-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, GGJiP1VhHM3J36xqOfs+s5+67hiSwFEo6wPb1seokj/yiDTv+Lj4+gBtkaRw6Cf+ QUTuXZQtoSCTMU735XOATg== 0000950116-99-000072.txt : 19990121 0000950116-99-000072.hdr.sgml : 19990121 ACCESSION NUMBER: 0000950116-99-000072 CONFORMED SUBMISSION TYPE: SC 13E4/A PUBLIC DOCUMENT COUNT: 4 FILED AS OF DATE: 19990120 SUBJECT COMPANY: 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: 0201 FILING VALUES: FORM TYPE: SC 13E4/A SEC ACT: SEC FILE NUMBER: 005-12733 FILM NUMBER: 99508679 BUSINESS ADDRESS: STREET 1: 3111 W ALLEGHENY AVE CITY: PHILADELPHIA STATE: PA ZIP: 19132 BUSINESS PHONE: 2152299000 FILED BY: 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: 0201 FILING VALUES: FORM TYPE: SC 13E4/A BUSINESS ADDRESS: STREET 1: 3111 W ALLEGHENY AVE CITY: PHILADELPHIA STATE: PA ZIP: 19132 BUSINESS PHONE: 2152299000 SC 13E4/A 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------------ SCHEDULE 13E-4/A (AMENDMENT NO. 1) ISSUER TENDER OFFER STATEMENT (PURSUANT TO SECTION 13(e)(1) OF THE SECURITIES EXCHANGE ACT OF 1934) ------------------------ THE PEP BOYS - MANNY, MOE & JACK (NAME OF ISSUER) THE PEP BOYS - MANNY, MOE & JACK (NAME OF PERSON(S) FILING STATEMENT) COMMON STOCK, PAR VALUE $1.00 PER SHARE (TITLE OF CLASS OF SECURITIES) 713278109 (CUSIP NUMBER OF CLASS OF SECURITIES) MITCHELL G. LEIBOVITZ CHAIRMAN OF THE BOARD, CHIEF EXECUTIVE OFFICER AND PRESIDENT THE PEP BOYS - MANNY, MOE & JACK 3111 WEST ALLEGHENY AVENUE PHILADELPHIA, PENNSYLVANIA 19132 (215) 229-9000 (NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON AUTHORIZED TO RECEIVE NOTICES AND COMMUNICATIONS ON BEHALF OF THE PERSON(S) FILING STATEMENT) Copies To: DANIEL D. RUBINO, ESQ. WILLKIE FARR & GALLAGHER 787 SEVENTH AVENUE NEW YORK, NEW YORK 10019-6099 (212) 728-8000 DECEMBER 23, 1998 (DATE TENDER OFFER FIRST PUBLISHED, SENT OR GIVEN TO SECURITY HOLDERS) CALCULATION OF FILING FEE ------------------------------------------------------------- ------------------------------------------------------------- TRANSACTION AMOUNT OF VALUATION* FILING FEE ------------------------------------------------------------- $160,000,000 $32,000 ------------------------------------------------------------- ------------------------------------------------------------- * Calculated solely for the purpose of determining the filing fee, based upon the purchase of 10,000,000 shares of Common Stock at the maximum tender offer price per share of $16.00. [X] Check box if any part of the fee is offset as provided by Rule 0-11(a)(2) and identify the filing with which the offsetting fee was previously paid. Identify the previous filing by registration statement number, or the form or schedule and the date of its filing. Amount Previously Paid: $32,000 Form or Registration No. : Schedule 13E-4 Filing Party: The Pep Boys - Manny, Moe & Jack Date Filed: December 23, 1998 This Amendment No. 1 amends and supplements the Issuer Tender Offer Statement on Schedule 13E-4 (the "Statement") dated December 23, 1998 filed by The Pep Boys - Manny, Moe & Jack, a Pennsylvania corporation (the "Company"), relating to the offer by the Company to purchase 10,000,000 shares (or such lesser number of shares as are validly tendered and not properly withdrawn) of its common stock, par value $1.00 per share ("Common Stock") (shares of Common Stock, together with associated common stock purchase rights issued pursuant to the Rights Agreement, dated as of December 5, 1997, between the Company and First Union National Bank, as Rights Agent, are hereinafter referred to as "Shares"), 63,825,110 of which Shares were outstanding as of December 22, 1998, at a price not greater than $16.00 nor less than $13.50 per Share, net to the seller in cash, without interest thereon, upon the terms and subject to the conditions set forth in the Offer to Purchase, dated December 23, 1998 (the "Offer to Purchase"), and in the related Letter of Transmittal, which, as amended or supplemented from time to time, together constitute the "Offer", copies of which are attached as Exhibit (a)(1) and (a)(2), respectively, to the Statement. Capitalized terms defined in the Statement and not otherwise defined herein shall have the meanings specified in the Statement. On January 19, 1999, the Company announced that it has extended the Offer by one business day. The Offer will expire, unless further extended, at 12:00 Midnight, New York City time, on Monday, January 25, 1999. ITEM 2. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION. (a)-(b) The information set forth below is hereby added to Section 2 -- "Purpose of the Offer; Certain Effects of the Offer -- The Financing" of the Offer to Purchase. On January 19, 1999, the Company announced that it has obtained $67,000,000 of commitments for the Financing. The Company will fund the purchase of Shares pursuant to the Offer with the proceeds of a private placement of two tranches of its Senior Notes and, to the extent necessary, with cash on hand. The Financing, which may be increased to up to $77,000,000 aggregate principal amount of Senior Notes, is expected to close promptly after the Expiration Date. The Senior Notes will be issued at par and will pay interest semi-annually. The first tranche, for up to $45,000,000, will mature in 2011 and will bear interest at 7.95% per annum. This tranche will require equal annual principal payments commencing at the end of the eighth year from issuance, resulting in an average life of approximately ten years. The second tranche, for up to $22,000,000 (and which may be increased to $32,000,000), will mature in 2009 and will bear interest at approximately 7.80% per annum, subject to prevailing interest rates on the Expiration Date. This tranche will require equal annual principal payments commencing at the end of the fourth year from issuance, resulting in an average life of approximately seven years. In addition, the interest rates on the Senior Notes is subject to a 0.50% increase for such time as the credit rating of the Company's long-term unsecured debt securities decreases below its current level. 