<PAGE>1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported):
April 29, 1994
The Pep Boys - Manny, Moe & Jack
(Exact name of registrant as specified in its charter)
Pennsylvania 1-3381 23-0962915
(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification
incorporation) Number)
3111 West Allegheny Avenue, Philadelphia, PA 19132
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:
(215) 229-9000
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Item 5.Other Events.
On April 29, 1994, The Pep Boys - Manny, Moe & Jack (the "Company") entered
into a Trust Agreement with First Fidelity Bank, National Association, as
Trustee, establishing a flexible trust (the "Trust") for the benefit of
various existing employee compensation and benefit plans of the Company. The
Company, pursuant to a Common Stock Purchase Agreement, dated as of April 29,
1994, will sell to the Trust up to $75,000,000 in common stock, par value
$1.00 per share, of the Company (the "Common Stock"), principally in exchange
for a Revolving Promissory Note. Such Common Stock will consist of Common
Stock which the Company has purchased and will purchase on the open market,
and may also consist of previously authorized but unissued Common Stock.
The Trust Agreement, Stock Purchase Agreement, Revolving Promissory Note and
Company press release, dated December 6, 1993, announcing the establishment of
the Trust are included as Exhibits hereto and are incorporated herein by
reference.
Item 7.Exhibits.
1. Trust Agreement, dated as of April 29, 1994, between the Company and
First Fidelity Bank, National Association, as Trustee.
2. Common Stock Purchase Agreement, dated as of April 29, 1994, between the
Company and First Fidelity Bank, National Association, as Trustee.
3. Revolving Promissory Note, dated April 29, 1994, between the Company and
First Fidelity Bank, National Association, as Trustee.
4. Press Release of the Company, date
December 6, 1993.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Dated: May 6, 1994
THE PEP BOYS - MANNY, MOE & JACK
By:/s/ Michael J. Holden
Michael J. Holden
Senior Vice President and
Chief Financial Officer
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EXHIBIT INDEX
Exhibit No. Description Page
1. Trust Agreement, dated as of April
29, 1994, between the Company and
First Fidelity Bank, National
Association, as Trustee.
2. Common Stock Purchase Agreement, dated
as of April 29, 1994, between the
Company and First Fidelity Bank,
National Association, as Trustee.
3. Revolving Promissory Note, dated April
29, 1994, between the Company and First
Fidelity Bank, National Association, as
Trustee.
4. Press Release of the Company, dated
December 6, 1993.
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THE PEP BOYS - MANNY, MOE & JACK
FLEXITRUST
Effective as of April 29, 1994
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TABLE OF CONTENTS
PAGE
ARTICLE 1
Trust, Trustee and Trust Fund
1.1 Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.2 Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.3 Trust Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.4 Trust Fund Subject to Claims of Creditors . . . . . . . . . . . . . 2
1.5 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
ARTICLE 2
Contributions and Dividends
2.1 Contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.2 Prepayments . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.3 Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
ARTICLE 3
Purchase and Sale of Shares
3.1 Purchase and Sale . . . . . . . . . . . . . . . . . . . . . . . . . 7
3.2 Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.3 Delivery of Shares . . . . . . . . . . . . . . . . . . . . . . . . 9
3.4 Company Records . . . . . . . . . . . . . . . . . . . . . . . . . . 9
ARTICLE 4
Release and Transfer of Company Stock
4.1 Company Stock Made Available for Transfer from Trust . . . . . . . 9
4.2 Transfer from Trust of Released Shares and Cash Proceeds . . . . . 10
4.3 Transfer of Other Assets . . . . . . . . . . . . . . . . . . . . . 11
ARTICLE 5
Compensation, Expenses and Tax Withholding
5.1 Compensation and Expenses . . . . . . . . . . . . . . . . . . . . . 11
5.2 Withholding of Taxes . . . . . . . . . . . . . . . . . . . . . . . 12
<PAGE>3
ARTICLE 6
Administration of Trust Fund
6.1 Management and Control of Trust Fund . . . . . . . . . . . . . . . 12
6.2 Investment of Funds . . . . . . . . . . . . . . . . . . . . . . . . 12
6.3 Trustee's Administrative Powers . . . . . . . . . . . . . . . . . . 13
6.4 Rights Regarding Company Stock . . . . . . . . . . . . . . . . . . 14
6.5 Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . 15
6.6 General Duty to Communicate to Committee . . . . . . . . . . . . . 16
ARTICLE 7
Duties of Trustee
7.1 Records and Accounts of Trustee . . . . . . . . . . . . . . . . . . 16
7.2 Reports of Trustee . . . . . . . . . . . . . . . . . . . . . . . . 17
7.3 Final Statement . . . . . . . . . . . . . . . . . . . . . . . . . 17
ARTICLE 8
Succession of Trustee
8.1 Resignation of Trustee . . . . . . . . . . . . . . . . . . . . . . 17
8.2 Removal of Trustee . . . . . . . . . . . . . . . . . . . . . . . . 18
8.3 Appointment of Successor Trustee . . . . . . . . . . . . . . . . . 18
8.4 Succession to Trust Fund Assets . . . . . . . . . . . . . . . . . . 18
8.5 Continuation of Trust . . . . . . . . . . . . . . . . . . . . . . . 18
8.6 Changes in Organization of Trustee . . . . . . . . . . . . . . . . 19
8.7 Continuance of Trustee's Powers in Event of Termination of the
Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
ARTICLE 9
Amendment or Termination
9.1 Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
9.2 Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
9.3 Effect of Termination . . . . . . . . . . . . . . . . . . . . . . . 20
9.4 Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
9.5 Form of Amendment or Termination . . . . . . . . . . . . . . . . . 20
ARTICLE 10
Miscellaneous
10.1 Controlling Law . . . . . . . . . . . . . . . . . . . . . . . . . . 21
10.2 Committee Action . . . . . . . . . . . . . . . . . . . . . . . . . 21
10.3 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
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10.4 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
10.5 Protection of Persons Dealing with the Trust . . . . . . . . . . . 22
10.6 Tax Status of Trust . . . . . . . . . . . . . . . . . . . . . . . . 22
10.7 No Third Party Rights; Plan Participants to Have No Interest in
the Company by Reason of the Trust . . . . . . . . . . . . . . . . 22
10.8 Nonassignability . . . . . . . . . . . . . . . . . . . . . . . . . 22
10.9 Gender and Plurals . . . . . . . . . . . . . . . . . . . . . . . . 22
10.10 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Schedule A
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THE PEP BOYS - MANNY, MOE & JACK
FLEXITRUST
THIS TRUST AGREEMENT (the "Agreement"), is made effective as of
April 29, 1994, between The Pep Boys - Manny, Moe & Jack, a Pennsylvania
corporation (the "Company"), and First Fidelity Bank, National Association, as
Trustee.
W I T N E S S E T H :
WHEREAS, the Company desires to establish a trust (the "Trust") in
accordance with the laws of the State of Delaware and for the purposes stated
in this Agreement;
WHEREAS, the Trustee desires to act as trustee of the Trust, and to
hold legal title to the assets of the Trust, in trust, for the purposes
hereinafter stated and in accordance with the terms hereof;
WHEREAS, the Company or its subsidiaries have previously adopted the
Plans (as herein defined);
WHEREAS, the Company desires to provide for the availability of
shares of its common stock to satisfy certain of its obligations or those of
its subsidiaries under the Plans and intends to sell to the Trust such assets
that shall be held therein, subject to the claims of the Company's general
creditors in the event of the Company's Insolvency (as defined herein) until
made available to the Plans, in such manner and at such times as specified
herein;
WHEREAS, the Company desires that the assets to be held in the Trust
Fund (as herein defined) should be principally or exclusively securities of
the Company except as where specifically otherwise provided and, therefore
expressly waives any diversification of investments that might otherwise be
necessary, appropriate or required pursuant to applicable provisions of law;
and
WHEREAS, the Trustee has been appointed as trustee and has accepted
such appointment as of the date first set forth above.
NOW, THEREFORE, the parties hereto hereby establish the Trust and
agree that the Trust will be comprised, held and disposed of as follows:
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ARTICLE 1
Trust, Trustee and Trust Fund
1.1 Trust. This Agreement and the Trust Fund shall be known as The
Pep Boys - Manny, Moe & Jack Flexitrust. The parties intend that the Trust
will be an independent legal entity with title to and power to convey all of
its assets in accordance with the terms of the Trust. The parties hereto
further intend that the Trust not be subject to the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), and that the assets held in the
Trust Fund shall not be "plan assets," as such term is described in ERISA and
Department of Labor regulations thereunder. The Trust is not a part of any of
the Plans and does not provide pension, welfare or any other benefits to any
Plan Participant (as herein defined). The assets of the Trust will be held,
invested and disposed of by the Trustee, in accordance with the terms of the
Trust. The Trust shall be irrevocable. No Plan Participant nor any Plan
shall have any preferred claim on, or any beneficial ownership interest in,
any assets of the Trust.
1.2 Trustee. The trustee named above, and its successor or
successors, is hereby designated as the trustee hereunder, to receive, hold,
invest, administer and distribute the Trust Fund in accordance with this
Agreement, the provisions of which shall govern the powers, duties and
responsibilities of the Trustee.
1.3 Trust Fund. The assets held at any time and from time to time
under the Trust collectively are herein referred to as the "Trust Fund" and
shall consist of contributions received by the Trustee, proceeds of any loans,
investments and reinvestment thereof, the earnings and income thereon, less
disbursements therefrom. Except as herein otherwise provided, title to the
assets of the Trust Fund shall at all times be vested in the Trustee and
securities that are part of the Trust Fund shall be held in such manner that
the Trustee's name and the fiduciary capacity in which the securities are held
are fully disclosed, subject to the right of the Trustee to hold title in
bearer form or in the name of a nominee, and the interests of others in the
Trust Fund shall be only the right to have such assets received, held,
invested, administered and distributed in accordance with the provisions of
the Trust.
1.4 Trust Fund Subject to Claims of Creditors. Notwithstanding any
provision of this Agreement to the contrary, the Trust Fund shall at all times
remain subject to the claims of the Company's general creditors under Federal
and state law in the event of the Company's Insolvency (as herein defined).
