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[SECOND] AMENDED AND RESTATED SEVERANCE AND RETENTION AGREEMENT

Employee Retention Agreement

[SECOND] AMENDED AND RESTATED SEVERANCE AND RETENTION AGREEMENT 

 | Document Parties: CSK AUTO CORP | CSK Auto, Inc You are currently viewing:
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CSK AUTO CORP | CSK Auto, Inc

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Title: [SECOND] AMENDED AND RESTATED SEVERANCE AND RETENTION AGREEMENT
Governing Law: Arizona     Date: 2/27/2007
Industry: Retail (Specialty)     Law Firm: Gibson, Dunn & Crutcher LLP    

[SECOND] AMENDED AND RESTATED SEVERANCE AND RETENTION AGREEMENT 

, Parties: csk auto corp , csk auto  inc
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Exhibit 10.1

[SECOND] AMENDED AND RESTATED SEVERANCE AND RETENTION AGREEMENT

     [SECOND] AMENDED AND RESTATED SEVERANCE AND RETENTION AGREEMENT (this “ Agreement ”) dated as of ___, 2007, by and between CSK Auto, Inc., an Arizona corporation (the “ Company ”), and ___ (the “ Executive ”).

RECITALS

     The Company considers it essential and in the best interest of its stockholders to foster the continuous employment of key management personnel. The Company further recognizes that, as in the case of many publicly held corporations, the possibility of a change of control of the Company may exist and that such possibility, and the uncertainty and questions which it may raise among management, may create concerns for, and the distraction of, management personnel and may even result in departures which might have otherwise not have taken place, all to the detriment of the Company and its stockholders. The Company now desires to take steps to reinforce and encourage the continued attention and dedication of members of the Company’s management, including the Executive, to their assigned duties without distraction in the face of potentially disturbing circumstances arising from the possibility of a Change of Control (as defined below) of the Company.

AGREEMENT

     1.  Definitions

          1.1. An “ Affiliate ” of the Company is an entity controlling, controlled by or under common control with the Company as defined in Rule 405 of the Securities and Exchange Commission under the Securities Act of 1933, as amended.

          1.2. “ Base Salary ” shall mean the Executive’s regular annual rate of base pay as of the date in question.

          1.3. “ Cause ” shall mean that Executive: (i) has been convicted of a felony, or has entered a plea of guilty or nolo contendere to a felony; (ii) has committed an act of fraud or dishonesty which is injurious to the Company or any of its subsidiaries; (iii) has willfully and continually refused to substantially perform his duties with the Company or any of its subsidiaries (other than any such refusal resulting from his incapacity due to mental illness or physical illness or injury), after a demand for substantial performance has been delivered to the Executive by the Board of Directors of the Company, where such demand reasonably identifies the manner in which the Board of Directors believes that the Executive has refused to substantially perform his duties and the passage of a reasonable period of time as specified by the Board of Directors for Executive to comply with such demand; or (iv) has willfully engaged in gross misconduct injurious to the Company or any of its subsidiaries.

 


 

          1.4. A “ Change of Control ” shall be deemed to have taken place if, after the date hereof:

     (a) any person, corporation, or other entity or group, including any “group” as defined in Section 13(d)(3) of the Securities Exchange Act of 1934, other than any employee benefit plan then maintained by CSK Auto Corporation (“ Parent ”), becomes the beneficial owner of shares of Parent having 50% or more of the total number of votes that may be cast for the election of directors of Parent (including any shares owned by such beneficial owner or members of its “group” as of the date hereof);

     (b) as the result of, or in connection with, any contested election for the Board of Directors of Parent, or any tender or exchange offer, merger or other business combination or sale of assets, or any combination of the foregoing (a “Transaction”), the persons who were directors of Parent before the Transaction shall cease to constitute a majority of the Board of Directors of Parent or any successor to Parent or its assets;

     (c) at any time Parent shall consolidate or merge with any other Person and Parent shall not be the continuing or surviving corporation, or any Person shall consolidate or merge with Parent and Parent shall be the continuing or surviving corporation, and in connection therewith, all or part of the outstanding Parent stock shall be changed into or exchanged for stock or other securities of any other Person or cash or any other property;

     (d) Parent shall be a party to a statutory share exchange with any other Person after which Parent is a subsidiary of any other Person; or

     (e) Parent shall sell or otherwise transfer all or substantially all of the assets or earning power of Parent and its subsidiaries (taken as a whole) to any Person or Persons.

