Exhibit 10.2

 

CHANGE OF CONTROL AGREEMENT

 

This CHANGE OF CONTROL AGREEMENT (this “Agreement”) is made by and between THE
PEP BOYS — MANNY, MOE & JACK, a Pennsylvania corporation (the “Company”), and
                                         (the “Executive”), dated as of
                                                  .

 

WHEREAS, the Company and Executive previously entered into that certain
Employment Agreement, dated as of                                             
(the “Original Agreement”), which sets forth certain of the terms and conditions
of the Executive’s employment with the Company in the event of any “Change of
Control,” and certain compensation that will be paid to the Executive if the
Executive’s employment is terminated in connection with a Change of Control;

 

WHEREAS, the Company and Executive desire to amend the Original Agreement so
that it complies with the requirements of section 409A of the Internal Revenue
Code of 1986, as amended (the “Code”), and the final regulations issued
thereunder, as well as to make certain other changes; and

 

IT IS, THEREFORE, AGREED:

 

1.                                       Operation of Agreement.

 

(a)                                  The “Effective Date” shall be the date
during the “Change of Control Period” (as defined in Section 1(b) hereof) on
which a Change of Control occurs.  Anything in this Agreement to the contrary
notwithstanding, if the Executive’s employment with the Company is terminated
within twelve (12) months prior to the date on which a Change of Control occurs,
and the Executive can reasonably demonstrate that such termination (i) was at
the request of a third party who has taken steps reasonably calculated to effect
a Change of Control or (ii) otherwise arose in connection with a Change of
Control, then for all purposes of this Agreement the “Effective Date” shall mean
the date immediately prior to the date of such termination.

 

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(b)                                 The “Change of Control Period” is the period
commencing on the date hereof and ending on the second anniversary of such date;
provided, however, that commencing on the date one year after the date hereof,
and on each annual anniversary of such date (such date and each annual
anniversary thereof is hereinafter referred to as the “Renewal Date”), the
Change of Control Period shall be automatically extended so as to terminate two
years from such Renewal Date, unless at least sixty (60) days prior to the
Renewal Date the Company shall give notice that the Change of Control Period
shall not be so extended.

 

2.                                       Change of Control.  For the purpose of
this Agreement, a “Change of Control” shall be deemed to have taken place if:

 

(a)                                  individuals who, on the date hereof,
constitute the Board of Directors (the “Board”) of the Company (the “Incumbent
Directors”) cease for any reason to constitute at least a majority of the Board,
provided that any person becoming a director subsequent to the date hereof,
whose election or nomination for election was approved by a vote of at least
two-thirds of the Incumbent Directors then on the Board (either by a specific
vote or by approval of the proxy statement of the Company in which such person
is named as a nominee for director, without written objection to such
nomination) shall be an Incumbent Director; provided, however, that no
individual initially elected or nominated as a director of the Company as a
result of an actual or threatened election contest with respect to directors or
as a result of any other actual or threatened solicitation of proxies or
consents by or on behalf of any person other than the Board shall be deemed to
be an Incumbent Director;

 

(b)                                 any “Person” (as such term is defined in
Section 3(a)(9) of the Securities Exchange Act of 1934 (the “Exchange Act”) and
as used in Sections 13(d)(3) and 14(d)(2) of the Exchange Act) is or becomes a
“beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly
or indirectly, of securities of the Company representing 20% or more of the
combined voting power of the Company’s then outstanding securities eligible to
vote for the election of the Board (the “Voting Securities”); provided, however,
that the event described in this Section 2(b) shall not

 

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be deemed to be a Change of Control by virtue of any of the following
acquisitions: (i) by the Company or any subsidiary of the Company in which the
Company owns more than 50% of the combined voting power of such entity (a
“Subsidiary”), (ii) by any employee benefit plan (or related trust) sponsored or
maintained by the Company or any Subsidiary, (iii) by any underwriter
temporarily holding the Company’s Voting Securities pursuant to an offering of
such Voting Securities, (iv) pursuant to a Non-Qualifying Transaction (as
defined in Section 2(c) hereof), or (v) pursuant to any acquisition by Executive
or any group of persons including Executive (or any entity controlled by
Executive or any group of persons including Executive);

 

(c)                                  the consummation of a merger,
consolidation, statutory share exchange or similar form of corporate transaction
involving the Company or any of its Subsidiaries that requires the approval of
the Company’s stockholders, whether for such transaction or the issuance of
securities in the transaction (a “Business Combination”), unless immediately
following such Business Combination:  (i) more than 50% of the total voting
power of (A) the Company resulting from such Business Combination (the
“Surviving Company”), or (B) if applicable, the ultimate parent Company that
directly or indirectly has beneficial ownership of 100% of the voting securities
eligible to elect directors of the Surviving Company (the “Parent Company”), is
represented by the Company’s Voting Securities that were outstanding immediately
prior to such Business Combination (or, if applicable, is represented by shares
into which the Company’s Voting Securities were converted pursuant to such
Business Combination), and such voting power among the holders thereof is in
substantially the same proportion as the voting power of the Company’s Voting
Securities among the holders thereof immediately prior to the Business
Combination, (ii) no person (other than any employee benefit plan (or related
trust) sponsored or maintained by the Surviving Company or the Parent Company),
is or becomes the beneficial owner, directly or indirectly, of 20% or more of
the total voting power of the outstanding voting securities eligible to elect
directors of the Parent Company (or, if there is no Parent Company, the
Surviving Company) and (iii) at least a majority of the members of the board of
directors of the Parent Company (or, if there is no Parent Company, the

 

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Surviving Company) following the consummation of the Business Combination were
Incumbent Directors at the time of the Board’s approval of the execution of the
initial agreement providing for such Business Combination (any Business
Combination which satisfies all of the criteria specified in (i), (ii) and
(iii) above shall be deemed to be a “Non-Qualifying Transaction”);

 

(d)                                 a sale of all or substantially all of the
Company’s assets;

 

(e)                                  the stockholders of the Company approve a
plan of complete liquidation or dissolution of the Company; or

 

(f)                                    such other events as the Board may
designate.