3 The Senior Notes will be callable at any time, at the option of the Company, in whole or in part, at the greater of par and the present value of the future debt service on the Senior Notes. The Senior Notes will not be registered under the Securities Act of 1933, as amended, and may not be offered or sold in the United States absent registration or an applicable exemption from registration requirements. The information set forth in the press release dated January 19, 1999, included herewith as Exhibit (a)(11), in the term sheet for the Senior Notes dated January 15, 1999, included herewith as Exhibit (b)(5), and in the sample commitment letter dated January 19, 1999, included herewith as Exhibit (b)(6), is incorporated herein by reference. ITEM 8. ADDITIONAL INFORMATION. (e) The information set forth in Section 7 -- "Certain Conditions of the Offer" of the Offer to Purchase is amended and restated in its entirety as follows. 7. CERTAIN CONDITIONS OF THE OFFER The Offer is conditioned upon the Company's having obtained waivers under or amendments to certain of its existing credit facilities to permit the Offer. See Section 2, "Purpose of the Offer; Certain Effects of the Offer". In addition, notwithstanding any other provision of the Offer, the Company shall not be required to accept for payment, purchase or pay for any Shares tendered, and may terminate or amend the Offer or may postpone the acceptance for payment of, or the purchase of and the payment for Shares tendered, subject to Rule 13e-4(f) under the Exchange Act, if at any time on or after December 23, 1998 and prior to the Expiration Date (whether any Shares have theretofore been accepted for payment, purchased or paid for pursuant to the Offer) any of the following events shall have occurred (or shall have been determined by the Company to have occurred) that, in the Company's judgment (regardless of the circumstances giving rise thereto, including an action or omission to act by the Company), makes it inadvisable to proceed with the Offer or with such acceptance for payment or payment: (a) there shall have been threatened, instituted or pending any action or proceeding by any government or governmental, regulatory or administrative agency, authority or tribunal or any other person, domestic or foreign, before any court, authority, agency or tribunal that directly or indirectly: (i) challenges the making of the Offer, the acquisition of some or all of the Shares pursuant to the Offer or otherwise relates in any manner to the Offer; or (ii) in the Company's reasonable judgment, could materially adversely affect the business, condition (financial or other), income, operations or prospects of the Company and its subsidiaries, or otherwise materially impair in any way the contemplated future conduct of the business of the Company or any of its subsidiaries or materially impair the contemplated benefits of the Offer to the Company; 4 (b) there shall have been any action threatened, pending or taken, or approval withheld, or any statute, rule, regulation, judgment, order or injunction threatened, proposed, sought, promulgated, enacted, entered, amended, enforced or deemed to be applicable to the Offer or the Company of any of its subsidiaries, by any court or any authority, agency, or tribunal that, in the Company's reasonable judgment, would or might directly or indirectly: (i) make the acceptance for payment of, or payment for, some or all of the Shares illegal or otherwise restrict or prohibit consummation of the Offer or otherwise relates in any manner to the Offer; (ii) delay or restrict the ability of the Company, or render the Company unable, to accept for payment or pay for some or all of the Shares; (iii) materially impair the contemplated benefits of the Offer to the Company; or (iv) materially adversely affect the business, condition (financial or other), income, operations or prospects of the Company and its subsidiaries, taken as a whole, or otherwise materially impair in any way the contemplated future conduct of the business of the Company or any of its subsidiaries; (c) there shall have occurred: (i) any general suspension of trading in, or limitation on prices for, securities on any national securities exchange or in the over-the-counter market; (ii) the declaration of any banking moratorium or any suspension of payments in respect of banks in the United States (whether or not mandatory); (iii) the commencement of a war, armed hostilities or other international or national crises directly or indirectly involving the United States; (iv) any limitation (whether or not mandatory) by any governmental, regulatory or administrative agency or authority on, or any event that, in the Company's reasonable judgment, might affect, the extension of credit by banks or other lending institutions in the United States; (v) any significant decrease in the market price of the Shares or in the market prices of equity securities generally or any change in the general political, market, economic or financial conditions in the United States or abroad that could, in the reasonable judgment of the Company, have a material adverse effect on the business, condition (financial or otherwise), income, operations or prospects of the Company and its subsidiaries, taken as a whole, or on the trading in the Shares or on the proposed financing for the Offer; (vi) in the case of any of the foregoing existing at the time of the commencement of the Offer, a material acceleration or worsening thereof; or (vii) any decline in either the Dow Jones Industrial Average or the Standard and Poor's Index of 500 Industrial Companies by an amount in excess of 10% measured from the close of business on December 22, 1998; (d) a tender or exchange offer with respect to some or all of the Shares (other than the Offer), or a merger or acquisition proposal for the Company, shall have been proposed, announced or made by another person or shall have been publicly disclosed, or any person or group shall have filed a Notification and Report Form under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 reflecting an intent to acquire the Company or any of the Shares, or the Company shall have learned that any person or "group" (within the meaning of Section 13(d)(3) of the Exchange Act) shall