EXHIBIT 10.12
PENSKE AUTOMOTIVE GROUP, INC.
MANAGEMENT INCENTIVE PLAN
(EFFECTIVE JULY 1, 2003)
1. PURPOSE. The purpose of the Penske Automotive Group, Inc. Management
Incentive Plan is to advance the interests of Penske Automotive Group,
Inc., and its stockholders by motivating key personnel of the Company to
take actions that will promote the Company's long-term success and growth.
2. DEFINITIONS
(a) "Award" means an award entitling a Participant to receive incentive
compensation subject to the terms and conditions of the Plan.
(b) "Board" means the Company's Board of Directors.
(c) "Code" means the Internal Revenue Code of 1986, as amended.
(d) "Committee" means the Compensation and Management Development
Committee of the Board or any subcommittee thereof delegated by the
Compensation and Management Development Committee to administer the
Plan, or any other committee appointed by the Board to administer the
Plan; provided, however, that in any event the Committee shall be
comprised of not less than two directors of the Company, each of whom
shall qualify as an "outside director" for purposes of Section 162(m)
of the Code and Section 1.162-27 (e) (3) of the Regulations.
(e) "Common Stock" means shares of common stock, par value $.0001 per
share, of the Company.
(f) "Company" means Penske Automotive Group, Inc., a Delaware corporation.
(g) "Fair Market Value" means the fair market value of a share of Common
Stock as determined by the Committee from time to time. Unless
determined otherwise by the Committee, the fair market value shall be
the closing price of the Common Stock on the New York Stock Exchange
on the relevant date or, if no sale occurred on such date, the closing
price on the nearest preceding date on which sales occurred.
(h) "Officer" means a Participant who is an officer of the Company.
(i) "Participant" means a key employee of the Company or a Subsidiary who
is selected by the Committee to participate in the Plan.
(j) "Performance Objectives" means the performance objectives established
pursuant to this Plan for Participants who have received Awards.
Performance Objectives
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may be described in terms of Company-wide objectives or objectives
that are related to the performance of the individual Participant or
the Subsidiary, division, region, product line, department or function
in which the Participant is employed or which is managed by the
Participant. Any Performance Objectives applicable to a Qualified
Performance-Based Award shall be limited to specified levels of or
increases or decreases in return on equity, earnings per share, total
earnings, earnings growth, earnings from continuing operations, return
on capital, return on assets, gross profit, earnings before interest
and taxes, sales, sales growth, gross margin, cost reduction goals,
fixed cost coverage measurements (including, but not limited to, the
ratio of service and parts revenues to operating costs), return on
investment, increase in the fair market value of the Common Stock,
share price (including, but not limited to, growth measures and total
stockholder return), market capitalization, operating profit, net
income, cash flow (including, but not limited to, operating cash flow
and free cash flow), financial return ratios, total return to
shareholders, market share, earnings measures/ratios, balance sheet
measurements (including, but not limited to, debt to equity ratios and
inventory or receivable turnover), human resources measurements
(including, but not limited to, measurements of employee turnover,
workers' compensation costs and employee satisfaction), internal rate
of return, unit sales, same store sales, customer satisfaction and
productivity. If the Committee determines that a change in the
business, operations, corporate structure or capital structure of the
Company, or the manner in which it conducts its business, or other
events or circumstances render the Performance Objectives unsuitable,
the Committee may modify such Performance Objectives or the related
minimum acceptable level of achievement, in whole or in part, as the
Committee deems appropriate and equitable; provided however that in
the case of a Qualified Performance-Based Award, such modification is
only permitted to the extent prescribed by Section 162(m) of the Code
and the Regulations.
(k) "Performance Period" means a period determined by the Committee which
shall be used for purposes of determining whether Awards are earned by
Participants.
(l) "Performance Target" means a target level of performance, based on one
or more Performance Objectives, established for a Performance Period
in accordance with Section 4.
(m) "Plan" means the Penske Automotive Group, Inc. Management Incentive
Plan, as stated herein, and as amended from time to time.
(n) "Qualified Performance-Based Award" means an Award or portion of an
Award to an Officer that is intended to satisfy the requirements for
"qualified performance-based compensation" under Code Section 162(m).
