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THE PEP BOYS - MANNY, MOE & JACK

3111 West Allegheny Avenue

Philadelphia, Pennsylvania 19132

LETTER TO OUR SHAREHOLDERS

As you know, 2008 was a rebuilding year for Pep Boys.  It was the first year executing our strategic plan, which was announced in the Fall of 2007. This plan focuses on:

·         Leading with our service business and growth through adding service spokes.

·         Creating a differentiated retail experience by creating the Automotive Superstore.

·         Leveraging our superstores and service centers to provide the most complete offering for our commercial              customers.

We are executing this plan to transform Pep Boys into the Automotive Solutions Provider of Choice for the Value-Oriented Customer.  With our strategic plan as our guide, in 2008 we began to address our priorities relative to our people, our products and services, our marketing and our service center density.

BEST PEOPLE

We have restructured our store leadership organization to ensure that all three lines of business - service, retail and commercial - work together for the benefit of our customers.  We feel good about the level of pride we see returning to our stores and, more importantly, our associates feel that we are making the right moves to restore the Pep Boys brand.   Our company-wide commitment for 2009 is to get Pep Boys “Back in Black.”  Black in sales trends and black in profitability.

One of the most important commitments we have made to our people has been training - technical, customer service and sales.  Training is important for both our associates and our customers.  It improves associate capability, pride and confidence.  It also improves the quality of the work we do.  And it improves the perception of the quality of work that we do, because our associates are able to serve our customers with skill and confidence.

BEST PRODUCTS AND SERVICES

With respect to our products, we are focused on core automotive.  It took much of 2008 to complete the re-merchandising of each of our stores that we started in 2007.  Our parts merchandising is now vastly improved in terms of coverage and pricing.  Our sales floor merchandising now makes it much easier for our customers to shop us and to find what they want.  Our focus on core automotive is also helping our commercial business.   Accessories and complementary products are still an important part of our mix.  In fact, accessories are a differentiating element of our Automotive Superstore.  We have retained complementary products that customers have come to know us for - like powersports and generators.   And we will add new categories from time to time, but this is not going to distract us from our core automotive focus.

As I have stated before, service is our leading business.  We have broken down the walls within our organization that previously existed between retail, commercial and service.  The mantra in our stores is to get “one more service sale per store per day.”   It’s about always saying “yes” to our customers and growing our business through execution in providing fast, expert service to each customer every time.  It’s about our category managers reviewing all three lines of business when it comes to customer insights, assortments, pricing and selling process.  This has led to the introduction of hybrid vehicle services and 29 minute oil changes, as well as investments in state-of-the-art diagnostic equipment.

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MARKETING

While we’ve reduced our total marketing budget for 2009, we’ve actually increased our budget for service-related advertising.  Tires are our biggest category and we have found that this category responds well to our promotional advertising.  The tire promotions benefit retail as well as service.  For service, it succeeds in informing customers about our service capabilities.  For retail, it appeals to DIYers since they need to purchase tires also, and cannot install tires themselves.  The message is delivered via TV, radio, print, direct mail, email and the web - with TV providing the greatest impact on customer acquisition.  The advertising has a more contemporary look, feel and sound to attract a broader male and female customer base.  The tag line, “When the light comes on – just come in - Pep Boys, Does Everything. For Less!” is intended to inform customers of both our full service offering as well as our value proposition.

Now launching is our rewards program, which is integrated with a more robust CRM program.  And they will both be followed by a more robust pepboys.com, that will include on-line service scheduling and many more customer benefits.

SERVICE SPOKES

When we announced our strategic plan in the fall of 2007, we identified two meaningful legacy issues - store size and market density.  We are addressing our larger than necessary stores with our Automotive Superstore.  It provides space for a wider array of automotive products and for a deeper assortment of parts.  It allows us to fulfill our Does Everything. For Less! brand promise.

Regarding market density, since the 1990’s the company has been spread across more than 30 states and Puerto Rico.  Our new marketing approach is more cost effective given our lack of density.  And service spokes will allow us to fill in the gaps between our superscenters.  Our supercenters were built to be destination stores.  Our service centers will offer customer convenience.  They allow us to be close to our service customers’ home or work.  They are lower cost and more efficient.  And they leverage the inventory in our supercenters and the trucks that are already on the road serving commercial customers.  Our first service center just opened in Ventura, California.  We are targeting 15 this year and 20 to 40 in 2010.

MOVING FORWARD

2008 was a difficult year for Pep Boys.  But it’s now in our rear-view mirror.  We are pleased with the progress that we have made and are encouraged with our prospects for transforming this 88-year old company into a success story.

Michael R. Odell

Chief Executive Officer

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THE PEP BOYS - MANNY, MOE & JACK

3111 West Allegheny Avenue

Philadelphia, Pennsylvania 19132

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS

To our Shareholders:

It is our pleasure to invite you to Pep Boys 2009 Annual Meeting.  This year’s meeting will be held on Wednesday, June 24, 2009, at the Hilton Philadelphia City Avenue, 4200 City Avenue, Philadelphia, Pennsylvania.  The meeting will begin promptly at 9:00 a.m.

At the meeting, shareholders will act on the following matters:

(Item 1)                The election of the full Board of Directors for a one-year term.

(Item 2)                The ratification of the appointment of our independent registered public accounting firm.

(Item 3)                 The amendment and restatement of our Stock Incentive Plan to extend its term through December 31, 2014 and to provide an additional 1,500,000 shares available for award issuances thereunder.

(Item 4)                 The approval of the amendment and restatement of our Annual Incentive Bonus Plan to allow certain amounts paid under the plan to be deductible under section 162(m) of the Internal Revenue Code.

(Item 5)                 A shareholder proposal regarding the Company’s reincorporation to North Dakota, if presented by its proponent.

The shareholders will also consider any other business that may properly come before the meeting.  The attached proxy statement provides further information about the matters to be acted on at the meeting.  All shareholders of record at the close of business on Friday, April 17, 2009 are entitled to vote at the meeting and any postponements or adjournments.  Your vote is important to us.  Please vote as soon as possible in one of the following ways:

·            By Internet by visiting the website shown on your Notice of Internet Availability of Proxy Materials or proxy card.

·            By telephone by calling the toll-free telephone number shown on your Notice of Internet Availability of Proxy Materials or proxy card.

·            By mail, if you requested printed proxy materials, by returning the proxy card in the postage-paid envelope provided.

·            By following the instructions on your proxy materials if your shares are held in the name of your bank, broker or other holder of record.

Whether or not you plan to attend the meeting, please make sure that your shares are represented by voting in advance of the meeting using one of these methods.

