PBY Prospect Capital Corporaton

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THE PEP BOYS - MANNY, MOE & JACK

3111 West Allegheny Avenue

Philadelphia, Pennsylvania 19132

LETTER TO OUR SHAREHOLDERS

2010 was another rewarding year for The Pep Boys - Manny, Moe & Jack, thanks again to our associates and their passionate commitment to our customers.  Our vision is to be The Automotive Solutions Provider of Choice for the Value Oriented Customer , with three primary objectives relative to our customers, our associates and our shareholders:

·         Earn the TRUST of our customers every day
·         Be the Preferred Employer in the automotive after-market
·         Achieve a high-teen pre-tax return on invested capital

We have spent the past three years building our business model from the ground up to deliver on these objectives in a sustainable manner.  In 2009, we made more money than we had in the previous twelve years combined.  In 2010, we improved on that by 59%. We have completed the turnaround phase of our story, but continue to work on additional opportunities to improve the profitability of our base business - like closing gross margin leaks, improving operating efficiencies and further leveraging our payables.  At the same time, we have built a solid foundation upon which to launch our growth phase.

We employ four strategies to achieve our vision to be The Automotive Solutions Provider of Choice for the Value Oriented Customer.

Earn the TRUST of Our Customers Every Day.  We do this by serving them with Speed, Expertise and Respect and providing the best Value.  We measure this through Net Promoter Scores via customer surveys conducted on-line and through outbound calls.  Our Net Promoter Scores have improved in each of the last seven years.  This year we are starting to supplement this metric with customer acquisition and retention data from our recently developed customer database.  This will allow us to measure actual customer behavior, in addition to their reported intentions.  Our rewards membership is now over 12 million - in just 23 months.

We are also using customer data to improve our processes for the benefit of our customers.  We are making it easier for our associates to be successful in serving our customers, as we strive for Execution Excellence.  E-serve, which includes appointment scheduling for tires and service, is a great example of improving the way we serve our customers.  You can check it out at pepboys.com and be sure to visit pepboys.com regularly because we are constantly updating and improving our on-line presence.

The customer experience starts with our associates, which is why we established our objective of being the Preferred Employer in the automotive after-market.  We have put into place and continue to improve our hiring, training, development and two-way communication practices, as well as, our performance-based compensation and benefit plans.  Just as important, we continue to focus on the development of the leaders in our stores.

Lead with Our Service Business and Grow through Service & Tire Centers.  We are a national, full service - tires, maintenance and repair - shop.  We leverage our retail and commercial businesses to buy our parts directly from the manufacturers, and we pass those savings on to our customers in the form of lower prices.   Pep Boys Does Everything.  For Less.  We have ASE-certified technicians on staff at all times.  We invest in the latest equipment.  We have a well-developed training program for all positions in the store.  We know that when customers rely on us every day to keep their cars and trucks running properly, we can provide all the necessary services at the lowest total cost.

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We opened 25 new stores in 2009, 35 in 2010 and plan to open 55 more in 2011 - both organically and through acquisitions.  Most of our new stores are Service & Tire Centers.  They are smaller in size and closer to where our target customers live and work.  They leverage the inventory, delivery operations and marketing of the Supercenter five to fifteen minutes away, while improving our market density.  As an example, we have gone from eight to 23 stores in the Orlando market in just over a year’s time.  The typical Service & Tire Center is about six bays and will do about $1 million or more in sales at maturity.  They live up to Does Everything.  For Less.  Plus they are more convenient for our customers.

Establish a Differentiated Retail Experience by Leveraging Our Automotive Superstore .  We have the broadest range of maintenance, performance and appearance products and accessories among national chains.  Our combination of service and retail makes us a leading installer of automotive after-market products.  We are focused on core automotive and continue to optimize our network to provide the highest level of replacement parts coverage.

Our new Supercenter design features a smaller footprint that showcases our service offering and parts availability and enables a consolidated labor model.  And we are very pleased with its impact on the customer experience, operating efficiency and financial performance.  So we have started to test how we will convert our existing stores to this One Team concept that is a win for our customers, our associates and our shareholders.

Leverage our Automotive Superstore to provide the most complete offering for our Commercial customers .  We support other installers also, not just with parts and fluids but also with tires, equipment, accessories and services.  Like our Service & Tire Centers, this leverages our inventory; and the delivery operations also support our Service & Tire Centers.

The result of our constant focus on our vision and strategies is continued improvement in our profitability and a healthy balance sheet.  As of year-end, we had no borrowings on our revolving line of credit and $90 million of cash on hand with which to grow our business and be The Automotive Solutions Provider of Choice for the Value Oriented Customer.  Our team is very energized about what we have accomplished over the past few years and even more excited about our prospects for the future.  Thank you for investing alongside of us.

