EXHIBIT 1.1
THE PEP BOYS - MANNY, MOE & ▇▇▇▇
4.25% Convertible Senior Notes due June 1, 2007
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PURCHASE AGREEMENT
May 15, 2002
▇▇▇▇▇▇▇, Sachs & Co.,
First Union Securities, Inc.
Advest, Inc.
As representatives of the several Purchasers
named in Schedule I hereto,
c/o Goldman, ▇▇▇▇▇ & Co.,
▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇.
Ladies and Gentlemen:
The Pep Boys - Manny, Moe & ▇▇▇▇, a Pennsylvania corporation (the
"Company"), proposes, subject to the terms and conditions stated herein, to
issue and sell to the Purchasers named in Schedule I hereto (the "Purchasers")
an aggregate of $125,000,000 principal amount of the Convertible Notes,
convertible into shares of common stock, par value $1.00 per share ("Stock") of
the Company, specified above (the "Firm Securities") and, at the election of the
Purchasers, up to an aggregate of $25,000,000 additional aggregate principal
amount (the "Optional Securities") (the Firm Securities and the Optional
Securities which the Purchasers elect to purchase pursuant to Section 2 hereof
are herein collectively called the "Securities"). The Securities will be
unconditionally guaranteed pursuant to guarantees (the "Guarantees") as to
payment of principal, premium, if any, and interest by The Pep Boys ▇▇▇▇▇ ▇▇▇ &
▇▇▇▇ of California, a California corporation ("PBY-CA"), Pep Boys -- Manny, Moe
& ▇▇▇▇ of Delaware, Inc., a Delaware corporation ("PBY-DE") and Pep Boys --
Manny, Moe & ▇▇▇▇ of Puerto Rico, Inc., a Delaware corporation ("PBY-PR" and
together with PBY-CA and PBY-DE, the "Guarantors").
The Purchasers and other holders (including subsequent transferees) of
Securities will be entitled to the benefits of the registration rights
agreement, to be dated as of the First Time of Delivery (as defined in Section
4) (the "Registration Rights Agreement"), by and among the Company, the
Guarantors and the Purchasers, in the form attached hereto as Exhibit A.
Pursuant to the Registration Rights Agreement, the Company will agree to file
with the Securities and Exchange Commission (the "Commission") under the
circumstances set forth therein a shelf registration statement pursuant to Rule
415 under the United States Securities Act of 1933, as amended (the "Securities
Act"), relating to the resale of (i) Securities, (ii) the Guarantees thereof,
(iii) the shares of Stock issuable upon conversion of the Securities by holders
thereof, and (iv) any associated common stock purchase rights attaching thereto
pursuant to the Company's Rights Agreement, dated as of December 5, 1997, and to
use their best efforts to cause such shelf registration statement to be declared
effective.
1. Each of the Company and the Guarantors, jointly and severally,
represents and warrants to, and agrees with, each of the Purchasers that:
(a) A preliminary offering circular, dated May 15, 2002 (the
"Preliminary Offering Circular") and an offering circular, dated May 15 2002
(the "Offering Circular"), and the Company's Annual Report on Form 10-K for the
fiscal year ended February 3, 2002, which is attached to and made a part of the
Preliminary Offering Circular and the Offering Circular, and the Company's
Current Report on Form 8-K dated May 15, 2002, which is attached to and made a
part of the Offering Circular only, have been prepared in connection with the
offering of the Securities the Guarantees thereof and shares of the Stock
issuable upon conversion thereof. Any reference to the Preliminary Offering
Circular or the Offering Circular shall be deemed to refer to and include the
Company's most recent Annual Report on Form 10-K and all subsequent documents
filed with the Commission pursuant to Section 13(a), 13(c) or 15(d) of the
United States Securities Exchange Act of 1934, as amended (the "Exchange Act")
on or prior to the date of the Preliminary Offering Circular or the Offering
Circular, as the case may be, and any reference to the Preliminary Offering
Circular or the Offering Circular, as the case may be, as amended or
supplemented, as of any specified date, shall be deemed to include (i) any
documents filed with the Commission pursuant to Section 13(a), 13(c) or 15(d) of
the Exchange Act after the date of the Preliminary Offering Circular or the
Offering Circular, as the case may be, and prior to such specified date and (ii)
any Additional Issuer Information (as defined in Section 5(f)) furnished by the
Company prior to the completion of the distribution of the Securities; and all
documents filed under the Exchange Act and so deemed to be included in the
Preliminary Offering Circular or the Offering Circular, as the case may be, or
any amendment or supplement thereto are hereinafter called the "Exchange Act
Reports". The Exchange Act Reports, when they were or are filed with the
Commission, conformed or will conform in all material respects to the applicable
requirements of the Exchange Act and the applicable rules and regulations of the
Commission thereunder. The Preliminary Offering Circular or the Offering
Circular and any amendments or supplements thereto and the Exchange Act Reports
did not and will not, as of their respective dates, contain an untrue statement
of a material fact or omit to state a material fact necessary in order to make
the statements therein, in the light of the circumstances under which they were
made, not misleading; PROVIDED, HOWEVER, that this representation and warranty
shall not apply to any statements or omissions made in reliance upon and in
conformity with information furnished in writing to the Company by a Purchaser
through ▇▇▇▇▇▇▇, Sachs & Co. expressly for use therein;
(b) Neither the Company nor any of its subsidiaries has sustained
since the date of the latest audited financial statements included in the
Offering Circular any material loss or interference with its business from fire,
explosion, flood or other calamity, whether or not covered by insurance, or from
any labor dispute or court or governmental action, order or decree, otherwise
than as set forth or contemplated in the Offering Circular; and, since the
respective dates as of which information is given in the Offering Circular,
there has not been any change in the capital stock, other than as a result of
the exercise of stock options in accordance with employee benefit plans, or any
increase in long-term debt in excess of $20 million of the Company or any of its
subsidiaries or any material adverse change, or any development involving a
prospective material adverse change, in or affecting the general affairs,
management, financial position, stockholders' equity or results of operations of
the Company and its subsidiaries, otherwise than as set forth or contemplated in
the Offering Circular;
(c) The Company and the Guarantors have good and marketable title in
fee simple to all real property owned by them and good and marketable title to
all personal property owned by them, in each case free and clear of all liens,
encumbrances and defects except such as are described in the Offering Circular
or such as do not materially affect the value of such property and do not
interfere with the use made and proposed to be made of such property by the
Company and its subsidiaries; and any real property and buildings held under
lease by the Company and its subsidiaries are held by them under valid,
subsisting and enforceable leases with such exceptions as are not material and
do not interfere with the use made and proposed to be made of such property and
buildings by the Company and its subsidiaries;
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(d) Each of the Company and the Guarantors has been duly incorporated
and is validly existing as a corporation in good standing under the laws of its
jurisdiction of incorporation, with power and authority (corporate and other) to
own its properties and conduct its business as described in the Offering
Circular, and has been duly qualified as a foreign corporation for the
transaction of business and, except for PBY-PR with respect to Puerto Rico (for
which PBY-PR is taking all necessary action to make it duly qualified), is in
good standing under the laws of each other jurisdiction in which it owns or
leases properties or conducts any business so as to require such qualification,
or is subject to no material liability or disability by reason of the failure to
be so qualified in any such jurisdiction; and each other subsidiary of the
Company has been duly incorporated and is validly existing as a corporation in
good standing under the laws of its jurisdiction of incorporation;
(e) The Company has an authorized capitalization as set forth in the
Offering Circular, and all of the issued shares of capital stock of the Company
have been duly and validly authorized and issued and are fully paid and
non-assessable; the shares of Stock initially issuable upon conversion of the
Securities have been duly and validly authorized and reserved for issuance and,
when issued and delivered in accordance with the provisions of the Securities
and the Indenture referred to below, will be duly and validly issued, fully paid
and non-assessable and will conform to the description of the Stock contained in
the Offering Circular; and all of the issued shares of capital stock of each
subsidiary of the Company have been duly and validly authorized and issued, are
fully paid and non-assessable and (except for directors' qualifying shares) are
owned directly or indirectly by the Company, free and clear of all liens,
encumbrances, equities or claims;
(f) The Securities have been duly authorized and, when issued and
delivered pursuant to this Agreement, will have been duly executed,
authenticated, issued and delivered and will constitute valid and legally
binding obligations of the Company entitled to the benefits provided by the
indenture to be dated as of May 21, 2002 (the "Indenture") between the Company