Brian D. Zuckerman

Secretary

May 13, 2009

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THE PEP BOYS - MANNY, MOE & JACK

3111 West Allegheny Avenue

Philadelphia, Pennsylvania 19132

PROXY STATEMENT

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GENERAL INFORMATION

This proxy statement is furnished in connection with the solicitation of proxies by the Board of Directors for use at this year’s Annual Meeting.  The meeting will be held on Wednesday, June 24, 2009, at the Hilton Philadelphia City Avenue, 4200 City Avenue, Philadelphia, Pennsylvania and will begin promptly at 9:00 a.m.

The Company’s Proxy Statement and 2008 Annual Report are available at www.proxyvote.com.

We are pleased to be using a procedure approved by the Securities and Exchange Commission that allows companies to furnish their proxy materials to shareholders over the Internet instead of mailing full sets of the printed materials.  We believe that this procedure will reduce costs, provide greater flexibility to our shareholders and lessen the environmental impact of our Annual Meeting.  On or about May 13, 2009, we started mailing to our shareholders a Notice of Internet Availability of Proxy Materials.   The Notice of Internet Availability contains instructions on how to access and read our Proxy Statement and our 2008 Annual Report on the Internet and to vote online.   If you received a Notice of Internet Availability by mail, you will not receive paper copies of the Proxy Materials in the mail unless you request them.  Instead, the Notice of Internet Availability instructs you on how to access and read the Proxy Statement and Annual Report and how you may submit your proxy over the Internet.  If you would like to receive a printed copy of the materials, please follow the instructions on the Notice of Internet Availability for requesting the materials, and we will promptly mail the materials to you.

We are mailing to shareholders, or making available to shareholders via the Internet, this Proxy Statement, form of proxy card, and our 2008 Annual Report on or about May 13, 2009.

What is the purpose of the meeting?

At the meeting, shareholders will vote on:

·             The election of directors.

·             The ratification of the appointment of our independent registered public accounting firm.

·             The amendment and restatement of our Stock Incentive Plan to extend its term through December 31, 2014 and to provide an additional 1,500,000 shares available for award issuances thereunder.

·             The approval of the amendment and restatement of our Annual Incentive Bonus Plan to allow certain amounts paid under the plan to be deductible under section 162(m) of the Internal Revenue Code.

·             A shareholder proposal regarding the Company’s reincorporation to North Dakota, if presented by its proponent.

In addition, we will report on our business operations and will answer questions posed by shareholders.

Who may vote at the meeting?

Common stock is the only class of stock that Pep Boys has outstanding and is referred to in this Proxy Statement as “Pep Boys Stock.”  You may vote those shares of Pep Boys Stock that you owned as of the close of business on the record date, April 17, 2009.  As of the record date, 54,460,471 shares were outstanding.    As of the record date, 2,195,270 of the outstanding shares were held by The Pep Boys - Manny, Moe & Jack Flexitrust.  This flexible employee benefits trust was established on April 29, 1994 to fund a portion of our obligations arising from various employee compensation and benefit plans.  Shares held for participating employees under the Flexitrust will be voted as directed by written instructions from the participating employees.

What are the voting rights of Pep Boys’ shareholders?

Each shareholder is entitled to one vote per share on all matters including in uncontested elections of directors.

In contested elections of directors, elections where the number of nominees exceeds the number of directors to be elected, each shareholder is entitled to vote cumulatively.  Cumulative voting entitles each shareholder to the number

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of votes equal to the number of shares owned by the shareholder multiplied by the number of directors to be elected.  Accordingly and without satisfying any condition precedent, a shareholder may cast all of his votes for one nominee for director or allocate his votes among all the nominees.

How do I vote?

You may vote using any of the following methods:

·              Internet .  You may vote your shares by the Internet.  You will need the control number printed on your Notice of Internet Availability, on your proxy card or in the instructions that accompany your proxy materials, as applicable.  The web site for Internet voting is listed on your Notice of Internet Availability, on your proxy card or in the instructions that accompany your proxy materials.  Internet voting is available 24 hours a day and will be accessible until 11:59 P.M. Eastern Time on June 23, 2009.   You will be able to confirm that the system has properly recorded your vote.  If you vote via the Internet, you do NOT need to return a proxy card or voting instruction form.

·              Telephone .  If located in the United States or Canada, you can vote your shares by telephone by calling the toll-free telephone number printed on your Notice of Internet Availability, on your proxy card or in the instructions that accompany your proxy materials, as applicable, and following the recorded instructions.  You will need the control number printed on your Notice of Internet Availability, on your proxy card or in the instructions that accompany your proxy materials, as applicable.  Telephone voting is available 24 hours a day and will be accessible until 11:59 P.M. Eastern Time on June 23, 2009.   You will be able to confirm that the system has properly recorded your vote.  If you vote by telephone, you do NOT need to return a proxy card or voting instruction form.

·              Mail .  If you received printed copies of the proxy materials by mail, you can vote by mail.  Simply complete and sign the proxy card and return it in the postage-paid envelope included in the materials.  If you hold your shares through a bank or brokerage account, please complete and mail the voting instruction form in the envelope provided.

·              Ballot at the Annual Meeting .  You may vote your shares at the meeting if you or your authorized proxy attends the meeting.  Even if you plan to attend the meeting, we encourage you to vote your shares by proxy using one of the foregoing methods.

Your shares will be voted as you direct.  If you sign and return a proxy card prior to the meeting that does not contain instructions, your shares will be voted as recommended by the Board of Directors.

Can I change my vote after I return my proxy card?

Yes.  You may revoke your proxy at any time prior to its exercise at the meeting by (i) providing a later dated vote by Internet or telephone, (ii) delivering either a written revocation notice or another signed proxy card with a later date to our corporate Secretary or (iii) attending the meeting, requesting that your previously delivered proxy be revoked and then voting in person.

How many votes must be present to hold the meeting?

In order to hold the meeting, a majority of the shares of Pep Boys Stock outstanding on the April 17, 2009 record date must be present at the meeting.  The presence of such a majority is called a quorum.  Since 54,460,471 shares were outstanding on the record date, at least 27,230,136 shares must be present to establish a quorum.

Your shares are counted as present at the meeting if you attend and vote in person or if you properly return a proxy card.  Abstentions will be counted as present for the purpose of determining whether there is a quorum for all matters to be acted upon at the meeting.

On routine matters, brokers who hold customer shares in “street name” but have not timely received voting instructions from such customers have discretion to vote such shares.  Accordingly, the presence of such votes at the

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meeting will be included in determining whether there is a quorum for (Item 1) and (Item 2).  A broker non-vote occurs when a brokerage firm holding a customer’s shares in street name has not received voting instructions from such customer with respect to a non-routine matter to be voted upon.  Accordingly, broker non-votes will not be counted as present for the purpose of determining whether there is a quorum for (Item 3), (Item 4) and (Item 5).

How many votes are needed to elect directors?

