Item 5.02. Departure of Directors or Principal Officers; Election of Directors; Appointment of
Certain Officers; Compensatory Arrangements of Certain Officers
On October 20, 2007, the Compensation Committee (the “Committee”) of the Board of Directors of CSK
Auto Corporation (the “Company”) authorized the grant of stock-based awards to certain of the
Company’s officers and associates pursuant to the Company’s internal equity grant program and 2004
Stock and Incentive Plan that was approved by the Company’s shareholders in June 2004 (the “Plan”).
The following stock options and restricted shares were awarded to the Company’s principal and named
executive officers:
Officer name, number of stock options, exercise price and number of restricted shares:
Lawrence N. Mondry — President & Chief Executive Officer
Number of Stock Options — 144,847 at exercise price of $10.795
Dale Ward — Senior Vice President — Operations
Number of Stock Options — 70,209 at exercise price of $10.795
Number of Restricted Shares — 10,271
Larry Buresh — Senior Vice President & Chief Information Officer
Number of Stock Options — 56,202 at exercise price of $10.795
Number of Restricted Shares — 8,222
Larry Ellis — Senior Vice President — Logistics
Number of Stock Options — 42,627 at exercise price of $10.795
Number of Restricted Shares — 6,236
Stock options and restricted shares awarded
to the above named officers vest as to
1
/
3
of such
options or shares (as the case may be) on each of the first, second and third year anniversaries of
the grant date, and are subject to the terms and conditions of the Plan and the stock option
contracts and restricted stock agreements entered into with each participant, the forms of which
were previously filed with the SEC, except as respects the form of
Mr. Mondry’s stock option contract, the form of which is
filed herewith. The foregoing notwithstanding, in certain circumstances,
including retirement and change in control in the event certain criteria as outlined in the Plan
(subject to express provision to the contrary, as further discussed below relative to Mr. Mondry’s
option grant) are attained, the vesting of equity awards granted under the Plan may be accelerated.
As previously reported on Form 8-K filed June 13, 2007, when Mr. Mondry was hired in June 2007, he
was awarded 75,000 restricted stock units and 300,000 stock options with an exercise price of
$18.655, which was the fair market value of our common stock on the grant date. These equity awards
were made to provide Mr. Mondry with a significant incentive to improve the Company’s performance
and thereby materially and positively impact shareholder value over time. At the time his
employment arrangements were entered into, it was contemplated that Mr. Mondry would not
participate in the Company’s 2007 equity program grant, but would first participate in the 2008
equity program grant, which is anticipated will be made after the Company’s audited financial
statements for fiscal 2007 are filed. Under the Company’s annual equity grant program, the Chief
Executive Officer has historically received stock options equal in value to 130% of base salary
based on the then Black Scholes valuation, which the Company uses for financial reporting purposes,
and that is what the Company agreed to provide to Mr. Mondry in the 2008 program grant pursuant to
his Employment Agreement. On October 20, 2007, the Committee
authorized the award set forth above to Mr. Mondry, which equates to 50% of the stock options that he would have received had he
fully participated in the 2007 program grant. The current grant to Mr. Mondry was made at this time
because the Committee determined that the substantial decline in our stock price over the past four
months (which the Committee does not believe can in any sense be attributed to anything Mr. Mondry
did or did not do) has to a considerable extent thwarted the objective of providing Mr. Mondry with
a significant initial equity incentive.
The terms
and conditions of the stock options awarded to Mr. Mondry as identified above are identical to the other
options granted to eligible officers and associates on October 20, 2007, with one exception. When
Mr. Mondry was hired, there had been recurring speculation concerning a possible near term merger
or acquisition transaction involving the Company. Consequently, Mr. Mondry’s initial employment
arrangements reflected in part the desire of the parties to adequately deal with that possibility.
When considering the grant of additional stock options for Mr. Mondry at this time, the directors
were mindful that Mr. Mondry would receive meaningful economic rewards in the event of a near term
merger or acquisition transaction by virtue of his initial restricted stock unit and stock option
awards and severance arrangements under his Employment Agreement. At the same time, the directors
did not wish that the
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