SECOND AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT
This Second Amended and Restated Loan and Security Agreement dated June 29, 2007 is entered into by and among The Pep Boys - Manny, Moe & Jack, a Pennsylvania corporation (“Pep Boys”), The Pep Boys Manny Moe & Jack of California, a California corporation (“PBY-California”), Pep Boys - Manny Moe & Jack of Delaware, Inc., a Delaware corporation (“PBY-Delaware”), and Pep Boys - Manny, Moe & Jack of Puerto Rico, Inc., a Delaware corporation (“PBY-Puerto Rico”; and together with Pep Boys, PBY, PBY-California and PBY-Delaware, each individually, a “Borrower” and collectively, “Borrowers”), 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”), the financial institutions from time to time parties hereto as lenders, whether by execution of this Agreement or an Assignment and Acceptance (each individually, a “Lender” and collectively, “Lenders”) and Wachovia Bank, National Association, a national banking association, in its capacity as agent for Lenders (in such capacity, “Agent”) and The CIT Group/Business Credit, Inc. and General Electric Capital Corporation (each individually in such capacity, a “Documentation Agent” and collectively, “Documentation Agents”).
W I T N E S S E T H:
WHEREAS, Wachovia (as such term is defined below), Borrowers and Guarantors have heretofore entered into certain financing arrangements as set forth in the Existing Loan Agreement (as such term is defined below) pursuant to which Agent and Lenders have made loans and advances and provided other financial accommodations to Borrowers;
WHEREAS, Borrowers and Guarantors have requested that Agent and Lenders modify and restate the existing financing arrangements with Borrowers and Guarantors;
WHEREAS, Agent and Lenders are willing to modify and restate the existing financing arrangements, subject to the terms and conditions contained herein and in the other Financing Agreements (as such term is defined below);
WHEREAS, each Lender is willing to agree (severally and not jointly) to make such loans and provide such financial accommodations to Borrowers on a pro rata basis according to its Commitment (as such term is defined below) on the terms and conditions set forth herein and Agent is willing to act as agent for Lenders on the terms and conditions set forth herein and the other Financing Agreements;
NOW, THEREFORE, in consideration of the mutual conditions and agreements set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows:
SECTION 1. DEFINITIONS
For purposes of this Agreement, the following terms shall have the respective meanings given to them below:
1.1 “Accounts” shall mean, as to each Borrower and Guarantor, all present and future rights of such Borrower and Guarantor to payment of a monetary obligation in respect of Inventory and other Collateral, whether or not earned by performance, which is not evidenced by chattel paper or an instrument, (a) for Inventory and other Collateral that has been or is to be sold, leased, licensed, assigned, or otherwise disposed of, (b) for services rendered or to be rendered, (c) for a secondary obligation incurred or to be incurred, or (d) arising out of the use of a credit or charge card or information contained on or for use with the card.
1.2 “Adjusted Eurodollar Rate” shall mean, with respect to each Interest Period for any Eurodollar Rate Loan comprising part of the same borrowing (including conversions, extensions and renewals), the rate per annum determined by dividing (a) the London Interbank Offered Rate for such Interest Period by (b) a percentage equal to: (1) one (1) minus (2) the Reserve Percentage. For purposes hereof, “Reserve Percentage” shall mean for any day, that percentage (expressed as a decimal) which is in effect from time to time under Regulation D of the Board of Governors of the Federal Reserve System (or any successor), as such regulation may be amended from time to time or any successor regulation, as the maximum reserve requirement (including, without limitation, any basic, supplemental, emergency, special, or marginal reserves) applicable with respect to Eurocurrency liabilities as that term is defined in Regulation D (or against any other category of liabilities that includes deposits by reference to which the interest rate of Eurodollar Loans is determined), whether or not any Lender has any Eurocurrency liabilities subject to such reserve requirement at that time. Eurodollar Loans shall be deemed to constitute Eurocurrency liabilities and as such shall be deemed subject to reserve requirements without benefits of credits for proration, exceptions or offsets that may be available from time to time to a Lender. The Adjusted Eurodollar Rate shall be adjusted automatically on and as of the effective date of any change in the Reserve Percentage.
1.3 “Adjusted Tangible Net Worth” shall mean as to any Person, at any time, in accordance with GAAP (except as otherwise specifically set forth below), on a consolidated basis for such Person and its Subsidiaries (if any), the amount equal to the difference between: (a) the aggregate net book value of all assets (excluding the value of patents, trademarks, trade names, copyrights, licenses, goodwill, deferred tax assets, prepaid assets (including, without limitation, prepaid insurance receivables of Colchester unless such receivables are offset by an associated liability), investments (whether characterized as loans or otherwise) to the Business Enterprises referred to in Section 9.10(o), the cash surrender value of life insurance policies and other intangible assets) of such Person and its Subsidiaries, calculating the book value of inventory for this purpose on a last-in-first-out basis, after deducting from such book values all appropriate reserves in accordance with GAAP (including all reserves for doubtful receivables, obsolescence, depreciation and amortization) and (b) the sum of: (i) the aggregate amount of the Indebtedness and other liabilities of such Person and its Subsidiaries (including tax and other proper accruals) and (ii) cash and investments of Colchester.
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1.4 “Administrative Borrower” shall mean The Pep Boys - Manny, Moe & Jack, a Pennsylvania corporation, in its capacity as Administrative Borrower on behalf of itself and the other Borrowers pursuant to Section 6.7 hereof and it successors and assigns in such capacity.
1.5 “Affiliate” shall mean, with respect to a specified Person, any other Person which directly or indirectly through one or more intermediaries controls, or is controlled by, or is under common control with, such specified person. For purposes of this definition, “control” (including, with correlative meanings, the terms “controlling”, “controlled by” and “under common control with”) when used with respect to any specified person shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such person, whether through the ownership of Voting Stock, by agreement or otherwise.
1.6 “Agent” shall mean Wachovia Bank, National Association, in its capacity as agent on behalf of Lenders pursuant to the terms hereof and any replacement or successor agent hereunder.
1.7 “Agent Payment Account” shall mean account no. 5000000030279 of Agent at Wachovia Bank, National Association, Charlotte, North Carolina or such other account of Agent as Agent may from time to time designate to Administrative Borrower as the Agent Payment Account for purposes of this Agreement and the other Financing Agreements.
1.8 “Applicable Margin” shall mean, at any time, as to the Interest Rate for Prime Rate Loans and the Interest Rate for Eurodollar Rate Loans, the applicable percentage (on a per annum basis) set forth below if either the Quarterly Average Excess Availability for the immediately preceding fiscal quarter is in the amount indicated for such percentage is at the level indicated for such percentage:
Quarterly Average
Excess Availability | | Applicable Prime
Rate Margin | | Applicable
Eurodollar Rate
Margin | |
(a) $50,000,000 or more | | 0 | % | 1 1/2 | % |
(b) Greater than $25,000,000
and less than $50,000,000 | | 0 | % | 1 3/4 | % |
(c) Greater than $10,000,000
and equal to or less than $25,000,000 | | 1/4 | % | 2 | % |
(d) $10,000,000 or less | | 1/2 | % | 2 1/4 | % |
provided, that, the Applicable Margin shall be calculated and established once each fiscal quarter (commending with the fiscal quarter ending on or about April 30, 2005) in accordance with the terms of Section 1.77 hereof and shall remain in effect until adjusted thereafter during the next fiscal quarter.
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1.9 “Applicable Unused Line Fee Percentage” shall mean, at any time, as to the calculation of the Unused Line Fee set forth in Section 3.2(a) hereof, the Applicable Unused Line Fee Percentage as set forth below if Quarterly Average Excess Availability for the immediately preceding fiscal quarter is in the amount indicated for such percentage:
Quarterly Average
Excess Availability | | Applicable Unused
Line Fee Percentage | |
(i) | $50,000,000 or more | | 1/4 | % |
(ii) | Greater than $25,000,000 and less than $50,000,000 | | 1/4 | % |
(iii) | Greater than $10,000,000 and equal to or less than $25,000,000 | | 3/8 | % |
(iv) | $10,000,000 or less | | 3/8 | % |
provided, that the Applicable Unused Line Fee Percentage shall be calculated and established once each fiscal quarter and shall be effective as of each January, April, July, and October of each calendar year.
1.10 “Assignment and Acceptance” shall mean an Assignment and Acceptance substantially in the form of Exhibit A attached hereto (with blanks appropriately completed) delivered to Agent in connection with an assignment of a Lender’s interest hereunder in accordance with the provisions of Section 14.7 hereof.
1.11 “Bank Product Provider” shall mean Agent, or any Affiliate of Agent that provides any Bank Products to Borrowers or Guarantors.
1.12 “Bank Product Provider Hedge Agreement” shall mean an agreement between any Borrower or Guarantor and any Bank Product Provider that is a swap agreement as such term is defined in 11 U.S.C. Section 101, and including any rate swap agreement, basis swap, forward rate agreement, commodity swap, interest rate option, forward foreign exchange agreement, spot foreign exchange agreement, rate cap agreement rate, floor agreement, rate collar agreement, currency swap agreement, cross-currency rate swap agreement, currency option, any other similar agreement (including any option to enter into any of the foregoing or a master agreement for any the foregoing together with all supplements thereto) for the purpose of protecting against or managing exposure to fluctuations in interest or exchange rates, currency valuations or commodity prices; sometimes being collectively referred to herein as “Bank Product Provider Hedge Agreements.”
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1.13 “Bank Products” shall mean any one or more of the following types or services or facilities provided to a Borrower by a Bank Product Provider: (a) credit cards or stored value cards or (b) cash management or related services, including (1) the automated clearinghouse transfer of funds for the account of a Borrower pursuant to agreement or overdraft for any accounts of Borrowers maintained at Agent or any Bank Product Provider that are subject to the control of Agent pursuant to any Deposit Account Control Agreement to which Agent or such Bank Product Provider is a party, as applicable, and (2) controlled disbursement services and (c) Bank Product Provider Hedge Agreements.
1.14 “Blocked Accounts” shall have the meaning set forth in Section 6.3 hereof.
1.15 “Borrowing Base” shall mean, at any time, as to each Borrower, the amount equal to the lesser of:
(a) the sum of:
(i) eighty (80%) percent multiplied by the Net Amount of Eligible Accounts of Borrowers; plus
(ii) the lesser of: (A) sixty-five (65%) percent multiplied by the Value of Eligible Inventory of Borrowers or (B) ninety (90%) percent of the Net Recovery Percentage multiplied by the Value of the Eligible Inventory of Borrowers, provided, that, in the event that Excess Availability is less than $37,500,000 (with Excess Availability calculated for this purpose without regard to the Special Reserve) for more than five (5) consecutive Business Days, Agent may at its option (or at the direction of the Required Lenders), reduce such percentage to eighty-five (85%) of the Net Recovery Percentage; less
(iii) any Reserves; or
(b) the Maximum Credit minus the Facility Reserve.
1.16 “Borrowing Base Certificate” shall mean a report, substantially in the form of Exhibit D hereto, as the same may from time to time be modified by Agent, which is duly completed as provided in Section 7.1 hereof and executed by the chief financial officer or Vice President-Finance of Pep Boys on behalf of each Borrower and delivered to Agent.
1.17 “Business Day” shall mean any day other than a Saturday, Sunday, or other day on which commercial banks are authorized or required to close under the laws of the State of New York, or the State of North Carolina, and a day on which Agent is open for the transaction of business, except that if a determination of a Business Day shall relate to any Eurodollar Rate Loans, the term Business Day shall also exclude any day on which banks are closed for dealings in dollar deposits in the London interbank market or other applicable Eurodollar Rate market.
1.18 “Business Enterprise” shall have the meaning set forth in Section 9.10(o) hereof.