In uncontested elections, a director nominee will only be elected if the number of votes cast “for” the nominee exceeds the number of votes cast “against” the nominee.  This is commonly referred to as a “majority vote.”  An “abstain” vote will have no effect on the outcome of the election, but will be counted for purposes of determining whether a quorum is present.  Broker non-votes, if any, will be counted towards the number of votes cast “for” or “against” the director nominee, as the case may be, because a director election is considered a routine matter.  Broker non-votes will also be counted for purposes of determining whether a quorum is present.  Under Pennsylvania law, if an incumbent director does not receive a majority vote, then the incumbent director will continue to serve on the Board of Directors until his or her successor is elected and qualified.  However, an incumbent director who does not receive the required majority vote for re-election is required to tender a resignation to the Board of Directors.  The Board of Directors will then accept or reject the resignation, or take other appropriate action, based upon the best interests of Pep Boys and our shareholders and will publicly disclose its decision and rationale within 90 days.

In contested elections, the nominees who receive the most votes cast “for” at the annual meeting will be elected.

How many votes are needed to approve the other matters to be acted on at the meeting?

Each of the other matters must be approved by a majority of the votes cast on such matter.   Abstentions and broker non-votes, if any, are not considered votes “cast” for matters other than the election of directors, and therefore will have no effect on the vote for matters other than the election of directors and will not be considered in determining whether such proposals have received the requisite shareholder vote.

What are the Board of Directors’ recommendations?

Unless you give other directions on your proxy card, the persons named as proxy holders on the proxy card will vote in accordance with the recommendations of the Board of Directors.

The Board recommends a vote:

·             FOR election of the nominated slate of directors.

·             FOR the ratification of the appointment of our independent registered public accounting firm.

·             FOR the amendment and restatement of our Stock Incentive Plan to extend its term through December 31, 2014 and to provide an additional 1,500,000 shares available for award issuances thereunder.

·             FOR t he approval of the amendment and restatement of our Annual Incentive Bonus Plan to allow certain amounts paid under the plan to be deductible under section 162(m) of the Internal Revenue Code.

·             AGAINST the shareholder proposal regarding the Company’s reincorporation to North Dakota.

We have not received proper notice of, and are not aware of, any other matters to be brought before the meeting.  If any other matters properly come before the meeting, the proxies received will be voted in accordance with the discretion of the proxy holders named on the proxy card.

A note about certain information contained in this Proxy Statement

Filings made by companies with the Securities and Exchange Commission (SEC) sometimes “incorporate information by reference.”  This means that the company is referring you to information that has previously been filed with the SEC and that such information should be considered part of the filing you are then reading.  The Audit Committee Report and the Human Resources Committee Report contained in this Proxy Statement are not incorporated by reference into any other filings with the SEC.

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SHARE OWNERSHIP

Who are Pep Boys’ largest shareholders?

Based solely on a review of filings with the SEC, the following table provides information about those shareholders that beneficially own more than 5% of the outstanding shares of Pep Boys Stock.

(1)           Based upon information disclosed in a Schedule 13G/A filed on February 17, 2009.

(2)           Based upon information disclosed in a Schedule 13G/A filed on February 9, 2009.  Dimensional Fund Advisers LP disclaims beneficial ownership of such shares.

(3)           Based upon information disclosed in a Schedule 13 D/A filed on April 9, 2009.

(4)           Based upon information disclosed in a Schedule 13G filed on February 5, 2009.  The shares reported are held in trust accounts for the economic benefit of those accounts.

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How many shares do Pep Boys’ directors and executive officers own?

The following table shows how many shares our directors, director nominee and executive officers named in the Summary Compensation Table found on page 19 beneficially owned on April 17, 2009.  The address for each of such individuals is 3111 West Allegheny Avenue, Philadelphia, PA 19132.

+                  Represents less than 1%.

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(1)           Includes shares for which the named person has sole voting and investment power and non-voting interests including restricted stock units and deferred compensation accounted for as Pep Boys Stock.  Also includes shares that can be acquired through stock option exercises through June 16, 2009:  Mitarotonda – 3,654; Hudson – 3,544; Arthur – 33,334; Odell – 5,734; Cirelli – 43,692; Webb – 6,667; White – 3,627; Hotz – 10,840; Sweetwood – 23,340; Scaccetti – 19,340; Fee – 4,000; Williams – 3,654; Atkins – 10,840; Bassi – 10,840; Reid – 940; and as a group – 211,880.

(2)           Mr. Mitarotonda is the sole stockholder and director of LNA Capital Corp., which is the general partner of Barington Capital Group, L.P., which is the majority member of each of Barington Companies Investors, LLC (“Barington Investors”), Barington Companies Advisors, LLC (“Barington Advisors”) and Barington Offshore Advisors II, LLC (“Barington Offshore”). Barington Investors is the general partner of Barington Companies Equity Partners, L.P. (“Barington”).  Barington Advisors is the general partner of Barington Investments, L.P.  (“Barington Investments”).  Barington Offshore is the investment advisor to Barington Companies Offshore Fund, Ltd.  (“Barington Fund”).  Barington, Barington Investments and Barington Fund beneficially own 1,468,268, 991,780 and 437,245 shares of Pep Boys Stock, respectively.   Mr. Mitarotonda disclaims beneficial ownership of these shares, except to the extent of his pecuniary interest therein.

(3)           Mr. Rachor’s ownership is reported as of April 23, 2008, the effective date of his resignation from the Company.

(4)           Mr. Yanowitz’ ownership is reported as of May 1, 2008, the effective date of his resignation from the Company.

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(ITEM 1)     ELECTION OF DIRECTORS

What is the makeup of the Board of Directors?

Our Board of Directors currently consists of 11 members.  Peter A. Bassi has decided to retire from service and not seek re-election.  Thomas R. Hudson Jr. was not nominated by our Board of Directors for re-election.  Each of our other nine directors has been nominated for re-election together with a new nominee.  Accordingly, when Messrs. Bassi’s and Hudson’s terms expire on June 24, 2009, our Board of Directors will be reduced to ten members.

Nominees for Election

The Board of Directors proposes that the following nominees be elected.  If elected, each nominee will serve a one-year term expiring at the 2010 Annual Meeting and until such director’s successor has been duly elected and qualified.  Each of the nominees has consented to serve, if elected.  Unless contrary instructions are given, the proxy holders named on the enclosed proxy card will vote for the election of these nominees.  If any nominee becomes unavailable to serve as a director, the proxy holders will vote for the election of any substitute nominee designated by the Board.

The nominees standing for election are:

Jane Scaccetti                                                                                                                  Director since 2002

Ms. Scaccetti, 55, a CPA, is the Chief Executive Officer of Drucker & Scaccetti PC, a public accounting and business advisory firm, of which she has a been a principal since 1990.  Ms. Scaccetti serves as a director of Nutrition Management Services Company.

John T. Sweetwood                                                                                        Director since 2002

Mr. Sweetwood, 61, is a principal and the President of Woods Investment, LLC, a private real estate investment firm.  From 1995 through 2002, Mr. Sweetwood served as an officer, and ultimately as President of The Americas, of Six Continents Hotels (currently, Intercontinental Hotels Group), a division of Six Continents PLC (currently IHG PLC) that operates hotels under the InterContinental, Crown Plaza, Holiday Inn and other brands.

