**Exhibit 10.6**

**EMPLOYMENTAGREEMENT**

This EMPLOYMENT AGREEMENTis made by and between THE PEP BOYS—MANNY, MOE & JACK, a Pennsylvaniacorporation (the “Company”), and Jeffrey C. Rachor (the “Executive”), on thedate of the last signature below (the “Effective Date”).

W I T N E S S E T H :

WHEREAS, the Company desires to retain the employmentservices of the Executive and the Executive desires to accept such employmentby entering into this Employment Agreement on the terms and conditions as setforth herein (the “Agreement”);

NOW, THEREFORE, inconsideration of the representations, warranties and mutual covenants set forthherein, the Company and the Executive agree as follows:

1.     *Position and Duties*.

(a)   TheExecutive shall serve as the President & Chief Executive Officer (“CEO”)of the Company and shall perform such duties and services incident to suchpositions and such other reasonably related duties as may be assigned to himfrom time to time by the Board of Directors of the Company (“Board”). On theEffective Date, the Board shall appoint the Executive to be a member of theBoard and, thereafter, use its best efforts to have the Executive elected tothe Board annually during the Executive’s employment with the Company. DuringExecutive’s employment with the Company, the Executive shall report directly toand take direction from the Board or its Chairman.

(b)   Excludingperiods of vacation, sick leave and disability to which the Executive isentitled, the Executive agrees to devote his full time, attention and energy tothe business of the Company and to use his reasonable best efforts to performfaithfully and efficiently such responsibilities. Executive shall not, withoutthe prior written consent of the Company, actively engage in any other businessor business activity during the Employment Period (as defined below). TheExecutive may, however, (i) serve on civic or charitable boards orcommittees, (ii) participate in appropriate professional organizations, (iii) deliverlectures, fulfill speaking engagements or teach at educational institutions, (iv) managepersonal investments, and (v) serve on corporate boards with thepermission of the Board, so long as such activities do not significantlyinterfere with the performance of the Executive’s responsibilities hereunder.

2.     *Employment Period; Commencement of Employment*.   Theterm of this Agreement shall commence on the Effective Date and end on thethird anniversary of the Effective Date, as defined below (the “InitialEmployment Period”). Thereafter, the term of this Agreement shall automaticallyrenew for an indeterminate number of one-year periods unless, at least threemonths prior to the expiration of the Initial Employment Period or anysucceeding one-year term, either party gives written notice to the other of itselection not to extend such term of the Agreement (the Initial EmploymentPeriod and any succeeding one-year renewal is hereinafter referred to as the “EmploymentPeriod”). The Executive shall commence employment services as soon asreasonably practicable following the Effective Date, but no later than March 26,2007 (the “Start Date”).

3.     *Compensation*.

(a)   *Signing Bonus*.   In consideration for the Executiveentering into this Agreement and agreeing to serve as the President &CEO, the Company shall pay to the Executive a signing bonus equal to $1,200,000(the “Signing Bonus”) within ten business days following the Start Date. TheSigning Bonus shall be conditioned on the Executive’s continued employment withthe Company for one year following the Start Date. To the extent that theExecutive’s employment with the Company is terminated by either the Executiveor the Company, for any or no reason, prior to the end of that one-year period,the Signing Bonus shall be forfeited and the Executive agrees to repay theSigning Bonus to the Company within five business days following suchtermination. The Executive agrees that the Company shall have the right to setoff such repayment obligation against any amount then owed by the Company tothe Executive, 

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including, withoutlimitation, the cancellation of stock options, restricted stock units and/orother equity instrument in the Company having a fair market value equal to therepayment obligation.