1.19 “Capital Expenditures” shall mean, with respect to any Person, all expenditures made and liabilities incurred for the acquisition of assets which are not, in accordance with
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GAAP, treated as expense items for such Person in the year made or incurred or as a prepaid expense applicable to a future year or years.
1.20 “Capital Leases” shall mean, as applied to any Person, any lease of (or any agreement conveying the right to use) any property (whether real, personal or mixed) by such Person as lessee which in accordance with GAAP, is required to be reflected as a liability on the balance sheet of such Person.
1.21 “Capital Stock” shall mean, with respect to any Person, any and all shares, interests, participations or other equivalents (however designated) of such Person’s capital stock or partnership, limited liability company or other equity interests at any time outstanding, and any and all rights, warrants or options exchangeable for or convertible into such capital stock or other interests (but excluding any debt security that is exchangeable for or convertible into such capital stock).
1.22 “Carrus” shall mean Carrus Supply Corporation, a Delaware corporation, and its successors and assigns.
1.23 “Cash Dominion Event” shall have the meaning set forth in Section 6.3(a)(i) hereof.
1.24 “Cash Equivalents” shall mean, at any time, (a) any evidence of Indebtedness with a maturity date of one hundred eighty (180) days or less issued or directly and fully guaranteed or insured by the United States of America or any agency or instrumentality thereof; provided, that, the full faith and credit of the United States of America is pledged in support thereof; (b) certificates of deposit or bankers’ acceptances with a maturity of one hundred eighty (180) days or less of any financial institution that is a member of the Federal Reserve System having combined capital and surplus and undivided profits of not less than $250,000,000; (c) commercial paper (including variable rate demand notes) with a maturity of one hundred eighty (180) days or less issued by a corporation (except an Affiliate of any Borrower or Guarantor) organized under the laws of any State of the United States of America or the District of Columbia and rated at least A-1 by Standard & Poor’s Ratings Service, a division of The McGraw-Hill Companies, Inc. or at least P-1 by Moody’s Investors Service, Inc.; (d) repurchase obligations with a term of not more than thirty (30) days for underlying securities of the types described in clause (a) above entered into with any financial institution having combined capital and surplus and undivided profits of not less than $250,000,000; (e) repurchase agreements and reverse repurchase agreements relating to marketable direct obligations issued or unconditionally guaranteed by the United States of America or issued by any governmental agency thereof and backed by the full faith and credit of the United States of America, in each case maturing within one hundred eighty (180) days or less from the date of acquisition; provided, that, the terms of such agreements comply with the guidelines set forth in the Federal Financial Agreements of Depository Institutions with Securities Dealers and Others, as adopted by the Comptroller of the Currency on October 31, 1985; (f) investments in money market funds and mutual funds which invest substantially all of their assets in securities of the types described in clauses (a) through (e) above; and (g) investments in money market funds administered or managed by financial institutions satisfactory to Agent, and which invest substantially all of their assets in securities
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consisting of Indebtedness of any state or states of the United States of America, or any political subdivision of such states.
1.25 “Change of Control” shall mean (a) the transfer (in one transaction or a series of transactions) of all or substantially all of the assets of any Borrower or Guarantor to any Person or group (as such term is used in Section 13(d)(3) of the Exchange Act) other than as permitted in Section 9.7 hereof; (b) the liquidation or dissolution of any Borrower or Guarantor or the adoption of a plan by the stockholders of any Borrower or Guarantor relating to the dissolution or liquidation of such Borrower or Guarantor other than as permitted in Section 9.7 hereof; (c) the acquisition by any Person or group (as such term is used in Section 13(d)(3) of the Exchange Act) of beneficial ownership, directly or indirectly, of fifty (50%) percent or more of the voting power of the total outstanding Voting Stock of Pep Boys; (d) during any period of two (2) consecutive years, individuals who at the beginning of such period constituted the Board of Directors of Pep Boys (together with any new directors whose nomination for election by the stockholders of Pep Boys, was approved by a vote of at least sixty-six and two-thirds (66 2/3%) percent of the directors then still in office who were either directors at the beginning of such period or whose election or nomination for election was previously so approved) cease for any reason to constitute a majority of the Board of Directors of Pep Boys then still in office; or (e) the failure of Pep Boys to own one hundred (100%) percent of the voting power of the total outstanding Voting Stock of any of the Borrowers (other than Pep Boys), Guarantors and Colchester.
1.26 “Code” shall mean the Internal Revenue Code of 1986, as the same now exists or may from time to time hereafter be amended, modified, recodified or supplemented, together with all rules, regulations and interpretations thereunder or related thereto.
1.27 “Colchester” shall mean Colchester Insurance Company, a Vermont insurance corporation, and its successors and assigns.
1.28 “Collateral” shall have the meaning set forth in Section 5 hereof.
1.29 “Collateral Access Agreement” shall mean an agreement in writing, in form and substance reasonably satisfactory to Agent in good faith, from any lessor of premises to any Borrower or Guarantor, or any other person to whom any Collateral is consigned or who has custody, control or possession of any such Collateral or is otherwise the owner or operator of any premises on which any of such Collateral is located in favor of Agent with respect to the Collateral at such premises or otherwise in the custody, control or possession of such lessor, consignee or other person.
1.30 “Commitment” shall mean, at any time, as to each Lender, the principal amount set forth next to such Lender’s name on Schedule 1 hereto or on Schedule 1 to the Assignment and Acceptance Agreement pursuant to which such Lender became a Lender hereunder in accordance with the provisions of Section 14.7 hereof, as the same may be adjusted from time to time in accordance with the terms hereof; sometimes being collectively referred to herein as “Commitments”.
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1.31 “Consolidated Net Income” shall mean, with respect to any Person for any period, the aggregate of the net income (loss) of such Person and its Subsidiaries, on a consolidated basis, for such period (excluding to the extent included therein any extraordinary and/or one time or unusual and non-recurring gains and non-cash extraordinary losses) after deducting all charges which should be deducted before arriving at the net income (loss) for such period and, without duplication, after deducting the Provision for Taxes for such period, all as determined in accordance with GAAP; provided, that, (a) the net income of any Person that is not a wholly-owned Subsidiary or that is accounted for by the equity method of accounting shall be included only to the extent of the amount of dividends or distributions paid or payable to such Person or a wholly-owned Subsidiary of such Person; (b) except to the extent included pursuant to the foregoing clause, the net income of any Person accrued prior to the date it becomes a wholly-owned Subsidiary of such Person or is merged into or consolidated with such Person or any of its wholly-owned Subsidiaries or that Person’s assets are acquired by such Person or by its wholly-owned Subsidiaries shall be excluded; and (c) the net income (if positive) of any wholly-owned Subsidiary to the extent that the declaration or payment of dividends or similar distributions by such wholly-owned Subsidiary to such Person or to any other wholly-owned Subsidiary of such Person is not at the time permitted by operation of the terms of its charter or any agreement, instrument, judgment, decree, order, statute, rule or governmental regulation applicable to such wholly-owned Subsidiary shall be excluded. For the purposes of this definition, (i) net income excludes any gain or non-cash loss together with any related Provision for Taxes for any such gain or loss realized upon the sale or other disposition of any assets that are not sold in the ordinary course of business (including, without limitation, dispositions pursuant to sale and leaseback transactions) or of any Capital Stock of such Person or a Subsidiary of such Person and any net income realized or loss incurred as a result of changes in accounting principles or the application thereof to such Person, and (ii) the term “Provision for Taxes” shall mean an amount equal to all taxes imposed on or measured by net income, whether Federal, State, Provincial, county or local, and whether foreign or domestic, that are paid or payable by any Person in respect of any period in accordance with GAAP.
1.32 “Credit Card Acknowledgments” shall mean, with respect to each Borrower, individually and collectively, the agreements in favor of Agent by Credit Card Issuers or Credit Card Processors who are parties to Credit Card Agreements in favor of Agent, in form and substance reasonably satisfactory to Agent.
1.33 “Credit Card Agreements” shall mean, with respect to each Borrower, all agreements (other than Credit Card Acknowledgments) now or hereafter entered into by such Borrower with any Credit Card Issuer or any Credit Card Processor, as the same now exist or may hereafter be amended, modified, supplemented, extended, renewed, restated or replaced, including, but not limited to, the agreements set forth on Schedule 8.20 to the Information Certificate.
1.34 “Credit Card Issuer” shall mean any person (other than any Borrower) who issues or whose members issue credit cards, including, without limitation, MasterCard or VISA bank credit or debit cards or other bank credit or debit cards issued through MasterCard International, Inc., VISA, U.S.A., Inc. or Visa International and American Express, Discover, Diners Club, Carte Blanche and other non-bank credit or debit cards, including, without limitation, credit or
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debit cards issued by or through American Express Travel Related Services Company, Inc. and Novus Services, Inc.
1.35 “Credit Card Processor” shall mean, with respect to each Borrower, any servicing or processing agent or any factor or financial intermediary who facilitates, services, processes or manages the credit authorization, billing transfer and/or payment procedures with respect to any of such Borrower’s sales transactions involving credit card or debit card purchases by customers using credit cards or debit cards issued by any Credit Card Issuer.
1.36 “Credit Card Receivables” shall mean, with respect to each Borrower, collectively, (a) all present and future rights of such Borrower to payment from any Credit Card Issuer, Credit Card Processor or other third party arising from sales of goods or rendition of services to customers who have purchased such goods or services using a credit or debit card and (b) all present and future rights of such Borrower to payment from any Credit Card Issuer, Credit Card Processor or other third party in connection with the sale or transfer of Accounts arising pursuant to the sale of goods or rendition of services to customers who have purchased such goods or services using a credit card or a debit card, including, but not limited to, all amounts at any time due or to become due from any Credit Card Issuer or Credit Card Processor under the Credit Card Agreements or otherwise.
1.37 “Credit Facility” shall mean the Loans and Letter of Credit Accommodations provided to or for the benefit of any Borrower pursuant to Sections 2.1 and 2.2 hereof.
1.38 “Default” shall mean an act, condition or event which with notice or passage of time or both would constitute an Event of Default.
1.39 “Defaulting Lender” shall have the meaning set forth in Section 6.10 hereof.
1.40 “Deposit Account Control Agreement” shall mean an agreement in writing, in form and substance reasonably satisfactory to Agent, by and among Agent, the Borrower or Guarantor with a deposit account at any bank into which Collateral is deposited.
1.41 “Direct Competitor” shall mean any Person engaged principally in the wholesale and/or retail sale of automotive parts, tires and/or accessories, automotive maintenance and/or service and installation of parts.
1.42 “EBITDA” shall mean, as to any Person, with respect to any period, an amount equal to: (a) the Consolidated Net Income of such Person and its Subsidiaries for such period determined in accordance with GAAP, plus (b) depreciation, amortization and other non-cash charges (including, but not limited to, imputed interest and deferred compensation) for such period (to the extent deducted in the computation of Consolidated Net Income of such Person), all in accordance with GAAP, plus (c) Interest Expense for such period (to the extent deducted in the computation of Consolidated Net Income of such Person), plus (d) charges for Federal, State, local and foreign income taxes for such period (to the extent deducted in the computation of Consolidated Net Income of such Person).
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1.43 “Eligible Accounts” shall mean, as to each Borrower, Accounts created by a Borrower which are and continue to be acceptable to Agent based on the criteria set forth below. In general, Accounts shall be Eligible Accounts if:
(a) such Accounts arise from the actual and bona fide sale and delivery of goods by such Borrower or rendition of services by such Borrower in the ordinary course of its business which transactions are completed in accordance with the terms and provisions contained in any documents related thereto;
(b) such Accounts are not unpaid more than the earlier of (i) sixty (60) days after the original due date thereof or (ii) ninety (90) days after the date of the original invoice for them;
(c) such Accounts comply with the terms and conditions contained in Section 7.2(b) of this Agreement;
(d) such Accounts do not arise from sales on consignment, guaranteed sale, sale and return, sale on approval, or other terms under which payment by the account debtor may be conditional or contingent;
(e) the chief executive office of the account debtor with respect to such Accounts is located in the United States of America, Puerto Rico or Canada (provided, that, at any time promptly upon Agent’s request, such Borrower shall execute and deliver, or cause to be executed and delivered, such other agreements, documents and instruments as may be required by Agent, in good faith, to perfect the security interests of Agent in those Accounts of an account debtor with its chief executive office or principal place of business in Canada in accordance with the applicable laws of the Province of Canada in which such chief executive office or principal place of business is located and take or cause to be taken such other and further actions as Agent may request, in good faith, to enable Agent as secured party with respect thereto to collect such Accounts under the applicable Federal or Provincial laws of Canada) or, at Agent’s option, if the chief executive office and principal place of business of the account debtor with respect to such Accounts is located other than in the United States of America or Canada, then if either: (i) the account debtor has delivered to such Borrower an irrevocable letter of credit issued or confirmed by a bank satisfactory to Agent and payable only in the United States of America and in U.S. dollars, sufficient to cover such Account, in form and substance satisfactory to Agent and if required by Agent, the original of such letter of credit has been delivered to Agent or Agent’s agent, and such Borrower has complied with the terms of Section 5.2(f) hereof with respect to the assignment of the proceeds of such letter of credit to Agent or naming Agent as transferee beneficiary thereunder, as Agent may specify, or (ii) such Account is subject to credit insurance payable to Agent issued by an insurer and on terms and in an amount acceptable to Agent, or (iii) such Account is otherwise acceptable in all respects to Agent, in its good faith determination (subject to such lending formula with respect thereto as Agent may determine, in good faith);
(f) such Accounts do not consist of progress billings (such that the obligation of the account debtors with respect to such Accounts is conditioned upon such Borrower’s satisfactory completion of any further performance under the agreement giving rise thereto), bill and hold invoices or retainage invoices, except as to bill and hold invoices, if Agent shall have
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received an agreement in writing from the account debtor, in form and substance satisfactory to Agent, confirming the unconditional obligation of the account debtor to take the goods related thereto and pay such invoice;
(g) the account debtor with respect to such Accounts has not asserted a counterclaim, defense or dispute and is not owed any amounts that may give rise to any right of setoff or recoupment against such Accounts (but the portion of the Accounts of such account debtor in excess of the amount at any time and from time to time owed by such Borrower to such account debtor or claimed owed by such account debtor may be deemed Eligible Accounts),
(h) there are no facts, events or occurrences which would impair the validity, enforceability or collectability of such Accounts or reduce the amount payable or delay payment thereunder;
(i) such Accounts are subject to the first priority, valid and perfected security interest of Agent and any goods giving rise thereto are not, and were not at the time of the sale thereof, subject to any liens except those permitted in this Agreement;
(j) neither the account debtor nor any officer or employee of the account debtor with respect to such Accounts is an officer, employee, agent or other Affiliate of any Borrower or Guarantor;
(k) the account debtors with respect to such Accounts are not any foreign government, the United States of America, any State, political subdivision, department, agency or instrumentality thereof, unless, if the account debtor is the United States of America, any State, political subdivision, department, agency or instrumentality thereof, upon Agent’s request, the Federal Assignment of Claims Act of 1940, as amended or any similar State or local law, if applicable, has been complied with in a manner satisfactory to Agent;
(l) there are no proceedings or actions which are threatened or pending against the account debtors with respect to such Accounts which might result in any material adverse change in any such account debtor’s financial condition (including, without limitation, any bankruptcy, dissolution, liquidation, reorganization or similar proceeding);
(m) such Accounts of a single account debtor or its Affiliates do not constitute more than five (5%) percent of all otherwise Eligible Accounts (but the portion of the Accounts not in excess of such percentage may be deemed Eligible Accounts), provided, that, with respect to Bridgestone/Firestone Inc. such percentage shall be ten (10%) percent;
(n) such Accounts are not owed by an account debtor who has Accounts unpaid more than the earlier of (i) sixty (60) days after the due date thereof and (ii) ninety (90) days after the date of the original invoice for them, which constitute more than fifty (50%) percent of the total Accounts of such account debtor;
(o) the account debtor is not located in a state requiring the filing of a Notice of Business Activities Report or similar report in order to permit such Borrower to seek judicial enforcement in such State of payment of such Account, unless such Borrower has qualified to do business in such state or has filed a Notice of Business Activities Report or equivalent report for
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the then current year or such failure to file and inability to seek judicial enforcement is capable of being remedied without any material delay or material cost;
(p) such Accounts are owed by account debtors whose total indebtedness to such Borrower does not exceed the credit limit with respect to such account debtors as determined by such Borrower substantially consistent with the current practices (taken as a whole) as of the date hereof and such credit limit is reasonably acceptable to Agent (but the portion of the Accounts not in excess of such credit limit may be deemed Eligible Accounts);
(q) such Accounts are not Credit Card Receivables; and
(r) such Accounts are owed by account debtors deemed creditworthy at all times by such Borrower consistent with its current practice and who are reasonably acceptable to Agent.
General criteria for Eligible Accounts may be established and revised from time to time by Agent in good faith based on an event, condition or other circumstance arising after the date hereof, or existing on the date hereof to the extent Agent has no written notice thereof from such Borrower, which adversely affects or would reasonably be expected to adversely affect the Accounts in the good faith determination of Agent. Any Accounts which are not Eligible Accounts shall nevertheless be part of the Collateral.
1.44 “Eligible Inventory” shall mean, as to each Borrower, the Inventory of such Borrower consisting of finished goods held for resale in the ordinary course of the business of such Borrower, which are acceptable to Agent based on the criteria set forth below. In general, Eligible Inventory shall not include:
(a) packaging and shipping materials;
(b) supplies used or consumed in such Borrower’s business;
(c) Inventory at premises other than those owned and controlled by such Borrower, except any Inventory which would otherwise be deemed Eligible Inventory at locations in the United States of America and Puerto Rico which are not owned and operated by such Borrower may nevertheless be considered Eligible Inventory: (i) as to locations which are leased by such Borrower if Agent shall have received a Collateral Access Agreement from the owner and lessor of such location, duly authorized, executed and delivered by such owner and lessor, except that notwithstanding that Agent shall not have received such an agreement for a particular leased location, Agent will consider Inventory at such leased location which would otherwise be Eligible Inventory to be Eligible Inventory, provided, that, (A) the other conditions set forth in this Section 1.44 are satisfied, in the good faith determination of Agent, and (B) Excess Availability is at least $37,500,000, and in any event, Agent may at any time establish such Reserves as Agent may determine in respect of amounts at any time payable by such Borrower to the owner or lessor of such location, without limiting any other rights and remedies of Agent under this Agreement or under the other Financing Agreements with respect to the establishment of Reserves or otherwise and (ii) as to premises of third parties (including sales agents, consignees, warehouses and processors), Agent shall have received a Collateral Access Agreement duly authorized, executed and delivered by the owner and operator of such premises
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(except that notwithstanding that Agent shall not have received such an agreement as to a particular third party location, Agent will consider Inventory at such location which would otherwise be Eligible Inventory to be Eligible Inventory to the extent that (A) the other conditions set forth with this Section 1.44 are satisfied in the good faith determination of Agent, and (B) Excess Availability is at least $37,500,000 and in such event, Agent may at any time establish such Reserves as Agent may determine in respect of amounts at any time payable by such Borrower to such third party, without limiting any other rights or remedies of Agent under this Agreement or under the other Financing Agreements with respect to the establishment of Reserves or otherwise, and in addition, if required by Agent, as to premises of third parties where assets of a Borrower are located: (A) the owner and operator authorizes the filing of appropriate UCC-1 financing statements in favor of such Borrower, which are duly assigned to Agent and (B) any secured lender to the owner and operator is properly notified of the first priority lien on such Inventory of Agent;
(d) Inventory located outside the continental United States of America or Puerto Rico;
(e) Inventory subject to a security interest or lien in favor of any person other than Agent except those permitted in this Agreement (including those liens which are the subject of a Collateral Access Agreement);
(f) bill and hold goods;
(g) unserviceable or obsolete Inventory;
(h) Inventory which is not subject to the first priority, valid and perfected security interest of Agent;
(i) damaged and/or defective Inventory;
(j) returned Inventory that is not held for resale;
(k) Inventory to be returned to vendors;
(l) Inventory subject to deposits made by customers for sales of Inventory that has not been delivered; and
(m) Inventory purchased or sold on consignment.
General criteria for Eligible Inventory may be established and revised from time to time by Agent in good faith based on an event, condition or other circumstance arising after August 1, 2003, or as of such date, to the extent Agent has no written notice thereof from such Borrower, which adversely affects or would reasonably be expected to adversely affect the Inventory in the good faith determination of Agent. Any Inventory which is not Eligible Inventory shall nevertheless be part of the Collateral.
1.45 “Eligible Transferee” shall mean (a) any Lender; (b) the parent company of any Lender and/or any Affiliate of such Lender which is at least fifty (50%) percent owned by such
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Lender or its parent company; (c) any person (whether a corporation, partnership, trust or otherwise) that is engaged in the business of making, purchasing, holding or otherwise investing in bank loans and similar extensions of credit in the ordinary course of its business and is administered or managed by a Lender or with respect to any Lender that is a fund which invests in bank loans and similar extensions of credit, any other fund that invests in bank loans and similar extensions of credit and is managed by the same investment advisor as such Lender or by an Affiliate of such investment advisor, and in each case is approved by Agent in its good faith determination; and (d) any other commercial bank, financial institution or “accredited investor” (as defined in Regulation D under the Securities Act of 1933) approved by Agent in its good faith determination, provided, that, (i) neither any Borrower nor any Guarantor or any Affiliate of any Borrower or Guarantor shall qualify as an Eligible Transferee, (ii) no Person to whom any Indebtedness which is in any way subordinated in right of payment to any other Indebtedness of any Borrower or Guarantor shall qualify as an Eligible Transferee, except as Agent may otherwise specifically agree and (iii) no assignment shall be made or participation sold to any Direct Competitor of any Borrower except after the occurrence of an Event of Default.
1.46 “Environmental Laws” shall mean all foreign, Federal, State and local laws (including common law), rules, codes, licenses, permits (including any conditions imposed therein), authorizations, judicial or administrative decisions, injunctions or agreements between Borrower and any Governmental Authority, relating to emissions, discharges, releases or threatened releases, of any Hazardous Materials into ambient air, surface water, groundwater, publicly owned treatment works, septic system, or land, or otherwise relating to the handling, storage, treatment, generation, use, or disposal of Hazardous Materials, pollution or to the protection of health or the environment, including, without limitation, CERCLA, the Resource Conservation and Recovery Act, 42 U.S.C. § 6901, et seq., and state statutes analogous thereto.
1.47 “Environmental Violation” shall mean any activity, occurrence or condition that violates or threatens (if the threat requires remediation under any Environmental Law and must be remediated during any grace period allowed under such Environmental Law) to violate or results in or threatens (if the threat requires remediation under any Environmental Law and must be remediated during any grace period allowed under such Environmental Law) to result in noncompliance with any Environmental Law.
1.48 “Equipment” shall mean, as to each Borrower and Guarantor, all of such Borrower’s and Guarantor’s now owned and hereafter acquired equipment, wherever located, including machinery, data processing and computer equipment (whether owned or licensed and including embedded software), vehicles, tools, furniture, fixtures, all attachments, accessions and property now or hereafter affixed thereto or used in connection therewith, and substitutions and replacements thereof, wherever located.
1.49 “ERISA” shall mean the Employee Retirement Income Security Act of 1974, together with all rules, regulations and interpretations thereunder or related thereto.
1.50 “ERISA Affiliate” shall mean any person required to be aggregated with any Borrower, any Guarantor or any of its or their respective Subsidiaries under Sections 414(b), 414(c), 414(m) or 414(o) of the Code.
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1.51 “ERISA Event” shall mean any of the following, the occurrence of which would have a reasonable likelihood of having a Material Adverse Effect (a) any “reportable event”, as defined in Section 4043(c) of ERISA or the regulations issued thereunder, with respect to a Plan; (b) the adoption of any amendment to a Plan that would require the provision of security pursuant to Section 401(a)(29) of the Code or Section 307 of ERISA; (c) the existence with respect to any Plan of an “accumulated funding deficiency” (as defined in Section 412 of the Code or Section 302 of ERISA), whether or not waived; (d) the filing pursuant to Section 412 of the Code or Section 303(d) of ERISA of an application for a waiver of the minimum funding standard with respect to any Plan; (e) the occurrence of a “prohibited transaction” with respect to which any Borrower, Guarantor or any of its or their respective Subsidiaries is a “disqualified person” (within the meaning of Section 4975 of the Code) or with respect to which any Borrower, Guarantor or any of its or their respective Subsidiaries could otherwise be liable; (f) a complete or partial withdrawal by any Borrower, Guarantor or any ERISA Affiliate from a Multiemployer Plan or a cessation of operations which is treated as such a withdrawal or notification that a Multiemployer Plan is in reorganization; (g) the filing of a notice of intent to terminate, the treatment of a Plan amendment as a termination under Section 4041 or 4041A of ERISA, or the commencement of proceedings by the Pension Benefit Guaranty Corporation to terminate a Plan or Multiemployer Plan; (h) an event or condition which might reasonably be expected to constitute grounds under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Plan or Multiemployer Plan; (i) the imposition of any liability under Title IV of ERISA, other than the Pension Benefit Guaranty Corporation premiums due but not delinquent under Section 4007 of ERISA, upon any Borrower, Guarantor or any ERISA Affiliate and (j) any other event or condition with respect to a Plan or any Multiemployer Plan or any Plan subject to Title IV of ERISA maintained, or contributed to, by any ERISA Affiliate that could reasonably be expected to result in liability of any Borrower.
1.52 “Eurodollar Rate Loans” shall mean any Loans or portion thereof on which interest is payable based on the Adjusted Eurodollar Rate in accordance with the terms hereof.
1.53 “Event of Default” shall mean the occurrence or existence of any event or condition described in Section 10.1 hereof.
1.54 “Excess Availability” shall mean, as to Borrowers, the amount, as determined by Agent, calculated at any date, 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 1.8, 1.9, 1.15(a)(ii)(B), 1.43(c), 6.3(a)(i) and 6.3(a)(ii) hereof, the Borrowing Base shall not be reduced by the Special Reserve.
1.55 “Exchange Act” shall mean the Securities Exchange Act of 1934, as the same now exists or may hereafter from time to time be amended, modified, recodified or supplemented, together with all rules, regulations and interpretations thereunder or related thereto.
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1.56 “Existing Financing Agreements” shall mean, individually and collectively, each and all of the following (as the same now exist or may hereafter be amended, modified, supplemented, extended, renewed, restated or replaced): (a) the Existing Loan Agreement, and (b) all other agreements, documents and instruments at any time executed and/or delivered in connection therewith or related thereto.
1.57 “Existing Loan Agreement” shall mean the Amended and Restated Loan and Security Agreement, dated August 1, 2003, by and among Agent, Lenders, Borrowers and Guarantors, as amended by Amendment No. 1 to Amended and Restated Loan and Security Agreement dated as of October 24, 2003, Amendment No. 2 to Amended and Restated Loan and Security Agreement dated as of October 15, 2004, Amendment No. 3 to Amended and Restated Loan and Security Agreement dated as of December 2, 2004, Amendment No. 4 to Amended and Restated Loan and Security Agreement dated as of November 16, 2005, Amendment No. 5 to Amended and Restated Loan and Security Agreement dated as of January 27, 2006, and Amendment No. 6 to Amended and Restated Loan and Security Agreement dated as of January 27, 2006, dated September 22, 2006.
1.58 “Existing Letters of Credit” shall mean, collectively, the letters of credit issued by Wachovia Bank, National Association for the account of Borrowers or for which such Borrower or Guarantor is otherwise liable listed on Schedule 1.58 hereto, as the same now exist or may hereafter be amended, modified, supplemented, extended, renewed, restated or replaced.
1.59 “Facility Reserve” shall mean an amount equal to: (a) the lesser of (i) $73,923,850.70, and (ii) the aggregate outstanding principal amount of Tranche A Loans (as such term is defined in the Synthetic Lease Facility Agreements) minus (b) the lesser of: (i) $10,000,000 and (ii) zero, unless the Synthetic Lease Facility Agent has received an appraisal pursuant to Section 4.4 of the Synthetic Lease Facility Intercreditor Agreement, then, an amount equal to (A) fifty (50%) percent of the net forced liquidation value of the Properties (as such term is defined in the Synthetic Lease Facility Agreements), set forth in the most recent appraisal received by Synthetic Lease Facility Agent minus (B) the aggregate principal amount of Loans and Lessor Advances (as such terms are defined in the Synthetic Lease Facility Agreements) owing to any Lenders or Lessor, as the case may be (as such term is defined in the Synthetic Lease Facility Agreements) other than Tranche A Lenders (as such term is defined in the Synthetic Lease Facility Agreements); provided, that upon the Second Facility Reserve Reduction Date the Facility Reserve shall be permanently reduced to zero (-0-).
1.60 “Fee Letter” shall mean the letter agreement, dated August 1, 2003, by and among Borrowers, Guarantors and Agent, setting forth certain fees payable by Borrowers to Agent for the benefit of itself and Lenders, as the same now exists or may hereafter be amended, modified, supplemented, extended, renewed, restated or replaced.
1.61 “Financing Agreements” shall mean, collectively, this Agreement and all notes, guarantees, security agreements, deposit account control agreements, investment property control agreements, intercreditor agreements (including the Synthetic Lease Facility Intercreditor Agreement, and the PNC Intercreditor Agreement), the Existing Financing Agreements, and all other agreements, documents and instruments now or at any time hereafter executed and/or delivered by any Borrower or Obligor in connection with this Agreement; provided, that, in no
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event shall the term Financing Agreements be deemed to include any Hedge Agreement (whether provided by a Bank Product Provider or otherwise) or the Synthetic Lease Facility Agreements.
1.62 “Fixed Charges” for any period shall mean the sum of, without duplication, (a) all Interest Expense, plus (b) all regularly scheduled (as determined at the beginning of the respective period) principal payments of Indebtedness for borrowed money and Indebtedness with respect to Capital Leases (and without duplicating amounts in item (a) of this definition, the interest component with respect to Indebtedness under Capital Leases) plus (c) the fees paid to Agent in respect of the financing arrangements provided for herein (other than the syndication fee) plus (d) fees payable to Persons in respect of other Indebtedness permitted in accordance with Section 9.9 hereof. The foregoing shall not be construed to include principal payments of Indebtedness arising pursuant to revolving loans and advances.
1.63 “Fixed Charge Coverage Ratio” shall mean, with respect to Pep Boys and its Subsidiaries, on a consolidated basis inclusive of Colchester, the ratio of (a) EBITDA during the four (4) full fiscal quarters immediately preceding the determination date with respect to the calculation of the Fixed Charge Coverage Ratio less Capital Expenditures for such period to (b) Fixed Charges of Pep Boys and its Subsidiaries for such four (4) fiscal quarter period.
1.64 “Flexi-Trust” shall mean the Trust established pursuant to the Flexi-Trust Agreement.
1.65 “Flexi-Trust Agreement” shall mean the Trust Agreement, effective as of April 29, 1994, between Pep Boys and Wachovia Bank, National Association, as Trustee, as the same now exists or may hereafter be amended, modified, supplemented, extended, renewed, restated or replaced.
1.66 “GAAP” shall mean generally accepted accounting principles in the United States of America as in effect from time to time as set forth in the opinions and pronouncements of the Accounting Principles Board and the American Institute of Certified Public Accountants and the statements and pronouncements of the Financial Accounting Standards Board which are applicable to the circumstances as of the date of determination consistently applied, except that, if any change in generally accepted accounting principles after August 1, 2003 that affects the calculation of compliance with the covenants in Sections 9.17 and 9.18 hereof or the calculation of the Fixed Charge Coverage Ratio or any component thereof, Pep Boys may by notice to Lender, or Agent may, by notice to Pep Boys, require that such covenants thereafter be calculated in accordance with generally accepted accounting principles as in effect and applied by Pep Boys immediately before such change in generally accepted accounting principles occurred. If such notice is given by Pep Boys (or if such notice is given by Agent then only upon Agent’s request), the compliance certificate delivered pursuant to Section 9.6 hereof after such change occurs shall be accompanied by a calculation of such covenant and ratio made in accordance with generally accepted accounting principles as in effect from time to time after such change occurs.
1.67 “GMAC Trade Payables Agreement” shall mean the Trade Payables Agreement by and between GMAC Commercial Finance LLC and Pep-Boys, dated October 18, 2004, as the
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same now exists or may hereafter be amended, modified, supplemented, extended, renewed, restated or replaced.
1.68 “Governmental Authority” shall mean any nation or government, any state, province, or other political subdivision thereof, any central bank (or similar monetary or regulatory authority) thereof, and any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government.
1.69 “Guarantors” shall mean, collectively, the following (together with their respective successors and assigns): (a) PBY Corporation, a Delaware corporation; and (b) Carrus Supply Corporation, a Delaware corporation; each sometimes being referred to herein individually as a “Guarantor”.
1.70 “Hazardous Materials” shall mean any of the following: (a) any petroleum or petroleum product, explosives, radioactive materials, asbestos, formaldehyde, polychlorinated biphenyls, lead and radon gas; (b) any substance, material, product, derivative, compound or mixture, mineral, chemical, waste, gas, medical waste, or pollutant, in each case whether naturally occurring, man-made or the by-product of any process, that is toxic, harmful or hazardous to the environment or human health or safety as determined in accordance with any Environmental Law; or (c) any substance, material, product, derivative, compound or mixture, mineral, chemical, waste, gas, medical waste or pollutant that would support the assertion of any claim under any Environmental Law, whether or not defined as hazardous as such under any Environmental Law.
1.71 “Hedge Agreement” shall mean an agreement between any Borrower or Guarantor and any Person (other than a Bank Product Provider) that is a swap agreement as such term is defined in 11 U.S.C. Section 101, and including any rate swap agreement, basis swap, forward rate agreement, commodity swap, interest rate option, forward foreign exchange agreement, spot foreign exchange agreement, rate cap agreement rate, floor agreement, rate collar agreement, currency swap agreement, cross-currency rate swap agreement, currency option, any other similar agreement (including any option to enter into any of the foregoing or a master agreement for any the foregoing together with all supplements thereto) for the purpose of protecting against or managing exposure to fluctuations in interest or exchange rates, currency valuations or commodity prices; sometimes being collectively referred to herein as “Hedge Agreements.”
