-----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, kUwdlToKYEx+wr12GqMwfnuF7Y9A5+cuwQBdAxCTo4UgB6Jnl6kkhgJly1UWvIXc W0vPg7pK+e3l2TuXehK3ow== 0000950116-95-000228.txt : 19950607 0000950116-95-000228.hdr.sgml : 19950607 ACCESSION NUMBER: 0000950116-95-000228 CONFORMED SUBMISSION TYPE: S-3/A PUBLIC DOCUMENT COUNT: 6 FILED AS OF DATE: 19950606 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: PEP BOYS MANNY MOE & JACK CENTRAL INDEX KEY: 0000077449 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-AUTO & HOME SUPPLY STORES [5531] IRS NUMBER: 230962915 STATE OF INCORPORATION: PA FISCAL YEAR END: 0203 FILING VALUES: FORM TYPE: S-3/A SEC ACT: 1933 Act SEC FILE NUMBER: 033-59859 FILM NUMBER: 95545397 BUSINESS ADDRESS: STREET 1: 3111 W ALLEGHENY AVE CITY: PHILADELPHIA STATE: PA ZIP: 19132 BUSINESS PHONE: 2152299000 S-3/A 1 FORM S-3/A 1 AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 6, 1995 REGISTRATION NO. 33-59859 ============================================================================= SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ---------------- AMENDMENT NO. 1 TO 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 Underwriters) ---------------- 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. [ ] If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ] If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ] If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box. [ ] ---------------- 2 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 JUNE 6, 1995 (LOGO) PEP BOYS $100,000,000 The Pep Boys -- Manny, Moe & Jack % Notes Due 2005 Interest payable and Due , 2005 ---------------- The Notes will not be redeemable prior to maturity and will not be subject to any sinking fund. ---------------- THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. Underwriting Price to Discounts and Proceeds to Public (1) Commissions Company (1)(2) -------------- ----------------- --------------- Per Note .... % % % Total ....... $ $ $ (1) Plus accrued interest, if any, from , 1995. (2) Before deduction of estimated expenses of $225,000 payable by the Company. ---------------- The Notes are offered by the several Underwriters when, as and if issued by the Company, delivered to and accepted by the Underwriters and subject to their right to reject orders in whole or in part. It is expected that delivery of the Notes, in book-entry form, will be made through the facilities of The Depository Trust Company on or about , 1995. CS First Boston The date of this Prospectus is , 1995 4 IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE NOTES OFFERED HEREBY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. 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 28, 1995 and the Company's Quarterly Report on Form 10-Q for the quarter ended April 29, 1995, 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. Michael J. Holden, Senior Vice President -- Chief Financial Officer and Treasurer, The Pep Boys -- Manny, Moe & Jack, 3111 West Allegheny Avenue, Philadelphia, Pennsylvania 19132, telephone (215) 229-9000. 2 5 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 436 Pep Boys stores (as of April 29, 1995) located in 32 states, of which 300 stores are owned and 136 stores are leased. Pep Boys' operations are supplied by distribution facilities in five locations. The Company operates approximately 8,900,000 gross square feet of retail space for an average of approximately 20,500 gross square feet per store, including an aggregate of 4,187 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 12 service bays along with a product offering of approximately 25,000 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. In 1994, the Company introduced a supplemental store format under the name "Pep Boys -- PARTS USA" to operate 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. PARTS USA stores will generally be approximately 10,000 to 13,000 square feet and will stock approximately 22,000 SKUs. As compared to the Supercenters, these stores will 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. During fiscal years 1992, 1993 and 1994, Pep Boys added a net of 20, 29 and 49 stores, respectively, including the first PARTS USA store in fiscal 1994. In fiscal 1995, the Company plans to open approximately 50 new warehouse format Supercenters and 25 PARTS USA stores, and expects to close approximately four older stores. Included in the Company's expansion will be its initial entry into Puerto Rico -- its first units outside of the continental United States. In fiscal 1994, the Company's annual gross revenues increased by more than $165 million to $1.41 billion (a 13% increase) and earnings before the cumulative effect of a change in accounting principle increased by $14 million to $80.0 million (a 22% 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 25,000 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 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. 3 6 USE OF PROCEEDS The net proceeds from the sale of the Notes due 2005 (the "Notes") offered hereby will be used to repay portions of the Company's long-term variable-rate bank debt, bearing interest at rates which range from 6.22% to 6.38%, and for general corporate purposes. The long-term debt expected to be repaid was incurred within one year of the date hereof to finance a portion of the capital expenditures incurred in connection with the opening of new stores, to retire the 9.33% Notes of the Company and for working capital purposes. The long-term debt expected to be repaid matures in March 2000. 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 29, 1995, and as adjusted to give effect to the sale of the Notes offered hereby. See "Use of Proceeds."
Actual As Adjusted ---------- ------------- (amounts in thousands) Short-term debt ...................................................... $ -- $ -- Current maturities of long-term debt ................................. 114,311 114,311 Long-term debt less current maturities: .............................. Indebtedness to banks under revolving credit loan agreement ......... $150,000 $ 79,275 Other lines of credit with banks .................................... 28,400 -- Mortgage notes ...................................................... 2,554 2,554 8 7/8 % Notes ....................................................... 107,040 107,040 9.33% Notes(1) ...................................................... 16,072 16,072 6 5/8 % Notes ....................................................... 75,000 75,000 4% Convertible subordinated notes ................................... 86,250 86,250 Notes offered hereby ................................................ -- 100,000 --------- ---------- $465,316 $466,191 Less current maturities .......................................... 114,311 114,311 --------- ---------- Total long-term debt ............................................... $351,005 $351,880 --------- ---------- Stockholders' equity: ................................................ Common Stock, par value $1.00 per share: Authorized 500,000,000 shares; 61,559,559 shares issued and outstanding .................. 61,560 61,560 Paid-in capital ..................................................... 131,278 131,278 Retained earnings ................................................... 467,675 467,675 --------- ---------- 660,513 660,513 Less: ............................................................... Treasury Stock, 100,000 shares at cost ............................ 2,705 2,705 Shares held in benefits trust, 2,232,500 shares at cost ........... 60,269 60,269 --------- ---------- Total stockholders' equity ....................................... 597,539 597,539 --------- ---------- Total long-term debt and stockholders' equity ........................ $948,544 $949,419 ========= ==========
- ------ (1) On May 30, 1995, the Company retired the 9.33% Notes with borrowings under the revolving credit loan agreement. 4 7 SELECTED FINANCIAL DATA The selected financial data for the five years ended January 28, 1995 (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 28, 1995, which have been audited by Deloitte & Touche LLP, independent auditors, are incorporated by reference herein. The selected financial data for the 13-week periods ended April 29, 1995 and April 30, 1994, 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 results of operations in the 13-week period ended April 29, 1995 are not necessarily indicative of the operating results for the full year. 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 28, 1995, the Company's Quarterly Report on Form 10-Q for the quarter ended April 29, 1995 and "Management's Discussion and Analysis of Financial Condition and Results of Operations" appearing elsewhere in this Prospectus.
13 Weeks Ended -------------------------------- April 29, 1995 April 30, 1994 -------------- -------------- Earnings Statement Data Merchandise sales ........ $ 307,549 $ 290,826 Service revenue .......... 53,660 46,874 ---------- ----------- Total revenues ........... 361,209 337,700 Gross profit from merchandise sales ...... 90,288 82,603 Gross profit from service revenue ................ 10,099 7,924 ---------- ----------- Total gross profit ....... 100,387 90,527 Selling, general and administrative expenses 67,055 57,926 Operating profit ......... 33,332 32,601 Nonoperating income ...... 456 1,099 Interest expense ......... 7,965 5,720 Earnings before income taxes and change in accounting principle ... 25,823 27,980 Income taxes ............. 9,619 10,423 Earnings before change in accounting principle ... 16,204 17,557 Cumulative effect of change in accounting principle .............. -- (4,300) Net ernings.............. 16,204 13,257 Balance Sheet Data Working capital .......... $ 77,666 $ 77,468 Total assets ............. 1,330,465 1,155,615 Long-term debt ........... 351,005 272,956 Stockholders' equity ..... 597,539 532,744 Other Statistics Ratio of earnings to fixed charges(1) ............. 3.6x 4.7x Depreciation and amortization ........... $ 12,407 $ 10,542 Capital expenditures ..... $ 39,211 $ 30,032 Number of retail outlets . 436 387 Total square footage ..... 8,940,000 7,813,000
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Year Ended --------------------------------------------------------------------------------------- Jan. 28, 1995 Jan. 29, 1994 Jan. 30, 1993 Feb. 1, 1992 Feb. 2, 1991 --------------- --------------- --------------- ------------- ------------- (dollars in thousands) Earnings Statement Data Merchandise sales ..................... $ 1,211,536 $ 1,076,543 $ 1,008,191 $ 873,381 $ 774,502 Service revenue ....................... 195,449 164,590 147,403 128,127 110,172 ----------- ----------- ----------- ----------- ----------- Total revenues ........................ 1,406,985 1,241,133 1,155,594 1,001,508 884,674 Gross profit from merchandise sales .................... 364,378 307,861 272,412 240,199 217,052 Gross profit from service revenue .............................. 32,417 27,457 24,528 19,726 17,854 ----------- ----------- ----------- ----------- ----------- Total gross profit .................... 396,795 335,318 296,940 259,925 234,906 Selling, general and administrative expenses .............. 247,872 214,710 194,160 176,275 157,468 Operating profit ...................... 148,923 120,608 102,780 83,650 77,438 Nonoperating income ................... 3,490 3,601 3,015 1,933 1,601 Interest expense ...................... 25,931 19,701 20,180 25,071 20,262 Earnings before income taxes and change in accounting principle ................. 126,482 104,508 85,615 60,512 58,777 Income taxes .......................... 46,474 38,996 31,036 21,640 21,247 Earnings before change in accounting principle ................. 80,008 65,512 54,579 38,872 37,530 Cumulative effect of change in accounting principle ............................ (4,300) -- -- -- -- Net earnings .......................... 75,708 65,512 54,579 38,872 37,530 Balance Sheet Data Working capital ....................... $ 121,858 $ 92,518 $ 104,622 $ 81,935 $ 91,801 Total assets .......................... 1,291,019 1,078,518 967,813 856,925 819,421 Long-term debt ........................ 380,787 253,000 209,347 279,250 285,868 Stockholders' equity .................. 586,253 547,759 509,763 378,514 344,603 Other Statistics Ratio of earnings to fixed charges(1) ........................... 4.7x 4.9x 4.3x 3.1x 3.3x Depreciation and amortization ......................... $ 44,402 $ 39,125 $ 36,674 $ 33,439 $ 27,838 Capital expenditures .................. $ 185,072 $ 135,165 $ 78,025 $ 65,801 $ 105,826 Number of retail outlets .............. 435 386 357 337 313 Total square footage .................. 8,900,000 7,771,000 7,039,000 6,522,000 5,950,000
- ------ (1) Computed by dividing earnings by fixed charges. "Earnings" consist of earnings before income taxes and change in accounting principle plus fixed charges (exclusive of capitalized interest costs). "Fixed charges" consist of interest costs (including capitalized interest costs) plus one-third of rental expense (which amount is considered representative of the interest factor in rental expense). 5 9 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 29, 1995 April 30, 1994 Jan. 28, 1995 Jan. 29, 1994 Jan. 30, 1993 -------------- -------------- ------------- ------------- ------------- Merchandise sales .......... 85.1% 86.1% 86.1% 86.7% 87.2% Service revenue(1) ......... 14.9 13.9 13.9 13.3 12.8 ------- ------- ------- ------ ------ Total revenues ............. 100.0 100.0 100.0 100.0 100.0 Costs of merchandise sales(2) .................. 70.6(3) 71.6(3) 69.9(3) 71.4(3) 73.0(3) Costs of service revenue(2) 81.2(3) 83.1(3) 83.4(3) 83.3(3) 83.4(3) ------- ------- ------- ------ ------ Total costs of revenues .... 72.2 73.2 71.8 73.0 74.3 Gross profit from merchandise sales ......... 29.4(3) 28.4(3) 30.1(3) 28.6(3) 27.0(3) Gross profit from service revenue ................... 18.8(3) 16.9(3) 16.6(3) 16.7(3) 16.6(3) ------- ------- ------- ------ ------ Total gross profit ......... 27.8 26.8 28.2 27.0 25.7 Selling, general and administrative expenses ... 18.6 17.1 17.6 17.3 16.8 ------- ------- ------- ------ ------ Operating profit ........... 9.2 9.7 10.6 9.7 8.9 Nonoperating income ........ .1 .3 .2 .3 .3 Interest expense ........... 2.2 1.7 1.8 1.6 1.8 ------- ------- ------- ------ ------ Earnings before income taxes and cumulative effect of change in accounting principle ................. 7.1 8.3 9.0 8.4 7.4 Income taxes ............... 37.2(4) 37.3(4) 36.7(4) 37.3(4) 36.3(4) ------- ------- ------- ------ ------ Earnings before cumulative effect of change in accounting principle ...... 4.5 5.2 5.7 5.3 4.7 Cumulative effect of change in accounting principle ................. -- (1.3) (0.3) -- -- ------- ------- ------- ------ ------ Net earnings ............... 4.5 3.9 5.4 5.3 4.7 ======= ======= ======= ====== ======
10
Percentage Change ----------------------------------------------------------- 1st Quarter 1995 vs. Fiscal 1994 vs. Fiscal 1993 vs. 1st Quarter 1994 Fiscal 1993 Fiscal 1992 -------------------- --------------- --------------- Merchandise sales .......... 5.8% 12.5% 6.8% Service revenue(1) ......... 14.5 18.7 11.7 ------ ------ ------ Total revenues ............. 7.0 13.4 7.4 Costs of merchandise sales(2) .................. 4.3 10.2 4.5 Costs of service revenue(2) 11.8 18.9 11.6 ------ ------ ------ Total costs of revenues .... 5.5 11.5 5.5 Gross profit from merchandise sales ......... 9.3 18.4 13.0 Gross profit from service revenue ................... 27.4 18.1 11.9 ------ ------ ------ Total gross profit ......... 10.9 18.3 12.9 Selling, general and administrative expenses ... 15.8 15.4 10.6 ------ ------ ------ Operating profit ........... 2.2 23.5 17.3 Nonoperating income ........ (58.5) (3.1) 19.4 Interest expense ........... 39.2 31.6 (2.4) ------ ------ ------ Earnings before income taxes and cumulative effect of change in accounting principle ................. (7.7) 21.0 22.1 Income taxes ............... (7.7) 19.2 25.6 ------ ------ ------ Earnings before cumulative effect of change in accounting principle ...... (7.7) 22.1 20.0 Cumulative effect of change in accounting principle ................. -- -- -- ------ ------ ------ Net earnings ............... 22.2 15.6 20.0 ====== ====== ======
- ------ (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. THIRTEEN WEEKS ENDED APRIL 29, 1995 VS. THIRTEEN WEEKS ENDED APRIL 30, 1994 Total revenues for the first quarter increased 7% due to a higher store count (436 at April 29, 1995 compared with 387 at April 30, 1994) while comparable store revenues (revenues generated by stores in operation during the same months of each period) decreased 2%. Comparable store merchandise sales decreased 3% while comparable service revenue increased 3%. 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. 6 11 Gross profit from service revenue increased, as a percentage of service revenue, due primarily to a decrease in service employee benefits costs. Selling, general and administrative expenses increased, as a percentage of total revenues, due primarily to higher store expenses. The 39% increase in interest expense was due primarily to higher debt levels coupled with higher interest rates. The 8% decrease in earnings before the cumulative effect of a change in accounting principle in 1995 as compared with 1994, was due primarily to a decrease in comparable store sales coupled with increases, as a percentage of total revenues, in selling, general and administrative expenses and interest expense, offset, in part, by increases in gross profit from merchandise sales and gross profit from service revenue, as a percentage of related sales and 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 1994 VS. FISCAL 1993 Total revenues for fiscal 1994 increased 13% over fiscal 1993 due to a higher store count (435 at January 28, 1995 compared with 386 at January 29, 1994) coupled with a 5% 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 store service revenue increased 8% over fiscal 1993. The increase in gross profit from merchandise sales, as a percentage of merchandise sales, was due primarily to significantly higher merchandise margins and a slight decrease in store occupancy costs. The small decrease in gross profit from service revenue, as a percentage of service revenue, was due primarily to an increase in service payroll costs, offset, in part, by a decrease in service employee benefits costs. The increase in selling, general and administrative expenses, as a percentage of total revenues, was due primarily to an increase in store expenses, offset, in part, by a decrease in employee benefits costs. The 32% increase in interest expense was due to higher debt levels incurred to fund the Company's store expansion program coupled with higher interest rates. The 22% increase in earnings before cumulative effect of change in accounting principle in fiscal 1994, as compared with fiscal 1993, was due to increases in comparable store revenues and gross profit from merchandise sales, as a percentage of merchandise sales, offset, in part, by increases in selling, general and administrative expenses and interest expense, as a percentage of total revenues. FISCAL 1993 VS. FISCAL 1992 Total revenues for fiscal 1993 increased 7% over fiscal 1992 due to a 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 significantly higher merchandise margins, offset, in part, by increases in store occupancy costs and warehousing costs. The small increase in gross profit from service revenue, as a percentage of service revenue, was due primarily to a decrease in service employee benefits costs, offset, in part, by an increase in service payroll and occupancy costs. 7 12 The increase in selling, general and administrative expenses, as a percentage of total revenues, was due primarily to an increase in store expenses. The 2% 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, and cumulative effect of change in accounting principle 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. 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 51 stores in fiscal 1994, 37 stores in fiscal 1993 and 29 stores in fiscal 1992. In fiscal 1994, with increased levels of capital expenditures coupled with cash from operating activities and lines of credit utilized to purchase its stock for transfer to the benefits trust, the Company increased its debt by $182,859,000. In fiscal 1993, with increased levels of capital expenditures coupled with cash from operating activities and lines of credit utilized to purchase its stock for transfer to the benefits trust, 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. The following table indicates the Company's principal cash requirements for the past three years.
