Exhibit 10.1
EXECUTION VERSION
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT is made by and between THE PEP BOYS-
MANNY, MOE & XXXX, a Pennsylvania corporation (the "Corporation"), and
Xxxxxxxx Xxxxxx Xxxxxxxxx (the "Executive"), on this 28th day of April, 2003
(the "Effective Date").
W I T N E S S E T H :
WHEREAS, the Corporation desires to retain the employment services of the
Executive and the Executive desires to accept such employment by entering into
this Employment Agreement on the terms and conditions as set forth herein (the
"Agreement");
NOW, THEREFORE, in consideration of the representations, warranties and mutual
covenants set forth herein, the Corporation and the Executive agree as follows:
1. Position and Duties.
(a) The Executive shall serve as the Chief Executive Officer of the Corporation
(the "CEO") and shall perform such duties and services incident to such
positions and such other reasonably related duties as may be assigned to him
from time to time by the Board of Directors of the Corporation ("Board"). The
Corporation shall nominate the Executive to the Board and use its best efforts
to have the Executive elected as a director. During Executive's employment
with the Corporation, the Executive shall report directly to and take direction
from the Board. The majority of Executive's services shall be performed at the
Corporation's main headquarters in Philadelphia Pennsylvania.
(b) Excluding periods of vacation, sick leave and disability to which the
Executive is entitled, the Executive agrees to devote his full time, attention
and energy to the business of the Corporation and to use his reasonable best
efforts to perform faithfully and efficiently such responsibilities. Executive
shall not, without the prior written consent of the Corporation, actively
engage in any other business or business activity during the Employment Period
(as defined below). The Executive may, however, (i) serve on corporate, civic
or charitable boards or committees, (ii) participate in appropriate
professional organizations, including the Young President's Organization,
(iii) deliver lectures, fulfill speaking engagements or teach at educational
institutions and (iv) manage personal investments, so long as such activities
do not significantly interfere with the performance of the Executive's
responsibilities hereunder.
2. Employment Period; Commencement of Employment. The term of this Agreement
shall commence on the Effective Date and end on the third anniversary of the
Effective Date (the "Initial Employment Period"). Thereafter, the term of this
Agreement shall automatically renew for an indeterminate number of one-year
periods unless, at least two months prior to the expiration of the Initial
Employment Period or any succeeding one-year term, either party gives written
notice to the other of its election not to extend such term of the Agreement
(the Initial Employment Period and any succeeding one-year renewal is
hereinafter referred to as the "Employment Period"). The Executive shall
commence employment services as soon as reasonably practicable following the
Effective Date but no later than May 27, 2003 (the "Employment Commencement
Date").
3. Compensation.
(a) Base Salary. During the Employment Period, as consideration for services
rendered, the Corporation shall pay to the Executive a base salary at an annual
rate at least equal to $900,000 ("Base Salary") payable over each calendar year
at the regular pay periods of the Corporation. During the Employment Period,
Base Salary shall be reviewed by the Board (or the Compensation Committee
thereof) at least annually and may be increased, but not decreased, at any time
and from time to time as shall be determined by the Board (or the Compensation
Committee) in its sole discretion.
(b) Signing Bonus. In consideration for the Executive entering into this
Agreement and agreeing to serve as the CEO, the Corporation shall pay to the
Executive a signing bonus equal to $500,000 (the "Signing Bonus") within five
business days following the Employment Commencement Date. The Signing Bonus
shall be conditioned on the Executive's continued employment with the
Corporation for twelve (12) months following the Employment Commencement Date.
To the extent that the Executive voluntarily terminates employment with the
Corporation or the Corporation terminates the Executive's employment for Cause
(as defined herein) during the initial twelve-month Employment Period, the
Signing Bonus shall be forfeited and the Executive agrees to repay the Signing
Bonus to the Corporation within five business days following such termination.
A termination of employment on account of the death or Disability (as defined
herein) of the Executive or initiated by the Corporation (other than for Cause)
or by the Executive for Good Reason shall not require such repayment.
