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.
(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.
(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 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 priort
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
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 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 the 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.
Percentage of Salary
for All Participants Percentage of
EBIT Increase Except CEO Salary for CEO
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%
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.
(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.Assignments and Alienation of Benefits.
(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 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
(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:\s\ Mitchell G. Leibovitz
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Chairman of the Board,
Chief Executive Officer & President