(b)   *Inducement Grant*.   On the Effective Date, the Companyshall grant to the Executive (i) a stock option to purchase 1,000,000shares of the Company’s common stock (the “Inducement Option”) and (ii) 500,000restricted stock units (the “Inducement RSUs” and together with the InducementOption, the “Inducement Grant”). The Inducement Option shall have an exerciseprice per share equal to the fair market value of one share of the Company’scommon stock on the Effective Date ( *i.e.*, theaverage of the high and low of the price per share on the NY Stock Exchange onthe date of grant). The Inducement Grants shall be subject to the followingvesting schedule: 25% fully vested on the Start Date and 25% to vest on each ofthe first, second and third anniversaries of the Effective Date. The InducementGrants shall have such other terms and conditions as set forth in separateagreements to be entered into by the Company and the Executive and asconsistent with the terms of the Company’s 1999 Stock Incentive Plan.

(c)   *Base Salary*.   During the Employment Period, asconsideration for services rendered, the Company shall pay to the Executive abase salary at an annual rate at least equal to $1,200,000 (“Base Salary”)payable over each calendar year at the regular pay periods of the Company. Duringthe Employment Period, Base Salary shall be reviewed by the Board at leastannually and may be increased, but not decreased, at any time and from time totime as shall be determined by the Board in its sole discretion.

(d)   *Annual Bonus*.   During the Employment Period, theExecutive shall be eligible to earn a bonus based upon performance objectivesestablished by the Board, with threshold, target, maximum and CAP bonus levelsof 75%, 150% 225% and 300% of Base Salary, under the Company’s Executive AnnualIncentive Bonus Plan (the “Bonus Plan”). If the target performance goals forFiscal 2007 are not attained such that the Executive would earn at least$1,800,000, the Company shall pay to Executive a guaranteed bonus, withoutregard to achievement of goals, for Fiscal 2007 equal to $1,800,000 (the “GuaranteedBonus”).

(e)   *Annual Grants*.   During the Employment Period, theExecutive shall be eligible for an annual equity grants (the “Annual Grants”),at the discretion of the Board, with target grants of stock options to purchase150,000 shares of the Company’s Common Stock and such number of restrictedstock units with a fair market value equal to the Executive’s then currentannual base salary, under the Company’s 1999 Stock Incentive Plan (or itssuccessor plan). The Annual Grants shall be subject to the following vestingschedule: 25% fully vested on their grant date and 25% to vest on each of thefirst, second and third anniversaries of their grant date.

(f)    *Employee Benefit Plans*.   In addition to the BaseSalary, Bonus and Annual Grants as hereinabove provided, the Executive shall beentitled to participate during the Employment Period in all incentive programs,savings, pension and retirement plans and programs generally available to othersenior executives of the Company from time to time other than those embodied inseparately negotiated agreements.

(g)   *Welfare Benefit Plans*.   During the Employment Period,the Executive and the Executive’s family shall be eligible for participation(to the same degree as other senior executives of the Company) in each welfarebenefit plan of the Company, including, without limitation, all medical,prescription, dental, disability, salary continuance, life, accidental deathand travel accident insurance plan and programs of the Company and itsaffiliated companies. The Executives annual automobile allowance, payable inbi-monthly installments, shall be $30,000.

(h)   *Vacation*.   During the Employment Period, the Executiveshall be entitled to four weeks per calendar year of paid vacation.

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(i)    *Business Expenses, Temporary Living, Travel and Relocation Expenses,etc*.   The Company shall promptly reimburse the Executive forall reasonable employment, travel, entertainment and other business relatedexpenses incurred by the Executive in accordance with the policies, practicesand procedures of the Company in effect from time to time. The Company shallreimburse the Executive for all reasonable and customary travel, commuting andtemporary living expenses during the first year of the Employment Period. Shouldthe Executive, at his sole discretion, relocate to the greater Philadelphiametropolitan area during the Employment Period, the Company shall reimburse theExecutive for all reasonable and customary relocation costs and expenses(including costs associated with the sale of his residence (including, withoutlimitation, sales commission and closing costs).

(j)    *Executive Supplemental Retirement Plan*.   The Executiveshall be immediately eligible to participate in the Company’s ExecutiveSupplemental Retirement Plan at a contribution level equal to 16% (of BaseSalary and Annual Bonus) fully vesting on (i) the fourth anniversary ofthe Effective Date or (ii) the Executive’s earlier involuntary terminationwithout “Cause,” as defined below, or termination for “Good Reason,” as definedbelow.

