Exhibit 10.1

PENSKE AUTOMOTIVE GROUP, INC.

2020 EQUITY INCENTIVE PLAN

 

1.

Purpose. The purpose of this 2020 Equity Incentive Plan (the “Plan”) is to
further the long term stability and financial success of Penske Automotive
Group, Inc. (the “Company”) by (a) attracting and retaining key employees,
members of the Board of Directors and other contributors to the Company and its
Affiliates through the use of equity and cash incentives and (b) encouraging
equity ownership in the Company by members of the Company’s Board of Directors
and management. It is believed that ownership of Company Stock will stimulate
the efforts of those Participants upon whose judgment and interest the Company
is and will be dependent for the successful conduct of its business. It is also
believed that awards granted under this Plan will strengthen their desire to
remain with the Company and will further align those Participants’ interests
with those of the Company’s shareholders.

2.

Definitions.  When the following terms are capitalized, they shall have the
meanings indicated, unless otherwise provided in an Award Agreement:

(a)

“Act” means the Securities Exchange Act of 1934, as amended.  A reference to any
provision of the Act shall include reference to any successor or replacement
provision of the Act, and any regulations promulgated with respect to such
provision.

(b)

“Affiliate” means a Parent or Subsidiary of the Company, whether existing as of
the effective date of the Plan or hereafter created or acquired.

(c)

“Applicable Withholding Taxes” means the amount of federal, state, local and
foreign income and payroll taxes that the Company is required by applicable law
to withhold in connection with any Award, provided, however, that if shares of
Company Stock are used to pay such Applicable Withholding Taxes, then the Fair
Market Value of such shares may not exceed the total maximum statutory tax
withholding obligations associated with the Award to the extent needed for the
Company (or an Affiliate) to avoid an accounting charge.

(d)

“Award” means individually or collectively, the award of an Option, Stock
Appreciation Right, Company Stock Award, Incentive Award or Restricted Award.

(e)

“Award Agreement” means the written or electronic document that sets forth the
terms of a Participant’s Award and may include a separate written or electronic
employment or services agreement between the Company or an Affiliate and a
Participant, to the extent such agreement provides for any type of Award
permitted to be granted under the Plan and is granted in accordance with the
terms of the Plan.

(f)

“Board” means the Board of Directors of the Company.

(g)

“Change of Control” means the occurrence of the following event: any individual,
entity or group (as defined in Section 13(d)(3) of the Act) other than the
Permitted Holders becomes the beneficial owner (as defined in Rule 13(d)(3)
under the Act) of Company securities that constitute more than 50% of the
combined voting power of the then outstanding securities of the Company that may
be cast for the election of directors to the Board of the Company (other than as
a result of an issuance of securities initiated by the Company in the ordinary
course of business).   Notwithstanding the foregoing, (i) no Change of Control
shall be deemed to have occurred if there is consummated any transaction or
series of integrated transactions immediately following which the record holders
of the Stock immediately prior to such transaction or series of transactions
continue to own, directly or indirectly, in the same proportions as their
ownership in the Company, an entity that owns all or substantially all of the
assets or voting securities of the Company immediately following such
transaction or series of transactions; and (ii) for purposes of an Award (A)
that provides for the payment of deferred

 

compensation that is subject to Code Section 409A upon a Change of Control or
(2) with respect to which the Company permits a deferral election, the
definition of “Change of Control” shall be deemed amended to conform to the
requirements of Code Section 409A to the extent necessary for the Award and
deferral election to comply with Code Section 409A.

(h)

“Code” means the Internal Revenue Code of 1986, as amended. A reference to any
provision of the Code shall include reference to any successor or replacement
provision of the Code, and any regulations promulgated with respect to such
provision.

(i)

“Committee” means the Plan administrator, as described under Section ‎14, and to
the extent of any delegation, the delegate of the Committee.

(j)

“Company” means Penske Automotive Group, Inc., a Delaware corporation, and any
successor thereto.

(k)

“Company Contributor” means a consultant, advisor or other individual (except a
member of the Board or an employee of the Company, a Parent or a Subsidiary of
the Company), who (i) renders bona fide services to the Company or any Affiliate
that are not in connection with the offer and sale of the Company’s securities
in a capital-raising transaction; and (ii) does not promote or maintain a market
for the Company’s securities.

(l)

“Company Stock” means the common stock of the Company. In the event of a change
in the capital structure of the Company, the shares resulting from such a change
shall be deemed to be Company Stock within the meaning of the Plan.

(m)

“Company Stock Award” means an award of Company Stock made without any
restrictions.

(n)

“Date of Grant” means the date on which the Committee authorizes an Award, or
such later date as shall be designated by the Committee. 

(o)

“Disability” or “Disabled” means, as to an Incentive Stock Option, a disability
within the meaning of Code Section 22(e)(3), and, as to a Restricted Stock Unit
and any other Award determined to be subject to Code Section 409A, a disability
within the meaning of Code Section 409A(a)(2)(C). As to all other forms of
Awards, the Committee shall determine whether a disability exists and such
determination shall be conclusive.

(p)

“Fair Market Value” means, for purposes of determining the value of Company
Stock (i) on the Date of Grant, the Stock Exchange closing price of Company
Stock on the Date of Grant, (ii) on the date of exercise, the Stock Exchange
closing price of Company Stock on the date preceding the exercise date, and
(iii) for all other purposes, unless the Committee specifies a different method,
the Stock Exchange closing sale price on the day as of which the Fair Market
Value is to be determined.  In all such cases, if no sale occurs on the relevant
date, then the Stock Exchange closing price of Company Stock as of the
immediately preceding date on which such a sale occurred shall be used.
Notwithstanding the foregoing, with respect to a sale of shares of Company Stock
on a Stock Exchange, the actual sale price shall be the Fair Market Value of
such shares. If Company Stock is not listed on a national or regional Stock
Exchange or market system, Fair Market Value shall be determined by the
Committee in good faith, subject to compliance with Code Section 409A. 

(q)

“Incentive Award” means a long or short-term incentive award with payment in the
form of cash, Company Stock or a combination of both, as designated by the
Committee and conditioned on the attainment of specified Performance Goals, or
any other event that the Committee determines.

