<PAGE>   1
                                                                    EXHIBIT 10.3


                      CHIEF AUTO PARTS INC. SEVERANCE PLAN
                        IN THE EVENT OF CHANGE OF CONTROL



PURPOSE:       Chief Auto Parts Inc. (the "Company") recognizes that even the
possibility of a change of control and the uncertainty and disruption a change
of control may result in the departure or distraction of the Company's office
and support employees. Such distraction or departures would be to the Company's
detriment at a critical time.

     Therefore, the Company and its Board of Directors considers it in the best
interest of Chief and its stockholders to provide the following severance
benefits for certain employees whose employment is terminated as a result of a
change in control.

     The Company hereby adopts the Chief Auto Parts Inc. Severance Plan In Event
of Change of Control (the "Plan"), effective as of January 1, 1998, for the
benefit of certain Employees of the Company, on the terms and conditions
hereinafter stated.

     The Plan, as a "severance pay arrangement" within the meaning of Section
3(2)(B)(i) of ERISA, is intended to be excepted from the definitions of
"employee pension benefit plan" and "pension plan" set forth under Section 3(2)
of ERISA, and is intended to meet the descriptive requirements of a plan
constituting a "severance pay plan" within the meaning of regulations published
by the Secretary of Labor at Title 29, Code of Federal Regulations, Section
2510.3-2(b).

SECTION 1.     DEFINITIONS.  As hereinafter used:

     1.1       "Ancillary Benefits" means any of the benefits set forth in
Section 3 hereof to which Employees may be entitled upon the occurrence of a
Severance.

     1.2       "Board" means the Board of Directors of the Company.

     1.3       "Cause" means an Employee's poor work performance or misconduct,
more specifically, (i) an Employee's willful or continued failure to
substantially perform his or her duties with the Company or a Successor
Employer, or (ii) an Employee's willful engagement in conduct which is
demonstrably and materially injurious to the Company or Successor Employer,
monetarily or otherwise; provided, however, that no act, or failure to act, on
an Employee's part shall be deemed "willful" unless done, or omitted to be done,
by the Employee not in good faith and without reasonable belief that such action
or omission was in the best interest of the Company or Successor Employer.

     1.4       "Change of Control" shall mean:

     (a) any "person" (as such term is used in Sections 13(d) and 14(d) of the
     Exchange Act), other than one or more Permitted Holders, is or becomes the
     beneficial owner (as defined in Rules 13d-3 and 13d-5 under the Exchange
     Act,


                                      1
<PAGE>   2

     except that for purposes of this clause (i) such person shall be deemed to
     have "beneficial ownership" of all shares that such person has the right to
     acquire, whether such right is exercisable immediately or only after the
     passage of time), directly or indirectly, of more than 50% of the total
     voting power of the then outstanding Voting Stock of the Company;

     (b) during any period of two consecutive years commencing after the
     Company's initial public equity offering, individuals who at the beginning
     of such period constituted the Board of Directors (together with any new
     directors whose election by such Board of Directors or whose nomination for
     election by the shareholders of the Company was approved by a vote of 66_%
     of the directors of the Company then still in office who were either
     directors at the beginning of such period or whose election or nomination
     for election was previously so approved) cease for any reason to constitute
     a majority of the Board of Directors then in office; or

     (c) the merger or consolidation of the Company with or into another Person
     or the merger of another Person with or into the Company, or the sale of
     all or substantially all of the assets of the Company to another Person (in
     each case other than a Person that is controlled by the Permitted Holders),
     and, in the case of any such merger or consolidation, the securities of the
     Company that are outstanding immediately prior to such transaction and
     which represent 100% of the aggregate voting power of the Voting Stock of
     the Company are changed into or exchanged for cash, securities or property,
     unless pursuant to such transaction such securities are changed into or
     exchanged for, in addition to any other consideration, securities of the
     surviving corporation or a parent corporation that owns all of the capital
     stock of such corporation that represent immediately after such
     transaction, at least 50% of the aggregate voting power of the Voting Stock
     of the surviving corporation or such parent corporation, as the case may
     be.

     1.5       "Closing Date" means, as to any Employee, the date of the closing
of the sale of the Company whether in whole, or a Region or Regions thereof.

     1.6       "Code" means the Internal Revenue Code of 1986, as it may be
amended from time to time.

     1.7       "Company" means Chief Auto Parts Inc., or any successors thereto.