Fiscal 1994 Fiscal 1993 Fiscal 1992 Total ------------- ------------- ------------- ---------- (dollar amounts in thousands) Capital expenditures .............. $185,072 $135,165 $ 78,025 $398,262 Net inventory (1) ................. 87,248 26,487 24,001 137,736 ------------- ------------- ------------- ---------- Total cash requirements ........... $272,320 $161,652 $102,026 $535,998 ============= ============= ============= ========== Net cash provided by operating activities (excluding net inventory) ....................... $124,474 $111,595 $100,415 $336,484 ============= ============= ============= ==========
- ------ (1) Net inventory includes the increase in inventory less the net change in checks outstanding and accounts payable. Inventories have increased in the past three years as the Company added a net of 98 stores while stock-keeping units per store rose during the period from approximately 22,000 to approximately 25,000, many of which were higher cost hard parts. During the first quarter of 1995, the Company invested $39,211,000 in property and equipment while net inventory decreased by $29,921,000. The Company currently plans to open approximately 75 stores in fiscal 1995, four of which have been opened in the first quarter. Management estimates that the cost to open all 75 stores, coupled with capital expenditures relating to existing stores, warehouses and offices during fiscal 1995 will be approximately $200,000,000. 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 benefits trust, of which Common Stock having a value of 8 13 $60,269,000 had been purchased as of April 29, 1995. 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 $140,600,000 at April 29, 1995, or from accessing traditional lending sources which may include the public capital markets. During the thirteen weeks ended April 29, 1995, the Company amended and restated a revolving credit agreement it had with several major banks to increase the amount of borrowings provided from up to $100,000,000 to up to $200,000,000. The Company's working capital was $77,666,000 at April 29, 1995, $121,858,000 at January 28, 1995 and $92,518,000 at January 29, 1994. The Company's long-term debt, as a percentage of its total capitalization, was 37% at April 29, 1995, 39% at January 28, 1995 and 32% at January 29, 1994. 9 14 DESCRIPTION OF NOTES The Notes will be issued under an Indenture, dated as of June __, 1995 (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 entirety 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 obligations of the Company, will mature on ________ __, 2005 and will be limited to $100,000,000 aggregate principal amount and will rank on a parity with all other unsecured and unsubordinated indebtedness of the Company. The Notes are not redeemable prior to maturity by the Company and do not provide for any sinking fund. The Notes will bear interest at the rate per annum stated on the cover page of this Prospectus from the date of issuance, payable semi-annually on ________ ____ and ________ ____ of each year, commencing _____________ __, 1995, to the person in whose name such Note is registered at the close of business on the _____ __ or __________ __, respectively, prior to the payment date. Principal of and interest on the Notes will be payable, and the Notes will be exchangeable and transfers thereof will be registrable, at the corporate trust office of the Trustee in New York, New York, provided that, at the option of the Company, payment of any interest may be made by check mailed to the address of the person entitled thereto as it appears in the Note Register. Payment of any interest due on any Note will be made to the person in whose name such Note is registered at the close of business on the Regular Record Date for such interest. (Sections 301, 305, 307 and 1002) FORM OF NOTES The Notes will be represented by one or more global securities (collectively, a "Global Note") registered in the name of The Depository Trust Company (the "Depositary"). Except as set forth below, a Global Note may be transferred in whole and not in part, only to the Depositary or another nominee of the Depositary or to a successor of the Depositary or its nominee. Upon the issuance of a Global Note, the Depositary will credit, on its book-entry registration and transfer system, the respective principal amounts of the Notes represented by such Global Note to the accounts of institutions that have accounts with the Depositary or its nominee ("Participants"). The accounts to be credited will be designated by the Underwriters, dealers or agents. Ownership of beneficial interests in a Global Note will be limited to Participants or persons that may hold interests through Participants. Ownership of interests in such Global Note will be shown on, and the transfer of those ownership interests will be effected only through, records maintained by the Depositary (with respect to Participants' interests) and such Participants (with respect to the owners of beneficial interests in such Global Note). The laws of some jurisdictions may require that certain purchasers of securities take physical delivery of such securities in definitive form. Such limits and laws may impair the ability to transfer or pledge beneficial interests in a Global Note. So long as the Depositary, or its nominee, is the registered holder and owner of such Global Note, the Depositary or such nominee, as the case may be, will be considered the sole owner and holder of the related Notes for all purposes of such Notes and for all purposes under the Indenture. Except as set forth below, owners of beneficial interests in a Global Note will not be entitled to have the Notes represented by such Global Note registered in their names, will not receive or be entitled to receive physical delivery of Notes in definitive form and will not be considered to be the owners or holders of any Notes under the Indenture or such Global Note. 10 15 Accordingly, each person owning a beneficial interest in a Global Note must rely on the procedures of the Depositary and, if such person is not a Participant, on the procedures of the Participant through which such person owns its interest, to exercise all rights of a holder of Notes under the Indenture or such Global Note. The Company understands that under existing industry practice, in the event the Company requests any action of holders of Notes or an owner of a beneficial interest in a Global Note desires to take any action that the Depositary, as the holder of such Global Note, is entitled to take, the Depositary would authorize the Participants to take such action, and that the Participants would authorize beneficial owners owning through such Participants to take such action or would otherwise act upon the instructions of beneficial owners owning through them. Payment of principal and interest on Notes represented by a Global Note will be made to the Depositary or its nominee, as the case may be, as the registered owner and holder of such Global Note. The Company expects that the Depositary, upon receipt of any payment of principal or interest, will immediately credit the accounts of the Participants with such payment in amounts proportionate to their respective holdings in principal amount of beneficial interest in the Global Note as shown in the records of the Depositary. Payments by Participants to owners of beneficial interests in a Global Note held through such Participants will be governed by standing instructions and customary practices, as is now the case with securities held for the accounts of customers registered in "street name", and will be the responsibility of such Participants. The Company and the Trustee will not have any responsibility or liability for any aspect of the records relating to, or payments made on account of, beneficial ownership interests in a Global Note for any Notes or for maintaining, supervising or reviewing any records relating to such beneficial ownership interests or for any other aspect of the relationship between the Depositary and its Participants or the relationship between such Participants and the owners of beneficial interests in such Global Note owned through such Participants. Unless and until it is exchanged in whole or in part for Notes in definitive form, a Global Note may not be transferred except as a whole by the Depositary to a nominee of such Depositary, by a nominee of such Depositary to such Depositary or another nominee of such Depositary, or to a successor of the Depositary or in its nominee. Notes represented by a Global Note will be exchangeable for Notes in definitive form of like tenor as such Global Note in denominations of $1,000 and in any greater amount that is an integral multiple thereof if (i) the Depositary notifies the Company that it is unwilling or unable to continue as Depositary for such Global Note or if at any time the Depositary ceases to be qualified to act as Depositary under applicable law and the Company does not appoint a successor depositary within 90 days or (ii) the Company in its discretion at any time determines not to have such Notes represented by a Global Note and notifies the Trustee thereof. Any Global Note that is exchangeable pursuant to the preceding sentence is exchangeable for Notes issuable in authorized denominations and registered in such names as the Depositary shall direct and an owner of a beneficial interest in a Global Note will be entitled to physical delivery of such Notes in definitive form. Subject to the foregoing, a Global Note is not exchangeable except for a Global Note or Global Notes of the same aggregate denominations to be registered in the name of the Depositary or its nominee. The Depositary has advised the Company and the Underwriters as follows: The Depositary is a limited-purpose trust company organized under the New York Banking Law, a "banking organization" within the meaning of the New York Banking Law, a member of the Federal Reserve System, a "clearing corporation" within the meaning of the New York Uniform Commercial Code and a "clearing agency" registered pursuant to the provisions of Section 17A of the Exchange Act. The Depositary was created to hold securities of Participants and to facilitate the clearance and settlement of securities transactions among the Participants in deposited securities through electronic book-entry changes in accounts of the Participants, thereby eliminating the need for physical movement of securities and certificates. Participants include securities brokers and dealers (including the Underwriters), banks, trust companies, clearing corporations and certain other organizations, some of which (and/or their representatives) own the Depositary. Access to the Depositary's book-entry system is also available to others such as banks, brokers, dealers and trust companies that clear through or maintain a custodial relationship with a Participant, either directly or indirectly ("indirect participants"). Persons who are not Participants may beneficially own securities held by the Depositary only through Participants or indirect Participants. The rules applicable to the Depositary and the Participants are on file with the Commission. The Depositary currently accepts only notes denominated and payable in U.S. dollars. 11 16 CERTAIN COVENANTS OF THE COMPANY RESTRICTIONS ON LIENS The Company will not, and will not permit any Restricted Subsidiary to, issue, assume or guarantee any Indebtedness secured by any mortgage, security interest, pledge, lien or other encumbrance upon, or any interest or title of any lessor, lender or other secured party to, or under any Capital Lease with respect to, any Operating Property or Operating Asset of the Company or any Restricted Subsidiary, whether such assets are now owned or hereafter acquired (herein referred to as a "Mortgage" or "Mortgages"), without in any such case effectively providing that the Notes (together with, if the Company shall so determine, any other Indebtedness ranking equally with the Notes) shall be secured equally and ratably with such Indebtedness, except that the foregoing restrictions shall not apply to: (a) Mortgages incurred or created in the ordinary course of business not arising in connection with Indebtedness that do not in the aggregate materially impair the use or value of the properties or assets of the Company and its Restricted Subsidiaries taken as a whole, (b) Mortgages existing as of the date of the Indenture, (c) Mortgages (other than Capital Leases) to secure the payment of all or any part of the purchase price or construction costs in respect of property or properties acquired by the Company or a Restricted Subsidiary after the date of the Indenture securing Indebtedness incurred prior to, at the time of, or within 360 days after, the acquisition of any such property or the completion of any such construction and which secures Indebtedness not in excess of the amount expended in the acquisition and improvements thereof, (d) Mortgages upon any property or assets owned by any Restricted Subsidiary when it becomes a Restricted Subsidiary, (e) Mortgages upon any property or assets of any corporation existing at the time such corporation is merged into or consolidated with the Company or any Restricted Subsidiary, or at the time of a sale, lease or other disposition of the properties of an entity as an entirety or substantially as an entirety to the Company or any Restricted Subsidiary, (f) Mortgages upon any property when the property is acquired by the Company or a Restricted Subsidiary, (g) Mortgages to secure the payment of all or any part of the cost of improvements to any property owned by the Company or a Restricted Subsidiary, (h) the extension, renewal or replacement of any Mortgage permitted by subparagraph (b), (c), (d), (e), (f) or (g) above, but only if the principal amount of Indebtedness secured by the Mortgage immediately prior thereto is not increased and the Mortgage is not extended to other property, (i) Mortgages for certain taxes or other governmental charges, (j) Mortgages arising out of any final judgment for the payment of money aggregating not in excess of $10,000,000, (k) Mortgages arising out of any legal proceeding or final judgment which is being contested in good faith, provided enforcement of any such lien has been stayed, (l) easements or similar encumbrances, the existence of which do not materially impair the use of the property subject thereto and (m) Mortgages securing Indebtedness of a Restricted Subsidiary to the Company or to another Restricted Subsidiary. (Section 1007(a) Notwithstanding the foregoing, the Company or any Restricted Subsidiary may create or assume Mortgages in addition to those permitted above, and renew, extend or replace such Mortgages provided that at the time of such creation, assumption, renewal, extension or replacement, and after giving effect thereto, Exempted Debt does not exceed 15% of Consolidated Net Tangible Assets. (Section 1007(b) RESTRICTIONS ON SALE AND LEASEBACK TRANSACTIONS The Company will not, nor will it permit any Restricted Subsidiary to, enter into any arrangement with any person providing for the leasing by the Company or any Restricted Subsidiary of any Operating Property or Operating Asset, whether now owned or hereafter acquired, which has been or is to be sold or transferred by the Company or such Restricted Subsidiary to such persons with the intention of taking back a lease on such property (a "Sale and Leaseback Transaction") unless (a) such transaction involves a lease or right to possession or use for a temporary period not to exceed three years following such sale, by the end of which it is intended that the use of such property by the lessee will be discontinued, (b) the Company or a Restricted Subsidiary would, on the effective date of such transaction, be entitled to issue, assume or guarantee indebtedness secured by a Mortgage on such property at least equal in an amount to the Attributable Debt in respect thereof, without equally and ratably securing the Notes as set forth in the Indenture, or (c) if the proceeds of such sale (i) are equal to or greater than the fair market value of such property and (ii) are applied within 360 days after the receipt of the proceeds of sale or transfer to either the purchase or acquisition of fixed assets or equipment used in the operation of the business or the construction of improvements on real property or to the repayment of Senior Funded Debt of the Company or any Restricted Subsidiary. The preceding restriction shall not apply to any Sale and Leaseback Transaction 12 17 between the Company and a Restricted Subsidiary or between Restricted Subsidiaries. (Section 1008(a) The Company or any Restricted Subsidiary may enter into Sale and Leaseback Transactions in addition to those permitted above, and without any obligation to retire any Senior Funded Debt of the Company or a Restricted Subsidiary, provided that, at the time of entering into such Sale and Leaseback Transactions, and after giving effect thereto, Exempted Debt does not exceed 15% of Consolidated Net Tangible Assets. (Section 1008(b)) CERTAIN DEFINITIONS Set forth below are certain significant terms which are defined in Section 101 of the Indenture: "Attributable Debt" in respect of a Sale and Leaseback Transaction means, at the time of determination, the present value (discounted at the actual rate of interest of such transaction) of the obligation of the lessee for net rental payments during the remaining term of the lease included in such Sale and Leaseback Transaction (including any period for which such lease has been extended or may, at the option of the lessor, be extended). "Capital Lease" means any lease of property which, in accordance with generally accepted accounting principles, should be capitalized on the lessee's balance sheet or for which the amount of the asset and liability thereunder as if so capitalized should be disclosed in a note to such balance sheet. "Consolidated" when used with respect to any of the terms defined in the Indenture, refers to such terms as reflected in a consolidation of the accounts of the Company and its Restricted Subsidiaries in accordance with generally accepted accounting principles. "Exempted Debt" means the sum of the following items outstanding as of the date Exempted Debt is being determined: (i) Indebtedness for money borrowed of the Company and its Restricted Subsidiaries incurred after the date of the Indenture and secured by liens created or assumed or permitted to exist pursuant to Section 1007(b) (excluding Indebtedness incurred in connection with pollution control financings and industrial revenue bond financings) and (ii) Attributable Debt of the Company and its Restricted Subsidiaries in respect of all Sale and Leaseback Transactions entered into pursuant to Section 1008(b). "Funded Debt" means Indebtedness, whether incurred, assumed or guaranteed, which matures more than one year from the date of creation thereof, or which is extendable or renewable at the sole option of the obligor so that it may become payable more than one year from such date. "Indebtedness" of any person means, without duplication, indebtedness for borrowed money and all indebtedness under purchase money mortgages or other purchase money liens or conditional sales or similar title retention agreements, in each case where such indebtedness has been created, incurred, assumed or guaranteed by such person or where such person is otherwise liable therefor, and indebtedness for borrowed money secured by any mortgage, pledge or other lien or encumbrance upon property owned by such person even though such person has not assumed or become liable for the payment of such indebtedness. "Investment" means and includes any investment in stock, evidences of indebtedness, loans or advances, however made or acquired, but shall not include accounts receivable of the Company or of any Restricted Subsidiary arising from transactions in the ordinary course of business, or any evidences of indebtedness, loans or advances made in connection with the sale to any Restricted Subsidiary of accounts receivable of the Company or any Restricted Subsidiary arising from transactions in the ordinary course of business of the Company or any Restricted Subsidiary. "Net Tangible Assets" means the total amounts of assets (less depreciation and valuation reserves and other reserves and items deductible from gross book value of specific asset accounts under generally accepted accounting principles) which under generally accepted accounting principles would be included on a balance sheet after deducting therefrom (a) all liability items except Funded Debt, Capitalized Lease Obligations, stockholders' equity and reserves for deferred income taxes and (b) all goodwill, trade names, trademarks, patents, unamortized debt discount and expense and other like intangibles, which in each such case would be so included on such balance sheet. 