<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE
SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S)240.14a-11(c) or (S)240.14a-12
The Pep Boys - Manny, Moe & Jack
------------------------------------------------
(Name of Registrant as Specified In Its Charter)
The Pep Boys - Manny, Moe & Jack
------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[X] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2).
[_] $500 per each party to the controversy pursuant to Exchange Act Rule 14a-
6(i)(3).
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
---------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
---------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
---------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
---------------------------------------------------------------
[_] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amounts Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE>
THE PEP BOYS -- MANNY, MOE & JACK
3111 WEST ALLEGHENY AVENUE
PHILADELPHIA, PENNSYLVANIA 19132
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
----------------
TO BE HELD ON TUESDAY, MAY 31, 1994 AT 10:00 A.M.
AT
THE SHERATON VALLEY FORGE HOTEL
N. GULPH ROAD AND FIRST AVENUE
KING OF PRUSSIA, PA 19406
----------------
To the Shareholders of The Pep Boys -- Manny, Moe & Jack:
The Annual Meeting of Shareholders of The Pep Boys -- Manny, Moe & Jack (the
"Company") will be held on Tuesday, May 31, 1994 at 10:00 a.m. at The Sheraton
Valley Forge Hotel, N. Gulph Road and First Avenue, King of Prussia, PA 19406,
for the following purposes:
1. To elect three Class II Directors to hold office as specified in the
proxy statement.
2. To ratify and approve the Company's bonus compensation plan, as
required to allow compensation paid to certain executive officers to
qualify for exemption from the deductibility limitations of Section
162(m) of the Internal Revenue Code of 1986, as amended.
3. To approve the appointment of independent auditors.
4. To transact such other business as may properly come before the
meeting.
The close of business on Friday, April 8, 1994 has been fixed as the record
date for the meeting. Only shareholders of record as of that date will be
entitled to notice of and to vote at said meeting and any adjournment or
postponement thereof.
The accompanying form of proxy is solicited by the Board of Directors of the
Company. Reference is made to the attached proxy statement for further
information with respect to the business to be transacted at the meeting.
The Board of Directors urges you to date, sign and return promptly the
accompanying form of proxy to give voting instructions with respect to your
shares of Common Stock. You are cordially invited to attend the meeting in
person. The return of the accompanying form of proxy will not affect your right
to vote in person if you do attend the meeting.
Frederick A. Stampone
Senior Vice President, Chief
Administrative Officer and Secretary
April 22, 1994
<PAGE>
THE PEP BOYS -- MANNY, MOE & JACK
3111 WEST ALLEGHENY AVENUE
PHILADELPHIA, PENNSYLVANIA 19132
----------------
PROXY STATEMENT
----------------
ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON TUESDAY, MAY 31, 1994
----------------
GENERAL
This proxy statement is furnished in connection with the solicitation of
proxies by the Board of Directors of The Pep Boys -- Manny, Moe & Jack (the
"Company") for use at the Company's Annual Meeting of Shareholders (the
"meeting") to be held on Tuesday, May 31, 1994 at 10:00 a.m. at The Sheraton
Valley Forge Hotel, N. Gulph Road and First Avenue, King of Prussia, PA 19406,
for the purposes set forth in the foregoing Notice. This proxy statement, the
foregoing Notice and the enclosed proxy are being sent to shareholders on or
about April 22, 1994.
The Company does not intend to bring any matters before the meeting except
those indicated in the Notice and does not know of any matter which anyone else
proposes to present for action at the meeting. If any other matters properly
come before the meeting, however, the persons named in the accompanying form of
proxy, or their duly constituted substitutes acting at the meeting, will be
deemed authorized to vote or otherwise to act thereon in accordance with their
judgment on such matters. Discretionary authority to cumulate votes is also
being solicited.
If the enclosed proxy is properly executed and returned prior to voting at
the meeting, the shares represented thereby will be voted in accordance with
the instructions marked thereon. In the absence of instructions, the shares
will be voted "For" the nominees of the Board of Directors in the election of
directors, subject to the discretion of the proxies to cumulate the votes in
accordance with their judgment, "For" the proposal to ratify and approve the
Company's bonus compensation plan, and "For" the proposal to approve the
appointment of independent auditors. Any proxy may be revoked at any time prior
to its exercise by notifying the Secretary of the Company in writing, by
delivering a duly authorized proxy bearing a later date or by attending the
meeting and voting in person. Proxies marked "Abstain" are included in
determining a quorum, but broker proxies which have not voted on a particular
matter are not included in determining a quorum with respect to that matter.
Abstentions and broker nonvotes will not be considered votes cast.
OUTSTANDING SHARES, VOTING RIGHTS
AND SHAREHOLDINGS OF CERTAIN PERSONS
OUTSTANDING SHARES AND VOTING RIGHTS
At the close of business on Friday, April 8, 1994, the record date for the
meeting, there were 59,138,455 outstanding shares of the Company's Common Stock
("Common Stock"), the only class of voting securities outstanding. The presence
at the meeting, in person or by proxy, of a majority of such outstanding shares
will constitute a quorum at the meeting. The record holders of Common Stock on
the record date will be entitled to one vote per share on all matters (other
than the election of Directors) voted upon at the meeting and will be entitled
to vote cumulatively in the election of Directors. Cumulative voting entitles
each shareholder to a number of votes equal to the number of shares owned by
the shareholder on the record date multiplied by the number of directors to be
<PAGE>
elected, and the shareholder may cast all of his votes for one nominee for
director or distribute the votes among two or more nominees.
SHARE OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information respecting the equity
securities of the Company beneficially owned at the close of business on April
8, 1994 by each holder of 5% or more of Common Stock, by each director and
nominee for director of the Company, by each executive officer of the Company
and by all executive officers and directors of the Company as a group. In
accordance with Rule 13d-3 of the Securities Exchange Act of 1934, as amended,
shares are deemed to be "beneficially owned" by a person, whether or not he
has any economic interest in the shares, if he has or shares the power to vote
or dispose of the shares.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF
NAME OF BENEFICIAL OWNERSHIP PERCENT OF
BENEFICIAL OWNER OF COMMON STOCK CLASS
---------------- -------------------- ----------
<S> <C> <C>
Benjamin Strauss 1,340,278 /(1)/
1,349,310 /(1a)/
---------
2,689,588 4.3%
Lester Rosenfeld 1,224,987 /(2)/
1,115,405 /(2a)/
---------
2,340,392 3.8%
Mitchell G. Leibovitz 1,450,014 /(3)/
546,720 /(3a)/
---------
1,996,734 3.2%
Michael J. Holden 259,965 /(4)/
546,720 /(3a)/
---------
806,685 1.3%
Frederick A. Stampone 190,524 /(5)/ +
Wendel H. Province 138,752 /(6)/ +
Mark L. Page 67,141 /(7)/ +
Bernard J. Korman 36,000 /(8)/ +
Lennox K. Black 36,000 /(8)/ +
David V. Wachs 16,700 /(8)/ +
Pemberton Hutchinson 16,500 /(9)/ +
Myles H. Tanenbaum 15,000 /(10)/ +
J. Richard Leaman, Jr. 11,788 /(11)/ +
Walter G. Arader 5,000 /(12)/ +
Total of all Executive Officers and
Directors as a Group (14 Persons) 7,820,084 /(13)/ 12.6%
</TABLE>
- ------------
+ Represents less than 1%.