have acquired or proposed to acquire beneficial ownership of more than 5% of the 5 outstanding Shares, or any new group shall have been formed that beneficially owns more than 5% of the outstanding Shares; or (e) any change or changes shall have occurred, be pending or threatened or be proposed, which have affected or could affect the business, scope, condition (financial or otherwise), assets, income, level of indebtedness, operations, prospects, stock ownership or capital structure of the Company or its subsidiaries which, in the Company's reasonable judgment, is or may be material to the Company or its subsidiaries. The foregoing conditions are for the sole benefit of the Company and may be asserted by the Company regardless of the circumstances (including any action or inaction by the Company) giving rise to any such condition, and may be waived by the Company, in whole or in part, at any time and from time to time in its reasonable discretion. The Company's failure at any time to exercise any of the foregoing rights shall not be deemed a waiver of any such right and each such right shall be deemed an ongoing right which may be asserted at any time and from time to time. Any determination by the Company concerning the events described above will be final and binding on all parties. ITEM 9. MATERIAL TO BE FILED AS EXHIBITS. (a)(11) Form of Press Release issued by the Company, dated January 19, 1999 (b)(5) Term Sheet for the Senior Notes, dated January 15, 1999. (b)(6) Sample Commitment Letter relating to Senior Notes, dated January 19, 1999. 6 SIGNATURE After due inquiry and to the best of my knowledge and belief, I certify that the information set forth in this Amendment to Schedule 13E-4 is true, complete and correct. THE PEP BOYS - MANNY, MOE & JACK By: /s/ Mitchell G. Leibovitz ------------------------------------- Mitchell G. Leibovitz Chairman of the Board, Chief Executive Officer and President Dated: January 20, 1999 EXHIBIT INDEX Exhibit No. Description - ----------- ----------- (a)(11) Form of Press Release issued by the Company, dated January 19, 1999. (b)(5) Term Sheet for the Senior Notes, dated January 15, 1999. (b)(6) Sample Commitment Letter relating to Senior Notes, dated January 19, 1999. EX-99.1 2 EXHIBIT (A)(11) [PEP BOYS LOGO] - ------------------------------------------------------------------------------- Press Release New York Stock Exchange "PBY" For Immediate Release - ------------------------------------------------------------------------------- January 19, 1999 Pep Boys Obtains Financing Commitments For Its Self Tender Offer The Pep Boys - Manny, Moe & Jack (NYSE: "PBY") Pursuant to the requirements of the Securities and exchange Commission, announced today the receipt of $67,000,000 in commitments for the financing of its "Dutch Auction" issuer tender offer to purchase for cash up to 10,000,000 shares of its common stock at a purchase price not greater than $16.00 nor less than $13.50 per share. The Company will fund the purchase with the proceeds of a private placement of two tranches of its Senior Notes and, to the extent necessary, with cash on hand. The private placement, which may be increased to up to $77,000,000 aggregate principal amount of Senior Notes, is expected to close promptly after the expiration of the tender offer. Pursuant to the requirements of the Securities and Exchange Commission, the Company has extended the tender offer by one business day. The tender offer will expire, unless further extended, at 12:00 Midnight, New York City time, on Monday, January 25, 1999. The Senior Notes will be issued at par and will pay interest semi-annually. The first tranche, for up to $45,000,000, will mature in 2011 and will bear interest at 7.95% per annum. The second tranche, for up to $22,000,000 (and which may be increased to $32,000,000), will mature in 2009 and will bear interest at approximately 7.80%, subject to prevailing interest rates on the expiration date of the tender offer. In addition, the interest rates on the Senior Notes are subject to a 0.50% increase for such time as the credit rating of the Company's long-term unsecured debt securities decreases below its current level. The Senior Notes will not be registered under the Securities Act of 1933, as amended, and may not be offered or sold in the United States absent registration or an applicable exemption from registration requirements. - ------------------------------------------------------------------------------- Contact: Nancy R. Kyle, Director of Investor Relations [Pep Boys logo 3111 West Allegheny Avenue, Philadelphia, PA 19132 with caricatures] Phone: 215-430-9720 Fax: 215-223-5267 E-mail address: Nancy_Kyle@pepboys.com Internet: http://www.pepboys.com EX-99.2 3 EXHIBIT (B)(5) Summary of Proposed Terms Draft 1/15/99 Up to $75,000,000 ___% Senior Notes due 20__ 1. Issuer The Pep Boys - Manny, Moe & Jack (the "Company") 2. Issue Up to $75,000,000 ___% Senior Notes due 20__ (the "Notes") 3. Coupon ___% per annum, payable semiannually; provided that if the Company's long-term unsecured indebtedness is not rated at least Baa3 by Moody's or BBB- by Standard & Poor's (the "Targeted Ratings") at any time on or prior to [June 30, 2001], the coupon rate will be increased by 50 basis points and shall remain at such level unless and until the Company regains both of the Targeted Ratings (or higher credit ratings by Moody's and Standard & Poor's) with respect to its long-term unsecured indebtedness. 4. Offering Price 100% of the principal amount 5. Closing Date January 26, 1999, or a later date on or before February 28, 1999 selected by the Company, provided that the Company will not be obligated to close on Notes in an amount exceeding the purchase price of the Company's common stock tendered pursuant to the Dutch auction commenced on December 23, 1998. 6. Use of Proceeds The net proceeds from the sale of the Notes will be used to repurchase stock of the Company and for general corporate purposes. 7. Ratings Baa3/BBB- by Moody's and Standard & Poor's respectively. 8. Mandatory Redemption The Notes will require equal annual principal payments commencing at the end of the ____ year, resulting in an average life of approximately ___ years. 