Exhibit 10.7
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT was originally made as of
September 14, 1988, was amended from time to time subsequent to
that date, and is hereby amended and restated in its entirety as
of June 3, 1998 (the Restatement Effective Date), by and
between THE PEP BOYS-MANNY, MOE & XXXX, a Pennsylvania
corporation (the Corporation), and Xxxxxxxx X. Xxxxxxxxx (the
Executive).
The Corporation, on behalf of itself and its
shareholders, wishes to continue to attract and retain well-
qualified executive and key personnel who are an integral part of
the management of the Corporation, such as Executive.
IT IS, THEREFORE, AGREED:
1. Term of Agreement. This Agreement shall be
effective as of the Restatement Effective Date, and shall
continue in effect for a period of three years. This Agreement
shall be automatically renewed for an additional three-year
period on June 3, 2001, and on the last day of each succeeding
three-year period, unless either party gives the other party
written notice (in accordance with Section 11(d)) of such party's
intention not to renew this Agreement at least three months prior
to the end of the original or any additional three-year period.
Any time during which this Agreement is in effect shall be
referred to as the "Employment Period". Notwithstanding the
foregoing provisions of this Section 1, the Employment Period
shall expire upon the termination of Executive's employment in
accordance with Section 5, provided that all payments and
benefits required to be paid or provided to Executive hereunder
are paid or provided, or arrangements therefor are made.
2. Employment Period. The Corporation hereby agrees
to continue Executive in its employ for the Employment Period.
3. Position and Duties.
(a) As of the date hereof, Executive is employed
as Chief Executive Officer and Chairman of the Board of Directors
("Board"), and as such Executive is responsible for oversight and
management of all operations and activities of the Corporation.
Executive shall report to the Board and to such committees
thereof as the Board shall direct. Executive shall perform such
executive duties consistent with his position as may be time-to-
time specified by the Board. During the Employment Period,
Executive's position (including, without limitation, his status,
offices, titles and reporting requirements), authority, duties
and responsibilities shall be consistent with those of the Chief
Executive Officer and Chairman of the Board of a publicly traded
corporation. Executive's services shall be performed at the
executive offices of the Corporation located in the Philadelphia,
Pennsylvania metropolitan area.
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(b) Excluding periods of vacation, sick leave and
disability to which Executive is entitled, Executive agrees to
devote reasonable attention and time during normal business hours
to the business and affairs of the Corporation and, to the extent
necessary to discharge the duties and responsibilities assigned
to Executive hereunder, to use Executive's reasonable best
efforts to perform faithfully and efficiently such duties and
responsibilities. 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 Executive's
duties and responsibilities. If the Board determines to pursue a
transaction which will result in a Change In Control (as herein
after defined), Executive's duties shall include all reasonable
efforts to maximize the value received by the Company and/or its
Shareholders in any such transaction.
4. Compensation.
(a) Base Salary. During the Employment Period,
as consideration for services rendered, the Corporation shall pay
to Executive a base salary at an annual rate equal to $825,000,
as adjusted as described in the following sentence (Base
Salary), payable in accordance with the regular pay policy of
the Corporation. During the Employment Period, Base Salary shall
be reviewed by the Board (or the Compensation Committee thereof)
at least annually during each fiscal year of the Corporation and
may be increased at any time, and at any number of times, but not
decreased at any time, at the discretion of the Board. Any
increase in Base Salary shall be in addition to any other
obligation of the Corporation to Executive under this Agreement.
(b) Bonus. During each fiscal year of the
Corporation ending during the Employment Period, Executive shall
receive a bonus in the amount actually earned by Executive under
the Corporation's Executive Incentive Bonus Plan, as such Plan
may be amended, modified or superseded or supplemented by another
bonus plan sponsored by the Corporation or any affiliated
company. The Board may at any time, and at any number of times,
award Executive additional bonus amounts in its discretion (the
aggregate of all such bonus amounts referred to under this
subsection 4(b) shall be referred to as the Bonus).
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(c) Additional Benefits. In addition to the Base
Salary and Bonus payable as hereinabove provided, Executive shall
be entitled to participate, without duplication, in The Executive
Supplemental Retirement Plan, The Long Term Disability Salary
Continuation Plan, The Pep Boys-Manny, Moe & Xxxx Pension Plan,
and any other similar incentive programs, savings, pension and
retirement plans and programs applicable to other key executives.