(1) This includes 66,384 shares owned by a trust in which Mr. Strauss has a
beneficial interest and 4,125 shares issuable pursuant to non-qualified
stock options exercisable within 60 days.
(1a) These shares are owned by The Strauss Foundation, a non-profit charitable
foundation, of which Mr. Strauss is a co-trustee.
2
<PAGE>
(2) This includes 50,976 shares owned by Mr. Rosenfeld's wife, 45,000 shares
owned by a trust in which Mr. Rosenfeld has a beneficial interest and
6,000 shares issuable pursuant to non-qualified stock options exercisable
within 60 days.
(2a) These shares include 624,166 shares owned by the Emanuel Rosenfeld
Foundation, a non-profit charitable foundation of which Mr. Rosenfeld is
a co-trustee, and 491,239 shares owned by three trusts of which Mr.
Rosenfeld is a co-trustee.
(3) This includes 76,545 shares owned by or for the benefit of Mr. Leibovitz'
children, 2,213 shares owned by Mr. Leibovitz' wife and 1,115,740 shares
issuable pursuant to incentive and non-qualified stock options exercisable
within 60 days.
(3a) These shares are owned by trusts for the Company's 401(k) savings plan
and defined benefit pension plan, of which Messrs. Leibovitz and Holden
are co-trustees.
(4) This includes 241,000 shares issuable pursuant to incentive and non-
qualified stock options exercisable within 60 days.
(5) This includes 186,200 shares issuable pursuant to incentive and non-
qualified stock options exercisable within 60 days, and 31 shares owned by
Mr. Stampone's minor son.
(6) This includes 137,000 shares issuable pursuant to non-qualified stock
options exercisable within 60 days.
(7) This includes 66,040 shares issuable pursuant to incentive and non-
qualified stock options exercisable within 60 days.
(8) This represents shares issuable pursuant to non-qualified stock options
exercisable within 60 days.
(9) This includes 15,000 shares issuable pursuant to non-qualified stock
options exercisable within 60 days.
(10) This includes 6,000 shares issuable pursuant to non-qualified stock
options exercisable within 60 days.
(11) This includes 10,788 shares issuable pursuant to non-qualified stock
options exercisable within 60 days.
(12) This includes 4,500 shares issuable pursuant to non-qualified stock
options exercisable within 60 days.
(13) This includes 1,881,093 shares issuable pursuant to incentive and non-
qualified stock options exercisable within 60 days granted to all
executive officers and directors.
ELECTION OF DIRECTORS
NOMINEES FOR ELECTION
At the meeting, the shareholders will elect three Class II directors to hold
office, subject to the provisions of the Company's By-laws, until the Annual
Meeting of Shareholders in 1997 and until their respective successors shall
have been duly elected and qualified. The Company's Board of Directors is
presently comprised of ten directors. Walter G. Arader, currently a Class II
director of the Company, will be retiring from the Board of Directors as of
the meeting. Effective upon the conclusion of the meeting, the Board of
Directors will be comprised of nine directors. The Board of Directors is
divided into three classes serving staggered three-year terms, the term of one
class of directors to expire each year. The term of the present Class II
directors expires at the meeting. Unless contrary instructions are given, the
persons named in the enclosed proxy or their substitutes will vote for the
election of the nominees named below, reserving the right to cumulate votes
according to their judgment. The Board of Directors believes that all of the
nominees are willing to serve as directors. However, if any nominee at the
time of election is unable to serve or is otherwise unavailable for election,
and as a result other nominees are designated by the Board of Directors, the
persons named in the enclosed proxy or their substitutes intend to vote for
the election of such designated nominees. The three nominees for director
receiving a plurality of the votes cast will be elected.
The nominees for election as Class II directors to serve until the Annual
Meeting of Shareholders in 1997 and the directors whose terms of office
continue after the meeting, together with certain information about them, are
as follows:
<TABLE>
<CAPTION>
HAS
BEEN A
DIRECTOR TERM PRESENT POSITION
NAME AGE SINCE EXPIRES WITH COMPANY
---- --- -------- ------- ----------------
<S> <C> <C> <C> <C>
Class II Directors
Bernard J. Korman........ 62 1983 1994 Director
Pemberton Hutchinson..... 63 1990 1994 Director
J. Richard Leaman, Jr.... 59 1991 1994 Director
Class I Directors
Benjamin Strauss......... 57 1970 1995 Director
David V. Wachs........... 67 1985 1995 Director
Myles H. Tanenbaum....... 64 1990 1995 Director
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
HAS
BEEN A
DIRECTOR TERM PRESENT POSITION
NAME AGE SINCE EXPIRES WITH COMPANY
---- --- -------- ------- ----------------
<S> <C> <C> <C> <C>
Class III Directors
Mitchell G. Leibovitz..... 48 1985 1996 Director, Chairman, CEO
and President
Lester Rosenfeld.......... 68 1959 1996 Director
Lennox K. Black........... 64 1987 1996 Director
</TABLE>
OCCUPATIONS AND OTHER DIRECTORSHIPS HELD BY DIRECTORS AND NOMINEES
Mitchell G. Leibovitz has been an executive officer of the Company for more
than the last five years.
Lester Rosenfeld is retired. He was employed as an executive officer of the
Company until December 31, 1981, and served as a part-time consultant to the
Company for 10 years thereafter.
Lennox K. Black is the Chairman of the Board of Directors and Chief Executive
Officer of Teleflex Incorporated, a diversified technical company active in
aerospace, automotive, medical and industrial markets, the stock of which is
traded on the American Stock Exchange. Mr. Black is also Chairman of the Board
and Chief Executive Officer of Penn Virginia Corporation, and is a director of
Quaker Chemical Corporation, Westmoreland Coal Company and Envirite
Corporation.
Bernard J. Korman is President, Chief Executive Officer and a director of
MEDIQ, Inc., a health services company, the stock of which is traded on the
American Stock Exchange. Mr. Korman is also a director of The New American High
Income Fund Inc., NutraMax Products, Inc., PCI Services, Inc., Today's Man,
Inc., Omega Healthcare Investors, Inc. and Mental Health Management, Inc.
Pemberton Hutchinson is Chairman of the Board of Directors of Westmoreland
Coal Company, a coal mining company, the stock of which is traded on the New
York Stock Exchange. Mr. Hutchinson is also a director of Teleflex Incorporated
and Mellon Bank Corporation.
J. Richard Leaman, Jr. is Vice Chairman and a director of Scott Paper
Company, which manufactures and distributes consumer and commercial paper
products and personal care and cleaning products and he is President of
S.D.Warren Company, a subsidiary of Scott Paper Company that produces coated
printing and publishing paper. The stock of Scott Paper Company is traded on
the New York Stock Exchange. Mr. Leaman is also a director of Church & Dwight
Co., Inc.
Benjamin Strauss was an executive officer of the Company for many years until
his retirement on February 1, 1992. He now serves as a part-time consultant to
the Company.
