Pep Boys 2010 Annual Report Download - page 26

20
In order to keep our executive compensation program competitive, we also maintain a Supplemental Executive
Retirement Plan, or SERP, known as our Account Plan. The Account Plan provides fixed annual contributions to a
retirement account based upon the participant’s age and then current compensation in accordance with the following:
If the Participant is…
Annual contribution as a
percentage of cash
compensation (salary +
short-term cash
incentive)
At least 55 years of age 19%
At least 45 years of age but not more than 54 years of age 16%
At least 40 years of age but not more than 44 years of age 13%
Not more than 39 years of age 10%
Notwithstanding the foregoing, for the first four years of a participant’s employment, their contribution
percentage is limited to 10%. As an inducement to hire Mr. Arthur, however, this limitation was waived.
In fiscal 2010, all named executive officers participated in the Account Plan.
In order to incent the achievement of incremental profitability, all Company contributions to the savings plan
and Account Plan (on account of all associates, including the named executive officers) that would otherwise have
been made during calendar 2010 were conditioned upon the Company’s achievement of a level of pre-tax income in
fiscal 2010, which exceeded 2009’s level. Because this objective was achieved, all such calendar 2010
contributions were made.
Health and Welfare Benefits.As one element of a market-competitive compensation package, we also provide
our named executive officers with health and welfare benefits, including medical and dental coverage, life insurance
valued at one times salary, long term disability coverage and an auto allowance (the auto allowance is a
grandfathered benefit no longer provided to newly- hired/appointed officers).
Employment Agreements. We have entered into Non-Competition and Change of Control Agreements with each
of the named executive officers as described in “Employment Agreements with Named Executive Officers”below.
The purpose of our Non-Competition Agreements is to prevent our named executive officers from soliciting our
employees or competing with us if they leave Pep Boys of their own volition. As consideration for such restrictive
covenants, the Non-Competition Agreements provide for a severance payment to be made to a named executive
officer if he is terminated by the Company without “cause.” The purpose of the Change of Control Agreements is to
provide an incentive for our officers to remain in our employment and continue to focus on the best interests of Pep
Boys without regard to any possible change of control. In 2010, the Compensation Committee, advised by Pay
Governance, undertook a comprehensive review of our Non-Competition and Change of Control Agreements and
determined that, taken as a whole, their terms were consistent with similar agreements provided to named executive
officers by a number of the peer group companies, as well as, throughout the general marketplace. Accordingly, no
changes were made to those agreements then in place. However, as with all aspects of our executive compensation
program, the Compensation Committee continually monitors emerging trends in executive compensation and
considers future changes as circumstances warrant.
Recoupment Policy. In fiscal 2010, we adopted a recoupment policy. We will seek to recover, at the direction of
the Compensation Committee, all or a portion of any compensation awarded or paid to a current or former Officer
during the prior three fiscal years year if (i) the amount of such compensation was based on the achievement of
certain financial results that were subsequently the subject of a restatement due to the material noncompliance of the
Company with any financial reporting requirement under the securities laws and (ii) a lower award or payment would
have been made to the Officer based upon the restated financial results. If, however, the Compensation Committee
determines that an Officer engaged in misconduct that resulted in the obligation to restate or knew or should have