<PAGE>
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
-
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] CONFIDENTIAL, FOR USE OF THE
- - COMMISSION ONLY (AS PERMITTED BY
[X] Definitive Proxy Statement RULE 14A-6(E)(2))
-
[ ] Definitive Additional Materials
-
[ ] Soliciting Material Pursuant to (S)240.14-11(c) or (S)240.14a-12
-
THE PEP BOYS - MANNY, MOE & JACK
------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[ ] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14-6(i)(2) or
- Item 22(a)(2) of Schedule 14A.
[ ] $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 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
-
[ ] 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) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
Notes:
<PAGE>
THE PEP BOYS - MANNY, MOE & JACK
3111 WEST ALLEGHENY AVENUE
PHILADELPHIA, PENNSYLVANIA 19132
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
----------------
TO BE HELD ON WEDNESDAY, JUNE 4, 1997 AT 10:00 A.M.
AT
VALLEY FORGE HILTON
251 WEST DEKALB PIKE
KING OF PRUSSIA, PA 19406
----------------
To the Shareholders of The Pep Boys - Manny, Moe & Jack:
1. To elect two Class II Directors to hold office as specified in the proxy
statement.
2. To approve an amendment to the Company's 1990 Stock Incentive Plan to
increase the aggregate number of shares of Common Stock available for
awards.
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 11, 1997 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 29, 1997
<PAGE>
THE PEP BOYS - MANNY, MOE & JACK
3111 WEST ALLEGHENY AVENUE
PHILADELPHIA, PENNSYLVANIA 19132
----------------
PROXY STATEMENT
----------------
ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON WEDNESDAY, JUNE 4, 1997
----------------
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 Wednesday, June 4, 1997 at 10:00 a.m. at the Valley
Forge Hilton Hotel, 251 West DeKalb Pike, 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 29, 1997.
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 approve the amendment to
the 1990 Stock Incentive 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.
According to state law and the Company's By-laws, the presence of a quorum
is required to transact business at the meeting. A quorum is defined as the
presence, either in person or by proxy, of a majority of the votes that all
shareholders are entitled to cast on a particular matter. Proxies marked
"Abstain" will be included in determining a quorum. On routine matters,
brokers who hold customer shares in "street name" but have not timely received
voting instructions from such customers have discretion to vote such shares.
Accordingly, the presence of such votes at the meeting will be included in
determining a quorum.
According to state law and the Company's By-laws, proposals must be approved
by the affirmative vote of a majority of the votes cast at the meeting.
Abstentions are not considered votes cast and therefore will have no effect on
the outcome of the proposals. According to the rules of the Securities and
Exchange Commission, however, the proposal to approve the amendment to the
Company's 1990 Stock Incentive Plan requires approval by the affirmative vote
of a majority of shares present, or represented by proxy, and entitled to vote
at the meeting. Therefore, abstentions will have the same effect as votes
against this proposal.
1
<PAGE>
OUTSTANDING SHARES, VOTING RIGHTS
AND SHAREHOLDINGS OF CERTAIN PERSONS
OUTSTANDING SHARES AND VOTING RIGHTS
At the close of business on Friday, April 11, 1997, the record date for the
meeting, there were 63,194,492 outstanding shares of the Company's Common
Stock ("Common Stock"), the only class of voting securities outstanding. Of
these shares, 2,232,500 were held by the trustee under The Pep Boys - Manny,
Moe & Jack Flexitrust, a flexible employee benefits trust established on April
29, 1994 to fund a portion of the Company's obligations arising from various
employee compensation and benefit plans. Under the terms of the Flexitrust,
all shares held for participating employees by the trustee will be voted or
not as directed by written instructions from the participating employees, and
shares for which no instructions are received will be voted in the same
proportion as the shares for which instructions are received. 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 elected, and the shareholder may
cast all of his votes for one nominee for director or allocate the votes among
all the 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
11, 1997 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>
AIM Management Group, Inc.................... 3,675,600(/1/) 5.8%
11 Greenway Plaza, Suite 1919
Houston, TX 77046
Benjamin Strauss............................. 1,120,737(/2/)
1,094,310(/2/a)
---------
2,215,047 3.5%
Lester Rosenfeld............................. 1,085,595(/3/)
1,123,628(/3/a)
---------
2,209,223 3.5%
Mitchell G. Leibovitz........................ 1,310,137(/4/)
887,912(/4/a)
---------
2,191,538(/4/b) 3.4%
Michael J. Holden............................ 206,326(/5/)
887,912(/4/a)
---------
1,090,769(/4/b) 1.7%
Wendel H. Province........................... 244,582(/6/) +
Frederick A. Stampone........................ 140,019(/7/) +
Mark L. Page................................. 128,026(/8/) +
Lennox K. Black.............................. 69,823(/9/) +
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF
NAME OF BENEFICIAL OWNERSHIP PERCENT OF
BENEFICIAL OWNER OF COMMON STOCK CLASS
---------------- -------------------- ----------
<S> <C> <C>
Bernard J. Korman........................... 63,623(/1//0/) +
Myles H. Tanenbaum.......................... 16,926(/1//1/) +
J. Richard Leaman, Jr....................... 16,667(/1//2/) +
Pemberton Hutchinson........................ 6,926(/1//3/) +
David V. Wachs.............................. 6,623(/1//4/) +
Malcolmn D. Pryor........................... 2,980(/1//5/) +
Total of all Executive Officers and
Directors as a Group (14 Persons).......... 7,453,736(/1//6/) 11.5%
</TABLE>
- --------
+ Represents less than 1%.