The Executive shall also receive an allowance for a late model
Jaguar, or similar automobile, as well as other automobile
allowances for gasoline, maintenance and repairs which are no
less favorable than those provided to other key executives of the
Corporation. The Corporation agrees in accordance with Split
Dollar and Collateral Assignment Agreements executed in
connection with the issuance of Guardian Life Insurance Policy
Number 3808137 on the lives of Executive and his wife, in the
face amount of Five Million Dollars, to pay premiums on such
policy so that the death benefit payable to the Executive's
beneficiary thereunder remains no less than Five Million Dollars,
and such premiums shall be paid irrespective of whether or not
Executive is employed by the Corporation, except where
Executive's employment was terminated in accordance with the
provisions of Section 6(c) hereof.
The Corporation shall also reimburse
Executive for reasonable legal and accounting fees which he may
incur in connection with the preparation and periodic review of:
his estate plan; tax planning; tax returns; and this Employment
Agreement and related employment arrangements.
(d) Welfare Benefit Plans. During the Employment
Period, Executive and/or Executive's family, as the case may be,
shall be eligible for participation in and shall receive all
benefits, without duplication, under each welfare benefit plan of
the Corporation maintained for its executives or employees,
including, without limitation, all medical, prescription, dental,
disability, reimbursement, salary continuance, life, accidental
death and travel accident insurance plans and programs of the
Corporation and its affiliated companies.
(e) Expenses. During the Employment Period,
Executive shall be entitled to receive prompt reimbursement for
all reasonable expenses incurred by Executive in the performance
of his duties hereunder, including, without limitation, the
expenses of membership at Xxxxxxxx National Golf Club (or such
similar replacement club); and the reasonable travel expenses of
Executive's wife where it is appropriate that she accompany him
on business related travel. Executive shall comply with the
Corporation's expense reimbursement policies as in effect from
time-to-time in connection with expense reimbursement under this
paragraph.
(f) Office and Support Staff. During the
Employment Period, Executive shall be entitled to an office and
secretarial and other assistance consistent with his position as
Chief Executive Officer and Chairman of the Board.
(g) Vacation. During the Employment Period,
Executive shall be entitled to eight weeks per calendar year of
paid vacation, but in no event shall Executive accumulate more
than twenty weeks of paid and unused vacation.
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(h) Change in Control Bonus. Upon the effective
date of a Change in Control, as that term is defined in the
following Section 4(i) ("Change in Control"), Corporation shall
pay to Executive, in immediately available funds by wire transfer
in accordance with Executive's instructions an amount equal to
three times Executive's Base Salary and Target Bonus (as those
terms are defined herein).
(i) Definition of Change in Control. For the
purpose of this Agreement, a Change of Control shall be deemed
to become effective on the date on which any of the following
shall occur:
(i) individuals who, on the date hereof,
constitute the Board (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 Corporation 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 Corporation 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;
(ii) any Person including a "Group" (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, in a single transaction or group of
related transactions of securities of the Corporation
representing 20% or more of the combined voting power of the
Corporation'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 4(i)(ii) shall
not be deemed to be a Change in Control by virtue of any of the
following acquisitions: (i) by the Corporation or any subsidiary
of the Corporation in which the Corporation 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 Corporation or any Subsidiary, (iii) by any
underwriter temporarily holding the Corporation's Voting
Securities pursuant to an offering of such voting Securities,
(iv) pursuant to a Non-Qualifying Transaction (as defined in
Section 4(i)(iii)), or (v) pursuant to any acquisition by
Executive or any person or group of persons including Executive
(or any entity controlled by Executive or any group of persons
including Executive or any Person or Group with whom Executive
has any management, investment or other relationship);
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(iii) the date on which there is a
consummation of a merger, consolidation, statutory share exchange
or similar form of corporate transaction involving the
Corporation or any of its Subsidiaries that requires the approval
of the Corporation's shareholders, (a Business Combination),
unless immediately following such Business Combination any of the
following is applicable: (i) more than 50% of the total voting
power of (A) the corporation resulting from such Business
Combination (the Surviving Corporation), or (B) if applicable,
the ultimate parent corporation that directly or indirectly has
beneficial ownership of 100% of the voting securities eligible to
elect directors of the Surviving Corporation (the Parent
Corporation), is represented by the Corporation's Voting
Securities that were outstanding immediately prior to such
Business Combination (or, if applicable, is represented by shares
into which the Corporation'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 Corporation's Voting Securities among
the holders thereof immediately prior to the Business
Combination; and (ii) no person (other than any person engaged in
a transaction described in clauses (i) through (v) in Section
4(i)(ii) above), 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 Corporation (or, if there is no parent Corporation, the
Surviving Corporation); or (iii) at least a majority of the
members of the board of directors of the Parent Corporation (or,
if there is no Parent Corporation, the Surviving Corporation)
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 in which any of the
criteria specified in (i), (ii) or (iii) of this Section
4(i)(iii) is applicable shall be deemed to be a Non-Qualifying
Transaction);
(iv) the closing for a sale of all or
substantially all of the Corporation's assets;
(v) the date on which a plan of complete
liquidation or dissolution of the Corporation becomes effective;
or
(vi) such other events as the Board may
designate.