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In addition, the Board of Directors and Chief Executive Officer of
the Company shall have the duty to inform the Trustee in writing of the
Company's Insolvency. If a person claiming to be a creditor of the Company
alleges in writing to the Trustee that the Company has become Insolvent, the
Trustee shall discontinue transfers of Released Shares pursuant to Article 4.
Unless the Trustee has actual knowledge of the Company's Insolvency,
or has received notice from the Company or a person claiming to be a Company
creditor alleging that the Company is Insolvent, the Trustee shall have no
duty to inquire whether the Company is Insolvent. The Trustee may in all
events conclusively rely on a copy of a Bankruptcy petition filed within a
court.
If at any time the Trustee has determined that the Company is
Insolvent, the Trustee shall discontinue transfers of Released Shares pursuant
to Article 4 and shall hold the Trust Fund for the benefit of the Company's
general creditors. Nothing in this Agreement shall in any way diminish any
rights of employees as general creditors of the Company with respect to
benefits due under the Plans or otherwise.
The Trustee shall resume transfers of Released Shares pursuant to
Article 4 only after it receives a copy of the court order dismissing such
Bankruptcy petition.
Notwithstanding anything herein to the contrary, in the event that
the Company is Insolvent, the Committee may, in its discretion and to the
extent permitted by applicable law, direct the Trustee to apply the Trust Fund
to satisfy the claims of the Company's creditors.
1.5 Definitions. In addition to the terms defined in the preceding
portions of this Agreement, certain capitalized terms have the meanings set
forth below:
Board of Directors. "Board of Directors" means the board of
directors of the Company, a committee comprised of members thereof or a
committee formed pursuant to a resolution of the Board.
Code. "Code" means the Internal Revenue Code of 1986, as amended.
Committee. "Committee" means the person or group of persons charged
by the Board of Directors with the powers provided to the Committee in this
Trust Agreement.
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Common Stock Purchase Agreement. "Common Stock Purchase Agreement"
means the agreement between the Company and the Trustee, executed on even date
herewith and attached hereto as Exhibit 1.
Company Stock. "Company Stock" means shares of common stock, par
value $1.00 per share, of the Company, or any successor securities thereto.
Extraordinary Dividend. "Extraordinary Dividend" means any dividend
or other distribution of cash or other property (other than Company Stock)
made with respect to Company Stock, which the Board of Directors declares
generally to be other than an ordinary dividend.
Fair Market Value. "Fair Market Value" means as of any date the
closing price on such date (or if such date is not a trading day, then on the
most recent prior date which is a trading day) of a share of Company Stock as
reported on the composite tape, or similar reporting system, for issues listed
on the New York Stock Exchange (or, if the Company Stock is no longer traded
on the New York Stock Exchange, on such other national securities exchange on
which the Company Stock is listed or national securities or central market
system upon which transactions in Company Stock are reported, as either shall
be designated by the Committee for the purposes hereof) or if sales of Company
Stock are not reported in any manner specified above, the closing price on
such date (or if such date is not a trading day, then on the most recent prior
date which is a trading day) in the over-the-counter market as reported by the
National Association of Securities Dealers Automated Quotation System or, if
not so reported, by the National Quotation Bureau, Incorporated or similar
organization selected by the Committee.
Insolvency or Insolvent. "Insolvency" or being "Insolvent" means
(i) inability of the Company to pay its debts as they become due, or (ii) the
Company being subject to a pending proceeding as a debtor under the provisions
of Title 11 of the United States Code (Bankruptcy Code).
Loan. "Loan" means the loan and extension of credit to the Trust
from the Company evidenced by the promissory note made by the Trustee of even
date herewith with which the Trustee purchased Company Stock, and any such
other loans or increase(s) in principal of the Loan the proceeds of which are
used by the Trustee for additional purchases of Company Stock.
New Shares. "New Shares" means authorized but unissued shares of
Company Stock, as defined in Section 3.1.
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1933 Act. "1933 Act" means the Securities Act of 1933, as amended.
Note. "Note" means the Revolving Promissory Note for the balance of
the purchase price in the form attached hereto as Exhibit 2.
Option Plan Participant. "Option Plan Participant" means, as of the
date of determination, each common-law employee of the Company who is a holder
of unexercised options to purchase Company Stock (whether or not vested) under
The Pep Boys - Manny, Moe & Jack 1990 Stock Incentive Plan, The Pep Boys -
Manny, Moe & Jack 1982 Incentive Stock Option Plan, The Pep Boys - Manny,
Moe & Jack 1984 Non-Qualified Stock Option Plan and The Pep Boys - Manny, Moe
& Jack 1985 Non-Qualified Stock Option Plan (collectively, the "Option
Plans").
Plan Participant. "Plan Participant" means a participant in any of
the Plans.
Plans. "Plans" means the employee benefit plans, programs,
contracts and compensation structures listed on Schedule A hereto, or as the
same may be amended from time to time by the Committee.
Released Shares. "Released Shares" shall have the meaning set forth
in Section 4.1.
Repurchased Shares. "Repurchased Shares" shall have the meaning set
forth in Section 3.1.
Trust Year. "Trust Year" or "Fiscal Year" means the fiscal year of
the Trust ending the Saturday falling closest to January 31st of each year.
Trustee. "Trustee" means First Fidelity Bank, National Association
(not in its corporate capacity but as trustee of the Trust), or any successor
trustee.
ARTICLE 2
Contributions and Dividends
2.1 Contributions. On the date of execution of this Agreement, if
any New Shares are purchased by the Trust at the First Closing (as defined in
Section 3.2(a)), the Company shall contribute to the Trust in cash the
aggregate par value of the New Shares. In addition, for each Trust Year, the
Company shall
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contribute to the Trust in cash such amount, which together with dividends, as
provided in Section 2.3, and any other earnings of the Trust, shall enable the
Trustee to make all payments of principal and interest under the Loan as they
come due. Unless otherwise expressly provided herein, the Trustee shall apply
all such contributions, dividends and earnings to the payment or prepayment of
principal and interest due under the Loan or to pay, in cash, the aggregate
par value of any additional New Shares purchased by the Trust. If, at the end
of any Trust Year, insufficient contributions have been made in cash, such
contributions shall be deemed to have been made in the form of forgiveness of
principal and interest on the Loan to the extent of the Company's failure to
make contributions as required by this Section 2.1. Such forgiveness shall be
the sole and absolute remedy that the Trust shall have against the Company for
any failure of the Company to make any contribution to the Trust. All
contributions made under the Trust shall be delivered to the Trustee. The
Trustee shall be accountable for all contributions received by it, but shall
have no duty to require any contributions to be made to it.
The Company in its sole discretion may at any time, or from time to
time, make additional deposits or contributions of cash or other property to
be held under the Trust by the Trustee to augment the principal to be held,
administered and disposed of by the Trustee as provided in this Agreement.
Neither the Trustee nor any Plan administrator, Plan Participant or other
third party shall have any right to compel such additional deposits or
contributions.
2.2 Prepayments. The Company may, from time to time, contribute
cash to the Trust in amounts sufficient to enable the Trustee to prepay, in
whole or in part, principal and interest of the Loan at any time or, in lieu
of such prepayment, the Committee may, from time to time, in accordance with
the terms of the Note direct that all or any part of such principal and/or
interest of the Loan shall be forgiven and the payment so directed shall be
forgiven. The Trustee shall use all such cash to prepay principal and/or
interest on the Loan in accordance with the terms of the Note.
2.3 Dividends. Except as otherwise provided in this paragraph,
dividends paid in any Trust Year in cash on Company Stock held by the Trust
(including dividends paid on Released Shares that have not been transferred
out of the Trust at the time of such dividend payment) shall be applied,
immediately upon receipt thereof by the Trustee, (i) first to interest accrued
and unpaid on the Loan as of the date of any such payment and then, (ii) to
the extent that any such payment exceeds such accrued and
<PAGE>11
unpaid interest on the Loan, to prepay interest that accrues on the Loan after
such payment through the end of such Trust Year, and then, (iii) to pay
principal installments due on the Loan within such Trust Year and then, (iv)
to the extent not otherwise distributed in accordance with the next sentence,
to additional installments of principal in the order of their scheduled
maturity. In the event that dividends paid on Company Stock held in the
Trust, other than Extraordinary Dividends, exceed the amount of scheduled
principal and interest due on the Loan in any Trust Year, such excess shall,
as determined by the Committee, be (i) applied to prepay, in whole or in part,
principal and/or interest of the Loan in accordance with the terms of the Note
or (ii) distributed to the Plans and/or to any other broad cross-section on
individuals employed by the Company. Extraordinary Dividends shall not be
used to pay interest on or principal of the Loan, but shall be invested in
additional Company Stock, as soon as practicable, except as otherwise provided
in this Trust Agreement. Dividends which are not in cash or in Company Stock
(including Extraordinary Dividends, or portions thereof) shall be reduced to
cash by the Trustee and reinvested in Company Stock as soon as practicable,
except as otherwise provided in this Trust Agreement. Company Stock purchased
with the proceeds of an Extraordinary Dividend or with the proceeds of a non-
cash dividend shall, for purposes of this Agreement (including, without
limitation, Section 4.1 hereof), be deemed to have been acquired with the
proceeds of the Loan.
If the Committee so determines, the Committee shall direct the
Trustee to make investments in Company Stock through open-market purchases,
private transactions or purchases from the Company. The Committee shall also
direct the Trustee as to the timing and manner of such purchases in order to
comply with applicable law and to avoid, if possible, adverse effects on the
publicly traded market price of Company Stock. The Trustee shall follow all
such instructions.
ARTICLE 3
Purchase and Sale of Shares
3.1 Purchase and Sale. Subject to the terms and conditions set
forth in the Common Stock Purchase Agreement, the Company will issue or sell
to the Trust, from time to time, and the Trust will purchase from the Company,
from time to time, up to $75,000,000 of Company Stock, pursuant to the
procedures set forth in this Article 3. The Company Stock may be (i)
previously authorized but unissued Company Stock (the "New Shares") or (ii)
Company Stock which the Company has purchased or purchases, from
<PAGE>12
time to time, on the open market or otherwise (the "Repurchased Shares").