13 18 "Operating Assets" means all merchandise inventories, furniture, fixtures and equipment (including all transportation and warehousing equipment but excluding office equipment and data processing equipment) owned or leased pursuant to Capital Leases by the Company or a Restricted Subsidiary. "Operating Property" means all real property and improvements thereon owned or leased pursuant to Capital Leases by the Company or a Restricted Subsidiary and constituting, without limitation, any store, warehouse, service center or distribution center wherever located, provided that such term shall not include any store, warehouse, service center or distribution center which the Company's Board of Directors declares by resolution not to be of material importance to the business of the Company and its Restricted Subsidiaries. "Restricted Subsidiaries" means all Subsidiaries other than Non-Restricted Subsidiaries. "Non-Restricted Subsidiaries" means (a) any Subsidiary so designated by the Board of Directors of the Company in accordance with the Indenture and (b) any other Subsidiary of which the majority of the voting stock is owned directly or indirectly by one or more Non-Restricted Subsidiaries. The Indenture provides that, subject to certain restrictions, the Company's Board of Directors may change the designations of Restricted Subsidiaries and Non-Restricted Subsidiaries. (Section 1009) Initially the Company will have no Non-Restricted Subsidiaries. "Senior Funded Debt" means all Funded Debt, except Funded Debt the payment of which is subordinated to the payment of the Notes. "Subsidiary" means any corporation of which at least a majority of the outstanding stock having voting power under ordinary circumstances for the election of directors of said corporation is at the time owned by the Company, or by the Company and one or more Subsidiaries, or by any one or more Subsidiaries. MERGER, CONSOLIDATION AND DISPOSITION OF ASSETS The Company will not consolidate with or merge into any other corporation or convey, transfer or lease its properties and assets substantially as an entirety to any person, and the Company will not permit any person to consolidate with or merge into the Company or convey, transfer or lease its assets and properties substantially as an entirety to the Company, unless (a) the successor shall be a corporation organized under the laws of the United States or a jurisdiction thereof, and such successor shall expressly assume the Company's obligations under the Indenture and the Notes, (b) immediately after giving effect to such transaction, no Event of Default under the Indenture or event which, after notice or lapse of time or both, would become an Event of Default thereunder would exist and be continuing, (c) if, as a result of such transaction, properties or assets of the Company would become subject to a Mortgage not permitted by the Indenture, the successor shall cause the Notes to be secured equally and ratably with (or prior to) all indebtedness secured by such Mortgage and (d) the Company has delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that such transaction complies with the Indenture. Upon compliance with these provisions by a successor corporation, the Company will be relieved (except in the case of a lease) of its obligations under the Indenture and the Notes. (Sections 801 and 802) The Indenture would not necessarily afford holders of the Notes protection in the event of a highly leveraged transaction involving the Company, such as a leveraged buyout. MODIFICATION OF THE INDENTURE; WAIVERS The Indenture provides that the Company and the Trustee, with the consent of not less than a majority in principal amount of the Notes at the time outstanding, may execute supplemental indentures adding any provisions to, or changing or eliminating any of the provisions of, the Indenture or modifying the rights of the holders of the Notes at the time outstanding, except that no such supplemental indenture may, without the consent of the holders of all the Notes at the time outstanding, (a) change the stated maturity date of the principal of, or any installment of principal of or any interest on, any Note or reduce the principal amount thereof or the rate of interest thereon, or change the place of payment or the currency in which payment is to be made, or impair the right to institute suit for the enforcement of any such payment on or after the due date thereof, (b) reduce the percentage of outstanding Notes, the consent of the holders of which is required for any supplemental indenture, (c) reduce the percentage of outstanding Notes required to waive certain provisions of the Indenture or (d) modify certain provisions of the Indenture. (Section 902) 14 19 The Holders of a majority in principal amount of the Notes at the time outstanding may on behalf of the holders of all Notes waive compliance by the Company with certain restrictive provisions of the Indenture. (Section 1011) The holders of a majority in principal amount of the Notes at the time outstanding may on behalf of the Holders of all Notes waive any past default under the Indenture except a default not heretofore cured in the payment of the principal of or any interest on any Note or in respect of a provision under which the Indenture cannot be modified or amended without the consent of the holder of each outstanding Note. (Section 513) EVENTS OF DEFAULT, WAIVER, AND NOTICE "Event of Default" is defined in the Indenture with respect to the Notes as being (a) default for 30 days in the payment of any interest installment any Notes, (b) default in the payment when due of principal of any Note, (c) default for 60 days, after notice to the Company by the Trustee or to the Company and the Trustee by the holders of not less than 25% in principal amount of the Notes at that time outstanding, in the performance, or breach, of any covenant or warranty of the Indenture (other than covenants and warranties specifically dealt with elsewhere), (d) default in respect to certain indebtedness in excess of $10,000,000 for money borrowed by the Company, which indebtedness shall have been accelerated for 30 days after notice specified in the next preceding clause and (e) certain events of bankruptcy, insolvency and reorganization. (Section 501) If an Event of Default with respect to the Notes at that time outstanding shall occur and be continuing, either the Trustee or the holders of not less than 25% in principal amount of the outstanding Notes may, by notice in writing to the Company (and to the Trustee if given by holders), declare the principal amount of all Notes to be due and payable. (Section 502) In certain cases, the holders of a majority in principal amount of the outstanding Notes may, on behalf of the holders of all the Notes, rescind and annul such acceleration or waive any past default or Event of Default, except a default not theretofore cured in payment of the principal of or interest on any of the Notes or a default relating to a covenant or provision of the Indenture which could not be modified or amended without the consent of all holders of Notes. (Sections 502 and 513) See "-- Modification of the Indenture; Waivers." The Indenture provides that the Trustee shall, within 90 days after the occurrence of a default with respect to the Notes, give to the holders of the Notes notice of such default known to it, unless such default shall have been cured or waived; but the Trustee shall be protected in withholding such notice if in good faith it determines that the withholding of such notice is in the interest of such holders, except in the case of a default in the payment of the principal ofor interest on any of the Notes and except that in the case of a default in respect of certain covenants and warranties, no such notice shall be given until at least 60 days after the occurrence of such default. (Section 602) The Indenture contains a provision entitling the Trustee, subject to the duty of the Trustee during a default to act with the required standard of care, to be indemnified by holders of the Notes before proceeding to exercise any right or power under the Indenture at the request of such holders. (Sections 601 and 603) The Indenture provides that the holders of a majority in principal amount of the outstanding Notes may direct the time, method and place of conducting proceedings for remedies available to the Trustee or of exercising any trust or power conferred on the Trustee with respect to the Notes. (Section 512) No holder of any Notes will have any right to institute any proceeding with respect to the Indenture or for any remedy thereunder, unless (a) such holder shall have previously given to the Trustee written notice of a continuing Event of Default with respect to the Notes, (b) the holders of at least 25% in aggregate principal amount of the outstanding Notes shall have made written request to the Trustee to institute proceedings as Trustee, (c) such holder or holders shall have offered to the Trustee reasonable indemnity, (d) the Trustee shall have failed to institute such proceeding within 60 days thereafter and (e) the Trustee shall not have received from the holders of a majority in aggregate principal amount of the outstanding Notes a direction inconsistent with such request. (Section 507) However, the holder of any Notes will have an absolute right to receive payment of the principal of and any interest on such Notes on or after the due dates expressed in such Notes and to institute suit for the enforcement of any such payment. (Section 508) The Company will be required to file with the Trustee annually, within 120 days of the end of each fiscal year of the Company, a certificate as to the compliance with all conditions and covenants of the Indenture. (Section 704) 15 20 DISCHARGE AND DEFEASANCE OF NOTES OR CERTAIN COVENANTS DEFEASANCE AND DISCHARGE The Indenture provides that the Company, at its option, (a) will be discharged from any and all obligations with respect to the Notes (except for certain obligations which include registering the transfer or exchange of the Notes, replacing stolen, lost or mutilated Notes, maintaining paying agencies and holding monies for payment in trust), or (b) need not comply with certain restrictive covenants of the Indenture, upon the deposit with the Trustee (and in the case of a discharge, 91 days after such deposit), in trust, cash in U.S. dollars or U.S. Government Obligations, or a combination thereof, which through the payment of interest thereon and principal thereof in accordance with their terms will provide money in an amount sufficient to pay each installment of principal of and any interest on the Notes on the dates such payments are due in accordance with the terms of the Indenture. To exercise any such option, the Company is required to meet certain conditions, including delivery to the Trustee of an Opinion of Counsel to the effect that the deposit and related defeasance and discharge would not cause the holders of the Notes to recognize income, gain or loss for Federal income tax purposes which, in the case of a discharge pursuant to clause (a), must refer to and be based upon a ruling or administrative pronouncement of the Internal Revenue Service. (Sections 403 and 1010) DEFEASANCE AND EVENTS OF DEFAULT In the event the Company exercises its option to omit compliance with certain covenants of the Indenture and the Notes are declared due and payable because of the occurrence of any Event of Default, the amount of money and U.S. Government Obligations on deposit with the Trustee should be sufficient to pay amounts due on the Notes at the time of their Stated Maturity but may not be sufficient to pay amounts due on the Notes at the time of the acceleration resulting from such Event of Default. However, the Company shall remain liable for such payments. CONCERNING THE TRUSTEE The Trustee acts as trustee under the indenture in connection with the Company's 4% Convertible Subordinated Notes due 1999. In the ordinary course of business, the Company maintains deposits with the Trustee and the Trustee has also from time to time provided other banking services to the Company. UNDERWRITING Under the terms and subject to the conditions contained in an Underwriting Agreement dated June , 1995 (the "Underwriting Agreement"), the Underwriters named below (the "Underwriters"), for whom CS First Boston Corporation is acting as representative (the "Representative"), have severally but not jointly agreed to purchase from the Company the following respective principal amounts of the Notes: Principal Underwriter Amount ----------- -------------- CS First Boston Corporation $ -------------- Total ................ $100,000,000 ============== The Underwriting Agreement provides that the obligations of the Underwriters are subject to certain conditions precedent and that the Underwriters will be obligated to purchase all of the Notes being offered hereby if any are purchased. The Underwriting Agreement provides that, in the event of a default by an Underwriter, in certain circumstances the purchase commitments of non-defaulting Underwriters may be increased or the Underwriting Agreement may be terminated. The Company has been advised by the Representative that the Underwriters propose to offer the Notes to the public initially at the public offering price set forth on the cover page of this Prospectus and, through the Representative, 16 21 to certain dealers at such price less a concession of % of the principal amount per Note and the Underwriters and such dealers may allow a discount of % of such principal amount per Note on sales to certain other dealers. After the initial public offering, the public offering price and concession and discount to dealers may be changed by the Representative. The Notes are a new issue of securities with no established trading market. The Representative has advised the Company that it intends to act as a market maker for the Notes. However, the Representative is not obligated to do so and may discontinue any market making at any time without notice. No assurance can be given as to the liquidity of the trading market for the Notes. The Company has agreed to indemnify the Underwriters against certain liabilities, including civil liabilities under the Securities Act, and under certain circumstances, to contribute to payments which the Underwriters may be required to make in respect thereof. CS First Boston Corporation 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." 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 17 22 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 Underwriters 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 28, 1995 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. 18 23 - ----------------------------------------------------------------------------- No dealer, salesperson or other person has been authorized to give any information or to make any 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 the Company or any Underwriter. This Prospectus does not constitute an offer to sell or a solicitation of an offer to buy any of the securities offered hereby in any jurisdiction to any person to whom it is unlawful to make such offer in such jurisdiction. 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. ------ TABLE OF CONTENTS Page -------- Available Information ..................... 2 Incorporation of Certain Documents by Reference ................................ 2 The Company ............................... 3 Use of Proceeds ........................... 4 Capitalization ............................ 4 Selected Financial Data ................... 5 Management's Discussion and Analysis of Financial Condition and Results of Operations ............................... 6 Description of Notes ...................... 10 Underwriting .............................. 16 Notice to Canadian Residents .............. 17 Legal Matters ............................. 18 Experts ................................... 18 - ----------------------------------------------------------------------------- 24 - ---------------------------------------------------------------------------- LOGO PEP BOYS $100,000,000 % Notes Due 2005 PROSPECTUS LOGO CS FIRST BOSTON ---------------------------------------------------------------------------- 25 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 ......................... $ 34,483 NASD Fee ..................................... 10,500 Printing and Engraving Expenses .............. 15,000 Legal Fees and Expenses ...................... 80,000 Accounting Fees and Expenses ................. 10,000 Blue Sky Fees and Expenses ................... 10,000 Trustee Fees ................................. 8,500 Rating Agency Fees ........................... 50,000 Miscellaneous Expenses ....................... 6,517 -------- Total ................................... $225,000 ======== 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 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. II-1 26 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. 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 Underwriters agree to indemnify the Company, its directors, certain officers and controlling persons against certain liabilities, including liabilities under the Securities Act. II-2 27 ITEM 16. EXHIBITS.