(k)   *Controlling Document*.   To the extent there is anyinconsistency between the terms of this Agreement and the terms of any plan orprogram under which compensation or benefits are provided hereunder, thisAgreement shall control. Otherwise, the Executive shall be subject to theterms, conditions and provisions of the Company’s plans and programs, asapplicable.

4.     *Termination*.   This Agreement and Executive’s employmentshall terminate under the following circumstances:

(a)   *Death or Disability*.   This Agreement shall terminateautomatically upon the Executive’s death. During the Employment Period, if, asa result of physical or mental incapacity or infirmity, Executive shall beunable to perform his duties under this Agreement for (i) a continuousperiod of 90 days or more, or (ii) periods aggregating 120 days or moreduring any period of 12 consecutive months (each a “Disability Period”), and atthe end of the Disability Period there is no reasonable probability thatExecutive can promptly resume his duties hereunder, Executive shall be deemeddisabled (the “Disability”) and the Company, by notice to Executive, shall havethe right to terminate this Agreement and the Executive’s employment forDisability at, as of or after the end of the Disability Period. The existenceof the Disability shall be determined by a reputable, licensed physicianselected by the Company in good faith, whose determination shall be final andbinding on the parties. Executive shall cooperate in all reasonable respects toenable an examination to be made by such physician. Notwithstanding theforegoing, the Company may conclusively determine Executive to have suffered aDisability and terminate the Employment Period on account of such Disability atany time after Executive has commenced receiving benefits under the Company’sLong Term Disability Salary Continuation Plan.

(b)   *With or Without Cause*.   The Company may terminate thisAgreement and the Executive’s employment with or without “Cause.”  For purposes of this Agreement, “Cause” means(i) the continued failure of Executive to comply with the lawfuldirectives of the Chairman or the Board (other than any such failure resultingfrom Executive’s incapacity due to physical or mental illness or any suchfailure subsequent to Executive being delivered a Notice of Termination withoutCause by the Company or delivering a Notice of Termination for Good Reason tothe Company) within 30 days after a written demand is delivered to theExecutive by the Company specifying the failure; (ii) any act by Executiveof illegality, dishonesty or fraud in connection with the Executive’semployment; (iii) the willful engaging by Executive in gross misconductwhich is demonstrably and materially injurious to the Company or itsaffiliates; (iv) Executive’s conviction of or pleading guilty or nocontest to a felony; or (v) a violation of *Section 6or 7* herein. For purpose of this paragraph (b), no act or failure toact by Executive shall be considered “willful” unless done or omitted to bedone by Executive in bad faith and without reasonable belief that Executive’saction or omission was in the best interests of the Company or its affiliates. Anyact, 

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or failure to act, basedupon authority given pursuant to a resolution duly adopted by the Board orbased upon the advice of counsel for the Company shall be conclusively presumedto be done, or omitted to be done, by Executive in good faith and in the bestinterests of the Company. Cause shall not exist unless and until the Companyhas delivered to Executive, along with the Notice of Termination for Cause, acopy of a resolution duly adopted by two-thirds (2¤3) of theentire Board (excluding Executive if Executive is a Board member) at a meetingof the Board called and held for such purpose, finding that in the good faithopinion of the Board an event set forth in clauses (i) - (v) abovehas occurred and specifying the particulars thereof in detail.

(c)   *With or Without Good Reason*.   This Agreement and theExecutive’s employment may be terminated by the Executive with or without GoodReason. For purposes of this Agreement, “Good Reason” means:

(i)    any changein the duties or responsibilities of Executive that is inconsistent in anymaterial and adverse respect with Executive’s position, duties,responsibilities or status as President & CEO (including any materialand adverse diminution of such duties or responsibilities or change in hisreporting relationship so that he is to report to someone other than the Boardor its Chairman); *provided*, *however*,that Good Reason shall not be deemed to occur upon (A) a change in dutiesor responsibilities (other than reporting responsibilities) that is solely anddirectly a result of the Company no longer being a publicly traded entity anddoes not involve any other event set forth in this paragraph (c).