(a) New Shares. The purchase price for the New Shares shall be an
amount equal to the average closing price of the Company Stock for the five
trading days immediately preceding the First Closing (defined in Section
3.2(a)) or each Subsequent Closing (defined in Section 3.2(b)), as the case
may be, as reported in The Wall Street Journal (the "Average Market Price") as
certified in writing to the Trustee by the Company.
(b) Repurchased Shares. The purchase price for the Repurchased
Shares shall be the purchase price paid by the Company to acquire such shares
(excluding, however, all fees, commissions, transfer taxes and other similar
costs incurred in connection with the Company's purchase of such shares).
3.2 Closing. (a) First Closing. The first closing of the sale and
purchase under the Common Stock Purchase Agreement (the "First Closing") will
be held at the offices of Willkie Farr & Gallagher, 153 East 53rd Street, New
York, New York 10022, simultaneously with the execution of this Agreement, or
at such other time, date and place as may be mutually agreed upon by the
Company and the Trustee. At the First Closing, the Company shall sell, and
the Trust shall purchase, 1,965,200 shares of Company Stock having a value of
$52,364,325. The Trust shall pay the purchase price with respect to such
Company Stock by (i) paying to the Company at the First Closing $1.00 per New
Share, if any, by transfer of immediately available funds, and (ii) delivering
to the Company the Note.
(b) Subsequent Closings. The parties understand that,
from time to time following the First Closing, the Company shall sell, and the
Trust shall purchase, additional Company Stock (each closing of such
subsequent transaction being referred to herein as a "Subsequent Closing");
provided, however, that the aggregate dollar amount of Company Stock purchased
by the Trust after the First Closing shall not exceed $75,000,000 minus the
sum of (i) the amount specified in Section 3.2(a) and (ii) the sum of all
amounts paid for Company Stock in prior Subsequent Closings. The Company
shall give notice, as described below (the "Sale Notice"), and shall sell any
Repurchased Shares or New Shares, to the Trustee within five (5) business days
after the date the Company acquires any Repurchased Shares or determines to
sell any New Shares to the Trustee. The Sale Notice shall set forth (i) the
number of Repurchased Shares and New Shares, if any, to be sold to, and
purchased by, the Trust and (ii) the aggregate purchase price to be paid by
the Trust for such shares as determined pursuant to Section 3.1 (a) and (b)
<PAGE>13
hereof (the "Subsequent Purchase Amount"). The Trust shall pay such
Subsequent Purchase Amount by (i) paying to the Company at the Subsequent
Closing $1.00 per New Share, if any, by wire transfer of immediately available
funds, and (ii) increasing (as of the date of such Subsequent Closing) the
principal amount outstanding under the Note by an amount equal to the
Subsequent Purchase Amount minus the amount paid pursuant to clause (i) of
this sentence. All Subsequent Closings will be held at the offices of Willkie
Farr & Gallagher, 153 East 53rd Street, New York, New York 10022, on the first
business day following the date of each and every Sale Notice, or at such
other time, date and place as may be mutually agreed upon by the Company and
the Trustee. The Company may defer the sale of Company Stock pursuant to this
Section 3.1 if the Company reasonably determines that there are sufficient
legal, financial or accounting reasons for the Company to defer the timing of
such sale and notifies the Trustee in writing of such deferral.
3.3 Delivery of Shares. At the First Closing and each Subsequent
Closing (hereinafter referred to as the "Closing" or "Closings"), the Company
will deliver to the Trustee a certificate representing the Company Stock sold
at such Closing, which certificate shall be registered in the name of the
Trustee, or the name of its nominee. The Company will pay all stamp and other
transfer taxes, if any, that may be payable in respect of the sale and
delivery of the Company Stock.
3.4 Company Records. The Company is hereby authorized to record
the price owed by the Trust from time to time and all repayments of the
principal of the Note on the schedule attached to the Note.
ARTICLE 4
Release and Transfer of Company Stock
4.1 Company Stock Made Available for Transfer from Trust.
Immediately after each payment, prepayment or forgiveness, if any, of
principal (and accrued interest thereon) of the Loan is made, a number of
shares of Company Stock shall be made available for transfer from the Trust
("Released Shares") in the manner set forth in Section 4.2. The number of
such Released Shares shall equal the number of shares of Company Stock held in
the Trust immediately prior to such payment, prepayment or forgiveness that
have not already been deemed Released Shares pursuant to a previous payment,
prepayment or forgiveness of principal of the Loan, multiplied by a fraction,
the numerator of which shall be the amount of principal paid or prepaid or
deemed
<PAGE>14
forgiven upon such payment or prepayment date or date of forgiveness and the
denominator of which shall be the sum of the numerator plus the principal
amount of the Loan remaining after such payment, prepayment or forgiveness.
No fractional shares shall be released. If the preceding computation results
in fractional shares, the number of Released Shares shall be computed by
rounding down to the next whole number. The number of Released Shares,
determined as aforesaid, shall be certified to the Trustee by the Committee.
4.2 Transfer from Trust of Released Shares and Cash Proceeds. At
the written direction of the Committee, Released Shares or other assets held
in the Trust shall be either (i) transferred by the Trustee to one or more of
the Plans, or (ii) sold by the Trustee and the proceeds of such sale
transferred either to (1) one or more of the Plans, or directly to Plan
Participants, in satisfaction of the obligation of such Plans or the Company
to pay compensation, benefits or any form of remuneration thereunder, or (2)
the Company in reimbursement of the Company's payment of such obligation under
such Plans. The Committee, in its sole discretion, may direct the Trustee to
transfer all of the Released Shares to a single Plan, or the proceeds of the
sale thereof to a single Plan or as reimbursement to the Company, as provided
in this paragraph, to the exclusion of all other Plans.
If Released Shares or proceeds from the sale thereof remain in the
Trust after the transfers or sales described above, such remaining Released
Shares or proceeds may, as the Committee shall direct, be transferred to, or
used by the Trustee for the benefit of the Plans or such other employee
benefits plans (or their participants and beneficiaries) covering a broad
cross-section of non-collectively bargained employees of the Company or its
subsidiaries as the Committee shall direct. Alternatively, if Released Shares
remain in the Trust after the transfers described in the paragraph above, such
remaining Released Shares may be retained in the Trust for a sufficient period
of time after the release of such shares so that such Released Shares may be
sold by the Trustee upon written direction of the Committee in accordance with
Rule 144 under the 1933 Act, if such exemption from registration requirements
of the 1933 Act is available, at such times as the Committee may direct.
However, in no event shall any shares of Company Stock remain in the Trust for
more than four (4) years after they become Released Shares. The Trustee shall
rely on the instructions of the Committee or the Company with respect to any
such Released Shares after such date.
<PAGE>15
The Committee will direct the Trustee as to the timing and manner of
any sales of Released Shares pursuant to this Section 4.2 in order to comply
with applicable law and to avoid, if possible, adverse effects on the publicly
traded market price of Company Stock.
To facilitate such sales of Released Shares pursuant to this Section
4.2, if required, the Company shall register under the 1933 Act, such number
of Released Shares as the Committee may direct.
Released Shares directed by the Committee to be transferred to Plans
with respect to which trusts have been established shall be transferred to the
trustee thereof; if there is no trust established with respect to a Plan, the
shares allocated to such Plan shall be transferred to the plan administrator
of such Plan, to third party service providers for such Plans or such other
person as the Committee shall direct; provided, however, any transfer directed
by the Committee to be made to the Company shall be wholly in the proceeds
from the sale of Released Shares.
The references to the Plans in this Agreement shall not cause the
Plans to become irrevocable and the Company retains sole discretion to modify
or amend any of the provisions of the Plans or to terminate any or all of them
to the extent provided therein and/or as permitted by applicable law.
4.3 Transfer of Other Assets. Any assets other than Company Stock
held in the Trust pursuant to Section 2.1 shall be transferred as directed by
the Committee in writing by the Trustee in such amounts and at such times to
or for the benefit of such Plans (or their participants and beneficiaries) at
the same time and in the same proportion as Released Shares are allocated to
such Plans, unless the Trustee is otherwise directed by the Committee.
ARTICLE 5
Compensation, Expenses and Tax Withholding
5.1 Compensation and Expenses. The Trustee shall be entitled to
such reasonable compensation for its services and to be reimbursed for its
reasonable legal, accounting and appraisal fees, expenses and other charges
reasonably incurred in connection with the administration, management,
investment and distribution of the Trust Fund all as may be agreed upon from
time to time by the Company and the Trustee. Such compensation shall be paid,
and such reimbursement shall be made, out of the
<PAGE>16
Trust Fund unless paid directly by the Company. The Company agrees to either
make such payments directly or make sufficient contributions to the Trust to
pay such amounts owing the Trustee in addition to those contributions required
by Section 2.1.
In the event the Company fails to make the contributions necessary
to pay compensation and expenses owing to the Trustee, as contemplated by this
Section 5.1, the Trustee shall be entitled to seek payment of such
compensation and expenses directly from the Company. However, the Trustee
shall not be entitled to use contributions required by Section 2.1 in
satisfaction of amounts owing to the Trustee for the payments or its
compensation and expenses.
5.2 Withholding of Taxes. The Trustee shall report and withhold
any Federal, state or local taxes that it is required by law or is instructed
by the Company to withhold from any payments, transfer or distributions it
makes pursuant to this Agreement and shall pay over amounts withheld to the
appropriate taxing authorities.
ARTICLE 6
Administration of Trust Fund
6.1 Management and Control of Trust Fund. Subject to the terms of
this Agreement, the Trustee shall have exclusive authority and responsibility
to control the assets of the Trust Fund unless the Trustee is otherwise
directed by the Committee.
