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CHANGE OF CONTROL AGREEMENT
This
CHANGE OF CONTROL AGREEMENT (this ?Agreement?) is made
by and between THE PEP BOYS - MANNY, MOE & JACK, 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 "Noti
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