David V. Wachs is Chairman of the Board of Directors of Charming Shoppes,
Inc., a retailer of women's clothing, the stock of which is traded on the
NASDAQ National Market System. Mr. Wachs is also a director of Developers
Diversified Realty Corporation.
Myles H. Tanenbaum is the President and a director of EQK Green Acres Trust,
a New York Stock Exchange listed real estate investment trust. Mr. Tanenbaum is
also a Trustee of Universal Health Realty Income Trust, a New York Stock
Exchange listed real estate investment trust. In addition, he is Chairman of
Arbor Enterprises, owner and operator of a chain of shared office suites.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors held four regularly scheduled meetings during the last
fiscal year.
4
<PAGE>
The Board of Directors has an Audit Committee, a Compensation Committee and a
Nominating Committee.
The directors who are members of the Compensation Committee are Messrs.
Arader, Black, Korman and Tanenbaum. Mr. Arader will be retiring from the Board
and the Compensation Committee as of the meeting. The Compensation Committee,
which held one meeting during the last fiscal year, recommends the compensation
for all officers of the Company.
The directors who are members of the Nominating Committee are Messrs.
Hutchinson, Strauss, and Wachs. The Nominating Committee, which held one
meeting during the last fiscal year, makes recommendations to the full Board
concerning the qualifications and selection of candidates for election to the
Board. The Committee will consider nominees recommended by shareholders. Such
recommendations should be sent in writing to the Secretary of the Company, 3111
West Allegheny Avenue, Philadelphia, PA 19132, stating in detail the
qualifications of such persons for nomination.
The directors who are members of the Audit Committee are Messrs. Hutchinson,
Leaman, and Rosenfeld. The Audit Committee, which held three meetings during
the last fiscal year, reviews the audited financial statements of the Company
and makes recommendations to the full Board on matters concerning the Company's
audits.
In accordance with the Company's By-laws, a shareholder may be entitled to
nominate one or more persons for election as a director at a meeting of the
shareholders if the shareholder gives timely notice of such intention in
writing to the President of the Company. To be timely, the shareholder's notice
must be delivered personally to or mailed and received by the Company at the
executive offices of the Company not less than 50 days nor more than 75 days
prior to the annual meeting, except that in the event that less than 65 days
notice or prior public disclosure of the date of the meeting is given or made
to shareholders, the shareholder's notice must be received not later than the
close of business on the 10th day following the day on which such public
disclosure was made. In addition, the shareholder's notice must set forth the
names and addresses of the shareholder making the nomination and of the
proposed nominees, a representation that said shareholder intends to appear in
person or by proxy at the meeting to nominate the proposed nominees, the
proposed nominees' principal occupation(s) for the past 5 years and a written
consent of each proposed nominee to serve as a director of the Company if so
elected. The presiding officer of the meeting may declare invalid any
nomination not made in compliance with the foregoing procedure.
COMPENSATION OF DIRECTORS
Non-management directors each were entitled to receive directors' fees at the
rate of $15,000 per annum during fiscal year 1993, plus $2,500 per annum for
each Committee of the Board on which such director served. Under a deferred
compensation plan, directors' fees may be deferred in whole or in part at the
election of the director. Compensation so deferred may be deemed to be invested
in shares of Common Stock determined by reference to the market price on the
date of credit, if so designated by the director. Amounts deemed invested in
shares are credited with dividends; other amounts accrue interest at the prime
rate charged by the Company's principal lender.
Under the 1990 Stock Incentive Plan, upon becoming a non-management director,
each director is granted an option to purchase, at fair market value on the
date of the grant, a number of shares of Common Stock which is equal to
$150,000 divided by the fair market value of the shares on the date of grant.
Thereafter, on the fifth anniversary of the most recent grant of an option to
that non-management director, he will be granted an option to purchase, at fair
market value on the date of the grant, that number of shares which is equal to
$100,000 divided by the fair market value of the shares on the date of the
grant. Options granted to non-management directors are exercisable in
cumulative installments, options for one-fifth of the number of Shares granted
being immediately
5
<PAGE>
exercisable and options for an additional one-fifth of the number of Shares
granted becoming exercisable on each of the next four anniversary dates.
Benjamin Strauss, an executive officer of the Company for many years,
entered into a consulting and retirement agreement as of February 2, 1992
pursuant to which Mr. Strauss received $122,500 in fiscal 1993 and will
receive that amount in each of the three following years, plus certain
additional benefits payable for a ten year period. The amounts payable to Mr.
Strauss are in addition to the fees and options to which Mr. Strauss is
entitled as a non-management director of the Company.
EXECUTIVE COMPENSATION
The following table sets forth, for the Company's last three fiscal years,
the cash compensation paid by the Company, as well as certain other
compensation paid or accrued for those years, to the Company's Chief Executive
Officer and each of the Company's other executive officers:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
-------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
------------------- ----------- ------------ ALL OTHER
NAME AND FISCAL LTIP PAYOUTS COMPENSATION
PRINCIPAL POSITION YEAR SALARY ($) BONUS($) OPTIONS (#) ($) ($)(B)(C)
------------------ ------ ---------- -------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Mitchell G. Leibovitz... 1993 $620,193 $ 93,750 -- -- $4,497
Chairman, CEO 1992 600,000 230,000 300,000(a) $4,150,000(a) 4,364
& President 1991 596,154 -- -- -- --
Wendel H. Province...... 1993 264,616 40,125 15,000 -- 4,497
Senior Vice President & 1992 252,500 96,792 35,000 -- 4,364
Chief Operating Officer 1991 223,750 -- 75,000 -- --
Michael J. Holden....... 1993 262,597 39,750 -- -- 4,497
Senior Vice President & 1992 252,500 96,792 -- -- 4,364
Chief Financial Officer 1991 250,577 -- -- -- --
Frederick A. Stampone... 1993 198,078 30,000 -- -- 4,497
Senior Vice President & 1992 190,000 72,833 -- -- 4,364
Chief Administrative 1991 188,077 -- -- -- --
Officer
Mark L. Page............ 1993 147,346 22,500 50,000 -- 4,497
Senior Vice President-- 1992 111,308 43,696 25,000 -- 3,307
Store Operations 1991 99,039 -- 31,300 -- --
</TABLE>
- ------------
(a) This amount represents compensation resulting from the exercise in full by
Mr. Leibovitz of 300,000 performance units granted in June, 1986 in
connection with his election as President of the Company. The action was
taken in view of federal tax legislation which limits the amount of
compensation deductible by the Company. The award entitled Mr. Leibovitz
to the amount by which 300,000 shares of the Company's stock increased in
value from the closing price of the stock ($9.04) on the date of his
election until the date of exercise. In December, 1992, the Board of
Directors, upon recommendation of the Compensation Committee, authorized
the accelerated exercise of the portion of the award not yet exercisable,
to enable Mr. Leibovitz to fully realize the value of the award in 1992,
thereby securing the full deductibility of such compensation by the
Company. In order to provide Mr. Leibovitz the same stake in continued
stock price appreciation he would have had if he deferred realization of
the performance units until their expiration in 1996, Mr. Leibovitz was
granted options to purchase 300,000 shares of the Company's stock at a
price equal to the closing price on the date that the performance units
were exercised. These options expire on December 8, 1996, the date on
which the performance units would have last been exercisable.