(1) Based upon information disclosed in Schedule 13-G dated February 12, 1997.
(2) This includes 66,384 shares owned by a trust in which Mr. Strauss has a
beneficial interest, 7,515 shares issuable pursuant to non-qualified stock
options exercisable within 60 days, 685 shares owned by Mr. Strauss'
spouse and 530 shares owned by Mr. Strauss' minor child.
(2a) These shares are owned by The Strauss Foundation, a non-profit charitable
foundation, of which Mr. Strauss is a co-trustee.
(3) This includes 50,976 shares owned by Mr. Rosenfeld's spouse, 45,000 shares
owned by a trust in which Mr. Rosenfeld has a beneficial interest and
9,623 shares issuable pursuant to non-qualified stock options exercisable
within 60 days.
(3a) This includes 551,700 shares owned by the Emanuel Rosenfeld Foundation, a
non-profit charitable foundation of which Mr. Rosenfeld is a co-trustee,
75,500 shares owned by two trusts in which Mr. Rosenfeld and his spouse
are co-trustees, 440,412 shares owned by various trusts of which Mr.
Rosenfeld is a co-trustee and 56,016 shares owned by various trusts of
which Mr. Rosenfeld's spouse is a co-trustee.
(4) This includes 55,502 shares owned by two trusts which benefit Mr.
Leibovitz' children of which Mr. Leibovitz' spouse is a co-trustee, 2,213
shares owned by Mr. Leibovitz' spouse, 100,000 shares owned by an
irrevocable Grantor Retained Annuity Trust for the benefit of Mr.
Leibovitz' children for which Mr. Leibovitz' spouse acts as trustee and
800,000 shares issuable pursuant to incentive and non-qualified stock
options exercisable within 60 days.
(4a) These shares are owned by trusts for the Company's 401(k) savings plan,
defined benefit pension plan and the Company's savings plan for employees
based in Puerto Rico, of which Messrs. Leibovitz and Holden are co-
trustees. Messrs. Leibovitz and Holden disclaim beneficial ownership in
such stock.
(4b) Totals do not add in order to avoid double counting of beneficial
interest due to positions as co-trustee.
(5) This includes 92,000 shares issuable pursuant to incentive and non-
qualified stock options exercisable within 60 days and 55,502 shares owned
by two trusts which benefit Mr. Leibovitz' children of which Mr. Holden is
a co-trustee.
(6) This includes 242,000 shares issuable pursuant to incentive and non-
qualified stock options exercisable within 60 days.
(7) This includes 133,250 shares issuable pursuant to non-qualified stock
options exercisable within 60 days and 32 shares owned by Mr. Stampone's
minor child.
(8) This includes 122,440 shares issuable pursuant to incentive and non-
qualified stock options exercisable within 60 days and 2,000 shares owned
by Mr. Page's spouse. Mr. Page disclaims beneficial ownership in stock
held by Mr. Page's spouse.
(9) This includes 39,623 shares issuable pursuant to non-qualified stock
options exercisable within 60 days and 200 shares owned by Mr. Black's
spouse. Mr. Black disclaims beneficial ownership in stock held by Mr.
Black's spouse.
(10) This includes 9,623 shares issuable pursuant to non-qualified stock
options exercisable within 60 days.
(11) This includes 1,926 shares issuable pursuant to non-qualified stock
options exercisable within 60 days.
(12) This includes 14,667 shares issuable pursuant to non-qualified stock
options exercisable within 60 days.
(13) This includes 1,926 shares issuable pursuant to non-qualified stock
options exercisable within 60 days.
(14) This represents shares issuable pursuant to non-qualified stock options
exercisable within 60 days.
(15) This includes 2,580 shares issuable pursuant to non-qualified stock
options exercisable within 60 days and 400 shares owned by Mr. Pryor's
spouse.
(16) This includes 1,483,796 shares issuable pursuant to incentive and non-
qualified stock options exercisable within 60 days granted to all
executive officers and directors. Totals do not add in order to avoid
double counting of beneficial interest due to positions as co-trustee.
3
<PAGE>
ELECTION OF DIRECTORS
NOMINEES FOR ELECTION
At the meeting, the shareholders will elect two Class II directors to hold
office, subject to the provisions of the Company's By-laws, until the Annual
Meeting of Shareholders in 2000 and until their respective successors shall
have been duly elected and qualified. The Company's Board of Directors is
presently comprised of ten directors and, as of the date of the meeting, the
size of the Board of Directors will be reduced from ten to nine directors as
Pemberton Hutchinson will not stand for re-election. 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 two 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 2000 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..................... 65 1983 1997 Director
J. Richard Leaman, Jr................. 62 1991 1997 Director
Class I Directors
Benjamin Strauss...................... 60 1970 1998 Director
David V. Wachs........................ 70 1985 1998 Director
Myles H. Tanenbaum.................... 66 1990 1998 Director
Malcolmn D. Pryor..................... 50 1994 1998 Director
Class III Directors
Mitchell G. Leibovitz................. 51 1985 1999 Director, Chairman,
CEO and President
Lester Rosenfeld...................... 71 1959 1999 Director
Lennox K. Black....................... 67 1987 1999 Director
</TABLE>
OCCUPATIONS AND OTHER DIRECTORSHIPS HELD BY DIRECTORS AND NOMINEES
Bernard J. Korman is Chairman of the Board of NutraMax Products, Inc. Until
October 1995, Mr. Korman was President, Chief Executive Officer and a director
of MEDIQ, Incorporated, a healthcare services company, the stock of which is
traded on the American Stock Exchange. Mr. Korman is also a director of The
New America High Income Fund, Inc., Today's Man, Inc., InnoServ Technologies,
Inc., Kapson Senior Quarters Corp., and Omega Healthcare Investors, Inc.