9. Optional Redemption The Notes will be callable at any time, at the option of the Company, in whole or in part, at a price equal to the greater of par and the present value of the future debt service on the Notes, discounted at the then current yield on U.S. Treasury securities of a maturity comparable to the remaining weighted average life of the Notes plus 50 basis points (the "Make-Whole Price"). 10. Limitation on Indebtedness; Subsidiary Indebtedness (i) The Company will not permit the Total Net Indebtedness to EBITDA Ratio determined on a pro forma basis (i.e., giving effect in the calculation of EBITDA to acquisitions and dispositions occurring during a given four-quarter period as of the beginning of such period) to exceed (1) 5.0 to 1 from [July 31,] 1999 to and including [January 29, 2000], (2) 4.5 to 1 from [January 30,] 2000 to and including [January 27,] 2001, and (3) 4.0 to 1 thereafter; provided that (A) on [July 31,] 1999 EBITDA shall be calculated by annualizing EBITDA for the Company's fiscal quarters ending [May 1], 1999 and [July 31], 1999 and (B) on [October 30], 1999 EBITDA shall be calculated by annualizing EBITDA for the Company's fiscal quarters ending on [May 1], [July 31], and [October 30], 1999. (ii) The Company will not permit any Subsidiary to create, assume, incur, guarantee or otherwise become liable in respect of any Indebtedness except: (a) Indebtedness secured by Liens permitted by Section (ii) or (iii) of the Limitations on Liens; (b) guarantees by Subsidiaries in respect of indebtedness outstanding under the Company's main Bank Credit Facility not exceeding $200,000,000 and of the Notes, and guarantees of other unsecured Indebtedness of the Company by Subsidiaries which have also guaranteed the Notes and guarantees of secured Indebtedness of the Company by Subsidiaries which have also guaranteed the Notes but only if and for so long as the Notes are secured equally and ratably with or prior to such secured Indebtedness (pursuant to documentation in form and substance reasonably satisfactory to the Required Holders); (c) In the case of any person that after the Closing Date becomes a Subsidiary or is consolidated with or merged with or into a Subsidiary or sells, leases or otherwise disposes of all of its property to a Subsidiary, Indebtedness outstanding at the time such person becomes a Subsidiary or is so consolidated or merged or effects such sale, lease or other disposition of property (and not created in anticipation thereof); (d) Indebtedness owing to the Company or a Subsidiary; and (e) other Indebtedness, provided that immediately after giving effect thereto and to the application of the proceeds of such Indebtedness the sum (without duplication) of (1) the aggregate unpaid principal amount of Indebtedness (including Capital Lease Obligations) of the Company secured by Liens permitted by Section (v) of the Limitation on Liens plus (2) the aggregate unpaid principal amount of Indebtedness of all Subsidiaries (other than Indebtedness permitted by Section (a), (b), (c) or (d) above) plus (3) the aggregate Attributable Debt in connection with all sale and leaseback transactions of the Company and its Subsidiaries entered into after the Closing Date in accordance with Section (i) of the Limitation on Sale and Leaseback Transactions, does not exceed 10% of Consolidated Capitalization. 11. Limitation on Liens The Company will not, and will not permit any Subsidiary to, create, assume, incur or suffer to exist any Lien upon or with respect to any property or assets, whether now owned or hereafter acquired, securing any Indebtedness, without making effective provision (pursuant to documentation in form and substance reasonably satisfactory to the Required Holders) whereby the Notes shall be secured by such Lien equally and ratably with or prior to any and all Indebtedness to be secured thereby, provided that nothing in this Limitation on Liens shall prohibit: (i) Liens in respect of property of the Company or a Subsidiary existing on the Closing Date and extensions, renewals and replacements of such Liens (including successive extensions, renewals and replacements), provided that the principal amount of Indebtedness (or the maximum commitment therefor) secured by any such Lien is not increased and such Lien does not extend to or cover any property other than the property covered by such Lien on the Closing Date; (ii) Liens in respect of property acquired or constructed by the Company or a Subsidiary after the Closing Date, which are created at the time of or within 360 days after acquisition or completion of construction of such property to secure Indebtedness assumed or incurred to finance all or any part of the purchase price or cost of construction of such property, provided that in any such case: (a) no such Lien shall extend to or cover any other property of the Company or such Subsidiary, as the case may be, and (b) the aggregate principal amount of Indebtedness secured by all such Liens in respect of any such property shall not exceed the cost of such property and any improvements then being financed; (iii) Liens in respect of property acquired by the Company or a Subsidiary after the Closing Date, existing on such property at the time of acquisition thereof (and not created in anticipation thereof), or, in the case of any person that after the Closing Date becomes a Subsidiary or is consolidated with or merged with or into the Company or a Subsidiary or sells, leases or otherwise disposes of all or substantially all of its property to the Company or a Subsidiary, Liens existing at the time such person becomes a Subsidiary or is so consolidated or merged or effects such sale, lease or other disposition of property (and not created in anticipation thereof), provided that in any such case no such Lien shall extend to or cover any other property of the Company or such Subsidiary, as the case may be; (iv) Liens securing Indebtedness owed by a Subsidiary to the Company or to a Subsidiary; and (v) Liens which would otherwise not be permitted by Sections (i) through (iv) above, securing additional Indebtedness of the Company or a Subsidiary, provided that after giving effect thereto and to the application of the proceeds of such Indebtedness the sum (without duplication) of (a) the aggregate unpaid principal amount of Indebtedness (including Capitalized Lease Obligations) of the Company secured by such Liens permitted by this Section plus (b) the aggregate unpaid principal amount of Indebtedness of Subsidiaries (other than Indebtedness permitted by Section (ii) (a), (b), (c) or (d) of the Limitation on Indebtedness; Subsidiary Indebtedness) plus (c) the aggregate Attributable Debt in connection with all sale and leaseback transactions of the Company and its Subsidiaries entered into after the Closing Date in accordance with the provisions of Section (i) of the Limitation on Sale and Leaseback Transactions, does not exceed 10% of Consolidated Capitalization. 12. Limitation on Sale and Leaseback Transactions The Company will not, and will not permit any Subsidiary to, sell, transfer or otherwise dispose of (collectively, a "transfer") any asset on terms whereby the asset or a substantially similar asset is or will be leased or reacquired by the Company or any Subsidiary over a period in excess of three years, unless either (i) after giving effect to such transaction and the incurrence of Attributable Debt in respect thereof and to the application of the proceeds of such Attributable Debt, the sum (without duplication) of (a) the aggregate unpaid principal amount of Indebtedness (including Capitalized Lease Obligations) of the Company secured by Liens permitted by Section (v) of the Limitation on Liens plus (b) the aggregate unpaid principal amount of Indebtedness of Subsidiaries (other than Indebtedness permitted by section (ii) (a), (b), (c) or (d) of the Limitation on Indebtedness; Subsidiary Indebtedness) plus (c) the aggregate Attributable Debt in connection with all sale and leaseback transactions of the Company and its Subsidiaries entered into after the Closing Date in accordance with the provisions of this Section (i), does not exceed 10% of Consolidated Capitalization, or (ii) the net proceeds realized from the transfer are applied within 360 days after the receipt thereof to the reinvestment in similar categories of property or assets for use in the business of the Company and its Subsidiaries or to the repayment of unsubordinated Funded Indebtedness of the Company or a Subsidiary. 13. Maintenance of Net Worth The Company will not at any time permit Consolidated Net Worth to be less than the sum of (a) [$525,000,000] plus (b) 25% of Consolidated Net Income for each fiscal year (beginning with the fiscal year ending on January 29, 2000) for which Consolidated Net Income is positive. 14. Limitation on Asset Sales The Company will not and will not permit any Subsidiary to, directly or indirectly, make any sale, transfer, lease (as lessor), loan or other disposition of any property or assets (an "Asset Sale") other than: (i) Asset Sales in the ordinary course of business; (ii) Asset Sales of property or assets by a Subsidiary to the Company or a Subsidiary; or (iii) other Asset Sales, provided that in each case (a) immediately before and after giving effect thereto, no Default or Event of Default shall have occurred and be continuing; and (b) the aggregate net book value of property or assets disposed of in such Asset Sale and all other Asset Sales under this clause (iii) by the Company and its Subsidiaries during the immediately preceding twelve months does not exceed 15% of Consolidated Capitalization (as of the last day of the quarterly accounting period ending on or most recently prior to the last day of such twelve month period), and provided further that for purposes of clause (b) above there shall be excluded the net book value of property or assets disposed of in an Asset Sale if and to the extent such Asset Sale is made for cash, payable in full upon the completion of such Asset Sale, and an amount equal to the net proceeds realized upon such Asset Sale is applied by the Company or such Subsidiary, as the case may be, within 360 days after the effective date of such Asset Sale (A) to the reinvestment in similar categories of property or assets for use in the business of the Company and its Subsidiaries or (B) to the repayment of unsubordinated Indebtedness. 15. Limitation on Merger or Consolidation The Company will not and will not permit any Subsidiary to consolidate with or merge with any other corporation or convey, transfer or lease all or substantially all of its assets in a single transaction or series of transactions to any person except: (i) a Subsidiary may consolidate or merge with any other corporation or convey or transfer all or substantially all of its assets to (a) the Company (provided that the Company shall be the continuing, surviving or acquiring corporation (the "surviving corporation")) or a then existing Subsidiary, or (b) any other person in an Asset Sale involving all of the outstanding stock or all or substantially all of the assets of such Subsidiary, in either case subject to the Limitations on Asset Sales; provided that if such Subsidiary is at the time a guarantor of the Notes and it is not the surviving corporation, the surviving corporation shall have (1) executed and delivered to each holder of a Note its assumption of the due and punctual performance and observance of all obligations of such Subsidiary under its guarantee of the Notes, and (2) caused to be delivered to each holder of a Note an opinion of counsel reasonably satisfactory to the Required Holders to the effect that all agreements or instruments effecting such assumption are enforceable in accordance with their terms and comply with the terms of the Note Purchase Agreement and such guarantee of the Notes; and (ii) the Company may consolidate or merge with any other corporation or convey or transfer all or substantially all of its assets to a corporation organized and existing under the laws of the United States or any State thereof, provided that (a) if the Company is not the surviving corporation, the surviving corporation shall have (1) executed and delivered to each holder of a Note its assumption of the due and punctual performance and observance of all obligations of the Company under the Note Purchase Agreement and the Notes and (2) caused to be delivered to each holder of a Note an opinion of counsel reasonably satisfactory to the Required Holders to the effect that all agreements or instruments effecting such assumption are enforceable in accordance with their terms and comply with the terms of the Note Purchase Agreement, and (b) immediately after giving effect to such transaction, no Default or Event of Default shall have occurred and be continuing. 