          1.5. The “ Change of Control Date ” shall mean the date immediately prior to the consummation of the Change of Control.

          1.6. The Executive shall have “ Good Reason ” to terminate employment if, without the Executive’s consent:

     (a) the Executive’s duties, responsibilities or authority are materially reduced or diminished (provided, however, that neither (i) a change in the Executive’s reporting relationships, nor (ii) an adjustment in the nature of the Executive’s duties and responsibilities that, in either case, does not remove from him the authority with respect to the Company’s functional area, employees or products and services that the Executive had immediately prior to such change or adjustment shall constitute Good Reason);

     (b) the Executive’s compensation or benefits are reduced;

     (c) the Company reduces the potential earnings of the Executive under any performance-based bonus or incentive plan of the Company;

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     (d) the Company requires that the Executive’s employment be based at a location outside a 50 mile radius from the location of the Executive’s employment location as of the date hereof or the Executive’s employment location immediately prior to a Change of Control Date, as the case may be;

     (e) any purchaser, assign, continuing or surviving corporation, or successor of the Company or its business or assets (whether by acquisition, merger, liquidation, consolidation, reorganization, sale or transfer of assets or business, or otherwise) fails or refuses to expressly assume in writing this Agreement and all of the duties and obligations of the Company hereunder pursuant to Section 9 hereof; or

     (f) the Company breaches any of the material provisions of this Agreement or the Executive’s employment agreement, if any.

          Notwithstanding the foregoing, none of the events referred to in (a) through (f) above shall constitute Good Reason unless the Executive gives written notice to the Company of his election to terminate his employment for such reason within 15 days after he becomes aware of the existence of facts or circumstances constituting Good Reason. Such notice shall set forth in reasonable detail the facts and circumstances constituting the Good Reason and, if the Good Reason is a curable condition (in the good faith determination of the Company), shall provide the Company with 30 days to cure such condition. The notice shall also specify the date when the termination of employment is to become effective (if the Good Reason is not curable or is curable, but not cured within the 30 days), which date shall be not less than 45 days and not more than 90 days from the date the notice is given; provided, however, that after receiving such notice, the Company shall be permitted to terminate the Executive’s employment prior to the termination date specified by Executive without payment of additional compensation to the Executive (other than the Company shall still be obligated for payment of Standard Severance Benefits in accordance with the terms and conditions herein).

          1.7. “ Person ” shall have the meaning ascribed to such term in Section 3(a)(9) of the Securities Exchange Act of 1934 and used in Sections 13(d) and 14(d) thereof, including a “group” as defined in Section 13(d).

          1.8. “ Target Bonus ” shall mean the target bonus (100% level) established for the Executive for the year in question under the Company’s “Annual Incentive Plan” or “Performance Unit Plan,” as applicable.

     2.  Retention Bonus . If a Change of Control occurs and (i) the Executive remains continuously employed by the Company or its Affiliates or the continuing or surviving corporation in the case of Section 1.4 hereof on a full-time basis through the date that is six months following the Change of Control Date or (ii) the Executive’s employment with the Company is terminated (a) by the Company without Cause or (b) by the Executive for Good Reason, in each case before the date that is six months following the Change of Control Date, the Company shall pay to the Executive a gross lump sum cash amount equal to three (3) months of the Executive’s then current Base Salary (the “ Retention Bonus ”). The Retention Bonus, if earned in accordance with the preceding sentence, shall be paid to the Executive within 10 days following the date that is six months following a Change of Control Date. Any payment of the

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Retention Bonus shall be paid net of any applicable withholding required under federal, state or local law.