J. Richard Leaman, Jr. is President of JRL Consulting Company and an
Executive-in-Residence at Widener University. Until May 1995, Mr. Leaman was
President and Chief Executive Officer of S.D. Warren Company, which
manufactures and distributes coated and uncoated printing and publishing
papers. He remains on the Board of Directors of S.D. Warren Company. From 1991
until December 1994, Mr. Leaman was Vice Chairman of the Board of Scott Paper
Company. Mr. Leaman is also a director of Church & Dwight Co., Inc. and S.D.
Warren Holdings, Inc.
4
<PAGE>
Benjamin Strauss was an executive officer of the Company for many years
until his retirement on February 1, 1992 and served as a part-time consultant
to the Company for five years thereafter.
David V. Wachs was Chairman of the Board and Chief Executive Officer of
Charming Shoppes, Inc., a retailer of women's clothing, the stock of which is
traded on the NASDAQ National Market, from which position he retired on May
17, 1995. Mr. Wachs is a director of Children's Concept, Inc.
Myles H. Tanenbaum is the President, Chief Executive Officer and a director
of Arbor Property 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.
Malcolmn D. Pryor is Chairman of the Board of Pryor, McClendon, Counts &
Co., Inc., an investment banking firm headquartered in Philadelphia with
offices in numerous cities in the United States. Mr. Pryor is also a director
of PCS Development Corp.
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 Teleflex Incorporated, a
diversified technical company active in aerospace, automotive, medical and
industrial markets, the stock of which is traded on the New York Stock
Exchange; until April 1995 he was also the Chief Executive Officer of such
corporation. Mr. Black is also Chairman of the Board of Penn Virginia
Corporation, and is a director of Quaker Chemical Corporation.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" EACH OF THE
NOMINATED DIRECTORS.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors held four regularly scheduled meetings during the
last fiscal year.
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.
Tanenbaum, Black, and Korman. The Compensation Committee, which held one
meeting during the last fiscal year, recommends the compensation for all
officers of the Company.
The directors who served as members of the Nominating Committee during the
last fiscal year, were Messrs. Black, Strauss and Hutchinson. 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. Leaman,
Rosenfeld and Pryor. The Audit Committee, which held two 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.
5
<PAGE>
In the last fiscal year, each director attended at least 75% of the
aggregate number of meetings held by the Board of Directors and meetings held
by the committee(s) on which such director served.
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 principal executive offices of the Company addressed to the attention
of the President, not less than 50 days nor more than 75 days prior to the
annual meeting; provided, however, 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, notice by the shareholder to be timely 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 $20,000 per annum during fiscal year 1996, 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 the same is deemed invested, 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 the
grant. Thereafter, on the fifth anniversary of the most recent grant of an
option to that non-management director, the director 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, one-fifth of which are immediately
exercisable and one-fifth of which become 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 $122,500 in fiscal year 1996, plus
certain additional benefits payable for a ten year period ending with fiscal
year 2001. Amounts payable to Mr. Strauss are in addition to the fees and
options to which Mr. Strauss is entitled as a non-management director of the
Company.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors, executive officers and persons who own more than ten percent of the
Common Stock to file initial reports of ownership and reports of changes in
ownership of the Common Stock. To the Company's knowledge, based solely upon a
review of copies of such reports furnished to the Company, during fiscal year
1996, its executive officers, directors and greater than ten percent
shareholders complied with all applicable Section 16(a) filing requirements.
6
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth, for the Company's last three fiscal years,
the cash compensation paid by the Company, as well as certain other
compensation paid or accrued for those years, to the Company's Chief Executive
Officer and each of the Company's other executive officers:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
ANNUAL COMPENSATION COMPENSATION
--------------------------- ------------
AWARDS
------------
SECURITIES ALL OTHER
NAME AND FISCAL UNDERLYING COMPENSATION
PRINCIPAL POSITION YEAR SALARY ($) BONUS ($) OPTIONS (#) ($)(A)
------------------ ------ ---------- --------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Mitchell G. Leibovitz.... 1996 741,466 431,250 -- 125,657(b)
Chief Executive 1995 704,366 -- 500,000 123,912(b)
Officer & President 1994 650,231 197,100 -- 8,226
Wendel H. Province....... 1996 420,795 208,939 20,000 5,880
Executive Vice President 1995 402,404 -- 25,000 5,284
& Chief Operating 1994 292,721 93,750 85,000 16,079
Officer
Michael J. Holden........ 1996 324,929 141,860 30,000 6,410
Executive Vice President 1995 301,221 -- 50,000 6,094
& Chief Financial 1994 275,644 69,625 -- 6,139
Officer
Mark L. Page............. 1996 220,794 75,686 20,000 5,625
Senior Vice President- 1995 198,558 -- 25,000 21,386(c)
Store Operations 1994 169,713 43,750 20,000 13,484
Frederick A. Stampone.... 1996 219,219 72,435 -- 5,354
Senior Vice President & 1995 214,038 -- -- 4,916
Chief Administrative 1994 207,885 47,250 -- 5,120
Officer
</TABLE>
- --------
(a) All Other Compensation for fiscal year 1996 includes the following: (1)
$4,500 contributed by the Company to each executive officer's account in
the Company's 401(k) Savings Plan; and (2) the cost of group term life
insurance premiums in excess of $50,000 of coverage provided by the
Company on behalf of each executive officer, as follows: Mr. Leibovitz -
$4,931; Mr. Province - $1,380; Mr. Holden - $1,910; Mr. Page - $1,125
and Mr. Stampone - $854.