Notwithstanding the foregoing, a Change in Control of
the Corporation shall not be deemed to occur solely because any
person acquires beneficial ownership of more than 20% of the
Corporation's Voting Securities as a result of the acquisition of
the Corporation's Voting Securities by the Corporation which
reduces the number of the Corporation's Voting Securities
outstanding; provided, that if after such acquisition by the
Corporation such person becomes the beneficial owner of
additional Corporation Voting Securities that increases the
percentage of outstanding Corporation Voting Securities
beneficially owned by such person by more than 3%, a Change in
Control of the Corporation shall then become effective unless
otherwise exempt under clauses (i) through (v) of Section
4(i)(ii) above or because it constitutes a Non-Qualifying
Transaction.
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5. Termination. The Executive's employment shall
terminate upon any of the following circumstances:
(a) Death or Disability. The Executive's
employment shall terminate automatically upon Executive's death.
The Corporation may terminate the Executive's employment, after
having established Executive's Disability (pursuant to the
definition of Disability set forth below), by giving to
Executive written notice of its intention to terminate
Executive's employment. In such a case, Executive's employment
with the Corporation shall terminate effective on the 179th day
after receipt of such notice (the Disability Effective Date),
provided that, within the 179 days after such receipt, Executive
shall not have returned to full performance of Executive's duties
and responsibilities, in which case the notice to terminate shall
be deemed null and void. For purposes of this Agreement,
Disability means personal injury, illness or other cause which,
after the expiration of not fewer than 180 days after its
commencement, renders Executive unable to perform fully his
duties and responsibilities with substantially the same level of
quality as immediately prior to such 180 days and such disability
is determined to be total and permanent by a physician selected
by the Corporation or its insurers and acceptable to Executive or
Executive's legal representative (such agreement as to
acceptability not to be withheld unreasonably).
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(b) With or Without Cause. The Corporation may
terminate 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 and responsibilities with the Corporation (other than any
such failure resulting from Executive's Disability or any such
failure subsequent to Executive being delivered a Notice of
Termination without Cause by the Corporation or delivering a
Notice of Termination for Good Reason to the Corporation) 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 responsibilities and Executive
has failed to cure such failure to the reasonable satisfaction of
the Board within 30 days, (ii) the willful engaging by Executive
in gross misconduct which is demonstrably and materially
injurious to the Corporation or any affiliated company, (iii)
Executive's non-appealable conviction of, or pleading guilty or
no contest to, a felony such that Executive's continued
employment would negatively compromise the image of the
Corporation and is determined by the Board to be Cause for
termination, (iv) abuse of alcohol or other drugs which
interferes with the performance by Executive of his duties,
provided Executive has been given 30 days notice by Corporation
of its intent to terminate Executive pursuant to this provision
during which time Executive has not demonstrated the cessation of
such abuse to the reasonable satisfaction of the Board; (v) fraud
theft, misappropriation or embezzlement of the Corporation's
funds, or (vi) Executive's attainment of his normal retirement
date (Normal Retirement Date) under both The Pep Boys - Manny,
Moe & Xxxx Pension Plan as amended to date, or any successor
thereof (the Pension Plan), and The Pep Boys - Manny, Moe and
Xxxx Executive Supplemental Pension Plan, as amended to date or
any successor thereof (the Supplemental Pension Plan). For
purpose of this paragraph (b), 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 Corporation or its affiliates. Any act, or failure to act,
based upon authority given pursuant to a resolution duly adopted
by the Board or based upon the advice of counsel for the
Corporation shall be conclusively presumed to be done, or omitted
to be done, by Executive in good faith and in the best interests
of the Corporation. Cause shall not exist unless and until the
Corporation 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 the entire 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) - (v) 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.
