Exhibit
4.2


 


THE PEP BOYS —
MANNY, MOE & JACK

as Issuer,


 


THE SUBSIDIARY
GUARANTORS

as Guarantors


 


and


 


WACHOVIA BANK,
NATIONAL ASSOCIATION

as Trustee


 


First Supplemental Indenture


 


Dated as of
December 14, 2004


 


7.50% Senior
Subordinated Notes due 2014


 





















 


Table of Contents


 


	
  ARTICLE I

  	
   

  
	
  Definitions

  	
   

  
	
   

  	
   

  
	
  ARTICLE II

  	
   

  
	
  Establishment and
  Terms of the Notes

  	
   

  
	
   

  	
   

  
	
  SECTION 2.01

  	
  Establishment of Series

  	
   

  
	
  SECTION 2.02

  	
  Maturity, Payment of Principal and
  Interest

  	
   

  
	
  SECTION
  2.03

  	
  Sinking
  Fund

  	
   

  
	
  SECTION
  2.04

  	
  Paying
  Agent and Registrar

  	
   

  
	
   

  	
   

  
	
  ARTICLE
  III

  	
   

  
	
  Redemption and Repurchase

  	
   

  
	
   

  	
   

  
	
  SECTION
  3.01

  	
  Applicability
  of Article XI of the Open-End Indenture; Notices to Trustee

  	
   

  
	
  SECTION
  3.02

  	
  Selection
  of Notes to be Redeemed

  	
   

  
	
  SECTION
  3.03

  	
  Notice
  of Redemption

  	
   

  
	
  SECTION
  3.04

  	
  Effect
  of Notice of Redemption

  	
   

  
	
  SECTION
  3.05

  	
  Deposit
  of Redemption Price

  	
   

  
	
  SECTION
  3.06

  	
  Notes
  Redeemed in Part

  	
   

  
	
  SECTION
  3.07

  	
  Optional
  Redemption

  	
   

  
	
   

  	
   

  
	
  ARTICLE
  IV

  	
   

  
	
  Additional Covenants

  	
   

  
	
   

  	
   

  
	
  SECTION
  4.01

  	
  Application
  of Article X of the Open-End Indenture

  	
   

  
	
  SECTION
  4.02

  	
  Payment
  of Taxes and Other Claims

  	
   

  
	
  SECTION
  4.03

  	
  Stay,
  Extension and Usury Laws

  	
   

  
	
  SECTION
  4.04

  	
  Limitation
  on Incurrence of Debt

  	
   

  
	
  SECTION
  4.05

  	
  Limitation
  on Restricted Payments

  	
   

  
	
  SECTION
  4.06

  	
  Limitation
  on Dividend and Other Payment Restrictions Affecting Restricted Subsidiaries

  	
   

  
	
  SECTION
  4.07

  	
  Limitation
  on Ranking of Certain Debt

  	
   

  
	
  SECTION
  4.08

  	
  Limitation
  on Liens Securing Pari Passu or Subordinated Debt

  	
   

  
	
  SECTION
  4.09

  	
  Limitation
  on Asset Dispositions

  	
   

  
	
  SECTION
  4.10

  	
  Transactions
  with Affiliates

  	
   

  
	
  SECTION
  4.11

  	
  Offer
  to Repurchase Upon Change of Control

  	
   

  
	
  SECTION
  4.12

  	
  Payments
  for Consent

  	
   

  
	
  SECTION
  4.13

  	
  Provision
  of Financial Information

  	
   

  



 


i





















 


	
  SECTION
  4.14

  	
  Designation
  of Restricted and Unrestricted Subsidiaries

  	
   

  
	
  SECTION
  4.15

  	
  Limitation
  on Business and Activities of Colchester and Carrus

  	
   

  
	
  SECTION
  4.16

  	
  Additional
  Subsidiary Guarantees

  	
   

  
	
  SECTION
  4.17

  	
  Maintenance
  of Properties

  	
   

  
	
  SECTION
  4.18

  	
  Maintenance
  of Insurance

  	
   

  
	
   

  	
   

  
	
  ARTICLE V

  	
   

  
	
  Subsidiary Guarantees

  	
   

  
	
   

  	
   

  
	
  SECTION
  5.01

  	
  Subsidiary
  Guarantees

  	
   

  
	
  SECTION
  5.02

  	
  Limitation
  on Guarantor Liability

  	
   

  
	
  SECTION
  5.03

  	
  Execution
  and Delivery of Subsidiary Guarantees

  	
   

  
	
  SECTION
  5.04

  	
  Guarantors
  May Consolidate, etc., on Certain Terms

  	
   

  
	
  SECTION
  5.05

  	
  Releases
  of Subsidiary Guarantees

  	
   

  
	
   

  	
   

  
	
  ARTICLE
  VI

  	
   

  
	
  Subordination of the Notes

  	
   

  
	
   

  	
   

  
	
  SECTION
  6.01

  	
  Application
  of Article XVI of the Open-End Indenture

  	
   

  
	
  SECTION
  6.02

  	
  Notes
  Subordinate to Senior Debt

  	
   

  
	
  SECTION
  6.03

  	
  Payment
  Over of Proceeds Upon Dissolution, Etc.