(b) Included in this amount is $116,226 in net premiums for a split-dollar
life insurance policy on behalf of Mr. Leibovitz, which will be repaid to
the Company upon surrender of the policy during Mr. Leibovitz' lifetime or
upon his death.
(c) Included in this amount in fiscal year 1995 is $16,066 representing
forgiveness of 40% of the total amount of advances made by the Company to
Mr. Page in connection with his relocation from Dallas to Los Angeles.
CHANGE IN CONTROL AGREEMENTS
During fiscal years 1988, 1989, 1993 and 1995, the Company entered into
agreements with Messrs. Leibovitz, Province, Holden, Page and Stampone,
executive officers of the Company, which generally become effective upon a
"change in control" of the Company. The 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 each agreement, the executive
would be entitled to compensation at a rate not less than his compensation
immediately prior to the change in control becoming effective, including both
base compensation and certain incentive compensation, benefits comparable to
those available prior to the change in control and a position with authority,
status and responsibilities comparable in all material respects to those held
previously. If 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 compensation to which he is entitled for the remaining
term of the agreement, 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 if a
change of control of the Company should occur.
7
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During fiscal year 1994, the Company made advances to Mr. Province,
Executive Vice President & Chief Operating Officer, totaling $540,587. On May
25, 1994, Mr. Province delivered an unsecured promissory note for the amount
of the indebtedness, providing for interest at the prime rate, which interest
will be capitalized at the end of each fiscal year of the Company and added to
the principal balance outstanding and shall thereafter be deemed principal and
shall bear interest. The balance outstanding on this note on February 1, 1997,
including capitalized interest through that date, was $671,223. The note
provides for repayment by December 31, 1999.
During fiscal year 1993, the Company made advances to Mr. Page, Senior Vice
President - Store Operations, for use in connection with his relocation from
Los Angeles to Philadelphia, aggregating $65,000. Mr. Page delivered a
promissory note to the Company for the amount of the indebtedness, providing
for principal repayment, if not paid earlier, on May 31, 1998, and for
interest payments during the term of the note at the rate of 5.2% per annum.
The note was secured by a second mortgage on Mr. Page's principal residence.
The loan was repaid in full in April, 1996.
STOCK OPTION GRANTS
The following table sets forth information concerning the grant of stock
options under the Company's 1990 Stock Incentive Plan to those of the
Company's executive officers receiving options during fiscal year 1996.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
----------------------------------------------------- POTENTIAL REALIZED VALUE
NUMBER OF % OF TOTAL AT ASSUMED ANNUAL RATES
SECURITIES OPTIONS OF STOCK PRICE APPRECIATION
UNDERLYING GRANTED TO EXERCISE OR FOR OPTION TERM
OPTIONS EMPLOYEES IN BASE PRICE EXPIRATION ---------------------------
NAME GRANTED (#)(A) FISCAL YEAR (B) ($/SH) DATE 5% ($) 10% ($)
---- -------------- --------------- ----------- ---------- ---------------------------
<S> <C> <C> <C> <C> <C> <C>
Wendel H. Province...... 20,000 3.26 33.875 3/27/06 426,076 1,079,761
Michael J. Holden....... 30,000 4.89 33.875 3/27/06 639,114 1,619,641
Mark L. Page............ 20,000 3.26 33.875 3/27/06 426,076 1,079,761
</TABLE>
- --------
(a) The options to Messrs. Province, Holden and Page were granted at a price
equal to fair market value on the date of grant and provide that 20% is
exercisable immediately and an additional 20% is exercisable on each of
the following four anniversaries of the date of grant.
(b) In fiscal year 1996, options to purchase 613,702 shares of Common Stock
were granted to 1,375 individuals, including store and service department
managers and their supervisors.
8
<PAGE>
STOCK OPTION EXERCISES AND HOLDINGS
The following table sets forth information related to options exercised
during fiscal year 1996 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 on February 1, 1997.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS AT IN-THE-MONEY OPTIONS
SHARES 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... 316,500 4,193,112 700,000 300,000 9,918,750 187,500
Wendel H. Province...... -- -- 224,000 68,000 2,759,188 50,500
Michael J. Holden....... 162,400 3,537,494 71,000 54,000 887,188 18,750
Mark L. Page............ 23,000 495,417 99,300 49,000 816,625 126,125
Frederick A. Stampone... 35,250 769,469 150,950 -- 2,824,647 --
</TABLE>
- --------
(a) Amounts are based on the fair market value of Common Stock on January 31,
1997 (the last day of the fiscal year on which the Common Stock traded
publicly), which was $31.75.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee consists of Myles H. Tanenbaum, Lennox K. Black,
and Bernard J. Korman. There are no relationships of a nature required to be
disclosed herein.
REPORT OF COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS ON EXECUTIVE
COMPENSATION
The Compensation Committee (the "Committee") is comprised of three non-
management directors of the Company. 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.
Individual performance is evaluated based on the specific responsibilities of
the executive and the value of the services provided, the executive's
management skills and experience and the individual's contribution to the
overall performance and profitability 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"). Base salaries
are reviewed annually to properly reflect the experience, performance and
scope of responsibility of the executives and to ensure that the salaries are
at levels which are appropriate to attract and retain high quality
individuals.
