Pep Boys 2006 Annual Report Download - page 23

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guidelines, as described below. The annual target grants for the named executive officers (other than the CEO) are
as follows:
Title Target RSU Grant Target Option Grant
EVP 18,000 6000
SVP 6000 2000
The Human Resources Committee weighted the split between RSUs and options more heavily towards RSUs as
is consistent with the prevailing corporate trend and in order to reduce our share overhang and the resulting dilution.
When making annual grants, the Human Resources Committee applies the performance values derived from the
named executive officers’ 360° Assessments (discussed above) to the target grants to determine the actual grant
level.
The Human Resources Committee has not established a target level for annual grants for the CEO. Instead, the
Human Resource Committee, in consultation with the head of Human Resources and the General Counsel, makes a
recommendation to the full Board of Directors regarding an annual grant that is consistent with Pep Boys’ overall
performance during the applicable fiscal year.
In fiscal 2006, each of Messrs. Smith, Bacon, and Yanowitz received equity grants reflective of their fiscal 2005
individual performance.
We have established stock ownership guidelines for our executive officers. Under our stock ownership
guidelines, it is recommended that each named executive officer incrementally acquire, over their first five years of
employment with Pep Boys, and then hold, at least two times their annual salary in Pep Boys stock. An officer may
satisfy the stock ownership guidelines through direct share ownership or by holding RSUs.
Retirement Plans. We maintain The Pep Boys Savings Plan, which is a broad-based 401(k) plan. Participants
make voluntary contributions to the savings plan, and we match 50% of the amounts contributed by participants
under the savings plan, up to 6% of salary. Due to low levels of participation in the savings plan, the plan
historically did not meet the non-discriminatory testing requirements under Internal Revenue Code regulations. As
a result, the savings plan was required to make annual refunds of contributions made by our “highly compensated
employees” (including the named executive officers) under the savings plan. Beginning in 2004, we limited the
highly compensated employees’ contributions to the savings plan to ½% of their salary per year. In order to assist
our officers with their retirement savings, we adopted a non-qualified deferred compensation plan that allows
participants to defer up to 20% of their annual salary and 100% of their annual bonus. In order to further encourage
share ownership and more directly align the interests of management with that of its shareholders, the first 20% of
an officer’s bonus deferred into Pep Boys Stock is matched by us on a one-for-one basis with Pep Boys Stock that
vests over three years.
In fiscal 2006, Each of Messrs. Smith, Page and Yanowitz received corporate matching contributions under both
the savings plan and the deferred compensation plan.
In order to keep our executive compensation program competitive, we also have an Executive Supplemental
Retirement Plan, or SERP. The defined benefit portion of the SERP provides a retirement benefit based upon a
participant’s years of service and average compensation, which benefit (and our resulting obligation) is not fixed
until the participant’s retirement. To minimize the uncertainty of this financial obligation, in fiscal 2004,
participation in the defined benefit portion of the SERP was frozen for all unvested and new SERP participants. All
officers who do not actively participate in the defined benefit portion of the SERP now receive fixed annual
contributions to a retirement account maintained under the SERP based upon their age and then current
compensation in accordance with the following: