Exhibit 10.1


 


EXECUTION VERSION


 


THE PEP BOYS - MANNY, MOE & JACK


1999 STOCK INCENTIVE PLAN


 


AMENDED AND RESTATED


AS OF SEPTEMBER 15, 2005


 


1.             Purpose.  The Pep Boys –
Manny, Moe & Jack, a Pennsylvania corporation, hereby amends and
restates The Pep Boys - Manny, Moe & Jack 1999 Stock Incentive Plan,
effective as of September 15, 2005 (the “Plan”).  The Plan is intended to recognize the
contributions made to the Company by key employees and members of the Board of
Directors of the Company or any Affiliate, to provide such persons with
additional incentive to devote themselves to the future success of the Company
or an Affiliate, and to improve the ability of the Company or an Affiliate to
attract, retain, and motivate individuals upon whom the Company’s sustained
growth and financial success depends, by providing such persons with an
opportunity to acquire or increase their proprietary interest in the Company.


 


2.             Definitions.  Unless the
context clearly indicates otherwise, the following terms shall have the
following meanings:


 


(a)           “Act”
means the Securities Act of 1933, as amended.


 


(b)           “Affiliate”
means a corporation which is a parent corporation or a subsidiary corporation
with respect to the Company within the meaning of Section 424 of the Code.


 


(c)           “Award”
means an award granted to an Optionee or a Participant under the Plan in the
form of an Option or Restricted Stock, or any combination thereof.


 


(d)           “Board
of Directors” means the Board of Directors of the Company.


 


(e)           “Change
of Control” shall have the meaning as set forth in Section 10 of the
Plan.


 


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


 


(g)           “Committee”
means the Board of Directors or a committee of two or more members of the Board
of Directors, each of whom, at the time he takes action with respect to the
Plan, is both (i) a “non-employee director” within the meaning of Rule 16b-3
and (ii) an “outside director” within the meaning of Section 162(m)
of the Code; provided, however that the Board of Directors may appoint any other
individual or individuals to administer the Plan with respect to Optionees and
Participants who are neither (i) ”insiders” within the meaning of Section 16
under the Securities Exchange Act of 1934, as amended, nor (ii) ”covered
employees” within the


 


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meaning
of Section 162(m) of the Code.


 


(h)           “Company”
means The Pep Boys - Manny, Moe & Jack, a Pennsylvania corporation.


 


(i)            “Disability”
shall have that meaning as set forth in Section 22(e)(3) of the Code.


 


(j)            “Fair
Market Value” shall have the meaning as set forth in Section 8(b) of
the Plan.


 


(k)           “ISO”
means an Option granted under the Plan which is intended to qualify as an “incentive
stock option” within the meaning of Section 422 of the Code.


 


(l)            “Non-management
Director” means a member of the Board of Directors who is not an employee
of the Company or any Affiliate.


 


(m)          “Non-qualified
Stock Option” means an Option granted under the Plan which is not intended
to qualify as an “incentive stock option” within the meaning of Section 422
of the Code.


 


(n)           “Option”
means either an ISO or a Non-qualified Stock Option granted under Section 8
of the Plan.


 


(o)           “Option
Document” means the document described in Section 8 which sets forth
the terms and conditions of each grant of Options.


 


(p)           “Option
Price” means the price at which Shares may be purchased, as calculated
pursuant to Section 8(b).


 


(q)           “Optionee”
means a person to whom an Option has been granted under the Plan, which Option
has not been exercised and has not expired or terminated.


 


(r)            “Participant”
means a person to whom Restricted Stock has been awarded under the Plan, which
Restricted Stock has not yet vested in full.


 


(s)           “Restricted
Period” means the period of time during which the Shares subject to the
Restricted Stock granted to a Participant remain subject to the restrictions
and conditions imposed on such Shares, as determined by the Committee.


 


(t)            “Restricted
Stock” means any Shares which are awarded pursuant to the terms of Section 9
hereof and which are subject to the restrictions and conditions set forth in Section 9
hereof for the Restricted Period.


 


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(u)           “Restricted
Stock Agreement” means the document described in Section 9 which sets
forth the terms and conditions of each grant of Restricted Stock.