  	
   

  
	
  SECTION
  6.04

  	
  No
  Payment When Senior Debt of the Company in Default

  	
   

  
	
  SECTION
  6.05

  	
  Payment
  Permitted If No Default

  	
   

  
	
  SECTION
  6.06

  	
  Subrogation
  to Rights of Holders of Senior Debt of the Company

  	
   

  
	
  SECTION
  6.07

  	
  Provisions
  Solely to Define Relative Rights

  	
   

  
	
  SECTION
  6.08

  	
  Trustee
  to Effectuate Subordination

  	
   

  
	
  SECTION
  6.09

  	
  No
  Waiver of Subordination Provisions

  	
   

  
	
  SECTION
  6.10

  	
  Notice
  to Trustee

  	
   

  
	
  SECTION
  6.11

  	
  Reliance
  on Judicial Order or Certificate of Liquidating Agent

  	
   

  
	
  SECTION
  6.12

  	
  Trustee
  Not Fiduciary for Holders of Senior Debt of the Company

  	
   

  
	
  SECTION
  6.13

  	
  Rights
  of Trustee as Holder of Senior Debt of the Company; Preservation of Trustee’s
  Rights

  	
   

  
	
  SECTION
  6.14

  	
  Article
  Applicable to Paying Agents

  	
   

  
	
  SECTION
  6.15

  	
  Defeasance
  of this Article VI

  	
   

  
	
   

  	
   

  
	
  ARTICLE
  VII

  	
   

  
	
  Consolidation, Merger, Sale or Transfer

  	
   

  
	
   

  	
   

  
	
  SECTION
  7.01

  	
  Consolidation,
  Merger, Sale or Transfer

  	
   

  
	
   

  	
   

  
	
  ARTICLE
  VIII

  	
   

  
	
  Remedies

  	
   

  
	
   

  	
   

  
	
  SECTION
  8.01

  	
  Application
  of Article V of the Open-End Indenture

  	
   

  



 


ii





















 


	
  ARTICLE
  IX

  	
   

  
	
  Modification and Waiver

  	
   

  
	
   

  	
   

  
	
  SECTION
  9.01

  	
  Application
  of Article IX of the Open End Indenture

  	
   

  
	
   

  	
   

  
	
  ARTICLE X

  	
   

  
	
  Satisfaction and
  Discharge; Defeasance and Covenant Defeasance

  	
   

  
	
   

  	
   

  
	
  SECTION
  10.01

  	
  Application
  of Article IV of the Open-End Indenture

  	
   

  
	
   

  	
   

  
	
  ARTICLE
  XI

  	
   

  
	
  Subordination of
  Subsidiary Guarantees

  	
   

  
	
   

  	
   

  
	
  SECTION
  11.01

  	
  Subsidiary
  Guarantees Subordinate to Senior Debt of Subordinate Guarantors

  	
   

  
	
  SECTION
  11.02

  	
  Payment
  Over of Proceeds Upon Dissolution, Etc

  	
   

  
	
  SECTION
  11.03

  	
  No
  Payment When Senior Debt of such Subsidiary Guarantor in Default

  	
   

  
	
  SECTION
  11.04

  	
  Payment
  Permitted If No Default

  	
   

  
	
  SECTION
  11.05

  	
  Subrogation
  to Rights of Holders of Senior Debt of such Subsidiary Guarantor

  	
   

  
	
  SECTION
  11.06

  	
  Provisions
  Solely to Define Relative Rights

  	
   

  
	
  SECTION
  11.07

  	
  Trustee
  to Effectuate Subordination

  	
   

  
	
  SECTION
  11.08

  	
  No
  Waiver of Subordination Provisions

  	
   

  
	
  SECTION
  11.09

  	
  Notice
  to Trustee

  	
   

  
	
  SECTION
  11.10

  	
  Reliance
  on Judicial Order or Certificate of Liquidating Agent

  	
   

  
	
  SECTION
  11.11

  	
  Trustee
  not Fiduciary for Holders of Senior Debt of Subsidiary Guarantors

  	
   

  
	
  SECTION
  11.12

  	
  Rights
  of Trustee as Holder of Senior Debt of such Subsidiary Guarantor;
  Preservation of Trustee’s Rights

  	
   

  
	
  SECTION
  11.13

  	
  Article
  Applicable to Paying Agents

  	
   

  
	
  SECTION
  11.14

  	
  Defeasance
  of this Article XI

  	
   

  
	
   

  	
   

  
	
  ARTICLE
  XII

  	
   

  
	
  Miscellaneous

  	
   

  
	
   

  	
   

  
	
