreement relied upon, (y) sets forth in
reasonable detail the facts and circumstances claimed to provide a basis for
termination of the Executive's employment under the provision so indicated and (z) if
the termination date is other than the date of receipt of such notice, specifies the
proposed termination date.
7. Obligations of the Company Upon Termination.
(a) Expiration of Employment Period. If the Executive's
employment shall be terminated on account of the expiration of the Employment
Period, the Company shall pay the Executive his Base Salary through the expiration of
the Employment Period, plus any Bonus amounts earned but not paid during such
period and any benefits to which the Executive is entitled under the terms of any of the
Company?s benefit plans, policies or arrangements, and the Company shall have no
further obligations to the Executive under this Agreement.
(b) Death. If the Executive's employment is terminated by
reason of the Executive's death, this Agreement shall terminate without further
obligations to the Executive's legal representatives, other than those death benefits
provided by the Company to which Executive is entitled at the date of the Executive's
death, which shall be at least comparable to those in effect at any time during the
ninety-day period immediately preceding the Effective Date or, if more favorable to the
Executive and/or the Executive's designees, as in effect on the date of the Executive's
death with respect to other key executives and their designees.
(c) Disability. If the Executive's employment is terminated by
reason of the Executive's Disability, this Agreement shall terminate without further
obligations to the Executive, other than those disability benefits provided by the
Company to which Executive is entitled as of the Disability Effective Date, which
benefits shall be at least comparable to those in effect at any time during the ninety-
day period immediately preceding the Effective Date or, if more favorable to the
Executive and/or the Executive's designees, as in effect on the date of the Executive's
Disability with respect to other key executives and their designees.
(d) With Cause or Without Good Reason. If the Executive's
employment shall be terminated (i) by the Company with Cause, or (ii) by Executive
without Good Reason, the Company shall pay the Executive his Base Salary through
the date of termination at the rate in effect at the time Notice of Termination is given,
plus any Bonus amounts earned but not paid through the date of termination and any
benefits to which the Executive is entitled under the terms of any of the Company?s
benefit plans, policies or arrangements, and the Company shall have no further
obligations to the Executive under this Agreement.
(e) Without Cause or With Good Reason. If, during the
Employment Period, Executive's employment shall be terminated (i) by the Company
without Cause, or (ii) by Executive for Good Reason, the Company shall pay to the
Executive in a lump sum in cash within ten (10) days after the date of termination
(unless a delay is required pursuant to Section 14(b) below), the aggregate of the
following amounts, with respect to which Executive shall have no duty of mitigation
and the Company shall have no right of set-off:
(A) to the extent not theretofore paid, the Executive's
Base Salary through the date of termination at the rate in effect on the date of
termination plus any Bonus amounts which have become payable and any accrued
vacation pay;
(B) a pro rata portion of Executive's Bonus for the Fiscal
Year in which the date of termination occurs equal to the product of (1) the greater of
(x) the average annual dollar bonus amount that was earned by the Executive under
the Bonus Plan for the three completed Fiscal Years immediately prior to the date of
termination, or (y) Executive's Target bonus amount under the Bonus Plan for the
Fiscal Year which includes the date of termination or, if no target has been set with
respect to Executive for such Fiscal Year, the Target bonus amount for the immediately
preceding Fiscal Year (in either case, based on Executive's target percentage of Base
Salary established pursuant to the Bonus Plan) (the greater of (x) and (y) being
referred to as the "Target Bonus"), multiplied by (2) a fraction, the numerator of which
is the number of days in the Fiscal Year in which the date of termination occurs
through the date of termination and the denominator of which is three hundred sixty-
five (365);
(C) an amount equal to Executive's Base Salary and
Target Bonus for the remainder of the Employment Period;
(D) an amount equal to the number of months remaining
in the Employment Period multiplied by the applicable monthly COBRA premium as in
effect on the date of the Executive?s termination that the Executive would have to pay
to continue the welfare benefits for which COBRA continuation rights are available for
the Executive and, where applicable, his or her family, with respect to those plans,
programs and policies described in Section 5(d);
(E) the present lump sum value of benefits which would
have accrued for the benefit of Executive under the The Pep Boys ? Manny, Moe &
Xxxx Account Plan or The Pep Boys ? Manny, Moe & Xxxx Legacy Plan, as applicable,
(the ?Retirement Plan?) which Executive was participating immediately prior to his
termination date and had Executive remained employed for the remainder of the
Employment Period after the date of termination and continued participating in such
Retirement Plan, determined using the factors specified in the Retirement Plan for
calculating lump sum distributions, and assuming that Executive would have
continued for such period to earn the Base Salary at the date of termination and be
paid the Target Bonus on each date during such Employment Period that the Bonus
typically had been paid prior to the date of termination. For purposes of clarity, this
benefit is intended as a portion of the severance benefit payable to the Executive
pursuant to this Section 7(e) and is not intended to be an additional benefit under the
Retirement Plan. In addition, for purposed of calculating ?Years of Service? under the
applicable Retirement Plan, Executive shall receive credit for the period of time
remaining in the Employment Period; and
(F) an amount equal to the number of months remaining
in the Employment Period multiplied by the applicable monthly premium or allowance
as in effect on the date of the Executive?s termination that would have to be paid to
continue the programs and benefits which are available for the Executive and, where
applicable, his or her family, with respect to those plans, programs and policies
described in Sections 5 (c) and (d), other than those covered by clause (D) and (E)
above.