 


(v)           “Rule 16b-3”
means Rule 16b-3 promulgated pursuant to the Securities Exchange Act of
1934, as amended.


 


(w)          “Shares”
means the shares of Common Stock, par value $1.00 per share, of the Company
which are the subject of Awards.


 


(x)            “Vest”,
“Vested” or “Vesting”, whether or not used with an initial
capital letter, means the time at which Restricted Stock granted under the Plan
will no longer be subject to forfeiture, based upon the expiration of the
Restricted Period and the satisfaction of other restrictions and conditions
imposed on the Shares relating to such Restricted Stock.  Upon Vesting, the restrictions and conditions
imposed on the Restricted Stock will lapse.


 


3.             Administration of the Plan.  The Committee
shall administer the Plan.


 


(a)           Meetings.  The Committee shall hold meetings at such
times and places as it may determine. 
Acts approved at a meeting by a majority of the members of the Committee
or acts approved in writing by the unanimous consent of the members of the
Committee shall be the valid acts of the Committee.


 


(b)           Grants.


 


(i)            (i)            The
Committee shall from time to time at its discretion grant Awards pursuant to
the terms of the Plan.  The Committee
shall have plenary authority and absolute discretion to (A) determine the
key employees and members of the Board of Directors (including Non-management
Directors) to whom and the times and the prices at which Awards shall be
granted, (B) determine the type of Award to be granted and the number of
Shares subject thereto, (C) determine the vesting conditions with respect
to Awards of Restricted Stock and the time or times after which Options will
become exercisable, (D) determine whether or not an Option is intended to
be an ISO, (E) determine the duration of the Restricted Period and the
restrictions and conditions to be imposed with respect to each Award; and (F) approve
the form and terms and conditions of the Option Documents or the Restricted
Stock Agreements, as the case may be, between the Company and the Optionee or
Participant; all subject, however, to the express provisions of the Plan.  In making such determinations, the Committee
may take into account the nature of the Optionee’s or Participant’s services
and responsibilities, the Optionee’s or Participant’s present and potential
contribution to the Company’s success and such other factors as it may deem
relevant.  The interpretation and
construction by the Committee of any provision of the Plan or of any Award granted
under it shall be final, binding and conclusive.


 


(ii)           (ii)           Unless
otherwise determined by the Committee, Awards shall be automatically granted,
without any further action by the Committee, to each Non-management Director, (A) upon
their initial election to the Board of Directors and (B) annually
thereafter, on the date of the Company’s Annual Meeting of Shareholders (an “Annual


 


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Meeting
Date”), in accordance with the following subclauses of this subsection (ii):


 


A.            On
each Annual Meeting Date, each Non-management Director shall receive such
number of (1) Restricted Stock units as is equal to the quotient of
$33,750 divided  by the “RSU Annualized Value” and (2) Options
as is equal to the quotient of $11,250 divided  by the “Option
Annualized Value”.  The Award granted
pursuant to this subsection A shall be referred to herein as the “Annual
Non-management Director Award.”


 


B.            On
their initial election to the Board of Directors, each Non-management Director
shall receive a pro-rata portion of an Annual Non-management Director Award
based on a fraction, the numerator of which is the number of days remaining
until the next scheduled Annual Meeting Date and the denominator of which is
365.


 


C.            Any
fractional Award otherwise to be issued under this subsection (ii) shall
be rounded up to the nearest whole Award.


 


D.            As
used in this subsection (ii), the term (1) “RSU Annualized Value”
means, as of the date the Award is granted, the average Fair Market Value of a Share
during the immediately preceding year and (2) “Option Annualized Value
means, as of the date the Award is granted, one-third of the RSU Annualized
Value.


 


E.             Each
(1) Restricted Stock unit granted under subsection A of this subsection (ii) shall
vest in cumulative installments of one-fourth of the number of units granted on
each of the first four anniversaries of the date of grant and (2) Option
granted under subsection shall be exercisable in cumulative installments
of one-fifth of the number of Shares granted under the Option on each of the
date of grant and the next four anniversaries of the date of grant.


 


F.             The
Committee may, in its discretion, make additional Award grants to
Non-management Directors upon the recommendation of the Chief Executive Officer
of the Company.


