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S.E.C. File No. 333-45793
Filed Pursuant to Rule 424(b)(5)
PRICING SUPPLEMENT TO PROSPECTUS DATED FEBRUARY 18, 1998
AND PROSPECTUS SUPPLEMENT DATED FEBRUARY 26, 1998
$75,000,000
PEP BOYS(R)
6.92% Term Enhanced ReMarketable Securities(SM) ("TERMS(SM)")
------------------
The annual interest rate on the 6.92% Term Enhanced ReMarketable
Securities(SM) ("TERMS(SM)") of The Pep Boys -- Manny, Moe & Jack (the
"Company") to July 7, 2006 (the "Initial Investor Maturity Date") is 6.92%. The
TERMS are subject to mandatory tender to Credit Suisse First Boston Corporation,
as Remarketing Dealer (the "Remarketing Dealer"), on each of (i) the Initial
Investor Maturity Date and (ii) if, as described herein under "Description of
the TERMS -- Tender of the TERMS; Remarketing -- Remarketing Dates; Adjustment
to Maturity Date," the Initial Investor Maturity Date is designated as a Window
Period Remarketing Date (as defined herein), the Additional Remarketing Date (as
defined herein) thereafter. Each of the Investor Maturity Date and the
Additional Remarketing Date, if any, are referred to herein as a "Remarketing
Date." The final maturity date (the "Maturity Date") is scheduled to occur on
July 7, 2016 (the "Scheduled Maturity Date") but may be adjusted to a later date
as described herein due to the occurrence, if any, of the Additional Remarketing
Date. If the Remarketing Dealer for any reason does not purchase all TERMS on a
Remarketing Date, the Company will be required to repurchase the TERMS on such
date from the record holders ("Holders") thereof at 100% of the principal amount
thereof plus accrued interest, if any. As a result, whether or not the Initial
Investor Maturity Date is a Window Period Remarketing Date, any person holding a
TERMS (or a beneficial interest therein) on or prior to the Initial Investor
Maturity Date, will, in all cases, (i) be entitled to receive 100% of the
principal amount of the TERMS and (ii) be obligated to surrender the TERMS, in
each case on the Initial Investor Maturity Date. In addition, if the Initial
Investor Maturity Date is designated as a Window Period Remarketing Date, any
person holding a TERMS (or a beneficial interest therein) on or after the
Initial Investor Maturity Date and on or prior to the Additional Remarketing
Date will, in all cases, (i) be entitled to receive 100% of the principal amount
of the TERMS and (ii) be obligated to surrender the TERMS, in each case on the
Additional Remarketing Date.
The TERMS are part of the Medium Term Notes, Series B, Due Nine Months or
More from Date of Issue, of the Company. Interest on the TERMS accruing during
the period from and including July 7, 1998 (the "Issue Date"), to but excluding
the Initial Investor Maturity Date will be payable semiannually on January 7
and July 7 of each year, commencing January 7, 1999. Interest on the TERMS
accruing from the Initial Investor Maturity Date (if such date is not a Window
Period Remarketing Date) or the Additional Remarketing Date (if the Initial
Investor Maturity Date is a Window Period Remarketing Date) will be paid
semiannually on each day that is a six-month anniversary of such date. Interest
on the TERMS accruing during the period from and including the Initial Investor
Maturity Date (if the Initial Investor Maturity Date is a Window Period
Remarketing Date) to but excluding the Additional Remarketing Date (the "Window
Period"), if applicable, will be payable on the Additional Remarketing Date.
Each day on which interest is scheduled to be paid is hereinafter referred to
as an "Interest Payment Date." Interest payable on any Interest Payment Date
will be payable to the persons in whose name the TERMS are registered on the
fifteenth calendar day (whether or not a Business Day (as defined herein))
immediately preceding the related Interest Payment Date; provided, that, in the
case of the Interest Payment Date relating to the Window Period, interest will
be payable to the persons to whom principal shall be payable on the Additional
Remarketing Date.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PRICING SUPPLEMENT OR THE PROSPECTUS AND
PROSPECTUS SUPPLEMENT. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
The TERMS will be sold to the public at varying prices relating to
prevailing market prices at the time of resale to be determined by the
Underwriter (as defined herein) at the time of each sale. The net proceeds to
the Company will be 102.04% of the principal amount of the TERMS sold and the
aggregate net proceeds will be $76,530,000, plus accrued interest, if any, from
July 7, 1998. The net proceeds include a premium paid by the Remarketing Dealer
for the right to remarket the TERMS. For further information with respect to
the plan of distribution, see "Underwriting."
The TERMS are offered by the Underwriter when, as and if issued by the
Company, delivered to and accepted by the Underwriter and subject to the
Underwriter's right to reject orders in whole or in part. The Underwriter
reserves the right to withdraw, cancel or modify such offer and to reject
orders in whole or in part. It is expected that delivery of the TERMS will be
made in book-entry form through the facilities of The Depository Trust Company
("DTC") on or about July 7, 1998.
Credit Suisse First Boston
Pricing Supplement dated June 30, 1998.
"Term Enhanced ReMarketable Securities(SM)" and "TERMS(SM)"
are service marks owned by Credit Suisse First Boston Corporation
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RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth the ratio of earnings to fixed charges of
the Company for the periods indicated:
<TABLE>
<CAPTION>
13 Weeks Ended Fiscal Year Ended
- ----------------------------- ------------------------------------------------------------------------------------
May 2, 1998 May 3, 1997 Jan. 31, 1998 Feb. 1, 1997 Feb. 3, 1996 Jan. 28, 1995 Jan. 29, 1994
- ------------- ------------- --------------- -------------- -------------- --------------- --------------
<S> <C> <C> <C> <C> <C> <C>
1.9x 3.8x 2.3x 4.7x 4.1x 4.7x 4.9x
</TABLE>
The ratio is computed by dividing earnings by fixed charges. "Earnings"
consist of earnings before income taxes and cumulative effect of change in
accounting principle plus fixed charges (exclusive of capitalized interest
costs). "Fixed charges" consist of interest costs (including capitalized
interest costs) plus one-third of rental expense (which amount is considered
representative of the interest factor in rental expense).
DESCRIPTION OF THE TERMS
General
The TERMS are to be issued as a series of Debt Securities under the Senior
Indenture, dated as of February 18, 1998, as may be supplemented from time to
time (the "Indenture"), between the Company and PNC Bank, National Association,
as trustee (the "Trustee"), which is more fully described in the accompanying
Prospectus and Prospectus Supplement. As of May 2, 1998, the Company had
outstanding under the Indenture Senior Securities (as defined in the
accompanying Prospectus and Prospectus Supplement) in the aggregate principal
amount of $100 million. The following description of the terms of the TERMS
supplements, and to the extent inconsistent therewith replaces, the description
of the general terms and provisions of the Senior Securities set forth in the
accompanying Prospectus and Prospectus Supplement. The Maturity Date of the
TERMS is scheduled to be July 7, 2016 (the "Scheduled Maturity Date") but may
be adjusted due to the occurrence, if any, of the Window Period.
The TERMS will be Senior Securities of the Company and will be limited to
$75,000,000 aggregate principal amount. Except in the limited circumstances
described herein, the TERMS are not subject to redemption prior to the Maturity
Date at the option of the Company. See "Redemption" below.
The TERMS will bear interest at the annual interest rate of 6.92% to July
7 , 2006 (the "Initial Investor Maturity Date"). The Initial Investor Maturity
Date and, if the Initial Investor Maturity Date is designated as a Window
Period Remarketing Date as described below under "-- Tender of the TERMS;
Remarketing -- Remarketing Dates; Adjustment to Maturity Date," the Additional
Remarketing Date thereafter, will be the Remarketing Dates for the TERMS. If
the Remarketing Dealer elects to remarket the TERMS on a Remarketing Date,
except in the limited circumstances described herein, (i) the TERMS will be
subject to mandatory tender to the Remarketing Dealer at 100% of the principal
amount thereof for remarketing on each such date, on the terms and subject to
the conditions described herein, and (ii) on and after such Remarketing Date,
the TERMS will bear interest at the rate determined by the Remarketing Dealer
in accordance with the procedures set forth below. See "Tender of TERMS;
Remarketing" below.
Under the circumstances described below, the TERMS are subject to
redemption by the Company from the Remarketing Dealer on a Remarketing Date.
See "Redemption" below. If the Remarketing Dealer for any reason does not
purchase all TERMS on a Remarketing Date, or elects not to remarket the TERMS,
or in certain other limited circumstances described herein, the Company will be
required to repurchase the TERMS from the Holders thereof on such date, at 100%
of the principal amount thereof plus accrued interest, if any. See "Repurchase"
below.
Interest on the TERMS accruing during the period from and including the
Issue Date, to but excluding the Initial Investor Maturity Date will be payable
semiannually on January 7 and July 7 of each year, commencing January 7, 1999.
Interest on the TERMS accruing from the Initial Investor Maturity Date (if such
date is not a Window Period Remarketing Date) or the Additional Remarketing
Date (if the Initial Investor Maturity Date is a Window Period Remarketing
Date) will be paid semiannually on each day that is a six-month anniversary of
such date. Interest on the TERMS accruing during the Window Period, if
applicable, will be payable on the Additional Remarketing Date. Interest
payable on any Interest Payment Date will be payable to the persons
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in whose names the TERMS are registered on the fifteenth calendar day (whether
or not a Business Day) immediately preceding the related Interest Payment Date;
provided, that, in the case of the Interest Payment Date relating to the Window
Period, interest will be payable to the persons to whom principal shall be
payable on the Additional Remarketing Date. Interest on the TERMS will be
computed on the basis of a 360-day year of twelve 30-day months; provided,
that, interest accruing during the Window Period will be computed on the basis
of the actual number of days in such period over a 360-day year. "Business Day"
means any day on which commercial banks are open for business (including
dealings in foreign exchange and foreign currency deposits) in The City of New
York and, in the case of the determination of the "Applicable Reference Index"
(as defined herein) that is based upon eurodollar deposits in London, the City
of London.
Interest payable on any Interest Payment Date and at the Maturity Date or
date of earlier redemption or repurchase shall be the amount of interest
accrued from and including the next preceding Interest Payment Date in respect
of which interest has been paid or duly provided for (or from and including the
Issue Date if no interest has been paid or duly provided for with respect to
the TERMS) to but excluding such Interest Payment Date or the Maturity Date or
date of redemption or repurchase, as the case may be. If any Interest Payment
Date or the Maturity Date or date of redemption or repurchase of TERMS falls on
a day that is not a Business Day, the payment otherwise then due shall be made
on the next Business Day with the same force and effect as if it were made on
the date such payment was due and no interest shall accrue on the amount so
payable for the period from and after such Interest Payment Date or the
Maturity Date or date of earlier redemption or repurchase, as the case may be.
The TERMS will be issued in denominations of $1,000 and integral multiples
thereof.
Tender of TERMS; Remarketing
The following description sets forth the terms and conditions of the
remarketing of the TERMS, in the event that the Remarketing Dealer elects to
purchase the TERMS and remarkets the TERMS on the Initial Investor Maturity
Date.
Mandatory Tender. Provided that the Remarketing Dealer gives notice to the
Company and the Trustee on a Business Day not earlier than fifteen nor later
than five Business Days prior to the Initial Investor Maturity Date of its
intention to purchase the TERMS for remarketing (the "Notification Date"), each
TERMS will be automatically tendered, or deemed tendered, to the Remarketing
Dealer for purchase on each of (i) the Initial Investor Maturity Date, and (ii)
if the Initial Investor Maturity Date is designated as a Window Period
Remarketing Date as described below under "-- Remarketing Dates; Adjustment to
Maturity Date," the Additional Remarketing Date thereafter, except in the
circumstances described under "-- Repurchase" or "-- Redemption" below. The
purchase price for the TERMS to be paid by the Remarketing Dealer on each
Remarketing Date will equal 100% of the principal amount thereof. See
"Notification of Results; Settlement" below. When the TERMS are tendered for
remarketing on a Remarketing Date, the Remarketing Dealer may remarket the
TERMS for its own account at varying prices to be determined by the Remarketing
Dealer at the time of each sale. From and after the Initial Investor Maturity
Date (if such date is not a Window Period Remarketing Date) or the Additional
Remarketing Date (if the Initial Investor Maturity Date is a Window Period
Remarketing Date), the TERMS will bear interest at the Interest Rate to
Maturity (as defined herein), determined as set forth under "-- Determination
of Applicable Interest Rate" below. During the Window Period, if applicable,
the TERMS will bear interest at the Window Period Interest Rate (as defined
herein) determined as set forth under "-- Determination of Applicable Interest
Rate" below. If the Remarketing Dealer elects to remarket the TERMS, the
obligation of the Remarketing Dealer to purchase the TERMS on the applicable
Remarketing Date is subject, among other things, to the conditions that, since
the Notification Date, no material adverse change in the condition of the
Company and its subsidiaries, considered as one enterprise, shall have occurred
and that no Event of Default (as defined in the Indenture), or any event which,
with the giving of notice or passage of time, or both, would constitute an
Event of Default, with respect to the TERMS shall have occurred and be
continuing. If for any reason the Remarketing Dealer does not purchase all
TERMS on the applicable Remarketing Date, the Company will be required to
repurchase the TERMS from the Holders thereof at a price equal to the principal
amount thereof plus all accrued and unpaid interest, if any, on the TERMS to
such Remarketing Date. See "-- Repurchase" below.
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The Initial Investor Maturity Date will be January 7, 2006. The Maturity
Date of the TERMS is scheduled to occur on the Scheduled Maturity Date, but may
be adjusted to a later date due to the occurrence, if any, of the Window
Period.
Remarketing Dates; Adjustment to Maturity Date. If the Remarketing Dealer
elects to remarket the TERMS on the Initial Investor Maturity Date, then not
later than 4:00 p.m., New York City time, on the fourth Business Day prior to
the Initial Investor Maturity Date, the Company may notify the Remarketing
Dealer, the Trustee and DTC by telephone, confirmed in writing that it elects
the Initial Investor Maturity Date to be a Window Period Remarketing Date (the
"Window Period Remarketing Date"). The Company will be eligible to make such
notification if at such time its senior unsecured debt is rated at least "Baa3"
by Moody's Investors Service and "BBB-" by Standard & Poor's Ratings Group or
the equivalent thereof by such rating agency at the time of such notification;
provided, that, the Remarketing Dealer may waive this requirement at its sole
discretion. If the Company does not provide such notification, the Initial
Investor Maturity Date will be the only Remarketing Date and the Maturity Date
will be the Scheduled Maturity Date. If the Company provides such notification,
then (i) the Additional Remarketing Date will be one of the 52 following
one-week anniversary dates of the Initial Investor Maturity Date (or if any
such day is not a Business Day, the next following Business Day) designated by
the Company not later than the fifth Business Day prior to such one-week
anniversary date (the "Additional Remarketing Date"); provided, that, if the
Company fails to so designate the Additional Remarketing Date, the Additional
Remarketing Date will be the date that is 52 weeks from the Initial Investor
Maturity Date (or if such day is not a Business Day, the next following
Business Day) and (ii) the Maturity Date of the TERMS will be a date that is
the 10th year anniversary of the Additional Remarketing Date (whether or not a
Business Day).
Determination of Applicable Interest Rate. From, and including, the
Initial Investor Maturity Date if such date is not a Window Period Remarketing
Date or, from and including the Additional Remarketing Date, if the Initial
Investor Maturity Date is a Window Period Remarketing Date, to but excluding
the Maturity Date, the TERMS will bear interest at the Interest Rate to
Maturity (as defined below). From, and including, the Initial Investor Maturity
Date if such date is a Window Period Remarketing Date to, but excluding, the
Additional Remarketing Date (the "Window Period"), if applicable, the TERMS
will bear interest at the Window Period Interest Rate (as defined below).
The "Interest Rate to Maturity" shall be determined by the Remarketing
Dealer by 3:30 p.m., New York City time, on the third Business Day immediately
preceding the Initial Investor Maturity Date (if such date is not a Window
Period Remarketing Date) or the Additional Remarketing Date (if the Initial
Investor Maturity Date is a Window Period Remarketing Date) (the "Re-pricing
Date"), to the nearest one hundred-thousandth (0.00001) of one percent per
annum, and will be equal to the sum of the Base Rate (as defined below) plus
the Applicable Spread (as defined below), which will be based on the Dollar
Price (as defined below) of the TERMS.
"Base Rate" means 5.45%.
The "Applicable Spread" will be the lowest bid indication, expressed as a
spread (in the form of a percentage or number of basis points) above the Base
Rate, obtained by the Remarketing Dealer on the Re-pricing Date from the bids
quoted by five Reference Corporate Dealers (as defined below) for the full
aggregate principal amount of the TERMS at the Dollar Price, but assuming (i)
an issue date of the Initial Investor Maturity Date (if such date is not a
Window Period Remarketing Date) or Additional Remarketing Date (if the Initial
Investor Maturity Date is a Window Period Remarketing Date) with settlement on
such date without accrued interest, (ii) a maturity date equal to the Maturity
Date of the TERMS, and (iii) a stated annual interest rate, payable
semiannually, equal to the Base Rate plus the spread bid by the applicable
Reference Corporate Dealer. If fewer than five Reference Corporate Dealers bid
as described above, then the Applicable Spread shall be the lowest of such bid
indications obtained as described above.
"Dollar Price" means, with respect to the TERMS, the present value, as of
the Initial Investor Maturity Date, of the Remaining Scheduled Payments (as
defined below) discounted to the Initial Investor Maturity Date, on a
semiannual basis (assuming a 360-day year consisting of twelve 30-day months),
at the Treasury Rate (as defined below); provided, that, in the case of the
Additional Remarketing Date, the Dollar Price will be the Accreted Dollar Price
(as defined below).
"Accreted Dollar Price" means, with respect to the Additional Remarketing
Date, the Dollar Price as of the Initial Investor Maturity Date (determined by
the Remarketing Dealer on the Notification Date for the Initial
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Investor Maturity Date as if the Initial Investor Maturity Date were not a
Window Period Remarketing Date) plus the product of (i) such Dollar Price as of
the Initial Investor Maturity Date, (ii) the weighted average per annum Window
Period Interest Rate for the Window Period and (iii) the number of days in the
Window Period divided by 360.
"Reference Corporate Dealers" means leading dealers of publicly traded
debt securities of the Company in The City of New York (which shall include the
Remarketing Dealer or one of its affiliates) selected by the Company.
"Remaining Scheduled Payments" means, with respect to the TERMS, the
remaining scheduled payments of the principal thereof and interest thereon,
calculated at the Base Rate only and assuming (i) a maturity date equal to the
Maturity Date of the TERMS, and (ii) that the Company did not elect the Initial
Investor Maturity Date to be a Window Period Remarketing Date.
"Treasury Rate" means the yield to maturity of the offered-side quote for
the then current 10 Year US Treasury Bond or other bench mark US Treasury Bond,
as the case may be, shown on Telerate page 500 (or any successor page), as of
11:00 a.m., New York City time, on the Notification Date. The 10 year
offered-side yield will be used to determine the Dollar Price with respect to
the determination of the Interest Rate to Maturity. In the event that the
offered-side quote for the then current 10 Year US Treasury Bond is no longer
shown on Telerate page 500 and there is no successor page, the Treasury Rate
will be calculated by the Remarketing Dealer and will be a yield to maturity of
the arithmetic mean of the secondary market bid rates, as of approximately
11:00 a.m., New York City time, on the Notification Date, of five leading
primary United States government securities dealers (which shall include the
Remarketing Dealer or an affiliate of the Remarketing Dealer) selected by the
Remarketing Dealer, excluding the highest and lowest of such bids, for an
aggregate principal amount of the then current 10 Year US Treasury Bond, or
other bench mark US Treasury Bond, as the case may be, equal to the full
aggregate principal amount of the TERMS. If fewer than three such United States
government securities dealers provide bids, the Treasury Rate shall be the
average of such bids.
The interest rate for the Window Period will be reset on each Interest
Reset Date (as defined below) during the Window Period and will equal the
Applicable Reference Index plus the Applicable Basic Margin Above the
Applicable Reference Index, in each case as calculated by the Remarketing
Dealer (the "Window Period Interest Rate"). The Wednesday of each week during
the Window Period will be an "Interest Reset Date." The "Interest Determination
Date" applicable to an Interest Reset Date will be the second Business Day
preceding such Interest Reset Date. The interest rate in effect from and
including the Window Period Remarketing Date which is the first day of the
Window Period to, but excluding, the first Interest Reset Date during such
Window Period will be determined as if the Window Period Remarketing Date were
an Interest Reset Date and the Interest Determination Date for such Interest
Reset Date were the second Business Day prior to the Window Period Remarketing
Date.
The "Applicable Reference Index" means, with respect to the Window Period,
one of the following indexes selected by the Company and notified to the
Remarketing Dealer no later than four Business Days prior to the Window Period
Remarketing Date: (i) the per annum rate equal to the one week eurodollar rate
shown on Telerate page 3750 (or any successor page) at 11:00 a.m., London time,
on the Interest Determination Date, or (ii) the per annum rate equal to the
average of the federal funds rates shown on Telerate page 5 (or any successor
page) at 11:00 a.m., New York City time, on the Interest Determination Date and
each of the four Business Days prior such Interest Determination Date, or (iii)
the one-week "AA" financial commercial paper rate shown on the internet world
wide web page (or any successor page) of the Board of Governors of the Federal
Reserve System (www.bog.frb.fed.us/releases/CP/) at 11:00 a.m., New York City
time, on the Interest Determination Date.
The "Applicable Basic Margin Above the Applicable Reference Index" will be
the lowest bid indication, expressed as a spread (in the form of a percentage
or number of basis points) above the Applicable Reference Index, obtained by
the Remarketing Dealer on the third Business Day prior to the Window Period
Remarketing Date from the bids quoted from five Reference Money Market Dealers
(as defined below) on such date for the full aggregate principal amount of the
TERMS at a dollar price equal to par, but assuming (i) an issue date of the
Window Period Remarketing Date, with settlement on such date without accrued
interest, (ii) a maturity date equal to the day that is 52 weeks from the
Window Period Remarketing Date, (iii) that the TERMS are callable
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by the Remarketing Dealer on a weekly basis after the Window Period Remarketing
Date, (iv) that the TERMS will be repurchased by the Company at par on the day
that is 52 weeks from the Window Period Remarketing Date if not previously
called by the Remarketing Dealer and (v) a stated annual interest rate, payable
on the Additional Remarketing Date, equal to the Applicable Reference Index
plus the spread bid by the applicable Reference Money Market Dealer. If fewer
than five Reference Money Market Dealers bid as described above, then the
Applicable Basic Margin Above the Applicable Reference Index shall be the
lowest of such bid indications obtained as described above.
"Reference Money Market Dealers" means leading dealers, selected by the
Company, of publicly traded debt securities of the Company in The City of New
York (which shall include the Remarketing Dealer or one of its affiliates) who
are also leading dealers in money market instruments. The Company will notify
the Remarketing Dealer of the identity of such Reference Money Market Dealers
no later than four Business Days prior to the Window Period Remarketing Date.
Notification of Results; Settlement. Provided the Remarketing Dealer has
previously notified the Company and the Trustee on the Notification Date of its
intention to purchase all TERMS on the Initial Investor Maturity Date, the
Remarketing Dealer will notify the Company, the Trustee and DTC by telephone,
confirmed in writing, by 4:00 p.m., New York City time, on the third Business
Day prior to the Initial Investor Maturity Date (if such date is not a Window
Period Remarketing Date) or the Additional Remarketing Date (if the Initial
Investor Maturity Date is a Window Period Remarketing Date), of the Interest
Rate to Maturity. If the Initial Investor Maturity Date is a Window Period
Remarketing Date, the Remarketing Dealer shall provide the Company, the Trustee
and DTC with notice in accordance with the preceding sentence, on the second
Business Day prior to the Initial Investor Maturity Date, of the Window Period
Interest Rate which will initially be in effect.
All of the TERMS will be automatically delivered to the account of the
Trustee, by book-entry through DTC pending payment of the purchase price
therefor, on each Remarketing Date.
In the event that the Remarketing Dealer purchases the TERMS on a
Remarketing Date, the Remarketing Dealer will make or cause the Trustee to make
payment to the DTC participant (each, a "DTC Participant") of each Holder of
TERMS, (by book-entry) through DTC by the close of business on such date
against delivery through DTC of such Holder's TERMS, of 100% of the principal
amount of the TERMS that have been purchased for remarketing by the Remarketing
Dealer. If the Remarketing Dealer does not purchase all of the TERMS on a
Remarketing Date, it will be the obligation of the Company to make or cause to
be made such payment for the TERMS, as described below under "Repurchase." In
any case, the Company will make or cause the Trustee to make payment of
interest to each Holder of TERMS due on a Remarketing Date by book entry
through DTC by the close of business on such date.
The transactions described above will be executed through DTC in
accordance with the procedures of DTC, and the accounts of the respective DTC
Participants will be debited and credited and the TERMS delivered by book-entry
as necessary to effect the purchases and sales thereof.
Transactions involving the sale and purchase of TERMS remarketed by the
Remarketing Dealer on a Remarketing Date will settle in immediately available
funds through DTC's Same-Day Funds Settlement System.
The tender and settlement procedures described above, including provisions
for payment by purchasers of TERMS in the remarketing or for payment to selling
Holders of TERMS, may be modified to the extent required by DTC or to the
extent required to facilitate the tender and remarketing of TERMS in
certificated form, if the book-entry system is no longer available for the
TERMS at the time of the remarketing. In addition, the Remarketing Dealer may,
in accordance with the terms of the Indenture, modify the tender and settlement
procedures set forth above in order to facilitate the tender and settlement
process.
As long as DTC's nominee holds the certificates representing any TERMS in
the book-entry system of DTC, no certificates for such TERMS will be delivered
by any selling Holder to reflect any transfer of such TERMS effected in the
remarketing. In addition, under the terms of the TERMS and the Remarketing
Agreement (described below), the Company has agreed that, notwithstanding any
provision to the contrary set forth in
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the Indenture, (i) it will use its best efforts to maintain the TERMS in
book-entry form with DTC or any successor thereto and to appoint a successor
depositary to the extent necessary to maintain the TERMS in book-entry form,
and (ii) it will waive any discretionary right it otherwise has under the
Indenture to cause the TERMS to be issued in certificated form.
For further information with respect to transfers and settlement through
DTC, see "Description of Debt Securities -- Book-Entry Debt Securities" in the
accompanying Prospectus.
The Remarketing Dealer. The Company and the Remarketing Dealer are
entering into a Remarketing Agreement, the general terms and provisions of
which are summarized below.
The Remarketing Dealer will not receive any fees or reimbursement of
expenses from the Company in connection with the remarketing.
In connection with the remarketing of the TERMS bearing the Interest Rate
to Maturity, the Remarketing Dealer will sell the TERMS for distribution to the
Reference Corporate Dealer that provides the lowest bid indication with respect
to the determination of the Applicable Spread. The Remarketing Agreement
provides the Remarketing Dealer with the right to match the lowest bid
indication received from the Reference Corporate Dealers with respect to the
determination of the Interest Rate to Maturity and to thereby have the right to
distribute the TERMS.
The Company will agree to indemnify the Remarketing Dealer against certain
liabilities, including liabilities under the Securities Act of 1933 (the
"Securities Act"), arising out of or in connection with its duties under the
Remarketing Agreement.
In the event that the Remarketing Dealer elects to remarket the TERMS as
described herein, the obligation of the Remarketing Dealer to purchase TERMS
from Holders of TERMS will be subject to several conditions precedent set forth
in the Remarketing Agreement, including the conditions that, since the
Notification Date, no material adverse change in the financial condition or
results of operations of the Company and its subsidiaries, considered as one
enterprise, shall have occurred and that no Event of Default (as defined in the
Indenture), or any event which, with the giving of notice or passage of time,
or both, would constitute an Event of Default, with respect to the TERMS shall
have occurred and be continuing. In addition, the Remarketing Agreement will
provide for the termination thereof on or before a Remarketing Date upon the
occurrence of certain events as set forth in the Remarketing Agreement.
No Holder of any TERMS shall have any rights or claims under the
Remarketing Agreement or against the Remarketing Dealer as a result of the
Remarketing Dealer not purchasing such TERMS.
The Remarketing Agreement will also provide that the Remarketing Dealer
may resign at any time as Remarketing Dealer, such resignation to be effective
10 days after the delivery to the Company and the Trustee of notice of such
resignation. In certain limited circumstances, the Remarketing Dealer may be
terminated. In either such case, the Remarketing Dealer shall select its
successor from a group of five broker-dealers of national standing identified
by the Company who, subject to certain conditions, may assume the Remarketing
Dealer's rights and obligations under the Remarketing Agreement.
The Remarketing Dealer, in its individual or any other capacity, may buy,
sell, hold and deal in any of the TERMS. The Remarketing Dealer may exercise
any vote or join in any action which any Holder of TERMS may be entitled to
exercise or take with like effect as if it did not act in any capacity under
the Remarketing Agreement. The Remarketing Dealer, in its individual capacity,
either as principal or agent, may also engage in or have an interest in any
financial or other transaction with the Company as freely as if did not act in
any capacity under the Remarketing Agreement.