16. Limitation on Transactions with Affiliates The Company will not and will not permit any Subsidiary to enter into directly or indirectly any Material transaction or Material group of related transactions (including without limitation the purchase, lease, sale or exchange of properties of any kind or the rendering of any service) with any Affiliate (other than the Company or another Subsidiary), except pursuant to the reasonable requirements of the Company's or such Subsidiary's business and upon fair and reasonable terms no less favorable to the Company or such Subsidiary than would be obtainable in a comparable arm's-length transaction with a person not an Affiliate. 17. Events of Default An "Event of Default" shall exist if any of the following conditions or events shall occur and be continuing: (i) the Company defaults in the payment of any principal or make-whole amount, if any, on any Note when the same becomes due and payable, whether at maturity or at a date fixed for prepayment or by declaration or otherwise; or (ii) the Company defaults in the payment of any interest on any Note for more than five business days after the same becomes due and payable; or (iii) the Company defaults in the performance of or compliance with certain requirements pertaining to the prompt delivery of the notice of Default or Event of Default or those contained in Limitation on Indebtedness; Subsidiary Indebtedness, Limitation on Liens, Limitation on Sale and Leaseback Transactions, Maintenance of Net Worth, Limitation on Asset Sales and Limitation on Merger or Consolidation (and, in the case of any such default under Maintenance of Net Worth, such default shall have continued for a period of 30 days after a Responsible Officer obtains knowledge thereof if and so long as the Company is proceeding diligently and in good faith, by issuing equity securities or otherwise, to remedy such default during such 30-day period); or (iv) the Company defaults in the performance of or compliance with any other term contained in the Note Purchase Agreement (other than those referred to in paragraphs (i), (ii) and (iii) of this Section) and such default is not remedied within 30 days after a Responsible Officer obtains knowledge of such default; or (v) any representation or warranty made in writing by or on behalf of the Company or any Subsidiary or by any officer of the Company or any Subsidiary in the Note Purchase Agreement or in any writing furnished in connection with the transactions contemplated thereby proves to have been false or incorrect in any material respect on the date as of which made; or (vi) (a) the Company or any Subsidiary is in default (as principal or as guarantor or other surety) in the payment of any principal of or premium or make-whole amount or interest on any Indebtedness (other than the Notes) that is outstanding in an aggregate principal amount of at least $20,000,000 beyond any period of grace provided with respect thereto, or (b) the Company or any Subsidiary is in default in the performance of or compliance with any term of any evidence of any Indebtedness outstanding in an aggregate principal amount of at least $20,000,000 or of any mortgage, indenture or other agreement relating thereto or any other condition exists, and as a consequence of such default or condition such Indebtedness has become, or has been declared, due and payable before its stated maturity or before its regularly scheduled dates of payment, or (c) as a consequence of the occurrence or continuation of any event or condition (other than the passage of time or the right of the holder of Indebtedness to convert such Indebtedness into equity interests or a sale of assets or other transaction that is permitted if made in connection with a repayment of Indebtedness), the Company or any Subsidiary has become obligated to purchase or repay any Indebtedness outstanding in an aggregate principal amount of at least $20,000,000 before its regular maturity or before its regularly scheduled dates of payment; or (vii) the Company or any Subsidiary (a) is generally not paying, or admits in writing its inability to pay, its debts as they become due, (b) files, or consents by answer or otherwise to the filing against it of, a petition for relief or reorganization or arrangement or any other petition in bankruptcy, for liquidation or to take advantage of any bankruptcy, insolvency, reorganization, moratorium or other similar law of any jurisdiction, (c) makes an assignment for the benefit of its creditors, (d) consents to the appointment of a custodian, receiver, trustee or other officer with similar powers with respect to it or with respect to any substantial part of its property, (e) is adjudicated as insolvent or to be liquidated, or (f) takes corporate action for the purpose of any of the foregoing; or (viii) a court or governmental authority of competent jurisdiction enters an order appointing, without consent by the Company or any Subsidiary, a custodian, receiver, trustee or other officer with similar powers with respect to it or with respect to any substantial part of its property, or constituting an order for relief or approving a petition for relief or reorganization or any other petition in bankruptcy or for liquidation or to take advantage of any bankruptcy or insolvency law of any jurisdiction, or ordering the dissolution, winding-up or liquidation of the Company or any such Subsidiary, or any such petition shall be filed against the Company or any such Subsidiary and such petition shall not be dismissed within 90 days; or (ix) a final judgment or judgments for the payment of money aggregating in excess of $20,000,000 are rendered against one or more of the Company and its Subsidiaries which judgments are not, within 60 days after entry thereof, bonded, paid, discharged or stayed pending appeal, or are not discharged within 60 days after the expiration of such stay; (x) or certain Material ERISA-related conditions and events. 