 


(c)           Exculpation.  No individual acting with the authority to
administer the Plan shall be personally liable for monetary damages as such for
any action taken or any failure to take any action in connection with the
administration of the Plan or the granting of Awards thereunder unless (i) such
individual has breached or failed to perform the duties of his office under Section 511
of the General Association Act of 1988, as amended (relating to standard of
care and justifiable reliance), and (ii) the breach or failure to perform
constitutes self-dealing, willful misconduct or recklessness; provided,
however, that the provisions of this subsection 3(c) shall not apply
to the responsibility or liability of a member of the Committee pursuant to any
criminal statute or to the liability of a member of the Committee for the
payment of taxes pursuant to local, state or federal law.


 


(d)           Indemnification.  Service on the Committee shall constitute
service as a member of the Board of Directors of the Company.  Each member of the Committee shall be


 


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entitled
without further act on his part to indemnity from the Company to the fullest
extent provided by applicable law and the Company’s Articles of Incorporation
and/or By-laws in connection with or arising out of any action, suit or
proceeding with respect to the administration of the Plan or the granting of
Awards thereunder in which he or she may be involved by reason of his or her
being or having been a member of the Committee, whether or not he or she
continues to be such member of the Committee at the time of the action, suit or
proceeding.


 


4.             Awards under the Plan.  Awards granted
under the Plan may be in the form of a Non-qualified Stock Option, an ISO or
Restricted Stock, or a combination thereof, at the discretion of the Committee;
provided, however, that ISOs may be granted only to individuals who are
employees of the Company or an Affiliate.


 


5.             Eligibility.  All key
employees and members of the Board of Directors of the Company or its
Affiliates shall be eligible to receive Awards hereunder.  The Committee, in its sole discretion, shall
determine whether an individual qualifies as a key employee.


 


6.             Shares Subject to Plan.  The aggregate maximum
number of Shares for which Awards may be granted pursuant to the Plan is
4,500,000, adjusted as provided in Section 11 of the Plan.  The Shares to be issued may be from
authorized and unissued shares of Common Stock of the Company or previously
issued shares of Common Stock of the Company reacquired by the Company.  Awards covering no more than 500,000 Shares
may be granted to any individual during any calendar year that the Plan is in
effect, except as such number of Shares shall be adjusted in accordance with
the provisions of Section 11 of the Plan. 
If an Option terminates or expires without having been fully exercised
for any reason, or if any Shares with respect to an award of Restricted Stock
shall be forfeited for any reason, the Shares subject thereto may again be the
subject of an Award granted pursuant to the Plan.


 


7.             Term of the Plan.  The Plan has
been effective since March 23, 1999, the date on which it was adopted by
the Board of Directors, subject to the approval by a majority of the votes cast
at a duly called meeting of the shareholders, which approval was obtained.  No Award may be granted under the Plan after March 23,
2009.


 


8.             Option Documents and Terms.  Each Option
granted under the Plan shall be a Non-qualified Stock Option unless the Option
shall be specifically designated at the time of grant to be an ISO for federal
income tax purposes.  Options granted
pursuant to the Plan shall be evidenced by the Option Documents in such form as
the Committee shall from time to time approve, which Option Documents shall
comply with and be subject to the following terms and conditions and such other
terms and conditions as the Committee shall from time to time require which are
not inconsistent with the terms of the Plan.


 


(a)           Number
of Option Shares.  Each Option Document shall state the number
of Shares to which it pertains.  An
Optionee may receive more than one Option, which may include both Options which
are intended to be ISOs and Options that are not intended to be ISOs, but only
on the terms and subject to the conditions and restrictions of the Plan.


 


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(b)           Option
Price.  Each Option Document shall state the Option
Price, which, for all Options, shall be at least 100% of the Fair Market Value
of the Shares on the date the Option is granted as determined by the Committee;
provided, however, that if an ISO is granted to an Optionee who then owns,
directly or by attribution under Section 424(d) of the Code, shares
possessing more than 10% of the total combined voting power of all classes of
stock of the Company or an Affiliate, then the Option Price shall be at least
110% of the Fair Market Value of the Shares
on the date the Option is granted.  If
the Shares are traded in a public market, then the Fair Market Value per share
shall be, if the Shares are listed on a national securities exchange, the mean
between the highest and lowest quoted selling prices thereof, or, if the Shares
are not so listed, the mean between the closing “bid” and “asked” prices
thereof, as applicable and as the Committee determines, on the day the Option
is granted, as reported in customary financial reporting services.