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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 2011 Annual Meeting of Shareholders.  This year’s meeting will be held on Wednesday, June 15, 2011, 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)         An advisory resolution on executive compensation.

(Item 3)         An advisory vote on the frequency of future advisory votes on executive compensation.

(Item 4)         The ratification of the appointment of our independent registered public accounting firm.

(Item 5)         The approval of our Employee Stock Purchase Plan.

(Item 6)         A shareholder proposal regarding lowering the threshold required to call a special meeting of shareholders, 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 8, 2011 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.

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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 15, 2011, 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 2010 Annual Report are available at www.proxyvote.com.

We are pleased to be using a procedure approved by the Securities and Exchange Commission (SEC) 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 reduce the environmental impact of our Annual Meeting.  On or about April 29, 2011, 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 2010 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 2010 Annual Report on or about April 29, 2011.

What is the purpose of the meeting?

At the meeting, shareholders will vote on:

·     The election of directors.

·             An advisory resolution on executive compensation.

·             An advisory vote on the frequency of future advisory votes on executive compensation.

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

·             The approval of our Employee Stock Purchase Plan.

·             A shareholder proposal regarding lowering the threshold required to call a special meeting of shareholders, 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 8, 2011.  As of the record date, 52,653,029 shares were outstanding.

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 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.

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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 also 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 14, 2011.  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 14, 2011.  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 8, 2011 record date must be present at the meeting.  The presence of such a majority is called a quorum.  Since 52,653,029 shares were outstanding on the record date, at least 26,326,515 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.

If a shareholder is the beneficial owner of shares held in “street name” by a bank or brokerage firm, such bank or brokerage firm, as the record holder of the shares, is required to vote those shares in accordance with such shareholder’s instructions.  If the shareholder does not give instructions to such bank or brokerage firm, it will nevertheless be entitled to vote the shares with respect to certain “discretionary” items, but will not be permitted to vote such shareholder’s shares with respect to “non-discretionary” items.  In the case of non-discretionary items, the shares will be treated as “broker non-votes.”  Shares treated as broker non-votes will be included for purposes of

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calculating the presence of a quorum.  Otherwise, shares represented by broker non-votes will be treated as shares not entitled to vote on a proposal.

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.  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 are not considered votes “cast” for matters, and therefore will have no effect on the vote for matters 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 advisory resolution on executive compensation.

·             FOR the advisory vote to conduct future advisory votes on executive compensation every year.

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

·             FOR the approval of our Employee Stock Purchase Plan.

·             AGAINST the shareholder proposal regarding lowering the threshold required to call a special meeting of shareholders, if presented by its proponent.

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 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 Compensation 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.

(a)                     Based upon information disclosed in a Schedule 13G/A filed on February 11, 2011.  Dimensional Fund Advisers LP disclaims beneficial ownership of such shares.

(b)                    Based upon information disclosed in a Schedule 13G filed on February 8, 2011.

(c)                     Based upon information disclosed in a Schedule 13G/A filed on February 14, 2011.

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

The following table shows how many shares our directors and executive officers named in the Summary Compensation Table beneficially owned on April 8, 2011.  The business address for each of such individuals is 3111 West Allegheny Avenue, Philadelphia, PA 19132.

+                  Represents less than 1%.

(a)           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 7, 2011:  Mitarotonda – 14,188; Odell – 312,621; Arthur – 132,898; Lukens – 7,859; Webb – 52,898; Cirelli – 49,083; White – 14,143; Sweetwood – 33,666; Hotz – 21,166; ; Scaccetti – 29,666; ; Shull – 32,986; Williams – 14,188; Atkins – 21,166 Reid – 10,256; and as a group – 822,450.

(b)          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”) and Barington Companies Advisors, LLC (“Barington Advisors”).  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 and Barington Investments beneficially own 1,459,558 and 991,780 shares of Pep Boys Stock, respectively.  Mr. Mitarotonda disclaims beneficial ownership of these shares, except to the extent of his pecuniary interest therein.

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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 10 members, nine non-management directors and our President & Chief Executive Officer.  All of our current directors have been nominated for re-election.

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 2012 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:

Ms. Scaccetti, 57, 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.  During the past five years, Ms. Scaccetti served as a director of Di Giorgio Corporation and Nutrition Management Services Company.  Ms. Scacetti’s financial expertise, public-company director experience, familiarity with Pep Boys’ business garnered through her tenure as a Director and diversity were the primary qualifications resulting in her nomination for re-election.

Mr. Sweetwood, 63, 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.  Mr. Sweetwood’s marketing and service industry expertise, together with his familiarity with Pep Boys’ business garnered through his tenure as a Director were the primary qualifications resulting in his nomination for re-election.