(c) Annual Bonus. During the first fiscal year of the Employment Period (the
"First Fiscal Year"), the Executive shall be entitled to earn a bonus based
upon performance objectives established by the Compensation Committee of the
Board (the "First Fiscal Year Bonus"). The threshold, target and maximum bonus
levels for the First Fiscal Year Bonus shall be 50%, 100% and 150% of Base
Salary, respectively. The First Fiscal Year Bonus shall be prorated for the
time that this Agreement is in effect during the First Fiscal Year and shall be
paid to the Executive after the end of the First Fiscal Year at the time that
fiscal year 2004 bonuses are paid to other senior executives under the
Corporation's Executive Incentive Bonus Plan (the "Bonus Plan"). If the
threshold performance goals for the First Fiscal Year are not attained such
that the Executive would not earn at least 50% of Base Salary (prorated as
above), the Corporation shall pay to Executive a guaranteed bonus for the First
Fiscal Year equal to 50% of Base Salary, prorated for the time that this
Agreement is in effect during the First Fiscal Year. For each full fiscal year
following the First Fiscal Year during the Employment Period, the Executive
shall be eligible to earn an annual bonus (an "Annual Bonus") under the terms
and conditions of the Bonus Plan (the Guaranteed Bonus and any Annual Bonus is
hereinafter referred to as a "Bonus"). For each full fiscal year following the
First Fiscal Year, the Executive's threshold, target and maximum bonus
opportunity shall be 50%, 100% and 150% of his Base Salary, respectively.
(d) Employee Benefit Plans. In addition to the Base Salary and Bonus payable
as hereinabove provided, the Executive shall be entitled to participate during
the Employment Period in all incentive programs, savings, pension and
retirement plans and programs generally available to other senior executives of
the Corporation from time to time other than those embodied in separately
negotiated agreements.
(e) Welfare Benefit Plans. During the Employment Period, the Executive and the
Executive's family shall be eligible for participation (to the same degree as
other senior executives of the Corporation) in each welfare benefit plan of the
Corporation, including, without limitation, all medical, prescription, dental,
disability, salary continuance, life, accidental death and travel accident
insurance plan and programs of the Corporation and its affiliated companies.
The Company shall pay for at least $2 million in term life insurance coverage
for the Executive.
(f) Reimbursement of Expenses. During the Employment Period, the Executive
shall be entitled to receive prompt reimbursement, in accordance with the
general expense reimbursement policy of the Corporation for all reasonable
expenses incurred by the Executive in the performance of his duties hereunder.
In addition, the Corporation shall reimburse the Executive for membership and
annual dues for his participation in the Young President's Organization and
travel expenses and attendance fees for attending conferences with such
organization during the Employment Period, up to a maximum of $25,000 per year.
The Corporation shall also reimburse the Executive for the reasonable costs
incurred by him for financial advice in connection with structuring and
negotiating the terms and conditions of this Agreement and his employment with
the Corporation, up to a maximum of $5,000.
(g) Vacation. During the Employment Period, the Executive shall be entitled to
four weeks per calendar year of paid vacation.
(h) Stock Option. On the Effective Date, the Corporation shall grant to the
Executive a stock option to purchase that number of shares of the Corporation's
common stock equal to $8,000,000 divided by the fair market value of one share
of common stock on the Effective Date (the "Inducement Option"). The
Inducement Option shall have an exercise price equal to the fair market value
of one share of the Corporation's common stock on the Effective Date and shall
be subject to the following vesting schedule: 20% fully vested on the Effective
Date, 20% to vest on each of the first, second, third and fourth anniversaries
of the Effective Date. Except as otherwise set forth herein, vesting shall be
contingent on continued employment with the Corporation. The Inducement Option
shall have such other terms and conditions as set forth in a stock option
agreement to be entered into by the Corporation and the Executive. For
purposes of this Section 3(h), the term "fair market value" shall mean the mean
between the highest and lowest quoted selling prices for the Corporation's
common stock.
(i) Relocation and Expenses. The Corporation shall reimburse the Executive for
all reasonable and customary relocation costs and expenses (including
reasonable and customary travel and lodging expenses for the Executive and his
family to look for permanent living accommodations and temporary living
accommodations for the Executive after the Employment Commencement Date but
excluding the broker's commission for selling his current Canadian residence)
accrued through the end of August 2003 in connection with the Executive's
relocation from his current home in Canada to the greater Philadelphia
metropolitan area, including all costs, expenses and fees necessary under U.S.
law to allow the Executive to enter the United States and work for the
Corporation during Employment Period. In the event that this Agreement and
Executive's employment is terminated by the Corporation without Cause within
thirty-six (36) months of the Effective Date or the Company gives to the
Executive written notice of its intent not to extend the Agreement beyond the
Initial Employment Period pursuant to Section 2 herein, the Corporation shall
reimburse the Executive for all reasonable and customary relocation costs and
expenses accrued (within four months of such termination of employment) in
connection with the Executive's relocation from his then current home in the
greater Philadelphia metropolitan area back to Xxxxxxx, Xxxxxxx, Xxxxxx.