 

Notwithstanding the foregoing, a Change of Control of the Company shall not be
deemed to occur solely because any person acquires beneficial ownership of more
than 20% of the Company’s Voting Securities as a result of the acquisition of
the Company’s Voting Securities by the Company which reduces the number of the
Company’s Voting Securities outstanding; provided, that if after such
acquisition by the Company such person becomes the beneficial owner of
additional Company Voting Securities that increases the percentage of
outstanding Company Voting Securities beneficially owned by such person by more
than one percent (1%) of the Company’s outstanding Voting Securities, a Change
of Control of the Company shall then occur.

 

3.                                       Employment Period.  The Company hereby
agrees to continue the Executive in its employ, for the period commencing on the
Effective Date and ending on the date                  after such date (the
“Employment Period”).

 

4.                                       Position and Duties.

 

(a)                                  As of the date hereof, the Executive is
employed as                                                and as such the
Executive is responsible for the oversight and management of the Company’s legal
affairs and corporate governance initiatives reporting directly to the Chief
Executive Officer.  During the Employment Period, (i) the Executive’s position
(including status, offices, titles and reporting requirements),

 

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authority, duties and responsibilities shall be at least comparable in all
material respects with the most significant of those held, exercised and
assigned at any time during the ninety (90) day period immediately preceding the
Effective Date and (ii) the Executive’s services shall be performed at the
location where the Executive was employed immediately preceding the Effective
Date or at an office or location less than twenty (20) miles from such location.

 

(b)                                 Excluding periods of vacation, sick leave
and disability to which the Executive is entitled, the Executive agrees to
devote reasonable attention and time during normal business hours to the
business and affairs of the Company and, to the extent necessary to discharge
the responsibilities assigned to the Executive hereunder, to use the Executive’s
reasonable best efforts to perform faithfully and efficiently such
responsibilities.  The Executive may (i) serve on corporate, civic or charitable
boards or committees, (ii) deliver lectures, fulfill speaking engagements or
teach at educational institutions and (iii) manage personal investments, so long
as such activities do not significantly interfere with the performance of the
Executive’s responsibilities.  It is expressly understood and agreed that to the
extent that any such activities have been conducted by the Executive prior to
the Effective Date, the continued conduct of such activities (or the conduct of
activities similar in nature and scope thereto) subsequent to the Effective Date
shall not thereafter be deemed to interfere with the performance of the
Executive’s responsibilities to the Company.

 

5.                                       Compensation.

 

(a)                                  Base Salary.  During the Employment Period,
as consideration for services rendered, the Company shall pay to the Executive a
base salary at an annual rate at least equal to the annual rate of base salary
paid to the Executive by the Company, and any affiliated companies, during the
ninety-day period immediately preceding the month in which the Effective Date
occurs (“Base Salary”) payable over the calendar year at the regular pay periods
of the Company.  During the Employment Period, Base Salary shall be reviewed by
the Board (or the Compensation Committee thereof) at least annually and shall be
increased, but not decreased, at any

 

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time and from time to time as shall be consistent with increases in Base Salary
awarded by the Company in the ordinary course of business to other key
executives.  Any increase in Base Salary shall not serve to limit or reduce any
other obligation to the Executive under this Agreement.  Executive’s Base Salary
shall not be reduced after any such increase.  As used in this Agreement, the
term “affiliated companies” includes any company controlling, controlled by or
under common control with the Company.

 

(b)                                 Bonus Plan.  During the Employment Period,
the Executive shall receive an annual bonus (a “Bonus”) at least equal to the
greater of (i) the average annual dollar bonus amount that was earned by the
Executive under the Company’s Annual Incentive Bonus Plan, as amended and
restated as of December 9, 2003 (or any predecessor or successor plan, policy or
arrangement thereto) (the “Bonus Plan”) for the three completed fiscal years of
the Company (each a “Fiscal Year”) immediately prior to the Effective Date, or
(ii) Executive’s Target (as defined in the Bonus Plan) bonus amount under the
Bonus Plan for the Fiscal Year which includes the Effective Date or, if no
target has been set with respect to Executive for such Fiscal Year, the Target
bonus amount for the immediately preceding Fiscal Year (in either case, based on
Executive’s target percentage of Base Salary established pursuant to the Bonus
Plan).   The Bonus shall be paid to the Executive as soon as practicable after
the Fiscal Year for which the Bonus applies, but not later than April 30
following the end of such Fiscal Year.

 

(c)                                  Employee Benefit Plans.  In addition to the
Base Salary and Bonus payable as hereinabove provided, the Executive shall be
entitled to participate during the Employment Period in all incentive programs,
savings, pension and retirement plans and programs applicable to other key
executives, and to receive use of an automobile of comparable value to
automobiles provided to other key executives (or to receive the same automobile
allowance as is provided to other key executives).  In no event shall such plans
and programs, in the aggregate, provide the Executive with compensation,
benefits and reward opportunities less favorable than the most favorable of
those provided by the Company and its affiliated companies for the Executive
under such plans and programs as in effect at any time during the ninety-day
period

 

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immediately preceding the Effective Date or, if more favorable to the Executive,
as provided at any time thereafter with respect to other key executives.