 


(c)           Exercise.  No Option shall be exercised prior to the
receipt by the Company of written notice of such exercise and of payment in
full of the Option Price for the Shares to be purchased.  Each such notice shall specify the number of
Shares to be purchased and shall (unless the Shares are covered by a then current
registration statement or a Notification under Regulation A under the Act)
contain the Optionee’s acknowledgment in form and substance satisfactory to the
Company that (a) such Shares are being purchased for investment and not
for distribution or resale (other than a distribution or resale which, in the
opinion of counsel satisfactory to the Company, may be made without violating
the registration provisions of the Act), (b) the Optionee has been advised
and understands that (i) the Shares have not been registered under the Act
and are “restricted securities” within the meaning of Rule 144 under the
Act and are subject to restrictions on transfer and (ii) the Company is
under no obligation to register the Shares under the Act or to take any action
which would make available to the Optionee any exemption from such
registration, (c) such Shares may not be transferred without compliance
with all applicable federal and state securities laws, and (d) an
appropriate legend referring to the foregoing restrictions on transfer and any
other restrictions imposed under the Option Documents may be endorsed on the
certificates.  Notwithstanding the above,
should the Company be advised by counsel that issuance of Shares should be
delayed pending (A) registration under federal or state securities laws or
(B) the receipt of an opinion that an appropriate exemption therefrom is
available, the Company may defer exercise of any Option granted hereunder until
either such event in (A) or (B) has occurred.


 


(d)           Medium
of Payment.  An Optionee shall pay for Shares subject to
an Option (i) in cash, (ii) by certified check payable to the order
of the Company, or (iii) by such other mode of payment as the Committee
may approve, including payment through a broker in accordance with procedures
permitted by Regulation T of the Federal Reserve Board.  Furthermore, the Committee may provide in an
Option Document issued to an employee (and shall provide in the case of Option
Documents issued to Non-management Directors) that payment may be made all or
in part in shares of the Company’s Common Stock held by the Optionee for at
least six months, subject to such limitations and prohibitions as the Committee
deems appropriate.  If payment is made in
whole or in part in shares of the Company’s Common Stock, then such Optionee
shall deliver to the Company certificates registered in the name of such
Optionee representing such shares of the Company’s Common Stock owned by such


 


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Optionee, free of all
liens, claims and encumbrances of every kind and having an aggregate Fair
Market Value on the date of delivery that is equal to but not greater than the
Option Price of the Shares with respect to which such Option is to be
exercised, accompanied by stock powers duly endorsed in blank by the Optionee.  The Committee may impose from time to time
such limitations and prohibitions on the use of shares of the Company’s Common
Stock to exercise an Option as it deems appropriate.


 


(e)           Termination
of Options.  No Option shall be exercisable after the
first to occur of the following:


 


(i)            (i)            Expiration
of the Option term specified in the Option Document, which shall not exceed (A) ten
years from the date of grant, or (B), with respect to ISOs, five years from the
date of grant if the Optionee on the date of grant owns, directly or by
attribution under Section 424(d) of the Code, shares possessing more
than ten percent (10%) of the total combined voting power of all classes of
stock of the Company or of an Affiliate;


 


(ii)


(ii)                           Expiration
of sixty (60) days from the date the Optionee’s employment or service with the
Company or its Affiliates terminates for any reason other than Disability,
death or as specified in subsection 8(e)(iv), (v) or (vi) or Section 10,
below;


 


(iii)                          Expiration
of one hundred and eighty days from the date the Optionee’s employment or
service with the Company or its Affiliates terminates due to the Optionee’s
Disability or death;


 


(iv)                          The
date that the employment of an Optionee who is an employee terminates for
cause, as determined by the Committee;


 