(r)

“Incentive Stock Option” means an Option intended to meet the requirements of,
and qualify for favorable federal income tax treatment under, Code Section 422.

 

(s)

“Maturity Date” means, with respect to a Restricted Stock Unit, the date upon
which all restrictions applicable to such Restricted Stock Unit have lapsed or
been removed.

(t)

“Nonstatutory Stock Option” means an Option that does not meet the requirements
of Code Section 422 or, even if meeting the requirements of Code Section 422, is
not intended to be an Incentive Stock Option and is so designated.

(u)

“Officer” means a person who is an officer of the Company within the meaning of
Section 16 of the Act.

(v)

“Option” means a right to purchase Company Stock granted under Section 7 of the
Plan, at a price determined in accordance with the Plan.

(w)

“Parent” means, with respect to any corporation, a parent of that corporation
within the meaning of Code Section 424(e).

(x)

“Participant” means any employee, director or other Company Contributor who
receives an Award under the Plan.  Where the context so requires, all references
to a Participant includes the legal or personal representative thereof or any
transferee. 

(y)

“Performance Goals” means any objective or subjective goals that the Committee
shall select with respect to any Award under the Plan. A Performance Goal may,
but is not required to, relate to one or more of the following with respect to
the Company, one or more of its Subsidiaries or one or more of its or their
divisions or units, or any combination of the foregoing, and may be applied on
an absolute basis and/or be relative to one or more peer group companies or
indices, or any combination thereof, as the Committee shall determine: specified
levels of or increases or decreases in revenue, return on equity, earnings per
share, total earnings, earnings growth, earnings from continuing operations,
EBITDA, EBITDAR, return on capital/equity, return on assets, gross profit,
earnings before interest and taxes, sales, sales growth, gross or operating
margin, cost reduction goals, fixed cost coverage measurements (including 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
growth measures and total stockholder return), market capitalization, operating
profit, profit margin, net income, cash flow (including operating cash flow and
free cash flow), financial return ratios, expense ratios, total return
to  shareholders, market share, earnings measures/ratios, balance sheet
measurements (including debt to equity ratios, maintenance of specified credit
availability levels, compliance with credit covenants, inventory measurements
and receivables/payables metrics), human resources measurements (including
measurements of employee turnover, workers’ compensation costs and employee
satisfaction), internal rate of return, unit sales, same store sales, specified
levels of acquisitions/acquired revenue, customer satisfaction and productivity
and compliance objectives (including lack of material weakness in internal
controls, each as determined in accordance with the relevant AICPA or PCAOB
principles).  The Committee will determine the method of measuring or evaluating
a Performance Goal, and reserves the right to adjust or modify such method at
any time.

(z)

“Permitted Holder” means (i) Mr. Roger S. Penske, his estate, guardians,
conservators, administrators, committees or personal representatives; (ii)
immediate family members and lineal descendants of Mr. Roger S. Penske and their
respective guardians, conservators, administrators, committees or personal
representatives; (iii) trusts or other entities created for the benefit of any
of the Persons listed in (i) or (ii) above or for the benefit of a trust covered
by this clause (iii); and (iv) any other Person or entity and their respective
Subsidiaries, in each case so long as the Persons or entities covered by clauses
(i), (ii) or (iii), directly or indirectly, control such Person or
entities.  For purposes of this definition, “control” when used with respect to
any entity means the power to direct the management and policies of such entity,
directly or indirectly, whether through the ownership of voting securities, by
contract or otherwise, and the terms “controlling” and “controlled” have
meanings correlative to the foregoing.

 

(aa)

“Restricted Award” means, collectively, the award of Restricted Stock or
Restricted Stock Units.

(bb)

“Restricted Stock” means Company Stock awarded upon the terms and subject to the
restrictions set forth in Section 6.

(cc)

“Restricted Stock Unit” means an award granted upon the terms and subject to the
restrictions and limitations set forth in Section 6 that entitles the holder to
receive a payment equal to the Fair Market Value of a share of Company Stock on
the Maturity Date.

(dd)

“Rule 16b-3” means Rule 16b-3 adopted pursuant to Section 16(b) of the Act. A
reference in the Plan to Rule 16b-3 shall include a reference to any
corresponding rule (or number re-designation) of any amendments to Rule 16b-3
adopted after the effective date of the Plan’s adoption.  The provisions of the
Plan referring to Rule 16b-3 shall apply only to Participants who are subject to
Section 16 of the Act.

(ee)

“Stock Appreciation Right” means a right to receive amounts from the Company
awarded upon the terms and subject to the restrictions set forth in Section 8.

(ff)

“Stock Exchange” means the principal national securities exchange on which
Company Stock is listed for trading, or, if Company Stock is not listed for
trading on a national securities exchange, such other recognized trading market
or quotation system upon which the largest number of shares of Company Stock has
been traded in the aggregate during the last 20 days before a Date of Grant, or
date on which an Option is exercised, whichever is applicable.

(gg)

“Subsidiary” means any business entity (including, but not limited to, a
corporation, partnership or limited liability company) of which a company
directly or indirectly owns 50% of the voting interests of the entity unless the
Committee determines that the entity should not be considered a Subsidiary for
purposes of the Plan. If a company owns less than 50% of the voting interests of
the entity, the entity will be considered a Subsidiary for purposes of the Plan
only if the Committee determines that the entity should be so considered. For
purposes of Incentive Stock Options, Subsidiary shall be limited to a subsidiary
within the meaning of Code Section 424(f).

(hh)

“Substitute Awards” means Awards granted or shares of Company Stock issued by
the Company in assumption of, or in substitution or exchange for, awards
previously granted, or the right or obligation to make future awards, in each
case, by a company acquired by the Company or any Affiliate or with which the
Company or any Affiliate combines.

(ii)

“10% Shareholder” means a person who owns, directly or indirectly, stock
possessing more than 10% of the total combined voting power of all classes of
stock of the Company or any Parent or Subsidiary of the Company. Indirect
ownership of stock shall be determined in accordance with Code Section 424(d).

3.

General. Awards may be granted under the Plan in the form of Options, Stock
Appreciation Rights, Company Stock Awards, Incentive Awards and Restricted
Awards. Options granted under the Plan may be Incentive Stock Options or
Nonstatutory Stock Options.