1.72 “Indebtedness” shall mean, with respect to any Person, any liability, whether or not contingent, (a) in respect of borrowed money (whether or not the recourse of the lender is to the whole of the assets of such Person or only to a portion thereof) or evidenced by bonds, notes, debentures or similar instruments; (b) representing the balance deferred and unpaid of the purchase price of any property or services (except any such balance that constitutes an account payable to a trade creditor (whether or not an Affiliate) created, incurred, assumed or guaranteed by such Person in the ordinary course of business of such Person in connection with obtaining goods, materials or services that is not overdue by more than ninety (90) days, unless the trade payable is being contested in good faith); (c) all obligations as lessee under leases which have been, or should be, in accordance with GAAP recorded as Capital Leases; (d) any contractual obligation, contingent or otherwise, of such Person to pay or be liable for the payment of any
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indebtedness described in this definition of another Person, including, without limitation, any such indebtedness, directly or indirectly guaranteed, or any agreement to purchase, repurchase, or otherwise acquire such indebtedness, obligation or liability or any security therefor, or to provide funds for the payment or discharge thereof, or to maintain solvency, assets, level of income, or other financial condition; (e) all obligations with respect to redeemable stock and redemption or repurchase obligations under any Capital Stock or other equity securities issued by such Person; (f) all reimbursement obligations and other liabilities of such Person with respect to surety bonds (whether bid, performance or otherwise), letters of credit, banker’s acceptances, drafts or similar documents or instruments issued for such Person’s account; (g) all indebtedness of such Person in respect of indebtedness of another Person for borrowed money or indebtedness of another Person otherwise described in this definition which is secured by any consensual lien, security interest, collateral assignment, conditional sale, mortgage, deed of trust, or other encumbrance on any asset of such Person, whether or not such obligations, liabilities or indebtedness are assumed by or are a personal liability of such Person, all as of such time; (h) all obligations, liabilities and indebtedness of such Person (marked to market) arising under swap agreements, cap agreements and collar agreements and other agreements or arrangements designed to protect such person against fluctuations in interest rates or currency or commodity values, and (i) all obligations, liabilities and indebtedness of such Person arising under Trade Payables Agreements, whether or not constituting indebtedness under GAAP. Any funds borrowed by Pep Boys against the cash surrender value of any “key-man” insurance policies (and which do not exceed such cash surrender value), which is not treated as indebtedness under GAAP shall not be deemed to be Indebtedness for purposes of this Agreement and the other Financing Agreements.
1.73 “Information Certificate” shall mean, collectively, the Information Certificates of Borrowers and Guarantors constituting Exhibit B hereto containing material information with respect to Borrowers and Guarantors, their respective businesses and assets provided by or on behalf of Borrowers and Guarantors to Agent in connection with the preparation of this Agreement and the other Financing Agreements and the financing arrangements provided for herein.
1.74 “Intellectual Property” shall mean, as to each Borrower and Guarantor, such Borrower’s and Guarantor’s now owned and hereafter arising or acquired: patents, patent rights, patent applications, copyrights, works which are the subject matter of copyrights, copyright registrations, trademarks, trade names, trade styles, trademark and service mark applications, and licenses and rights to use any of the foregoing; all extensions, renewals, reissues, divisions, continuations, and continuations-in-part of any of the foregoing; all rights to sue for past, present and future infringement of any of the foregoing; inventions, trade secrets, formulae, processes, compounds, drawings, designs, blueprints, surveys, reports, manuals, and operating standards; goodwill (including any goodwill associated with any trademark or the license of any trademark); customer and other lists in whatever form maintained; trade secret rights, copyright rights, rights in works of authorship, domain names and domain name registrations; software and contract rights relating to computer software programs, in whatever form created or maintained.
1.75 “Interest Expense” shall mean, for any period, as to any Person, all of the following as determined in accordance with GAAP: (a) total interest expense, whether paid or accrued during such period (including the interest component of Capital Leases for such period),
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including, without limitation, all bank fees, commissions, discounts and other fees and charges owed with respect to letters of credit, banker’s acceptances or similar instruments but excluding (b) amortization of discount and amortization of deferred financing fees paid in cash in connection with the transactions contemplated hereby and (c) any other interest expense not payable in cash.
1.76 “Interest Period” shall mean for any Eurodollar Rate Loan, a period of approximately one (1), two (2), or three (3) months duration as any Borrower (or Administrative Borrower on behalf of such Borrower) may elect, the exact duration to be determined in accordance with the customary practice in the applicable Eurodollar Rate market; provided, that, such Borrower (or Administrative Borrower on behalf of such Borrower) may not elect an Interest Period which will end after the last day of the then-current term of this Agreement.
1.77 “Interest Rate” shall mean,
(a) Subject to clauses (b) and (c) of this definition below:
(i) as to Prime Rate Loans, a rate equal to the Prime Rate, and
(ii) as to Eurodollar Rate Loans, a rate equal to one and three-quarters (1 ¾%) percent per annum in excess of the Adjusted Eurodollar Rate (in each case, based on the London Interbank Offered Rate applicable for the Interest Period selected by a Borrower or by an Administrative Borrower on behalf of such Borrower as in effect two (2) Business Days after the date of receipt by Agent of the request of such Borrower for such Eurodollar Rate Loans in accordance with the terms hereof, whether such rate is higher or lower than any rate previously quoted to such Borrower).
(b) Subject to clause (c) of this definition below, effective as of the first (1st) day of the second month of each fiscal quarter commencing with the fiscal quarter ending April 30, 2005 (i.e., June 1, 2005), the Interest Rate payable by Borrowers shall be increased or decreased, as the case may be, (A) as to Prime Rate Loans, to the rate equal to the Applicable Margin on a per annum basis in excess of the Prime Rate, and (B) as to Eurodollar Rate Loans, to the rate equal to the Applicable Margin on a per annum basis in excess of the Adjusted Eurodollar Rate.
(c) Notwithstanding anything to the contrary contained in clauses (a) and (b) of this definition, the Applicable Margin otherwise used to calculate the Interest Rate for Prime Rate Loans and Eurodollar Rate Loans shall be the then applicable percentage set forth in the definition of the term Applicable Margin for each category of Loans (without regard to the amount of Excess Availability) plus two (2%) percent per annum, at Agent’s option or at the written direction of the Required Lenders, after five (5) Business Days’ notice to any Borrower, (i) for the period (A) from and after the effective date of termination or non-renewal hereof (including any termination of the initial term or any renewal term) until Agent has received full and final payment of all outstanding and unpaid Obligations or as to contingent Obligations, cash collateral in the amount and on the terms required under Section 14.1 hereof (notwithstanding entry of a judgment against a Borrower) and (B) from and after the date of the occurrence of an Event of Default for so long as such Event of Default is continuing as determined by Agent, and
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(ii) on Loans at any time outstanding in excess of the Borrowing Base (whether or not such excess(es), arise or are made with or without Agent’s or any Lender’s knowledge or consent and whether made before or after an Event of Default).
1.78 “Inventory” shall mean, as to each Borrower and Guarantor, all of such Borrower’s and Guarantor’s now owned and hereafter existing or acquired goods, wherever located, which (a) are leased by such Borrower or Guarantor as lessor; (b) are held by such Borrower for sale or lease or to be furnished under a contract of service; (c) are furnished by such Borrower or Guarantor under a contract of service; or (d) consist of raw materials, work in process, finished goods and all other inventory of whatsoever kind or nature.
1.79 “Investment Property Control Agreement” shall mean an agreement in writing, in form and substance reasonably satisfactory to Agent, by and among Agent, any Borrower or Guarantor (as the case may be) and any securities intermediary, commodity intermediary or other person who has custody, control or possession of any investment property of such Borrower or Guarantor, acknowledging that such securities intermediary, commodity intermediary or other person has custody, control or possession of such investment property on behalf of Agent, that it will comply with entitlement orders originated by Agent with respect to such investment property, or other instructions of Agent, and has such other terms and conditions as Agent may require.
1.80 “JP Morgan Trade Payables Agreement” shall mean, collectively, the Confirmed Receivables Secured Program Agreement and Confirmed Receivables Program Agreement between JP Morgan Chase Bank, NA and Pep Boys, each dated on or about the date hereof, as the same now exists or may hereafter be amended, modified, supplemented, extended, renewed, restated or replaced.
1.81 “Lenders” shall mean the financial institutions who are signatories hereto as Lenders and other persons made a party to this Agreement as a Lender in accordance with Section 14.7 hereof, and their respective successors and assigns; each sometimes being referred to herein individually as a “Lender”.
1.82 “Letter of Credit Accommodations” shall mean, collectively, the letters of credit, merchandise purchase or other guaranties which are from time to time either (a) issued or opened by Agent or any Lender for the account of any Borrower or (b) with respect to which Agent or Lenders have agreed to indemnify the issuer or guaranteed to the issuer the performance by any Borrower or Obligor of its obligations to such issuer; sometimes being referred to herein individually as “Letter of Credit Accommodation”.
1.83 “Loans” shall mean, the loans made to or for the benefit of any Borrower by or on behalf of Lender on a revolving basis (involving advances, repayments and readvances) as set forth in Section 2.1 hereof.
1.84 “Lombard” shall mean RBS Lombard, Inc., a New York corporation.
1.85 “Lombard Agency Agreement” shall mean the Agency Agreement dated December 27, 2002 by and between Pep Boys and Lombard, the Amendment to Agency Agreement dated as of June 23, 2004, by and among Borrowers and Lombard, and the Second
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Amendment to Agency Agreement dated as of October 15, 2004, by and among Borrowers and Lombard.
1.86 “Lombard Agency Transactions” shall mean the purchases of equipment by Pep Boys as agent for Lombard pursuant to the Lombard Agency Agreement, which equipment is to be leased by Lombard as lessor to Borrowers as lessee, provided, that, such “Lombard Agency Transactions” as defined herein shall be limited to unreimbursed purchases of equipment not to exceed $35,000,000 outstanding and unreimbursed in the aggregate.
1.87 “Lombard Progress Payment Rider” shall mean the Progress Payment Rider, dated as of October 15, 2004, by and among Borrowers and Lombard, as a rider to the Master Lease Agreement, dated as of October 15, 2004, by and among Borrowers and Lombard.
1.88 “London Interbank Offered Rate” shall mean, with respect to any Eurodollar Rate Loan for the Interest Period applicable thereto, the rate of interest per annum (rounded upwards, if necessary, to the nearest 1/100 of 1%) appearing on Telerate Page 3750 (or any successor page) as the London interbank offered rate for deposits in U.S. Dollars at approximately 11:00 A.M. (London time) two (2) Business Days prior to the first day of such Interest Period for a term comparable to such Interest Period; provided, that, if more than one rate is specified on Telerate Page 3750, the applicable rate shall be the arithmetic mean of all such rates. If, for any reason, such rate is not available, the term “London Interbank Offered Rate” shall mean, with respect to any Eurodollar Rate Loan for the Interest Period applicable thereto, the rate of interest per annum (rounded upwards, if necessary, to the nearest 1/100 of 1%) appearing on Reuters Screen LIBO Page as the London interbank offered rate for deposits in Dollars at approximately 11:00 A.M. (London time) two (2) Business Days prior to the first day of such Interest Period for a term comparable to such Interest Period; provided, however, if more than one rate is specified on Reuters Screen LIBO Page, the applicable rate shall be the arithmetic mean of all such rates.
1.89 “Maintenance Reversion Date” shall mean the date that Excess Availability has been greater than $75,000,000 for thirty (30) consecutive days, provided, that, (a) no more than three (3) Maintenance Reversion Dates may occur during the term of this Agreement and (b) if an additional Minimum EBITDA Maintenance Event occurs, no further Maintenance Reversion Dates shall occur during the term of this Agreement.
1.90 “Material Adverse Effect” shall mean a material adverse effect on (a) the financial condition, business, performance or operations of Borrowers and Guarantors (taken as a whole) or (b) the legality, validity or enforceability of this Agreement or any of the other Financing Agreements; (c) the legality, validity, enforceability, perfection or priority of the security interests and liens of Agent or any Lender upon the Collateral; (d) the Collateral of Borrowers (taken as a whole) or the aggregate value of the Collateral (taken as a whole); (e) the ability of Borrowers (taken as a whole) to repay the Obligations or of Borrowers to perform their obligations under this Agreement or any of the other Financing Agreements; or (f) the ability of Agent to enforce the Obligations or realize upon the Collateral or otherwise with respect to the rights and remedies of Agent under this Agreement or any of the other Financing Agreements.