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(c) With or Without Good Reason. Executive's
employment may be terminated by Executive with or without Good
Reason. For purposes of this Agreement, Good Reason means:
(i) without the express consent of Executive
(A) any change in the duties or responsibilities (including
reporting responsibilities) of Executive that is inconsistent in
any material and adverse respect with Executive's position(s),
duties, responsibilities or status as Chief Executive Officer and
Chairman of the Board immediately prior to the Effective Date
(including any material and adverse diminution of such duties or
responsibilities); provided, however, that Good Reason shall not
be deemed to occur upon a change in duties or responsibilities
(other than reporting responsibilities) that is solely and
directly a result of the Corporation no longer being a publicly
traded entity and does not involve any other event set forth in
this paragraph (c) or (B) a material and adverse change in
Executive's titles or offices (including his position as Chief
Executive Officer and Chairman of the Board) with the
Corporation;
(ii) any failure by the Corporation to comply
in any material respect with any of the provisions of Section 4
of this Agreement;
(iii) the Corporation's requiring
Executive to perform his services regularly other than at the
executive offices of the Corporation at a location other than
that described in Section 3(a) hereof or requiring Executive to
travel in the performance of his duties significantly more
extensively than the customary travel requirements of Executive
prior to the date hereof;
(iv) any purported termination by the
Corporation of Executive's employment otherwise than as permitted
by this Agreement, it being understood that any such purported
termination shall not be effective for any purpose of this
Agreement; or
(v) any failure by the Corporation to comply
with and satisfy Section 10(c) of this Agreement;
provided that a termination by Executive with Good
Reason shall be effective only if, within 30 days following the
delivery of a Notice of Termination for Good Reason by Executive
to the Corporation, the Corporation has failed to cure the
circumstances giving rise to Good Reason to the reasonable
satisfaction of Executive.
(d) Expiration of the Employment Period. The
Executive's employment shall terminate upon the expiration of the
Employment Period due to the giving of a notice of non-renewal by
the Corporation or Executive in accordance with Section 1.
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(e) Notice of Termination. Any termination by
the Corporation with or without Cause or by Executive with or
without Good Reason shall be communicated by Notice of
Termination to the other party hereto given in accordance with
Section 11(d) of this Agreement. For purposes of this Agreement,
a Notice of Termination means a written notice which (i)
indicates the specific termination provision in this Agreement
relied upon, (ii) sets forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of
Executive's employment under the provision so indicated and (iii)
if the termination date is other than the date of receipt of such
notice specifies the proposed termination date.
6. Obligations of the Corporation Upon Termination of
Employment.
(a) Death. If Executive's employment is
terminated by reason of Executive's death, this Agreement shall
terminate without further obligations to Executive's personal
representatives, other than those death benefits provided by the
Corporation to which Executive is entitled at the date of
Executive's death, including, without limitation, benefits under
The Pension Plan, The Supplemental Pension Plan, the split dollar
insurance benefit referred to under Section 4(c) and the group
life insurance plan.
(b) Disability. If Executive's employment is
terminated by reason of Executive's disability, this Agreement
shall terminate without further obligations to Executive, other
than those benefits provided by the Corporation to which
Executive is entitled as of the Disability Effective Date.
(c) Cause, Without Good Reason or Non-Renewal By
Executive. If Executive's employment shall be terminated (i) by
the Corporation with Cause, (ii) by Executive without Good Reason
or (iii) on account of the expiration of the Employment Period
due to the giving of a notice of non-renewal by Executive in
accordance with Section 1, the Corporation shall pay Executive
his Base Salary through the date of termination and shall have no
further obligations to Executive under this Agreement.
(d) Without Cause, With Good Reason or
Non-Renewal by the Corporation. If Executive's employment shall
be terminated (i) by the Corporation without Cause, (ii) by
Executive with Good Reason or (iii) on account of the expiration
of the Employment Period due to the giving of a notice of non-
renewal by the Corporation in accordance with Section 1, the
Corporation shall pay to Executive in a lump sum in cash within
ten (10) days after the date of termination the aggregate of the
following amounts, with respect to which Executive shall have no
duty of mitigation and the Corporation shall have no right of
set-off:
(i) to the extent not theretofore paid,
Executive's Base Salary through the date of termination plus any
Bonus amounts which have become payable and any accrued vacation
pay;
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(ii) a pro-rata portion of Executive's Bonus
for the Fiscal Year in which the date of termination occurs equal
to the product of (A) greater of (x) the average annual dollar
bonus amount that was earned by the Executive under the
Corporation's Executive Incentive Bonus Plan (or any predecessor
or successor plan, policy or arrangement thereto) (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 (B) 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);
(iii) an amount equal to three times
Executive's Base Salary and Target Bonus; except that the
aforesaid amount shall not be payable under this Section
6(d)(iii) if the date of termination of Executive's employment
occurs on or before the seventh calendar day after the effective
date of a Change in Control;
(iv) to the extent not theretofore paid, the
Change in Control Bonus, if any, payable in accordance with the
provisions of Section 4(h), except that if Executive's employment
has terminated for any reason prior to the effective date of a
Change in Control, the aforesaid bonus shall not be payable under
this Section 6(d)(iv); and
(v) the present lump sum value of benefits
which would have accrued under the Pension Plan had Executive
remained employed for three years following the date of
termination determined using the factors specified in the Pension
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 three-year period that the Bonus typically
had been paid prior to the date of termination.
In addition, upon termination of Executive's employment
in accordance with this Section 6(d), including termination after
a Change in Control, he shall be deemed, for purposes of the
Supplemental Pension Plan, to have attained his Normal Retirement
Date and shall commence receiving his Supplemental Pension Plan
benefit upon the date which is the later to occur of his fifty-
fifth birthday or the date of termination under this Section
6(d), and such benefit shall be computed without regard to early
retirement factors and assuming he accrued 25 years of service.
None of the Change in Control Bonus payable under this Agreement,
any amount payable under this Agreement on account of the
Executive's termination of employment, other than Base Salary and
Bonus (as defined in Sections 4(a) and 4(b) hereof) accrued to
the date of termination of employment, or any amount payable as,
or because of, a Sale Transaction Bonus under an agreement
between the Executive and the Company dated as of June 3, 1998,
shall be considered in computing the Executive's benefit under
the Supplemental Pension Plan.
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In addition, upon a termination of Executive's
employment in accordance with this Section 6(d), the Corporation
shall continue to provide benefits to Executive and his family
for three years following the termination date at least equal to
those which were being provided to them in accordance with
Sections 4(c) and 4(d) at any time within the six-month period
ending on the date of termination. To the extent that the
benefits provided for in this Section 6(d) are not permissible
after termination of employment under the terms of the benefit
plans of the Corporation then in effect, the Corporation shall
pay to Executive in a lump sum in cash within thirty (30) days
after the date of termination an amount equal to the cost to
Executive of acquiring on a non-group basis, for three years,
those benefits lost to Executive and/or Executive's family as a
result of Executive's termination.
(e) In addition, upon a termination of
Executive's employment in accordance with section 6(d), and
notwithstanding any other provisions of this Agreement or any
other agreement dealing with the subject matter of stock options
or stock-based awards, upon termination of the Executive's
employment because of his death, disability or attainment of the
Normal Retirement Date, all non-vested stock options, and any
other non-vested stock or stock-based awards, shall immediately
become fully vested, non-forfeitable and exercisable at any time
on the sooner of (i) their expiration or (ii) last day of the
month which is within the period ending forty-two calendar months
after the date of termination of employment.