Ms. Atkins, 54, 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 currently serves as a director of Shoppers Drug Mart Corporation, Spartan Stores, Inc. and Tim Hortons Inc.  Ms. Atkins’ retail industry, operations, strategic planning and financial expertise, public-company director experience, familiarity with Pep Boys’ business garnered through her tenure as a Director and diversity were the primary qualifications resulting in her nomination for re-election.

Mr. Hotz, 66, 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 currently serves as a director of Universal Health Services, Inc.  Mr. Hotz’ financial, M&A and regulatory expertise, public-company director experience and familiarity with Pep Boys’ business garnered through his tenure as a Director were the primary qualifications resulting in his nomination for re-election.

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Mr. Mitarotonda, 56, 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 currently serves as a director of A. Schulman, Inc., Griffon Corporation and Gerber Scientific, Inc. and, during the past five years, served as a director of Sielox, Inc. (formerly Dynabazaar, Inc.) and L Q Corporation, Inc.  Mr. Mitarotonda’s status as a significant shareholder, financial and corporate governance expertise, experiences as a chief executive officer, public-company director experience and familiarity with Pep Boys’ business garnered through his tenure as a Director and former Chairman of the Board were the primary qualifications resulting in his nomination for re-election.

Mr. White, 66, 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 currently serves as a director of Dillard’s, Inc and, during the past five years, served as a director of Gold Toe Corporation, Oneida Ltd. and Playtex Products, Inc.  Mr. White’s retail industry, operations and merchandising expertise, public-company director experience and familiarity with Pep Boys’ business garnered through his tenure as a Director were the primary qualifications resulting in his nomination for re-election.

Mr. Williams, 68, is the President & CEO of International Legwear Group, a sock and legwear manufacturer and marketer that he founded in September of 2010.  In 2008, Mr. Williams retired 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 1990 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 .  During the past five years, Mr. Williams served as a director of Gold Toe Corporation.  Mr. Williams’ experiences as a chief executive officer, supply chain and financial expertise, public-company director experience and familiarity with Pep Boys’ business garnered through his tenure as a Director were the primary qualifications resulting in his nomination for re-election.

Dr. Reid, 70, 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 currently serves as a director of A. Schulman, Inc. and Mack-Cali Realty Corporation and, during the past five years, served as a director of Handleman Corporation.  Mr. Reid’s financial and regulatory expertise, public-company director experience, familiarity with Pep Boys’ business garnered through his tenure as a Director and diversity were the primary qualifications resulting in his nomination for re-election.

Mr. Odell, 47, has been our Chief Executive Officer since September 22, 2008, and was designated with the additional title of President in June 2010.  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

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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.  Mr. Odell’s position as our President & Chief Executive Officer and his automotive aftermarket, retail industry, service industry, operations and financial expertise were the primary qualifications resulting in his nomination for re-election.

Mr. Lukens, 62, 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 currently serves as a director of Westlake Chemical Corporation and, during the past five years, served as a director of NCI Building Systems Inc.  Mr. Lukens’ experiences as a chief executive officer, service industry and financial expertise, public-company director experience and familiarity with Pep Boys’ business garnered through his tenure as a Director were the primary qualifications resulting in his nomination for re-election.

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

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 2010 Annual Meeting, our CEO certified to the NYSE that he was not aware of any violation by Pep Boys of NYSE corporate governance listing standards.

Diversity.  While the Board has not adopted a formal diversity policy, in accordance with the Board’s Code of Conduct, the Nominating and Governance Committee annually reviews with the full Board, the appropriate skills and characteristics required of Directors and nominees in the context of the current make-up of the Board, including diversity of age, gender, ethnicity and personal experiences.

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 President & Chief Executive Officer, Mr. Odell, are independent.  All Committees of the Board consist entirely of independent directors.

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

Board Leadership Structure and Role in Risk Oversight .  Pep Boys currently separates the roles of Chairman of the Board and Chief Executive Officer.  Given the relatively short tenure of both our current Chairman of the Board and President & Chief Executive Officer, the Board believes that the separation of these roles currently allows the President & Chief Executive Officer to focus his efforts primarily on the successful short and long-term operations of the Company for the benefit of all its constituents, while allowing the Chairman of the Board to manage the operation of the Board in its oversight of the President & Chief Executive Officer and Pep Boys’ strategic direction.

Pep Boys has adopted an enterprise risk oversight program pursuant to which management, lead by Pep Boys’ Chief Financial Officer and General Counsel, together with the Audit Committee identifies the most significant risks faced by the Company.  On a quarterly basis, management assesses the status of these risks and the Company’s mitigation efforts against them, which are reporting in writing to the full Board and discussed in detail with the Audit Committee and in summary fashion with the full Board.

Compensation Policies and Practices Risk.   In connection with its annual review of Pep Boys’ compensation policies and practices, our Compensation Committee of the Board of Directors, together with senior management and the Compensation Committee’s independent executive compensation consultant, considered whether any of our compensation policies and practices has the potential to create risks that are reasonably likely to have a material adverse effect on Pep Boys.  The Compensation Committee considered the risk profile of our business and the design and structure of our compensation policies and practices.  We concluded that the risks arising from our compensation policies and practices are not reasonably likely to have a material adverse effect on Pep Boys based on the following:

·              Pep Boys is not engaged in speculative activities that have the potential for creating unusual gains or losses.

·              Our base salaries, retirement benefits, perquisites and generally available benefit programs create little, if any, risk to Pep Boys.

·              Except as provided below, all of our management employees who receive short-term incentive-based compensation do so pursuant to the terms of our shareholder approved Annual Incentive Bonus Plan.  The bonus targets under such plan for Officer’s are entirely based, and for middle-management are primarily based, upon the achievement of stated corporate-level financial objectives, which are in alignment with our overall business plan.  In particular, we do not place disproportionate weight on any one metric, do not include an inordinate amount of metrics, reasonably leverage the selected metrics and employ features to mitigate risks, including limitations on annual cash payouts.  Accordingly, we do not believe that the structure of the Annual Incentive Bonus Plan encourages associates to take risks that are reasonably likely to have a material adverse effect on Pep Boys.  (The aforementioned exception is for store level associates who have a separate bonus program and whose bonus compensation, individually or in the aggregate, is of an amount that creates little, if any, risk to Pep Boys.)

·              Our long-term incentive-based compensation is granted in the form of equity awards, which are subject to time-based and performance-based vesting that is aligned to our corporate objective of creating value for our shareholders.  The nature of such awards discourages short-term risk taking.  In addition, our officers are subject to share ownership guidelines requiring them to be invested in our future performance.

·              We believe that our mix of fixed compensation and “at risk” compensation does not encourage inappropriate risk-taking by our associates.

Personal Loans to Executive Officers and Directors.  Pep Boys has no personal loans extended to its executive officers or 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 attended the 2010 Annual Meeting.

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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.

Compensation Committee Interlocks and Insider Participation

Ms. Atkins and Messrs. Hotz and Mitarotonda are the current members of our Compensation Committee.  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 Compensation Committee.

Meetings and Committees of the Board of Directors

The Board of Directors held ten meetings during fiscal 2010.  During fiscal 2010, 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.  The Board of Directors has standing Audit, Compensation and Nominating and Governance Committees.  All Committee members are “independent” as defined by the listing standards of the NYSE.

Audit Committee.  Ms. Scaccetti (chair), 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 eight times during fiscal 2010.

Compensation Committee.  Ms. Atkins (chair) and Messrs. Hotz and Mitarotonda are the current members of the Compensation Committee.  The Compensation Committee recommends the compensation structure, components and levels for all of Pep Boys’ officers.  The Compensation Committee met 13 times during fiscal 2010.

Nominating and Governance Committee.  Messrs. Sweetwood (chair), Mitarotonda and Reid and Ms. Scaccetti 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 twice during fiscal 2010.

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 Messrs. White (chair), Sweetwood and Williams and Ms. Atkins.

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

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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 and personal experiences) and his or her independence from Pep Boys.  Such qualifications are evaluated against our then current requirements, as expressed by the full Board and our President & 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 President & Chief Executive Officer.

How are directors compensated?

In 2010, in consultation with Pay Governance, LLC, our compensation consultant, we reviewed our director compensation in comparison to the compensation paid to the directors of the companies comprising our peer group (see, “EXECUTIVE COMPENSATION — Compensation Discussion & Analysis — Summary” for a description of our peer group) and as it related to the changing workload of our Board as dictated by the emerging trends in corporate governance.  As a result, in June 2010, we revised our director compensation to (i) increase the aggregate value of the annual equity grants by $10,000, (ii) increase the base compensation of our Chairman of the Board (who does not receive committee fees despite attending most committee meetings as a non-voting participant) by $20,000, (iii) increase the Compensation Committee chair and member fees by $5,000 and $2,500, respectively, and (iv) decrease the Audit Committee chair and member fees by $5,000 and $3,000, respectively.  The current director compensation is detailed below.

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 $100,000.

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

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Equity Grants.  The 2009 Stock Incentive Plan provides for an annual equity grant having an aggregate value of $55,000 to non-management directors.  The Stock Incentive Plan is administered, interpreted and implemented by the Compensation Committee.

The following table details the compensation paid to non-employee directors during the fiscal year ended January 29, 2011.