and Wachovia Bank, National Association, as Trustee (the "Trustee"), under which
they are to be issued, which will be substantially in the form previously
delivered to you; the Indenture has been duly authorized and, when executed and
delivered by the Company and the Trustee, the Indenture will constitute a valid
and legally binding instrument, enforceable in accordance with its terms,
subject, as to enforcement, to bankruptcy, insolvency, reorganization and other
laws of general applicability relating to or affecting creditors' rights and to
general equity principles; and the Securities, the Guarantees and the INDENTURE
will conform to the descriptions thereof in the Offering Circular and will be in
substantially the form previously delivered to you;
(g) The Registration Rights Agreement has been duly authorized and,
when executed and delivered by the Company and the Purchasers, the Registration
Rights Agreement will constitute a valid and legally binding agreement of the
Company, enforceable against the Company in accordance with its terms, subject,
as to enforcement, to bankruptcy, insolvency, reorganization and other laws of
general applicability relating to or affecting creditors' rights and to general
equity principles, and except as the enforcement of indemnification and
contribution provisions thereof may be limited by applicable law;
(h) None of the transactions contemplated by this Agreement
(including, without limitation, the use of the proceeds from the sale of the
Securities) will violate or result in a violation of Section 7 of the Exchange
Act, or any regulation promulgated thereunder, including, without limitation,
Regulations G, T, U, and X of the Board of Governors of the Federal Reserve
System;
(i) The Guarantees have been duly authorized and, when executed and
delivered by the Guarantors and when the Securities have been duly executed,
issued and authenticated in accordance with the provisions of the Indenture, and
delivered and paid for in accordance with this Agreement, each of the Guarantees
will be "Guarantees" that are subject to the terms of the Indenture and will
constitute valid and legally binding obligations of the Guarantors enforceable
in
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accordance with their terms, subject, as to enforcement, to bankruptcy,
insolvency, fraudulent conveyance, reorganization and other laws of general
applicability relating to or affecting creditors' rights and to general equity
principles;
(j) Prior to the date hereof, neither the Company nor any of its
affiliates has taken any action which is designed to or which has constituted or
which might have been expected to cause or result in stabilization or
manipulation of the price of any security of the Company in connection with the
offering of the Securities;
(k) The issue and sale of the Securities and the Guarantees and the
compliance by the Company and the Guarantors with all of the provisions of the
Securities, the Guarantees, the Indenture, the Registration Rights Agreement and
this Agreement and the consummation of the transactions herein and therein
contemplated will not (i) conflict with or result in a breach or violation of
any of the terms or provisions of, or constitute a default under, any indenture
or loan agreement to which the Company or any of its subsidiaries is a party or
by which the Company or any of its subsidiaries is bound or to which any of the
property or assets of the Company or any of its subsidiaries is subject, (ii)
conflict with or result in a breach or violation of any of the terms or
provisions of, or constitute a default under, any mortgage, deed of trust or
other agreement or instrument to which the Company or any of its subsidiaries is
a party or by which the Company or any of its subsidiaries is bound or to which
any of the property or assets of the Company or any of its subsidiaries is
subject, except for such breaches and defaults that individually and in the
aggregate would not reasonably be expected to have a material adverse effect on
the current, and future, consolidated financial position, stockholders' equity
or results of operations of the Company and its subsidiaries (a "Material
Adverse Effect"), or have a material adverse effect on the Company's or any of
the Guarantors' execution or delivery of, or the performance of any of their
respective obligations under, or the validity of, this Agreement, the
Registration Rights Agreement, the Indenture, the Securities or the Guarantees;
(iii) result in any violation of the provisions of the Certificate of
Incorporation or By-laws or other constituent document of the Company or the
Guarantors, or (iv) result in any violation of any statute or any order, rule or
regulation of any court or governmental agency or body having jurisdiction over
the Company or any of its subsidiaries or any of their properties; and no
consent, approval, authorization, order, registration or qualification of or
with any such court or governmental agency or body is required for the issue and
sale of the Securities or the Guarantees or the consummation by the Company and
the Guarantors of the transactions contemplated by this Agreement, the Indenture
or the Registration Rights Agreement, except for (i) the filing of a
registration statement by the Company with the Commission pursuant to the
Securities Act pursuant to the Registration Rights Agreement, (ii) the
qualification of the Indenture under the United States Trust Indenture Act of
1939, as amended (the "Trust Indenture Act"), pursuant to the Registration
Rights Agreement, (iii) for the approval of the Stock issuable upon conversion
of the Securities for listing on the New York Stock Exchange, (iv) such as have
already been obtained and (v) such consents, approvals, authorizations,
registrations or qualifications as may be required under state securities or
Blue Sky laws in connection with the purchase and distribution of the Securities
by the Purchasers and the resale of the Securities and the Stock pursuant to the
Registration Rights Agreement;
(l) Neither the Company nor any of its subsidiaries is (i) in
violation of its Certificate of Incorporation or By-laws or other constituent
document or (ii) in default in the performance or observance of any obligation,
covenant or condition contained in any indenture, mortgage, deed of trust, loan
agreement, lease or other agreement or instrument to which it is a party or by
which it or any of its properties may be bound, except for such defaults that
could not, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect;
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(m) The statements set forth in the Offering Circular under the
caption "Description of Notes" and "Description of Capital Stock", insofar as
they purport to constitute a summary of the terms of the Securities, the
Guarantees and the Stock, are accurate, complete and fair;
(n) Other than as set forth in the Offering Circular, there are no
legal or governmental proceedings pending to which the Company or any of its
subsidiaries is a party or of which any property of the Company or any of its
subsidiaries is the subject which, if determined adversely to the Company or any
of its subsidiaries, would individually or in the aggregate have a Material
Adverse Effect; and, to the best of the Company's knowledge, no such proceedings
are threatened or contemplated by governmental authorities or threatened by
others;
(o) When the Securities are issued and delivered pursuant to this
Agreement, neither the Securities nor the Guarantees will be of the same class
(within the meaning of Rule 144A under the Securities Act) as securities which
are listed on a national securities exchange registered under Section 6 of the
Exchange Act or quoted in a U.S. automated inter-dealer quotation system;
(p) The Company is subject to Section 13 or 15(d) of the Exchange Act;
(q) The Company is not, and after giving effect to the offering and
sale of the Securities, will not be an "investment company", as such term is
defined in the United States Investment Company Act of 1940, as amended (the
"Investment Company Act");
(r) Neither the Company nor the Guarantors, nor any person acting on
its or their behalf has offered or sold the Securities or the Guarantees by
means of any general solicitation or general advertising within the meaning of
Rule 502(c) under the Securities Act;
(s) Within the preceding six months, neither the Company nor the
Guarantors nor any other person acting on behalf of the Company or the
Guarantors has offered or sold to any person any Securities, or any securities
of the same or a similar class as the Securities, other than Securities offered
or sold to the Purchasers hereunder. The Company will take reasonable
precautions designed to insure that any offer or sale, direct or indirect, in
the United States or to any U.S. person (as defined in Rule 902 under the
Securities Act) of any Securities or any substantially similar security issued
by the Company, within six months subsequent to the date on which the
distribution of the Securities has been completed (as notified to the Company by
▇▇▇▇▇▇▇, ▇▇▇▇▇ & Co.), is made under restrictions and other circumstances
reasonably designed not to affect the status of the offer and sale of the
Securities in the United States and to U.S. persons contemplated by this
Agreement as transactions exempt from the registration provisions of the
Securities Act;
(t) Neither the Company nor any of its affiliates does business with
the government of Cuba or with any person or affiliate located in Cuba within
the meaning of Section 517.075, Florida Statutes; and
(u) To the Company's knowledge, Deloitte & Touche LLP, who have
certified certain financial statements of the Company and its subsidiaries, are
independent public accountants as required by the Act and the rules and
regulations of the Commission thereunder.