1.91 “Material Contract” shall mean (a) any contract or other agreement (other than the Financing Agreements), written or oral, of any Borrower relating to the purchase of merchandise
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involving monetary liability of or to any Person in an amount in excess of $10,000,000 in any fiscal year, or relating to any other matter involving monetary liability of or to any Person in an amount in excess of $10,000,000 in any fiscal year, and (b) any other contract or other agreement (other than the Financing Agreements), whether written or oral, to which Borrower is a party as to which the breach, nonperformance, cancellation or failure to renew by any party thereto would have a material adverse effect on the business, assets, condition (financial or otherwise) or results of operations of any Borrower or Guarantor or the validity or enforceability of this Agreement, any of the other Financing Agreements, or any of the rights and remedies of Agent and Lenders hereunder or thereunder.
1.92 “Maximum Credit” shall mean $357,500,000 plus the amount of any increase thereof effected pursuant to the terms of Section 2.5 hereof; provided, that, the Maximum Credit shall not exceed $400,000,000.
1.93 “Minimum EBITDA Maintenance Event” shall mean the period commencing the end of any month during which Excess Availability is at any time less than $50,000,000 and ending on a Maintenance Reversion Date; provided, that, (a) no more than three (3) Maintenance Reversion Dates may occur during the term of this Agreement, and (b) if an additional Minimum EBITDA Maintenance Event occurs no further Maintenance Reversion Dates may occur during the term of this Agreement.
1.94 “Multiemployer Plan” shall mean a “multi-employer plan” as defined in Section 4001(a)(3) of ERISA which is or was at any time during the current year or the immediately preceding six (6) years contributed to by any Borrower, Guarantor or any ERISA Affiliate.
1.95 “Net Amount of Eligible Accounts” shall mean, the gross amount of the Eligible Accounts of Borrowers less (a) sales, excise or similar taxes included in the amount thereof and (b) returns, discounts, claims, credits and allowances of any nature at any time issued, owing, granted, outstanding, available or claimed with respect thereto.
1.96 “Net Recovery Percentage” shall mean the fraction, expressed as a percentage, (a)the numerator of which is the amount equal to the amount of the recovery in respect of the Inventory at such time on a “going out of business sale” basis as set forth in the most recent acceptable appraisal of Inventory received by Agent in accordance with Section 7.3, net of operating expenses, liquidation expenses and commissions, and (b) the denominator of which is the applicable original cost of the aggregate amount of the Inventory subject to such appraisal.
1.97 “Obligations” shall mean (a) any and all Loans, Letter of Credit Accommodations and all other obligations, liabilities and indebtedness of every kind, nature and description owing by any or all of Borrowers and Guarantors to Agent or any Lender and/or any of their Affiliates, including principal, interest, charges, fees, costs and expenses, however evidenced, whether as principal, surety, endorser, guarantor or otherwise, arising under this Agreement or any of the other Financing Agreements, whether now existing or hereafter arising, whether arising before, during or after the initial or any renewal term of this Agreement or after the commencement of any case with respect to such Borrower under the United States Bankruptcy Code or any similar statute (including the payment of interest and other amounts which would accrue and become due but for the commencement of such case, whether or not such amounts are allowed or
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allowable in whole or in part in such case), whether direct or indirect, absolute or contingent, joint or several, due or not due, primary or secondary, liquidated or unliquidated, or secured or unsecured, and (b) for purposes only of Section 5.1 hereof and subject to the priority in right of payment set forth in Section 6.4 hereof, all obligations, liabilities and indebtedness of every kind, nature and description owing by any or all of Borrowers or Guarantors to Agent or any Bank Product Provider arising under or pursuant to any Bank Products, whether now existing or hereafter arising, provided, that, (i) as to any such obligations, liabilities and indebtedness arising under or pursuant to a Hedge Agreement, the same shall only be included within the Obligations if upon Agent’s request, Agent shall have entered into an agreement, in form and substance satisfactory to Agent, with the Bank Product Provider that is a counterparty to such Bank Product Provider Hedge Agreement, as acknowledged and agreed to by Borrowers and Guarantors, providing for the delivery to Agent by such counterparty of information with respect to the amount of such obligations and providing for the other rights of Agent and such Bank Product Provider in connection with such arrangements, and (ii) in no event shall any Bank Product Provider acting in such capacity to such obligations, liabilities or indebtedness are owing be deemed a Lender for purposes hereof to the extent of and as to such obligations, liabilities or indebtedness other than for purposes of Section 5.1 hereof and other than for purposes of Sections 12.1, 12.2, 12.3(b), 12.6, 12.7, 12.9, 12.12, and 14.6 hereof shall be deemed to include such Bank Product Provider and in no event shall the approval of any such person in its capacity as Bank Product Provider be required in connection with the release or termination of any security interest or lien of Agent.
1.98 “Obligor” shall mean any guarantor, endorser, acceptor, surety or other person liable on or with respect to the Obligations or who is the owner of any property which is security for the Obligations (including, without limitation, Guarantors), other than Borrowers.
1.99 “Operating Assets” shall mean all merchandise inventories, furniture, fixtures and equipment (including all transportation and warehousing equipment and excluding office equipment and data processing equipment) owned or leased pursuant to Capital Leases by Borrowers, Guarantors or any of their respective Subsidiaries.
1.100 “Operating Property” shall mean all real property and improvements thereon owned or leased pursuant to Capital Leases by a Borrower, Guarantor or any of its Subsidiaries constituting, without limitation, any store, warehouse, service center or distribution center wherever located, provided that such term shall not include any store, warehouse, service center or distribution center which any Borrower’s, Guarantor’s or any Subsidiary’s Board of Directors (or any Committee thereof) declares by resolution not to be of material importance to the business of such Borrower, Guarantor or Subsidiary. Operating Property is treated as having been “acquired” on the date the Operating Property is placed in operation by a Borrower, Guarantor or any of its Subsidiaries after the later of (a) its acquisition from a third party, (b) completion of its original construction or (c) completion of its substantial reconstruction, renovation, remodeling or expansion (whether or not constituting an Operating Property prior to such reconstruction, renovation, remodeling or expansion).
1.101 “Participant” shall mean any financial institution that acquires and holds a participation in the interest of any Lender in any of the Loans and Letter of Credit
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Accommodations in conformity with the provisions of Section 14.7 of this Agreement governing participations.
1.102 “Permits” shall have the meaning set forth in Section 8.7 hereof.
1.103 “PBY” shall mean PBY Corporation, a Delaware corporation, and its successors and assigns.
1.104 “PBY-California” shall mean The Pep Boys Manny Moe & Jack of California, a California corporation, and its successors and assigns.
1.105 “PBY-Delaware” shall mean Pep Boys - - Manny, Moe & Jack of Delaware, Inc., a Delaware corporation, and its successors and assigns.
1.106 “PBY-Puerto Rico” shall mean Pep Boys - Manny, Moe & Jack of Puerto Rico, Inc., a Delaware corporation, and its successors and assigns.
1.107 “Pep Boys” shall mean The Pep Boys - - Manny, Moe & Jack, a Pennsylvania corporation, and its successors and assigns.
1.108 “Person” or “person” shall mean any individual, sole proprietorship, partnership, corporation (including any corporation which elects subchapter S status under the Code), limited liability company, limited liability partnership, business trust, unincorporated association, joint stock corporation, trust, joint venture or other entity or any government or any agency or instrumentality or political subdivision thereof.
1.109 “Plan” means an employee benefit plan (as defined in Section 3(3) of ERISA) which any Borrower or Guarantor sponsors, maintains, or to which it makes, is making, or is obligated to make contributions, or in the case of a Multiemployer Plan has made contributions at any time during the immediately preceding six (6) plan years.
1.110 “PNC Credit Card Documents” shall mean, collectively, each of the documents listed on Schedule 1.110 hereto, and the PNC Intercreditor Agreement, as the same now exist or may hereafter be amended, modified, supplemented, extended, renewed, restated or replaced.
1.111 “PNC Intercreditor Agreement” shall mean the Intercreditor Agreement dated as of December 13, 2001 by and between Agent and PNC Bank, National Association, as amended amended by Amendment No. 1 to Intercreditor Agreement dated November 16, 2005, as the same now exist or may hereafter be amended, modified, supplemented, extended, renewed, restated or replaced.
1.112 “Prime Rate” shall mean the rate from time to time publicly announced by Wachovia Bank, National Association, or its successors, as its prime rate, whether or not such announced rate is the best rate available at such bank.
1.113 “Prime Rate Loans” shall mean any Loans or portion thereof on which interest is payable based on the Prime Rate in accordance with the terms thereof.
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1.114 “Pro Rata Share” shall mean as to any Lender, the fraction (expressed as a percentage) the numerator of which is such Lender’s Commitment and the denominator of which is the aggregate amount of all of the Commitments of Lenders, as adjusted from time to time in accordance with the provisions of Section 14.7 hereof; provided, that, if the Commitments have been terminated, the numerator shall be the unpaid amount of such Lender’s Loans and its interest in the Letter of Credit Accommodations and the denominator shall be the aggregate amount of all unpaid Loans and Letter of Credit Accommodations.
1.115 “Provision for Taxes” shall mean an amount equal to all taxes imposed on or measured by net income, whether Federal, State, Provincial, county or local, and whether foreign or domestic, that are paid or payable by any Person in respect of any period in accordance with GAAP.
1.116 “Quarterly Average Excess Availability” shall mean, at any time, the daily average of the Excess Availability for the immediately preceding fiscal quarter as calculated by Agent in good faith.
1.117 “Real Property” shall mean all now owned and hereafter acquired real property of each Borrower and Guarantor, including leasehold interests, together with all buildings, structures, and other improvements located thereon and all licenses, easements and appurtenances relating thereto, wherever located.
1.118 “Receivables” shall mean all of the following now owned or hereafter arising or acquired property of each Borrower and Guarantor: (a) all Accounts; (b) all amounts at any time payable to any Borrower or Guarantor in respect of the sale or other disposition by such Borrower or Guarantor of (i) any Account or (ii) any other obligation for the payment of money arising from or in connection with the sale or other disposition of Inventory or any other Collateral; (c) all interest, fees, late charges, penalties, collection fees and other amounts due or to become due or otherwise payable in connection with (i) any Account or (ii) any other obligation for the payment of money arising from or in connection with the sale or other disposition of Inventory or any other Collateral; (d) all payment intangibles of such Borrower or Guarantor; (e) letters of credit, indemnities, guarantees, security or other deposits and proceeds thereof issued payable to any Borrower or Guarantor or otherwise in favor of or delivered to any Borrower or Guarantor in connection with (i) any Account or (ii) any other obligation for the payment of money arising from or in connection with the sale or other disposition of Inventory or any other Collateral; or (f) all other accounts, contract rights, chattel paper, instruments, notes, general intangibles and other forms of obligations owing to any Borrower or Guarantor, arising from or in connection with the sale of Inventory or any other Collateral, or the leasing, licensing or other disposition of any Inventory or other Collateral (including Intellectual Property or other general intangibles), rendition of services or from loans or advances by any Borrower or Guarantor or to or for the benefit of any third person (including loans or advances to any Affiliates or Subsidiaries of any Borrower or Guarantor) or otherwise associated with any Accounts, Inventory or other Collateral of any Borrower or Guarantor (including, without limitation, choses in action, causes of action, tax refunds, tax refund claims, rights and claims against carriers and shippers, and rights to indemnification, casualty or any similar types of insurance and any proceeds thereof.
