Pep Boys 2012 Annual Report Download - page 26

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22
transactions under Company stock plans) or (c) that utilize Company stock in a margin account or pledge
arrangement.
Tax and Accounting Matters. We consider the tax and accounting impact of each element 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 Plan is currently structured with the intention
that stock option grants and performance-based RSUs will qualify as “performance based” compensation that is not
subject to the $1 million deduction limit under Section 162(m). 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 Compensation 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 our shareholders. All compensation paid to the named executive
officers in fiscal 2011 was fully deductible.
Compensation Committee Report
We have reviewed and discussed the foregoing Compensation Discussion and Analysis with management. Based
upon our review and discussion with management, we have recommended to the Board of Directors that the
Compensation Discussion and Analysis be included in this Proxy Statement and in Pep Boys’ Annual Report on
Form 10-K for the fiscal year ended February 2, 2013 filed with the SEC.
This report is submitted by M. Shân Atkins, Robert H. Hotz and James A. Mitarotonda.