2. Subject to the terms and conditions herein set forth, the Company
agrees to issue and sell to each of the Purchasers, and each of the Purchasers
agrees, severally and not jointly, to purchase from the Company, at a purchase
price of 97.25% of the principal amount thereof, the principal amount of
Securities set forth opposite the name of such Purchaser in Schedule I hereto,
and (b) in the event and to the extent that the Underwriters shall exercise the
election to purchase Optional Securities as provided below, the Company agrees
to issue and sell to each of the Underwriters, and each of the Underwriters
agrees, severally and not jointly, to purchase from the Company, at the same
purchase price set forth in clause (a) of this Section 2, that portion of the
aggregate principal amount of the Optional Securities as to which such election
shall have been exercised (to be adjusted
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by you so as to eliminate fractions of $25,000,000) determined by multiplying
such aggregate principal amount of Optional Securities by a fraction, the
numerator of which is the maximum aggregate principal amount of Optional
Securities which such Underwriter is entitled to purchase as set forth opposite
the name of such Underwriter in Schedule I hereto and the denominator of which
is the maximum aggregate principal amount of Optional Securities which all of
the Underwriters are entitled to purchase hereunder.
The Company hereby grants to the Underwriters the right to purchase at
their election up to $25,000,000 aggregate principal amount of Optional
Securities, at the purchase price set forth in clause (a) of the first paragraph
of this Section 2, for the sole purpose of covering sales of securities in
excess of the aggregate principal amount of Firm Securities. Any such election
to purchase Optional Securities may be exercised by written notice from you to
the Company, given within a period of 30 calendar days after the date of this
Agreement, setting forth the aggregate principal amount of Optional Securities
to be purchased and the date on which such Optional Securities are to be
delivered, as determined by you but in no event earlier than the First Time of
Delivery (as defined in Section (4) hereof) or, unless you and the Company
otherwise agree in writing, earlier than two or later than ten business days
after the date of such notice.
3. Upon the authorization by you of the release of the Firm
Securities, the several Purchasers propose to offer the Firm Securities for sale
upon the terms and conditions set forth in this Agreement and the Offering
Circular and each Purchaser hereby represents and warrants to, and agrees with
the Company that:
(a) It will offer and sell the Securities only to persons who it
reasonably believes are "qualified institutional buyers" ("QIBs") within the
meaning of Rule 144A under the Securities Act in transactions meeting the
requirements of Rule 144A;
(b) It is an Institutional Accredited Investor; and
(c) It will not offer or sell the Securities by any form of general
solicitation or general advertising, including but not limited to the methods
described in Rule 502(c) under the Securities Act.
4. (a) The Securities to be purchased by each Purchaser hereunder will
be represented by one or more definitive global Securities in book-entry form
which will be deposited by or on behalf of the Company with The Depository Trust
Company ("DTC") or its designated custodian. The Company will deliver the
Securities to ▇▇▇▇▇▇▇, Sachs & Co., for the account of each Purchaser, against
payment by or on behalf of such Purchaser of the purchase price thereof by
certified or official bank check or checks, payable to the order of the Company
in Federal (same day) funds, by causing DTC to credit the Securities to the
account of ▇▇▇▇▇▇▇, ▇▇▇▇▇ & Co. at DTC. The Company will cause the certificates
representing the Securities to be made available to ▇▇▇▇▇▇▇, Sachs & Co. for
checking at least twenty-four hours prior to the Time of Delivery (as defined
below) at the office of DTC or its designated custodian (the "Designated
Office"). The time and date of such delivery and payment shall be, with respect
to the Firm Securities, 9:30 a.m., New York City time, on May 21, 2002 or such
other time and date as ▇▇▇▇▇▇▇, ▇▇▇▇▇ & Co. and the Company may agree upon in
writing, and, with respect to the Optional Securities, 9:30 a.m., New York City
time, on the date specified by ▇▇▇▇▇▇▇, Sachs & Co. in the written notice given
by ▇▇▇▇▇▇▇, ▇▇▇▇▇ & Co. of the Underwriters' election to purchase such Optional
Securities, or such other time and date as ▇▇▇▇▇▇▇, Sachs & Co. and the Company
may agree upon in writing. Such time and date for delivery of the Firm
Securities is herein called the "First Time of Delivery", such time and date for
delivery of the Optional Securities, if not the First Time of Delivery, is
herein called the "Second Time of Delivery", and each such time and date for
delivery is herein called a "Time of Delivery".
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(b) The documents to be delivered at the Time of Delivery by or on
behalf of the parties hereto pursuant to Section 7 hereof, including the
cross-receipt for the Securities and any additional documents requested by the
Purchasers pursuant to Section 7(j) hereof, will be delivered at such time and
date at the offices of ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇: ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇
▇▇▇▇▇ (the "Closing Location"), and the Securities will be delivered at the
Designated Office, all at the Time of Delivery. A meeting will be held at the
Closing Location at 3:00 p.m., New York City time, on the New York Business Day
next preceding the Time of Delivery, at which meeting the final drafts of the
documents to be delivered pursuant to the preceding sentence will be available
for review by the parties hereto. For the purposes of this Section 4, "New York
Business Day" shall mean each Monday, Tuesday, Wednesday, Thursday and Friday
which is not a day on which banking institutions in New York are generally
authorized or obligated by law or executive order to close.
5. Each of the Company and the Guarantors, jointly and severally,
agrees with each of the Purchasers:
(a) To prepare the Offering Circular in a form approved by you; to
make no amendment or any supplement to the Offering Circular which shall be
disapproved by you promptly after reasonable notice thereof; and to furnish you
with copies thereof;
(b) Promptly from time to time to take such action as you may
reasonably request to qualify the Securities and the shares of Stock issuable
upon conversion of the Securities for offering and sale under the securities
laws of such jurisdictions as you may request and to comply with such laws so as
to permit the continuance of sales and dealings therein in such jurisdictions
for as long as may be necessary to complete the distribution of the Securities,
provided that in connection therewith the Company shall not be required to
qualify as a foreign corporation or to file a general consent to service of
process in any jurisdiction;
(c) To furnish the Purchasers with copies of the Offering Circular in
such quantities as you may reasonably request and each amendment or supplement
thereto signed by an authorized officer of the Company with the independent
accountants' report(s) in the Offering Circular, and any amendment or supplement
containing amendments to the financial statements covered by such report(s),
signed by the accountants, and additional written and electronic copies thereof
in such quantities as you may from time to time reasonably request, and if, at
any time prior to the expiration of nine months after the date of the Offering
Circular, any event shall have occurred as a result of which the Offering
Circular as then amended or supplemented would include an untrue statement of a
material fact or omit to state any material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were made
when such Offering Circular is delivered, not misleading, or, if for any other
reason it shall be necessary or desirable during such same period to amend or
supplement the Offering Circular, to notify you and upon your request to prepare
and furnish without charge to each Purchaser and to any dealer in securities as
many written and electronic copies as you may from time to time reasonably
request of an amended Offering Circular or a supplement to the Offering Circular
which will correct such statement or omission or effect such compliance;
(d) During the period beginning from the date hereof and continuing
until the date 90 days after the last Time of Delivery, not to offer, sell,
contract to sell or otherwise dispose of any securities of the Company that are
substantially similar to the Securities or the Stock, including but not limited
to any securities that are convertible into or exchangeable for, or that
represent the right to receive, Stock or any such substantially similar
securities (other than (i) pursuant to employee stock option plans and employee
benefit plans existing on the date of this Agreement, (ii) pursuant to the
Company's dividend reinvestment plan, (iii) the issuance of shares of Stock upon
the conversion of the Securities, or (iv) the issuance of Stock or securities
convertible into Stock in connection with acquisition transactions of the
Company, provided, that the recipients of such Stock shall be bound by
7
the restriction set forth above for the remainder of the 90-day period), without
your prior written consent;
(e) Not to be or become, at any time prior to the expiration of three
years after the last Time of Delivery, an open-end investment company, unit
investment trust, closed-end investment company or face-amount certificate
company that is or is required to be registered under Section 8 of the
Investment Company Act;
(f) At any time when the Company is not subject to Section 13 or 15(d)
of the Exchange Act, for the benefit of holders from time to time of Securities,
to furnish at its expense, upon request, to holders of Securities and
prospective purchasers of securities information (the "Additional Issuer
Information") satisfying the requirements of subsection (d)(4)(i) of Rule 144A
under the Securities Act;
(g) If requested by you, to use its best efforts to cause such
Designated Securities to be eligible for the PORTAL trading system of the
National Association of Securities Dealers, Inc.;
(h) To furnish to the holders of the Securities as soon as practicable
after the end of each fiscal year an annual report (including a balance sheet
and statements of income, stockholders' equity and cash flows of the Company and
its consolidated subsidiaries certified by independent public accountants) and,
as soon as practicable after the end of each of the first three quarters of each
fiscal year (beginning with the fiscal quarter ending after the date of the
Offering Circular), to make available to its stockholders consolidated summary
financial information of the Company and its subsidiaries for such quarter in
reasonable detail;
(i) During a period of five years from the date of the Offering
Circular, to furnish to you copies of all reports or other communications
(financial or other) furnished to stockholders of the Company, and to deliver to
you (i) as soon as they are available, copies of any reports and financial
statements furnished to or filed with the Commission or any securities exchange
on which the Securities or any class of securities of the Company is listed; and
(ii) such additional information concerning the business and financial condition
of the Company as you may from time to time reasonably request (such financial
statements to be on a consolidated basis to the extent the accounts of the
Company and its subsidiaries are consolidated in reports furnished to its
stockholders generally or to the Commission);
(j) During the period of three years after the Time of Delivery, the
Company will not, and will not permit any of its "affiliates" (as defined in
Rule 144 under the Securities Act) to, resell any of the Securities which
constitute "restricted securities" under Rule 144 that have been reacquired by
any of them;
(k) To use the net proceeds received by it from the sale of the
Securities pursuant to this Agreement in the manner specified in the Offering
Circular under the caption "Use of Proceeds";
(l) To reserve and keep available at all times, free of preemptive
rights, shares of Stock for the purpose of enabling the Company to satisfy any
obligations to issue shares of its Stock upon conversion of the Securities; and
(m) To use its best efforts to list, subject to notice of issuance,
the shares of Stock issuable upon conversion of the Securities on the New York
Stock Exchange.