In addition, upon a termination of Executive in accordance with this Section 7(e), all
non-vested stock options, and any other non-vested stock or stock-based awards held
by Executive, shall immediately become fully vested, non-forfeitable and exercisable.
Notwithstanding anything herein to the contrary, in the event that Executive is entitled
to the amounts set forth above as a result of a termination of Executive?s employment
prior to a Change of Control and Executive reasonably demonstrates pursuant to
Section 1(a) that such termination was at the direction of a third party or in connection
with the Change of Control, the Executive shall receive the amounts set forth in this
Section 7(e), less any severance compensation paid to Executive in connection with
such termination, within ten (10) days following the Change of Control; provided
however, that if these amounts are deemed to constitute deferred compensation
subject to the requirements of Section 409A of the Code, such amounts shall be paid
to the Executive as follows: (i) if the Change of Control qualifies as a permissible
distribution event within the meaning of Section 409A(a)(2)(A)(v) of the Code, it will be
paid within ten (10) days following the Change of Control, unless payment is required
to be delayed pursuant to Section 14(b) below in which case it will be paid at the end of
the period described in Section 14(b) if such date is later than the ten (10) day period
following the Change of Control, or (ii) if the Change of Control does not qualify as a
permissible distribution event within the meaning of Section 409A(a)(2)(A)(v) of the
Code, it will be payable in a single sum on the first business day of the month
immediately following the six (6) month anniversary of the date Executive terminated
employment with the Company.
8. Non-Exclusivity of Rights. Nothing in this Agreement shall
prevent or limit the Executive's continuing or future participation in any benefit, bonus,
incentive or other plan or program provided by the Company or any of its affiliated
companies and for which the Executive may qualify, nor shall anything herein limit
such rights as the Executive may have under any stock option or other agreements
with the Company or any of its affiliated companies. Amounts which are vested
benefits or which the Executive is otherwise entitled to receive under any plan or
program of the Company or any of its affiliated companies at or subsequent to the date
on which the Executive's employment is terminated shall be payable in accordance
with such plan or program. Anything herein to the contrary notwithstanding, if the
Executive becomes entitled to payments pursuant to Section 7(e) hereof, such
Executive agrees to waive payments under any severance plan or program of the
Company.
9. Confidential Information. The Executive shall hold in a fiduciary
capacity for the benefit of the Company all secret or confidential information,
knowledge or data relating to the Company or any of its affiliated companies, and their
respective businesses, which shall have been obtained by the Executive during the
Executive's employment by the Company or any of its affiliated companies and which
shall not be public knowledge (other than by acts by the Executive or his
representatives in violation of this Agreement). After termination of the Executive's
employment with the Company, the Executive shall not, without the prior written
consent of the Company, communicate or divulge any such information, knowledge or
data to anyone other than the Company and those designated by it. In no event shall
an asserted violation of the provisions of this Section 9 constitute a basis for deferring
or withholding any amounts otherwise payable to the Executive under this Agreement.