M. Shân Atkins                                                                                                              Director since 2004

Ms. Atkins, 52, a CPA and Chartered Accountant, is Managing Director of Chetrum Capital LLC, a private investment firm.  From 1996 through 2001, Ms. Atkins served as an officer, and ultimately as Executive Vice President – Strategic Initiatives, of Sears Roebuck & Co.  Ms. Atkins serves as a director of Shoppers Drug Mart Corporation, Spartan Stores, Inc. and Tim Hortons Inc.

Robert H. Hotz                                                                                                                 Director since 2005

Mr. Hotz, 64, is Senior Managing Director, Co-Head of Investment Banking, a member of the Operating Committee and Co-Chairman of Houlihan Lokey Howard & Zukin, Inc, where he has been employed since 2002.  Mr. Hotz serves as a director of Universal Health Services, Inc.

James A. Mitarotonda                                                                         Director since August 2006                                                                                      Chairman of the Board since July 2008

Mr. Mitarotonda, 54, is the Chairman of the Board, President and Chief Executive Officer of Barington Capital Group, L.P., an investment firm that he co-founded in 1991.  Mr. Mitarotonda served as the President and Chief Executive Officer of Dynabazaar, Inc. from May 2006 until April 2007 and January 2004 until December 2004.  Mr. Mitarotonda also served as the Co-Chief Executive Officer and Co-Chairman of L Q Corporation, Inc. from April 2003 until May 2004 and as its sole Chief Executive Officer from May 2004 until October 2004.  Mr. Mitarotonda serves as a director of A. Schulman, Inc., Griffon Corporation and Sielox, Inc.

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Nick White                                                                                                                                     Director since August 2006

Mr. White, 64, is President and Chief Executive Officer of White & Associates, a management consulting firm that he founded in 2000.  From 1973 through 2000, Mr. White held numerous executive and management level positions with Wal-Mart Stores, Inc., including Executive Vice President and General Manager of the Supercenter division from 1990 to 2000 and Executive Vice President and General Manager of Sam’s Wholesale Club from 1985 through 1989.   Mr. White serves as a director of Dillard’s, Inc.

James A. Williams                                                                                                Director since August 2006

Mr. Williams, 66, retired in 2008 from his position of Corporate President and Vice Chairman of GoldToeMoretz, LLC, the resultant parent company formed as a result of the merger of Gold Toe Brands, Inc. and Moretz Sports, Inc. in October 2006.  From 1999 through October 2006, Mr. Williams served as the President and Chief Executive Officer of Gold Toe Brands, Inc., the largest branded sock manufacturer in the United States.

Irvin D. Reid                                                                                                                          Director since December 2007

Dr. Reid, 68, is the President Emeritus and Eugene Applebaum Professor, Community Engagement, at Wayne State University, an urban research university located in Detroit, Michigan and served two three-year terms on the Board of the Federal Reserve Bank of Chicago (Detroit Branch).   Mr. Reid serves as a director of A. Schulman, Inc. and Mack-Cali Realty Corporation.

Michael R. Odell                                                                                                   Director since July 2008

Mr. Odell, 45, has been our Chief Executive Officer since September 22, 2008.  He joined Pep Boys in September 2007 as Executive Vice President—Chief Operating Officer, after having most recently served as the Executive Vice President and General Manager of Sears Retail & Specialty Stores.  Mr. Odell joined Sears in its finance department in 1994 where he served until he joined Sears operations team in 1998. There he served in various executive operations positions of increasing seniority, including as Vice President, Stores—Sears Automotive Group.

Max L. Lukens                                                                                                                  Director Nominee

Mr. Lukens, 61, is retired.  He was the President and Chief Executive Officer of Stewart & Stevenson Services, Inc., a company primarily engaged in the design, manufacture and service of military tactical vehicles, from March 2004 until May 2006 when the company was sold.  He served as Interim Chief Executive Officer and President of Stewart & Stevenson from September 2003 until March 2004, and as Chairman of the Board from December 2002 to March 2004.  From 1981 until January 2000, Mr. Lukens worked for Baker Hughes Incorporated, an oilfield services company, in a number of capacities, including Chairman of the Board, President and Chief Executive Officer.  Mr. Lukens served on our Board of Directors from August 2006 until October 2007, when he resigned for personal reasons due to the illness of a family member.  Mr. Lukens serves as a director of NCI Building Systems Inc. and Westlake Chemical Corporation.  If elected by shareholders, the Board intends to appoint Mr. Lukens as Chairman of the Board.

Each of Messrs. Mitarotonda, Reid, White and Williams was originally appointed to the Board pursuant to the terms of an agreement between the Company and a group of investors led by Barington Capital Group, L.P.  Such agreement has since expired.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE

“FOR”

EACH OF THESE NOMINEES FOR DIRECTOR

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Corporate Governance

Our Board of Directors’ governance principles are embodied in our corporate Code of Ethics (applicable to all Pep Boys associates including our executive officers and members of the Board), the Board of Directors Code of Conduct and the various Board committee charters, all of which are available for review on our website, www.pepboys.com, or which will be provided in writing, free of charge, to any shareholder upon request to: Pep Boys, 3111 West Allegheny Avenue, Philadelphia, PA 19132, Attention: Secretary.  The information on our website is not part of this Proxy Statement.  References to our website herein are intended as inactive textual references only.

As required by the New York Stock Exchange (NYSE), promptly following our 2008 Annual Meeting, our Interim CEO certified to the NYSE that he was not aware of any violation by Pep Boys of NYSE corporate governance listing standards.

Independence.  An independent director is independent from management and free from any relationship with Pep Boys that, in the opinion of the Board, would interfere in the exercise of independent judgment as a director.  In reaching such an opinion, the Board considers, among other factors, the guidelines for independent directors promulgated by the NYSE.  The independence of the outside directors is reviewed annually by the full Board.  In accordance with NYSE guidelines, our Board consists of a majority of independent directors.  In fact, all of our current directors, except our Chief Executive Officer, Mr. Odell, are independent.  Director nominee, Max L. Lukens is also independent.  All Committees of the Board consist entirely of independent directors.

Communicating with the Board of Directors.  Interested parties should address all communications to the full Board or an individual director to the attention of our corporate Secretary.  Our corporate Secretary reviews all such communications to determine if they are related to specific products or services, are solicitations or otherwise relate to improper or irrelevant topics.  All such improper communications receive a response in due course.  Any communication directed to an individual director relating solely to a matter involving such director is forwarded to such director.   Any communication directed to an individual director relating to a matter involving both such director and Pep Boys or the Board of Directors, as a whole, is forwarded to such director and the Chairman of the Board.  The balance of the communications are forwarded to the Chairman of the Board.  Except for improper communications, all interested party communications to the Board of Directors or an individual director received by the corporate Secretary are kept in confidence from management.  These procedures were adopted unanimously by the independent directors.