6. Each of the Company and the Guarantors, jointly and severally,
covenants and agrees with the several Purchasers that the Company and the
Guarantors will pay or cause to be paid the following: (i) the fees,
disbursements and expenses of the Company's and the Guarantor's counsel and
accountants in connection with the issue of the Securities and the shares of
Stock issuable upon conversion of the Securities and all other expenses in
connection with the preparation, printing and filing of the Preliminary Offering
Circular and the Offering Circular and any amendments and
8
supplements thereto and the mailing and delivering of copies thereof to the
Purchasers and dealers; (ii) the cost of printing or producing any Agreement
among Purchasers, this Agreement, the Registration Rights Agreement, the
Indenture, the Blue Sky and Legal Investment Memoranda, closing documents
(including any compilations thereof) and any other documents in connection with
the offering, purchase, sale and delivery of the Securities; (iii) all expenses
in connection with the qualification of the Securities and the Guarantees
thereof and the shares of Stock issuable upon conversion of the Securities for
offering and sale under state securities laws as provided in Section 5(b)
hereof, including the reasonable fees and disbursements of counsel for the
Purchasers in connection with such qualification and in connection with the Blue
Sky and legal investment surveys; (iv) any fees charged by securities rating
services for rating the Securities and the Guarantees thereof; (v) the cost of
preparing the Securities; (vi) the reasonable fees and expenses of the Trustee
and any agent of the Trustee and the fees and disbursements of counsel for the
Trustee in connection with the Indenture, the Securities and the Guarantees
thereof; (vii) any cost incurred in connection with the designation of the
Securities for trading in PORTAL and the listing of the shares of Stock issuable
upon conversion of the Securities; and (viii) all other costs and expenses
incident to the performance of its obligations hereunder which are not otherwise
specifically provided for in this Section. It is understood, however, that,
except as provided in this Section, and Sections 8 and 11 hereof, the Purchasers
will pay all of their own costs and expenses, including the fees of their
counsel, transfer taxes on resale of any of the Securities by them, and any
advertising expenses connected with any offers they may make.
7. The obligations of the Purchasers hereunder as to the Securities to
be delivered at each Time of Delivery shall be subject, in their discretion, to
the condition that all representations and warranties and other statements of
the Company and the Guarantors herein are, at and as of such Time of Delivery,
true and correct, the condition that the Company and the Guarantors shall have
performed all of their respective obligations hereunder theretofore to be
performed, and the following additional conditions:
(a) ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇, counsel for the Purchasers, shall have
furnished to you such opinion or opinions, dated such Time of Delivery, with
respect to such matters as you may reasonably request, and such counsel shall
have received such papers and information as they may reasonably request to
enable them to pass upon such matters;
(b) ▇▇▇▇▇▇▇ ▇▇▇▇ & ▇▇▇▇▇▇▇▇▇, counsel for the Company and the
Guarantors, shall have furnished to you their written opinion, dated such Time
of Delivery, in form and substance satisfactory to you, and subject to customary
assumptions, qualifications and exceptions, to the effect that:
(i) The Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the
Commonwealth of Pennsylvania, with power and authority (corporate and
other) to own its properties and conduct its business as described in
the Offering Circular;
(ii) The Company has an authorized capitalization as set forth in
the Offering Circular; and the shares of Stock initially issuable upon
conversion of the Securities have been duly and validly authorized and
reserved for issuance and, when issued and delivered in accordance
with the provisions of the Securities and the Indenture, will be duly
and validly issued and fully paid and non-assessable, and will conform
to the description of the Stock contained in the Offering Circular;
(iii) Each of the Company and the Guarantors has been duly
qualified as a foreign corporation for the transaction of business
and, except for PBY-PR, is in good standing under
9
the laws of each other jurisdiction in which it owns or leases
properties or conducts any business so as to require such
qualification, or is subject to no material liability or disability by
reason of the failure to be so qualified in any such jurisdiction
(such counsel being entitled to rely in respect of the opinion in this
clause upon opinions of local counsel and in respect of matters of
fact upon certificates of officers of the Company, provided that such
counsel shall state that they believe that both you and they are
justified in relying upon such opinions and certificates);
(iv) Each Guarantor has been duly incorporated and is validly
existing as a corporation in good standing under the laws of its
jurisdiction of incorporation; and all of the issued shares of capital
stock of each such subsidiary have been duly and validly authorized
and issued, are fully paid and non-assessable, and (except for
directors' qualifying shares) are owned directly or indirectly by the
Company, free and clear of all liens, encumbrances, equities or claims
(such counsel being entitled to rely in respect of the opinion in this
clause upon opinions of local counsel and in respect of matters of
fact upon certificates of officers of the Company or its subsidiaries,
provided that such counsel shall state that they believe that both you
and they are justified in relying upon such opinions and
certificates);
(v) To the best of such counsel's knowledge and other than as set
forth in the Offering Circular, there are no legal or governmental
proceedings pending to which the Company or any of its subsidiaries is
a party or of which any property of the Company or any of its
subsidiaries is the subject which, if determined adversely to the
Company or any of its subsidiaries, would individually or in the
aggregate have a Material Adverse Effect; and, to the best of such
counsel's knowledge, no such proceedings that could reasonably be
expected to individually or in the aggregate have a Material Adverse
Effect are threatened or contemplated by governmental authorities or
threatened by others;
(vi) This Agreement has been duly authorized, executed and
delivered by the Company and the Guarantors;
(vii) The Securities have been duly authorized and executed by
the Company for issuance and sale pursuant to the terms of this
Agreement and when authenticated by the Trustee in the manner provided
in the Indenture (assuming due authorization, execution and delivery
of the Indenture by the Trustee) and issued and delivered against
payment of the purchase price therefore in accordance with the terms
of this Agreement, the Securities will constitute valid and legally
binding obligations of the Company entitled to the benefits provided
by the Indenture; and the Securities conform to the description
thereof in the Offering Circular;
(viii) the Guarantees have been duly authorized, executed, issued
and delivered and when the Securities have been duly executed, issued
and authenticated in accordance with the provisions of the Indenture,
and delivered and paid for in accordance with the terms of this
Agreement, each of the Guarantees will be "Guarantees" that are
subject to the terms of the Indenture and will constitute valid and
legally binding obligations of the Guarantors; and the Guarantees
conform to the description thereof in the Offering Circular;
(ix) The Registration Rights Agreement has been duly authorized,
executed and delivered by the Company and the Guarantors and (assuming
the due authorization, execution and delivery by the Purchasers)
constitutes a valid and legally binding agreement of the Company and
the Guarantors, enforceable against the Company and the Guarantors in
10
accordance with its terms, subject, as to enforcement, to bankruptcy,
insolvency, reorganization and other laws of general applicability
relating to or affecting creditors' rights and to general equity
principles, and except as the enforcement of indemnification and
contribution provisions thereof may be limited by applicable law;
(x) The Indenture has been duly authorized, executed and
delivered by the Company and the Guarantors and (assuming due
authorization, execution and delivery by the Trustee) constitutes a
valid and legally binding instrument, enforceable in accordance with
its terms, subject, as to enforcement, to bankruptcy, insolvency,
reorganization and other laws of general applicability relating to or
affecting creditors' rights and to general equity principles; and the
Indenture conforms to the description thereof in the Offering
Circular;
(xi) The issue and sale of the Securities and the Guarantees
being issued at such Time of Delivery and the compliance by such of
the Company and the Guarantors as is a party thereto with all of the
provisions of the Securities and the Guarantees, the Indenture, the
Registration Rights Agreement and this Agreement and the consummation
of the transactions herein and therein contemplated will not (i)
conflict with or result in a breach or violation of any of the terms
or provisions of, or constitute a default under, any indenture,
mortgage, deed of trust, loan agreement, lease or other agreement or
instrument known to such counsel to which the Company or any of its
subsidiaries is a party or by which the Company or any of its
subsidiaries is bound or to which any of the property or assets of the
Company or any of its subsidiaries is subject, except for such
breaches, violations or defaults that individually and in the
aggregate would not reasonably be expected to have a Material Adverse
Effect or have a material adverse effect on the Company's or any of
the Guarantors' execution or delivery of, or the performance of any of
their respective obligations under, or the validity of, this
Agreement, the Registration Rights Agreement, the Indenture, the
Securities or the Guarantees; (ii) nor will such actions result in any
violation of the provisions of the Certificate of Incorporation or
By-laws or other constituent document of the Company or any of the
Guarantors or (iii) result in any violation of any applicable New York
State or federal law, statute, rule or regulation, or the Pennsylvania
Business Corporation Law of 1988, as amended, or the Delaware General
Corporation Law, or any judgment, order, writ or decree, known to us,
of any New York State or federal governmental agency or court having
jurisdiction over the Company or the Guarantors or any of their
respective properties, assets or operations ("Applicable Laws"). Such
counsel need not express any opinion as to any violation of Applicable
Laws which results from the status of the Trustee or the holders of
Securities or facts relating specifically to the Trustee or the
holders of Securities;
(xii) No filing with, or authorization, approval, consent,
license, order, registration, qualification or decree of any federal
or New York or Pennsylvania court or governmental authority or agency
(other than (i) such as may be required under the Securities Act of
1933, as amended, and the regulations promulgated thereunder and the
securities or blue sky laws of the various jurisdictions in which the
Securities will be offered or sold, (ii) routine corporate filings
required to be made after the date hereof to comply with applicable
federal and state securities laws, to maintain good standing and to
maintain or renew licenses and permits required for any of the Company
or the Guarantors to operate their respective business in the ordinary
course of business and (iii) filings, regulations or notices required
for the exercise by the Trustee of its rights and remedies under the
Indenture, as to which we express no opinion) is required for the
issue and sale of the Securities and the Guarantees being issued at
such Time of Delivery or the consummation by the Company and the
Guarantors of the
11
transactions contemplated by this Agreement, the Indenture or the
Registration Rights Agreement;
(xiii) Neither the Company nor any of the Guarantors is (i) in
violation of its Certificate of Incorporation or By-laws or (ii) in
default in the performance or observance of any obligation, covenant
or condition contained in any indenture, mortgage, deed of trust, loan
agreement, lease or other agreement or instrument to which it is a
party or by which it or any of its properties may be bound, except for
such violations that individually or in the aggregate could not
reasonably be expected to have a Material Adverse Effect;
(xiv) The information set forth in the Offering Circular under
the captions "Description of Notes" and "Description of Capital
Stock," insofar as they purport to constitute a summary of the legal
matters, documents or proceeding s referred to therein, and the
statements set forth under the caption "Certain United States Federal
Income Tax Consequences," insofar as they purport to describe the
provisions of the laws and documents referred to therein, are
accurate, complete and fair in all material respects;
(xv) The Exchange Act Reports (other than the financial
statements and related schedules therein, as to which such counsel
need express no opinion), when they were filed with the Commission,
complied as to form in all material respects with the requirements of
the Exchange Act, and the rules and regulations of the Commission
thereunder; and such counsel has no reason to believe that any of such
documents, when they were so filed, contained an untrue statement of a
material fact or omitted to state a material fact necessary in order
to make the statements therein, in the light of the circumstances
under which they were made when such documents were so filed, not
misleading;
(xvi) No registration of the Securities or the Guarantees under
the Securities Act, and no qualification of an indenture under the
Trust Indenture Act with respect thereto, is required for the offer,
sale and initial resale of the Securities and the Guarantees by the
Purchasers in the manner contemplated by this Agreement; and
(xvii) The Company is not an "investment company", as such term
is defined in the Investment Company Act.
In addition, such counsel shall state that it has no reason to believe
that the Offering Circular and any further amendments or supplements thereto
(except for financial statements and schedules and other financial data included
or incorporated by reference therein or omitted therefrom as to which such
counsel need express no opinion), as of its date or as of such Time of Delivery,
included or includes an untrue statement of a material fact or omitted or omits
to state a material fact necessary in order to make the statements therein, in
the light of the circumstances under which they were made, not misleading.
(c) On the date of the Offering Circular prior to the execution of
this Agreement and also at each Time of Delivery, Deloitte & Touche LLP shall
have furnished to you a letter or letters, dated the respective dates of
delivery thereof, in form and substance satisfactory to you, to the effect set
forth in Annex II hereto;
(d) (i) Neither the Company nor any of its subsidiaries shall have
sustained since the date of the latest audited financial statements included in
the Offering Circular any loss or interference with its business from fire,
explosion, flood or other calamity, whether or not covered by insurance, or from
12
any labor dispute or court or governmental action, order or decree, otherwise
than as set forth or contemplated in the Offering Circular, and (ii) since the
respective dates as of which information is given in the Offering Circular there
shall not have been any change in the capital stock or long-term debt of the
Company or any of its subsidiaries or any change, or any development involving a
prospective change, in or affecting the general affairs, management, financial
position, stockholders' equity or results of operations of the Company and its
subsidiaries, otherwise than as set forth or contemplated in the Offering
Circular, the effect of which, in any such case described in clause (i) or (ii),
is in the judgment of the Representatives so material and adverse as to make it
impracticable or inadvisable to proceed with the public offering or the delivery
of the Securities and the Guarantees thereof being issued at such Time of
Delivery on the terms and in the manner contemplated in this Agreement and in
the Offering Circular;
(e) On or after the date hereof (i) no downgrading shall have occurred
in the rating accorded the Company's debt securities by any "nationally
recognized statistical rating organization", as that term is defined by the
Commission for purposes of Rule 436(g)(2) under the Securities Act, and (ii) no
such organization shall have publicly announced that it has under surveillance
or review, with possible negative implications, its rating of any of the
Company's debt securities;
(f) On or after the date hereof there shall not have occurred any of
the following: (i) a suspension or material limitation in trading in securities
generally on the New York Stock Exchange; (ii) a suspension or material
limitation in trading in the Company's securities on the New York Stock
Exchange; (iii) a general moratorium on commercial banking activities declared
by either Federal or New York State authorities or a material disruption in
commercial banking or securities settlement or clearance services in the United
States; (iv) the outbreak or escalation of hostilities involving the United
States or the declaration by the United States of a national emergency or war or
(v) the occurrence of any other calamity or crisis or any change in financial,
political or economic conditions in the United States or elsewhere, if the
effect of any such event specified in clause (iv) or (v) in the judgment of the
Representatives makes it impracticable or inadvisable to proceed with the public
offering or the delivery of the Securities being issued at such Time of Delivery
on the terms and in the manner contemplated in the Offering Circular;
(g) The Securities shall have been designated for trading on PORTAL;
(h) The Company shall have obtained and delivered to the Purchasers
executed copies of a written agreement (each, a "Lock-Up Agreement") of those
directors and executive officers of the Company listed on Exhibit A-1
substantially in the form of Exhibit A-2 hereto, with such exceptions as may be
agreed to between the Company and the Purchasers, by the date hereof, and
executed originals of each Lock-Up Agreement shall have been delivered to you by
the First Time of Delivery;
(i) The shares of Stock issuable upon conversion of the Securities
shall have been duly listed, subject to notice of issuance, on the New York
Stock Exchange; and
(j) Each of the Company and the Guarantors shall have furnished or
caused to be furnished to you at such Time of Delivery certificates of officers
of the Company and each of the Guarantors satisfactory to you as to the accuracy
of the representations and warranties of the Company and the Guarantors herein
at and as of such Time of Delivery, as to the performance by the Company and
each of the Guarantors, respectively, of all of its obligations hereunder to be
performed at or prior to such Time of Delivery, as to the matters set forth in
subsection (d) of this Section and as to such other matters as you may
reasonably request.