(v)                           Immediately
upon the occurrence of an act or omission by an Optionee who is an employee
which constitutes either (i) the willful breach of his employment
agreement with the Company or an Affiliate, or his engagement in any sort of
disloyalty to the Company or an Affiliate, including, without limitation,
fraud, embezzlement, theft, commission of a felony or dishonesty in the course
of his employment; or (ii) the disclosure or misuse by Optionee of trade
secrets or confidential information of the Company or an Affiliate.  The employment of such Optionee shall be
deemed to have terminated for cause as of the date of such act or omission, and
any Option granted by the Company to said Optionee and held by such Optionee
shall, without the requirement of any notice, terminate as of the date of such
act or omission, so long as within 90 days after the Company has obtained
sufficient information as to such act or omission, including investigatory
confirmation in proper circumstances, to make evaluation by the Committee
appropriate, there has been a finding by the Committee, after full
consideration of the facts, that there has been an act or omission by the
Optionee the nature of which is as set forth in clauses (i) or (ii) above.  In addition to such immediate termination of
Options, the Optionee shall forfeit all Shares for any exercised portion of the
Option for which the Company has not yet delivered the share certificates to
the Optionee,


 


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upon
refund by the Company of any option price paid by the Optionee.


 


(vi)                          Immediately,
without the requirement of any notice, upon the occurrence of an act by an
Optionee who is a Non-management Director which act is, with respect to the
Company or an Affiliate, a fraud, intentional misrepresentation, embezzlement,
misappropriation or conversion of the Company’s or an Affiliate’s assets or
opportunities.


 


(f)            Transfers.  Generally, an Option granted under the Plan
shall not be transferable, except by will or by the laws of descent and
distribution, and may be exercised, during the lifetime of an Optionee, only by
the Optionee or, in the event of his or her incompetence, by the Optionee’s
legal representative; provided, however, that the Committee may, in its sole
discretion, at the time of grant or at any time thereafter, allow for the
transfer of Options that are not ISOs to other persons or entities, subject to
such conditions or limitations as the Committee may establish.  No Option granted under the Plan shall be
subject to execution, attachment or other process.


 


(g)           Other
Provisions.  The Option Documents may contain such other
provisions including, without limitation, provisions authorizing the Committee
to accelerate the exercisability of all or any portion of an Option granted
pursuant to the Plan, additional restrictions upon the exercise of the Option
or additional limitations upon the term of the Option, as the Committee shall
deem advisable.


 


(h)           Amendment.  The Committee shall have the right to amend Option
Documents issued to an Optionee subject to his consent, except as limited by Section 12
of the Plan, and except that the consent of the Optionee shall not be required
for any amendment made under Section 10 of the Plan.


 


9.             Restricted Stock Agreements and Terms.  Restricted Stock
granted pursuant to the Plan shall be evidenced by a Restricted Stock Agreement
in such form as the Committee shall from time to time approve, which Restricted
Stock Agreement shall comply with and be subject to the following terms and
conditions and such other terms and conditions which the Committee shall from
time to time require which are not inconsistent with the terms of the Plan.


 


(a)           Issuance
of Shares.  Upon an award of Restricted Stock to a
Participant and receipt by the Company of a fully executed Restricted Stock
Agreement, accompanied by such additional documentation as specified therein,
the stock certificate representing the Restricted Stock shall be issued,
transferred to and registered in the name of the Participant with such legend
thereon as the Committee shall deem appropriate.  Such stock certificate shall be held by the
Company until the Restricted Stock Vests or is forfeited.  The Company shall not be obligated to deliver
any stock certificates until such Shares have been listed (or authorized for
listing upon official notice of issuance) upon each stock exchange upon which
outstanding Shares of such class at the time of the Award are listed nor until
there has been compliance with such laws or regulations as the Company may deem
applicable, including without limitation registration or qualification of such
Shares under any federal or state law.


 


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(b)           Dividends
and Voting Rights.  Unless the Committee determines otherwise,
during the period from the date the Restricted Stock is awarded to the date the
Restricted Period expires, the Participant will be entitled to all rights of a
stockholder of the Company, including the right to vote the Shares and receive
dividends and other distributions declared on such Shares from time to time, as
distributed.  Notwithstanding the
foregoing, the Committee shall determine whether dividends of stock and other
non-cash distributions with respect to the Restricted Stock shall be withheld
by the Company for the account of the Participant and whether they shall be
subject to the Vesting and forfeiture provisions applicable to the related
Restricted Stock.  The Committee shall
determine whether interest shall be paid on such amounts withheld, the rate of
any such interest, and the other terms applicable to such withheld amounts.


