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CHANGE OF CONTROL AGREEMENT
            This CHANGE OF CONTROL AGREEMENT (this ?Agreement?) is made 
by and between THE PEP BOYS - MANNY, MOE & JACK, a Pennsylvania corporation 
(the "Company"), and ____________  (the "Executive"), dated as of _____________.
            WHEREAS, the Company and Executive previously entered into that 
certain Employment Agreement, dated as of ___________ (the ?Original Agreement?), 
which sets forth certain of the terms and conditions of the Executive?s employment 
with the Company in the event of any ?Change of Control,? and certain compensation 
that will be paid to the Executive if the Executive?s employment is terminated in 
connection with a Change of Control; 
            WHEREAS, the Company and Executive desire to amend the Original 
Agreement so that it complies with the requirements of section 409A of the Internal 
Revenue Code of 1986, as amended (the ?Code?), and the final regulations issued 
thereunder, as well as to make certain other changes; and
            IT IS, THEREFORE, AGREED:
            1.        Operation of Agreement.
                  (a)        The "Effective Date" shall be the date during the "Change 
of Control Period" (as defined in Section 1(b) hereof) on which a Change of Control 
occurs.  Anything in this Agreement to the contrary notwithstanding, if the Executive's 
employment with the Company is terminated within twelve (12) months prior to the 
date on which a Change of Control occurs, and the Executive can reasonably 
demonstrate that such termination (i) was at the request of a third party who has taken 
steps reasonably calculated to effect a Change of Control or (ii) otherwise arose in 
connection with a Change of Control, then for all purposes of this Agreement the 
"Effective Date" shall mean the date immediately prior to the date of such termination.
                  (b)        The "Change of Control Period" is the period commencing 
on the date hereof and ending on the second anniversary of such date; provided, 
however, that commencing on the date one year after the date hereof, and on each 
annual anniversary of such date (such date and each annual anniversary thereof is 
hereinafter referred to as the "Renewal Date"), the Change of Control Period shall be 
automatically extended so as to terminate two years from such Renewal Date, unless 
at least sixty (60) days prior to the Renewal Date the Company shall give notice that 
the Change of Control Period shall not be so extended.
            2.        Change of Control.  For the purpose of this Agreement, a "Change 
of Control" shall be deemed to have taken place if: 
                  (a)        individuals who, on the date hereof, constitute the Board of 
Directors (the "Board") of the Company (the "Incumbent Directors") cease for any 
reason to constitute at least a majority of the Board, provided that any person becoming 
a director subsequent to the date hereof, whose election or nomination for election 
was approved by a vote of at least two-thirds of the Incumbent Directors then on the 
Board (either by a specific vote or by approval of the proxy statement of the Company 
in which such person is named as a nominee for director, without written objection to 
such nomination) shall be an Incumbent Director; provided, however, that no 
individual initially elected or nominated as a director of the Company as a result of an 
actual or threatened election contest with respect to directors or as a result of any other 
actual or threatened solicitation of proxies or consents by or on behalf of any person 
other than the Board shall be deemed to be an Incumbent Director;
                  (b)        any "Person" (as such term is defined in Section 3(a)(9) of 
the Securities Exchange Act of 1934 (the "Exchange Act") and as used in Sections 
13(d)(3) and 14(d)(2) of the Exchange Act) is or becomes a "beneficial owner" (as 
defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of 
the Company representing 20% or more of the combined voting power of the 
Company's then outstanding securities eligible to vote for the election of the Board (the 
"Voting Securities"); provided, however, that the event described in this Section 2(b) 
shall not be deemed to be a Change of Control by virtue of any of the following 
acquisitions: (i) by the Company or any subsidiary of the Company in which the 
Company owns more than 50% of the combined voting power of such entity (a 
"Subsidiary"), (ii) by any employee benefit plan (or related trust) sponsored or 
maintained by the Company or any Subsidiary, (iii) by any underwriter temporarily 
holding the Company's Voting Securities pursuant to an offering of such Voting 
Securities, (iv) pursuant to a Non-Qualifying Transaction (as defined in Section 2(c) 
hereof), or (v) pursuant to any acquisition by Executive or any group of persons 
including Executive (or any entity controlled by Executive or any group of persons 
including Executive);
                  (c)         the consummation of a merger, consolidation, statutory 
share exchange or similar form of corporate transaction involving the Company or any 
of its Subsidiaries that requires the approval of the Company's stockholders, whether 
for such transaction or the issuance of securities in the transaction (a "Business 
Combination"), unless immediately following such Business Combination:  (i) more 
than 50% of the total voting power of (A) the Company resulting from such Business 
Combination (the "Surviving Company"), or (B) if applicable, the ultimate parent 
Company that directly or indirectly has beneficial ownership of 100% of the voting 
securities eligible to elect directors of the Surviving Company (the "Parent Company"), 
is represented by the Company's Voting Securities that were outstanding immediately 
prior to such Business Combination (or, if applicable, is represented by shares into 
which the Company's Voting Securities were converted pursuant to such Business 
Combination), and such voting power among the holders thereof is in substantially the 
same proportion as the voting power of the Company's Voting Securities among the 
holders thereof immediately prior to the Business Combination, (ii) no person (other 
than any employee benefit plan (or related trust) sponsored or maintained by the 
Surviving Company or the Parent Company), is or becomes the beneficial owner, 
directly or indirectly, of 20% or more of the total voting power of the outstanding voting 
securities eligible to elect directors of the Parent Company (or, if there is no Parent 
Company, the Surviving Company) and (iii) at least a majority of the members of the 
board of directors of the Parent Company (or, if there is no Parent Company, the 
Surviving Company) following the consummation of the Business Combination were 
Incumbent Directors at the time of the Board's approval of the execution of the initial 
agreement providing for such Business Combination (any Business Combination 
which satisfies all of the criteria specified in (i), (ii) and (iii) above shall be deemed to 
be a "Non-Qualifying Transaction");
                  (d)        a sale of all or substantially all of the Company's assets;
                  (e)        the stockholders of the Company approve a plan of 
complete liquidation or dissolution of the Company; or
                  (f)        such other events as the Board may designate.
                Notwithstanding the foregoing, a Change of Control of the Company 
shall not be deemed to occur solely because any person acquires beneficial 
ownership of more than 20% of the Company's Voting Securities as a result of the 
acquisition of the Company's Voting Securities by the Company which reduces the 
number of the Company's Voting Securities outstanding; provided, that if after such 
acquisition by the Company such person becomes the beneficial owner of additional 
Company Voting Securities that increases the percentage of outstanding Company 
Voting Securities beneficially owned by such person by more than one percent (1%) of 
the Company?s outstanding Voting Securities, a Change of Control of the Company 
shall then occur.
            3.        Employment Period.  The Company hereby agrees to continue the 
Executive in its employ, for the period commencing on the Effective Date and ending 
on the date ___ (__) year(s) after such date (the "Employment Period").
            4.        Position and Duties.
                  (a)        As of the date hereof, the Executive is employed as 
________ and as such the Executive is responsible for the oversight and management 
of the ________________.  During the Employment Period, (i) the Executive's position 
(including status, offices, titles and reporting requirements), authority, duties and 
responsibilities shall be at least comparable in all material respects with the most 
significant of those held, exercised and assigned at any time during the ninety (90) day 
period immediately preceding the Effective Date and (ii) the Executive's services shall 
be performed at the location where the Executive was employed immediately 
preceding the Effective Date or at an office or location less than twenty (20) miles from 
such location.
                  (b)        Excluding periods of vacation, sick leave and disability to 
which the Executive is entitled, the Executive agrees to devote reasonable attention 
and time during normal business hours to the business and affairs of the Company 
and, to the extent necessary to discharge the responsibilities assigned to the Executive 
hereunder, to use the Executive's reasonable best efforts to perform faithfully and 
efficiently such responsibilities.  The Executive may (i) serve on corporate, civic or 
charitable boards or committees, (ii) deliver lectures, fulfill speaking engagements or 
teach at educational institutions and (iii) manage personal investments, so long as 
such activities do not significantly interfere with the performance of the Executive's 
responsibilities.  It is expressly understood and agreed that to the extent that any such 
activities have been conducted by the Executive prior to the Effective Date, the 
continued conduct of such activities (or the conduct of activities similar in nature and 
scope thereto) subsequent to the Effective Date shall not thereafter be deemed to 
interfere with the performance of the Executive's responsibilities to the Company.
            5.        Compensation.
                  (a)        Base Salary.  During the Employment Period, as 
consideration for services rendered, the Company shall pay to the Executive a base 
salary at an annual rate at least equal to the annual rate of base salary paid to the 
Executive by the Company, and any affiliated companies, during the ninety-day period 
immediately preceding the month in which the Effective Date occurs ("Base Salary") 
payable over the calendar year at the regular pay periods of the Company.  During the 
Employment Period, Base Salary shall be reviewed by the Board (or the Compensation 
Committee thereof) at least annually and shall be increased, but not decreased, at any 
time and from time to time as shall be consistent with increases in Base Salary 
awarded by the Company in the ordinary course of business to other key executives.  
Any increase in Base Salary shall not serve to limit or reduce any other obligation to 
the Executive under this Agreement.  Executive's Base Salary shall not be reduced 
after any such increase.  As used in this Agreement, the term "affiliated companies" 
includes any company controlling, controlled by or under common control with the 
Company.   
                  (b)        Bonus Plan.  During the Employment Period, the Executive 
shall receive an annual bonus (a "Bonus") at least equal to the greater of (i) the 
average annual dollar bonus amount that was earned by the Executive under the 
Company's Annual Incentive Bonus Plan, as amended and restated as of December 
9, 2003 (or any predecessor or successor plan, policy or arrangement thereto) (the 
"Bonus Plan") for the three completed fiscal years of the Company (each a "Fiscal 
Year") immediately prior to the Effective Date, or (ii) Executive's Target (as defined in 
the Bonus Plan) bonus amount under the Bonus Plan for the Fiscal Year which 
includes the Effective Date or, if no target has been set with respect to Executive for 
such Fiscal Year, the Target bonus amount for the immediately preceding Fiscal Year 
(in either case, based on Executive's target percentage of Base Salary established 
pursuant to the Bonus Plan).   The Bonus shall be paid to the Executive as soon as 
practicable after the Fiscal Year for which the Bonus applies, but not later than April 30 
following the end of such Fiscal Year. 
                  (c)        Employee Benefit Plans.  In addition to the Base Salary and 
Bonus payable as hereinabove provided, the Executive shall be entitled to participate 
during the Employment Period in all incentive programs, savings, pension and 
retirement plans and programs applicable to other key executives, and to receive use 
of an automobile of comparable value to automobiles provided to other key executives 
(or to receive the same automobile allowance as is provided to other key executives).  
In no event shall such plans and programs, in the aggregate, provide the Executive 
with compensation, benefits and reward opportunities less favorable than the most 
favorable of those provided by the Company and its affiliated companies for the 
Executive under such plans and programs as in effect at any time during the ninety-
day period immediately preceding the Effective Date or, if more favorable to the 
Executive, as provided at any time thereafter with respect to other key executives.
                  (d)        Welfare Benefit Plans.  During the Employment Period, the 
Executive and/or the Executive's family, as the case may be, shall be eligible for 
participation in and shall receive all benefits under each welfare benefit plan of the 
Company, including, without limitation, all medical, supplemental medical, 
prescription, dental, disability, salary continuance, life, accidental death and travel 
accident insurance plan and programs of the Company and its affiliated companies, in 
each case not less favorable than those in effect at any time during the ninety-day 
period immediately preceding the Effective Date which would be most favorable to the 
Executive or, if more favorable to the Executive, as in effect at any time thereafter with 
respect to other key executives.
                  (e)        Expenses.  During the Employment Period, the Executive 
shall be entitled to receive prompt reimbursement for all reasonable expenses incurred 
by the Executive in the performance of his duties hereunder, which reimbursement 
shall be paid to the Executive over a period that is no longer than that required under 