In order to determine the Company's competitive position on each element of
compensation for the Chief Executive Officer and the other executive officers,
the Company retained the services of Towers Perrin, a nationally recognized
executive compensation consulting firm. The consultant's recommendations,
which were issued March, 1995, were based on a comparison of the Company's
compensation levels to a proprietary database comprised of over 500 companies,
many of which are included in the S&P 500 Stock Index. Additionally, the
consultant made comparisons to the publicly available data for the other eight
companies then comprising the S&P Specialty Retail Index, in which the Company
was also included. Based on the report of Towers Perrin, the Company presented
to the Shareholders an amendment to the Company's Bonus Plan which was
approved at the May 31, 1995 Annual Meeting of Shareholders. The increases in
the base salaries of the executive officers for fiscal 1996 were based on
subjective determinations taking into account the criteria described above.
The Bonus Plan is administered by the 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
9
<PAGE>
bonuses. The 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.
Under the Company's Bonus Plan, eligible participants are grouped into five
classes, with each class having a different range of bonus payments for
achieving specified pre-tax earnings targets, exclusive of extraordinary items
("EBT"), as follows: (i) for the Chief Executive Officer, bonus payments range
from 50% of base salary at the 20% EBT increase level to 100% of base salary
at the 40% EBT increase level; (ii) for Group "A", which for fiscal year 1996
included Mr. Province, bonus payments range from 33.75% of base salary at the
20% EBT increase level to 67.5% of base salary at the 40% EBT increase level;
(iii) for Group "B", which for fiscal year 1996 included Mr. Holden, bonus
payments range from 30% of base salary at the 20% EBT increase level to 56.25%
of base salary at the 40% EBT increase level; (iv) for Group "C", which for
fiscal year 1996 included Messrs. Stampone, Page and another officer, bonus
payments range from 22.5% of base salary at the 20% EBT increase level to 45%
of base salary at the 40% EBT increase level; and (v) for Group "D", which for
fiscal year 1996 included the other eligible participants, bonus payments
range from 18.75% of base salary at the 20% EBT increase level to 37.5% of
base salary at the 40% EBT increase level. If the minimum 20% EBT increase
level is achieved, the Bonus Plan also affords the Chief Executive Officer the
discretion to increase the bonus for each officer, excluding the Chief
Executive Officer, by an additional one-third of the percentage set forth
above based upon individual performance. For fiscal year 1996, the Chief
Executive Officer determined to award the executive officers (other than the
Chief Executive Officer) bonuses ranging from 6.90% to 10.35% of base salary.
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. The Company's practice is to make periodic
grants of stock options to its executives. In making grants of stock options,
the Committee considers both the performance of the executive and the time
since the most recent grant. The intention is to provide a long-term incentive
opportunity equal to the median of the broad industry and specialty retail
databases. The Company's Stock Incentive Plan provides for the grant of non-
qualified and incentive stock options at exercise prices equal to the fair
market value on the date of grant. Options granted to the Chief Executive
Officer and the other executive officers are generally exercisable for ten
years, absent earlier termination of employment. All outstanding options held
by executive officers provide for deferred vesting over four years. The
provisions of the Stock Incentive Plan provide executive officers of the
Company with a significant interest in long-term growth in the price of the
Company's Common Stock.
On March 19, 1996, the Committee recommended, and on March 28, 1996 the full
Board of Directors approved, the grant of options to purchase 20,000, 30,000
and 20,000 shares to Messrs. Province, Holden and Page, respectively.
A combination of 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. The Committee's current policy is that
compensation payable to the Company's named executive officers should
generally meet the conditions required for full deductibility under Section
162(m) of the Internal Revenue Code. All compensation earned by executive
officers for fiscal year 1996 was fully deductible. The Bonus Plan and the
Option Plan are structured with the intention that compensation payable
pursuant to those plans qualifies as "performance based" compensation which is
not subject to the $1 million deductibility limit under Section 162(m).
This report is submitted by the Compensation Committee:
Myles H. Tanenbaum
Lennox K. Black
Bernard J. Korman
10
<PAGE>
During 1997, Pep Boys will continue to send quarterly earnings releases only
to those shareholders who request them. If you would like to receive such
information for fiscal year 1997, please complete the information below, affix
postage and return to us by JUNE 15, 1997.
PLEASE TYPE OR PRINT CLEARLY
Name ______________________________ Fax Number _______________________________
Address ___________________________ E-Mail Address ___________________________
City ____________________ State _____________________ Zip ____________________
WOULD YOU PREFER THAT THE INFORMATION BE: (PLEASE CIRCLE ONE)
Mailed Faxed E-mailed
We will try to accommodate your preference.
<PAGE>
Please
affix
Postage
Investor Relations
The Pep Boys-Manny, Moe & Jack
3111 West Allegheny Avenue
Philadelphia, PA 19132
<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 an industry peer
group comprised of those companies which formerly comprised the Standard &
Poor's Retail Specialty Index: Circuit City Stores, Costco (formerly known as
Price/Costco), CVS (formerly known as Melville), Home Depot, Lowe's, Tandy,
Toys R Us, Woolworth and the Company.
Comparison of Five-Year Cumulative Total Return Among the Company, the S&P 500
Index and an Industry Peer Group
[CHART APPEARS HERE]
PENSION AND OTHER BENEFIT PLANS
The Company has a qualified defined benefit pension plan for all employees
hired prior to February 2, 1992. Future benefit accruals on behalf of all
employees were frozen as of December 31, 1996.