     1.8       "Effective Period" means, as to any Employee, the period that
begins on his Closing Date and ends on the earlier of (i) the date which is
twelve (12) months from such Closing Date or (ii) the Expiration Date.

     1.9       "Employee" means a person who is employed by the Company as a
regular full-time employee or a regular part-time employee with more than three
(3) months of Service in a position listed in Section 2.1, immediately prior to
the applicable Closing Date. Notwithstanding the foregoing, this Plan shall not
apply to any employee covered by a



                                       2
<PAGE>   3

collective bargaining agreement, or to any store employee, any hourly paid
distribution center employee, distribution center supervisors, maintenance
employees, set-up crews, or employees of the PPW division of the Company.

         1.10       "Employee's Region" means a subsidiary, division or other
distinct operating group as so designated by the Company, in which an Employee
is employed immediately prior to the Closing Date.

         1.11       "ERISA" means the Employee Retirement Income Security Act
of 1974, as it may be amended from time to time.

         1.12       "Expiration Date" means the date this Plan expires and
becomes null and void and of no further effect, which unless specifically
extended by the Board, shall be August 1, 2001.

         1.13       "Good Reason" means circumstances where

                    (a) the Employee's position is or will be eliminated as a
                    result of a sale of the Employee's Region;

                    (b) in offering the Employee continued employment, (i) the
                    Employee is asked to transfer to another facility of the
                    Company or Successor Employer (other than the Company's
                    corporate office) which is outside the same general
                    metropolitan area from the Employee's then current place of
                    employment, (ii) the Employee is asked to accept a material
                    reduction in salary or (iii) the Employee is asked to accept
                    a material change in the Employee's title, duties or
                    responsibilities in the nature of a demotion (other than for
                    Cause); and

                    (c) the Employee elects not to accept the offer of continued
                    employment because of (b)(i), (b)(ii) and/or (b)(iii) above.

         1.14       "Permitted Holders" means (i) The Principal Fund, Trust
Company of the West or any of their respective Affiliates and (ii) Oaktree
Capital Management LLC and its Affiliates, including any partnerships, separate
accounts, or other entities managed by Oaktree.

         1.15       "Plan" means the Chief Auto Parts Inc. Severance Plan In
Event of Change of Control, as set forth herein, and as the same may be amended
from time to time.

         1.16       "Plan Administrator" means the Vice President, Human
Resources of the Company or such other person as may be appointed by the Company
from time to time to administer the Plan and to determine benefit eligibility.



                                       3
<PAGE>   4

         1.17       "Salary" means, for a Salaried Employee, base annual salary
with the Company as of his Severance Date (or Closing Date, if earlier) and, for
an Employee paid on an hourly basis, the average monthly wages received by the
Employee from the Company during the twelve (12) month period immediately
preceding his Severance Date (or Closing Date, if earlier). "Salary" does not
include overtime, shift differential, bonus, or any other remuneration. A "Month
of Salary" and a "Week of Salary" shall be calculated in accordance with the
Company's regular payroll procedure.

         1.18       "Service" means the Employee's period of employment with the
Company beginning with full time or regular part time employment, and ending on
the Employee's Severance Date (or Closing Date, if earlier), and determined in
accordance with Company Policies.

         1.19       "Severance" means the involuntary termination of an
Employee's employment with the Company or a Successor Employer, which occurs as
a direct result of a sale of the Employee's Region and which involuntary
termination occurs during the Effective Period. An Employee will not be
considered to have incurred a Severance if (i) the Employee voluntarily
terminates his employment with the Company or Successor Employer, other than for
Good Reason, or the Employee's death or a physical or mental condition causes
the Employee's inability to substantially perform his duties (even with
reasonable accommodations) with the employer, including, without limitation,
such condition entitling him to benefits under any sick pay or disability income
policy or program of the Company or Successor Employer, or (ii) he is dismissed
for Cause, or (iii) the Employee's employment with the Successor Employer in the
same or similar position he held with the Company immediately prior to the sale
of the Employee's Region terminates for any reason, and the Successor Employer
maintains a Successor Plan. In no event shall an Employee be deemed to have
incurred a Severance merely because of the sale of the Employee's Region.

         1.20       "Severance Date" means the date during the Effective Period
on which an Employee incurs a Severance.

         1.21       "Severance Benefits" means payments made to eligible
Employees pursuant to Section 2.1 hereof.