the Company?s reimbursement policy as in effect at any time during the ninety-day 
period immediately preceding the Effective Date which would be most favorable to the 
Executive or, if more favorable to the Executive, as in effect at any time thereafter with 
respect to other key executives.  
                  (f)        Office and Support Staff.  During the Employment Period, 
the Executive shall be entitled to an office or offices of a size and with furnishings and 
other appointments, and to secretarial and other assistance, at least equal to those 
provided to the Executive at any time during the ninety-day period immediately 
preceding the Effective Date, or, if more favorable to the Executive, as provided at any 
time thereafter with respect to other key executives.
                  (g)        Vacation.  During the Employment Period, the Executive 
shall be entitled to paid vacation in accordance with the most favorable policies of the 
Company as in effect at any time during the ninety-day period immediately preceding 
the Effective Date or, if more favorable to the Executive, as in effect at any time 
thereafter with respect to other key executives.
            6.        Termination.  This Agreement shall terminate under the following 
circumstances: 
                  (a)        Expiration of the Employment Period.  This Agreement shall 
terminate automatically upon the expiration of the Employment Period.
                  (b)        Death or Disability.  This Agreement shall terminate 
automatically upon the Executive's death.  The Company may terminate this 
Agreement, after having established the Executive's Disability (pursuant to the 
definition of "Disability" set forth below), by giving to the Executive written notice of its 
intention to terminate the Executive's employment.  In such a case, the Executive's 
employment with the Company shall terminate effective on the 180th day after receipt 
of such notice (the "Disability Effective Date"), provided that, within 180 days after such 
receipt, the Executive shall not have returned to full performance of the Executive's 
duties.  For purposes of this Agreement, "Disability" means personal injury, illness or 
other cause which, after the expiration of not less than 180 days after its 
commencement, renders the Executive unable to perform his duties with substantially 
the same level of quality as immediately prior to such incident and such disability is 
determined to be total and permanent by a physician selected by the Company or its 
insurers and acceptable to the Executive or the Executive's legal representative (such 
agreement as to acceptability not to be withheld unreasonably).
                  (c)        With or Without Cause.  The Company may terminate the 
Executive's employment with or without "Cause."  For purposes of this Agreement, 
"Cause" means (i) the willful and continued failure of Executive to perform 
substantially his duties with the Company (other than any such failure resulting from 
Executive's incapacity due to physical or mental illness or any such failure subsequent 
to Executive being delivered a Notice of Termination without Cause by the Company 
or delivering a Notice of Termination for Good Reason to the Company) after a written 
demand for substantial performance is delivered to Executive by the Board which 
specifically identifies the manner in which the Board believes that Executive has not 
substantially performed Executive's duties and the Executive has failed to cure such 
failure to the reasonable satisfaction of the Board; (ii) the willful engaging by Executive 
in gross negligence or willful misconduct which is demonstrably and materially 
injurious to the Company or its affiliates; or (iii) Executive's conviction of or pleading 
guilty or no contest to a felony.  For purpose of this Section 6(c), no act or failure to act 
by Executive shall be considered "willful" unless done or omitted to be done by 
Executive in bad faith and without reasonable belief that Executive's action or 
omission was in the best interests of the Company or its affiliates.  Any act, or failure to 
act, based upon authority given pursuant to a resolution duly adopted by the Board, 
based upon the advice of counsel for the Company or upon the instructions of the 
Company's chief executive officer or another senior officer of the Company shall be 
conclusively presumed to be done, or omitted to be done, by Executive in good faith 
and in the best interests of the Company.  Cause shall not exist unless and until the 
Company has delivered to Executive, along with the Notice of Termination for Cause, 
a copy of a resolution duly adopted by three-quarters (3/4) of all members of the Board 
(excluding Executive if Executive is a Board member) at a meeting of the Board called 
and held for such purpose (after reasonable notice to Executive and an opportunity for 
Executive, together with counsel, to be heard before the Board), finding that in the 
good faith opinion of the Board an event set forth in clauses (i) - (iii) above has 
occurred and specifying the particulars thereof in detail.  The Board must notify 
Executive of any event constituting Cause within ninety (90) days following the 
Board's knowledge of its existence or such event shall not constitute Cause under this 
Agreement.
                  (d)        With or Without Good Reason.  The Executive's 
employment may be terminated by the Executive with or without Good Reason.  For 
purposes of this Agreement, "Good Reason" means:
                  (i)        A material diminution in the Executive?s authority, duties or 
responsibilities as compared with the Executive's authority, duties or responsibilities 
with the Company immediately prior to the Effective Date; provided, however, that 
Good Reason shall not be deemed to occur upon a change in authority, duties or 
responsibilities that is solely and directly a result of the Company no longer being a 
publicly traded entity and does not involve any other event set forth in this Section 6(d);
                  (ii)        A material diminution in the authority, duties, or 
responsibilities of the supervisor to whom the Executive is required to report 
immediately prior to the Effective Date;
                  (iii)         A material change in the geographic location at which the 
Executive must perform services for the Company, which for this purposes shall mean 
the Company requiring the Executive to be based at any office or location other than 
that described in Section 4(a)(ii) hereof, except for travel required in the performance of 
the Executive's responsibilities which shall be no more extensive than the customary 
travel requirements of Executive prior to the Effective Date; or
                  (iv)        Any other action or inaction that constitutes a material 
breach of this Agreement by the Company; 
provided, however, that a termination by Executive for Good Reason shall be effective 
only if (i) the Executive has provided a Notice of Termination to the Company within 90 
days after the initial existence of the event constituting Good Reason that an event 
constituting Good Reason has occurred, (ii) within 30 days following the delivery of 
such Notice of Termination by Executive to the Company, the Company has failed to 
cure the circumstances giving rise to Good Reason and (iii) the Executive resigns from 
employment prior to the end of the Employment Period.  Any termination by the Company with or without Cause or by the Executive with or 
without Good Reason shall be communicated by Notice of Termination to the other 
party hereto given in accordance with Section 13(d) hereof.  For purposes of this 
Agreement, a "Notice of Termination" means a written notice which (x) indicates the 
specific termination provision in this Agreement relied upon, (y) sets forth in 
reasonable detail the facts and circumstances claimed to provide a basis for 
termination of the Executive's employment under the provision so indicated and (z) if 
the termination date is other than the date of receipt of such notice, specifies the 
proposed termination date.  
            7.        Obligations of the Company Upon Termination.
                  (a)        Expiration of Employment Period.  If the Executive's 
employment shall be terminated on account of the expiration of the Employment 
Period, the Company shall pay the Executive his Base Salary through the expiration of 
the Employment Period, plus any Bonus amounts earned but not paid during such 
period and any benefits to which the Executive is entitled under the terms of any of the 
Company?s benefit plans, policies or arrangements, and the Company shall have no 
further obligations to the Executive under this Agreement. 
                  (b)        Death.  If the Executive's employment is terminated by 
reason of the Executive's death, this Agreement shall terminate without further 
obligations to the Executive's legal representatives, other than those death benefits 
provided by the Company to which Executive is entitled at the date of the Executive's 
death, which shall be at least comparable to those in effect at any time during the 
ninety-day period immediately preceding the Effective Date or, if more favorable to the 
Executive and/or the Executive's designees, as in effect on the date of the Executive's 
death with respect to other key executives and their designees.
                  (c)        Disability.  If the Executive's employment is terminated by 
reason of the Executive's Disability, this Agreement shall terminate without further 
obligations to the Executive, other than those disability benefits provided by the 
Company to which Executive is entitled as of the Disability Effective Date, which 
benefits shall be at least comparable to those in effect at any time during the ninety-
day period immediately preceding the Effective Date or, if more favorable to the 
Executive and/or the Executive's designees, as in effect on the date of the Executive's 
Disability with respect to other key executives and their designees.  
                  (d)        With Cause or Without Good Reason.  If the Executive's 
employment shall be terminated (i) by the Company with Cause, or (ii) by Executive 
without Good Reason, the Company shall pay the Executive his Base Salary through 
the date of termination at the rate in effect at the time Notice of Termination is given, 
plus any Bonus amounts earned but not paid through the date of termination and any 
benefits to which the Executive is entitled under the terms of any of the Company?s 
benefit plans, policies or arrangements, and the Company shall have no further 
obligations to the Executive under this Agreement. 
                  (e)        Without Cause or With Good Reason.  If, during the 
Employment Period, Executive's employment shall be terminated (i) by the Company 
without Cause, or (ii) by Executive for Good Reason, the Company shall pay to the 
Executive in a lump sum in cash within ten (10) days after the date of termination 
(unless a delay is required pursuant to Section 14(b) below), the aggregate of the 
following amounts, with respect to which Executive shall have no duty of mitigation 
and the Company shall have no right of set-off:
                        (A)        to the extent not theretofore paid, the Executive's 
Base Salary through the date of termination at the rate in effect on the date of 
termination plus any Bonus amounts which have become payable and any accrued 
vacation pay;
                        (B)        a pro rata portion of Executive's Bonus for the Fiscal 
Year in which the date of termination occurs equal to the product of (1) the greater of 
(x) the average annual dollar bonus amount that was earned by the Executive under 
the Bonus Plan for the three completed Fiscal Years immediately prior to the date of 
termination, or (y) Executive's Target bonus amount under the Bonus Plan for the 
Fiscal Year which includes the date of termination or, if no target has been set with 
respect to Executive for such Fiscal Year, the Target bonus amount for the immediately 
preceding Fiscal Year (in either case, based on Executive's target percentage of Base 
Salary established pursuant to the Bonus Plan) (the greater of (x) and (y) being 
referred to as the "Target Bonus"), multiplied by (2) a fraction, the numerator of which 
is the number of days in the Fiscal Year in which the date of termination occurs 
through the date of termination and the denominator of which is three hundred sixty-
five (365);
                        (C)         an amount equal to Executive's Base Salary and 
Target Bonus for the remainder of the Employment Period;
                        (D)        an amount equal to the number of months remaining 
in the Employment Period multiplied by the applicable monthly COBRA premium as in 
effect on the date of the Executive?s termination that the Executive would have to pay 
to continue the welfare benefits for which COBRA continuation rights are available for 
the Executive and, where applicable, his or her family, with respect to those plans, 
programs and policies described in Section 5(d);
                        (E)        the present lump sum value of benefits which would 
have accrued for the benefit of Executive under the The Pep Boys ? Manny, Moe & 
Jack Account Plan or The Pep Boys ? Manny, Moe & Jack Legacy Plan, as applicable, 
(the ?Retirement Plan?) which Executive was participating immediately prior to his 
termination date and had Executive remained employed for the remainder of the 
Employment Period after the date of termination and continued participating in such 
Retirement Plan, determined using the factors specified in the Retirement Plan for 
calculating lump sum distributions, and assuming that Executive would have 
continued for such period to earn the Base Salary at the date of termination and be 
paid the Target Bonus on each date during such Employment Period that the Bonus 
typically had been paid prior to the date of termination.  For purposes of clarity, this 
benefit is intended as a portion of the severance benefit payable to the Executive 
pursuant to this Section 7(e) and is not intended to be an additional benefit under the 
Retirement Plan.   In addition, for purposed of calculating ?Years of Service? under the 
applicable Retirement Plan, Executive shall receive credit for the period of time 
remaining in the Employment Period; and 
                                (F)        an amount equal to the number of months remaining 
in the Employment Period multiplied by the applicable monthly premium or allowance 
as in effect on the date of the Executive?s termination that would have to be paid to 
continue the programs and benefits which are available for the Executive and, where 
applicable, his or her family, with respect to those plans, programs and policies 
described in Sections 5 (c) and (d), other than those covered by clause (D) and (E) 
above.
        
