AMENDMENT NO. 3 TO LOAN AND SECURITY AGREEMENT
May 15, 2002
Congress Financial Corporation
▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Ladies and Gentlemen:
Congress Financial Corporation ("Lender") and The Pep Boys - Manny, Moe & ▇▇▇▇,
a Pennsylvania corporation ("Pep Boys"), The Pep Boys Manny, Moe & ▇▇▇▇ of
California, a California corporation ("PBY-California"), Pep Boys ▇▇▇▇▇ ▇▇▇ &
▇▇▇▇ of Delaware, Inc., a Delaware corporation ("PBY-Delaware"), and
Pep Boys - Manny, Moe & ▇▇▇▇ of Puerto Rico, Inc., a Delaware corporation
("PBY-Puerto Rico"; and together with Pep Boys, PBY-California and
PBY-Delaware, each individually, a "Borrower" and collectively, "Borrowers" as
hereinafter further defined), PBY Corporation, a Delaware corporation ("PBY")
and Carrus Supply Corporation, a Delaware corporation ("Carrus" and, together
with PBY, each individually, a "Guarantor" and collectively, "Guarantors" as
hereinafter further defined) have entered into certain financing arrangements
pursuant to which Lender may make loans and advances and provide other
financial accommodations to Borrower as set forth in the Loan and Security
Agreement, dated September 22, 2000, as amended by Amendment No. 1 to Loan and
Security Agreement, dated as of June 29, 2001, and Amendment No. 2 to Loan and
Security Agreement, dated December 13, 2001 (as the same now exists or may
hereafter be amended, modified, supplemented, extended, renewed, restated or
replaced, the "Loan Agreement") and the agreements, documents and instruments
at any time executed and/or delivered in connection therewith or related
thereto, including, but not limited to, this Amendment, but excluding the
Synthetic Lease Facility Agreements, (all of the foregoing together with the
Loan Agreement, as the same now exist or may hereafter be amended, modified,
supplemented, extended, renewed, restated or replaced, being collectively
referred to herein as the "Financing Agreements").
Borrowers and Guarantors have requested that Lender consent to Borrowers and
Guarantors incurring certain additional indebtedness, consent to revising
certain calculations of Excess Availability (as defined in the Loan Agreement)
and enter into certain amendments to the Financing Agreements in connection
therewith. Lender is willing to agree to the foregoing, subject to the terms
and conditions contained herein.
In consideration of the foregoing, the mutual agreements and covenants
contained herein, and other good and valuable consideration, the adequacy and
sufficiency of which are hereby acknowledged, Lender, each Borrower and each
Guarantor agree as follows:
1. Definitions.
(a) Additional Definitions. As used herein, the following terms shall have
the meanings given to them below, and the Loan Agreement and the other
Financing Agreements are hereby amended to include, in addition and not in
limitation, the following definitions:
(i) "2002 Senior Notes" shall mean the 4.25% Convertible Senior Notes
due 2007 issued pursuant to the 2002 Senior Note Indenture.
(ii) "2002 Senior Note Indenture" shall mean the Indenture, dated as of
May 21, 2002, by and between Pep Boys, PBY-California, PBY-Delaware and
PBY-Puerto Rico, and Wachovia National Bank, N.A. as Trustee, with
respect to Pep Boys' 4.25% Convertible Senior Notes due 2007 in the
aggregate principal amount of $150,000,000, as the same now exists or may
hereafter be amended, modified, supplemented, extended, renewed, restated
or replaced.
(b) Interpretation. All capitalized terms used herein shall have the meanings
assigned thereto in the Loan Agreement and the other Financing Agreements,
unless otherwise defined herein.
2. Amendments to Loan Agreement.
(a) Excess Availability. Section 1.45 of the Loan Agreement is hereby deleted
in its entirety and the following substituted therefor:
"1.45 "Excess Availability" shall mean, as to Borrowers, the amount, as
determined by Lender, calculated at any time, equal to: (a) the lesser of:
(i)the Borrowing Base and (ii) the Maximum Credit, minus (b) the sum of:
(i) the amount of all then outstanding and unpaid Obligations of Borrowers,
plus (ii) the aggregate amount of all then outstanding and unpaid trade
payables and other obligations of Borrowers which are more than forty-five (45)
days past due as of such time (unless the trade payables or the obligation is
being contested in good faith). For purposes of calculating Excess Availability
in connection with Sections 1.5, 1.6, 1.10(a)(ii)(B), 1.35(c), 6.3(a)(i) and
6.3(a)(ii) hereof, the Borrowing Base shall not be reduced by the Special
Reserve."
