EXHIBIT 10.27 - THE PEP BOYS ANNUAL INCENTIVE BONUS PLAN (AMENDED AND RESTATED
AS OF   DECEMBER 9, 2003)

THE PEP BOYS - MANNY, MOE & JACK
ANNUAL INCENTIVE BONUS PLAN
(as amended and restated as of December 9, 2003)

          The Pep Boys - Manny, Moe & Jack, a Pennsylvania corporation (the
“Company”), established, effective January 29, 1989, an Annual Incentive Bonus
Plan for the benefit of officers of the Company who were eligible to participate
as provided therein.  On March 31, 1992, March 30, 1994, March 31, 1995 and
March 31, 1998, the Board of Directors of the Company (the “Board”) amended the
plan in numerous respects.  By action of the Board on December 9, 2003, the plan
was further amended to read in its entirety as hereinafter set forth (the
“Plan”).

          1.          Purpose.  The Plan is intended to increase the
profitability of the Company by giving employees of the Company holding
positions at the levels of officer or director (such employees being hereinafter
collectively referred to as the “Eligible Employees”) a financial stake in the
growth and profitability of the Company.  The Plan has the further objective of
enhancing the Company’s compensation packages for Eligible Employees, thus
enabling the Company to attract and retain officers and other key employees of
the highest ability.  The Plan is intended to provide Eligible Employees with
incentive opportunities that:  (a) provide compensation opportunities which are
competitive with other companies of similar size and industry focus; (b) focus
Eligible Employees’ attention on the accomplishment of specific Company goals;
and (c) recognize different levels and types of individual contributions by
providing a portion of the incentive payout for the achievement of individual
objectives.  The Plan is intended to supplement, not replace, any other bonus
paid by the Company to any of its Eligible Employees and is not intended to
preclude the continuation of such arrangements or the adoption of additional
bonus or incentive plans, programs or contracts.

          2.          Definitions.

                       (a)          “Applicable Performance Measures” shall mean
the Company Performance Measures and/or the Individual Performance Measures upon
which a Participant’s right to receive a Bonus is based.

                       (b)          “Award Period” shall mean a measuring period
of one Fiscal Year.

                       (c)          “Bonus” shall mean a cash payment made by
the Company to a Participant after an Award Period, based on performance against
specific predetermined performance objectives for both the Company and the
Participant, as calculated in accordance with the provisions of this Plan
document.

                       (d)          “Bonus Level” shall mean the level at which
a Participant shall participate in the Plan as set forth in Paragraph 4(b)
hereof.

                       (e)          “CEO” shall mean the person elected to the
office of Chief Executive Officer of the Company by the Board of Directors.

                       (f)          “Code” shall mean the Internal Revenue Code
of 1986, as amended.

                       (g)          “Compensation Committee” shall mean the
Compensation Committee of the Board.  The Compensation Committee shall consist
of two or more persons appointed by the Board, each of whom shall be an “outside
director” as defined under Code section 162(m) and related Treasury regulations.

                       (h)          “Executive Officer” shall mean an executive
officer (within the meaning of the Securities Exchange Act of 1934, as amended)
who is among the top five most highly compensated employees of the Company at
the beginning of any Award Period.

                       (i)          “Fiscal Year” shall mean the Fiscal Year of
the Company which ends on the Saturday nearest January 31 in each year.

                       (j)          “Participant” shall have the meaning set
forth in Paragraph 4 hereof.

                       (k)          “President” shall mean the person elected to
the office of President, Chief Operating Officer or equivalent of the Company by
the Board of Directors.

                       (l)          “Salary” shall mean the base salary of a
Participant for a Fiscal Year.  For purposes of the foregoing, base salary shall
include (i) amounts which the Participant elects to forego to provide benefits
under a plan which satisfies the provisions of Section 401(k) or Section 125 of
the Internal Revenue Code and (ii) amounts which the Participant elects to defer
under a deferred compensation plan or program, other than an equity-based
deferred compensation plan, adopted by the Company.  Base salary shall not
include any amount attributable to any

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bonus paid or accrued (including any bonus deferred under a deferred
compensation plan or program adopted by the Company), whether or not pursuant to
a plan or program.