In addition, upon a termination of Executive in accordance with this Section 7(e), all 
non-vested stock options, and any other non-vested stock or stock-based awards held 
by Executive, shall immediately become fully vested, non-forfeitable and exercisable. 
Notwithstanding anything herein to the contrary, in the event that Executive is entitled 
to the amounts set forth above as a result of a termination of Executive?s employment 
prior to a Change of Control and Executive reasonably demonstrates pursuant to 
Section 1(a) that such termination was at the direction of a third party or in connection 
with the Change of Control, the Executive shall receive the amounts set forth in this 
Section 7(e), less any severance compensation paid to Executive in connection with 
such termination, within ten (10) days following the Change of Control; provided 
however, that if these amounts are deemed to constitute deferred compensation 
subject to the requirements of Section 409A of the Code, such amounts shall be paid 
to the Executive as follows: (i) if the Change of Control qualifies as a permissible 
distribution event within the meaning of Section 409A(a)(2)(A)(v) of the Code, it will be 
paid within ten (10) days following the Change of Control, unless payment is required 
to be delayed pursuant to Section 14(b) below in which case it will be paid at the end of 
the period described in Section 14(b) if such date is later than the ten (10) day period 
following the Change of Control, or (ii) if the Change of Control does not qualify as a 
permissible distribution event within the meaning of Section 409A(a)(2)(A)(v) of the 
Code, it will be payable in a single sum on the first business day of the month 
immediately following the six (6) month anniversary of the date Executive terminated 
employment with the Company.  
            8.        Non-Exclusivity of Rights.  Nothing in this Agreement shall 
prevent or limit the Executive's continuing or future participation in any benefit, bonus, 
incentive or other plan or program provided by the Company or any of its affiliated 
companies and for which the Executive may qualify, nor shall anything herein limit 
such rights as the Executive may have under any stock option or other agreements 
with the Company or any of its affiliated companies.  Amounts which are vested 
benefits or which the Executive is otherwise entitled to receive under any plan or 
program of the Company or any of its affiliated companies at or subsequent to the date 
on which the Executive's employment is terminated shall be payable in accordance 
with such plan or program.  Anything herein to the contrary notwithstanding, if the 
Executive becomes entitled to payments pursuant to Section 7(e) hereof, such 
Executive agrees to waive payments under any severance plan or program of the 
Company.
            9.        Confidential Information.  The Executive shall hold in a fiduciary 
capacity for the benefit of the Company all secret or confidential information, 
knowledge or data relating to the Company or any of its affiliated companies, and their 
respective businesses, which shall have been obtained by the Executive during the 
Executive's employment by the Company or any of its affiliated companies and which 
shall not be public knowledge (other than by acts by the Executive or his 
representatives in violation of this Agreement).  After termination of the Executive's 
employment with the Company, the Executive shall not, without the prior written 
consent of the Company, communicate or divulge any such information, knowledge or 
data to anyone other than the Company and those designated by it.  In no event shall 
an asserted violation of the provisions of this Section 9 constitute a basis for deferring 
or withholding any amounts otherwise payable to the Executive under this Agreement.
            10.        Covenant Against Competition.
                  (a)        If, after the occurrence of a Change of Control, the 
Executive's employment by the Company is terminated pursuant to Sections 7(d) or 
7(e) hereof, then for the greater of one year after the date of termination or the 
remainder of the Employment Period, the Executive shall not, directly or indirectly, (i) 
induce or attempt to influence any employee of the Company to terminate his 
employment with the Company or hire or solicit for hire on behalf of another employer 
any person then employed or who had been employed by the Company during the 
immediately preceding six months or (ii) engage in (as a principal, partner, director, 
officer, agent, employee, consultant or otherwise) or be financially interested in any 
business operating within the United States of America, if (A) such business? primary 
business is the retail and/or commercial sale of automotive parts, accessories, tires 
and/or automotive repair/maintenance services including, without limitation, the 
entities (including their franchisees and affiliates) listed on Schedule 10(a)(ii)(A) 
hereto, or (B) such business is a general retailer which generates revenues from the 
retail and/or commercial sale of automotive parts, accessories, tires and/or automotive 
repair/maintenance services in an aggregate amount in excess of $1 billion, including, 
without limitation, the entities (including their franchisees and affiliates) listed on 
Schedule 10(a)(ii)(B) hereto.  However, nothing contained in this Section 10(a) shall 
prevent the Officer from holding for investment up to two percent (2%) of any class of 
equity securities of a company whose securities are traded on a national or foreign 
securities exchange.
                  (b)        Executive acknowledges that the restrictions contained in 
Sections 9 and 10 hereof, in view of the nature of the business in which the Company 
is engaged, are reasonable and necessary in order to protect the legitimate interests of 
the Company, and that any violation thereof would result in irreparable injuries to the 
Company, and the Executive therefore acknowledges that, in the event of his violation 
of any of these restrictions, the Company shall be entitled to obtain from any court of 
competent jurisdiction preliminary and permanent injunctive relief (without the posting 
of any bond) as well as damages and an equitable accounting of all earnings, profits 
and other benefits arising from such a violation, which rights shall be cumulative and 
in addition to any other rights or remedies to which the Company may be entitled.
                  (c)        If the Executive violates any of the restrictions contained in 
the foregoing Section 10(a), the period during which the restrictions contained in 
Section 10(a) shall remain in effect shall be tolled as of the time of commencement of 
such violation, and shall not begin to run again until such time as such violation shall 
be cured by the Executive to the satisfaction of the Company. 
                  (d)        Executive acknowledges and agrees that the covenants 
and other provisions set forth in Sections 10(a), 10(b) and 10(c) hereof are reasonable 
and valid in geographical and temporal scope and in all other respects.  If any of such 
covenants or other provisions are found to be invalid or unenforceable by a final 
determination of a court of competent jurisdiction, then (I) the remaining covenants 
and other provisions set forth in Sections 10(a), 10(b) and 10(c) shall be unimpaired, 
and (ii) the invalid or unenforceable covenant or provision shall be deemed replaced 
by a covenant or provision that is valid or enforceable and that comes closest to 
expressing the intention of the covenant or provision found to be invalid or 
unenforceable.
            11.        Certain Additional Payments by the Company.
                  (a)        If it is determined (as hereafter provided) that any payment 
or distribution by the Company to or for the benefit of Executive, whether paid or 
payable or distributed or distributable pursuant to the terms of this Agreement or 
otherwise pursuant to or by reason of any other agreement, policy, plan, program or 
arrangement, including without limitation any stock option, stock appreciation right or 
similar right, or the lapse or termination of any restriction on or the vesting or 
exercisability of any of the foregoing (a "Payment"), would be subject to the excise tax 
imposed by Section 4999 of the Code (or any successor provision thereto) or to any 
similar tax imposed by state or local law, or any interest or penalties with respect to 
such excise tax (such tax or taxes, together with any such interest and penalties, are 
hereafter collectively referred to as the "Excise Tax"), then Executive will be entitled to 
receive an additional payment or payments (a "Gross-Up Payment") in an amount 
such that, after payment by Executive of all taxes (including any interest or penalties 
imposed with respect to such taxes), including any Excise Tax, imposed upon the 
Gross-Up Payment, Executive retains an amount of the Gross-Up Payment equal to 
the Excise Tax imposed upon the Payments.  
                  (b)        Subject to the provisions of Section 11(f) hereof, all 
determinations required to be made under this Section 11, including whether an 
Excise Tax is payable by Executive and the amount of such Excise Tax and whether a 
Gross-Up Payment is required and the amount of such Gross-Up Payment, will be 
made by a nationally recognized firm of certified public accountants (the "Accounting 
Firm") selected by Executive in his sole discretion.  Executive will direct the Accounting 
Firm to submit its determination and detailed supporting calculations to both the 
Company and Executive within 30 days after the date of the Change of Control or the 
date of Executive's termination of employment, if applicable, and any other such time 
or times as may be requested by the Company or Executive.  If the Accounting Firm 
determines that any Excise Tax is payable by Executive, unless the payment is 
required to be delayed pursuant to Section 14(b) below, the Company will pay the 
required Gross-Up Payment to Executive within 15 days after receipt of such 
determination and calculations.  If the Accounting Firm determines that no Excise Tax 
is payable by Executive, it will, at the same time as it makes such determination, 
furnish Executive with an opinion that he has substantial authority not to report any 
Excise Tax on his federal, state, local income or other tax return.  Any determination by 
the Accounting Firm as to the amount of the Gross-Up Payment will be binding upon 
the Company and Executive.  As a result of the uncertainty in the application of 
Section 4999 of the Code (or any successor provision thereto) and the possibility of 
similar uncertainty regarding applicable state or local tax law at the time of any 
determination by the Accounting Firm hereunder, it is possible that Gross-Up 
Payments which will not have been made by the Company should have been made 
(an "Underpayment"), consistent with the calculations required to be made hereunder.  
In the event that the Company exhausts or fails to pursue its remedies pursuant to 
Section 11(f) hereof and Executive thereafter is required to make a payment of any 
Excise Tax, Executive will direct the Accounting Firm to determine the amount of the 
Underpayment that has occurred and to submit its determination and detailed 
supporting calculations to both the Company and Executive as promptly as possible.  
Unless the Underpayment is required to be delayed pursuant to Section 14(b) below, 
such Underpayment will be promptly paid by the Company to, or for the benefit of, 
Executive within 15 days after receipt of such determination and calculations.
                  (c)        The Company and Executive will each provide the 
Accounting Firm access to and copies of any books, records and documents in the 
possession of the Company or Executive, as the case may be, reasonably requested 
by the Accounting Firm, and otherwise cooperate with the Accounting Firm in 
connection with the preparation and issuance of the determination contemplated by 
Section 11(b) hereof.
                  (d)        The federal, state and local income or other tax returns filed 
by Executive will be prepared and filed on a consistent basis with the determination of 
the Accounting Firm with respect to the Excise Tax payable by Executive.  Executive 
will make proper payment of the amount of any Excise Tax, and at the request of the 
Company, provide to the Company true and correct copies (with any amendments) of 
his federal income tax return as filed with the Internal Revenue Service and 
corresponding state and local tax returns, if relevant, as filed with the applicable taxing 
authority, and such other documents reasonably requested by the Company, 
evidencing such payment.  If prior to the filing of Executive's federal income tax return, 
or corresponding state or local tax return, if relevant, the Accounting Firm determines 
that the amount of the Gross-Up Payment should be reduced, Executive will within 15 
days pay to the Company the amount of such reduction.
                  (e)        The fees and expenses of the Accounting Firm for its 
services in connection with the determinations and calculations contemplated by 
Sections 11(b) and (d) hereof will be borne by the Company.  If such fees and 
expenses are initially advanced by Executive, the Company will reimburse Executive 
the full amount of such fees and expenses within 15 days after receipt from Executive 
of a statement therefor and reasonable evidence of his payment thereof.
                  (f)        Executive will notify the Company in writing of any claim by 
the Internal Revenue Service that, if successful, would require the payment by the 
Company of a Gross-Up Payment.  Such notification will be given as promptly as 
practicable but no later than 30 days after Executive actually receives notice of such 
claim and Executive will further apprise the Company of the nature of such claim and 
the date on which such claim is requested to be paid (in each case, to the extent 
known by Executive).  Executive will not pay such claim prior to the date that any 
payment of amount with respect to such claim is due.  If the Company notifies 
Executive in writing prior to the expiration of such period that it desires to contest such 
claim, Executive will:
                        (A)        provide the Company with any written records or 
documents in his possession relating to such claim reasonably requested by the 
Company;
                        (B)        take such action in connection with contesting such 
claim as the Company will reasonably request in writing from time to time, including 
without limitation accepting legal representation with respect to such claim by an 
attorney competent in respect of the subject matter and reasonably selected by the 
Company;
                        (C)        cooperate with the Company in good faith in order 
effectively to contest such claim; and
                        (D)        permit the Company to participate in any proceedings 
relating to such claim;
provided, however, that the Company will bear and pay directly all costs and expenses 
(including interest and penalties) incurred in connection with such contest and will 
indemnify and hold harmless Executive, on an after-tax basis, for and against any 
Excise Tax or income tax, including interest and penalties with respect thereto, 
imposed as a result of such representation and payment of costs and expenses.  
Without limiting the foregoing provisions of this Section 11(f), the Company will control 
all proceedings taken in connection with the contest of any claim contemplated by this 
Section 11(f) and, at its sole option, may pursue or forego any and all administrative 
appeals, proceedings, hearings and conferences with the taxing authority in respect of 
such claim (provided that Executive may participate therein at his own cost and 
expense) and may, at its option, either direct Executive to pay the tax claimed and sue 
for a refund or contest the claim in any permissible manner, and Executive agrees to 
prosecute such contest to a determination before any administrative tribunal, in a court 
of initial jurisdiction and in one or more appellate courts, as the Company will 
determine; provided, however, that if the Company directs Executive to pay the tax 
claimed and sue for a refund, the Company will advance the amount of such payment 
to Executive on an interest-free basis and will indemnify and hold Executive harmless, 
on an after-tax basis, from any Excise Tax or income tax, including interest or penalties 
with respect thereto, imposed with respect to such advance; and provided further, 
however, that any extension of the statute of limitations relating to payment of taxes for 
the taxable year of Executive with respect to which the contested amount is claimed to 
be due is limited solely to such contested amount.  Furthermore, the Company's 
control of any such contested claim will be limited to issues with respect to which a 
Gross-Up Payment would be payable hereunder and Executive will be entitled to settle 
or contest, as the case may be, any other issue raised by the Internal Revenue Service 
or any other taxing authority.
                  (g)        If Executive receives any refund with respect to any Excise 
Tax previously paid to the Internal Revenue Service by Executive, and if Executive had 
received a Gross-Up Payment from the Company with respect to such Excise Tax, 
Executive will promptly pay to the Company the amount of such refund (together with 
any interest paid or credited thereon after any taxes applicable thereto).  If, after the 
receipt by Executive of an amount advanced by the Company pursuant to 
Section 11(f) hereof, a determination is made that Executive will not be entitled to any 
refund with respect to such claim and the Company does not notify Executive in 
writing of its intent to contest such denial or refund prior to the expiration of 30 days 
after such determination, then such advance will be forgiven and will not be required 
to be repaid and the amount of such advance will offset, to the extent thereof, the 
amount of the Gross-Up Payment required to be paid pursuant to this Section 11.
            12.        Successors.
                  (a)        This Agreement is personal to the Executive and without 
the prior written consent of the Company shall not be assignable by the Executive 
other than by will or the laws of descent and distribution.  This Agreement shall inure 
to the benefit of and be enforceable by the Executive's legal representatives.
                  (b)        This Agreement shall inure to the benefit of and be binding 
upon the Company and its successors.
                  (c)        The Company will require any successor (whether direct or 
indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of 
the business and/or assets of the Company to expressly assume and agree to perform 
this Agreement in the same manner and to the same extent that the Company would 
be required to perform it if no such succession had taken place.  As used in this 
Agreement, "Company" shall mean the Company as hereinbefore defined and any 
successor to its business and/or assets as aforesaid which assumes and agrees to 
perform this Agreement by operation of law, or otherwise.
            13.        Miscellaneous.
                  (a)        This Agreement shall be governed by and construed in 
accordance with the laws of the Commonwealth of Pennsylvania without reference to 
principles of conflict of laws.  The parties hereto agree that the exclusive jurisdiction of 
any dispute regarding this Agreement shall be the state courts located in Philadelphia, 
Pennsylvania.  The Company shall reimburse Executive for the fees and expenses 
incurred by him in enforcing this Agreement, provided that at least one matter in 
dispute is decided in favor of Executive.  
                  (b)        The captions of this Agreement are not part of the 
provisions hereof and shall have no force or effect.  
                  (c)        This Agreement may not be amended or modified otherwise 
than by a written agreement executed by the parties hereto or their respective 
successors and legal representatives.
                  (d)        All notices and other communications hereunder shall be in 
writing and shall be given by hand delivery to the other party or by registered or 
certified mail, return receipt requested, postage prepaid, addressed as follows:
                  If to the Executive, to the Executive?s most recent home address 
reflected on the Company?s books and records; and
                  