(ii)   anysubstantial failure by the Company to comply with any of the provisions of *Sections 3* or 8(c) of this Agreement;

provided, however,that a termination by Executive for Good Reason shall be effective only if,within 30 days following the delivery of a Notice of Termination for GoodReason by Executive to the Company, the Company has failed to cure the circumstancesgiving rise to Good Reason to the reasonable satisfaction of the Executive.

(d)   *Notice of Termination*.   Any termination by the Companywith or without Cause or by the Executive with or without Good Reason shall becommunicated by Notice of Termination to the other party hereto given inaccordance with *Section 9(d) *of thisAgreement. For purposes of this Agreement, a “Notice of Termination” means awritten notice which (i) indicates the specific termination provision inthis Agreement relied upon, (ii) sets forth in reasonable detail the factsand circumstances claimed to provide a basis for termination of the Executive’semployment under the provision so indicated, if applicable, and (iii) ifthe termination date is other than the date of receipt of such notice,specifies the proposed termination date.

(e)   *Expiration of the Employment Period*.   This Agreementand the Executive’s employment shall terminate upon the delivery of a notice ofnon-extension of the Employment Period by either the Executive or the Companyas set forth in *Section 2*.

(f)    *Certain Modifications*.   Notwithstanding anything to thecontrary contained in this *Section 4*or in any other Section of this Agreement, Good Reason shall not be deemedto occur, and the Company shall not be deemed in violation of any provision ofthis Agreement, upon any change in duties or responsibilities of the Executivethat is a result of a modification of the organizational structure of theCompany.

5.     *Obligations of the Company Upon Termination*.

(a)   *Death*.   If the Executive’s employment is terminated byreason of the Executive’s death, this Agreement shall terminate and the Companyshall pay the Executive’s estate his Base Salary through the date oftermination at the rate in effect at the time of death and any other benefits(including death benefits and any bonus due under the terms of the Bonus Plan)to which Executive is entitled to hereunder 

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as of the date of theExecutive’s death and shall have no further obligations to the Executive underthis Agreement.

(b)   *Disability*.   If the Executive’s employment isterminated by reason of the Executive’s Disability, this Agreement shallterminate and the Company shall pay the Executive his Base Salary through thedate of termination at the rate in effect at the time of Disability and anyother benefits (including Disability benefits) to which Executive is entitledto hereunder at the date of the termination and shall have no furtherobligations to the Executive under this Agreement.

(c)   *With Cause, Without Good Reason or Non-Extension of Employment Period*.   Ifthe Executive’s employment shall be terminated (i) by the Company withCause, (ii) by Executive without Good Reason or (iii) on account ofthe delivery by either party of a notice of non-extension of the EmploymentPeriod, the Company shall pay the Executive his Base Salary through the date oftermination at the rate in effect at the time Notice of Termination is givenand shall have no further obligations to the Executive under this Agreement.

(d)   *Without Cause or With Good Reason*.   If, during theEmployment Period, Executive’s employment shall be terminated (i) by theCompany without Cause, or (ii) by Executive for Good Reason, the Companyshall pay to the Executive or provide the following amounts and benefits, withrespect to which Executive shall have no duty of mitigation:

(A)  to theextent not theretofore paid, the Company shall pay the Executive’s Base Salarythrough the date of termination at the rate in effect on the date oftermination plus any Bonus amounts had been earned but had not yet been paidand any vacation pay for accrued but unused vacation through the date oftermination in the calendar year which includes the date of termination (suchamount to be paid in a lump sum within 10 days of such termination);

(B)   the Companyshall pay to the Executive an amount equal to two times his then current BaseSalary (such amount to be paid in a lump sum within 10 days of suchtermination);

(C)   if the dateof termination is prior to the payment of the Guaranteed Bonus, the Companyshall pay to the Executive an amount equal to the Guaranteed Bonus (such amountto be paid in a lump sum within 10 days of such termination); and

(D)  to theextent at least 333,333 of the Inducement RSUs are not fully vested as of thetermination date, the Company shall cause such additional number of theInducement RSUs to immediately vest as is equal to 333,333 minus such number ofthe Inducement RSUs that have otherwise fully vested as of the terminationdate.