  SECTION
  12.01

  	
  Trustee
  Matters

  	
   

  
	
  SECTION
  12.02

  	
  Calculations

  	
   

  
	
  SECTION
  12.03

  	
  Ratification

  	
   

  
	
  SECTION
  12.04

  	
  Counterpart
  Originals

  	
   

  
	
  SECTION
  12.05

  	
  Effect
  of Headings

  	
   

  
	
  SECTION
  12.06

  	
  Governing
  Law

  	
   

  
	
  SECTION
  12.07

  	
  Provisions
  for the Sole Benefit of Parties and Holders

  	
   

  
	
   

  	
   

  
	
  EXHIBITS

  	
   

  
	
   

  	
   

  
	
  Exhibit
  A

  	
  Form
  of Note

  	
   

  



 


iii





















 


	
  Exhibit
  B

  	
  Form
  of Subsidiary Guarantee

  	
   

  
	
  Exhibit
  C

  	
  Form
  of Supplemental Indenture to be Delivered by Subsequent Guarantors

  	
   

  



 


iv





















 


FIRST SUPPLEMENTAL INDENTURE (this “Supplemental Indenture”),
dated as of December 14, 2004, among The Pep Boys—Manny, Moe & Jack, a
Pennsylvania corporation (the “Company”), the Subsidiary Guarantors
listed as signatories hereto (the “Subsidiary Guarantors”), and Wachovia
Bank, National Association, a national banking association, as trustee (the “Trustee”).


 


W I T N E S S E T H:


 


WHEREAS, the Company has entered into an Indenture, dated as of
December 14, 2004 (the “Open-End Indenture”), with the Trustee,
providing for the issuance from time to time of Securities (as therein defined)
in one or more series;


 


WHEREAS, the Open-End Indenture, as supplemented by this Supplemental
Indenture, is herein called the “Indenture”;


 


WHEREAS, the Company desires to issue the Notes (as defined below),
which will be a new series of Securities under the Indenture, in an initial aggregate
principal amount of $200,000,000;


 


WHEREAS, Section 9.1(4) of the Open-End Indenture provides that,
without the consent of any Holders, the Company and the Trustee, at any time
and from time to time, may enter into one or more supplemental indentures to
establish the form or terms of Securities of any series as permitted by
Sections 2.1 and 3.1 of the Open-End Indenture;


 


WHEREAS, Section 9.1(2) of the Open-End Indenture provides that,
without the consent of any Holders, the Company and the Trustee, at any time
and from time to time, may enter into one or more supplemental indentures to
add to the covenants of the Company for the benefit of the Holders of all or
any series of Securities or to surrender any right or power conferred upon the
Company under the Open-End Indenture;


 


WHEREAS, Section 9.1(8) of the Open-End Indenture provides that,
without the consent of any Holders, the Company and the Trustee, at any time
and from time to time, may enter into one or more supplemental indentures to
add any additional Events of Default with respect to any series of Securities;


 


WHEREAS, Section 9.1(9) of the Open-End Indenture provides that,
without the consent of any Holders, the Company and the Trustee, at any time
and from time to time, may enter into one or more supplemental indentures to
supplement any of the provisions of this Indenture to such extent as shall be
necessary to permit or facilitate the defeasance and discharge of any series of
Securities pursuant to Article IV of the Open-End Indenture, provided that any
such action shall not adversely affect the interests of any Holder of an
Outstanding Security in any material respect, and prior to the execution and
delivery of this Supplemental Indenture no Securities of any series are
Outstanding;


 


WHEREAS, Section 9.1(12) of the Open-End Indenture provides that,
without the consent of any Holders, the Company and the Trustee, at any time
and from time to time, may enter into one or more supplemental indentures to
make provisions for, and to establish the form


 





















 


and terms of establish the form or terms of, the guarantee by any
Person of any or all of the obligations of the Company under the Indenture with
respect to any series of Securities;


 


WHEREAS, Section 9.1(13) of the Open-End Indenture provides that,
without the consent of any Holders, the Company and the Trustee, at any time
and from time to time, may enter into one or more supplemental indentures to
amend or supplement any provision contained in the Open-End Indenture or in any
supplemental indenture, provided that no such amendment or supplement shall
materially adversely affect the interests of the Holders of any Securities then
Outstanding, and prior to the execution and delivery of this Supplemental
Indenture no Securities of any series are Outstanding;


 


WHEREAS, the Subsidiary Guarantors desire to guarantee, jointly and
severally, the Company’s payment obligations under the Indenture and the Notes;
and


 


WHEREAS, all conditions necessary to authorize the execution and
delivery of this Supplemental Indenture and to make it a valid and binding
obligation of the Company and the Subsidiary Guarantors have been done or
performed.