                  If to the Company:
                  The Pep Boys - Manny, Moe & Jack
                  3111 West Allegheny Avenue
                  Philadelphia, PA 19132
Attention: Chief Executive Officer and General Counsel
or to such other address as either party shall have furnished to the other in writing in 
accordance herewith.  Notice and communications shall be effective when actually 
received by the addressee.
                  (e)        The invalidity or unenforceability of any provision of this 
Agreement shall not affect the validity or enforceability of any other provision of this 
Agreement.
                  (f)        The Company may withhold from any amounts payable 
under this Agreement such Federal, state or local taxes as shall be required to be 
withheld pursuant to any applicable law or regulation.
                  (g)        This Agreement contains the entire understanding of the 
Company and the Executive with respect to the subject matter hereof, and supersedes 
all prior agreements, understandings, negotiations and discussions, whether oral or 
written, of the parties, with respect to the subject matter hereof, including the Original 
Agreement.     
                  (h)        The Executive and the Company acknowledge that the 
employment of the Executive by the Company, prior to the Effective Date, is "at will", 
and may be terminated by either the Executive or the Company at any time.  Upon a 
termination of the Executive's employment or upon the Executive's ceasing to be an 
officer of the Company, in each case, prior to the Effective Date, there shall be no 
further rights under this Agreement.
            14.        Section 409A of the Internal Revenue Code.  
                  (a)        This Agreement shall be interpreted to avoid any penalty 
sanctions under section 409A of the Code.  Accordingly, all provisions herein, or 
incorporated by reference, shall be construed and interpreted to comply with Section 
409A of the Code, to the extent applicable, and, if necessary, any such provision shall 
be deemed amended to comply with section 409A of the Code and regulations 
thereunder.  If any payment or benefit cannot be provided or made at the time specified 
herein without incurring sanctions under section 409A of the Code, then such benefit 
or payment shall be provided in full at the earliest time thereafter when such sanctions 
will not be imposed.  All payments to be made upon a termination of employment 
under this Agreement may only be made upon a ?separation from service? (as defined 
under Section 409A of the Code).  In no event may the Executive, directly or indirectly, 
designate the calendar year of payment.  
                  (b)        To the maximum extent permitted under section 409A of the 
Code, the cash severance payments payable under this Agreement are intended to 
comply with the ?short-term deferral exception? under Treas. Reg. section1.409A-
1(b)(4); provided, however, any amount payable to the Executive during the six (6) 
month period following the Executive?s termination date that does not qualify within 
such exception and is deemed as deferred compensation subject to the requirements 
of section 409A of the Code, then such amount shall hereinafter be referred to as the 
?Excess Amount.?  If at the time of the Executive?s termination of employment, the 
Company?s (or any entity required to be aggregated with the Company under section 
409A of the Code) stock is publicly-traded on an established securities market or 
otherwise and the Executive is a ?specified employee? (as defined in section 409A of 
the Code and determined in the sole discretion of the Company (or any successor 
thereto) in accordance with the Company?s (or any successor thereto) ?specified 
employee? determination policy), then the Company shall postpone the 
commencement of the payment of the portion of the Excess Amount that is payable 
within the six (6) month period following the Executive?s termination date with the 
Company (or any successor thereto) for six (6) months following the Executive?s 
separation from service  with the Company (or any successor thereto).  The delayed 
Excess Amount shall be paid in a lump sum to the Executive within ten (10) days 
following the date that is six (6) months following the Executive?s separation from 
service with the Company (or any successor thereto).  If the Executive dies during 
such six (6) month period and prior to the payment of the portion of the Excess Amount 
that is required to be delayed on account of section 409A of the Code, such Excess 
Amount shall be paid to the personal representative of the Executive?s estate within 
sixty (60) days after the Executive?s death. 
                  (c)        All reimbursements provided under this Agreement shall be 
made or provided in accordance with the requirements of Section 409A of the Code, 
including, where applicable, the requirement that (i) any reimbursement is for 
expenses incurred during the Executive?s lifetime (or during a shorter period of time 
specified in this Agreement), (ii) the amount of expenses eligible for reimbursement 
during a calendar year may not affect the expenses eligible for reimbursement in any 
other calendar year, (iii) the reimbursement of an eligible expense will be made on or 
before the last day of the taxable year following the year in which the expense is 
incurred, and (iv) the right to reimbursement is not subject to liquidation or exchange 
for another benefit.  Any tax gross up payments to be made hereunder shall be made 
not later than the end of the Executive?s taxable year next following the Executive?s 
taxable year in which the related taxes are remitted to the taxing authority.
    