All payments andbenefits to be provided to the Executive under this *Section 5(d) *shallbe subject to the Executive’s (x) compliance with the restrictions of *Sections 6 and 7(a) *herein and (y) execution of ageneral release and waiver of claims against the Company in the form to bedetermined by the Company at the time of termination. Anything herein to thecontrary notwithstanding, if the Executive becomes entitled to paymentspursuant to *Section 5(d) *hereof, Executiveagrees to waive payments under any severance plan or program of the Company.

(e)   *Change of Control Agreement*.   Notwithstanding theforegoing, the Company shall have no obligation to provide, and the Executiveshall not be entitled to receive, the payments and benefits to be providedunder this *Section 5*, if the Executive’semployment shall be terminated during such Executive’s Employment Period (asdefined in that certain Change of Control Employment Agreement, dated as of thedate hereof, between the Company and the Officer (the “Change in ControlAgreement”)). During the Employment Period (as defined in the Change of ControlAgreement), the Change of Control Agreement shall supercede this Agreement inits entirety.

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6.     *Confidential Information*.   The Executive shall foreverhold in a fiduciary capacity for the benefit of the Company all secret orconfidential information, knowledge or data relating to the Company or any ofits affiliated companies, and their respective businesses, which shall havebeen obtained by the Executive during the Executive’s employment by the Companyor any of its affiliated companies and which shall not be public knowledge. TheExecutive shall not, without the prior written consent of the Company or exceptas required by law or in a judicial or administrative proceeding with subpoenapowers, communicate or divulge any such information, knowledge or data toanyone other than the Company and those designated by it.

7.     *Covenant Against Competition*.

(a)  TheExecutive shall not, during his employment with the Company, and for two yearsthereafter, directly or indirectly, (a) induce or attempt to influence anyemployee of the Company to terminate his employment with the Company or hire orsolicit for hire on behalf of another employer any person then employed or whohad been employed by the Company during the immediately preceding six months or(b) engage in (as a principal, partner, director, officer, agent,employee, consultant or otherwise) or be financially interested in any businessoperating within the United States of America, if (i) such business’primary business is the retail and/or commercial sale of automotive parts,accessories, tires and/or automotive repair/maintenance services including, withoutlimitation, the entities (including their franchisees and affiliates) listed on*Schedule 7* hereto, or (ii) theretail and/or commercial sale of automotive parts, accessories, tires and/orrepair/maintenance services is the primary focus of such engagement orfinancial interest. However, nothing contained in this *Section 7*shall prevent the Executive from (i) following his employment with theCompany, engaging in (as a principal, partner, director, officer, agent,employee, consultant or otherwise) or be financially interested in any new orused automotive dealership business (including an automotive repair andmaintenance service business that is ancillary thereto) or (ii) holdingfor investment up to two percent (2%) of any class or equity securities of acompany whose securities are traded on a national or foreign securitiesexchange.

(b) The Executiveacknowledges that the restrictions contained in *Section 6*hereof and this *Section 7*, in view of thenature of the business in which the Company is engaged, are reasonable andnecessary in order to protect the legitimate interests of the Company, and thatany violation thereof would result in irreparable injuries to the Company, andthe Executive therefore acknowledges that, in the event of his violation of anyof these restrictions, the Company shall be entitled to obtain from any courtof competent jurisdiction preliminary and permanent injunctive relief (withoutthe posting of any bond) as well as damages and an equitable accounting of allearnings, profits and other benefits arising from such a violation, whichrights shall be cumulative and in addition to any other rights or remedies towhich the Company may be entitled.

(c)  If theExecutive violates any of the restrictions contained in this *Section 7*, the restrictive period shall be extendedfrom the time of the commencement of any such violation until such time as suchviolation shall be cured by the Executive to the satisfaction of the Company.