 


NOW, THEREFORE, in consideration of the agreements and obligations set
forth herein and for other good and valuable consideration, the sufficiency of
which is hereby acknowledged, the parties hereto hereby agree to the following
provisions:


 


ARTICLE I

Definitions


 


Capitalized terms used herein but not defined herein have the meanings
ascribed thereto in the Open-End Indenture. 
To the extent that any provision of this Supplemental Indenture
conflicts with the express provisions of the Open-End Indenture, the provisions
of this Supplemental Indenture shall govern and be controlling for all purposes
of the Indenture.


 


“Additional Notes” means 7.50% Senior Subordinated Notes due 2014 of
the Company issued hereunder after the Closing Date and having identical terms
(except as to the initial interest payment date) to the Notes.


 


“Adjusted Treasury Rate” means with respect to any Redemption Date, the
rate per annum equal to the semi-annual equivalent yield to maturity of the
Comparable Treasury Issue, assuming a price for the Comparable Treasury Issue
(expressed as a percentage of its principal amount) equal to the Comparable Treasury
Price for such Redemption Date, plus 0.50%.


 


“Affiliate” of any Person means any other Person directly or indirectly
controlling or controlled by or under direct or indirect common control with
such Person. For the purposes of this definition, “control” when used with
respect to any Person means the power to direct the management and policies of
such Person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise; and the terms “controlling” and “controlled”
have meanings correlative to the foregoing; provided that direct or indirect
beneficial ownership of 10% or more of the Voting Stock of a Person shall be
deemed to constitute control.


 


2





















 


“Asset Disposition” by any Person means any transfer, conveyance, sale,
lease or other disposition (but excluding the creation of any Lien) by such
Person or any of its Restricted Subsidiaries (including a consolidation or
merger or other sale of any such Restricted Subsidiary with, into or to another
Person in a transaction in which such Restricted Subsidiary ceases to be a
Restricted Subsidiary, but excluding a disposition by a Restricted Subsidiary
of such Person to such Person or a Restricted Subsidiary of such Person or by
such Person to a Restricted Subsidiary of such Person) of:


 


(1)           shares of Capital Stock (other than
directors’ qualifying shares) or other ownership interests of a Restricted
Subsidiary of such Person;


 


(2)           substantially all of the assets of
such Person or any of its Restricted Subsidiaries representing a division or
line of business; or


 


(3)           other assets or rights of such Person
or any of its Restricted Subsidiaries outside of the ordinary course of
business;


 


provided in each case that
the aggregate consideration for such transfer, conveyance, sale, lease or other
disposition is equal to $3,000,000 or more.


 


The term “Asset
Disposition” shall not include:


 


(1)           a Restricted Payment that is made in
compliance with Section 4.05 of this Supplemental Indenture;


 


(2)           the designation of any Restricted
Subsidiary as an Unrestricted Subsidiary or the contribution to the capital of
any Unrestricted Subsidiary, in either case in compliance with the applicable
provisions of the Indenture; or


 


(3)           any transaction subject to and
consummated in compliance with Section 7.01 of this Supplemental Indenture.


 


“Average Life” means, as of any date of determination, with respect to
any Debt, the quotient obtained by dividing (1) the sum of the products of the
number of years from such date of determination to the dates of each successive
scheduled principal payments of such Debt by (2) the sum of all such principal
payments.


 


“Bankruptcy Law” means Title 11, U.S. Code or any similar federal,
state or commonwealth law for the relief of debtors.


 


“Board of Directors” means, with respect to any corporation, the board
of directors of such corporation, or any committee of such board duly
authorized to act generally or in any particular respect for such corporation
hereunder.


 


“Carrus” means Carrus Supply Corporation, a Delaware corporation.


 


“Cash Equivalents” means:


 


3





















 


(1)           securities issued or directly and
fully guaranteed or insured by the United States government or any agency or
instrumentality thereof having maturities of not more than six months from the
date of acquisition;


 


(2)           certificates of deposit and
Eurodollar time deposits with maturities of six months or less from the date of
acquisition, bankers’ acceptances with maturities not exceeding six months and
overnight bank deposits, in each case with any lender party to the Senior
Credit Facility or with any domestic commercial bank having capital and surplus
in excess of $500,000,000 and a rating by Fitch of “B” or better (or the
equivalent under any successor rating categories of Fitch);


 


(3)           repurchase obligations with a term of
not more than seven days for underlying securities of the types described in
clauses (1) and (2) above entered into with any financial institution meeting
the qualifications specified in clause (2) above;


 


(4)           commercial paper having a rating of
at least P-1 from Moody’s and a rating of at least A-1 from S&P; and


 


(5)           investments in money market or other
mutual funds substantially all of whose assets comprise securities of the types
described in clauses (1) through (4) above.


 


“Change of Control” shall have the meaning set forth in Section 4.11 of
this Supplemental Indenture.


 


“Closing Date” means December 14, 2004.


 


“Colchester” means Colchester Insurance Company, a Vermont insurance
corporation.


 


“Company” shall have the meaning set forth in the preamble hereto.


