Pep Boys 2007 Annual Report Download - page 34

26
Employment Agreements With Named Executive Officers
President & Chief Executive Officer. We have an Employment Agreement with Mr. Rachor for a three-year
term expiring on March 26, 2010 that outlines Mr. Rachor’s compensation package discussed above and provides
him with a severance payment equal to two year’s base salary and the accelerating vesting of his SERP balance
upon termination by the Company without cause prior to March 26, 2010.
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. Rachor, Odell, Cirelli and Webb 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:
1 incumbent 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
1 any person becomes the beneficial owner of 20% or more of our voting securities
1 the 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
1 a sale of all or substantially all of our assets
1 the approval of a complete liquidation or dissolution of Pep Boys; or
1 such 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. Odell, Cirelli, Webb and Yanowitz has agreed to
customary covenants against competition during their employment and for one year thereafter; provided, that Mr.
Odell’s severance payment will be equal to 18-months’ base salary if he is terminated during his first 18 months of
employment.
Executive Officer Transition. On May 24, 2008, Mr. Odell was appointed Interim Chief Executive Officer. In
connection with such appointment, the sole change to Mr. Odell’s compensation was a $20,000 monthly increase to
his base salary. Mr. Odell succeeds Mr. Rachor, who resigned on April 23, 2008. Mr. Rachor was not entitled to
any additional compensation (aside from his salary and benefits through his resignation date) in connection with his
Proxy