         1.22       "Successor Employer" means any entity which purchases a
subsidiary, division or region from the Company, closes such purchase on or
before the Expiration Date and offers continued employment to an Employee.

         1.23       "Successor Plan" means a severance arrangement adopted by a
Successor Employer which provides substantially similar benefits to Employees as
the benefits provided under this Plan.


                                       4

<PAGE>   5

SECTION 2.     SEVERANCE BENEFITS UPON A CHANGE OF CONTROL.

     2.1       Amount of Severance Benefits. Any Employee who incurs a Severance
shall be entitled to receive Severance Benefits in accordance with the
following, based upon his position with the Company at the Closing Date of the
Employee's Division; provided, however, that no Employee shall be eligible to
receive Severance Benefits or any Ancillary Benefits under this Plan to the
extent the Employee receives benefits of the same type from or under any
contract, plan, fund, program, policy or arrangement maintained by a Successor
Employer.

     (a)       Category A: The Severance Benefits in this Category A are
               applicable only to an Employee who, immediately prior to the
               Closing Date of the Employee's Region, was employed for at least
               one (1) year by the Company in the positions of:

               President and Chief Executive Officer: Twelve (12) months of
               Salary;

               Senior Vice President; Vice President and Chief Information
               Officer; Vice President and General Counsel; Executive Assistant
               to the President: Fifteen (15) months of Salary.

     (b)       Category B: The Severance Benefits in this Category are
               applicable only to an Employee who, immediately prior to the
               Closing Date of the Employee's Region, is employed by the Company
               in any of the following positions:

               Other Members of the Executive Operating Committee, as designated
               from time to time by the President and Chief Executive Officer,
               and other Corporate Officers:

                    Less than one (1) year:   Six (6) months.

                    More than one (1) year: Four (4) weeks of Salary, multiplied
                    by the Employee's Service, with a minimum payment of nine
                    (9) months, and a maximum payment of twelve (12) months.

     (c)       Category C: The Severance Benefits in this Category C are
               applicable only to an Employee who, immediately prior to the
               Closing Date of the Employee's Region, is employed by the Company
               as a Non-Store, Exempt (Salaried) employee such as Corporate
               Department Managers, Managers, or Distribution Center Managers
               (Grades 30 through 33):

               (i)  If such Employee has one (1) year of Service or less than
                    one (1) year of Service, the Severance Benefits shall be
                    equal to six (6) weeks of Salary;


                                       5
<PAGE>   6



               (ii) If such an Employee has more than one (1) year of Service,
                    the Severance Benefits shall be three weeks of Salary
                    multiplied by the Employee's Service, not to exceed
                    twenty-six (26) weeks of Salary, with a minimum of six (6)
                    weeks of Salary.

     (d)       Category D: The Severance Benefits in this Category D are
               applicable only to an Employee who, immediately prior to the
               Closing Date of the Employee's Region, is employed by the Company
               in Grades 23 through 29:

               (i)  If such an Employee has less than one (1) year of Service,
                    the Severance Benefits shall be equal to one (1) week of
                    Salary; and if more than one (1) year, but not more than two
                    (2) years, two (2) weeks of Salary;


               (ii) If such an Employee has more than two (2) years of Service,
                    the Severance Benefits shall be equal to two (2) weeks of
                    Salary for the first two (2) years; thereafter one (1)
                    additional week for each year of Service, with a minimum of
                    four (4) weeks and a maximum of twenty (20) weeks.

     (e)       Category E: The Severance Benefits in this Category E are
               applicable only to an Employee who, immediately prior to the
               Closing Date of the Employee's Region, is employed by the Company
               as an hourly-paid, non-union and non-store-assigned employee in
               an administrative, clerical or support staff position.

               (i)  If such an Employee has less than one (1) year of Service
                    the Severance Benefits shall be equal to: one (1) week of
                    Salary.

               (ii) If such an Employee has one (1) year of Service or more,
                    the Severance Benefits shall be one (1) week of Salary
                    multiplied by the Employee's Service, not to exceed eight
                    (8) weeks, with a minimum of two (2) weeks.

     2.2       Form of Payment. At the Company's sole discretion, all Severance
Benefits shall be calculated and payable from the Severance Date and paid to
Employees on a biweekly basis, from which shall be deducted federal, state and
local withholding taxes, FICA and the Employee's required contributions for any
Ancillary Benefits. The Company may also choose to pay all Severance Benefits in
a lump sum, less applicable withholdings and employee contributions.

