Pep Boys 2008 Annual Report Download - page 42
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36
grant; (iii) we will not be entitled to a tax deduction for compensation attributable to grants to our chief executive
officer or certain other of our executive officers, if and to the extent such compensation does not qualify as
“performance-based compensation” under Section 162(m) of the Code, and such compensation, along with any
other non-performance-based compensation paid in the same calendar year, exceeds $1 million; and (iv) a grant may
be taxable to the recipient at 20 percentage points above ordinary income tax rates at the time it becomes vested,
plus interest, even if that is prior to the delivery of the cash or shares of Pep Boys Stock in settlement of the grant, if
the grant constitutes “deferred compensation” under Section 409A of the Code, and the requirements of Section
409A of the Code are not satisfied.
Section 162(m) of the Code generally disallows a publicly held corporation’s tax deduction for compensation
paid to its chief executive officer and certain other of its executive officers in excess of $1,000,000 in any year.
Compensation that qualifies as performance-based compensation is excluded from the $1,000,000 deductibility cap
and therefore remains fully deductible by the corporation that pays it. We intend that stock options granted under
the 2009 Plan will qualify as performance-based compensation. Restricted Stock grants, phantom units and
dividend equivalents granted under the 2009 Plan will not qualify as performance-based compensation under the
2009 Plan.
The 2009 Plan provides that we have the right to require the recipient of any grant under the 2009 Plan to (i) pay
to us an or otherwise make available to us an amount sufficient to satisfy any federal, state and/or local withholding
tax requirements prior to the delivery or transfer of any certificates for shares of Pep Boys Stock or (ii) take
whatever action we deem appropriate to protect our interests with respect to tax liabilities, including, without
limitation, allowing the grantee to surrender, or we retain from shares of Pep Boys Stock that would otherwise be
deliverable in connection with an award, a number of shares of Pep Boys Stock equal to such tax liability.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE
"FOR"
THE APPROVAL OF THE AMENDMENT AND RESTATEMENT OF
OUR ANNUAL INCENTIVE BONUS PLAN