10. Covenant Against Competition.
(a) If, after the occurrence of a Change of Control, the
Executive's employment by the Company is terminated pursuant to Sections 7(d) or
7(e) hereof, then for the greater of one year after the date of termination or the
remainder of the Employment Period, the Executive shall not, directly or indirectly, (i)
induce or attempt to influence any employee of the Company to terminate his
employment with the Company or hire or solicit for hire on behalf of another employer
any person then employed or who had been employed by the Company during the
immediately preceding six months or (ii) engage in (as a principal, partner, director,
officer, agent, employee, consultant or otherwise) or be financially interested in any
business operating within the United States of America, if (A) such business? primary
business is the retail and/or commercial sale of automotive parts, accessories, tires
and/or automotive repair/maintenance services including, without limitation, the
entities (including their franchisees and affiliates) listed on Schedule 10(a)(ii)(A)
hereto, or (B) such business is a general retailer which generates revenues from the
retail and/or commercial sale of automotive parts, accessories, tires and/or automotive
repair/maintenance services in an aggregate amount in excess of $1 billion, including,
without limitation, the entities (including their franchisees and affiliates) listed on
Schedule 10(a)(ii)(B) hereto. However, nothing contained in this Section 10(a) shall
prevent the Officer from holding for investment up to two percent (2%) of any class of
equity securities of a company whose securities are traded on a national or foreign
securities exchange.
(b) Executive acknowledges that the restrictions contained in
Sections 9 and 10 hereof, in view of the nature of the business in which the Company
is engaged, are reasonable and necessary in order to protect the legitimate interests of
the Company, and that any violation thereof would result in irreparable injuries to the
Company, and the Executive therefore acknowledges that, in the event of his violation
of any of these restrictions, the Company shall be entitled to obtain from any court of
competent jurisdiction preliminary and permanent injunctive relief (without the posting
of any bond) as well as damages and an equitable accounting of all earnings, profits
and other benefits arising from such a violation, which rights shall be cumulative and
in addition to any other rights or remedies to which the Company may be entitled.
(c) If the Executive violates any of the restrictions contained in
the foregoing Section 10(a), the period during which the restrictions contained in
Section 10(a) shall remain in effect shall be tolled as of the time of commencement of
such violation, and shall not begin to run again until such time as such violation shall
be cured by the Executive to the satisfaction of the Company.
(d) Executive acknowledges and agrees that the covenants
and other provisions set forth in Sections 10(a), 10(b) and 10(c) hereof are reasonable
and valid in geographical and temporal scope and in all other respects. If any of such
covenants or other provisions are found to be invalid or unenforceable by a final
determination of a court of competent jurisdiction, then (I) the remaining covenants
and other provisions set forth in Sections 10(a), 10(b) and 10(c) shall be unimpaired,
and (ii) the invalid or unenforceable covenant or provision shall be deemed replaced
by a covenant or provision that is valid or enforceable and that comes closest to
expressing the intention of the covenant or provision found to be invalid or
unenforceable.
11. Certain Additional Payments by the Company.
(a) If it is determined (as hereafter provided) that any payment
or distribution by the Company to or for the benefit of Executive, whether paid or
payable or distributed or distributable pursuant to the terms of this Agreement or
otherwise pursuant to or by reason of any other agreement, policy, plan, program or
arrangement, including without limitation any stock option, stock appreciation right or
similar right, or the lapse or termination of any restriction on or the vesting or
exercisability of any of the foregoing (a "Payment"), would be subject to the excise tax
imposed by Section 4999 of the Code (or any successor provision thereto) or to any
similar tax imposed by state or local law, or any interest or penalties with respect to
such excise tax (such tax or taxes, together with any such interest and penalties, are
hereafter collectively referred to as the "Excise Tax"), then Executive will be entitled to
receive an additional payment or payments (a "Gross-Up Payment") in an amount
such that, after payment by Executive of all taxes (including any interest or penalties
imposed with respect to such taxes), including any Excise Tax, imposed upon the
Gross-Up Payment, Executive retains an amount of the Gross-Up Payment equal to
the Excise Tax imposed upon the Payments.
(b) Subject to the provisions of Section 11(f) hereof, all
determinations required to be made under this Section 11, including whether an
Excise Tax is payable by Executive and the amount of such Excise Tax and whether a
Gross-Up Payment is required and the amount of such Gross-Up Payment, will be
made by a nationally recognized firm of certified public accountants (the "Accounting
Firm") selected by Executive in his sole discretion. Executive will direct the Accounting
Firm to submit its determination and detailed supporting calculations to both the
Company and Executive within 30 days after the date of the Change of Control or the
date of Executive's termination of employment, if applicable, and any other such time
or times as may be requested by the Company or Executive. If the Accounting Firm
determines that any Excise Tax is payable by Executive, unless the payment is
required to be delayed pursuant to Section 14(b) below, the Company will pay the
required Gross-Up Payment to Executive within 15 days after receipt of such
determination and calculations. If the Accounting Firm determines that no Excise Tax
is payable by Executive, it will, at the same time as it makes such determination,
furnish Executive with an opinion that he has substantial authority not to report any
Excise Tax on his federal, state, local income or other tax return. Any determination by
the Accounting Firm as to the amount of the Gross-Up Payment will be binding upon
the Company and Executive. As a result of the uncertainty in the application of
Section 4999 of the Code (or any successor provision thereto) and the possibility of
similar uncertainty regarding applicable state or local tax law at the time of any
determination by the Accounting Firm hereunder, it is possible that Gross-Up
Payments which will not have been made by the Company should have been made
(an "Underpayment"), consistent with the calculations required to be made hereunder.
In the event that the Company exhausts or fails to pursue its remedies pursuant to
Section 11(f) hereof and Executive thereafter is required to make a payment of any
Excise Tax, Executive will direct the Accounting Firm to determine the amount of the
Underpayment that has occurred and to submit its determination and detailed
supporting calculations to both the Company and Executive as promptly as possible.
Unless the Underpayment is required to be delayed pursuant to Section 14(b) below,
such Underpayment will be promptly paid by the Company to, or for the benefit of,
Executive within 15 days after receipt of such determination and calculations.
(c) The Company and Executive will each provide the
Accounting Firm access to and copies of any books, records and documents in the
possession of the Company or Executive, as the case may be, reasonably requested
by the Accounting Firm, and otherwise cooperate with the Accounting Firm in
connection with the preparation and issuance of the determination contemplated by
Section 11(b) hereof.
(d) The federal, state and local income or other tax returns filed
by Executive will be prepared and filed on a consistent basis with the determination of
the Accounting Firm with respect to the Excise Tax payable by Executive. Executive
will make proper payment of the amount of any Excise Tax, and at the request of the
Company, provide to the Company true and correct copies (with any amendments) of
his federal income tax return as filed with the Internal Revenue Service and
corresponding state and local tax returns, if relevant, as filed with the applicable taxing
authority, and such other documents reasonably requested by the Company,
evidencing such payment. If prior to the filing of Executive's federal income tax return,
or corresponding state or local tax return, if relevant, the Accounting Firm determines
that the amount of the Gross-Up Payment should be reduced, Executive will within 15
days pay to the Company the amount of such reduction.
(e) The fees and expenses of the Accounting Firm for its
services in connection with the determinations and calculations contemplated by
Sections 11(b) and (d) hereof will be borne by the Company. If such fees and
expenses are initially advanced by Executive, the Company will reimburse Executive
the full amount of such fees and expenses within 15 days after receipt from Executive
of a statement therefor and reasonable evidence of his payment thereof.
(f) Executive will notify the Company in writing of any claim by
the Internal Revenue Service that, if successful, would require the payment by the
Company of a Gross-Up Payment. Such notification will be given as promptly as
practicable but no later than 30 days after Executive actually receives notice of such
claim and Executive will further apprise the Company of the nature of such claim and
the date on which such claim is requested to be paid (in each case, to the extent
known by Executive). Executive will not pay such claim prior to the date that any
payment of amount with respect to such claim is due. If the Company notifies
Executive in writing prior to the expiration of such period that it desires to contest such
claim, Executive will:
(A) provide the Company with any written records or
documents in his possession relating to such claim reasonably requested by the
Company;
(B) take such action in connection with contesting such
claim as the Company will reasonably request in writing from time to time, including
without limitation accepting legal representation with respect to such claim by an
attorney competent in respect of the subject matter and reasonably selected by the
Company;
(C) cooperate with the Company in good faith in order
effectively to contest such claim; and
(D) permit the Company to participate in any proceedings
relating to such claim;
provided, however, that the Company will bear and pay directly all costs and expenses
(including interest and penalties) incurred in connection with such contest and will
indemnify and hold harmless Executive, on an after-tax basis, for and against any
Excise Tax or income tax, including interest and penalties with respect thereto,
imposed as a result of such representation and payment of costs and expenses.