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1.119 “Records” shall mean, as to each Borrower and Guarantor, all of such Borrower’s and Guarantor’s present and future books of account of every kind or nature, purchase and sale agreements, invoices, ledger cards, bills of lading and other shipping evidence, statements, correspondence, memoranda, credit files and other data relating to the Collateral or any account debtor, together with the tapes, disks, diskettes and other data and software storage media and devices, file cabinets or containers in or on which the foregoing are stored (including any rights of any Borrower or Guarantor with respect to the foregoing maintained with or by any other person).
1.120 “Reference Bank” shall mean Wachovia Bank, National Association, or such other bank as Agent may from time to time designate.
1.121 “Refinancing Indebtedness” shall have the meaning set forth in Section 9.9 hereof.
1.122 “Renewal Date” shall the meaning set forth in Section 14.1 hereof.
1.123 “Register” shall have the meaning set forth in Section 14.7 hereof.
1.124 “Required Lenders” shall mean, at any time, those Lenders whose Pro Rata Shares aggregate sixty-six and two-thirds (66 2/3%) percent or more of the aggregate of the Commitments of all Lenders, or if the Commitments shall have been terminated, Lenders to whom at least sixty-six and two-thirds (66 2/3%) percent of the then outstanding Obligations are owing.
1.125 “Reserves” shall mean as of any date of determination, such amounts as Agent may from time to time establish and revise in good faith reducing the amount of Loans and Letter of Credit Accommodations which would otherwise be available to any Borrower under the lending formula(s) provided for herein: (a) to reflect events, conditions, contingencies or risks which, as determined by Agent in good faith, adversely affect, or would have a reasonable likelihood of adversely affecting, either (i) the Collateral or any other property which is security for the Obligations or its value or (ii) the assets or business of any Borrower or Obligor or the security interests and other rights of Agent or any Lender in the Collateral (including the enforceability, perfection and priority thereof) or (b) to reflect Agent’s good faith belief that any collateral report or financial information furnished by or on behalf of any Borrower or Obligor to Agent is or may have been incomplete, inaccurate or misleading in any material respect or (c) to reflect outstanding Letter of Credit Accommodations as provided in Section2.2 hereof or (d) in respect of any state of facts which Agent determines in good faith constitutes a Default or an Event of Default or (e) to reflect inventory shrinkage, or (f) to reflect the aggregate amount of deposits, if any, received by any Borrower from its customers, or (g) to reflect amounts due or to become due in respect of sales, use and/or withholding taxes, or (h) to reflect amounts owing by such Borrower to Credit Card Issuers or Credit Card Processors in connection with the Credit Card Agreements, or (i) any rental payments, service charges or other amounts due to lessors of real or personal property to the extent Inventory or Records are located in or on property or such Records are needed to monitor or otherwise deal with Collateral. Without limiting the generality of the foregoing, Reserves may be established to reflect (i) that dilution with respect to the Accounts (based on the ratio of the aggregate amount of non-cash reductions in Accounts for any
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period to the aggregate dollar amount of the sales of Borrower for such period) as calculated by Agent for any period is or is reasonably anticipated to be greater than ten (10%) percent and (ii) obligations, liabilities or indebtedness (contingent or otherwise) of Borrowers or Guarantors to any Bank Product Provider arising under or in connection with any Bank Product Provider Hedge Agreement of any Borrower or Guarantor with any Bank Product Provider to the extent that such obligations, liabilities or indebtedness constitute Obligations as such term is defined herein or otherwise receive the benefit of the security interest of Agent in any Collateral. In addition to the foregoing Reserves, Agent shall establish and maintain (A) the Facility Reserve, and (B) at any time that Excess Availability shall be less than $50,000,000, then Agent shall establish and maintain the Special Reserve. To the extent Agent may revise the lending formulas used to determine the Borrowing Base or establish new criteria or revise existing criteria for Eligible Accounts or Eligible Inventory so as to address any circumstances, condition, event or contingency in a manner satisfactory to Agent, Agent shall not establish a Reserve for the same purpose. The amount of any Reserve established by Agent shall have a reasonable relationship to the event, condition or other matter which is the basis for such reserve as determined by Agent in good faith.
1.126 “Secured Parties” shall mean, collectively, (a) Agent, (b) any issuer of a Letter of Credit Accommodation, (c) Lenders, and (d) Bank Product Providers.
1.127 “Second Facility Reserve Reduction Date” shall mean the date that Agent determines that all of the conditions precedent set forth in Schedule 1.127 have been satisfied.
1.128 “Solvent” shall mean, at any time with respect to any Person, that at such time (a) such Person is able to pay its debts as they mature and has (and has reason to believe it will continue to have) sufficient capital (and not unreasonably small capital) to carry on its business consistent with its practices as of the date hereof, and (b) the assets and properties of such Person at a fair valuation and at their present fair salable value are greater than the Indebtedness of such Person, and including subordinated and contingent liabilities computed at the amount which, to the best of such Person’s knowledge, represents an amount which can reasonably be expected to become an actual or matured liability.
1.129 “Special Agent Advances” shall have the meaning set forth in Section 12.11 hereof.
1.130 “Special Reserve” shall mean the amount equal to $15,000,000.
1.131 “Subsidiary” or “subsidiary” shall mean, with respect to any Person, any corporation, limited liability company, limited liability partnership or other limited or general partnership, trust, association or other business entity of which an aggregate of at least a majority of the outstanding Capital Stock or other interests entitled to vote in the election of the board of directors of such corporation (irrespective of whether, at the time, Capital Stock of any other class or classes of such corporation shall have or might have voting power by reason of the happening of any contingency), managers, trustees or other controlling persons, or an equivalent controlling interest therein, of such Person is, at the time, directly or indirectly, owned by such Person and/or one or more subsidiaries of such Person.
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1.132 “Synthetic Lease Facility Agent” shall mean Wachovia Bank, National Association, as Agent for the Tranche A Lenders (as such term is defined in the Synthetic Lease Facility Agreements) under the Synthetic Lease Facility Agreements, together with any successors or assigns.
1.133 “Synthetic Lease Facility Agreements” shall mean, collectively, the following (as the same now exists or may hereafter be amended, modified, supplemented, extended, renewed, restated or replaced): (a) the agreements and documents listed on Schedule 1.133 hereto, and (b) all agreements, documents, mortgages and instruments executed and/or delivered in connection with any of the foregoing.
1.134 “Synthetic Lease Facility Intercreditor Agreement” shall mean the Amended and Restated Intercreditor and Lien Subordination Agreement dated as of August 1, 2003 among Pep Boys, PBY-California, PBY-Delaware, Pep Boys - Manny, Moe & Jack of Puerto Rico, Inc., PBY Corporation, Carrus Supply Corporation, Wachovia Development Corporation, Wachovia Bank, National Association, as the agent for various parties as referenced therein and the Agent Agent (as the same now exists or may hereafter be amended, modified, supplemented, extended, renewed, restated or replaced).
1.135 “Term Loan Agent” shall mean Wachovia Bank, National Association, in its capacity as Agent under the Term Loan Agreements and its successors and assigns.
1.136 “Term Loan Agreements” shall mean, collectively, the $200,000,000 Credit Agreement by and among Pep Boys, certain of its subsidiaries, Term Loan Agent and Term Loan Lenders (as the same now exists or may hereafter be amended, modified, supplemented, extended, renewed, restated or replaced), and all other agreements, documents and instruments at any time executed and/or delivered by any Borrower or Guarantor with, to or in favor of Term Loan Agent and/or Term Loan Lenders in connection therewith or related thereto; sometimes being referred to herein individually as a “Term Loan Agreement”.
1.137 “Term Loan Lenders” shall mean all of the Lenders (as such term is defined in the Term Loan Agreements) parties to the Term Loan Agreements, and their successors and assigns.
1.138 “TNW Minimum Amount” shall have the meaning set forth in Section 9.17 hereof.
1.139 “Trade Payable Agreements” shall mean collectively, (a) the GMAC Trade Payables Agreement, (b) the JP Morgan Trade Payables Agreement, and (c) any other agreement between any Borrower or Guarantor and a financial institution or other Person pursuant to which such Person, agrees to purchase accounts payable owing by such Borrower or Guarantor to suppliers, arising from such Borrower’s or Guarantor’s purchase of merchandise from suppliers for resale in its retail stores and commercial outlets.
1.140 “2004 Senior Notes” shall mean the Senior Subordinated Notes issued pursuant to the 2004 Senior Subordinated Note Indenture.
1.141 “2004 Senior Subordinated Note Indenture” shall mean the Indenture, by and between Pep Boys and Wachovia Bank, National Association, as Trustee, dated December 14,
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2004, with respect to Pep Boys’ Senior Subordinated Notes due December 15, 2014 in the aggregate principal amount of $200,000,000, as the same now exists or may hereafter be amended, modified, supplemented, extended, renewed, restated or replaced.
1.142 “UCC” shall mean the Uniform Commercial Code as in effect in the State of New York, and any successor statute, as in effect from time to time (except that terms used herein which are defined in the Uniform Commercial Code as in effect in the State of New York on the date hereof shall continue to have the same meaning notwithstanding any replacement or amendment of such statute except as Agent may otherwise determine).
1.143 “Value” shall mean, as determined by Agent in good faith, with respect to Inventory, the lower of (a) cost computed on a last-in first-out basis in accordance with GAAP or (b) market value as determined in accordance with GAAP, provided, that, for purposes of the calculation of the Borrowing Base, the Value of the Inventory shall not include: (A) the portion of the value of Inventory equal to the profit earned by any Affiliate on the sale thereof to any Borrower or (B) write-ups in value with respect to currency exchange rates.
1.144 “Voting Stock” shall mean with respect to any Person, (a) one (1) or more classes of Capital Stock of such Person having general voting powers to elect at least a majority of the board of directors, managers or trustees of such Person, irrespective of whether at the time Capital Stock of any other class or classes have or might have voting power by reason of the happening of any contingency, and (b) any Capital Stock of such Person convertible or exchangeable without restriction at the option of the holder thereof into Capital Stock of such Person described in clause (a) of this definition.
1.145 “Wachovia” shall mean Wachovia Bank, National Association, a national banking association, in its individual capacity, and its successors and assigns.
1.146 “Weekly Collateral Report” shall mean a report, substantially in the form of Exhibit E hereto, as the same may from time to time be modified by Lender, which is duly completed as provided in Section 7.1 hereof and executed by the chief financial officer or Vice President-Finance of Pep Boys on behalf of each Borrower and delivered to Lender.
1.147 “Weighted Average Life to Maturity” shall mean when applied to any Indebtedness at any date, the number of years obtained by dividing (a) the then outstanding principal amount of such Indebtedness into (b) the product obtained by multiplying (i) the amount of each then outstanding installment, sinking fund, serial maturity or other required payments of principal, including payment at final maturity, in respect thereof, by (ii) the number of years (calculated to the nearest one-twelfth) that will elapse between such date and the making of such payment.
1.148 “Working Capital Advances” shall have the meaning set forth in Section 4.2 (c) hereof.
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SECTION 2. CREDIT FACILITIES
2.1 Loans.
(a) Subject to and upon the terms and conditions contained herein, each Lender severally (and not jointly) agrees to make its Pro Rata Share of Loans to each Borrower from time to time in amounts requested by such Borrower (or Administrative Borrower on behalf of such Borrower) up to the Borrowing Base.