(f) The obligations of the Corporation upon
Executive's termination of employment set forth in this Section 6
(together with any other benefits referred to in this Section 6,
as well as any amounts payable under the terms of certain
agreement of even date herewith relating to a Sale Transaction)
will be the sole and exclusive benefits or compensation of any
nature due to Executive or his estate upon a termination of
employment for any reason.
7. Non-Exclusivity of Rights. Nothing in this
Agreement shall prevent or limit Executive's continuing or future
participation in any benefit, bonus, incentive or other plan or
program provided by the Corporation or any of its affiliated
companies and for which Executive may qualify, nor shall anything
herein limit or otherwise affect such rights as Executive may
have under any stock option or other agreements with the
Corporation or any of its affiliated companies. Amounts which
are vested benefits or which Executive is otherwise entitled to
receive under any plan or program of the Corporation or any of
its affiliated companies at or subsequent to the date on which
Executive's employment is terminated shall be payable in
accordance with such plan or program. Anything herein to the
contrary notwithstanding, if Executive becomes entitled to
payments pursuant to Section 6(d) hereof, the Executive agrees to
waive payments under any severance plan or program of the
Corporation.
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8. Noncompetition; Nondisclosure; Nonsolicitation.
(a) Executive hereby covenants and agrees that,
during the Employment Period and for one year thereafter (the
Covenant Period), he shall not, without the prior written
consent of the Corporation, engage in Competition (as defined
below) with the Corporation. For purposes of this Agreement, if
Executive takes any of the following actions he shall be engaged
in Competition: engaging in or carrying on, directly or
indirectly, any enterprise, whether as an advisor, principal,
agent, lender, investor, partner, officer, director, employee,
stockholder, associate or consultant to any person, partnership,
corporation or any other business entity, that is engaged in any
business operating within the United States of America, which is
involved in business activities which are the same as, similar to
or in competition with business activities carried on by the
Corporation, or actually known by the Executive as being
definitely planned by the Corporation, at or about the time of
the termination of the Executive's employment; provided, however,
that Competition shall not include (i) the passive ownership of
securities in any public enterprise and exercise of rights
appurtenant thereto, so long as such securities (other than
securities obtained by reason of a merger of the Corporation)
represent no more than two percent of the voting power of all
securities of such enterprise or (ii) the indirect ownership of
securities through ownership of shares in a registered investment
company.
(b) Executive shall not, directly or indirectly,
without the Corporation's prior written consent, disclose or use
any nonpublic confidential information of or relating to the
Corporation, whether disclosed to or learned by Executive during
the course of his employment or otherwise, so long as such
information is not publicly known or available through no breach
hereof by Executive, except for such disclosures as are required
by law. All computer software and books paid for by the
Corporation and all records or files generated or acquired while
an employee of the Corporation and in the capacity as an employee
of the Corporation are acknowledged to be property of the
Corporation and shall not be removed from the Corporation's
possession or made use of other than in pursuit of the
Corporation's business and upon termination of employment for any
reason, Executive shall deliver to Corporation without further
demand all copies thereof which are in his possession or under
his control. Executive further agrees that he shall not make any
statements at any time that disparage the reputation of the
Corporation or any of its affiliates. For purposes of this
Section 8, the term affiliate of the Corporation means the
Board, any and all Committees of the Board (the Committees) and
any and all individual members of either the Board or any of the
Committees, in their capacity as such, and any employee or
officer of the Corporation.
(c) Executive hereby covenants and agrees that,
during the Covenant Period, he shall not directly or indirectly
attempt to influence, persuade, hire or induce, or assist any
other person in so influencing, persuading or inducing, any
employee, supplier or customer of the Corporation to give up, or
to not commence, employment or a business relationship with the
Corporation.
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(d) Executive acknowledges and agrees that the
remedy at law available to the Corporation for breach of any of
his obligations under Section 8(a), (b) or (c) of this Agreement
would be inadequate, and that damages flowing from such a breach
may not readily be susceptible to being measured in monetary
terms. Accordingly, Executive acknowledges, consents and agrees
that, in addition to any other rights or remedies which the
Corporation may have at law, in equity or under this Agreement,
upon adequate proof of his violation of any provision of Section
4 of this Agreement, the Corporation shall be entitled to
immediate injunctive relief and may obtain a temporary order
restraining any threatened or further breach, without the
necessity of proof of actual damage and without any need to post
a bond.