          3.          Administration, Amendment and Termination.

                       (a)          The Plan shall be administered by the
Compensation Committee acting by a majority vote of its members.  The
Compensation Committee shall have the power and authority to take all actions
and make all determinations which it deems necessary or desirable to effectuate,
administer or interpret the Plan.  The Company’s adoption and continuation of
the Plan is voluntary.  The Compensation Committee shall have the power and
authority to extend, amend, modify or terminate the Plan at any time; provided,
however, that the Compensation Committee shall not have the power to amend or
modify any provision of the Plan without stockholder approval in a manner that
would affect the terms of the Plan applicable to Executive Officers, if
stockholder approval would be required under Code section 162(m).  The
Compensation Committee’s authority to extend, amend or modify the Plan shall
include, without limitation, the right to change Award Periods, to determine the
time or times of paying Bonuses, to establish and approve Company and individual
performance goals and the relative weightings of the goals, and to establish
such other measures as may be necessary to meet the objectives of the Plan.  In
particular, but without limitation of the foregoing, the Compensation Committee
shall have the power and authority to make any amendments or modifications to
the Plan which may be necessary for the Plan to maintain compliance with Section
162(m) of the Internal Revenue Code of 1986, as amended.  An action to terminate
or to substantively amend or modify the Plan shall become effective immediately
upon its adoption or on such date as specified by the Compensation Committee,
but not with respect to any Fiscal Year prior to the Fiscal Year in which the
Compensation Committee so acts.

                       (b)          All actions taken and all determinations
made by the Compensation Committee in accordance with the power and authority
conferred upon the Compensation Committee under Paragraph 3(a) above shall be
final, binding and conclusive on all parties, including the Company and all
Participants.

          4.          Participants.

                       (a)          Each Eligible Employee shall be entitled to
participate in the Plan for each Fiscal Year or portion thereof in which such
employee holds a position at the level of officer or director of the Company
(the “Participants”, or individually, “Participant”), unless excluded from
participation by the Compensation Committee or as provided by Paragraph 11
hereof.  With respect to an individual who becomes an Eligible Employee during
an Award Period, such individual shall become a Participant, unless excluded
from participation by the Compensation Committee or as provided in Paragraph 11
hereof, and shall be eligible to receive an amount equal to the amount which
would have been paid if the Participant had been an Eligible Employee for the
entire Award Period, multiplied by a fraction, the numerator of which is the
number of days during the Award Period that the Participant was an Eligible
Employee of the Company and the denominator of which is the number of days in
the Award Period. 

                       (b)          Each Participant shall participate in the
Plan and earn Bonuses at one of five Bonus Levels, as set forth below:

 

Bonus Level

 

Participant Group

 

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Tier I

 

CEO

 

Tier II

 

President

 

Tier III

 

Executive Vice Presidents

 

Tier IV

 

Senior Vice Presidents

 

Tier V

 

Vice Presidents

With respect to any Participant who was employed at more than one of the Bonus
Levels during an Award Period, the total Bonus amount for such Award Period for
which such Participant shall be eligible shall be the sum of prorated Bonus
payments corresponding to the applicable Bonus Levels.  Each such prorated Bonus
payment shall equal the amount which would have been paid if the Participant had
been an Eligible Employee at the applicable Bonus Level for the entire Award
Period, multiplied by a fraction, the numerator of which is the number of days

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during the Award Period that the Participant was employed at such Bonus Level
and the denominator of which is the number of days in the Award Period.

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          5.          Company Performance Measures. 

                       (a)          Under the Plan, for each Award Period the
Compensation Committee will establish minimum, target and maximum performance
goals for the Company using one or more of the following business criteria (the
“Company Performance Measures”):  (1) return on total stockholder equity; (2)
earnings per share of Common Stock; (3) net income (before or after taxes); (4)
earnings before interest, taxes, depreciation and amortization; (5) sales or
revenue targets; (6) return on assets, capital or investment; (7) cash flow: (8)
market share; (9) cost reduction goals; (10) budget comparisons; (11)
implementation or completion of  projects or processes strategic or critical to
the Corporation’s business operations; (12) measures of customer satisfaction;
and (13) any combination of, or a specified increase in, any of the foregoing. 
Such performance goals may be based upon the attainment of specified levels of
the Corporation’s performance under one or more of the measures described above
relative to the performance of other entities and may also be based on the
performance of any of the Corporation’s business units or divisions or any
parent or subsidiary.  In addition, the Compensation Committee will establish
relative weightings for the respective Company Performance Measures being used. 

