Pep Boys 2007 Annual Report Download - page 26

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18
Company’s peer group and to compensate Mr. Odell for certain bonus awards and equity holdings that Mr. Odell
forfeited upon leaving his former employer.
Mr. Webb joined the Company on September 10, 2007. In order to induce Mr. Webb to join the Company, the
Human Resource Committee recommended, and the full board, approved (i) a base salary of $400,000, (ii) a target
annual bonus equal to 45% of his base salary (such bonus being guaranteed for fiscal 2007), (iii) participation in the
Company’s other incentive and welfare and benefit plans made available to executives, (iv) an inducement grant of
restricted stock units valued at $360,000 and (v) a signing bonus of $375,000. This compensation package was
designed by the Human Resources Committee to be competitive with those of the chief merchandising officers of
the Company’s peer group and to compensate Mr. Webb for certain bonus awards and equity holdings that Mr.
Webb forfeited upon leaving his former employer.
Interim Chief Executive Officer.
To appropriately compensate our Chairman of the Board for his services as Interim Chief Executive Officer,
from July 2006 through March 2007, we paid Mr. Leonard a monthly salary of $83,333 and reimbursed him for his
commuting expense, with a tax gross-up, from his home in California to our Philadelphia store support center.
Otherwise, Mr. Leonard did not receive or participate in any of our welfare, retirement or other benefit plans or
receive any perquisites. While Mr. Leonard served as interim CEO, he did not receive his customary cash
consideration on account of his service on the Board of Directors, but he did receive his customary equity grants
under our Stock Incentive Plan as a member of the Board. Mr. Leonard’s director compensation received in fiscal
2006 is not reflected in the named executive officer compensation tables below.
Former Executive Officers.
Mr. Smith was separated from the Company effective September 7, 2007. Pursuant to the terms of Mr. Smith’s
Non-Competition Agreement, Mr. Smith received a severance payment equal to two years’ base salary and the
accelerated vesting of all his then outstanding options and RSUs. Mr. Smith also became entitled to the
disbursement of his vested SERP balance.
Mr. Page retired from the Company effective September 7, 2007. Pursuant to the terms of Mr. Page’s Non-
Competition Agreement, Mr. Page received a severance payment equal to one and half years’ base salary. Mr. Page
also became entitled to the disbursement of his vested SERP balance.
While Messrs. Rachor and Yanowitz were both executive officers as of the end of fiscal 2007, both executive
officers subsequently resigned from the Company. Mr. Yanowitz announced his planned departure from the
Company on January 17, 2008. He resigned from the Company effective May 1, 2008. Mr. Rachor resigned from
the Company effective April 23, 2008.
Tax and Accounting Matters.
We consider the tax and accounting impact of each type of compensation in determining the appropriate
compensation structure. For tax purposes, annual compensation payable to the named executive officers generally
must not exceed $1 million in the aggregate during any year to be fully deductible under Section 162(m) of the
Internal Revenue Code. The Stock Incentive Plans are structured with the intention that stock option grants will
qualify as “performance based” compensation that is not subject to the $1 million deduction limit under Section
162(m). In addition, bonuses paid to the CEO under the Annual Incentive Bonus Plan qualify as “performance
based” compensation that is not subject to the $1 million deduction limit under Section 162(m). RSUs generally do
not qualify as “performance based” compensation for this purpose and are therefore subject to the $1 million
deduction limit. In order to compete effectively for the acquisition and retention of top executive talent, we believe
that we must have the flexibility to pay salary, bonus and other compensation that may not be fully deductible under
Section 162(m). Accordingly, the Human Resources Committee retains the authority to authorize payments that may
not be deductible under Section 162(m) if it believes that such payments are in the best interests of Pep Boys and
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