(e) Executive acknowledges and agrees that the
covenants set forth in Section 8(a), (b) and (c) of this
Agreement are reasonable and valid in geographical and temporal
scope and in all other respects. If any of such covenants or
such other provisions of this Agreement are found to be invalid
or unenforceable by a final determination of a court of competent
jurisdiction (i) the remaining terms and provisions hereof shall
be unimpaired and (ii) the invalid or unenforceable term or
provision shall be deemed replaced by a term or provision that is
valid and enforceable and that comes closest to expressing the
intention of the invalid or unenforceable term or provision.
(f) Executive understands that the provisions of
Section 8(a), (b) and (c) of this Agreement may limit his ability
to earn a livelihood in a business similar to the business of the
Corporation but he nevertheless agrees and hereby acknowledges
that (i) such provisions do not impose a greater restraint than
is necessary to protect the goodwill or other business interests
of the Corporation, (ii) such provisions contain reasonable
limitations as to time and scope of activity to be restrained,
and (iii) the consideration provided hereunder is separate,
independent and sufficient to compensate Executive for the
restrictions contained in Section 8 of this Agreement. In
consideration of the foregoing and in light of Executive's
education, skills and abilities, Executive agrees that he shall
not assert that, and it should not be considered that, any
provisions of Section 8 otherwise are void, voidable or
unenforceable or should be voided or held unenforceable.
(g) If Executive violates any of the restrictions
contained in Section 8(a), (b) and (c) of this Agreement, the
restrictive period shall not run in favor of the Executive from
the time of the commencement of any such violation until such
time as such violation shall be cured by the Executive to the
satisfaction of the Corporation. Executive's obligations under
this Section 8 shall survive any expiration or termination of
this Agreement.
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9. Certain Additional Payments by the Corporation.
(a) If it is determined (as hereafter provided)
that any payment or distribution by the Corporation 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 9(f)
hereof, all determinations required to be made under this Section
9, 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 jointly by Executive and the
Corporation. Executive will direct the Accounting Firm to submit
its determination and detailed supporting calculations to both
the Corporation and Executive within 15 calendar days after the
effective date of any Change in 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 Corporation
or Executive. If the Accounting Firm determines that any Excise
Tax is payable by Executive, the Corporation will pay the
required Gross-Up Payment (net of any applicable withholding
taxes) to Executive within five business 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
Corporation 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
Corporation should have been made (an Underpayment), consistent
with the calculations required to be made hereunder. In the
event that the Corporation exhausts or fails to pursue its
remedies pursuant to Section 9(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 Corporation and
Executive as promptly as possible. Any such Underpayment will be
promptly paid by the Corporation to, or for the benefit of,
Executive within five business days after receipt of such
determination and calculations.
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(c) The Corporation and Executive will each
provide the Accounting Firm access to and copies of any books,
records and documents in the possession of the Corporation 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 9(b) hereof.
(d) The federal, state and local income or other
tax returns filed by Executive will be prepared and filed based
on the advice 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
Corporation, provide to the Corporation 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 Corporation, 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 five business days pay to the
Corporation 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 9(b) and (d) hereof will be
borne by the Corporation. If such fees and expenses are
initially advanced by Executive, the Corporation will reimburse
Executive the full amount of such fees and expenses within five
business days after receipt from Executive of a statement
therefor and reasonable evidence of his payment thereof.
(f) Executive will notify the Corporation in
writing of any claim by the Internal Revenue Service that, if
successful, would require the payment by the Corporation of a
Gross-Up Payment. Such notification will be given as promptly as
practicable but no later than 10 business days after Executive
actually receives notice of such claim and Executive will further
apprise the Corporation 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 earlier of (a) the expiration of the 30-calendar-day
period following the date on which he gives such notice to the
Corporation and (b) the date that any payment of amount with
respect to such claim is due. If the Corporation notifies
Executive in writing prior to the expiration of such period that
it desires to contest such claim, Executive will:
(1) provide the Corporation with any written
records or documents in his possession
relating to such claim reasonably
requested by the Corporation;
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(2) take such action in connection with
contesting such claim as the Corporation
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 Corporation;
(3) cooperate with the Corporation in good
faith in order effectively to contest
such claim; and
(4) permit the Corporation to participate in
any proceedings relating to such claim;
provided, however, that the Corporation 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 9(f), the
Corporation will control all proceedings taken in connection with
the contest of any claim contemplated by this section 9(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 refrain from paying such tax and
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 Corporation will
determine; provided, however, that if the Corporation directs
Executive to pay the tax claimed and xxx for a refund, the
Corporation 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
Corporation'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.