4.

Number of Shares of Company Stock and Compensation Cap.

(a)

Plan Reserve.  Subject to Section ‎13 of the Plan, there shall be reserved for
issuance under the Plan an aggregate of 5,000,000 shares of Company Stock, which
shall be authorized, but unissued shares (the “Reserve”). 

(b)

Depletion of Reserve.    The Reserve shall be depleted on the date of grant of
an Award by the maximum number of Shares, if any, with respect to which such
Award is granted.  For clarity, an Award that provides for settlement solely in
cash shall not cause any depletion of the Reserve at the time such Award is
granted.  If such Award is later amended, however, to permit or require

 

settlement in Shares, then the Reserve shall be depleted, at the time of such
amendment, by the maximum number of Shares which may be issued in settlement of
such Award.

(c)

Replenishment of Reserve.  Shares of Company Stock that are subject to Awards
but that (i) are not issued under the Award as a result of the expiration or
termination of the Award, or because such Award is settled in cash, (ii) will
not be issued because the criteria for issuance of such shares will not be met,
(iii) are issued but forfeited pursuant to the terms of the Award, or (iv) are
issued but the Company subsequently reacquires them pursuant to rights reserved
upon the issuance of such shares, shall be recredited to the Reserve and may
again be used for new Awards under this Plan.  Notwithstanding the foregoing,
shares of Company Stock recredited to the Reserve pursuant to clause (iv) may
not be issued pursuant to Incentive Stock Options.  Shares that are withheld by,
or tendered back to, the Company for payment of Applicable Withholding Taxes or
to pay the exercise price of an Option shall not be recredited to the Reserve.

(d)

Individual Award Limits.  Subject to Section 13 of the Plan, no more than
1,000,000 shares of Company Stock may be allocated to the Awards that are
granted to any one Participant during any single calendar year, of which no more
than 1,000,000 shares of Company Common Stock may be awarded to any one
Participant in the form of Incentive Stock Options during any single calendar
year.

(e)

Substitute Awards.  Substitute Awards shall not reduce the Reserve or the
per-Participant Award limits under Section 4(e). Additionally, in the event that
a company acquired by the Company or any Subsidiary or with which the Company or
any Subsidiary combines has shares available under a pre-existing plan approved
by shareholders and not adopted in contemplation of such acquisition or
combination, the shares available for grant pursuant to the terms of such
pre-existing plan (as adjusted, to the extent appropriate, using the exchange
ratio or other adjustment or valuation ratio or formula used in such acquisition
or combination to determine the consideration payable to the holders of common
stock of the entities party to such acquisition or combination) may be used for
Awards under the Plan and shall not reduce the shares of Company Stock
authorized for grant under the Plan; provided that Awards using such available
shares shall not be made after the date awards or grants could have been made
under the terms of the pre-existing plan, absent the acquisition or combination,
and shall only be made to individuals who were not Participants prior to such
acquisition or combination.

5.

Eligibility.

(a)

Individuals Eligible for Awards.  All present and future employees or directors
of the Company or any of its Affiliates, and other Company Contributors shall be
eligible to receive Awards under the Plan. Subject to any restrictions imposed
in the Plan, the Committee shall have the power and discretion, as provided in
Section ‎14, to select which employees, directors and Company Contributors shall
receive Awards and to determine for each such Participant the terms and
conditions, the nature of the Award and the number of shares or units to be
allocated to each Participant as part of each Award.

(b)

No Guarantee of Awards or Employment.  Neither the grant of an Award nor
anything else in the Plan shall obligate the Company or any Affiliate to pay a
Participant any particular amount of remuneration, to continue the employment or
service of the Participant after the grant or to make further grants to the
Participant at any time thereafter.

6.

Company Stock Awards, Incentive Awards and Restricted Awards.

(a)

Grant of Company Stock Award. Whenever the Committee deems it appropriate to
grant a Company Stock Award, the Company shall provide an Award Agreement to the
Participant stating the number of shares of Company Stock for which the Company
Stock Award is granted,

 

and the terms and conditions thereof. A Company Stock Award may be made by the
Committee in its discretion without cash consideration.

(b)

Grant of Incentive Award. Whenever the Committee deems it appropriate to grant
an Incentive Award, the Company shall provide an Award Agreement to the
Participant stating the terms and conditions on which the Incentive Award is
granted. An Incentive Award may be made by the Committee in its discretion with
or without cash consideration.

(c)

Grant of Restricted Award.  Whenever the Committee deems it appropriate to grant
a Restricted Award, the Company shall provide an Award Agreement to the
Participant stating the number of shares of Restricted Stock or number of
Restricted Stock Units for which the Restricted Award is granted and the terms
and conditions thereof, to the extent consistent with paragraphs (d) and (e)
below, as applicable.  A Restricted Award may be made by the Committee in its
discretion without cash consideration. 

(d)

Restricted Award Terms.    

(i)

All Restricted Awards.  A Restricted Stock Award issued pursuant to the Plan
shall be subject to the following restrictions:

(1)

None of such shares or units may be sold, assigned, transferred, pledged,
hypothecated, or otherwise encumbered or disposed of until the restrictions on
such shares or units shall have lapsed.

(2)

Unless specified otherwise in a Participant’s Award Agreement or as permitted by
the Plan, the restrictions on such shares or units must remain in effect for a
period of no less than one year from the Date of Grant.

(3)

Unless specified otherwise in a Participant’s Award Agreement or as permitted by
the Plan, if a Participant ceases to be employed by the Company or any
Affiliate, or otherwise ceases to be a Company Contributor, as applicable, prior
to the date the restrictions on such Award shall have lapsed, then the
Participant shall forfeit to the Company any Restricted Awards on the date such
Participant shall cease to be so employed.

(4)

The Committee may establish such other restrictions on such shares or units that
the Committee deems appropriate, including, without limitation, events of
forfeiture and Performance Goals that must be achieved for the vesting of
Awards.