 


“Comparable Treasury Issue” means the United States Treasury Security
selected by an Independent Investment Banker as having a maturity comparable to
the remaining term of the Notes that would be utilized, at the time of
selection and in accordance with customary financial practice, in pricing new
issues of corporate debt securities of comparable maturity to the remaining
term of the Notes.


 


“Comparable Treasury Price” means, with respect to any Redemption Date,
(1) the average of the bid and asked prices for the Comparable Treasury Issue
(expressed in each case as a percentage of its principal amount) on the third
Business Day preceding such Redemption Date, as set forth in the daily
statistical release (or any successor release) published by the Federal Reserve
Bank of New York and designated “Composite 3:30 p.m. Quotations for U.S.
Government Securities” or (2) if such release (or any successor release) is not
published or does not contain such prices on such Business Day, (A) the
Reference Treasury Dealer Quotations for such Redemption Date, after excluding
the highest and lowest of such Reference Treasury Dealer Quotations, or (B) if
the Trustee obtains fewer than three such Reference Treasury Dealer Quotations,
the average of all such Quotations.


 


4





















 


“Consolidated Cash Flow Available for Fixed Charges” for any period
means the Consolidated Net Income for such period increased by the sum of:


 


(1)           Consolidated Interest Expense for such
period; plus


 


(2)           the consolidated amount of interest
capitalized by the Company and its Restricted Subsidiaries during such period
calculated in accordance with generally accepted accounting principles; plus


 


(3)           Consolidated Income Tax Expense for
such period; plus


 


(4)           the consolidated depreciation and
amortization expense included in the income statement of the Company and its
Restricted Subsidiaries for such period; plus


 


(5)           other non-cash expenses (excluding any
such non-cash expense to the extent that it represents an accrual of or reserve
for cash expenses in any future period or amortization of a prepaid cash
expense that was paid in a prior period) included in the income statement of
the Company and its Restricted Subsidiaries for such period; minus


 


(6)           non-cash items increasing Consolidated
Net Income for such period, other than items that were accrued in the ordinary
course of business, in each case, on a consolidated basis and determined in
accordance with generally accepted accounting principles;


 


provided, however, that
there shall be excluded therefrom the Consolidated Cash Flow Available for
Fixed Charges (if positive) of any Restricted Subsidiary that is not a
Subsidiary Guarantor (calculated separately for such Restricted Subsidiary in
the same manner as provided above for the Company) that is subject to a
restriction which prevents the payment of dividends or the making of
distributions to the Company or another Restricted Subsidiary to the extent of
such restriction.


 


“Consolidated Cash Flow Coverage Ratio” as of any date of determination
means the ratio of:


 


(1)           Consolidated Cash Flow Available for
Fixed Charges for the period of the most recently completed four consecutive
fiscal quarters for which quarterly or annual financial statements are
available to


 


(2)           Consolidated Fixed Charges for such
period;


 


provided, however, that
Consolidated Fixed Charges shall be adjusted to give effect on a pro forma
basis to any Debt that has been Incurred by the Company or any Restricted
Subsidiary since the end of such period that remains outstanding and to any
Debt that is proposed to be Incurred by the Company or any Restricted
Subsidiary as if in each case such Debt had been Incurred on the first day of
such period and as if any Debt that is or will no longer be outstanding as the
result of the Incurrence of any such Debt had not been outstanding as of the
first day of such period; provided, however, that in making such computation,
the Consolidated Interest Expense attributable to interest on any proposed Debt
bearing a floating interest rate shall be


 


5





















 


computed on a pro forma
basis as if the rate in effect on the date of computation had been the
applicable rate for the entire period; and provided further that, in the event
the Company or any of its Restricted Subsidiaries has made Asset Dispositions
or acquisitions of assets not in the ordinary course of business (including
acquisitions of other Persons by merger, consolidation or purchase of Capital
Stock) during or after such period, such computation shall be made on a pro
forma basis as if the Asset Dispositions or acquisitions had taken place on the
first day of such period.


 


“Consolidated Fixed Charges” for any period means the sum of:


 


(1)           Consolidated Interest Expense and


 


(2)           the consolidated amount of interest
capitalized by the Company and its Restricted Subsidiaries during such period
calculated in accordance with generally accepted accounting principles.


 


“Consolidated Income Tax Expense” for any period means the consolidated
provision for income taxes of the Company and its Restricted Subsidiaries for
such period calculated on a consolidated basis in accordance with generally
accepted accounting principles.