Director Compensation Table

Share Ownership Guidelines.   Each of our non-employee directors is expected to hold shares equal to 4x the annual director retainer (i.e., $140,000).  The share ownership levels may be satisfied through direct share ownership and/or by holding unvested time-based RSUs and vested “in the money” stock options.  Non-employee directors have five years from their appointment to Board to achieve their expected ownership level.  If in a shortfall position, (i) a non-employee director may not sell Pep Boys Stock and (ii) all net after-tax shares acquired upon the exercise of stock options must be retained.  All of our non-employee directors are currently in compliance with our share ownership guidelines.

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.

Involvement of Certain Legal Proceedings

None of our directors or executive officers are currently involved, or have been involved during the last ten years, in a legal proceeding of the type required to be disclosed under Item 402 of Regulation S-K.

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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), Mr. Hotz, Mr. Reid and Mr. Williams are the current members of the Audit Committee.  Ms. Scaccetti has been designated by the full Board as an Audit Committee Financial Expert 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 audits.  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 and its committees, 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, as amended and adopted by the Public Company Accounting Oversight Board (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 the Public Company Accounting Oversight Board.

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 29, 2011 filed with the SEC.

This report is submitted by: Jane Scaccetti; 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 2010 and fiscal 2009 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.

Tax Fees.  Tax Fees billed in fiscal 2010 and 2009 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 2010, 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 was compatible with maintaining Deloitte & Touche LLP’s independence.

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EXECUTIVE COMPENSATION

Compensation Discussion and Analysis

In this section, we discuss and analyze Pep Boys’ executive compensation program, which we believe plays a material role in our ability to drive strong financial results and to attract and retain a highly experienced and successful management team.

Pay for Performance.   Fiscal 2010 was our second consecutive profitable year marked by a 59% increase in net earnings of $13.6 million.  The increase in profitability was the result of positive comparable store sales across all lines of business and improved total gross profit margins.  Our return on invested capital also improved by 40% to 10.9%, as we continue to work toward our long-term goal in the high teens.  We believe that our efforts in 2010 have also positioned the Company for future success as we opened 35 new locations — 28 Service & Tire Centers and seven Supercenters — and continued to build cash on our balance sheet, $90 million at year end.

As a result, our executives realized the benefit of our heavily weighted performance-based compensation program.  The payouts under our annual incentive bonus plan properly rewarded our executive officers for exceeding financial performance objectives in fiscal 2010 that were deemed to be important to the Company and its shareholders.  In addition, 60% of the long-term incentive awards made under our Stock Incentive Plan in fiscal 2010 require the Company to achieve specified thresholds of return on invested capital and total shareholder return in fiscal 2013 in order to deliver any value to our executives.  The 40% balance of the long-term incentive awards granted in fiscal 2010 were in the form of stock options, which are also performance-based requiring appreciation in the Company’s per share stock price in order to deliver value to our executives.

Of the components of compensation comprising our executive compensation program, the percentage mix between “at-risk” and fixed compensation (excluding health and welfare benefits), at target levels, for each of our named executive officers is set forth in the following table.  “At-risk” compensation is only earned and paid if pre-established performance levels are achieved.

Compensation Philosophy .

Pep Boys’ executive compensation program is designed to:

·                        Enable Pep Boys to attract, retain, and motivate key executives who are critical for current and long-term success;

·                        Provide targeted compensation levels which are competitive with our customized peer group (discussed below) as to base salary, annual incentives and long-term incentives, and which are reflective of current and/or expected future company performance levels;

·                        Support Pep Boys’ long-range business strategy;

·                        Establish a clear linkage between individual performance objectives and corporate or business unit financial performance objectives; and

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·                        Align executive compensation with shareholder interests by linking long-term incentives to increasing shareholder value, utilizing performance metrics where appropriate.

Pep Boys’ executive compensation may also take into account the following additional considerations:

·                        Short term incentives will be structured in a manner which gives primary emphasis to meeting or exceeding the company’s annual financial objectives;

·                        Long-term incentives will be designed to reward performance over a multi-year time frame, with vesting of awards to occur over a corresponding time period;

·                        The Compensation Committee may determine that payout on any short term bonus component will be contingent upon achievement of the annual budget.  This decision will be made annually, when targets are set for the ensuing year;

·                        If the long-term incentive plan includes more than one performance dimension, the Compensation Committee may decide to treat performance on one element as a prerequisite to payout on other goals (i.e. as a ‘qualifier’), whether or not threshold performance is achieved on those other dimensions;

·                        The Compensation Committee believes that requiring achievement of full target performance in order to trigger any payout under the annual incentive plan is generally inappropriate due to the risk of incenting poor decision making at the margin.  The Compensation Committee will annually set a “threshold” performance level which is below the target objective, at which point some amount of incentive compensation will be paid;

·                        From time to time the Compensation Committee may decide to grant a discretionary, individual short or long term incentive award based on a specific individual’s performance;

·                        In the spirit of encouraging over-performance against annual targets, performance above target may be rewarded disproportionately; i.e. marginal rewards for over-performance may exceed the marginal penalty for under-performance; and

·                        All payouts are subject to the discretion of the Compensation Committee even if targets are achieved.