(ii)

Restricted Stock Awards. Upon the acceptance by a Participant of an award of
Restricted Stock, unless otherwise set forth in the Award Agreement, such
Participant shall, subject to the restrictions set forth in paragraph (d)(i)
above, have all the rights of a shareholder with respect to the shares of
Restricted Stock subject to such award of Restricted Stock, including, but not
limited to, the right to vote such shares of Restricted Stock and the right to
receive all dividends and other distributions paid thereon. Certificates, if
any, representing Restricted Stock shall bear a legend referring to the
restrictions set forth in the Plan and the Participant’s Award Agreement. If
shares of Restricted Stock are issued without certificates, notice of the
restrictions set forth in the Plan and the Participant’s Award Agreement must be
given to the shareholder in the manner required by law.

(iii)

Restricted Stock Unit Awards.

 

(1)

Each Restricted Stock Unit shall entitle the Participant, on the Maturity Date,
to receive from the Company an amount equal to the Fair Market Value on the
Maturity Date of one share of Company Stock subject to any limitations or
enhancements on such value as the Committee may set forth in the notice of the
Restricted Stock Unit Award.

(2)

The manner in which the Company’s obligation arising on the Maturity Date of a
Restricted Stock Unit shall be paid and date of payment shall be determined by
the Committee and shall be set forth in the Participant’s Award Agreement. The
Committee may provide for payment in Company Stock or cash or a fixed
combination of Company Stock and cash, or the Committee may reserve the right to
determine the manner of payment at the time the payment is made.

(3)

A Participant receiving an award of Restricted Stock Units shall not possess any
rights of a shareholder with respect to the Restricted Stock Units and shall be
entitled to receive payments equivalent to dividends and other distributions
paid on shares of Company Stock only to the extent set forth in the Award
Agreement.

(e)

Withholding Taxes.  Each Participant shall agree at the time the Participant’s
Company Stock Award, Incentive Award and/or Restricted Award is granted, and as
a condition thereof, to pay to the Company or make arrangements satisfactory to
the Company regarding the payment to the Company of, Applicable Withholding
Taxes. Until such amount has been paid or arrangements satisfactory to the
Company have been made, no stock certificates free of a legend reflecting the
restrictions set forth in paragraph (d) above shall be issued to such
Participant for Restricted Stock. As an alternative to making a cash payment to
the Company to satisfy Applicable Withholding Taxes for an Award of Company
Stock, Restricted Stock, or Restricted Stock Units that are settled in shares of
Company Stock, if the grant so provides, or the Committee by separate action so
permits, the Participant may elect to (i) deliver shares of Company Stock
(either by actual delivery or attestation) or (ii) have the Company retain that
number of shares of Company Stock that otherwise be issued under the Award, in
each case having a Fair Market Value sufficient to satisfy all or a specified
portion of the Applicable Withholding Taxes. Any such election shall be made
only in accordance with procedures established by the Committee. The Committee
has the express authority to change any election procedure it establishes at any
time. The Applicable Withholding Taxes attributable to Restricted Stock Units or
Incentive Awards that are settled in cash may be withheld from the cash payment
by the Company to the Participant for such Restricted Stock Units or Incentive
Award.

(f)

Legend on Share Certificates. The Company may place on any certificate
representing Company Stock issued under this Section 6 any legend deemed
desirable by the Company’s counsel to comply with federal or state securities
laws, and the Company may require of the Participant a customary written
indication of the Participant’s investment intent.

7.

Options.

(a)

Grant of Options.  Whenever the Committee deems it appropriate to grant Options,
the Company shall provide an Award Agreement to the Participant stating the
number of shares for which Options are granted, the exercise price per share,
whether the Options are Incentive Stock Options or Nonstatutory Stock Options,
and the conditions to which the grant and exercise of the Options are subject,
including whether vesting will be contingent on the achievement of any
Performance Goals, as the Committee acting in its complete discretion deems
consistent with the terms of the Plan.  Incentive Stock options only may be
granted to employees of the Company, the Parent or a Subsidiary of the Company.

 

(b)

Exercise Price.  The exercise price of shares of Company Stock covered by an
Option shall be not less than 100% of the Fair Market Value of such shares on
the Date of Grant; provided that if an Incentive Stock Option is granted to an
employee who, at the time of the grant, is a 10% Shareholder, then the exercise
price of the shares covered by the Incentive Stock Option shall be not less than
110% of the Fair Market Value of such shares on the Date of Grant. 

(c)

Exercise of Stock Options. Options may be exercised in whole or in part at such
times as may be specified by the Committee in the Participant’s Award Agreement;
provided that:

(i)

No Incentive Stock Option may be exercised after the first to occur of:

(x) Ten years (or, in the case of an Incentive Stock Option granted to a 10%
Shareholder, five years) from the Date of Grant;

(y)Three months after the date of the Participant’s termination of employment
with the Company and its Affiliates for reasons other than death or Disability;
or

(z)One year following the date of the Participant’s termination of employment
from the Company and its Affiliates by reason of death or Disability.

If an Incentive Stock Option remains exercisable after the time periods set
forth in clauses (y) or (z), then it shall be treated as a Nonstatutory Stock
Option following the end of such time periods.

(ii)

An Incentive Stock Option, by its terms, shall be exercisable in any calendar
year only to the extent that the aggregate Fair Market Value (determined at the
Date of Grant) of the Company Stock with respect to which Incentive Stock
Options are exercisable for the first time during the calendar year does not
exceed $100,000 (the “Limitation Amount”). Incentive Stock Options granted under
the Plan and all other plans of the Company and any Parent or Subsidiary of the
Company shall be aggregated for purposes of determining whether the Limitation
Amount has been exceeded. The Committee may impose such conditions as it deems
appropriate on an Incentive Stock Option to ensure that the foregoing
requirement is met. If Incentive Stock Options that first become exercisable in
a calendar year exceed the Limitation Amount, the excess Options will be treated
as Nonstatutory Stock Options to the extent permitted by law.

(d)

Automatic Exercise.  Notwithstanding the foregoing, an Option Award Agreement
may provide that if on the last day of the term of an Option the Fair Market
Value of one share of Company Stock exceeds the exercise price of the Option,
the Participant has not exercised the Option and the Option has not expired, the
Option shall be deemed to have been exercised by the Participant on such day
with payment made by withholding shares of Company Stock otherwise issuable in
connection with the exercise of the Option. In such event, the Company shall
deliver to the Participant the number of shares of Company Stock for which the
Option was deemed exercised, less the number of shares of Company Stock required
to be withheld for the payment of the total purchase price and Applicable
Withholding Taxes; and any fractional share of Company Stock shall be cancelled
or settled in cash as determined by the Company.