6.2 Investment of Funds. Except as otherwise provided in Sections
2.3 and 5.1, and in this Section 6.2, the Trustee shall invest and reinvest
the Trust Fund exclusively in Company Stock, including any accretions thereto
resulting from the proceeds of a tender offer, recapitalization or similar
transaction which, if not in Company Stock, shall be reduced to cash as soon
as practicable. Unless directed otherwise by the Committee, the Trustee may
invest any portion of the Trust Fund temporarily pending investment in Company
Stock, distribution or payment of expenses in (i) investments in United States
Government obligations with maturities of less than one year, (ii) interest-
bearing accounts including but not limited to certificates of deposit, time
deposits, saving accounts and money market accounts with maturities of less
than one year in any bank, including the Trustee, with aggregate capital at
the time of such investment in excess of $1,000,000,000 and a Moody's
Investors Service Rating at the time of such investment of at least P1, or an
equivalent rating from a nationally recognized
<PAGE>17
rating agency, which accounts are insured by the Federal Deposit Insurance
Corporation or other similar federal agency, (iii) obligations issued or
guaranteed by any agency or instrumentality of the United States of America
with maturities of less than one year, (iv) short-term discount obligations of
the Federal National Mortgage Association or (v) a common, collective, or
pooled trust fund maintained by any corporate Trustee hereunder whose
investments are limited to those described in (i), (ii), (iii) and/or (iv) of
this paragraph, in which event such part of the Trust Fund so transferred
shall be subject to all the terms and provisions of the common, collective, or
pooled trust fund which contemplate the commingling of such trust assets for
investment purposes with trust assets of other trusts.
6.3 Trustee's Administrative Powers. Except as otherwise provided
herein, and subject to the Trustee's duties hereunder, the Trustee shall have
the following powers and rights, in addition to those provided elsewhere in
this Agreement or by law:
(a) to retain any asset of the Trust Fund for the purposes set
forth herein;
(b) subject to Section 2.3, Article 4, Section 6.2, Section
6.4 and Section 9.3, to sell, transfer, mortgage, pledge, lease or otherwise
dispose of, or grant options with respect to, any Trust Fund assets at public
or private sale, as necessary to perform its obligations hereunder;
(c) upon direction from the Committee, to borrow from the
Company pursuant to the Loan to acquire Company Stock as authorized by this
Agreement, and to enter into agreements upon such terms (including reasonable
interest and security for the Loan and rights to renegotiate and prepay such
Loan) as may be determined by the Committee with respect to a Loan; provided,
however, that any collateral given by the Trustee for the Loan shall be
limited to cash and property contributed by the Company to the Trust and
dividends paid on Company Stock held in the Trust and shall not include
Company Stock acquired with the proceeds of the Loan;
(d) with the consent of the Committee, to settle, submit to
arbitration, compromise, contest, prosecute or abandon claims and demands in
favor of or against the Trust Fund;
(e) to vote or to give any consent with respect to any
securities, including any Company Stock, held by the Trust either in person or
by proxy for any purpose, provided that the
<PAGE>18
Trustee shall vote, tender or exchange all shares of Company Stock as provided
in Section 6.4;
(f) to employ such accountants, actuaries, attorneys,
investment bankers, appraisers, other advisors and agents as may be reasonably
necessary in collecting, managing, administering, investing, valuing,
distributing and protecting the Trust Fund or the assets thereof or any
borrowings of the Trustee made in accordance with Section 6.3(c); and to pay
their reasonable fees and expenses, which shall be deemed to be expenses of
the Trust and for which the Trustee shall be reimbursed in accordance with
Section 5.1;
(g) to cause any asset of the Trust Fund to be issued, held or
registered in the Trustee's name or in the name of its nominee, or in such
form that title will pass by delivery, provided that the records of the
Trustee shall indicate the true ownership of such asset;
(h) to utilize another entity as custodian to hold, but not
invest or otherwise manage or control, some or all of the assets of the Trust
Fund; and
(i) to consult with legal counsel (who may also be counsel for
the Trustee or the Company generally) with respect to any of its duties or
obligations hereunder; and to pay the reasonable fees and expenses of such
counsel, which shall be deemed to be expenses of the Trust and for which the
Trustee shall be reimbursed in accordance with Section 5.1.
Notwithstanding any power granted to the Trustee pursuant to the foregoing or
under applicable law, neither the Trust nor the Trustee shall have any power
to, and shall not, engage in any trade or business (solely in its capacity as
Trustee of the Trust) and, in particular, the Trustee shall not have any power
that could give the Trust the objective of carrying on a business and dividing
the gains therefrom, within the meaning of Treas. Reg. 301.7701-2.
6.4 Rights Regarding Company Stock.
(a) Voting Rights. The Trustee shall follow the directions of
the Option Plan Participants with respect to the manner of voting of Company
Stock held by the Trust. Prior to each annual or special shareholders'
meeting of the Company, or deadline for the return of action by written
consent of shareholders in lieu of a meeting (or, if such schedule cannot be
met, as early as practicable before such meeting or deadline), the Trustee
shall furnish to each Option Plan Participant, at the
<PAGE>19
expense of the Company, a copy of the proxy solicitation material sent
generally to shareholders, together with a form requesting confidential
instructions on how the Option Plan Participant directs the Trustee to vote
with respect to each matter pending before such meeting or written consent of
shareholders. The Committee and the Trustee shall be deemed to have complied
with the preceding sentence with respect to any Option Plan Participant if
they timely mail such proxy solicitation material and form to the Option Plan
Participant's last known address on the records of the Company. The Trustee
shall collect the confidential instruction forms and shall vote all Company
Stock held in the Trust in the same proportion as the directions actually
received from Option Plan Participants, on a "one-person, one-vote" basis.
(b) Tender or Exchange Offer. If a tender or exchange offer
is commenced for Company Stock, the Trustee shall, at the expense of the
Company, notify each Option Plan Participant of such offer and utilize its
best efforts to distribute or cause to be distributed to each Option Plan
Participant, in a timely manner, all information distributed to shareholders
of the Company in connection with such offer together with a form requesting
confidential instruction forms and shall tender or exchange that number of
shares of Company Stock held in the Trust equal to the total number of such
shares multiplied by a fraction, the numerator of which is the number of
Option Plan Participants who affirmatively direct the Trustee to tender, and
the denominator of which is the total number of Option Plan Participants
(including Option Plan Participants who provide no instructions).
(c) Confidentiality. The instructions of each individual
Option Plan Participant made to the Trustee pursuant to the foregoing
paragraphs (a) and (b) shall be held confidential by the Trustee and shall not
be divulged or released to any person, including officers and employees of the
Company and its affiliates, except as otherwise required by law or pursuant to
order of a court of competent jurisdiction.
(d) Trustee Action. The Trustee shall not make any
recommendations regarding the manner of exercising any rights under this
Section 6.4, including whether or not such rights should be exercised.
6.5 Indemnification.
(a) To the extent lawfully allowable, the Company shall and
hereby does indemnify and hold harmless the Trustee from and against any
claims, demands, actions, administrative or
<PAGE>20
other proceedings, causes of action, liability, loss, costs, damage or expense
(including reasonable attorneys' fees), which may be asserted against it, in
any way arising out of or incurred as a result of its action or failure to act
in connection with the operation and administration of the Trust; provided
that such indemnification shall not apply to the extent that the Trustee has
acted in willful or negligent violation of applicable law or its duties under
this Trust or in bad faith. The Trustee shall be under no liability to any
person for any loss of any kind which may result (i) by reason of any action
taken by it in accordance with any direction of the Committee or pursuant to
Section 6.4, (ii) by reason of its failure to exercise any power or authority
or to take any action hereunder because of the failure of the Committee to
give directions to the Trustee, as provided for in this Agreement or (iii) by
reason of any act or omission of the Committee with respect to its duties
under this Trust. The Trustee shall be fully protected in acting upon any
instrument, certificate or paper delivered by the Committee or the trustee or
administrator of any Plan and believed in good faith by the Trustee to be
genuine and to be signed or presented by the proper person or persons, and the
Trustee shall be under no duty to make any investigation or inquiry as to any
statement contained in any such writing, but may accept the same as conclusive
evidence of the truth and accuracy of the statements therein contained. This
section shall survive termination of this Agreement.
(b) The Company may, but shall not be required to, maintain
liability insurance to insure its obligations hereunder. If any payments made
by the Company or the Trust pursuant to this indemnity are covered by
insurance, the Company or the Trust (as applicable) shall be subrogated to the
rights of the indemnified party against the insurance company.
6.6 General Duty to Communicate to Committee. The Trustee shall
promptly notify the Committee of all communications with or from any
governmental agency or with respect to any legal proceeding with regard to the
Trust and with or from any Plan Participants concerning their alleged
entitlements under the Plans or the Trust.
ARTICLE 7
Duties of Trustee
7.1 Records and Accounts of Trustee. The Trustee shall maintain
accurate and detailed records and accounts of all transactions of the Trust,
which shall be available at all
<PAGE>21
reasonable times for inspection or audit by any person designated by the
Company and which shall be retained.
7.2 Reports of Trustee. Within thirty (30) days following the
close of each Fiscal Year and each quarter of each Fiscal Year, the Trustee
shall deliver to the Committee a statement for the period ending on the last
day of such Fiscal Year and/or quarter of such Fiscal Year, as the case may
be, listing all securities and other property acquired or disposed of and all
receipts, disbursements and other transactions effected by the Trust during
such period, and further listing all cash, securities, and other property held
by the Trust, together with the Fair Market Value thereof, as of the end of
such period. In addition to the foregoing, the report shall contain such
information regarding the Trust Fund's assets and transactions as the
Committee in its discretion may reasonably request. The Trustee shall also
deliver to the Committee such statements for other periods as the Committee
may reasonably request. Except as otherwise provided in the next sentence,
all tax returns and other regulatory filings, if any, required by the Trust
shall be prepared by the Trustee and submitted to the Committee for the
Company's review at least thirty (30) days before the due date (including any
extension thereof) for filing such tax return or other regulatory filing. The
Company may, upon written notice to the Trustee, assume the responsibility for
preparing any tax return or other regulatory filing required by the Trust.
The Trustee shall, at the expense of the Company, timely file all such tax
returns and other regulatory filings, if any, as shall be directed by the
Company and shall promptly provide copies of such filings to the Committee.
7.3 Final Statement. In the event of the resignation or removal of
a Trustee hereunder, the Committee may request and the Trustee shall with
reasonable promptness submit, for the period ending on the effective date of
such resignation or removal, a statement similar in form and purpose to that
described in Section 7.2.
ARTICLE 8
Succession of Trustee
8.1 Resignation of Trustee. The Trustee or any successor thereto
may resign as Trustee hereunder at any time upon delivering a written notice
of such resignation, to take effect 60 days after the delivery thereof to the
Committee, unless the Committee accepts shorter notice; provided, however,
<PAGE>22
that no such resignation shall be effective until a successor Trustee has
assumed the office of Trustee hereunder.
8.2 Removal of Trustee. The Trustee or any successor thereto may
be removed by the Company by delivering to the Trustee so removed an
instrument executed by the Committee. Such removal shall take effect at the
date specified in such instrument, which shall not be less than 60 days after
delivery of the instrument, unless the Trustee accepts shorter notice;
provided, however, that no such removal shall be effective until a successor
Trustee has assumed the office of Trustee hereunder.
8.3 Appointment of Successor Trustee. Whenever the Trustee or any
successor thereto shall resign or be removed or a vacancy in the position
shall otherwise occur, the Committee shall use its best efforts to appoint a
successor Trustee as soon as practicable after receipt by the Committee of a
notice described in Section 8.1, or the delivery to the Trustee of a notice
described in Section 8.2, as the case may be, but in no event more than
60 days after receipt or delivery, as the case may be, of such notice. A
successor Trustee's appointment shall not become effective until such
successor shall accept such appointment by delivering its acceptance in
writing to the Company. If a successor is not appointed within such 60 day
period, the Trustee, at the Company's expense, may petition a court of
competent jurisdiction for appointment of a successor. In any event, only an
entity with trust powers under applicable law, which is not an affiliate of
the Company, may be a successor trustee hereunder.
8.4 Succession to Trust Fund Assets. The title to all property
held hereunder shall vest in any successor Trustee acting pursuant to the
provisions hereof without the execution or filing of any further instrument,
but a resigning or removed Trustee shall, at the expense of the Company,
execute all instruments and do all acts necessary to vest title in the
successor Trustee. Each successor Trustee shall have, exercise and enjoy all
of the powers, both discretionary and ministerial, herein conferred upon its
predecessors. A successor Trustee shall not be obliged to examine or review
the accounts, records, or acts of, or property delivered by, any previous
Trustee and shall not be responsible for any action or any failure to act on
the part of any previous Trustee.
8.5 Continuation of Trust. In no event shall the legal disability,
resignation or removal of a Trustee terminate the Trust, but the Committee
shall forthwith appoint a successor Trustee in accordance with Section 8.3 to
carry out the terms of the Trust.
<PAGE>23
8.6 Changes in Organization of Trustee. In the event that any
corporate Trustee hereunder shall be converted into, shall merge or
consolidate with, or shall sell or transfer substantially all of its assets
and business to another corporation, the corporation resulting from such
conversion, merger or consolidation, or the corporation to which such sale or
transfer shall be made, shall thereafter become and be the Trustee under the
Trust with the same effect as though originally so named but only if such
corporation is qualified to be a successor trustee hereunder.
8.7 Continuance of Trustee's Powers in Event of Termination of the
Trust. In the event of the termination of the Trust, as provided herein, the
Trustee shall dispose of the Trust Fund in accordance with the provisions
hereof. Until the final distribution of the Trust Fund, the Trustee shall
continue to have all powers provided hereunder as necessary or expedient for
the orderly liquidation and distribution of the Trust Fund.
ARTICLE 9
Amendment or Termination
9.1 Amendments. Except as otherwise provided herein, the Company
may amend the Trust at any time and from time to time in any manner which it
deems desirable, provided, however:
(a) no amendment that would adversely affect the contingent rights
of Plan Participants may change:
(i) the formula contained in Section 4.1 or Section 4.2 so as
to change the number of Released Shares in any Trust
Year;
(ii) the terms of Sections 2.1, 2.2, 2.3, 4.2, 6.4, 9.1, 9.2
or 9.3;
(b) no amendment may change the duties of the Trustee without the
Trustee's consent, which consent shall not be unreasonably
withheld; and
(c) no amendment may alter the terms of Section 1.1 to make the
Trust revocable.
Notwithstanding the foregoing, the Company, acting in good faith
taking into account the best interests of a broadly-based population of
individuals employed by the Company or broadly-based employee benefit plans in
which such persons
<PAGE>24
participate, shall retain the power under all circumstances to amend the Trust
to add employee benefit plans to, or delete Plans from, Schedule A and to
clarify any ambiguities or similar issues of interpretation in this Agreement.
9.2 Termination. The Trust shall terminate upon the earlier of
(i) 34 years from its effective date, or (ii) the date on which the Trust no
longer holds any assets. The Board of Directors may terminate the Trust at
any time prior to the date the Trust terminates pursuant to the preceding
sentence; provided, however, termination of the Trust shall not effect a
revocation of the terms hereof.
9.3 Effect of Termination. Upon termination of the Trust, the
Trustee shall sell sufficient remaining assets of the Trust so that the
proceeds of such sale, together with any other available cash, can be applied
to pay in full the remaining principal amount(s) of the Loan and any accrued
but unpaid interest thereon and any expenses of the Trust. The Committee
shall direct the Trustee as to the timing and manner of such sale in order to
comply with applicable law and to avoid, if possible, adverse effects on the
publicly-traded market price of Company Stock. In the event the proceeds of
the sale shall be insufficient to discharge the Loan in its entirety, the
Company shall be deemed to have forgiven all amounts which shall remain due
and owing thereon. Any assets or Company Stock remaining in the Trust after
such payment in full of the Loan shall be distributed to or for the benefit of
any employee benefit plan (including one or more of the Plans) in which a
broad cross-section of non-collectively bargained employees of the Company or
its subsidiaries participate, as the Committee shall, in its sole discretion,
determine and so notify the Trustee in writing.
9.4 Merger. If the Company is merged into another corporation or
another corporation is merged into the Company then (a) the surviving
corporation shall become the grantor of the Trust, (b) the assets of the Trust
shall be subject to the claims of the creditors of the surviving corporation
in accordance with Article 1, above, and (c) the provisions of this Agreement
which apply to Company Stock (including without limitation the provisions of
Article 4, above) shall apply to the stock of the surviving corporation held
hereunder or transferred to the Trust.
9.5 Form of Amendment or Termination. Any amendment or termination
of the Trust shall be evidenced by an instrument in writing signed by an
authorized officer of the Company, certifying that said amendment or
termination has been authorized
<PAGE>25
and directed by the Company or the Board of Directors, as applicable.
ARTICLE 10
Miscellaneous
10.1 Controlling Law. The laws of the State of Delaware shall be
the controlling law in all matters relating to the Trust, without regard to
conflicts of law.
10.2 Committee Action. Any action required or permitted to be taken
by the Committee may be taken on behalf of the Committee by any individual so
authorized. The Company shall furnish to the Trustee the name and specimen
signature of each member of the Committee upon whose statement of a decision
or direction the Trustee is authorized to conclusively rely. Until notified
of a change in the identity of such person or persons, the Trustee shall act
upon the assumption that there has been no change.
10.3 Notices. All notices, requests, or other communications
required or permitted to be delivered hereunder shall be in writing, delivered
by registered or certified mail, return receipt requested, telecopier or hand
delivery as follows:
To the Company: The Pep Boys - Manny, Moe & Jack
3111 W. Allegheny Avenue
Philadelphia, Pennsylvania 19132
Attn: Michael J. Holden
with a copy to: Willkie Farr & Gallagher
One Citicorp Center
153 East 53rd Street
New York, New York 10022-4677
Attn: Daniel D. Rubino, Esq.
To the Trustee: First Fidelity Bank, National
Association
123 South Broad Street
Philadelphia, PA 19109-1199
Attn: Corporate Trust Administration
Any party hereto may from time to time, by written notice given as aforesaid,
designate any other address to which notices, requests or other communications
addressed to it shall be sent.
<PAGE>26
10.4 Severability. If any provision of the Trust shall be held
illegal, invalid or unenforceable for any reason, such provision shall not
affect the remaining parts hereof, but the Trust shall be construed and
enforced as if said provision had never been inserted herein.
10.5 Protection of Persons Dealing with the Trust. No person
dealing with the Trustee shall be required or entitled to monitor the
application of any money paid or property delivered to the Trustee, or
determine whether or not the Trustee is acting pursuant to authorities granted
to it hereunder or to authorizations or directions herein required.
10.6 Tax Status of Trust. The trust is intended to be a grantor
trust, of which the Company is the grantor, within the meaning of subpart E,
part 1, subchapter J, chapter 1, subtitle A of the Code, and shall be
construed accordingly. Until advised otherwise, the Trustee and the Company
may presume that the Trust is so characterized for Federal income tax purposes
and the Trustee shall make all filings of tax returns on that presumption.
10.7 No Third Party Rights; Plan Participants to Have No Interest in
the Company by Reason of the Trust. Neither this Agreement nor the Trust
shall confer upon any person other than the parties hereto any rights, remedy
or claim with respect to the assets of the Trust or otherwise. Neither the
creation of the Trust nor anything contained in the Trust shall be construed
as giving any person, including any individual employed by the Company or any
subsidiary of the Company, any equity or interest in the assets, business or
affairs of the Company or any Plan Participant a right to any benefit
available under any of the Plans.
10.8 Nonassignability. No right or interest, if any, of any person
to receive distributions from the Trust shall be assignable or transferable,
in whole or in part, either directly or by operation of law or otherwise,
including, but not by way of limitation, by execution, levy, garnishment,
attachment, pledge, or bankruptcy, but excluding death or mental incompetency,
and, to the fullest extent permitted by applicable law, no right or interest,
if any, of any person to receive distributions from the Trust shall be subject
to any obligation or liability of any such person, including claims for
alimony or the support of any spouse or child.
10.9 Gender and Plurals. Whenever the context requires or permits,
the masculine general shall include the feminine
<PAGE>27
gender and the singular form shall include the plural form and shall be
interchangeable.
10.10 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be considered an original.
IN WITNESS WHEREOF, the Company and the Trustee have caused this
Agreement to be signed, and their seals affixed hereto, by their authorized
officers all as of the day, month and year first above written.