(b) This represents the amount contributed by the Company in fiscal years 1993
and 1992 to each executive officer's account in the Company's 401(k)
Savings Plan.
(c) In accordance with the transitional provisions applicable to the revised
rules on executive officer and director compensation disclosure adopted by
the Securities and Exchange Commission, amounts of All Other Compensation
are excluded for fiscal year 1991.
6
<PAGE>
COMPENSATION ARRANGEMENTS
During fiscal 1988, 1989 and 1993, the Company entered into agreements with
Messrs. Leibovitz, Holden, Stampone, Province and Page, executive officers of
the Company, which generally become effective upon a "change in control" of the
Company. A "change in control" shall be deemed to have taken place if: (i) any
person, including a "group" as such term is used in Section 13(d)(3) of the
Securities Exchange Act of 1934, becomes (other than as a result of a purchase
from the Company) the beneficial owner of shares of the Company having 20% or
more of the total number of votes that may be cast for the election of
directors of the Company (excluding shares of the Company owned by such person
prior to the date of this Agreement), and such beneficial ownership continues
for five consecutive days or (ii) within a period of two consecutive years, as
the result of, or in connection with, any cash tender or exchange offer (other
than by the Company), merger or other business combination, sale of assets or
contested election or any combination of the foregoing transactions, the
persons who were directors of the Company prior to such event shall cease for
any reason to constitute at least a majority of the Board of Directors of the
Company or any successor. The employment agreements will become effective for a
term of three years in the case of Mr. Leibovitz and two years with respect to
each of the other executives. During the term of the agreement, each of the
executives would be entitled to compensation at a rate not less than his
compensation immediately prior to the agreement becoming effective, to benefits
comparable to those available prior to the change in control and to a position
with authority, status and responsibilities comparable in all material respects
to those held previously. In the event that the executive's position is changed
after the agreement becomes effective, he has the right to terminate the
agreement and receive a lump sum payment equal to the remainder of his salary,
and he and his family are to receive the benefits to which he is entitled for
the remaining term of the agreement or a payment equal to the value of those
benefits. A trust agreement has been established to better assure executive
officers of payment under these agreements in the event that a change of
control of the Company should occur.
During fiscal 1990 the Company made advances to Mr. Province, Senior Vice
President & Chief Operating Officer, for use in connection with his relocation
to Philadelphia. The Company held a promissory note from Mr. Province for the
$53,200 balance of indebtedness, providing for principal repayment on the
earlier of September 5, 1995 or the date Mr. Province voluntarily terminated
his employment with the Company, and for interest payments during the term of
the note at the rate of 8 1/4% per annum. The note was secured by a second
mortgage on Mr. Province's principal residence. On September 7, 1993, Mr.
Province repaid the indebtedness to the Company in full and the corresponding
note was cancelled.
During fiscal 1991 and 1992, the Company made advances to Mr. Page, Senior
Vice President--Store Operations, for use in connection with his relocation
from Dallas to Los Angeles, aggregating $40,175. In February, 1991, Mr. Page
delivered an unsecured promissory note for the amount of the indebtedness,
providing for principal repayment on February 3, 1996, a proportionate amount
of forgiveness on each anniversary of the note, and imputed interest at the
statutory rate during the term of the note. After a proportionate amount of
forgiveness of the indebtedness during fiscal 1991, 1992 and 1993, the balance
of the note currently outstanding is $16,070. During fiscal 1993, the Company
made advances to Mr. Page for use in connection with his relocation from Los
Angeles to Philadelphia, aggregating $65,000. Mr. Page delivered a promissory
note to the Company for the amount of the indebtedness, providing for principal
repayment, if not paid earlier, on May 31, 1998, and for interest payments
during the term of the note at the rate of 5.2% per annum. The note is secured
by a second mortgage on Mr. Page's principal residence.
7
<PAGE>
STOCK OPTION GRANTS
The following table sets forth information concerning the grant of stock
options under the Company's 1990 Stock Incentive Plan to the Company's Chief
Executive Officer and each of the Company's other executive officers during
fiscal 1993:
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZATION
---------------------------------------------------- VALUE AT ASSUMED
% OF TOTAL ANNUAL RATES OF STOCK
OPTIONS PRICE APPRECIATION FOR
GRANTED TO EXERCISE OR OPTION TERM
OPTIONS EMPLOYEES IN BASE PRICE EXPIRATION -----------------------
NAME GRANTED (#)(A) FISCAL YEAR(B) ($/SH) DATE 5% ($) 10% ($)
---- -------------- -------------- ----------- ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Wendel H. Province...... 15,000 3.5% $23.125 6/1/03 $ 218,148 $ 552,830
Mark L. Page............ 50,000 11.7% $23.125 6/1/03 727,160 1,842,765
</TABLE>
(a) The options to Messrs. Province and Page were granted at a price equal to
fair market value on the date of grant and provide that 20% are
exercisable immediately and an additional 20% are exercisable on each of
the following four anniversaries of the grant.
(b) In fiscal 1993, options to purchase 429,100 shares of the Company's stock
were granted to 862 individuals, including store and service department
managers and their supervisors.
STOCK OPTION EXERCISES AND HOLDINGS
The following table sets forth information related to stock options
exercised during fiscal 1993 by the Company's Chief Executive Officer and each
of the Company's other executive officers, and the number and value of options
held by such individuals at January 29, 1994:
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
<TABLE>
<CAPTION>
NUMBER OF VALUE OF UNEXERCISED
UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
SHARES AT FISCAL YEAR-END (#) AT FISCAL YEAR-END ($)(A)
ACQUIRED VALUE ------------------------- -------------------------
NAME ON EXERCISE(#) REALIZED ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- -------------- ------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Mitchell G. Leibovitz... -- -- 1,115,740 90,000 $17,350,401 $416,250
Wendel H. Province...... 65,000 $776,913 110,000 63,000 1,585,875 663,187
Michael J. Holden....... -- -- 241,000 -- 3,481,334 --
Frederick A. Stampone... -- -- 186,200 -- 2,642,109 --
Mark L. Page............ -- -- 40,780 67,520 433,189 465,327
</TABLE>
(a) Amounts are based on the fair market value of common stock on January 29,
1994, which was $27.50.
REPORT OF COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS
The Compensation Committee is comprised of four non-management directors of
the Company (the "Committee"). The Committee reviews and recommends to the
Board of Directors compensation for the executive officers of the Company
named in the Summary Compensation Table and other officers of the Company. At
the present time, executive compensation consists of base salary, bonus
compensation under the Company's Executive Incentive Bonus Plan ("Bonus Plan")
and stock options under the Company's 1990 Stock Incentive Plan ("Option
Plan"). The Committee recommends base salaries and administers the Bonus Plan
and the Option Plan, with each component reviewed relative to the performance
of the executive and the compensation structure of similarly situated
executives of the Company's competitors and peer companies. Individual
performance is evaluated based on the specific responsibilities of the
executive and the value of the services provided, the
8
<PAGE>
executive's management skills and experience and the individual's contribution
to the overall performance and profitability of the Company. The combination of
the base salary, the Bonus Plan and the Option Plan reflects the short and long
term goals of the Company and aligns executive financial rewards with those of
the Company's shareholders. The Committee's philosophy is that overall
compensation should be significantly related to the Company's performance in
terms of earnings and increases in the Company's value as reflected by its
stock price.