4. Termination. This Agreement and Executive's employment shall terminate
under the following circumstances:
(a) Death or Disability. This Agreement shall terminate automatically upon the
Executive's death. During the Employment Period, if, as a result of physical
or mental incapacity or infirmity, Executive shall be unable to perform his
duties under this Agreement for (i) a continuous period of 90 days or more, or
(ii) periods aggregating 120 days or more during any period of 12 consecutive
months (each a "Disability Period"), and at the end of the Disability Period
there is no reasonable probability that Executive can promptly resume his
duties hereunder, Executive shall be deemed disabled (the "Disability") and the
Corporation, by notice to Executive, shall have the right to terminate this
Agreement and the Executive's employment for Disability at, as of or after the
end of the Disability Period. The existence of the Disability shall be
determined by a reputable, licensed physician selected by Corporation in good
faith, whose determination shall be final and binding on the parties.
Executive shall cooperate in all reasonable respects to enable an examination
to be made by such physician. Notwithstanding the foregoing, the Corporation
may conclusively determine Executive to have suffered a Disability and
terminate the Employment Period on account of such Disability at any time after
Executive has commenced receiving benefits under the Corporation's Long Term
Disability Salary Continuation Plan.
(b) With or Without Cause. The Corporation may terminate this Agreement and
the Executive's employment with or without "Cause." For purposes of this
Agreement, "Cause" means (i) the continued failure of Executive to perform
substantially his duties with the Corporation (other than any such failure
resulting from Executive's incapacity due to physical or mental illness or any
such failure subsequent to Executive being delivered a Notice of Termination
without Cause by the Corporation or delivering a Notice of Termination for Good
Reason to the Corporation); (ii) any act by Executive of illegality, dishonesty
or fraud in connection with the Executive's employment; (iii) the willful
engaging by Executive in gross misconduct which is demonstrably and materially
injurious to the Corporation or its affiliates; (iv) Executive's conviction of
or pleading guilty or no contest to a felony; or (v) a violation of Section 6
or 7 herein. 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, 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.
(c) With or Without Good Reason. This Agreement and the Executive's employment
may be terminated by the Executive with or without Good Reason. For purposes
of this Agreement, "Good Reason" means:
(i) any change in the duties or responsibilities of Executive that is
inconsistent in any material and adverse respect with Executive's position,
duties, responsibilities or status as CEO (including any material and adverse
diminution of such duties or responsibilities); provided, however, that Good
Reason shall not be deemed to occur upon (A) 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).
(ii) a material and adverse change in Executive's title or office as CEO, other
than an insubstantial and inadvertent action which is remedied by the
Corporation promptly after receipt of notice thereof given by Executive;
(iii) any substantial failure by the Corporation to comply with any of the
provisions of Section 3 of this Agreement; or
(iv) the Corporation requiring the Executive to be based at any office or
location other than that described in Section 1(a) hereof, except for travel
required in the performance of the Executive's responsibilities hereunder;
provided, however, that a termination by Executive for 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 the Executive.
(d) Notice of Termination. Any termination by the Corporation with or without
Cause or by the Executive with or without Good Reason shall be communicated by
Notice of Termination to the other party hereto given in accordance with
Section 9(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 the 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.
(e) Expiration of the Employment Period. This Agreement and the Executive's
employment shall terminate upon the delivery of a notice of non-extension of
the Employment Period by either the Executive or the Corporation as set forth
in Section 2.
(f) Certain Modifications. Notwithstanding anything to the contrary contained
in this Section 4 or in any other Section of this Agreement, Good Reason shall
not be deemed to occur, and the Corporation shall not be deemed in violation of
any provision of this Agreement, upon any change in duties or responsibilities
of the Executive that is a result of a modification of the organizational
structure of the Corporation.