 

(d)                                 Welfare Benefit Plans.  During the
Employment Period, the Executive and/or the Executive’s family, as the case may
be, shall be eligible for participation in and shall receive all benefits under
each welfare benefit plan of the Company, including, without limitation, all
medical, supplemental medical, prescription, dental, disability, salary
continuance, life, accidental death and travel accident insurance plan and
programs of the Company and its affiliated companies, in each case not less
favorable than those in effect at any time during the ninety-day period
immediately preceding the Effective Date which would be most favorable to the
Executive or, if more favorable to the Executive, as in effect at any time
thereafter with respect to other key executives.

 

(e)                                  Expenses.  During the Employment Period,
the Executive shall be entitled to receive prompt reimbursement for all
reasonable expenses incurred by the Executive in the performance of his duties
hereunder, which reimbursement shall be paid to the Executive over a period that
is no longer than that required under the Company’s reimbursement policy as in
effect at any time during the ninety-day period immediately preceding the
Effective Date which would be most favorable to the Executive or, if more
favorable to the Executive, as in effect at any time thereafter with respect to
other key executives.

 

(f)                                    Office and Support Staff.  During the
Employment Period, the Executive shall be entitled to an office or offices of a
size and with furnishings and other appointments, and to secretarial and other
assistance, at least equal to those provided to the Executive at any time during
the ninety-day period immediately preceding the Effective Date, or, if more
favorable to the Executive, as provided at any time thereafter with respect to
other key executives.

 

(g)                                 Vacation.  During the Employment Period, the
Executive shall be entitled to paid vacation in accordance with the most
favorable policies of the Company as in effect at any time during the ninety-day
period immediately preceding

 

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the Effective Date or, if more favorable to the Executive, as in effect at any
time thereafter with respect to other key executives.

 

6.                                       Termination.  This Agreement shall
terminate under the following circumstances:

 

(a)                                  Expiration of the Employment Period.  This
Agreement shall terminate automatically upon the expiration of the Employment
Period.

 

(b)                                 Death or Disability.  This Agreement shall
terminate automatically upon the Executive’s death.  The Company may terminate
this Agreement, after having established the Executive’s Disability (pursuant to
the definition of “Disability” set forth below), by giving to the Executive
written notice of its intention to terminate the Executive’s employment.  In
such a case, the Executive’s employment with the Company shall terminate
effective on the 180th day after receipt of such notice (the “Disability
Effective Date”), provided that, within 180 days after such receipt, the
Executive shall not have returned to full performance of the Executive’s
duties.  For purposes of this Agreement, “Disability” means personal injury,
illness or other cause which, after the expiration of not less than 180 days
after its commencement, renders the Executive unable to perform his duties with
substantially the same level of quality as immediately prior to such incident
and such disability is determined to be total and permanent by a physician
selected by the Company or its insurers and acceptable to the Executive or the
Executive’s legal representative (such agreement as to acceptability not to be
withheld unreasonably).

 

(c)                                  With or Without Cause.  The Company may
terminate the Executive’s employment with or without “Cause.”  For purposes of
this Agreement, “Cause” means (i) the willful and continued failure of Executive
to perform substantially his duties with the Company (other than any such
failure resulting from Executive’s incapacity due to physical or mental illness
or any such failure subsequent to Executive being delivered a Notice of
Termination without Cause by the Company or delivering a Notice of Termination
for Good Reason to the Company) after a written demand for substantial
performance is delivered to Executive by the Board which specifically

 

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identifies the manner in which the Board believes that Executive has not
substantially performed Executive’s duties and the Executive has failed to cure
such failure to the reasonable satisfaction of the Board; (ii) the willful
engaging by Executive in gross negligence or willful misconduct which is
demonstrably and materially injurious to the Company or its affiliates; or
(iii) Executive’s conviction of or pleading guilty or no contest to a felony. 
For purpose of this Section 6(c), no act or failure to act by Executive shall be
considered “willful” unless done or omitted to be done by Executive in bad faith
and without reasonable belief that Executive’s action or omission was in the
best interests of the Company or its affiliates.  Any act, or failure to act,
based upon authority given pursuant to a resolution duly adopted by the Board,
based upon the advice of counsel for the Company or upon the instructions of the
Company’s chief executive officer or another senior officer of the Company shall
be conclusively presumed to be done, or omitted to be done, by Executive in good
faith and in the best interests of the Company.  Cause shall not exist unless
and until the Company has delivered to Executive, along with the Notice of
Termination for Cause, a copy of a resolution duly adopted by three-quarters
(3/4) of all members of the Board (excluding Executive if Executive is a Board
member) at a meeting of the Board called and held for such purpose (after
reasonable notice to Executive and an opportunity for Executive, together with
counsel, to be heard before the Board), finding that in the good faith opinion
of the Board an event set forth in clauses (i) - (iii) above has occurred and
specifying the particulars thereof in detail.  The Board must notify Executive
of any event constituting Cause within ninety (90) days following the Board’s
knowledge of its existence or such event shall not constitute Cause under this
Agreement.