Base salaries are reviewed annually to reflect properly the experience,
performance and scope of responsibility of the executives and to be sure that
the salaries are at levels which are appropriate to attract and retain high
quality individuals.
Under the Bonus Plan in effect for fiscal 1993, a base bonus is awarded to
each officer for each year in which the Company's pre-tax earnings, exclusive
of extraordinary items ("EBT"), exceeds a targeted increase over the prior
year's EBT. The Company's EBT for fiscal 1993 exceeded the prior year by 20%;
the resulting base bonus awards equalled 11.25%. The Bonus Plan also provides
for a discretionary bonus of up to one-third of the base bonus, to be
determined in the case of executive officers by the Committee, based upon each
executive's contributions, responsibilities and performance during the year. In
light of the earnings performance of the Company in fiscal 1993 and the
difficult comparisons to earnings in fiscal 1992, the Committee determined to
award to the Chief Executive Officer and to each of the other executive
officers the maximum discretionary bonus provided for by the Bonus Plan,
bringing their total bonuses for the year to 15% of salary.
On March 30, 1994, the Committee recommended and the Board of Directors
approved a change in the Bonus Plan to modify the base bonus awards that
officers may earn for increases in EBT in fiscal 1994 over EBT for fiscal 1993.
Moreover, the Compensation Committee has determined to structure the Company's
executive compensation arrangements in a manner which preserves the
deductibility of certain compensation paid to any one executive, in accordance
with Section 162(m) of the Internal Revenue Code. Consequently, and to align
the compensation of the Chief Executive Officer more closely with that of
shareholders, on March 30, 1994 the Compensation Committee also eliminated the
discretionary portion of the Chief Executive Officer's bonus.
Compensation through stock options, which directly aligns the interests of
management with those of shareholders, is a very significant part of the
Company's executive compensation program. The Company's Stock Incentive Plan
provides for the grant of non-qualified stock options at exercise prices equal
to the fair market value on the date of grant. Substantial options have been
granted to the Chief Executive Officer and the other executive officers, which
options are generally exercisable for ten years, absent earlier termination of
employment. All outstanding non-qualified options held by executive officers
provide for deferred vesting over four years. The provisions of the Option Plan
provide executive officers of the Company with a significant interest in long
term growth in the price of the Company's common stock.
This report is submitted by the following directors who are members of the
Compensation Committee:
Walter G. Arader
Lennox K. Black
Bernard J. Korman
Myles H. Tanenbaum
Upon the retirement of Mr. Arader as of the meeting, the Committee will be
comprised of three non-management directors of the Company.
9
<PAGE>
PERFORMANCE GRAPH
The following graph compares the cumulative total return on the Company's
shares over the past five fiscal years with the cumulative total return on
shares of companies in the Standard & Poor's 500 Index and the Standard &
Poor's Retail Specialty Index. The Standard & Poor's Retail Specialty Index is
composed of the following companies (in addition to the Company): Blockbuster
Entertainment, Circuit City Stores, Home Depot, Lowe's, Melville, Price/Costco,
Tandy, Toys R Us and Woolworth.
Comparison of Five-Year Cumulative Total Return Among
the Company, the S&P 500 Index and the S&P Retail Specialty Index
[PERFORMANCE GRAPH APPEARS HERE]
PENSION AND OTHER BENEFIT PLANS
The Company has a long-term disability salary continuation plan which
provides for the continuation of the salary of eligible employees, who are key
employees designated by the Board of Directors, from the time of disability
until age 65 at the rate of each employee's salary at the time he becomes
disabled. A portion of the benefits are funded by insurance policies purchased
by the Company and of which the Company is the sole beneficiary.
10
<PAGE>
The Company has a qualified defined benefit pension plan for all employees
hired prior to February 2, 1992. The amount of contribution for each individual
is not readily ascertainable. The Company also has an executive supplemental
pension plan, which is an unfunded deferred compensation plan for eligible
employees who are key employees designated by the Board of Directors. All
current executive officers of the Company are covered by this plan. The
executive supplemental pension plan provides retirement and death benefits. The
employees covered by this plan have a vested interest after five years as a
participant in the plan. Death benefits under the plan are in the annual amount
of 50% of the base salary of the eligible employee on the date of his death and
are payable for 15 years or until his normal retirement date, whichever is
later. The plan also provides for the lump sum distribution of the present
value of the accrued benefits of an eligible employee following a termination
of employment in connection with a "change in control" of the Company. A trust
agreement has been established to better assure executive officers of payment
of these benefits if such events occur.
The following chart shows, as of the end of the last fiscal year, the
approximate annuity under both pension plans, commencing at the employees'
normal retirement date (age 65) and payable for the longer of ten years or
life, for plan participants whose highest average salary and years of service
under the executive supplemental pension plan are set forth below:
<TABLE>
<CAPTION>
ESTIMATED ANNUAL RETIREMENT INCOME
AVERAGE SALARY YEARS OF SERVICE
- -------------- ---------------------------------------
25
5 10 15 20 AND OVER
- -- -- -- --------
<S> <C> <C> <C> <C> <C>
175,000................................. 17,500 35,000 52,500 70,000 87,500
225,000................................. 22,500 45,000 67,500 90,000 112,500
275,000................................. 27,500 55,000 82,500 110,000 137,500
325,000................................. 32,500 65,000 97,500 130,000 162,500
375,000................................. 37,500 75,000 112,500 150,000 187,500
475,000................................. 47,500 95,000 142,500 190,000 237,500
525,000................................. 52,500 105,000 157,500 210,000 262,500
575,000................................. 57,500 115,000 172,500 230,000 287,500
675,000................................. 67,500 135,000 202,500 270,000 337,500
</TABLE>
The salaries of the executive officers who are covered under the pension
plans are set forth in the Summary Compensation Table on page 6. The credited
years of service under the executive supplemental pension plan for each of
those individuals, in the order in which they are named, are 15, 4, 14, 12 and
18, respectively.
Effective September 1, 1987, the Company established a savings plan (the
"Savings Plan") for employees of the Company which is intended to satisfy the
requirements of Sections 401(a) and 401(k) of the Internal Revenue Code of
1986, as amended (the "Code"). To be eligible to participate in the Savings
Plan, an employee must be 21 years old and have completed one year of service
with the Company. A participant in the Savings Plan may elect to contribute
from 1% to 12% of his salary, which is deducted directly from his compensation
and credited to his account under the Savings Plan, up to the maximum amount
which a participant may contribute in any one calendar year, which was $8,994
for 1993. In addition, the Code limits the maximum amount of aggregate employer
and employee contributions (other than certain "rollover contributions")
allocated to the account of any participant in any calendar year to 25% of his
salary. The Company contributes to the Savings Plan for each participant's
account in an amount equal to the lesser of 50% of the participant's
contribution for such year or 3% of the participant's compensation.