 


(c)           Restricted
Period and Vesting Schedule.  The Committee shall have the plenary
authority and absolute discretion to determine the Restricted Period for the
Restricted Stock granted to a Participant and the times at which the Shares
subject to such Restricted Stock shall Vest, which may be different for each
award of Restricted Stock, provided, however that no Shares shall Vest prior to
one year from the date of grant of the Restricted Stock.  Notwithstanding the foregoing, only whole
Shares shall Vest.  In the event that a
Participant shall become entitled to a fractional Share, such fractional Share
shall not Vest unless and until the Participant becomes entitled to such number
of fractional Shares as shall be equal in sum to a whole Share.


 


(d)           Forfeiture
of Shares.


 


(i)            (i)            Except
as otherwise provided by the Committee, in the event the Participant’s employment
or service with the Company terminates for any reason other than Disability or
death, or as specified in Section 10 of the Plan, any Shares subject to
the Participant’s Restricted Stock which has not Vested shall be automatically
forfeited by the Participant.  Shares
which are forfeited may be canceled by the Company without any action by the
Participant.


 


(ii)           (ii)           Except
as otherwise provided by the Committee, in the event the Participant’s
employment or service with the Company terminates due to the Participant’s
Disability or death, any of the Participant’s Restricted Stock which has not
Vested shall, if such termination occurs more than one year after the date of
the award of such Restricted Stock, vest in the prorated amount equal to the
ratio of (A) the number of whole years between the date of the Award and
the date of such termination to (B) the total Restricted Period to which
the Award is subject, and the balance of the Restricted Stock shall be
forfeited.  If such termination occurs
less than one year after the date of grant of the Award, the Participant’s
Restricted Stock shall be automatically forfeited by the Participant and may be
canceled by the Company without any action by the Participant.


 


(e)           Transfers.  During the Restricted Period, no Restricted
Stock awarded under the Plan or any interest therein may be transferred, except
by will or by the laws of descent and distribution.  During the lifetime of the person to whom
Restricted Stock is granted, the


 


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rights of such
Restricted Stock may be exercised only by him or, in the event of his
incompetence, by his legal representative. 
Upon the death of a Participant, the person to whom the rights shall
have passed by will or the laws of descent and distribution shall become
entitled to the Restricted Stock only in accordance with the provisions of subsection (d) above.


 


(f)            Other
Provisions.  The Restricted Stock Agreements shall contain
such other provisions as the Committee shall deem advisable.


 


(g)           Amendment.  The Committee shall have the right to amend
the Restricted Stock Agreements issued to a Participant subject to his consent,
except that the consent of the Participant shall not be required for any
amendment made under Section 10 of the Plan.


 


10.           Change of Control.  For purposes of
this Section, 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 “Incumbent
Directors”) cease for any reason to constitute at least a majority of the Board
of Directors, 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 of
Directors (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 of Directors 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 of Directors (the “Voting Securities”); provided,
however, that the event described in this paragraph (b) shall not
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, or (iv) pursuant to a Non-Qualifying Transaction
(as defined in paragraph (c));


 


(c)           a
merger, consolidation, statutory share exchange or similar form of corporate
transaction is consummated 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 corporation


 


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resulting from such
Business Combination (the “Surviving Corporation”), or (B) if applicable, the
ultimate parent corporation that directly or indirectly has beneficial
ownership of 100% of the voting securities eligible to elect directors of the
Surviving Corporation (the “Parent Corporation”), 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 Corporation or the Parent Corporation), 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 Corporation (or, if there is no Parent Corporation, the Surviving
Corporation) and (iii) at least a majority of the members of the board of
directors of the Parent Corporation (or, if there is no Parent Corporation, the
Surviving Corporation) following the consummation of the Business Combination
were Incumbent Directors at the time of the Board of Directors’ 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 is consummated;


 


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


 


(f)            there
occur such other events as the Board of Directors 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, a
Change of Control of the Company shall then occur.