 


“Consolidated Interest Expense” means for any period the consolidated
interest expense included in a consolidated income statement (without deduction
of interest income) of the Company and its Restricted Subsidiaries for such
period calculated on a consolidated basis in accordance with generally accepted
accounting principles, including without limitation or duplication (or, to the
extent not so included, with the addition of):


 


(1)           the amortization of Debt discounts;


 


(2)           any payments or fees with respect to
letters of credit, bankers’ acceptances or similar facilities;


 


(3)           net
fees with respect to interest rate swap or similar agreements or foreign
currency hedge, exchange or similar agreements;


 


(4)           Preferred
Stock dividends of the Company and its Restricted Subsidiaries (other than with
respect to Redeemable Stock) declared and paid or payable;


 


(5)           accrued Redeemable Stock dividends of
the Company and its Restricted Subsidiaries, whether or not declared or paid;


 


(6)           interest
on Debt guaranteed by the Company and its Restricted Subsidiaries; and


 


(7)           the portion of rental expense deemed
to be representative of the interest factor attributable to Capital Lease
Obligations.


 


“Consolidated Net Income” for any period means the consolidated net
income (or loss) of the Company and its Restricted Subsidiaries for such period
determined on a


 


6





















 


consolidated basis in accordance with generally accepted accounting
principles; provided that there shall be excluded therefrom:


 


(1)           the net income (or loss) of any
Person acquired by the Company or a Restricted Subsidiary in a
pooling-of-interests transaction for any period prior to the date of such
transaction;


 


(2)           the net income (or loss) of any
Person that is not a Restricted Subsidiary except to the extent of the amount
of dividends or other distributions actually paid to the Company or a
Restricted Subsidiary by such Person during such period;


 


(3)           gains or losses on Asset Dispositions
by the Company or its Subsidiaries;


 


(4)           all extraordinary gains and
extraordinary losses;


 


(5)           gains or losses from the early
retirement or extinguishment of indebtedness;


 


(6)           the cumulative effect of changes in
accounting principles;


 


(7)           non-cash gains or losses resulting
from fluctuations in currency exchange rates;  and


 


(8)           the tax effect of any of the items
described in clauses (1) through (6) above;


 


provided, further, that for
purposes of any determination pursuant to Section 4.05 of this Supplemental
Indenture, there shall further be excluded therefrom the net income (but not
net loss) of any Restricted Subsidiary that is not a Subsidiary Guarantor that
is subject to a restriction which prevents the payment of dividends or the
making of distributions to the Company or another Restricted Subsidiary to the
extent of such restriction.


 


“Consolidated Net Tangible Assets” of any Person means the total amount
of assets (less applicable reserves and other properly deductible items) which
under generally accepted accounting principles would be included on a
consolidated balance sheet of such Person and its Restricted Subsidiaries after
deducting therefrom:


 


(1)           all goodwill, trade names,
trademarks, patents, patent applications, licenses, non-compete agreements,
unamortized debt discount and expense and other like intangibles, which in each
case under generally accepted accounting principles would be included on such
consolidated balance sheet; and


 


(2)           appropriate deductions for any
minority interests.


 


“Debt” means (without duplication), with respect to any Person, whether
recourse is to all or a portion of the assets of such Person and whether or not
contingent:


 


(1)           every obligation of such Person for
money borrowed;


 


7





















 


(2)           every obligation of such Person
evidenced by bonds, debentures, notes or other similar instruments, including
obligations Incurred in connection with the acquisition of property, assets or
businesses;


 


(3)           every reimbursement obligation of such
Person with respect to letters of credit, bankers’ acceptances or similar
facilities issued for the account of such Person;


 


(4)           every obligation of such Person issued
or assumed as the deferred purchase price of property or services (including
securities repurchase agreements but excluding trade accounts payable or
accrued liabilities arising in the ordinary course of business and with respect
to services, excluding deferred compensation to employees), which purchase
price is due more than six months after the date of placing such property in
service or taking delivery and title thereto or engaging such services, the
amount of such price being that which would be negotiated in an arm’s length
transaction for cash between a willing seller and a willing and able buyer,
neither of which is under any compulsion to complete the transaction or
services;


 


(5)           every Capital Lease Obligation of such
Person;


 


(6)           all Receivables Sales of such Person
which are sold with recourse to such Person;


 


(7)           all Redeemable Stock issued by such
Person;


 


(8)           if such Person is a Restricted
Subsidiary, all Preferred Stock issued by such Person;


 


(9)           every net obligation under Interest
Rate, Currency or Commodity Price Agreements of such Person; and


 


(10)         every obligation of the type referred to
in clauses (1) through (9) of another Person and all dividends of another
Person the payment of which, in either case, (a) such Person has Guaranteed or
is responsible or liable, directly or indirectly, as obligor, Guarantor or
otherwise or (b) is secured by (or for which the holder of such obligation has
an existing right, contingent or otherwise, to be secured by) any Lien upon or
with respect to property (including, without limitation, accounts and contract
rights) owned by such Person, even though such Person has not assumed or become
liable for the payment of such Debt or dividends.


 


Notwithstanding the foregoing, Debt shall not include any obligation
arising from any agreement entered into in connection with the acquisition of
any business or assets with any seller of such business or assets that (1)
provides for the payment of earn-outs to such seller or (2) guarantees to such
seller a minimum price to be realized by such seller upon the sale of any
Common Stock of the Company that was issued by the Company to such seller in
connection with such acquisition.