Repurchase
In the event that (i) the Remarketing Dealer for any reason does not
notify the Company of the Interest Rate to Maturity or the Window Period
Interest Rate by (a) in the case of the Interest Rate to Maturity, 4:00 p.m.,
New York City time, on the third Business Day prior to the Initial Investor
Maturity Date (if the Initial Investor Maturity Date is not a Window Period
Remarketing Date) or the Additional Remarketing Date (if the
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<PAGE>
Initial Investor Maturity Date is a Window Period Remarketing Date), or (b) in
the case of the Window Period Interest Rate, 4:00 p.m., New York City time, on
the second Business Day prior to the Initial Investor Maturity Date, or (ii)
prior to a Remarketing Date, the Remarketing Dealer has resigned and no
successor has been appointed on or before the third Business Day immediately
preceding such Remarketing Date, or (iii) since the Notification Date, a
material adverse change in the financial condition or results of operations of
the Company and its subsidiaries, considered as one enterprise, shall have
occurred or an Event of Default, or any event which, with the giving of notice
or passage of time, or both, would constitute an Event of Default, with respect
to the TERMS shall have occurred and be continuing, or any other event
constituting a termination event under the Remarketing Agreement shall have
occurred, or (iv) the Remarketing Dealer for any reason elects not to purchase
the TERMS for remarketing on a Remarketing Date, or (v) the Remarketing Dealer
for any reason does not purchase all tendered TERMS on the applicable
Remarketing Date, the Company will repurchase the TERMS as a whole on such
Remarketing Date at a price equal to 100% of the principal amount of the TERMS
plus all accrued and unpaid interest, if any, on the TERMS to such date. In any
such case, payment will be made by the Company to the DTC Participant of each
tendering Holder of TERMS, by book-entry through DTC by the close of business
on the Remarketing Date against delivery through DTC of such Holder's tendered
TERMS.
Redemption
If the Remarketing Dealer elects to remarket the TERMS on a Remarketing
Date, the TERMS will be subject to mandatory tender to the Remarketing Dealer
for remarketing on such date, in each case subject to the conditions described
above under "Tender of TERMS; Remarketing" and "Repurchase" and to the
Company's right to redeem the TERMS from the Remarketing Dealer as described in
the next sentence. The Company will notify the Remarketing Dealer and the
Trustee, not later than the fourth Business Day immediately preceding the
applicable Remarketing Date, if the Company irrevocably elects to exercise its
right to redeem the TERMS, in whole but not in part, from the Remarketing
Dealer on such date at the Optional Redemption Price.
The "Optional Redemption Price" shall be the sum of (i) the greater of (x)
100% of the full aggregate principal amount of the TERMS and (y) the Dollar
Price as of the applicable Remarketing Date (which, if the applicable
Remarketing Date is the Additional Remarketing Date, will equal the Accreted
Dollar Price) plus, in the case of either (x) or (y) above, accrued and unpaid
interest to the applicable Remarketing Date.
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The following summary of certain United States Federal income tax
consequences of the purchase, ownership and disposition of the TERMS is based
upon laws, regulations, rulings and decisions now in effect, all of which are
subject to change (including changes in effective dates) or possible differing
interpretations. It deals only with TERMS held as capital assets and does not
purport to deal with persons in special tax situations, such as financial
institutions, insurance companies, regulated investment companies, dealers in
securities or currencies, persons holding TERMS as a hedge against currency
risk or as a position in a "straddle" for tax purposes, or persons whose
functional currency is not the U.S. dollar. Persons considering the purchase of
the TERMS should consult their own tax advisors concerning the application of
United States Federal income tax laws to their particular situations as well as
any consequences of the purchase, ownership and disposition of the TERMS
arising under the laws of any other taxing jurisdiction.
As used herein, the term "U.S. Holder" means a Holder of a TERMS that is
for United States Federal income tax purposes (i) a citizen or resident of the
United States, or (ii) a corporation, partnership or other entity created or
organized in or under the laws of the United States or of any political
subdivision thereof (other than a partnership that is not treated as a United
States person under any applicable Treasury regulations), or (iii) an estate
whose income is subject to United States Federal income tax regardless of its
source, or (iv) a trust if a court within the United States is able to exercise
primary supervision over the administration of the trust and one or more United
States persons have the authority to control all substantial decisions of the
trust, or (v) any other person whose income or gain in respect of a TERMS is
effectively connected with the conduct of a United States trade or business.
Notwithstanding the preceding sentence, to the extent provided in Treasury
regulations, certain trusts in existence on August 20, 1996, and treated as
United States persons prior to such date, that elect to continue to be treated
as United States persons also will be a U.S. Holder. As used herein, the term
"non-U.S. Holder" means a Holder of a TERMS that is not a U.S. Holder.
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The United States Federal income tax treatment of debt obligations such as
the TERMS is not entirely certain. Because the TERMS are subject to mandatory
tender on the Initial Investor Maturity Date, the Company intends to treat the
TERMS as maturing on the Initial Investor Maturity Date for United States
Federal income tax purposes. By purchasing the TERMS, the U.S. Holder agrees to
follow such treatment for United States Federal income tax purposes. Based on
such treatment, interest on the TERMS will constitute "qualified stated
interest" and generally will be taxable to a U.S. Holder as ordinary interest
income at the time such payments are accrued or received (in accordance with
the U.S. Holder's regular method of tax accounting). Under the foregoing, if
the TERMS are issued to the Holder at par value or alternatively, the excess of
the par value over the issue price does not exceed the statutory de minimis
amount (generally 1/4 of 1% of the TERMS' stated redemption price at the
Initial Investor Maturity Date multiplied by the number of complete years to
the Initial Investor Maturity Date from its issue date), the TERMS will not be
treated as having original issue discount.
It is expected that the TERMS will be issued without having original issue
discount. If, however, the TERMS are issued at a discount greater than the
statutory de minimis amount, a Holder would be required to include original
issue discount in income as ordinary interest for United States Federal income
tax purposes as it accrues under a constant yield method in advance of receipt
of the cash payments attributable to such income, regardless of the Holder's
regular method of accounting.