                       (b)          To the extent applicable, the Compensation
Committee, in determining whether and to what extent a Company Performance
Measure has been achieved, shall use the information set forth in the Company’s
audited financial statements.

          6.          Individual Performance Measures.  Under the Plan, for each
Award Period the Company will establish individual or “small team” performance
goals for each Participant (the “Individual Performance Measures”); provided,
however, that Individual Performance Measures shall not apply to a Bonus
designated as “qualified performance-based compensation” under Code section
162(m).

          7.          Establishment of Plan Components.

                       (a)          During the first ninety (90) days of each
Award Period, the Compensation Committee, after consultation with the CEO, will
establish and approve the following components of the Plan for the Award
Period:  (i) the Participants; (ii) the minimum, target and maximum Company
performance levels for each Company Performance Measure being used; (iii) the
relative weightings of the respective Company Performance Measures being used;
(iv) the target, minimum and maximum Bonus amounts (each expressed as a
percentage of salary) at each Bonus Level; and (v) the percentages of the Bonus
amounts at each of the Bonus Levels which are attributable to the Company’s
performance and the individual Participant’s performance, respectively, during
the Award Period.  The Compensation Committee shall set forth the decisions
reached on each of the items in this Paragraph 7(a) in its minutes.

                       (b)          During the first ninety (90) days of each
Award Period, the Company will prepare, and the Compensation Committee will
review, approve and set forth in its minutes, the following information for the
Award Period, as determined by the Compensation Committee:  (i) the Bonus
Levels; (ii) the Participants in each Bonus Level (classified by title of
position held); (iii) the target Bonus amount for each Bonus Level (expressed as
a percentage of salary); (iv) the percentages of the Bonus amounts at each of
the Bonus Levels which are attributable to the Company’s performance and the
individual Participant’s performance, respectively, during the Award Period; (v)
the Company Performance Measures for the current Award Period; (vi) the relative
weightings of each such Company Performance Measure; and (vii) the minimum,
target and maximum performance levels for each such Company Performance Measure.

          8.          Determination of Bonus.  Within sixty (60) days after the
end of the Award Period, actual performance will be compared to the
predetermined performance levels for both Company Performance Measures and
Individual Performance Measures, and the resulting actual Bonus amounts for
Participants will be reviewed by the CEO and submitted to the Compensation
Committee for final approval.  Nothing in this Paragraph 8 shall be used to
create any presumption that Bonuses under the Plan are the exclusive means of
providing incentive compensation for Eligible Employees, it being expressly
understood and agreed that the Compensation Committee has the authority to
recommend to the Board of Directors payments to any of the Eligible Employees,
in cash or otherwise, based on performance measures or otherwise, other than
Bonuses under this Plan to Participants.

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          9.          Special Rules for Executive Officers

                       (a)          The maximum Bonus payable to an Executive
Officer for any Fiscal Year shall not exceed three million dollars ($3,000,000).

                       (b)          Notwithstanding anything to the contrary set
forth in this Plan, the Compensation Committee shall establish the Applicable
Performance Measures for Executive Officers no later than the earliest to occur
of (i) the ninetieth (90th) day following the beginning of the Award Period or
(ii) the date on which 25% of the Award Period has been completed, or (iii) such
other date as may be required under applicable regulations under Code section
162(m).  Such Applicable Performance Measures shall be set forth in the minutes
of the Compensation Committee.

                       (c)          Unless the Compensation Committee determines
otherwise, any Bonus payable to an Executive Officer shall be based on
Applicable Performance Measures that satisfy the requirements for “qualified
performance-based compensation” under Code section 162(m), including the
requirement that the achievement of the Applicable Performance Measures be
substantially uncertain at the time they are established and that the Applicable
Performance Measures be established in such a way that a third party with
knowledge of the relevant facts could determine whether and to what extent the
Applicable Performance Measures have been met.  To the extent that any Bonus is
designated as “qualified performance-based compensation” under Code section
162(m), no such Bonus may be made as an alternative to any other award that is
not designated as “qualified performance based compensation” but instead must be
separate and apart from all other awards made.  To the extent a Bonus is
designated as “qualified performance-based compensation,” the Compensation
Committee is authorized to reduce such Bonus for any Award Period based upon its
assessment of personal performance or other factors, but may not increase the
Bonus that would otherwise be payable to the Participant.  In no event shall a
reduction to one Participant’s Bonus result in an increase to a Bonus designated
as “qualified performance based compensation” under Code section 162(m).