SECTION 3.     ANCILLARY BENEFITS.

     3.1       Unused Vacation. Any Employee who is eligible for and receives
Severance Benefits under this Plan shall be paid, in cash, for all earned but
unused vacation pay which has not been paid to the Employee as of the Employee's
Severance Date.



                                       6
<PAGE>   7
     3.2       Health Care Benefits. Benefits under the Company's health care
plans, which provide medical, dental and prescription coverage, will be provided
during the period of time for which an Employee could receive periodic payment
of Severance Benefits; provided, however, that the Employee must make the same
contributions for such benefits that current, active employees are making during
such period.

     3.3       Career Counseling. The Company in its discretion may provide
career counseling by a career counseling firm selected by and paid for by the
Company at a level of counseling selected by the Company.

     3.4       Relocation. For those Employees holding positions listed in
Category A or B in Section 2.1 of the Plan who incur a Severance, the Company
shall absorb the reasonable cost of relocating the Employee to a point no
further than the point of origin from which the Employee was moved, if the
Employee's Severance Date is less than twelve (12) months after the Employee was
last relocated by the Company. Any relocation of an Employee under this Plan
shall be made in accordance with the Company's relocation policy and applicable
regulations of the Internal Revenue Service. If a new employer of any Employee
absorbs the costs of relocating the Employee, or if an Employee obtains
full-time employment in the general metropolitan area where he is located at the
time of his Severance, then, in either event, the provisions of this Section 3.4
shall not apply.

     3.5       Stock Options. Any Employee holding options in the Company's
common stock at his Severance Date shall be entitled to receive a stock option
benefit as provided for in said option plan.

SECTION 4.     CLAIMS PROCEDURES.

     4.1       in the event of a claim by an Employee as to the entitlement to
or amount of any Severance Benefit or its method of payment, or as to the
entitlement to or amount of any Ancillary Benefit, or its method of payment, or
as to the entitlement to or amount of any Ancillary Benefit, or its method of
payment, such Employee shall present the reason for his claim in writing to the
Plan Administrator within thirty (30) days of his or her severance. The Plan
Administrator shall, within thirty (30) days after receipt of such written
claim, send a written notification to the Employee as to its disposition. In the
Event the claim is wholly or partially denied, such written notification shall
(a) state the specific reason or reasons for the denial, (b) make specific
reference to pertinent Plan Provisions on which the denial is based, (c) provide
a description of any additional material or information necessary for the
Employee to perfect the claim and an explanation of why such material or
information is necessary, and (d) set forth the procedure by which the Employee
may appeal the denial of his claim. In the event an Employee wishes to appeal
the denial of his claim, he may request a review of such denial by making
application in writing to the Plan Administrator within sixty (60) days after
receipt of such denial. Such Employee (or his duly authorized legal
representative) may, upon written request to the Plan Administrator, review any
documents pertinent to his claim, and submit in writing issues and comments in
support


                                       7

<PAGE>   8

of his position. Within sixty (60) days after receipt of a written appeal
(unless special circumstances, such as the need to hold a hearing, require an
extension of time, but in no event more than one hundred twenty (120) days after
such receipt), the Plan Administrator shall notify the Employee of the final
decision. The final decision shall be in writing and shall include specific
reasons for the decision, written in a manner calculated to be understood by the
claimant, and specific references to the pertinent Plan provisions on which the
decision is based.

     4.2       No Employee shall be eligible to receive Severance Benefits or
other Ancillary Benefits under the Plan unless he first releases the Company in
writing from all claims or liabilities of any kind relating to his Severance.
The Company may waive this requirement in its sole discretion.

SECTION 5.     PLAN ADMINISTRATION.

     5.1       The Plan shall be interpreted, administered and operated by the
Plan Administrator, who shall have complete authority, in his sole discretion,
subject to the express provisions of the Plan, to determine who shall be
eligible for Severance Benefits and/or Ancillary Benefits, to interpret the
Plan, to prescribe, amend and rescind rules and regulations relating to it, and
to make all other determinations necessary or advisable for the administration
of the Plan.

     5.2       All questions of any character whatsoever arising in connection
with the interpretation of the Plan or its administration or operation shall be
submitted to and settled and determined by the Plan Administrator in an
equitable and fair manner in accordance with the procedure for claims and
appeals described in Section 4.1. Any such settlement and determination shall be
final and conclusive, and shall bind and may be relied upon by the Company, each
of the Employees and all other parties in interest.