Director Attendance at the Annual Meeting.         All Board members are strongly encouraged to attend the Annual Meeting of Shareholders.   All nominees then standing for election, except Mr. Hudson, attended the 2008 Annual Meeting.

Executive Sessions of the Independent Directors .  Our non-executive Chairman, Mr. Mitarotonda, presides over all such sessions, which are held, at a minimum, immediately following all regularly scheduled Board meetings.

Personal Loans to Executive Officers and Directors.  Pep Boys has no personal loans extended to its executive officers or directors.

Human Resources Committee Interlocks and Insider Participation

Messrs. Bassi, Sweetwood, White and Williams were the members of our Human Resources Committee in fiscal 2008.  None of these members is or has been an officer or employee of Pep Boys or has any relationship with Pep Boys requiring disclosure under Item 404 of SEC Regulation S-K.  No executive officer of Pep Boys serves as a member of the board of directors or compensation committee of any entity that has one or more executive officers serving as a member of Pep Boys’ Board of Directors or Human Resources Committee.

Meetings and Committees of the Board of Directors

The Board of Directors held 14 meetings during fiscal 2008.  During fiscal 2008, each director standing for re-election attended at least 75% of the aggregate number of meetings held by the Board and all committee(s) on which such director served, except for Dr. Reid who attended 73%.  The Board of Directors has standing Audit, Human

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Resources and Nominating and Governance Committees.     All Committee members are “independent” as defined by the listing standards of the NYSE.

Audit Committee.  Ms. Scaccetti (chair), Ms. Atkins, Mr. Hotz, Dr. Reid and Mr. Williams are the current members of the Audit Committee.  The Audit Committee reviews Pep Boys’ consolidated financial statements and makes recommendations to the full Board of Directors on matters concerning the audits of Pep Boys’ books and records.  The Audit Committee met 12 times during fiscal 2008.

Human Resources Committee.  Messrs. Bassi (chair), Sweetwood, White and Williams are the current members of the Human Resources Committee.  The Human Resources Committee recommends the compensation for all of Pep Boys’ officers and serves as the Board’s representative on all human resource matters directly impacting Pep Boys’ business performance.  The Human Resource Committee met seven times during fiscal 2008.

Nominating and Governance Committee.  Messrs. Sweetwood (chair), Bassi and Hudson are the current members of the Nominating and Governance Committee.  The Nominating and Governance Committee recommends candidates to serve on the Board and serves as the Board’s representative on all corporate governance matters.  The Nominating and Governance Committee met four times during fiscal 2008.

Operating Efficiency Committee.  The Board has appointed a special committee that meets from time-to-time, to assist management with identifying and realizing opportunities to improve operational performance.  The Committee currently consists of Mr. White (chair), Ms. Atkins and Dr. Reid.

Can a shareholder nominate a candidate for director?

The Nominating and Governance Committee considers nominees recommended by our shareholders.  Written recommendations should be sent to our offices located at 3111 West Allegheny Avenue, Philadelphia, PA 19132, Attention: Secretary.  The recommendation should state the qualifications of the nominee to be considered.

A shareholder may also nominate candidates to be considered for election as directors at an upcoming shareholders’ meeting by timely notifying us in accordance with our By-laws.  To be timely, a shareholder’s notice must be received at our principal executive offices not less than 50 nor more than 75 days prior to the date of the scheduled shareholders’ meeting.  If the public announcement of the holding of the shareholders’ meeting was given less than 65 days prior to the date of such meeting, then a shareholder’s notice received at our principal executive offices within ten days of the date of such public announcement will be considered timely.  The shareholder’s notice must also set forth all of the following information:

·              the name and address of the shareholder making the nomination;

·            a representation that the shareholder intends to appear in person or by proxy at the meeting to nominate the proposed nominee;

·            the name of the proposed nominee;

·            the proposed nominee’s principal occupation and employment for the past 5 years;

·            a description of any other directorships held by the proposed nominee; and

·            a description of all arrangements or understandings between the nominee and any other person or persons relating to the nomination of, and voting arrangements with respect to, the nominee.

How are candidates identified and evaluated?

Identification.  The Nominating and Governance Committee considers all candidates recommended by our shareholders, directors and senior management on an equal basis.  The Nominating and Governance Committee’s preference is to identify nominees using our own resources, but has the authority to and will engage search firms(s) as necessary.

Qualifications .  The Nominating and Governance Committee evaluates each candidate’s professional background and experience, judgment and diversity (age, gender, ethnicity, etc.) and his or her independence from Pep Boys.

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Such qualifications are evaluated against our then current requirements, as expressed by the full Board and our Chief Executive Officer, and the current make up of the full Board.

Evaluations .  Candidates are evaluated on the basis of their resume, third party references, public reputation and personnel interviews.  Before a candidate can be recommended to the full Board, such candidate is generally interviewed by each member of the Nominating and Governance Committee and meets, in person, with at least one member of the Nominating and Governance Committee, the Chairman of the Board and the Chief Executive Officer.

How are directors compensated?

Base Compensation.  Each non-management director (other than the Chairman of the Board) receives an annual director’s fee of $35,000.  Our Chairman of the Board receives an annual director’s fee of $80,000.

Committee Compensation.  Directors serving on our committees also receive the following annual fees.

A director may elect to have all or a part of his or her director’s fees deferred.  Amounts deferred receive a rate of return equal to the prime interest rate or the performance of Pep Boys Stock (represented by stock units), as elected by the director, and are paid at a later date chosen by the director at the time of deferral.  A director who is also an employee of Pep Boys receives no additional compensation for service as a director.

Equity Grants.  The Pep Boys Stock Incentive Plan provides for an annual equity grant having an aggregate value of $45,000 to non-management directors.  The Stock Incentive Plan is administered, interpreted and implemented by the Human Resources Committee of the Board of Directors.

The table details the compensation paid to non-employee directors during the fiscal year ended January 31, 2009.

Director Compensation Table

( 1)      Mr. Leonard resigned from the Board of Directors on July 14, 2008.

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Certain Relationships and Related Transactions

The Audit Committee, which is comprised of independent directors, has established a written Related Party Transaction Policy.  Such policy provides that to help identify related-party transactions and relationships (i) all transactions between the Company and another party are reviewed by the Company’s legal and finance departments prior to the execution of definitive transaction documents and (ii) each director and executive officer completes a questionnaire that requires the disclosure of any transaction or relationship that the person, or any member of his or her immediate family, has or will have with the Company.   The full Board of Directors reviews and approves, ratifies or rejects any transactions and relationships of the nature that would be required to be disclosed under Item 404 of Regulation S-K.  In reviewing any such related-party transaction or relationship, the Board considers such information as it deems important to determine whether the transaction is on reasonable and competitive terms and is fair to the Company.   No such relationships or transactions of a nature required to be disclosed under Item 404 of Regulation S-K currently exist.