EXHIBIT NUMBER DESCRIPTION ----------- ---------------------- 1 Form of Underwriting Agreement 4 Form of Indenture between the Company and First Fidelity Bank, National Association, as Trustee, including form of Note 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 28, 1995) *12.2 Calculation of Ratio of Earnings to Fixed Charges for the 13 weeks ended April 29, 1995 23.1 Consent of Willkie Farr & Gallagher (included as part of Exhibit 5) 23.2 Consent of Deloitte & Touche LLP *24 Power of Attorney 25 Form T-1, Statement of Eligibility under the Trust Indenture Act of 1939 of the Trustee
- ------ *Previously filed. 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 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-3 28 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 amendment to its Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Philadelphia, Commonwealth of Pennsylvania, on June 5, 1995. THE PEP BOYS - MANNY, MOE & JACK By: /s/ MITCHELL G. LEIBOVITZ ------------------------------ Mitchell G. Leibovitz Chairman of the Board, President and Chief Executive Officer 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, President and June 5, 1995 ---------------------------- Chief Executive Officer and Director Mitchell G. Leibovitz (Principal Executive Officer) /s/ MICHAEL J. HOLDEN Senior Vice President and Chief Financial June 5, 1995 ---------------------------- Officer (Principal Financial and Michael J. Holden Accounting Officer) * Director June 5, 1995 ---------------------------- Lennox K. Black * Director June 5, 1995 ---------------------------- Pemberton Hutchinson Director ---------------------------- Bernard J. Korman Director ---------------------------- J. Richard Leaman, Jr. * Director June 5, 1995 ---------------------------- Malcolmn D. Pryor * Director June 5, 1995 ---------------------------- Lester Rosenfeld * Director June 5, 1995 ---------------------------- Benjamin Strauss * Director June 5, 1995 ---------------------------- Myles H. Tanenbaum * Director June 5, 1995 ---------------------------- David V. Wachs *By: /s/ MICHAEL J. HOLDEN -------------------------- Michael J. Holden Attorney-in-Fact
II-4 29 EXHIBIT INDEX
Exhibit Number Description ----------- -------------- 1 Form of Underwriting Agreement 4 Form of Indenture between the Company and First Fidelity Bank, National Association, as Trustee, including form of Note 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 28, 1995) *12.2 Calculation of Ratio of Earnings to Fixed Charges for the 13 weeks ended April 29, 1995 23.1 Consent of Willkie Farr & Gallagher (included as part of Exhibit 5) 23.2 Consent of Deloitte & Touche LLP *24 Power of Attorney 25 Form T-1, Statement of Eligibility under the Trust Indenture Act of 1939 of the Trustee
- ------ *Previously filed. EX-1 2 UNDERWRITING AGREEMENT 30 Draft of June 6, 1995 $100,000,000 THE PEP BOYS -- MANNY, MOE & JACK _____% Notes Due 2005 UNDERWRITING AGREEMENT ---------------------- June , 1995 CS FIRST BOSTON CORPORATION, As Representative of the Several Underwriters, Park Avenue Plaza New York, NY 10055 Ladies and Gentlemen: 1. Introductory. The Pep Boys -- Manny, Moe & Jack, a Pennsylvania corporation (the "Company"), proposes to issue and sell $100,000,000 principal amount of its _____% Notes Due 2005 (the "Securities") to be issued under an indenture, dated as of June __, 1995 ("Indenture"), between the Company and First Fidelity Bank, National Association, as Trustee. The Company hereby agrees with the several Underwriters named in Schedule A hereto ("Underwriters") as follows: 2. Representations and Warranties of the Company. (a) The Company represents and warrants to, and agrees with, the several Underwriters 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 CS First Boston Corporation ("CS First Boston") 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) filed prior to the execution and delivery of this Agreement, was declared effective by the Commission or (B) if the Company has advised CS First Boston 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, 31 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 Closing Date (as hereinafter defined), 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 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 any Underwriter through CS First Boston specifically for use therein, it being understood and agreed that the only such information is that described as such in Section 2(b). (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 2 32 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. (v) Each "Significant Subsidiary" (as such term is defined in Rule 405 of the Act, except that for purposes of this Agreement, each reference in such Rule 405 definition to "10 percent" shall be replaced with "5 percent") is listed on Schedule B hereto. Each Significant 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 Significant 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) 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. (viii) 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. (ix) The Indenture has been duly authorized by the Company, will be substantially in the form heretofore delivered to CS First Boston 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 3 33 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 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 in all material respects to the description thereof contained in the Prospectus. (x) 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 in all material respects to the description thereof contained in the Prospectus. (xi) 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. (xii) 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. (xiii) (A) Neither the Company nor any of its Significant 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 4 34 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, 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. (xiv) 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. (xv) The Company and its Significant Subsidiaries have good and marketable title to all properties (real and personal) owned by the Company and its Significant 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 Significant 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 Significant Subsidiaries; neither the Company nor any of its Significant 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 Significant 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. (xvi) The Company and its Significant 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. (xvii) 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 5 35 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 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. (xviii) 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. (xix) 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. (xx) 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 6 36 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. (xxi) 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 or, to the Company's knowledge, any Underwriter in connection with the Securities to be sold by the Company, other than the compensation due and payable to the Underwriters as described in the Prospectus. (xxii) 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. (xxiii) 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. (xxiv) 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. (xxv) 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. 7 37 (xxvi) 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. (b) The Company hereby acknowledges and agrees with the Underwriters that, for all purposes of this Agreement and the transactions herein contemplated, the only information furnished to the Company by any Underwriter through CS First Boston 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 third and fourth paragraphs 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 Underwriters, and the Underwriters agree, severally and not jointly, to purchase from the Company, at a purchase price of _____% of the principal amount thereof plus accrued interest, if any, from __________ __, 1995 to the Closing Date, the respective principal amounts of Securities set forth opposite the names of the Underwriters in Schedule A hereto. The Company will deliver against payment of the purchase price the Securities in the form of one or more permanent global Securities in definitive form (the "Global Securities") deposited with the Trustee as custodian for The Depository Trust Company ("DTC") and registered in the name of Cede & Co., as nominee for DTC. Interests in any permanent Global Securities will be held only in book-entry form through DTC, except in the limited circumstances described in the Prospectus. Payment for the Securities shall be made by the Underwriters by certified or official bank check or checks 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 _____________, 1995 , or at such other time not later than seven full business days thereafter as CS First Boston Corporation ("CS First Boston") and the Company determine, such time being herein referred to as the "Closing Date", against delivery to the Trustee as custodian for DTC of the Global Securities representing all of the Securities. The Global Securities will be made available for checking 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. 4. Offering by Underwriters. It is understood that the several Underwriters propose 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 several Underwriters 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 CS First Boston, 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 CS First Boston promptly of any such filing pursuant to Rule 424(b). 8 38 (b) The Company will advise CS First Boston 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 CS First Boston's prior consent, which consent shall not be unreasonably withheld; and the Company will also advise CS First Boston 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 Underwriters 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 will promptly notify CS First Boston of such event and will promptly 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 CS First Boston's consent to, nor the Underwriters' 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. (e) The Company will furnish to CS First Boston 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 CS First Boston reasonably requests. (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 CS First Boston designates 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 CS First Boston, as soon as practicable after the end of each 9 39 fiscal year, a copy of its annual report to stockholders for such year; and the Company will furnish to CS First Boston (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 CS First Boston may reasonably request. The Company agrees with the Underwriters that the Company will pay all expenses incident to the performance of its obligations under this Agreement, and will reimburse the Underwriters for any expenses (including reasonable fees and disbursements of counsel) incurred by them in connection with the qualification of the Securities for sale under the laws of such jurisdictions as CS First Boston designates and the printing of memoranda relating thereto, for the filing fee of and the related reasonable fees and expenses of counsel for the Underwriters 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 Underwriters. The obligations of the several Underwriters to purchase and pay for the Securities on the 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) CS First Boston 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 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 as to 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 10 40 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 as to 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 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 Underwriters; 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 11 41 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 CS First Boston. 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 the 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 CS First Boston, 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 a majority in interest of the Underwriters including CS First Boston, 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 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 a majority in interest of the Underwriters including CS First Boston, 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) CS First Boston shall have received an opinion, dated the Closing Date, of Willkie Farr & Gallagher, counsel for the Company, to the effect that: (i) Each of the Company and its Significant Subsidiaries has been duly incorporated and is a validly existing corporation in good standing under the laws of the jurisdiction of its incorporation, 12 42 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 Significant 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 Significant 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) This Agreement has been duly authorized, executed and delivered by the Company. (iv) 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, 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, and are 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 in all material respects to the descriptions thereof contained in the Prospectus. (v) 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 13 43 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. (vi) 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. (vii) Neither the Company nor any of its Significant 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 Significant Subsidiary or, to 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 Significant Subsidiaries is a party or to which any of the properties or assets of the Company or any such Significant Subsidiary is subject. (viii) 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. (ix) To the knowledge of such counsel after reasonable inquiry, there are no contracts, agreements or understandings between the 14 44 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. (x) 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. (xi) 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. (xii) The Registration Statement and the Prospectus, and each amendment or supplement thereto, as of their respective effective or issue dates and as of the 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. Such counsel shall also state that 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 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 15 45 being understood that such counsel need express no view as to the financial statements or other financial data contained in the Registration Statement or the Prospectus. (e) CS First Boston shall have received from Dewey Ballantine, counsel for the Underwriters, such opinion or opinions, dated the Closing Date, with respect to the validity of the Securities, the Registration Statement, the Prospectus and other related matters as CS First Boston 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) CS First Boston shall have received a certificate, dated the 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 the 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 the 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) CS First Boston shall have received a letter, dated the 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 the 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 CS First Boston and counsel for the Underwriters. The Company will furnish CS First Boston with such conformed copies of such opinions, certificates, letters and documents as CS First Boston reasonably requests. 7. Indemnification and Contribution. (a) The Company will indemnify and hold harmless each Underwriter against any losses, claims, damages or liabilities, joint or several, to which such Underwriter 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 16 46 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 each 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 any Underwriter through CS First Boston specifically for use therein, it being understood and agreed that the only such information furnished by any Underwriter consists of the information described as such in Section 2(b); 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 any Underwriter to the extent that any such loss, claim, damage or liability of such 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 such Underwriter. (b) Each Underwriter will severally and not jointly 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 such Underwriter through CS First Boston 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, it being understood and agreed that the only such information furnished by any Underwriter consists of the information described as such in Section 2(b). (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 17 47 pending or threatened action in respect of which any indemnified party is or 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 Underwriters 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 Underwriters 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 Underwriters 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 Underwriters. 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 Underwriters 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), no Underwriter shall 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 such 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. The Underwriters' obligations in this subsection (d) to contribute are several in proportion to their respective underwriting obligations and not joint. (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 any Underwriter within the meaning of the Act; and the obligations of the Underwriters under this Section shall be in addition to any liability which the respective Underwriters 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. Default of Underwriters. If any Underwriter or Underwriters default in their obligations to purchase Securities hereunder on the Closing Date and the aggregate principal amount of Securities that such defaulting Underwriter or Underwriters agreed but failed to purchase does not exceed 10% of the total principal amount of Securities that the Underwriters are obligated to purchase on the Closing Date, CS First Boston may make arrangements satisfactory to the Company for the purchase of such Securities by other 18 48 persons, including any of the Underwriters, but if no such arrangements are made by the Closing Date, the non-defaulting Underwriters shall be obligated severally, in proportion to their respective commitments hereunder, to purchase the Securities that such defaulting Underwriters agreed but failed to purchase on the Closing Date. If any Underwriter or Underwriters so default and the aggregate principal amount of Securities with respect to which such default or defaults occur exceeds 10% of the total principal amount of Securities that the Underwriters are obligated to purchase on the Closing Date and arrangements satisfactory to CS First Boston and the Company for the purchase of such Securities by other persons are not made within 36 hours after such default, this Agreement will terminate without liability on the part of any non-defaulting Underwriter or the Company, except as provided in Section 9. As used in this Agreement, the term "Underwriter" includes any person substituted for an Underwriter under this Section. Nothing herein will relieve a defaulting Underwriter from liability for its default. 9. Survival of Certain Representations and Obligations. The respective indemnities, agreements, representations, warranties and other statements of the Company or its officers and of the several Underwriters 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 any 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 this Agreement is terminated pursuant to Section 8 or if for any reason the purchase of the Securities by the Underwriters is not consummated, the Company shall remain responsible for the expenses to be paid or reimbursed by it pursuant to Section 5 and the respective obligations of the Company and the Underwriters under Section 7 shall remain in effect, and if any Securities have been purchased hereunder the representations and warranties in Section 2 and all obligations under Section 5 shall also remain in effect. If the purchase of the Securities by the Underwriters is not consummated for any reason other than solely because of the termination of this Agreement pursuant to Section 8 or the occurrence of any event specified in clause (iii), (iv) or (v) of Section 6(c), the Company will reimburse the Underwriters for all out-of-pocket expenses (including fees and disbursements of counsel) reasonably incurred by them in connection with the offering of the Securities. 10. Notices. All communications hereunder will be in writing and, if sent to the Underwriters, will be mailed, delivered or telegraphed and confirmed to CS First Boston at Park Avenue Plaza, New York, N.Y. 10055, Attention: Investment Banking Department - Transactions Advisory Group, or, if sent to the Company, will be mailed, delivered or telegraphed and confirmed to it at The Pep Boys -- Manny, Moe & Jack, 3111 West Allegheny Avenue, Philadelphia, Pennsylvania, 19132, Attention: Chief Financial Officer; provided, however, that any notice to an Underwriter pursuant to Section 7 will be mailed, delivered or telegraphed and confirmed to such Underwriter. 11. 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. 12. Representation of Underwriters. CS First Boston will act for the several Underwriters in connection with this financing, and any action under this Agreement taken by CS First Boston will be binding upon all the Underwriters. 19 49 13. 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. 14. Applicable Law; Consent to Jurisdiction. This Agreement 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. The Company hereby submits to the non-exclusive jurisdiction of the Federal and state courts in the Borough of Manhattan in The City of New York in any suit or proceeding arising out of or relating to this Agreement or the transactions contemplated hereby. 20 50 If the foregoing is in accordance with CS First Boston's 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 several Underwriters in accordance with its terms. Very truly yours, THE PEP BOYS -- MANNY, MOE & JACK By -------------------------------------------- Name: Michael J. Holden Title: Senior Vice President - Finance The foregoing Underwriting Agreement is hereby confirmed and accepted as of the date first above written. CS FIRST BOSTON CORPORATION By ------------------------- Name: Andrew R. Taussig Title: Managing Director Acting on behalf of itself and as the Representative of the several Underwriters. 21 51 SCHEDULE A Principal Amount Underwriter of Securities ----------- ----------------- CS First Boston Corporation . . . . . . . . . . . $ ------------ Total . . . . . . . . . . . . . . . . . . . . . $100,000,000 ============ 22 52 SCHEDULE B Significant Subsidiaries of the Company --------------------------------------- The Pep Boys -- Manny, Moe & Jack of California Pep Boys -- Manny, Moe & Jack of Delaware, Inc. Pep Boys -- Manny, Moe & Jack of Puerto Rico, Inc. Colchester Insurance Company 23 EX-4 3 INDENTURE 53 Draft of June 6, 1995 =============================================================================== THE PEP BOYS-MANNY, MOE & JACK, Issuer ------ TO FIRST FIDELITY BANK, NATIONAL ASSOCIATION, Trustee ------------------------ INDENTURE Dated as of June __, 1995 $100,000,000 __% Notes Due 2005 =============================================================================== 54 TABLE OF CONTENTS Page ---- ARTICLE I DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION. . . . . . . . . 1 SECTION 101. Definitions . . . . . . . . . . . . . . . . . . . . . 1 SECTION 102. Compliance Certificates and Opinions. . . . . . . . . 11 SECTION 103. Form of Documents Delivered to Trustee. . . . . . . . 12 SECTION 104. Acts of Holders . . . . . . . . . . . . . . . . . . . 13 SECTION 105. Notices, Etc., to Trustee and Company . . . . . . . . 14 SECTION 106. Notice to Holders; Waiver . . . . . . . . . . . . . . 14 SECTION 107. Conflict with Trust Indenture Act . . . . . . . . . . 15 SECTION 108. Effect of Headings and Table of Contents. . . . . . . 15 SECTION 109. Successors and Assigns. . . . . . . . . . . . . . . . 15 SECTION 110. Separability Clause . . . . . . . . . . . . . . . . . 15 SECTION 111. Benefits of Indenture . . . . . . . . . . . . . . . . 15 SECTION 112. Governing Law . . . . . . . . . . . . . . . . . . . . 15 SECTION 113. Legal Holidays. . . . . . . . . . . . . . . . . . . . 16 ARTICLE II SECURITY FORM. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 SECTION 201. Form Generally. . . . . . . . . . . . . . . . . . . . 16 SECTION 202. Form of Face of Security. . . . . . . . . . . . . . . 16 SECTION 203. Form of Reverse of Security . . . . . . . . . . . . . 19 SECTION 204. Form of Trustee's Certificate of Authentication . . . 20 ARTICLE III THE SECURITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 SECTION 301. Title and Terms . . . . . . . . . . . . . . . . . . . 22 SECTION 302. Denominations . . . . . . . . . . . . . . . . . . . . 22 SECTION 303. Execution, Authentication, Delivery and Dating. . . . 23 SECTION 304. Temporary Securities. . . . . . . . . . . . . . . . . 24 SECTION 305. Registration, Registration of Transfer and Exchange. 24 SECTION 306. Mutilated, Destroyed, Lost and Stolen Securities. . . 26 SECTION 307. Payment of Interest; Interest Rights Preserved. . . . 27 SECTION 308. Persons Deemed Owners . . . . . . . . . . . . . . . . 29 SECTION 309. Cancellation. . . . . . . . . . . . . . . . . . . . . 29 SECTION 310. Computation of Interest . . . . . . . . . . . . . . . 29 ARTICLE IV. SATISFACTION AND DISCHARGE . . . . . . . . . . . . . . . . . . . . . . . 30 SECTION 401. Satisfaction and Discharge of Indenture . . . . . . . 30 SECTION 402. Application of Trust Funds; Indemnification . . . . . 31 SECTION 403. Satisfaction, Discharge and Defeasance of Securities. 32 i 55 ARTICLE V REMEDIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33 SECTION 501. Events of Default . . . . . . . . . . . . . . . . . . 33 SECTION 502. Acceleration of Maturity; Recision and Annulment. . . 35 SECTION 503. Collection of Indebtedness and Suits for Enforcement by Trustee. . . . . . . . . . . . . . . . . . . . . . 36 SECTION 504. Trustee May File Proofs of Claim. . . . . . . . . . . 37 SECTION 505. Trustee May Enforce Claims Without Possession of Securities. . . . . . . . . . . . . . . . . . . . . . 38 SECTION 506. Application of Money Collected. . . . . . . . . . . . 38 SECTION 507. Limitation on Suits.. . . . . . . . . . . . . . . . . 39 SECTION 508. Unconditional Right of Holders to Receive Principal and Interest. . . . . . . . . . . . . . . . . . . . . 40 SECTION 509. Restoration of Rights and Remedies. . . . . . . . . . 40 SECTION 510. Rights and Remedies Cumulative. . . . . . . . . . . . 40 SECTION 511. Delay or Omission Not Waiver. . . . . . . . . . . . . 40 SECTION 512. Control by Holders. . . . . . . . . . . . . . . . . . 41 SECTION 513. Waiver of Past Defaults.. . . . . . . . . . . . . . . 41 SECTION 514. Undertaking for Costs.. . . . . . . . . . . . . . . . 42 SECTION 515. Waiver of Stay or Extension Laws. . . . . . . . . . . 42 ARTICLE VI THE TRUSTEE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42 SECTION 601. Certain Duties and Responsibilities.. . . . . . . . . 42 SECTION 602. Notice of Defaults. . . . . . . . . . . . . . . . . . 44 SECTION 603. Certain Rights of Trustee . . . . . . . . . . . . . . 44 SECTION 604. Not Responsible for Recitals or Issuance of Securities. . . . . . . . . . . . . . . . . . . . . . 45 SECTION 605. May Hold Securities . . . . . . . . . . . . . . . . . 46 SECTION 606. Money Held in Trust.. . . . . . . . . . . . . . . . . 46 SECTION 607. Compensation and Reimbursement. . . . . . . . . . . . 46 SECTION 608. Disqualification; Conflicting Interests.. . . . . . . 47 SECTION 609. Corporate Trustee Required; Eligibility . . . . . . . 47 SECTION 610. Resignation and Removal; Appointment of Successor . . 47 SECTION 611. Acceptance of Appointment by Successor. . . . . . . . 49 SECTION 612. Merger, Conversion, Consolidation or Succession to Business . . . . . . . . . . . . . . 49 SECTION 613. Preferential Collection of Claims Against Company . . 50 SECTION 614. Appointment of Authenticating Agent . . . . . . . . . 55 ARTICLE VII HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY. . . . . . . . . . . . 56 SECTION 701. Company to Furnish Trustee Names and Addresses of Holders . . . . . . . . . . . . . . . . . . . . . . . 57 SECTION 702. Preservation of Information; Communications to Holders . . . . . . . . . . . . . . . . . . . . . . . 57 SECTION 703. Reports by Trustee. . . . . . . . . . . . . . . . . . 57 SECTION 704. Reports by Company. . . . . . . . . . . . . . . . . . 59 ARTICLE VIII CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE . . . . . . . . . . 60 SECTION 801. Company May Consolidate, Etc., Only on Certain Terms. 60 SECTION 802. Successor Corporation Substituted.. . . . . . . . . . 61 ii 56 ARTICLE IX SUPPLEMENTAL INDENTURES. . . . . . . . . . . . . . . . . . . . . . . . . 62 SECTION 901. Supplemental Indentures Without Consent of Holders. . 62 SECTION 902. Supplemental Indentures with Consent of Holders.. . . 62 SECTION 903. Execution of Supplemental Indentures. . . . . . . . . 63 SECTION 904. Effect of Supplemental Indentures.. . . . . . . . . . 63 SECTION 905. Conformity with Trust Indenture Act.. . . . . . . . . 64 SECTION 906. Reference in Securities to Supplemental Indentures. . 64 ARTICLE X COVENANTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64 SECTION 1001. Payment of Principal and Interest.. . . . . . . . . . 64 SECTION 1002. Maintenance of Office or Agency.. . . . . . . . . . . 64 SECTION 1003. Money for Securities Payments to Be Held in Trust . . 65 SECTION 1004. Corporate Existence.. . . . . . . . . . . . . . . . . 66 SECTION 1005. [Intentionally Omitted].. . . . . . . . . . . . . . . 67 SECTION 1006. [Intentionally Omitted].. . . . . . . . . . . . . . . 67 SECTION 1007. Limitation Upon Liens.. . . . . . . . . . . . . . . . 67 SECTION 1008. Limitation Upon Sale and Leaseback Transactions . . . 69 SECTION 1009. Limitations Upon Permitting Restricted Subsidiaries to become Non-Restricted Subsidiaries and Non-Restricted Subsidiaries to become Restricted Subsidiaries. . . . . . . . . . . . . . . . . . . . . 70 SECTION 1010. Defeasance of Certain Obligations . . . . . . . . . . 70 SECTION 1011. Waiver of Certain Covenants . . . . . . . . . . . . . 71 ARTICLE XI REDEMPTION OF SECURITIES . . . . . . . . . . . . . . . . . . . . . . . . 72 Section 1101. No Right of Redemption. . . . . . . . 72 iii THE PEP BOYS-MANNY, MOE & JACK Reconciliation and tie between Trust Indenture Act of 1939 and Indenture, dated as of June ___, 1995 Trust Indenture Indenture Act Section Section Section 310(a)(1) . . . . . . . . . . . . . . . . . . 609 (a)(2) . . . . . . . . . . . . . . . . . . 609 (a)(3) . . . . . . . . . . . . . . . . . . Not Applicable (a)(4) . . . . . . . . . . . . . . . . . . Not Applicable (b) . . . . . . . . . . . . . . . . . . 608, 610 Section 311(a) . . . . . . . . . . . . . . . . . . 613(a) (b) . . . . . . . . . . . . . . . . . . 613(b) Section 312(a) . . . . . . . . . . . . . . . . . . 701, 702(a) (b) . . . . . . . . . . . . . . . . . . 702(b) (c) . . . . . . . . . . . . . . . . . . 702(c) Section 313(a) . . . . . . . . . . . . . . . . . . 703(a) (b) . . . . . . . . . . . . . . . . . . 703(b) (c) . . . . . . . . . . . . . . . . . . 703(a), 703(b) (d) . . . . . . . . . . . . . . . . . . 703(c) Section 314(a) . . . . . . . . . . . . . . . . . . 704 (b) . . . . . . . . . . . . . . . . . . Not Applicable (c)(1) . . . . . . . . . . . . . . . . . . 102 (c)(2) . . . . . . . . . . . . . . . . . . 102 (c)(3) . . . . . . . . . . . . . . . . . . Not Applicable (d) . . . . . . . . . . . . . . . . . . Not Applicable (e) . . . . . . . . . . . . . . . . . . 102 Section 315(a) . . . . . . . . . . . . . . . . . . 601(a) (b) . . . . . . . . . . . . . . . . . . 602 (c) . . . . . . . . . . . . . . . . . . 601(b) (d) . . . . . . . . . . . . . . . . . . 601(c) (d)(1) . . . . . . . . . . . . . . . . . . 601(a)(1), 601(c)(1) (d)(2) . . . . . . . . . . . . . . . . . . 601(c)(2) (d)(3) . . . . . . . . . . . . . . . . . . 601(c)(3) (e) . . . . . . . . . . . . . . . . . . 514 Section 316(a)(1)(A). . . . . . . . . . . . . . . . . . 502, 512 (a)(1)(B). . . . . . . . . . . . . . . . . . 513 (a)(2) . . . . . . . . . . . . . . . . . . Not Required (b) . . . . . . . . . . . . . . . . . . 508 (c) . . . . . . . . . . . . . . . . . . 512 Section 317(a)(1) . . . . . . . . . . . . . . . . . . 503 (a)(2) . . . . . . . . . . . . . . . . . . 504 (b) . . . . . . . . . . . . . . . . . . 1003 Section 318(a) . . . . . . . . . . . . . . . . . . 107 - ------------------------ NOTE: This reconciliation and tie shall not, for any purpose, be deemed to be a part of the Indenture. iv 57 INDENTURE, dated as of June __, 1995, between The Pep Boys-Manny, Moe & Jack, a corporation duly organized and existing under the laws of the Commonwealth of Pennsylvania (herein called the "Company"), having its principal office at 3111 West Allegheny Avenue, Philadelphia, Pennsylvania 19132, and First Fidelity Bank, National Association, Philadelphia, Pennsylvania, as Trustee (herein called the "Trustee"). ARTICLE I 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: (1) the terms defined in this Article have the meanings assigned to them in this Article and include the plural as well as the singular; (2) 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; (3) all accounting terms not otherwise defined herein have the meanings assigned to them in accordance with generally accepted accounting principles, and, except as otherwise herein expressly provided, the term "generally accepted accounting principles" with respect to any computation required or permitted hereunder shall mean such accounting principles as are generally accepted at the date of such computation; and (4) 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. 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 58 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. "Attributable Debt" means in respect of a Sale and Leaseback Transaction referred to in Section 1008, at the time of determination, the present value (discounted at the actual rate of interest of such transaction) of the obligation of the lessee for net rental payments during the remaining term of the lease included in such arrangement (including any period for which such lease has been extended or may, at the option of the lessor, be extended). The term "net rental payments" under any lease for any period shall mean the sum of the rental and other payments required to be paid in such period by the lessee thereunder, not including, however, any amounts required to be paid by such lessee (whether or not designated as rental or additional rental) on account of maintenance and repairs, insurance, taxes, assessments, water rates or similar charges required to be paid by such lessee thereunder or any amounts required to be paid by such lessee thereunder contingent upon the amount of sales, maintenance and repairs, insurance, taxes, assessments, water rates or similar charges. "Authenticating Agent" means any Person authorized by the Trustee to act on behalf of the Trustee to authenticate Securities. "Authorized Newspaper" means a newspaper of general circulation in the relevant area, printed in the English language and customarily published on each Business Day, whether or not published on Saturdays, Sundays or holidays. Whenever successive weekly publications in an Authorized Newspaper are required hereunder they may be made (unless otherwise expressly provided herein) on the same or different days of the week and in the same or in different Authorized Newspapers. "Board of Directors" means either the board of directors of the Company or any duly authorized committee of that board to which the powers of that board have been lawfully delegated. "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. 2 59 "Business Day", when used with respect to any place of payment designated pursuant to Section 1002, means any day which is not a Saturday, a Sunday, or a day on which banks and trust companies in that place of payment are authorized or obligated by law, regulation or executive order to remain closed. "Capital Lease" means any lease of property which, in accordance with generally accepted accounting principles, should be capitalized on the lessee's balance sheet or for which the amount of the asset and liability thereunder as if so capitalized should be disclosed in a note to such balance sheet; and "Capitalized Lease Obligation" means the amount of the liability which should be so capitalized or disclosed. "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. "Company" means the Person named as the "Company" in the first paragraph of this instrument until a successor corporation shall have become such pursuant to the applicable provisions of this Indenture, and thereafter "Company" shall mean such successor corporation. "Company Request" or "Company Order" means, respectively, 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. "Consolidated" when used with respect to any of the terms defined herein refers to such terms as reflected in a consolidation of the accounts of the Company and its Restricted Subsidiaries in accordance with generally accepted accounting principles. "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" includes corporations, associations, companies and business trusts. 3 60 "Default" means any event, act or condition which with notice or lapse of time, or both, would constitute an Event of Default. "Defaulted Interest" has the meaning specified in Section 307. "Depositary" means, with respect to the Securities issuable or issued in whole or in part in the form of one or more Global Securities, initially The Depository Trust Company, a limited-purpose trust company organized under the Banking Law of the State of New York ("DTC"), or any successor Depositary which shall succeed DTC pursuant to the applicable provisions of Article III of this Indenture. "Event of Default" has the meaning specified in Section 501. "Exempted Debt" means the sum of the following items outstanding as of the date Exempted Debt is being determined: (i) Indebtedness for money borrowed of the Company and its Restricted Subsidiaries incurred after the date of this Indenture and secured by liens created or assumed or permitted to exist pursuant to Section 1007(b) (excluding Indebtedness incurred in connection with pollution control financings and industrial revenue bond financings), and (ii) Attributable Debt of the Company and its Restricted Subsidiaries in respect of all Sale and Leaseback Transactions entered into pursuant to Section 1008(b). "Funded Debt" of any Person means Indebtedness, whether incurred, assumed or guaranteed, maturing by its terms more than one year from the date of creation thereof or which is extendable or renewable at the sole option of the obligor in such manner that it may become payable more than one year from the date of creation thereof. "Global Security" means a Security evidencing all or part of the Securities, issued to the Depositary or its nominee and registered in the name of such Depositary or nominee. "Holder" means a Person in whose name a Security is registered in the Security Register. "Indebtedness" of any Person means, without duplication, indebtedness for borrowed money and all indebtedness under purchase money mortgages or other purchase money liens or conditional sales or similar title retention agreements, in each case where such indebtedness has been created, incurred, assumed or guaranteed by such Person or where such Person is otherwise liable 4 therefor, and indebtedness for borrowed money secured by any mortgage, pledge or other lien or encumbrance upon property owned by such Person, even though such Person has not assumed or become liable for the payment of such indebtedness. "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 Security. "Investment" means and includes any investment in stock, evidences of indebtedness, loans or advances, however made or acquired, but shall not include accounts receivable of the Company or of any Restricted Subsidiary arising from transactions in the ordinary course of business, or any evidences of indebtedness, loans or advances made in connection with the sale to any Restricted Subsidiary of accounts receivable of the Company or any Restricted Subsidiary arising from transactions in the ordinary course of business of the Company or any Restricted Subsidiary. "Net Tangible Assets" of any Person means the total amount of assets (less depreciation and valuation reserves and other reserves and items deductible from the gross book value of specific asset accounts under generally accepted accounting principles) which under generally accepted accounting principles would be included on a balance sheet, after deducting therefrom (i) all liability items except Funded Debt, Capitalized Lease Obligations, stockholders' equity and reserves for deferred income taxes, and (ii) all goodwill, trade names, trademarks, patents, unamortized debt discount and expense and other like intangibles, which in each such case would be so included on such balance sheet. "Non-Restricted Subsidiary" means (i) any Subsidiary which, subject to Section 1009, shall be designated by the Board of Directors or by duly authorized officers of the Company as a Non-Restricted Subsidiary, and (ii) any other Subsidiary of which the majority of the voting stock is owned directly or indirectly by one or more Non-Restricted Subsidiaries. "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. 5 61 "Operating Assets" means all merchandise inventories, furniture, fixtures and equipment (including all transportation and warehousing equipment but excluding office equipment and data processing equipment) owned or leased pursuant to Capital Leases by the Company or a Restricted Subsidiary. "Operating Property" means all real property and improvements thereon owned or leased pursuant to Capital Leases by the Company or a Restricted Subsidiary constituting, without limitation, any store, warehouse, service center or distribution center wherever located, provided that such term shall not include any store, warehouse, service center or distribution center which the Company's Board of Directors declares by resolution not to be of material importance to the business of the Company and its Restricted Subsidiaries. Operating Property is treated as having been "acquired" on the date the Operating Property is placed in operation by the Company or a Restricted Subsidiary after the later of (a) its acquisition from a third party, including a Non-Restricted Subsidiary, (b) completion of its original construction or (c) completion of its substantial reconstruction, renovation, remodeling or expansion (whether or not constituting an Operating Property prior to such reconstruction, renovation, remodeling or expansion). "Opinion of Counsel" means a written opinion of counsel, who may be counsel for the Company, and who shall be reasonably acceptable to the Trustee. "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 cancelled by the Trustee or delivered to the Trustee for cancellation; (ii) Securities for whose payment 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; 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 6 62 the Trustee 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 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 the Company or any Person authorized by the Company to pay the principal of or interest on any Securities on behalf of the Company. "Person" means any individual, corporation, partnership, joint venture, association, joint-stock company, trust, unincorporated organization or government or any agency or political subdivision thereof. "Predecessor Security" of any Security means every previous Security evidencing all or a portion of the same debt as that evidenced by such 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. "Regular Record Date" for the interest payable on any Interest Payment Date on the Securities means the date specified for that purpose as contemplated by Section 301. "Responsible Officer", when used with respect to the Trustee, means any officer within the Corporate Trust Office (or any successor group of the Trustee) including any vice president, any assistant vice president, or any other officer of the Trustee customarily performing functions similar to 7 63 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. "Restricted Subsidiary" means any Subsidiary of which the majority of voting stock is owned by the Company; provided, however, that the Board of Directors or duly authorized officers of the Company may, subject to and in accordance with Section 1009, designate any Non-Restricted Subsidiary as a Restricted Subsidiary and any Restricted Subsidiary as a Non-Restricted Subsidiary. "Securities" means the __% Notes Due 2005 of the Company authenticated and delivered under this Indenture. "Security Register" and "Security Registrar" have the respective meanings specified in Section 305. "Senior Funded Debt" means all Funded Debt except Subordinated Funded Debt. "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 the Securities or any installment of principal thereof or interest thereon, means the date specified in the Security as the fixed date on which the principal of the Security or such installment of principal or interest is due and payable. "Subordinated Funded Debt" means any unsecured Indebtedness of the Company which is expressly made subordinate and junior in rank and right of payment to the Securities and such other Indebtedness of the Company as may be specified or characterized in the instruments evidencing the Subordinated Funded Debt or the indenture or other similar instrument under which it is issued (which indenture or other instrument shall be binding on all holders of such Subordinated Funded Debt) (the Securities and any other Indebtedness of the Company to which the Subordinated Funded Debt is subordinate and junior being hereinafter in this paragraph called "Superior Debt") by provisions not substantially more favorable to the holders of the Subordinated Funded Debt than the following: (i) in the event of any insolvency or bankruptcy proceedings, any receivership, liquidation, reorganization or other similar proceedings in connection therewith, relative to the Company or to its creditors, as such, or to its property, and in the event of any proceedings for voluntary liquidation, dissolution or other winding up of the Company, 8 64 whether or not involving insolvency or bankruptcy, then the holders of Superior Debt shall be entitled to receive payment in full of all principal and interest on all Superior Debt before the holders of the Subordinated Funded Debt are entitled to receive any payment on account of principal or interest upon the Subordinated Funded Debt, and to that end (but subject to the power of a court of competent jurisdiction to make other equitable provisions reflecting the rights conferred by the provisions of the Subordinated Funded Debt upon the Superior Debt and the holders thereof with respect to the Subordinated Funded Debt and the holders thereof by a lawful plan or reorganization under applicable bankruptcy or insolvency law) the holders of Superior Debt shall be entitled to receive for application in payment thereof any payment or distribution of any kind or character, whether in cash or property or securities or by set-off or otherwise, which may be payable or deliverable in any such proceedings in respect of the Subordinated Funded Debt, except securities which are subordinate and junior in right of payment to the payment of all Superior Debt then outstanding; (ii) in the event that any Subordinated Funded Debt is declared due and payable before its expressed maturity because of the occurrence of an event of default with respect to such Subordinated Funded Debt (under circumstances when the provisions of the foregoing clause (i) shall not be applicable), the holders of the Superior Debt outstanding, at the time such Subordinated Funded Debt so becomes due and payable because of such occurrence of such an event of default, shall be entitled to receive payment in full of all principal and interest on all Superior Debt before the holders of such Subordinated Funded Debt are entitled to receive any payment on account of the principal or interest upon such Subordinated Funded Debt except payments at the expressed maturity of such Subordinated Funded Debt, current interest payments as provided in such Subordinated Funded Debt, payments pursuant to any mandatory sinking fund (or analogous provision) in respect of such Subordinated Funded Debt, and payments for the purpose of curing any such event of default; (iii) in the event that (x) there shall have occurred a default in the payment of the principal of or interest on any Superior Debt, or (y) there shall have occurred any other event of default with respect to any Superior Debt permitting the holders thereof to accelerate the maturity thereof and if written notice thereof shall have been given to the Company by a holder or holders of such Superior Debt or their representative or representatives or trustee or trustees under any indenture pursuant to which any instruments evidencing any of such Superior Debt may have been issued, or (z) the payment hereinafter referred to would itself constitute an event of default with respect to 9 65 any Superior Debt, then, in any such case, unless or until such event of default shall have been cured or waived or shall have ceased to exist, no payment shall be made by the Company on account of principal of or interest on any Subordinated Funded Debt (whether pursuant to any sinking fund or otherwise) or on account of the purchase or other acquisition of any Subordinated Funded Debt; and (iv) no holder of Superior Debt or trustee for such holder shall be prejudiced in his or her right to enforce subordination of the Subordinated Funded Debt by any act or failure to act on the part of the Company; provided, however, that the Subordinated Funded Debt may provide that the foregoing provisions are solely for the purposes of defining the relative rights of the holders of Superior Debt on the one hand, and the holders of the Subordinated Funded Debt on the other hand, and that nothing therein shall impair, as between the Company and the holders of the Subordinated Funded Debt, the obligation of the Company, which is unconditional and absolute, to pay to the holders thereof the principal thereof and interest thereon in accordance with its terms, nor shall anything therein prevent the holders of the Subordinated Funded Debt from exercising all remedies otherwise permitted by applicable law or thereunder upon default thereunder, subject to the rights under clauses (i), (ii) and (iii) above of holders of Superior Debt to receive cash, property or securities otherwise payable or deliverable to the holders of the Subordinated Funded Debt; and provided, further, that the Subordinated Funded Debt may provide that, insofar as a trustee or paying agent for such Subordinated Funded Debt is concerned, the foregoing provisions shall not prevent the application by such trustee or paying agent of any moneys deposited with such trustee or paying agent for the purpose of the payment of or on account of the principal and interest on such Subordinated Funded Debt if such trustee or paying agent did not have knowledge at the time of such application that such payment was prohibited by the foregoing provisions. "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 10 66 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. "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 or include each such Person who is then a Trustee hereunder. "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. "U.S. Government Obligations" means direct obligations of the United States for the payment of which its full faith and credit is pledged, or obligations of a person controlled or supervised by and acting as an agency or instrumentality of the United States and the payment of which is unconditionally guaranteed by the United States. "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. ------------------------------------- Except as otherwise expressly provided by this Indenture, 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 (other than certificates provided pursuant to Section 704(4)) shall include: 11 67 (1) a statement that each such individual signing such certificate or opinion has read such covenant or condition and the definitions herein relating thereto; (2) 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; (3) 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 (4) a statement as to whether, 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. 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 of 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. 12 68 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 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 proved 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 further 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 13 69 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. 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, (1) the Trustee by any Holder or by the Company shall be sufficient for every purpose hereunder if made, given, furnished or filed in writing (and, where specified, in the form so specified) to or with the Trustee at its Corporate Trust Office, Attention: Corporate Trust Administration Department, or (2) 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 notification as shall be made with the approval of the Trustee shall constitute a sufficient notification for every purpose hereunder. 14 70 In case, by reason of suspension of publication of any Authorized Newspaper, or by reason of any other cause, it shall be impossible to make publication of any notice in an Authorized Newspaper or Authorized Newspapers as required by this Indenture, then such method of publication or notification as shall be made with the approval of the Trustee shall constitute a sufficient publication of such notice. SECTION 107. Conflict with Trust Indenture Act. ---------------------------------- If any provision hereof limits, qualifies or conflicts with the duties imposed by Sections 310 to 317, inclusive, of the Trust Indenture Act, such imposed duties shall control. 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. 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 and assigns hereunder and the Holders, 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. 15 71 SECTION 113. Legal Holidays. --------------- In any case where any Interest Payment Date or Stated Maturity of any Security shall not be a Business Day at any place of payment designated pursuant to Section 1002, then (notwithstanding any other provision of this Indenture or of the Securities) payment of interest or principal need not be made at such place of payment on such date, but may be made on the next succeeding Business Day at such place of payment with the same force and effect as if made on the Interest Payment Date, or at the Stated Maturity, provided that no interest shall accrue for the period from and after such Interest Payment Date or Stated Maturity, as the case may be. ARTICLE II SECURITY FORM SECTION 201. Form Generally. --------------- The Securities shall be in substantially the form 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 of the Securities. The Trustee's certificates of authentication shall be in substantially the form set forth in this Article. The Securities shall be typed, printed, lithographed, photocopied or engraved or produced in any other manner, all as determined by the officers executing such Securities, as evidenced by their section of such Securities. SECTION 202. Form of Face of Security. ------------------------- The form of the face of the Global Securities shall be as set forth below; (If a Security is issued in definitive form, the form of such definitive security will be identical to the form of the face of the Global Security, except that the three legends appearing immediately beneath the title of the Security shall be omitted): 16 72 THE PEP BOYS - MANNY, MOE & JACK --% Notes Due 2005 THIS NOTE IS A REGISTERED GLOBAL NOTE AND IS REGISTERED IN THE NAME OF CEDE & CO., AS NOMINEE OF THE DEPOSITORY TRUST COMPANY ("DTC"). UNLESS THIS REGISTERED GLOBAL NOTE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF DTC TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY NOTE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC AND ANY PAYMENT IS MADE TO CEDE & CO., ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL SINCE THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR NOTES IN DEFINITIVE REGISTERED FORM, THIS REGISTERED GLOBAL NOTE MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY DTC TO A NOMINEE OF DTC, OR BY A NOMINEE OF DTC TO DTC OR ANOTHER NOMINEE OF DTC, OR BY DTC OR ANY SUCH NOMINEE TO A SUCCESSOR DEPOSITARY OR A NOMINEE OF SUCH SUCCESSOR DEPOSITARY. No. ________________ $______________ CUSIP NO. __________ The Pep Boys-Manny, Moe & Jack, a corporation duly organized and existing under the laws of the Commonwealth of Pennsylvania (herein called the "Company", which term includes any successor corporation under the Indenture hereinafter referred to), for value received, hereby promises to pay to ____________________, or registered assigns, the principal sum of ____________________ Dollars on ________ __, 2005, and to pay interest thereon from ________________ or from the most recent Interest Payment Date to which interest has been paid or duly provided for, semiannually on _________ and _____ __, in each year, commencing___________________________ ___________ ____at the rate of __% per annum, until the principal hereof is paid or made available for payment. 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__________ or __________ (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 17 73 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 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 interest on this Security will be made at the office or agency of the Company maintained for that purpose 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: _________________________ 18 74 SECTION 203. Form of Reverse of Security. ---------------------------- The form of the reverse of the Securities shall be as set forth below: This Security is one of a duly authorized issue of securities of the Company designated as its __% Notes Due 2005 (herein called the "Securities") limited in aggregate principal amount to $100,000,000, issued and to be issued under an Indenture, dated as of June __, 1995 (herein called the "Indenture"), between the Company and First Fidelity Bank, National Association, 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, obligations and immunities thereunder of the Company, the Trustee and the Holders of the Securities and of the terms upon which the Securities are, and are to be, authenticated and delivered. The Indenture contains provisions for defeasance of (a) the entire indebtedness of this Security and (b) certain restrictive covenants upon compliance by the Company with certain conditions set forth therein. The Securities may not be redeemed prior to their maturity. 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 to be affected 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 19 75 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 therefor 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 interest on this Security at the times, place and rate, and in the coin or currency, herein prescribed. As provided in the Indenture and subject to certain limitations herein set forth, the transfer of this Security is registrable on the Security Register, upon surrender of this Security for registration of transfer at the office or agency of the Company maintained for such purpose, duly endorsed by, or accompanied by a written instrument of transfer in form satisfactory to the Company and the Security Registrar duly executed by the Holder hereof or his attorney duly authorized in writing, and thereupon one or more new Securities of authorized denominations and for the same aggregate principal amount, will be issued to the designated transferee or transferees. 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, the 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 presentation 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 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. All terms used in this Security which are defined in the Indenture shall have the meanings assigned to them in the Indenture. SECTION 204. Form of Trustee's Certificate of Authentication. ------------------------------------------------ This is one of the Securities referred to in the within-mentioned Indenture. 20 76 FIRST FIDELITY BANK, NATIONAL ASSOCIATION By:_______________________________________ Authorized Officer Dated:____________________________________ 21 77 ARTICLE III 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 $100,000,000 million, except for Securities authenticated and delivered upon registration of transfer of, or in exchange for, or in lieu of, other Securities pursuant to Section 304, 305, 306, or 906. The Securities shall be known and designated as the __% Notes due 2005. Their Stated Maturity shall be _______ __, 2005. The Securities shall bear interest at the rate of __% per annum from _______ __, 1995, or from the most recent interest payment date to which interest has been paid, as the case may be, payable on _______ __, 1995, and semiannually thereafter on ______ __ and _______ __ of each year to the Person in whose name the Security or any Predecessor Security is registered at the close of business on the ______ __ or ______ __ next preceding such interest payment date until the principal thereof is paid or duly provided for. The principal of, and interest on, the Securities shall be payable, at the office or agency of the Company maintained for such purpose in the Borough of Manhattan, the City of New York or at such other office or agency of the Company as may be maintained for such purpose; provided, however, that, at the option of the Company, interest may be paid by check mailed to addresses of the Persons entitled thereto as such addresses shall appear on the Security Registrar. The Securities are not redeemable prior to Stated Maturity. At the election of the Company, the entire indebtedness on the Securities or certain of the Company's Obligations and covenants and certain Events of Default thereunder may be defeased as provided in Article IV. SECTION 302. Denominations. -------------- The Securities shall be issuable only in fully registered form without coupons and in denominations of $1,000 and any integral multiple thereof. 22 78 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 individual 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 the Company Order shall authenticate and deliver such Securities for original issue in an aggregate principal amount of up to $100,000,000, as provided in this Indenture 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. Notwithstanding the foregoing, if any Security shall have been authenticated and delivered hereunder but never issued and sold by the Company, and the Company shall deliver such Security to the Trustee for cancellation as provided in Section 309 together with a Company Order (which need not comply with Section 102 and need not be accompanied by an Opinion of Counsel) directing such cancellation and stating that such Security has never been issued and sold by the Company, for all purposes of this Indenture such Security shall be deemed never to have been authenticated and delivered hereunder and shall never be entitled to the benefits of this Indenture. 23 79 SECTION 304. Temporary Securities. --------------------- Pending the preparation of definitive Securities or a permanent Global Security, 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 on a permanent Global Security 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. 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 or beneficial interests in a permanent Global Security, as the case may be, 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 authenticated denominations. Until so exchanged the temporary Securities shall in all respects be entitled to the same benefits under this Indenture as definitive Securities or beneficial interests in a permanent Global Security, as the case may be. SECTION 305. Registration, Registration of Transfer and Exchange. ---------------------------------------------------- The Company shall cause to be kept at one of its offices or agencies maintained pursuant to Section 1002 a register or registers (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. The Corporate Trust Office of 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 the office or agency of the Company designated pursuant to Section 1002, 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. 24 80 At the option of the Holder, Securities (except Global Securities) may be exchanged for other Securities of a like aggregate principal amount and of a like Stated Maturity and with like terms and conditions, 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. Notwithstanding any other provision of this Section, unless and until it is exchanged in whole or in part for Securities in definitive form, a Global Security representing all or a portion of the Securities may not be transferred except as a whole by the Depositary or by a nominee of the Depositary or another nominee of such Depositary or by such Depositary or any such nominee to a successor Depositary or a nominee of such successor Depositary. If at any time the Depositary for the Securities notifies the Company that it is unwilling or unable to continue as Depositary for the Securities or if at any time the Depositary for the Securities shall no longer be registered or in good standing under the Securities Exchange Act of 1934, or other applicable statute or regulation, the Company shall appoint a successor Depositary with respect to the Securities. If a successor Depositary for the Securities is not appointed by the Company within 90 days after the Company receives such notice or becomes aware of such condition, the Company will execute, and the Trustee, upon receipt of a Company Order for the authentication and delivery of definitive Securities, will authenticate and deliver, Securities in definitive form in an aggregate principal amount equal to the principal amount of the Global Security or Securities in exchange for such Global Security or Securities. The Company may at any time and in its sole discretion determine that the Securities issued in the form of one or more Global Securities shall no longer be represented by such Global Security or Securities. In such event, the Company will execute, and the Trustee, upon receipt of a Company Order for the authentication and delivery of definitive Securities, will authenticate and deliver, Securities in definitive form and in an aggregate principal amount equal to the principal amount of the Global Security or Securities in exchange for such Global Security or Securities. 25 81 In any exchange provided for in either of the preceding two paragraphs, the Company will execute and the Trustee will authenticate and deliver Securities in definitive registered form in authorized denominations. Upon the exchange of a Global Security for Securities in definitive form, such Global Security shall be cancelled by the Trustee. Securities issued in exchange for a Global Security pursuant to this Section shall be registered in such names and in such authorized denominations as the Depositary shall instruct the Trustee. The Trustee shall deliver such Securities to the persons in whose names such Securities are so registered. 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 303, 304, or 906 not involving any transfer. 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 26 82 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. 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 by virtue of having been such Holder, and such Defaulted Interest may be paid by the Company, at its election in each case, as provided in Clause (1) or (2) below: (1) 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 27 83 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 not 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 name 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 (2). (2) The Company may make payment of any Defaulted Interest on the Securities in any other lawful manner not inconsistent with the requirements of any securities exchange on which such 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. 28 84 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 as the owner of such Security for the purpose of receiving payment of principal of 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. No holder of any beneficial interest in any Global Security held on its behalf by the Depositary shall have any rights under this Indenture with respect to such Global Security, and the Depositary may be treated by the Company, the Trustee, and any agent of the Company or the Trustee as the owner of such Global Security for all purposes whatsoever. Notwithstanding the foregoing, nothing herein shall impair, as between the Depositary and such holders of beneficial interests, the operation of customary practices governing the exercise of the rights of the Depositary as holder of any Security. SECTION 309. Cancellation. ------------- All Securities surrendered for payment, registration of transfer or exchange shall, if surrendered to any Person other than the Trustee, be delivered to the Trustee and shall be promptly cancelled 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 may deliver to the Trustee (or to any other Person for delivery to the Trustee) for cancellation any Securities previously authenticated hereunder which the Company has not issued or sold, and all Securities so delivered shall be promptly cancelled by the Trustee. No Securities shall be authenticated in lieu of or in exchange for any Securities cancelled as provided in this Section, except as expressly permitted by this Indenture. All cancelled Securities held by the Trustee shall be destroyed and a certificate of their destruction delivered to the Company, unless by Company Order the Company shall direct that cancelled Securities be returned to it. 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. 29 85 ARTICLE IV. 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 registration of transfer or exchange of Securities herein expressly provided for), and the Trustee, 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 (i) have become due and payable, or (ii) will become due and payable at their stated Maturity within one year, or (iii) are deemed paid and discharged pursuant to Section 403, as applicable, and the Company, in the case of (i), (ii) or (iii) above, 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 interest to the date of such deposit (in the case of Securities which become due and payable) or to the Stated Maturity, as the case may be; (2) the Company has paid or caused to be paid all other sums payable hereunder by the Company; and (3) 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. 30 86 Notwithstanding the satisfaction and discharge of this Indenture, the obligations of the Company to the Trustee under Section 607, the obligations of the Trustee to any Authenticating Agent under Section 614, and, if money shall have been deposited with the Trustee pursuant to subclause (B) of clause (1) of this Section or if money or obligations shall have been deposited with or received by the Trustee pursuant to Section 403, the obligations of the Trustee under Section 402 and the last paragraph of Section 1003, shall survive. SECTION 402. Application of Trust Funds; Indemnification. -------------------------------------------- (a) Subject to the provisions of the last paragraph of Section 1003, all money deposited with the Trustee pursuant to Section 401, all money and U.S. Government Obligations deposited with the Trustee pursuant to Section 403 or 1010 and all money received by the Trustee in respect of U.S. Government Obligations deposited with the Trustee pursuant to Section 403 or 1010, 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 interest for whose payment such money has been deposited with or received by the Trustee. (b) The Company shall pay and shall indemnify the Trustee against any tax, fee or other charge imposed on or assessed against U.S. Government Obligations deposited pursuant to Section 403 or 1010 or the interest and principal received in respect of such obligations other than any payable by or on behalf of Holders. (c) The Trustee shall deliver or pay to the Company from time to time upon Company Request any U.S. Government Obligations or money held by it as provided in Section 403 or 1010 which, in the opinion of a nationally recognized firm of independent certified public accountants expressed in a written certification thereof delivered to the Trustee, are then in excess of the amount thereof which then would have been required to be deposited for the purpose for which such U.S. Government Obligations or money were deposited or received. This provision shall not authorize the sale by the Trustee of any U.S. Government Obligations held under this Indenture. 31 87 SECTION 403. Satisfaction, Discharge and Defeasance of Securities. ----------------------------------------------------- The Company shall be deemed to have paid and discharged the entire indebtedness on all the Outstanding Securities on the 91st day after the date of the deposit referred to in Subparagraph (d) hereof, and the provisions of this Indenture, as it relates to such Outstanding Securities, shall no longer be in effect (and the Trustee, at the expense of the Company, shall at Company Request, execute proper instruments acknowledging the same), except as to: (a) the rights of Holders of Securities to receive, from the trust funds described in Subparagraph (d) hereof, payment of the principal of and each installment of principal of or interest on the Outstanding Securities on the Stated Maturity of such principal or installment of principal or interest; (b) the Company's obligations with respect to such Securities under Sections 305, 306, 1002 and 1003 and the Company's obligations with respect to the Trustee under Section 607; and (c) the rights, powers, trust and immunities of the Trustee hereunder and the duties of the Trustee under Section 402 and the duty of the Trustee to authenticate Securities issued on registration of transfer or exchange; provided that, the following conditions shall have been satisfied: (d) the Company shall have deposited or caused to be deposited irrevocably with the Trustee 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, cash in U.S. dollars (or such other money or currencies as shall then be legal tender in the United States) and/or U.S. Government Obligations which through the payment of interest and principal in respect thereof, in accordance with their terms, will provide (and without reinvestment and assuming no tax liability will be imposed on such Trustee), not later than one day before the due date of any payment of money, an 32 88 amount sufficient, in the opinion of a nationally recognized firm of independent certified public accountants expressed in a written certification thereof delivered to the Trustee, to pay and discharge each installment of principal of and any interest on all the Securities on the dates such installments of interest or principal are due; (e) such deposit will not result in a breach or violation of, or constitute a default under, this Indenture or any other agreement or instrument to which the Company is a party or by which it is bound which breach, violation or default, in the case of any other such agreement or instrument, individually or in the aggregate, would have a material adverse effect upon the business of the Company and its Restricted Subsidiaries taken as a whole or upon this Company's ability to perform its obligations under this Section; (f) such provision would not cause any Outstanding Securities then listed on the New York Stock Exchange or other securities exchange to be delisted as a result thereof; (g) no Event of Default or event which with notice or lapse of time would become an Event of Default with respect to the Securities shall have occurred and be continuing on the date of such deposit or during the period ending on the 91st day after such date; (h) the Company has delivered to the Trustee an Officers' Certificate and an Opinion of Counsel to the effect that the Company has received from, or there has been published by, the Internal Revenue Service a ruling to the effect that Holders of the Securities will not recognize income, gain or loss for Federal income tax purposes as a result of such deposits, defeasance and discharge and will be subject to Federal income tax on the same amount and in the same manner and at the same times, as would have been the case if such deposit, defeasance and discharge had not occurred; and (i) the Company has delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that all conditions precedent provided for relating to the defeasance contemplated by this Section have been complied with. 33 89 ARTICLE V 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 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; or (2) default in the payment of the principal of any Security at its Stated Maturity; or (3) 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 (4) a default under any bond, debenture, note or other evidence of indebtedness in excess of $10,000,000 for money borrowed by the Company or under any mortgage, indenture or instrument under which there may be issued or by which there may be secured or evidenced any indebtedness in excess of $10,000,000 for money borrowed by the Company (including this Indenture), whether such indebtedness now exists or shall hereafter be created, which default shall have resulted in such indebtedness becoming or being declared due and payable prior to the date on which it would otherwise have become due and payable, without such acceleration having been rescinded or annulled, within a period of 30 days after there shall have been given, by registered or certified mail, to the Company by the Trustee or to the Company and the 34 90 Trustee by the Holders of at least 25% in principal amount of the Outstanding Securities a written notice specifying such default and requiring the Company to cause such acceleration to be rescinded or annulled and stating that such notice is a "Notice of Default" hereunder; or (5) 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 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 90 consecutive days; or (6) 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 it to the entry of a decree or order for relief in respect of the Company in an involuntary 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 occurs and is continuing, then 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 amount of all of the 35 91 Securities to be due and payable immediately, by a notice in writing to the Company (and to the Trustee if given by Holders), and upon any such declaration such principal amount (or specified amount) shall become immediately due and payable. At any time after such declaration of acceleration has been made 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 consequence 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 any Securities which have become due otherwise than by such declaration of acceleration and interest thereon at the rate borne by the Securities; (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 installment of interest on any Security when such interest becomes due and payable and such default continues for a period of 60 days, or 36 92 (2) default is made in the payment of the principal of any Security at the Stated Maturity thereof, 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 interest and, to the extent that payment of such interest shall be legally enforceable, interest on any overdue principal 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 most effectual 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. 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 37 93 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, if any) 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 interest owing and unpaid in respect of the Securities and to file such other papers or documents as may be necessary or advisable 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. ------------------------------- 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 interest, upon presentation of the Securities and the notation thereon of the payment if only partially paid and upon surrender thereof if fully paid: 38 94 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 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 interest, respectively. 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 of such 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 of such Holders, or to obtain or to seek to obtain priority or preference over any other of such Holders or to enforce any right under this Indenture, except in the manner herein provided and for the equal and ratable benefit of all such Holders. 39 95 SECTION 508. Unconditional Right of Holders to Receive Principal and Interest. --------------------------------------------------- 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 (subject to Section 307) interest on, such Security on the Stated Maturities expressed in such Security and to institute suit for the enforcement of any such payment, and such rights shall not be impaired without the consent of such Holder. SECTION 509. Restoration of Rights and Remedies. ----------------------------------- If the Trustee or any Holder, as permitted hereunder, 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 Holder 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 in Section 507 or 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 Securities 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. 40 96 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 or expose the Trustee to personal liability, and (2) the Trustee may take any other action deemed proper by the Trustee which is not inconsistent with such direction. The Company may, but shall not be obligated to, fix a record date for the purpose of determining the Holders of Securities entitled to direct the time, method and place of conducting any such proceeding, or exercising any such trust or power, or to waive any past default pursuant to Section 513. If fixed, such record date shall be the later of 30 days prior to the first solicitation of such consent or the date of the most recent list of Holders of Securities furnished to the Trustee pursuant to Section 701 prior to such solicitation. 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 or interest, on any Security, not heretofore cured, or (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. 41 97 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 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 interest on any Security on or after the Stated Maturities expressed in such Security. 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 VI 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 42 98 (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 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 wilful 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; (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. 43 99 (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 provided in Section 703(c), 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 interest on any Security, the Trustee shall be protected in withholding such notice if and so long as Responsible Officers of the Trustee in good faith determine that the withholding of such notice is in the interest of the Holders; and provided, further, that in the case of any default of the character specified in Section 501(3), no such notice to Holders shall be given until at least 60 days after the occurrence thereof. 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. 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 or as otherwise expressly provided herein and any resolution of the Board of Directors may be sufficiently evidenced by a Board 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; 44 100 (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 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 herein and in the Securities, except the Trustee's certificates of authentication, shall be taken as the statements of the Company, and the Trustee or any Authenticating Agent 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 or any Authenticating Agent shall not be accountable for the use or application by the Company of the Securities or the proceeds thereof. 45 101 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 hereunder except as otherwise agreed 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 and/or the allocated costs of its in-house 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 and any of its agents designated in accordance with this Indenture for, and to hold each of them 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 or trusts 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. 46 102 When the Trustee incurs expenses or renders services after an Event of Default, the expenses and the compensation for the services are intended to constitute expenses of administration under any bankruptcy law. The provisions of this Section shall survive the termination of this Indenture. SECTION 608. Disqualification; Conflicting Interests. ---------------------------------------- The Trustee shall be subject to the provisions of Section 310(b) of the Trust Indenture Act. Nothing herein shall prevent the Trustee from filing with the Commission the application referred to in the penultimate paragraph of Section 310(b) of the Trust Indenture Act. SECTION 609. Corporate Trustee Required; Eligibility. ---------------------------------------- There shall at all times be a Trustee hereunder 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 or a corporation or other Person permitted to exercise corporate trust powers, having a combined capital and surplus of at least $100,000,000 and which is 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. The Company may not, nor may any Person directly or indirectly controlling, controlled by, or under common control with the Company, serve as Trustee. If at any time the Trustee shall cease to be eligible in accordance with the provision 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. 47 103 (b) The Trustee may resign at any time by giving written notice thereof to the Company. If an 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, unless the Trustee's duty to resign is stayed as provided herein, 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 or Trustees. (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 or Trustees and shall comply with the applicable requirements of Section 611. 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 48 104 successor Trustee so appointed shall, forthwith upon its acceptance of such appointment in accordance with the applicable requirements of Section 611, 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 of Securities as their names and addresses appear in the Security Register. Each notice shall include the name of the successor Trustee with respect to the Securities and the address of its Corporate Trust Office. SECTION 611. Acceptance of Appointment by Successor. --------------------------------------- In case of the appointment hereunder of a successor Trustee, every such successor Trustee so appointed 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 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 the 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. 49 105 SECTION 612. Merger, Conversion, Consolidation or Succession to Business. --------------------------------------------------- Any corporation into which the Trustee may be merged or converted 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. SECTION 613. Preferential Collection of Claims Against Company. -------------------------------------------------- The Trustee shall comply with Section 311(a) of the Trust Indenture Act, excluding any creditor relationship listed in Section 310(b) of the Trust Indenture Act. A trustee who has resigned or been removed shall be subject to Section 311(a) of the Trust Indenture Act to the extent indicated therein. 50 106 SECTION 614. Appointment of Authenticating Agent. ------------------------------------ At any time when any of the Securities remains Outstanding 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 exchange or registration of transfer or pursuant to Section 306, and Securities so authenticated shall be entitled to the benefits of this Indenture and shall be valid and 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 51 107 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. Any successor Authenticating Agent upon acceptance of its appointment hereunder shall become vested with all the 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. 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. FIRST FIDELITY BANK, NATIONAL ASSOCIATION By___________________________ As Authenticating Agent By___________________________ Authorized Officer 52 108 ARTICLE VII 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 the Regular Record Date for the payment of interest, a list, in such form as the Trustee may reasonably require, of the names and addresses of the Holders as of a date not more than 15 days prior to time such information is furnished, and (b) at such other times as the Trustee may request in writing, within 30 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; provided no such list need be furnished if the Trustee shall be the 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, the names and addresses of such Holders received by the Trustee in its capacity as Security Registrar and the names and addresses of such Holders filed with it within the two preceding years pursuant to Section 703(c)(2). 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 Section 312(b) of the Trust Indenture Act with other Holder 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 Section 312(c) of the Trust Indenture Act. SECTION 703. Reports by Trustee. ------------------- (a) If such report is required by Section 313 of the Trust Indenture Act, within 60 days after each __________, beginning with the _______________ following the date of this Indenture, the Trustee shall mail to each Holder a brief report dated as of such ________ ______ that complies with Section 313(a) of the Trust Indenture Act. The Trustee also shall comply with Section 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. 53 109 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 submit to 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; 54 110 (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, as provided in Section 703(c), within 30 days after the filing thereof with the Trustee, 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. ARTICLE VIII 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 corporation or convey, transfer or lease its properties and assets substantially as an entirety 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 corporation or convey, transfer or lease its properties and assets substantially as an entirety to any Person, the corporation 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 organized and existing under the laws of the United States of America, any State thereof or the District of Columbia and 55 111 shall expressly assume, by an indenture supplemental hereto, executed and delivered to the Trustee, in form satisfactory to the Trustee, the due and punctual payment of the principal of 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; (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) if, as a result of any such consolidation or merger or such conveyance, transfer or lease, properties or assets of the Company would become subject to a mortgage, pledge, lien, security interest or other encumbrance which would not be permitted by this Indenture, the Company or such successor corporation or Person, as the case may be, shall take such steps as shall be necessary effectively to secure the Securities equally and ratably with (or prior to) all indebtedness secured thereby; 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 complies with this Article and that all conditions precedent herein provided for relating to such transaction have been complied with. SECTION 802. Successor Corporation Substituted. ---------------------------------- Upon any consolidation or merger by the Company with or into any other corporation or any conveyance, transfer of lease of the properties and assets of the Company substantially as an entirety in accordance with Section 801, the successor corporation 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 corporation had been named as the Company herein, and thereafter, except in the case of a lease, the predecessor corporation shall be relieved of all obligations and covenants under this Indenture and the Securities. 56 112 ARTICLE IX SUPPLEMENTAL INDENTURES SECTION 901. Supplemental Indentures Without Consent of Holders -------------------------------------------------- Without the consent of any Holders, the Company, when authorized by or pursuant to 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 corporation to the Company and the assumption by any such successor of the covenants of the Company herein and in the Securities; 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 pursuant to the requirements of Section 1007 or otherwise; or (5) to cure any ambiguity, to correct or supplement any provision herein which may be defective or 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 and which 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 principal of or interest on, any Security, or reduce the principal 57 113 amount thereof or the rate of interest thereon, or change the place of payment where, or the coin or currency in which, any Security 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 (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, Section 513 or Section 1011, 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; provided, however, that this clause shall not be deemed to require the consent of any Holder with respect to changes in the references to "the Trustee" and concomitant changes in this Section and Sections 801 and 1011. 