8.

Stock Appreciation Rights.

(a)

Grant of Stock Appreciation Rights.  Whenever the Committee deems it appropriate
to grant Stock Appreciation Rights, the Company shall provide an Award Agreement
to the Participant stating the number of shares for which Stock Appreciation
Rights are granted, the exercise price per share, and the conditions to which
the grant and exercise of the Stock Appreciation Rights are subject, including
whether vesting will be contingent on the achievement of any Performance Goals,
as the Committee acting in its complete discretion deems consistent with the
terms of the Plan.

 

(b)

Calculation of Value. Stock Appreciation Rights shall entitle the Participant,
upon the exercise of all or any part of the Stock Appreciation Rights, to
receive from the Company an amount equal to the excess of (x) the Fair Market
Value on the date of exercise of the Company Stock covered by the surrendered
Stock Appreciation Rights over (y) the Fair Market Value on the Date of Grant of
the Company Stock covered by the Stock Appreciation Rights. The Committee may
limit the amount that the Participant may be entitled to receive upon exercise
of the Stock Appreciation Right.

(c)

Exercise.  Stock Appreciation Rights shall be exercisable, in whole or in part,
at such times as the Committee shall specify in the Participant’s Stock
Appreciation Rights Award Agreement.

(d)

Settlement.  The manner in which the Company’s obligation arising upon the
exercise of a Stock Appreciation Right shall be paid shall be determined by the
Committee and shall be set forth in the Award Agreement. The Committee may
provide for payment in Company Stock or cash, or a fixed combination of Company
Stock or cash, or the Committee may reserve the right to determine the manner of
payment at the time the Stock Appreciation Right is exercised. Shares of Company
Stock issued upon the exercise of a Stock Appreciation Right shall be valued at
their Fair Market Value on the date of exercise.

9.

Method of Exercise of Options and Stock Appreciation Rights.

(a)

Notice and Payment of Exercise Price. Options and Stock Appreciation Rights may
be exercised by the Participant by giving notice of the exercise to the Company,
stating the number of shares the Participant has elected to purchase under the
Option or the number of Stock Appreciation Rights the Participant has elected to
exercise. In the case of a purchase of shares under an Option, such notice shall
be effective only if accompanied by the exercise price in full paid in cash;
provided that, if the terms of an Option so permit, or the Committee by separate
action so permits, the Participant may (i) deliver shares of Company Stock
(valued at their Fair Market Value on the date of exercise) in satisfaction of
all or any part of the exercise price (either by actual delivery or
attestation), (ii) to the extent permitted under applicable laws and
regulations, deliver a properly executed exercise notice together with
irrevocable instructions to a broker to exercise all or part of the Option, sell
a sufficient number of shares of Company Stock to cover the exercise price and
other costs and expenses associated with such sale and deliver promptly the
amount necessary to pay the exercise price or (iii) request that the Company
reduce the number of shares of Company Stock issued by the number of shares
having an aggregate Fair Market Value equal to the aggregate exercise price. The
Participant shall not be entitled to make payment of the exercise price other
than in cash unless provisions for an alternative payment method are included in
the Participant’s stock option Award Agreement or are agreed to in writing by
the Company with the approval of the Committee prior to exercise of the Option.

(b)

Legend on Share Certificates. The Company may place on any certificate
representing Company Stock issued upon the exercise of an Option or a Stock
Appreciation Right any legend deemed desirable by the Company’s counsel to
comply with federal or state securities laws, and the Company may require of the
Participant a customary written indication of the Participant’s investment
intent.

(c)

Shareholder Rights.  Until the Participant has made any required payment,
including any Applicable Withholding Taxes, and has had issued to him a
certificate for the shares of Company Stock acquired, he shall possess no
shareholder rights with respect to the shares.

(d)

Withholding Taxes.  Each Participant shall agree as a condition of the exercise
of an Option or a Stock Appreciation Right to pay to the Company Applicable
Withholding Taxes, or make arrangements satisfactory to the Company regarding
the payment to the Company of such amounts. Until Applicable Withholding Taxes
have been paid or arrangements satisfactory to the Company have been made, no
stock certificate shall be issued upon the exercise of an Option or a Stock
Appreciation Right.

 

As an alternative to making a cash payment to the Company to satisfy Applicable
Withholding Taxes if the Option or Stock Appreciation Rights Award Agreement so
provides, or the Committee by separate action so provides, a Participant may
elect to (i) deliver shares of Company Stock, (ii) to the extent permitted under
applicable laws and regulations, deliver irrevocable instructions to a broker to
exercise all or part of the Option, sell a sufficient number of shares of
Company Stock to cover the Applicable Withholding Taxes and expenses associated
with such sale and deliver promptly the amount necessary to pay the Applicable
Withholding Taxes, or (iii) have the Company retain that number of shares of
Company Stock that would otherwise be issuable upon exercise having a Fair
Market Value that would satisfy all or a specified portion of the Applicable
Withholding Taxes. Any such election shall be made only in accordance with
procedures established by the Committee.

(e)

Compliance with Laws.  Notwithstanding anything herein to the contrary, if the
Company is subject to Section 16 of the Act, Options and Stock Appreciation
Rights shall always be granted and exercised in such a manner as to conform to
the provisions of Rule 16b-3.

10.

Nontransferability of Awards. Except as described below or as otherwise
determined by the Committee and set forth in a Participant’s Award Agreement, no
Award shall be transferable by a Participant except by will or the laws of
descent and distribution, and an Option or Stock Appreciation Right shall be
exercised only by a Participant during the lifetime of the
Participant.  Notwithstanding the foregoing, a Participant may assign or
transfer an Award that is not an Incentive Stock Option with the consent of the
Committee to a family member (or trust or other entity for the benefit of the
Participant or the Participant’s family members), without consideration (each
transferee thereof, a “Permitted Assignee”); provided that any such Permitted
Assignee shall be bound by and subject to all of the terms and conditions of the
Plan and transferred Award and shall execute an Award Agreement satisfactory to
the Company evidencing such obligations.  Notwithstanding the foregoing, a
Participant who transfers an Award, as well as the Participant’s transferee,
also shall remain bound by the terms and conditions of the Plan.