Report of the Audit Committee of the Board of Directors

The Audit Committee reviews Pep Boys’ financial statements and makes recommendations to the full Board of Directors on matters concerning the audits of Pep Boys’ books and records.  Each committee member is “independent” as defined by the listing standards of the New York Stock Exchange.  Ms. Scaccetti (chair), Ms. Atkins, Mr. Hotz, Mr. Reid and Mr. Williams are the current members of the Audit Committee.  Both Ms. Scaccetti and Ms. Atkins have been designated by the full Board as Audit Committee Financial Experts as defined by SEC regulations.  A written charter adopted by the full Board governs the activities of the Audit Committee.  The charter is reviewed, and when necessary revised, annually.

Management has primary responsibility for Pep Boys’ internal accounting controls and financial reporting process.  The independent registered public accounting firm is responsible for performing an independent audit of Pep Boys’ consolidated financial statements and internal control over financial reporting in accordance with standards of the Public Company Accounting Oversight Board (United States) and to issue a report as a result of such audit and to issue an attestation of management’s assertion of Pep Boys internal control over financial reporting.   The Audit Committee’s responsibility is to monitor and oversee these processes.  The Audit Committee serves as a focal point for communication among the Board of Directors, the independent registered public accounting firm, management and Pep Boys’ internal audit function, as the respective duties of such groups, or their constituent members, relate to Pep Boys’ financial accounting and reporting and to its internal controls.

In this context, the Audit Committee reviewed and discussed the audited consolidated financial statements with management and the independent registered public accounting firm.  These discussions included the matters required to be discussed by Statement on Auditing Standards No. 61 (Communication with Audit Committees).  The Audit Committee also reviewed and discussed with management, the internal auditors and the independent registered public accounting firm, management’s report, and the independent registered public accounting firm’s attestation, on internal control over financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act of 2002.

The Audit Committee also discussed with the independent registered public accounting firm its independence from Pep Boys and its management, including the written disclosures submitted to the Audit Committee by the independent registered public accounting firm as required by Independence Standards Board Standard No. 1 (Independence Discussions with Audit Committees).

Based upon the discussions and reviews referred to above, the Audit Committee recommended that the Board of Directors include the audited consolidated financial statements and management’s report on internal control over financial reporting in Pep Boys’ Annual Report on Form 10-K for the fiscal year ended January 31, 2009 filed with the SEC.

This report is submitted by: Jane Scaccetti; M. Shân Atkins; Robert H. Hotz; Irvin D. Reid; and James A. Williams.

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Independent Registered Public Accounting Firm’s Fees

The following table summarizes the aggregate fees billed to us by our independent registered public accounting firm, Deloitte & Touche LLP, the member firms of Deloitte Touche Tohmatsu, and their respective affiliates.

Audit Fees.  Audit Fees billed in fiscal 2008 and fiscal 2007 consisted of (i) the audit of our annual financial statements, (ii) the audit of our internal control over financial reporting, (iii) the reviews of our quarterly financial statements and (iv) comfort letters, statutory and regulatory audits, consents and other services related to SEC matters.

Audit-Related Fees.  Audit-Related Fees billed in fiscal 2008 consisted of providing third party access to work papers.  Audit-related fees billed in fiscal 2007 consisted of employee benefit plan audits.

Tax Fees.  Tax Fees billed in fiscal 2008 and 2007 consisted of tax compliance services in connection with tax audits and appeals.

The Audit Committee annually engages Pep Boys’ independent registered public accounting firm and pre-approves, for the following fiscal year, their services related to the annual audit and interim quarterly reviews of Pep Boys’ financial statements and all reasonably related assurance and services.  All non-audit services are considered for approval by the Audit Committee on an as-requested basis by Pep Boys.  For fiscal 2008, the Audit Committee discussed the non-audit services with Deloitte & Touche LLP and management to determine that they were permitted under the rules and regulations concerning the independence of independent registered public accounting firms promulgated by the SEC and the American Institute of Certified Public Accountants.  Following such discussions, the Audit Committee determined that the provision of such non-audit services by Deloitte & Touche LLP was compatible with maintaining their independence.

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EXECUTIVE COMPENSATION

Compensation Discussion and Analysis

Summary .

The compensation provided to the executives listed in the Summary Compensation Table, whom we refer to as our named executive officers, consists of base salaries, short-term cash incentives, long-term equity incentives, retirement plan contributions and heath and welfare benefits.  Long-term incentives consist of stock options and restricted stock units, or RSUs.  Our executive compensation program is designed to attract and retain highly-qualified individuals and to reward such individuals for their efforts in achieving our corporate objectives, and is based upon four principles:

·                   Performance-oriented.  Ensuring the alignment of shareholder, corporate and individual goals.

·                   Value-oriented. Ensuring optimum value creation, while considering tax effectiveness, accounting impact, overhang and dilution considerations.

·                   Fairness.   Ensuring an executive team orientation, where future value is equitable relative to an individual’s role and contribution.

·                   Corporate Ownership.  Building executive stock ownership to demonstrate commitment to and faith in the future of Pep Boys.

All program components are designed to be competitive at the market median of our peer group, with the opportunity to earn more or less based on performance.  Our peer group consists of the following competitors and comparably-sized specialty retailers: AutoZone, Advance Auto Parts, Monro Muffler & Brake, O’Reilly Automotive, Border’s, Cost Plus, Dick’s Sporting Goods, Hibbett Sports, Jo-Ann Stores, PetSmart and Williams-Sonoma.  The compensation mix as a percentage of total compensation is designed to reflect market competitiveness and job level responsibility.  The Human Resources Committee recommends to the full Board of Directors the annual total compensation levels for all of the named executive officers (other than the CEO), based on recommendations made by the CEO and the SVP-Human Resources and in consultation with management consultants.  The Human Resources Committee recommends to the full Board of Directors the annual total compensation level for the CEO, based on recommendations made by the SVP-Human Resources and the General Counsel and in consultation with management consultants.  To arrive at such recommendations, the chair of the Human Resources Committee schedules and develops the agenda for committee meetings in consultation with the SVP-Human Resources.  The SVP-Human Resources is responsible for developing appropriate materials for the Human Resources Committee’s review and consideration, including recommendations as to the amount and form of executive compensation, and for reviewing these materials and recommendations with the chair of the Human Resources Committee and our compensation consultants.  Our CEO has input on the recommendations to the Human Resources Committee with respect to the compensation of our named executive officers and other officers.  The Human Resources Committee considers, but is not bound to and does not always accept, management’s recommendations with respect to executive compensation.  The SVP-Human Resources, regularly, and the CEO, on occasion, attend committee meetings, excluding portions of meetings where their own compensation is discussed.

