Pep Boys 2006 Annual Report Download - page 31

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Employment Agreements With Named Executive Officers
Interim CEO Agreement. We had a letter agreement with Mr. Leonard, which provided for a monthly salary of
$83,333 during his term as interim CEO (July 18, 2006 – March 25, 2007). Mr. Leonard did not receive or
participate in any of the Company’s welfare, retirement or other benefits plans or receive any other perquisites.
While Mr. Leonard served as interim CEO, he did not receive his customary cash consideration on account of his
service on the Board, but did receive his customary equity grants under the Company’s 1999 Stock Incentive Plan.
Change of Control Agreements. We have agreements with Messrs. Smith, Bacon and Page that become
effective upon a change of control of Pep Boys. Following a change of 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 of 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 of 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 of control. Upon a change of control, all outstanding but unvested
stock options and RSUs held by our all of our associates (including the named executive officers) vests and
becomes fully exercisable. For the purposes of these agreements, a change of control shall be deemed to have taken
place if:
Ɣincumbent directors (those in place on, or approved by two-thirds of those in place on, the date of the
execution of the agreements) cease to constitute a majority of our Board
Ɣany person becomes the beneficial owner of 20% or more of our voting securities
Ɣthe consummation of business combination transaction, unless immediately thereafter (1) more than 50% of
the voting power of the resulting entity is represented by our shareholders immediately prior to such
transaction, (2) no person is the beneficial owner of more than 20% of the resulting entity’s voting securities
and (3) at least a majority of the directors of the resulting entity were incumbent directors
Ɣa sale of all or substantially all of our assets
Ɣthe approval of a complete liquidation or dissolution of Pep Boys; or
Ɣsuch other events as the Board may designate.
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.
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. 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 2, 2008, 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.