11.

Effective Date of the Plan. This Plan shall become effective on May 13, 2020,
subject to the approval of the holders of a majority of the shares present or
represented by proxy at a duly held meeting of shareholders of the Company on
such date.

12.

Termination and Amendment of Plan and Awards. 

(a)

Term of Plan.  If not sooner terminated by the Board pursuant to Section ‎12(b),
this Plan shall terminate when all shares of Company Stock reserved for issuance
hereunder have been issued.  If the term of this Plan extends beyond ten (10)
years from the Effective Date, no Incentive Stock Options may be granted after
such time unless the shareholders of the Company have approved an extension of
this Plan for such purpose. No Awards shall be granted under the Plan after its
termination.  If the Plan is terminated by the Board pursuant to Section 12(b),
then the authority of the Board and the Committee under this Section 12 and to
otherwise administer the Plan will extend beyond the date of this Plan’s
termination to the extent necessary to administer Awards outstanding on the date
of the Plan’s termination. In addition, termination of this Plan will not affect
the rights of Participants with respect to Awards previously granted to them,
and all unexpired Awards will continue in force and effect after termination of
this Plan except as they may lapse or be terminated by their own terms and
conditions.

(b)

Termination and Amendment of Plan.  The Board may, at any time, terminate the
Plan or amend the Plan in such respects as it shall deem advisable, subject to
the following limitations:

(i)

Shareholders must approve any amendment to the Plan to the extent the Company
determines that such approval is required by the Code,  Rule 16b-3, the listing
requirements of the Stock Exchange on which Company Stock is then traded, or any
other applicable law, including, but not limited to, an amendment that (i)
increases the total number of shares of Company Stock reserved for issuance
pursuant to Awards granted under the Plan (except pursuant to Section

 

‎13), (ii) expands the class of persons eligible to receive Awards, or (iii)
materially increases the benefits accruing to Participants under the Plan.

(ii)

A termination or amendment of the Plan shall not, without the consent of the
Participant, adversely affect a Participant’s rights under an Award previously
granted to such Participant, except that the Board may unilaterally amend the
Plan and Awards as it deems appropriate to ensure compliance with Rule 16b-3 and
other applicable law, and to cause Awards to meet the requirements of the Code,
including Code Sections 422 and 409A.

(c)

Amendment, Modification or Cancellation of Awards.  The Committee may modify,
amend, or cancel any Award, or waive any restrictions or conditions applicable
to any Award, subject to the following limitations:

(i)

Any modification or amendment that materially diminishes the rights of the
Participant, or the cancellation of an Award, shall be effective only if agreed
to by the Participant, except that the Committee need not obtain Participant
consent for the adjustment or cancellation of an Award pursuant to Section ‎13
or to the extent the Committee determines it necessary to comply with Rule 16b-3
or any other applicable law, the Code, or the listing requirements of the Stock
Exchange or market on which the Shares are then traded.

(ii)

Other than as provided in Section ‎13, outstanding Options or Stock Appreciation
Rights may not (A) be amended to reduce the exercise price or grant price of
such outstanding Options or Stock Appreciation Rights; (B) be cancelled in
exchange for Options or Stock Appreciation Rights with an exercise or grant
price that is less than the exercise price of the original Options or Stock
Appreciation Rights; or (C) be cancelled in exchange for cash or other
securities if the exercise price or grant price of such outstanding Option or
Stock Appreciation Right is greater than the Fair Market Value of a share of
Company Stock.

13.

Change in Capital Structure.

(a)

Adjustment of Shares.  In the event of a stock dividend, stock split or
combination of shares, recapitalization, merger in which the Company is the
surviving corporation, reorganization, reincorporation, consolidation, special
dividend, spin-off or other change in the Company’s capital stock without the
receipt of consideration by the Company (including, but not limited to, the
creation or issuance to shareholders generally of rights, options or warrants
for the purchase of common stock or preferred stock of the Company), or any
other event shall occur (which event, in the judgment of the Board or Committee,
necessitates an adjustment to prevent dilution or enlargement of the benefits or
potential benefits intended to be made available under this Plan), the number
and kind of shares of stock or securities of the Company to be subject to the
Plan and to Awards then outstanding or to be granted thereunder, the aggregate
and individual maximum number of shares or securities which may be delivered
under the Plan pursuant to Section 4, and the exercise price and other terms and
relevant provisions of Awards shall be appropriately adjusted by the Committee,
whose determination shall be binding on all persons; provided, however, that no
adjustment of an outstanding Option or Stock Appreciation Right may be made that
would create a deferral of income or a modification, extension or renewal of
such Option or Stock Appreciation Right under Code Section 409A except as
permitted thereby. If the adjustment would produce fractional shares with
respect to any Incentive Award, Restricted Award or unexercised Option or Stock
Appreciation Right, the Committee may adjust appropriately the number of shares
covered by the Award so as to eliminate the fractional shares.

Notwithstanding the foregoing, in the case of a stock dividend (other than a
stock dividend declared in lieu of an ordinary cash dividend) or subdivision or
combination of the shares

 

(including a reverse stock split), if no action is taken by the Committee,
adjustments contemplated by this subsection that are proportionate shall
nevertheless automatically be made as of the date of such stock dividend or
subdivision or combination of the shares; provided that the number of shares of
Company Stock subject to any Award payable or denominated in shares must always
be a whole number, and any fractional share resulting from such adjustment shall
be rounded down to the nearest whole share, unless the Committee determines
otherwise.