 

(d)                                 With or Without Good Reason.  The
Executive’s employment may be terminated by the Executive with or without Good
Reason.  For purposes of this Agreement, “Good Reason” means:

 

(i)                                     A material diminution in the Executive’s
authority, duties or responsibilities as compared with the Executive’s
authority, duties or responsibilities with the Company immediately prior to the
Effective Date; provided, however, that Good Reason shall not be deemed to occur
upon a change in authority, duties or

 

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responsibilities that is solely and directly a result of the Company no longer
being a publicly traded entity and does not involve any other event set forth in
this Section 6(d);

 

(ii)                                  A material diminution in the authority,
duties, or responsibilities of the supervisor to whom the Executive is required
to report immediately prior to the Effective Date;

 

(iii)                               A material change in the geographic location
at which the Executive must perform services for the Company, which for this
purposes shall mean the Company requiring the Executive to be based at any
office or location other than that described in Section 4(a)(ii) hereof, except
for travel required in the performance of the Executive’s responsibilities which
shall be no more extensive than the customary travel requirements of Executive
prior to the Effective Date; or

 

(iv)                              Any other action or inaction that constitutes
a material breach of this Agreement by the Company;

 

provided, however, that a termination by Executive for Good Reason shall be
effective only if (i) the Executive has provided a Notice of Termination to the
Company within 90 days after the initial existence of the event constituting
Good Reason that an event constituting Good Reason has occurred, (ii) within 30
days following the delivery of such Notice of Termination by Executive to the
Company, the Company has failed to cure the circumstances giving rise to Good
Reason and (iii) the Executive resigns from employment prior to the end of the
Employment Period.

 

Any termination by the Company with or without Cause or by the Executive with or
without Good Reason shall be communicated by Notice of Termination to the other
party hereto given in accordance with Section 13(d) hereof.  For purposes of
this Agreement, a “Notice of Termination” means a written notice which
(x) indicates the specific termination provision in this Agreement relied upon,
(y) sets forth in reasonable detail the facts and circumstances claimed to
provide a basis for termination of the Executive’s employment under the
provision so indicated and (z) if the termination date is other than the date of
receipt of such notice, specifies the proposed termination date.

 

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7.                                       Obligations of the Company Upon
Termination.

 

(a)                                  Expiration of Employment Period.  If the
Executive’s employment shall be terminated on account of the expiration of the
Employment Period, the Company shall pay the Executive his Base Salary through
the expiration of the Employment Period, plus any Bonus amounts earned but not
paid during such period and any benefits to which the Executive is entitled
under the terms of any of the Company’s benefit plans, policies or arrangements,
and the Company shall have no further obligations to the Executive under this
Agreement.

 

(b)                                 Death.  If the Executive’s employment is
terminated by reason of the Executive’s death, this Agreement shall terminate
without further obligations to the Executive’s legal representatives, other than
those death benefits provided by the Company to which Executive is entitled at
the date of the Executive’s death, which shall be at least comparable to those
in effect at any time during the ninety-day period immediately preceding the
Effective Date or, if more favorable to the Executive and/or the Executive’s
designees, as in effect on the date of the Executive’s death with respect to
other key executives and their designees.

 

(c)                                  Disability.  If the Executive’s employment
is terminated by reason of the Executive’s Disability, this Agreement shall
terminate without further obligations to the Executive, other than those
disability benefits provided by the Company to which Executive is entitled as of
the Disability Effective Date, which benefits shall be at least comparable to
those in effect at any time during the ninety-day period immediately preceding
the Effective Date or, if more favorable to the Executive and/or the Executive’s
designees, as in effect on the date of the Executive’s Disability with respect
to other key executives and their designees.

 

(d)                                 With Cause or Without Good Reason.  If the
Executive’s employment shall be terminated (i) by the Company with Cause, or
(ii) by Executive without Good Reason, the Company shall pay the Executive his
Base Salary through the date of termination at the rate in effect at the time
Notice of Termination is given,

 

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plus any Bonus amounts earned but not paid through the date of termination and
any benefits to which the Executive is entitled under the terms of any of the
Company’s benefit plans, policies or arrangements, and the Company shall have no
further obligations to the Executive under this Agreement.

 

(e)                                  Without Cause or With Good Reason.  If,
during the Employment Period, Executive’s employment shall be terminated (i) by
the Company without Cause, or (ii) by Executive for Good Reason, the Company
shall pay to the Executive in a lump sum in cash within ten (10) days after the
date of termination (unless a delay is required pursuant to
Section 14(b) below), the aggregate of the following amounts, with respect to
which Executive shall have no duty of mitigation and the Company shall have no
right of set-off:

 

(A)                              to the extent not theretofore paid, the
Executive’s Base Salary through the date of termination at the rate in effect on
the date of termination plus any Bonus amounts which have become payable and any
accrued vacation pay;

 

(B)                                a pro rata portion of Executive’s Bonus for
the Fiscal Year in which the date of termination occurs equal to the product of
(1) the greater of (x) the average annual dollar bonus amount that was earned by
the Executive under the Bonus Plan for the three completed Fiscal Years
immediately prior to the date of termination, or (y) Executive’s Target bonus
amount under the Bonus Plan for the Fiscal Year which includes the date of
termination or, if no target has been set with respect to Executive for such
Fiscal Year, the Target bonus amount for the immediately preceding Fiscal Year
(in either case, based on Executive’s target percentage of Base Salary
established pursuant to the Bonus Plan) (the greater of (x) and (y) being
referred to as the “Target Bonus”), multiplied by (2) a fraction, the numerator
of which is the number of days in the Fiscal Year in which the date of
termination occurs through the date of termination and the denominator of which
is three hundred sixty-five (365);

 

(C)                                an amount equal to Executive’s Base Salary
and Target Bonus for the remainder of the Employment Period;

 

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(D)                               an amount equal to the number of months
remaining in the Employment Period multiplied by the applicable monthly COBRA
premium as in effect on the date of the Executive’s termination that the
Executive would have to pay to continue the welfare benefits for which COBRA
continuation rights are available for the Executive and, where applicable, his
or her family, with respect to those plans, programs and policies described in
Section 5(d);

 