The following table sets forth information concerning the amount of benefits
available at normal retirement age under this plan, which are not subject to
deduction for Social Security or other offset amounts, accrued to the Chief
Executive Officer and each of the Company's other executive officers. The
amount of annual benefits available is based on the employee's compensation
level over the last five years and the number of years of participation in the
plan. The maximum annual benefit is $20,000.
<TABLE>
<CAPTION>
ANNUALIZED
NAME BENEFIT($)
- ---- ----------
<S> <C>
Mitchell G. Leibovitz................................................ 20,000
Wendel H. Province................................................... 9,816
Michael J. Holden.................................................... 20,000
Mark L. Page......................................................... 19,162
Frederick A. Stampone................................................ 20,000
</TABLE>
11
<PAGE>
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, which are not subject to
deduction for Social Security or other offset amounts. 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 "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 the executive
supplemental pension plan), 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. A trust agreement has been established to better
assure executive officers of payment of these benefits if such events occur.
The executive supplemental pension is based upon the highest average
compensation of the executive officer for a five year period, except in the
case of the Company's Chief Executive Officer, in which event it is based on
the highest average compensation for a three year period. For fiscal years
prior to 1995, base salary only is included in such determination; for fiscal
year 1995 and thereafter, both base salary and the executive officer's bonus
under the Bonus Plan is included. The following chart shows, based on the
highest average salary for the appropriate time period, including bonus where
applicable, the approximate annuity under both pension plans, commencing at
the employee's normal retirement date (age 65) and payable for the longer of
ten years or life:
PENSION PLAN TABLE
<TABLE>
<CAPTION>
ESTIMATED ANNUAL RETIREMENT INCOME ($)
YEARS OF SERVICE
AVERAGE INCLUDED COMPENSATION 5 10 15 20 25 AND OVER
- ----------------------------- ------- ------- ------- ------- -----------
<S> <C> <C> <C> <C> <C>
200,000.......................... 20,000 40,000 60,000 80,000 100,000
400,000.......................... 40,000 80,000 120,000 160,000 200,000
600,000.......................... 60,000 120,000 180,000 240,000 300,000
800,000.......................... 80,000 160,000 240,000 320,000 400,000
1,000,000.......................... 100,000 200,000 300,000 400,000 500,000
1,200,000.......................... 120,000 240,000 360,000 480,000 600,000
1,400,000.......................... 140,000 280,000 420,000 560,000 700,000
</TABLE>
The credited years of service under the pension plans for each of those
individuals, in the order in which they are named on the Summary Compensation
Table, are 18, 7, 17, 21 and 14, respectively.
12
<PAGE>
PROPOSAL TO APPROVE AN AMENDMENT TO THE COMPANY'S 1990 STOCK INCENTIVE PLAN
On May 21, 1990, the shareholders of the Company approved the adoption of
the Company's 1990 Stock Incentive Plan (the "Plan"). The purpose of the Plan
is to recognize the contributions made to the Company by its key employees,
including store and service managers, their supervisors, administrators and
professional support staff, officers and members of the Board of Directors of
the Company; to provide such persons with an additional incentive to devote
themselves to the Company's future success; and to improve the Company's
ability to attract and retain individuals upon whom the Company's sustained
growth and financial success depend.
On June 1, 1993, the shareholders approved an amendment to the Plan to
increase the aggregate number of shares of Common Stock ("Shares") available
for awards under the Plan from 1,000,000 to 2,500,000 Shares. On May 31, 1995
the shareholders approved an amendment to the Plan: (i) to increase the
aggregate number of Shares from 2,500,000 to 4,000,000, the majority of which
have been awarded through stock option grants over the past two years, and
(ii) to limit to 500,000 the number of Shares for which awards may be granted
to any one employee in any year.
The Board of Directors has unanimously approved, and recommends that the
shareholders approve, an amendment to the Plan to increase the number of
Shares available for awards thereunder by 2,000,000 to a total of 6,000,000
Shares.
The material provisions of the 1990 Stock Incentive Plan, as proposed to be
amended, are as follows:
Number of Shares. The Plan authorizes the granting of awards in the form of
stock options or restricted stock, or a combination thereof (collectively, the
"Awards"). The aggregate maximum number of Shares available for Awards,
including options already granted, is 6,000,000, subject to adjustment to
reflect changes in the Company's capitalization. No person may be granted
awards under the Plan covering more than 500,000 Shares in any one calendar
year.
Market Value. On April 11, 1997, the closing price for Common Stock on the
New York Stock Exchange was $29.6250 per share.
Administration. The Plan is administered by the members of the Board of
Directors of the Company who are not employees of the Company or by a
committee designated by the Board of Directors composed of three or more non-
management directors. At present, the Plan is administered by the Compensation
Committee of the Board of Directors which is composed of three non-management
directors (the "Committee"). The Committee is authorized to interpret and
implement the Plan and the documents entered into pursuant to the Plan, and to
make all determinations necessary or advisable in administering the Plan.
Awards will be evidenced by non-transferable written documents containing
provisions consistent with the Plan and such other provisions as the Committee
deems appropriate.