Under the foregoing treatment, upon the sale, exchange or retirement of a
TERMS, a U.S. Holder generally will recognize taxable gain or loss equal to the
difference between the amount realized on the sale, exchange or retirement
(other than amounts representing accrued and unpaid interest) and such U.S.
Holder's adjusted tax basis in the TERMS. A U.S. Holder's adjusted tax basis in
a TERMS generally will equal such U.S. Holder's initial investment in the TERMS
increased by any original issue discount included in income (and accrued market
discount, if any, if the U.S. Holder has included such market discount in
income) and decreased by the amount of any payments, other than qualified
stated interest payments, received and amortizable bond premium taken with
respect to such TERMS. Such gain or loss will generally be long-term capital
gain or loss if the TERMS were held for more than one year.
Currently, individual taxpayers are subject to reduced maximum tax rates
on their long-term capital gains depending on the length of the holding period
for the capital assets. Gains recognized on capital assets held by an
individual taxpayer for more than eighteen months are subject to a 20% maximum
rate and capital gains recognized on capital assets held by an individual
taxpayer for more than twelve months but less than eighteen months are subject
to a 28% maximum rate (the "mid-term rate"). On June 25, 1998, the House of
Representatives passed the IRS Restructuring and Reform Act of 1998 (the
"legislation") which would eliminate the mid-term rate and apply the 20%
maximum rate to all gains recognized by individual tax payers on the sale of
capital assets held for more than 12 months. The Senate is expected to vote on
this legislation in early July. The legislation would apply retroactively to
the sale or disposition of a capital asset occurring after December 31, 1997.
No assurance can be given on whether or not the legislation will be enacted
into law. Prospective investors are urged to consult their own tax advisors
regarding this legislation.
There can be no assurance that the Internal Revenue Service ("IRS") will
agree with the Company's treatment of the TERMS and it is possible that the IRS
could assert another treatment. For instance, it is possible that the IRS could
seek to treat the TERMS as maturing on the Maturity Date.
In the event the TERMS were treated as maturing on the Maturity Date for
United States Federal income tax purposes, because the Interest Rate to
Maturity will not be determined until the Determination Date, the TERMS would
be treated as having contingent interest under the Internal Revenue Code of
1986, as amended (the "Code"). In such event, under Treasury Regulations
governing debt instruments that provide for contingent payments (the
"Contingent Payment Regulations"), the Company would be required to construct a
projected payment schedule for the TERMS, based upon the Company's current
borrowing costs for comparable debt instruments of the Company, from which an
estimated yield on the TERMS would be calculated. A U.S. Holder would be
required to include in income original issue discount in an amount equal to the
product of the adjusted issue price of the TERMS at the beginning of each
interest accrual period and the estimated yield of the TERMS. In general, for
these purposes, a TERMS' adjusted issue price would equal the TERMS' issue
price increased by the interest previously accrued on the TERMS, and reduced by
all payments made on the TERMS. As a result of the application of the
Contingent Payment Regulations, it is possible that a U.S. Holder would be
required to include interest in income in excess of actual cash payments
received for certain taxable years.
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<PAGE>
In addition, the character of any gain or loss, upon the sale or exchange
of a TERMS (including a sale pursuant to the mandatory tender on the Initial
Investor Maturity Date) by a U.S. Holder, will likely differ if the TERMS were
treated as contingent payment obligations. Any such taxable gain generally
would be treated as ordinary income. Any such taxable loss generally would be
ordinary to the extent of previously accrued original issue discount, and any
excess would generally be treated as capital loss.
Non-U.S. Holders
A non-U.S. Holder will not be subject to United States Federal income
taxes on payments of principal, premium (if any) or interest (including
original issue discount, if any) on a TERMS, unless such non-U.S. Holder is a
direct or indirect 10% or greater shareholder of the Company, a controlled
foreign corporation related to the Company or a bank receiving interest
described in section 881(c)(3)(A) of the Code. To qualify for the exemption
from taxation, the last United States payor in the chain of payment prior to
payment to a non-U.S. Holder (the "Withholding Agent") must have received in
the year in which a payment of interest or principal occurs, or in either of
the two preceding calendar years, a statement that (i) is signed by the Holder
of the TERMS under penalties of perjury, (ii) certifies that such owner is not
a U.S. Holder and (iii) provides the name and address of the Holder. The
statement may be made on an IRS Form W-8 or a substantially similar form, and
the Holder must inform the Withholding Agent of any change in the information
on the statement within 30 days of such change. If a TERMS is held through a
securities clearing organization or certain other financial institutions, the
organization or institution may provide a signed statement to the Withholding
Agent. However, in such case, the signed statement must be accompanied by a
copy of the IRS Form W-8 or the substitute form provided by the Holder to the
organization or institution. The Treasury Department is considering
implementation of further certification requirements aimed at determining
whether the issuer of a debt obligation is related to holders thereof.
Generally, a non-U.S. Holder will not be subject to United States Federal
income taxes on any amount which constitutes gain upon retirement or
disposition of a TERMS, provided the gain is not effectively connected with the
conduct of a trade or business in the United States by the non-U.S. Holder.
Certain other exceptions may be applicable, and a non-U.S. Holder should
consult its tax advisor in this regard.
The TERMS will not be includible in the estate of a non-U.S. Holder unless
the individual is a direct or indirect 10% or greater shareholder of the
Company or, at the time of such individual's death, payments in respect of the
TERMS would have been effectively connected with the conduct by such individual
of a trade or business in the United States.
Backup Withholding
Backup withholding of United States Federal income tax at a rate of 31%
may apply to payments made in respect of the TERMS to registered owners who are
not "exempt recipients" and who fail to provide certain identifying information
(such as the registered owner's taxpayer identification number) in the required
manner. Generally, individuals are not exempt recipients, whereas corporations
and certain other entities generally are exempt recipients. Payments made in
respect of the TERMS to a U.S. Holder must be reported to the IRS, unless the
U.S. Holder is an exempt recipient or establishes an exemption. Compliance with
the identification procedures described in the preceding section would
establish an exemption from backup withholding for those non-U.S. Holders who
are not exempt recipients.