Contributions made by the Company for each participant are fully invested in
the Company's Common Stock, except that participants 55 years of age or older
may elect to have the entire Company contribution invested in another
investment category. Benefits under the Savings Plan are payable upon
termination of employment.
11
<PAGE>
PROPOSAL TO RATIFY AND APPROVE THE COMPANY'S BONUS COMPENSATION PLAN
On June 6, 1989, the Board of Directors approved the adoption of the
Company's Executive Incentive Bonus Plan (the "Bonus Plan"). The purpose of the
Bonus Plan is to provide an incentive for each officer of the Company elected
by the Board of Directors and not excluded by the Compensation Committee,
including the executive officers named in the Summary Compensation Table on
page 6 ("Participants"), to achieve substantial increases in the profitability
of the Company in comparison to the Company's performance in the previous
fiscal year by providing bonus compensation tied to such increases in
profitability. The approximate number of persons eligible to participate is 22.
The Bonus Plan is administered by the Compensation Committee which has the
power and authority to take all actions and make all determinations which it
deems necessary or desirable to effectuate, administer or interpret the Bonus
Plan including the power and authority to extend, amend, modify or terminate
the Bonus Plan at any time and to change award periods and determine the time
or times for payment of bonuses. The Compensation Committee establishes the
bonus targets and performance goals, and establishes any other measures as may
be necessary to meet the objectives of the Bonus Plan.
No bonuses are awarded under the Bonus Plan unless the pre-tax earnings,
exclusive of extraordinary items ("EBT"), of the current fiscal year exceeds
EBT for the prior fiscal year by at least 20%. To the extent that EBT equals or
exceeds a 20% increase from the prior fiscal year, bonuses are paid. The amount
of bonus paid increases for each 1% increment over 20% in EBT over the prior
year, up to a maximum award at the 41% EBT increase level. For fiscal 1994,
bonus targets determined by the Compensation Committee for all officers except
the Chief Executive Officer range from 18.75% of base salary at the 20% EBT
increase level to 37.5% of base salary at the 41% EBT increase level, and for
the Chief Executive Officer the bonus ranges from 30% of salary at the 20% EBT
increase level to 50% of salary at the 41% EBT increase level.
The performance goals set forth in the Bonus Plan are intended to satisfy the
conditions of Section 162(m) of the Internal Revenue Code of 1986, as amended,
which exempts certain compensation from the $1,000,000 annual deductibility
limitation for compensation of certain executive officers. One of the
requirements of Section 162(m) is that the material terms of the performance
goals under the Bonus Plan must be disclosed and approved by an affirmative
vote of a majority of the shareholders.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THIS PROPOSAL.
BONUS PLAN BENEFITS
<TABLE>
<CAPTION>
EXECUTIVE INCENTIVE BONUS PLAN
NAME POSITION DOLLAR VALUE ($)(A)
- ---- -------- ------------------------------
<S> <C> <C>
Mitchell G. Chairman, Chief Executive $197,100
Leibovitz Officer & President
Wendel H. Province Senior Vice President & 53,438
Chief Operating Officer
Michael J. Holden Senior Vice President & 52,219
Chief Financial Officer
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
EXECUTIVE INCENTIVE BONUS PLAN
NAME POSITION DOLLAR VALUE ($)(A)
- ---- -------- ------------------------------
<S> <C> <C>
Frederick A. Stampone Senior Vice President & 39,375
Chief Administrative
Officer
Mark L. Page Senior Vice President -- 32,813
Store Operations
Executive Group 374,944
Non-Executive Director Group N/A
Non-Executive Officer
Employee Group 364,594
</TABLE>
- ------------
(a) Because the amount of compensation to be paid under the Bonus Plan is not
determinable until year-end, the amounts in this column represent the
amounts that would have been paid in the fiscal year ended January 29,
1994 had the current performance goal formula been in place at such time.
PROPOSAL TO APPROVE THE APPOINTMENT OF INDEPENDENT AUDITORS
Subject to approval by the shareholders, the Board of Directors, upon the
recommendation of the Audit Committee, has selected the firm of Deloitte &
Touche, which served as the Company's independent auditors for the last fiscal
year, to serve as the Company's independent auditors with respect to the
consolidated financial statements of the Company and its subsidiaries for the
current fiscal year. If the shareholders do not approve this selection by the
affirmative vote of a majority of the votes cast at the meeting, other
independent auditors will be considered by the Board upon the recommendation
of the Audit Committee.
A representative of Deloitte & Touche is expected to be present at the
meeting and will have the opportunity to make a statement if he or she desires
to do so. The representative is also expected to be available to respond to
appropriate questions of shareholders.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THIS PROPOSAL.
COST OF SOLICITATION OF PROXIES
The accompanying form of proxy will be voted as specified at the meeting.
The expense of the solicitation of the proxies, including the cost of
preparing and distributing material, the handling and tabulation of proxies
received and charges of brokerage houses and other institutions in forwarding
such documents to beneficial owners, will be paid by the Company. In addition
to the mailing of the proxy material, said solicitation may be made in person
or by telephone or telegraph by directors, officers or regular employees of
the Company or other persons who may be engaged to perform soliciting
activities.
PROPOSALS OF SHAREHOLDERS
All proposals which any shareholder of the Company desires to present at the
next annual meeting and to have included in the next Board of Directors' Proxy
Statement and form of proxy relating to that meeting must be received by
Frederick A. Stampone, Senior Vice President, Chief Administrative Officer and
Secretary of the Company, at the address of the Company appearing on the first
page of the Proxy Statement, no later than December 22, 1994.
13
<PAGE>
In addition to the foregoing, the Company's By-laws provide that a
shareholder may be entitled to present an item of business at a meeting of the
shareholders if the shareholder gives timely notice of such intention in
writing to the President of the Company. To be timely, the shareholder's notice
must be delivered to or mailed and received by the Company at the principal
executive offices of the Company not fewer than 50 days nor more than 75 days
prior to the annual meeting, except that in the event that less than 65 days
notice or prior public disclosure of the date of the meeting is given or made
to shareholders, the shareholder's notice must be received by the Company not
later than the close of business on the 10th day following the day on which
such public disclosure is made. The shareholder's notice must set forth a
general description of each item of business the shareholder proposes to bring
before the annual meeting, the name and address of the shareholder proposing to
bring such item of business and a representation that the shareholder intends
to appear in person or by proxy at the meeting.
ANNUAL REPORT ON FORM 10-K
THE COMPANY WILL PROVIDE WITHOUT CHARGE TO EACH PERSON SOLICITED BY THE PROXY
STATEMENT, ON THE WRITTEN REQUEST OF ANY SUCH PERSON, A COPY OF THE COMPANY'S
ANNUAL REPORT ON FORM 10-K (INCLUDING THE FINANCIAL STATEMENTS AND THE
SCHEDULES THERETO) AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION FOR ITS
MOST RECENT FISCAL YEAR. SUCH WRITTEN REQUEST SHOULD BE DIRECTED TO FREDERICK
A. STAMPONE, SENIOR VICE PRESIDENT, CHIEF ADMINISTRATIVE OFFICER AND SECRETARY,
AT THE ADDRESS OF THE COMPANY APPEARING ON THE FIRST PAGE OF THIS PROXY
STATEMENT.