In connection with establishing compensation levels for fiscal 2008, Towers Perrin advised the Human Resources Committee on the then current competitiveness of program design and award values.  The consultants periodically attend committee meetings and also communicate with the chair of the Human Resources Committee outside of meetings.  The consultants work with management (including the CEO, SVP-Human Resources and General Counsel) from time to time for purposes of gathering information and reviewing and providing input to management on recommendations, proposals and materials that management may take to the Human Resources Committee.

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The Human Resources Committee and the Board of Directors consider our overall compensation levels for the named executive officers to be reasonable and appropriate.

Please note that the “ Components of Compensation ” discussion that follows is generally applicable to all named executive officers who served as executive officers during fiscal 2008.   Each of Messrs. Odell, Cirelli, Fee and Webb, served as executive officers during the entirety of fiscal 2008.  Mr. Arthur joined the Company during fiscal 2008.  See the discussion that follows under, “ New Executive Officer .”  Messrs. Rachor and Yanowitz left the employment of the Company during fiscal 2008.  See the discussion that follows under, “ Former Executive Officers .”

Components of Compensation .

Base Salary .  The Human Resources Committee reviews base salaries annually to reflect the experience, performance and scope of responsibility of the named executive officers and to ensure that the salaries are at levels that are appropriate to retain high quality individuals.  The Human Resources Committee measures each named executive officer’s individual performance during the applicable fiscal year on a five-point scale (1-unacceptable; 2-requires improvement; 3-satisfactory; 4-commendable; 5-outstanding) in the areas of leadership, impact and functional skills, based upon such executive officer’s supervisor’s assessment.  An average performance value is then applied against the relative position of the named executive officer’s current salary within the market range for his position and the budgeted percentage increase for all officers as a group.  For example, a named executive officer with an average performance value of 5 whose current salary was at the lowest end of the market range for his position would receive the highest salary increase.  While a named executive officer with an average performance value of 1 whose current salary was at the highest end of the market range for his position would theoretically receive the lowest salary increase (in practice, such executive would not receive any increase and likely would be terminated).  These performance values are then applied against the relative position of the named executive officer’s current salary within the market range for his position and the budgeted percentage increase for all officers as a group.  This budgeted percentage increase was 2.0% for fiscal 2008.  However, consistent with our plan to return Pep Boys to profitability, no named executive officer was awarded a merit-based increase to their base salary for fiscal 2008.

Short-Term Incentives .  The named executive officers participate in our Annual Incentive Bonus Plan, which is a short-term incentive plan designed to reward the achievement of pre-established goals.  Prior to fiscal 2008, these pre-established goals included both corporate and individual objectives for our named executive officers (other than our CEO).  To more closely align our named executive officers’ compensation with that of our overall performance, for fiscal 2008, we eliminated the use of individual objectives and tied our named executive officers’ short-term incentives entirely to corporate objectives.  For fiscal 2008, the named executive officers’ potential participation levels were as follows:

For fiscal 2008, the corporate objectives, which are those financial measures deemed most important to Pep Boys’ overall success, and their weightings were as follows:

(a)  A customer satisfaction score that measures the likelihood of referring others to Pep Boys.

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For fiscal 2008, the Human Resources Committee established target levels that it believed were achievable.  However, it also believed, at the time the target levels were established, that the achievement of the targets was substantially uncertain.  The Human Resources Committee retains full discretion to either award or withhold in its entirety, or increase or decrease the amount of, short-term incentive plan compensation regardless of the attainment, or failure to attain, the relevant performance goal(s) (except that short-term incentive plan compensation cannot be increased in the case of compensation meant to qualify as “performance based” compensation under Section 162(m) of the Internal Revenue Code).

For fiscal 2008, the Company achieved its corporate objectives in the areas of (i) retail customer service index at 68 and (ii) service center customer service index at 55, resulting in a potential payout of 37% of target.     Accordingly, for fiscal 2008, the Human Resources Committee approved short-term incentive plan compensation for each of Messrs. Cirelli, Fee and Webb equal to 17% of their respective 2008 annual salaries.   As an inducement for Mr. Arthur to join the Company in fiscal 2008, his short-term incentive plan compensation was guaranteed at target level regardless of the Company’s performance against its bonus objectives.   Despite the Human Resources Committee’s approval of short-term incentive plan compensation equal to 31% of his 2008 annual salary, Mr. Odell, citing the fact that the Company had determined not to provide merit increases across its associate base, elected to forgo any short-term incentive plan compensation.  Because Messrs. Rachor and Yanowitz left the employment of the Company prior to the conclusion of fiscal 2008, neither of them received any short-term incentive plan compensation.

Long-Term Incentives .  We believe that compensation through equity grants directly aligns the interests of management with that of its shareholders — long-term growth in the price of Pep Boys stock.  The Stock Incentive Plans provides for the grant of stock options at exercise prices equal to the fair market value (the mean between and the high and low quoted selling prices) of Pep Boys stock on the date of grant and the grant of RSUs.  All of the stock options granted in fiscal 2008 expire seven years from the date of grant and all stock options and RSUs granted in 2008 become exercisable in thirds on the first three anniversaries of the date of grant.  Dividend equivalents are paid on RSUs.

Equity grants made in fiscal 2007 were calculated by multiplying a named executive officer’s individual performance score (detailed in the “ Base Salary ” discussion above) by a pre-established target grant for such named executive officer’s position.  For the fiscal 2008 equity grants, the Human Resources Committee determined not to utilize such formula due to the unique employment circumstances of its named executive officers in fiscal 2007.  accordingly, Messrs. Odell, Arthur and Webb received grants based upon their then recent inducement offers to join the Company and Messrs. Cirelli and Fee received grants based upon the Human Resources Committee’s measure of such executive’s contributions to the Company in fiscal 2007.

For the fiscal 2009 equity grants, the Human Resource Committee has established target grants designed to be competitive at market median of our peer group and to assist the named executive officers in achieving our established ownership guidelines, as described below.  In order to further incent our named executive officers to improve our operating performance, such target grants will consist solely of stock options.

We have established stock ownership guidelines for our executive officers.  Under our stock ownership guidelines, it is recommended that each named executive officer incrementally acquire, over their first five years of employment with Pep Boys, and then hold, at least two times their annual salary in Pep Boys stock. An officer may satisfy the stock ownership guidelines through direct share ownership and/or by holding RSUs.

Retirement Plans .  We maintain The Pep Boys Savings Plan, which is a broad-based 401(k) plan.  Participants make voluntary contributions to the savings plan, and we match 50% of the amounts contributed by participants under the savings plan, up to 6% of salary.  Due to low levels of participation in the savings plan, the plan historically did not meet the non-discriminatory testing requirements under Internal Revenue Code regulations.  As a result, the savings plan was required to make annual refunds of contributions made by our “highly compensated employees” (including the named executive officers) under the savings plan.  Beginning in 2004, we limited our officers’ contributions to the savings plan to ½% of their salary per year.  In order to assist our officers with their retirement savings, we adopted a non-qualified deferred compensation plan that allows participants to defer up to

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20% of their annual salary and 100% of their annual bonus.  In order to further encourage share ownership and more directly align the interests of management with that of its shareholders, the first 20% of an officer’s bonus deferred into Pep Boys Stock is matched by us on a one-for-one basis with Pep Boys Stock that vests over three years.