     3.  Change of Control Severance Benefits

          3.1. Eligibility for Change of Control Severance Benefits . The Executive shall be eligible for the benefits described in Section 3.2 (the “ Change of Control Severance Benefits ”) if there has been a Change of Control and during the twelve (12) month period commencing on the Change of Control Date (the “ Post Change of Control Period ”), the Executive’s employment with the Company is terminated (i) by the Company without Cause or (ii) by the Executive for Good Reason.

          3.2. Severance Benefit . Upon satisfaction of the terms and conditions of this Agreement, and subject to Section 5, the Executive shall be entitled to the following Change of Control Severance Benefits:

     (a) Cash Payments . The Executive shall be entitled to receive an amount in cash equal to the sum of:

          (i) 100% of the greater of (x) the sum of the Executive’s Base Salary and Target Bonus, in each case as in effect upon the date Executive’s employment was terminated, or (y) the sum of the Executive’s Base Salary and Target Bonus, in each case as in effect on the Change of Control Date; and

          (ii) accrued and unused vacation.

The payment shall be made in equal monthly installments over a twelve (12) month period (the “severance period”) and shall be paid net of any applicable withholding required under federal, state or local law. Any such payment shall be in lieu of any payment otherwise due under the Company’s “Annual Incentive Plan” or “Performance Unit Plan” for the year in which the Executive’s termination occurs.

     (b) Benefits Continuation . During the severance period, the Company shall provide the Executive (and his eligible dependents, to the extent applicable and comparable to coverage afforded prior to termination of employment) with continued coverage under the Company’s medical, dental, vision and Exec-U-Care benefit plans, in each case, in accordance with the terms thereof and with the same level of coverage (and related cost to the Executive) as if the Executive had remained employed during such period. In no event shall the Executive be entitled to participation in any other employee benefit plans or arrangements or perquisites provided by the Company from and after the date the Executive’s employment is terminated, except as set forth herein.

     (c) Outplacement Services . The Company shall provide reimbursement to the Executive for outplacement counseling services from an outplacement firm of national reputation engaged by the Executive to assist the Executive in obtaining new employment, provided that the amount required to be reimbursed for such services by the

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Company shall not exceed 15% of the greater of Executive’s Base Salary as in effect upon the date Executive’s employment was terminated or as in effect on the Change of Control Date.

     (d) If the Company determines (i) that on the date the Executive’s employment with the Company terminates or at such other time that the Company determines to be relevant, the Executive is a “specified employee” (as such term is defined under Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”)) of the Company and (ii) that payment of the amounts set forth in Section 3.2(a)(i) or other such payments provided hereunder would be considered “deferred compensation” under Section 409A of the Code subject to the additional tax under Section 409A(a)(1)(B) of the Code if provided at the time otherwise required under this Agreement, then commencement of such payments shall be delayed until the earlier of (A) the Executive’s death or disability (within the meaning of Section 409A of the Code) or (B) the date that is six months following the Executive’s “separation from service” with the Company (within the meaning of Section 409A of the Code). Any installment payments that are delayed pursuant to the preceding sentence shall be paid in lump sum on the first date such payments become payable pursuant to the preceding sentence, after which time the remainder of the payments shall be made in equal monthly installments pursuant to Section 3.2.

     4.  Standard Severance Benefits

          4.1. Eligibility for Standard Severance Benefits . If the Executive’s employment with the Company is terminated (i) by the Company without Cause or (ii) by the Executive for Good Reason, in each case other than during the Post Change of Control Period, the Executive shall be eligible for the benefits described in Section 4.2 (the “ Standard Severance Benefits ”).

          4.2. Severance Benefit . Upon satisfaction of the terms and conditions of this Agreement, and subject to Section 5, the Executive shall be entitled to the following Standard Severance Benefits:

     (a) Cash Payments . The Executive shall be entitled to receive an amount in cash equal to the sum of:

          (i) 100% of the greater of (x) the sum of Executive’s Base Salary and Target Bonus, in each case as in effect upon the date Executive’s employment was terminated, or (if applicable) (y) the sum of Executive’s Base Salary and Target Bonus, in each case as in effect on the date Executive gives notice, pursuant to Section 1.6, in the case of a termination for Good Reason; and

          (ii) accrued and unused vacation.

