-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, l7+FnPgRRwTLpA6r1yOa2jj/z+tr0MnyuDUvtBptjzaZnZba0DyketbfPmsetXAa x+cLu2KUsPOnJeljNsdlMw== 0000950116-94-000109.txt : 19940822 0000950116-94-000109.hdr.sgml : 19940822 ACCESSION NUMBER: 0000950116-94-000109 CONFORMED SUBMISSION TYPE: S-3 PUBLIC DOCUMENT COUNT: 7 FILED AS OF DATE: 19940817 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PEP BOYS MANNY MOE & JACK CENTRAL INDEX KEY: 0000077449 STANDARD INDUSTRIAL CLASSIFICATION: 5531 IRS NUMBER: 230962915 STATE OF INCORPORATION: PA FISCAL YEAR END: 0203 FILING VALUES: FORM TYPE: S-3 SEC ACT: 1933 Act SEC FILE NUMBER: 033-55115 FILM NUMBER: 94544779 BUSINESS ADDRESS: STREET 1: 3111 W ALLEGHENY AVE CITY: PHILADELPHIA STATE: PA ZIP: 19132 BUSINESS PHONE: 2152299000 S-3 1 FORM S-3 1 As filed with the Securities and Exchange Commission on August 17, 1994 Registration No. 33- ========================================================================== SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ---------- FORM S-3 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 ---------- THE PEP BOYS - MANNY, MOE & JACK (Exact name of registrant as specified in its charter) Pennsylvania 23-0962915 (State or other jurisdiction (I.R.S. Employer of incorporation) Identification No.) ---------- 3111 West Allegheny Avenue Philadelphia, Pennsylvania 19132 (215) 229-9000 (Address, including zip code, and telephone number, including area code, of registrant's principal executive offices) ---------- Mitchell G. Leibovitz Chairman of the Board, President and Chief Executive Officer 3111 West Allegheny Avenue Philadelphia, Pennsylvania 19132 (215) 229-9000 (Name, address, including zip code, and telephone number, including area code, of agent for service) ---------- with copies to: Daniel D. Rubino, Esq. Morton A. Pierce, Esq. Willkie Farr & Gallagher Dewey Ballantine One Citicorp Center 1301 Avenue of the Americas 153 East 53rd Street New York, New York 10019 New York, New York 10022 (212) 259-8000 (212) 821-8000 (Counsel for Registrant) (Counsel for Underwriter) ---------- Approximate date of commencement of proposed sale to the public: As soon as practicable after the effective date of this Registration Statement. If the only securities being registered on this Form are being offered pursuant to dividend or interest reinvestment plans, please check the following box. / / If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, other than securities offered only in connection with dividend or reinvestment plans, check the following box. / / ---------- 2 CALCULATION OF REGISTRATION FEE
===================================================================================================================== Proposed Proposed Maximum Maximum Amount of Title of Each Class of Securities Amount to be Offering Price per Aggregate Offering Registration to be Registered Registered(1) Security(2) Price(2) Fee - ---------------------------------------------------------------------------------------------------------------------- % Convertible Subordinated Notes due 1999 $86,250,000 100% $86,250,000 $29,742 - ---------------------------------------------------------------------------------------------------------------------- Common Stock, par value $1.00 per share (including attached Common Stock Purchase Rights (3)) ......... (4) - - None ======================================================================================================================
(1) Includes $11,250,000 in principal amount of Notes subject to the Underwriter's over-allotment option. (2) Estimated solely for the purpose of calculating the registration fee. (3) Prior to the occurrence of certain events, the Common Stock Purchase Rights will not be evidenced separately from shares of the Common Stock. Upon the occurrence of such events, separate Rights certificates will be issued representing one Right for each share of Common Stock held. (4) Represents such indeterminate number of shares of Common Stock as shall be issuable upon conversion of the Notes. ---------- The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment that specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until this Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine. ========================================================================== 3 Information contained herein is subject to completion or amendment. A registration statement relating to these securities has been filed with the Securities and Exchange Commission. These securities may not be sold nor may offers to buy be accepted prior to the time the registration statement becomes effective. This prospectus shall not constitute an offer to sell or the solicitation of an offer to buy nor shall there be any sale of these securities in any State in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such State. SUBJECT TO COMPLETION, DATED AUGUST 17, 1994 (Logo) $75,000,000 The Pep Boys - Manny, Moe & Jack % Convertible Subordinated Notes Due 1999 Interest payable and Due , 1999 ---------- The Notes are convertible into Common Stock of The Pep Boys - Manny, Moe & Jack at any time on or before , 1999, unless previously redeemed, at a conversion price of $ per share, subject to adjustment in certain events. On August 16, 1994, the reported last sale price of the Common Stock on the New York Stock Exchange was $33 1/8 per share. The Notes are redeemable, in whole or in part, at the option of the Company at any time on or after , 1997 at the redemption prices set forth herein plus accrued interest. The Notes are subordinated to all existing and future Senior Indebtedness (as defined herein) of the Company. As of July 30, 1994, after giving effect to the offering of the Notes (the "Offering") and application of the net proceeds therefrom, Senior Indebtedness of the Company would have been approximately $327.4 million. The Notes have been approved for listing on the New York Stock Exchange, subject to official notice of issuance. ---------- 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 AD- EQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. 4
Underwriting Price to Discounts and Proceeds to Public (1) Commissions Company (1)(2) ----------- -------------- -------------- Per Note ............................................. % % % Total (3) ............................................ $ $ $
(1) Plus accrued interest, if any, from , 1994. (2) Before deduction of estimated expenses of $250,000 payable by the Company. (3) The Company has granted the Underwriter an option, exercisable for 30 days from the date of the initial public offering of the Notes, to purchase up to an additional $11,250,000 principal amount of Notes solely to cover over-allotments. If the option is exercised in full, the total Price to Public will be $ , Underwriting Discounts and Commissions will be $ and Proceeds to Company will be $ . ---------- The Notes are offered by the Underwriter when, as and if issued by the Company, delivered to and accepted by the Underwriter and subject to its right to reject orders in whole or in part. It is expected that the Notes will be ready for delivery on or about , 1994. CS First Boston The date of this Prospectus is , 1994 5 IN CONNECTION WITH THIS OFFERING, THE UNDERWRITER MAY OVER-ALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE NOTES OFFERED HEREBY OR THE COMMON STOCK OF THE COMPANY AT LEVELS ABOVE THOSE WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NEW YORK STOCK EXCHANGE, IN THE OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME. ---------- AVAILABLE INFORMATION The Company is subject to the informational requirements of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance therewith files annual and quarterly reports, proxy statements and other information with the Securities and Exchange Commission (the "Commission"). Such reports, proxy statements and other information concerning the Company may be inspected, and copies of such material may be obtained at prescribed rates, at the Commission's Public Reference Section, Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, as well as at the Commission's Regional Offices at Seven World Trade Center, New York, New York 10048 and Northwestern Atrium Center, 500 West Madison Street, Room 1400, Chicago, Illinois 60661-2511. The Company's Common Stock is listed on the New York Stock Exchange (the "NYSE"). Reports, proxy statements and other information concerning the Company may be inspected at the offices of the NYSE at 20 Broad Street, New York, New York 10005. This Prospectus constitutes part of a Registration Statement on Form S-3 (the "Registration Statement") filed by the Company with the Commission under the Securities Act of 1933, as amended (the "Securities Act"). This Prospectus omits certain of the information contained in the Registration Statement and the exhibits and schedules thereto, in accordance with the rules and regulations of the Commission. For further information concerning the Company and the Notes offered hereby, reference is made to the Registration Statement and the exhibits and schedules filed therewith, which may be inspected without charge at the office of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 and copies of which may be obtained from the Commission at prescribed rates. Any statements contained herein concerning the provisions of any document are not necessarily complete, and, in each instance, reference is made to the copy of such document filed as an exhibit to the Registration Statement or otherwise filed with the Commission. Each such statement is qualified in its entirety by such reference. INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE The Company's Annual Report on Form 10-K for the year ended January 29, 1994, the Company's Quarterly Report on Form 10-Q for the quarter ended April 30, 1994, the description of the Company's common stock, par value $1.00 per share (the "Common Stock"), set forth in the Registration Statement on Form 8-A filed by the Company to register such securities under Section 12 of the Exchange Act, and any amendments or reports filed for the purpose of updating such description, the description of the Company's Common Stock Purchase Rights set forth in the Registration Statement on Form 8-A, dated December 21, 1987, as amended by the Company's Form 8, dated June 30, 1989, and the Company's Current 6 Report on Form 8-K, dated May 6, 1994, each as filed with the Commission pursuant to the Exchange Act, are incorporated into this Prospectus by reference. All reports and other documents subsequently filed by the Company pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of this Prospectus and prior to the termination of this Offering shall be deemed to be incorporated by reference herein and to be a part hereof from the date of filing of such reports and documents. Any statement incorporated herein shall be deemed to be modified or superseded for purposes of this Prospectus to the extent that a statement contained herein or in any other subsequently filed document which also is or is deemed to be incorporated by reference herein modifies or supersedes such statement. Any statement so modified or superseded shall not be deemed, except as so modified or superseded, to constitute a part of this Prospectus. The Company will provide without charge to each person to whom this Prospectus is delivered, upon written or oral request of such person, a copy of any or all of the foregoing documents incorporated herein by reference (other than exhibits to such documents, unless such exhibits are specifically incorporated by reference into such document). Requests for such documents should be submitted in writing to Mr. Frederick A. Stampone, Senior Vice President - Chief Administrative Officer and Secretary, The Pep Boys - Manny, Moe & Jack, 3111 West Allegheny Avenue, Philadelphia, Pennsylvania 19132, telephone (215) 229-9000. THE COMPANY The Pep Boys - Manny, Moe & Jack (together with its subsidiaries, the "Pep Boys" or the "Company") is a leading automotive aftermarket retail and service chain. The Company is engaged principally in the retail sale of automotive parts and accessories, automotive maintenance and service and the installation of parts. Pep Boys operates its business through its chain of 395 Pep Boys stores (as of July 30, 1994), of which 279 are owned and 116 are leased. Pep Boys stores are located in 29 states in predominantly four market areas - the middle Atlantic, southeastern, western and southwestern regions. Pep Boys' operations are supplied by distribution facilities in five locations. The Company operates approximately 8,004,000 gross square feet of retail space for an average of approximately 20,300 gross square feet per store, including an aggregate of 3,741 service bays. A typical new Pep Boys store is a free-standing warehouse format supercenter of approximately 22,000 square feet. Each new supercenter has approximately 11 service bays along with a product offering of approximately 24,000 stock-keeping units ("SKUs") and is generally located in an area with high automotive traffic count and population density. Pep Boys believes that the operation of service bays in its supercenter stores differentiates it from most of its competitors by providing its customers with the ability to purchase parts and have them installed at the same location. Pep Boys intends to introduce a supplemental store format under the name "Pep Boys - PARTS USA", with approximately 22,000 SKUs, in locations that the Company believes will be better served by stores with an extensive selection of parts and accessories but without tires or service bays. See "Recent Developments." 7 During fiscal years 1991, 1992 and 1993, Pep Boys added a net of 24, 20 and 29 stores, respectively. In fiscal 1994, the Company plans to open approximately 50 new warehouse format supercenters and expects to close approximately six older stores. In fiscal 1993, the Company's annual gross revenues increased by more than $85 million to $1.24 billion (a 7% increase) and net earnings increased by $11 million to $65.5 million (a 20% increase). See "Management's Discussion and Analysis of Financial Condition and Results of Operations." Although the Company's competition varies by geographical area, the Company believes that it generally has a favorable competitive position in terms of price, depth and breadth of merchandise, quality of personnel and customer service. The Company believes that it provides customers with among the lowest prices in each of its markets. Pep Boys employs an everyday-low-price strategy which it believes provides its customers better value and consistency on a day-to-day basis and improves inventory management. In addition, Pep Boys believes that it carries among the largest selection of parts, accessories and chemicals in the automotive aftermarket retail industry, with approximately 24,000 SKUs per supercenter. The Company also believes it provides a high level of customer service through its well-trained and knowledgeable employees. The Company's advertising strategy consists primarily of television advertising and multi-page catalogs, supplemented with radio advertising and various in-store promotions. The Company utilizes electronic parts catalogs, enabling employees to reference and access parts instantly while noting price, related items and in-stock position. In addition, the Company monitors product sales by SKU through its point-of-sale system which utilizes bar code slot scanning. This system enables the Company to monitor its gross margins and set minimum and maximum inventory levels for each store. The Company's new centralized buying system and a perpetual inventory-automatic replenishment system orders additional inventory from one of the Company's warehouses when a store's inventory on hand falls below the minimum level set for each SKU. The Pep Boys - Manny, Moe & Jack, a Pennsylvania corporation, was incorporated in 1925. The Company's executive offices are located at 3111 West Allegheny Avenue, Philadelphia, Pennsylvania 19132, telephone (215) 229-9000. RECENT DEVELOPMENTS For the quarter ended July 30, 1994, the Company's sales increased 13% to $370.4 million from $329.1 million for the same period in the prior fiscal year, and the Company's net earnings for the quarter increased 23% to $23.5 million, or $.39 per share, from $19.1 million, or $.31 per share, for the same period in the prior fiscal year. For the six months ended July 30, 1994, the Company's sales increased 13% to $708.1 million from $628.3 million for the same period in the prior fiscal year, and the Company's net earnings for the six months before an accounting change increased 26% to $41.1 million, or $.68 per share, from $32.5 million, or $.53 per share, for the same period in the prior fiscal year. During the first quarter of the 1994 fiscal year, the Company adopted the Financial Accounting Board's SFAS No. 112, "Employers' Accounting for 8 Postemployment Benefits." See "Management's Discussion and Analysis of Financial Condition and Results of Operations." This accounting change resulted in a charge to earnings for the first quarter of $4.3 million, or $.07 per share. During the quarter ended July 30, 1994, the Company's comparable store sales and service revenue increased 5% and 6%, respectively, and during the six months ended July 30, 1994, the Company's comparable store sales and service revenue increased 5% and 8%, respectively. During the quarter ended July 30, 1994, the Company opened eight new warehouse format supercenters bringing the total for the first half of the year to ten new supercenters opened. On August 11, 1994, Pep Boys announced that it will introduce a supplemental store format under the name "Pep Boys - PARTS USA" in locations that the Company believes will be better served by stores with an extensive selection of parts and accessories but without tires or service bays. These locations will primarily consist of certain urban areas, smaller markets and areas located between supercenters. It is expected that PARTS USA stores will stock approximately 22,000 SKUs. As compared to the supercenters, the Company expects these stores to have a higher percentage of hard parts and accessories, the highest margin merchandise categories, in the sales mix. By supplementing its supercenter expansion with PARTS USA stores, the Company seeks to increase its market penetration and share over time. Pep Boys plans to open at least ten PARTS USA stores in 1995. The Company's plans for opening additional supercenters are not expected to be affected by the supplemental PARTS USA store format. Pep Boys intends to open 50 supercenters during its 1994 fiscal year and 60 supercenters during its 1995 fiscal year. USE OF PROCEEDS The net proceeds from the sale of the Convertible Subordinated Notes due 1999 (the "Notes") offered hereby are estimated to be $74.0 million ($85.1 million if the Underwriter's over-allotment option is exercised in full). The proceeds of the Offering will be used to repay portions of the Company's short-term variable-rate debt, bearing interest at rates which range from 4.6% to 5.0%. The short-term debt expected to be repaid was incurred within one year of the date hereof to purchase shares of Common Stock to be held in the Company's flexible employee benefits trust (the "Flexitrust") (established on April 29, 1994 to fund a portion of the Company's obligations arising from various employee compensation and benefit plans), to finance a portion of the capital expenditures incurred in connection with the opening of new stores and for working capital purposes. The short-term debt matures within sixty days of the date of this Prospectus. See "Capitalization." Pending use of the proceeds of the Offering, the Company expects to invest such funds in short-term marketable securities. CAPITALIZATION The following table sets forth the capitalization of the Company at April 30, 1994, and as adjusted to give effect to the sale of the Notes offered hereby (assuming the over-allotment option is not exercised). See "Use of Proceeds." 9
Actual As Adjusted -------- ----------- (amounts in thousands) Short-term debt(1) .......................................................... $ 94,600 $ 20,600 Current maturities of long-term debt ......................................... 7,317 7,317 Long-term debt less current maturities: Indebtedness to banks under revolving credit loan agreement(1) ............. $ 55,000 $ 55,000 Mortgage notes ............................................................. 2,059 2,059 8 7/8% Notes ............................................................... 125,000 125,000 9.33% Notes ................................................................ 23,214 23,214 6 5/8% Notes ............................................................... 75,000 75,000 Notes offered hereby........................................................ - 75,000 -------- -------- $280,273 $355,273 Less current maturities ................................................. 7,317 7,317 -------- -------- Total long-term debt ...................................................... $272,956 $347,956 -------- -------- Stockholders' equity: Common Stock, par value $1.00 per share: Authorized 500,000,000 shares; 61,187,166 shares issued and outstanding ................................. 61,187 61,187 Paid-in capital ............................................................ 124,523 124,523 Retained earnings .......................................................... 399,398 399,398 -------- -------- 585,108 585,108 Less shares held in Flexitrust, 1,965,200 shares at cost(2)................. 52,364 52,364 -------- -------- Total stockholders' equity ................................................ 532,744 532,744 -------- -------- Total long-term debt and stockholders' equity ................................ $805,700 $880,700 ======== ========
---------- (1) As of July 30, 1994, outstanding short-term debt was $92.7 million and outstanding indebtedness to banks under revolving credit loan agreement was $90.0 million. The increase in outstanding indebtedness to banks under revolving credit loan agreement as of July 30, 1994 as compared to April 30, 1994 is primarily the result of capital expenditures associated with the Company's store expansion program. See "Management's Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources." (2) On April 29, 1994, the Company sold these shares of Common Stock, which it had repurchased in the open market, to the Flexitrust in exchange for a promissory note payable to the Company. 10 PRICE RANGE OF COMMON STOCK AND DIVIDENDS The Common Stock of the Company is listed on the New York Stock Exchange under the symbol "PBY". There were 3,573 registered shareholders as of April 30, 1994. The table below sets forth the high and low sales prices of the Common Stock and the quarterly cash dividends declared per share of Common Stock during the periods indicated.
Price Range Cash --------------- Dividends Low High Declared --- ---- -------- Fiscal Year ending January 28, 1995 First Quarter............................................. $26 $31 $.0425 Second Quarter............................................ 29 1/4 33 3/4 .0425 Third Quarter (as of August 16, 1994)..................... 29 1/8 33 7/8 Fiscal Year ended January 29, 1994 First Quarter ............................................ $19 7/8 $26 7/8 $.0375 Second Quarter............................................ 20 24 .0375 Third Quarter ............................................ 20 1/8 25 1/8 .0375 Fourth Quarter............................................ 22 7/8 27 1/2 .0375 Fiscal Year ended January 30, 1993 First Quarter ............................................ $17 1/8 $23 5/8 $.0325 Second Quarter............................................ 19 1/4 24 7/8 .0350 Third Quarter ............................................ 21 1/4 27 3/8 .0350 Fourth Quarter............................................ 21 1/2 27 1/4 .0350
The last reported sales price for the Common Stock on the New York Stock Exchange on August 16, 1994 was $33 1/8. It is the present intention of the Company's Board of Directors to continue to pay regular quarterly cash dividends; however, the declaration and payment of future dividends will be determined by the Board of Directors in its sole discretion and will depend upon the earnings, financial condition and capital needs of the Company and other factors which the Board of Directors deems relevant. 11 SELECTED FINANCIAL DATA The selected financial data for the five years ended January 29, 1994 (except for "Number of retail outlets," "Ratio of earnings to fixed charges" and "Total square footage") were derived from audited financial statements. The financial statements for the three years ended January 29, 1994, which have been audited by Deloitte & Touche LLP, independent certified public accountants, are incorporated by reference herein. The selected financial data for the 13-week periods ended April 30, 1994 and May 1, 1993, respectively, have been derived from unaudited financial statements and reflect, in the opinion of the Company, all adjustments necessary to present fairly the information for such periods. The selected financial data should be read in conjunction with the financial statements and other information contained in the Company's Annual Report on Form 10-K for the year ended January 29, 1994, the Company's Quarterly Report on Form 10-Q for the quarter ended April 30, 1994 and "Management's Discussion and Analysis of Financial Condition and Results of Operations" appearing elsewhere in this Prospectus.
13 Weeks Ended Year Ended --------------------------- ----------------------------------------------------------------------------- April 30, 1994 May 1, 1993 Jan. 29, 1994 Jan. 30, 1993 Feb. 1, 1992 Feb. 2, 1991 Feb. 3, 1990(1) -------------- ----------- ------------- ------------- ------------ ------------ --------------- (dollars in thousands, except per share data) Earnings Statement Data Merchandise sales . $ 290,826 $ 260,452 $1,076,543 $1,008,191 $ 873,381 $ 774,502 $ 703,487 Service revenue ... 46,874 38,695 164,590 147,403 128,127 110,172 95,204 ---------- ---------- ---------- ---------- ---------- ---------- ---------- Total revenues .... 337,700 299,147 1,241,133 1,155,594 1,001,508 884,674 798,691 Gross profit from merchandise sales ............ 82,603 68,905 307,861 272,412 240,199 217,052 190,874 Gross profit from service revenue........... 7,924 5,884 27,457 24,528 19,726 17,854 18,120 ---------- ---------- ---------- ---------- ---------- ---------- ---------- Total gross profit ........... 90,527 74,789 335,318 296,940 259,925 234,906 208,994 Selling, general and administrative expenses ......... 57,926 49,696 214,710 194,160 176,275 157,468 139,913 Operating profit .. 32,601 25,093 120,608 102,780 83,650 77,438 69,081 Nonoperating income ........... 1,099 1,088 3,601 3,015 1,933 1,601 4,097 Interest expense .. 5,720 5,012 19,701 20,180 25,071 20,262 18,054 Earnings before income taxes and change in accounting principle......... 27,980 21,169 104,508 85,615 60,512 58,777 55,124 Income taxes....... 10,423 7,727 38,996 31,036 21,640 21,247 20,061 Earnings before change in accounting principle......... 17,557 13,442 65,512 54,579 38,872 37,530 35,063 Cumulative effect of change in accounting principle......... (4,300) - - - - - - Net earnings....... 13,257 13,442 65,512 54,579 38,872 37,530 35,063 Net earnings per share before cumulative effect of change in accounting principle(2)...... 0.29 0.22 1.06 .90 .69 .67 .63 Cumulative effect of change in accounting principle......... (0.07) - - - - - - Net earnings per share(2)...... 0.22 0.22 1.06 .90 .69 .67 .63 12
13 Weeks Ended Year Ended --------------------------- ----------------------------------------------------------------------------- April 30, 1994 May 1, 1993 Jan. 29, 1994 Jan. 30, 1993 Feb. 1, 1992 Feb. 2, 1991 Feb. 3, 1990(1) -------------- ----------- ------------- ------------- ------------ ------------ --------------- (dollars in thousands, except per share data) Balance Sheet Data Working capital.... $ 77,468 $ 127,507 $ 92,518 $ 104,622 $ 81,935 $ 91,801 $ 70,160 Total assets....... 1,155,615 1,025,910 1,078,518 967,813 856,925 819,421 676,030 Long-term debt..... 272,956 229,943 253,000 209,347 279,250 285,868 227,648 Stockholders' equity ........... 532,744 521,792 547,759 509,763 378,514 344,603 311,754 Other Statistics Ratio of earnings to fixed charges(3)......... 4.7x 4.2x 4.9x 4.3x 3.1x 3.3x 3.4x Depreciation and amortization...... $ 10,542 $ 9,421 $ 39,125 $ 36,674 $ 33,439 $ 27,838 $ 22,941 Capital expenditures...... $ 30,032 $ 19,018 $ 135,165 $ 78,025 $ 65,801 $ 105,826 $ 88,398 Number of retail outlets .......... 387 359 386 357 337 313 281 Total square footage........... 7,813,000 7,095,000 7,771,000 7,039,000 6,522,000 5,950,000 5,299,000 ---------- (1) The fiscal year ended February 3, 1990 included 53 weeks. (2) The shares of Common Stock held by the Flexitrust, which consisted of 1,965,200 shares as of April 30, 1994, are not considered to be outstanding in the computation of earnings per share until the shares are utilized to fund various compensation and benefit plans. (3) Computed by dividing earnings by fixed charges. "Earnings" consist of earnings before income taxes 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).
13 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Results of Operations The following table presents for the periods indicated certain items in the consolidated statements of earnings as a percentage of total revenues (except as otherwise provided) and the percentage change in dollar amounts of such items compared to the indicated prior period.
Percentage of Total Revenues -------------------------------------------------------------------------- 13 Weeks Ended Fiscal Year Ended --------------------------- --------------------------------------------- April 30, 1994 May 1, 1993 Jan. 29, 1994 Jan. 30, 1993 Feb. 1, 1992 -------------- ----------- ------------- ------------- ------------ Merchandise sales 86.1% 87.1% 86.7% 87.2% 87.2% Service revenue(1) ..... 13.9 12.9 13.3 12.8 12.8 -------------------------------------------------------------------------- Total revenues ......... 100.0 100.0 100.0 100.0 100.0 Costs of merchandise sales(2).............. 71.6(3) 73.5(3) 71.4(3) 73.0(3) 72.5(3) Costs of service revenue(2) ........... 83.1(3) 84.8(3) 83.3(3) 83.4(3) 84.6(3) -------------------------------------------------------------------------- Total costs of revenues 73.2 75.0 73.0 74.3 74.0 Gross profit from merchandise sales..... 28.4(3) 26.5(3) 28.6(3) 27.0(3) 27.5(3) Gross profit from service revenue ...... 16.9(3) 15.2(3) 16.7(3) 16.6(3) 15.4(3) -------------------------------------------------------------------------- Total gross profit ..... 26.8 25.0 27.0 25.7 26.0 Selling, general and administrative expenses ............. 17.1 16.6 17.3 16.8 17.6 -------------------------------------------------------------------------- Operating profit ....... 9.7 8.4 9.7 8.9 8.4 Nonoperating income..... .3 .4 .3 .3 .2 Interest expense........ 1.7 1.7 1.6 1.8 2.5 -------------------------------------------------------------------------- Earnings before income taxes and cumulative effect of change in accounting principle.. 8.3 7.1 8.4 7.4 6.1 Income taxes............ 37.3(4) 36.5(4) 37.3(4) 36.3(4) 35.8(4) -------------------------------------------------------------------------- Earnings before cumulative effect of change in accounting principle............. 5.2 4.5 5.3 4.7 3.9 Cumulative effect of change in accounting principle............. (1.3) - - - - -------------------------------------------------------------------------- Net earnings ........... 3.9 4.5 5.3 4.7 3.9 ==========================================================================
14
Percentage Change ------------------------------------------------------------- 1st Quarter 1994 vs. Fiscal 1993 vs. Fiscal 1992 vs. 1st Quarter 1993 Fiscal 1992 Fiscal 1991 -------------------- ---------------- ----------------- Merchandise sales 11.7% 6.8% 15.4% Service revenue(1) ..... 21.1 11.7 15.0 ------------------------------------------------------------- Total revenues ......... 12.9 7.4 15.4 Costs of merchandise sales(2).............. 8.7 4.5 16.2 Costs of service revenue(2) ........... 18.7 11.6 13.4 ------------------------------------------------------------- Total costs of revenues 10.2 5.5 15.8 Gross profit from merchandise sales..... 19.9 13.0 13.4 Gross profit from service revenue ...... 34.7 11.9 24.3 ------------------------------------------------------------- Total gross profit ..... 21.0 12.9 14.2 Selling, general and administrative expenses ............. 16.6 10.6 10.1 ------------------------------------------------------------- Operating profit ....... 29.9 17.3 22.9 Nonoperating income..... 1.0 19.4 56.0 Interest expense........ 14.1 (2.4) (19.5) ------------------------------------------------------------- Earnings before income taxes and cumulative effect of change in accounting principle.. 32.2 22.1 41.5 Income taxes............ 34.9 25.6 43.4 ------------------------------------------------------------- Earnings before cumulative effect of change in accounting principle............. 30.6 20.0 40.4 Cumulative effect of change in accounting principle............. - - - ------------------------------------------------------------- Net earnings ........... (1.4) 20.0 40.4 ============================================================= ---------- (1) Service revenue consists of the labor charge for installing merchandise or maintaining or repairing vehicles, excluding the sale of any installed parts or materials. (2) Costs of merchandise sales include the cost of products sold, buying, warehousing and store occupancy costs. Costs of service revenue include service center payroll and related employee benefits and service center occupancy costs. Occupancy costs include utilities, rents, real estate and property taxes, repairs and maintenance and depreciation and amortization expenses. (3) As a percentage of related sales or revenue, as applicable. (4) As a percentage of earnings before income taxes.