                       (d)          If a Bonus to which an Executive Officer may
become entitled is designated as “qualified performance-based compensation”
under Code section 162(m), the Compensation Committee shall certify in writing
prior to payment of such Bonus that the Applicable Performance Measures were in
fact achieved.  Any such certification by the Compensation Committee shall be
set forth in its minutes.

          10.        Payment of Bonuses.   Bonuses shall be paid in cash or
otherwise deferred by the Participant (as permitted by the Company) within
ninety (90) days after the end of the Award Period to which such Bonus relates.

          10.        Termination of Employment.

                       (a)          If a Participant’s employment with the
Company has terminated during an Award Period, for any reason whatsoever, with
or without cause, then the Participant may not receive a Bonus for such Award
Period, except as otherwise provided in Paragraph 11(b) below or in a separate
written agreement between the Company and the Participant.

                       (b)          If during an Award Period, a Participant
dies; becomes disabled; or retires on or after his Early Retirement Date (as
defined in the Company’s defined benefit pension plan), such Participant (or the
Participant’s designated beneficiary) shall be paid, within ninety (90) days
after the end of the Award Period, an amount equal to the amount which would
have been paid if the Participant had been employed by the Company throughout
the entire Award Period, multiplied by a fraction, the numerator of which is the
number of days during the Award Period that the Participant was employed by the
Company and the denominator of which is the number of days in the Award Period.

          11.        Assignment and Alienation of Benefits.

                       (a)          To the maximum extent permitted by law, a
Participant’s right or benefits under this Plan shall not be subject to
anticipation, alienation, sale, assignment, pledge, encumbrance or charge, and
any attempt to anticipate, alienate, sell, assign, pledge, encumber or charge
the same shall be void.  No right or benefit hereunder shall in any manner be
liable for or subject to the debts, contracts, liabilities or torts of the
person entitled to such benefit.

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                       (b)          If any Participant becomes bankrupt or
attempts to anticipate, alienate, sell, assign, pledge, encumber, or charge any
rights to a benefit hereunder, then such right or benefit, in the discretion of
the Compensation Committee, may be terminated.  In such event, the Company may
hold or apply the same or any part thereof for the benefit of the Participant,
his or her spouse, children or dependents, or any of them, in such manner and
portion as the Compensation Committee may deem proper.

       12.          Miscellaneous.

                       (a)          The establishment of this Plan shall not be
construed as granting any Participant the right to remain in the employ of the
Company, nor shall this Plan be construed as limiting the right of the Company
to discharge a Participant from employment at any time for any reason
whatsoever, with or without cause.

                       (b)          The Company may withhold from any amounts
payable under the Plan such Federal, state or local taxes as may be required to
be withheld pursuant to any applicable law or regulation.

                       (c)          Notwithstanding any provision of the Plan to
the contrary, Bonuses to Executive Officers, if made, will be made contingent
upon, and subject to, stockholder approval of the Plan at the 2004 Annual
Stockholders’ Meeting.

                       (d)          It is the intent of the Company that the
Plan and any Bonuses made under the Plan to Executive Officers comply with the
applicable provisions of Code section 162(m).  To the extent that any legal
requirement of Code section 162(m) as set forth in the Plan ceases to be
required under Code section 162(m), that Plan provision shall cease to apply.

                       (e)          The paragraph headings in this Plan are for
convenience only; they form no part of the Plan and shall not affect its
interpretation.

                       (f)          This Plan shall be governed by and construed
in accordance with the laws of the Commonwealth of Pennsylvania.

As adopted by the Board on

THE PEP BOYS - MANNY, MOE & JACK

December 9, 2003.

 

 

 

 

By:

 /s/ Lawrence N. Stevenson

 

 

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     Chief Executive Officer

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