(b) Senior Indentures. Section 1.96 of the Loan Agreement is hereby deleted in
its entirety and the following substituted therefor:
"1.96 "Pep Boys Senior Indentures" shall mean, collectively, the following
(as the same now exists or may hereafter be amended, modified, supplemented,
extended, renewed, restated or replaced): (a) the 1991 Senior Note
Indenture,(b) the 1995 Senior Note Indenture, (c) the 1997 Senior Note
Indenture,(d) the 1998 Senior Note Indenture, (e) the 2002 Senior Note
Indenture and (f) all agreements, documents and instruments executed and/or
delivered in connection with any of the foregoing."
(c) Letter of Credit Accommodations. Section 2.2(e) of the Loan Agreement is
hereby deleted in its entirety and the following substituted therefor:
"(e) Except in Lender's discretion, the amount of all outstanding Letter of
Credit Accommodations and all other commitments and obligations made or
incurred by Lender in connection therewith shall not at any time exceed
$50,000,000. At any time an Event of Default exists or has occurred and is
continuing, upon Lender's request, Borrowers will either furnish cash
collateral to secure the reimbursement obligations to the issuer in connection
with any Letter of Credit Accommodations or furnish cash collateral to Lender
for the Letter of Credit Accommodations."
(d) Grant of Security Interest. Section 5.1(c) of the Loan Agreement is hereby
amended by adding the following to the end thereof:
"provided that, the proceeds from the offering and issuance of the 2002 Senior
Notes, and any monies, securities and other investment property, credit
balances, deposits, deposit accounts and other property purchased with such
proceeds, other than types or items of property constituting Collateral, shall
not constitute Collateral."
(e) Inventory Covenants. Section 7.3(d) of the Loan Agreement is hereby
deleted in its entirety and the following substituted therefor:
"(d) upon Lender's request, Borrowers shall, at their expense, no more than
three (3) times in any twelve (12) month period, but at any time or times as
Lender may request on or after an Event of Default, deliver or cause to be
delivered to Lender written appraisals as to the Inventory in form, scope and
methodology reasonably acceptable to Lender and by an appraiser reasonably
acceptable to Lender, addressed to Lender and upon which Lender is expressly
permitted to rely;".
(f) Senior Indebtedness. Section 9.9(h) of the Loan Agreement is hereby
deleted in its entirety and the following substituted therefor:
"(h) Indebtedness of Borrowers evidenced by or arising under the Pep Boys
Senior Indentures (as in effect on the date hereof, except with respect to
the 2002 Senior Note Indenture, as in effect on May 21, 2002), provided, that:
(i) the aggregate principal amount of such Indebtedness shall not exceed
$675,000,000 as of May 21, 2002, less the aggregate amount of all repayments,
repurchases or redemptions thereof from and after such date, whether optional
or mandatory, plus interest thereon at the applicable rates provided in the
Pep Boys Senior Indentures in effect on the date hereof, except in the case of
the 2002 Senior Note Indenture which shall be as in effect on May 21, 2002;
(ii) as of May 15, 2002, the principal amount of such outstanding Indebtedness
under the 1991 Senior Note Indenture is $75,000,000;
(iii) as of May 15, 2002, the principal amount of such outstanding Indebtedness
under the 1995 Senior Note Indenture is $100,000,000;
(iv) as of May 15, 2002, the principal amount of such outstanding Indebtedness
under the 1997 Senior Note Indenture is $144,005,000;
(v) as of May 15, 2002, the principal amount of such outstanding Indebtedness
under the 1998 Senior Note Indenture is $200,000,000;
(vi) as of May 21, 2002, the principal amount of such outstanding indebtedness
under the 2002 Senior Note Indenture is $150,000,000;
(vii) as of the date hereof, and after giving effect to the Synthetic Lease
Facility Agreements, no default or event of default, or act, condition or event
which with notice or passage of time or both would constitute an event of
default exists or has occurred and is continuing under any of the Pep Boys
Senior Indentures;
(viii) such Indebtedness is and shall remain unsecured;
(ix) Borrowers shall not, directly or indirectly, make, or be required to