Without limiting the foregoing provisions of this Section 11(f), the Company will control
all proceedings taken in connection with the contest of any claim contemplated by this
Section 11(f) and, at its sole option, may pursue or forego any and all administrative
appeals, proceedings, hearings and conferences with the taxing authority in respect of
such claim (provided that Executive may participate therein at his own cost and
expense) and may, at its option, either direct Executive to pay the tax claimed and xxx
for a refund or contest the claim in any permissible manner, and Executive agrees to
prosecute such contest to a determination before any administrative tribunal, in a court
of initial jurisdiction and in one or more appellate courts, as the Company will
determine; provided, however, that if the Company directs Executive to pay the tax
claimed and xxx for a refund, the Company will advance the amount of such payment
to Executive on an interest-free basis and will indemnify and hold Executive harmless,
on an after-tax basis, from any Excise Tax or income tax, including interest or penalties
with respect thereto, imposed with respect to such advance; and provided further,
however, that any extension of the statute of limitations relating to payment of taxes for
the taxable year of Executive with respect to which the contested amount is claimed to
be due is limited solely to such contested amount. Furthermore, the Company's
control of any such contested claim will be limited to issues with respect to which a
Gross-Up Payment would be payable hereunder and Executive will be entitled to settle
or contest, as the case may be, any other issue raised by the Internal Revenue Service
or any other taxing authority.
(g) If Executive receives any refund with respect to any Excise
Tax previously paid to the Internal Revenue Service by Executive, and if Executive had
received a Gross-Up Payment from the Company with respect to such Excise Tax,
Executive will promptly pay to the Company the amount of such refund (together with
any interest paid or credited thereon after any taxes applicable thereto). If, after the
receipt by Executive of an amount advanced by the Company pursuant to
Section 11(f) hereof, a determination is made that Executive will not be entitled to any
refund with respect to such claim and the Company does not notify Executive in
writing of its intent to contest such denial or refund prior to the expiration of 30 days
after such determination, then such advance will be forgiven and will not be required
to be repaid and the amount of such advance will offset, to the extent thereof, the
amount of the Gross-Up Payment required to be paid pursuant to this Section 11.
12. Successors.
(a) This Agreement is personal to the Executive and without
the prior written consent of the Company shall not be assignable by the Executive
other than by will or the laws of descent and distribution. This Agreement shall inure
to the benefit of and be enforceable by the Executive's legal representatives.
(b) This Agreement shall inure to the benefit of and be binding
upon the Company and its successors.
(c) The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of
the business and/or assets of the Company to expressly assume and agree to perform
this Agreement in the same manner and to the same extent that the Company would
be required to perform it if no such succession had taken place. As used in this
Agreement, "Company" shall mean the Company as hereinbefore defined and any
successor to its business and/or assets as aforesaid which assumes and agrees to
perform this Agreement by operation of law, or otherwise.
13. Miscellaneous.
(a) This Agreement shall be governed by and construed in
accordance with the laws of the Commonwealth of Pennsylvania without reference to
principles of conflict of laws. The parties hereto agree that the exclusive jurisdiction of
any dispute regarding this Agreement shall be the state courts located in Philadelphia,
Pennsylvania. The Company shall reimburse Executive for the fees and expenses
incurred by him in enforcing this Agreement, provided that at least one matter in
dispute is decided in favor of Executive.
(b) The captions of this Agreement are not part of the
provisions hereof and shall have no force or effect.
(c) This Agreement may not be amended or modified otherwise
than by a written agreement executed by the parties hereto or their respective
successors and legal representatives.
(d) All notices and other communications hereunder shall be in
writing and shall be given by hand delivery to the other party or by registered or
certified mail, return receipt requested, postage prepaid, addressed as follows:
If to the Executive, to the Executive?s most recent home address
reflected on the Company?s books and records; and
If to the Company:
The Pep Boys - Manny, Moe & Xxxx
0000 Xxxx Xxxxxxxxx Xxxxxx
Xxxxxxxxxxxx, XX 00000
Attention: Chief Executive Officer and General Counsel
or to such other address as either party shall have furnished to the other in writing in
accordance herewith. Notice and communications shall be effective when actually
received by the addressee.