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 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, immunities or liabilities 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 58 114 supplemental indenture shall form a part of this Indenture for all purposes; and 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 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 by the Trustee in exchange for Outstanding Securities. ARTICLE X COVENANTS SECTION 1001. Payment of Principal and Interest. ---------------------------------- The Company covenants and agrees that it will duly and punctually pay the principal of, and interest on, the Securities in accordance with the terms of the Securities and this Indenture. 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 and where notices and demands to or upon the Company in respect of the Securities and this Indenture may be served. The Company hereby initially appoints the Corporate Trust Office of the Trustee as office or agency for each of said purposes. 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 59 115 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 Securities 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 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 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 or interest on any Securities, deposit with a Paying Agent a sum sufficient to pay the principal or interest so becoming due, such sum to be held in trust for the benefit of the Persons entitled to such principal 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: (i) hold all sums held by it for the payment of the principal of 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; 60 116 (ii) 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 or interest on the Securities; and (iii) 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 received by the Trustee in respect of obligations deposited with the Trustee pursuant to Section 403 or 1010, or then held by the Company, in trust for the payment of the principal of or interest on any Security and remaining unclaimed for two years after such principal 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 any Authorized Newspaper in each place of payment, 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. Corporate 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 corporate existence and the corporate existence of its Restricted Subsidiaries and its and their rights (charter and statutory) and franchises; provided, however, that (1) the Company or any Restricted Subsidiary shall not be required to preserve any such right or franchise if the Board of Directors of the Company 61 117 shall determine that the preservation thereof is no longer desirable in the conduct of the business of the Company or of such Restricted Subsidiary and that the loss thereof is not disadvantageous in any material respect to the Holders, and (2) the Company shall not be required to preserve the corporate existence of any Restricted Subsidiary if the Board of Directors of the Company 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 1005. [Intentionally Omitted]. SECTION 1006. [Intentionally Omitted]. SECTION 1007. Limitation Upon Liens. ---------------------- (a) The Company will not, and will not permit any Restricted Subsidiary to, issue, assume or guarantee any Indebtedness secured by any mortgage, security interest, pledge, lien of other encumbrance upon, or any interest or title of any lessor, lender or other secured party to or under any Capital Lease with respect to, any Operating Property or Operating Asset of the Company or any Restricted Subsidiary, whether such Operating Property or Operating Asset is now owned or hereafter acquired (such mortgages, security interests, pledges, liens and other encumbrances being hereinafter called a "Mortgage" or "Mortgages"), except (1) Mortgages incurred or created in the ordinary course of business not arising in connection with Indebtedness that do not in the aggregate materially impair the use or value of the properties or assets of the Company and its Restricted Subsidiaries, taken as a whole, (2) Mortgages existing on the date hereof, (3) Mortgages (other than Capital Leases) to secure the payment of all or any part of the purchase price or construction costs in respect of property or properties acquired by the Company or a Restricted Subsidiary after the date hereof securing indebtedness incurred prior to, at the time of, or within 360 days after, the acquisition of any such property or the completion of any such construction in the aggregate not in excess of the aggregate amount expended in the acquisition of such property or properties plus the aggregate amount expended for the improvements thereon, (4) Mortgages upon any property or assets owned by any Restricted Subsidiary when it becomes a Restricted Subsidiary, 62 118 (5) Mortgages upon any property or assets of any corporation existing at the time such corporation is merged into or consolidated with the Company or any Restricted Subsidiary, or at the time of a sale, lease or other disposition of an entity as an entirety or substantially as an entirety to the Company or any Restricted Subsidiary, (6) Mortgages upon any property when the property is acquired by the Company or a Restricted Subsidiary, (7) Mortgages to secure the payment of all or any part of the cost of improvements to any property owned by the Company or a Restricted Subsidiary, (8) the extension, renewal or replacement of any Mortgage permitted by Subparagraph (2), (3), (4), (5), (6) or (7), but only if the principal amount of Indebtedness secured by the Mortgage immediately prior thereto is not increased and the Mortgage is not extended to other property, (9) Mortgages for taxes or other governmental charges either not yet delinquent or nonpayment of which is being contested in good faith by appropriate proceedings, provided enforcement of any lien has been stayed, (10) Mortgages arising out of any final judgment for the payment of money aggregating not in excess of $10,000,000, (11) Mortgages created by or relating to any legal proceeding or final judgment which at the time is being contested in good faith by appropriate proceedings, provided enforcement of any lien has been stayed, (12) easements or similar encumbrances, the existence of which do not impair the use of the property subject thereto for the purposes for which it is held or was acquired, (13) Mortgages securing Indebtedness of a Restricted Subsidiary to the Company or to another Restricted Subsidiary, without in any such case effectively providing concurrently with the issuance, assumption or guarantee of any such Indebtedness that the Securities (together with, if the Company shall so determine, any other 63 119 Indebtedness ranking equally with such Securities) shall be secured equally and ratably with such Indebtedness. (b) Notwithstanding the provisions of Subsection (a) of this Section 1007, the Company or any Restricted Subsidiary may create or assume Mortgages (including Capital Leases) in addition to those permitted by Subsection (a) of this Section 1007, and renew, extend or replace such Mortgages; provided that, at the time of such creation, assumption, renewal, extension or replacement, and after giving effect thereto, Exempted Debt does not exceed 15% of the Consolidated Net Tangible Assets. SECTION 1008. Limitation Upon Sale and Leaseback Transactions ----------------------------------------------- (a) The Company will not, nor will it permit any Restricted Subsidiary to, enter into any arrangements with any Person (other than the Company or a Restricted Subsidiary) providing for the leasing by the Company or any Restricted Subsidiary of any Operating Property or Operating Asset now owned or hereafter acquired which has been or is to be sold or transferred by the Company or such Restricted Subsidiary to such Person with the intention of taking back a lease of such property (a "Sale and Leaseback Transaction") unless (i) such transaction involves a lease or right to possession or use for a temporary period not to exceed three years following such sale, by the end of which it is intended that the use of such property by the lessee will be discontinued, (ii) the Company or a Restricted Subsidiary would, on the effective date of such transaction, be entitled, pursuant to the provisions of Section 1007(a) hereof, to issue, assume or guarantee Indebtedness secured by a Mortgage on such property at least equal in amount to the Attributable Debt in respect of such Sale and Leaseback Transaction without equally and ratably securing the Securities, or (iii) if the proceeds of such sale (a) are equal to or greater than the fair market value of such property, and (b) are applied within 360 days to either the purchase or acquisition of fixed assets or equipment used in the operation of its business or the construction of improvements on real property or to the repayment of Senior Funded Debt of the Company or any Restricted Subsidiary. (b) Notwithstanding the provisions of Subsection (a) of this Section 1008, the Company or any Restricted Subsidiary may enter into Sale and Leaseback Transactions in addition to those permitted by paragraph (a) of this Section 1008, and without any obligation to retire any Senior Funded Debt of the Company or a Restricted Subsidiary; provided that, at the time of 64 120 entering into such Sale and Leaseback Transactions, and after giving effect thereto, Exempted Debt does not exceed 15% of Consolidated Net Tangible Assets. SECTION 1009. Limitations Upon Permitting Restricted Subsidiaries to become Non-Restricted Subsidiaries and Non-Restricted Subsidiaries to become Restricted Subsidiaries. --------------------------------------------------- (a) The Company will not permit any Restricted Subsidiary to be designated as or otherwise to become a Non-Restricted Subsidiary unless (i) the principal purpose of such Subsidiary is to engage in financing the operations of the Company or its Subsidiaries or both, and (ii) immediately after such Restricted Subsidiary becomes a Non-Restricted Subsidiary, it will not own, directly or indirectly, any capital stock of any other Restricted Subsidiary or any Mortgage on property of any other Restricted Subsidiary. The Company will promptly redesignate any Non-Restricted Subsidiary which ceases to meet the conditions specified above as a Restricted Subsidiary. (b) Promptly after the adoption of any Board Resolution designating a Restricted Subsidiary as a Non-Restricted Subsidiary or a Non-Restricted Subsidiary as a Restricted Subsidiary, or the making of any election by duly authorized officers of the Company to effect any such designation, a copy of such Board Resolutions or a written statement as to such designation signed by such officers shall be filed with the Trustee, together with an Officers' Certificate stating that the provisions of this Section 1009 have been complied with in connection with such designation, and, in case of the designation of a Restricted Subsidiary as a Non-Restricted Subsidiary, setting forth the name of each other Subsidiary (if any) which has become a Non-Restricted Subsidiary as a result of such designation. SECTION 1010. Defeasance of Certain Obligations. ---------------------------------- The Company may omit to comply with any term, provision or condition set forth in Section 1007 through 1009, inclusive, provided that the following conditions shall have been satisfied: (1) With reference to this Section 1010, the Company has deposited or caused to be irrevocably deposited (except as provided in Section 403) with the Trustee as trust funds in trust, specifically pledged as security for, and dedicated solely to, the benefit of the Holders cash in U.S. dollars (or such other money or currencies as shall then be 65 121 legal tender in the United States) and/or U.S. Government Obligations, which through the payment of interest and principal in respect thereof, in accordance with their terms, will provide (and without reinvestment and assuming no tax liability will be imposed on such Trustee), not later than one day before the due date of any payment of money, an amount in cash, sufficient, in the opinion of a nationally recognized firm of independent certified public accountants expressed in a written certification thereof delivered to the Trustee, to pay and discharge each installment of principal of and any interest on all the Securities on the dates such installments of interest or principal are due; (2) Such deposit will not result in a breach or violation of, or constitute a default under, this Indenture or any other agreement or instrument to which the Company is a party or by which it is bound which breach, violation or default, in the case of any other such agreement or instrument, individually or in the aggregate, would have a material adverse effect upon the business of the Company and its Restricted Subsidiaries taken as a whole or upon the Company's ability to perform its obligations under this Section; (3) No Event of Default or event which with notice or lapse of time would become an Event of Default (including by reason of such deposit) shall have occurred and be continuing on the date of such deposit; (5) The Company has delivered to the Trustee an Opinion of Counsel to the effect that Holders will not recognize income, gain or loss for Federal income tax purposes as a result of such deposit and defeasance of certain obligations and will be subject to Federal Income tax on the same amounts and in the same manner and at the same times as would have been the case if such deposit and defeasance had not occurred; and (6) 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 defeasance contemplated by this Section have been complied with. SECTION 1011. Waiver of Certain Covenants. ---------------------------- The Company may omit in any particular instance to comply with any term, provision or condition set forth in Sections 1007 to 1009, inclusive, if before the time for such compliance the Holders of at least a majority 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, covenant or condition, but no such waiver shall extend to or affect such term, provision, covenant or condition except to the extent so expressly waived and, until such waiver shall become effective, the 66 122 obligations of the Company and the duties of the Trustee in respect of any such term, provision, covenant or condition shall remain in full force and effect. ARTICLE XI REDEMPTION OF SECURITIES Section 1101. No Right of Redemption. ----------------------- The Securities may not be redeemed prior to their Stated Maturity. * * * 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. 67 123 IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be duly executed, and their respective corporate seal to be hereunto affixed and attested, all as of the day and year first above written. THE PEP BOYS-MANNY, MOE & JACK By:___________________________________ Attest: [SEAL] FIRST FIDELITY BANK, NATIONAL ASSOCIATION By:___________________________________ Attest: [SEAL] 68 124 STATE OF _____________ ) : ss.: COUNTY OF ____________ ) On the _____ day of ____________, 19___, before me personally came ____________, to me known, who, being by me duly sworn, did depose and say that he is ____________ of The Pep Boys-Manny, Moe & Jack, one of the corporations described in and which executed the foregoing instrument; that he knows the seal of said corporation; that the seal affixed to said instrument is such corporate seal; that it was so affixed by authority of the Board of Directors of said corporation; and that he signed his name thereto by like authority. ------------------------------ STATE OF _____________ ) : ss.: COUNTY OF ____________ ) On the _____ day of ____________, 19___, before me personally came ____________, to me known, who, being by me duly sworn, did depose and say that he is ____________ of First Fidelity Bank, National Association, one of the corporations described in and which executed the foregoing instrument; that he knows the seal of said corporation; that the seal affixed to said instrument is such corporate seal; that it was so affixed by authority of the Board of Directors of said corporation; and that he signed his name thereto by like authority. ------------------------------ EX-5 4 LEGAL OPINION 125 [WILLKIE FARR & GALLAGHER LETTERHEAD] June 5, 1995 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 (File No. 33-59859) (the "Registration Statement") relating to the Notes due 2005 of the Company (the "Notes"). 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, as representative of the several underwriters (the "Underwriters"). 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 and that the provisions of all applicable federal and state securities laws have been complied with. Based upon and subject to the foregoing, we are of the opinion that 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 Underwriters, will be binding obligations of the Company and entitled to the benefits of the Indenture. We hereby consent to the filing of this opinion as an exhibit to the Registration Statement, to the incorporation by reference of this opinion in any abbreviated registration statement in connection with the Notes and to the reference to our firm under the caption "Legal Matters" in the Registration Statement. Very truly yours, /s/ Willkie Farr & Gallagher ---------------------------- Willkie Farr & Gallagher EX-23 5 EXHIBIT 23.2 126 EXHIBIT 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 20, 1995, appearing in the Annual Report on Form 10-K of The Pep Boys -- Manny, Moe and Jack for the year ended January 28, 1995 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 June 1, 1995 EX-25 6 FORM T-1 127 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 (Exact Name of Trustee as Specified in its Charter) 22-1147033 (I.R.S. Employer Identification No.) 202A SOUTH BRIDGE STREET, ELKTON, MARYLAND (Address of Principal Executive Offices) 21921 (Zip Code) FIRST FIDELITY BANK, NATIONAL ASSOCIATION 123 SOUTH BROAD STREET PHILADELPHIA, PA 19109 ATTENTION: CORPORATE TRUST ADMINISTRATION (215) 985-6000 (Name, address and telephone number of Agent for Service) The Pep Boys-Manny, Moe & Jack (Exact Name of Obligor as Specified in its Charter) Pennsylvania (State or other jurisdiction of Incorporation or Organization) 23-0962915 (I.R.S. Employer Identification No.) 3111 West Allegheny Avenue,Philadelphia (Address of Principal Executive Offices) 19132 (Zip Code) NOTES DUE 2005 (Title of Indenture Securities) 128 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. 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. 129 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 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. 130 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 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 date --- dated January 11, 1994, evidencing the authority of the trustee to transact business.* 3. Copy of the Certification of Fiduciary Powers of the trustee by the --- Office of the Comptroller of the Currency dated July 24, 1992.* 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. --- X 7. Copy of report of condition of the trustee at the close of business --- on March 31, 1995, published pursuant to the requirements of its supervising authority. 131 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 lOa-4 under the Act. - Not Applicable ---------- *Previously filed with the Securities Exchange Commission on February 11, 1994 as an Exhibit to Form T-1 in connection with Registration Statement Number 22-73340 and **previously filed with the Securities Exchange Commission on April 14, 1995 with Registration Statement Number 33-58625 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. 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 and Qualification to be signed on its behalf by the undersigned, thereunto duly authorized, all in the City of Philadelphia and Commonwealth of Pennsylvania, on the 2nd day of June, 1995. FIRST FIDELITY BANK, NATIONAL ASSOCIATION By: /s/ Alan G. Finn ------------------------ Alan G. Finn Asst. Vice President 132 EXHIBIT 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, Notes due 2005, First Fidelity Bank, National Association, hereby consents 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/ Alan G. Finn ------------------------ Alan G. Finn Asst. Vice President Philadelphia, Pennsylvania June 2, 1995 133 EXHIBIT 7 REPORT OF CONDITION Consolidating domestic and foreign subsidiaries of the First Fidelity Bank, National Association of Elkton in the state of Maryland, at the close of business on March 31, 1995, 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 ........ 1,599,546 Interest-bearing balances ................................. 131,786 Securities Hold-to-maturity securities ............................... 3,154,827 Available-for-sale securities ............................. 3,271,974 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 ........................................ 10,000 Securities purchased under agreements to resell ........... 207,267 Loans and lease financing receivables: Loan and leases, net of unearned income ........... 22,371,585 LESS: Allowance for loan and lease losses ......... 517,965 LESS: Allocated transfer risk reserve ............. 0 Loans and leases, net of unearned income, allowance, and reserve ...................................................... 21,853,620 Assets held in trading accounts .............................. 70,275 Premises and fixed assets (including capitalized leases) ..... 390,023 Other real estate owned ...................................... 135,803 Investment in unconsolidated subsidiaries and associated companies .................................................... 13,434 Customer's liability to this bank on acceptances outstanding . 180,053 Intangible assets ............................................ 721,391 Other assets ................................................. 890,755 Total assets ................................................. 32,630,754 LIABILITIES Deposits: In domestic offices .................................... 25,014,990 Noninterest-bearing ...................... 4,531,531 Interest-bearing ......................... 20,483,459 In foreign offices, Edge and Agreement subsidiaries, and IBFs ............................................... 1,106,660 Noninterest-bearing ...................... 11,811 Interest-bearing ......................... 1,094,849 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 ................................. 1,044,014 Securities sold under agreements to repurchase ......... 1,421,199 Demand notes issued to the U.S. Treasury ..................... 0 Trading liabilities .......................................... 0 Other borrowed money: With original maturity of one year or less ................... 16,956 with original maturity of more than one year ........... 635 Mortgage indebtedness and obligations under capitalized leases 16,899 Bank's liability on acceptances executed and outstanding ..... 180,795 Subordinated notes and debentures ............................ 175,000 Other liabilities ............................................ 620,629 Total liabilities ............................................ 29,597,777 Limited-life preferred stock and related surplus ............. 0 EQUITY CAPITAL Perpetual preferred stock and related surplus ................ 160,540 Common Stock ................................................. 452,156 Surplus ...................................................... 1,300,080 Undivided profits and capital reserves ....................... 1,167,757 Net unrealized holding gains (losses) on available-for-sale securities .................................................. (47,556) Cumulative foreign currency translation adjustments .......... 0 Total equity capital ......................................... 3,032,977 Total liabilities, limited-life preferred stock and equity capital .................................................... 32,630,754 -----END PRIVACY-ENHANCED MESSAGE-----