In addition, upon the sale of a TERMS to (or through) a broker, the broker
must withhold 31% of the entire purchase price, unless either (i) the broker
determines that the seller is a corporation or other exempt recipient or (ii)
the seller provides, in the required manner, certain identifying information
and, in the case of a non-U.S. Holder, certifies that such seller is a non-U.S.
Holder (and certain other conditions are met). Such a sale must also be
reported by the broker to the IRS, unless either (i) the broker determines that
the seller is an exempt recipient or (ii) the seller certifies its non-U.S.
status (and certain other conditions are met). Certification of the registered
owner's non-U.S. status would be made normally on an IRS Form W-8 under
penalties of perjury, although in certain cases it may be possible to submit
other documentary evidence.
Any amounts withheld under the backup withholding rules from a payment to
a Holder would be allowed as a refund or a credit against such Holder's United
States Federal income tax provided the required information is furnished to the
IRS.
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New Withholding Regulations
On October 6, 1997, the Treasury Department issued new regulations (the
"New Regulations") which make certain modifications to the withholding, backup
withholding and information reporting rules described above. The New
Regulations attempt to unify certification requirements and modify reliance
standards. The New Regulations will generally be effective for payments made
after December 31, 1999, subject to certain transition rules. Prospective
investors are urged to consult their own tax advisors regarding the New
Regulations.
UNDERWRITING
Subject to the terms and conditions set forth in a Distribution Agreement
dated as of February 26, 1998, as supplemented by a Terms Agreement dated as of
June 30, 1998 (the "Distribution Agreement"), between the Company and Credit
Suisse First Boston Corporation (the "Underwriter"), the Company has agreed to
sell to the Underwriter, and the Underwriter has agreed to purchase from the
Company, the entire principal amount of the TERMS at a price equal to 102.04%
of the principal amount thereof. Such amount includes a premium paid by the
Remarketing Dealer for the right to remarket the TERMS.
In the Distribution Agreement, the Underwriter has agreed, subject to the
terms and conditions set forth therein, to purchase all of the TERMS offered
hereby if any TERMS are purchased. The Underwriter has advised the Company that
the Underwriter proposes to offer the TERMS from time to time for sale in
negotiated transactions or otherwise, at prices relating to prevailing market
prices determined at the time of sale. The Underwriter may effect such
transactions by selling TERMS to or through dealers and such dealers may
receive compensation in the form of underwriting discounts, concessions or
commissions from the Underwriter and any purchasers of TERMS for whom they may
act as agent. The Underwriter and any dealers that participate with the
Underwriter in the distribution of the TERMS may be deemed to be underwriters,
and any discounts or commissions received by them and any profit on the resale
of TERMS by them may be deemed to be underwriting compensation.
The TERMS are a new issue of securities with no established trading
market. The Company has been advised by the Underwriter that the Underwriter
intends to make a market in the TERMS, but it is not obligated to do so and may
discontinue market making at any time without notice. No assurance can be given
as to the liquidity of the trading market for the TERMS.
Following a Remarketing Date, the TERMS may be remarketed to or through
the Underwriter, directly to purchasers, to dealers or otherwise. Such
transactions may be effected from time to time at a fixed price or prices, or
at market prices prevailing at the time of sales at prices related to such
prevailing market prices or at negotiated prices. If required at any time, this
Pricing Supplement and the accompanying Prospectus and Prospectus Supplement,
as amended or supplemented, or a new Prospectus may be used in connection with
remarketing the TERMS. The TERMS may also be remarketed following a Remarketing
Date in one or more private transactions, including pursuant to Rule 144A under
the Securities Act.
In the ordinary course of business, the Underwriter and its affiliates
have engaged and may in the future engage in investment banking transactions
with the Company and certain of its affiliates.
The Company has agreed to indemnify the Underwriter against certain
liabilities, including liabilities under the Securities Act, or to make
contribution to certain payments in respect thereof.
VALIDITY OF THE TERMS
The validity of the TERMS offered hereby will be passed upon for the
Company by Willkie Farr & Gallagher, New York, New York. Certain legal matters
will be passed upon for the Underwriter by Brown & Wood LLP, New York, New
York.
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No dealer, salesperson or other individual has been authorized to give any
information or to make any representations other than those contained or
incorporated by reference in this Pricing Supplement or the Prospectus or
Prospectus Supplement in connection with the offer made by this Pricing
Supplement and the Prospectus and Prospectus Supplement and, if given or made,
such information or representations must not be relied upon as having been
authorized by the Company or the Underwriter. Neither the delivery of this
Pricing Supplement and the Prospectus and Prospectus Supplement nor any sale
made hereunder and thereunder shall under any circumstance create an
implication that there has been no change in the affairs of the Company since
the date hereof. This Pricing Supplement and the Prospectus and Prospectus
Supplement do not constitute an offer or solicitation by anyone in any
jurisdiction in which such offer or solicitation is not authorized or in which
the person making such offer or solicitation is not qualified to do so or to
anyone to whom it is unlawful to make such offer or solicitation.
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TABLE OF CONTENTS
Pricing Supplement
Page
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Ratio of Earnings to Fixed Charges .............................. 2
Description of the TERMS ........................................ 2
Certain United States Federal
Income Tax Considerations ................................... 8
Underwriting .................................................... 11
Validity of the TERMS ........................................... 11
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<PAGE>
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$75,000,000
PEP BOYS(R)
6.92% Term Enhanced
ReMarketable Securities(SM)
("TERMS(SM)")
PRICING SUPPLEMENT
Credit Suisse First Boston
"Term Enhanced ReMarketable Securities(SM)"
and "TERMS(SM)" are service marks owned by
Credit Suisse First Boston Corporation
- --------------------------------------------------------------------------------