make, any payments in respect of such Indebtedness, except, that, Borrowers may
make regularly scheduled payments of principal, interest and fees, on an
unaccelerated basis, in respect of such Indebtedness in accordance with the
terms of the Pep Boys Senior Indentures as in effect on the date hereof, except
in the case of the 2002 Senior Note Indenture which shall be as in effect on
May 21, 2002, and payments as otherwise permitted pursuant to
Section 9.9(h)(x)(B);
(x) Borrowers shall not, directly or indirectly, (A) amend, modify, alter or
change any of the material terms of such Indebtedness or any of the Pep Boys
Senior Indentures as in effect on the date hereof, except in the case of the
2002 Senior Note Indenture as in effect on May 21, 2002, except, that,
Borrowers may, after prior written notice to Lender, amend, modify, alter or
change the terms thereof so as to extend the maturity thereof or defer the
timing of any payments in respect thereof, or to forgive or cancel any portion
of such Indebtedness other than pursuant to payments thereof, or to reduce the
interest rate or any fees in connection therewith, or to make the provisions
thereof less restrictive or burdensome than the terms or conditions of the Pep
Boys Senior Indentures as in effect on the date hereof, or (B) make optional
prepayments of principal or redeem, retire, defease, purchase or otherwise
acquire such Indebtedness, or set aside or otherwise deposit or invest any sums
for such purpose except that Borrowers may make optional prepayments of
principal or redeem, retire, defease, purchase or otherwise acquire such
Indebtedness, provided, that, each of the following conditions is satisfied as
determined by Lender: (1) as of the date of such payment and after giving
effect thereto, Excess Availability for each of the immediately preceding
thirty (30) consecutive days shall have been not less than $25,000,000, and as
of the date of such payment and after giving effect thereto, the Excess
Availability shall be not less than $25,000,000 and (2) as of the date of such
payment and after giving effect thereto, no Event of Default or act, condition
or event which with notice or passage of time or both would constitute an
Event of Default shall exist or be continuing, and, except that Pep Boys may
redeem or retire such Indebtedness with proceeds of Refinancing Indebtedness
with respect thereto as permitted in this Section 9.9(l) hereof, and
(xi) Borrowers shall furnish to Lender all notices or demands in connection
with such Indebtedness either received by any Borrower or Guarantor or on its
behalf promptly after the receipt thereof, or sent by any Borrower or Guarantor
or on its behalf concurrently with the sending thereof, as the case may be."
3. Use of Proceeds. Borrowers and Guarantors shall use the proceeds of all
loans and other indebtedness pursuant to the 2002 Senior Note Indenture only
for the purposes described in the final Offering Circular dated May 15, 2002
concerning the 2002 Senior Notes.
4. Reporting. Borrower and Guarantors shall deliver to Lender by not later
than the tenth (10th) Business Day of each month, or more frequently as Lender
may reasonably request, a written report in form and substance satisfactory to
Lender describing the use during the immediately preceding month, or such other
period as Lender may request, of all proceeds of the 2002 Senior Note Indenture
and the 2002 Senior Notes.
5. Consent. Subject to the terms and conditions contained herein, Lender
hereby consents to Borrowers and Guarantors entering into the 2002 Senior Note
Indenture substantially in the form attached hereto as Exhibit A, and waives
the Event of Default under Section 10.1(a)(iii) of the Loan Agreement which
would arise from a violation of Section 9.9(h) of the Loan Agreement, but for
the consent and amendments set forth herein (provided, that, the foregoing
shall not be construed as a consent to or waiver of any other Event of
Default).
6. Collateral. To secure payment and performance of all obligations, each
Borrower and Guarantor hereby grants to Lender and hereby confirms, reaffirms
and restates its prior grant to Lender under the Loan Agreement and the other
Financing Agreements, a continuing security interest and lien upon, and a right
of set-off against, and hereby assigns to Lender, as security, all of the
Collateral.