        IN WITNESS WHEREOF, the Executive has hereunto set his hand and the 
Company has caused this Agreement to be executed in its name on its behalf, all as of 
the day and year first above written.
                                            _______________________________                
                                                Name: 
                                            THE PEP BOYS - MANNY, MOE & JACK
                                            By:_______________________________        
                                                                                                  
-26-ex4-1.htm

    
      

    

    Exhibit 4.1

     

    
      THIS
NOTE AND THE COMMON SHARES ISSUABLE UPON CONVERSION OF THIS NOTE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE
SECURITIES LAWS.  THIS NOTE AND THE COMMON SHARES ISSUABLE UPON
CONVERSION OF THIS NOTE MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR
HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THIS
NOTE UNDER SAID ACT OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO IDO
SECURITY INC. THAT SUCH REGISTRATION IS NOT REQUIRED.

      

      Principal Amount
$___________                                                                                                Issue
Date: October 31, 2008

      

      SECURED CONVERTIBLE
PROMISSORY NOTE

      

      FOR VALUE RECEIVED, IDO SECURITY INC.,
a Nevada corporation (hereinafter called "Borrower"), hereby promises to pay to
_____________________________________________,
______________________________________________________________ (the "Holder") or
order, without demand, the sum of __________________________________ Dollars
($_________) (“Principal Amount”), with simple and unpaid interest accruing
thereon, on April 30, 2010 (the "Maturity Date"), if not retired
sooner.