The Committee shall designate any Qualified Performance-Based Award as
such at the time of grant.
(o) "Regulations" means the Treasury Regulations promulgated under the
Code, as amended from time to time.
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(p) "Retirement" means termination of employment with the Company or a
Subsidiary after completing at least 5 years of continuous employment
and attaining age 60.
(q) "Subsidiary" means a corporation or other entity (i) more than fifty
percent (50%) of whose outstanding shares or securities (representing
the right to vote for the election of directors or other managing
authority) are, or (ii) which does not have outstanding shares or
securities (as may be the case in a Partnership, joint venture or
unincorporated association), but more than fifty percent (50%) of
whose ownership interest (representing the right generally to make
decisions for such other entity) is, now or hereafter owned or
controlled directly or indirectly by the Company.
3. PARTICIPATION. For each Performance Period, the Committee shall designate
those key employees of the Company and its Subsidiaries who shall receive
Awards under the Plan. Selection for participation for one Performance
Period shall not confer on a Participant the right to participate in the
Plan for any other Performance Period.
4. AWARDS. For each Performance Period, each Participant shall receive an
Award entitling the Participant to receive cash incentive compensation or
other incentive compensation (including common stock or other awards under
the Amended and Restated Penske Automotive Group, Inc. 2002 Equity Plan (or
similar plan)) upon the attainment of one or more Performance Targets. The
Committee may establish different terms for Awards for different
Participants or groups of Participants. The amount of compensation payable
under an Award may be stated as a dollar amount or as a percentage of the
Participant's base compensation. The Committee may provide for a threshold
level of performance below which no amount of compensation will be paid and
a maximum level of performance above which no additional amount of
compensation will be paid, and it may provide for the payment of differing
amounts of compensation for different levels of performance.
Notwithstanding any other provision of the plan to the contrary, the
Committee retains the absolute discretion to reduce the amount of any
incentive compensation that would be otherwise payable to a participant
(including a reduction in such amount to zero).
5. ESTABLISHMENT OF PERFORMANCE TARGETS. Within the first twenty-five percent
(25%) of each Performance Period, the Committee shall establish one or more
Performance Targets for that Performance Period.
6. PAYMENT OF AWARDS. Following the end of each Performance Period, the
Committee shall determine whether the Performance Targets for such
Performance Period have been satisfied and shall certify its determination
in approved minutes of the Committee meeting held for such purpose. If the
Committee certifies that one or more Performance Targets for a Performance
Period have been achieved, all compensation payable in respect of Awards
subject to such Performance Target shall be paid to Participants as soon as
reasonably practicable thereafter (subject to the limitations set forth in
paragraph 3); provided, that such compensation shall be payable in the
calendar year that follows the calendar year which includes the last day of
the Performance Period
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and in all events by March 15 of such calendar year and, provided, however,
that the Committee may permit the deferral of such compensation under a
deferred compensation plan of the Company or a Subsidiary. If a Performance
Target for a Performance Period is not achieved, the Committee in its sole
discretion may determine that all or a portion of any Award shall be deemed
to be earned based on such criteria as the Committee deems appropriate,
including without limitation individual performance or the performance of
the Subsidiary or business division employing the Participant; provided,
however, that the Committee shall not have such discretion with respect to
any Qualified Performance-Based Award. Any Award that is not considered
earned in accordance with this Section shall be forfeited.
7. PARTIAL PARTICIPATION. Unless the Committee shall determine otherwise, the
rules and procedures for partial participation shall be consistent with the
following:
(a) EMPLOYMENT TERMINATION. If a Participant terminates employment with
the Company before payment of Awards are made for a Performance Period
for reasons other than death, disability or Retirement, any Award
granted to the Participant in respect of that Performance Period shall
be forfeited and cancelled.
(b) DEATH, DISABILITY OR RETIREMENT. A Participant whose employment
terminates during a Performance Period because of death, disability or
Retirement may, under such rules as the Committee may from time to
time prescribe, be eligible for consideration for a pro-rata Award
based on the period of active employment during the Performance
Period, which Award shall be paid at the time specified in Section 5.