18. Repurchase of Notes The Company may repurchase the Notes in whole or in part at any time, provided that (i) the offer to repurchase is made pro rata to all holders of the Notes and remains outstanding for a reasonable period of time (not to be less than 30 days), (ii) any Notes so repurchased are thereafter canceled and (iii) the remaining average life of the Notes not repurchased will remain unchanged. 19. Amendments Any provision of the Note Purchase Agreement or the Notes may be amended or waived with the written consent of the Required Holders except that each holder must consent in writing to any amendment or waiver which changes the interest rate or the maturity, prepayment or redemption provisions of the Notes or the percentage required to amend the Note Purchase Agreement or the Notes. 20. Definitions "Attributable Debt" means, as to any particular lease relating to a sale and leaseback transaction occurring after the Closing Date, the total amount of rent (discounted semiannually from the respective due dates thereof at the interest rate implicit in such lease) required to be paid by the lessee under such lease during the remaining term thereof. "Capital Lease" means, at any time, a lease with respect to which the lessee is required concurrently to recognize the acquisition of an asset and the incurrence of a liability in accordance with GAAP. "Capitalized Lease Obligations" means, with respect to any person, all outstanding obligations of such person in respect of Capital Leases, taken at the capitalized amount thereof, accounted for as indebtedness in accordance with GAAP. "Consolidated Capitalization" means, at any date, the sum of (i) Consolidated Indebtedness plus (ii) Consolidated Net Worth plus (iii) deferred taxes, all as determined on a consolidated basis for the Company and its Subsidiaries in accordance with GAAP. "Consolidated Indebtedness" means, at any date, all Indebtedness of the Company and its Subsidiaries determined on a consolidated basis in accordance with GAAP. "Consolidated Interest Expense" means, for any period, the sum for the Company and its Subsidiaries, determined on a consolidated basis in accordance with GAAP, of all amounts which would be deducted in computing Consolidated Net Income for such period on account of interest on Indebtedness (including imputed interest in respect of Capitalized Lease Obligations and amortization of debt discount and expense). "Consolidated Net Income" means, for any period, the net income of the Company and its Subsidiaries for such period, determined on a consolidated basis in accordance with GAAP, excluding (i) the proceeds of any life insurance policy, (ii) any gains arising from (a) the sale or other disposition of any assets (other than current assets) to the extent that the aggregate amount of the gains during such period from the sale or other disposition of assets (other than current assets) exceeds the aggregate amount of the losses during such period from the sale, abandonment or other disposition of assets (other than current assets), (b) any write-up of assets or (c) the acquisition of outstanding securities of the Company or any Subsidiary, (iii) any amount representing any interest in the undistributed earnings of any person other than a Subsidiary, (iv) any earnings, prior to the date of acquisition, of any person acquired in any manner, and any earnings of any Subsidiary acquired prior to its becoming a Subsidiary, (v) any earnings of a successor to or transferee of the assets of the Company prior to its becoming such successor or transferee, (vi) any deferred credit (or amortization of a deferred credit) arising from the acquisition of any person, and (vii) any extraordinary gains not covered by clause (ii) above to the extent the aggregate amount of such extraordinary gains during such period exceeds the aggregate amount of extraordinary losses during such period not arising from the sale, abandonment or other disposition of assets (other than current assets). "Consolidated Net Indebtedness" means, at any date, Consolidated Indebtedness less the aggregate amount (without duplication) of the cash balances at bank and in hand, short-term deposits and other cash equivalents. "Consolidated Net Worth" means, at any date, on a consolidated basis for the Company and its Subsidiaries, (i) the sum of (a) capital stock taken at par or stated value plus (b) capital in excess of par or stated value relating to capital stock plus (c) retained earnings (or minus any retained earning deficit) minus (ii) the sum of treasury stock, capital stock subscribed for and unissued and other contra-equity accounts, all determined in accordance with GAAP. "EBITDA" means, for any period Consolidated Net Income plus all amounts deducted in the computation thereof on account of (i) Consolidated Interest Expense, (ii) depreciation and amortization expenses and other non-cash charges and (iii) income and profit taxes. "Indebtedness" means, with respect to any person at any time, without duplication, (i) its liabilities for borrowed money, (ii) its liabilities for the deferred purchase price of property acquired by such person (excluding accounts payable arising in the ordinary course of business and not overdue but including all liabilities created or arising under any conditional sale or other title retention agreement with respect to any such property), (iii) its Capitalized Lease Obligations, (iv) all liabilities for borrowed money secured by any Lien with respect to any property owned by such person (whether or not it has assumed or otherwise become liable for such liabilities), provided that if such person has not assumed or otherwise become liable for such liabilities the amount of Indebtedness in respect of such liabilities shall not exceed the fair market value of the property securing such liabilities at the time of incurrence