In order to maintain a competitive total compensation program, Pep Boys compares itself with a custom peer group comprising key competitors in the automotive service and retail business, as well as, comparably-sized companies in the broader hardlines retail industry.  The peer group is reviewed annually by the Compensation Committee, together with its compensation consultant, to ensure that it remains relevant and was last amended in the Fall of 2009.  The current peer group includes: Aarons, Advance Auto Parts, Autozone, Big 5 Sporting Goods, Cabela’s, Conn’s, Dick’s Sporting Goods, hhgregg, Midas, Monro Muffler & Brake, O’Reilly Automotive, PetSmart, RadioShack, Rent-A-Center, Tractor Supply and West Marine.  In some cases, Pep Boys also analyzes competitive practices in the general industry for those positions that may be occupied by executives recruited from outside of these industries.

For fiscal 2010, the Compensation Committee recommended to the full Board the annual total compensation levels for all of the named executive officers (other than the President & Chief Executive Officer), based on recommendations made by the President & Chief Executive Officer and the Senior Vice President - Human Resources, and in consultation with Pay Governance, the Compensation Committee’s compensation consultant.  The Compensation Committee recommended to the full Board the annual total compensation level for the President & Chief Executive Officer after consulting with Pay Governance.  To arrive at such recommendations, the chair of the Compensation Committee scheduled and developed the agenda for committee meetings in consultation with the Senior Vice President - Human Resources.  The Senior Vice President - Human Resources was responsible for developing appropriate materials for the Compensation Committee’s review and consideration and for reviewing these materials and recommendations with the chair of the Compensation Committee and Pay Governance prior to

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their presentation to the Compensation Committee.  Our President & Chief Executive Officer was principally responsible for recommendations made to the Compensation Committee with respect to the compensation of our named executive officers (other than himself) and other officers.  The Compensation Committee considered, but was not bound to and did not always accept, management’s recommendations with respect to executive compensation.  The President & Chief Executive Officer, Senior Vice President — Human Resources and Senior Vice President — General Counsel & Secretary regularly attended committee meetings, excluding portions of meetings where their own compensation was discussed.

In connection with establishing compensation levels for fiscal 2010, Pay Governance advised the Compensation Committee on the then-current competitiveness of program design and award values.  Representatives of Pay Governance regularly attended committee meetings and also communicated with the chair of the Compensation Committee outside of meetings.  Pay Governance worked with management (including the President & Chief Executive Officer, Senior Vice President - Human Resources and Senior Vice President — General Counsel & Secretary) from time-to-time for purposes of gathering information and reviewing and providing input to management on recommendations, proposals and materials that management presented to the Compensation Committee.  Pay Governance was engaged directly by the Compensation Committee and did not provide any additional services to the Company in fiscal 2010.

The Compensation Committee and the Board of Directors consider our overall compensation levels for the named executive officers to be reasonable and appropriate and believe that our executive compensation program achieves the objectives outlined at the beginning of this summary.

Components of Compensation .

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 health and welfare benefits.

Base Salary .  The Compensation 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 appropriate to retain high quality individuals.  The full Board measures the President & Chief Executive Officer’s individual performance during the applicable fiscal year in the areas of strategic planning and execution, leadership, financial results, management development and succession planning, key stakeholder focus, ethics and Board relations, based upon individual assessments completed by each Director.  The Compensation Committee reviews the President & Chief Executive Officer’s assessments of each other named executive officer’s individual performance during the applicable fiscal year in the areas of core and positional competencies.  Salary adjustments are then made taking into account the performance assessment, 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 fiscal 2010, the Compensation Committee determined that each of the named executive officers’ base salary was at the appropriate level without need for adjustment, except for Mr. Cirelli who received a 1% increase.

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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.  In order to directly align our named executive officers’ short-term incentive compensation with that of our overall performance, these pre-established goals consist entirely of corporate (as opposed to individual) objectives.  For fiscal 2010, the named executive officers’ annual short-term incentive opportunity was as follows:

(a) Amounts achieved above the “cash cap” percentage up to the “maximum” percentage are earned and paid out over the subsequent three years, assuming the executive remains employed by the Company.  (b) In recognition of the importance of their positions to the Company and their individual contributions, in March 2010, the Compensation Committee increased then Senior Vice Presidents Shull and Webb’s target participation levels to 65% of base salary for fiscal 2010.  Messrs. Shull and Webb were subsequently promoted to the Executive Vice President level in June 2010, however, their target participation levels remained at 65% for the balance of fiscal 2010.

