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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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SCHEDULE 13E-4/A
(AMENDMENT NO. 1)
ISSUER TENDER OFFER STATEMENT
(PURSUANT TO SECTION 13(e)(1) OF THE SECURITIES EXCHANGE ACT OF 1934)
------------------------
THE PEP BOYS - MANNY, MOE & JACK
(NAME OF ISSUER)
THE PEP BOYS - MANNY, MOE & JACK
(NAME OF PERSON(S) FILING STATEMENT)
COMMON STOCK, PAR VALUE $1.00 PER SHARE
(TITLE OF CLASS OF SECURITIES)
713278109
(CUSIP NUMBER OF CLASS OF SECURITIES)
MITCHELL G. LEIBOVITZ
CHAIRMAN OF THE BOARD, CHIEF EXECUTIVE OFFICER AND PRESIDENT
THE PEP BOYS - MANNY, MOE & JACK
3111 WEST ALLEGHENY AVENUE
PHILADELPHIA, PENNSYLVANIA 19132
(215) 229-9000
(NAME, ADDRESS AND TELEPHONE NUMBER
OF PERSON AUTHORIZED TO RECEIVE NOTICES
AND COMMUNICATIONS ON BEHALF OF THE PERSON(S) FILING STATEMENT)
Copies To:
DANIEL D. RUBINO, ESQ.
WILLKIE FARR & GALLAGHER
787 SEVENTH AVENUE
NEW YORK, NEW YORK 10019-6099
(212) 728-8000
DECEMBER 23, 1998
(DATE TENDER OFFER FIRST PUBLISHED,
SENT OR GIVEN TO SECURITY HOLDERS)
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CALCULATION OF FILING FEE
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TRANSACTION AMOUNT OF
VALUATION* FILING FEE
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$160,000,000 $32,000
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* Calculated solely for the purpose of determining the filing fee,
based upon the purchase of 10,000,000 shares of Common Stock at
the maximum tender offer price per share of $16.00.
[X] Check box if any part of the fee is offset as provided by Rule
0-11(a)(2) and identify the filing with which the offsetting fee
was previously paid. Identify the previous filing by registration
statement number, or the form or schedule and the date of its
filing.
Amount Previously Paid: $32,000
Form or Registration No. : Schedule 13E-4
Filing Party: The Pep Boys - Manny, Moe & Jack
Date Filed: December 23, 1998
<PAGE>
This Amendment No. 1 amends and supplements the Issuer Tender Offer
Statement on Schedule 13E-4 (the "Statement") dated December 23, 1998 filed by
The Pep Boys - Manny, Moe & Jack, a Pennsylvania corporation (the "Company"),
relating to the offer by the Company to purchase 10,000,000 shares (or such
lesser number of shares as are validly tendered and not properly withdrawn) of
its common stock, par value $1.00 per share ("Common Stock") (shares of Common
Stock, together with associated common stock purchase rights issued pursuant to
the Rights Agreement, dated as of December 5, 1997, between the Company and
First Union National Bank, as Rights Agent, are hereinafter referred to as
"Shares"), 63,825,110 of which Shares were outstanding as of December 22, 1998,
at a price not greater than $16.00 nor less than $13.50 per Share, net to the
seller in cash, without interest thereon, upon the terms and subject to the
conditions set forth in the Offer to Purchase, dated December 23, 1998 (the
"Offer to Purchase"), and in the related Letter of Transmittal, which, as
amended or supplemented from time to time, together constitute the "Offer",
copies of which are attached as Exhibit (a)(1) and (a)(2), respectively, to the
Statement. Capitalized terms defined in the Statement and not otherwise defined
herein shall have the meanings specified in the Statement.
On January 19, 1999, the Company announced that it has extended the
Offer by one business day. The Offer will expire, unless further extended, at
12:00 Midnight, New York City time, on Monday, January 25, 1999.
ITEM 2. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
(a)-(b) The information set forth below is hereby added to Section 2 -- "Purpose
of the Offer; Certain Effects of the Offer -- The Financing" of the Offer to
Purchase.
On January 19, 1999, the Company announced that it has obtained
$67,000,000 of commitments for the Financing. The Company will fund the purchase
of Shares pursuant to the Offer with the proceeds of a private placement of two
tranches of its Senior Notes and, to the extent necessary, with cash on hand.
The Financing, which may be increased to up to $77,000,000 aggregate principal
amount of Senior Notes, is expected to close promptly after the Expiration Date.
The Senior Notes will be issued at par and will pay interest
semi-annually. The first tranche, for up to $45,000,000, will mature in 2011 and
will bear interest at 7.95% per annum. This tranche will require equal annual
principal payments commencing at the end of the eighth year from issuance,
resulting in an average life of approximately ten years. The second tranche, for
up to $22,000,000 (and which may be increased to $32,000,000), will mature in
2009 and will bear interest at approximately 7.80% per annum, subject to
prevailing interest rates on the Expiration Date. This tranche will require
equal annual principal payments commencing at the end of the fourth year from
issuance, resulting in an average life of approximately seven years. In
addition, the interest rates on the Senior Notes is subject to a 0.50% increase
for such time as the credit rating of the Company's long-term unsecured debt
securities decreases below its current level.
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The Senior Notes will be callable at any time, at the option of the
Company, in whole or in part, at the greater of par and the present value of the
future debt service on the Senior Notes.
The Senior Notes will not be registered under the Securities Act of
1933, as amended, and may not be offered or sold in the United States absent
registration or an applicable exemption from registration requirements.