      

      This Note
has been entered into pursuant to the terms of a subscription agreement between
the Borrower and the Holder, dated of even date herewith (the “Subscription
Agreement”), and shall be governed by the terms of such Subscription
Agreement.  Unless otherwise separately defined herein, all
capitalized terms used in this Note shall have the same meaning as is set forth
in the Subscription Agreement.  The following terms shall apply to
this Note:

      

      ARTICLE
I

      

      INTEREST:
AMORTIZATION; SECURITY AGREEMENT

       

              1.1.         
Interest
Rate.   Subject to Section
6.7 hereof, interest payable on this Note shall accrue on the outstanding
Principal Amount at a rate per annum (the "Interest Rate") of ten percent
(10%).  Interest on the outstanding Principal Amount shall accrue from
the date of this Note and shall be payable in arrears together with, at the same
time and in the same manner as payment of Principal Amount and on the Maturity
Date, whether by acceleration or otherwise.  For purposes of
calculating the conversion price pursuant to Article II, each interest due date
shall be deemed the Repayment Date, as defined in Section
1.2.

       

                     
1.2.          Minimum
Monthly Principal Payments.   Amortizing payments
of the outstanding Principal Amount of this Note and accrued interest shall
commence on the sixth month anniversary date of this Note and on the same day of
each month thereafter (each a “Repayment Date”) until the Principal Amount has
been repaid in full, whether by the payment of cash or by the conversion of such
Principal Amount and interest into Common Stock pursuant to the terms
hereof.  Subject to Article II and Article III below, on each
Repayment Date, the Borrower shall make payments to the Holder in an amount
equal to 8.33% of the initial Principal Amount, the
amount of accrued but unpaid or unconverted interest on the entire Principal
Amount as of such Repayment Date, and any other amounts which are then owing
under this Note that have not been paid (collectively, the “Monthly
Amount”).  Amounts of conversions of Principal Amount and made by the
Holder or Borrower pursuant to Article II or Article III and amounts redeemed
pursuant to Article II of this
Note shall be applied first against outstanding fees and damages,
then outstanding already payable accrued interest and then to Principal Amounts
of not yet due Monthly Amounts commencing with the last Monthly Amount next
payable and thereafter to Monthly Amounts in reverse chronological
order.  Any Principal Amount, interest and any other sum arising under
this Note and the Subscription Agreement that remains outstanding on the
Maturity Date shall be due and payable on the Maturity Date.

      

      
        
          
          

        

        
          1

          
            

          

        

        
          
          

        

         

                       
1.3.          Default Interest
Rate.  Following the occurrence and during the continuance of
an Event of Default (as defined in Article IV), which, if susceptible to cure is
not cured within five (5) days, otherwise then from the first date of such
occurrence, the annual interest rate on this Note shall (subject to Section 4.7)
be fifteen percent (15%).  Such interest shall be due and payable
together with regular scheduled Monthly Amounts.

      

      

      ARTICLE II

      

      CONVERSION REPAYMENT

      

                      2.            
Payment of
Monthly Amount in Cash or Common Stock.  Subject to Section 3.2 hereof, the
Borrower, at the Borrower’s election, shall pay the Monthly Amount not later
than four (4) business days after the relevant Repayment Date (i) in cash in an
amount equal to 110% of the Principal Amount component of the Monthly Amount and
100% of all other components of the Monthly Amount, or (ii) in Common Stock at
an applied conversion rate equal to the lesser of (A) the Fixed Conversion Price
(as defined in section 3.1 hereof), or (B) seventy-five percent (75%) of the
average of the closing price of the common stock as reported by Bloomberg L.P.
for the Principal Market for the five trading days preceding the relevant
Repayment Date.  The Borrower must
contemporaneously deliver to Holder supporting calculation for the amount of
cash paid or shares of Common Stock delivered.  Amounts paid with
shares of Common Stock must be delivered to the Holder as described in Section
3.3(b).    Payment amounts and form must be made to all Other Holders
in proportion to the relative Note principal held by the Holder and the Other
Holders.  Borrower must give Holder fifteen (15) trading days notice
prior to each Repayment Date if Borrower will pay the Monthly Amount in cash,
otherwise such payment will be made by delivery of shares of Common
Stock.  The
foregoing sentence notwithstanding such Monthly Amount if to be paid with shares
of Common Stock will be
automatically deferred (“Deferred Payment”) unless the Holder gives notice to
the Borrower at least five (5) days before a
Repayment Date that the Holder will accept
payment of such Monthly
Amount in the form of
Common Stock.  The Conversion Price of each Deferred Payment will be
the lesser of (i) the Conversion Price (as defined in Section 3.1 hereof), or (ii) seventy-five percent
(75%) of the average of the closing prices of the Common Stock as reported by
Bloomberg L.P. for the Principal Market for the five (5) trading days preceding
the date a Notice of Conversion (a form of which is annexed as Exhibit A to this
Note) is given by Holder to the Borrower with respect
to such Deferred Payment.  The foregoing notwithstanding, no amount payable
hereunder may be paid in shares of Common Stock by the Borrower without the
consent of the Holder after and during the pendency of an Event of Default
(or an event that with the passage of time or the giving of notice could
become an Event of Default),
unless waived in writing by the Holder.   Common Stock delivered
pursuant to this Section 2 must be immediately resellable and transferable by
the Holder without any additional holding period.

      

      ARTICLE III

      

      CONVERSION RIGHTS

      

                      3.1.         
Holder's
Conversion Rights.   Subject to Section
3.2, the Holder shall have the right, but not the obligation at all times, to
convert all or any portion of the then aggregate outstanding Principal Amount of
this Note, and/or accrued interest into shares of Common Stock, subject to the
terms and conditions set forth in this Article III at the rate of $0.15 per
share of Common Stock (“Fixed Conversion Price”) as same may be adjusted
pursuant to this Note and the Subscription Agreement. The Holder may exercise
such right by delivery to the Borrower of a written Notice of Conversion
pursuant to Section 3.3.

      

      
        
          
          

        

        
          2

          
            

          

        

        
          
          

        

         

                       
3.2.          Conversion
Limitation.   The Holder
shall not be entitled to convert on a Conversion Date that amount of the Note in
connection with that number of shares of Common Stock which would be in excess
of the sum of (i) the number of shares of Common Stock beneficially owned by the
Holder and its affiliates on a Conversion Date, (ii) any Common Stock issuable
in connection with the unconverted portion of the Note, and (iii) the number of
shares of Common Stock issuable upon the conversion of the Note with respect to
which the determination of this provision is being made on a Conversion Date,
which would result in beneficial ownership by the Holder and its affiliates of
more than 4.99% of the outstanding shares of Common Stock of the Borrower on
such Conversion Date.  For the purposes of the provision to the
immediately preceding sentence, beneficial ownership shall be determined in
accordance with Section 13(d) of the Securities Exchange Act of 1934, as
amended, and Regulation 13d-3 thereunder.  Subject to the foregoing,
the Holder shall be limited to aggregate conversions of 4.99%.  The
Holder shall have the authority and obligation to determine whether the
restriction contained in this Section 3.2 will limit any conversion hereunder
and to the extent that the Holder determines that the limitation contained in
this Section applies, the determination of which portion of the Notes are
convertible shall be the responsibility and obligation of the
Holder.   The Holder may waive the conversion limitation
described in this Section 3.2, in whole or in part, upon and effective after 61
days prior written notice to the Borrower to increase such percentage to up to
9.99%.  In all circumstances, the delivery by the Holder of a Notice of
Conversion as provided below shall be deemed to be the Holder’s representation
that such conversion conforms to the provisions of this Section 3.2 and the
Company shall be under no obligation to verify or ascertain compliance by the
Holder with this provision.

      

      
               
3.3.          Mechanics of
Holder's Conversion.

       

                                     
(a)       
    In the
event that the Holder elects to convert any amounts outstanding under this Note
into Common Stock, the Holder shall give notice of such election by delivering
an executed and completed notice of conversion (a "Notice of Conversion") to the
Borrower, which Notice of Conversion shall provide a breakdown in reasonable
detail of the Principal Amount, accrued interest and amounts being
converted.  The original Note is not required to be surrendered to the
Borrower until all sums due
under the Note have been paid.  On each Conversion Date (as
hereinafter defined) and in accordance with its Notice of Conversion, the Holder
shall make the appropriate reduction to the Principal Amount, accrued interest
and fees as entered in its records.  Each date on which a Notice of
Conversion is delivered or telecopied to the Borrower in accordance with the
provisions hereof shall be deemed a "Conversion Date." A form of Notice of
Conversion to be employed by the Holder is annexed hereto as Exhibit
A.