 


“Designated Senior Debt” of the Company means:


 


(1)           Debt of the Company under the Senior
Credit Facility and


 


8





















 


(2)           any
Senior Debt of the Company:


 


(a) which at the time of determination exceeds
$25,000,000 in aggregate principal amount outstanding or available under a
committed facility;


 


(b) which is specifically designated in the
instrument evidencing such Senior Debt as “Designated Senior Debt” by the
Company; and


 


(c) as to which the Trustee has received an Officers’
Certificate of the Company specifying 
such Senior Debt as “Designated Senior Debt”.


 


“Equity Offering” means an offering of Common Stock which results in
aggregate cash net proceeds to the Company.


 


“Event of Default” shall have the meaning set forth in Section 8.01(a)
of this Supplemental Indenture.


 


“Excess Proceeds” shall have the meaning set forth in Section 4.09 of
this Supplemental Indenture.


 


“Exchange Act” means the Securities Exchange Act of 1934, as amended.


 


“Fitch” means Fitch, Inc., and its successors.


 


“Group” shall have the meaning set forth in Section 4.11 of this
Supplemental Indenture.


 


“Guarantee” by any Person means any obligation, contingent or
otherwise, of such Person guaranteeing, or having the economic effect of
guaranteeing, any Debt of any other Person (the “primary obligor”) in any
manner, whether directly or indirectly, and including, without limitation, any
obligation of such Person,


 


(1)           to purchase or pay (or advance or
supply funds for the purchase or payment of) such Debt or to purchase (or to
advance or supply funds for the purchase of) any security for the payment of
such Debt;


 


(2)           to purchase property, securities or
services for the purpose of assuring the holder of such Debt of the payment of
such Debt; or


 


(3)           to maintain working capital, equity
capital or other financial statement condition or liquidity of the primary
obligor so as to enable the primary obligor to pay such Debt (and “Guaranteed”,
“Guaranteeing” and “Guarantor” shall have meanings correlative to the
foregoing);


 


provided, however, that the
Guarantee by any Person shall not include endorsements by such Person for
collection or deposit, in either case, in the ordinary course of business.


 


9





















 


“Guarantee Payment” shall have the meaning set forth in Section 11.02
of this Supplemental Indenture.


 


“Guarantor Junior Subordinated Payment” shall have the meaning set
forth in Section 11.02 of this Supplemental Indenture.


 


“Guarantor Proceeding” shall have the meaning set forth in Section
11.02 of this Supplemental Indenture.


 


“Guarantor Senior Payment Default” shall have the meaning set forth in
Section 11.03 of this Supplemental Indenture.


 


“Incur” means, with respect to any Debt or other obligation of any
Person, to create, issue, incur (by conversion, exchange or otherwise), assume,
Guarantee or otherwise become liable in respect of such Debt or other
obligation including by acquisition of Subsidiaries or the recording, as
required pursuant to generally accepted accounting principles or otherwise, of
any such Debt or other obligation on the balance sheet of such Person (and “Incurrence”,
“Incurred”, “Incurrable” and “Incurring” shall have meanings correlative to the
foregoing); provided, however, that a change in generally accepted accounting
principles that results in an obligation of such Person that exists at such
time becoming Debt shall not be deemed an Incurrence of such Debt.


 


“Indenture” shall have the meaning set forth in the recitals hereto.


 


“Independent Investment Banker” means any Reference Treasury Dealer
appointed by the Trustee after consultation with the Company.


 


“Interest Payment Record Date” shall have the meaning set forth in
Section 2.02(b) of this Supplemental Indenture.


 


“Interest Rate, Currency or Commodity Price Agreement” of any Person
means any forward contract, futures contract, swap, option or other financial
agreement or arrangement (including, without limitation, caps, floors, collars
and similar agreements) relating to, or the value of which is dependent upon,
interest rates, currency exchange rates or commodity prices or indices (excluding
contracts for the purchase or sale of goods in the ordinary course of
business).


 


“Inventory” of any Person means the automotive parts and supplies
inventories of such Person that are held for sale, or are to be used or
consumed by such Person, in the ordinary course of business.  For purposes of the Indenture, the value of
each particular item of inventory shall be deemed to be the historical purchase
price thereof.


 


“Investment” by any Person means any direct or indirect loan, advance
or other extension of credit or capital contribution (by means of transfers of
cash or other property (other than Capital Stock that is neither Redeemable
Stock nor Preferred Stock of a Restricted Subsidiary) to others or payments for
property or services for the account or use of others, or otherwise) to, or
purchase or acquisition of Capital Stock, bonds, notes, debentures or other
securities or evidence of Debt issued by, any other Person, including any
payment on a Guarantee of any obligation of such other Person, but shall not
include


 


10





















 


(1)           trade accounts receivable in the
ordinary course of business on credit terms made generally available to the
customers of such Person;


 


(2)           any Permitted Interest Rate, Currency or
Commodity Price Agreement; and


 


(3)           endorsements of negotiable instruments
and documents in the ordinary course of business.