The information set forth in the press release dated January 19, 1999,
included herewith as Exhibit (a)(11), in the term sheet for the Senior Notes
dated January 15, 1999, included herewith as Exhibit (b)(5), and in the sample
commitment letter dated January 19, 1999, included herewith as Exhibit (b)(6),
is incorporated herein by reference.
ITEM 8. ADDITIONAL INFORMATION.
(e) The information set forth in Section 7 -- "Certain Conditions of the Offer"
of the Offer to Purchase is amended and restated in its entirety as follows.
7. CERTAIN CONDITIONS OF THE OFFER
The Offer is conditioned upon the Company's having obtained waivers
under or amendments to certain of its existing credit facilities to permit the
Offer. See Section 2, "Purpose of the Offer; Certain Effects of the Offer". In
addition, notwithstanding any other provision of the Offer, the Company shall
not be required to accept for payment, purchase or pay for any Shares tendered,
and may terminate or amend the Offer or may postpone the acceptance for payment
of, or the purchase of and the payment for Shares tendered, subject to Rule
13e-4(f) under the Exchange Act, if at any time on or after December 23, 1998
and prior to the Expiration Date (whether any Shares have theretofore been
accepted for payment, purchased or paid for pursuant to the Offer) any of the
following events shall have occurred (or shall have been determined by the
Company to have occurred) that, in the Company's judgment (regardless of the
circumstances giving rise thereto, including an action or omission to act by the
Company), makes it inadvisable to proceed with the Offer or with such acceptance
for payment or payment:
(a) there shall have been threatened, instituted or pending
any action or proceeding by any government or governmental, regulatory
or administrative agency, authority or tribunal or any other person,
domestic or foreign, before any court, authority, agency or tribunal
that directly or indirectly: (i) challenges the making of the Offer,
the acquisition of some or all of the Shares pursuant to the Offer or
otherwise relates in any manner to the Offer; or (ii) in the Company's
reasonable judgment, could materially adversely affect the business,
condition (financial or other), income, operations or prospects of the
Company and its subsidiaries, or otherwise materially impair in any way
the contemplated future conduct of the business of the Company or any
of its subsidiaries or materially impair the contemplated benefits of
the Offer to the Company;
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(b) there shall have been any action threatened, pending or
taken, or approval withheld, or any statute, rule, regulation,
judgment, order or injunction threatened, proposed, sought,
promulgated, enacted, entered, amended, enforced or deemed to be
applicable to the Offer or the Company of any of its subsidiaries, by
any court or any authority, agency, or tribunal that, in the Company's
reasonable judgment, would or might directly or indirectly: (i) make
the acceptance for payment of, or payment for, some or all of the
Shares illegal or otherwise restrict or prohibit consummation of the
Offer or otherwise relates in any manner to the Offer; (ii) delay or
restrict the ability of the Company, or render the Company unable, to
accept for payment or pay for some or all of the Shares; (iii)
materially impair the contemplated benefits of the Offer to the
Company; or (iv) materially adversely affect the business, condition
(financial or other), income, operations or prospects of the Company
and its subsidiaries, taken as a whole, or otherwise materially impair
in any way the contemplated future conduct of the business of the
Company or any of its subsidiaries;
(c) there shall have occurred: (i) any general suspension of
trading in, or limitation on prices for, securities on any national
securities exchange or in the over-the-counter market; (ii) the
declaration of any banking moratorium or any suspension of payments in
respect of banks in the United States (whether or not mandatory); (iii)
the commencement of a war, armed hostilities or other international or
national crises directly or indirectly involving the United States;
(iv) any limitation (whether or not mandatory) by any governmental,
regulatory or administrative agency or authority on, or any event that,
in the Company's reasonable judgment, might affect, the extension of
credit by banks or other lending institutions in the United States; (v)
any significant decrease in the market price of the Shares or in the
market prices of equity securities generally or any change in the
general political, market, economic or financial conditions in the
United States or abroad that could, in the reasonable judgment of the
Company, have a material adverse effect on the business, condition
(financial or otherwise), income, operations or prospects of the
Company and its subsidiaries, taken as a whole, or on the trading in
the Shares or on the proposed financing for the Offer; (vi) in the case
of any of the foregoing existing at the time of the commencement of the
Offer, a material acceleration or worsening thereof; or (vii) any
decline in either the Dow Jones Industrial Average or the Standard and
Poor's Index of 500 Industrial Companies by an amount in excess of 10%
measured from the close of business on December 22, 1998;
(d) a tender or exchange offer with respect to some or all of
the Shares (other than the Offer), or a merger or acquisition proposal
for the Company, shall have been proposed, announced or made by another
person or shall have been publicly disclosed, or any person or group
shall have filed a Notification and Report Form under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976 reflecting an
intent to acquire the Company or any of the Shares, or the Company
shall have learned that any person or "group" (within the meaning of
Section 13(d)(3) of the Exchange Act) shall have acquired or proposed
to acquire beneficial ownership of more than 5% of the
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outstanding Shares, or any new group shall have been formed that
beneficially owns more than 5% of the outstanding Shares; or
(e) any change or changes shall have occurred, be pending or
threatened or be proposed, which have affected or could affect the
business, scope, condition (financial or otherwise), assets, income,
level of indebtedness, operations, prospects, stock ownership or
capital structure of the Company or its subsidiaries which, in the
Company's reasonable judgment, is or may be material to the Company or
its subsidiaries.
The foregoing conditions are for the sole benefit of the Company and
may be asserted by the Company regardless of the circumstances (including any
action or inaction by the Company) giving rise to any such condition, and may be
waived by the Company, in whole or in part, at any time and from time to time in
its reasonable discretion. The Company's failure at any time to exercise any of
the foregoing rights shall not be deemed a waiver of any such right and each
such right shall be deemed an ongoing right which may be asserted at any time
and from time to time. Any determination by the Company concerning the events
described above will be final and binding on all parties.
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS.
(a)(11) Form of Press Release issued by the Company, dated January 19, 1999
(b)(5) Term Sheet for the Senior Notes, dated January 15, 1999.
(b)(6) Sample Commitment Letter relating to Senior Notes, dated January
19, 1999.
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SIGNATURE
After due inquiry and to the best of my knowledge and belief, I certify
that the information set forth in this Amendment to Schedule 13E-4 is true,
complete and correct.
THE PEP BOYS - MANNY, MOE & JACK
By: /s/ Mitchell G. Leibovitz
-------------------------------------
Mitchell G. Leibovitz
Chairman of the Board,
Chief Executive Officer and President
Dated: January 20, 1999
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EXHIBIT INDEX
Exhibit No. Description
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(a)(11) Form of Press Release issued by the Company, dated January 19, 1999.
(b)(5) Term Sheet for the Senior Notes, dated January 15, 1999.
(b)(6) Sample Commitment Letter relating to Senior Notes, dated January
19, 1999.
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[PEP BOYS LOGO]
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Press Release New York Stock Exchange "PBY"
For Immediate Release
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January 19, 1999
Pep Boys Obtains Financing Commitments For Its Self Tender Offer
The Pep Boys - Manny, Moe & Jack (NYSE: "PBY") Pursuant to the requirements of
the Securities and exchange Commission, announced today the receipt of
$67,000,000 in commitments for the financing of its "Dutch Auction" issuer
tender offer to purchase for cash up to 10,000,000 shares of its common stock at
a purchase price not greater than $16.00 nor less than $13.50 per share. The
Company will fund the purchase with the proceeds of a private placement of two
tranches of its Senior Notes and, to the extent necessary, with cash on hand.
The private placement, which may be increased to up to $77,000,000 aggregate
principal amount of Senior Notes, is expected to close promptly after the
expiration of the tender offer.
Pursuant to the requirements of the Securities and Exchange Commission, the
Company has extended the tender offer by one business day. The tender offer will
expire, unless further extended, at 12:00 Midnight, New York City time, on
Monday, January 25, 1999.
The Senior Notes will be issued at par and will pay interest semi-annually. The
first tranche, for up to $45,000,000, will mature in 2011 and will bear interest
at 7.95% per annum. The second tranche, for up to $22,000,000 (and which may be
increased to $32,000,000), will mature in 2009 and will bear interest at
approximately 7.80%, subject to prevailing interest rates on the expiration date
of the tender offer. In addition, the interest rates on the Senior Notes are
subject to a 0.50% increase for such time as the credit rating of the Company's
long-term unsecured debt securities decreases below its current level.
The Senior Notes will not be registered under the Securities Act of 1933, as
amended, and may not be offered or sold in the United States absent registration
or an applicable exemption from registration requirements.
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Contact: Nancy R. Kyle, Director of Investor Relations [Pep Boys logo
3111 West Allegheny Avenue, Philadelphia, PA 19132 with caricatures]
Phone: 215-430-9720 Fax: 215-223-5267
E-mail address: [email protected]
Internet: http://www.pepboys.com
<PAGE>
Summary of Proposed Terms Draft 1/15/99
Up to $75,000,000 ___% Senior Notes due 20__
1. Issuer The Pep Boys - Manny, Moe & Jack (the
"Company")
2. Issue Up to $75,000,000 ___% Senior Notes due 20__
(the "Notes")
3. Coupon ___% per annum, payable semiannually; provided
that if the Company's long-term unsecured
indebtedness is not rated at least Baa3 by
Moody's or BBB- by Standard & Poor's (the
"Targeted Ratings") at any time on or prior to
[June 30, 2001], the coupon rate will be
increased by 50 basis points and shall remain
at such level unless and until the Company
regains both of the Targeted Ratings (or
higher credit ratings by Moody's and Standard
& Poor's) with respect to its long-term
unsecured indebtedness.
4. Offering Price 100% of the principal amount
5. Closing Date January 26, 1999, or a later date on or before
February 28, 1999 selected by the Company,
provided that the Company will not be
obligated to close on Notes in an amount
exceeding the purchase price of the Company's
common stock tendered pursuant to the Dutch
auction commenced on December 23, 1998.
6. Use of Proceeds The net proceeds from the sale of the Notes
will be used to repurchase stock of the
Company and for general corporate purposes.
7. Ratings Baa3/BBB- by Moody's and Standard & Poor's
respectively.
8. Mandatory Redemption The Notes will require equal annual principal
payments commencing at the end of the ____
year, resulting in an average life of
approximately ___ years.
9. Optional Redemption The Notes will be callable at any time, at the
option of the Company, in whole or in part, at
a price equal to the greater of par and the
present value of the future debt service on
the Notes, discounted at the then current
yield on U.S. Treasury securities of a
maturity comparable to the remaining weighted
average life of the Notes plus 50 basis points
(the "Make-Whole Price").
<PAGE>
10. Limitation on
Indebtedness; Subsidiary
Indebtedness (i) The Company will not permit the Total
Net Indebtedness to EBITDA Ratio
determined on a pro forma basis (i.e.,
giving effect in the calculation of
EBITDA to acquisitions and dispositions
occurring during a given four-quarter
period as of the beginning of such
period) to exceed
(1) 5.0 to 1 from [July 31,] 1999 to and
including [January 29, 2000],
(2) 4.5 to 1 from [January 30,] 2000 to
and including [January 27,] 2001,
and
(3) 4.0 to 1 thereafter;
provided that (A) on [July 31,] 1999
EBITDA shall be calculated by
annualizing EBITDA for the Company's
fiscal quarters ending [May 1], 1999 and
[July 31], 1999 and (B) on [October 30],
1999 EBITDA shall be calculated by
annualizing EBITDA for the Company's
fiscal quarters ending on [May 1], [July
31], and [October 30], 1999.
(ii) The Company will not permit any
Subsidiary to create, assume, incur,
guarantee or otherwise become liable in
respect of any Indebtedness except:
(a) Indebtedness secured by Liens
permitted by Section (ii) or (iii)
of the Limitations on Liens;
(b) guarantees by Subsidiaries in
respect of indebtedness outstanding
under the Company's main Bank Credit
Facility not exceeding $200,000,000
and of the Notes, and guarantees of
other unsecured Indebtedness of the
Company by Subsidiaries which have
also guaranteed the Notes and
guarantees of secured Indebtedness
of the Company by Subsidiaries which
have also guaranteed the Notes but
only if and for so long as the Notes
are secured equally and ratably with
or prior to such secured
Indebtedness (pursuant to
documentation in form and substance
reasonably satisfactory to the
Required Holders);
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(c) In the case of any person that after
the Closing Date becomes a
Subsidiary or is consolidated with
or merged with or into a Subsidiary
or sells, leases or otherwise
disposes of all of its property to a
Subsidiary, Indebtedness outstanding
at the time such person becomes a
Subsidiary or is so consolidated or
merged or effects such sale, lease
or other disposition of property
(and not created in anticipation
thereof);
(d) Indebtedness owing to the Company or
a Subsidiary; and
(e) other Indebtedness, provided that
immediately after giving effect
thereto and to the application of
the proceeds of such Indebtedness
the sum (without duplication) of
(1) the aggregate unpaid principal
amount of Indebtedness
(including Capital Lease
Obligations) of the Company
secured by Liens permitted by
Section (v) of the Limitation
on Liens plus
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(2) the aggregate unpaid principal
amount of Indebtedness of all
Subsidiaries (other than
Indebtedness permitted by
Section (a), (b), (c) or (d)
above) plus
(3) the aggregate Attributable Debt
in connection with all sale and
leaseback transactions of the
Company and its Subsidiaries
entered into after the Closing
Date in accordance with Section
(i) of the Limitation on Sale
and Leaseback Transactions,
does not exceed 10% of Consolidated
Capitalization.
11. Limitation on Liens The Company will not, and will not permit any
Subsidiary to, create, assume, incur or suffer
to exist any Lien upon or with respect to any
property or assets, whether now owned or
hereafter acquired, securing any Indebtedness,
without making effective provision (pursuant
to documentation in form and substance
reasonably satisfactory to the Required
Holders) whereby the Notes shall be secured by
such Lien equally and ratably with or prior to
any and all Indebtedness to be secured
thereby, provided that nothing in this
Limitation on Liens shall prohibit:
(i) Liens in respect of property of the
Company or a Subsidiary existing on the
Closing Date and extensions, renewals
and replacements of such Liens
(including successive extensions,
renewals and replacements), provided
that the principal amount of
Indebtedness (or the maximum commitment
therefor) secured by any such Lien is
not increased and such Lien does not
extend to or cover any property other
than the property covered by such Lien
on the Closing Date;
(ii) Liens in respect of property acquired or
constructed by the Company or a
Subsidiary after the Closing Date, which
are created at the time of or within 360
days after acquisition or completion of
construction of such property to secure
Indebtedness assumed or incurred to
finance all or any part of the purchase
price or cost of construction of such
property, provided that in any such
case:
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(a) no such Lien shall extend to or
cover any other property of the
Company or such Subsidiary, as the
case may be, and
(b) the aggregate principal amount of
Indebtedness secured by all such
Liens in respect of any such
property shall not exceed the cost
of such property and any
improvements then being financed;
(iii) Liens in respect of property acquired by
the Company or a Subsidiary after the
Closing Date, existing on such property
at the time of acquisition thereof (and
not created in anticipation thereof),
or, in the case of any person that after
the Closing Date becomes a Subsidiary or
is consolidated with or merged with or
into the Company or a Subsidiary or
sells, leases or otherwise disposes of
all or substantially all of its property
to the Company or a Subsidiary, Liens
existing at the time such person becomes
a Subsidiary or is so consolidated or
merged or effects such sale, lease or
other disposition of property (and not
created in anticipation thereof),
provided that in any such case no such
Lien shall extend to or cover any other
property of the Company or such
Subsidiary, as the case may be;
(iv) Liens securing Indebtedness owed by a
Subsidiary to the Company or to a
Subsidiary; and
(v) Liens which would otherwise not be
permitted by Sections (i) through (iv)
above, securing additional Indebtedness
of the Company or a Subsidiary, provided
that after giving effect thereto and to
the application of the proceeds of such
Indebtedness the sum (without
duplication) of
(a) the aggregate unpaid principal
amount of Indebtedness (including
Capitalized Lease Obligations) of
the Company secured by such Liens
permitted by this Section plus
(b) the aggregate unpaid principal
amount of Indebtedness of
Subsidiaries (other than
Indebtedness permitted by Section
(ii) (a), (b), (c) or (d) of the
Limitation on Indebtedness;
Subsidiary Indebtedness) plus
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(c) the aggregate Attributable Debt in
connection with all sale and
leaseback transactions of the
Company and its Subsidiaries entered
into after the Closing Date in
accordance with the provisions of
Section (i) of the Limitation on
Sale and Leaseback Transactions,
does not exceed 10% of Consolidated
Capitalization.
12. Limitation on Sale
and Leaseback
Transactions The Company will not, and will not permit any
Subsidiary to, sell, transfer or otherwise
dispose of (collectively, a "transfer") any
asset on terms whereby the asset or a
substantially similar asset is or will be
leased or reacquired by the Company or any
Subsidiary over a period in excess of three
years, unless either
(i) after giving effect to such transaction
and the incurrence of Attributable Debt
in respect thereof and to the
application of the proceeds of such
Attributable Debt, the sum (without
duplication) of
(a) the aggregate unpaid principal
amount of Indebtedness (including
Capitalized Lease Obligations) of
the Company secured by Liens
permitted by Section (v) of the
Limitation on Liens plus
(b) the aggregate unpaid principal
amount of Indebtedness of
Subsidiaries (other than
Indebtedness permitted by section
(ii) (a), (b), (c) or (d) of the
Limitation on Indebtedness;
Subsidiary Indebtedness) plus
(c) the aggregate Attributable Debt in
connection with all sale and
leaseback transactions of the
Company and its Subsidiaries entered
into after the Closing Date in
accordance with the provisions of
this Section (i),
does not exceed 10% of Consolidated
Capitalization, or
(ii) the net proceeds realized from the
transfer are applied within 360 days
after the receipt thereof to the
reinvestment in similar categories of
property or assets for use in the
business of the Company and its
Subsidiaries or to the repayment of
unsubordinated Funded Indebtedness of
the Company or a Subsidiary.
<PAGE>
13. Maintenance of
Net Worth The Company will not at any time permit
Consolidated Net Worth to be less than the sum
of (a) [$525,000,000] plus (b) 25% of
Consolidated Net Income for each fiscal year
(beginning with the fiscal year ending on
January 29, 2000) for which Consolidated Net
Income is positive.
14. Limitation on
Asset Sales The Company will not and will not permit any
Subsidiary to, directly or indirectly, make
any sale, transfer, lease (as lessor), loan or
other disposition of any property or assets
(an "Asset Sale") other than:
(i) Asset Sales in the ordinary course of
business;
(ii) Asset Sales of property or assets by a
Subsidiary to the Company or a
Subsidiary; or
(iii) other Asset Sales, provided that in each
case
(a) immediately before and after giving
effect thereto, no Default or Event
of Default shall have occurred and
be continuing; and
(b) the aggregate net book value of
property or assets disposed of in
such Asset Sale and all other Asset
Sales under this clause (iii) by the
Company and its Subsidiaries during
the immediately preceding twelve
months does not exceed 15% of
Consolidated Capitalization (as of
the last day of the quarterly
accounting period ending on or most
recently prior to the last day of
such twelve month period),
<PAGE>
and provided further that for purposes of
clause (b) above there shall be excluded the
net book value of property or assets disposed
of in an Asset Sale if and to the extent such
Asset Sale is made for cash, payable in full
upon the completion of such Asset Sale, and an
amount equal to the net proceeds realized upon
such Asset Sale is applied by the Company or
such Subsidiary, as the case may be, within
360 days after the effective date of such
Asset Sale (A) to the reinvestment in similar
categories of property or assets for use in
the business of the Company and its
Subsidiaries or (B) to the repayment of
unsubordinated Indebtedness.
15. Limitation on Merger
or Consolidation The Company will not and will not permit any
Subsidiary to consolidate with or merge with
any other corporation or convey, transfer or
lease all or substantially all of its assets
in a single transaction or series of
transactions to any person except:
(i) a Subsidiary may consolidate or merge
with any other corporation or convey or
transfer all or substantially all of its
assets to
(a) the Company (provided that the
Company shall be the continuing,
surviving or acquiring corporation
(the "surviving corporation")) or a
then existing Subsidiary, or
(b) any other person in an Asset Sale
involving all of the outstanding
stock or all or substantially all of
the assets of such Subsidiary, in
either case subject to the
Limitations on Asset Sales; provided
that if such Subsidiary is at the
time a guarantor of the Notes and it
is not the surviving corporation,
the surviving corporation shall have
(1) executed and delivered to each
holder of a Note its assumption
of the due and punctual
performance and observance of
all obligations of such
Subsidiary under its guarantee
of the Notes, and
(2) caused to be delivered to each
holder of a Note an opinion of
counsel reasonably satisfactory
to the Required Holders to the
effect that all agreements or
instruments effecting such
assumption are enforceable in
accordance with their terms and
comply with the terms of the
Note Purchase Agreement and
such guarantee of the Notes;
and
<PAGE>
(ii) the Company may consolidate or merge
with any other corporation or convey or
transfer all or substantially all of its
assets to a corporation organized and
existing under the laws of the United
States or any State thereof, provided
that
(a) if the Company is not the surviving
corporation, the surviving
corporation shall have
(1) executed and delivered to each
holder of a Note its assumption
of the due and punctual
performance and observance of
all obligations of the Company
under the Note Purchase
Agreement and the Notes and
(2) caused to be delivered to each
holder of a Note an opinion of
counsel reasonably satisfactory
to the Required Holders to the
effect that all agreements or
instruments effecting such
assumption are enforceable in
accordance with their terms and
comply with the terms of the
Note Purchase Agreement, and
(b) immediately after giving effect to
such transaction, no Default or
Event of Default shall have occurred
and be continuing.
16. Limitation on Transactions
with Affiliates The Company will not and will not permit any
Subsidiary to enter into directly or
indirectly any Material transaction or
Material group of related transactions
(including without limitation the purchase,
lease, sale or exchange of properties of any
kind or the rendering of any service) with any
Affiliate (other than the Company or another
Subsidiary), except pursuant to the reasonable
requirements of the Company's or such
Subsidiary's business and upon fair and
reasonable terms no less favorable to the
Company or such Subsidiary than would be
obtainable in a comparable arm's-length
transaction with a person not an Affiliate.
17. Events of Default An "Event of Default" shall exist if any of
the following conditions or events shall occur
and be continuing:
(i) the Company defaults in the payment of
any principal or make-whole amount, if
any, on any Note when the same becomes
due and payable, whether at maturity or
at a date fixed for prepayment or by
declaration or otherwise; or
(ii) the Company defaults in the payment of
any interest on any Note for more than
five business days after the same
becomes due and payable; or
<PAGE>
(iii) the Company defaults in the performance
of or compliance with certain
requirements pertaining to the prompt
delivery of the notice of Default or
Event of Default or those contained in
Limitation on Indebtedness; Subsidiary
Indebtedness, Limitation on Liens,
Limitation on Sale and Leaseback
Transactions, Maintenance of Net Worth,
Limitation on Asset Sales and Limitation
on Merger or Consolidation (and, in the
case of any such default under
Maintenance of Net Worth, such default
shall have continued for a period of 30
days after a Responsible Officer obtains
knowledge thereof if and so long as the
Company is proceeding diligently and in
good faith, by issuing equity securities
or otherwise, to remedy such default
during such 30-day period); or
(iv) the Company defaults in the performance
of or compliance with any other term
contained in the Note Purchase Agreement
(other than those referred to in
paragraphs (i), (ii) and (iii) of this
Section) and such default is not
remedied within 30 days after a
Responsible Officer obtains knowledge of
such default; or
(v) any representation or warranty made in
writing by or on behalf of the Company
or any Subsidiary or by any officer of
the Company or any Subsidiary in the
Note Purchase Agreement or in any
writing furnished in connection with the
transactions contemplated thereby proves
to have been false or incorrect in any
material respect on the date as of which
made; or
<PAGE>
(vi) (a) the Company or any Subsidiary is in
default (as principal or as guarantor
or other surety) in the payment of any
principal of or premium or make-whole
amount or interest on any Indebtedness
(other than the Notes) that is
outstanding in an aggregate principal
amount of at least $20,000,000 beyond
any period of grace provided with
respect thereto, or (b) the Company or
any Subsidiary is in default in the
performance of or compliance with any
term of any evidence of any
Indebtedness outstanding in an
aggregate principal amount of at least
$20,000,000 or of any mortgage,
indenture or other agreement relating
thereto or any other condition exists,
and as a consequence of such default or
condition such Indebtedness has become,
or has been declared, due and payable
before its stated maturity or before
its regularly scheduled dates of
payment, or (c) as a consequence of the
occurrence or continuation of any event
or condition (other than the passage of
time or the right of the holder of
Indebtedness to convert such
Indebtedness into equity interests or a
sale of assets or other transaction
that is permitted if made in connection
with a repayment of Indebtedness), the
Company or any Subsidiary has become
obligated to purchase or repay any
Indebtedness outstanding in an
aggregate principal amount of at least
$20,000,000 before its regular maturity
or before its regularly scheduled dates
of payment; or
(vii) the Company or any Subsidiary (a) is
generally not paying, or admits in
writing its inability to pay, its debts
as they become due, (b) files, or
consents by answer or otherwise to the
filing against it of, a petition for
relief or reorganization or arrangement
or any other petition in bankruptcy,
for liquidation or to take advantage of
any bankruptcy, insolvency,
reorganization, moratorium or other
similar law of any jurisdiction, (c)
makes an assignment for the benefit of
its creditors, (d) consents to the
appointment of a custodian, receiver,
trustee or other officer with similar
powers with respect to it or with
respect to any substantial part of its
property, (e) is adjudicated as
insolvent or to be liquidated, or (f)
takes corporate action for the purpose
of any of the foregoing; or
<PAGE>
(viii) a court or governmental authority of
competent jurisdiction enters an order
appointing, without consent by the
Company or any Subsidiary, a custodian,
receiver, trustee or other officer with
similar powers with respect to it or
with respect to any substantial part of
its property, or constituting an order
for relief or approving a petition for
relief or reorganization or any other
petition in bankruptcy or for
liquidation or to take advantage of any
bankruptcy or insolvency law of any
jurisdiction, or ordering the
dissolution, winding-up or liquidation
of the Company or any such Subsidiary,
or any such petition shall be filed
against the Company or any such
Subsidiary and such petition shall not
be dismissed within 90 days; or
(ix) a final judgment or judgments for the
payment of money aggregating in excess
of $20,000,000 are rendered against one
or more of the Company and its
Subsidiaries which judgments are not,
within 60 days after entry thereof,
bonded, paid, discharged or stayed
pending appeal, or are not discharged
within 60 days after the expiration of
such stay;
(x) or certain Material ERISA-related
conditions and events.