Eligibility. The Plan is open to participation by all key employees and
directors of the Company. As of March 31, 1997, the Company had an aggregate
of 1,823 employees and 9 non-management directors eligible to participate in
the Plan. The Plan provides that each non-management director, without any
action by the Committee, will automatically receive option grants as described
hereafter and that no other Awards will be made to those directors under the
Plan. Each non-management director when first elected to the Board of
Directors will be granted an option to purchase, at fair market value on the
date of the grant, a number of Shares 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
13
<PAGE>
grant of an option under the Plan or any other stock option plan previously or
hereafter adopted by the Company, each non-management director 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. All options granted to non-management
directors vest and become exercisable in cumulative installments over a four
year period, with one-fifth vesting on the date of grant and one-fifth vesting
on each of the next four anniversaries of the grant.
Term of Plan. No awards may be made under the Plan after March 28, 2000.
Options. The exercise price of all options granted under the Plan shall be
not less than 100% of the fair market value of the shares on the date the
option is granted or, in the case of an incentive stock option (ISO) within
the meaning of Section 422 of the Internal Revenue Code (the "Code"), at least
110% of the fair market value of the Shares on the date the option is granted
if the optionee owns, directly or by attribution, Shares possessing more than
10% of the total voting power of all of the Common Stock of the Company. Both
ISOs and options not intended to qualify as ISOs (Nonqualified Options) may be
granted under the Plan. Unless an option is specifically designated at the
time of grant as an ISO, options issued under the Plan will be Nonqualified
Options.
Termination of Options. All options terminate on the earliest of (a) the
expiration of the term specified in the option, which shall not exceed (i) ten
years from the date of grant, or (ii) in the case of an ISO, five years from
the date of grant if the recipient on the date of grant owns, directly or by
attribution, Shares possessing more than 10% of the voting power of the Common
Stock of the Company; (b) the expiration of sixty days from the date the
optionee's employment or service terminates for any reason other than
disability, death or cause (as defined in the Plan); (c) the expiration of 180
days from the date the optionee's employment or service terminates by reason
of disability or death; (d) the date that an optionee's employment or service
terminates for cause; (e) immediately upon the occurrence of a willful breach
of the terms of an optionee's employment contract or an act of disloyalty (as
defined in the Plan) by an optionee to the Company; or (f) the date set by the
Committee to be an accelerated expiration date in the event of a dissolution
or liquidation of the Company or upon the occurrence of certain other
corporate transactions.
Payment for Options. An optionee may pay for Shares issuable upon exercise
of an option in a combination of cash or certified check or, if the option so
provides, in Shares held by the optionee based on the fair market value of the
Shares at the time of payment.
Restricted Stock Awards. Restricted stock awards are Shares issued in the
name of the recipient (the "Restricted Stock"), but which are subject to
restrictions on transfer and risks of forfeiture. The Committee determines the
restrictions and conditions applicable to the issuance of Restricted Stock,
and the period of time during which Restricted Stock remains subject to such
restrictions and conditions, which period shall be at least one year (the
"Restricted Period"). The conditions must be satisfied in order for the
Restricted Stock to vest in the recipient without risk of forfeiture. The
unvested shares of Restricted Stock are subject to forfeiture if the recipient
fails to remain in the employ of the Company during the Restricted Period
except in the case of death or disability. Except as otherwise determined by
the Committee, the recipient shall have all of the rights of a holder of
Shares during the Restricted Period, including without limitation the right to
receive such dividends as may be declared from time to time and the right to
vote the Restricted Stock.
Amendments. The Board of Directors may amend the Plan from time to time in
such manner as it may deem advisable, subject to certain limitations with
respect to the provisions specifying option grants to non-management
directors. However, the Board of Directors may not, without obtaining
shareholder approval within 12 months before or after such action, change the
class of individuals eligible to receive an ISO, extend the expiration date
for the grant of ISOs under the Plan, decrease the
14
<PAGE>
minimum exercise price of an ISO granted under the Plan or increase the
maximum number of shares as to which Awards may be granted under the Plan.
Tax Aspects of the Plan. For Federal income tax purposes under the Code, a
recipient of an ISO will not recognize taxable income upon either the grant or
exercise of the ISO. Such an Optionee will recognize long-term capital gain or
loss on a disposition of the Shares acquired upon exercise of ISOs provided
the Optionee does not dispose of the Shares within two years from the date the
ISO is granted or within the year after the Shares subject to the Option were
transferred to him. If the Optionee satisfies both of the foregoing holding
periods, the Company will not be allowed a tax deduction by reason of the
grant or exercise of an ISO.
For purposes of determining whether an Optionee is subject to any
alternative minimum tax liability, an Optionee who exercises an ISO generally
would be required to increase his or her alternative minimum taxable income,
and compute the tax basis in the stock so acquired, in the same manner as if
the Optionee had exercised a Nonqualified Option. Each Optionee is potentially
subject to the alternative minimum tax. In substance, a taxpayer is required
to pay the higher of his/her alternative minimum tax liability or his/her
"regular" income tax liability. As a result, a taxpayer has to determine
his/her potential liability under the alternative minimum tax.
Under current Federal income tax law, a recipient of a Nonqualified Option
will not recognize taxable income at the time of grant, and the Company will
not be allowed a tax deduction by reason of the grant. Such an Optionee will,
in general, recognize ordinary income in the taxable year in which he or she
exercises the Nonqualified Option, in an amount equal to the excess of the
fair market value of the Shares at the time of exercise over the exercise
price of the Option, and the Company will be allowed a tax deduction in that
amount. Upon disposition of the Shares subject to the Option, the Optionee
will recognize long-term or short-term capital gain or loss, depending upon
the length of time he or she held the Shares prior to disposition, equal to
the difference between the amount realized on disposition and the Optionee's
basis in the Shares subject to the Option (which basis ordinarily is the fair
market value of the Shares on the date the Option was exercised).