5. Obligations of the Corporation Upon Termination.
(a) Death. If the Executive's employment is terminated by reason of the
Executive's death, this Agreement shall terminate and the Corporation shall pay
the Executive's estate his Base Salary through the date of termination at the
rate in effect at the time of death and any other benefits (including death
benefits) to which Executive is entitled to hereunder as of the date of the
Executive's death and shall have no further obligations to the Executive under
this Agreement.
(b) Disability. If the Executive's employment is terminated by reason of the
Executive's Disability, this Agreement shall terminate and the Corporation
shall pay the Executive his Base Salary through the date of termination at the
rate in effect at the time of Disability and any other benefits (including
Disability benefits) to which Executive is entitled to hereunder at the date of
the termination and shall have no further obligations to the Executive under
this Agreement.
(c) With Cause, Without Good Reason or Non-Extension of Employment Period. If
the Executive's employment shall be terminated (i) by the Corporation with
Cause, (ii) by Executive without Good Reason or (iii) on account of the
delivery by either party of a notice of non-extension of the Employment Period,
the Corporation shall pay the Executive his Base Salary through the date of
termination at the rate in effect at the time Notice of Termination is given
and shall have no further obligations to the Executive under this Agreement.
(d) Without Cause or With Good Reason. If, during the Employment Period,
Executive's employment shall be terminated (i) by the Corporation without
Cause, or (ii) by Executive for Good Reason, the Corporation shall pay to the
Executive or provide the following amounts and benefits, with respect to which
Executive shall have no duty of mitigation:
(A) to the extent not theretofore paid, the Corporation shall pay the
Executive's Base Salary through the date of termination at the rate in effect
on the date of termination plus any Bonus amounts which have been earned and
become payable and any vacation pay for accrued but unused vacation through the
date of termination in the calendar year which includes the date of termination
(such amount to be paid in a lump sum within 10 days of such termination);
(B) the Corporation shall continue to pay to the Executive the Base Salary in
equal installments at the regular pay periods of the Corporation from the
termination date through the end of the then applicable Employment Period as if
the Executive had continued to be employed for the remainder of the then
applicable Employment Period (the "Severance Period");
(C) the Corporation shall also pay to the Executive (i) his target bonus amount
under the Bonus Plan (or 150% of Base Salary if such termination occurs in the
First Fiscal Year) 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 "Target Bonus") and (ii) his Target Bonus for
each fiscal year that ends during the Severance Period;
(D) the Corporation shall continue to provide welfare benefits to the Executive
and his family during the Severance Period at least equal to those which would
have been provided to them in accordance with the plans, programs and policies
described in Section 3(e) in this Agreement if the Executive's employment had
continued through the Severance Period. To the extent that such benefits 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 the
Executive in a lump sum in cash within thirty (30) days after the date of
termination an amount equal to the cost to the Executive of acquiring on a
non-group basis those benefits lost to the Executive and the Executive's family
as a result of the Executive's termination; and
(E) all non-vested stock options held by the Executive shall immediately become
fully vested and non-forfeitable; All payments and benefits to be provided to
this Section 5(d) shall be subject to the Executive's (x) compliance with the
restrictions of Sections 6 and 7(a) herein and (y) execution of a general
release and waiver of claims against the Corporation in the form to be
determined by the Corporation at the time of termination. Anything herein to
the contrary notwithstanding, if the Executive becomes entitled to payments
pursuant to Section 5(d) hereof, Executive agrees to waive payments under any
severance plan or program of the Corporation.
6. Confidential Information. The Executive shall forever hold in a fiduciary
capacity for the benefit of the Corporation all secret or confidential
information, knowledge or data relating to the Corporation or any of its
affiliated companies, and their respective businesses, which shall have been
obtained by the Executive during the Executive's employment by the Corporation
or any of its affiliated companies and which shall not be public knowledge.
The Executive shall not, without the prior written consent of the Corporation,
communicate or divulge any such information, knowledge or data to anyone other
than the Corporation and those designated by it.