(b)

Change of Control.  If an Award Agreement specifies the treatment of an Award
upon a Change of Control, then such provisions in the Award Agreement shall
control, notwithstanding any contrary provision in this Plan.  If an Award
Agreement does not contain provisions regarding treatment of an Award upon a
Change of Control, then, unless provided otherwise by the Board or Committee
prior to a Change of Control, in the event of a Change of Control:

(i)

Each outstanding Option or Stock Appreciation Right shall become immediately and
fully vested and all Options and Stock Appreciations Rights shall be cancelled
as of the closing of the Change of Control in exchange for a cash payment equal
to the excess of the “Change in Control Price” (meaning the price paid or deemed
paid in the Change of Control transaction, as determined by the Committee) over
the exercise or grant price of such Awards;

(ii)

Outstanding Restricted Awards and Incentive Awards that are not then vested
shall vest assuming, if applicable, the Performance Goals were met at the higher
of (A) 100% of target or (B) the level of achievement of the Performance Goals
measured at the time of the Change of Control and assuming that the Performance
Goals would continue to be achieved at the same rate through the end of the
performance period; and

(iii)

Except as otherwise expressly provided in any agreement between a Participant
and the Company or one of its Affiliates, if the receipt of any payment by a
Participant under the circumstances described above would result in the payment
by the Participant of any excise tax provided for in Section 280G and Section
4999 of the Code, then the Committee may, in its discretion, reduce the amount
of such payment to the extent required to prevent the imposition of such excise
tax.

(c)

Participant Consent Not Required.  Any determination made or action taken under
this Section ‎13 by the Committee or Board shall be final and conclusive and may
be made or taken without the consent of any Participant.

14.

Administration of the Plan. The Plan shall be administered by the Committee,
which shall be the full Board or a committee appointed by the Board, consisting
of not less than two members of the Board. As of the Effective Date, the Board
appoints the Compensation and Management Development Committee of the Board to
be the Committee for purposes of the Plan. The Committee shall have general
authority to impose any limitation or condition upon an Award that the Committee
deems appropriate to achieve the objectives of the Award and the Plan and,
without limitation and in addition to powers set forth elsewhere in the Plan,
shall have the following specific authority:

(a)

Authority.  The Committee shall have the power and complete discretion to
determine (i) which eligible employees, directors and other Company Contributors
shall receive an Award and the nature of the Award, (ii) the number of shares of
Company Stock to be covered by each Award, (iii) whether Options shall be
Incentive Stock Options or Nonstatutory Stock Options, (iv) the Fair Market
Value of Company Stock, subject to Section ‎2(p), (v) the time or times when an
Award shall be granted, (vi) whether an Award shall become vested over a period
of time and/or upon the achievement of Performance Goals, and when it shall be
fully vested, (vii) when Options or Stock Appreciation Rights may be exercised,
(viii)  whether a Disability exists, subject to Section ‎2(o), (ix) the manner
in which payment will be made upon the exercise of Options or

 

Stock Appreciation Rights, (x) conditions relating to the length of time before
disposition of Company Stock received under an Award is permitted, (xi)  the
manner of payment of Applicable Withholding Taxes, (xii) the terms and
conditions applicable to Restricted Awards, (xiii) the terms and conditions on
which restrictions upon Restricted Awards shall lapse, (xiv) whether to
accelerate the time at which any or all restrictions with respect to Restricted
Awards will lapse or be removed, (xv) notice provisions relating to the sale of
Company Stock acquired under the Plan, and (xvi) any additional requirements
relating to Awards that the Committee deems appropriate.

The Committee may accelerate the vesting of an Award, or cause the lapse of
restrictions related to such Award, or deem an Award to be earned, in whole or
in part, in the event of the Participant’s death, Disability, retirement,
termination of employment, Change of Control, or any other event as determined
by the Committee in its sole discretion.

(b)

Administrative Rules.  The Committee may adopt rules and procedures for carrying
out the Plan. The interpretation and construction of any provision of the Plan
by the Committee shall be final and conclusive. The Committee may consult with
counsel, who may be counsel to the Company, and shall not incur any liability
for any action taken in good faith in reliance upon the advice of counsel.

(c)

Delegation to Subcommittee.  If a committee of the Board is appointed to serve
as the Committee, such Committee shall have, in connection with the
administration of the Plan, the powers possessed by the Board, including the
power to delegate a subcommittee of the administrative powers the Committee is
authorized to exercise, subject, however, to such resolutions, not inconsistent
with the provisions of the Plan, as may be adopted from time to time by the
Board.

(d)

Delegation to Officers.  To the extent permitted by applicable law, the
Committee may delegate to one or more Officers the authority to exercise the
Committee’s authority under the Plan, other than with respect to Participants
who are Officers.

(e)

Rule 16b-3.  As to Awards that that are authorized by the Committee and intended
to be exempt under Rule 16b-3 of the Exchange Act, the requirements of Rule
16b-3(d)(1) under the Exchange Act with respect to committee action also are
intended to be satisfied.  To the extent applicable, Committee members shall
meet the requirements of the rules and regulations of the Stock Exchange.

(f)

Indemnification. In addition to such other rights of indemnification as they may
have, the members of the Committee (or any subcommittee or Officer who is a
delegate thereof) shall be indemnified by the Company against the reasonable
expenses, including attorneys’ fees, actually and necessarily incurred in
connection with the defense of any action, suit or proceeding, or in connection
with any appeal therein, to which they or any of them may be a party by reason
of any action taken or failure to act under or in connection with the Plan or
any Award granted hereunder, and against all amounts paid by them in settlement
thereof (provided such settlement is approved by the Board) or paid by the Board
in satisfaction of a judgment in any such action, suit or proceeding, except in
relation to matters as to which it shall be determined in such action, suit or
proceeding that such Committee member has acted in bad faith; provided, however,
that within 60 days after receipt of notice of institution of any such action,
suit or proceeding, a Committee member shall offer the Company in writing the
opportunity, at its own cost, to handle and defend the same.

15.

Notice. All notices and other communications required or permitted to be given
under this Plan shall be in writing and shall be deemed to have been duly given
if delivered personally or mailed first class, postage prepaid, as follows:

(a)

If to the Company – at its principal business address to the attention of the
Secretary;

 

(b)

If to any Participant – at the last address of the Participant known to the
sender at the time the notice or other communication is sent.

In either event, notice may also be delivered via email as long as the email
account is one used in the regular course of business of the Participant or
Company representative.  In addition, notice may be provided in accordance with
such procedures adopted by the Committee, which may include notice provided via
a third party administrator platform. 

16.

Compliance with Code Section 409A.  