As a result of the rules under Section 16(b) of the Exchange Act of 1934,
and depending upon the particular exemption from the provisions of Section
16(b) utilized, officers and directors of the Company and persons owning more
than 10% of the outstanding shares of the Common Stock ("Insiders") may not
receive the same tax treatment as set forth above with respect to the grant
and/or exercise of Options. Generally, Insiders will not be subject to
taxation until the expiration of any period during which they are subject to
the liability provisions of Section 16(b) with respect to any particular
Option. Insiders should check with their own tax advisers to ascertain the
appropriate tax treatment for any particular Option.
Generally, the grant of a Restricted Stock award does not immediately
produce taxable income to a recipient or a tax deduction to the Company. At
the time the restrictions and conditions expire, however, a recipient will
recognize ordinary income in an amount equal to the fair market value of the
Shares on the date the restrictions and conditions expire and the Company will
be entitled to a corresponding income tax deduction. A recipient who elects
under Section 83(b) of the Code within 30 days after the date of the grant,
however, will have ordinary income on the date of the grant equal to the fair
market value on that date of the Shares of Restricted Stock as if the shares
were unrestricted and could be sold immediately. With respect to the sale or
exchange of Shares after the restrictions have expired, the holding period to
determine whether the recipient has long-term or short-term capital gain or
loss will commence on the date the restrictions expire. If the recipient makes
a timely election pursuant to Section 83(b) of the Code, to be taxed as of the
date of the grant, the holding period will commence on the date of the grant
and the tax basis will be equal to the fair market value of the Shares on the
date of grant as if the Shares were unrestricted and could be sold
immediately. Even if no
15
<PAGE>
election has been made under Section 83(b) of the Code, any dividends received
from the Restricted Stock while the restrictions are in effect will be taxed
as additional compensation, and the Company will be entitled to a
corresponding compensation deduction. Otherwise, dividends paid on Restricted
Stock will be taxed to the recipient at ordinary income rates and will not be
deductible by the Company.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THIS PROPOSAL.
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 LLP, 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 LLP 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, 1997.
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, addressed
to the attention of the President, at the principal executive offices of the
Company not fewer than 50 days nor more than 75 days prior to the annual
meeting; provided, however, that in the event that less than 65 days notice or
prior public disclosure (including but not limited to the mailing of the
meeting notice) of the date of the meeting is given or made to shareholders,
notice by the shareholder to be timely 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
16
<PAGE>
was made. The shareholder's notice must set forth a general description of
each item of business proposed to be brought before the meeting, the name and
address of the shareholder proposing to bring such item of business before the
meeting and a representation that the shareholder intends to appear in person
or by proxy at the meeting. The presiding officer of the meeting may refuse to
consider any business that shall be brought before any meeting of shareholders
of the Company other than as provided herein.
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.
17
<PAGE>
THE PEP BOYS - MANNY, MOE & JACK
ANNUAL MEETING OF STOCKHOLDERS - TO BE HELD JUNE 4, 1997
THE BOARD OF DIRECTORS SOLICITS THIS PROXY
The undersigned hereby appoint(s) Mitchell G. Leibovitz, Michael J. Holden,
and each of them, attorney, agent and proxy of the undersigned, with full power
of substitution, to vote all shares of common stock of The Pep Boys -- Manny,
Moe & Jack that the undersigned would be entitled to vote if personally present
at the 1997 Annual Meeting of Stockholders of the Company, and at any
postponement or adjournment thereof.
THIS PROXY WILL BE VOTED AS SPECIFIED BY THE UNDERSIGNED. IF NO CHOICE IS
SPECIFIED, THIS PROXY WILL BE VOTED FOR THE ELECTION OF ALL NOMINEES FOR
DIRECTOR LISTED ON THE REVERSE SIDE, FOR PROPOSALS NUMBERS 2 AND 3, AND
ACCORDING TO THE DISCRETION OF THE PROXY HOLDERS ON ANY OTHER MATTERS THAT MAY
PROPERLY COME BEFORE THE MEETING OR ANY POSTPONEMENT OR ADJOURNMENT THEREOF.
(TO BE SIGNED ON REVERSE SIDE)
<PAGE>
[X] PLEASE MARK YOUR
VOTE AS IN THIS EXAMPLE.
The Board of Directors recommends a vote "FOR" Items 1, 2 and 3.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
FOR all WITHHOLD AUTHORITY
nominees for all nominees NOMINEES: Bernard J. Korman
1. Election of Directors. [ ] [ ] J. Richard Leaman, Jr.
FOR AGAINST ABSTAIN
2. To approve the amendment to [ ] [ ] [ ]
Company's 1990 Stock Incentive
Plan.
3. To ratify the appointment of [ ] [ ] [ ]
Deloitte & Touche LLP as the
(INSTRUCTIONS: To withhold authority to vote for any Company's independent auditors.
individual nominee, write that nominee's name in the
space provided below).
____________________________________________________
Signature(s):____________________ Date:_________________________Signature(s):_________________________ Date:________________________
NOTE: PLEASE DATE AND SIGN EXACTLY AS YOUR NAME APPEARS ON THE FORM AND MAIL THE PROXY PROMPTLY. WHEN SIGNING AS ATTORNEY, EXECUTOR,
ADMINISTRATOR, TRUSTEE OR GUARDIAN, PLEASE GIVE YOUR FULL TITLE AS SUCH. IF SHARES ARE HELD JOINTLY, EACH JOINT OWNER SHOULD
SIGN.
</TABLE>