(E)                                 the present lump sum value of benefits which
would have accrued for the benefit of Executive under the The Pep Boys — Manny,
Moe & Jack Account Plan or The Pep Boys — Manny, Moe & Jack Legacy Plan, as
applicable, (the “Retirement Plan”) which Executive was participating
immediately prior to his termination date and had Executive remained employed
for the remainder of the Employment Period after the date of termination and
continued participating in such Retirement Plan, determined using the factors
specified in the Retirement Plan for calculating lump sum distributions, and
assuming that Executive would have continued for such period to earn the Base
Salary at the date of termination and be paid the Target Bonus on each date
during such Employment Period that the Bonus typically had been paid prior to
the date of termination.  For purposes of clarity, this benefit is intended as a
portion of the severance benefit payable to the Executive pursuant to this
Section 7(e) and is not intended to be an additional benefit under the
Retirement Plan.   In addition, for purposed of calculating “Years of Service”
under the applicable Retirement Plan, Executive shall receive credit for the
period of time remaining in the Employment Period; and

 

(F)                                 an amount equal to the number of months
remaining in the Employment Period multiplied by the applicable monthly premium
or allowance as in effect on the date of the Executive’s termination that would
have to be paid to continue the programs and benefits which are available for
the Executive and, where applicable, his or her family, with respect to those
plans, programs and policies described in Sections 5 (c) and (d), other than
those covered by clause (D) and (E) above.

 

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In addition, upon a termination of Executive in accordance with this
Section 7(e), all non-vested stock options, and any other non-vested stock or
stock-based awards held by Executive, shall immediately become fully vested,
non-forfeitable and exercisable.

 

Notwithstanding anything herein to the contrary, in the event that Executive is
entitled to the amounts set forth above as a result of a termination of
Executive’s employment prior to a Change of Control and Executive reasonably
demonstrates pursuant to Section 1(a) that such termination was at the direction
of a third party or in connection with the Change of Control, the Executive
shall receive the amounts set forth in this Section 7(e), less any severance
compensation paid to Executive in connection with such termination, within ten
(10) days following the Change of Control; provided however, that if these
amounts are deemed to constitute deferred compensation subject to the
requirements of Section 409A of the Code, such amounts shall be paid to the
Executive as follows: (i) if the Change of Control qualifies as a permissible
distribution event within the meaning of Section 409A(a)(2)(A)(v) of the Code,
it will be paid within ten (10) days following the Change of Control, unless
payment is required to be delayed pursuant to Section 14(b) below in which case
it will be paid at the end of the period described in Section 14(b) if such date
is later than the ten (10) day period following the Change of Control, or
(ii) if the Change of Control does not qualify as a permissible distribution
event within the meaning of Section 409A(a)(2)(A)(v) of the Code, it will be
payable in a single sum on the first business day of the month immediately
following the six (6) month anniversary of the date Executive terminated
employment with the Company.

 

8.                                       Non-Exclusivity of Rights.  Nothing in
this Agreement shall prevent or limit the Executive’s continuing or future
participation in any benefit, bonus, incentive or other plan or program provided
by the Company or any of its affiliated companies and for which the Executive
may qualify, nor shall anything herein limit such rights as the Executive may
have under any stock option or other agreements with the Company or any of its
affiliated companies.  Amounts which are vested benefits or which the Executive
is otherwise entitled to receive under any plan or program of the Company or any
of its affiliated companies at or subsequent to the date on which the
Executive’s

 

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employment is terminated shall be payable in accordance with such plan or
program. Anything herein to the contrary notwithstanding, if the Executive
becomes entitled to payments pursuant to Section 7(e) hereof, such Executive
agrees to waive payments under any severance plan or program of the Company.

 

9.                                       Confidential Information.  The
Executive shall hold in a fiduciary capacity for the benefit of the Company all
secret or confidential information, knowledge or data relating to the Company or
any of its affiliated companies, and their respective businesses, which shall
have been obtained by the Executive during the Executive’s employment by the
Company or any of its affiliated companies and which shall not be public
knowledge (other than by acts by the Executive or his representatives in
violation of this Agreement).  After termination of the Executive’s employment
with the Company, the Executive shall not, without the prior written consent of
the Company, communicate or divulge any such information, knowledge or data to
anyone other than the Company and those designated by it.  In no event shall an
asserted violation of the provisions of this Section 9 constitute a basis for
deferring or withholding any amounts otherwise payable to the Executive under
this Agreement.

 

10.                                 Covenant Against Competition.

 

(a)                                  If, after the occurrence of a Change of
Control, the Executive’s employment by the Company is terminated pursuant to
Sections 7(d) or 7(e) hereof, then for the greater of one year after the date of
termination or the remainder of the Employment Period, the Executive shall not,
directly or indirectly, (i) induce or attempt to influence any employee of the
Company to terminate his employment with the Company or hire or solicit for hire
on behalf of another employer any person then employed or who had been employed
by the Company during the immediately preceding six months or (ii) engage in (as
a principal, partner, director, officer, agent, employee, consultant or
otherwise) or be financially interested in any business operating within the
United States of America, if (A) such business’ primary business is the retail
and/or commercial sale of automotive parts, accessories, tires and/or automotive
repair/maintenance services including, without limitation, the entities

 

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(including their franchisees and affiliates) listed on Schedule
10(a)(ii)(A) hereto, or (B) such business is a general retailer which generates
revenues from the retail and/or commercial sale of automotive parts,
accessories, tires and/or automotive repair/maintenance services in an aggregate
amount in excess of $1 billion, including, without limitation, the entities
(including their franchisees and affiliates) listed on Schedule 10(a)(ii)(B)
hereto.  However, nothing contained in this Section 10(a) shall prevent the
Officer from holding for investment up to two percent (2%) of any class of
equity securities of a company whose securities are traded on a national or
foreign securities exchange.