8. (a) Each of the Company and the Guarantors, jointly and severally,
will indemnify and hold harmless each Purchaser against any losses, claims,
damages or liabilities, joint or several, to which such Purchaser may become
subject, under the Securities Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are based
upon an untrue
13
statement or alleged untrue statement of a material fact contained in any
Preliminary Offering Circular or the Offering Circular, or any amendment or
supplement thereto, or arise out of or are based upon the omission or alleged
omission to state therein a material fact necessary to make the statements
therein not misleading, and will reimburse each Purchaser for any legal or other
expenses reasonably incurred by such Purchaser in connection with investigating
or defending any such action or claim as such expenses are incurred; PROVIDED,
HOWEVER, that neither the Company nor the Guarantors shall 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 or omission or
alleged omission made in any Preliminary Offering Circular or the Offering
Circular or any such amendment or supplement in reliance upon and in conformity
with written information furnished to the Company by any Purchaser through
▇▇▇▇▇▇▇, Sachs & Co. expressly for use therein.
(b) Each Purchaser will indemnify and hold harmless the Company and
the Guarantors against any losses, claims, damages or liabilities to which the
Company or the Guarantors may become subject, under the Securities Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon an untrue statement or alleged
untrue statement of a material fact contained in any Preliminary Offering
Circular or the Offering Circular, or any amendment or supplement thereto, or
arise out of or are based upon the omission or alleged omission to state therein
a material fact 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 any
Preliminary Offering Circular or the Offering Circular or any such amendment or
supplement in reliance upon and in conformity with written information furnished
to the Company by such Purchaser through ▇▇▇▇▇▇▇, ▇▇▇▇▇ & Co. expressly for use
therein; and will reimburse the Company for any legal or other expenses
reasonably incurred by the Company and the Guarantors in connection with
investigating or defending any such action or claim as such expenses are
incurred.
(c) Promptly after receipt by an indemnified party under subsection
(a) or (b) above of notice of the commencement of any action, such indemnified
party shall, if a claim in respect thereof is to be made against the
indemnifying party under such subsection, notify the indemnifying party in
writing of the commencement thereof; but the omission so to notify the
indemnifying party shall not relieve it from any liability which it may have to
any indemnified party otherwise than under such subsection. In case any such
action shall be brought against any indemnified party and it shall notify the
indemnifying party of the commencement thereof, the indemnifying party shall be
entitled to participate therein and, to the extent that it shall wish, jointly
with any other indemnifying party similarly notified, 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 shall
not be liable to such indemnified party under such subsection for any legal
expenses of other counsel or any other expenses, in each case subsequently
incurred by such indemnified party, in connection with the defense thereof other
than reasonable costs of investigation. In no event shall an indemnifying party
be liable for fees and expenses of more than one counsel (in addition to local
counsel) separate from their own counsel for all indemnified parties in
connection with any one or separate but similar or related actions in the same
jurisdiction arising out of the same general allegations or circumstances. No
indemnifying party shall, without the written consent of the indemnified party,
effect the settlement or compromise of, or consent to the entry of any judgment
with respect to, any pending or threatened action or claim in respect of which
indemnification or contribution may be sought hereunder (whether or not the
indemnified party is an actual or potential party to such action or claim)
unless such settlement, compromise or judgment (i) includes an unconditional
release of the indemnified party from all liability arising out of such action
or claim and (ii) does not include a statement as to, or an admission of, fault,
culpability or a failure to act, by or on behalf of any indemnified party.
14
(d) If the indemnification provided for in this Section 8 is
unavailable to or insufficient to hold harmless an indemnified party under
subsection (a) or (b) above in respect of any losses, claims, damages or
liabilities (or actions in respect thereof) referred to therein, then each
indemnifying party shall contribute to the amount paid or payable by such
indemnified party as a result of such losses, claims, damages or liabilities (or
actions in respect thereof) in such proportion as is appropriate to reflect the
relative benefits received by the Company and the Guarantors on the one hand and
the Purchasers on the other from the offering of the Securities and the
Guarantees thereof. If, however, the allocation provided by the immediately
preceding sentence is not permitted by applicable law or if the indemnified
party failed to give the notice required under subsection (c) above, then each
indemnifying party shall contribute to such amount paid or payable by such
indemnified party in such proportion as is appropriate to reflect not only such
relative benefits but also the relative fault of the Company and the Guarantors
on the one hand and the Purchasers on the other in connection with the
statements or omissions which resulted in such losses, claims, damages or
liabilities (or actions in respect thereof), as well as any other relevant
equitable considerations. The relative benefits received by the Company and the
Guarantors on the one hand and the Purchasers 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 Purchasers, in each case as set forth
in the Offering Circular. 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 and the Guarantors on the one
hand or the Purchasers on the other and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such statement or
omission. The Company, the Guarantors and the Purchasers agree that it would not
be just and equitable if contribution pursuant to this subsection (d) were
determined by pro rata allocation (even if the Purchasers were treated as one
entity for such purpose) or by any other method of allocation which does not
take account of the equitable considerations referred to above in this
subsection (d). The amount paid or payable by an indemnified party as a result
of the losses, claims, damages or liabilities (or actions in respect thereof)
referred to above in 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 such action or claim. Notwithstanding the
provisions of this subsection (d), no Purchaser 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 investors were offered to
investors exceeds the amount of any damages which such Purchaser has otherwise
been required to pay by reason of such untrue or alleged untrue statement or
omission or alleged omission. The Purchasers' 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 8 shall be in
addition to any liability which the Company and the Guarantors may otherwise
have and shall extend, upon the same terms and conditions, to each person, if
any, who controls any Purchaser within the meaning of the Act; and the
obligations of the Purchasers under this Section 8 shall be in addition to any
liability which the respective Purchasers may otherwise have and shall extend,
upon the same terms and conditions, to each officer and director of the Company
and the Guarantors and to each person, if any, who controls the Company or the
Guarantors within the meaning of the Securities Act.
9. (a) If any Purchaser shall default in its obligation to purchase
the Securities which it has agreed to purchase hereunder, you may in your
discretion arrange for you or another party or other parties to purchase such
Securities on the terms contained herein. If within thirty-six hours after such
default by any Purchaser you do not arrange for the purchase of such Securities,
then the Company shall be entitled to a further period of thirty-six hours
within which to procure another party or other parties satisfactory to you to
purchase such Securities on such terms. In the event that, within the respective
prescribed periods, you notify the Company that you have so arranged for the
purchase of
15
such Securities, or the Company notifies you that it has so arranged for the
purchase of such Securities, you or the Company shall have the right to postpone
such Time of Delivery for a period of not more than seven days, in order to
effect whatever changes may thereby be made necessary in the Offering Circular,
or in any other documents or arrangements, and the Company agrees to prepare
promptly any amendments to the Offering Circular which in your opinion may
thereby be made necessary. The term "Purchaser" as used in this Agreement shall
include any person substituted under this Section with like effect as if such
person had originally been a party to this Agreement with respect to such
Securities.
(b) If, after giving effect to any arrangements for the purchase of
the Securities of a defaulting Purchaser or Purchasers by you and the Company as
provided in subsection (a) above, the aggregate principal amount of such
Securities which remains unpurchased does not exceed one-eleventh of the
aggregate principal amount of all the Securities to be purchased at such Time of
Delivery, then the Company shall have the right to require each non-defaulting
Purchaser to purchase the principal amount of Securities which such Purchaser
agreed to purchase hereunder at such Time of Delivery and, in addition, to
require each non-defaulting Purchaser to purchase its pro rata share (based on
the principal amount of Securities which such Purchaser agreed to purchase
hereunder) of the Securities of such defaulting Purchaser or Purchasers for
which such arrangements have not been made; but nothing herein shall relieve a
defaulting Purchaser from liability for its default.