For fiscal year 2010, after reviewing the Company’s peer group’s practices and emerging trends in executive compensation with Pay Governance, the Compensation Committee determined to add two objectives to the Annual Incentive Bonus Plan.  Pre-tax income remained the most important objective, weighted at 50% (reduced from 80% in fiscal 2009).  Pre-tax return on invested capital was added at a weight of 25% to reflect the Compensation Committee’s view that profitability alone is an incomplete measure of performance if the capital employed to earn it is not taken into consideration.  Total revenue was also added at a weight of 25% to reflect the criticality to the Company’s short- and long-term strategy of sales growth, in general, and the addition of sales through the opening of new Service and Tire Centers, in particular.  Customer satisfaction scores remained important objectives in fiscal 2010, but as potential modifiers to the results otherwise achieved with respect to the foregoing primary three objectives (rather than comprising 20% of the overall objectives as in fiscal 2009).

(a)  Calculated before unusual, non-operating gains and losses.
(b)  Pre-Tax Income (before unusual, non-operating gains and losses) divided by debt plus equity.
(c)  The calculated aggregate payout on the first three objectives may be increased or decreased by a factor up to 5% for each of Retail and Service Net Promoter scores - a customer satisfaction score that measures the likelihood of referring others to Pep Boys.

For fiscal 2010, the Compensation Committee established target levels that it believed were achievable, but also substantially uncertain.  The Compensation Committee retains full discretion to either award or withhold in its entirety, or to 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).

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For fiscal 2010 the Company achieved the following results against its corporate objectives (i) pre-tax income at $56,603,000, (ii) pre-tax return on invested capital at 10.9%, (iii) total revenue at $1,988,641, (iv) the retail net promoter modifier at 76% and (v) the service net promoter modifier at 73%, resulting in an aggregate potential payout of 137% of target.  Accordingly, for fiscal 2010, the Compensation Committee approved short-term incentive plan compensation (in accordance with the above referenced formula without any discretionary adjustment) for Mr. Odell at 137%, Mr. Arthur at 103%, each of Mr. Shull and Mr. Webb at 89% and Mr. Cirelli at 66% of their respective 2010 annual salaries.  Mr. Odell declined $60,000 of his incentive payment that he was otherwise entitled to receive, which amount, at Mr. Odell’s request, was allocated to accounts set aside by Pep Boys to provide associates’ children with educational scholarships and to provide hardship assistance to Pep Boys’ associates.

Long-Term Incentives .  Compensation through equity grants directly aligns the interests of management with that of its shareholders.  The Stock Incentive Plan 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 for the grant of restricted stock units.

For the fiscal 2010 equity grants, the Compensation Committee worked with Pay Governance to survey our peer group’s practices and emerging trends in long-term incentive compensation in an effort to further align this component of the compensation program with the interests of shareholders, namely building long-term shareholder value.  Based upon this survey data, the Compensation Committee determined to award equity grants consisting of 40% time-based vesting stock options and 60% performance-based vesting restricted stock units (RSUs).  Prior year RSU grants were only subject to time-based vesting.  The 2010 RSUs will only vest if predetermined objectives are achieved by the end of a three-year period.  Two-thirds of the 2010 RSUs are tied to the Company achieving at least a threshold return on invested capital and one-third are tied to achieving at least a threshold level of total shareholder return measured against our peer group.  In fiscal 2010, taking into account the Company’s fiscal 2009 financial performance and the relative position of each named executive officer’s total compensation to the market median of our peer group, the Compensation Committee recommended, and the full Board approved, the following equity grants.

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 0.5% of their salary per year.  Given this limitation, in order to assist our officers with their retirement savings, in fiscal 2004, we adopted a non-qualified deferred compensation plan that allows participants to defer up to 20% of their annual salary and 100% of their annual bonus.  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.

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In order to keep our executive compensation program competitive, we also maintain a Supplemental Executive Retirement Plan, or SERP, known as our Account Plan.  The Account Plan provides fixed annual contributions to a retirement account based upon the participant’s age and then current compensation in accordance with the following:

Notwithstanding the foregoing, for the first four years of a participant’s employment, their contribution percentage is limited to 10%.  As an inducement to hire Mr. Arthur, however, this limitation was waived.

In fiscal 2010, all named executive officers participated in the Account Plan.

In order to incent the achievement of incremental profitability, all Company contributions to the savings plan and Account Plan (on account of all associates, including the named executive officers) that would otherwise have been made during calendar 2010 were conditioned upon the Company’s achievement of a level of pre-tax income in fiscal 2010, which exceeded 2009’s level.  Because this objective was achieved, all such calendar 2010 contributions were made.

Health and Welfare Benefits .  As one element of a market-competitive compensation package, 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 and an auto allowance (the auto allowance is a grandfathered benefit no longer provided to newly- hired/appointed officers).