(b) Agent may, in its discretion, from time to time, upon not less than ten (10) days prior notice to a Borrower or Administrative Borrower on behalf of such Borrower, reduce the lending formula(s) with respect to Eligible Inventory to the extent that Agent determines in good faith that without duplication: (i) the number of days of the turnover of the Inventory for any period has adversely changed in any material respect or (ii) the nature, quality or mix of the Inventory has deteriorated. In determining whether to reduce the lending formula(s), Agent may consider events, conditions, contingencies or risks which are also considered in determining Eligible Accounts, Eligible Inventory or in establishing Reserves. To the extent Agent shall have established a Reserve which is sufficient to address an event, condition or matter described in this Section 2.1(b) in a manner satisfactory to Agent in good faith, Agent shall not exercise its rights under this Section 2.1(b) to reduce the lending formulas to address such event, condition or matter. The amount of any reduction in the lending formula by Agent pursuant to this Section 2.1(b) shall have a reasonable relationship to the matter which is the basis for such a reduction.
(c) Except in Agent’s discretion, with the consent of all Lenders, or as otherwise provided herein, (i) the aggregate amount of the Loans and the Letter of Credit Accommodations outstanding at any time shall not exceed the lesser of the Borrowing Base or the Maximum Credit less the Facility Reserve, and (ii) the aggregate principal amount of the Loans and the Letter of Credit Accommodations outstanding at any time plus the aggregate principal amount of Tranche A Loans (as such term is defined in the Synthetic Lease Facility Agreements) outstanding at any time shall not exceed the Maximum Credit.
(d) In the event that the aggregate principal amount of the Loans and Letter of Credit Accommodations outstanding exceeds the Borrowing Base, or the aggregate amount of the outstanding Letter of Credit Accommodations exceed the sublimit for Letter of Credit Accommodations set forth in Section 2.2(e), or the aggregate amount of the Loans and Letter of Credit Accommodations exceeds the Maximum Credit less the Facility Reserve, such event shall not limit, waive or otherwise affect any rights of Agent or Lenders in such circumstances or on any future occasions and Borrowers shall, upon demand by Agent, which may be made at any time or from time to time, immediately repay to Agent the entire amount of any such excess(es) for which payment is demanded.
2.2 Letter of Credit Accommodations.
(a) Subject to and upon the terms and conditions contained herein, at the request of a Borrower (or Administrative Borrower on behalf of such Borrower), Agent agrees, for the ratable risk of each Lender according to its Pro Rata Share, to provide or arrange for Letter of Credit Accommodations for the account of such Borrower with Wachovia Bank, National Association or such other national bank with whom Agent has established a business relationship containing terms and conditions acceptable to Agent and the issuer thereof. Any payments made by or on behalf of Agent or any Lender to any issuer thereof and/or related parties in connection with the Letter of Credit Accommodations provided to or for the benefit of
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a Borrower shall constitute additional Loans to such Borrower pursuant to this Section 2 (or Special Agent Advances as the case may be).
(b) In addition to any charges, fees or expenses charged by any bank or issuer in connection with the Letter of Credit Accommodations, Borrowers shall pay to Agent, for the benefit of Lenders, a letter of credit fee at a rate equal to one and one-half (1.50%) percent per annum, on the daily outstanding balance of the Letter of Credit Accommodations for the immediately preceding month (or part thereof), payable in arrears as of the first day of each succeeding month, except that Agent may, and upon the written direction of Required Lenders shall, require Borrowers to pay to Agent for the ratable benefit of Lenders such letter of credit fee, at a rate equal to three and one-half (3.50%) percent per annum on such daily outstanding balance for: (i) the period from and after the date of termination hereof until Agent and Lenders have received full and final payment of all Obligations (notwithstanding entry of a judgment against any Borrower) and (ii) the period from and after the date of the occurrence of an Event of Default for so long as such Event of Default is continuing as determined by Agent. Such letter of credit fee shall be calculated on the basis of a three hundred sixty (360) day year and actual days elapsed and the obligation of Borrowers to pay such fee shall survive the termination of this Agreement.
(c) The Borrower requesting such Letter of Credit Accommodation (or Administrative Borrower on behalf of such Borrower) shall give Agent two (2) Business Days’ prior written notice of such Borrower’s request for the issuance of a Letter of Credit Accommodation. Such notice shall be irrevocable and shall specify the original face amount of the Letter of Credit Accommodation requested, the effective date (which date shall be a Business Day and in no event shall be a date less than ten (10) days prior to the end of the then current term of this Agreement) of issuance of such requested Letter of Credit Accommodation, whether such Letter of Credit Accommodations may be drawn in a single or in partial draws, the date on which such requested Letter of Credit Accommodation is to expire (which date shall be a Business Day), the purpose for which such Letter of Credit Accommodation is to be issued, and the beneficiary of the requested Letter of Credit Accommodation. The Borrower requesting the Letter of Credit Accommodation (or Administrative Borrower on behalf of such Borrower) shall attach to such notice the proposed terms of or form of the Letter of Credit Accommodation.
(d) In addition to being subject to the satisfaction of the applicable conditions precedent contained in Section 4 hereof and the other terms and conditions contained herein, no Letter of Credit Accommodations shall be available unless each of the following conditions precedent have been satisfied in a manner satisfactory to Agent: (i) the Borrower requesting such Letter of Credit Accommodation (or Administrative Borrower on behalf of such Borrower) shall have delivered to the proposed issuer of such Letter of Credit Accommodation at such times and in such manner as such proposed issuer may require, an application, in form and substance satisfactory to such proposed issuer and Agent, for the issuance of the Letter of Credit Accommodation and such other documents as may be required pursuant to the terms thereof, and the form and terms of the proposed Letter of Credit Accommodation shall be satisfactory to Agent and such proposed issuer, (ii) as of the date of issuance, no order of any court, arbitrator or other Governmental Authority shall purport by its terms to enjoin or restrain money center banks generally from issuing letters of credit of the type and in the amount of the proposed Letter of Credit Accommodation, and no law, rule or regulation applicable to money center banks
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generally and no request or directive (whether or not having the force of law) from any Governmental Authority with jurisdiction over money center banks generally shall prohibit, or request that the proposed issuer of such Letter of Credit Accommodation refrain from, the issuance of letters of credit generally or the issuance of such Letters of Credit Accommodation; and (iii) the Excess Availability of Borrowers, prior to giving effect to any Reserves with respect to such Letter of Credit Accommodations, on the date of the proposed issuance of any Letter of Credit Accommodations, shall be equal to or greater than: (A) if the proposed Letter of Credit Accommodation is for the purpose of purchasing Eligible Inventory and the documents of title with respect thereto are consigned to the issuer, the sum of (1) the percentage equal to one hundred (100%) percent minus the then applicable percentage with respect to Eligible Inventory set forth in the definition of the term Borrowing Base multiplied by the Value of such Eligible Inventory, plus (2) freight, taxes, duty and other amounts which Agent estimates must be paid in connection with such Inventory upon arrival and for delivery to one of such Borrower’s locations for Eligible Inventory within the United States of America and (B) if the proposed Letter of Credit Accommodation is for any other purpose or the documents of title are not consigned to the issuer in connection with a Letter of Credit Accommodation which is for the purpose of purchasing Inventory, an amount equal to one hundred (100%) percent of the face amount thereof and all other commitments and obligations made or incurred by Agent with respect thereto. Effective on the issuance of each Letter of Credit Accommodation, a Reserve shall be established in the applicable amount set forth in Section 2.2(d)(iii)(A) or Section 2.2(d)(iii)(B).
(e) Except in Agent’s discretion, with the consent of all Lenders, the amount of all outstanding Letter of Credit Accommodations and all other commitments and obligations made or incurred by Agent or any Lender in connection therewith shall not at any time exceed $125,000,000.
(f) Borrowers and Guarantors shall indemnify and hold Agent and Lenders harmless from and against any and all losses, claims, damages, liabilities, costs and expenses which Agent or any Lender may suffer or incur in connection with any Letter of Credit Accommodations and any documents, drafts or acceptances relating thereto, including any losses, claims, damages, liabilities, costs and expenses due to any action taken by any issuer or correspondent with respect to any Letter of Credit Accommodation, except for such losses, claims, damages, liabilities, costs or expenses that are a direct result of the gross negligence or wilful misconduct of Agent or any Lender as determined pursuant to a final non-appealable order of a court of competent jurisdiction. Each Borrower and Guarantor assumes all risks with respect to the acts or omissions of the drawer under or beneficiary of any Letter of Credit Accommodation and for such purposes the drawer or beneficiary shall be deemed such Borrower’s agent. Each Borrower and Guarantor assumes all risks for, and agrees to pay, all foreign, Federal, State and local taxes, duties and levies relating to any goods subject to any Letter of Credit Accommodations or any documents, drafts or acceptances thereunder. Each Borrower and Guarantor hereby releases and holds Agent and Lenders harmless from and against any acts, waivers, errors, delays or omissions, whether caused by any Borrower, Guarantor, by any issuer or correspondent or otherwise with respect to or relating to any Letter of Credit Accommodation, except for the gross negligence or wilful misconduct of Agent or any Lender as determined pursuant to a final, non-appealable order of a court of competent jurisdiction. The provisions of this Section 2.2(f) shall survive the payment of Obligations and the termination of this Agreement.
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(g) In connection with Inventory purchased pursuant to Letter of Credit Accommodations, Borrowers shall, at Agent’s request, instruct all suppliers, carriers, forwarders, customs brokers, warehouses or others receiving or holding cash, checks, Inventory, documents or instruments in which Agent holds a security interest to deliver them to Agent and/or subject to Agent’s order, and if they shall come into such Borrower’s possession, to deliver them, upon Agent’s request, to Agent in their original form. Borrowers shall also, at Agent’s request, designate Agent as the consignee on all bills of lading and other negotiable and non-negotiable documents.
(h) Each Borrower hereby irrevocably authorizes and directs any issuer of a Letter of Credit Accommodation to name such Borrower as the account party therein and to deliver to Agent all instruments, documents and other writings and property received by issuer pursuant to the Letter of Credit Accommodations and to accept and rely upon Agent’s instructions and agreements with respect to all matters arising in connection with the Letter of Credit Accommodations or the applications therefor. Nothing contained herein shall be deemed or construed to grant any Borrower any right or authority to pledge the credit of Agent or any Lender in any manner. Agent and Lenders shall have no liability of any kind with respect to any Letter of Credit Accommodation provided by an issuer other than Agent or any Lender unless Agent has duly executed and delivered to such issuer the application or a guarantee or indemnification in writing with respect to such Letter of Credit Accommodation. Borrowers and Guarantors shall be bound by any reasonable interpretation made in good faith by Agent, or any other issuer or correspondent under or in connection with any Letter of Credit Accommodation or any documents, drafts or acceptances thereunder, notwithstanding that such interpretation may be inconsistent with any instructions of any Borrower or Guarantor.
(i) So long as no Event of Default exists or has occurred and is continuing, a Borrower may (i) approve or resolve any questions of non-compliance of documents, (ii) give any instructions as to acceptance or rejection of any documents or goods, (iii) execute any and all applications for steamship or airway guaranties, indemnities or delivery orders, and (iv) with Agent’s consent, grant any extensions of the maturity of, time of payment for, or time of presentation of, any drafts, acceptances, or documents, and (v) agree to any amendments, renewals, extensions, modifications, changes or cancellations of any of the terms or conditions of any of the applications, Letter of Credit Accommodations, or documents, drafts or acceptances thereunder or any letters of credit included in the Collateral.
(j) At any time an Event of Default exists or has occurred and is continuing, Agent shall have the right and authority to, and Borrowers shall not, without the prior written consent of Agent, approve or resolve any questions of non-compliance of documents, give any instructions as to acceptance or rejection of any documents or goods, execute any and all applications for steamship or airway guaranties, indemnities or delivery orders, grant any extensions of the maturity of, time of payments for, or time of presentation of, any drafts, acceptances, or documents, and agree to any amendments, renewals, extensions, modifications, changes or cancellations of any of the terms or conditions of any of the applications, Letter of Credit Accommodations, or documents, drafts or acceptances thereunder or any letters of credit included in the Collateral. Agent may take such actions either in its own name or in any Borrower’s name.
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