(c) If, after giving effect to any arrangements for the purchase of
the Securities of a defaulting Purchaser or Purchasers by you and the Company as
provided in subsection (a) above, the aggregate principal amount of Securities
which remains unpurchased exceeds one-eleventh of the aggregate principal amount
of all the Securities to be purchased at such Time of Delivery, or if the
Company shall not exercise the right described in subsection (b) above to
require non-defaulting Purchasers to purchase Securities of a defaulting
Purchaser or Purchasers, then this Agreement (or, with respect to the Second
Time of Delivery, the obligation of the underwriters to purchase and of the
Company to sell the Optional Securities) shall thereupon terminate, without
liability on the part of any non-defaulting Purchaser or the Company, except for
the expenses to be borne by the Company and the Purchasers as provided in
Section 6 hereof and the indemnity and contribution agreements in Section 8
hereof; but nothing herein shall relieve a defaulting Purchaser from liability
for its default.
10. The respective indemnities, agreements, representations,
warranties and other statements of the Company and the Guarantors and the
several Purchasers, as set forth in this Agreement or made by or on behalf of
them, respectively, pursuant to this Agreement, shall remain in full force and
effect, regardless of any investigation (or any statement as to the results
thereof) made by or on behalf of any Purchaser or any controlling person of any
Purchaser, the Company or the Guarantees, or any officer or director or
controlling person of the Company, and shall survive delivery of and payment for
the Securities.
11. If this Agreement shall be terminated pursuant to Section 9
hereof, the Company and the Guarantees shall not then be under any liability to
any Purchaser except as provided in Sections 6 and 8 hereof; but, if for any
other reason, the Securities and the Guarantors thereof are not delivered by or
on behalf of the Company and the Guarantees as provided herein, the Company and
the Guarantors will reimburse the Purchasers through you for all out-of-pocket
expenses approved in writing by you, including fees and disbursements of
counsel, reasonably incurred by the Purchasers in making preparations for the
purchase, sale and delivery of the Securities, but the Company and the
Guarantors shall then be under no further liability to any Purchaser except as
provided in Sections 6 and 8 hereof.
12. In all dealings hereunder, you shall act on behalf of each of the
Purchasers, and the parties hereto shall be entitled to act and rely upon any
statement, request, notice or agreement on
16
behalf of any Purchaser made or given by you jointly or by ▇▇▇▇▇▇▇, ▇▇▇▇▇ & Co.
on behalf of you as the representatives.
All statements, requests, notices and agreements hereunder shall be in
writing, and if to the Purchasers shall be delivered or sent by mail, telex or
facsimile transmission to you as the representatives in care of ▇▇▇▇▇▇▇, Sachs &
Co., ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, Attention: Registration
Department; and if to the Company shall be delivered or sent by mail, telex or
facsimile transmission to the address of the Company set forth in the Offering
Circular, Attention: Secretary; PROVIDED, HOWEVER, that any notice to a
Purchaser pursuant to Section 8(c) hereof shall be delivered or sent by mail,
telex or facsimile transmission to such Purchaser at its address set forth in
its Purchasers' Questionnaire, or telex constituting such Questionnaire, which
address will be supplied to the Company by you upon request. Any such
statements, requests, notices or agreements shall take effect upon receipt
thereof.
13. This Agreement shall be binding upon, and inure solely to the
benefit of, the Purchasers, the Company, the Guarantors and, to the extent
provided in Sections 8 and 10 hereof, the officers and directors of the Company
and the Guarantors and each person who controls the Company, the Guarantors or
any Purchaser, and their respective heirs, executors, administrators, successors
and assigns, and no other person shall acquire or have any right under or by
virtue of this Agreement. No purchaser of any of the Securities from any
Purchaser shall be deemed a successor or assign by reason merely of such
purchase.
14. Time shall be of the essence of this Agreement.
15. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF NEW YORK.
16. This Agreement may be executed by any one or more of the parties
hereto in any number of counterparts, each of which shall be deemed to be an
original, but all such respective counterparts shall together constitute one and
the same instrument.
17. The Company is authorized, subject to applicable law, to disclose
any and all aspects of this potential transaction that are necessary to support
any U.S. federal income tax benefits expected to be claimed with respect to such
transaction, and all materials of any kind (including tax opinions and other tax
analyses) related to those benefits, without the Purchasers imposing any
limitation of any kind.
17
If the foregoing is in accordance with your understanding, please sign
and return to us eight counterparts hereof, and upon the acceptance hereof by
you, on behalf of each of the Purchasers, this letter and such acceptance hereof
shall constitute a binding agreement between each of the Purchasers, the Company
and each Guarantor. It is understood that your acceptance of this letter on
behalf of each of the Purchasers is and each Guarantor pursuant to the authority
set forth in a form of Agreement among Purchasers, the form of which shall be
submitted to the Company for examination upon request, but without warranty on
your part as to the authority of the signers thereof.
Very truly yours,
The Pep Boys - Manny, Moe & ▇▇▇▇
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
---------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Vice President - Chief Accounting
Officer and Treasurer
The Pep Boys ▇▇▇▇▇ ▇▇▇ & ▇▇▇▇ of California
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
---------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Vice President - Chief Accounting
Officer and Treasurer
Pep Boys - Manny, Moe & ▇▇▇▇ of Delaware, Inc.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
---------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Vice President - Chief Accounting
Officer and Treasurer
Pep Boys - Manny, Moe & ▇▇▇▇ of Puerto Rico, Inc.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
---------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Vice President - Chief Accounting
Officer and Treasurer
Accepted as of the date hereof:
▇▇▇▇▇▇▇, Sachs & Co.
First Union Securities, Inc.
Advest, Inc.
By: /s/ ▇▇▇▇▇▇▇, ▇▇▇▇▇ & Co.
---------------------------------------
(▇▇▇▇▇▇▇, Sachs & Co.)
On behalf of each of the Purchasers
18
SCHEDULE I
PRINCIPAL
PRINCIPAL AMOUNT OF
AMOUNT OF OPTIONAL SECURITIES
FIRM SECURITIES TO BE PURCHASED
TO BE IF MAXIMUM OPTION
UNDERWRITER PURCHASED EXERCISED
----------- --------------- -------------------
▇▇▇▇▇▇▇, ▇▇▇▇▇ & Co.................... $ 87,500,000 $ 17,500,000
First Union Securities, Inc. .......... 28,125,000 5,625,000
Advest, Inc. .......................... 9,375,000 1,875,000
--------------- -------------------
Total.......................... $ 125,000,000 $ 25,000,000
=============== ===================
19
ANNEX I
Pursuant to Section 7(d) of the
Purchase Agreement, the accountants
shall furnish letters to the Purchasers to the effect that:
(i) They are independent certified public accountants with
respect to the Company and its subsidiaries within the meaning of the
Securities Exchange Act of 1934 (the "Exchange Act") and the
applicable published rules and regulations thereunder;
(ii) In our opinion, the consolidated financial statements and
financial statement schedules audited by us and included in the
Offering Circular comply as to form in all material respects with the
applicable requirements of the Exchange Act and the related published
rules and regulations;
(iii) The unaudited selected financial information with respect
to the consolidated results of operations and financial position of
the Company for the five most recent fiscal years included in the
Offering Circular agrees with the corresponding amounts (after
restatements where applicable) in the audited consolidated financial
statements for such five fiscal years;
(iv) On the basis of limited procedures not constituting an audit
in accordance with generally accepted auditing standards, consisting
of a reading of the unaudited financial statements and other
information referred to below, a reading of the latest available
interim financial statements of the Company and its subsidiaries,
inspection of the minute books of the Company and its subsidiaries
since the date of the latest audited financial statements included in
the Offering Circular, inquiries of officials of the Company and its
subsidiaries responsible for financial and accounting matters and such
other inquiries and procedures as may be specified in such letter,
nothing came to their attention that caused them to believe that:
(A) the unaudited consolidated statements of income,
consolidated balance sheets and consolidated statements of cash
flows included in the Offering Circular are not in conformity
with generally accepted accounting principles applied on the
basis substantially consistent with the basis for the unaudited
condensed consolidated statements of income, consolidated balance
sheets and consolidated statements of cash flows included in the
Offering Circular;
(B) any other unaudited income statement data and
balance sheet items included in the Offering Circular do not
agree with the corresponding items in the unaudited consolidated
financial statements from which such data and items were derived,
and any such unaudited data and items were not determined on a
basis substantially consistent with the basis for the
corresponding amounts in the audited consolidated financial
statements included in the Offering Circular;
(C) the unaudited financial statements which were not
included in the Offering Circular but from which were derived any
unaudited condensed financial
statements referred to in clause (A) and any unaudited income
statement data and balance sheet items included in the Offering
Circular and referred to in clause (B) were not determined on a
basis substantially consistent with the basis for the audited
consolidated financial statements included in the Offering
Circular;
(D) any unaudited pro forma consolidated condensed
financial statements included in the Offering Circular do not
comply as to form in all material respects with the applicable
accounting requirements or the pro forma adjustments have not
been properly applied to the historical amounts in the
compilation of those statements;
(E) as of a specified date not more than five days prior
to the date of such letter, there have been any changes in the
consolidated capital stock (other than issuances of capital stock
upon exercise of options and stock appreciation rights, upon
earn-outs of performance shares and upon conversions of
convertible securities, in each case which were outstanding on
the date of the latest financial statements included in the
Offering Circular) or any increase in the consolidated long-term
debt of the Company and its subsidiaries, or any decreases in
consolidated net revenues; and
(v) In addition to the examination referred to in their report(s)
included in the Offering Circular and the limited procedures,
inspection of minute books, inquiries and other procedures referred to
in paragraphs (iii) and (iv) above, they have carried out certain
specified procedures, not constituting an audit in accordance with
generally accepted auditing standards, with respect to certain
amounts, percentages and financial information specified by the
Representatives, which are derived from the general accounting records
of the Company and its subsidiaries, which appear in the Offering
Circular, and have compared certain of such amounts, percentages and
financial information with the accounting records of the Company and
its subsidiaries and have found them to be in agreement.