15 Thirteen Weeks Ended April 30, 1994 vs. Thirteen Weeks Ended May 1, 1993 Total revenues for the first quarter increased 13% due to a higher store count (387 at April 30, 1994 compared with 359 at May 1, 1993) coupled with a 6% increase in comparable store revenues (revenues generated by stores in operation during the same months of each period). Comparable store merchandise sales increased 5% while comparable service revenue increased 11%. Gross profit from merchandise sales increased, as a percentage of merchandise sales, due primarily to higher merchandise margins, offset, in part, by an increase in store occupancy costs. Gross profit from service revenue increased, as a percentage of service revenue, due primarily to a decrease in service center occupancy costs. Selling, general and administrative expenses increased, as a percentage of total revenues, due primarily to higher media costs and a slight increase in store expenses. The increase in income taxes, as a percentage of earnings before income taxes, was due primarily to a 1% increase in the federal statutory tax rate from 34% to 35%. The 31% increase in earnings before the cumulative effect of a change in accounting principle in 1994 as compared with 1993, was due primarily to an increase in gross profit from merchandise sales, as a percentage of merchandise sales, offset, in part, by an increase in selling, general and administrative expenses, as a percentage of total revenues. On January 30, 1994, the Company adopted SFAS No. 112, "Employers' Accounting for Postemployment Benefits." This statement establishes accrual accounting standards for employer-provided benefits which cover former or inactive employees after employment, but before retirement. Adoption of this accounting standard on January 30, 1994 resulted in a one-time charge to earnings of $4,300,000 (net of income tax benefit of $2,552,000) or $.07 per share recognized as a cumulative effect of a change in accounting principle. Fiscal 1993 vs. Fiscal 1992 Total revenues for fiscal 1993 increased 7% over fiscal 1992 due to a 16 higher store count (386 at January 29, 1994 compared with 357 at January 30, 1993) coupled with a 1% increase in comparable store revenues. Comparable store merchandise sales remained constant while comparable store service revenue increased 3% over fiscal 1992. The increase in gross profit from merchandise sales, as a percentage of merchandise sales, was due primarily to higher merchandise margins, offset, in part, by increases in store occupancy costs and warehousing costs. The Company currently intends to continue its policy of taking what it deems appropriate measures to respond to the price reduction practices of certain competitors. The small increase in gross profit from service revenue, as a percentage of service revenue, was due primarily to a decrease in service employee benefit costs, offset, in part, by an increase in service personnel and occupancy costs. The increase in selling, general and administrative expenses, as a percentage of total revenues, was due primarily to an increase in store expenses. The decrease in interest expense was due to lower interest rates, offset, in part, by higher debt levels incurred to fund the Company's store expansion program. The increase in income taxes, as a percentage of earnings before income taxes, was due primarily to a 1% increase in the federal statutory tax rate from 34% to 35%. The 20% increase in net earnings in fiscal 1993, as compared with fiscal 1992, was due to a substantial increase in gross profit from merchandise sales, as a percentage of merchandise sales, offset, in part, by an increase in selling, general and administrative expenses, as a percentage of total revenues. Fiscal 1992 vs. Fiscal 1991 Total revenues for fiscal 1992 increased 15% over fiscal 1991 due to a higher store count (357 at January 30, 1993 compared with 337 at February 1, 1992) coupled with a substantial increase in comparable store revenues. Comparable store revenues increased 12% over fiscal 1991. Comparable store merchandise sales increased 12% and comparable store service revenue increased 10% over fiscal 1991. The decrease in gross profit from merchandise sales, as a percentage of merchandise sales, was due primarily to lower merchandise margins offset, in part, by a decrease in store occupancy costs. During fiscal 1992, selling prices on certain merchandise were lowered in an effort to increase market share. Additionally, the Company lowered its selling prices in certain markets on a significant number of items in response to the actions of certain competitors. The increase in gross profit from service revenue, as a percentage of service revenue, was due primarily to decreases in service personnel and 17 occupancy costs, offset, in part, by an increase in service employee benefit costs. The decrease in selling, general and administrative expenses, as a percentage of total revenues, was due primarily to a decrease in store expenses and lower employee benefit and advertising costs. This was partially offset by a slight increase in general office costs. The substantial decrease in interest expense was due primarily to the conversion of substantially all of the Company's $75,000,000 convertible subordinated debentures into equity during fiscal 1992. The 40% increase in net earnings in fiscal 1992, as compared with fiscal 1991, was due to a substantial increase in comparable store revenues, and decreases, as a percentage of total revenues, in selling, general and administrative costs and interest expense, offset, in part, by a decrease in gross profit from merchandise sales. Effects of Inflation The Company uses the LIFO method of inventory valuation. Thus, the cost of merchandise sold approximates current cost. Although the Company cannot accurately determine the precise effect of inflation on its operations, it does not believe inflation has had a material effect on revenues or results of operations. Liquidity and Capital Resources The Company's cash requirements arise principally from the need to finance the acquisition, construction and equipping of new stores and to purchase inventory. The Company opened 37 stores in fiscal 1993, 29 stores in fiscal 1992 and 27 stores in fiscal 1991. In fiscal 1993, with increased levels of capital expenditures due to an accelerated expansion program coupled with cash from operating activities and lines of credit utilized to purchase its stock for transfer to the Flexitrust, the Company increased its debt by $77,525,000. In fiscal 1992, with substantial cash flows from operating activities and the conversion of substantially all its $75,000,000 convertible subordinated debentures, the Company reduced its debt by $72,639,000. In fiscal 1991, with the increased cash flows from operating activities and reduced levels of capital expenditures, the Company reduced its debt by $25,037,000. The following table indicates the Company's principal cash requirements for the past three years. 18
Fiscal 1993 Fiscal 1992 Fiscal 1991 Total ------------------------------------------------------- (dollar amounts in thousands) Capital expenditures ................ $135,165 $78,025 $65,801 $278,991 Increase (decrease) in inventory (net of checks outstanding and accounts payable) ........................... 26,487 24,001 (21,715) 28,773 ----------------------------------------------------- Total cash requirements .............. $161,652 $102,026 $ 44,086 $307,764 ===================================================== Cash provided by operating activities (excluding net inventory additions) $111,595 $100,415 $ 73,625 $285,635 =====================================================
Inventories have increased in the past three years as the Company added a net of 73 stores while stock-keeping units per store rose during the period from approximately 19,000 to approximately 24,000, many of which were higher cost hard parts. During the first quarter of 1994, the Company invested $30,032,000 in property and equipment while inventory increased by $57,097,000. The Company currently plans to open approximately 50 stores in fiscal 1994, two of which have been opened in the first quarter and eight of which have been opened in the second quarter. Management estimates that the cost to open all 50 stores, coupled with capital expenditures relating to existing stores, warehouses and offices during fiscal 1994 will be approximately $155,000,000. In addition to the funds required to finance the Company's store expansion, the Company has authorization to purchase Common Stock having a value of up to $75,000,000 for sale to the Flexitrust, of which Common Stock having a value of $52,364,000 had been purchased as of April 30, 1994 ($57,495,000 as of August 16, 1994). Funds required to finance the store expansion, including related inventory requirements, and the stock repurchase are expected to come from operating activities with the remainder provided by unused lines of credit, which totalled $104,400,000 at April 30, 1994 ($71,300,000 at July 30, 1994), or from accessing traditional lending sources which may include the public capital markets. The Company's working capital was $95,012,000 at July 30, 1994, $77,468,000 at April 30, 1994, $92,518,000 at January 29, 1994 and $104,622,000 at January 30, 1993. The Company's long-term debt, as a percentage of its total capitalization, was 35% at July 30, 1994, 34% at April 30, 1994, 32% at January 29, 1994 and 29% at January 30, 1993. 19 DESCRIPTION OF NOTES The Notes are to be issued under an Indenture, dated as of , 1994 (the "Indenture"), between the Company and First Fidelity Bank, National Association, as trustee (the "Trustee"), a form of which is filed as an exhibit to the Registration Statement of which this Prospectus is a part. The following summaries of certain provisions of the Indenture do not purport to be complete, and where particular provisions of the Indenture are referred to, such provisions, including definitions of certain terms, are incorporated by reference as a part of such summaries or terms, which are qualified in their entity by reference to the provisions of the Indenture. The section references appearing below are to sections in the Indenture. General The Notes will be unsecured subordinated obligations of the Company, will mature on , 1999 and will be limited to $75,000,000 aggregate principal amount, plus such additional amount not in excess of $11,250,000 as may be purchased by the Underwriters upon exercise of their over-allotment option. The Notes will bear interest at the rate per annum stated on the cover page of this Prospectus from the date of issuance, or from the most recent Interest Payment Date to which interest has been paid or provided for, payable semi-annually on and in each year, commencing , 1994, to the person in whose name such Note (or any predecessor Note) is registered at the close of business on the or preceding such Interest Payment Date (Sections 301 and 307). Principal of and premium, if any, and interest on the Notes will be payable, Notes may be presented for conversion, and transfer of the Notes will be registrable at the office or agency of the Company in the Borough of Manhattan, the City of New York, or at any other office or agency maintained by the Company for such purpose. In addition, payment of interest may be made, at the option of the Company by check mailed to the address of the person entitled thereto as shown on the Note Register (Sections 301, 305, 1002 and 1202). The Notes are to be registered Notes, without coupons, in denominations of $1,000 or any integral multiple thereof (Section 302). No service charge will be made for any conversion or registration of transfer or exchange of Notes, except for any tax or other governmental charge that may be imposed in connection therewith (Section 305). Conversion Rights The Notes will be convertible, in whole or from time to time in part (in denominations of $1,000 or integral multiples thereof), at the option of the holder thereof, into Common Stock of the Company, initially at the conversion price stated on the cover page hereof, at any time prior to redemption or maturity, except that the right to convert Notes called for redemption will terminate at the close of business on the tenth business day preceding the Redemption Date and will be lost if not exercised prior to that time, unless the Company defaults in making the payment due upon redemption (Section 1201). 20 If the Company, by dividend or otherwise, declares or makes a distribution on its Common Stock of the type referred to in clause (4) or (5) of the following paragraph, the Holder of each Note, upon the conversion thereof subsequent to the close of business on the date fixed for the determination of stockholders entitled to receive such distribution and prior to the effectiveness of the conversion price adjustment in respect of such distribution pursuant to such clause (4) or (5), will be entitled to receive for each share of Common Stock into which such Note is converted the portion of the evidence of indebtedness, shares of capital stock, cash and other assets so distributed applicable to one share of Common Stock; provided, however, that the Company may, with respect to all Holders so converting, in lieu of distributing any portion of such distribution not consisting of cash or securities of the Company, pay such Holder cash equal to the fair market value thereof, as determined in good faith by the Board of Directors (Section 1201). The conversion price will be subject to adjustment in certain events, including: (1) the payment of dividends (and other distributions) in Common Stock on any class of capital stock of the Company; (2) the issuance to all holders of Common Stock of rights, warrants or options entitling them to subscribe for or purchase Common Stock at less than the current market price (as defined in the Indenture); provided, however, that if such rights, warrants or options are only exercisable upon the occurrence of certain triggering events, then the conversion price will not be adjusted until such triggering events occur; (3) subdivisions, combinations and reclassifications of Common Stock; (4) distributions to all holders of Common Stock of evidences of indebtedness of the Company, shares of any class of capital stock, cash or other assets (including securities, but excluding those dividends, rights, warrants, options and distributions referred to above and dividends and distributions paid in cash out of the retained earnings of the Company); (5) distributions consisting exclusively of cash (excluding any cash distributions for which an adjustment has been made pursuant to a preceding clause of this paragraph) to all holders of Common Stock in an aggregate amount that, together with (A) other all-cash distributions made within the preceding 12 months not triggering a conversion price adjustment and (B) all Excess Payments (as defined below) in respect of each tender offer or other negotiated transaction by the Company or any of its subsidiaries for Common Stock concluded within the preceding 12 months not triggering a conversion price adjustment, exceeds an amount equal to 20% of the Company's market capitalization (being the product of the current market price of the Common Stock times the number of shares of Common Stock then outstanding) on the date of such distribution; (6) issuance of Common Stock to an Affiliate for a net consideration per share less than the current market price per share (other than issuances of Common Stock under certain employee benefit plans); and (7) payment of an Excess Payment in respect of a tender offer or other negotiated transaction by the Company or any of its subsidiaries for Common Stock, if the aggregate amount of such Excess Payment, together with (A) the aggregate amount of all-cash distributions made within the preceding 12 months not triggering a conversion price adjustment and (B) all Excess Payments in respect of each tender offer or other negotiated transaction by the Company or any of its subsidiaries for Common Stock concluded within the preceding 12 months not triggering a conversion price adjustment, exceeds an amount equal to 20% of the Company's market capitalization on the expiration of such tender 21 offer (Section 1204). "Excess Payment" means the excess of (A) the aggregate of the cash and value of other consideration paid by the Company or any of its subsidiaries with respect to the shares acquired in the tender offer or other negotiated transaction over (B) the market value of such acquired shares after the completion of the tender offer or other negotiated transaction. No adjustment of the conversion price will be required to be made until cumulative adjustments amount to 1% or more of the conversion price as last adjusted (Section 1204). Notwithstanding the foregoing, no adjustment to the conversion price shall reduce the conversion price below the then par value per share of the Common Stock. Certain adjustments in the conversion price in accordance with the foregoing provisions (other than to take account of a stock dividend or stock split) could be taxable pursuant to Section 305 of the Internal Revenue Code of 1986, as amended, as a constructive distribution of stock to holders of the Notes at the time of such adjustments in the conversion price. In addition to the foregoing adjustments, the Company will be permitted to make such reductions in the conversion price as it considers to be advisable in order that any event treated for federal income tax purposes as a dividend of stock or stock rights will not be taxable to the holders of the Common Stock (Section 1204). In the case of certain consolidations or mergers to which the Company is a party or the transfer of substantially all of the assets of the Company, each Note then outstanding would, without the consent of any Holders of Notes, become convertible only into the kind and amount of securities, cash and other property receivable upon the consolidation, merger or transfer by a holder of the number of shares of Common Stock into which such Note might have been converted immediately prior to such consolidation, merger or transfer (assuming such holder of Common Stock failed to exercise any rights of election and received per share the kind and amount receivable per share by a plurality of non-electing shares) (Section 1211). Fractional shares of Common Stock are not to be issued upon conversion, but, in lieu thereof, the Company will pay a cash adjustment based upon the market price (Section 1203). Notes surrendered for conversion during the period from the close of business on any Regular Record Date next preceding any Interest Payment Date to the opening of business on such Interest Payment Date (except Notes that mature prior to such Interest Payment Date and Notes called for redemption on a redemption date within such period) must be accompanied by payment of an amount equal to the interest thereon which the registered Holder is to receive. Except where Notes surrendered for conversion must be accompanied by payment as described above, no interest on converted Notes will be payable by the Company on any Interest Payment Date subsequent to the date of conversion. No other payment or adjustment for interest or dividends is to be made upon conversion (Sections 307 and 1202). Subordination of Notes The payment of principal of and premium, if any, and interest on the Notes is, to the extent set forth in the Indenture, subordinated in right 22 of payment to the prior payment in full of all Senior Indebtedness (as defined below), whether now outstanding or incurred in the future (Section 1301). Upon any payment or distribution of assets of the Company to creditors upon any dissolution, winding up, liquidation or reorganization, the holders of all Senior Indebtedness will be entitled to receive payment in full of all amounts due or to become due thereon before the Holders of the Notes will be entitled to receive any payment in respect of the principal of or premium, if any, or interest on the Notes (Section 1302), but the obligation of the Company to make payments of principal of or premium, if any, and interest on the Notes will not otherwise be affected (Section 1304). No payment on account of principal of or premium, if any, or interest on the Notes may be made and no repurchase of the Notes may be made as described herein under "Repurchase of Notes at the Option of the Holder Upon a Change in Control" at any time when there is a continuing default in any payment of principal of or premium, if any, or interest on any Senior Indebtedness (as defined below), or any other event of default with respect to any Senior Indebtedness resulting in the acceleration of the maturity thereof. In addition, no payment on account of principal of or premium, if any, or interest on the Notes may be made and no repurchase of the Notes may be made as described herein under "Repurchase of Notes at the Option of the Holder Upon a Change in Control" at any time there shall have occurred and be continuing any event of default (other than a default referred to in the immediately preceding sentence) with respect to any Senior Indebtedness, which default would permit immediate acceleration thereof, for the period commencing on receipt of notice of such default by the Trustee from the holder of such Senior Indebtedness (or any representative therefor) and ending on the earlier of (i) the date such event of default has been cured or waived and (ii) the date 180 days after receipt of such notice (Section 1303). The Holders of the Notes will be subrogated to the rights of the holders of Senior Indebtedness to the extent of payments made on Senior Indebtedness upon any distribution of assets in any such proceedings out of the distributive share of the Notes (Section 1302). By reason of such subordination, in the event of insolvency of the Company, Holders of the Notes may recover less, ratably, than other creditors of the Company. Senior Indebtedness is defined in the Indenture as the principal of and premium, if any, and unpaid interest on, and any reasonable fees or costs related to, (a) indebtedness of the Company (including indebtedness of others guaranteed by the Company), other than the Notes, whether outstanding on the date of the Indenture or thereafter created, incurred, assumed or guaranteed, (i) for money owing to banks, or their subsidiaries or their affiliates, (ii) for money borrowed other than from banks or (iii) arising under a lease of or given in connection with the acquisition of property, equipment or other assets, which indebtedness, pursuant to generally accepted accounting principles then in effect, is classified upon the balance sheet of the Company as a liability of the Company, unless, in each case, the instrument creating or evidencing the same or pursuant to which the same is outstanding expressly provides that such indebtedness is not superior in right of payment to the Notes; and (b) 23 renewals, extensions, modifications, amendments and refundings of any such indebtedness; provided, however, that Senior Indebtedness shall not include indebtedness to a subsidiary or other Affiliate of the Company (Section 101). As of July 30, 1994, after giving effect to this Offering and application of the net proceeds therefrom, Senior Indebtedness would have been approximately $327.4 million. The Company expects from time to time to incur additional indebtedness constituting Senior Indebtedness. The Indenture does not prohibit or limit the incurring of additional Senior Indebtedness by the Company. Redemption at the Option of the Company The Notes are not subject to the provisions of any sinking fund. The Notes will be redeemable, at the Company's option, as a whole or from time to time in part (in denominations of $1,000 or integral multiples thereof), on or after , 1997 and prior to maturity, upon not less than 30 nor more than 60 days' notice mailed to the registered Holders thereof, at the following redemption prices (expressed as percentages of principal amount): if redeemed during the period commencing on , 1997 and ending on (and including) , 1998, %; and thereafter at 100% of the principal amount, plus, in each case, accrued interest to the redemption date (subject to the right of Holders of record on the relevant record date to receive interest due on the Interest Payment Date that is on or prior to the redemption date) (Sections 203, 1101, 1105 and 1107). Repurchase of Notes at the Option of the Holder Upon a Change in Control In the event of any Change in Control (as defined below), each Holder of Notes will have the right, at such Holder's option, to require the Company to purchase all or any part (in denominations of $1,000 or integral multiples thereof) of the Holder's Notes on the date (the "Repurchase Date") that is 60 days after the date the Company gives notice of the Change in Control as described below at a price (the "Repurchase Price") equal to 100% of the principal amount thereof, together with accrued and unpaid interest to the Repurchase Date (Section 1401). On or before the Repurchase Date, the Company will deposit with a Paying Agent an amount of money sufficient to pay the Repurchase Price of the Notes that are to be repaid on the Repurchase Date (Section 1403). Promptly, but in any event within 30 days following any Change in Control, the Company is required, with respect to any Senior Indebtedness that would prohibit the repurchase of Notes by the Company in the event of a Change in Control, to either (i) repay all such Senior Indebtedness in full or (ii) obtain the requisite consents under such Senior Indebtedness to permit the repurchase of the Notes as provided below (Section 1303). Notwithstanding the foregoing, failure by the Company to repurchase the Notes when required under the preceding paragraph will result in an Event of Default under the Indenture whether or not such repurchase is permitted by the subordination provisions of the Indenture (Section 501). On or before the 20th day after the occurrence of a Change in Control, the Company is obligated to mail to the Trustee and to all Holders of record of the Notes a notice of the occurrence of such Change in Control, 24 the date by which the repurchase right must be exercised, the Repurchase Price for the Notes and the procedures that the Holder must follow to exercise this right. To exercise the repurchase right, the Holder of a Note must deliver, at any time prior to the close of business on the Repurchase Date, written notice to an agent designated by the Company for such purpose of the Holder's exercise of such right, stating the certificate numbers of the Note or Notes with respect to which the right is being exercised, the portion (which portion must be $1,000 or an integral multiple thereof) of the principal amount of the Notes that the Holder will deliver to be repurchased, and that such Notes will be repurchased pursuant to the terms of Article Fourteen (Section 1401). Under the Indenture, a "Change in Control" of the Company is deemed to have occurred at such time as (i) a "person" or "Group" (within the meaning of Sections 13(d) and 14(d)(2) of the Exchange Act) (A) becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act) of more than 50% of the total voting rights attaching to the then outstanding voting capital stock of the Company or (B) has the right or the ability by voting right, contract or otherwise to elect or designate for election a majority of the entire Board of Directors; or (ii) (A) the Company consolidates with or merges into any other Person or conveys, transfers or leases all or substantially all of its assets to any Person or (B) any Person merges into the Company, in either event pursuant to a transaction in which voting capital stock of the Company representing more than 50% of the total voting rights of the Company outstanding immediately prior to the effectiveness thereof is reclassified or changed into or exchanged for cash, securities or other property; provided, that any consolidation, merger, conveyance, transfer or lease between the Company and any of its Subsidiaries (including, without limitation, the reincorporation of the Company in another jurisdiction) shall be excluded from the operation of this clause (ii). Notwithstanding the above, a Change in Control shall not be deemed to have occurred by virtue of the Company's or any of its employee benefit or stock plans' filing (or being required to file after the lapse of time) a Schedule 13D or 14D-1 (or any successor or similar schedule, form or report under the Exchange Act) as a result of the Company's or any such plans' becoming the beneficial owner of shares of capital stock of the Company entitling such person to exercise a majority of the total voting power of all shares of capital stock of the Company entitled to vote in ordinary circumstances in elections of directors. (Section 101). The right of Holders of the Notes to require the Company to repurchase the Notes would not be triggered by certain corporate restructurings and similar technical changes in corporate form, e.g., in the event of a merger or consolidation of the Company where the Person formed by such consolidation or into which the Company is merged expressly and directly assumes the obligations of the Company in compliance with Section 801 of the Indenture (Section 801). Furthermore, the right of Holders of the Notes to require the Company to repurchase the Notes may be modified by the Company and the Trustee with the consent of the Holders of not less than a majority in principal amount of the Notes at the time outstanding (Section 902). If a Change in Control were to occur, there can be no assurance that the Company would have sufficient funds to pay the Repurchase Price for 25 all Notes tendered. Except as described above with respect to a Change in Control, the Indenture does not contain provisions that permit the Holders of the Notes to require that the Company repurchase or redeem the Notes in the event of a takeover, recapitalization or similar restructuring. In addition, the Change in Control provisions may in certain circumstances make more difficult or discourage a takeover of the Company. In the event a Change in Control occurs and the Holders exercise their rights to require the Company to repurchase Notes, the Company intends to comply with applicable tender offer rules under the Exchange Act, including Rules 13e-4 and 14e-1, as then in effect, with respect to any such purchase (Section 1405). Limitations on Mergers The Company may, without the consent of the Holders of the Notes, consolidate with or merge into any other entity or convey, transfer or lease all or substantially all of its properties and assets to any person provided that (i) the entity formed by such consolidation or into which the Company is merged or the person that acquires by conveyance or transfer, or which leases all or substantially all of the properties and assets of the Company is a corporation, partnership or trust organized and existing under the laws of the United States, any state thereof or the District of Columbia, (ii) the successor entity shall expressly assume, by a supplemental indenture executed and delivered by the successor entity to the Trustee, in form satisfactory to the Trustee, the due and punctual payment of the principal of and premium, if any, and interest on the Notes and the performance of every covenant of the Indenture on the part of the Company to be performed or observed and has provided for conversion rights in accordance with the Indenture, (iii) immediately after giving effect to such transaction, no Event of Default, and no event that, after notice or lapse of time or both, would become an Event of Default, shall have occurred and be continuing, and (iv) such consolidation, merger, conveyance, transfer or lease does not affect the validity or enforceability of the Notes (Section 801). Modification and Waiver Modifications and amendments of the Indenture may be made by the Company and the Trustee with the consent of the Holders of not less than a majority in principal amount of the Notes at the time outstanding; provided, however, that no such modification or amendment may, without the consent of the Holder of each outstanding Note affected thereby, (i) change the stated maturity of the principal of, or any installment of interest on, any Note, (ii) reduce the principal amount of, or the premium, if any, or interest on, any Note, (iii) change the place or currency of payment of principal of, or premium, if any, or interest on, any Note, (iv) impair the right to institute suit for the enforcement of any payment on or with respect to any Note, (v) adversely affect the right to convert Notes, (vi) modify the subordination provisions in a manner adverse to the Holders of the Notes, (vii) reduce the above-stated percentage of outstanding Notes necessary to modify or amend the Indenture or (viii) reduce the percentage of aggregate principal amount of outstanding Notes necessary for waiver of certain defaults (Section 902). 26 The Holders of a majority in aggregate principal amount of the outstanding Notes may waive any past default under the Indenture, except that a default in the payment of principal of or premium, if any, or interest on the Notes or a failure to comply with certain covenants of the Company may not be waived without the consent of the Holder of each outstanding Note (Section 513). Events of Default The following will be Events of Default under the Indenture: (i) failure to pay principal of or premium, if any, on any Note when due, whether or not such payment is prohibited by the subordination provisions of the Indenture; (ii) failure to pay any interest on any Note when due for 30 days, whether or not such payment is prohibited by the subordination provisions of the Indenture; (iii) failure to repurchase or redeem the Notes as provided in the Indenture; (iv) failure to perform any other covenant of the Company in the Indenture, which failure continues for 60 days after written notice as provided in the Indenture; (v) default in the payment of any indebtedness of the Company in excess of $10 million for borrowed money or representing any Senior Indebtedness at its stated maturity or default on any such indebtedness that results in the acceleration of such indebtedness prior to its express maturity; and (vi) certain events of bankruptcy, insolvency or reorganization of the Company (Section 501). Subject to the provisions of the Indenture relating to the duties of the Trustee, in case an Event of Default shall occur and be continuing, the Trustee will be under no obligation to exercise any of its rights or powers under the Indenture at the request or direction of any of the Holders, unless such Holders shall have offered to the Trustee reasonable indemnity (Section 603). Subject to such provisions for the indemnification of the Trustee, the Holders of a majority in principal amount of the Outstanding Notes will have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Trustee or exercising any trust or power conferred on the Trustee (Section 512). If an Event of Default shall occur and be continuing, other than an event of bankruptcy, insolvency or reorganization of the Company, either the Trustee or the Holders of at least 25% in principal amount of the Outstanding Notes may accelerate the maturity of all Notes. If an Event of Default shall occur and be continuing by reason of an event of bankruptcy, insolvency or reorganization of the Company, the maturity of the Notes shall immediately become due and payable without any act on the part of the Trustee or any Holder. After any such acceleration but before a judgment or decree based on acceleration, the Holders of a majority in aggregate principal amount of Outstanding Notes may, under certain circumstances, rescind or annul such acceleration if all Events of Default, other than the non-payment of acceleration principal, have been cured or waived as provided in the Indenture (Section 502). For information as to waiver of defaults, see "Modification and Waiver." No Holder of any Note will have any right to institute any proceeding with respect to the Indenture or for any remedy thereunder, unless such Holder shall have previously given to the Trustee written notice of a 27 continuing Event of Default and unless the Holders of at least 25% in principal amount of the Outstanding Notes shall have made written request and offered reasonable indemnity, to the Trustee to institute such proceeding as trustee, and the Trustee shall not have received from the Holders of a majority in principal amount of the Outstanding Notes a direction inconsistent with such request and shall have filed to institute such proceeding within 60 days (Section 507). However, such limitations do not apply to a suit instituted by a Holder of a Note for the enforcement or payment of the principal or premium, if any, or interest on such Note on or after the respective due dates expressed in such Note or of the right to convert such Note in accordance with the Indenture (Section 508). The Company will be required to furnish to the Trustee annually a statement as to its performance of certain of its obligations under the Indenture and as to any default in such performance (Section 1004). Discharge of Indenture; Defeasance The Company may terminate all obligations under the Indenture at any time by delivering all outstanding Notes to the Trustee for cancellation and paying any other sums payable under the Indenture. The Indenture also provides that the Company may elect: (a) to defease and be discharged from any and all obligations with respect to the Notes and that the provisions of the Indenture will no longer be in effect with respect to the Notes, except for the obligations to register the transfer or exchange of the Notes, to replace temporary or mutilated, destroyed, lost or stolen Notes, to maintain an office or agency in respect of the Notes and to hold monies for payment in trust ("Defeasance"); or (b) to be released from its obligations with respect to the Notes under certain restrictive covenants of the Indenture, and that violation of such covenants will not constitute an "Event of Default" under the Indenture ("Covenant Defeasance"). Such Defeasance or Covenant Defeasance will take effect only upon the deposit with the Trustee, in trust for such purpose, of money and/or U.S. Government Obligations that, through the payment of principal and interest in accordance with their terms, will provide money in an amount sufficient to pay the principal of and premium, if any, and interest on the Notes on the dates such payments are due, and certain other conditions are satisfied. The Trustee The Trustee is First Fidelity Bank, National Association, which also serves as trustee of the Flexitrust. 28 DESCRIPTION OF COMMON STOCK AND RELATED RIGHTS The statements made under this caption include summaries of certain provisions contained in the Company's Articles of Incorporation, Bylaws and Shareholders Rights Plan (as amended, the "Plan"). These statements do not purport to be complete and are qualified in their entirety by reference to such documents. The Company is authorized to issue 500,000,000 shares of Common Stock, $1.00 par value, of which 61,321,080 shares were outstanding as of July 30, 1994. Holders of Common Stock are entitled to receive dividends when and as declared by the Board of Directors out of funds legally available therefor. See "Price Range of Common Stock and Dividends" for information as to dividend policy. Holders of Common Stock have no preemptive right to purchase additional shares. Each share of Common Stock is entitled to one vote with respect to matters other than the election of directors. In the election of directors, each holder of Common Stock is entitled to as many votes as is equal to the number of shares held multiplied by the number of directors to be elected, and each shareholder may cast all of such votes for a single director or may distribute them among any number of directors to be voted for. The Bylaws of the Company provide that the Board of Directors shall consist of not more than 12 members divided into three classes, the precise number of members to be fixed from time to time by the Board of Directors. The Board is currently comprised of nine Directors. The Directors of the class elected at each annual election hold office for a term of three years, with the term of each class expiring at successive annual meetings of shareholders. On December 17, 1987, the Company adopted the Plan. Pursuant thereto, the Board declared a dividend distribution of one Common Stock Purchase Right ("Right") for each share of the Company's Common Stock then outstanding and authorized the issuance of one Right with respect to each share of Common Stock to become outstanding thereafter, including the Common Stock issuable upon the conversion of the Notes offered hereby. Each Right ordinarily entitles its holder to purchase one share of Common Stock at an exercise price of $55 per share, subject to adjustment pursuant to certain antidilution provisions. The Rights will become exercisable only if a person or a group acquires beneficial ownership of 20% or more of the Company's Common Stock (exclusive of holdings as of December 17, 1987) or announces a tender offer, the consummation of which would result in ownership by a person or a group of 30% or more of the Common Stock (exclusive of holdings as of December 17, 1987). The Company, by action of its Board of Directors, is entitled to redeem the Rights at $.02 per Right at any time before a person or a group has crossed the 20% ownership threshold and, provided a majority of the Company's independent directors approves such redemption, for 15 days thereafter. If the Company is involved in a merger or other business combination at any time after the Rights become exercisable, each Right will entitle its holder to buy a number of shares of common stock of the acquiring company having a market value equal to twice the exercise price of each Right. In addition, if a person or group acquires 20% or more of the Company's Common Stock (exclusive of shareholdings as of December 17, 1987) or if a 20% or greater shareholder (exclusive of shareholders as of December 17, 1987) acquires the Company by means of a reverse merger or 29 engages in certain self-dealing transactions with the Company, each Right not owned by such party will entitle its holder to purchase, at the Right's then current exercise price, that number of shares of Common Stock having a market value at the time of twice the exercise price of each right. The Plan authorizes the Company's independent directors to waive or alter certain features of the Rights in certain circumstances. The final expiration date of the Rights, even if they never become exercisable, is December 31, 1997. The foregoing provisions of the Bylaws and the Plan may have an effect of delaying, deferring or preventing a change in control of the Company. Although the Flexitrust is not intended to be an antitakeover mechanism, the creation of the Flexitrust and the purchase of shares of Common Stock by the Flexitrust may also have certain antitakeover effects. Because the trustee of the Flexitrust votes the Common Stock held by it in the manner directed by participants in certain of the Company's employee benefit plans, the transfer of shares of Common Stock to the Flexitrust may make it more difficult for an acquiror of Common Stock to obtain an affirmative vote for a proposed merger without employee support. Additionally, an Interested Shareholder (as defined in Section 2553 of the Pennsylvania Business Corporation Law of 1988, as amended (the "BCL")) would find it difficult to engage in a business combination with the Company during the five-year period after becoming an Interested Shareholder without the support of some employees. The Company's Common Stock is currently listed on the New York Stock Exchange. The transfer agent and registrar for the Company's Common Stock is American Stock Transfer & Trust Company, New York, New York. UNDERWRITING Under the terms and conditions contained in an underwriting agreement between CS First Boston Corporation (the "Underwriter") and the Company (the "Underwriting Agreement"), the Underwriter has agreed with the Company to purchase from the Company all of the Notes. The Underwriting Agreement provides that the obligations of the Underwriter are subject to certain conditions precedent and that the Underwriter will be obligated to purchase all of the Notes being offered hereby if any are purchased. The Company has granted the Underwriter an option, expiring at the close of business on the 30th day after the date of the initial public offering of the Notes, to purchase up to an additional $11,250,000 principal amount of Notes at the initial public offering price less the underwriting discount, all as set forth on the cover page of this Prospectus. The Underwriter may exercise such option only to cover over-allotments in the sale of the Notes. The Company has been advised by the Underwriter that it proposes to offer the Notes to the public initially at the offering price set forth on the cover page of this Prospectus and to certain dealers at such price less a concession of % of the principal amount per Note. The Underwriter and such dealers may allow a discount of % of such principal amount on sales to certain other dealers; after the initial public offering, the 30 public offering price and concession and discount to dealers may be changed by the Underwriter. The Notes have been approved for listing on The New York Stock Exchange, subject to official notice of issuance; however, no assurance can be given that an active trading market for the Notes will develop or continue. The Company and the directors and executive officers of the Company have agreed that, for a period of 90 days after the commencement of the Offering, they will not, without the prior written consent of the Underwriter, directly or indirectly, issue, offer, sell, contract to sell, grant any option to purchase, hypothecate or otherwise dispose of, or file a registration statement under the Securities Act relating to, any Common Stock or any security convertible into or exchangeable for Common Stock, other than to the Underwriter pursuant to the Underwriting Agreement, upon conversion of the Notes or pursuant to employee benefit plans (including stock option plans) existing on the date of this Prospectus. The Company has agreed to indemnify the Underwriter against certain liabilities, including civil liabilities under the Securities Act, and under certain circumstances, to contribute to payments that the Underwriter may be required to make in respect thereof. The Underwriter from time to time performs investment banking services for the Company for customary fees. NOTICE TO CANADIAN RESIDENTS Resale Restrictions The distribution of the Notes in Canada is being made only on a private placement basis exempt from the requirement that the Company prepare and file a prospectus with the securities regulatory authorities in each province where trades of Notes are effected. Accordingly, any resale of the Notes in Canada must be made in accordance with applicable securities laws which will vary depending on the relevant jurisdiction, and which may require resales to be made in accordance with available statutory exemptions or pursuant to a discretionary exemption granted by the applicable Canadian securities regulatory authority. Purchasers are advised to seek legal advice prior to any resale of the Notes. Representations of Purchasers Each purchaser of Notes in Canada who receives a purchase confirmation will be deemed to represent to the Company and the dealer from whom such purchase confirmation is received that (i) such purchaser is entitled under applicable provincial securities laws to purchase such Notes without the benefit of a prospectus qualified under such securities laws, (ii) where required by law, such purchaser is purchasing as principal and not as agent, and (iii) such purchaser has reviewed the text above under "Resale Restrictions." 31 Rights of Action and Enforcement The securities being offered are those of a foreign issuer and Ontario purchasers will not receive the contractual right of action prescribed by section 32 of the Regulation under the Securities Act (Ontario). As a result, Ontario purchasers must rely on other remedies that may be available, including common law rights of action for damages or rescission or rights of action under the civil liability provisions of the U.S. federal securities laws. All of the issuer's directors and officers as well as the experts named herein may be located outside of Canada and, as a result, it may not be possible for Ontario purchasers to effect service of process within Canada upon the issuer or such persons. All or a substantial portion of the assets of the issuer and such persons may be located outside Canada and, as a result, it may not be possible to satisfy a judgment against the issuer or such persons in Canada or to enforce a judgment obtained in Canadian courts against such issuer or person outside of Canada. Notice to British Columbia Residents A purchaser of Notes to whom the Securities Act (British Columbia) applies is advised that such purchaser is required to file with the British Columbia Securities Commission a report within ten days of the sale of any Notes acquired by such purchaser pursuant to this offering. Such report must be in the form attached to British Columbia Securities Commission Blanket Order BOR #88/5, a copy of which may be obtained from the Company. Only one such report must be filed in respect of Notes acquired on the same date and under the same prospectus exemption. LEGAL MATTERS The validity of the authorization and issuance of the Notes offered hereby is being passed upon for the Company by Willkie Farr & Gallagher, New York, New York, and for the Underwriter by Dewey Ballantine, New York, New York. EXPERTS The financial statements and the related financial statement schedules incorporated in this Prospectus by reference from the Company's Annual Report on Form 10-K for the year ended January 29, 1994 have been audited by Deloitte & Touche LLP, independent auditors, as stated in their report which is incorporated herein by reference, and have been so incorporated in reliance upon the report of such firm given upon their authority as experts in accounting and auditing. 32
====================================================== ====================================================== No dealer, salesperson or other individual has (Logo) been authorized to give any information or to make any PEP BOYS(R) representation not contained in this Prospectus and, if given or made, such information or representation must not be relied upon as having been authorized by $75,000,000 the Company or the Underwriter. This Prospectus does not constitute an offer to sell or solicitation of an offer to buy any of the securities offered hereby in any jurisdiction or to any person to whom it is % Convertible Subordinated unlawful to make such offer in such jurisdiction. Notes Due 1999 Neither the delivery of this Prospectus nor any sale made hereunder shall, under any circumstances, create any implication that the information herein is correct as of any time subsequent to the date hereof or that there has been no change in the affairs of the Company since such date. PROSPECTUS (LOGO) CS FIRST BOSTON ---------- TABLE OF CONTENTS Page ---- Available Information........................... 2 Incorporation of Certain Documents by Reference..................................... 2 The Company..................................... 3 Recent Developments............................. 4 Use of Proceeds................................. 4 Capitalization.................................. 5 Price Range of Common Stock and Dividends....... 6 Selected Financial Data......................... 7 Management's Discussion and Analysis of Financial Condition and Results of Operations. 8 Description of Notes............................ 12 Description of Common Stock and Related Rights.. 18 Underwriting ................................... 20 Notice to Canadian Residents.................... 20 Legal Matters................................... 21 Experts......................................... 21 ====================================================== ======================================================
33 PART II INFORMATION NOT REQUIRED IN PROSPECTUS Item 14. Other Expenses of Issuance and Distribution The following table sets forth all expenses (other than the underwriting discounts and commissions) in connection with the sale and distribution of the securities being registered, which will be paid solely by the Company. All the amounts shown are estimates, except the Commission registration fee and the NASD fee: SEC Registration Fee ................... $ 29,742 NASD Fee................................ 9,125 Transfer Agent and Registrar Fees and Expenses ............................. 10,000 Printing and Engraving Expenses......... 25,000 Legal Fees and Expenses................. 100,000 Accounting Fees and Expenses ........... 15,000 Blue Sky Fees and Expenses ............. 10,000 Trustee Fees ........................... 8,500 Miscellaneous Expenses ................. 42,633 -------- Total ............................ $250,000 ======== Item 15. Indemnification of Directors and Officers Sections 1741 through 1750 of Subchapter D, Chapter 17, of the BCL contain provisions for mandatory and discretionary indemnification of a corporation's directors, officers and other personnel, and related matters. Under Section 1741, subject to certain limitations, a corporation has the power to indemnify directors and officers under certain prescribed circumstances against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred in connection with an action or proceeding, whether civil, criminal, administrative or investigative (other than derivative actions), to which any of them is a party or is threatened to be made a party by reason of his being a representative of the corporation or serving at the request of the corporation as a representative of another corporation, partnership, joint venture, trust or other enterprise, if he acted in good faith and in a manner he reasonably believed to be in, or not opposed to, the best interests of the corporation and, with respect to any criminal proceeding, had no reasonable cause to believe his conduct was unlawful. Section 1742 permits indemnification in derivative actions if the appropriate standard of conduct is met, except in respect of any claim, issue or matter as to which the person has been adjudged to be liable to the corporation unless and only to the extent that the proper court II-1 34 determines upon application that, despite the adjudication of liability but in view of all the circumstances of the case, the person is fairly and reasonably entitled to indemnity for the expenses that the court deems proper. Under Section 1743, indemnification is mandatory to the extent that the officer or director has been successful on the merits or otherwise in defense of any action or proceeding referred to in Section 1741 or 1742. Section 1744 provides that, unless ordered by a court, any indemnification under Section 1741 or 1742 shall be made by the corporation only as authorized in the specific case upon a determination that the representative met the applicable standard of conduct and that such determination will be made (i) by the board of directors by a majority vote of a quorum of directors not parties to the action or proceeding; (ii) if a quorum is not obtainable, or if obtainable and a majority of disinterested directors so directs, by independent legal counsel; or (iii) by the shareholders. Section 1745 provides that expenses incurred by an officer or director in defending an action or proceeding may be paid by the corporation in advance of the final disposition of such action or proceeding upon receipt of an undertaking by or on behalf of such person to repay such amount if it shall ultimately be determined that he is not entitled to be indemnified by the corporation. Section 1746 provides generally that the indemnification and advancement of expenses provided by Subchapter 17D of the BCL (i) will not be deemed exclusive of any other rights to which a person seeking indemnification or advancement of expenses may be entitled under any bylaw, agreement, vote of shareholders or disinterested directors or otherwise, both as to action in his official capacity and as to action in another capacity while holding that office, and (ii) may not be made in any case where the act or failure to act giving rise to the claim for indemnification is determined by a court to have constituted willful misconduct or recklessness. Section 1747 grants a corporation the power to purchase and maintain insurance on behalf of any director or officer against any liability incurred by him in his capacity as officer or director, whether or not the corporation would have the power to indemnify him against that liability under Subchapter 17D of BCL. Sections 1748 and 1749 extend the indemnification and advancement of expenses provisions contained in Subchapter 17D of the BCL to successor corporations in fundamental corporate changes and to representatives serving as fiduciaries of employee benefit plans. Section 1750 provides that the indemnification and advancement of expenses provided by, or granted pursuant to, Subchapter 17D of the BCL shall, unless otherwise provided when authorized or ratified, continue as to a person who has ceased to be a director, officer, employee or agent and shall inure to the benefit of the heirs and personal representative of such person. II-2 35 Article VII of the Company's Bylaws provides in general that the Company shall indemnify its officers and directors to the fullest extent permitted by law. The Bylaws further provide that any alteration, amendment, or repeal of the indemnification provisions, if not approved by 80% of the Board of Directors, requires the affirmative vote of shareholders owning at least 80% of the outstanding shares entitled to vote. The Company has purchased liability insurance on behalf of its directors and officers. A form of such policy is filed as Exhibit 10.5 to the Registrant's Annual Report on Form 10-K for the fiscal year ended February 3, 1990. See Section 7 of the Underwriting Agreement, filed as Exhibit 1 hereto, pursuant to which the Underwriter agrees to indemnify the Company, its directors, certain officers and controlling persons against certain liabilities, including liabilities under the Securities Act. Item 16. Exhibits. Exhibit Number Description ------ ----------- 1 Form of Underwriting Agreement 4.1 Form of Indenture between the Company and First Fidelity Bank, National Association, as Trustee, including form of Note 4.2 Rights Agreement, dated as of December 17, 1987, between the Company and The Philadelphia National Bank, including form of Right Certificate and Summary of Rights to Purchase Common Stock (incorporated by reference to Exhibit 1 to the Company's Current Report on Form 8-K dated December 17, 1987) 4.3 Amendment to Rights Agreement, dated as of June 6, 1989, between the Company and The Philadelphia National Bank (incorporated by reference to Exhibit 1 to the Company's Current Report on Form 8-K dated June 6, 1989) 5 Opinion of Willkie Farr & Gallagher 12.1 Calculation of Ratio of Earnings to Fixed Charges (incorporated by reference to Exhibit 12 to the Company's Annual Report on Form 10-K for the year ended January 29, 1994) 12.2 Calculation of Ratio of Earnings to Fixed Charges for the 13 weeks ended April 30, 1994 and May 1, 1993 23.1 Consent of Willkie Farr & Gallagher (included as part of Exhibit 5) 23.2 Consent of Deloitte & Touche LLP 24 Power of Attorney (included as part of signature page) 25 Form T-1, Statement of Eligibility under the Trust Indenture Act of 1939 of the Trustee Item 17. Undertakings The undersigned registrant hereby undertakes that, for purposes of determining any liability under the Securities Act, each filing of the registrant's annual report pursuant to section 13(a) or section 15(d) of the Exchange Act (and, where applicable, each filing of an employee benefit plan's annual report pursuant to section 15(d) of the Exchange Act) that is incorporated by reference in the registration statement shall II-3 36 be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that, in the opinion of the Commission, such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question of whether such indemnification by them is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue. The undersigned registrant hereby undertakes that: (1) for purposes of determining any liability under the Securities Act, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective; and (2) for the purpose of determining any liability under the Securities Act, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. II-4 37 SIGNATURES Pursuant to the requirements of the Securities Act, the registrant certifies that is has reasonable grounds to believe that it meets all of the requirements for filing on Form S-3 and has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Philadelphia, Commonwealth of Pennsylvania, on August 17, 1994. THE PEP BOYS - MANNY, MOE & JACK By: /s/ MITCHELL G. LEIBOVITZ ------------------------------ Mitchell G. Leibovitz Chairman of the Board, President and Chief Executive Officer 38 KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Mitchell G. Leibovitz and Michael J. Holden, and each of them, his true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign any and all amendments to this Registration Statement, and to file the same, with all exhibits thereto, and other documentation in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or their substitute or substitutes, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated.