14
<PAGE>
PROXY PROXY
THE PEP BOYS -- MANNY, MOE & JACK
3111 WEST ALLEGHENY AVENUE
PHILADELPHIA, PA 19132
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned shareholder of THE PEP BOYS -- MANNY, MOE & JACK hereby
constitutes and appoints MITCHELL G. LEIBOVITZ, MICHAEL J. HOLDEN and each of
them acting individually, as the attorney and proxy of the undersigned, with
full power of substitution, for and in the name and stead of the undersigned to
attend the Annual Meeting of Shareholders of the Company to be held on Tuesday,
May 31, 1994 at 10:00 a.m. at The Sheraton Valley Forge Hotel, N. Gulph Road
and First Avenue, King of Prussia, Pennsylvania, 19406 and any adjournment
thereof, and thereat to cast all votes that the undersigned would be entitled
to cast if then personally present:
1. ELECTION OF DIRECTORS:[_] FOR all of the [_] WITHHOLD AUTHORITY to vote
nominees listed for all of the nominees listed
below (except below
as marked to the
contrary below)
(INSTRUCTION: TO WITHHOLD AUTHORITY FOR ANY INDIVIDUAL NOMINEE STRIKE A LINE
THROUGH THE NOMINEE'S NAME IN THE LIST BELOW)
Bernard J. Korman -- Pemberton Hutchinson -- J. Richard Leaman, Jr.
2. PROPOSAL TO RATIFY AND APPROVE THE COMPANY'S BONUS COMPENSATION PLAN:
[_] FOR the proposal [_] AGAINST the proposal [_] ABSTAIN from voting on
proposal
3. PROPOSAL TO RATIFY THE COMPANY'S SELECTION OF AUDITORS:
[_] FOR the proposal [_] AGAINST the proposal [_] ABSTAIN from voting on
proposal
4. IN THEIR DISCRETION, THE PROXIES WILL VOTE UPON SUCH OTHER MATTERS AS MAY
PROPERLY COME BEFORE THE MEETING.
(PLEASE SIGN ON THE OTHER SIDE)
<PAGE>
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED SHAREHOLDERS. IF NO DIRECTION IS MADE, THIS PROXY
WILL BE VOTED FOR THE NOMINEES FOR DIRECTOR, FOR THE PROPOSAL TO RATIFY AND
APPROVE THE COMPANY'S BONUS COMPENSATION PLAN, FOR THE PROPOSAL TO APPROVE THE
APPOINTMENT OF INDEPENDENT AUDITORS AND FOR ANY OTHER MATTER WHICH MAY PROPERLY
COME BEFORE THE MEETING. IF NO DIRECTION IS MADE, THE ATTORNEY AND PROXY SHALL,
SUBJECT TO THEIR DISCRETION, HAVE THE AUTHORITY TO CUMULATE THEIR VOTES IN SUCH
A MANNER AS SAID ATTORNEY AND PROXY CONSIDERS MOST DESIRABLE TO ELECT THE
MAXIMUM NUMBER OF SUCH NOMINEES.
The undersigned hereby acknowledges receipt of the Annual Report, Notice of
said meeting and the Proxy Statement furnished in connection therewith and
hereby ratifies all that the said attorneys and proxies may do by virtue
hereof.
NOTE: Please mark, date and sign this proxy card and return it in the enclosed
envelope. Please sign as name appears below. If shares are registered in more
than one name, all owners should sign. If signing in a fiduciary or
representative capacity, please give full title and attach evidence of
authority. Corporations please sign with full corporate name by a duly
authorized officer and affix corporate seal.
DATED , 1994
---------------------
(COMPLETE DATE)
(SEAL)
---------------------------
(SHAREHOLDER'S SIGNATURE)
(SEAL)
---------------------------
(SHAREHOLDER'S SIGNATURE)
SHARES
--------------------------
<PAGE>
THE PEP BOYS - MANNY, MOE & JACK
--------------------------------
EXECUTIVE INCENTIVE BONUS PLAN
------------------------------
(as amended and restated as of March 30, 1994)
The Pep Boys - Manny, Moe & Jack, a Pennsylvania corporation (the
"Company") established, effective January 29, 1989, an Executive Incentive Bonus
Plan for the benefit of officers of the Company who are eligible to participate
as provided herein. By action of its Board of Directors on March 31, 1992, the
said plan was amended in numerous respects. By action of its Board of Directors
on March 30, 1944, the said plan was further amended to read in its entirety as
hereinafter set forth, said plan being hereinafter referred to as the "Plan".
1. Purpose. The Plan is intended to increase the profitability of the
-------
Company by giving the officers of the Company a financial stake in the growth
and profitability of the Company. The Plan has the further objective of
enhancing the Company's executive compensation package, thus enabling the
Company to attract and retain executive officers of the highest ability. The
Plan is intended to supplement, not replace, any other bonus paid by the Company
to its officers and is not intended to preclude the continuation of such
arrangements or the adoption of additional bonus or incentive plans, programs or
contracts.
2. Definitions.
-----------
(a) "Award Period" shall mean a measuring period of one Fiscal Year.
------------
<PAGE>
(b) "Board of Directors" shall mean the Board of Directors of the Company.
------------------
(c) "Bonus" shall mean a cash payment made by the Company to a Participant
-----
after an Award Period, based on increases in EBIT, all as calculated and as more
fully set forth under paragraph 5 hereof.
(d) "CEO" shall mean the person elected to the office of Chief Executive
---
Officer of the Company by the Board of Directors.
(e) "Company" shall mean The Pep Boys - Manny, Moe & Jack, a Pennsylvania
-------
corporation.
(f) "Compensation Committee" shall mean the Compensation Committee of the
----------------------
Board of Directors.
(g) "Covered Employee" shall mean any Participant that the Compensation
----------------
Committee reasonably believes may be a "covered employee" within the meaning of
Section 162(m) of the Internal Revenue Code for the taxable year of the Company
in which a Bonus would be deductible.
(h) "EBIT" shall have the meaning set forth in Paragraph 5 hereof.
----
(i) "Fiscal Year" shall mean the Fiscal Year of the Company which ends on
-----------
the Saturday nearest January 31 in each year.
(j) "Participant" shall have the meaning set forth in Paragraph 4 hereof.
-----------
-2-
<PAGE>
(k) "President" shall mean the person elected to the office of President
---------
of the Company by the Board of Directors.
(l) "Salary" shall mean the base salary of an officer of the Company for a
------
Fiscal Year, including amounts which Participant elects to forego to provide
benefits under a plan which satisfies the provisions of Section 401(k) or
Section 125 of the Internal Revenue Code, exclusive of all bonuses paid or
accrued with respect to that Fiscal Year, whether or not pursuant to a plan or
program.