7. Covenant Against Competition.
(a) The Executive shall not, during his employment with the Corporation, and
(i) for two years following his termination of employment with the Corporation
for any reason other than by the Corporation without Cause or by the Executive
for Good Reason or (ii) during the Severance Period in the event the Executive
is terminated by the Corporation without Cause or the Executive terminates his
employment for Good Reason, directly or indirectly induce or attempt to
influence any employee of the Corporation to terminate his employment with the
Corporation and shall not engage in (as a principal, partner, director,
officer, agent, employee, consultant or otherwise) or be financially interested
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 being
definitely planned by the Corporation, at the time of the termination of the
Executive's employment. However, nothing contained in this Section 7(a) shall
prevent the Executive from holding for investment up to two percent (2%) of any
class or equity securities of a company whose securities are traded on a
national or foreign securities exchange.
(b) Executive acknowledges that the restrictions contained in Section 6 and
7(a), in view of the nature of the business in which the Corporation is
engaged, are reasonable and necessary in order to protect the legitimate
interests of the Corporation, and that any violation thereof would result in
irreparable injuries to the Corporation, and the Executive therefore
acknowledges that, in the event of his violation of any of these restrictions,
the Corporation shall be entitled to obtain from any court of competent
jurisdiction preliminary and permanent injunctive relief as well as damages and
an equitable accounting of all earnings, profits and other benefits arising
from such a violation, which rights shall be cumulative and in addition to any
other rights or remedies to which the Corporation may be entitled.
(c) If the Executive violates any of the restrictions contained in the
foregoing Section 7(a), the restrictive period shall be extended 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.
8. Successors.
(a) This Agreement is personal to the Executive and without the prior written
consent of the Corporation shall not be assignable by the Executive otherwise
than by will or the laws of descent and distribution. This Agreement shall
inure to the benefit of and be enforceable by the Executive's legal
representatives.
(b) This Agreement shall inure to the benefit of and be binding upon the
Corporation and its successors.
(c) The Corporation will require any successor (whether direct or indirect, by
purchase, merger, consolidation or otherwise) 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 it 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.
9. 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.
(b) The captions of this Agreement are not part of the provisions hereof and
shall have no force or effect.
(c) This Agreement may not be amended or modified otherwise than by a written
agreement executed by the parties hereto or their respective successors and
legal representatives.
(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 the Executive, to:
Xxxxxxxx Xxxxxx Xxxxxxxxx
000 Xxxxxx Xxxx
Xxxxxxx, Xxxxxxx
Xxxxxx X0X 0X0
(until such time as the Executive has relocated to the United States and
thereafter to such new U.S. address)
If to the Corporation, to:
The Pep Boys - Manny, Moe & Xxxx
0000 Xxxx Xxxxxxxxx Xxxxxx
Xxxxxxxxxxxx, XX 00000
Attention: President
with a copy to:
Xxxxxxx Xxxx & Xxxxxxxxx
000 Xxxxxxx Xxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxx X. Xxxxxx, Esq.
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) The invalidity or unenforceability of any provision or provisions of this
Agreement shall not affect the validity or enforceability of any other
provision or provisions of this Agreement, which shall remain in full force
and effect. If any provision of this Agreement is held to be invalid, void or
unenforceable in any jurisdiction, any court or arbitrator so holding shall
substitute a valid, enforceable provision that preserves, to the maximum lawful
extent, the terms and intent of this Agreement. If any of the provisions of,
or covenants contained in, this Agreement are hereafter construed to be invalid
or unenforceable in any jurisdiction, the same shall not affect the remainder
of the provisions or the enforceability thereof in any other jurisdiction,
which shall be given full effect, without regard to the invalidity or
unenforceability in such other jurisdiction. Any such holding shall affect
such provision of this Agreement, solely as to that jurisdiction, without
rendering that or any other provisions of this Agreement invalid, illegal, or
unenforceable in any other jurisdiction. If any covenant should be deemed
invalid, illegal or unenforceable because its scope is considered excessive,
such covenant will be modified so that the scope of the covenant is reduced
only to the minimum extent necessary to render the modified covenant valid,
legal and enforceable.
(f) 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.
(g) This Agreement and the stock option agreement to be entered into in
connection with the grant of the Inducement Option, contains the entire
understanding of the Corporation and the Executive with respect to the subject
matter hereof.
IN WITNESS WHEREOF, the Executive has hereunto set his hand and the Corporation
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
Xxxxxxxx Xxxxxx Xxxxxxxxx
THE PEP BOYS - MANNY, MOE & XXXX
By: /s/ The Pep Boys - Manny, Moe & Xxxx