Signature Title Date ---------- ------ ----- /s/ MITCHELL G. LEIBOVITZ Chairman of the Board, August 17, 1994 ------------------------------- President and Chief Mitchell G. Leibovitz Executive Officer and Director (Principal Executive Officer) /s/ MICHAEL J. HOLDEN Senior Vice President and August 17, 1994 -------------------------------- Chief Financial Officer Michael J. Holden (Principal Financial and Accounting Officer) /s/ LENNOX K. BLACK Director August 17, 1994 -------------------------------- Lennox K. Black /s/ PEMBERTON HUTCHINSON Director August 17, 1994 -------------------------------- Pemberton Hutchinson /s/ BERNARD J. KORMAN Director August 17, 1994 -------------------------------- Bernard J. Korman /s/ J. RICHARD LEAMAN, JR. Director August 17, 1994 -------------------------------- J. Richard Leaman, Jr. /s/ LESTER ROSENFELD Director August 17, 1994 -------------------------------- Lester Rosenfeld /s/ BENJAMIN STRAUSS Director August 17, 1994 -------------------------------- Benjamin Strauss /s/ MYLES H. TANENBAUM Director August 17, 1994 -------------------------------- Myles H. Tanenbaum /s/ DAVID V. WACHS Director August 17, 1994 -------------------------------- David V. Wachs
39 EXHIBIT INDEX Exhibit Number Description ------- ----------- 1 Form of Underwriting Agreement 4.1 Form of Indenture between the Company and First Fidelity Bank, National Association, as Trustee, including form of Note 4.2 Rights Agreement, dated as of December 17, 1987, between the Company and The Philadelphia National Bank, including form of Right Certificate and Summary of Rights to Purchase Common Stock (incorporated by reference to Exhibit 1 to the Company's Current Report on Form 8-K dated December 17, 1987) 4.3 Amendment to Rights Agreement, dated as of June 6, 1989, between the Company and The Philadelphia National Bank (incorporated by reference to Exhibit 1 to the Company's Current Report on Form 8-K dated June 6, 1989) 5 Opinion of Willkie Farr & Gallagher 12.1 Calculation of Ratio of Earnings to Fixed Charges (incorporated by reference to Exhibit 12 to the Company's Annual Report on Form 10-K for the year ended January 29, 1994) 12.2 Calculation of Ratio of Earnings to Fixed Charges for the 13 weeks ended April 30, 1994 and May 1, 1993 23.1 Consent of Willkie Farr & Gallagher (included as part of Exhibit 5) 23.2 Consent of Deloitte & Touche LLP 24 Power of Attorney (included as part of signature page) 25 Form T-1, Statement of Eligibility under the Trust Indenture Act of 1939 of the Trustee EX-1 2 EXHIBIT 1 1 EX-1 Draft of 8/16/94 $__________ THE PEP BOYS - MANNY, MOE AND JACK ____% Convertible Subordinated Notes Due 1999 UNDERWRITING AGREEMENT ____ __, 1994 CS FIRST BOSTON CORPORATION Park Avenue Plaza New York, NY 10055 Ladies and Gentlemen: 1. Introductory. The Pep Boys - Manny, Moe and Jack, a Pennsylvania corporation (the "Company"), proposes to issue and sell to CS First Boston Corporation (the "Underwriter") $__________ principal amount (the "Firm Securities") of its ____% Convertible Subordinated Notes Due 1999 (the "Notes") to be issued under an indenture, dated as of ____ __, 1994 ("Indenture"), between the Company and First Fidelity Bank, National Association, as Trustee, and also proposes to issue and sell, at the option of the Underwriter, an aggregate of not more than $_________ principal amount (the "Option Securities") of the Notes as set forth below. The Firm Securities and the Option Securities are hereinafter collectively referred to as the "Securities". The Company hereby agrees with the Underwriter as follows: 2. Representations and Warranties of the Company. (a) The Company represents and warrants to, and agrees with, the Underwriter that: (i) A registration statement on Form S-3 (No. 33- ), including a form of prospectus, relating to the Securities has been filed with the Securities and Exchange Commission ("Commission") and either (A) has been declared effective under the Securities Act of 1933, as amended ("Act"), and is not proposed to be amended or (B) is proposed to be amended by amendment or post-effective amendment. If the Company does not propose to amend such registration statement and if any post- effective amendment to such registration statement has been filed with the Commission prior to the execution and delivery of this Agreement, the most recent such amendment has been declared effective by the Commission. For purposes of this Agreement, "Effective Time" means (A) if the Company has advised you that it does not propose to amend such registration statement, the date and time as of which such registration statement, or the most recent post-effective amendment thereto (if any) 2 EX-1 filed prior to the execution and delivery of this Agreement, was declared effective by the Commission or (B) if the Company has advised you that it proposes to file an amendment or post-effective amendment to such registration statement, the date and time as of which such registration statement, as amended by such amendment or post-effective amendment, as the case may be, is declared effective by the Commission. "Effective Date" means the date of the Effective Time. Such registration statement, as amended at the Effective Time, including all material incorporated by reference therein and including all information (if any) deemed to be a part of such registration statement as of the Effective Time pursuant to Rule 430A(b) under the Act, is hereinafter referred to as the "Registration Statement," and the form of prospectus relating to the Securities, as first filed with the Commission pursuant to and in accordance with Rule 424(b) ("Rule 424(b)") under the Act or (if no such filing is required) as included in the Registration Statement, including all material incorporated by reference in such prospectus, is hereinafter referred to as the "Prospectus". No stop order suspending the effectiveness of such Registration Statement or any part thereof has been issued and no proceeding for that purpose has been instituted or, to the Company's knowledge, threatened by the Commission. (ii) If the Effective Time is prior to the execution and delivery of this Agreement: (A) at the Effective Time, the Registration Statement conformed in all material respects to the requirements of the Act, the Trust Indenture Act of 1939 ("Trust Indenture Act") and the rules and regulations of the Commission ("Rules and Regulations") and did not include any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading and (B) on the date of this Agreement, the Registration Statement conforms, and at the time of filing of the Prospectus pursuant to Rule 424(b) and on the First Closing Date and any Second Closing Date, the Registration Statement and the Prospectus will conform, in all material respects to the requirements of the Act, the Trust Indenture Act and the Rules and Regulations, and neither of such documents includes, or will include, any untrue statement of a material fact or omits, or will omit, to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. If the Effective Time is subsequent to the execution and delivery of this Agreement: (A) at the Effective Time, the Registration Statement and the Prospectus will conform in all material respects to the requirements of the Act, the Trust Indenture Act and the Rules and Regulations, and neither of such documents includes, or will include, any untrue statement of a material fact or omits, or will omit, to state any material fact required to be stated therein or necessary to make the statements therein not misleading and (B) on the First Closing Date and any Second Closing Date, the Registration Statement and the Prospectus will conform in all material respects to the requirements of the Act, the Trust Indenture Act and the Rules and Regulations, and neither of such documents will include any untrue statement of a material fact or will omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. The two preceding sentences do not apply to statements in or omissions from the Registration Statement or Prospectus based upon written information furnished to the Company by the Underwriter specifically for use therein. (iii) Each preliminary prospectus filed as part of the registration statement as originally filed or as part of any amendment thereto, or filed pursuant to Rule 424 under the Act, conformed when so filed in all material respects to the requirements of the Act and the Rules and Regulations. (iv) The Company has been duly incorporated and is validly existing as a corporation in good standing under the laws of the Commonwealth of Pennsylvania, and has the corporate power and authority to own, lease and operate its properties and to conduct its business as described in the Prospectus; and the Company is duly qualified to transact business and is in good standing in each jurisdiction in which the conduct of its business or its ownership, leasing or operation of property requires such qualification, except to the extent that the failure to be so qualified or in good standing would not have a material adverse effect on the Company and its Subsidiaries, taken as a whole. 3 EX-1 (v) The Company's only subsidiaries are listed on Schedule A hereto (collectively, the "Subsidiaries"). Each Subsidiary of the Company has been duly incorporated and is validly existing as a corporation in good standing under the laws of the jurisdiction of its incorporation, has the corporate power and authority to own, lease and operate its properties and to conduct its business as described in the Prospectus and is duly qualified to transact business and is in good standing in each jurisdiction in which the conduct of its business or its ownership, leasing or operation of property requires such qualification, except to the extent that the failure to be so qualified or in good standing would not have a material adverse effect on the Company and its Subsidiaries, taken as a whole. All of the outstanding capital stock of each Subsidiary has been duly authorized and validly issued and is fully paid and non-assessable and is owned by the Company, directly or through Subsidiaries, free and clear of any mortgage, pledge, lien, perfected security interest, claim or encumbrance of any kind or, to the knowledge of the Company, any unperfected security interest. (vi) All outstanding shares of capital stock of the Company have been duly authorized, are validly issued, fully paid and non-assessable and have been issued in compliance with applicable federal and state securities laws; the Company has an authorized and outstanding capital stock as set forth in the Prospectus under the caption "Capitalization"; and the stockholders of the Company have no preemptive or similar rights with respect to the capital stock or any other securities of the Company. (vii) The Securities are convertible into common stock, par value $1.00 per share, of the Company (the "Common Stock") in accordance with the terms of the Indenture; the shares of Common Stock issuable upon conversion of the Securities have been duly authorized and reserved for issuance upon such conversion and, if and when issued upon such conversion, will be validly issued, fully paid and non-assessable and will conform to the description thereof contained in the Prospectus. (viii) There are no contracts, agreements or understandings between the Company and any third party granting such third party the right to require the Company to file a registration statement under the Act with respect to any securities of the Company owned or to be owned by such third party or to require the Company to include such securities in the securities registered pursuant to the Registration Statement or in any other securities being registered pursuant to any other registration statement filed by the Company under the Act. (ix) This Agreement has been duly authorized, executed and delivered by the Company and constitutes the legal, valid and binding obligation of the Company enforceable against the Company in accordance with its terms, except to the extent that (A) enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws relating to creditors' rights generally and by general principles of equity and (B) rights to indemnity and contribution may be limited by federal or state securities laws or policies underlying such laws. (x) The Indenture has been duly authorized by the Company, will be substantially in the form heretofore delivered to you and, when duly executed and delivered by the Company and the Trustee, will constitute a valid and binding obligation of the Company, enforceable against the Company in accordance with its terms, except to the extent that enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws relating to creditors' rights generally and by general principles of equity; the Indenture is (or, if the 4 EX-1 Effective Time is subsequent to the execution and delivery of this Agreement, at the Effective Time the Indenture will be) duly qualified under the Trust Indenture Act; and the Indenture conforms to the description thereof contained in the Prospectus. (xi) The Securities have been duly authorized by the Company, and when executed, authenticated, issued and delivered in the manner provided for in the Indenture and sold and paid for as provided in this Agreement, the Securities will constitute valid and binding obligations of the Company entitled to the benefits of the Indenture and enforceable against the Company in accordance with their terms, except to the extent that enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws relating to creditors' rights generally and by general principles of equity; and the Securities conform to the description thereof contained in the Prospectus. (xii) No consent, approval or authorization, and no order, registration or qualification of or with any natural person, corporation, partnership, trust, firm, association or other entity, whether acting in an individual, fiduciary or other capacity ("Person"), or any court or government agency or body, is required for the issuance of the Securities or for the consummation of the other transactions contemplated by this Agreement, except such as have been obtained and made under the Act, the Trust Indenture Act or the Rules and Regulations and such as may be required under state securities laws in connection with the offer and sale of the Securities. (xiii) The execution, delivery and performance of the Indenture and this Agreement and the consummation of the transactions herein and therein contemplated have been duly authorized by all necessary corporate action on the part of the Company and its Subsidiaries and will not (A) contravene any provision of the charter or by-laws of the Company or any of its Subsidiaries, or (B) conflict with or result in a breach or violation of any of the terms and provisions of, or constitute a default under, or result in the creation or imposition of any lien, charge or encumbrance upon any assets or property of the Company or any of its Subsidiaries under, any statute, rule, regulation, order or decree of any governmental agency or body or any court having jurisdiction over the Company or any of its Subsidiaries or any of their properties or any indenture, mortgage, loan agreement, note, lease, permit, license or other agreement or instrument to which the Company or any such Subsidiary is bound or to which any of the properties of the Company or any such Subsidiary is subject, except, in the case of clause (B), as would not, singly or in the aggregate, have a material adverse effect on the condition (financial or other), business, prospects, results of operations or general affairs of the Company and its Subsidiaries, taken as a whole, or on the transactions contemplated by this Agreement and the Indenture; and the Company has full power and authority to authorize, issue and sell the Securities as contemplated by this Agreement. (xiv) (A) Neither the Company nor any of its Subsidiaries is in violation of its charter or by-laws, (B) neither the Company nor any of its Subsidiaries is in violation of any applicable law, ordinance, administrative or governmental rule or regulation, or any order of any court or governmental agency or body having jurisdiction over the Company or any Subsidiary and (C) no event of default or event that, but for the giving of notice or the lapse of time or both, would constitute an event of default exists, or upon the use of proceeds from the sale of the Securities in the manner contemplated by the description under the caption "Use of Proceeds" contained in the Prospectus or upon the consummation of the other transactions contemplated by the Prospectus will exist, under any agreement or instrument for borrowed money, any guarantee of any agreement or instrument for borrowed money or any lease, permit, license or other agreement or instrument to which the Company or any of its Subsidiaries is a party or to which any of the properties or assets of the Company or any such Subsidiary is subject, 5 EX-1 except, in the case of clauses (B) and (C), for such violations and defaults that would not, singly or in the aggregate, have a material adverse effect on the condition (financial or other), business, prospects, results of operations or general affairs of the Company and its Subsidiaries, taken as a whole. (xv) The Company and its Subsidiaries have such permits, licenses, franchises, consents, approvals, authorizations and clearances ("Licenses") and are in compliance with all applicable laws and regulations of federal, state, local and foreign governmental or regulatory authorities, as are necessary to own, lease or operate their properties and to conduct their businesses in the manner described in the Prospectus and all such Licenses are in full force and effect, in each case except as would not, singly or in the aggregate, have a material adverse effect on the condition (financial or other), business, prospects, results of operations or general affairs of the Company and its Subsidiaries, taken as a whole. (xvi) The Company and its Subsidiaries have good and marketable title to all properties (real and personal) owned by the Company and its Subsidiaries, free and clear of all liens, claims, security interests or other encumbrances that are material or that may interfere with the conduct of the business of the Company and its Subsidiaries, taken as a whole; all properties held under lease or sublease by the Company and its Subsidiaries are held under valid, subsisting and enforceable leases or subleases with such exceptions as are not material and do not interfere with the use made or proposed to be made of such property by the Company and its Subsidiaries; neither the Company nor any of its Subsidiaries is in default under any such lease or sublease, except for defaults which are not material and will not interfere with the conduct of the business of the Company and its Subsidiaries, taken as a whole; and no material claim of any sort has been asserted by anyone adverse to the rights of the Company or any Subsidiary under any such lease or subleases or affecting or questioning the right of such entity to the continued possession of the leased or subleased properties under any such lease or sublease. (xvii) The Company and its Subsidiaries carry or are entitled to the benefits of insurance, including, without limitation, product liability and business interruption insurance, in such amounts and covering such risks as the Company reasonably believes is generally maintained by companies of established repute engaged in the same or similar business, and all such insurance is in full force and effect. (xviii) The properties, assets and operations of the Company and its Subsidiaries are in compliance in all material respects with all applicable federal, state, local and foreign laws, rules and regulations, orders, decrees, judgments, permits and licenses relating to public and worker health and safety and to the protection and clean- up of the natural environment and activities or conditions related thereto, including, without limitation, those relating to the generation, handling, disposal, transportation or release of hazardous materials (collectively, "Environmental Laws"). With respect to such properties, assets and operations, including any previously owned, leased or operated properties, assets or operations there are no past, present or, to the knowledge of the Company or any of its Subsidiaries, reasonably anticipated future events, conditions, circumstances, activities, practices, incidents, actions or plans of the Company or any of its Subsidiaries that may interfere with or prevent compliance or continued compliance with applicable Environmental Laws in any material respect. Neither the Company nor any of its Subsidiaries is the subject of any federal, state, local or foreign investigation, and neither the Company nor any of its Subsidiaries has received any notice or claim (or is aware of any facts that would form a reasonable basis for any claim), or entered into any negotiations or agreements with any third party 6 EX-1 relating to any liability or remedial action or potential liability or remedial action under Environmental Laws, nor are there any pending, reasonably anticipated or, to the best knowledge of the Company or any of its Subsidiaries, threatened actions, suits or proceedings against or affecting the Company, any of its Subsidiaries or their properties, assets or operations, in connection with any such Environmental Laws. The term "hazardous materials" shall mean those substances that are regulated by or form the basis for liability under any applicable Environmental Laws. (xix) There are no pending actions, suits or proceedings against or affecting the Company, any of its Subsidiaries or any of their properties that are required under the Act to be described in the Registration Statement and the Prospectus (other than as described therein) or that could, singly or in the aggregate, have a material adverse effect on the condition (financial or other), business, prospects, results of operations or general affairs of the Company and its Subsidiaries, taken as a whole, or could have a material adverse effect on the ability of the Company to perform its obligations under this Agreement, the Indenture or the Securities, or that are otherwise material in the context of the sale of the Securities; and, to the Company's knowledge, no such actions, suits or proceedings are threatened or contemplated. (xx) The Company and its Subsidiaries own or possess all the patents, trademarks, service marks, trade names, copyrights, licenses and rights with respect thereto (collectively, "Intellectual Property") necessary for the conduct of their businesses as described in the Prospectus, except where the failure to own or possess the same would not, singly or in the aggregate, have a material adverse effect on the condition (financial or other), business, prospects, results of operations or general affairs of the Company and its Subsidiaries, taken as a whole; and to the knowledge of the Company and its Subsidiaries, no conflict with the rights of others exists with respect to any such Intellectual Property. (xxi) The Company and its Subsidiaries have filed all federal, state, local and foreign tax returns required to be filed, such returns are complete and correct in all material respects, and all taxes shown by such returns or otherwise assessed or due and payable have been paid, except such taxes as are being contested in good faith and as to which adequate reserves have been provided. The charges, accruals and reserves on the books of the Company and its Subsidiaries in respect of any tax liability for any year not finally determined are adequate to meet any assessments or reassessments for additional taxes, and there has been no tax deficiency asserted and, to the knowledge of the Company and its Subsidiaries, no tax deficiency might be asserted against the Company or any of its Subsidiaries, except for such inadequacies or deficiencies that could not, singly or in the aggregate, have a material adverse effect on the condition (financial or other), business, prospects, results of operations or general affairs of the Company and its Subsidiaries, taken as a whole. (xxii) There are no contracts, agreements or understandings between the Company and any person entitling such person to any fee, commission or payment from the Company in connection with the Securities to be sold by the Company, other than the compensation due and payable to the Underwriter as described in the Prospectus. (xxiii) The Flexitrust (as defined in the Prospectus) has been duly authorized by all necessary corporate action on the part of the Company and its Subsidiaries. Neither the establishment and maintenance of the Flexitrust nor the consummation of the transactions contemplated by the Flexitrust will (A) contravene any provision of the charter or by-laws of the Company or any of its Subsidiaries or (B) conflict with or result 7 EX-1 in a breach or violation of any of the terms and provisions of, or constitute a default under, or result in the creation or imposition of any lien, charge or encumbrance upon any assets or property of the Company or any of its Subsidiaries under, any statute, rule, regulation, order or decree of any governmental agency or body or any court having jurisdiction over the Company or any of its Subsidiaries or any of their properties or any indenture, mortgage, loan agreement, note, lease, permit, license or other agreement or instrument to which the Company or any such Subsidiary is bound or to which any of the properties of the Company or any such Subsidiary is subject, except, in the case of clause (B), as would not, singly or in the aggregate, have a material adverse effect on the condition (financial or other), business, prospects, results of operations or general affairs of the Company and its Subsidiaries, taken as a whole. (xxiv) No labor disturbance by the employees of the Company exists, or to the knowledge of the Company, is threatened, that could, singly or in the aggregate, have a material adverse effect on the condition (financial or other), business, prospects, results of operations or general affairs of the Company and its Subsidiaries, taken as a whole. (xxv) The financial statements and related schedules and notes included or incorporated by reference in the Registration Statement and the Prospectus comply, in all material respects, with the requirements of the Act and the Rules and Regulations, were prepared in accordance with generally accepted accounting principles consistently applied throughout the periods involved and fairly present the financial condition and results of operations of the Company and its Subsidiaries, on a consolidated basis, at the dates and for the periods presented. The financial information and statistical data set forth in the Prospectus under the captions "Selected Financial Data" and "Capitalization" are fairly stated in all material respects in relation to the consolidated financial statements of the Company from which they have been derived. (xxvi) Since the dates as of which information is given in the Registration Statement and the Prospectus, (A) neither the Company nor its Subsidiaries has incurred any material liability or obligation (indirect, direct or contingent) or entered into any material verbal or written agreement or other transaction that is not in the ordinary course of business or that could result in a material reduction in the future earnings of the Company; (B) neither the Company nor its Subsidiaries has sustained any material loss or interference with its business or properties from fire, flood, windstorm, accident or other calamity (whether or not covered by insurance); (C) there has been no change in the indebtedness of the Company and, except as contemplated by the Prospectus, no change in the capital stock of the Company and no dividend or distribution of any kind declared, paid or made by the Company on any class of its capital stock; and (D) there has been no material adverse change, nor any development reasonably likely to result in a material adverse change, in the condition (financial or other), business, prospects, results of operations or general affairs of the Company and its Subsidiaries, taken as a whole. (xxvii) On the date the registration statement was first filed with the Commission, and at the Effective Time, the Company met the conditions for use of Form S-3 under the Act and the Rules and Regulations. (xxviii) The Company has complied, and will continue to comply, with all provisions of Section 517.075, Florida Statutes (Chapter 92-198, Laws of Florida), and the regulations thereunder. (xxix) The Company has obtained the written agreement of each director and executive officer of the Company, in form reasonably 8 EX-1 satisfactory to the Underwriter, that such persons will not, directly or indirectly, issue, offer, sell, contract to sell, grant any option to purchase, hypothecate or otherwise dispose or cause the disposition of, any shares of Common Stock or any security convertible into or exchangeable or exercisable for Common Stock, for a period of 90 days after the commencement of the public offering of the Securities by the Underwriter, without the prior written consent of the Underwriter. (b) The Company hereby acknowledges and agrees with the Underwriter that, for all purposes of this Agreement and the transactions herein contemplated, the only information furnished to the Company by the Underwriter specifically for use in the Registration Statement, the Prospectus or any amendment or supplement thereto, or any related preliminary prospectus, are (i) the statements with respect to stabilization appearing on the inside front cover page of the preliminary prospectus and the Prospectus, (ii) the first sentence of the last paragraph of text appearing on the front cover page of the preliminary prospectus and the Prospectus and (iii) the information appearing in the preliminary prospectus and the Prospectus in the fourth paragraph under the caption "Underwriting." 3. Purchase, Sale and Delivery of Securities. On the basis of the representations, warranties and agreements herein contained, but subject to the terms and conditions herein set forth, the Company agrees to sell to the Underwriter, and the Underwriter agrees to purchase from the Company, at a purchase price of _____% of the principal amount thereof plus accrued interest, if any, from __________, 1994 to the First Closing Date (as defined below), the Firm Securities. The Company will deliver the Firm Securities to you for the account of the Underwriter, against payment of the purchase price by certified or official bank check in New York Clearing House (next day) funds drawn to the order of the Company at the offices of Dewey Ballantine, 1301 Avenue of the Americas, New York, New York, at 10:00 A.M., New York time, on _________, 1994, or at such other time not later than seven full business days thereafter as you and the Company determine, such time and date being herein referred to as the "First Closing Date". The Securities so to be delivered will be in definitive fully registered form, in such denominations and registered in such names as you request and will be made available for checking and packaging at the offices of CS First Boston Corporation, Park Avenue Plaza, New York, New York 10055 at least 24 hours prior to the Closing Date. In addition, upon written notice from you given to the Company not more than 30 days subsequent to the date of the initial public offering of the Securities, the Underwriter may purchase all or less than all of the Option Securities at a purchase price of _____% of the principal amount thereof plus accrued interest, if any, from _______________ __, 1994 to the Second Closing Date (as defined below). The Company agrees to sell to the Underwriter the principal amount of Option Securities specified in such notice and the Underwriter agrees to purchase such Option Securities. Such Option Securities may be purchased by the Underwriter only for the purpose of covering over-allotments made in connection with the sale of the Firm Securities. No Option Securities shall be sold or delivered unless the Firm Securities previously have been, or simultaneously are, sold and delivered. The right to purchase the Option Securities or any portion thereof may be surrendered and terminated at any time upon notice by you to the Company. The time for the delivery of and payment for the Option Securities, being herein referred to as the "Second Closing Date" (which date may be the same as the First Closing Date), shall be determined by you but shall be not later than seven full business days after notice of election to purchase Option Securities is given. The Company will deliver the Option Securities to you against payment of the purchase price therefor by certified or 9 EX-1 official bank check in New York Clearing House (next day) funds drawn to the order of the Company at the above office of Dewey Ballantine. The Option Securities will be in definitive fully registered form, in such denominations and registered in such names as you request upon reasonable notice prior to the Second Closing Date and will be made available for checking and packaging at the office of CS First Boston Corporation at a reasonable time in advance of the Second Closing Date. 4. Offering by Underwriter. It is understood that the Underwriter proposes to offer the Securities for sale to the public as set forth in the Prospectus. 5. Certain Agreements of the Company. The Company agrees with the Underwriter that: (a) If the Effective Time is prior to the execution and delivery of this Agreement, the Company will file the Prospectus with the Commission pursuant to and in accordance with subparagraph (1) (or, if applicable and if consented to by you, subparagraph (4)) of Rule 424(b) not later than the earlier of (A) the second business day following the execution and delivery of this Agreement or (B) the fifth business day after the Effective Date. The Company will advise you promptly of any such filing pursuant to Rule 424(b). (b) The Company will advise you promptly of any proposal to amend or supplement the registration statement as filed or the related prospectus or the Registration Statement or the Prospectus and will not effect such amendment or supplementation without your prior consent, which consent shall not be unreasonably withheld; and the Company will also advise you promptly of the effectiveness of the Registration Statement (if the Effective Time is subsequent to the execution and delivery of this Agreement) and of any amendment or supplementation of the Registration Statement or the Prospectus and of the institution by the Commission of any stop order proceedings in respect of the Registration Statement and will use its best efforts to prevent the issuance of any such stop order and to obtain as soon as possible its lifting, if issued. (c) If, at any time when a prospectus relating to the Securities is required to be delivered under the Act, any event occurs or a condition exists as a result of which it is necessary, in the reasonable opinion of counsel to the Underwriter or counsel to the Company, to amend the Registration Statement or amend or supplement the Prospectus in order that the Prospectus would not include an untrue statement of a material fact or omit to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, or if it is necessary, in the reasonable opinion of either such counsel, at any time to amend the Registration Statement or amend or supplement the Prospectus to comply with the Act, the Company promptly will prepare and file with the Commission an amendment or supplement that will correct such statement or omission or an amendment that will effect such compliance. Neither your consent to, nor the Underwriter's delivery of, any such amendment or supplement shall constitute a waiver of any of the conditions set forth in Section 6 of this Agreement. (d) As soon as practicable, but not later than the Availability Date (as defined below), the Company will make generally available to its securityholders an earnings statement covering a period of at least 12 months beginning after the Effective Date that will satisfy the provisions of Section 11(a) of the Act and Rule 158 thereunder. For the purpose of the preceding sentence, "Availability Date" means the 45th day after the end of the fourth fiscal quarter following the fiscal quarter that includes the Effective Date, except that, if such fourth fiscal quarter is the last quarter of the Company's fiscal year, "Availability Date" means the 90th day after the end of such fourth fiscal quarter. 10 EX-1 (e) The Company will furnish to you copies of the Registration Statement (at least two of which will be signed and will include all exhibits and a signed accountant's report of Deloitte & Touche), each related preliminary prospectus, the Prospectus and all amendments and supplements to such documents, in each case as soon as available and in such quantities as you reasonably request. (f) The Company will arrange for the qualification of the Securities for sale and the determination of their eligibility for investment under the laws of such jurisdictions as you designate and will continue such qualifications in effect so long as required for the distribution thereof. (g) During the period of five years hereafter, the Company will furnish to you, as soon as practicable after the end of each fiscal year, a copy of its annual report to stockholders for such year; and the Company will furnish to you (i) as soon as available, a copy of each report or definitive proxy statement of the Company filed with the Commission under the Securities Exchange Act of 1934, as amended, or mailed to stockholders and (ii) from time to time, such other information concerning the Company as you may reasonably request. (h) Other than pursuant to this Agreement or upon conversion of the Securities or pursuant to employee benefit plans (including stock option plans) in accordance with the terms thereof in existence on the date hereof, the Company will not, directly or indirectly, issue, offer, sell, contract to sell, grant any option to purchase, hypothecate or otherwise dispose or cause the disposition of, or file a registration statement under the Act relating to, any shares of Common Stock or any security convertible into or exchangeable or exercisable for Common Stock, for a period of 90 days after the commencement of the public offering of the Securities by the Underwriter, without the prior written consent of the Underwriter. The Company agrees with the Underwriter that the Company will pay all expenses incident to the performance of its obligations under this Agreement, and will reimburse the Underwriter for any expenses (including reasonable fees and disbursements of counsel) incurred by it in connection with the qualification of the Securities for sale under the laws of such jurisdictions as you designate and the printing of memoranda relating thereto, for the filing fee of and the related reasonable fees and expenses of counsel for the Underwriter in connection with any filings required to be made with the National Association of Securities Dealers, Inc. relating to the Securities, any fees charged by investment rating agencies for the rating of the Securities and for expenses incurred in printing and distributing the Registration Statement, preliminary prospectuses and the Prospectus (including any amendments and supplements thereto) or related documents. 6. Conditions of the Obligations of the Underwriter. The obligations of the Underwriter to purchase and pay for the Firm Securities on the First Closing Date and the Option Securities on the Second Closing Date will be subject to the accuracy of the representations and warranties on the part of the Company herein, to the accuracy of the statements of Company officers made pursuant to the provisions hereof, to the performance by the Company of its obligations hereunder and to the following additional conditions precedent: (a) You shall have received a letter, dated the date of delivery thereof (which, if the Effective Time is prior to the execution and delivery of this Agreement, shall be on or prior to the date of this Agreement or, if the Effective Time is subsequent to the execution and delivery of this Agreement, shall be prior to the filing of the 11 EX-1 amendment or post-effective amendment to the registration statement to be filed shortly prior to the Effective Time), of Deloitte & Touche confirming that they are independent public accountants within the meaning of the Act and the applicable published Rules and Regulations thereunder and stating in effect that: (i) in their opinion the financial statements and schedules examined by them and included or incorporated by reference in the Registration Statement comply in form in all material respects with the applicable accounting requirements of the Act and the related published Rules and Regulations; (ii) they have made a review of the unaudited financial statements included or incorporated by reference in the Registration Statement in accordance with standards established by the American Institute of Certified Public Accountants, as indicated in their report attached to such letter; (iii)on the basis of the review referred to in clause (ii) above, a reading of the latest available interim financial statements of the Company, a reading of the minutes of all meetings of the stockholders and directors (including each committee thereof) of the Company and its Subsidiaries, inquiries of officials of the Company who have responsibility for financial and accounting matters and other specified procedures, nothing came to their attention that caused them to believe that: (A) the unaudited financial statements included or incorporated by reference in the Registration Statement do not comply in form in all material respects with the applicable accounting requirements of the Act and the related published Rules and Regulations or are not in conformity with generally accepted accounting principles applied on a basis substantially consistent with that of the audited financial statements included or incorporated by reference in the Registration Statement; (B) the information set forth under the caption "Selected Financial Data" in the Prospectus does not agree with the amounts set forth in the financial statements from which it was derived or was not determined on a basis substantially consistent with that of the corresponding amounts in the audited financial statements included or incorporated by reference in the Registration Statement; (C) at the date of the latest available balance sheet read by such accountants, and at a subsequent specified date not more than five days prior to the date of such letter, there was any decrease in stockholders' equity or change in the capital stock or any increase in short-term indebtedness or long-term debt of the Company and its consolidated Subsidiaries or, at the date of the latest available balance sheet read by such accountants, there was any decrease in consolidated net current assets or total assets, as compared with amounts shown on the latest balance sheet included in the Prospectus; or (D) for the period from the closing date of the latest income statement included or incorporated by reference in the Prospectus to the closing date of the latest available income statement read by such accountants there were any decreases, as compared with the corresponding period of the previous year and with the period of corresponding length ended the date of 12 EX-1 the latest income statement included or incorporated by reference in the Prospectus, in merchandise sales, service revenue, total gross profit or operating profit or in the total or per share amounts of net earnings, or any increases or decreases, as the case may be, in other items specified by the Underwriter; except in all cases set forth in clauses (C) and (D) above for changes, increases or decreases which the Prospectus discloses have occurred or may occur or which are described in such letter; (iv) they have compared specified dollar amounts (or percentages derived from such dollar amounts), numerical data and other financial information contained in the Registration Statement (in each case to the extent that such dollar amounts, percentages, numerical data and other financial information are derived from the general accounting records of the Company and its Subsidiaries subject to the internal controls of the Company's accounting system or are derived directly from such records by analysis or computation) with the results obtained from inquiries, a reading of such general accounting records and other procedures specified in such letter and have found such dollar amounts, percentages, numerical data and other financial information to be in agreement with such results. For purposes of this subsection, if the Effective Time is subsequent to the execution and delivery of this Agreement, "Registration Statement" shall mean the registration statement as proposed to be amended by the amendment or post-effective amendment to be filed shortly prior to the Effective Time, and "Prospectus" shall mean the prospectus included in the Registration Statement. All financial statements and schedules included in material incorporated by reference into the Prospectus shall be deemed included in the Registration Statement for purposes of this subsection. (b) If the Effective Time is not prior to the execution and delivery of this Agreement, the Effective Time shall have occurred not later than 10:00 P.M., New York time, on the date of this Agreement or such later date as shall have been consented to by you. If the Effective Time is prior to the execution and delivery of this Agreement, the Prospectus shall have been filed with the Commission in accordance with the Rules and Regulations and Section 5(a) of this Agreement. On or prior to such Closing Date, no stop order suspending the effectiveness of the Registration Statement shall have been issued and no proceedings for that purpose shall have been instituted or, to the knowledge of the Company or you, shall be contemplated by the Commission. (c) Subsequent to the execution and delivery of this Agreement, there shall not have occurred (i) any change, or any development involving a prospective change, in or affecting particularly the business or properties of the Company or any of its Subsidiaries that, in the judgment of the Underwriter, materially impairs the investment quality of the Securities; (ii) any downgrading in the rating of any debt securities of the Company by any "nationally recognized statistical rating organization" (as defined for purposes of Rule 436(g) under the Act), or any public announcement that any such organization has under surveillance or review its rating of any debt securities of the Company (other than an announcement with positive implications of a possible upgrading, and no implications of a possible downgrading, of such rating); (iii) any suspension or limitation of trading in securities generally on the New York Stock Exchange, or any setting of minimum prices for trading on such exchange, or any suspension of trading of any securities of the Company on any exchange or in the over-the-counter market; (iv) any banking moratorium declared by Federal or New York 13 EX-1 authorities; or (v) any outbreak or escalation of major hostilities in which the United States is involved, any declaration of war by Congress or any other substantial national or international calamity or emergency if, in the judgment of the Underwriter, the effect of any such outbreak, escalation, declaration, calamity or emergency makes it impractical or inadvisable to proceed with completion of the sale of and payment for the Securities. (d) You shall have received an opinion, dated such Closing Date, of Willkie Farr & Gallagher, counsel for the Company, to the effect that: (i) Each of the Company and its Subsidiaries has been duly incorporated and is a validly existing corporation in good standing under the laws of the jurisdiction of its incorporation, with corporate power and authority to own, lease and operate its properties and conduct its business as described in the Prospectus; and each of the Company and its Subsidiaries is duly qualified to transact business as a foreign corporation in good standing in all other jurisdictions in which it owns, leases or operates property or in which the conduct of its business requires such qualification, except to the extent that the failure to be so qualified or in good standing would not have a material adverse effect on the Company and its Subsidiaries, taken as a whole; and all of the outstanding shares of capital stock of the Company's Subsidiaries have been duly authorized and validly issued, are fully paid and non-assessable and are owned by the Company, directly or through Subsidiaries, free and clear, to the knowledge of such counsel after reasonable inquiry, of any mortgage, pledge, lien, claim, security interest or other encumbrance. (ii) The authorized and outstanding shares of capital stock of the Company are as set forth in the Prospectus under the caption "Capitalization"; and the stockholders of the Company have no preemptive or similar rights with respect to the capital stock or any other securities of the Company. (iii)The Securities are convertible into Common Stock in accordance with the terms of the Indenture; the shares of Common Stock issuable upon conversion of the Securities have been duly authorized and reserved for issuance upon such conversion and, when issued upon such conversion, will be validly issued, fully paid and non-assessable and will conform to the description thereof contained in the Prospectus. (iv) This Agreement has been duly authorized, executed and delivered by the Company and constitutes the legal, valid and binding obligation of the Company enforceable against the Company in accordance with its terms, except to the extent that (A) enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws relating to creditors' rights generally and by general principles of equity and (B) rights to indemnity and contribution may be limited by federal or state securities laws or policies underlying such laws. (v) The Indenture has been duly authorized, executed and delivered by the Company and has been duly qualified under the Trust Indenture Act and, assuming due authorization, execution and delivery by the Trustee, constitutes a valid and binding obligation of the Company, enforceable against the Company in accordance with its terms, except to the extent that enforceability may be limited by bankruptcy, insolvency, 14 EX-1 reorganization, moratorium or other similar laws relating to creditors' rights generally and by general principles of equity; and the Securities have been duly authorized, executed and (assuming they have been duly authenticated in accordance with the terms of the Indenture) issued, constitute legal, valid and binding obligations of the Company, enforceable against the Company in accordance with their terms entitled to the benefits provided by the Indenture, except to the extent that enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws relating to creditors' rights generally and by general principles of equity; and the Indenture and the Securities conform to the descriptions thereof contained in the Prospectus. (vi) No consent, approval or authorization, and no order, registration or qualification of or with any Person or any court or governmental agency or body is required for the issuance of the Securities sold by the Company or for the consummation of the other transactions contemplated by this Agreement, except such as have been obtained and made under the Act, the Trust Indenture Act or the Rules and Regulations and such as may be required under state securities laws in connection with the offer and sale of the Securities. (vii) The execution, delivery and performance of the Indenture and this Agreement and the consummation of the transactions herein and therein contemplated have been duly authorized by all necessary corporate action on the part of the Company and its Subsidiaries and will not (A) contravene any provision of the charter or by-laws of the Company or any of its Subsidiaries, or (B) conflict with or result in a breach or violation of any of the terms and provisions of, or constitute a default under, or result in the creation or imposition or encumbrance upon any assets or property of the Company or any of its Subsidiaries under, any statute, rule, regulation, order or decree of any governmental agency or body or any court having jurisdiction over the Company or any of its Subsidiaries or any of their properties, or any indenture, mortgage, loan agreement, note, lease, permit, license or other agreement or instrument known to such counsel after reasonable inquiry to which the Company or any such Subsidiary is bound or to which any of the properties of the Company or any such Subsidiary is subject, except, in the case of clause (B), as would not, singly or in the aggregate, have a material adverse effect on the condition (financial or other), business, prospects, results of operations or general affairs of the Company and its Subsidiaries, taken as a whole, or on the transactions contemplated by this Agreement and the Indenture; and the Company has full power and authority to authorize, issue and sell the Securities as contemplated by this Agreement. (viii) Neither the Company nor any of its Subsidiaries is in violation of its charter or by-laws or, to the knowledge of such counsel after reasonable inquiry, any applicable law, ordinance, administrative or governmental rule or regulation, or any order of any court or governmental agency or body having jurisdiction over the Company or any Subsidiary or, to 15 EX-1 the knowledge of such counsel after reasonable inquiry, in default in the performance or observance of any material obligation, agreement or condition in any agreement or instrument to which the Company or any of its Subsidiaries is a party or to which any of the properties or assets of the Company or any such Subsidiary is subject. (ix) To the knowledge of such counsel after reasonable inquiry, there are no pending or threatened actions, suits or proceedings against or affecting the Company, any of the Subsidiaries or any of their properties that are required under the Act to be described in the Registration Statement and the Prospectus (other than as described therein) or that could have a material effect on the ability of the Company to perform its obligations under this Agreement, the Indenture or the Securities, or that are otherwise material in the context of the sale of the Securities. (x) To the knowledge of such counsel after reasonable inquiry, there are no contracts, agreements or understandings between the Company and any third party granting such third party the right to require the Company to file a registration statement under the Act with respect to any securities of the Company owned or to be owned by such third party or to require the Company to include such securities in the securities registered pursuant to the Registration Statement or in any other securities being registered pursuant to any other registration statement filed by the Company under the Act. (xi) The descriptions in the Registration Statement and the Prospectus of contracts and other documents are accurate and fairly present the information required to be shown; and such counsel does not know of any statutes, regulations or legal or governmental proceedings required to be described in the Registration Statement or the Prospectus that are not described as required or that could materially and adversely affect the ability of the Company to perform its obligations under the Indenture, the Securities or this Agreement, or of any contracts or documents of a character required to be described in the Registration Statement or the Prospectus or to be filed as exhibits to the Registration Statement that are not described and filed as required; it being understood that such counsel need express no opinion as to the financial statements or other financial data contained in the Registration Statement or the Prospectus. (xii) The Registration Statement was declared effective under the Act as of the date and time specified in such opinion, the Prospectus either was filed with the Commission pursuant to the subparagraph of Rule 424(b) specified in such opinion on the date specified therein or was included in the Registration Statement (as the case may be) and, to the knowledge of such counsel after reasonable inquiry, no stop order suspending the effectiveness of the Registration Statement or any part thereof has been issued and no proceedings for that purpose have been instituted or are pending or contemplated under the Act. (xiii) The Registration Statement and the Prospectus, and each amendment or supplement thereto, as of their respective effective or issue dates and as of such Closing Date, complied as to form in all material respects with the requirements of the Act, the Trust Indenture Act and the Rules and Regulations; and such counsel have no reason to believe that either the Registration Statement at the time the Registration Statement became effective contained an untrue statement of a 16 EX-1 material fact or omitted to state any material fact required to be stated therein or necessary to make the statements therein not misleading, or that the Prospectus or any amendment or supplement thereto, as of their respective dates and as of the Closing Date, as the case may be, contained any untrue statement of a material fact or omitted to state a material fact required to be stated in the Prospectus or necessary in order to make the statements in the Prospectus, in light of the circumstances under which they were made, not misleading; it being understood that such counsel need express no opinion as to the financial statements or other financial data contained in the Registration Statement or the Prospectus. (e) You shall have received from Dewey Ballantine, counsel for the Underwriter, such opinion or opinions, dated such Closing Date, with respect to the validity of the Securities, the Registration Statement, the Prospectus and other related matters as you may require, and the Company shall have furnished to such counsel such documents or certificates as they reasonably request for the purpose of enabling them to pass upon such matters. (f) You shall have received a certificate, dated such Closing Date, of the President and the principal financial officer of the Company in which such officers, to the best of their knowledge after reasonable investigation, shall state that (A) the representations and warranties of the Company in this Agreement are true and correct, (B) the Company has complied with all agreements and satisfied all conditions on its part to be performed or satisfied hereunder at or prior to such Closing Date, (C) no stop order suspending the effectiveness of the Registration Statement has been issued and no proceedings for that purpose have been instituted or are contemplated by the Commission, (D) they have carefully examined the Registration Statement and the Prospectus and neither the Registration Statement nor the Prospectus or any amendment or supplement thereto, (i) as of the Effective Time, contained any untrue statement of a material fact or omitted to state any material fact required to be stated therein or necessary to make the statements therein not misleading and (ii) as of their respective issue dates and as of such Closing Date, contained any untrue statement of a material fact or omitted to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading and (E) subsequent to the dates as of which information is given in the Registration Statement and the Prospectus, there has been no material adverse change, nor any development reasonably likely, singly or in the aggregate, to result in a material adverse change, in the condition (financial or other), business, prospects, results of operations or general affairs of the Company and its Subsidiaries, taken as a whole. (g) You shall have received a letter, dated such Closing Date, of Deloitte & Touche that meets the requirements of subsection (a) of this Section, except that the specified date referred to in such subsection will be a date not more than five days prior to such Closing Date for the purposes of this subsection. All such opinions, certificates, letters and other documents will be in compliance with the provisions hereof only if they are reasonably satisfactory in form and substance to you and your counsel. The Company will furnish you with such conformed copies of such opinions, certificates, letters and documents as you reasonably request. 