(d) Theinvalidity or unenforceability of any provision or provisions of this *Section 7* shall not affect the validity orenforceability of any other provision or provisions of this *Section 7*, which shall remain in full force and effect.If any provision of this *Section 7*is held to be invalid, void or unenforceable in any jurisdiction, any court orarbitrator so holding shall substitute a valid, enforceable provision thatpreserves, to the maximum lawful extent, the terms and intent of this Agreementand shall correspondingly modify the Company’s obligations under *Section 5(d)*. If any of the provisions of, or covenantscontained in, this *Section 7*are hereafter construed to be invalid or unenforceable in any jurisdiction, thesame shall not affect the remainder of the provisions or the enforceabilitythereof in any other jurisdiction, which shall be given full effect, withoutregard to the invalidity or unenforceability in such other jurisdiction. Anysuch holding shall affect such provision of this *Section 2*,solely as to that jurisdiction, without rendering that or 

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any other provisions ofthis *Section 2* invalid, illegal, orunenforceable in any other jurisdiction. If any covenant contained in this *Section 2* should be deemed invalid, illegal orunenforceable because its scope is considered excessive, such covenant will bemodified so that the scope of the covenant is reduced only to the minimumextent necessary to render the modified covenant valid, legal and enforceableand a corresponding reduction in the scope of the Company’s obligations under *Section 5(d) *shall also be made.

8.    *Successors*.

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

(b)   ThisAgreement shall inure to the benefit of and be binding upon the Company and itssuccessors.

(c)   The Companywill require any successor (whether direct or indirect, by purchase, merger,consolidation or otherwise) to all or substantially all of the business and/orassets of the Company to expressly assume and agree to perform this Agreementin the same manner and to the same extent that the Company would be required toperform 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 itsbusiness and/or assets as aforesaid which assumes and agrees to perform thisAgreement by operation of law, or otherwise.

9.     *Miscellaneous*.

(a)   ThisAgreement shall be governed by and construed in accordance with the laws of theCommonwealth of Pennsylvania without reference to principles of conflict oflaws. The parties hereto agree that exclusive jurisdiction of any disputeregarding this Agreement shall be the state courts located in Philadelphia,Pennsylvania.

(b)   Thecaptions of this Agreement are not part of the provisions hereof and shall haveno force or effect.

(c)   ThisAgreement may not be amended or modified otherwise than by a written agreementexecuted by the parties hereto or their respective successors and legalrepresentatives.

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

*If to the Executive, to*:

the residence address of the Executive set forth inthe Company’s books and records

*If to the Company, to*:

The Pep Boys—Manny, Moe & Jack3111 West Allegheny AvenuePhiladelphia, PA 19132Attention:  Chairman of the Boardcc: General Counsel

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or to such otheraddress as either party shall have furnished to the other in writing inaccordance herewith. Notice and communications shall be effective when actuallyreceived by the addressee.

(e)   The Companymay withhold from any amounts payable under this Agreement such Federal, stateor local taxes as shall be required to be withheld pursuant to any applicablelaw or regulation.

(f)    ThisAgreement, together with the Change of Control Agreement and the agreementsevidencing the Inducement Grants, contains the entire understanding of theCompany and the Executive with respect to the subject matter hereof.

(g)   If theExecutive is precluded from performing this employment by reason of anypre-existing contractual restrictions, the terms and benefits of this Agreementshall be null and void.

INWITNESS WHEREOF, the Executive has hereunto set his hand and the Company hascaused this Agreement to be executed in its name on its behalf, on the date(s) shownbelow.

|        | /s/ JEFFREY C. RACHOR                         |
|--------|-----------------------------------------------|
|   | Dated: April 13,  2007                   |
|   | THE  PEP BOYS—MANNY, MOE & JACK |
|   | By:                                           | /s/ WILLIAM LEONARD |
|   |                                          | William Leonard |   |
|   |                                          | *Chairman of the Board* |   |
|   |                                          | Dated: April 13, 2007 |   |

 

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