[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
”).
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.
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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