SEVERANCE AND RETENTION
AGREEMENT
SEVERANCE AND
RETENTION AGREEMENT (this “ Agreement ”) dated
as of December 19, 2005, by and between CSK Auto, Inc., an
Arizona corporation (the “ Company ”), and Louis
Mancini (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 involving dishonesty for personal gain
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 effectiveness of the Change of
Control.
1.6.
The Executive shall have “ Good Reason ” to
terminate employment if:
(a) the Executive
is not elected, reelected, or otherwise continued in the office of
the Company or any of its subsidiaries or the continuing or
surviving corporation in the case of a Change of Control that he
held immediately prior to the Change of Control Date, or he is
removed as a member of the Board of Directors of Parent or the
continuing or surviving corporation in the case of a Change of
Control if the Executive was a director immediately prior to the
Change of Control Date;
(b) the
Executive’s duties, responsibilities or authority are
materially reduced or diminished without the Executive’s
consent;
(c) the
Executive’s compensation or benefits are reduced;
(d) the Company
reduces the potential earnings of the Executive under any
performance-based bonus or incentive plan of the
Company;
2
(e) 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;
(f) 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
(g) 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
(g) 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 90 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, 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 60 days
and not more than 180 days from the date the notice is
given.
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 (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 a 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 a 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 ”). In accordance with
the preceding sentence, such payments, if any, shall be made to the
Executive within 10 days following the date that is six months
following a Change of Control Date. Any payment of the Retention
Bonus shall be paid net of any applicable withholding required
under federal, state or local law.
3
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 6, 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,
benefits 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, benefits 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 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)
Outplacement Services . The Company shall provide the
Executive with outplacement counseling services from an
outplacement firm of national reputation to assist the Executive in
obtaining new employment, provided that the amount required to be
expended on 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 as in effect on
the Change of Control Date.
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 6, the
Executive shall be entitled to the following Standard Severance
Benefits:
4
(a) Cash
Payments . The Executive shall be entitled to receive an amount
in cash equal to the sum of:
A. For the one
year period commencing on the effective date of this
agreement:
(i) 100% of the
greater of (x) the sum of the Executive’s Base Salary,
benefits 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, benefits and Target Bonus, in
each case as in effect on the date hereof; and
(ii) accrued and
unused vacation.
The payment
shall be made in equal monthly installments over a twelve
(12) month 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.
(i) 50% of the
greater of (x) the sum of the Executive’s Base Salary,
benefits 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, benefits and Target Bonus, in
each case as in effect on the date hereof; and
(ii) accrued and
unused vacation.
The payment
shall be made in equal monthly installments over a six
(6) month 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)
Outplacement Services . The Company shall provide the
Executive with outplacement counseling services from an
outplacement firm of national reputation to assist the Executive in
obtaining new employment, provided that the amount required to be
expended on 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 as in effect on
the date hereof.
5.
Release . Notwithstanding anything in this Agreement to the
contrary, neither the Retention Bonus, the Change of Control
Severance Be
|