THE PEP BOYS - MANNY, MOE & JACK
By: /s/Bernard K. McElroy
Name: Bernard K. McElroy
Title: Assistant Vice President - Finance
FIRST FIDELITY BANK, NATIONAL ASSOCIATION
solely in its capacity as Trustee hereunder
By: /s/Alan G. Finn
Name: Alan G. Finn
Title: Assistant Vice President
<PAGE>28
SCHEDULE A
Pep Boys Employee Benefit Programs
Title Plan Type
The Pep Boys Savings Plan 401(k) Company Match and
Employee Contributions
The Pep Boys - Manny, Moe & Jack Pension Plan Defined Benefit Pension Plan
The Pep Boys Employee Welfare Benefits Plan Medical/VEBA
The Pep Boys - Manny, Moe & Jack Long Term Long-Term
Disability Benefit Plan Disability Disability Plan
The Pep Boys - Manny, Moe & Jack
1984 Non-Qualified Stock Option Plan Stock Option Plan
The Pep Boys - Manny, Moe & Jack
1985 Non-Qualified Stock Option Plan Stock Option Plan
The Pep Boys - Manny, Moe & Jack
1990 Stock Incentive Plan Stock Option Plan
The Pep Boys - Manny, Moe & Jack Long Term Long-Term
Disability Salary Continuation Plan Disability Plan
The Pep Boys - Manny, Moe & Jack Executive Non-Qualified
Supplemental Pension Plan Pension Plan
<PAGE>1
COMMON STOCK PURCHASE AGREEMENT
THIS COMMON STOCK PURCHASE AGREEMENT (the "Agreement") is made this
29th day of April, 1994, between The Pep Boys - Manny, Moe & Jack, a
Pennsylvania corporation (the "Seller" or the "Company"), and First Fidelity
Bank, National Association, not in its individual or corporate capacity, but
solely in its capacity as trustee (the "Trustee") of The Pep Boys - Manny, Moe
& Jack Flexitrust (the "Trust", which is hereinafter sometimes referred to as
the "Purchaser") under a trust agreement between the Seller and the Trustee
dated as of April 29, 1994 (the "Trust Agreement").
W I T N E S S E T H:
WHEREAS, as contemplated by the Trust Agreement, the Purchaser is to
purchase, from time to time, from the Seller, and the Seller is to sell, from
time to time, to the Purchaser, shares of the Seller's Common Stock, par value
$1.00 per share (the "Company Stock") having a value of up to $75,000,000, all
as more specifically provided herein.
NOW, THEREFORE, in consideration of the mutual covenants and
undertakings contained herein, and subject to and on the terms and conditions
herein set forth, the parties hereto agree as follows:
ARTICLE I
PURCHASE AND SALE OF SHARES
1.1 Purchase and Sale. Subject to the terms and conditions set
forth herein, the Seller will issue or sell to the Purchaser, from time to
time, and the Purchaser will purchase from the Seller, from time to time, up
to $75,000,000 of Company Stock, pursuant to the procedures set forth in this
Article I. The Company Stock may be (i) previously authorized but unissued
Company Stock (the "New Shares") or (ii) Company Stock which the Seller has
purchased or purchases, from time to time, on the open market or otherwise
(the "Repurchased Shares").
(a) New Shares. The purchase price for the New Shares shall be an
amount equal to the average closing price of the Company Stock for the five
trading days immediately preceding the First Closing (defined in Section
1.2(a)) or each Subsequent Closing (defined in Section 1.2(b)), as the case
may be, as reported in The Wall Street Journal (the "Average Market Price").
(b) Repurchased Shares. The purchase price for the Repurchased Shares
shall be the purchase price paid by the Seller
<PAGE>2
to acquire such shares (excluding, however, all fees, commissions, transfer
taxes and other similar costs incurred in connection with the Seller's
purchase of such shares).
1.2 Closing. (a) First Closing. The first closing of the sale and
purchase under this Agreement (the "First Closing") will be held at the
offices of Willkie Farr & Gallagher, 153 East 53rd Street, New York, New York
10022, simultaneously with the execution of this Agreement, or at such other
time, date and place as may be mutually agreed upon by the Seller and the
Purchaser. At the First Closing, Seller shall sell, and Purchaser shall
purchase, 1,965,200 shares of Company Stock having a value of $52,364,325.
The Purchaser shall pay the purchase price with respect to such Company Stock
by (i) paying to the Seller at the First Closing $1.00 per New Share, if any,
by transfer of immediately available funds, and (ii) delivering to the Seller
the Revolving Promissory Note for the balance of the purchase price in the
form attached hereto as Exhibit 1 (the "Note").
(b) Subsequent Closings. The parties understand that, from time to time
following the First Closing, the Seller shall sell, and the Purchaser shall
purchase, additional Company Stock (each closing of such subsequent
transaction being referred to herein as a "Subsequent Closing"); provided,
however, that the aggregate dollar amount of Company Stock purchased by the
Purchaser after the First Closing shall not exceed $75,000,000 minus the sum
of (i) the amount specified in Section 1.2(a) and (ii) the sum of all amounts
paid for Company Stock in prior Subsequent Closings. The Seller shall give
notice, as described below (the "Sale Notice"), and shall sell any Repurchased
Shares or New Shares, to the Purchaser within five (5) business days after the
date the Seller acquires any Repurchased Shares or the Seller determines to
sell any New Shares to the Purchaser. The Sale Notice shall set forth (i) the
number of Repurchased Shares and New Shares, if any, to be sold to, and
purchased by, the Purchaser and (ii) the aggregate purchase price to be paid
by the Purchaser for such shares as determined pursuant to Section 1.1 (a) and
(b) hereof (the "Subsequent Purchase Amount"). The Purchaser shall pay such
Subsequent Purchase Amount by (i) paying to the Seller at the Subsequent
Closing $1.00 per New Share, if any, by wire transfer of immediately available
funds, and (ii) increasing (as of the date of such Subsequent Closing) the
principal amount outstanding under the Note by an amount equal to the
Subsequent Purchase Amount minus the amount paid pursuant to clause (i) of
this sentence. All Subsequent Closings will be held at the offices of Willkie
Farr & Gallagher, 153 East 53rd Street, New York, New York 10022, on the first
business day following the date of each and every Sale Notice, or at such
other time, date and place as
<PAGE>3
may be mutually agreed upon by the Seller and the Purchaser. The Seller may
defer the sale of Common Stock pursuant to this Section 1.2 if the Seller
reasonably determines that there are sufficient legal, financial or accounting
reasons for the Seller to defer the timing of such sale.
1.3 Delivery of Shares. At the First Closing and each Subsequent
Closing (hereinafter referred to as the "Closing" or "Closings"), the Seller
will deliver to the Purchaser a certificate representing the Company Stock
sold at such Closing, which certificate shall be registered in the name of the
Trustee, or the name of its nominee. The Seller will pay all stamp and other
transfer taxes, if any, that may be payable in respect of the sale and
delivery of the Company Stock.
1.4 Seller Records. Seller is hereby authorized to record the
price owed by the Purchaser from time to time and all repayments of the
principal of the Note on the schedule attached to the Note.
ARTICLE II
The Seller represents and warrants to the Purchaser as follows:
2.1 Corporate Existence and Authority. The Seller (a) is a
corporation duly organized, validly existing and in good standing under the
laws of the Commonwealth of Pennsylvania, (b) has all requisite corporate
power to execute, deliver and perform this Agreement and (c) has taken all
necessary corporate action to authorize the execution, delivery and
performance of this Agreement.
2.2 No Conflict. The execution and delivery of this Agreement does
not, and the consummation of the transactions contemplated hereby will not,
violate, conflict with or constitute a default under (a) the Seller's
certificate of incorporation or bylaws, which violation, conflict or default
would have a material adverse effect on the Seller and its subsidiaries taken
as a whole, (b) any agreement, indenture or other instrument to which the
Seller is a party or by which the Seller or its assets may be bound or (c) to
the best of its knowledge, any law, regulation, order, arbitration, award,
judgment or decree applicable to the Seller.
2.3 Validity. This Agreement has been duly executed and delivered
by the Seller and is a valid and binding agreement of the Seller enforceable
against the Seller in accordance with its terms, except as the enforceability
thereof may be limited by
<PAGE>4
any applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent
conveyance or other laws affecting the enforcement of creditors' rights
generally, and by general principles of equity.
2.4 The Company Stock. The Company Stock has been duly authorized
and, when sold as contemplated hereby, will be validly issued, fully-paid and
non-assessable shares of the Seller. No stockholder of the Seller has any
preemptive or other subscription right to acquire any shares of Common Stock.
The Seller will convey to the Purchaser, on the date of Closing, good and
valid title to the Company Stock free and clear of any liens, claims, security
interests and encumbrances.
2.5 Litigation. There are no actions, suits, proceedings,
arbitrations or investigations pending or, to the Seller's best knowledge,
threatened in any court or before any governmental agency or instrumentality
or arbitration panel or otherwise against or by the Seller which seek to or
could restrain, prohibit, rescind or declare unlawful, or result in
substantial damages in respect of, this Agreement or the performance hereof by
the Seller (including, without limitation, the delivery of the Company Stock).