Employment Agreements .  We have entered into Non-Competition and Change of Control Agreements with each of the named executive officers as described in “Employment Agreements with Named Executive Officers ” 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 our employment and continue to focus on the best interests of Pep Boys without regard to any possible change of control.  In 2010, the Compensation Committee, advised by Pay Governance, undertook a comprehensive review of our Non-Competition and Change of Control Agreements and determined that, taken as a whole, their terms were consistent with similar agreements provided to named executive officers by a number of the peer group companies, as well as, throughout the general marketplace.  Accordingly, no changes were made to those agreements then in place.  However, as with all aspects of our executive compensation program, the Compensation Committee continually monitors emerging trends in executive compensation and considers future changes as circumstances warrant.

Recoupment Policy .  In fiscal 2010, we adopted a recoupment policy.  We will seek to recover, at the direction of the Compensation Committee, all or a portion of any compensation awarded or paid to a current or former Officer during the prior three fiscal years year if (i) the amount of such compensation was based on the achievement of certain financial results that were subsequently the subject of a restatement due to the material noncompliance of the Company with any financial reporting requirement under the securities laws and (ii) a lower award or payment would have been made to the Officer based upon the restated financial results.  If, however, the Compensation Committee determines that an Officer engaged in misconduct that resulted in the obligation to restate or knew or should have

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known of such misconduct and failed to take appropriate action, then we will seek to recover the related compensation regardless of the fiscal year in which it was paid.

Share Ownership Guidelines .  In fiscal 2010, the Compensation Committee undertook a review of our share ownership guidelines for all our officers as compared to our peer group and determined to increase the ownership levels, as a multiple of their annual salary, for our President & Chief Executive Officer from 3x to 5x and our Executive Vice Presidents from 2x to 3x.  As a result of this review, our officers are expected to hold shares equal to the following multiples of their annual salary: President & Chief Executive Officer 5x; Executive Vice President 3x; Senior Vice President 2x; and Vice President 1x.  The share ownership levels may be satisfied through direct share ownership and/or by holding unvested time-based RSUs and vested “in the money” stock options.  Officers have five years from the later of their appointment to their then current position or the establishment of a higher ownership threshold for their position (as described above) to achieve their expected ownership levels.  If in a shortfall position, (i) an officer may not sell Pep Boys Stock, (ii) all net after-tax shares acquired upon the exercise of stock options or the vesting of RSUs must be retained and (iii) any short-term incentive award in excess of the “cash cap” level will be awarded in the form of RSUs.  All of our named executive officers are currently in compliance with our share ownership guidelines.

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 Plan is currently structured with the intention that stock option grants and perforamnce-based RSUs will qualify as “performance based” compensation that is not subject to the $1 million deduction limit under Section 162(m).  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 Compensation 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 2010 was fully deductible.

Compensation 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 29, 2011 filed with the SEC.

This report is submitted by M. Shân Atkins, Robert H. Hotz and James A. Mitarotonda.

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Summary Compensation Table

The following table provides information regarding the fiscal 2010 compensation for Pep Boys’ CEO, CFO and the three other executive officers that received the highest compensation in fiscal 2010.  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.

(a)              Represents the grant date fair value calculated under SFAS No. 123(R).

(b)             Represents the grant date fair value calculated under SFAS No. 123(R).

(c)              Represents amounts earned under our Annual Incentive Compensation Plan in the year reported, that were paid, or payable but deferred at the executive officer’s election, in the following fiscal year.  For fiscal 2010, the amount reflected for Mr. Odell does not include $60,000 that he was otherwise entitled to receive, but declined.  Such amount, at Mr. Odell’s request, was allocated to an account set aside by Pep Boys to provide associates’ children with educational scholarships and to provide hardship assistance to Pep Boys’ associates.

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(d)             For fiscal 2010, consists of the following dollar amounts:

For fiscal 2010, for Messrs. Odell and Shull also includes $48,410 and $30,235, respectively, in relocation expenses.

(e)           Mr. Odell joined Pep Boys on September 17, 2007 as Executive Vice President — Chief Operating Officer.  Mr. Odell was appointed interim Chief Executive Officer on May 24, 2008, permanent Chief Executive Officer on on September 22, 2008 and President & Chief Executive Officer on June 17, 2010.

(f)             Mr. Arthur joined Pep Boys on May 1, 2008.

(g)          Mr. Shull joined Pep Boys on September 2, 2008 as Senior Vice President — Stores and was promoted to Executive Vice President — Stores on June 17, 2010.

(h)          Mr. Webb joined Pep Boys on September 10, 2007 as Senior Vice President — Merchandising & Marketing and was promoted to Executive Vice President — Merchandising & Marketing on June 17, 2010.

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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 2010 and (ii) the customary annual equity grants made at the beginning of fiscal 2010 in respect of fiscal 2009 service.