 


11.           Adjustments on Changes in Capitalization.  The aggregate
number of Shares as to which Awards may be granted hereunder, the maximum
number of Shares for which Awards may be granted to any individual during any
calendar year, the number of Shares covered by each outstanding Award and the
Option Price, in the case of grants of Options, shall be appropriately adjusted
in the event of a stock dividend, stock split, spin-off, recapitalization or
other change in the number or class of issued and outstanding equity securities
of the Company resulting from a subdivision or consolidation of the Common
Stock and/or other outstanding equity security or a recapitalization or other
capital adjustment (not including the issuance of Common Stock on the
conversion of other securities of the Company which are convertible into Common
Stock)


 


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affecting
the Common Stock which is effected without receipt of consideration by the
Company.  The Committee, in its sole
discretion, shall have authority to determine the adjustments to be made under
this Section and any such determination by the Committee shall be final,
binding and conclusive; provided, however, that no adjustment shall be made
which will cause an ISO to lose its status as such without the consent of the
Optionee.


 


12.           Amendment of the Plan.  The Board of
Directors may amend the Plan from time to time in such manner as it may deem
advisable.  Nevertheless, the Board of
Directors may not, without obtaining approval by vote of a majority of the
votes cast at a duly called meeting of the shareholders at which a quorum
representing a majority of all outstanding voting stock of the Company is,
either in person or by proxy, present
and voting on the matter, within twelve months before or after such action,
change the class of individuals eligible to receive an ISO, extend the
expiration date for the grant of ISOs under the Plan, decrease the minimum
Option Price of an ISO granted under the Plan or increase the maximum number of
Shares as to which Options may be granted or the maximum number which may be
granted to any individual in any calendar year. 
No amendment to the Plan shall adversely affect any outstanding Option,
however, without the consent of the Optionee.


 


13.           No Continued Employment.  The grant of an
Award pursuant to the Plan shall not be construed to imply or to constitute
evidence of any agreement, express or implied, on the part of the Company or
any Affiliate to retain the Optionee or Participant in the employ of the
Company or an Affiliate and/or as a member of the Company’s Board of Directors
or in any other capacity.


 


14.           Withholding of Taxes.  Whenever the
Company proposes or is required to deliver or transfer Shares in connection
with the exercise of an Option or in connection with the Vesting of Restricted
Stock, the Company shall have the right to (a) require the recipient to
remit or otherwise make available to the Company an amount sufficient to
satisfy any federal, state and/or local withholding tax requirements prior to
the delivery or transfer of any certificate or certificates for such Shares or (b) take
whatever action it deems necessary to protect its interests with respect to tax
liabilities, including without limitation allowing the Optionee or Participant
to surrender, or have the Company retain from Shares which are otherwise
issuable or deliverable in connection with an Award a number of Shares which
have a Fair Market Value equal to such tax liability.  The Company’s obligation to make any delivery
or transfer of Shares shall be conditioned on the Optionee’s or Participant’s
compliance, to the Company’s satisfaction, with any withholding requirement.


 


15.           Interpretation.  The Plan is
intended to enable transactions under the Plan with respect to directors and officers
(within the meaning of Section 16(a) under the Securities Exchange
Act of 1934, as amended) to satisfy the conditions of Rule 16b-3; to the
extent that any provision of the Plan, or any provisions of any Option or
Restricted Stock granted pursuant to the Plan, would cause a conflict with such
conditions or would cause the administration of the Plan as provided in Section 3
to fail to satisfy the conditions of Rule 16b-3, such provision shall be
deemed null and void to the extent permitted by applicable law.  Subject to the foregoing, the Committee’s
determinations under the Plan need not be uniform and may be made by it
selectively among persons who receive, or are eligible to receive, Awards under
the Plan.


 


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*  * 
*  *


 


As approved by the Board
of Directors on September 15, 2005


 


*  * 
*  *


 


	
   

  	
  THE PEP BOYS –
  MANNY, MOE & JACK

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Lawrence N.
  Stevenson

  	
   

  
	
   

  	
   

  	
  Lawrence N.
  Stevenson

  
	
   

  	
   

  	
  Chairman and CEO

  
	
   

  	
   

  
	
   

  	
  Date:
  December 7, 2005

  



 


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