The payment shall be made in equal monthly installments over a twelve (12) month period (the “severance period”) and shall be paid net of any applicable withholding required under federal, state or local law. Any such payment shall be in lieu of any

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payment otherwise due under the Company’s “Annual Incentive Plan” or “Performance Unit Plan” for the year in which the Executive’s termination occurs.

     (b) Benefits Continuation . During the severance period, the Company shall provide the Executive (and his eligible dependents, to the extent applicable and comparable to coverage afforded prior to termination of employment) with continued coverage under the Company’s medical, dental, vision and Exec-U-Care benefit plans, in each case, in accordance with the terms thereof and with the same level of coverage (and related cost to the Executive) as if the Executive had remained employed during such period. In no event shall the Executive be entitled to participation in any other employee benefit plans or arrangements or perquisites provided by the Company from and after the date the Executive’s employment is terminated, except as set forth herein.

     (c) Outplacement Services . The Company shall provide reimbursement to the Executive for outplacement counseling services from an outplacement firm of national reputation engaged by the Executive to assist the Executive in obtaining new employment, provided that the amount required to be reimbursed for such services by the Company shall not exceed 15% of the greater of Executive’s Base Salary as in effect upon the date Executive’s employment was terminated or Executive’s Base Salary in effect on the date Executive gives notice pursuant to Section 1.6, in the case of a termination for Good Reason.

     (d) If the Company determines (i) that on the date the Executive’s employment with the Company terminates or at such other time that the Company determines to be relevant, the Executive is a “specified employee” (as such term is defined under Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”)) of the Company and (ii) that payment of the amounts set forth in Section 4.2(a)(i) or other such payments provided hereunder would be considered “deferred compensation” under Section 409A of the Code subject to the additional tax under Section 409A(a)(1)(B) of the Code if provided at the time otherwise required under this Agreement, then commencement of such payments shall be delayed until the earlier of (A) the Executive’s death or disability (within the meaning of Section 409A of the Code) or (B) the date that is six months following the Executive’s “separation from service” with the Company (within the meaning of Section 409A of the Code). Any installment payments that are delayed pursuant to the preceding sentence shall be paid in lump sum on the first date such payments become payable pursuant to the preceding sentence, after which time the remainder of the payments shall be made in equal monthly installments pursuant to Section 4.2.

     5.  Release . Notwithstanding anything in this Agreement to the contrary, neither the Retention Bonus, the Change of Control Severance Benefits nor the Standard Severance Benefits shall be payable to the Executive pursuant to this Agreement unless and until the eighth (8th) day after the Executive executes (and does not subsequently revoke), in each case, a general release in the form of Exhibit A attached hereto (the “ Release ”).

     6. Tax Indemnity Payments.

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     (a) Notwithstanding anything in this Severance Agreement or any other agreement between the Executive and the Company to the contrary, in the event that it shall be determined that the aggregate payments or distributions by the Company, any purchaser, successor, or assign thereof, or any of its or their affiliates to or for the benefit of the Executive, whether paid or payable or distributed or distributable pursuant to the terms hereof, the LTIP or otherwise, but determined without regard to any additional payments required under this Section 6 (each a “ Payment ”), constitute “parachute payments” (as such term is defined under Section 280G of the Code or any successor provision, and the regulations promulgated thereunder (collectively, “ Section 280G ”)) subject to the excise tax imposed by Section 4999 of the Code or any successor provision (collectively, “ Section 4999 ”) or any interest or penalties with respect to such excise tax (the total excise tax, together with any interest and penalties, are hereinafter collectively referred to as the “ Excise Tax ”)), then the Executive shall be entitled to receive an additional payment (a “ Gross-Up Payment ”) in an amount such that after payment by the Executive of all taxes (including any interest or penalties imposed with respect to such taxes), including, without limitation, any federal, state or local income and self-employment taxes and Excise Tax (and any interest and penalties imposed with respect to any such taxes) imposed upon the Gr


 
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