(a)

To the extent that amounts payable under this Plan are subject to Code Section
409A, the Plan and Awards are intended to comply with such Code Section 409A and
official guidance issued thereunder. Otherwise, the Plan and Awards are intended
to be exempt from Code Section 409A. Notwithstanding anything to the contrary,
the Plan and Awards shall be interpreted, operated and administered in a manner
consistent with these intentions.

(b)

For purposes of the Plan, all references to “employment termination,”
“termination from employment,” “termination from service,” “separation from
service” or like phrases are intended to constitute a “separation from service”
as defined by Code Section 409A.

(c)

Notwithstanding anything in the Plan to the contrary, if a Participant is a
specified employee (within the meaning of the default provisions for determining
specified employees under Section 409A of the Code) with respect to the Company
at the time of the Participant’s employment termination or separation from
service, all payments that are not then exempt from Code Section 409A, which are
payable as a result of such employment termination or separation from service,
and would have been due during the six-month period following the Participant’s
employment termination or separation from service shall be aggregated and paid
on the date that is six months and one day after the Participant’s employment
termination or separation from service (or, if earlier, as soon as practicable
after the date of the Participant’s death).

17.

Clawback. Notwithstanding any other provisions in this Plan, all Awards shall be
subject to recovery under (a) any law, government regulation or Stock Exchange
listing requirement, and (b) any recoupment or clawback policy adopted by the
Board.  Any amendment to such clawback policy after the date an Award is granted
shall be applicable to such Award without the need for Participant consent. 

18.

Miscellaneous.  

(a)

No Shareholder Rights. No Participant shall be deemed to be the holder of, or to
have any of the rights of a holder with respect to, any shares of Company Stock
subject to an Award unless otherwise stated herein or until such Participation
has satisfied all requirements under the terms of the Award.

 

(b)

No Guarantee of Tax Treatment.  Notwithstanding any provisions of the Plan, the
Company does not guarantee to any Participant that (i) any Award intended to be
exempt from Code Section 409A shall be so exempt, (ii) any Award intended to
comply with Code Section 409A or Code Section 422 shall so comply, or (iii) any
Award shall otherwise receive a specific tax treatment under any other
applicable tax law, nor in any such case will the Company or any Parent or
Subsidiary indemnify, defend or hold harmless any individual with respect to the
tax consequences of any Award. 

(c)

Governing Law. The terms of the Plan shall be governed by the laws of the State
of Delaware, without regard to conflict of law provisions at any jurisdiction.

(d)

Limitations on Actions and Venue.  Any legal action or proceeding with respect
to this Plan, any Award or any Award Agreement, must be brought within one (1)
year (365 days) after the day

 

the complaining party first knew or should have known of the events giving rise
to the complaint, and the exclusive jurisdiction, forum, and venue with respect
to any such legal action or proceeding shall be the state and federal courts, as
applicable, located in Detroit, Michigan.   

(e)

Construction.  Whenever any words are used herein in the masculine, they shall
be construed as though they were used in the feminine in all cases where they
would so apply; and wherever any words are used in the singular or plural, they
shall be construed as though they were used in the plural or singular, as the
case may be, in all cases where they would so apply.  Titles of sections are for
general information only, and this Plan is not to be construed with reference to
such titles.

(f)

Requirements of Law and Securities Exchange.  The granting of Awards and the
issuance of Company Stock in connection with an Award are subject to all
applicable laws, rules and regulations and to such approvals by any governmental
agencies or Stock Exchanges or markets as may be required. Notwithstanding any
other provision of this Plan or any Award agreement, the Company has no
liability to deliver any Company Stock under this Plan or make any payment
unless such delivery or payment would comply with all applicable laws and the
applicable requirements of any Stock Exchange or similar entity, and unless and
until the Participant has taken all actions required by the Company in
connection therewith.  The Company may impose such restrictions on any Company
Stock issued under the Plan as the Company determines necessary or desirable to
comply with all applicable laws, rules and regulations or the requirements of
any Stock Exchange.

(g)

No Fractional Shares.  No fractional Shares or other securities may be issued or
delivered pursuant to this Plan.  If, but for this provision, fractional Shares
would be issuable pursuant to an Award, then such fractional Share shall be
canceled without payment thereunder.  Notwithstanding the foregoing, the
Committee may alternatively decide, in its sole discretion, to cause such
fractional Shares to be rounded up to the nearest whole Share or for a cash
payment to be made equal to the Fair Market Value of such fractional Share.

(h)

Unfunded Plan.  This Plan is unfunded and does not create, and should not be
construed to create, a trust or separate fund with respect to this Plan’s
benefits. This Plan does not establish any fiduciary relationship between the
Company and any Participant or other person. To the extent any person holds any
rights by virtue of an Award granted under this Plan, such rights are no greater
than the rights of the Company’s general unsecured creditors.  Neither the
Company nor any Subsidiary will be required to segregate any assets that may at
any time be represented by Awards granted pursuant to the Plan.

(i)

Severability.  If any provision of this Plan or any Award Agreement (i) is or
becomes or is deemed to be invalid, illegal or unenforceable in any
jurisdiction, or as to any person or Award, or (ii) would disqualify this Plan,
any Award Agreement or any Award under any law the Committee deems applicable,
then such provision should be construed or deemed amended to conform to
applicable laws, or if it cannot be so construed or deemed amended without, in
the determination of the Committee, materially altering the intent of this Plan,
Award Agreement or Award, then such provision should be stricken as to such
jurisdiction, person or Award, and the remainder of this Plan, such Award
Agreement and such Award will remain in full force and effect.

(j)

Manner of Action. Board and Committee actions and authorizations with respect to
the Plan and Awards granted thereunder are not required to take any specific
form.  For example, and without limiting the generality of the foregoing, any
action or authorization by the Board or the Committee that is not described as
an amendment, but that would be inconsistent with the Plan or an Award agreement
as then in effect, shall be given the same effect as a formal amendment thereto
(provided that such amendment is permitted by Section ‎12).

IN WITNESS HEREOF, this instrument has been executed as of the 13th day of May,
2020.

 

 

 

 

 

PENSKE AUTOMOTIVE GROUP, INC.

 

 

By:

 

/s/ Claude H. Denker, III

 

 

Claude H. Denker, III, Executive Vice President, Human Resources