     5.3       The Plan Administrator may delegate any of his duties hereunder
to such person or persons as he or she may designate from time to time.

     5.4       The Plan Administrator is empowered, on behalf of the Plan, to
engage accountants, legal counsel and such other personnel as he deems necessary
or advisable to assist him in the performance of his duties under the Plan. The
functions of any such persons engaged by the Plan Administrator shall be limited
to the specified services and duties for which they are engaged, and such
persons shall have no other duties, obligations or responsibilities under the
Plan. Such persons shall exercise no discretionary authority or discretionary
control respecting the management of the Plan. All reasonable expenses thereof
shall be borne by the Company.

SECTION 6.     PLAN MODIFICATION OR TERMINATION.

     6.1       The Plan may be amended or terminated by the Board of Directors
at any time, and the Board may extend the applicability of the Plan to other
Employees or extend



                                       8
<PAGE>   9

the Effective Period. Additionally, the Board of Directors upon recommendation
of the President may, from time to time, make such modifications as the Board
Members deem appropriate.

SECTION 7.     GENERAL PROVISIONS.

     7.1       Nothing in the Plan shall be deemed to give any Employee the
right to be retained in the employ of the Company or a Successor Employer, or to
interfere with the right of the Company or a Successor Employer to discharge him
at any time and for any lawful reason, with or without notice.

     7.2       Except as otherwise provided herein or by law, no right or
interest of any Employee under the Plan shall be assignable or transferable, in
whole or in part, either directly or by operation of law or otherwise, including
without limitation by execution, levy, garnishment, attachment, pledge or in any
manner; no attempted assignment or transfer thereof shall be effective; and no
right or interest of any Employee under the plan shall be liable for, or subject
to, any obligation or liability of such Employee. When a payment is due under
this Plan to an Employee who is unable to care for his affairs, payment may be
made directly to his legal guardian or personal representative.

     7.3       No Severed Employee shall be entitled to receive Severance
Benefits under any other severance pay plan of the Company. The Employer shall
provide each Employee with at least thirty (30) days' notice of an Employee's
Severance Date, or such greater notice as required by law. Only the Plan
Administrator or his delegate, or an individual in a comparable position with a
Successor Employer, is authorized to notify an Employee of his Severance Date.
If the Company is obligated by law or by contract to pay severance pay, a
termination indemnity, notice pay, or the like, or if the Company is obligated
by law or by contract to provide advance notice of separation ("Notice Period"),
then any Severance Benefits hereunder shall be reduced by the amount of any such
severance pay, termination indemnity, notice pay or the like, as applicable, and
by the amount of any pay received during any Notice Period.

     7.4       An Employee shall not be eligible for any benefits under the Plan
unless he remains in his position of employment with the Company or a Successor
Employer until his Severance Date.

     7.5       Any Termination of an Employee for Cause shall be administered in
accordance with the Company's or Successor Employer's employment policies.

     7.6       If any Employee dies while eligible to receive Severance
Benefits, the balance of any Severance Benefits due and owing shall be payable
to the Employee's estate.

     7.7       In the event that any amount to be received by an Employee in
accordance with this policy would cause an "excess parachute payment" to exist
within the meaning of



                                       9
<PAGE>   10

Sections 280G or 4999 of the Code, the Company shall reduce the amount payable
to the Employee to a lesser amount so that no portion of any amount received by
the Employee would be an "excess parachute payment."

     7.8       If any provision of the Plan shall be held invalid or
unenforceable, such invalidity or unenforceability shall not affect any other
provisions hereof, and the Plan shall be construed and enforced as if such
provisions had not been included.

     7.9       The Plan shall be governed by and construed in accordance with
ERISA and all applicable rules and regulations thereunder.

     7.10      The Plan shall be effective as of January 1, 1998, and shall
remain in effect until the Expiration Date unless earlier terminated by the
Board pursuant to Section 6.1 hereof, and shall not be applicable to any
Severance which occurs after the Expiration Date.

     7.11      This Plan shall constitute the entire Plan and shall supersede
any and all prior documents, instruments, agreements, policies, notices, or
descriptions related to the subject matter hereof.


     IN WITNESS WHEREOF, the Company has caused the Plan to be adopted this
_____ day of ____________, 1998.


                                   CHIEF AUTO PARTS INC.


                                   By:
                                        --------------------------------------
                                   Title:
                                          ------------------------------------



                                       10