Pep Boys 2005 Annual Report Download - page 75

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EMPLOYMENT AGREEMENTS WITH THE NAMED EXECUTIVE OFFICERS
Change in Control Agreements. We have agreements with Messrs. Smith, Bacon and Page that become effective upon
a change in control of Pep Boys. On February 9, 2006 we entered into such an agreement with Mr. Stevenson which replaced
his employment agreement that was scheduled to expire on April 28, 2006. Following a change in control, these employment
agreements become effective for two years and provide these executives with positions and responsibilities, base and incentive
compensation and benefits equal or greater to those provided immediately prior to the change in control. In addition, we are
obligated to pay any excise tax imposed by Section 4999 of the Internal Revenue Code (a parachute payment excise tax) on a
change in control payment made to a named executive officer. A trust agreement has been established to better assure the
named executive officers of the satisfaction of Pep Boys’ obligations under their employment agreements following a change
in control.
We also have a Change of Control Agreement with Mr. Yanowitz that is substantially similar to those entered into by the
Company’s other executive officers, except that (i) it provides for a payment equal to two years’ salary, bonus and benefits, if
Mr. Yanowitz provides three-months of transition services following a change of control, and (ii) the definition of change of
control thereunder has been expanded to include a sale, discontinuance or closure of a material portion of the Company’s
assets and those business combination transactions where the Company’s shareholders own less than 75% of the equity of the
resulting entity. The Company has also agreed to pay Mr. Yanowitz a one-time cash bonus of $340,000 upon the earlier of
September 1, 2006 or the consummation of a strategic transaction.
Non-Competition Agreements. In exchange for a severance payment equal to one year’s base salary upon the termination
of their employment without cause, each of Messrs. Stevenson, Bacon and Yanowitz has agreed to customary covenants
against competition during their employment and for one year thereafter. In exchange for a severance payment equal to one
and one-half years’ base salary upon the termination of his employment without cause or his resignation effective February 3,
2007, Mr. Page has agreed to customary covenants against competition during his employment and for eighteen months
thereafter. In exchange for a severance payment equal to two years’ base salary and the accelerated vesting of all then
outstanding Company equity upon the termination of his employment without cause, Mr. Smith has agreed to customary
covenants against competition during his employment and for two years thereafter.
STOCK OPTION GRANTS IN LAST FISCAL YEAR
The following table shows information about stock options granted to the named executive officers during fiscal 2005.
Individual Grants
Number of
Securities
Underlying
Options
% of Total
Options
Granted to
Employees in
Fiscal Year
Exercise or
Base Price Expiration
Potential Realized Value
at Assumed Annual Rates
of Stock Price Appreciation
for Option Term
Name Granted (#)(a) (%)(b) ($/Share) Date 5% ($) 10% ($)
Lawrence N. Stevenson 130,000 45.0 17.54 02/25/12 928,270 2,163,265
Hal Smith 20,000 6.9 17.54 02/25/12 142,811 332,810
Mark S. Bacon 50,000 17.3 17.84 02/28/12 363,134 846,256
Mark L. Page 2,500 0.9 17.54 02/25/12 17,851 41,601
Harry F. Yanowitz 10,000 3.5 17.54 02/25/12 71,405 166,405
(a) The stock options were granted at a price equal to the fair market value on the date of grant with 20% exercisable
immediately and an additional 20% exercisable on each of the next four anniversaries of the grant date.
(b) In fiscal 2005, options to purchase 288,675 shares of Pep Boys Stock were granted to 34 employees.