Pep Boys 2012 Annual Report Download - page 25

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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 2012were conditioned upon the Company’ s achievement of a level of pre-tax income in
fiscal 2012that exceeded 2011’ s level. Because this objective was not achieved, no calendar 2012 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.
Employment Agreements. In August 2012, we entered into revised Change of Control Agreements with each of
Messrs. Odell, Webb and Cirelli to eliminate the provision of any "gross-up" payments, restructure the severance
compensation and modify the definition of a change of control, all in order to reflect current best practices in
executive compensation and corporate governance. We entered into a Change of Control Agreement of an identical
form with each of Mr. Stern and Mr. Carey upon the commencement of their employment with the Company. 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 potential loss of
employment due to a possible change of control.
In addition, we amended and restated our Stock Incentive Plan to provide that newly-issued equity awards no
longer automatically vest upon the occurrence of a change of control, but rather only following a business
combination, asset sale or liquidation transaction if the surviving company or successor does not assume such awards
or convert them into awards of equivalent value (i.e., double trigger vesting).
We have also entered into Non-Competition Agreements with each of our named executive officersin order to
prevent any of them from soliciting our employees or competing with us if they were to 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.”
These agreements are fully described in “Employment Agreements with Named Executive Officers” below.
Recoupment Policy (“Clawback”).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 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 known of such misconduct and failed to
take appropriate action, then we will seek to recover the related compensation regardless of the fiscal year in which it
was paid.
Share Ownership Guidelines. Our Officers are expected to hold shares equal to the following multiples of their
annual salary: President & Chief Executive Officer 5x; Executive Vice President 3x; Senior Vice President 2x; and
Vice President 1x. The share ownership levels may be satisfied through direct share ownership and/or by holding
unvested time-based RSUs and vested “in the money” stock options. Officers have five years from the later of their
appointment to their then current position or the establishment of a higher ownership threshold for their position (as
described above) to achieve their expected ownership levels. If in a shortfall position, (i) an officer may not sell Pep
Boys Stock, (ii) all net after-tax shares acquired upon the exercise of stock options or the vesting of RSUs must be
retained and (iii) any short-term incentive award in excess of the “cash cap” level will be awarded in the form of
RSUs. All of our named executive officers are currently in compliance with our share ownership guidelines.
Anti-hedging/pledging Policy. Our Officers and Directors are prohibited from entering into contracts,
instruments or other transactions or purchasing securities (a) designed to hedge against their Company stock
holdings, (b) that derive their value with or in relation to the price of a share of Company stock (except for