7. Indemnification and Contribution. (a) The Company will indemnify and hold harmless the Underwriter against any losses, claims, damages or liabilities, joint or several, to which the Underwriter may become 17 EX-1 subject, under the Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in the Registration Statement, the Prospectus, or any amendment or supplement thereto, or any related preliminary prospectus, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, and will reimburse the Underwriter for any legal or other expenses reasonably incurred by such Underwriter in connection with investigating or defending any such loss, claim, damage, liability or action as such expenses are incurred; provided, however, that the Company will not be liable in any such case to the extent that any such loss, claim, damage or liability arises out of or is based upon an untrue statement or alleged untrue statement in or omission or alleged omission from any of such documents in reliance upon and in conformity with written information furnished to the Company by the Underwriter specifically for use therein; and provided, further, that with respect to any untrue statement or omission or alleged untrue statement or omission made in any preliminary prospectus, the indemnity agreement contained in this subsection (a) shall not inure to the benefit of the Underwriter to the extent that any such loss, claim, damage or liability of the Underwriter results from the fact that there was not sent or given to such person, if required by law, at or prior to the written confirmation of the sale of such Securities to the person asserting any such loss, claim, damage or liability, a copy of the Prospectus (exclusive of material incorporated by reference therein) if the Company had previously furnished copies thereof in requisite quantities to the Underwriter. (b) The Underwriter will indemnify and hold harmless the Company against any losses, claims, damages or liabilities to which the Company may become subject, under the Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in the Registration Statement, the Prospectus, or any amendment or supplement thereto, or any related preliminary prospectus, or arise out of or are based upon the omission or the alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, in each case to the extent, but only to the extent, that such untrue statement or alleged untrue statement or omission or alleged omission was made in reliance upon and in conformity with written information furnished to the Company by the Underwriter specifically for use therein, and will reimburse any legal or other expenses reasonably incurred by the Company in connection with investigating or defending any such loss, claim, damage, liability or action as such expenses are incurred. (c) Promptly after receipt by an indemnified party under this Section of notice of the commencement of any action, such indemnified party will, if a claim in respect thereof is to be made against an indemnifying party under subsection (a) or (b) above, notify the indemnifying party of the commencement thereof; but the omission so to notify the indemnifying party will not relieve it from any liability which it may have to any indemnified party otherwise than under subsection (a) or (b) above, except to the extent that the omission so to notify the indemnifying party actually prejudices the indemnifying party's ability to defend the action. In case any such action is brought against any indemnified party and it notifies an indemnifying party of the commencement thereof, the indemnifying party will be entitled to participate therein and, to the extent that it may wish, to assume the defense thereof, with counsel satisfactory to such indemnified party (who shall not, except with the consent of the indemnified party, be counsel to the indemnifying party), and after notice from the indemnifying party to such indemnified party of its election so to assume the defense thereof, the indemnifying party will not be liable to such indemnified party under this Section for any legal or other expenses subsequently incurred by such indemnified party in connection with the defense thereof other than reasonable costs of investigation. No indemnifying party shall, without the prior written consent of the indemnified party, effect any settlement of any pending or threatened action in respect of which any indemnified party is or 18 EX-1 could have been a party and indemnity could have been sought hereunder by such indemnified party unless such settlement includes an unconditional release of such indemnified party from all liability on any claims that are the subject matter of such action. (d) If the indemnification provided for in this Section is unavailable or insufficient to hold harmless an indemnified party under subsection (a) or (b) above, then the indemnifying party shall contribute to the amount paid or payable by such indemnified party as a result of the losses, claims, damages or liabilities referred to in subsection (a) or (b) above (i) in such proportion as is appropriate to reflect the relative benefits received by the Company on the one hand and the Underwriter on the other from the offering of the Securities or (ii) if the allocation provided by clause (i) above is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above but also the relative fault of the Company on the one hand and the Underwriter on the other in connection with the statements or omissions which resulted in such losses, claims, damages or liabilities as well as any other relevant equitable considerations. The relative benefits received by the Company on the one hand and the Underwriter on the other shall be deemed to be in the same proportion as the total net proceeds from the offering (before deducting expenses) received by the Company bear to the total underwriting discounts and commissions received by the Underwriter. The relative fault shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company or the Underwriter and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such untrue statement or omission. The amount paid by an indemnified party as a result of the losses, claims, damages or liabilities referred to in the first sentence of this subsection (d) shall be deemed to include any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any action or claim which is the subject of this subsection (d). Notwithstanding the provisions of this subsection (d), the Underwriter shall not be required to contribute any amount in excess of the amount by which the total price at which the Securities underwritten by it and distributed to the public were offered to the public exceeds the amount of any damages which the Underwriter has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. (e) The obligations of the Company under this Section shall be in addition to any liability which the Company may otherwise have and shall extend, upon the same terms and conditions, to each person, if any, who controls the Underwriter within the meaning of the Act; and the obligations of the Underwriter under this Section shall be in addition to any liability which the Underwriter may otherwise have and shall extend, upon the same terms and conditions, to each director of the Company, to each officer of the Company who has signed the Registration Statement and to each person, if any, who controls the Company within the meaning of the Act. 8. Survival of Certain Representations and Obligations. The respective indemnities, agreements, representations, warranties and other statements of the Company or its officers and the Underwriter set forth in or made pursuant to this Agreement will remain in full force and effect, regardless of any investigation, or statement as to the results thereof, made by or on behalf of the Underwriter, the Company or any of their respective representatives, officers or directors or any controlling person, and will survive delivery of and payment for the Securities. If for any reason the purchase of the Securities by the Underwriter is not consummated, the Company shall remain responsible for the expenses to be paid or reimbursed by them pursuant to Section 5 and the respective obligations of the Company and the Underwriter under Section 7 shall remain in effect. If the purchase of the 19 EX-1 Securities by the Underwriter is not consummated for any reason other than solely because of the default by the Underwriter of its obligations hereunder or the occurrence of any event specified in clause (iii), (iv) or (v) of Section 6(c), the Company will reimburse the Underwriter for all out-of-pocket expenses (including fees and disbursements of counsel) reasonably incurred by it in connection with the offering of the Securities. 9. Notices. All communications hereunder will be in writing and, if sent to the Underwriter, will be mailed, delivered or telegraphed and confirmed to CS First Boston Corporation, Park Avenue Plaza, New York, N.Y. 10055, Attention: Investment Banking Department - New Issue Processing Group, or, if sent to the Company, will be mailed, delivered or telegraphed and confirmed to it at The Pep Boys - Manny, Moe and Jack, 3111 West Allegheny Avenue, Philadelphia, Pennsylvania, 19132, Attention: Chief Financial Officer. 10. Successors. This Agreement will inure to the benefit of and be binding upon the parties hereto and their respective personal representatives and successors and the officers and directors and controlling persons referred to in Section 7, and no other person will have any right or obligation hereunder. 11. Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original, but all such counterparts shall together constitute one and the same Agreement. 12. Applicable Law; Consent to Jurisdiction. This Agreement shall be governed by, and construed in accordance with, the laws of the State of New York. The Company hereby consents to personal jurisdiction in the State of New York and voluntarily submits to the jurisdiction of the courts of such State in any proceeding with respect to this Agreement, including federal district courts located in such State. 20 EX-1 If the foregoing is in accordance with your understanding of our agreement, kindly sign and return to us one of the counterparts hereof, whereupon it will become a binding agreement among the Company and the Underwriter in accordance with its terms. Very truly yours, THE PEP BOYS - MANNY, MOE AND JACK By________________________________ Name: Title: The foregoing Underwriting Agreement is hereby confirmed and accepted as of the date first above written. CS FIRST BOSTON CORPORATION By_____________________________ Name: Title: 21 EX-1 SCHEDULE A Subsidiaries of the Company --------------------------- PBY Corporation The Pep Boys - Manny, Moe and Jack of California EX-4 3 EXHIBIT 4.1 1 EX-4.1 DB Draft of August 16, 1994 ============================================================================ THE PEP BOYS - MANNY, MOE & JACK Issuer to FIRST FIDELITY BANK, NATIONAL ASSOCIATION Trustee Indenture Dated as of ________________, 1994 $_______________* __% Convertible Subordinated Notes Due 1999 ============================================================================ *Subject to increase up to $___________. 2 EX-4.1 THE PEP BOYS - MANNY, MOE & JACK Reconciliation and tie between Trust Indenture Act of 1939 and Indenture dated as of _________, 1994. Trust Indenture Indenture Act Section Section * 310(a)(1).....................................609 (a)(2).....................................609 (a)(3).....................................Not Applicable (a)(4).....................................Not Applicable (a)(5).....................................609 (b)........................................608 (c)........................................Not Applicable 610 * 311(a)........................................613 (b)........................................613 (b)(2).....................................613 (c)........................................Not Applicable * 312(a)........................................701 702(a) (b)........................................702(b) (c)........................................702(b) * 313(a)........................................703(a) (b)........................................703(b) (c)........................................703(a) (d)........................................703(b) * 314(a)........................................704; 1004 (b)........................................Not Applicable (c)(1).....................................102 (c)(2).....................................102 (c)(3).....................................Not Applicable (d)........................................Not Applicable (e)........................................102 (f)........................................Not Applicable * 315(a)........................................601(a) (b)........................................602 703 (c)........................................601(b) (d)........................................601(c) (d)(1).....................................601(c)(1) (d)(2).....................................601(c)(2) (d)(3).....................................601(c)(3) (e)........................................514 * 316(a)(1)(A)..................................512 (a)(1)(B)..................................513 (a)(2).....................................Not Applicable (b)........................................508 (c)........................................114 3 EX-4.1 * 317(a)(1).....................................503 (a)(2).....................................504 (b)........................................1003 * 318(a)........................................107 - ------------------- Note:This reconciliation and tie shall not, for any purpose, be deemed to be a part of the Indenture. 4 EX-4.1 THE PEP BOYS - MANNY, MOE & JACK TABLE OF CONTENTS ----------------- Page ---- ARTICLE ONE DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION................................... 1 SECTION 101. Definitions.......................................... 1 SECTION 102. Compliance Certificates and Opinions................. 7 SECTION 103. Form of Documents Delivered to Trustee............... 7 SECTION 104. Acts of Holders...................................... 8 SECTION 105. Notices, Etc., to Trustee and Company................ 9 SECTION 106. Notice to Holders; Waiver............................ 9 SECTION 107. Conflict with Trust Indenture Act.................... 9 SECTION 108. Effect of Headings and Table of Contents............. 9 SECTION 109. Successors and Assigns............................... 10 SECTION 110. Separability Clause.................................. 10 SECTION 111. Benefits of Indenture................................ 10 SECTION 112. Governing Law........................................ 10 SECTION 113. Legal Holidays....................................... 10 SECTION 114. Record Date for Vote or Consent of Holders........... 10 SECTION 115. Incorporators, Stockholders, Officers and Directors of the Company Exempt from Individual Liability...... 11 ARTICLE TWO FORM OF SECURITIES....................................... 11 SECTION 201. Forms Generally...................................... 11 SECTION 202. Form of Face of Security............................. 11 SECTION 203. Form of Reverse of Security.......................... 13 SECTION 204. Form of Trustee's Certificate of Authentication...... 16 SECTION 205. Form of Election to Convert.......................... 16 SECTION 206. Form of Option of Holder to Elect Purchase........... 17 ARTICLE THREE THE SECURITIES........................................... 18 SECTION 301. Title and Terms...................................... 18 SECTION 302. Denominations........................................ 19 SECTION 303. Execution, Authentication, Delivery and Dating....... 19 SECTION 304. Temporary Securities................................. 19 SECTION 305. Registration, Registration of Transfer and Exchange.. 19 SECTION 306. Mutilated, Destroyed, Lost and Stolen Securities..... 20 SECTION 307. Payment of Interest; Interest Rights Preserved....... 21 SECTION 308. Persons Deemed Owners................................ 22 SECTION 309. Cancellation......................................... 22 SECTION 310. Computation of Interest.............................. 22 ARTICLE FOUR SATISFACTION AND DISCHARGE............................... 23 SECTION 401. Satisfaction and Discharge of Indenture.............. 23 SECTION 402. Application of Trust Money........................... 23 5 EX-4.1 ARTICLE FIVE REMEDIES................................................. 24 SECTION 501. Events of Default.................................... 24 SECTION 502. Acceleration of Maturity, Rescission and Annulment... 25 SECTION 503. Collection of Indebtedness and Suits for Enforcement by Trustee............................... 26 SECTION 504. Trustee May File Proofs of Claim..................... 27 SECTION 505. Trustee May Enforce Claims Without Possession of Securities........................................... 27 SECTION 506. Application of Money Collected....................... 27 SECTION 507. Limitation on Suits.................................. 28 SECTION 508. Unconditional Right of Holders to Receive Principal, Premium and Interest and to Convert....... 28 SECTION 509. Restoration of Rights and Remedies................... 29 SECTION 510. Rights and Remedies Cumulative....................... 29 SECTION 511. Delay or Omission Not Waiver......................... 29 SECTION 512. Control by Holders................................... 29 SECTION 513. Waiver of Past Defaults.............................. 29 SECTION 514. Undertaking for Costs................................ 30 SECTION 515. Waiver of Stay or Extension Laws..................... 30 ARTICLE SIX THE TRUSTEE.............................................. 30 SECTION 601. Certain Duties and Responsibilities.................. 30 SECTION 602. Notice of Defaults................................... 31 SECTION 603. Certain Rights of Trustee............................ 32 SECTION 604. Not Responsible for Recitals or Issuance of Securities........................................... 32 SECTION 605. May Hold Securities.................................. 33 SECTION 606. Money Held in Trust.................................. 33 SECTION 607. Compensation and Reimbursement....................... 33 SECTION 608. Disqualification; Conflicting Interest............... 33 SECTION 609. Corporate Trustee Required; Eligibility.............. 34 SECTION 610. Resignation and Removal; Appointment of Successor.... 34 SECTION 611. Acceptance of Appointment by Successor............... 35 SECTION 612. Merger, Conversion, Consolidation or Succession to Business............................................. 35 SECTION 613. Preferential Collection of Claims Against Company.... 36 SECTION 614. Appointment of Authenticating Agent.................. 36 ARTICLE SEVEN HOLDERS LISTS AND REPORTS BY TRUSTEE AND COMPANY.............................................. 37 SECTION 701. Company to Furnish Trustee Names and Addresses of Holders.............................................. 37 SECTION 702. Preservation of Information, Communications to Holders.............................................. 37 SECTION 703. Reports by Trustee................................... 38 SECTION 704. Reports by Company................................... 38 6 EX-4.1 ARTICLE EIGHT CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE........................................ 39 SECTION 801. Company May Consolidate, Etc., Only on Certain Terms................................................ 39 SECTION 802. Successor Substituted for Company.................... 39 ARTICLE NINE SUPPLEMENTAL INDENTURES.................................. 40 SECTION 901. Supplemental Indentures Without Consent of Holders... 40 SECTION 902. Supplemental Indentures with Consent of Holders...... 40 SECTION 903. Execution of Supplemental Indentures................. 41 SECTION 904. Effect of Supplemental Indentures.................... 41 SECTION 905. Conformity with Trust Indenture Act.................. 41 SECTION 906. Reference in Securities to Supplemental Indentures... 41 ARTICLE TEN COVENANTS................................................ 42 SECTION 1001. Payment of Principal, Premium and Interest.......... 42 SECTION 1002. Maintenance of Office or Agency..................... 42 SECTION 1003. Money for Security Payments to be Held in Trust..... 42 SECTION 1004. Statements of Officers of Company as to Default..... 43 SECTION 1005. Existence........................................... 44 SECTION 1006. Maintenance of Properties........................... 44 SECTION 1007. Payment of Taxes and Other Claims................... 44 SECTION 1008. Further Instruments and Acts........................ 44 SECTION 1009. Waiver of Certain Covenants......................... 45 ARTICLE ELEVEN REDEMPTION OF SECURITIES................................. 45 SECTION 1101. Right of Redemption................................. 45 SECTION 1102. Applicability of Article............................ 45 SECTION 1103. Election to Redeem; Notice to Trustee............... 45 SECTION 1104. Selection by Trustee of Securities to Be Redeemed... 45 SECTION 1105. Notice of Redemption................................ 46 SECTION 1106. Deposit of Redemption Price......................... 46 SECTION 1107. Securities Payable on Redemption Date............... 47 SECTION 1108. Securities Redeemed in Part......................... 47 SECTION 1109. Conversion Arrangements on Call for Redemption...... 47 ARTICLE TWELVE CONVERSION OF SECURITIES................................. 48 SECTION 1201. Conversion Privilege and Conversion Price........... 48 SECTION 1202. Exercise of Conversion Privilege.................... 49 SECTION 1203. Fractions of Shares................................. 49 SECTION 1204. Adjustment of Conversion Price...................... 50 SECTION 1205. Notice of Adjustments of Conversion Price........... 55 SECTION 1206. Notice of Certain Corporate Activities.............. 56 SECTION 1207. Company to Reserve Common Stock..................... 56 SECTION 1208. Taxes on Conversions................................ 56 SECTION 1209. Covenant as to Common Stock......................... 56 SECTION 1210. Cancellation of Converted Securities................ 57 SECTION 1211. Provisions in Case of Consolidation, Merger......... 57 7 EX-4.1 SECTION 1212. Trustee Adjustment Disclaimer....................... 57 ARTICLE THIRTEEN SUBORDINATION OF SECURITIES............................. 58 SECTION 1301. Agreement to Subordinate by Company................. 58 SECTION 1302. Distribution on Dissolution, Liquidation and Reorganization: Subrogation......................... 58 SECTION 1303. No Payment in Event of Default on Senior Indebtedness........................................ 60 SECTION 1304. Payments Permitted.................................. 60 SECTION 1305. Authorization to Trustee to Effect Subordination.... 61 SECTION 1306. Notices to Trustee.................................. 61 SECTION 1307. Trustee as Holder of Senior Indebtedness............ 61 SECTION 1308. Modification of Terms of Senior Indebtedness........ 61 ARTICLE FOURTEEN RIGHT TO REQUIRE REPURCHASE............................. 62 SECTION 1401. Repurchase of Securities at Option of the Holder upon Change of Control.............................. 62 SECTION 1402. Effect of Change of Control Purchase Notice......... 64 SECTION 1403. Deposit of Change of Control Purchase Price......... 65 SECTION 1404. Securities Purchased in Part........................ 65 SECTION 1405. Covenant to Comply with Securities Laws Upon Purchase of Securities.............................. 65 ARTICLE FIFTEEN DEFEASANCE AND COVENANT DEFEASANCE....................... 65 SECTION 1501. Company's Option to Effect Defeasance or Covenant Defeasance.......................................... 65 SECTION 1502. Defeasance and Discharge............................ 65 SECTION 1503. Covenant Defeasance................................. 66 SECTION 1504. Conditions to Defeasance or Covenant Defeasance..... 66 SECTION 1505. Deposited Money and U.S. Government Obligations to be Held in Trust; Other Miscellaneous Provisions.... 68 SECTION 1506. Reinstatement....................................... 69 8 EX-4.1 INDENTURE, dated as of ____________________, 1994, between THE PEP BOYS - MANNY, MOE & JACK, a Pennsylvania corporation (the "Company"), having its principal office at 3111 West Allegheny Avenue, Philadelphia, Pennsylvania 19132, and FIRST FIDELITY BANK, NATIONAL ASSOCIATION, Philadelphia, Pennsylvania, as Trustee (the "Trustee"). ARTICLE ONE DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION SECTION 101. Definitions. For all purposes of this Indenture, except as otherwise expressly provided or unless the context otherwise requires: (a) the terms defined in this Article have the meanings assigned to them in this Article and include the plural as well as the singular; (b) all other terms used herein which are defined in the Trust Indenture Act, either directly or by reference therein, have the meanings assigned to them therein; (c) all accounting terms not otherwise defined herein have the meanings assigned to them in accordance with generally accepted accounting principles; (d) the words "herein," "hereof" and "hereunder" and other words of similar import refer to this Indenture as a whole and not to any particular Article, Section or other subdivision; and (e) unless otherwise specifically stated herein, the words "Article" and "Section" refer to an Article and Section, respectively, of this Indenture. Certain terms, used principally in Article Six, are defined in that Article. "Act," when used with respect to any Holder, has the meaning specified in Section 104. "Affiliate" of any specified Person means any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person. For the purposes of this definition, "control" when used with respect to any specified Person means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms "controlling" and "controlled" have meanings correlative to the foregoing. "Authenticating Agent" means any Person authorized by the Trustee to act on behalf of the Trustee to authenticate Securities. "Board of Directors" means either the board of directors of the Company or any duly authorized committee of that board. 9 EX-4.1 "Board Resolution" means a copy of a resolution certified by the Secretary or an Assistant Secretary of the Company to have been duly adopted by the Board of Directors and to be in full force and effect on the date of such certification, and delivered to the Trustee. "Business Day" means each Monday, Tuesday, Wednesday, Thursday and Friday which is not a day on which banking institutions in the city of New York, New York or the city of Philadelphia, Pennsylvania are authorized or obligated by law or executive order to close. "Called Securities" have the meaning specified in Section 1109. "Capital Stock" means, with respect to any corporation, any and all shares, interest, rights to purchase, warrants, options, participations or other equivalents of or interests (however designated) in stock issued by that corporation. "Change of Control" means such time as (i) a "person" or "group" (within the meaning of Sections 13(d) and 14(d)(2) of the Exchange Act), (A) becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act) of more than 50% of the total voting rights attaching to the then outstanding voting capital stock of the Company or (B) has the right or the ability by voting right, contract or otherwise to elect or designate for election a majority of the entire Board of Directors; or (ii) (A) the Company consolidates with or merges into any other Person or conveys, transfers or leases all or substantially all of its assets to any Person or (B) any Person merges into the Company, in either event pursuant to a transaction in which voting capital stock of the Company representing more than 50% of the total voting rights of the Company outstanding immediately prior to the effectiveness thereof is reclassified or changed into or exchanged for cash, securities or other property; provided that any consolidation, merger, conveyance, transfer or lease between the Company and any of its Subsidiaries (including, without limitation, the reincorporation of the Company in another jurisdiction) shall be excluded from the operation of this clause (ii). Notwithstanding the foregoing, a Change in Control shall not be deemed to have occurred by virtue of the Company's or any of its employee benefit or stock plans' filing (or being required to file after the lapse of time) a Schedule 13D or 14D-1 (or any successor or similar schedule, form or report under the Exchange Act) as a result of the Company's or any such plans' becoming the beneficial owner of shares of capital stock of the Company entitling such person to exercise a majority of the total voting power of all shares of capital stock of the Company entitled to vote in ordinary circumstances in elections of directors. "Change of Control Notice" has the meaning specified in Section 1401. "Change of Control Purchase Date" has the meaning specified in Section 1401. "Change of Control Purchase Price" has the meaning specified in Section 1401. "Change of Control Purchase Notice" has the meaning specified in Section 1401. "Closing Price" on any Trading Day with respect to the per share price of Common Stock means the last reported sales price regular way or, in case no such reported sale takes place on such Day, the average of the reported closing bid and asked prices regular way, in either case on the New York Stock Exchange or, if the Common Stock is not listed or admitted to trading on such Exchange, on the principal national securities exchange on 10 EX-4.1 which the Common Stock is listed or admitted to trading or, if not listed or admitted to trading on any national securities exchange, on the Nasdaq National Market or, if the Common Stock is not listed or admitted to trading on any national securities exchange or the Nasdaq National Market, the average of the closing bid and asked prices in the over-the-counter market as furnished by any New York Stock Exchange member firm that is selected from time to time by the Company for that purpose and is reasonably acceptable to the Trustee. "Commission" means the Securities and Exchange Commission, as from time to time constituted, created under the Securities Exchange Act of 1934, or, if at any time after the execution of this instrument such Commission is not existing and performing the duties now assigned to it under the Trust Indenture Act, then the body performing such duties at such time. "Common Stock" includes any stock of any class of the Company which has no preference in respect of dividends or of amounts payable in the event of any voluntary or involuntary liquidation, dissolution or winding-up of the Company and which is not subject to redemption by the Company. However, subject to the provisions of Section 1211, shares issuable on conversions of Securities shall include only shares of the class designated as Common Stock of the Company at the date of this Indenture or shares of any class or classes resulting from any reclassification or reclassifications thereof and which have no preference in respect of dividends or of amounts payable in the event of any voluntary or involuntary liquidation, dissolution or winding-up of the Company and which are not subject to redemption by the Company; provided that if at any time there shall be more than one such resulting class, the shares of each such class then so issuable shall be substantially in the proportion which the total number of shares of such class resulting from all such reclassifications bears to the total number of shares of all such classes resulting from all such reclassifications. "Company" means the Person named as the "Company" in the first paragraph of this instrument until a successor Person shall have become such pursuant to the applicable provisions of this Indenture and thereafter "Company" shall mean such successor Person. "Company Request" or "Company Order" means a written request or order signed in the name of the Company by its Chairman of the Board, its President or a Vice President, and by its Treasurer, an Assistant Treasurer, its Secretary or an Assistant Secretary, and delivered to the Trustee. "Corporate Trust Office" means the principal office of the Trustee in Philadelphia, Pennsylvania, at which at any particular time its corporate trust business shall be administered. "Corporation" means a corporation, association, company, joint-stock company or business trust. "Covenant Defeasance" has the meaning specified in Section 1503. "Current Purchase" has the meaning specified in Section 1204. "Current Purchase Expiration Time" has the meaning specified in Section 1204. "Defaulted Interest" has the meaning specified in Section 307. "Defeasance" has the meaning specified in Section 1502. "Event of Default" has the meaning specified in Section 501. 11 EX-4.1 "Exchange Act" means the Securities Exchange Act of 1934, as amended. "Holder" means a Person in whose name a Security is registered in the Security Register. "Indenture" means this instrument as originally executed or as it may from time to time be supplemented or amended by one or more indentures supplemental hereto entered into pursuant to the applicable provisions hereof including, for all purposes of this instrument, the provisions of the Trust Indenture Act that are deemed to be a part of and govern this instrument. "Interest Payment Date" means the Stated Maturity of an installment of interest on the Securities. "Maturity," when used with respect to any Security, means the date on which the principal of such Security becomes due and payable as therein or herein provided, whether at the Stated Maturity or by declaration of acceleration, call for redemption or otherwise. "Non-Payment Default" means, at any time when the Company has outstanding obligations constituting Senior Indebtedness, the occurrence or existence of any event, circumstance, condition or state of facts that, by the terms of such Senior Indebtedness, permits one or more holders of such obligations (or a trustee or agent on behalf of the holders thereof) to declare such obligations immediately due and payable prior to the date on which they would otherwise become due and payable, other than a Payment Default. "Obligation" of any Person means any obligation of such Person to pay principal, premium, interest (including interest accruing on or after the filing of any petition in bankruptcy or for reorganization relating to the Company, whether or not a claim for such post-petition interest is allowed in such proceeding), penalties, reimbursement or indemnification amounts, fees, expenses or other amounts. "Officers' Certificate" means a certificate signed by the Chairman of the Board, the President or a Vice President, and by the Treasurer, an Assistant Treasurer, the Secretary or an Assistant Secretary, of the Company and delivered to the Trustee; provided, however, that for purposes of Section 1004, "Officers' Certificate" means a certificate signed by the principal executive officer, principal financial officer or principal accounting officer of the Company. "Opinion of Counsel" means a written opinion of counsel reasonably acceptable to the Trustee which may include counsel for the Company. "Outstanding," when used with respect to Securities, means, as of the date of determination, all Securities theretofore authenticated and delivered under this Indenture, except: (i) Securities theretofore canceled by the Trustee or delivered to the Trustee for cancellation; (ii) Securities for whose payment or redemption money in the necessary amount has been theretofore deposited with the Trustee or any Paying Agent (other than the Company) in trust or set aside and segregated in trust by the Company (if the Company shall act as its own Paying Agent) for the Holders of such Securities; provided that, if such Securities are to be redeemed, notice of such redemption has been duly 12 EX-4.1 given pursuant to this Indenture or provision therefor satisfactory to the Trustee has been made; and (iii) Securities which have been paid pursuant to Section 306 or in exchange for or in lieu of which other Securities have been authenticated and delivered pursuant to this Indenture, other than any such Securities in respect of which there shall have been presented to the Company proof satisfactory to it that such Securities are held by a bona fide purchaser in whose hands such Securities are valid obligations of the Company; provided, however, that in determining whether the Holders of the requisite principal amount of the Outstanding Securities have given any request, demand, authorization, direction, notice, consent or waiver hereunder, Securities owned by the Company or any other obligor upon the Securities or any Affiliate of the Company or of such other obligor shall be disregarded and deemed not to be Outstanding, except that, in determining whether the Trustee shall be protected in relying upon any such request, demand, authorization, direction, notice, consent or waiver, only Securities which the Trustee actually knows to be so owned shall be so disregarded. Securities so owned which have been pledged in good faith may be regarded as Outstanding if the pledgee establishes to the satisfaction of the Trustee the pledgee's right so to act with respect to such Securities and that the pledgee is not the Company or any other obligor upon the Securities or any Affiliate of the Company or of such other obligor. "Paying Agent" means any Person authorized by the Company to pay the principal of (and premium, if any) or interest on any Securities on behalf of the Company. "Payment Blockage Period" has the meaning specified in Section 1303. "Payment Default" means a default in the payment of any principal of or premium, if any, interest or sinking fund on, or other payment Obligation of the Company constituting, Senior Indebtedness when due, whether at the Stated Maturity of any such payment or by declaration of acceleration, call for redemption or otherwise. "Person" means any individual, corporation, partnership, joint venture, trust, unincorporated organization or government or any agency or political subdivision thereof. "Predecessor Security" of any particular Security means every previous Security evidencing all or a portion of the same debt as that evidenced by such particular Security; and, for the purposes of this definition, any Security authenticated and delivered under Section 306 in exchange for or in lieu of a mutilated, destroyed, lost or stolen Security shall be deemed to evidence the same debt as the mutilated, destroyed, lost or stolen Security. "Prior Purchase" has the meaning specified in Section 1204. "Purchase Shares" has the meaning specified in Section 1204. "Redemption Date," when used with respect to any Security to be redeemed, means the date fixed for such redemption by or pursuant to this Indenture. "Redemption Price," when used with respect to any Security to be redeemed, means the price at which it is to be redeemed pursuant to this Indenture, including as applicable without duplication, any premium or accrued interest due upon such redemption pursuant to the terms of this Indenture. 13 EX-4.1 "Reference Date has the meaning specified in Section 1204. "Reference Price" has the meaning specified in Section 1204. "Regular Record Date" for the interest payable on any Interest Payment Date means the __________ or __________ (whether or not a Business Day), as the case may be, next preceding such Interest Payment Date. "Responsible Officer," when used with respect to the Trustee, means any vice president, any assistant vice president, any corporate trust officer or any other officer within the Trustee's Corporate Trust Office customarily performing functions similar to those performed by any of the above designated officers and also means, with respect to a particular trust matter, any other officer to whom such matter is referred because of his knowledge of and familiarity with the particular subject. "Securities" means the __% Convertible Subordinated Debentures Due 1999 of the Company authenticated and delivered under this Indenture. "Security Register" and "Security Registrar" have the respective meanings specified in Section 305. "Senior Indebtedness" means the principal of and premium, if any, and unpaid interest on, and any reasonable fees or costs related to the following: (a) indebtedness of the Company (including indebtedness of others guaranteed by the Company), other than the Securities, whether outstanding on the date hereof or hereafter created, incurred, assumed or guaranteed, (i) for money owing to banks, or their subsidiaries or their affiliates, (ii) for money borrowed other than from banks or (iii) arising under a lease of or given in connection with the acquisition of property, equipment or other assets which indebtedness, pursuant to generally accepted accounting principles then in effect, is classified upon the balance sheet of the Company as a liability of the Company, unless, in each case, the instrument creating or evidencing the same or pursuant to which the same is outstanding expressly provides that such indebtedness is not superior in right of payment to the Securities, and (b) renewals, extensions, modifications, amendments and refundings of any such indebtedness; provided, however, that Senior Indebtedness shall not include indebtedness to a Subsidiary or other Affiliate of the Company. "Special Record Date" for the payment of any Defaulted Interest means a date fixed by the Trustee pursuant to Section 307. "Stated Maturity," when used with respect to any Security or any installment of interest thereon, means the date specified in such Security as the fixed date on which the principal of such Security or such installment of interest is due and payable. "Subsidiary" means a corporation more than 50% of the outstanding voting stock of which is owned, directly or indirectly, by the Company or by one or more other Subsidiaries, or by the Company and one or more other Subsidiaries. For the purposes of this definition, "voting stock" means stock which ordinarily has voting power for the election of directors, whether at all times or only so long as no senior class of stock has such voting power by reason of any contingency. "Trading Day" means each Monday, Tuesday, Wednesday, Thursday and Friday, other than any day on which securities are not traded on the applicable securities exchange or in the applicable securities market. 14 EX-4.1 "Trust Indenture Act" means the Trust Indenture Act of 1939 as in force at the date as of which this instrument was executed, except as provided in Section 905; provided that in the event the Trust Indenture Act of 1939 is amended after such date, "Trust Indenture Act" means, to the extent required by such amendment, the Trust Indenture Act of 1939 as so amended. "Trustee" means the Person named as the "Trustee" in the first paragraph of this instrument until a successor Trustee shall have become such pursuant to the applicable provisions of this Indenture, and thereafter "Trustee" shall mean such successor Trustee. "U.S. Government Obligations" has the meaning specified in Section 1504. "Vice President," when used with respect to the Company or the Trustee, means any vice president, whether or not designated by a number or a word or words added before or after the title "vice president." SECTION 102. Compliance Certificates and Opinions. Upon any application or request by the Company to the Trustee to take any action under any provision of this Indenture, the Company shall furnish to the Trustee an Officers' Certificate stating that all conditions precedent, if any, provided for in this Indenture relating to the proposed action have been complied with and an Opinion of Counsel stating that in the opinion of such counsel all such conditions precedent, if any, have been complied with, except that in the case of any such application or request as to which the furnishing of such documents is specifically required by any provision of this Indenture relating to such particular application or request, no additional certificate or opinion need be furnished. Every certificate or opinion with respect to compliance with a condition or covenant provided for in this Indenture shall include: (a) a statement that each individual signing such certificate or opinion has read such covenant or condition and the definitions herein relating thereto; (b) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based; (c) a statement that, in the opinion of each such individual, he has made such examination or investigation as is necessary to enable him to express an informed opinion as to whether or not such covenant or condition has been complied with; and (d) a statement as to whether or not, in the opinion of each such individual, such condition or covenant has been complied with. SECTION 103. Form of Documents Delivered to Trustee. In any case where several matters are required to be certified by, or covered by an opinion of, any specified Person, it is not necessary that all such matters be certified by, or covered by the opinion of, only one such Person, or that they be so certified or covered by only one document, but one such Person may certify or give an opinion with respect to some matters and one or more other such Persons as to other matters, and any such Person may certify or give an opinion as to such matters in one or several documents. 15 EX-4.1 Any certificate or opinion of an officer of the Company may be based, insofar as it relates to legal matters, upon a certificate or opinion of, or representations by, counsel, unless such officer knows, or in the exercise of reasonable care should know, that the certificate or opinion or representations with respect to the matters upon which his certificate or opinion is based are erroneous. Any such certificate or Opinion of Counsel may be based, insofar as it relates to factual matters, upon a certificate or opinion of, or representations by, an officer or officers of the Company, stating that the information with respect to such factual matters is in the possession of the Company, unless such counsel knows, or in the exercise of reasonable care should know, that the certificate or opinion or representations with respect to such matters are erroneous. Where any Person is required to make, give or execute two or more applications, requests, consents, certificates, statements, opinions or other instruments under this Indenture, they may, but need not, be consolidated and form one instrument. SECTION 104. Acts of Holders. (a) Any request, demand, authorization, direction, notice, consent, waiver or other action provided by this Indenture to be given or taken by Holders may be embodied in and evidenced by one or more instruments of substantially similar tenor signed by such Holders in person or by an agent duly appointed in writing; and, except as herein otherwise expressly provided, such action shall become effective when such instrument or instruments are delivered to the Trustee and, where it is hereby expressly required, to the Company. Such instrument or instruments (and the action embodied therein and evidenced thereby) are herein sometimes referred to as the "Act" of the Holders signing such instrument or instruments. Proof of execution of any such instrument or of a writing appointing any such agent shall be sufficient for any purpose of this Indenture and (subject to Section 601) conclusive in favor of the Trustee and the Company, if made in the manner provided in this Section. (b) The fact and date of the execution by any Person of any such instrument or writing may be proved by the affidavit of a witness of such execution or by a certificate of a notary public or other officer authorized by law to take acknowledgements of deeds, certifying that the individual signing such instrument or writing acknowledged to him the execution thereof. Where such execution is by a signer acting in a capacity other than his individual capacity, such certificate or affidavit shall also constitute sufficient proof of his authority. The fact and date of the execution of any such instrument or writing, or the authority of the Person executing the same, may also be provided in any other manner which the Trustee deems sufficient. (c) The ownership of Securities shall be proved by the Security Register. (d) Any request, demand, authorization, direction, notice, consent, waiver or other Act of the Holder of any Security shall bind every future Holder of the same Security and the Holder of every Security issued upon the registration of transfer thereof or in exchange therefor or in lieu thereof in respect of anything done, omitted or suffered to be done by the Trustee or the Company in reliance thereon, whether or not notation of such action is made upon such Security. Without limiting the foregoing, a Holder entitled hereunder to give or take any action hereunder with regard to any particular Security may do so with regard to all or any part of the principal amount of such Security or by one or more duly appointed agents each of which may do so pursuant to such appointment with regard to all or any different part of such principal amount. 