18. Repurchase of Notes The Company may repurchase the Notes in whole
or in part at any time, provided that (i) the
offer to repurchase is made pro rata to all
holders of the Notes and remains outstanding
for a reasonable period of time (not to be
less than 30 days), (ii) any Notes so
repurchased are thereafter canceled and (iii)
the remaining average life of the Notes not
repurchased will remain unchanged.
<PAGE>
19. Amendments Any provision of the Note Purchase Agreement
or the Notes may be amended or waived with the
written consent of the Required Holders except
that each holder must consent in writing to
any amendment or waiver which changes the
interest rate or the maturity, prepayment or
redemption provisions of the Notes or the
percentage required to amend the Note Purchase
Agreement or the Notes.
20. Definitions "Attributable Debt" means, as to any
particular lease relating to a sale and
leaseback transaction occurring after the
Closing Date, the total amount of rent
(discounted semiannually from the respective
due dates thereof at the interest rate
implicit in such lease) required to be paid by
the lessee under such lease during the
remaining term thereof.
"Capital Lease" means, at any time, a lease
with respect to which the lessee is required
concurrently to recognize the acquisition of
an asset and the incurrence of a liability in
accordance with GAAP.
"Capitalized Lease Obligations" means, with
respect to any person, all outstanding
obligations of such person in respect of
Capital Leases, taken at the capitalized
amount thereof, accounted for as indebtedness
in accordance with GAAP.
"Consolidated Capitalization" means, at any
date, the sum of (i) Consolidated Indebtedness
plus (ii) Consolidated Net Worth plus (iii)
deferred taxes, all as determined on a
consolidated basis for the Company and its
Subsidiaries in accordance with GAAP.
"Consolidated Indebtedness" means, at any
date, all Indebtedness of the Company and its
Subsidiaries determined on a consolidated
basis in accordance with GAAP.
"Consolidated Interest Expense" means, for any
period, the sum for the Company and its
Subsidiaries, determined on a consolidated
basis in accordance with GAAP, of all amounts
which would be deducted in computing
Consolidated Net Income for such period on
account of interest on Indebtedness (including
imputed interest in respect of Capitalized
Lease Obligations and amortization of debt
discount and expense).
"Consolidated Net Income" means, for any
period, the net income of the Company and its
Subsidiaries for such period, determined on a
consolidated basis in accordance with GAAP,
excluding
(i) the proceeds of any life insurance
policy,
<PAGE>
(ii) any gains arising from (a) the sale or
other disposition of any assets (other
than current assets) to the extent that
the aggregate amount of the gains during
such period from the sale or other
disposition of assets (other than
current assets) exceeds the aggregate
amount of the losses during such period
from the sale, abandonment or other
disposition of assets (other than
current assets), (b) any write-up of
assets or (c) the acquisition of
outstanding securities of the Company or
any Subsidiary,
(iii) any amount representing any interest in
the undistributed earnings of any person
other than a Subsidiary,
(iv) any earnings, prior to the date of
acquisition, of any person acquired in
any manner, and any earnings of any
Subsidiary acquired prior to its
becoming a Subsidiary,
(v) any earnings of a successor to or
transferee of the assets of the Company
prior to its becoming such successor or
transferee,
(vi) any deferred credit (or amortization of
a deferred credit) arising from the
acquisition of any person, and
(vii) any extraordinary gains not covered by
clause (ii) above to the extent the
aggregate amount of such extraordinary
gains during such period exceeds the
aggregate amount of extraordinary losses
during such period not arising from the
sale, abandonment or other disposition
of assets (other than current assets).
"Consolidated Net Indebtedness" means, at any
date, Consolidated Indebtedness less the
aggregate amount (without duplication) of the
cash balances at bank and in hand, short-term
deposits and other cash equivalents.
"Consolidated Net Worth" means, at any date,
on a consolidated basis for the Company and
its Subsidiaries, (i) the sum of (a) capital
stock taken at par or stated value plus (b)
capital in excess of par or stated value
relating to capital stock plus (c) retained
earnings (or minus any retained earning
deficit) minus (ii) the sum of treasury stock,
capital stock subscribed for and unissued and
other contra-equity accounts, all determined
in accordance with GAAP.
"EBITDA" means, for any period Consolidated
Net Income plus all amounts deducted in the
computation thereof on account of (i)
Consolidated Interest Expense, (ii)
depreciation and amortization expenses and
other non-cash charges and (iii) income and
profit taxes.