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(g) If, after the receipt by Executive of an
amount advanced by the Corporation pursuant to Section 9(f)
hereof, Executive receives any refund with respect to such claim,
Executive will (subject to the Corporation's complying with the
requirements of Section 9(f) hereof) promptly pay to the
Corporation 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
Corporation pursuant to Section 10(f) hereof, a determination is
made that Executive will not be entitled to any refund with
respect to such claim and the Corporation does not notify
Executive in writing of its intent to contest such denial or
refund prior to the expiration of 30 calendar 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 9.
10. Successors.
(a) This Agreement is personal to Executive and
without the prior written consent of the Corporation shall not be
assignable by Executive otherwise than by will or the laws of
descent and distribution. This Agreement shall inure to the
benefit of and be enforceable by Executive's personal
representatives.
(b) This Agreement shall inure to the benefit of
and be binding upon the Corporation and its successors and
assigns.
(c) The Corporation will require any successor
(whether direct or indirect, by purchase, merger, consolidation
or otherwise and whether or not there has been a Sale
Transaction, as that term may be defined in an Agreement between
Executive and Corporation contemporaneously executed herewith,
and any amended or successor agreement thereto or whether or not
there has been a Change in Control as defined herein) to all or
substantially all of the business and/or assets of the
Corporation to expressly assume and agree to perform this
Agreement in the same manner and to the same extent that the
corporation would be required to perform as if no such succession
had taken place. As used in this Agreement, Corporation shall
mean the Corporation 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.
11. 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 exclusive jurisdiction of any
dispute regarding this Agreement shall be the state courts
located in Philadelphia, Pennsylvania. The fees and expenses
incurred by either party in enforcing this Agreement shall be
paid to the party prevailing in such enforcement by the non-
prevailing party.
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(b) The captions of this Agreement are not part
of the provisions hereof and shall have no force or effect.
(c) Any amendment, modification or waiver of this
Agreement shall not be effective unless in writing executed by
the parties hereto or their respective successors and legal
representatives.. Neither the failure nor any delay on the part
of any party to exercise any right, remedy, power or privilege
hereunder shall operate as a waiver thereof, nor shall any single
or partial exercise of any right, remedy, power or privilege
preclude any other or further exercise of the same or of any
right remedy, power or privilege with respect to any occurrence
be construed as a waiver of any right remedy, power privilege
with respect to such occurrence.
(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 Executive:
Xxxxxxxx X. Xxxxxxxxx
000 Xxxx Xxxxx Xxxxx
Xxxx Xxxx, XX 00000
If to the Corporation:
The Pep Boys - Manny, Moe & Xxxx
0000 Xxxx Xxxxxxxxx Xxxxxx
Xxxxxxxxxxxx, XX 00000
Attention: Board of Directors, c/o Corporate
Secretary
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) As used in this Agreement, the term
"affiliated companies" includes any company controlling,
controlled by or under common ownership with the Corporation.
(f) The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or
enforceability of any other provision of this Agreement. Each of
the parties hereto shall execute such further instruments and
take such further actions as any other party shall reasonably
request in order to effectuate the purposes of this Agreement.
(g) The Corporation 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.
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IN WITNESS WHEREOF, Executive has hereunto set his hand
and the Corporation, duly authorized by its Board of Directors,
has caused this Agreement to be executed in its name on its
behalf, all as of the day and year first above written.
/s/ Xxxxxxxx X. Xxxxxxxxx
____________________ -----------------------------------
Witness Xxxxxxxx X. Xxxxxxxxx
Attest: THE PEP BOYS - MANNY, MOE & XXXX
____________________ By: /s/ Xxxxx X. Xxxxxxxxx
-----------------------------------
Xxxxx X. Xxxxxxxxx
Chairman of the Compensation
Committee of the Board of Directors
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