 

(b)                                 Executive acknowledges that the restrictions
contained in Sections 9 and 10 hereof, in view of the nature of the business in
which the Company is engaged, are reasonable and necessary in order to protect
the legitimate interests of the Company, and that any violation thereof would
result in irreparable injuries to the Company, and the Executive therefore
acknowledges that, in the event of his violation of any of these restrictions,
the Company shall be entitled to obtain from any court of competent jurisdiction
preliminary and permanent injunctive relief (without the posting of any bond) as
well as damages and an equitable accounting of all earnings, profits and other
benefits arising from such a violation, which rights shall be cumulative and in
addition to any other rights or remedies to which the Company may be entitled.

 

(c)                                  If the Executive violates any of the
restrictions contained in the foregoing Section 10(a), the period during which
the restrictions contained in Section 10(a) shall remain in effect shall be
tolled as of the time of commencement of such violation, and shall not begin to
run again until such time as such violation shall be cured by the Executive to
the satisfaction of the Company.

 

(d)                                 Executive acknowledges and agrees that the
covenants and other provisions set forth in Sections 10(a), 10(b) and 10(c)
hereof are reasonable and valid in geographical and temporal scope and in all
other respects.  If any of such covenants or other provisions are found to be
invalid or unenforceable by a final determination of a court of competent
jurisdiction, then (I) the remaining covenants and

 

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other provisions set forth in Sections 10(a), 10(b) and 10(c) shall be
unimpaired, and (ii) the invalid or unenforceable covenant or provision shall be
deemed replaced by a covenant or provision that is valid or enforceable and that
comes closest to expressing the intention of the covenant or provision found to
be invalid or unenforceable.

 

11.                                 Certain Additional Payments by the Company.

 

(a)                                  If it is determined (as hereafter provided)
that any payment or distribution by the Company to or for the benefit of
Executive, whether paid or payable or distributed or distributable pursuant to
the terms of this Agreement or otherwise pursuant to or by reason of any other
agreement, policy, plan, program or arrangement, including without limitation
any stock option, stock appreciation right or similar right, or the lapse or
termination of any restriction on or the vesting or exercisability of any of the
foregoing (a “Payment”), would be subject to the excise tax imposed by
Section 4999 of the Code (or any successor provision thereto) or to any similar
tax imposed by state or local law, or any interest or penalties with respect to
such excise tax (such tax or taxes, together with any such interest and
penalties, are hereafter collectively referred to as the “Excise Tax”), then
Executive will be entitled to receive an additional payment or payments (a
“Gross-Up Payment”) in an amount such that, after payment by Executive of all
taxes (including any interest or penalties imposed with respect to such taxes),
including any Excise Tax, imposed upon the Gross-Up Payment, Executive retains
an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the
Payments.

 

(b)                                 Subject to the provisions of
Section 11(f) hereof, all determinations required to be made under this
Section 11, including whether an Excise Tax is payable by Executive and the
amount of such Excise Tax and whether a Gross-Up Payment is required and the
amount of such Gross-Up Payment, will be made by a nationally recognized firm of
certified public accountants (the “Accounting Firm”) selected by Executive in
his sole discretion.  Executive will direct the Accounting Firm to submit its
determination and detailed supporting calculations to both the Company and
Executive within 30 days after the date of the Change of Control or the date of

 

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Executive’s termination of employment, if applicable, and any other such time or
times as may be requested by the Company or Executive.  If the Accounting Firm
determines that any Excise Tax is payable by Executive, unless the payment is
required to be delayed pursuant to Section 14(b) below, the Company will pay the
required Gross-Up Payment to Executive within 15 days after receipt of such
determination and calculations.  If the Accounting Firm determines that no
Excise Tax is payable by Executive, it will, at the same time as it makes such
determination, furnish Executive with an opinion that he has substantial
authority not to report any Excise Tax on his federal, state, local income or
other tax return.  Any determination by the Accounting Firm as to the amount of
the Gross-Up Payment will be binding upon the Company and Executive.  As a
result of the uncertainty in the application of Section 4999 of the Code (or any
successor provision thereto) and the possibility of similar uncertainty
regarding applicable state or local tax law at the time of any determination by
the Accounting Firm hereunder, it is possible that Gross-Up Payments which will
not have been made by the Company should have been made (an “Underpayment”),
consistent with the calculations required to be made hereunder.  In the event
that the Company exhausts or fails to pursue its remedies pursuant to
Section 11(f) hereof and Executive thereafter is required to make a payment of
any Excise Tax, Executive will direct the Accounting Firm to determine the
amount of the Underpayment that has occurred and to submit its determination and
detailed supporting calculations to both the Company and Executive as promptly
as possible.  Unless the Underpayment is required to be delayed pursuant to
Section 14(b) below, such Underpayment will be promptly paid by the Company to,
or for the benefit of, Executive within 15 days after receipt of such
determination and calculations.

 

(c)                                  The Company and Executive will each provide
the Accounting Firm access to and copies of any books, records and documents in
the possession of the Company or Executive, as the case may be, reasonably
requested by the Accounting Firm, and otherwise cooperate with the Accounting
Firm in connection with the preparation and issuance of the determination
contemplated by Section 11(b) hereof.