(e) The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other provision of this
Agreement.
(f) The Company may withhold from any amounts payable
under this Agreement such Federal, state or local taxes as shall be required to be
withheld pursuant to any applicable law or regulation.
(g) This Agreement contains the entire understanding of the
Company and the Executive with respect to the subject matter hereof, and supersedes
all prior agreements, understandings, negotiations and discussions, whether oral or
written, of the parties, with respect to the subject matter hereof, including the Original
Agreement.
(h) The Executive and the Company acknowledge that the
employment of the Executive by the Company, prior to the Effective Date, is "at will",
and may be terminated by either the Executive or the Company at any time. Upon a
termination of the Executive's employment or upon the Executive's ceasing to be an
officer of the Company, in each case, prior to the Effective Date, there shall be no
further rights under this Agreement.
14. Section 409A of the Internal Revenue Code.
(a) This Agreement shall be interpreted to avoid any penalty
sanctions under section 409A of the Code. Accordingly, all provisions herein, or
incorporated by reference, shall be construed and interpreted to comply with Section
409A of the Code, to the extent applicable, and, if necessary, any such provision shall
be deemed amended to comply with section 409A of the Code and regulations
thereunder. If any payment or benefit cannot be provided or made at the time specified
herein without incurring sanctions under section 409A of the Code, then such benefit
or payment shall be provided in full at the earliest time thereafter when such sanctions
will not be imposed. All payments to be made upon a termination of employment
under this Agreement may only be made upon a ?separation from service? (as defined
under Section 409A of the Code). In no event may the Executive, directly or indirectly,
designate the calendar year of payment.
(b) To the maximum extent permitted under section 409A of the
Code, the cash severance payments payable under this Agreement are intended to
comply with the ?short-term deferral exception? under Treas. Reg. section1.409A-
1(b)(4); provided, however, any amount payable to the Executive during the six (6)
month period following the Executive?s termination date that does not qualify within
such exception and is deemed as deferred compensation subject to the requirements
of section 409A of the Code, then such amount shall hereinafter be referred to as the
?Excess Amount.? If at the time of the Executive?s termination of employment, the
Company?s (or any entity required to be aggregated with the Company under section
409A of the Code) stock is publicly-traded on an established securities market or
otherwise and the Executive is a ?specified employee? (as defined in section 409A of
the Code and determined in the sole discretion of the Company (or any successor
thereto) in accordance with the Company?s (or any successor thereto) ?specified
employee? determination policy), then the Company shall postpone the
commencement of the payment of the portion of the Excess Amount that is payable
within the six (6) month period following the Executive?s termination date with the
Company (or any successor thereto) for six (6) months following the Executive?s
separation from service with the Company (or any successor thereto). The delayed
Excess Amount shall be paid in a lump sum to the Executive within ten (10) days
following the date that is six (6) months following the Executive?s separation from
service with the Company (or any successor thereto). If the Executive dies during
such six (6) month period and prior to the payment of the portion of the Excess Amount
that is required to be delayed on account of section 409A of the Code, such Excess
Amount shall be paid to the personal representative of the Executive?s estate within
sixty (60) days after the Executive?s death.
(c) All reimbursements provided under this Agreement shall be
made or provided in accordance with the requirements of Section 409A of the Code,
including, where applicable, the requirement that (i) any reimbursement is for
expenses incurred during the Executive?s lifetime (or during a shorter period of time
specified in this Agreement), (ii) the amount of expenses eligible for reimbursement
during a calendar year may not affect the expenses eligible for reimbursement in any
other calendar year, (iii) the reimbursement of an eligible expense will be made on or
before the last day of the taxable year following the year in which the expense is
incurred, and (iv) the right to reimbursement is not subject to liquidation or exchange
for another benefit. Any tax gross up payments to be made hereunder shall be made
not later than the end of the Executive?s taxable year next following the Executive?s
taxable year in which the related taxes are remitted to the taxing authority.
IN WITNESS WHEREOF, the Executive has hereunto set his hand and the
Company has caused this Agreement to be executed in its name on its behalf, all as of
the day and year first above written.
_______________________________
Name:
THE PEP BOYS - MANNY, MOE & XXXX
By:_______________________________
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