thereof, (v) all its liabilities in respect of letters of credit or instruments serving a similar function issued or accepted for its account by banks and other financial institutions (whether or not representing obligations for borrowed money), (vi) swaps of such person, and (vii) any guaranty of such person with respect to liabilities of a type described in any of clauses (i) through (vi) above; provided that, in the case of the Company and its Subsidiaries, Indebtedness shall not include obligations arising from agreements of the Company or a Subsidiary to provide indemnification, adjustment of purchase price, earn-out or other similar obligations, in each case incurred in connection with the acquisition or disposition of any business or assets of the Company or a Subsidiary, but only to the extent such obligations are not required to be accounted for as indebtedness under GAAP. "Material" means material in relation to the business, financial condition, assets or properties of the Company and its Subsidiaries, taken as a whole. "Required Holders" means, at any time, the holders of at least a majority in unpaid principal amount of the Notes at the time outstanding. "Responsible Officer" means the chief financial officer, principal accounting officer, treasurer or comptroller of the Company and any officer of the Company with responsibility for the administration of the relevant portion of the Note Purchase Agreement. "Subsidiary" means, with respect to any person, any corporation or other business entity a majority of the combined voting power of all Voting Stock of which is owned by such person or one or more of its Subsidiaries or such person and one or more of its Subsidiaries. "Total Net Indebtedness to EBITDA Ratio" means, at any date, the ratio of (i) Consolidated Net Indebtedness as at such date to (ii) EBITDA for the four consecutive fiscal quarters then most recently ended determined on a pro forma basis (i.e., giving effect to acquisitions and dispositions occurring during a given four-quarter period as of the beginning of such period). "Voting Stock" means, with respect to any person, any shares of stock or other equity interests of any class or classes of such person whose holders are entitled under ordinary circumstances (irrespective of whether at the time stock or other equity interests of any other class or classes shall have or might have voting power by reason of the happening of any contingency) to vote for the election of a majority of the directors, managers, trustees or other governing body of such person. 20. Direct Placement Status The Notes are being distributed to the purchasers in a private placement not registered under the Securities Act of 1933 and in reliance upon the representations of the purchasers that they are purchasing the Notes for investment and not with a view to any resale or distribution thereof. Accordingly, the purchasers should proceed on the assumption that they must bear the economic risk of the investment for an indefinite period, since the Notes may not be sold unless (i) they are subsequently registered under the Securities Act of 1933; (ii) they are sold on a private placement basis; or (iii) they may be sold without registration under the Securities Act of 1933. 21. Counsel The reasonable fees and disbursements of special counsel for the purchasers will be borne by the Company. EX-99.3 4 EXHIBIT (B)(6) [Sample Commitment Letter. Substantially similar letters have been executed by Jefferson-Pilot Life Insurance Company, Lincoln National Investment Management and Ohio National Life Insurance.] Lloyd E. Campbell Managing Director Investment Banking January 19, 1999 Allstate Life Insurance Company 3075 Sanders Road, STE G3A Northbrook, IL 60062-7124 Re: The Pep Boys - Manny, Moe & Jack $75,000,000 ___% Senior Notes due 20__ Attn.: Mr. Jerry D. Zinkula Senior Portfolio Manager This is to confirm our understanding that you will purchase from the issuer, The Pep Boys - Manny, Moe & Jack (the "Company"), $15,000,000 principal amount of a proposed issue of $75,000,000 __% Senior Notes due 2009 at one hundred percent (100%) of par. Confirming our understanding with regard to the coupon, the interest rate will be fixed at a spread of three hundred and ten basis points (+310 bps) over the on-the-run ten (10) year United States Treasury. Your purchase is subject to the negotiation and execution of a note purchase agreement and related documentation mutually satisfactory to you and the Company. The terms of the issue will be substantially as outlined in the Summary of Proposed Terms dated January 15, 1999. Mr. David A. Stagliano (212-530-5368) of the law firm Milbank, Tweed, Hadley & McCloy has been selected to act as independent counsel for the purchasers, and the Company has agreed to pay their fees and disbursements. Counsel is engaged in revising the Note Purchase Agreement and copies will be sent to you for examination in the next day or two. You have advised us that these securities are to be acquired by you, for your own account, for other accounts with respect to which you have sole investment discretion or for the accounts of the investors identified below, for investment and not with a view to the distribution or resale thereof, and that you and any other such accounts have no present intention of distributing or reselling such securities, subject nevertheless to any requirement of law that the disposition of your property shall at all times be and remain within your control. We would appreciate you confirming the foregoing by signing and returning the enclosed duplicate copy of this letter to the attention of the undersigned at Credit Suisse First Boston Corporation, 11 Madison Avenue, New York, New York 10010. Very truly yours, CREDIT SUISSE FIRST BOSTON CORPORATION As agent for The Pep Boys - Manny, Moe & Jack By:____________________ Lloyd E. Campbell Managing Director CONFIRMED: [ ] By:__________________ Title: Please list the names of the purchasers for whom you are acting as agent and with respect to whom you do not have sole investment discretion, and the principal amounts of the purchases to be made by them respectively. -----END PRIVACY-ENHANCED MESSAGE-----