<PAGE>
"Indebtedness" means, with respect to any
person at any time, without duplication,
(i) its liabilities for borrowed money,
(ii) its liabilities for the deferred
purchase price of property acquired by
such person (excluding accounts payable
arising in the ordinary course of
business and not overdue but including
all liabilities created or arising under
any conditional sale or other title
retention agreement with respect to any
such property),
(iii) its Capitalized Lease Obligations,
(iv) all liabilities for borrowed money
secured by any Lien with respect to any
property owned by such person (whether
or not it has assumed or otherwise
become liable for such liabilities),
provided that if such person has not
assumed or otherwise become liable for
such liabilities the amount of
Indebtedness in respect of such
liabilities shall not exceed the fair
market value of the property securing
such liabilities at the time of
incurrence thereof,
(v) all its liabilities in respect of
letters of credit or instruments serving
a similar function issued or accepted
for its account by banks and other
financial institutions (whether or not
representing obligations for borrowed
money),
(vi) swaps of such person, and
(vii) any guaranty of such person with respect
to liabilities of a type described in
any of clauses (i) through (vi) above;
provided that, in the case of the Company and
its Subsidiaries, Indebtedness shall not
include obligations arising from agreements of
the Company or a Subsidiary to provide
indemnification, adjustment of purchase price,
earn-out or other similar obligations, in each
case incurred in connection with the
acquisition or disposition of any business or
assets of the Company or a Subsidiary, but
only to the extent such obligations are not
required to be accounted for as indebtedness
under GAAP.
<PAGE>
"Material" means material in relation to the
business, financial condition, assets or
properties of the Company and its
Subsidiaries, taken as a whole.
"Required Holders" means, at any time, the
holders of at least a majority in unpaid
principal amount of the Notes at the time
outstanding.
"Responsible Officer" means the chief
financial officer, principal accounting
officer, treasurer or comptroller of the
Company and any officer of the Company with
responsibility for the administration of the
relevant portion of the Note Purchase
Agreement.
"Subsidiary" means, with respect to any
person, any corporation or other business
entity a majority of the combined voting power
of all Voting Stock of which is owned by such
person or one or more of its Subsidiaries or
such person and one or more of its
Subsidiaries.
"Total Net Indebtedness to EBITDA Ratio"
means, at any date, the ratio of (i)
Consolidated Net Indebtedness as at such date
to (ii) EBITDA for the four consecutive fiscal
quarters then most recently ended determined
on a pro forma basis (i.e., giving effect to
acquisitions and dispositions occurring during
a given four-quarter period as of the
beginning of such period).
<PAGE>
"Voting Stock" means, with respect to any
person, any shares of stock or other equity
interests of any class or classes of such
person whose holders are entitled under
ordinary circumstances (irrespective of
whether at the time stock or other equity
interests of any other class or classes shall
have or might have voting power by reason of
the happening of any contingency) to vote for
the election of a majority of the directors,
managers, trustees or other governing body of
such person.
20. Direct Placement Status The Notes are being distributed to the
purchasers in a private placement not
registered under the Securities Act of 1933
and in reliance upon the representations of
the purchasers that they are purchasing the
Notes for investment and not with a view to
any resale or distribution thereof.
Accordingly, the purchasers should proceed on
the assumption that they must bear the
economic risk of the investment for an
indefinite period, since the Notes may not be
sold unless (i) they are subsequently
registered under the Securities Act of 1933;
(ii) they are sold on a private placement
basis; or (iii) they may be sold without
registration under the Securities Act of 1933.
21. Counsel The reasonable fees and disbursements of
special counsel for the purchasers will be
borne by the Company.
<PAGE>
[Sample Commitment Letter. Substantially similar letters have been
executed by Jefferson-Pilot Life Insurance Company, Lincoln
National Investment Management and Ohio National Life Insurance.]
Lloyd E. Campbell
Managing Director
Investment Banking
January 19, 1999
Allstate Life Insurance Company
3075 Sanders Road, STE G3A
Northbrook, IL 60062-7124
Re: The Pep Boys - Manny, Moe & Jack
$75,000,000 ___% Senior Notes due 20__
Attn.: Mr. Jerry D. Zinkula
Senior Portfolio Manager
This is to confirm our understanding that you will purchase from the issuer, The
Pep Boys - Manny, Moe & Jack (the "Company"), $15,000,000 principal amount of a
proposed issue of $75,000,000 __% Senior Notes due 2009 at one hundred percent
(100%) of par. Confirming our understanding with regard to the coupon, the
interest rate will be fixed at a spread of three hundred and ten basis points
(+310 bps) over the on-the-run ten (10) year United States Treasury. Your
purchase is subject to the negotiation and execution of a note purchase
agreement and related documentation mutually satisfactory to you and the
Company.
The terms of the issue will be substantially as outlined in the Summary of
Proposed Terms dated January 15, 1999.
Mr. David A. Stagliano (212-530-5368) of the law firm Milbank, Tweed, Hadley &
McCloy has been selected to act as independent counsel for the purchasers, and
the Company has agreed to pay their fees and disbursements. Counsel is engaged
in revising the Note Purchase Agreement and copies will be sent to you for
examination in the next day or two.
You have advised us that these securities are to be acquired by you, for your
own account, for other accounts with respect to which you have sole investment
discretion or for the accounts of the investors identified below, for investment
and not with a view to the distribution or resale thereof, and that you and any
other such accounts have no present intention of distributing or reselling such
securities, subject nevertheless to any requirement of law that the disposition
of your property shall at all times be and remain within your control.
We would appreciate you confirming the foregoing by signing and returning the
enclosed duplicate copy of this letter to the
<PAGE>
attention of the undersigned at Credit Suisse First Boston Corporation, 11
Madison Avenue, New York, New York 10010.
Very truly yours,
CREDIT SUISSE FIRST BOSTON CORPORATION
As agent for The Pep Boys - Manny, Moe & Jack
By:____________________
Lloyd E. Campbell
Managing Director
CONFIRMED:
[ ]
By:__________________
Title:
Please list the names of the purchasers for whom you are acting as agent and
with respect to whom you do not have sole investment discretion, and the
principal amounts of the purchases to be made by them respectively.