       

                                     
(b)           Pursuant to
the terms of a Notice of Conversion, the Borrower will issue instructions to the
transfer agent accompanied by an opinion of counsel, if so required by the
Borrower's transfer agent and shall cause the transfer agent to transmit the
certificates representing the Conversion Shares to the Holder by crediting the
account of the Holder's designated broker with the Depository Trust Corporation
("DTC") through its Deposit Withdrawal Agent Commission ("DWAC") system within
four (4) business days after receipt by the Borrower of the Notice of Conversion
(the "Delivery Date"). In the case of the exercise of the conversion rights set
forth herein the conversion privilege shall be deemed to have been exercised and
the Conversion Shares issuable upon such conversion shall be deemed to have been
issued upon the date of receipt by the Borrower of the Notice of Conversion. The
Holder shall be treated for all purposes as the record holder of such shares of
Common Stock, unless the Holder provides the Borrower written instructions to
the contrary.   In the event that Conversion Shares cannot be
delivered to the Holder via DWAC, the Borrower shall deliver physical
certificates representing the Conversion Shares by the Delivery
Date.

      

      
        
          
          

        

        
          3

          
            

          

        

        
          
          

        

         

      

                      3.4.          Conversion
Mechanics.

      

                                     
(a)           
The number of shares of Common
Stock to be issued upon each conversion of this Note pursuant to this Article
III shall be determined by dividing that portion of the Principal Amount and
interest and fees to be converted, if any, by the then applicable Fixed
Conversion Price.

       

                                     
(b)           
The Fixed Conversion Price
and number and kind of shares or other securities to be issued upon conversion
shall be subject to adjustment from time to time upon the happening of certain
events while this conversion right remains outstanding, as
follows:

      

      A.          Merger,
Sale of Assets,
etc.  If the
Borrower at any time shall consolidate with or merge into or sell or convey all
or substantially all its assets to any other corporation, this Note, as to the
unpaid principal portion thereof and accrued interest thereon, shall thereafter
be deemed to evidence the right to purchase such number and kind of shares or
other securities and property as would have been issuable or distributable on
account of such consolidation, merger, sale or conveyance, upon or with respect
to the securities subject to the conversion or purchase right immediately prior
to such consolidation, merger, sale or conveyance.  The foregoing
provision shall similarly apply to successive transactions of a similar nature
by any such successor or purchaser.  Without limiting the generality
of the foregoing, the anti-dilution provisions of this Section shall apply to
such securities of such successor or purchaser after any such consolidation,
merger, sale or conveyance.

      

      B.           Reclassification,
etc.  If the
Borrower at any time shall, by reclassification or otherwise, change the Common
Stock into the same or a different number of securities of any class or classes,
this Note, as to the unpaid principal portion thereof and accrued interest
thereon, shall thereafter be deemed to evidence the right to purchase an
adjusted number of such securities and kind of securities as would have been
issuable as the result of such change with respect to the Common Stock
immediately prior to such reclassification or other change.

      

      C.           Stock
Splits, Combinations and Dividends.  If the shares of Common
Stock are subdivided or combined into a greater or smaller number of shares of
Common Stock, or if a dividend is paid on the Common Stock in shares of Common
Stock, the Conversion Price shall be proportionately reduced in case of
subdivision of shares or stock dividend or proportionately increased in the case
of combination of shares, in each such case by the ratio which the total number
of shares of Common Stock outstanding immediately after such event bears to the
total number of shares of Common Stock outstanding immediately prior to such
event.

      

                                     
D.           Share
Issuance.   So long as this Note
is outstanding, if the Borrower shall issue any Common Stock except for the
Excepted Issuances (as defined in the Subscription Agreement), prior to the
complete conversion or payment of this Note, for a consideration less than the
Fixed Conversion Price that would be in effect at the time of such issue, then,
and thereafter successively upon each such issuance, the Fixed Conversion Price
shall be reduced to such other lower issue price.  For purposes of
this adjustment, the issuance of any security or debt instrument of the Borrower
carrying the right to convert such security or debt instrument into Common Stock
or of any warrant, right or option to purchase Common Stock shall result in an
adjustment to the Fixed Conversion Price upon the issuance of the
above-described security, debt instrument, warrant, right, or option and again
upon the issuance of shares of Common Stock upon exercise of such conversion or
purchase rights if such issuance is at a price lower than the then applicable
Conversion Price.  The reduction of the Fixed Conversion Price
described in this paragraph is in addition to the other rights of the Holder
described in the Subscription Agreement.

      

      
        
          
          

        

        
          4

          
            

          

        

        
          
          

        

         

                                       
(c)           Whenever the Conversion Price is
adjusted pursuant to Section 3.4(b) above, the Borrower shall promptly mail to
the Holder a notice setting forth the Conversion Price after such adjustment and
setting forth a statement of the facts requiring such
adjustment.

      

      

      3.5.         
Reservation.   Subject to the filing
by Borrower of the Charter Amendment no later than March 31, 2009 to increase
the authorized shares of Common Stock, during the period the conversion right
exists, Borrower will reserve from its authorized and unissued Common Stock not
less than 125% of the number of shares to provide for the issuance of
Common Stock upon the full conversion of this Note. Borrower shall reserve Common Stock
issuable upon conversion of this Note as described in the Subscription
Agreement.  Borrower represents that upon issuance, such shares
will be duly and validly issued, fully paid and
non-assessable.  Borrower agrees that its issuance of this Note shall
constitute full authority to its officers, agents, and transfer agents who are
charged with the duty of executing and issuing stock certificates to execute and
issue the necessary certificates for shares of Common Stock upon the conversion
of this Note.

      

      3.6       
   Issuance of
Replacement Note.  Upon any partial conversion
of this Note, a replacement Note containing the same date and provisions of this
Note shall, at the written
request of the Holder, be
issued by the Borrower to the Holder for the outstanding Principal Amount of
this Note and accrued interest which shall not have been converted or paid,
provided Holder has surrendered an original Note to the Company. In the event
that the Holder elects not to surrender a Note for reissuance upon partial
payment or conversion, the Holder hereby indemnifies the Borrower against any
and all loss or damage attributable to a third-party claim in an amount in
excess of the actual amount then due under the Note.

      

      ARTICLE IV

      

      SECURITY INTEREST

       

             
4.            
Security
Interest/Waiver of Automatic Stay.   This Note is secured
by a security interest granted to the Collateral Agent for the benefit of the
Holder pursuant to a Security Agreement dated as of December 24, 2007, as delivered by Borrower to
Holder.  The Borrower acknowledges and agrees that should a proceeding
under any bankruptcy or insolvency law be commenced by or against the Borrower,
or if any of the Collateral (as defined in the Security Agreement) should become
the subject of any bankruptcy or insolvency proceeding, then the Holder should
be entitled to, among other relief to which the Holder may be entitled under the
Transaction Documents and any other agreement to which the Borrower and Holder
are parties (collectively, "Loan Documents") and/or applicable law, an order
from the court granting immediate relief from the automatic stay pursuant to 11
U.S.C. Section 362 to permit the Holder to exercise all of its rights and
remedies pursuant to the Loan Documents and/or applicable law.  TO THE
EXTENT PERMITTED BY LAW, THE BORROWER EXPRESSLY WAIVES THE BENEFIT OF THE
AUTOMATIC STAY IMPOSED BY 11 U.S.C. SECTION 362.  FURTHERMORE, THE
BORROWER EXPRESSLY ACKNOWLEDGES AND AGREES THAT NEITHER 11 U.S.C. SECTION 362
NOR ANY OTHER SECTION OF THE BANKRUPTCY CODE OR OTHER STATUTE OR RULE
(INCLUDING, WITHOUT LIMITATION, 11 U.S.C. SECTION 105) SHALL STAY, INTERDICT,
CONDITION, REDUCE OR INHIBIT IN ANY WAY THE ABILITY OF THE HOLDER TO ENFORCE ANY
OF ITS RIGHTS AND REMEDIES UNDER THE LOAN DOCUMENTS AND/OR APPLICABLE
LAW.  The Borrower hereby consents to any motion for relief from stay
that may be filed by the Holder in any bankruptcy or insolvency proceeding
initiated by or against the Borrower and, further, agrees not to file any
opposition to any motion for relief from stay filed by the
Holder.  The Borrower represents, acknowledges and agrees that this
provision is a specific and material aspect of the Loan Documents, and that the
Holder would not agree to the terms of the Loan Documents if this waiver were
not a part of this Note. The Borrower further represents, acknowledges and
agrees that this waiver is knowingly, intelligently and voluntarily made, that
neither the Holder nor any person acting on behalf of the Holder has made any
representations to induce this waiver, that the Borrower has been represented
(or has had the opportunity to he represented) in the signing of this Note and
the Loan Documents and in the making of this waiver by independent legal counsel
selected by the Borrower and that the Borrower has discussed this waiver with
counsel.

      

      
        
          
          

        

        
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      ARTICLE V

      

      EVENTS OF DEFAULT

       

             
The occurrence of any of the following events of default ("Event of Default")
shall, at the option of the Holder hereof, make all sums of principal and
interest then remaining unpaid hereon and all other amounts payable hereunder
immediately due and payable, upon demand, without presentment, or grace period,
all of which hereby are expressly waived, except as set forth
below:

      

      5.1           Failure to
Pay Principal or Interest.  The Borrower fails to pay
any installment of Principal Amount, interest or other sum due under this Note
or any Transaction Document when due and such failure continues for a period of
five (5) business days after the due date.

