Pep Boys 2009 Annual Report Download - page 40

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Name
Michael R. Odell 58,027
Raymond L. Arthur 11,605
Joseph A. Cirelli 6,673
William E. Shull III 9,284
Scott A. Webb 11,605
Executive Officers as a Group (7 persons) 110,540
.
Such performance-based shares will only vest if we achieve certain predetermined performance goals over a
three-year period for return on invested capital and/or total shareholder return. If such performance goals are not
achieved, the awards will automatically be forfeited.
On April 9, 2010, the closing price of a share of Pep Boys Stock on the New York Stock Exchange was $10.87.
Federal Income Tax Consequences. The federal income tax consequences arising with respect to grants awarded
under the 2009 Stock Incentive Plan will depend on the type of grant. The following provides only a general
description of the application of federal income tax laws to certain grants under the 2009 Stock Incentive Plan. This
discussion is intended for the information of stockholders considering how to vote at the 2009 Annual Meeting and
not as tax guidance to participants in the 2009 Stock Incentive Plan, as the consequences may vary with the types of
grants made, the identity of the recipients, and the method of payment or settlement. The summary does not address
the effects of other federal taxes (including possible “golden parachute” excise taxes) or taxes imposed under state,
local, or foreign tax laws.
From the recipients’ standpoint, as a general rule, ordinary income will be recognized at the time of payment of
cash or delivery of actual shares of Pep Boys Stock. Future appreciation on shares of Pep Boys Stock held beyond
the ordinary income recognition event will be taxable at capital gains rates when the shares of Pep Boys Stock are
sold. We, as a general rule, will be entitled to a tax deduction that corresponds in time and amount to the ordinary
income recognized by the recipient, and we will not be entitled to any tax deduction in respect of capital gain income
recognized by the recipient.
Exceptions to these general rules may arise under the following circumstances: (i) if shares of Pep Boys Stock,
when delivered, are subject to a substantial risk of forfeiture by reason of failure to satisfy any employment-, service-
, or performance-related condition, ordinary income taxation and our tax deduction will be delayed until the risk of
forfeiture lapses (unless the recipient makes a special election to ignore the risk of forfeiture); (ii) if an employee is
granted a stock option that qualifies as an “incentive stock option,” no ordinary income will be recognized, and we
will not be entitled to any tax deduction, if shares of Pep Boys Stock acquired upon exercise of such stock option are
held more than the longer of one year from the date of exercise and two years from the date of 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 million in any year.
Compensation that qualifies as performance-based compensation is excluded from the $1 million deductibility cap
and therefore remains fully deductible by the corporation that pays it. We intend that stock options will qualify as
performance-based compensation. If the shareholders approve the amendment and restatement of the 2009 Stock
Incentive Plan at the Annual Meeting, we also intend that performance-based restricted stock, phantom units and
dividend equivalents on phantom units granted under the 2009 Stock Incentive Plan will qualify as performance-