2.6 Business and Financial Information. Seller has heretofore
delivered to the Purchaser copies of the audited consolidated balance sheets,
statements of stockholders' equity, statements of income and statements of
cash flows of Seller and its consolidated subsidiaries as of and for the
fiscal years ended January 29, 1994, January 30, 1993 and February 1, 1992
(including the relating notes and schedules, the "Seller Financial
Statements"). The Seller Financial Statements in all material respects fairly
present the consolidated results of operations, changes in stockholders'
equity and cash flows for the periods set forth therein and the consolidated
financial position as at the dates thereof of Seller and its consolidated
subsidiaries, in accordance with generally accepted accounting principles
consistently applied throughout the periods involved, except as set forth in
the notes thereto and subject, in the case of unaudited financial statements,
to the omission of certain notes not ordinarily accompanying such unaudited
financial statements and to normal year-end audit adjustments which in each
case will not be material to Seller and its consolidated subsidiaries taken as
a whole. Since January 1, 1992, Seller has filed with the Securities and
Exchange Commission all forms, reports and documents required pursuant to the
Securities Act of 1933, as amended (the "1933 Act"), and the Securities
Exchange Act of 1934, as amended (the "1934 Act") (collectively, the "Acts"),
to be filed by it (the "Disclosure Documents"). At the
<PAGE>5
time filed, all of the Disclosure Documents complied as to form in all
material respects with all applicable requirements of the Acts. None of the
Disclosure Documents, at the time filed, contained any untrue statement of a
material fact or omitted to state a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
The Purchaser represents and warrants to the Seller as follows:
3.1 Authority; Validity. The Purchaser has full power and
authority under the Trust to execute and deliver this Agreement and the Note
and to consummate the transactions contemplated hereby. This Agreement has
been duly authorized, executed and delivered by the Trustee on behalf of the
Trust and is a valid and binding agreement of the Purchaser enforceable in
accordance with its terms, except as the enforceability thereof may be limited
by any applicable bankruptcy, insolvency, reorganization, moratorium,
fraudulent conveyance or other laws affecting the enforcement of creditors'
rights generally, and by general principles of equity. The Note has been duly
authorized by the trustee on behalf of the Trust and, upon execution and
delivery by the Trustee on behalf of the Trust, the Note will be a valid and
binding agreement of the Purchaser enforceable in accordance with its terms,
except as the enforceability thereof may be limited by any applicable
bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or
other laws affecting the enforcement of creditors' rights generally, and by
general principles of equity.
3.2 No Conflict. The execution and delivery of this Agreement do
not, and the execution and delivery of the Note, and the consummation of the
transactions contemplated hereby and thereby will not, violate, conflict with
or constitute a default under (a) the terms of the Trust, (b) to the best of
the Purchaser's knowledge any agreement, indenture or other instrument to
which the Trust is a party or by which the Trust or its assets may be bound or
subject or (c) to the best of the Purchaser's knowledge any law, regulation,
order, arbitration award, judgment or decree applicable to the Trust.
The Trustee represents that this Agreement has been duly authorized,
executed and delivered by the Trustee on behalf
<PAGE>6
of the Trust and the Note has been duly authenticated by the Trustee on behalf
of the Trust.
ARTICLE IV
RESTRICTIONS ON DISPOSITION OF THE COMPANY STOCK
4.1 Restricted Securities. The Purchaser and the Company
acknowledge that the Purchaser is acquiring the Company Stock pursuant to a
transaction exempt from registration under the 1933 Act. The Purchaser
represents, warrants and agrees that all Company Stock acquired by the
Purchaser pursuant to this Agreement is being acquired for investment and not
with a view to the resale or distribution thereof, or of making any sale or
other disposition thereof which would be in violation of the 1933 Act or any
applicable state securities law, and that the Purchaser will not dispose of
any of the Company Stock, except in accordance with Article IV of the Trust
Agreement and (i) that the Trustee will, from time to time upon instruction
from the Company, convey to certain Plan Administrators or trustees of the
Plans listed on Schedule A of the Trust Agreement or sell pursuant to an
effective registration statement under the 1933 Act or an exemption therefrom,
a portion of the Company Stock to satisfy the obligations of the Company or
affiliates of the Company under such Plans, and (ii) upon termination of the
Trust to the extent that the Trust then holds any Company Stock, in each case
of clause (i) or (ii) above all in compliance with all provisions of
applicable federal and state law regulating the issuance, sale and
distribution of securities and then only in compliance with the Trust
Agreement.
4.2 Legend. Until such time as the Company Stock is registered
pursuant to the provisions of the 1933 Act or may be sold without registration
in accordance with Rule 144 under the 1933 Act or any other exemption from
registration available thereunder, any certificate or certificates
representing the Company Stock delivered pursuant to Section 1.3 will bear a
legend in substantially the following form:
"The shares represented by this certificate have not been registered
under the Securities Act of 1933, as amended, and may not be sold,
transferred or otherwise disposed of unless they have first been
registered under such Act or unless an exemption from registration is
available."
The Seller may place stop transfer orders against the registration or transfer
of any shares evidenced by such a
<PAGE>7
certificate or certificates until such time as the requirements of the
foregoing are satisfied.
ARTICLE V
COVENANTS OF SELLER
The Seller agrees that:
5.1 Compliance and Filings. The Seller will comply with all
federal, state, local and foreign laws, regulations or orders, and all the
rules of any stock exchange or similar entity which are applicable to it or to
the conduct of its business, and, without limiting the generality of the
foregoing, shall make such filings, distributions and disclosures as are
required by the 1933 Act, the 1934 Act or any of the regulations, rules or
orders promulgated thereunder, insofar as the failure to comply would
materially and adversely affect the Company and its subsidiaries taken as a
whole. The Seller will maintain complete and accurate books, records and
accounts in accordance with the requirements of Section 13(b)(2) under the
1934 Act.
5.2 Registration; Listing. After a written request by the
Committee (as such term is defined in the Trust Agreement), the Seller will
cause the Company Stock to be listed on the New York Stock Exchange, register
under the 1933 Act such number of shares of Company Stock as the Committee may
from time to time direct, prepare for filing at the Seller's expense a
registration statement with the Securities and Exchange Commission sufficient
to permit the public offering of such Company Stock in accordance with the
terms of this Agreement, and the Seller will use its best efforts in all
matters necessary or advisable to cause such registration statement to become
effective as promptly as practicable and to remain effective for a reasonable
period, all to the extent requisite to permit the sale or other disposition of
such Company Stock. The Seller shall also use its best efforts to register or
qualify the Company Stock so registered under the securities and blue sky laws
of such jurisdictions within the United States as the Trustee may reasonably
request pursuant to a written request of the Committee, provided, however,
that the Seller shall not be required to (i) consent to general service of
process for all purposes in any jurisdiction where it is not then qualified or
(ii) qualify generally or use efforts to cause itself to qualify generally to
do business as a foreign corporation in any jurisdiction wherein it would not
otherwise be required to qualify.
<PAGE>8
ARTICLE VI
CONDITIONS TO CLOSING
6.1 Conditions to Obligations of Purchaser. The obligation of the
Purchaser to purchase the Company Stock is subject to the satisfaction of the
following conditions on the date of each Closing:
(a) If the purchase relates to the purchase of Company Stock at a
Subsequent Closing, the Purchaser shall have received the Sale Notice
described in Section 1.2(b) hereof;
(b) If the purchase relates to New Shares, an amount no less than
the cash portion of the purchase price shall have been, or caused to have
been, contributed, loaned or otherwise transferred to the Purchaser by
the Seller;
(c) The representations and warranties of the Seller set forth in
Article II hereof shall be true and correct; and if the Closing shall
occur on a date other than the date of this Agreement, the Purchaser
shall have been furnished with a certificate, dated the date of the
Closing, to such effect, signed by an authorized officer of the Seller;
and
(d) All permits, approvals, authorizations and consents of third
parties necessary for the consummation of the transactions herein shall
have been obtained, and no order of any court or administrative agency
shall be in effect which restrains or prohibits the transactions
contemplated by this Agreement, and no suit, action or other proceeding
by any governmental body or other person shall have been instituted which
questions the validity or legality of the transactions contemplated by
this Agreement.
6.2 Conditions to Obligations of the Seller. The obligation of the
Seller to issue, sell and deliver the Company Stock to the Purchaser is
subject to the satisfaction of the following conditions on the date of
Closing;
(a) If the purchase relates to the purchase of Company Stock at a
Subsequent Closing, the Seller shall have delivered to the Purchaser the
Sale Notice described in Section 1.2(b) hereof;
(b) The representations and warranties of the Purchaser set forth
in Article III hereof shall be true and correct; and if the Closing shall
occur on a date other than the date of this Agreement, the Seller shall
have been
<PAGE>9
furnished with a certificate dated the date of the Closing, to such effect,
signed by an authorized officer of the Trustee; and
(c) No order of any court or administrative agency shall be in
effect which restrains or prohibits the transactions contemplated by this
Agreement, and no suit, action or other proceeding by any governmental
body or other person shall have been instituted which questions the
validity or legality of the transactions contemplated by this Agreement.
(d) All permits, approvals, authorizations and consents of third
parties necessary for the consummation of the transactions herein shall
have been obtained, and no order of any court or administrative agency
shall be in effect which restrains or prohibits the transactions
contemplated by this Agreement, and no suit, action or other proceeding
by any governmental body or other person shall have been instituted which
questions the validity or legality of the transactions contemplated by
this Agreement.
ARTICLE VII
MISCELLANEOUS
7.1 Expenses. The Seller shall pay all of its expenses, and it
shall pay the Purchaser's expenses, in connection with the authorization,
preparation, execution and performance of this Agreement, including, without
limitation, the reasonable fees and expenses of the Trustee, its agents,
representatives, counsel, financial advisors and consultants, which the Seller
has previously approved.
7.2 Survival of Seller's Representations and Warranties. All
representations and warranties made by the Seller to the Purchaser in this
Agreement shall survive the Closing.
7.3 Notices. All notices, requests, or other communications
required or permitted to be delivered hereunder shall be in writing, delivered
by registered or certified mail, return receipt requested, telecopier or hand
delivery as follows:
<PAGE>10
(a) To the Seller:
The Pep Boys - Manny, Moe & Jack
3111 W. Allegheny Avenue
Philadelphia, Pennsylvania 19132
Attn: Michael J. Holden
with a copy to:
Willkie Farr & Gallagher
One Citicorp Center
153 East 53rd Street
New York, New York 10022
Attn.: Daniel D. Rubino, Esq.
(b) To the Purchaser:
First Fidelity Bank, National Association
123 South Broad Street
Philadelphia, PA 19109-1199
Attn: Corporate Trust Administration
Any party hereto may from time to time, by written notice given as aforesaid,
designate any other address to which notices, requests or other communications
addressed to it shall be sent.
7.4 Specific Performance. The parties hereto acknowledge that
damages would be an inadequate remedy for any breach of the provisions of this
Agreement and agree that the obligations of the parties hereunder shall be
specifically enforceable, and neither party will take any action to impede the
other from seeking to enforce such rights or specific performance.