      

      5.2           Breach of
Covenant.  The
Borrower breaches any material covenant or other material term or condition of
the Subscription Agreement, this Note, or other Transaction Document in any
material respect and such breach, if subject to cure, continues for a period of
ten (10) business days after written notice to the Borrower from the
Holder.

      

      5.3           Breach of
Representations and Warranties.  Any material representation
or warranty of the Borrower made herein, in the Subscription Agreement,
Transaction Document or in any agreement, statement or certificate given in
writing pursuant hereto or in connection herewith or therewith shall be false or
misleading in any material respect as of the date made and the Closing
Date.

      

      5.4           Receiver or
Trustee.  The
Borrower or any Subsidiary of Borrower shall make an assignment for the benefit
of creditors, or apply for or consent to the appointment of a receiver or
trustee for them or for a substantial part of their property or business; or
such a receiver or trustee shall otherwise be appointed.

      

      5.5           Judgments.  Any money judgment, writ or
similar final process shall be entered or filed against Borrower or any
subsidiary of Borrower or any of their property or other assets for more than
$500,000, and shall remain unpaid, unvacated,
unbonded or unstayed for a period of forty-five (45) days.

      

      5.6           Non-Payment.   A default by the
Borrower or Subsidiary under any one or more obligations in an aggregate
monetary amount in excess of two hundred thousand dollars ($200,000.00) for more
than twenty days after the due date and any applicable grace period, unless the
Borrower or Subsidiary is contesting the validity of such obligation in good
faith.

      

      5.7           Bankruptcy.  Bankruptcy, insolvency,
reorganization or liquidation proceedings or other proceedings or relief under
any bankruptcy law or any law, or the issuance of any notice in relation to such
event, for the relief of debtors shall be instituted by or against the Borrower
or any Subsidiary of Borrower and if instituted against them are not dismissed
within sixty (60) days of
initiation.

      

      
        
          
          

        

        
          6

          
            

          

        

        
          
          

        

         

      

      5.8           Delisting.   Failure of the Common
Stock to be quoted or listed on the OTC Bulletin Board (“Bulletin Board”) or
other Principal Market; failure to comply with the requirements for continued
listing on the Bulletin Board for a period of 15 consecutive trading
days.

      

      5.9           Stop
Trade.  An SEC or
judicial stop trade order or Principal Market trading suspension with respect to
Borrower’s Common Stock that lasts for five or more consecutive trading
days.

      

      5.10         Failure to Deliver Common
Stock or Replacement Note.  Borrower's failure to timely
deliver Common Stock to the Holder pursuant to and in the form required by this
Note and Sections 7 and 11 of the Subscription Agreement, and, if required, a
replacement Note, within 5 business days following the required delivery
date.

      

      5.11         Reverse
Splits.   The Borrower
effectuates a reverse split of its Common Stock without twenty days prior
written notice to the Holder.

      

      5.12         Reservation
Default.  Failure
by the Borrower to have reserved for issuance upon conversion of the Note the
amount of Common Stock as set forth in this Note and the Subscription
Agreement.

      

      5.13         Restated
Numbers.  A
material restatement by the Borrower of any prior financial statements included
in any of the Reports.

      

      5.14         Material
Breach of Security Agreement.   Any default by the
Company of any of its material obligations pursuant to the Security
Agreement.

      

      5.15         Cross
Default.  A
default by the Borrower of a material term, covenant, warranty or undertaking of
any Transaction Document including but not limited to the Transaction Documents
of the Initial Investment or other agreement to which the Borrower and Holder
are parties, or the occurrence of a material event of default under any such
other agreement which is not cured after any required notice and/or cure
period.

      

      ARTICLE VI

      

      MISCELLANEOUS

      

      6.1           Failure or
Indulgence Not Waiver.  No failure or delay on the
part of Holder hereof in the exercise of any power, right or privilege hereunder
shall operate as a waiver thereof, nor shall any single or partial exercise of
any such power, right or privilege preclude other or further exercise thereof or
of any other right, power or privilege.  All rights and remedies
existing hereunder are cumulative to, and not exclusive of, any rights or
remedies otherwise available.

      

      6.2           Notices.  All
notices, demands, requests, consents, approvals, and other communications
required or permitted hereunder shall be in writing and, unless otherwise
specified herein, shall be (i) personally served, (ii) deposited in the mail,
registered or certified, return receipt requested, postage prepaid, (iii)
delivered by reputable air courier service with charges prepaid, or (iv)
transmitted by hand delivery, telegram, or facsimile, addressed as set forth
below or to such other address as such party shall have specified most recently
by written notice.  Any notice or other communication required or
permitted to be given hereunder shall be deemed effective (a) upon hand delivery
or delivery by facsimile, with accurate confirmation generated by the
transmitting facsimile machine, at the address or number designated below (if
delivered on a business day during normal business hours where such notice is to
be received), or the first business day following such delivery (if delivered
other than on a business day during normal business hours where such notice is
to be received) or (b) on the second business day following the date of mailing
by express courier service, fully prepaid, addressed to such address, or upon
actual receipt of such mailing, whichever shall first occur.  The
addresses for such communications shall be: (i) if to the Borrower to: IDO
Security Inc., 17 State Street,
New York, NY 10004, Fax: (646) 285-0026, with a copy by telecopier only
to: Aboudi & Brounstein, 3 Gavish St., Kfar Saba, Israel, Fax:
972-9-764-4834, and (ii) if to the Holder, to the name, address and telecopy
number set forth on the front page of this Note, with a copy by telecopier only
to Grushko & Mittman, P.C., 551 Fifth Avenue, Suite 1601, New York, New York
10176, Fax: (212) 697-3575.

      

      
        
          
          

        

        
          7

          
            

          

        

        
          
          

        

         

      

      6.3           Amendment
Provision.  The term "Note" and all reference thereto, as used
throughout this instrument, shall mean this instrument as originally executed,
or if later amended or supplemented, then as so amended or
supplemented.

      

      6.4           Assignability.  This
Note shall be binding upon the Borrower and its successors and assigns, and
shall inure to the benefit of the Holder and its successors and
assigns.

      

      6.5           Cost of
Collection.  If default is made in the payment of this Note,
Borrower shall pay the Holder hereof reasonable costs of collection, including
reasonable attorneys' fees.

      

      6.6           Governing
Law.  This Note shall be governed by and construed in
accordance with the laws of the State of New York.  Any action brought
by either party against the other concerning the transactions contemplated by
this Agreement shall be brought only in the state courts of New York or in the
federal courts located in the state of New York.  Both parties and the
individual signing this Agreement on behalf of the Borrower agree to submit to
the jurisdiction of such courts.  The prevailing party shall be
entitled to recover from the other party its reasonable attorney's fees and
costs.

      

      6.7           Maximum
Payments.  Nothing contained herein shall be deemed to
establish or require the payment of a rate of interest or other charges in
excess of the maximum permitted by applicable law.  In the event that
the rate of interest required to be paid or other charges hereunder exceed the
maximum permitted by such law, any payments in excess of such maximum shall be
credited against amounts owed by the Borrower to the Holder and thus refunded to
the Borrower.

      

      6.8           Construction.   Each
party acknowledges that its legal counsel participated in the preparation of
this Note and, therefore, stipulates that the rule of construction that
ambiguities are to be resolved against the drafting party shall not be applied
in the interpretation of this Note to favor any party against the
other.

      

      6.9           Remedies.   This
Note shall be deemed an unconditional obligation of Borrower for the payment of
money and, without limitation to any other remedies available to
Holder.  This Note may be enforced against Borrower by summary
proceeding pursuant to N.Y. Civil Procedure Law and rules Sect. 3213 or any
similar rule or statute in the jurisdiction where enforcement is
sought.

      

      

      [THIS
SPACE INTENTIONALLY LEFT BLANK]

       

      
        
          
          

        

        
          8

          
            

          

        

        
          
          

        

      

      

      IN WITNESS WHEREOF, Borrower
has caused this Note to be signed in its name by an authorized officer as of the
31st
day of October, 2008.

      

                          IDO SECURITY
INC.

      

      

      

                          By:________________________________

                          Name:

                          Title:

      

      WITNESS:

      

      

      

      ______________________________________

       

      
        
          
          

        

        
          9

          
            

          

        

        
          
          

        

         

      

      NOTICE OF
CONVERSION

      

      (To be
executed by the Registered Holder in order to convert the Note)

      

      

      The
undersigned hereby elects to convert $_________ of the principal and $_________
of the interest due on the Note issued by IDO Security Inc. on October 31, 2008
into Shares of Common Stock of IDO Security Inc. (the "Borrower") according to
the conditions set forth in such Note, as of the date written
below.

      

      

      

      Date of
Conversion:________________________________________________________________________________________

      

      

      Conversion
Price:__________________________________________________________________________________________

      

      

      Shares To
Be
Delivered:_____________________________________________________________________________________

      

      

      Signature:________________________________________________________________________________________________

      

      

      Print
Name:_______________________________________________________________________________________________

      

      

      Address:_________________________________________________________________________________________________

      

      _________________________________________________________________________________________________

       

       

       

      10

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