16 EX-4.1 SECTION 105. Notices, Etc., to Trustee and Company. Any request, demand, authorization, direction, notice, consent, waiver or Act of Holders or other document provided or permitted by this Indenture to be made upon, given or furnished to, or filed with, (a) the Trustee by any Holder or by the Company shall be sufficient for every purpose hereunder if made, given, furnished or filed in writing to or with the Trustee at its Corporate Trust Office, Attention: Corporate Trust Department, or (b) the Company by the Trustee or by any Holder shall be sufficient for every purpose hereunder (unless otherwise herein expressly provided) if in writing and mailed, first-class postage prepaid, to the Company, addressed to it at the address of its principal office specified in the first paragraph of this instrument or at any other address previously furnished in writing to the Trustee by the Company. SECTION 106. Notice to Holders; Waiver. Where this Indenture provides for notice to Holders of any event, such notice shall be sufficiently given (unless otherwise herein expressly provided) if in writing and mailed, first-class postage prepaid, to each Holder affected by such event, at his address as it appears in the Security Register, not later than the latest date, and not earlier than the earliest date, prescribed for the giving of such notice. In any case where notice to Holders is given by mail, neither the failure to mail such notice, nor any defect in any notice so mailed, to any particular Holder shall affect the sufficiency of such notice with respect to other Holders. Where this Indenture provides for notice in any manner, such notice may be waived in writing by the Person entitled to receive such notice, either before or after the event, and such waiver shall be the equivalent of such notice. Waivers of notice by Holders shall be filed with the Trustee, but such filing shall not be a condition precedent to the validity of any action taken in reliance upon such waiver. In case by reason of the suspension of regular mail service or by reason of any other cause it shall be impracticable to give such notice by mail, then such modification as shall be made with the approval of the Trustee shall constitute a sufficient notification for every purpose hereunder. SECTION 107. Conflict with Trust Indenture Act. If any provision hereof limits, qualifies or conflicts with provision of the Trust Indenture Act that is required under such Act to be a part of and govern this Indenture, the latter provision shall control. If any provision of this Indenture modifies or excludes any provision of the Trust Indenture Act that may be so modified or excluded, the provisions of the Trust Indenture Act shall be deemed to apply to this Indenture as so modified, or if excluded shall not be deemed to apply to this Indenture, as the case may be. SECTION 108. Effect of Headings and Table of Contents. The Article and Section headings herein and the Table of Contents are for convenience only and shall not affect the construction hereof. 17 EX-4.1 SECTION 109. Successors and Assigns. All covenants and agreements in this Indenture by the Company shall bind its successors and assigns, whether so expressed or not. SECTION 110. Separability Clause. In case any provision in this Indenture or in the Securities shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. SECTION 111. Benefits of Indenture. Nothing in this Indenture or in the Securities, express or implied, shall give to any Person, other than the parties hereto and their successors hereunder, the holders of Senior Indebtedness and the Holders of Securities, any benefit or any legal or equitable right, remedy or claim under this Indenture. SECTION 112. Governing Law. This Indenture and the Securities shall be governed by and construed in accordance with the laws of the State of New York, without regard to principles of conflicts of laws as applied in such state. SECTION 113. Legal Holidays. In any case where any Interest Payment Date, Redemption Date or Stated Maturity of any Security or the last date on which a Holder has the right to convert his Securities shall not be a Business Day, then (notwithstanding any other provision of this Indenture or of the Securities) payment of interest or principal (and premium, if any) or conversion of the Securities need not be made on such date, but may be made on the next succeeding Business Day with the same force and effect as if made on the Interest Payment Date or Redemption Date, or at the Stated Maturity, or on such last day for conversion, provided that no interest shall accrue for the period from and after such Interest Payment Date, Redemption Date or Stated Maturity, as the case may be, if such payment is made or duly provided for on the next succeeding Business Day. SECTION 114. Record Date for Vote or Consent of Holders. The Company (or, in the event deposits have been made pursuant to Articles Four of Fifteen or after the occurrence of an Event of Default the Trustee has called for action by the Holders, the Trustee) may set a record date for purposes of determining the identity of Holders entitled to vote or consent to any action by vote or consent authorized or permitted under this Indenture, which record date shall be the later of ten days prior to the first solicitation of such vote or consent or the date of the most recent list of Holders furnished to the Trustee pursuant to Section 701 hereof prior to such solicitation. If a record date is fixed, those persons who were Holders of Securities at such record date (or their duly designated proxies), and only those persons, shall be entitled to take such action by vote or consent or to revoke any vote or consent previously given, whether or not such persons continue to be Holders after such record date. 18 EX-4.1 SECTION 115. Incorporators, Stockholders, Officers and Directors of the Company Exempt from Individual Liability. No recourse under or upon any obligation, covenant or agreement of this Indenture or any indenture supplemental hereto or of any Security, or for any claim based thereon or otherwise in respect thereof, shall be had against any incorporator, stockholder, officer or director, as such past, present or future, of the Company or of any successor Person, either directly or through the Company or any successor Person, whether by virtue of any constitution, statute or rule of law, or by the enforcement of any assessment or penalty or otherwise; it being expressly understood that this Indenture and the obligations issued hereunder are solely corporate obligations, and that no such personal liability whatever shall attach to, or is or shall be incurred by the incorporators, stockholders, officers or directors, as such, of the Company or of any successor Person, or any of them, because of the creation of the indebtedness hereby authorized, or under or by reason of the obligations, covenants or agreements contained in this Indenture or in any of the Securities or implied therefrom; and that any and all such personal liability of every name and nature, either at common law or in equity or by constitution or statute, of, and any and all such rights and claims against, every such incorporator, stockholder, officer or director, as such, because of the creation of the indebtedness hereby authorized, or under or by reason of the obligations, covenants or agreements contained in this Indenture or in any of the Securities or implied therefrom are hereby expressly waived and released as a condition of, and as a consideration for, the execution of this Indenture and the issue of such Securities. ARTICLE TWO FORM OF SECURITIES SECTION 201. Forms Generally. The Securities and the Trustee's certificates of authentication shall be in substantially the forms set forth in this Article, with such appropriate insertions, omissions, substitutions and other variations as are required or permitted by this Indenture, and may have such letters, numbers or other marks of identification and such legends or endorsements placed thereon as may be required to comply with the rules of any securities exchange or as may, consistently herewith, be determined by the officers executing such Securities, as evidenced by their execution thereof, with the consent of the Trustee. The definitive Securities relating thereto shall be printed, lithographed or engraved or produced by any combination of these methods on steel engraved borders or may be produced in any other manner permitted by the rules of any securities exchange on which the Securities may be listed, all as determined by the officers executing such Securities, as evidenced by their execution thereof, with the consent of the Trustee. SECTION 202. Form of Face of Security. THE PEP BOYS - MANNY, MOE & JACK ___% Convertible Subordinated Note Due 1999 No. _______ $_________ 19 EX-4.1 The Pep Boys - Manny, Moe & Jack, a Pennsylvania corporation (herein called the "Company," which term includes any successor corporation under the Indenture hereinafter referenced), for value received, hereby promises to pay to ____________________ or registered assigns, the principal sum of __________________ Dollars on _______________, 1999, and to pay interest thereon from ______________, 1994 or from the most recent Interest Payment Date to which interest has been paid or duly provided for, semi- annually on __________ and __________ in each year, commencing _______________, 1994, until the principal hereof is paid or made available for payment, at the rate per annum of ___% from and including the date of issuance of this Security until maturity or earlier redemption. The interest so payable, and punctually paid or duly provided for, on any Interest Payment Date will, as provided in such Indenture, be paid to the Person in whose name this Security (or one or more Predecessor Securities) is registered at the close of business on the Regular Record Date for such interest, which shall be the __________ and __________ (whether or not a Business Day), as the case may be, next preceding such Interest Payment Date. Any such interest not so punctually paid or duly provided for will forthwith cease to be payable to the Holder on such Regular Record Date and may either be paid to the Person in whose name this Security (or one or more Predecessor Securities) is registered at the close of business on a Special Record Date for the payment of such Defaulted Interest to be fixed by the Trustee, notice whereof shall be given to Holders of Securities not less than 10 days prior to such Special Record Date, or be paid at any time in any other lawful manner not inconsistent with the requirements of any securities exchange on which the Securities may be listed, and upon such notice as may be required by such exchange, all as more fully provided in said Indenture. Payment of the principal of (and premium, if any) and interest on this Security will be made at the office or agency of the Company in the Borough of Manhattan, the City of New York, or at any other office or agency maintained by the Company for such purpose, in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts; provided, however, that at the option of the Company, payment of interest may be made by check mailed to the address of the Person entitled thereto as such address shall appear in the Security Register. Reference is hereby made to the further provisions of this Security set forth on the reverse hereof, which further provisions shall for all purposes have the same effect as if set forth at this place. Unless the certificate of authentication hereon has been executed by the Trustee referred to on the reverse hereof by manual signature, this Security shall not be entitled to any benefit under the Indenture or be valid or obligatory for any purpose. IN WITNESS WHEREOF, the Company has caused this instrument to be duly executed under its corporate seal. Dated: THE PEP BOYS- MANNY, MOE & JACK By:____________________________________ Attest: By: ______________________________ 20 EX-4.1 SECTION 203. Form of Reverse of Security. This Security is one of a duly authorized issue of Securities of the Company designated as its ___% Convertible Subordinated Notes Due 1999 (herein called the "Securities"), limited in aggregate principal amount to $__________ (subject to increase as provided in the Indenture up to $__________ aggregate principal amount), issued and to be issued under an Indenture, dated as of _________, 1994 (herein called the "Indenture"), between the Company and ______________, as Trustee (herein called the "Trustee," which term includes any successor trustee under the Indenture), to which Indenture and all indentures supplemental thereto reference is hereby made for a statement of the respective rights, limitations of rights, duties and immunities thereunder of the Company, the Trustee, the holders of Senior Indebtedness and the Holders of the Securities and of the terms upon which the Securities are, and are to be, authenticated and delivered. Subject to and upon compliance with the provisions of the Indenture, the Holder of this Security is entitled at his option, at any time on or before the close of business on __________, 1999, or in case this Security or a portion hereof is called for redemption, then in respect of this Security or such portion hereof until and including, but (unless the Company defaults in making the payment due upon redemption) not after, the close of business on the fifth Business Day preceding the Redemption Date, to convert this Security (or any portion of the principal amount hereof which is $1,000 or an integral multiple thereof), at the principal amount hereof, or of such portion, into fully paid and non-assessable shares (calculated as to each conversion to the nearest 1/100 of a share) of Common Stock of the Company at a conversion price equal to $___________ aggregate principal amount of Securities for each share of Common Stock (or at the current adjusted conversion price if an adjustment has been made as provided in the Indenture) by surrender of this Security, duly endorsed or assigned to the Company or in blank, to the Company at its office or agency in the Borough of Manhattan, the City of New York, or at any other office or agency maintained by the Company for such purpose, accompanied by written notice to the Company that the Holder hereof elects to convert this Security, or if less than the entire principal amount hereof is to be converted, the portion hereof to be converted, and, in case such surrender shall be made during the period from the close of business on any Regular Record Date next preceding any Interest Payment Date to the opening of business on such Interest Payment Date (unless this Security or the portion thereof being converted matures prior to such Interest Payment Date), also accompanied by payment in New York Clearing House or other funds acceptable to the Company of an amount equal to the interest payable on such Interest Payment Date on the principal amount of this Security then being converted. Subject to the aforesaid requirement for payment and, in the case of a conversion after the Regular Record Date next preceding any Interest Payment Date and on or before such Interest Payment Date, to the right of the Holder of this Security (or any Predecessor Security) of record at such Regular Record Date to receive an installment of interest (with certain exceptions provided in the Indenture), no payment or adjustment is to be made on conversion for interest accrued hereon or for dividends on the Common Stock issued on conversion. The Company's delivery to the Holder of the fixed number of shares of Common Stock of the Company (and any cash in lieu of fractional shares of such Common Stock) into which the Security is convertible shall be deemed to satisfy the Company's obligation to pay the principal amount of the Security and all accrued interest and original issue discount that has not previously been paid. The Common Stock of the Company so delivered shall be treated as issued first in payment of accrued interest and original issue discount and then in payment of principal. Thus, accrued interest and original issue discount, if any, shall be treated as paid rather than canceled, extinguished or forfeited. No fractions of shares or scrip representing fractions of shares will be issued on conversion, but instead of any fractional interest the Company shall pay a cash adjustment as provided in the Indenture. The conversion price is subject to adjustment as provided in the Indenture. In addition, the 21 EX-4.1 Indenture provides that in case of certain consolidations or mergers to which the Company is a party or the transfer or lease of its properties and assets substantially as an entirety, the Indenture shall be amended, without the consent of any Holders of Securities, so that this Security, if then outstanding, will be convertible thereafter, during the period this Security shall be convertible as specified above, only into the kind and amount of securities, cash and other property receivable upon the consolidation, merger or transfer by a holder of the number of shares of Common Stock into which this Security might have been converted immediately prior to such consolidation, merger or transfer (assuming such holder of Common Stock failed to exercise any rights of election and received per share the kind and amount received per share by a plurality of non-electing shares). The Securities are redeemable, at the Company's option, as a whole or from time to time in part (in denominations of $1,000 or integral multiples thereof), on or after _______________, 1997, upon not less than 30 nor more than 60 days notice mailed to the registered Holder thereof at a redemption price of _____% of principal amount if redeemed during the period commencing on __________, 1997 and ending on (and including) __________, 1998, and thereafter at a Redemption Price equal to 100% of the principal amount, together, in each case, with accrued interest to the Redemption Date, but interest installments whose Stated Maturity is on or prior to such Redemption Date will be payable to the Holders of such Securities, or one or more Predecessor Securities, of record at the close of business on the relevant Record Dates referred to on the face hereof, all as provided in the Indenture. In the event of redemption or conversion of this Security in part only, a new Security or Securities for the unredeemed or unconverted portion thereof will be issued in the name of the Holder thereof upon the cancellation hereof. The indebtedness evidenced by this Security is, to the extent provided in the Indenture, subordinate and subject in right of payment to the prior payment in full of all Senior Indebtedness, and this Security is issued subject to the provisions of the Indenture with respect thereto. Each Holder of this Security, by accepting the same, (a) agrees to and shall be bound by such provisions, (b) authorizes and directs the Trustee on his behalf to take such action as may be necessary or appropriate to effectuate the subordination so provided and (c) appoints the Trustee his attorney-in-fact for any and all such purposes. In the event there shall occur any Change of Control with respect to the Company, each Holder of Securities shall have the right, at such Holder's option but subject to the conditions set forth in the Indenture, to require the Company to purchase on the Change of Control Purchase Date all or any part of such Holder's Securities at a Change of Control Purchase Price equal to 100% of the principal amount thereof, together with accrued and unpaid interest to the Change of Control Purchase Date and in the manner specified in the Indenture. 22 EX-4.1 If an Event of Default shall occur and be continuing, the principal of all the Securities may be declared due and payable in the manner and with the effect provided in the Indenture. The Indenture permits, with certain exceptions as therein provided, the amendment thereof and the modification of the rights and obligations of the Company and the rights of the Holders of the Securities under the Indenture at any time by the Company and the Trustee with the consent of the Holders of a majority in aggregate principal amount of the Securities at the time Outstanding. The Indenture also contains provisions permitting the Holders of specified percentages in aggregate principal amount of the Securities at the time Outstanding, on behalf of the Holders of all the Securities, to waive compliance by the Company with certain provisions of the Indenture and certain past defaults under the Indenture and their consequences. Any such consent or waiver by the Holder of this Security shall be conclusive and binding upon such Holder and upon all future Holders of this Security and of any Security issued upon the registration of transfer hereof or in exchange herefor or in lieu hereof, whether or not notation of such consent or waiver is made upon this Security. No reference herein to the Indenture and no provision of this Security or of the Indenture shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal of (and premium, if any) and interest on this Security at the times, place and rate, and in the coin or currency, herein prescribed or to convert this Security as provided in the Indenture. The Securities are issuable only in registered form without coupons in denominations of $1,000 and any integral multiple thereof. As provided in the Indenture and subject to certain limitations therein set forth, Securities are exchangeable for a like aggregate principal amount of Securities of a different authorized denomination, as requested by the Holder surrendering the same. No service charge shall be made for any such registration of transfer or exchange, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge payable in connection therewith. Prior to due presentment of this Security for registration of transfer, the Company, the Trustee and any agent of the Company or the Trustee may treat the Person in whose name this Security is registered in the Securities Register as the owner hereof for all purposes, whether or not this Security be overdue, and neither the Company, the Trustee nor any such agent shall be affected by notice to the contrary. The Indenture and the Securities shall be governed by and construed in accordance with the laws of the State of New York as applied to contracts made and performed within the State of New York, without regard to principles of conflicts of laws. All terms used in this Security which are defined in the Indenture shall have the meanings assigned to them in the Indenture. 23 EX-4.1 ASSIGNMENT FORM To Assign this Security, fill in the form below: I or we assign and transfer this Security to _______________ whose tax identification number or social security number is ____________, and whose address is (print or type below, including zip code): ________________________ ________________________ ________________________ I or we irrevocably appoint _________________________ agent to transfer this Security on the books of the Company. The Agent may substitute another to act for him. Date:__________________ Your signature: _________________________________ (Sign exactly as your name appears on the other side of of this Security) Signature Guarantee: __________________________________________ Member firm of the New York Stock Exchange or commercial bank or trust Company having an office in the United States SECTION 204. Form of Trustee's Certificate of Authentication. This is one of the Securities referred to in the within-mentioned Indenture. [insert name of trustee] as Trustee By:________________________________ Authorized Signatory Dated:___________________ SECTION 205. Form of Election to Convert. To The Pep Boys - Manny, Moe & Jack: The undersigned owner of this Security hereby irrevocably exercises the option to convert this Security, or the portion (which is $1,000 or an integral multiple thereof) below designated, into shares of Common Stock of The Pep Boys - Manny, Moe & Jack in accordance with the terms of the Indenture referred to in this Security, and directs that the shares issuable and deliverable upon conversion, together with any check in payment for fractional shares, be issued in the name of and delivered to the undersigned registered Holder hereof, unless a different name has been indicated in the assignment below. If shares are to be issued in the name of a person other than the undersigned, the undersigned will pay all transfer taxes payable with respect thereto and shall cause the undersigned's signature to be guaranteed. Any amount required to be paid by the undersigned on account of interest accompanies this Security. 24 EX-4.1 Dated:________________ Portion of Security to be converted ($1,000 or an integral multiple thereof): $_____________________ ________________________________________ Signature (for conversion only) If shares of Common Stock are to be issued and registered otherwise than to the registered Holder named above, please have the above signature guaranteed and print or typewrite name and address, including zip code, and social security or other taxpayer identification number. ________________________________________ ________________________________________ ________________________________________ Date:______________ Signature:______________________________ (Sign exactly as your name appears on the other side of this Security) Signature Guarantee: _____________________________ Member firm of the New York Stock Exchange or commercial bank or trust company having an office in the United States SECTION 206. Form of Option of Holder to Elect Purchase. If you wish to have this Security purchased by the Company pursuant to Section 1402 of the Indenture, check the box: ____ If you wish to elect to have only part of this Security purchased by the Company pursuant to Section 1402 of the Indenture, state the amount: $______________ Date:_____________ Signature:______________________________ (Sign exactly as your name appears on the other side of this Security) 25 EX-4.1 Signature Guarantee: _________________________________ Member firm of the New York Stock Exchange or commercial bank or trust company having an office in the United States ARTICLE THREE THE SECURITIES SECTION 301. Title and Terms. The aggregate principal amount of Securities which may be authenticated and delivered under this Indenture is limited to (a) $__________, plus (b) such aggregate principal amount (which may not exceed $__________ principal amount) of Securities as shall be purchased by the Underwriters on the Second Closing Date pursuant to the Underwriting Agreement, ____________, 1994 between the Company and CS First Boston Corporation, as Underwriter, except for Securities authenticated and delivered upon registration of transfer of, or in exchange for, or in lieu of, other Securities pursuant to Sections 304, 305, 306, 906, 1108, 1202 or 1404. The Securities shall be known and designated as the "____% Convertible Subordinated Notes Due 2001" of the Company. Their Stated Maturity shall be _______________, 2001 and they shall bear interest at the rate of ___% per annum, from and including the date of issuance thereof until maturity or earlier redemption, payable semi-annually on __________ and __________ commencing _______________, 1994, until the principal thereof is paid or made available for payment. The principal of (and premium, if any) and interest on the Securities shall be payable at the office or agency of the Company in the Borough of Manhattan, the City of New York maintained for such purpose and at any other office or agency maintained by the Company for such purpose; provided, however, that at the option of the Company, payment of interest may be made by check mailed to the address of the Person entitled thereto as such address shall appear in the Security Register. The Securities shall be redeemable as provided in Article Eleven. The Securities shall be convertible as provided in Article Twelve. The Securities shall be subordinated in right of payment to Senior Indebtedness as provided in Article Thirteen. The Securities shall be subject to repurchase by the Company, at the option of the Holders, as provided in Article Fourteen. 26 EX-4.1 SECTION 302. Denominations. The Securities shall be issuable only in registered form without coupons and only in denominations of $1,000 and any integral multiple thereof. SECTION 303. Execution, Authentication, Delivery and Dating. The Securities shall be executed on behalf of the Company by its Chairman of the Board, its President or one of its Vice Presidents, under its corporate seal reproduced thereon attested by its Secretary or one of its Assistant Secretaries. The signature of any of these officers on the Securities may be manual or facsimile. Securities bearing the manual or facsimile signatures of individuals who were at any time the proper officers of the Company shall bind the Company, notwithstanding that such individuals or any of them have ceased to hold such offices prior to the authentication and delivery of such Securities or did not hold such offices at the date of such Securities. At any time and from time to time after the execution and delivery of this Indenture, the Company may deliver Securities executed by the Company to the Trustee for authentication, together with a Company Order for the authentication and delivery of such Securities; and the Trustee in accordance with such Company Order shall authenticate and deliver such Securities as in this Indenture provided and not otherwise. Each Security shall be dated the date of its authentication. No Security shall be entitled to any benefit under this Indenture or be valid or obligatory for any purpose unless there appears on such Security a certificate of authentication substantially in the form provided for herein executed by the Trustee by manual signature, and such certificate upon any Security shall be conclusive evidence, and the only evidence, that such Security has been duly authenticated and delivered hereunder and is entitled to the benefits of this Indenture. SECTION 304. Temporary Securities. Pending the preparation of definitive Securities, the Company may execute, and upon Company Order the Trustee shall authenticate and deliver, temporary Securities which are printed, lithographed, typewritten, mimeographed or otherwise produced, in any authorized denomination, substantially of the tenor of the definitive Securities in lieu of which they are issued and with such appropriate insertions, omissions, substitutions and other variations as the officers executing such Securities may determine, as evidenced by their execution of such Securities with the consent of the Trustee. If temporary Securities are issued, the Company will cause definitive Securities to be prepared without unreasonable delay. After the preparation of definitive Securities, the temporary Securities shall be exchangeable for definitive Securities upon surrender of the temporary Securities at any office or agency of the Company designated pursuant to Section 1002, without charge to the Holder. Upon surrender for cancellation of any one or more temporary Securities the Company shall execute and the Trustee shall authenticate and deliver in exchange therefor a like principal amount of definitive Securities of authorized denominations. Until so exchanged the temporary Securities shall in all respects be entitled to the same benefits under this Indenture as definitive Securities. SECTION 305. Registration, Registration of Transfer and Exchange. The Company shall cause to be kept at the Corporate Trust Office of the Trustee a register (the register) maintained in such office and in any other office or agency designated pursuant to Section 1002 being herein sometimes collectively referred to as the "Security Register") in which, subject to such reasonable regulations as it may prescribe, the Company shall provide for the registration of Securities and of transfers of Securities. 27 EX-4.1 The Trustee is hereby appointed "Security Registrar" for the purpose of registering Securities and transfers of Securities as herein provided. Upon surrender for registration of transfer of any Security at an office or agency of the Company designated pursuant to Section 1002 for such purpose, the Company shall execute, and the Trustee shall authenticate and deliver, in the name of the designated transferee or transferees, one or more new Securities of any authorized denominations and of a like aggregate principal amount. At the option of the Holder, Securities may be exchanged for other Securities of any authorized denominations and of a like aggregate principal amount, upon surrender of the Securities to be exchanged at such office or agency. Whenever any Securities are so surrendered for exchange, the Company shall execute, and the Trustee shall authenticate and deliver, the Securities which the Holder making the exchange is entitled to receive. All Securities issued upon any registration of transfer or exchange of Securities shall be the valid obligations of the Company evidencing the same debt, and entitled to the same benefits under this Indenture, as the Securities surrendered upon such registration of transfer or exchange. Every Security presented or surrendered for registration of transfer or for exchange shall (if so required by the Company or the Trustee) be duly endorsed, or be accompanied by a written instrument of transfer in form satisfactory to the Company and the Security Registrar duly executed, by the Holder thereof or his attorney duly authorized in writing. No service charge shall be made for any registration of transfer or exchange of Securities, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with any registration of transfer or exchange of Securities, other than exchanges pursuant to Section 304, 906, 1108, 1202 or 1404 not involving any transfer. The Company shall not be required (i) to issue, register the transfer of or exchange any Security during a period beginning at the opening of business 15 days before the day of the mailing of a notice of redemption of Securities selected for redemption under Section 1104 and ending at the close of business on the day of such mailing, or (ii) to register the transfer of or exchange any Security so selected for redemption in whole or in part, except the unredeemed portion of any Security being redeemed in part. All Securities issued upon any registration of transfer or exchange of Securities shall be the valid obligations of the Company evidencing the same debt, and entitled to the same benefits under this Indenture, as the Securities surrendered upon such registration of transfer or exchange. SECTION 306. Mutilated, Destroyed, Lost and Stolen Securities. If any mutilated Security is surrendered to the Trustee, the Company shall execute and the Trustee shall authenticate and deliver in exchange therefor a new Security of like tenor and principal amount and bearing a number not contemporaneously outstanding. If there shall be delivered to the Company and the Trustee (i) evidence to their satisfaction of the destruction, loss or theft of any Security and (ii) such security or indemnity, as may be required by them to save each of them and any agent of either of them harmless, then, in the absence of notice to the Company or the Trustee that such Security has been acquired by a bona fide purchaser, the Company shall execute and upon its request the Trustee shall authenticate and deliver, in lieu of any such destroyed, lost or stolen Security, a new Security of like tenor and principal amount and bearing a number not contemporaneously outstanding. In case any such mutilated, destroyed, lost or stolen Security has become or is about to become due and payable, the Company in its discretion may, instead of issuing a new Security, pay such Security. 28 EX-4.1 Upon the issuance of any new Security under this Section, the Company may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other expenses (including the fees and expenses of the Trustee) connected therewith. Every new Security issued pursuant to this Section in lieu of any destroyed, lost or stolen Security shall constitute an original additional contractual obligation of the Company, whether or not the destroyed, lost or stolen Security shall be at any time enforceable by anyone, and shall be entitled to all the benefits of this Indenture equally and proportionately with any and all other Securities duly issued hereunder. The provisions of this Section are exclusive and shall preclude (to the extent lawful) all other rights and remedies with respect to the replacement or payment of mutilated, destroyed, lost or stolen Securities. SECTION 307. Payment of Interest; Interest Rights Preserved. Interest on any Security which is payable, and is punctually paid or duly provided for, on any Interest Payment Date shall be paid to the Person in whose name that Security (or one or more Predecessor Securities) is registered at the close of business on the Regular Record Date for such interest. Any interest on any Security which is payable, but is not punctually paid or duly provided for, on any Interest Payment Date (herein called "Defaulted Interest") shall forthwith cease to be payable to the Holder on the relevant Regular Record Date notwithstanding the fact that such Holder was a Holder on such Regular Record Date, and such Defaulted Interest may be paid by the Company at its election, as provided in Clause (a) or (b) below: (a) The Company may elect to make payment of any Defaulted Interest to the Persons in whose names the Securities (or their respective Predecessor Securities) are registered at the close of business on a Special Record Date for the payment of such Defaulted Interest, which shall be fixed in the following manner. The Company shall notify the Trustee in writing of the amount of Defaulted Interest proposed to be paid on each Security and the date of the proposed payment, and at the same time the Company shall deposit with the Trustee an amount of money equal to the aggregate amount proposed to be paid in respect of such Defaulted Interest or shall make arrangements satisfactory to the Trustee for such deposit prior to the date of the proposed payment, such money when deposited to be held in trust for the benefit of the Persons entitled to such Defaulted Interest as in this Clause provided. Thereupon the Trustee shall fix a Special Record Date for the payment of such Defaulted Interest which shall be not more than 15 days and no less than 10 days prior to the date of the proposed payment and not less than 10 days after the receipt by the Trustee of the notice of the proposed payment. The Trustee shall promptly notify the Company of such Special Record Date and, in the name and at the expense of the Company, shall cause notice of the proposed payment of such Defaulted Interest and the Special Record Date therefor to be mailed, first-class postage prepaid, to each Holder at his address as it appears in the Security Register, not less than 10 days prior to such Special Record Date. Notice of the proposed payment of such Defaulted Interest and the Special Record Date therefor having been so mailed, such Defaulted Interest shall be paid to the Persons in whose names the Securities (or their respective Predecessor Securities) are registered at the close of business on such Special Record Date and shall no longer be payable pursuant to the following Clause (b). 29 EX-4.1 (b) The Company may make payment of any Defaulted Interest in any other lawful manner not inconsistent with the requirements of any securities exchange on which the Securities may be listed, and upon such notice as may be required by such exchange, if, after notice given by the Company to the Trustee of the proposed payment pursuant to this clause, such manner of payment shall be deemed practicable by the Trustee. Subject to the foregoing provisions of this Section, each Security delivered under this Indenture upon registration of transfer of or in exchange for or in lieu of any other Security shall carry the rights to interest accrued and unpaid, and to accrue, which were carried by such other Security. In the case of any Security which is converted after any Regular Record Date (without regard to any Special Record Date) and on or prior to the next succeeding Interest Payment Date (other than any Security whose Maturity is prior to such Interest Payment Date), subject to the obligation to deliver funds pursuant to Section 1202, interest whose Stated Maturity is on such Interest Payment Date shall be payable on such Interest Payment Date notwithstanding such conversion, and such interest (whether or not punctually paid or duly provided for) shall be paid to the Person in whose name that Security (or one or more Predecessor Securities) is registered at the close of business on such Regular Record Date. Except as otherwise expressly provided in the immediately preceding sentence, in the case of any Security which is converted, interest whose Stated Maturity is after the date of conversion of such Security shall not be payable. SECTION 308. Persons Deemed Owners. Prior to due presentment of a Security for registration of transfer, the Company, the Trustee and any agent of the Company or the Trustee may treat the Person in whose name such Security is registered in the Securities Register as the owner of such Security for the purpose of receiving payment of principal of (and premium, if any) and (subject to Section 307) interest on such Security and for all other purposes whatsoever, whether or not such Security be overdue, and neither the Company, the Trustee nor any agent of the Company or the Trustee shall be affected by notice to the contrary. SECTION 309. Cancellation. All Securities surrendered for payment, redemption, registration of transfer or exchange, conversion or repurchase shall, if surrendered to any Person other than the Trustee, be delivered to the Trustee and shall be promptly canceled by it. The Company may at any time deliver to the Trustee for cancellation any Securities previously authenticated and delivered hereunder which the Company may have acquired in any manner whatsoever, and all Securities so delivered shall be promptly canceled by the Trustee. No Securities shall be authenticated in lieu of or in exchange for any Securities canceled as provided in this Section, except as expressly permitted by this Indenture. All canceled Securities held by the Trustee shall be disposed of by the Trustee and a certificate of destruction delivered to the Company. SECTION 310. Computation of Interest. Interest on the Securities shall be computed on the basis of a 360-day year of twelve 30-day months. 30 EX-4.1 ARTICLE FOUR SATISFACTION AND DISCHARGE SECTION 401. Satisfaction and Discharge of Indenture. This Indenture shall upon Company Request cease to be of further effect (except as to any surviving rights of conversion, registration of transfer or exchange of Securities and rights of the Trustee herein expressly provided for), and the Trustee, on demand of and at the expense of the Company, shall execute proper instruments acknowledging satisfaction and discharge of this Indenture, when (1) either (A) all Securities theretofore authenticated and delivered (other than (i) Securities which have been destroyed, lost or stolen and which have been replaced or paid as provided in Section 306 and (ii) Securities for whose payment money has theretofore been deposited in trust or segregated and held in trust by the Company and thereafter repaid to the Company or discharged from such trust, as provided in Section 1003) have been delivered to the Trustee for cancellation; or (B) all such Securities not theretofore delivered to the Trustee for cancellation have become due and payable and the Company has deposited or caused to be deposited with the Trustee as trust funds in trust for the purpose an amount sufficient to pay and discharge the entire indebtedness on such Securities not theretofore delivered to the Trustee for cancellation, for principal (and premium, if any) and interest to the date of such deposit (in the case of Securities which have become due and payable) or to the Stated Maturity or Redemption Date, as the case may be; (2) the Company has paid or caused to be paid all other sums payable hereunder by the Company; (3) the Trustee has not received any notice pursuant to the terms of Section 1306; and (4) the Company has delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that all conditions precedent herein provided for relating to the satisfaction and discharge of this Indenture have been complied with. Notwithstanding the satisfaction and discharge of this Indenture, the obligations of the Company in Sections 305, 306, 607, 608, 702, 1001, 1002 and 1003 and in Article Twelve shall survive until the Securities are no longer outstanding and the obligations of the Company in Section 607 shall survive termination of this Indenture. SECTION 402. Application of Trust Money. Subject to the provisions of the last paragraph of Section 1003, all money deposited with the Trustee pursuant to Section 401 shall be held in trust and applied by it, in accordance with the provisions of the Securities and this Indenture, to the payment, either directly or through any Paying Agent (including the Company acting as its own Paying Agent) as the Trustee may determine, to the Persons entitled thereto, of the principal (and 31 EX-4.1 premium, if any) and interest for whose payment such money has been deposited with the Trustee. All moneys deposited with the Trustee pursuant to Section 401 (and held by it or any Paying Agent) for the payment of Securities subsequently converted shall be returned to the Company upon Company Request. ARTICLE FIVE REMEDIES SECTION 501. Events of Default. "Event of Default," wherever used herein, means any one of the following events (whatever the reason for such Event of Default and whether it shall be occasioned by the provisions of Article Thirteen or be voluntary or involuntary or be effected by operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body): (1) default in the payment of any interest upon any Security when it becomes due and payable, and continuance of such default for a period of 30 days, whether or not such payment is prohibited by Article Thirteen; or (2) default in the payment of the principal of (or premium, if any, on) any Security at its Maturity; or (3) default in the payment of the Redemption Price in respect of any Security on the Redemption Date therefor in accordance with the provisions of Article Eleven; or (4) default in the payment of the Change of Control Purchase Price in respect of any Security on the Change of Control Purchase Date therefor in accordance with the provisions of Article Fourteen; or (5) default in the performance, or breach, of any covenant or warranty of the Company in this Indenture (other than a covenant or warranty a default in whose performance or whose breach is elsewhere in this Section specifically dealt with), and continuance of such default or breach for a period of 60 days after there has been given, by registered or certified mail, to the Company by the Trustee or to the Company and the Trustee by the Holders of at least 25% in principal amount of the Outstanding Securities a written notice specifying such default or breach and requiring it to be remedied and stating that such notice is a "Notice of Default" hereunder; or (6) default in the payment of any mortgage, indenture, bond, note or other instrument under which there may be issued, or by which there may be secured or evidenced, any indebtedness of the Company in excess of an aggregate of $10,000,000 either for borrowed money or representing any Senior Indebtedness, or default under any such indebtedness that results in the acceleration of such indebtedness prior to its express maturity; provided, however, that if such default under such mortgage, indenture or instrument shall be remedied or cured by the Company or waived by the holders of such indebtedness prior to an acceleration under this Indenture, then the Event of Default hereunder by reason thereof shall be deemed likewise to have been thereupon remedied, cured or waived without further action upon the part of either the Trustee or any of the Holders of the Securities; or (7) the entry by a court having jurisdiction in the premises of (A) a decree or order for relief in respect of the Company in an involuntary 32 EX-4.1 case or proceeding under any applicable federal or state bankruptcy, insolvency, reorganization or other similar law or (B) a decree or order adjudging the Company a bankrupt or insolvent, or approving as properly filed a petition seeking reorganization, arrangement, adjustment or composition of or in respect of the Company under any applicable federal or state law, or appointing a custodian, receiver, liquidator, assignee, trustee, sequestrator or other similar official of the Company or of any substantial part of its property, or ordering the winding up or liquidation of its affairs, and the continuance of any such decree or order for relief or any such other decree or order unstayed and in effect for a period of 60 consecutive days; or (8) the commencement by the Company of a voluntary case or proceeding under any applicable federal or state bankruptcy, insolvency, reorganization or other similar law or of any other case or proceeding to be adjudicated a bankrupt or insolvent, or the consent by the Company to the entry of decree or order for relief in respect of the Company in an involuntary case or proceeding under any applicable federal or state bankruptcy, insolvency, reorganization or other similar law or to the commencement of any bankruptcy or insolvency case or proceeding against it, or the filing by it of a petition or answer or consent seeking reorganization or relief under any applicable federal or state law, or the consent by it to the filing of such petition or to the appointment of or taking possession by a custodian, receiver, liquidator, assignee, trustee, sequestrator or similar official of the Company or of any substantial part of its property, or the making by it of an assignment for the benefit of creditors, or the admission by it in writing of its inability to pay its debts generally as they become due, or the taking of corporate action by the Company in furtherance of any such action. SECTION 502. Acceleration of Maturity, Rescission and Annulment. If an Event of Default (other than an Event of Default specified in clause (7) or (8) of Section 501) occurs and is continuing, then and in every such case the Trustee or the Holders of not less than 25% in principal amount of the Outstanding Securities may declare the principal of all the Securities to be due and payable, by a notice in writing to the Company (and to the Trustee if given by Holders), and such principal shall become immediately due and payable. If an Event of Default specified in clause (7) or (8) of Section 501 occurs, all unpaid principal and accrued interest on the Securities then outstanding shall become and be immediately due and payable without any declaration or other act on the part of the Trustee or any Holder. At any time after a declaration of acceleration has been made as a result of an Event of Default described in clause (6) of Section 501, and before a judgment or decree for payment of the money due has been obtained by the Trustee as hereinafter in this Article provided, the Holders of a majority in principal amount of the Outstanding Securities, by written notice to the Company and the Trustee, may rescind and annul such declaration and its consequences if: (1) the Company has paid or deposited with the Trustee a sum sufficient to pay (A) all overdue interest on all Securities, (B) the principal of (and premium, if any, on) any Securities which have become due otherwise than by such declaration of acceleration and interest thereon at the rate borne by the Securities, 33 EX-4.1 (C) to the extent that payment of such interest is lawful, interest upon overdue interest at the rate borne by the Securities, and (D) all sums paid or advanced by the Trustee hereunder and the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel; and (2) all Events of Default, other than the non-payment of the principal of Securities which have become due solely by such declaration of acceleration, have been cured or waived as provided in Section 513. No such rescission shall affect any subsequent default or impair any right consequent thereon. SECTION 503. Collection of Indebtedness and Suits for Enforcement by Trustee. The Company covenants that if (1) default is made in the payment of any interest on any Security when such interest becomes due and payable and such default continues for a period of 30 days, or (2) default is made in the payment of the principal of (or premium, if any, on) any Security at the Maturity thereof, including payment of the Redemption Price on any Redemption Date, or (3) default is made in the payment of the Change in Control Purchase Price in respect of any Security on the Change in Control Purchase Date therefor in accordance with the provisions of Article Fourteen, the Company will, upon demand of the Trustee, pay to it, for the benefit of the Holders of such Securities, the whole amount then due and payable on such Securities for principal (and premium, if any) and interest, and, to the extent that payment of such interest shall be legally enforceable, interest on any overdue principal (and premium, if any) and on any overdue interest, at the rate borne by the Securities, and, in addition thereto, such further amount as shall be sufficient to cover the costs and expenses of collection, including the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel. If the Company fails to pay such amounts forthwith upon such demand, the Trustee, in its own name and as trustee of an express trust, may institute a judicial proceeding for the collection of the sums so due and unpaid, may prosecute such proceeding to judgment or final decree and may enforce the same against the Company or any other obligor upon the Securities and collect the moneys adjudged or decreed to be payable in the manner provided by law out of the property of the Company or any other obligor upon the Securities, wherever situated. If an Event of Default occurs and is continuing, the Trustee may in its discretion proceed to protect and enforce its rights and the rights of the Holders by such appropriate judicial proceedings as the Trustee shall deem appropriate to protect and enforce any such rights, whether for the specific enforcement of any covenant or agreement in this Indenture or in aid of the exercise of any power granted herein, or to enforce any other proper remedy. 34 EX-4.1 SECTION 504. Trustee May File Proofs of Claim. In case of the pendency of any receivership, insolvency, liquidation, bankruptcy, reorganization, arrangement, adjustment, composition or other judicial proceeding relative to the Company or any other obligor upon the Securities or the property of the Company or of such other obligor or their creditors, the Trustee (irrespective of whether the principal of the Securities shall then be due and payable as therein expressed or by declaration or otherwise and irrespective of whether the Trustee shall have made any demand on the Company for the payment of overdue principal or interest) shall be entitled and empowered, by intervention in such proceeding or otherwise, (i) to file and prove a claim for the whole amount of principal (and premium, if any) and interest owing and unpaid in respect of the Securities and to file such other papers or documents as may be necessary or advisable and to take any and all actions authorized under the Trust Indenture Act or any other applicable laws as may be appropriate in order to have the claims of the Trustee (including any claim for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel) and of the Holders allowed in such judicial proceeding, and (ii) to collect and receive any moneys or other property payable or deliverable on any such claims and to distribute the same; and any custodian, receiver, assignee, trustee, liquidator, sequestrator or other similar official in any such judicial proceeding is hereby authorized by each Holder to make such payments to the Trustee and, in the event that the Trustee shall consent to the making of such payments directly to the Holders, to pay to the Trustee any amount due it for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, and any other amounts due the Trustee under Section 607. Nothing herein contained shall be deemed to authorize the Trustee to authorize or consent to or accept or adopt on behalf of any Holder any plan of reorganization, arrangement, adjustment or composition affecting the Securities or the rights of any Holder thereof or to authorize the Trustee to vote in respect of the claim of any Holder in any such proceeding. SECTION 505. Trustee May Enforce Claims Without Possession of Securities. All rights of action and claims under this Indenture or the Securities may be prosecuted and enforced by the Trustee without the possession of any of the Securities or the production thereof in any proceeding relating thereto, and any such proceeding instituted by the Trustee shall be brought in its own name as trustee of an express trust, and any recovery of judgment shall, after provision for the payment of the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, be for the ratable benefit of the Holders of the Securities in respect of which such judgment has been recovered. SECTION 506. Application of Money Collected. Subject to Article Thirteen, any money collected by the Trustee pursuant to this Article shall be applied in the following order, at the date or dates fixed by the Trustee and, in case of the distribution of such money on account of principal (or premium, if any) or interest, upon presentation of the Securities and the notation thereon of the payment if only partially paid and upon surrender thereof if fully paid: 35 EX-4.1 FIRST: To the payment of all amounts due the Trustee under Section 607; and SECOND: To the payment of the amounts then due and unpaid for principal of (and premium, if any) and interest on the Securities in respect of which or for the benefit of which such money has been collected, ratably, without preference or priority of any kind, according to the amounts due and payable on such Securities for principal (and premium, if any) and interest, respectively; and THIRD: To the payment of the remainder, if any, to whomsoever may be lawfully entitled thereto, or as a court of competent jurisdiction may direct. SECTION 507. Limitation on Suits. No Holder of any Security shall have any right to institute any proceeding, judicial or otherwise, with respect to this Indenture, or for the appointment of a receiver or trustee, or for any other remedy hereunder, unless (1) such Holder has previously given written notice to the Trustee of a continuing Event of Default; (2) the Holders of not less than 25% in principal amount of the Outstanding Securities shall have made written request to the Trustee to institute proceedings in respect of such Event of Default in its own name as Trustee hereunder, (3) such Holder or Holders have offered to the Trustee reasonable indemnity against the costs, expenses and liabilities to be incurred in compliance with such request; (4) the Trustee for 60 days after its receipt of such notice, request and offer of indemnity has failed to institute any such proceeding; and (5) no direction inconsistent with such written request has been given to the Trustee during such 60-day period by the Holders of a majority in principal amount of the Outstanding Securities; it being understood and intended that no one or more Holders shall have any right in any manner whatever by virtue of, or by availing of, any provision of this Indenture to affect, disturb or prejudice the rights of any other Holders, or to obtain or to seek to obtain priority or preference over any other Holders or to enforce any right under this Indenture, except in the manner herein provided and for the equal and ratable benefit of all the Holders. SECTION 508. Unconditional Right of Holders to Receive Principal, Premium and Interest and to Convert. Notwithstanding any other provision in this Indenture, the Holder of any Security shall have the right, which is absolute and unconditional, to receive payment of the principal of (and premium, if any) and (subject to Section 307) interest on such Security on the respective Stated Maturities expressed in such Security (or, in the case of redemption, on the Redemption Date) and to convert such Security in accordance with Article Twelve and to institute suit for the enforcement of any such payment and right to convert, and such rights shall not be impaired without the consent of such Holder. 36 EX-4.1 SECTION 509. Restoration of Rights and Remedies. If the Trustee or any Holder has instituted any proceeding to enforce any right or remedy under this Indenture and such proceeding has been discontinued or abandoned for any reason, or has been determined adversely to the Trustee or to such Holder, then and in every such case, subject to any determination in such proceeding, the Company, the Trustee and the Holders shall be restored severally and respectively to their former positions hereunder and thereafter all rights and remedies of the Trustee and the Holders shall continue as though no such proceeding had been instituted. SECTION 510. Rights and Remedies Cumulative. Except as otherwise provided with respect to the replacement or payment of mutilated, destroyed, lost or stolen Securities in the last paragraph of Section 306, no right or remedy herein conferred upon or reserved to the Trustee or to the Holders is intended to be exclusive of any other right or remedy, and every right and remedy shall, to the extent permitted by law, be cumulative and in addition to every other right and remedy given hereunder or now or hereafter existing at law or in equity or otherwise. The assertion or employment of any right or remedy hereunder, or otherwise, shall not prevent the concurrent assertion or employment of any other appropriate right or remedy. SECTION 511. Delay or Omission Not Waiver. No delay or omission of the Trustee or of any Holder of any Security to exercise any right or remedy accruing upon any Event of Default shall impair any such right or remedy or constitute a waiver of any such Event of Default or an acquiescence therein. Every right and remedy given by this Article or by law to the Trustee or to the Holders may be exercised from time to time, and as often as may be deemed expedient, by the Trustee or by the Holders, as the case may be. SECTION 512. Control by Holders. The Holders of a majority in principal amount of the Outstanding Securities shall have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Trustee or exercising any trust or power conferred on the Trustee, provided that (1) such direction shall not be in conflict with any rule of law or with this Indenture, and (2) the Trustee may take any other action deemed proper by the Trustee which is not inconsistent with such direction. SECTION 513. Waiver of Past Defaults. The Holders of not less than a majority in principal amount of the Outstanding Securities may on behalf of the Holders of all the Securities waive any past default hereunder and its consequences, except a default (1) in the payment of the principal of (or premium, if any) or interest on any Security, or 37 EX-4.1 (2) in respect of a covenant or provision hereof which under Article Nine cannot be modified or amended without the consent of the Holder of each Outstanding Security affected. Upon any such waiver, such default shall cease to exist, and any Event of Default arising therefrom shall be deemed to have been cured for every purpose of this Indenture; but no such waiver shall extend to any subsequent or other default or impair any right consequent thereon. SECTION 514. Undertaking for Costs. All parties to this Indenture agree, and each Holder of any Security by his acceptance thereof shall be deemed to have agreed, that any court may in its discretion require, in any suit for the enforcement of any right or remedy under this Indenture, or in any suit against the Trustee for any action taken, suffered or omitted by it as Trustee, the filing by any party litigant in such suit of an undertaking to pay the costs of such suit, and that such court may in its discretion assess reasonable costs, including reasonable attorneys' fees, against any party litigant in such suit, having due regard to the merits and good faith of the claims or defenses made by such party litigant; but the provisions of this Section shall not apply to any suit instituted by the Company, to any suit instituted by the Trustee, to any suit instituted by any Holder, or group of Holders, holding in the aggregate more than 10% in principal amount of the Outstanding Securities, or to any suit instituted by any Holder for the enforcement of the payment of the principal of (or premium, if any) or interest on any Security on or after the respective Stated Maturities expressed in such Security (or, in the case of redemption, on or after the Redemption Date) or for the enforcement of the right to convert any Security in accordance with Article Twelve. SECTION 515. Waiver of Stay or Extension Laws. The Company covenants (to the extent that it may lawfully do so) that it will not at any time insist upon, or plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay or extension law wherever enacted, now or at any time hereafter in force, which may affect the covenants or the performance of this Indenture, and the Company (to the extent that it may lawfully do so) hereby expressly waives all benefit or advantage of any such law and covenants that it will not hinder, delay or impede the execution of any power herein granted to the Trustee, but will suffer and permit the execution of every such power as though no such law had been enacted. ARTICLE SIX THE TRUSTEE SECTION 601. Certain Duties and Responsibilities. (a) Except during the continuance of an Event of Default, (1) the Trustee undertakes to perform such duties and only such duties as are specifically set forth in this Indenture, and no implied covenants or obligations shall be read into this Indenture against the Trustee; and (2) in the absence of bad faith on its part, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions 38 EX-4.1 furnished to the Trustee and conforming to the requirements of this Indenture; but in the case of any such certificates or opinions which by any provision hereof are specifically required to be furnished to the Trustee, the Trustee shall be under a duty to examine the same to determine whether or not they conform to the requirements of this Indenture. (b) In case an Event of Default has occurred and is continuing, the Trustee shall exercise such of the rights and powers vested in it by this Indenture, and use the same degree of care and skill in their exercise, as a prudent man would exercise or use under the circumstances in the conduct of his own affairs. (c) No provision of this Indenture shall be construed to relieve the Trustee from liability for its own negligent action, its own negligent failure to act, or its own willful misconduct, except that (1) this Subsection shall not be construed to limit the effect of Subsection (a) of this Section; (2) the Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer, unless it shall be proved that the Trustee was negligent in ascertaining the pertinent facts; and (3) the Trustee shall not be liable with respect to any action taken or omitted to be taken by it in good faith in accordance with the direction of the Holders of a majority in principal amount of the Outstanding Securities relating to the time, method and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred upon the Trustee, under this Indenture; and (4) no provision of this Indenture shall require the Trustee to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder, or in the exercise of any of its rights or powers, if it shall have reasonable grounds for believing that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it. (d) Whether or not therein expressly so provided, every provision of this Indenture relating to the conduct or affecting the liability of or affording protection to the Trustee shall be subject to the provisions of this Section. SECTION 602. Notice of Defaults. Within 90 days after the occurrence of any default hereunder, the Trustee shall transmit by mail to all Holders, as their names and addresses appear in the Security Register, notice of such default hereunder known to the Trustee, unless such default shall have been cured or waived; provided, however, that, except in the case of a default in the payment of the principal of (or premium, if any) or interest on any Security, the Trustee shall be protected in withholding such notice if and so long as the board of directors, the executive committee or a trust committee of directors or Responsible Officers of the Trustee in good faith determine that the withholding of such notice is in the interest of the Holders. For the purpose of this Section, the term "default" means any event which is, or after notice or lapse of time or both would become, an Event of Default. 39 EX-4.1 SECTION 603. Certain Rights of Trustee. Subject to the provisions of Section 601: (a) the Trustee may rely and shall be protected in acting or refraining from acting upon any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document believed by it to be genuine and to have been signed or presented by the proper party or parties; (b) any request or direction of the Company mentioned herein shall be sufficiently evidenced by a Company Request or Company Order and any resolution of the Board of Directors may be sufficiently evidenced by a Board of Resolution; (c) whenever in the administration of this Indenture the Trustee shall deem it desirable that a matter be proved or established prior to taking, suffering or omitting any action hereunder, the Trustee (unless other evidence be herein specifically prescribed) may, in the absence of bad faith on its part, rely upon an Officers' Certificate; (d) the Trustee may consult with counsel and the written advice of such counsel or any Opinion of Counsel shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in reliance thereon; (e) the Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Indenture at the request or direction of any of the Holders pursuant to this Indenture, unless such Holders shall have offered to the Trustee reasonable security or indemnity against the costs, expenses and liabilities which might be incurred by it in compliance with such request or direction; (f) the Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document, but the Trustee, in its discretion, may make such further inquiry or investigation into such facts or matters as it may see fit, and, if the Trustee shall determine to make such further inquiry or investigation, it shall be entitled to examine the books, records and premises of the Company, personally or by agent or attorney; and (g) the Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents or attorneys and the Trustee shall not be responsible for any misconduct or negligence on the part of any agent or attorney appointed with due care by it hereunder. SECTION 604. Not Responsible for Recitals or Issuance of Securities. The recitals contained in the Securities, except the Trustee's certificates of authentication, shall be taken as the statements of the Company, and the Trustee assumes no responsibility for their correctness. The Trustee makes no representations as to the validity or sufficiency of this Indenture or of the Securities. The Trustee shall not be accountable for the use or application by the Company of Securities or the proceeds thereof. 40 EX-4.1 SECTION 605. May Hold Securities. The Trustee, any Authenticating Agent, any Paying Agent, any Security Registrar or any other agent of the Company, in its individual or any other capacity, may become the owner or pledgee of Securities and, subject to Sections 608 and 613, may otherwise deal with the Company with the same rights it would have if it were not Trustee, Authenticating Agent, Paying Agent, Security Registrar or such other agent. SECTION 606. Money Held in Trust. Money held by the Trustee in trust hereunder need not be segregated from other funds except to the extent required by law. The Trustee shall be under no liability for interest on any money received by it from time to time hereunder except as otherwise agreed in writing with the Company. SECTION 607. Compensation and Reimbursement. The Company agrees (1) to pay to the Trustee from time to time reasonable compensation for all services rendered by it hereunder (which compensation shall not be limited by any provision of law in regard to the compensation of a trustee of an express trust); (2) except as otherwise expressly provided herein, to reimburse the Trustee upon its request for all reasonable expenses, disbursements and advances incurred or made by the Trustee in accordance with any provision of this Indenture (including the reasonable compensation and the expenses and disbursements of its agents and counsel), except any such expense, disbursement or advance as may be attributable to any action or failure to act by the Trustee that breaches the applicable standard of care relating thereto; and (3) to indemnify the Trustee for, and to hold it harmless against, any loss, liability or expense incurred unless incurred in connection with any action or failure to act by the Trustee that breaches the applicable standard of care relating thereto, arising out of or in connection with the acceptance or administration of the trust hereunder, including the costs and expenses of defending itself against any claim or liability in connection with the exercise or performance of any of its powers or duties hereunder. When the Trustee incurs expenses or renders services in connection with an Event of Default specified in clauses (7) and (8) of Section 501, the expenses (including the reasonable charges and expenses of its counsel) and the compensation for the services are intended to constitute expenses of administration under any applicable federal or state bankruptcy, insolvency or other similar law. The provisions of this Section shall survive the termination of this Indenture. SECTION 608. Disqualification; Conflicting Interest. The Trustee shall be subject to the provisions of * 310(b) of the Trust Indenture Act. Nothing herein shall prevent the Trustee from filing with the SEC the application referred to in the penultimate paragraph of * 310(b) of the Trust Indenture Act. 41 EX-4.1 SECTION 609. Corporate Trustee Required; Eligibility There shall at all times be a Trustee hereunder who satisfies the requirements of paragraphs (1), (2) and (5) of * 310 of the Trust Indenture Act and which shall be a corporation organized and doing business under the laws of the United States of America, any state thereof or the District of Columbia, authorized under such laws to exercise corporate trust powers, having a combined capital and surplus of at least $100,000,000 and subject to supervision or examination by federal or state authority. If such corporation publishes reports of condition at least annually, pursuant to law or to the requirements of said supervising or examining authority, then for the purposes of this Section, the combined capital and surplus of such corporation shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. If at any time the Trustee shall cease to be eligible in accordance with the provisions of this Section, it shall resign immediately in the manner and with the effect hereinafter specified in this Article. SECTION 610. Resignation and Removal; Appointment of Successor. (a) No resignation or removal of the Trustee and no appointment of a successor Trustee pursuant to this Article shall become effective until the acceptance of appointment by the successor Trustee in accordance with the applicable requirements of Section 611. (b) The Trustee may resign at any time by giving written notice thereof to the Company. If the instrument of acceptance by a successor Trustee required by Section 611 shall not have been delivered to the Trustee within 30 days after the giving of such notice of resignation, the resigning Trustee may petition any court of competent jurisdiction for the appointment of a successor Trustee. (c) The Trustee may be removed at any time by Act of the Holders of a majority in principal amount of the Outstanding Securities, delivered to the Trustee and to the Company. (d) If at any time: (1) the Trustee shall fail to comply with Section 608 after written request therefor by the Company or by any Holder who has been a bona fide Holder of a Security for at least six months, or (2) the Trustee shall cease to be eligible under Section 609 and shall fail to resign after written request therefor by the Company or by any such Holder, or (3) the Trustee shall become incapable of acting or shall be adjudged a bankrupt or insolvent or a receiver of the Trustee or of its property shall be appointed or any public officer shall take charge or control of the Trustee or of its property or affairs for the purpose of rehabilitation, conservation or liquidation, then, in any such case, (i) the Company by a Board Resolution may remove the Trustee, or (ii) subject to Section 514, any Holder who has been a bona fide Holder of a Security for at least six months may, on behalf of himself and all others similarly situated, petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee. 42 EX-4.1 (e) If the Trustee shall resign, be removed or become incapable of acting, or if a vacancy shall occur in the office of Trustee for any cause, the Company, by a Board Resolution, shall promptly appoint a successor Trustee. If, within one year after such resignation, removal or incapability, or the occurrence of such vacancy, a successor Trustee shall be appointed by Act of the Holders of a majority in principal amount of the Outstanding Securities delivered to the Company and the retiring Trustee, the successor Trustee so appointed shall, forthwith upon its acceptance of such appointment, become the successor Trustee and supersede the successor Trustee appointed by the Company. If no successor Trustee shall have been so appointed by the Company or the Holders and accepted appointment in the manner required by Section 611, any Holder who has been a bona fide Holder of a Security for at least six months may, on behalf of himself and all others similarly situated, petition any court of competent jurisdiction for the appointment of a successor Trustee. (f) The Company shall give notice of each resignation and each removal of the Trustee and each appointment of a successor Trustee by mailing written notice of such event by first-class mail, postage prepaid, to all Holders as their names and addresses appear in the Security Register. Each notice shall include the name of the successor Trustee and the address of its Corporate Trust Office. SECTION 611. Acceptance of Appointment by Successor. Every successor Trustee appointed hereunder shall execute, acknowledge and deliver to the Company and to the retiring Trustee an instrument accepting such appointment, and thereupon the resignation or removal of the retiring Trustee shall become effective, the retiring Trustee shall be released from all obligations for future actions under this Indenture and such successor Trustee, without any further act, deed or conveyance, shall become vested, with all the rights, powers, trusts and duties of the retiring Trustee; but, on request of the Company or the successor Trustee, such retiring Trustee shall, upon payment of its charges, execute and deliver an instrument transferring to such successor Trustee all the rights, powers and trusts of the retiring Trustee and shall duly assign, transfer and deliver to such successor Trustee all property and money held by such retiring Trustee hereunder. Upon request of any such successor Trustee, the Company shall execute any and all instruments for more fully and certainly, vesting in and confirming to such successor Trustee all such rights, powers and trusts. No successor Trustee shall accept its appointment unless at the time of such acceptance such successor Trustee shall be qualified and eligible under this Article. SECTION 612. Merger, Conversion, Consolidation or Succession to Business. Any corporation into which the Trustee may be merged or convened or with which it may be consolidated, or any corporation resulting from any merger, conversion or consolidation to which the Trustee shall be a party, or any corporation succeeding to all or substantially all the corporate trust business of the Trustee, shall be the successor of the Trustee hereunder, provided such corporation shall be otherwise qualified and eligible under this Article, without the execution or filing of any paper or any further act on the part of any of the parties hereto. In case any, Securities shall have been authenticated, but not delivered, by, the Trustee then in office, any successor by merger, conversion or consolidation to such authenticating Trustee may adopt such authentication and deliver the Securities so authenticated with the same effect as if such successor Trustee had itself authenticated such Securities. 43 EX-4.1 SECTION 613. Preferential Collection of Claims Against Company. The Trustee shall comply with * 311(a) of the Trust Indenture Act, excluding any creditor relationship listed in * 310(b) of the Trust Indenture Act. A trustee who has resigned or been removed shall be subject to * 311(a) of the Trust Indenture Act to the extent indicated therein. SECTION 614. Appointment of Authenticating Agent. The Trustee may appoint an Authenticating Agent or Agents which shall be authorized to act on behalf of the Trustee to authenticate Securities issued upon original issue and upon exchange, registration of transfer, partial conversion or partial redemption thereof or pursuant to Section 306, and Securities so authenticated shall be entitled to the benefits of this Indenture and shall be valid and obligatory for all purposes as if authenticated by the Trustee hereunder. Wherever reference is made in this Indenture to the authentication and delivery of Securities by the Trustee or the Trustee's certificate of authentication, such reference shall be deemed to include authentication and delivery on behalf of the Trustee by an Authenticating Agent and a certificate of authentication executed on behalf of the Trustee by an Authenticating Agent. Each Authenticating Agent shall be acceptable to the Company and shall at all times be a corporation organized and doing business under the laws of the United States of America, any state thereof or the District of Columbia, authorized under such laws to act as Authenticating Agent, having a combined capital and surplus of not less than $100,000,000 and subject to supervision or examination by federal or state authority. If such Authenticating Agent publishes reports of condition at least annually pursuant to law or to the requirements of said supervising or examining authority, then for the purposes of this Section, the combined capital and surplus of such Authenticating Agent shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. If at any time an Authenticating Agent shall cease to be eligible in accordance with the provisions of this Section, such Authenticating Agent shall resign immediately in the manner and with the effect specified in this Section. Any corporation into which an Authenticating Agent may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger, conversion or consolidation to which such Authenticating Agent shall be a party, or any corporation succeeding to the corporate agency or corporate trust business of an Authenticating Agent, shall continue to be an Authenticating Agent, provided such corporation shall be otherwise eligible under this Section without the execution or filing of any paper or any further act on the part of the Trustee or the Authenticating Agent. An Authenticating Agent may resign at any time by giving written notice thereof to the Trustee and to the Company. The Trustee may at any time terminate the agency of an Authenticating Agent by giving written notice thereof to such Authenticating Agent and to the Company. Upon receiving such a notice of resignation or upon such a termination, or in case at any time such Authenticating Agent shall cease to be eligible in accordance with the provisions of this Section, the Trustee may appoint a successor Authenticating Agent which shall be acceptable to the Company and shall mail written notice of such appointment by first-class mail, postage prepaid, to all Holders as their names and addresses appear in the Security Register. Any successor Authenticating Agent upon acceptance of its appointment hereunder shall become vested with all rights, powers and duties of its predecessor hereunder, with like effect as if originally named as an Authenticating Agent. No successor Authenticating Agent shall be appointed unless eligible under the provisions of this Section. 44 EX-4.1 The Trustee agrees to pay to each Authenticating Agent from time to time reasonable compensation for its services under this Section, and the Trustee shall be entitled to be reimbursed for such payments, subject to the provisions of Section 607. If an appointment is made pursuant to this Section, the Securities may have endorsed thereon, in addition to the Trustee's certificate of authentication, an alternate certificate of authentication in the following form: This is one of the Securities described in the within mentioned Indenture. [insert name of trustee] As Trustee By:__________________________________________ As Authenticating Agent By:__________________________________________ Authorized Signatory ARTICLE SEVEN HOLDERS LISTS AND REPORTS BY TRUSTEE AND COMPANY SECTION 701. Company to Furnish Trustee Names and Addresses of Holders. The Company will furnish or cause to be furnished to the Trustee (a) semi-annually, not more than 15 days after each Regular Record Date, a list, in such form as the Trustee may reasonably require, of the names and addresses of the Holders as of such Regular Record Date, and (b) at such other times as the Trustee may request in writing, within 10 Business Days after the receipt by the Company of any such request, a list of similar form and content as of a date not more than 15 days prior to the time such list is furnished; excluding from any such list names and addresses received by the Trustee in its capacity as Security Registrar. SECTION 702. Preservation of Information, Communications to Holders. (a) The Trustee shall preserve, in as current a form as is reasonably practicable, the names and addresses of Holders contained in the most recent list furnished to the Trustee as provided in Section 701 and the names and addresses of Holders received by the Trustee in its capacity as Security Registrar. The Trustee may destroy any list furnished to it as provided in Section 701 upon receipt of a new list so furnished. (b) Holders may communicate pursuant to * 312(b) of the Trust Indenture Act with other Holders with respect to their rights under this Indenture or the Securities. The Company, the Trustee, the Registrar and any other person shall have the protection of * 312(c) of the Trust Indenture Act. 45 EX-4.1 SECTION 703. Reports by Trustee. (a) If such report is required by * 313 of the Trust Indenture Act, within 60 days after each May 15, beginning with the May 15 following the date of this Indenture, the Trustee shall mail to each Holder a brief report dated as of such May 15 that complies with * 313(a) of the Trust Indenture Act. The Trustee also shall comply with * 313(b)(2), (c) and (d) of the Trust Indenture Act. (b) A copy of each such report shall, at the time of such transmission to Holders, be filed by the Trustee with each stock exchange upon which the Securities are listed, with the Commission and with the Company. The Company will notify the Trustee when the Securities are listed on any stock exchange. SECTION 704. Reports by Company. The Company shall: (1) file with the Trustee, within 15 days after the Company is required to file the same with the Commission, copies of the annual reports and of the information, documents and other reports (or copies of such portions of any of the foregoing as the Commission may from time to time by rules and regulations prescribe) which the Company may be required to file with the Commission pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of 1934; or, if the Company is not required to file information, documents or reports pursuant to either of said Sections, then it shall file with the Trustee and the Commission, in accordance with rules and regulations prescribed from time to time by the Commission, such of the supplementary and periodic information, documents and reports which may be required pursuant to Section 13 of the Securities Exchange Act of 1934 in respect of a security listed and registered on a national securities exchange as may be prescribed from time to time in such rules and regulations including, in the case of annual reports, if required by such rules and regulations, certificates or opinions of independent public accountants, conforming to the requirements of Section 102, as to compliance with conditions or covenants, compliance with which is subject to verification by accountants; (2) file with the Trustee and the Commission, in accordance with rules and regulations prescribed from time to time by the Commission, such additional information, documents and reports with respect to compliance by the Company with the conditions and covenants of this Indenture as may be required from time to time by such rules and regulations; and (3) transmit by mail to all Holders, in the manner and to the extent provided in Subsection 703(a), such summaries of any information, documents and reports required to be filed by the Company pursuant to paragraphs (1) and (2) of this Section as may be required by rules and regulations prescribed from time to time by the Commission. 46 EX-4.1 ARTICLE EIGHT CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE SECTION 801. Company May Consolidate, Etc., Only on Certain Terms. The Company shall not consolidate with or merge into any other Person or convey, transact or lease all or substantially all of its properties and assets to any Person, and the Company shall not permit any Person to consolidate with or merge into the Company or convey, transfer or lease its properties and assets substantially as an entirety to the Company, unless: (1) in case the Company shall consolidate with or merge into another Person or convey, transfer or lease its properties and assets substantially as an entirety to any Person, the Person formed by such consolidation or into which the Company is merged or the Person which acquires by conveyance or transfer, or which leases, the properties and assets of the Company substantially as an entirety shall be a corporation, partnership or trust, organized and validly existing under the laws of the United States of America, any state thereof or the District of Columbia and shall expressly assume, by an indenture supplemental hereto, executed and delivered by the successor corporation to the Trustee in form satisfactory to the Trustee, the due and punctual payment of the principal of (and premium, if any) and interest on all the Securities and the performance of every covenant of this Indenture on the part of the Company to be performed or observed and shall have provided for conversion rights in accordance with Section 1211; (2) immediately after giving effect to such transaction, no Event of Default, and no event which, after notice or lapse of time or both, would become an Event of Default, shall have happened and be continuing; (3) such consolidation, merger, conveyance, transfer or lease does not materially affect the validity or enforceability of the Securities; and (4) the Company has delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that such consolidation, merger, conveyance, transfer or lease and, if a supplemental indenture is required in connection with such transaction, such supplemental indenture, comply with this Article and that all conditions precedent herein provided for relating to such transaction have been complied with. SECTION 802. Successor Substituted for Company. Upon any consolidation of the Company with, or merger of the Company into, any other Person or any conveyance, transfer or lease of all or substantially all the properties and assets of the Company in accordance with Section 801, the successor Person formed by such consolidation or into which the Company is merged or to which such conveyance, transfer or lease is made shall succeed to, and be substituted for, and may exercise every right and power of, the Company under this Indenture with the same effect as if such successor Person had been named as the Company herein, and thereafter, except in the case of a lease, the predecessor Person shall be relieved of all obligations and covenants under this Indenture and the Securities. 47 EX-4.1 ARTICLE NINE SUPPLEMENTAL INDENTURES SECTION 901. Supplemental Indentures Without Consent of Holders. Without the consent of any Holders, the Company, when authorized by a Board Resolution, and the Trustee, at any time and from time to time, may enter into one or more indentures supplemental hereto, in form satisfactory to the Trustee, for any of the following purposes: (1) to evidence the succession of another Person to the Company and the assumption by any such successor of the covenants of the Company herein and in the Securities in accordance with Article Eight; or (2) to add to the covenants of the Company for the benefit of the Holders, or to surrender any right or power herein conferred upon the Company; or (3) to add any additional Events of Default; or (4) to secure the Securities; or (5) to make provision with respect to the conversion rights of Holders pursuant to the requirements of Section 1211; or (6) to cure any ambiguity, to correct or supplement any provision herein which may be inconsistent with any other provision herein, or to make any other provisions with respect to matters or questions arising under this Indenture which shall not be inconsistent with the provisions of this Indenture, provided such action pursuant to this Clause (6) shall not adversely affect the interests of the Holders in any material respect. SECTION 902. Supplemental Indentures with Consent of Holders. With the consent of the Holders of not less than a majority in principal amount of the Outstanding Securities, by Act of said Holders delivered to the Company and the Trustee, the Company, when authorized by a Board Resolution, and the Trustee may enter into an indenture or indentures supplemental hereto for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of this Indenture or of modifying in any manner the rights of the Holders under this Indenture; provided, however, that no such supplemental indenture shall, without the consent of the Holder of each Outstanding Security affected thereby: (1) change the Stated Maturity of the principal of, or any installment of interest on, any Security or reduce the principal amount thereof or the rate of interest thereon or any premium payable upon the redemption thereof, or change the place of payment where, or the coin or currency in which, any Security or any premium or the interest thereon is payable, or impair the right to institute suit for the enforcement of any such payment on or after the Stated Maturity thereof (or, in the case of redemption, on or after the Redemption Date or, in the case of a repurchase pursuant to Article Fourteen, on or after the Change of Control Purchase Date), or adversely affect the right to convert any 48 EX-4.1 Security as provided in Article Twelve (except as permitted by Section 901(5)) or modify the provisions of this Indenture with respect to the subordination of the Securities in a manner adverse to the Holders, or (2) reduce the percentage in principal amount of the Outstanding Securities, the consent of whose Holders is required for any such supplemental indenture, or the consent of whose Holders is required for any waiver (of compliance with certain provisions of this Indenture or certain defaults hereunder and their consequences) provided for in this Indenture, or (3) modify any of the provisions of this Section or Section 513 or Section 1009, except to increase any such percentage or to provide that certain other provisions of this Indenture cannot be modified or waived without the consent of the Holder of each Outstanding Security affected thereby. It shall not be necessary for any Act of Holders under this Section to approve the particular form of any proposed supplemental indenture, but it shall be sufficient if such Act shall approve the substance thereof. SECTION 903. Execution of Supplemental Indentures. In executing, or accepting the additional trusts created by, any supplemental indenture permitted by this Article or the modifications thereby of the trusts created by this Indenture, the Trustee shall be entitled to receive, and (subject to Section 601) shall be fully protected in relying upon, an Opinion of Counsel of the Company stating that the execution of such supplemental indenture is authorized or permitted by this Indenture. The Trustee may, but shall not be obligated to, enter into any such supplemental indenture which affects the Trustee's own rights, duties or immunities under this Indenture or otherwise. SECTION 904. Effect of Supplemental Indentures. Upon the execution of any supplemental indenture under this Article, this Indenture shall be modified in accordance therewith, and such supplemental indenture shall form a part of this Indenture for all purposes; and, subject to Section 902, every Holder of Securities theretofore or thereafter authenticated and delivered hereunder shall be bound thereby. SECTION 905. Conformity with Trust Indenture Act. Every supplemental indenture executed pursuant to this Article shall conform to the requirements of the Trust Indenture Act as then in effect. SECTION 906. Reference in Securities to Supplemental Indentures. Securities authenticated and delivered after the execution of any supplemental indenture pursuant to this Article may, and shall if required by the Trustee, bear a notation in form approved by the Trustee as to any matter provided for in such supplemental indenture. If the Company or the Trustee shall so determine, new Securities so modified as to conform, in the opinion of the Trustee and the Company, to any such supplemental indenture may be prepared and executed by the Company and authenticated and delivered to the Trustee in exchange for Outstanding Securities. 49 EX-4.1 ARTICLE TEN COVENANTS SECTION 1001. Payment of Principal, Premium and Interest. The Company covenants and agrees that it will duly and punctually pay the principal of (and premium, if any) and interest on the Securities and the Redemption Price and the Change of Control Purchase Price, if any, each in accordance with the terms of the Securities and this Indenture. To the extent permitted by applicable law, the Company shall pay interest on overdue amounts at the rate set forth in paragraph 1 of the Securities, and it shall pay interest on overdue interest at the same rate compounded semi-annually (to the extent that the payment of such interest shall be legally enforceable), which interest on overdue interest shall accrue from the date such amounts became overdue. SECTION 1002. Maintenance of Office or Agency. The Company will maintain in the Borough of Manhattan, the City of New York an office or agency where Securities may be presented or surrendered for payment, where Securities may be surrendered for registration of transfer or exchange, where Securities may be surrendered for conversion or purchase pursuant to Article Fourteen and where notices and demands to or upon the Company in respect of the Securities and this Indenture may be served. The Company will give prompt written notice to the Trustee of the location, and any change in the location, of such office or agency. If at any time the Company shall fail to maintain any such required office or agency or shall fail to furnish the Trustee with the address thereof, such presentations, surrenders, notices and demands may be made or served at the Corporate Trust Office of the Trustee, and the Company hereby appoints the Trustee as its agent to receive all such presentations, surrenders, notices and demands. The Company may also from time to time designate one or more other offices or agencies (in or outside of The City of New York) where the Securities may be presented or surrendered for any or all such purposes and may from time to time rescind such designations; provided, however, that no such designation or rescission shall in any manner relieve the Company of its obligation to maintain an office or agency in The Borough of Manhattan, the City of New York for such purposes. The Company will give prompt written notice to the Trustee of any such designation or rescission and of any change in the location of any such other office or agency. SECTION 1003. Money for Security Payments to be Held in Trust. If the Company, shall at any time act as its own Paying Agent, it will, on or before each due date of the principal of (and premium, if any) or interest on any of the Securities, segregate and hold in trust for the benefit of the Persons entitled thereto a sum sufficient to pay the principal (and premium, if any) or interest so becoming due until such sums shall be paid to such Persons or otherwise disposed of as herein provided and will promptly notify the Trustee of its action or failure so to act. Whenever the Company shall have one or more Paying Agents, it will, prior to each due date of the principal of (and premium, if any) or interest on any Securities, deposit with a Paying Agent a sum sufficient to pay the principal (and premium, if any) or interest so becoming due, such sum to be 50 EX-4.1 held in trust for the benefit of the Persons entitled to such principal, premium or interest, and (unless such Paying Agent is the Trustee) the Company will promptly notify the Trustee of its action or failure so to act. The Company will cause each Paying Agent other than the Trustee to execute and deliver to the Trustee an instrument in which such Paying Agent shall agree with the Trustee, subject to the provisions of this Section, that such Paying Agent will: (1) hold all sums held by it for the payment of the principal of (and premium, if any) or interest on Securities in trust for the benefit of the Persons entitled thereto until such sums shall be paid to such Persons or otherwise disposed of as herein provided; (2) give the Trustee notice of any default by the Company (or any other obligor upon the Securities) in the making of any payment of principal (and premium, if any) or interest; and (3) at any time during the continuance of any such default, upon the written request of the Trustee, forthwith pay to the Trustee all sums so held in trust by such Paying Agent. The Company may at any time, for the purpose of obtaining the satisfaction and discharge of this Indenture or for any other purpose, pay, or by Company Order direct any Paying Agent to pay, to the Trustee all sums held in trust by the Company or such Paying Agent, such sums to be held by the Trustee upon the same trusts as those upon which such sums were held by the Company or such Paying Agent; and, upon such payment by any Paying Agent to the Trustee, such Paying Agent shall be released from all further liability with respect to such money. Any money deposited with the Trustee or any Paying Agent, or then held by the Company in trust for the payment of the principal of (and premium, if any) or interest on any Security and remaining unclaimed for two years after such principal (and premium, if any) or interest has become due and payable shall be paid to the Company on Company Request or (if then held by the Company) shall be discharged from such trust; and the Holder of such Security), shall thereafter, as an unsecured general creditor, look only to the Company for payment thereof, and all liability of the Trustee or such Paying Agent with respect to such trust money, and all liability of the Company as trustee thereof, shall thereupon cease; provided, however, that the Trustee or such Paying Agent, before being required to make any such repayment, may at the expense of the Company cause to be published once, in a newspaper published in the English language, customarily published on each Business Day and of general circulation in New York, New York and Philadelphia, Pennsylvania, notice that such money remains unclaimed and that, after a date specified therein, which shall not be less than 30 days from the date of such publication, any unclaimed balance of such money then remaining, will be repaid to the Company. SECTION 1004. Statements of Officers of Company as to Default. (a) The Company shall deliver to the Trustee, within 120 days after the end of each fiscal year of the Company ending after the date hereof (but no later than the time of filing of the annual report of the Company, with the Trustee pursuant to Section 704), an Officers' Certificate, stating whether or not to the best knowledge of the signers thereof the Company is in compliance with all conditions and covenants hereunder, without regard to any period of grace or requirement of notice provided hereunder. If the Company 51 EX-4.1 shall be in default, specifying all such defaults and the nature and status thereof of which they may have knowledge. The Officers' Certificate need not comply with Section 102 hereof. (b) The Company shall file with the Trustee written notice of the occurrence of any default or Event of Default within five Business Days of its becoming aware of any such default or Event of Default. SECTION 1005. Existence. Subject to Article Eight, the Company will do or cause to be done all things necessary to preserve and keep in full force and effect its existence, rights (charter and statutory) and franchises; provided, however, that the Company shall not be required to preserve any such right or franchise if its Board of Directors shall determine that the preservation thereof is no longer desirable in the conduct of the business of the Company and that the loss thereof is not disadvantageous in any material respect to the Holders. SECTION 1006. Maintenance of Properties. The Company will cause all properties material to the conduct of its business or the business of any Subsidiary to be maintained and kept in good condition, repair and working order and supplied with all necessary equipment and will cause to be made all necessary repairs, renewals, replacements, betterments and improvements thereof, all as in the judgment of the Company, may be necessary so that the business carried on in connection therewith may be properly and advantageously conducted at all times while any Securities are Outstanding; provided, however, that nothing in this Section shall prevent the Company from discontinuing the operation or maintenance of any of such properties if such discontinuance is, in the judgment of the Company, desirable in the conduct of its business or the business of any Subsidiary and not disadvantageous in any material respect to the Holders. SECTION 1007. Payment of Taxes and Other Claims. The Company shall pay or discharge or cause to be paid or discharged, before the same shall become delinquent, (1) all taxes, assessments and governmental charges (including withholding taxes and any penalties, interest and additions to taxes) levied or imposed upon the Company or any Subsidiary or upon the income, profits or property of the Company or any Subsidiary, and (2) all material lawful claims for labor, materials and supplies which, if unpaid, might by law become a lien upon the property of the Company or any Subsidiary, in each case material to the Company and its Subsidiaries taken as a whole; provided, however, that the Company, shall not be required to pay or discharge or cause to be paid or discharged any such tax, assessment, charge or claim whose amount, applicability or validity is being contested in good faith by appropriate proceedings and for which disputed amounts adequate reserves have been made. SECTION 1008. Further Instruments and Acts. Upon reasonable request of the Trustee, the Company will execute and deliver such further instruments and perform such further acts as may be reasonably necessary, or proper to carry out more effectively the purposes of this Indenture, including, but not limited to, any reporting requirements relating to original issue discount for purposes of federal income taxation. 52 EX-4.1 SECTION 1009. Waiver of Certain Covenants. The Company may omit in any particular instance to comply with any term, provision or condition set forth in this Article Ten (other than Sections 1001 through 1005, inclusive), if before the time for such compliance the Holders of at least a majority (or such greater amount as may be specified in any such term, provision or condition) in principal amount of the Outstanding Securities shall, by Act of such Holders, either waive such compliance in such instance or generally waive compliance with such term, provision or condition, but no such waiver shall extend to or affect such term, provision or condition except to the extent so expressly waived, and, until such waiver shall become effective, the obligations of the Company and the duties of the Trustee in respect of any such term, provision or condition shall remain in full force and effect. ARTICLE ELEVEN REDEMPTION OF SECURITIES SECTION 1101. Right of Redemption. The Securities may be redeemed at the election of the Company, as a whole or from time to time in part, at any time on or after _______________, 1997, at the Redemption Prices specified in the form of Security hereinbefore set forth for redemptions, together with accrued interest to the Redemption Date. SECTION 1102. Applicability of Article. Redemption of Securities at the election of the Company, as permitted or required by any provision of this Indenture, shall be made in accordance with such provision and this Article. SECTION 1103. Election to Redeem; Notice to Trustee. The election of the Company to redeem any Securities pursuant to Section 1101 shall be evidenced by a Board Resolution. In case of any redemption at the election of the Company, the Company shall, at least 45 days prior to the Redemption Date fixed by the Company (unless a shorter notice shall be satisfactory to the Trustee), notify the Trustee of such Redemption Date and of the principal amount of Securities to be redeemed. SECTION 1104. Selection by Trustee of Securities to Be Redeemed. If less than all the Securities are to be redeemed, the particular Securities to be redeemed shall be selected not more than 60 days prior to the Redemption Date by the Trustee, from the Outstanding Securities not previously called for redemption, by such method as the Trustee shall deem fair and appropriate and which may provide for the selection for redemption of portions (equal to $1,000 or any integral multiple thereof) of the principal amount of Securities of a denomination larger than $1,000. If any Security selected for partial redemption is converted in part before termination of the conversion right with respect to the portion of the Security so selected, the converted portion of such Security shall be deemed (so far as may be) to be the portion selected for redemption. 53 EX-4.1 Securities which have been converted during a selection of Securities to be redeemed shall be treated by the Trustee as Outstanding for the purpose of such selection. The Trustee shall promptly notify the Company and each Security Registrar in writing of the Securities selected for redemption and, in the case of any Securities selected for partial redemption, the principal amount thereof to be redeemed. For all purposes of this Indenture, unless the context otherwise requires, all provisions relating to the redemption of Securities shall relate, in the case of any Securities redeemed or to be redeemed only in part, to the portion of the principal amount of such Securities which has been or is to be redeemed. SECTION 1105. Notice of Redemption. Notice of redemption shall be given by first-class mail, postage prepaid, mailed not less than 30 nor more than 60 days prior to the Redemption Date, to each Holder of Securities to be redeemed, at his address, appearing in the Security Register. All notices of redemption shall state: (1) the Redemption Date, (2) the Redemption Price, (3) if less than all the Outstanding Securities are to be redeemed, the identification (and, in the case of partial redemption, the principal amounts) of the particular Securities to be redeemed, (4) that on the Redemption Date the Redemption Price will become due and payable upon each such Security to be redeemed and that interest thereon will cease to accrue on and after said date, (5) the conversion price, the date on which the right to convert the principal of the Securities to be redeemed will terminate and the place or places where such Securities may be surrendered for conversion, and (6) the place or places where such Securities are to be surrendered for payment of the Redemption Price. Notice of redemption of Securities to be redeemed at the election of the Company shall be given by the Company or, at the Company's request, by the Trustee in the name and at the expense of the Company. SECTION 1106. Deposit of Redemption Price. Prior to any Redemption Date, the Company shall deposit with the Trustee or with a Paying Agent (or, if the Company is acting as its own Paying Agent, segregate and hold in trust as provided in Section 1003) an amount of money sufficient to pay the Redemption Price of, and (except if the Redemption Date shall be an Interest Payment Date) accrued interest on, all the Securities which are to be redeemed on that date other than any Securities called for redemption on that date which have been converted prior to the date of such deposit. 54 EX-4.1 If any Security called for redemption is converted, any money deposited with the Trustee or with any Paying Agent or so segregated and held in trust for the redemption of such Security shall (subject to any right of the Holder of such Security or any Predecessor Security to receive interest as provided in the last paragraph of Section 307) be paid to the Company upon Company Request or, if then held by the Company, shall be discharged from such trust. SECTION 1107. Securities Payable on Redemption Date. Notice of redemption having been given as aforesaid, the Securities so to be redeemed shall, on the Redemption Date, become due and payable at the Redemption Price therein specified, and from and after such date (unless the Company shall default in the payment of the Redemption Price and accrued interest) such Securities shall cease to bear interest. Upon surrender of any such Security for redemption in accordance with said notice, such Security shall be paid by the Company at the Redemption Price, together with accrued interest to the Redemption Date; provided, however, that installments of interest whose Stated Maturity is on or prior to the Redemption Date shall be payable to the Holders of such Securities, or one or more Predecessor Securities, registered as such at the close of business on the relevant Record Dates according to their terms and the provisions of Section 307. If any Security called for redemption shall not be so paid upon surrender thereof for redemption the principal (and premium, if any) shall, until paid, bear interest from the Redemption Date at the rate borne by the Security. SECTION 1108. Securities Redeemed in Part. Any Security which is to be redeemed only in part shall be surrendered at an office or agency of the Company designated for that purpose pursuant to Section 1002 (with, if the Company or the Trustee so requires, due endorsement by, or a written instrument of transfer in form satisfactory to the Company and the Trustee duly executed by, the Holder thereof or his attorney duly authorized in writing), and the Company shall execute, and the Trustee shall authenticate and deliver to the Holder of such Security without service charge, a new Security or Securities of any authorized denomination as requested by such Holder, in aggregate principal amount equal to and in exchange for the unredeemed portion of the principal of the Security so surrendered. SECTION 1109. Conversion Arrangements on Call for Redemption. Notwithstanding anything to the contrary contained in this Indenture, in connection with any redemption of Securities, the Company, by an agreement with one or more investment bankers or other purchasers, may arrange for such purchasers to purchase all Securities called for redemption (the "Called Securities") which are either (i) surrendered for redemption or (ii) not duly surrendered for redemption or conversion prior to the close of business on the Redemption Date, and to convert the same into shares of Common Stock, by the purchasers' depositing with the Trustee (acting as Paying Agent with respect to the deposit of such amount and as conversion agent with respect to the conversion of such Called Securities), in trust for the Holders of the Called Securities, on or prior to the Redemption Date in the manner agreed to by the Company and such purchasers, an amount sufficient to pay the Redemption Price, payable by the Company on redemption of such Called Securities. In connection with any such arrangement for purchase and conversion, the Trustee as Paying Agent shall pay on or after the Redemption Date such amounts so deposited by the purchasers in exchange for Called Securities surrendered for redemption prior to the close of business on the Redemption Date and for all Called Securities surrendered after such 55 EX-4.1 Redemption Date. Notwithstanding anything to the contrary contained in this Article Eleven, the obligation of the Company to pay the Redemption Price of such Called Securities shall be satisfied and discharged to the extent such amount is so paid by such purchasers, provided, however, that nothing in this Section 1109 shall in any way relieve the Company of the obligation to any such Redemption Price on all Called Securities to the extent such amount is not so paid by said purchasers. For all purposes of this Indenture, any Called Securities surrendered by the Holders for redemption, and any Called Securities not duly surrendered for redemption or conversion prior to the close of business on the Redemption Date, shall be deemed acquired by such purchasers from such Holders and surrendered by such purchasers for conversion and shall in all respects be deemed to have been converted, all as of immediately prior to the close of business on the Redemption Date, subject to the deposit by the purchasers of the above amount as aforesaid. Nothing in this Section 1109 shall in any way limit the right of any Holder of a Security to convert his Security pursuant to the terms of this Indenture any time prior to the close of business on the fifth Business Day preceding the Redemption Date. ARTICLE TWELVE CONVERSION OF SECURITIES SECTION 1201. Conversion Privilege and Conversion Price. Subject to and upon compliance with the provisions of this Article, at the option of the Holder thereof, any Security or any portion of the principal amount thereof which is $1,000 or an integral multiple of $1,000 may be converted at the principal amount thereof, or of such portion thereof, into fully paid and nonassessable shares (calculated as to each conversion to the nearest 1/100th of a share) of Common Stock of the Company, at the conversion price, determined as hereinafter provided, in effect at the time of conversion. Such conversion right shall expire at the close of business on _______________, 1999. In case a Security or portion thereof is called for redemption, such conversion right in respect of the Security or portion so called shall expire at the close of business on the fifth Business Day preceding the Redemption Date, unless the Company defaults in making the payment due upon redemption. The price at which shares of Common Stock shall be delivered upon conversion (herein called the "conversion price") shall be initially $_________ per share of Common Stock. The conversion price shall be adjusted in certain instances as provided in Section 1204. In case the Company shall, by dividend or otherwise, declare or make a distribution on its Common Stock referred to in paragraph (4) or (5) of Section 1204, the Holder of each Security, upon the conversion thereof pursuant to this Article subsequent to the close of business on the date fixed for the determination of stockholders entitled to receive such distribution and prior to the effectiveness of the conversion price adjustment in respect of such distribution pursuant to paragraph (4) or (5) of Section 1204, shall also be entitled to receive for each share of Common Stock into which such Security is converted, the portion of the evidences of indebtedness, shares of capital stock, cash and assets so distributed applicable to one share of Common Stock, provided that, at the election of the Company (whose election shall be evidenced by a Board Resolution) with respect to all Holders so converting, the Company may, in lieu of distributing to such Holder any portion of such distribution not consisting of cash or securities of the Company, pay such Holder an amount in cash equal to the fair market value thereof (as determined by the Board of Directors, whose determination shall be conclusive and described in a Board Resolution). 56 EX-4.1 If any conversion of a Security described in the immediately preceding sentence occurs prior to the payment date for a distribution to holders of Common Stock which the Holder of the Security so converted is entitled to receive in accordance with the immediately preceding sentence, the Company may elect (such election to be evidenced by a Board Resolution) to distribute to such Holder a due bill for the evidences of indebtedness, shares of capital stock, cash or assets to which such Holder is so entitled, provided that such due bill (i) meets any applicable requirements of the principal national securities exchange or other market on which the Common Stock is then traded and (ii) requires payment or delivery of such evidences of indebtedness, shares of capital stock, cash or assets no later than the date of payment or delivery thereof to holders of Common Stock receiving such distribution. SECTION 1202. Exercise of Conversion Privilege. In order to exercise the conversion privilege, the Holder of any Security to be converted shall surrender such Security, duly endorsed or assigned to the Company or in blank, at any office or agency maintained by the Company pursuant to Section 1002, accompanied by written notice to the Company at such office or agency that the Holder elects to convert such Security, or, if less than the entire principal amount thereof is to be converted, the portion thereof to be converted. Securities surrendered for conversion during the period from the close of business on any Regular Record Date next preceding any Interest Payment Date to the opening of business on such Interest Payment Date shall (except for Securities whose Maturity is prior to such Interest Payment Date and Securities called for redemption on a Redemption Date within such period) be accompanied by payment in New York Clearing House funds or other funds acceptable to the Company of an amount equal to the interest payable on such Interest Payment Date on the principal amount of Securities being surrendered for conversion. Except as provided in the preceding sentence and subject to the last paragraph of Section 307, no payment or adjustment shall be made upon any conversion on account of any interest accrued on the Securities surrendered for conversion on account of any dividends on the Common Stock issued upon conversion. Securities shall be deemed to have been converted immediately prior to the close of business on the day of surrender of such Securities for conversion in accordance with the foregoing provisions, and at such time the rights of the Holders of such Securities as Holders shall cease, and the Person or Persons entitled to receive the Common Stock issuable upon conversion shall be treated for all purposes as the record holder or holders of such Common Stock at such time. As promptly as practicable on or after the conversion date, the Company shall issue and shall deliver at such office or agency a certificate or certificates for the number of full shares of Common Stock issuable upon conversion, together with payment in lieu of any fraction of a share, as provided in Section 1203. In the case of any Security which is converted in part only, upon such conversion the Company shall execute and the Trustee shall authenticate and deliver to the Holder thereof, at the expense of the Company, a new Security or Securities, of authorized denominations in aggregate principal amount equal to the unconverted portion of the principal amount of such Security. SECTION 1203. Fractions of Shares. No fractional shares of Common Stock shall be issued upon conversion of Securities. If more than one Security shall be surrendered for conversion at one time by the same Holder, the number of full shares which shall be issuable upon conversion thereof shall be computed on the basis of the aggregate principal amount of the Securities (or specified portions thereof) so surrendered. Instead of any fractional share of Common Stock 57 EX-4.1 which would otherwise be issuable upon conversion of any Security or Securities (or specified portions thereof), the Company shall pay a cash adjustment (rounded to the nearest cent) in respect of such fraction in an amount equal to the same fraction of the Closing Price per share of the Common Stock at the close of business on the day of conversion (or, if such day is not a Trading Day, on the Trading Day immediately preceding such day). SECTION 1204. Adjustment of Conversion Price. (1) In case the Company shall pay or make a dividend or other distribution on its Common Stock exclusively in Common Stock or shall pay or make a dividend or other distribution on any other class of capital stock of the Company which dividend or distribution includes Common Stock, the conversion price in effect at the opening of business on the day following the date fixed for the determination of stockholders entitled to receive such dividend or other distribution shall be reduced by multiplying such conversion price by a fraction of which the numerator shall be the number of shares of Common Stock outstanding at the close of business on the date fixed for such determination and the denominator shall be the sum of such number of shares and the total number of shares constituting such dividend or other distribution, such reduction to become effective immediately after the opening of business on the day following the date fixed for such determination. For the purposes of this paragraph (1), the number of shares of Common Stock at any time outstanding shall not include shares held in the treasury of the Company but shall include shares issuable in respect of scrip certificates issued in lieu of fractions of shares of Common Stock. The Company shall not pay any dividend or make any distribution on shares of Common Stock held in the treasury of the Company. (2) Subject to the last sentence of paragraph (8) of this Section, in case the Company shall pay or make a dividend or other distribution on its Common Stock consisting exclusively of, or shall otherwise issue to all holders of its Common Stock, rights or warrants entitling the holders thereof to subscribe for or purchase shares of Common Stock at a price per share less than the current market price per share (determined as provided in paragraph (9) of this Section) of the Common Stock on the date fixed for the determination of stockholders entitled to receive such rights or warrants, the conversion price in effect at the opening of business on the day following the date fixed for such determination shall be reduced by multiplying such conversion price by a fraction of which the numerator shall be the number of shares of Common Stock outstanding at the close of business on the date fixed for such determination plus the number of shares of Common Stock which the aggregate of the offering price of the total number of shares of Common Stock so offered for subscription or purchase would purchase at such current market price and the denominator shall be the number of shares of Common Stock outstanding at the close of business on the date fixed for such determination plus the number of shares of Common Stock so offered for subscription or purchase, such reduction to become effective immediately after the opening of business on the day following the date fixed for such determination. For the purposes of this paragraph (2), the number of shares of Common Stock at any time outstanding shall not include shares held in the treasury of the Company but shall include shares issuable in respect of scrip certificates issued in lieu of fractions of shares of Common Stock. The Company shall not issue any rights or warrants in respect of Common Stock held in the treasury of the Company. If at the end of the period during which such rights or warrants are convertible into Common Stock, not all such rights or warrants have been converted into Common Stock, the adjustment shall be immediately readjusted (on a prospective basis for any Securities not theretofore converted) to what it would have been based on the number of additional shares of Common Stock actually issued. (3) In case outstanding shares of Common Stock shall be subdivided into a greater number of shares of Common Stock, the conversion price in 58 EX-4.1 effect at the opening of business on the day following the day upon which such subdivision become effective shall be proportionately reduced, and conversely, in case outstanding shares of Common Stock shall each be combined into a smaller number of shares of Common Stock, the conversion price in effect at the opening of business on the day following the day upon which such combination becomes effective shall be proportionately increased, such reduction or increase, as the case may be, to become effective immediately after the opening of business on the day following the day upon which such subdivision or combination becomes effective. (4) Subject to the last sentence of this paragraph (4), in case the Company shall, by dividend or otherwise, distribute to all holders of its Common Stock evidences of its indebtedness, shares of any class of capital stock, cash or assets (including securities, but excluding (x) any rights or warrants referred to in paragraph (2) of this Section, (y) any dividend or distribution paid exclusively in cash out of the retained earnings of the Company and (z) any dividend or distribution referred to in paragraph (1) of this Section), the conversion price shall be reduced so that the same shall equal the price determined by multiplying the conversion price in effect immediately prior to the effectiveness of the conversion price reduction contemplated by this paragraph (4) by a fraction of which the numerator shall be the current market price per share (determined as provided in paragraph (9) of this Section) of the Common Stock on the date of such effectiveness less the fair market value (as determined by the Board of Directors, whose determination shall be conclusive and described in a Board Resolution), on the date of such effectiveness, of the portion of the evidences of indebtedness, shares of capital stock, cash and assets so distributed applicable to one share of Common Stock and the denominator shall be such current market price per share of the Common Stock, such reduction to become effective immediately prior to the opening of business on the day following the date fixed for the determination of stockholders entitled to receive such distribution (the "Reference Date"). If the Board of Directors determines the fair market value of any distribution for purposes of this paragraph (4) by reference to the actual or when issued trading market value for any securities comprising such distribution, it must in doing so consider the prices in such market over the same period used in computing the current market price per share pursuant to paragraph (9) of this Section. For purposes of this paragraph (4), any dividend or distribution that includes shares of Common Stock, rights or warrants to subscribe for or purchase shares of Common Stock or other securities convertible into or exchangeable for shares of Common Stock shall be deemed instead to be (a) (i) a dividend or distribution of the evidences of indebtedness, cash, assets or shares of capital stock other than such shares of Common Stock, such rights or warrants or such other convertible or exchangeable securities (making any conversion price reduction required by this paragraph (4)) immediately followed by (ii) in the case of such shares of Common Stock or such rights or warrants, a dividend or distribution thereof (making any further conversion price reduction required by paragraph (1) or (2) of this Section, except any shares of Common Stock included in such dividend or distribution shall not be deemed "outstanding at the close of business on the date fixed for such determination" within the meaning of paragraph (1) of this Section) or (b) in the case of such other convertible or exchangeable securities, a dividend or distribution of such number of shares of Common Stock as would then be issuable upon the conversion or exchange thereof, whether or not the conversion or exchange of such securities is subject to any conditions (making any further conversion price reduction required by paragraph (1) of this Section, except the shares deemed to constitute such dividend or distribution shall not be deemed "outstanding at the close of business on the date fixed for such determination," within the meaning of paragraph (1) of this Section). (5) In case the Company shall, by dividend or otherwise, at any time distribute to all holders of its Common Stock cash (including any distributions of cash out of the retained earnings of the Company but excluding any cash that is distributed as part of a distribution requiring a purchase price adjustment pursuant to paragraph (4) of this Section) in an 59 EX-4.1 aggregate amount that, together with (i) the aggregate amount of any other distributions to all holders of its Common Stock made exclusively in cash within the 12 months preceding the date of payment of such distribution and in respect of which no conversion price adjustment pursuant to paragraph (4) of this Section or this paragraph (5) has been made and (ii) the portion of the aggregate of any cash plus the fair market value (as determined by the Board of Directors, whose determination shall be conclusive and described in a Board Resolution) of consideration payable in respect of any tender offer or other negotiated purchase by the Company or a Subsidiary for all or any portion of the Company's Common Stock concluded within the 12 months preceding the date of payment of such distribution and in respect of which no conversion price adjustment pursuant to paragraph (7) of this Section has been made that is in excess of an amount equal to the product of (x) the number of shares of Common Stock with respect to which the aggregate tender offer or negotiated purchase consideration is payable times (y) the average of the daily Closing Prices per share of Common Stock in the five consecutive Trading Days selected by the Company out of the 10 consecutive Trading Days next succeeding the date of payment of the negotiated purchase consideration or expiration of the tender offer, as the case may be (the "Reference Price"), exceeds 20% of the product of the current market price per share (determined as provided in paragraph (9) of this Section) of the Common Stock on the date fixed for stockholders entitled to receive such distribution times the number of shares of Common Stock outstanding on such date (excluding shares held in the Treasury of the Company), the conversion price shall be reduced so that the same shall equal the price determined by multiplying such conversion price in effect immediately prior to the effectiveness of the conversion price reduction contemplated by this paragraph (5) by a fraction of which the numerator shall be the current market price per share (determined as provided in paragraph (9) of this Section) of the Common Stock on the date of such effectiveness less the amount of cash so distributed applicable to one share of Common Stock and the denominator shall be such current market price per share (determined as provided in paragraph (9) of this Section) of the Common Stock on the date of such distribution, such reduction to become effective immediately prior to the opening of business on the day following the date fixed for the payment of such distribution. (6) In case the Company shall issue to an Affiliate shares of its Common Stock at a net price per share less than the current market price per share (determined as provided in paragraph (9) of this Section) on the date the Company fixes the offering price of such additional shares, the conversion price shall be reduced immediately thereafter so that it shall equal the price determined by multiplying such conversion price in effect immediately prior thereto by a fraction of which the numerator shall be the number of shares of Common Stock outstanding immediately prior to the issuance of such additional shares plus the number of shares of Common Stock which the aggregate offering price of the total number of shares of Common Stock so offered would purchase at the current market price and the denominator shall be the number of shares of Common Stock that would be outstanding immediately after the issuance of such additional shares. Such adjustment shall be made successively whenever such an issuance is made. For the purposes of this paragraph (6), the number of shares of Common Stock at any time outstanding shall not include shares held in the Treasury of the Company but shall include shares issuable in respect of scrip certificates issued in lieu of fractions of shares of Common Stock. This paragraph (6) shall not apply to Common Stock issued to any Affiliate under bona fide benefits plans adopted by the Board of Directors for the benefit of the Company's directors, employees and advisers and approved by the holders of Common Stock when required by law. (7) In case a tender offer or other negotiated purchase (the "Current Purchase") made by the Company or any Subsidiary for all or any portion of the Company's Common Stock shall be consummated, if the aggregate of any cash plus the fair market value (as determined by the Board of Directors, whose determination shall be conclusive and described in a Board 60 EX-4.1 Resolution) of consideration payable in respect of such tender offer or other negotiated purchase is in excess of the Reference Price with respect to such transaction, and the amount of such excess, together with (i) the portion of the aggregate of the cash, plus the fair market value (as determined by the Board of Directors, whose determination shall be conclusive and described in a Board Resolution) of consideration payable in respect of any tender offer or other negotiated purchase (the "Prior Purchase") by the Company or a Subsidiary for all or any portion of the Company's Common Stock concluded within the 12 months preceding the expiration of a tender offer or the consummation of any negotiated purchase, as the case may be, that is the subject of the Current Purchase (the "Current Purchase Expiration Time") and in respect of which no conversion price adjustment pursuant to this paragraph (7) has been made, that is in excess of the Reference Price with respect to such Prior Purchase, and (ii) the aggregate amount of any distributions to all holders of the Company's Common Stock made exclusively in cash (specifically including distributions of cash out of retained earnings) within the 12 months preceding the expiration of the tender offer and as to which no adjustment pursuant to paragraph (4) or paragraph (5) of this Section has been made, exceeds 20% of the product of the Reference Price times the number of shares of Common Stock outstanding (including any tendered shares but excluding any shares held in the Treasury of the Company) at the Current Purchase Expiration Time, the conversion price shall be reduced so that the same shall equal the price determined by multiplying such conversion price in effect immediately prior to the Current Purchase Expiration Time by a fraction of which the numerator shall be (i) the product of the Reference Price times the number of shares of Common Stock outstanding (including any tendered shares but excluding any shares held in the Treasury of the Company) at the Current Purchase Expiration Time minus (ii) the fair market value (determined as aforesaid) of the aggregate consideration payable to stockholders based on the acceptance (up to any maximum specified in the terms of the tender offer or other negotiated purchase) of all shares validly tendered and not withdrawn or purchased in any negotiated purchase as of the Current Purchase Expiration Time (the shares deemed so accepted or purchased, up to any such maximum, being referred to as the "Purchase Shares") and the denominator shall be the product of (i) such Reference Price times (ii) such number of outstanding shares (excluding any shares held in the Treasury of the Company) at the Current Purchase Expiration Time less the number of Purchase Shares, such reduction to become effective immediately prior to the opening of business on the day following the Current Purchase Expiration Time. (8) The reclassification of Common Stock into securities other than Common Stock (other than any reclassification upon a consolidation or merger to which Section 1211 applies) shall be deemed to involve (a) a distribution of such securities other than Common Stock to all holders of Common Stock (and the effective date of such reclassification shall be deemed to be the "Reference Date" within the meaning of paragraph (4) of this Section), and (b) a subdivision or combination, as the case may be, of the number of shares of Common Stock outstanding immediately prior to such reclassification into the number of shares of Common Stock outstanding immediately thereafter (and the effective date of such reclassification shall be deemed to be "the day upon which such subdivision becomes effective"or "the day upon which such combination becomes effective," as the case may be, and "the day upon which such subdivision or combination becomes effective" within the meaning of paragraph (3) of this Section). Rights, warrants or options issued by the Company to all holders of its Common Stock entitling the holders thereof to subscribe for or purchase shares of Common Stock or Preferred Stock, which rights, warrants or options (i) are deemed to be transferred with such shares of Common Stock, (ii) are not exercisable and (iii) are also issued in respect of future issuances of Common Stock, in each case in clauses (i) through (iii) until the occurrence of a specified event or events ("Trigger Event"), shall for purposes of this Section 1204 not be deemed issued until the occurrence of the earliest Trigger Event. 61 EX-4.1 (9) For the purpose of any computation under this paragraph and paragraphs (2), (4), (5) and (6) of this Section, the current market price per share of Common Stock on any date shall be deemed to be the average of the daily Closing Prices for the 5 consecutive Trading Days selected by the Company commencing not more than 20 Trading Days before, and ending not later than, the date in question; provided, however, that (i) if the "ex" date for any event (other than the issuance or distribution requiring such computation) that requires an adjustment to the conversion price pursuant to paragraph (1), (2), (3), (4), (5), (6) or (7) above occurs on or after the 20th Trading Day prior to the day in question and prior to the "ex" date for the issuance or distribution requiring such computation, the Closing Price for each Trading Day prior to the "ex" date for such other event shall be adjusted by multiplying such Closing Price by the same fraction by which the conversion price is so required to be adjusted as a result of such other event, (ii) if the "ex" date for any event (other than the issuance or distribution requiring such computation) that requires an adjustment to the conversion price pursuant to paragraph (1), (2), (3), (4), (5), (6) or (7) above occurs on or after the "ex" date for the issuance or distribution requiring such computation and on or prior to the day in question, the Closing Price for each Trading Day on and after the "ex" date for such other event shall be adjusted by multiplying such Closing Price by the reciprocal of the fraction by which the conversion price is so required to be adjusted as a result of such other event, and (iii) if the "ex" date for the issuance or distribution requiring such computation is on or prior to the day in question, after taking into account any adjustment required pursuant to clause (ii) of this proviso, the Closing Price for each Trading Day on or after such "ex" date shall be adjusted by adding thereto the amount of any cash and the fair market value on the day in question (as determined by the Board of Directors in a manner consistent with any determination of such value for purposes of paragraph (4) or (5) of this Section, whose determination shall be conclusive and described in a Board Resolution) of the evidences of indebtedness, shares of capital stock or assets being distributed applicable to one share of Common Stock as of the close of business on the day before such "ex" date. For the purpose of any computation under paragraph (7) of this Section, the current market price per share of Common Stock on any date shall be deemed to be the average Closing Prices for the 5 consecutive Trading Days selected by the Company commencing on or after the latest (the "Commencement Date") of (i) the date 20 Trading Days before the date in question, (ii) the date of commencement of a tender offer requiring such computation and (iii) the date of the last amendment, if any, of such a tender offer involving a change in the maximum number of shares for which tenders are sought or a change in the consideration offered, and ending not later than the expiration time with respect to the tender offer or negotiated purchase, as the case may be; provided, however, that if the "ex" date for any event (other than the tender offer requiring such computation) that requires an adjustment to the conversion price pursuant to paragraph (1), (2), (3), (4), (5), (6) or (7) above occurs on or after the Commencement Date and prior to the expiration time for the tender offer requiring such computation, the Closing Price for each Trading Day prior to the "ex" date, for such other event shall be adjusted by multiplying such Closing Price by the same fraction by which the conversion price is so required to be adjusted as a result of such other event. For purposes of this paragraph, the term "ex" date, (i) when used with respect to any issuance or distribution, means the first date on which the Common Stock trades regular way on the relevant exchange or in the relevant market from which the Closing Price was obtained without the right to receive such issuance or distribution, (ii) when used with respect to any subdivision or combination of shares of Common Stock, means the first date on which the Common Stock trades regular way on such exchange or in such market after the time at which such subdivision or combination becomes effective, and (iii) when used with respect to any tender offer means the first date on which the Common Stock trades regular way on such exchange or in such market after the expiration time of such tender offer. 62 EX-4.1 (10) The Company may make such reductions in the conversion price, in addition to those required by paragraphs (1), (2), (3), (4), (5), (6), (7) and (8) of this Section, as it considers to be advisable in order that any event treated for federal income tax purposes as a dividend of stock or stock rights shall not be taxable to the recipients. (11) No adjustment in the conversion price shall be required unless such adjustment would require an increase or decrease of at least 1% in the conversion price; provided, however, that any adjustments which by reason of this paragraph (11) are not required to be made shall be carried forward and taken into account in any subsequent adjustment. (12) Anything herein to the contrary notwithstanding, in the event the Company shall declare any dividend or distribution requiring an adjustment in the conversion price hereunder and shall, thereafter and before the payment of such dividend or distribution to stockholders, legally abandon its plan to pay such dividend or distribution, the conversion price then in effect hereunder, if changed to reflect such dividend or distribution, shall upon the legal abandonment of such plan be changed to the conversion price which would have been in effect at the time of such abandonment (after giving effect to all other adjustments not so legally abandoned pursuant to the provisions of this Article Twelve) had such dividend or distribution never been declared. (13) Notwithstanding any other provision of this Section 1204, no adjustment to the conversion price shall reduce the conversion price below the then par value per share of the Common Stock, and any such purported adjustment shall instead reduce the conversion price to such par value. The Company hereby covenants not to take any action (i) to increase the par value per share of the Common Stock or (ii) that would or does result in any adjustment in the conversion price that, if made without giving effect to the previous sentence, would cause the conversion price to be less than the then par value per share of the Common Stock. SECTION 1205. Notice of Adjustments of Conversion Price. Whenever the conversion price is adjusted as herein provided: (a) the Company shall compute the adjusted conversion price in accordance with Section 1204 and shall prepare a certificate signed by the Treasurer of the Company setting forth the adjusted conversion price and showing in reasonable detail the facts upon which such adjustment is based, and such certificate shall forthwith be filed (with a copy to the Trustee) at each office or agency maintained for the purpose of conversion of Securities pursuant to Section 1002 and each of the Paying Agent and the Trustee, in the absence of bad faith on its part, may rely on such certificate in determining the Conversion Price in effect at any time, provided that the Trustee shall be under a duty to examine such certificate to determine whether or not it conforms to the requirements of this Indenture; and (b) a notice stating that the conversion price has been adjusted and setting forth the adjusted conversion price shall forthwith be required, and as soon as practicable after it is required, such notice shall be mailed by the Company to all Holders at their last addresses as they shall appear in the Security Register. 63 EX-4.1 SECTION 1206. Notice of Certain Corporate Activities. In case: (a) the Company takes any action that would require an adjustment in the conversion price pursuant to paragraphs (1) through (8) of Section 1204; or (b) of the voluntary or involuntary dissolution, liquidation or winding up of the Company; then the Company shall cause to be filed at each office or agency maintained for the purpose of conversion of Securities pursuant to Section 1002, and shall cause to be mailed to all Holders at their last addresses as they shall appear in the Security Register, at least 20 days prior to the applicable record, effective or expiration date hereinafter specified, a notice stating (x) the date on which a record is to be taken for the purpose of such dividend, distribution or granting of rights, warrants or options, or, if a record is not to be taken, the date as of which the holders of Common Stock of record to be entitled to such dividend, distribution, rights, warrants or options are to be determined, or (y) the date on which such reclassification, consolidation, merger, sale, transfer, dissolution, liquidation or winding up is expected to become effective, and the date as of which it is expected that holders of Common Stock of record shall be entitled to exchange their shares of Common Stock for securities, cash or other property deliverable upon such reclassification, consolidation, merger, sale, transfer, dissolution, liquidation or winding up, or (z) the date on which such tender offer commenced, the date on which such tender offer is scheduled to expire unless extended or such negotiated purchase is scheduled to be consummated, the consideration offered and the other material terms thereof (or the material terms of any amendment thereto). SECTION 1207. Company to Reserve Common Stock. The Company, shall at all times reserve and keep available, free from preemptive rights, out of its authorized but unissued Common Stock, for the purpose of effecting the conversion of Securities, the full number of shares of Common Stock then issuable upon the conversion of all outstanding Securities. SECTION 1208. Taxes on Conversions. The Company will pay any and all taxes that may be payable in respect of the issue or delivery of shares of Common Stock on conversion of Securities pursuant hereto. The Company shall not, however, be required to pay any tax which may be payable in respect of any transfer involved in the issue and delivery of shares of Common Stock in a name other than that of the Holder of the Security or Securities to be converted, and no such issue or delivery shall be made unless and until the Person requesting such issue has paid to the Company or Securities Registrar the amount of any such tax, or has established to the satisfaction of the Company or Securities Registrar that such tax has been paid. SECTION 1209. Covenant as to Common Stock. The Company covenants that all shares of Common Stock which may be issued upon conversion of Securities will upon issue be fully paid and nonassessable and, except as provided in Section 1208, the Company will pay all taxes, liens and charges with respect to the issue thereof. 64 EX-4.1 The Company will endeavor promptly to comply with all federal and state securities laws regulating the offer and delivery of shares of Common Stock upon conversion of Securities, if any, and will list or cause to have quoted such shares of Common Stock on each national securities exchange or in the over-the-counter market or such other market on which the Common Stock is then listed or quoted. SECTION 1210. Cancellation of Converted Securities. All Securities delivered for conversion shall be delivered to the Trustee to be canceled by or at the direction of the Trustee, which shall dispose of the same as provided in Section 309. SECTION 1211. Provisions in Case of Consolidation, Merger or Sale of Assets. In case of any consolidation of the Company with, or merger of the Company into, any other Person, any merger of another Person into the Company (other than a merger which does not result in any reclassification, conversion, exchange or cancellation of outstanding shares of Common Stock of the Company) or any sale, transfer or lease of all or substantially all of the Company's properties or assets, the Person formed by such consolidation or resulting from such merger or which acquires such assets, as the case may be, shall execute and deliver to the Trustee a supplemental indenture providing that the Holder of each Security then outstanding and such Person shall have the right thereafter, during the period such Security shall be convertible as specified in Section 1201, to convert such Security only into the kind and amount of securities, cash and other property receivable, if any, upon such consolidation, merger, sale, transfer or lease by a holder of the number of shares of Common Stock of the Company into which such Security might have been converted immediately prior to such consolidation, merger, sale, transfer or lease, assuming such holder of Common Stock of the Company (i) is not a Person with which the Company consolidated or into which the Company merged or which merged into the Company or to which such sale, transfer or lease was made, as the case may be ("Constituent Person"), or an Affiliate of a Constituent Person and (ii) failed to exercise his rights of election, if any, as to the kind or amount of securities, cash and other property receivable upon such consolidation, merger, sale, transfer or lease (provided that if the kind or amount of securities, cash and other property receivable upon such consolidation, merger, sale, transfer or lease is not the same for each share of Common Stock of the Company held immediately prior to such consolidation, merger, sale, transfer or lease by other than a Constituent Person or an Affiliate thereof and in respect of which such right of election shall not have been exercised ("non-electing share"), then for the purpose of this Section the kind and amount of securities, cash and other property receivable upon such consolidation, merger, sale, transfer or lease by each non-electing share shall be deemed to be the kind and amount so receivable per share by a plurality of the non-electing shares). Such supplemental indenture shall provide for adjustments which, for events subsequent to the effective date of such supplemental indenture, shall be as nearly equivalent as may be practicable to the adjustments provided for in this Article. The above provisions of this Section shall similarly apply to successive consolidations, mergers, sales, transfers and leases. SECTION 1212. Trustee Adjustment Disclaimer. The Trustee has no duty to determine when an adjustment under this Article Twelve should be made, how it should be made or what it should be. The Trustee has no duty to determine whether a supplemental indenture under Section 1211 need be entered into or whether any provisions of any supplemental indenture are correct. The Trustee shall not be accountable for 65 EX-4.1 and makes no representation as to the validity or value of any securities or assets issued upon conversion of Securities. The Trustee shall not be responsible for the Company's failure to comply with this Article Twelve. ARTICLE THIRTEEN SUBORDINATION OF SECURITIES SECTION 1301. Agreement to Subordinate by Company. Notwithstanding anything in this Indenture to the contrary (other than the last paragraph of Section 1505), the Company, for itself, its successors and assigns, covenants and agrees, and each Holder of Securities, by his acceptance thereof, likewise covenants and agrees, that payment by the Company of the principal of and premium, if any, and interest on each and all of the Securities, and payment in respect of any repurchase of the Securities pursuant to Section 1401, is hereby expressly subordinated, to the extent and in the manner hereinafter set forth, in right of payment to the prior payment in full of all Senior Indebtedness. SECTION 1302. Distribution on Dissolution, Liquidation and Reorganization: Subrogation. Upon any distribution of assets of the Company upon any dissolution, winding up, liquidation or reorganization of the Company, whether in bankruptcy, insolvency, reorganization or receivership proceeding or upon an assignment for the benefit of creditors or any other marshalling of the assets and liabilities of the Company or otherwise (subject to the power of a court of competent jurisdiction to make other equitable provision reflecting the rights conferred in this Indenture upon the Senior Indebtedness and the holders thereof, with respect to the Securities and the holders thereof, by a lawful plan of reorganization under applicable bankruptcy law), (a) the holders of all Senior Indebtedness shall be entitled to receive payment in full of the principal thereof, premium, if any, and the interest due thereon before the Holders of the Securities are entitled to receive any payment upon the principal of or premium, if any, or interest on indebtedness evidenced by the Securities; and (b) any payment or distribution of assets of the Company of any kind or character, whether in cash, property or securities, to which the Holders of the Securities or the Trustee would be entitled except for the provisions of this Article Thirteen shall be paid by the liquidating trustee or agent or other person making such payment or distribution, whether a trustee in bankruptcy, a receiver or liquidating trustee or otherwise, directly to the holders of Senior Indebtedness or their representative or representatives or to the trustee or trustees under any indenture under which any instruments evidencing any of such Senior Indebtedness may have been issued, ratably according to the aggregate amounts remaining unpaid on account of the principal of, premium, if any, and interest on the Senior Indebtedness held or represented by each, to the extent necessary to make payments in full of all Senior Indebtedness remaining unpaid, after giving effect to any concurrent payment or distribution to the holders of such Senior Indebtedness; and 66 EX-4.1 (c) in the event that, notwithstanding the foregoing, any payment or distribution of assets of the Company of any kind or character, whether in cash, property or securities, shall be received by the Holders of the Securities or by the Trustee before all Senior Indebtedness is paid in full, such payment or distribution shall be paid over to the holders of such Senior Indebtedness, or their representative or representatives or to the trustee or trustees under any indenture under which any instruments evidencing any of such Senior Indebtedness may have been issued, ratably as aforesaid, for application to the payment of all Senior Indebtedness remaining unpaid until all such Senior Indebtedness shall have been paid in full, after giving effect to any concurrent payment or distribution to the holders of such Senior Indebtedness. Subject to the payment in full of all Senior Indebtedness, the Holders of the Securities shall be subrogated to the rights of the holders of Senior Indebtedness to receive payments or distribution of cash, property, or securities of the Company, applicable to Senior Indebtedness until the principal of, premium, if any, and interest on the Securities shall be paid in full and no such payments or distributions to the Holders of the Securities of cash, property or securities otherwise distributable to the holders of Senior Indebtedness shall, as between the Company, its creditors other than the holders of Senior Indebtedness and the Holders of the Securities be deemed to be a payment by the Company to or on account of the Securities. It is understood that the provisions of this Article Thirteen are and are intended solely for the purpose of defining the relative rights of the Holders of the Securities on the one hand, and the holders of Senior Indebtedness on the other hand. Nothing contained in this Article Thirteen or elsewhere in this Indenture or in the Securities is intended to or shall impair, as between the Company, its creditors other than the holders of Senior Indebtedness and the Holders of the Security, as the case may be, the obligations of the Company, which are unconditional and absolute, to pay to the Holders of the Securities principal of, premium, if any, and interest on the Securities as and when the same shall become due and payable in accordance with their terms, or to affect the relative rights of the Holders of the Securities and creditors of the Company other than the holders of Senior Indebtedness, nor shall anything herein or in the Securities prevent the Trustee or the Holder of any Security from exercising all remedies otherwise permitted by applicable law upon default under this Indenture, subject to the rights, if any, under this Article Thirteen of the holders of Senior Indebtedness in respect of cash, property or securities of the Company received upon the exercise of any such remedy. Upon any payment or distribution of assets of the Company referred to in this Article Thirteen, the Trustee, subject to the provisions of Section 601, shall be entitled to rely upon a certificate of the liquidating trustee or agent or other person making any distribution to the Trustee for the purpose of ascertaining the persons entitled to participate in such distribution, the holders of Senior Indebtedness and other indebtedness of the Company, the amount thereof or payable thereon, the amount or amounts paid or distributed thereon and all other facts pertinent thereto or to this Article Thirteen. The Trustee, however, shall not be deemed to owe any fiduciary duty to the holders of Senior Indebtedness. The Trustee shall not be liable to any such holder if it shall pay over or distribute to or on behalf of Holders of Securities or the Company moneys or assets to which any holder of Senior Indebtedness shall be entitled by virtue of this Article Thirteen. If the Trustee or any Holder of Securities does not file a proper claim or proof of debt in the form required in any proceeding referred to above prior to 30 days before the expiration of the time to file such claim in such proceeding, then the holder of any Senior Indebtedness is hereby authorized, and has the right, to file an appropriate claim or claims for or on behalf of such Holder of Securities. 