In order to keep our executive compensation program competitive, we also maintained an Executive Supplemental Retirement Plan, or SERP.  In fiscal 2008, the SERP included both a defined benefit portion and a defined contribution portion.  The defined benefit portion, applicable to certain legacy executives, provides a retirement benefit based upon a participant’s years of service and average compensation.  The defined contribution portion, applicable to executives who were hired or whose benefit vested after 2004, provides fixed annual contributions to a retirement account based upon the participant’s age and then current compensation in accordance with the following:

In fiscal 2008, all named executive officers participated in the defined contribution portion of the SERP, except for Mr. Cirelli who participated in the defined benefit portion of the SERP.  Mr. Cirelli also had a frozen benefit under our qualified defined benefit plan, as described in “Pension Plans” on page 23 below.

On December 19, 2008, the SERP was amended to split the defined benefit portion into a stand alone Legacy Plan and the defined contribution portion into a stand alone Account Plan.  In addition, the Legacy Plan was amended to provide for all amounts payable thereunder for periods on and after January 1, 2009 to be paid to Legacy Plan participants in a single lump sum payment in January 2009.  Thereafter, no other benefits will accrue or become payable under the Legacy Plan.   Mr. Cirelli was the only named officer that participated under the Legacy Plan.  Accordingly, in January 2009, Mr. Cirelli received the present value (as of December 31, 2008) of his accumulated benefit under the Legacy Plan.

Health and Welfare Benefits .  In order to keep our executive compensation program competitive, we also provide our named executive officers with health and welfare benefits, including medical and dental coverage, life insurance valued at one times salary, long term disability coverage, an auto allowance and a tax/financial planning allowance.

Employment Agreements .  We have entered into Non-Competition and Change of Control Agreements with Messrs. Odell, Arthur, Cirelli, Fee and Webb as described in “Employment Agreements with Named Executive Officers ” on page 25 below.   The purpose of our Non-Competition Agreements is to prevent our named executive officers from soliciting our employees or competing with us if they leave Pep Boys of their own volition.  As consideration for such restrictive covenants, the Non-Competition Agreements provide for a severance payment to be made to a named executive officer if he is terminated by the Company without “cause.”  The purpose of the Change of Control Agreements is to provide an incentive for our officers to remain in employment and continue to focus on the best interests of the company without regard to any possible change of control.

New Executive Officer.

Mr. Arthur joined the Company on May 1, 2008.  In order to induce Mr. Arthur to join the Company, the Human Resource Committee recommended, and the full Board, approved (i) a base salary of $500,000, (ii) a target annual bonus equal to 75% of his base salary (such bonus being guaranteed for fiscal 2008), (iii) participation in the

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Company’s other incentive and welfare and benefit plans made available to executives, (iv) an inducement grant of 25,000 RSUs and 100,000 stock options.  This compensation package was designed by the Human Resources Committee to be competitive with those of the chief financial officers of the Company’s peer group.

Former Executive Officers.

Mr. Rachor resigned from the Company effective April 23, 2008.  Mr. Yanowitz resigned from the Company effective May 1, 2008.

Tax and Accounting Matters.

We consider the tax and accounting impact of each type of compensation in determining the appropriate compensation structure. For tax purposes, annual compensation payable to the named executive officers generally must not exceed $1 million in the aggregate during any year to be fully deductible under Section 162(m) of the Internal Revenue Code.  The Stock Incentive Plans are structured with the intention that stock option grants will qualify as “performance based” compensation that is not subject to the $1 million deduction limit under Section 162(m).  In addition, bonuses paid to the named executive officers under the Annual Incentive Bonus Plan qualify as “performance based” compensation that is not subject to the $1 million deduction limit under Section 162(m).  RSUs generally do not qualify as “performance based” compensation for this purpose and are therefore subject to the $1 million deduction limit.  In order to compete effectively for the acquisition and retention of top executive talent, we believe that we must have the flexibility to pay salary, bonus and other compensation that may not be fully deductible under Section 162(m). Accordingly, the Human Resources Committee retains the authority to authorize payments that may not be deductible under Section 162(m) if it believes that such payments are in the best interests of Pep Boys and our shareholders.  All compensation paid to the named executive officers in fiscal 2008, except for a portion paid to Mr. Cirelli (due to the payout of his vested benefit under the Legacy Plan) was fully deductible.

Human Resources Committee Report

We have reviewed and discussed the foregoing Compensation Discussion and Analysis with management.  Based upon our review and discussion with management, we have recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this Proxy Statement and in Pep Boys’ Annual Report on Form 10-K for the fiscal year ended January 31, 2009 filed with the SEC.

This report is submitted by:      Peter A. Bassi; John T. Sweetwood; Nick White; and James A. Williams.

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Summary Compensation Table

The following table provides information regarding the fiscal 2008 compensation for Pep Boys’ CEO, CFO, the three other executive officers that received the highest compensation in fiscal 2008 and our former CEO and CFO.  These executives are referred to herein as the “named executive officers.”  As explained in our Compensation Discussion and Analysis, the compensation provided to our named executive officers consists of base salaries, short-term cash incentives, long-term equity incentives, retirement plan contributions and heath and welfare benefits.  Aside from our customary annual compensation, in fiscal 2008, we amended our Legacy Plan to provide for all amounts payable thereunder for periods on and after January 1, 2009 to be paid to participants in a single lump sum payment in January 2009.  Mr. Cirelli was the only named executive officer that participated under the Legacy Plan.  Accordingly, in January 2009, Mr. Cirelli received the present value (as of December 31, 2008) of his accumulated benefit under the Legacy Plan, which is reflected in the table below.  In addition, as an inducement to join the Company, Mr. Arthur received an inducement equity grant and his short-term incentive plan compensation was guaranteed, both of which are reflected in the table below.   The table below also reflects Mr. Odell’s election, citing the fact that the Company had determined not to provide merit increases across its associate base, to forego his fiscal 2008 short-term incentive plan compensation.

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For Mr. Cirelli also includes the disbursement of his $1,406,676 vested Legacy Plan balance.

For Mr. Yanowitz also includes the disbursement of his $260,008 vested Account Plan balance.

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Grants of Plan Based Awards

The following table shows (i) potential payouts under our short-term incentive program assuming specified pre-established corporate objectives were achieved in fiscal 2008 and (ii) equity grants made during fiscal 2008.  The equity grants included customary annual grants made to Messrs. Odell, Cirelli, Fee and Webb on account of their fiscal 2008 service and grants made to Mr. Arthur to induce him to join the Company.