7. Additional Representations, Warranties and Covenants. In addition to the
continuing representations, warranties and covenants heretofore or hereafter
made by each Borrower and Guarantor to Lender pursuant to the other Financing
Agreements, each Borrower and Guarantor hereby jointly and severally
represents, warrants and covenants with and to Lender as follows, which
representations, warranties and covenants are continuing and shall survive the
execution and delivery hereof and shall be incorporated into and made a part of
the Financing Agreements:
(a) No Event of Default or condition or event which with notice or passage of
time or both would constitute an Event of Default exists or has occurred as of
the date of this Amendment (after giving effect to the amendments made and
consents granted by Lender pursuant to this Amendment). As of the date of any
Borrower or Guarantor entering into the 2002 Senior Note Indenture and after
giving effect to such transaction, the aggregate amount of outstanding
Exempted Debt represented by such transaction, when aggregated with all other
outstanding Exempted Debt, shall not exceed the Exempted Debt Limit, and such
transaction is and shall be in compliance with the terms and conditions set
forth in the Pep Boys Indentures.
(b) This Amendment and each other agreement or instrument to be executed and
delivered by Borrowers and Guarantors hereunder has been duly executed and
delivered by each Borrower and Guarantor and is in full force and effect as of
the date hereof, and the agreements and obligations of each Borrower contained
herein and therein constitute legal, valid and binding obligations of each
Borrower and Guarantor enforceable against each Borrower and Guarantor in
accordance with their terms.
(c) Neither the execution and delivery of the 2002 Senior Note Indenture, nor
the consummation of the transactions contemplated by the 2002 Senior Note
Indenture, nor compliance with the provisions of the 2002 Senior Note Indenture
or instruments thereunder shall result in (i) the creation or imposition of any
lien, claim, charge or encumbrance upon any of the Collateral, except in favor
of Lender or as expressly permitted by Section9.8 of the Loan Agreement (after
giving effect to this Amendment) and by the other Financing Agreements or (ii)
the incurrence, creation, assumption of any Indebtedness of any Borrower or
Guarantor, except as expressly permitted under Section 9.9 and 9.10 of the Loan
Agreement (after giving effect to this Amendment) and by the other Financing
Agreements.
(d) No court of competent jurisdiction has issued any injunction, restraining
order or other order which prohibits consummation of the transactions
contemplated in respect of the 2002 Senior Note Indenture, and no governmental
or other action or proceeding has been threatened or commenced in the United
States of America, seeking any injunction, restraining order or other order
which seeks to void or otherwise modify the transactions described in the 2002
Senior Note Indenture. Neither the execution and delivery of the 2002 Senior
Note Indenture, nor the consummation of the transactions contemplated by the
2002 Senior Note Indenture, nor compliance with the provisions thereof, shall
violate any Federal or state securities laws or any other law or regulation or
any order or decree of any court or governmental instrumentality in respect or
shall conflict with or result in the breach of, or constitute a default in any
respect under, any indenture, or other material mortgage, agreement, instrument
or undertaking to which any Borrower or Guarantor is a party or may be bound,
or violate any provision of the organizational documents of any Borrower or
Guarantor.
(e) Each Borrower and Guarantor shall take such steps and execute and deliver,
and cause to be executed and delivered, to Lender, such additional UCC
financing statements and termination statements, and other and further
agreements, documents and instruments as Lender may require in order to more
fully evidence, perfect and protect Lender's security interest in Collateral.
(f) The 2002 Senior Note Indenture have been duly authorized, executed and
delivered by each Borrower and Guarantor and are in full force and effect as of
the date hereof.
8. Conditions to Effectiveness of Consent and Amendment. The effectiveness of
the amendments and consents pursuant to this Amendment shall be subject to the
satisfaction of each of the following conditions precedent:
(a) Lender shall have received an executed original or executed original
counterparts of this Amendment (as the case may be), duly authorized, executed
and delivered by the respective parties hereto;
(b) Lender shall have received, in form and substance satisfactory to Lender,
all consents, waivers, acknowledgments, releases, terminations and such other
documents and agreements from third persons which Lender may deem necessary or
desirable in order to permit, protect and perfect its security interests in and
liens upon the Collateral;
(c) Lender shall have received an opinion of counsel to the Borrowers and
Guarantors, in form and substance satisfactory to Lender, stating, among other
things and without limitation, that the execution and delivery of the 2002
Senior Note Indenture and the consummation of the transactions contemplated
therein shall not violate any term or condition set forth in any of the Pep
Boys Indentures;
(d) Lender shall have received, by not later than May 21, 2002, a true and
complete copy of the 2002 Senior Note Indenture, substantially identical to the
form of 2002 Senior Note Indenture attached hereto as Exhibit A, duly
authorized, executed and delivered by and to the appropriate parties thereto
and all notices, instruments, documents and agreements relating thereto,
including all exhibits and schedules thereto, together with evidence that the
transactions contemplated under the terms and conditions of the 2002 Senior
Note Indenture have been consummated prior to or contemporaneously with the
execution of this Amendment; and
(e) Lender shall have received a correct and complete copy of the final
Offering Circular, dated May 15, 2002, concerning the 2002 Senior Notes and all
amendments thereto as filed with the Securities and Exchange Commission.
(f) no Event of Default shall exist or have occurred and no event or condition
shall have occurred or exist which notice or passage of time or both would
constitute an Event of Default (after giving effect to the amendments made and
consents granted by Lender pursuant to this Amendment).
9. Additional Events of Default. The parties hereto acknowledge, confirm and
agree that the failure of any Borrower or Guarantor to comply with the
covenants and agreements contained herein shall constitute an Event of Default
under the Financing Agreements (subject to the applicable cure period, if any,
with respect thereto provided for in the Loan Agreement as in effect on the
date hereof).
10. Amendment Fee. Borrowers shall jointly and severally pay to Lender an
amendment fee in an amount equal to $200,000, which amount shall be payable
simultaneously with the execution of this Amendment, and fully earned as of the
date hereof. Such fee shall be in addition to all other amounts payable under
the Financing Agreements, shall constitute part of the Obligations and may, at
Lender=s option, be charged directly to any account of any Borrower maintained
with Lender.
11. Effect of this Amendment. Except as modified pursuant hereto, no other
waivers, changes or modifications to the Financing Agreements are intended or
implied, and in all other respects, the Financing Agreements are hereby
specifically ratified, restated and confirmed by all parties hereto as of the
effective date hereof. To the extent of conflict between the terms of this
Amendment and the other Financing Agreements, the terms of this Amendment shall
control.
12. Further Assurances. The parties hereto shall execute and deliver such
additional documents and take such additional actions as may be necessary to
effectuate the provisions and purposes of this Amendment.
13. Governing Law. The rights and obligations hereunder of each of the parties
hereto shall be governed by and interpreted and determined in accordance with
the laws of the State of NewYork (without giving effect to principles of
conflicts of laws).
14. Binding Effect. This Amendment shall be binding upon and inure to the
benefit of each of the parties hereto and their respective successors and
assigns. Any acknowledgment or consent contained herein shall not be construed
to constitute a consent to any other or further action by any Borrower or
Guarantor or to entitle any Borrower or Guarantor to any other consent. The
Loan Agreement and this Amendment shall be read and construed as one agreement.
15. Counterparts. This Amendment may be executed in any number of
counterparts, but all of such counterparts shall together constitute but one
and the same agreement. In making proof of this Amendment, it shall not be
necessary to produce or account for more than one counterpart thereof signed
by each of the parties thereto.
Very truly yours,
/s/ THE PEP BOYS - MANNY, MOE & ▇▇▇▇
/s/ THE PEP BOYS ▇▇▇▇▇ ▇▇▇ &
▇▇▇▇ OF CALIFORNIA
/s/ PEP BOYS - MANNY, MOE & ▇▇▇▇ OF
DELAWARE, INC.
/s/ PEP BOYS - MANNY, MOE & ▇▇▇▇ OF
PUERTO RICO, INC.
[SIGNATURES CONTINUED ON NEXT PAGE]
[SIGNATURES CONTINUED FROM PRIOR PAGE]
GUARANTORS
/s/ PBY CORPORATION
/s/ CARRUS SUPPLY CORPORATION
AGREED AND ACCEPTED:
/s/ CONGRESS FINANCIAL CORPORATION