67 EX-4.1 SECTION 1303. No Payment in Event of Default on Senior Indebtedness. In the event that any Payment Default shall have occurred and be continuing, then no payment on account of any principal, premium (if any), interest, redemption or repurchase of the Securities shall be made unless and until such Payment Default shall have been cured or waived or shall have ceased to exist or all amounts then due and payable in respect of Senior Indebtedness shall have been paid in full, or provision shall have been made for such payment in cash or cash equivalents or otherwise in a manner satisfactory to the holders of Senior Indebtedness. In the event that any Non-Payment Default shall have occurred with respect to any Senior Indebtedness and be continuing, then, upon the receipt by the Trustee of written notice of such Non-Payment Default from a holder of such Senior Indebtedness or a representative thereof, no payment on account of any principal, premium (if any), interest, redemption or repurchase of the Securities shall be made during the period (the "Payment Blockage Period") commencing on the date of such receipt of such written notice and ending on the earlier of (i) the date on which the Trustee shall have received written notice of such Non-Payment Default shall have been cured or waived or shall have ceased to exist or any acceleration of the Senior Indebtedness to which such Non-Payment Default relates shall have been rescinded or annulled or such Senior Indebtedness shall have been discharged and (ii) the 180th day after the date of such receipt of such written notice. During any 360-day, period the aggregate of all Payment Blockage Periods shall not exceed 180 days and there shall be a period of at least 180 consecutive days in each 360-day period when no Payment Blockage Period is in effect. For all purposes of this paragraph, no Payment Default or Non-Payment Default that existed or was continuing on the date of commencement of any Payment Blockage Period shall be, or be made, the basis for the commencement of a subsequent Payment Blockage Period by Holders of Senior Indebtedness or their representatives unless such Payment Default or Non-Payment Default shall have been cured for a period of not less than 60 consecutive days. In the event that, notwithstanding the foregoing, the Company shall make any payment to the Trustee or the Holder of any Security prohibited by the foregoing provisions of this Section, and if such fact shall, at or prior to the time of such payment, be actually known to the Trustee or, as the case may be, such Holder, then and in such event such payment shall be paid over and delivered forthwith to the Company. The provisions of this Section shall not apply to any payment with respect to which Section 1302 would be applied. SECTION 1304. Payments Permitted. Nothing contained in this Indenture or in any of the Securities shall (a) affect the obligation of the Company to make, or prevent the Company from making, at any time, except as provided in Sections 1302 and 1303, payments of principal of, premium, if any, or interest on the Securities or (b) prevent the application by the Trustee of any moneys deposited with it hereunder to the payment of or on account of the principal of, premium, if any, or interest on the Securities unless the Trustee shall have received at its Corporate Trust Office written notice of any event prohibiting the making of such payment more than two Business Days prior to the date fixed for such payment. 68 EX-4.1 SECTION 1305. Authorization to Trustee to Effect Subordination. Each Holder of Securities by his acceptance thereof authorizes and directs the Trustee in his behalf to take such action as may be necessary or appropriate to effectuate the subordination as provided in this Article Thirteen and appoints the Trustee his attorney-in-fact for any and all such purposes. SECTION 1306. Notices to Trustee. Notwithstanding the provisions of this Article or any other provisions of this Indenture, neither the Trustee nor any Paying Agent (other than the Company) shall be charged with knowledge of the existence of any Senior Indebtedness or of any event which would prohibit the making of any payment of moneys to or by the Trustee or such Paying Agent, unless and until the Trustee or such Paying Agent shall have received (in the case of the Trustee, at its Corporate Trust Office) written notice thereof from the Company or from the holder of any Senior Indebtedness or from the trustee for any such holder, together with proof satisfactory to the Trustee of such holding of Senior Indebtedness or of the authority of such trustee; provided, however, that if at least two Business Days prior to the date upon which by the terms hereof any such moneys may become payable for any purpose (including, without limitation, the payment of either the principal of, premium, if any, or interest on any Security) the Trustee shall not have received with respect to any such moneys the notice provided for in this Section 1306, then, anything herein contained to the contrary notwithstanding, the Trustee shall have the full power and authority to receive such moneys and to apply the same to the purpose for which they were received, and shall not be affected by any notice to the contrary, which may be received by it on or after such two Business Days prior to such date. The Trustee shall be entitled to rely on the delivery to it of a written notice by a person representing himself to be a holder of Senior Indebtedness (or a trustee on behalf of such holder) to establish that such a notice has been given by a holder of Senior Indebtedness or a trustee on behalf of any such holder. In the event that the Trustee determines in good faith that further evidence is required with respect to the right of any person as a holder of Senior Indebtedness to participate in any payment or distribution pursuant to this Article Thirteen, the Trustee may request such person to furnish evidence to the reasonable satisfaction of the Trustee as to the amount of Senior Indebtedness held by such person, the extent to which such person is entitled to participate in such payment or distribution and any other facts pertinent to the rights of such person under this Article Thirteen and, if such evidence is not furnished, the Trustee may defer any payment to such person pending judicial determination as to the right of such person to receive such payment. SECTION 1307. Trustee as Holder of Senior Indebtedness. The Trustee shall be entitled to all the rights set forth in this Article Thirteen in respect of any Senior Indebtedness at any time held by it to the same extent as any other holding of Senior Indebtedness and nothing in Section 613 or elsewhere in this Indenture shall be construed to deprive the Trustee of any of its rights as such holder. SECTION 1308. Modification of Terms of Senior Indebtedness. Any renewal or extension of the time of payment of any Senior Indebtedness or the exercise by the holders of Senior Indebtedness of any of their rights under any instrument creating or evidencing Senior Indebtedness, including without limitation the waiver of defaults thereunder, may be made or done all without notice to or assent from the Holders of the Securities or the Trustee. 69 EX-4.1 No compromise, alteration, amendment, modification, extension, renewal or other change of, or waiver, consent or other action in respect of, any liability or obligation under or in respect of, or of any of the terms, covenants or conditions of any indenture or other instrument under which any Senior Indebtedness or of such Senior Indebtedness, whether or not such release is in accordance with the provisions of any applicable document, shall in any way alter or affect any of the provisions of this Article Thirteen or of the Securities relating to the subordination thereof. ARTICLE FOURTEEN RIGHT TO REQUIRE REPURCHASE SECTION 1401. Repurchase of Securities at Option of the Holder upon Change of Control. (a) If at any time there shall have occurred a Change of Control with respect to the Company, each Holder shall have the right, at such Holder's option, subject to the terms and conditions of this Indenture, to require the Company to repurchase all or a portion of such Holder's Securities (in denominations of $1,000 or integral multiples thereof), at the purchase price equal to 100% of the principal amount plus accrued interest to the Change of Control Purchase Date (the "Change of Control Purchase Price"), on the date (the "Change of Control Purchase Date") that is 60 days after the date the Company's Change of Control Notice (as defined below) is mailed (or such later date as is required by law), subject to substantial satisfaction by or on behalf of the Holder of the requirements set forth in Section 1401(c). Promptly, but in any event within 30 days following any such Change of Control, the Company hereby covenants, with respect to any Senior Indebtedness that would prohibit the repurchase of Securities by the Company in the event of such Change of Control, to: either (i) repay all such Senior Indebtedness in full, in cash; or (ii) obtain the requisite consents under such Senior Indebtedness or any agreement pursuant to which any such Senior Indebtedness is issued to permit the repurchase of the Securities as provided below. The foregoing shall in no way limit the occurrence of an Event of Default, including an Event of Default arising from a default under the covenants of the second sentence of this Section 1401(a), and the right to demand payment of the Securities upon acceleration thereafter. (b) Within 20 days after the occurrence of a Change of Control, the Company covenants that it shall mail a written notice (the "Change of Control Notice") of Change of Control by first-class mail to the Trustee and to each Holder (and to beneficial owners as required by applicable law) and shall cause a copy of such notice to be published in a daily newspaper of national circulation. The notice shall state: (1) the events causing a Change of Control (specifying such event) and the date of such Change of Control; (2) the date by which the Change of Control Purchase Notice (as defined below) pursuant to this Section 1401 must be given; (3) the Change of Control Purchase Date; (4) the Change of Control Purchase Price; 70 EX-4.1 (5) the name and address of the Paying Agent and the conversion agent; (6) the conversion price and any adjustments thereto; (7) that Securities as to which a Change of Control Purchase Notice has been given may be converted into Common Stock only if the Change of Control Purchase Notice has been withdrawn in accordance with the terms of this Indenture; (8) the procedures the Holder must follow to exercise rights under this Section 1401 and a brief description of such rights; (9) a brief description of the conversion rights of the Securities; and (10) the procedures for withdrawing a Change of Control Purchase Notice. The Change of Control Notice shall also state whether or not the Company has satisfied its obligations to the holders of the Senior Indebtedness of the type referred to in Section 1401(a) as required pursuant to Section 1401(a). If the Company is unable to satisfy such obligations, the Change of Control Notice shall also state that the Company is or will be in default under Section 501(4) of the Indenture, that receipt by the Company of one or more Change of Control Purchase Notices by Holders of at least 25% of the outstanding Securities will constitute a Notice of Default thereunder, and that the failure of the Company to cure such default within 60 days (or the then applicable time period) shall be an Event of Default allowing the Trustee or the Holders of not less than 25% in principal amount of the Outstanding Securities to declare the principal of all the Securities to be due and payable immediately. (c) A Holder may exercise its rights specified in Section 1401(a) upon delivery of a written notice of purchase (a "Change of Control Purchase Notice") to the Paying Agent at any time prior to the close of business on the Change of Control Purchase Date, stating: (1) the certificate number or numbers of the Security or Securities which the Holder will deliver to be purchased; (2) the portion of the principal amount of the Security or Securities which the Holder will deliver to be repurchased, which portion must be $1,000 or an integral multiple thereof; and (3) that such Security or Securities shall be repurchased pursuant to the terms and conditions specified in this Article Fourteen. The delivery of such Security or Securities to the Paying Agent prior to, on or after the Change of Control Purchase Date (together with all necessary endorsements) at the offices of the Paying Agent shall be a condition to the receipt by the Holder of the Change of Control Purchase Price therefor; provided, however, that such Change of Control Purchase Price shall be so paid pursuant to this Section 1401 only if the Security or Securities so delivered to the Paying Agent shall conform in all respects to the description thereof set forth in the related Change of Control Purchase Notice. The Company shall repurchase from the Holder thereof, pursuant to this Section 1401, a portion of a Security if the principal amount of such portion is $1,000 or an integral multiple of $1,000. Any repurchase by the Company contemplated pursuant to the provisions of this Section 1401 shall be 71 EX-4.1 consummated by the delivery of the consideration to be received by the Holder promptly following the later of the Change of Control Purchase Date and the time of delivery of the Security. Notwithstanding anything herein to the contrary, any Holder delivering to the Paying Agent the Change of Control Purchase Notice contemplated by this Section 1401(c) shall have the right to withdraw such Change of Control Purchase Notice at any time prior to the close of business on the Change of Control Purchase Date by delivery of a written notice of withdrawal to the Paying Agent in accordance with Section 1401. SECTION 1402. Effect of Change of Control Purchase Notice. Upon receipt by the Company of the Change of Control Purchase Notice specified in Section 1401, the Holder of the Security in respect of which such notice was given shall (unless such notice is withdrawn as specified in the following paragraph) thereafter be entitled to receive solely the Change of Control Purchase Price with respect to such Security. Such price shall be paid to such Holder (provided the conditions in Section 1401 have been satisfied) promptly following the later of (x) the Change of Control Purchase Date with respect to such Security and (y) the time of delivery of such Security to the Paying Agent by the Holder thereof in the manner required by Section 1401(c). Securities in respect of which a Change of Control Purchase Notice has been given by the Holder thereof may not be converted into shares of Common Stock on or after the date of the delivery of such Change of Control Purchase Notice unless such notice has first been validly withdrawn as specified in the following paragraph. A Change of Control Purchase Notice may be withdrawn by means of a written notice of withdrawal delivered to the office of the Paying Agent at any time prior to the close of business on the Change of Control Purchase Date specifying: (1) the certificate number or numbers of the Security or Securities in respect of which such notice of withdrawal is being submitted; (2) the portion of the principal amount of the Security or Securities with respect to which such notice of withdrawal is being submitted, which amount must be $1,000 or an integral multiple thereof; and (3) the portion of the principal amount, if any, of such Security or Securities which remains subject to the original Change of Control Purchase Notice and which has been or will be delivered for purchase by the Company, which amount must be $1,000 or an integral multiple thereof. In addition to the requirement that the Company must first comply with the covenants set forth in Section 1401, there shall be no repurchase of any Securities pursuant to Section 1401 if there has occurred (prior to, on or after the giving, by the Holders of such Securities, of the required Change of Control Purchase Notice) and is continuing an Event of Default. The foregoing shall in no way limit the occurrence of an Event of Default, including an Event of Default arising from a default under the covenants in this Article Fourteen and the right to demand payment of the Securities upon acceleration thereafter. 72 EX-4.1 SECTION 1403. Deposit of Change of Control Purchase Price. On or before the Change of Control Purchase Date, the Company shall deposit with the Trustee or with the Paying Agent (or, if the Company or a Subsidiary or an Affiliate of either of them is the Paying Agent, shall segregate and hold in trust as provided in Section 1003) an amount of money sufficient to pay the aggregate Change of Control Purchase Price of all the Securities or portions thereof which are to be purchased as of the Change of Control Purchase Date. SECTION 1404. Securities Purchased in Part. Any Security which is to be purchased only in part shall be surrendered at the office of the Paying Agent (with, if the Company or the Trustee so requires, due endorsement by, or writing instrument of transfer in form satisfactory to the Company and the Trustee duly executed by, the Holder thereof or such Holder's attorney duly authorized in writing) and the Company shall execute and the Trustee shall authenticate and make available for delivery to the Holder of such Security, without service charge, a new Security or Securities of any authorized denomination as requested by such Holder in aggregate principal amount equal to, and in exchange for, the portion of the principal amount of the Security so surrendered which is not purchased. SECTION 1405. Covenant to Comply with Securities Laws Upon Purchase of Securities. In connection with any purchase of Securities under Section 1401 hereof, the Company shall, to the extent then applicable and required by law: (i) comply with Rule 13e-4 (which term, as used herein, includes any successor provision thereto) under the Exchange Act; (ii) file the related Schedule 13E-4 (or any successor or similar schedule, form or report) under the Exchange Act; and (iii) otherwise comply with all federal and state securities laws so as to permit the rights and obligations under Section 1401 to be exercised in the time and in the manner specified in Section 1401. ARTICLE FIFTEEN DEFEASANCE AND COVENANT DEFEASANCE SECTION 1501. Company's Option to Effect Defeasance or Covenant Defeasance. The Company may, at its option by Board Resolution, at any time, elect to have either Section 1502 or Section 1503 applied to the Outstanding Securities upon compliance with the conditions set forth below in this Article Fifteen. SECTION 1502. Defeasance and Discharge. Upon the Company's exercise of the option provided in Section 1501 applicable to this Section 1502, the Company shall be deemed to have been discharged from its obligations with respect to the Outstanding Securities (including the provisions of Article Thirteen hereof) on the date the conditions set forth below are satisfied (hereinafter, "Defeasance"). For this purpose, such Defeasance means that the Company shall be deemed to have paid and discharged the entire indebtedness represented by the Outstanding Securities and to have satisfied all its other obligations under such Securities and this Indenture insofar as such Securities are concerned (and the Trustee, at the expense of the Company, shall execute proper instruments acknowledging the same), except for the following which shall survive until 73 EX-4.1 otherwise terminated or discharged hereunder: (A) the rights of Holders of Outstanding Securities to receive, solely from the trust fund described in Section 1504 and as more fully set forth in such Section, payments in respect of the principal of and premium, if any, and interest on such Securities when such payments are due, (B) the Company's obligations with respect to such Securities under Sections 305, 306, 702, 1002 and 1003, (C) the rights, powers, trusts, duties and immunities of the Trustee hereunder, (D) the Company's obligations under Article Twelve and (E) this Article Fifteen. Subject to compliance with this Article Fifteen, the Company may exercise its option under this Section 1502 notwithstanding the prior exercise of its option under Section 1503. SECTION 1503. Covenant Defeasance. Upon the Company's exercise of the option provided in Section 1501 applicable to this Section 1503, the Company (i) shall be released from its obligations under Sections 1006, 1007 and 1008, and the provisions of Article Thirteen hereof, and (ii) the occurrence of an event specified in Section 501(6) shall not constitute an Event of Default, and such Sections and Article shall no longer apply with respect to or for the benefit of the Company, the Securities, the Holders of Securities and the holders of Senior Indebtedness on and after the date the conditions set forth below are satisfied (hereinafter, "Covenant Defeasance"). For this purpose, such Covenant Defeasance means that the Company may omit to comply with and shall have no liability, in respect of any term, condition or limitation set forth in any such Sections or Article whether directly or indirectly by reason of any reference elsewhere herein to any such Sections or Article or by reason of any reference in an) such Sections or Article to any other provision herein or in any other document, but the remainder of this Indenture and such Securities shall be unaffected thereby. SECTION 1504. Conditions to Defeasance or Covenant Defeasance. The following shall be the conditions to application of either Section 1502 or Section 1503 to the Outstanding Securities: (1) The Company shall irrevocably have deposited or caused to be deposited with the Trustee (or another trustee satisfying the requirements of Section 609 who shall agree to comply with the provisions of this Article Fifteen applicable to it) as trust funds in trust for the purpose of making the following payments, specifically pledged as security for, and dedicated solely to, the benefit of the Holders of such Securities, (A) money in an amount, or (B) U.S. Government Obligations which through the scheduled payment of principal and interest in respect thereof in accordance with their terms and without further reinvestment thereof will provide, not later than one Business Day before the due date of any payment, money in an amount, or (C) a combination thereof in an aggregate amount, sufficient, in the opinion of a nationally recognized firm of independent public accountants expressed in a written certification thereof delivered to the Trustee, to pay and discharge, and which shall be applied by the Trustee or other qualifying trustee to pay and discharge, the principal of and premium, if any, on and each installment of interest on the Securities on the Stated Maturity of such principal or installment of interest on the day on which such payments are due and payable in accordance with the terms of this Indenture and of such Securities. For this purpose, "U.S. Government Obligations" means securities that are (x) direct obligations of the United States of America for the payment of which is full faith and credit is pledged or (y) obligations of a Person controlled or supervised by and acting as an agency or instrumentality of the United States of America the payment of which is unconditionally guaranteed as a full faith and credit obligation by the United States of America, which, in either case, are not callable or redeemable at the option of the issuer thereof, and shall also include a 75 EX-4.1 depository receipt issued by a bank (as defined in Section 3(a)(2) of the Securities Act of 1933, as amended) as custodian with respect to any such U.S. Government Obligation or a specific payment of principal of or interest on any such U.S. Government Obligation held by such custodian for the account of the holder of such depository receipt; provided that (except as required by law) such custodian is not authorized to make any deduction from the amount payable to the holder of such depository receipt from any amount received by the custodian in respect of the U.S. Government Obligation or the specific payment of principal of or interest on the U.S. Government Obligation evidenced by such depository receipt. (2) In the case of an election under Section 1502, the Company shall have delivered to the Trustee an Opinion of Counsel stating that (x) the Company has received from, or there has been published by, the Internal Revenue Services a ruling or (y) since the date of this Indenture there has been a change in the applicable federal income tax law, in either case to the effect that, and based thereon such opinion shall confirm that the Holders of the Outstanding Securities will not recognize income, gain or loss for federal income tax purposes as a result of such deposit, defeasance and discharge and will be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such defeasance had not occurred. (3) In the case of an election under Section 1503, the Company shall have delivered to the Trustee an Opinion of Counsel to the effect that the Holders of the Outstanding Securities will not recognize gain or loss for federal income tax purposes as a result of such Covenant Defeasance and will be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such deposit and Covenant Defeasance had not occurred. (4) The Company shall have delivered to the Trustee an Officers' Certificate to the effect that the Securities, if then listed on any securities exchange, will not be delisted as a result of such deposit, in the case of an election under Section 1502 or 1503. (5) At the time of such Defeasance of Covenant Defeasance: (A) no default in the payment of all or a portion of principal (or premium, if any) or interest in respect of any Senior Indebtedness shall have occurred and be continuing, and no event of default with respect to any Senior Indebtedness shall have occurred and be continuing and shall have resulted in such Senior Indebtedness becoming or being declared due and payable prior to the date on which it would otherwise have become due and payable and (b)(i) no other event of default with respect to any Senior Indebtedness shall have occurred and be continuing permitting the holders of such Senior Indebtedness (or a trustee on behalf of the holders thereof) to declare such Senior Indebtedness due and payable prior to the date on which it would otherwise have become due and payable, (ii) no judicial proceeding shall be pending with respect to any such event of default and (iii) the Company and the Trustee shall not have received a notice with respect to any such event of default from any holder of Senior Indebtedness (or their representative or representatives) or, in the case of either clause (A) or clause (B) above, each such default or event of default shall have been cured or waived or shall have ceased to exist. (6) No Event of Default or event which with notice or lapse of time or both would become an Event of Default shall have occurred and be continuing on the date of such deposit or, insofar as subsections 501(7) and (8) are concerned, at any time during the period ending on the 91st day after the date of such deposit (it being understood that this condition shall not be deemed satisfied until the expiration of such period). 75 EX-4.1 (7) Such Defeasance or Covenant Defeasance shall not cause the Trustee to have a conflicting interest as defined in Section 608 and for purposes of the Trust Indenture Act with respect to any securities of the Company. (8) Such Defeasance or Covenant Defeasance shall not result in a breach or violation of, or constitute a default under, any other agreement or instrument to which the Company is a party or by which it is bound. (9) The Company shall have delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that all conditions present provided for relating to either the Defeasance under Section 1502 or the Covenant Defeasance under Section 1503 (as the case may be) have been complied with. (10) Such Defeasance or Covenant Defeasance shall not result in the trust arising from such deposit to constitute, unless it is qualified as, a regulated investment company under the Investment Company Act of 1940, as amended. (11) The subordination provisions of Article Thirteen shall no longer apply to the Securities upon such Defeasance or Covenant Defeasance. SECTION 1505. Deposited Money and U.S. Government Obligations to be Held in Trust; Other Miscellaneous Provisions. Subject to the provisions of the last paragraph of Section 1003, all money and U.S. Government Obligations (including the proceeds thereof) deposited with the Trustee (or other qualifying trustee -- collectively for purposes of this Section 1505, the "Trustee") pursuant to Section 1504 shall be held in trust and applied by the Trustee, in accordance with the provisions of such Securities and this Indenture, to the payment, either directly or through any Paying Agent (including the Company acting as its own Paying Agent) as the Trustee may determine, to the Holders of such Securities, of all sums due and to become due thereon in respect of principal (and premium, if any) and interest, but such money need not be segregated from other funds except to the extent required by law. Money so held in trust, to the extent allocated for the payment of Securities shall not be subject to the provisions of Article Thirteen. The Company shall pay and indemnify the Trustee against any tax, fee or other charge imposed on or assessed against the U.S. Government Obligations deposited pursuant to Section 1504 or the principal and interest received in respect thereof other than any such tax, fee or other charge which by law, is for the account of the Holders of the Outstanding Securities. Anything in this Article Fifteen to the contrary notwithstanding, the Trustee shall deliver or pay to the Company from time to time upon Company Request any money or U.S. Government Obligations held by it as provided in Section 1504 which, in the opinion of a nationally, recognized firm of independent public accountants expressed in a written certification thereof delivered to the Trustee, are in excess of the amount hereof which would then be required to be deposited to effect an equivalent Defeasance or Covenant Defeasance. The provision for subordination of the Securities set forth in Article Thirteen are hereby expressly made subject to the provisions for Defeasance or Covenant Defeasance in this Article Fifteen and, anything herein to the contrary notwithstanding, upon the effectiveness of such Defeasance or Covenant Defeasance, such Securities shall thereupon cease to be so subordinated. 76 EX-4.1 SECTION 1506. Reinstatement. If the Trustee or Paying Agent is unable to apply any money in accordance with Section 1502 or 1503 by reason of any order or judgment of any court or governmental authority enjoining, restraining or otherwise prohibiting such application, the Company's obligations under this Indenture and the Securities shall be revived and reinstated as though no deposit had occurred pursuant to this Article Fifteen until such time as the Trustee or Paying Agent is permitted to apply all such money in accordance with Section 1502 or 1503; provided, however, that if the Company makes any payment of principal of (or premium, if any) or interest on any Security following the reinstatement of its obligations, the Company shall be subrogated to the rights of the Holders of such Securities to receive such payment from the money held by the Trustee or Paying Agent. * * * This instrument may be executed in any number of counterparts, each of which so executed shall be deemed to be an original, but all such counterparts shall together constitute but one and the same instrument. 77 EX-4.1 IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be duly executed, and their respective corporate seals to be hereunto affixed and attested, all as of the day and year first above written. THE PEP BOYS - MANNY, MOE & JACK By:________________________________________ Name: Title: Attest: ________________________ Name: Title FIRST FIDELITY BANK, NATIONAL ASSOCIATION as Trustee By:________________________________________ Name: Title: Attest: ________________________ Name: Title: EX-5 4 EXHIBIT 5 1 EX-5 [WILLKIE FARR & GALLAGHER LETTERHEAD] August 17, 1994 The Pep Boys - Manny, Moe & Jack 3111 West Allegheny Avenue Philadelphia, Pennsylvania 19132 Re: Registration Statement on Form S-3 Ladies and Gentlemen: The Pep Boys - Manny, Moe & Jack (the "Company") has requested our opinion in connection with the Registration Statement on Form S-3 (the "Registration Statement") relating to (i) the Convertible Subordinated Notes due 1999 of the Company (the "Notes") and (ii) the shares of Common Stock, par value $1.00 per share, of the Company, issuable upon conversion of the Notes (the "Shares"). The Notes will be issued under an Indenture (the "Indenture") to be entered into by the Company and First Fidelity Bank, National Association, as Trustee, (the "Trustee") and sold pursuant to the terms of an underwriting agreement to be executed by the Company and CS First Boston Corporation (the "Underwriter"). We have examined copies of the Certificate of Incorporation and Bylaws of the Company, the Registration Statement, all resolutions adopted by the Company's Board of Directors and other records and documents that we have deemed necessary for the purpose of this opinion. We have also examined such other documents, papers, statutes and authorities as we have deemed necessary to form a basis for the opinion hereinafter expressed. In our examination, we have assumed the genuineness of all signatures and the conformity to original documents of all copies submitted to us. As to various questions of fact material to our opinion, we have relied on statements and certificates of officers and representatives of the Company and public officials. In rendering this opinion, we have also assumed that there will be no changes in applicable law or facts between the date hereof and any date of issuance of Notes or Shares and that the provisions of all applicable federal and state securities laws have been complied with. 2 EX-5 Based upon and subject to the foregoing, we are of the opinion that: 1. The Notes have been duly authorized and, when duly executed, authenticated and delivered by or on behalf of the Company, duly authenticated by the Trustee and duly paid for by the Underwriter, will be binding obligations of the Company and entitled to the benefits of the Indenture; and 2. The Shares have been duly authorized and duly reserved for issuance upon conversion of the Notes and, when issued and delivered pursuant to the terms of the Indenture, will be validly issued, fully paid and non-assessable. We hereby consent to the filing of this opinion as an exhibit to the Registration Statement and to the reference to our firm under the caption "Legal Matters" in the Registration Statement. Very truly yours, /s/ Willkie Farr & Gallagher EX-12 5 EXHIBIT 12.2 1 EX-12.2 THE PEP BOYS - MANNY, MOE & JACK AND SUBSIDIARIES Exhibit 12.2 - Calculation of Ratio of Earnings to Fixed Charges for the 13 weeks ended April 30, 1994 and May 1, 1993 - -------------------------------------------------------------------------- 13 Weeks Ended --------------------------------- (in thousands, except ratios) April 30, 1994 May 1, 1993 - -------------------------------------------------------------------------- Interest $ 5,720 $ 5,012 Interest factor in rental expense 1,469 1,364 Capitalized interest 341 166 - -------------------------------------------------------------------------- (a) Fixed charges, as defined $ 7,530 $ 6,542 - -------------------------------------------------------------------------- Earnings before income taxes and cumulative effect of change in accounting principle $27,980 $21,169 Fixed charges 7,530 6,542 Capitalized interest (341) (166) - -------------------------------------------------------------------------- (b) Earnings, as defined $35,169 $27,545 - -------------------------------------------------------------------------- (c) Ratio of earnings to fixed charges (b divided by a) 4.7x 4.2x - -------------------------------------------------------------------------- EX-23 6 EXHIBIT 23.2 1 EX-23.2 INDEPENDENT AUDITORS' CONSENT We consent to the incorporation by reference in this Registration Statement of The Pep Boys - Manny, Moe & Jack on Form S-3 of our report dated March 22, 1994, appearing in the Annual Report on Form 10-K of The Pep Boys - Manny, Moe & Jack for the year ended January 29, 1994 and to the reference to us under the headings "Selected Financial Data" and "Experts" in the Prospectus, which is part of this Registration Statement. DELOITTE & TOUCHE LLP Philadelphia, Pennsylvania August 16, 1994 EX-25 7 EXHIBIT 25 1 EX-25 ______________ SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM T-1 STATEMENT OF ELIGIBILITY UNDER THE TRUST INDENTURE ACT OF 1939 OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE PURSUANT TO SECTION 305(b)(2) _____ FIRST FIDELITY BANK, NATIONAL ASSOCIATION (Name of Trustee) 22-1147033 (I.R.S. Employer Identification No.) 175 WEST BROADWAY, SALEM, NEW JERSEY (Address of Principal Executive Offices) 08079 (Zip Code) THE PEP BOYS - MANNY, MOE & JACK (Name of Obligor) PENNSYLVANIA (State of Incorporation) 23-0962915 (I.R.S. Employer Identification No.) 3111 WEST ALLEGHENY AVENUE PHILADELPHIA, PENNSYLVANIA (Address of Principal Executive Offices) 19132 (Zip Code) CONVERTIBLE SUBORDINATED NOTES due 1999 (Title of Indenture Securities) 2 EX-25 1. General information. Furnish the following information as to the trustee: (a) Name and address of each examining or supervisory authority to which it is subject: Comptroller of the Currency United States Department of the Treasury Washington, D.C. 20219 Federal Reserve Bank (3rd District) Philadelphia, Pennsylvania 19106 Federal Deposit Insurance Corporation Washington, D.C. 20429 (b) Whether it is authorized to exercise corporate trust powers. Yes. 2. Affiliations with obligor. If the obligor is an affiliate of the trustee, describe each such affiliation. None. 3. Voting securities of the trustee. Furnish the following information as to each class of voting securities of the trustee: Not applicable - see answer to item 13. 4. Trusteeships under other indentures. If the trustee is a trustee under another indenture under which any other securities, or certificates of interest or participation in any other securities, of the obligor are outstanding, furnish the following information: Not applicable - see answer to item 13. 3 EX-25 5. Interlocking directorates and similar relationships with the obligor or underwriters. If the trustee or any of the directors or executive officers of the trustee is a director, officer, partner, employee, appointee, or representative of the obligor or of any underwriter for the obligor, identify each such person having any such connection and state the nature of each such connection. Not applicable - see answer to item 13. 6. Voting securities of the trustee owned by the obligor or its officials. Furnish the following information as to the voting securities of the trustee owned beneficially by the obligor and each director, partner, and executive officer of the obligor: Not applicable - see answer to item 13. 7. Voting securities of the trustee owned by underwriters or their officials. Furnish the following information as to the voting securities of the trustee owned beneficially by each underwriter for the obligor and each director, partner, and executive officer of each such underwriter: Not applicable - see answer to item 13. 8. Securities of the obligor owned or held by the trustee. Furnish the following information as to securities of the obligor owned beneficially or held as collateral security for obligations in default by the trustee: Not applicable - see answer to item 13. 9. Securities of underwriters owned or held by the trustee. If the trustee owns beneficially or holds as collateral security for obligations in default any securities of an underwriter for the obligor, furnish the following information 4 EX-25 as to each class of securities of such underwriter any of which are so owned or held by the trustee: Not applicable - see answer to item 13. 10. Ownership or holdings by the trustee of voting securities of certain affiliates or security holders of the obligor. If the trustee owns beneficially or holds as collateral security for obligations in default voting securities of a person who, to the knowledge of the trustee (1) owns 10 percent or more of the voting stock of the obligor or (2) is an affiliate, other than a subsidiary, of the obligor, furnish the following information as to the voting securities of such person: Not applicable - see answer to item 13. 11. Ownership or holdings by the trustee of any securities of a person owning 50 percent or more of the voting securities of the obligor. If the trustee owns beneficially or holds as collateral security for obligations in default any securities of a person who, to the knowledge of the trustee, owns 50 percent or more of the voting securities of the obligor, furnish the following information as to each class of securities of such person any of which are so owned or held by the trustee: Not applicable - see answer to item 13. 12. Indebtedness of the obligor to the trustee. Except as noted in the instructions, if the obligor is indebted to the trustee, furnish the following information: Not applicable - see answer to item 13. 13. Defaults by the obligor. (a) State whether there is or has been a default with respect to the securities under this indenture. Explain the nature of any such default. None. (b) If the trustee is a trustee under another indenture under which any other securities, or certificates of interest or participation in any other securities, of the obligor are 5 EX-25 outstanding, or is trustee for more than one outstanding series of securities under the indenture, state whether there has been a default under any such indenture or series, identify the indenture or series affected, and explain the nature of any such default. None. 14. Affiliations with the underwriters. If any underwriter is an affiliate of the trustee, describe each such affiliation. Not applicable - see answer to item 13. 15. Foreign trustee. Identify the order or rule pursuant to which the trustee is authorized to act as sole trustee under indentures qualified or to be qualified under the Act. Not applicable - trustee is a national banking association organized under the laws of the United States. 16. List of Exhibits. List below all exhibits filed as part of this statement of eligibility. 1. Copy of Articles of Association of the trustee as now in - ---- effect.* 2. Copy of the Certificate of the Comptroller of the - ---- Currency dated January 11, 1994, evidencing the authority of the trustee to transact business.* 3. Copy of the authorization of the trustee to exercise - ---- fiduciary powers.* 4. Copy of existing by-laws of the trustee.* - ---- 5. Copy of each indenture referred to in Item 4, if the - ---- obligor is in default, not applicable. X 6. Consent of the trustee required by Section 321(b) of the - ---- Act. 6 EX-25 X 7. Copy of report of condition of the trustee at the close - ---- of business on June 30, 1994, published pursuant to the requirements of its supervising authority. 8. Copy of any order pursuant to which the foreign trustee - ---- is authorized to act as sole trustee under indentures qualified or to be qualified under the Act, not applicable. 9. Consent to service of process required of foreign - ---- trustees pursuant to Rule 10a-4 under the Act, not applicable. _____________________ *Previously filed with the Securities and Exchange Commission on February 11, 1994 as an exhibit to Form T-1 in connection with Registration Statement No. 22-73340 and incorporated herein by reference. NOTE The trustee disclaims responsibility for the accuracy or completeness of information contained in this Statement of Eligibility and Qualification not known to the trustee and not obtainable by it through reasonable investigation and as to which information it has obtained from the obligor and has had to rely or will obtain from the principal underwriters and will have to rely. 7 EX-25 SIGNATURE Pursuant to the requirements of the Trust Indenture Act of 1939, the trustee, First Fidelity Bank, National Association, a national banking association organized and existing under the laws of the United States of America, has duly caused this Statement of Eligibility to be signed on its behalf by the undersigned, thereunto duly authorized, all in the City of Philadelphia and Commonwealth of Pennsylvania, on the 16th day of August, 1994. FIRST FIDELITY BANK, NATIONAL ASSOCIATION By:/s/John H. Clapham ------------------------------ John H. Clapham Assistant Vice President 8 EX-25 EXHIBIT 6 CONSENT OF TRUSTEE Pursuant to the requirements of Section 321(b) of the Trust Indenture Act of 1939, and in connection with the proposed issue of The Pep Boys - Manny, Moe & Jack, we hereby consent that reports of examinations by Federal, State, Territorial or District authorities may be furnished by such authorities to the Securities and Exchange Commission upon request therefor. FIRST FIDELITY BANK, NATIONAL ASSOCIATION By:/s/John H. Clapham ------------------------------- John H. Clapham Assistant Vice President Philadelphia, Pennsylvania August 16, 1994 9 EX-25 EXHIBIT T-7 REPORT OF CONDITION Consolidating domestic and foreign subsidiaries of the First Fidelity Bank, National Association of Salem in the state of New Jersey, at the close of business on June 30, 1994, published in response to call made by Comptroller of the Currency, under title 12, United States Code, Section 161. Charter Number 33869 Comptroller of the Currency Northeastern District. Statement of Resources and Liabilities ASSETS Thousand of Dollars ----------- Cash and balance due from depository institutions: Noninterest-bearing balances and currency and coin......... 1,515,147 Interest-bearing balances.................................. 439,530 Securities................................................... ///////// Hold-to-maturity securities................................ 3,418,048 Available-for-sale securities.............................. 2,832,519 Federal funds sold and securities purchased under agreements ////////// to resell in domestic offices of the bank and of it ////////// Edge and Agreement subsidiaries, and in IBFs: ////////// Federal funds sold..................................... 558,540 Securities purchased under agreements to resell........ 276,261 Loans and lease financing receivables: Loan and leases, net of unearned income......18,542,773 LESS: Allowance for loan and lease losses.......515,420 LESS: Allocated transfer risk reserve.................0 Loans and leases, net of unearned income, allowance, and reserve................................................. 18,027,353 Assets held in trading accounts............................... 161,733 Premises and fixed assets (including capitalized leases)...... 337,978 Other real estate owned....................................... 135,958 Investment in unconsolidated subsidiaries and associated ////////// companies..................................................... 11,646 Customer's liability to this bank on acceptances outstanding... 194,720 Intangible assets............................................. 291,235 Other assets.................................................. 482,637 Total assets.................................................. 28,683,305 LIABILITIES Deposits: In domestic offices..................................... 22,688,126 Noninterest-bearing..........................4,564,800 Interest-bearing............................18,123,326 In foreign offices, Edge and Agreement subsidiaries, and IBFs................................................ 713,517 Noninterest-bearing.............................15,866 Interest-bearing...............................697,651 Federal funds purchased and securities sold under agreements to repurchase in domestic offices of the bank and of its Edge and Agreement subsidiaries, and IBFs Federal fund purchased.................................. 861,993 Securities sold under agreements to repurchase.......... 1,091,313 Demand notes issued to the U.S. Treasury...................... 0 Trading liabilities........................................... 0 Other borrowed money:......................................... ///////// With original maturity of one year or less.............. 390 With original maturity of more than one year............ 740 Mortgage indebtedness and obligations under capitalized leases 7,009 Bank's liability on acceptances executed and outstanding..... 197,334 Subordinated notes and debentures............................ 175,000 Other liabilities............................................ 422,642 Total liabilities............................................ 26,158,064 Limited-life preferred stock and related surplus............. 0 EQUITY CAPITAL Perpetual preferred stock and related surplus................. 0 Common Stock.................................................. 430,000 Surplus....................................................... 985,034 Undivided profits and capital reserves........................ 1,138,808 Net unrealized holding gains (losses) on available-for-sale ///////// securities................................................... (28,601) Cumulative foreign currency translation adjustments........... 0 Total equity capital.......................................... 2,525,241 Total liabilities, limited-life preferred stock and equity.... ////////// capital..................................................... 28,683,305 -----END PRIVACY-ENHANCED MESSAGE-----