 

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(d)                                 The federal, state and local income or other
tax returns filed by Executive will be prepared and filed on a consistent basis
with the determination of the Accounting Firm with respect to the Excise Tax
payable by Executive.  Executive will make proper payment of the amount of any
Excise Tax, and at the request of the Company, provide to the Company true and
correct copies (with any amendments) of his federal income tax return as filed
with the Internal Revenue Service and corresponding state and local tax returns,
if relevant, as filed with the applicable taxing authority, and such other
documents reasonably requested by the Company, evidencing such payment.  If
prior to the filing of Executive’s federal income tax return, or corresponding
state or local tax return, if relevant, the Accounting Firm determines that the
amount of the Gross-Up Payment should be reduced, Executive will within 15 days
pay to the Company the amount of such reduction.

 

(e)                                  The fees and expenses of the Accounting
Firm for its services in connection with the determinations and calculations
contemplated by Sections 11(b) and (d) hereof will be borne by the Company.  If
such fees and expenses are initially advanced by Executive, the Company will
reimburse Executive the full amount of such fees and expenses within 15 days
after receipt from Executive of a statement therefor and reasonable evidence of
his payment thereof.

 

(f)                                    Executive will notify the Company in
writing of any claim by the Internal Revenue Service that, if successful, would
require the payment by the Company of a Gross-Up Payment.  Such notification
will be given as promptly as practicable but no later than 30 days after
Executive actually receives notice of such claim and Executive will further
apprise the Company of the nature of such claim and the date on which such claim
is requested to be paid (in each case, to the extent known by Executive). 
Executive will not pay such claim prior to the date that any payment of amount
with respect to such claim is due.  If the Company notifies Executive in writing
prior to the expiration of such period that it desires to contest such claim,
Executive will:

 

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(A)                              provide the Company with any written records or
documents in his possession relating to such claim reasonably requested by the
Company;

 

(B)                                take such action in connection with
contesting such claim as the Company will reasonably request in writing from
time to time, including without limitation accepting legal representation with
respect to such claim by an attorney competent in respect of the subject matter
and reasonably selected by the Company;

 

(C)                                cooperate with the Company in good faith in
order effectively to contest such claim; and

 

(D)                               permit the Company to participate in any
proceedings relating to such claim;

 

provided, however, that the Company will bear and pay directly all costs and
expenses (including interest and penalties) incurred in connection with such
contest and will indemnify and hold harmless Executive, on an after-tax basis,
for and against any Excise Tax or income tax, including interest and penalties
with respect thereto, imposed as a result of such representation and payment of
costs and expenses.  Without limiting the foregoing provisions of this
Section 11(f), the Company will control all proceedings taken in connection with
the contest of any claim contemplated by this Section 11(f) and, at its sole
option, may pursue or forego any and all administrative appeals, proceedings,
hearings and conferences with the taxing authority in respect of such claim
(provided that Executive may participate therein at his own cost and expense)
and may, at its option, either direct Executive to pay the tax claimed and sue
for a refund or contest the claim in any permissible manner, and Executive
agrees to prosecute such contest to a determination before any administrative
tribunal, in a court of initial jurisdiction and in one or more appellate
courts, as the Company will determine; provided, however, that if the Company
directs Executive to pay the tax claimed and sue for a refund, the Company will
advance the amount of such payment to Executive on an interest-free basis and
will indemnify and hold Executive harmless,

 

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on an after-tax basis, from any Excise Tax or income tax, including interest or
penalties with respect thereto, imposed with respect to such advance; and
provided further, however, that any extension of the statute of limitations
relating to payment of taxes for the taxable year of Executive with respect to
which the contested amount is claimed to be due is limited solely to such
contested amount.  Furthermore, the Company’s control of any such contested
claim will be limited to issues with respect to which a Gross-Up Payment would
be payable hereunder and Executive will be entitled to settle or contest, as the
case may be, any other issue raised by the Internal Revenue Service or any other
taxing authority.

 

(g)                                 If Executive receives any refund with
respect to any Excise Tax previously paid to the Internal Revenue Service by
Executive, and if Executive had received a Gross-Up Payment from the Company
with respect to such Excise Tax, Executive will promptly pay to the Company the
amount of such refund (together with any interest paid or credited thereon after
any taxes applicable thereto).  If, after the receipt by Executive of an amount
advanced by the Company pursuant to Section 11(f) hereof, a determination is
made that Executive will not be entitled to any refund with respect to such
claim and the Company does not notify Executive in writing of its intent to
contest such denial or refund prior to the expiration of 30 days after such
determination, then such advance will be forgiven and will not be required to be
repaid and the amount of such advance will offset, to the extent thereof, the
amount of the Gross-Up Payment required to be paid pursuant to this Section 11.

 

12.                                 Successors.

 

(a)                                  This Agreement is personal to the Executive
and without the prior written consent of the Company shall not be assignable by
the Executive other than by will or the laws of descent and distribution.  This
Agreement shall inure to the benefit of and be enforceable by the Executive’s
legal representatives.

 

(b)                                 This Agreement shall inure to the benefit of
and be binding upon the Company and its successors.

 

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(c)                                  The Company will require any successor
(whether direct or indirect, by purchase, merger, consolidation or otherwise) to
all or substantially all of the business and/or assets of the Company to
expressly assume and agree to perform this Agreement in the same manner and to
the same extent that the Company would be required to perform it if no such
succession had taken place.  As used in this Agreement, “Company” shall mean the
Company as hereinbefore defined and any successor to its business and/or assets
as aforesaid which assumes and agrees to perform this Agreement by operation of
law, or otherwise.

 

13.                                 Miscellaneous.

 

(a)                                  This Agreement shall be governed by and
construed in accordance with the laws of the Commonwealth of Pennsylvania
without reference to principles of conflict of laws.  The parties hereto agree
that the exclusive jurisdiction of any dispute regarding this Agreement shall be
the state courts located in Philadelphia, Pennsylvania.  The Company shall
reimburse Executive for the fees and expenses incurred by him in enforcing this
Agreement, provided that at least one matter in dispute is decided in favor of
Executive.