Dear Deloitte & Touche LLP:
▇▇▇▇▇▇▇, Sachs & Co., as representatives of the Purchasers of 4.25%
Convertible Senior Notes due June 1, 2007 to be issued by The Pep Boys -- Manny,
Moe & ▇▇▇▇ (the "Company"), will be reviewing certain information relating to
the Company that will be included (incorporated by reference) in the Offering
Circular. This review process, applied to the information relation to the issue,
is (will be) substantially consistent with the due diligence review process that
we would perform if this placement of securities were being registered pursuant
to the Securities Act of 1933 (the Act). It is recognized however that what is
"substantially consistent" may vary from situation to situation and may not be
the same as that done in a registered offering of the same securities for the
same issuer and whether the procedures being, or to be, followed will be
"substantially consistent" will be determined by us on a case-by-case basis. We
are knowledgeable with respect to the due diligence review process that would be
performed if this placement of securities were being registered pursuant to the
Act. We hereby request that you deliver to us a "comfort" letter concerning the
financial statements of the issuer and certain statistical and other data
included in the offering document. We will contact you to identify the
procedures we wish you to follow and the form we wish the comfort letter to
take.
Very truly yours,
By:
-------------------------------
(▇▇▇▇▇▇▇, Sachs & Co.)
EXHIBIT A-1
LIST OF PERSONS TO SIGN LOCK-UP AGREEMENT
DIRECTORS
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ (except with respect to 70,000 shares of common stock
held by the ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ Foundation, a non-profit
charitable foundation, of which ▇▇. ▇▇▇▇▇▇▇▇▇ is a
trustee and as to which no Form 4 need be filed, and up
to an additional 10,000 shares of common stock in the
aggregate held by various trusts of which ▇▇. ▇▇▇▇▇▇▇▇▇
is a trustee or co-trustee)
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ (except with respect to 100,000 shares of common stock
held by The ▇▇▇▇▇▇▇ Foundation, a non-profit charitable
foundation of which ▇▇. ▇▇▇▇▇▇▇ is a co-trustee, the
disposition of which shares of common stock is not
subject to the reporting requirements of Section 16 of
the Securities Exchange Act of 1934, as amended)
▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ (also executive officer)
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇▇▇ ▇. Black (except upon the 45th day after the date of the final
Offering Circular, all shares of common stock, the
disposition of which is not subject to the reporting
requirements of Section 16 of the Securities Exchange
Act of 1934, as amended)
J. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇.
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
▇▇▇▇▇ ▇. ▇▇▇▇▇
▇▇▇▇ Scacceti
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
EXECUTIVE OFFICERS:
▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇.
▇▇▇▇ ▇. Page
▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
▇▇▇ ▇. ▇▇▇▇▇
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
EXHIBIT A-2
THE PEP BOYS-MANNY,
MOE & ▇▇▇▇ LOCK-UP AGREEMENT
MAY , 2000
▇▇▇▇▇▇▇, Sachs & Co.
First Union Securities, Inc.
c/o Goldman, ▇▇▇▇▇ & Co.
▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Re: THE PEP BOYS-MANNY, MOE & ▇▇▇▇ - LOCK-UP AGREEMENT
Ladies and Gentlemen:
The undersigned understands that you, as representatives (the
"Representatives"), propose to enter into a
Purchase Agreement on behalf of the
Initial Purchasers named in Schedule I to such agreement (collectively, the
"Purchasers"), with The Pep Boys-Manny, Moe & ▇▇▇▇, a Pennsylvania corporation
(the "Company"), providing for a private placement in reliance on Rule 144A of
convertible senior notes of the Company, convertible into its Common Stock (the
"Shares").
In consideration of the agreement by the Purchasers to offer and sell
the convertible senior notes, and of other good and valuable consideration the
receipt and sufficiency of which is hereby acknowledged, the undersigned agrees
that, during the period beginning from the date of the final Offering Circular
covering the offering of the convertible senior notes and continuing to and
including the date 90 days after the date of such final Offering Circular, the
undersigned will not offer, sell, contract to sell, pledge, grant any option to
purchase, make any short sale or otherwise dispose of any shares of Common Stock
of the Company, or any options or warrants to purchase any shares of Common
Stock of the Company, or any securities convertible into, exchangeable for or
that represent the right to receive shares of Common Stock of the Company,
whether now owned or hereinafter acquired, owned directly by the undersigned
(including holding as a custodian) or with respect to which the undersigned has
beneficial ownership within the rules and regulations of the SEC (collectively
the "Undersigned's Shares").
The foregoing restriction is expressly agreed to preclude the
undersigned from engaging in any hedging or other transaction which is designed
to or which reasonably could be expected to lead to or result in a sale or
disposition of the Undersigned's Shares even if such Shares would be disposed of
by someone other than the undersigned. Such prohibited hedging or other
transactions would include without limitation any short sale or any purchase,
sale or grant of any right (including without limitation any put or call option)
with respect to any of the Undersigned's Shares or with respect to any security
that includes, relates to, or derives any significant part of its
value from such Shares.
Notwithstanding the foregoing, the undersigned may transfer the
Undersigned's Shares (i) as a BONA FIDE gift or gifts, provided that the donee
or donees thereof agree to be bound in writing by the restrictions set forth
herein, (ii) to any trust for the direct or indirect benefit of the undersigned
or the immediate family of the undersigned, provided that the trustee of the
trust agrees to be bound in writing by the restrictions set forth herein, and
provided further that any such transfer shall not involve a disposition for
value, or (iii) with the prior written consent of ▇▇▇▇▇▇▇, ▇▇▇▇▇ & Co. on behalf
of the Purchasers. For purposes of this Lock-Up Agreement, "immediate family"
shall mean any relationship by blood, marriage or adoption, not more remote than
first cousin. In addition, notwithstanding the foregoing, if the undersigned is
a corporation, the corporation may transfer the capital stock of the Company to
any wholly-owned subsidiary of such corporation; PROVIDED, HOWEVER, that in any
such case, it shall be a condition to the transfer that the transferee execute
an agreement stating that the transferee is receiving and holding such capital
stock subject to the provisions of this Agreement and there shall be no further
transfer of such capital stock except in accordance with this Agreement, and
provided further that any such transfer shall not involve a disposition for
value. The undersigned now has, and, except as contemplated by clause (i), (ii),
or (iii) above, for the duration of this Lock-Up Agreement will have, good and
marketable title to the Undersigned's Shares, free and clear of all liens,
encumbrances, and claims whatsoever. The undersigned also agrees and consents to
the entry of stop transfer instructions with the Company's transfer agent and
registrar against the transfer of the Undersigned's Shares except in compliance
with the foregoing restrictions.
The undersigned understands that the Company and the Purchasers are
relying upon this Lock-Up Agreement in proceeding toward consummation of the
offering. The undersigned further understands that this Lock-Up Agreement is
irrevocable and shall be binding upon the undersigned's heirs, legal
representatives, successors, and assigns.
Very truly yours,
----------------------------------------
Exact Name of Shareholder
----------------------------------------
Authorized Signature
----------------------------------------
Title