3. Administration, Amendment and Termination.
-----------------------------------------
(a) The Plan shall be administered by the Compensation Committee acting by
a majority vote of its members. The Compensation Committee shall have the power
and authority to take all actions and make all determinations which it deems
necessary or desirable to effectuate, administer or interpret the Plan. The
Company's adoption and continuation of the Plan is voluntary. The Compensation
Committee shall have the power and authority to extend, amend, modify or
terminate the Plan at any time, including without limitation, to change Award
Periods, to determine the time or times of paying Bonuses, to establish
performance and EBIT goals, and to establish such other measures as may be
necessary to meet the objectives of the Plan; provided, however, that, with
-------- -------
respect to any Covered Employee, no amendment shall change the Bonus calculation
formula, as set forth in Section 5 herein, so as to increase the amount of Bonus
payable
-3-
<PAGE>
upon attainment of a goal for any Award Period after the beginning of such Award
Period. An action to terminate or to substantively amend or modify the Plan
shall become effective immediately upon its adoption or on such date as
specified by the Compensation Committee, but not with respect to any Fiscal Year
prior to the Fiscal Year in which the Compensation Committee so acts.
(b) All actions taken and all determinations made by the Compensation
Committee in accordance with the power and authority conferred upon the
Compensation Committee under subsection (a) above shall be final, binding and
conclusive on all parties, including the Company and all Participants.
4. Participants. Each officer of the Company elected by the Board of
------------
Directors to fill such office shall be entitled to participate in the Plan for
each Fiscal Year or portion thereof in which such person serves as an officer
(the "Participants", or individually, "Participant"), unless excluded from
participation by the Compensation Committee or as provided by paragraph 7
hereof. With respect to a Participant who became an officer during a Fiscal
Year, such Participant shall be paid an amount equal to the amount which would
have been paid if the Participant had been employed for the entire Award Period,
multiplied by a fraction the numerator of which is the number of days during the
Award Period that the Participant was an officer
-4-
<PAGE>
of the Company and the denominator of which is the number of days in the Award
Period.
5. Calculation of Bonus.
--------------------
(a) Each Participant shall be entitled to payment from the Company of a
Bonus equal to the applicable percentage of such Participant's Salary, as set
forth in the tables below, for certain percentage increases in EBIT during an
Award Period over EBIT for the fiscal year which precedes the Award Period. For
purposes of this Plan, "EBIT" shall mean the consolidated earnings before income
taxes of the Company, as determined in accordance with generally accepted
accounting principles, and adjusted for any additions or reductions thereto that
the President recommends and the Compensation Committee approves in order to
eliminate the effect of extraordinary or non-recurring items of income or loss.
In determining EBIT, there shall be included as an expense of the Company all
bonuses, including, without limitation, those Bonuses paid or accrued under this
Plan with respect to the Fiscal Year. For purposes of this Plan, the column in
the table below entitled "EBIT Increase" measures EBIT for the Fiscal Year with
respect to which the Bonus is being calculated, against EBIT for the immediately
preceding Fiscal Year.
-5-
<PAGE>
<TABLE>
<CAPTION>
Percentage of Salary
for All Participants Percentage of
EBIT Increase Except CEO Salary for CEO
- ---------------- --------------------- ---------------
<S> <C> <C>
20% 18.75% 30%
21% 19.50% 31%
22% 20.25% 32%
23% 21.00% 33%
24% 21.75% 34%
25% 22.50% 35%
26% 23.25% 36%
27% 24.00% 37%
28% 24.75% 38%
29% 25.50% 39%
30% 26.25% 40%
31% 27.25% 41%
32% 28.25% 42%
33% 29.25% 43%
34% 30.25% 44%
35% 31.25% 45%
36% 32.25% 46%
37% 33.25% 47%
38% 34.25% 48%
39% 35.25% 49%
40% 36.25% 50%
41% or more 37.50% 50%
</TABLE>
-6-
<PAGE>
Except for EBIT increase calculations above 19.5% but less than 20%,
calculations of percentage increases in EBIT shall be rounded to the nearest
whole percentage.
(b) Nothing in this Paragraph 5 shall be used to create any presumption
that Bonuses under the Plan are the exclusive means of providing incentive
compensation for officers, it being expressly understood and agreed that the
Compensation Committee has the authority to recommend to the Board of Directors
payments to the officers, in cash or otherwise, based on EBIT or otherwise,
other than Bonuses under this Plan, to Participants.
6. Payment of Awards. Bonuses shall be paid in cash within fifteen days
-----------------
after the Company has publicly announced its consolidated earnings before income
taxes for the Fiscal Year with respect to which the Bonus is payable; provided,
--------
however, that, with respect to any Covered Employee, no Bonus shall be paid
- -------
unless and until the Compensation Committee has certified in writing that the
EBIT goals as set forth in Section 5 have been met.
7. Termination of Employment.
-------------------------
(a) Other than as set forth in subparagraph (b) below, a participant may
not receive a Bonus for any Award Period if the Participant's employment by the
Company has terminated, for any reason whatsoever, with or without cause, prior
to the payment of the Bonus with respect to such Award Period.
-7-
<PAGE>
(b) If during an Award Period, a participant dies, becomes disabled or
retires on or after his Early Retirement Date (as defined in the Company's
defined benefit pension plan), such Participant (or the Participant's designated
beneficiary) shall be paid an amount equal to the amount which would have been
paid if the Participant had been an officer for the Award Period, multiplied by
a fraction, the numerator of which is the number of days during the Award Period
that the Participant was an officer of the Company and the denominator of which
is the number of days in the Award Period.
8. Assignment and Alienation of Benefits.
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(a) To the maximum extent permitted by law, a Participant's right or
benefits under this Plan shall not be subject to anticipation, alienation, sale,
assignment, pledge, encumbrance or charge, and any attempt to anticipate,
alienate, sell, assign, pledge, encumber or charge the same shall be void. No
right or benefit hereunder shall in any manner be liable for or subject to the
debts, contracts, liabilities or torts of the person entitled to such benefit.
(b) If any Participant becomes bankrupt or attempts to anticipate,
alienate, sell, assign, pledge, encumber, or charge any rights to a benefit
hereunder, then such right or benefit, in the discretion of the Compensation
Committee, may be terminated. In such event, the Company may hold or apply the
same or any part thereof for the benefit of the Participant, his
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or her spouse, children or the dependents, or any of them, in such manner and
portion as the Compensation Committee may deem proper.
9. Miscellaneous.
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(a) The establishment of this Plan shall not be construed as granting any
Participant the right to remain in the employ of the Company, nor shall this
Plan be construed as limiting the right of the Company to discharge a
Participant from employment at any time for any reason whatsoever, with or
without cause.
(b) Notwithstanding anything to the contrary herein, no Bonus shall be
paid to any Covered Employee pursuant to the terms hereof unless and until the
material terms of the performance goals as set forth in Section 5 are approved
by the majority vote of the Company's shareholders in a manner which complies
with the requirements of Section 162(m) of the Internal Revenue Code.
(c) The paragraph headings in this Plan are for convenience only; they
form no part of the Plan and shall not affect its interpretation.
(d) This Plan shall be governed by and construed in accordance with the
laws of the Commonwealth of Pennsylvania.
THE PEP BOYS - MANNY, MOE & JACK
By:
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