 

(b)                                 The captions of this Agreement are not part
of the provisions hereof and shall have no force or effect.

 

(c)                                  This Agreement may not be amended or
modified otherwise than by a written agreement executed by the parties hereto or
their respective successors and legal representatives.

 

(d)                                 All notices and other communications
hereunder shall be in writing and shall be given by hand delivery to the other
party or by registered or certified mail, return receipt requested, postage
prepaid, addressed as follows:

 

If to the Executive, to the Executive’s most recent home address reflected on
the Company’s books and records; and

 

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If to the Company:

 

The Pep Boys - Manny, Moe & Jack

3111 West Allegheny Avenue

Philadelphia, PA 19132

Attention: Chief Executive Officer and General Counsel

 

or to such other address as either party shall have furnished to the other in
writing in accordance herewith.  Notice and communications shall be effective
when actually received by the addressee.

 

(e)                                  The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement.

 

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

 

(g)                                 This Agreement contains the entire
understanding of the Company and the Executive with respect to the subject
matter hereof, and supersedes all prior agreements, understandings, negotiations
and discussions, whether oral or written, of the parties, with respect to the
subject matter hereof, including the Original Agreement.

 

(h)                                 The Executive and the Company acknowledge
that the employment of the Executive by the Company, prior to the Effective
Date, is “at will”, and may be terminated by either the Executive or the Company
at any time.  Upon a termination of the Executive’s employment or upon the
Executive’s ceasing to be an officer of the Company, in each case, prior to the
Effective Date, there shall be no further rights under this Agreement.

 

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14.                                 Section 409A of the Internal Revenue Code.

 

(a)                                  This Agreement shall be interpreted to
avoid any penalty sanctions under section 409A of the Code.  Accordingly, all
provisions herein, or incorporated by reference, shall be construed and
interpreted to comply with Section 409A of the Code, to the extent applicable,
and, if necessary, any such provision shall be deemed amended to comply with
section 409A of the Code and regulations thereunder.  If any payment or benefit
cannot be provided or made at the time specified herein without incurring
sanctions under section 409A of the Code, then such benefit or payment shall be
provided in full at the earliest time thereafter when such sanctions will not be
imposed.  All payments to be made upon a termination of employment under this
Agreement may only be made upon a “separation from service” (as defined under
Section 409A of the Code).  In no event may the Executive, directly or
indirectly, designate the calendar year of payment.

 

(b)                                 To the maximum extent permitted under
section 409A of the Code, the cash severance payments payable under this
Agreement are intended to comply with the “short-term deferral exception” under
Treas. Reg. §1.409A-1(b)(4); provided, however, any amount payable to the
Executive during the six (6) month period following the Executive’s termination
date that does not qualify within such exception and is deemed as deferred
compensation subject to the requirements of section 409A of the Code, then such
amount shall hereinafter be referred to as the “Excess Amount.”  If at the time
of the Executive’s termination of employment, the Company’s (or any entity
required to be aggregated with the Company under section 409A of the Code) stock
is publicly-traded on an established securities market or otherwise and the
Executive is a “specified employee” (as defined in section 409A of the Code and
determined in the sole discretion of the Company (or any successor thereto) in
accordance with the Company’s (or any successor thereto) “specified employee”
determination policy), then the Company shall postpone the commencement of the
payment of the portion of the Excess Amount that is payable within the six (6)
month period following the Executive’s termination date with the Company (or any
successor thereto) for six (6) months following the Executive’s separation from
service with the Company (or any successor thereto).  The delayed Excess Amount
shall be

 

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paid in a lump sum to the Executive within ten (10) days following the date that
is six (6) months following the Executive’s separation from service with the
Company (or any successor thereto).  If the Executive dies during such six (6)
month period and prior to the payment of the portion of the Excess Amount that
is required to be delayed on account of section 409A of the Code, such Excess
Amount shall be paid to the personal representative of the Executive’s estate
within sixty (60) days after the Executive’s death.

 

(c)                                  All reimbursements provided under this
Agreement shall be made or provided in accordance with the requirements of
Section 409A of the Code, including, where applicable, the requirement that (i)
any reimbursement is for expenses incurred during the Executive’s lifetime (or
during a shorter period of time specified in this Agreement), (ii) the amount of
expenses eligible for reimbursement during a calendar year may not affect the
expenses eligible for reimbursement in any other calendar year, (iii) the
reimbursement of an eligible expense will be made on or before the last day of
the taxable year following the year in which the expense is incurred, and (iv)
the right to reimbursement is not subject to liquidation or exchange for another
benefit.  Any tax gross up payments to be made hereunder shall be made not later
than the end of the Executive’s taxable year next following the Executive’s
taxable year in which the related taxes are remitted to the taxing authority.

 

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IN WITNESS WHEREOF, the Executive has hereunto set his hand and the Company has
caused this Agreement to be executed in its name on its behalf, all as of the
day and year first above written.

 

 

 

 

 

Name:

 

 

 

THE PEP BOYS - MANNY, MOE & JACK

 

 

 

By:

 

 

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Schedule 10(a)(ii)(A)

 

Advance, AutoZone, Discount Tire, Firestone, Goodyear, Jiffy Lube, Just Tires,
Les Schwab, Midas, Mieneke, Monro, NAPA, O’Reilly, TBC Corp., Tires Plus

 

Schedule 10(a)(ii)(B)

 

BJ’s Wholesale, Costco, Price Club, Sam’s Club, Sears/Kmart, Target, Wal-Mart

 

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