(c) LEAVE OF ABSENCE. A Participant who is on a leave of absence other
than a personal leave for more than ninety (90) consecutive days
during the Performance Period, or who is on a personal leave of
absence for more than thirty (30) consecutive days, shall forfeit any
portion of an Award attributable to said period of leave pursuant to
such rules as the Committee may establish.
8. MAXIMUM AMOUNT OF QUALIFIED PERFORMANCE-BASED AWARDS. The maximum dollar
amount of compensation that may be paid to any Participant in respect of
Qualified Performance-Based Awards for a single fiscal year shall be
$5,000,000.
9. ADJUSTMENTS. To the extent that a Performance Target is based on an
increase in the Fair Market Value of the Common Stock, in the event of any
stock dividend, stock split, combination of shares, recapitalization or
other change in the capital structure of the Company, any merger,
consolidation, spin-off, reorganization, partial or complete liquidation or
other distribution of assets (other than a normal cash dividend), issuance
of rights or warrants to purchase securities or any other corporate
transaction having an effect similar to any of the foregoing, then the
Committee may make or provide for such adjustments in such Performance
Target as the Committee in its sole discretion may in good faith determine
to be equitably required in order to prevent dilution or enlargement of the
rights of Participants.
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10. TAX WITHHOLDING. The Company shall be entitled to withhold from any payment
made under the Plan the full amount of any required federal, state or local
taxes.
11. NONTRANSFERABILITY OF BENEFITS. A Participant may not assign or transfer
any interest in an Award. Notwithstanding the foregoing, upon the death of
a Participant, the Participant's rights and benefits under the Plan shall
pass by will or by the laws of descent and distribution.
12. ADMINISTRATION AND INTERPRETATION. The Committee shall have complete
authority to interpret the Plan, to prescribe rules and requirements
relating to it, and to make all determinations necessary or advisable in
the administration of the Plan, including, without limitation, the amending
or altering of the Plan as may be required to comply with or conform to any
federal, state or local laws or regulations.
13. AMENDMENT AND TERMINATION OF PLAN. The Committee may at any time terminate
the Plan and may at any time and from time to time amend or modify the Plan
in any respect; provided, however, that no amendment shall be effective
without approval of the stockholders of the Company if the amendment would
increase the maximum amount of compensation payable to a Participant in any
Performance Period pursuant to Qualified Performance-Based Awards as
specified in Section 7. Neither the termination of the Plan nor any
amendment to the Plan shall reduce benefits accruing under Awards granted
prior the date of such termination or amendment.
14. GOVERNING LAW. The Plan shall be governed and construed in accordance with
the laws of the State of Michigan. As a condition to eligibility to receive
an Award under the Plan, each Participant irrevocably consents to the
exclusive jurisdiction of the courts of the State of Michigan and of any
federal court located in the Eastern District of Michigan in connection
with any action or proceeding arising out of or relating to this Plan, any
document or instrument delivered pursuant to or in connection with this
Plan, or any alleged breach of this Plan or any such document or
instrument.
15. EFFECTIVE DATES AND STOCKHOLDER APPROVAL. This Plan shall be effective for
periods beginning on and after July 1, 2003, provided that no Qualified
Performance-Based Award shall be effective if the Plan is not approved by a
vote of the stockholders of the Company at an annual meeting or special
meeting.
16. NO RIGHTS TO CONTINUED EMPLOYMENT. Participation in the Plan does not
create or constitute an express or implied employment contract between the
Company and the Participant nor limit the right of the Company to discharge
or otherwise deal with a Participant without regard to the existence of the
Plan.
17. UNFUNDED PLAN. The Plan shall at all times be an unfunded payroll practice
and no provision shall at any time be made with respect to segregating
assets of the Company for payment of any Award. No Participant or any other
person shall have any interest in any particular assets of the Company by
reason of the right to receive an Award under the Plan and any such
Participant or any other person shall have only the rights of a general
unsecured creditor of the Company.
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18. SECTION 409A. To the extent applicable, this Plan is intended to comply
with the provisions of Section 409A of the Code. This Plan shall be
administered in a manner consistent with the intent.
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