7.5 Successors and Assigns; Integration; Assignment. This
Agreement shall be binding upon, inure to the benefit of and be enforceable by
the parties hereto and their respective legal representatives, successors and
assigns. This Agreement (a) constitutes, together with the Note, the Trust
Agreement and any other written agreements between the Purchaser and the
Seller executed and delivered on the date hereof, the entire agreement between
the parties hereto and supersedes all other prior agreements and
understandings, both written and oral, among the parties, with respect to the
subject matter hereof, (b) shall not confer upon any person other than the
parties hereto any rights or remedies hereunder and no other person may rely
upon any representation of warranty contained herein and (c) shall not be
assignable by operation of law or otherwise, except that the Trustee may
assign all its rights hereunder to any corporation or
<PAGE>11
other institution exercising trust powers in connection with any such
institution assuming the duties of a trustee under the Trust.
7.6 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware.
7.7 Further Assurances. Subject to the terms and conditions herein
provided, each of the parties hereto agrees to use all reasonable efforts to
take, or cause to be taken, all actions and to do, or cause to be done, all
things necessary, proper or advisable to consummate and make effective the
transactions contemplated by this Agreement.
7.8 Amendment and Waiver. No amendment or waiver of any provision
of this Agreement or consent to departure therefrom shall be effective unless
in writing and signed by the Purchaser and the Seller.
7.9 Counterparts. This Agreement may be executed in any number of
counterparts with the same effect as if the signatures thereto were upon one
instrument.
7.10 Certain Limitations. The execution, delivery and performance
by the Trustee of this Agreement have been, and will be, effected by the
Trustee solely in its capacity as Trustee under the terms of the Trust and not
in its individual or corporate capacity. Nothing in this Agreement shall be
interpreted to increase, decrease or modify in any manner any liability of the
Trustee to the Seller or to any trustee, representative or other claimant by
right of the Seller resulting from the Trustee's performance of its duties
under the constituent instruments of the Trust, and no personal or corporate
liability shall be asserted or enforceable against the Trustee by reason of
any of the covenants, statements or representations contained in this
Agreement.
7.11 Incorporation. The terms and conditions of the Trust
Agreement relating to the nature of the responsibilities of the Trustee and
the indemnification of the Trustee by the Seller are incorporated herein by
reference and made applicable to this Agreement.
<PAGE>12
IN WITNESS WHEREOF, the undersigned have duly executed this Agreement on
the date and year first above written.
THE PEP BOYS - MANNY, MOE & JACK
By: /s/Bernard K. McElroy
Name: Bernard K. McElroy
Title: Assistant Vice President - Finance
FIRST FIDELITY BANK, NATIONAL ASSOCIATION
By: /s/Alan G. Finn
Name: Alan G. Finn
Title: Assistant Vice President
<PAGE>1
REVOLVING PROMISSORY NOTE [SPECIMEN]
Wilmington, Delaware April 29, 1994
FOR VALUE RECEIVED, the undersigned, First Fidelity Bank, National
Association, not in its individual or corporate capacity but solely in its
capacity as Trustee of The Pep Boys - Manny, Moe & Jack Flexitrust (the
"Trust"), hereby promises on behalf of the Trust to pay to the order of The
Pep Boys - Manny, Moe & Jack, a Pennsylvania corporation (the "Company"), at
the principal offices of the Company or at such other place as the Company
shall designate in writing, up to Seventy-Five Million Dollars and No Cents
($75,000,000.00). Payments of principal shall be made in proportion to the
total amount borrowed under this Note as shown on Annex A attached hereto as
such may be amended from time to time, with interest in arrears thereon, as
hereinafter provided. Such amortization schedule shall be calculated without
taking into account any prepayments of principal, but then such prepayments
shall be credited against principal then due in accordance with Section 2.2 of
the Trust Agreement creating the Trust (the "Trust Agreement").
This Note may be prepaid in whole or in part at any time without penalty
in accordance with Section 2.2 of the Trust Agreement; provided that, in
accordance with Section 2.1 and Section 2.2 of the Trust Agreement, all or any
portion of principal of this Note then outstanding, together with any accrued
but unpaid interest on this Note, may be deemed forgiven; and provided
further, that in the event the Trust shall have been terminated in accordance
with Section 9.2 of the Trust Agreement and the Trustee shall have complied
with the requirements of Section 9.3 of the Trust Agreement, any remaining
principal of this Note then outstanding, together with any accrued but unpaid
interest on this Note, shall be deemed forgiven.
Interest on the unpaid principal balance, at an annual interest rate
equal to 8.75%, shall be paid annually, in arrears, on or before each December
31, such payments commencing December 31, 1994, and shall be calculated on the
basis of a 360-day year of 30-day months.
Payments received within any Trust Year (as defined in the Trust
Agreement) shall be applied (i) first to interest accrued and unpaid as of the
date of any such payment, and then (ii) to the extent that any such payment
exceeds such accrued and unpaid interest, to prepay interest that accrues
after such payment through the end of such Trust Year, and then (iii) to pay
principal installments due within such Trust Year, and then (iv)
<PAGE>2
to the extent not otherwise distributed in accordance with Section 2.3 of the
Trust Agreement, to additional installments of principal in the order of their
scheduled maturity. Whenever any payment falls due on a Saturday, Sunday or
public holiday, such payment shall be made on the next succeeding business
day. Upon termination of the Trust, the entire unpaid balance of principal
and interest shall be immediately payable.
The Company shall, and is hereby authorized to, record on the schedule
attached hereto as Annex A, or to otherwise record in accordance with its
usual practice, the date and amount of any increase in the principal amount of
this Note, and the date and amount of each principal payment; provided,
however, that failure to do so shall not affect the Trust's obligation to pay
amounts due hereunder.
This Note shall be construed under the laws of the State of Delaware.
The undersigned represents and warrants that the indebtedness represented
by this Note was incurred for the purpose of purchasing shares of Common
Stock, par value $1.00 per share, of the Company.
The Note may not be assigned by the Company, other than by operation of
law, without the prior express written consent of the undersigned.
The Company shall have no recourse whatsoever to any assets of the
Trustee in its individual or corporate capacity for repayment. The Trustee is
entering into this Note not in its individual or corporate capacity but solely
as Trustee, and no personal or corporate liability or personal or corporate
responsibilities are assumed by, or shall at any time be asserted or
enforceable against, the Trustee in its individual or corporate capacity
under, or with respect to, this Note.
FIRST FIDELITY BANK, NATIONAL ASSOCIATION
as Trustee on behalf of
THE PEP BOYS - MANNY, MOE & JACK FLEXITRUST
By: /s/Alan G. Finn
Name: Alan G. Finn
Title: Assistant Vice President
<PAGE>3
<TABLE>
<CAPTION>
ANNEX A
Example of Using
Annual Cumulative $10MM of Total
Percent of Percent of Principal Value
December 31 Principal Due Principal Due Amortization Balance
<S> <C> <C> <C> <C>
1994 0 0 $0.00 $10,000,000.00
1995 0 0 0.00 10,000,000.00
1996 0 0 0.00 10,000,000.00
1997 0 0 0.00 10,000,000.00
1998 0 0 0.00 10,000,000.00
1999 1.23% 1.23% 122,514.53 9,877,485.47
2000 1.33% 2.56% 133,234.55 9,744,250.92
2001 1.45% 4.01% 144,892.57 9,599,358.35
2002 1.58% 5.58% 157,570.67 9,441,787.68
2003 1.71% 7.30% 171,358.11 9,270,429.58
2004 1.86% 9.16% 186,351.94 9,084,077.64
2005 2.03% 11.19% 202,657.73 8,881,419.90
2006 2.20% 13.39% 220,390.29 8,661,029.62
2007 2.40% 15.79% 239,674.44 8,421,355.18
2008 2.61% 18.39% 260,645.95 8,160,709.23
2009 2.83% 21.23% 283,452.47 7,877,256.76
2010 3.08% 24.31% 308,254.56 7,569,002.20
2011 3.35% 27.66% 335,226.83 7,233,775.37
2012 3.65% 31.31% 364,559.18 6,869,216.19
2013 3.96% 35.27% 396,458.11 6,472,758.08
2014 4.31% 39.58% 431,148.20 6,041,609.88
2015 4.69% 44.27% 468,873.66 5,572,736.22
2016 5.10% 49.37% 509,900.11 5,062,836.11
2017 5.55% 54.92% 554,516.37 4,508,319.74
2018 6.03% 60.95% 603,036.55 3,905,283.19
2019 6.56% 67.51% 655,802.25 3,249,480.94
2020 7.13% 74.64% 713,184.94 2,536,296.00
2021 7.76% 82.39% 775,588.63 1,760,707.37
2022 8.43% 90.83% 843,452.63 917,254.74
2023 9.17% 100.00% 917,254.74 0.00
____________________________
Date Principal Amount of Note
April 29, 1994 $52,364,325
_______________ $______________
_______________ $______________
_______________ $______________
</TABLE>
<PAGE>1
PRESS RELEASE
December 6, 1993
PEP BOYS TO REPURCHASE UP TO $75 MILLION OF STOCK;
ANNOUNCES PLAN TO ESTABLISH EMPLOYEE BENEFIT TRUST
Pep Boys - Manny, Moe & Jack (NYSE: "PBY"), the nation's leading
automotive aftermarket retail and service chain announced that its Board of
Directors today approved the repurchase of up to $75,000,000 worth of the
company's common shares in the open market and its intention to establish a
flexible employee benefit trust. Based upon Friday's closing price of
$26.375, the company would repurchase approximately 2,844,000, or 4.7%, of its
60,987,000 outstanding shares.
The repurchase shares will be held in the trust and will be used to
finance various existing employee compensation and benefit plans, including
healthcare programs, savings and retirement plans and other benefit
obligations. The trust will allocate or sell the repurchased shares over the
next fifteen years to fund these benefit programs. This transaction will
enable Pep Boys to fund future employee benefit obligations at current stock
prices. The shares will be repurchased from time to time depending upon
market conditions.
Mitchell G. Leibovitz, President & CEO, commented, "We believe that Pep
Boys' long-term earnings growth and stock appreciation potential is
significant, so the prospect of funding future employee benefit obligations at
current stock prices should provide a substantial cash flow benefit to the
company in the years ahead."
The Board of Directors also approved a quarterly dividend of $.0375 per
share which is payable on January 24, 1994, to holders of record on January
10, 1994.
91430222