 


“Investment Grade” means Baa3 or above in the case of Moody’s (or the
equivalent under any successor rating categories of Moody’s) and BBB- or above
in the case of S&P (or the equivalent under any successor rating categories
of S&P).


 


“Junior Subordinated Payment” shall have the meaning set forth in
Section 6.03 of this Supplemental Indenture.


 


“Maturity Date” shall have the meaning provided in Section 2.02 of this
Supplemental Indenture.


 


“Moody’s” means Moody’s Investors Service, Inc., and its successors.


 


“Net Available Proceeds” from any Asset Disposition by any Person means
cash or Cash Equivalents received (including by way of sale or discounting of a
note, installment receivable or other receivable, but excluding any other
consideration received in the form of assumption by the acquiree of Debt or
other obligations relating to such properties or assets) therefrom by such Person,
net of:


 


(1)           all legal, title and recording tax
expenses, commissions and other fees and expenses Incurred and all federal,
state, foreign and local taxes required to be accrued as a liability as a
consequence of such Asset Disposition;


 


(2)           all
payments made by such Person or its Restricted Subsidiaries on any Debt which
is secured by such assets in accordance with the terms of any Lien upon or with
respect to such assets or which must by the terms of such Lien, or in order to
obtain a necessary consent to such Asset Disposition or by applicable law, be
repaid out of the proceeds from such Asset Disposition;


 


(3)           all distributions and other payments
made to minority interest holders in Restricted Subsidiaries of such Person or
joint ventures as a result of such Asset Disposition; and


 


(4)           appropriate
amounts to be provided by such Person or any Restricted Subsidiary thereof, as
the case may be, as a reserve in accordance with generally accepted accounting
principles against any liabilities associated with such assets and retained by
such Person or any Restricted Subsidiary thereof, as the case may be, after
such Asset Disposition, including, without limitation, liabilities under any
indemnification obligations and severance and other employee termination costs
associated with such Asset Disposition, in each case as determined by the Board
of Directors, in its reasonable good faith judgment evidenced by a resolution
of the Board of Directors filed with the


 


11





















 


Trustee;
provided, however, that any reduction in such reserve within twelve months
following the consummation of such Asset Disposition will be treated for all
purposes of the Indenture and the Notes as a new Asset Disposition at the time
of such reduction with Net Available Proceeds equal to the amount of such
reduction.


 


“Notes” or “Note” shall have the meaning set forth in Section 2.01 of
this Supplemental Indenture.


 


“Notes Payment” shall have the meaning set forth in Section 6.03 of
this Supplemental Indenture.


 


“Offer to Purchase” means a written offer (the “Offer”) sent by the
Company by first class mail, postage prepaid, to each Holder at his address
appearing in the Security Register on the date of the Offer offering to
purchase up to the principal amount of Notes specified in such Offer at the
purchase price specified in such Offer (as determined pursuant to the
Indenture). Unless otherwise required by applicable law, the Offer shall
specify an expiration date (the “Offer Expiration Date”) of the Offer to
Purchase which shall be, subject to any contrary requirements of applicable
law, not less than 30 days or more than 60 days after the date of such Offer
and a settlement date (the “Repurchase Date”) for purchase of Notes within five
Business Days after the Offer Expiration Date. The Company shall notify the
Trustee at least 15 Business Days (or such shorter period as is acceptable to
the Trustee) prior to the mailing of the Offer of the Company’s obligation to
make an Offer to Purchase, and the Offer shall be mailed by the Company or, at
the Company’s request, by the Trustee in the name and at the expense of the
Company. The Offer shall contain a description of the events requiring the
Company to make the Offer to Purchase and all instructions and materials
necessary to enable such Holders to tender Notes pursuant to the Offer to
Purchase. The Offer shall also state:


 


(1)           the section of the Indenture pursuant
to which the Offer to Purchase is being made;


 


(2)           the
Offer Expiration Date and the Repurchase Date;


 


(3)           the
aggregate principal amount of the outstanding Notes offered to be purchased by
the Company pursuant to the Offer to Purchase (including, if less than 100%,
the manner by which such amount has been determined pursuant to the section of
the Indenture requiring the Offer to Purchase) (the “Purchase Amount”);


 


(4)           the purchase price to be paid by the
Company for each $1,000 aggregate principal amount of Notes accepted for
payment (as specified pursuant to the Indenture) (the “Purchase Price”);


 


(5)           that the Holder may tender all or any
portion of the Notes registered in the name of such Holder and that any portion
of a Note tendered must be tendered in an integral multiple of $1,000 principal
amount;


 


(6)           the place or places where Notes are to
be surrendered for tender pursuant to the Offer to Purchase;


 


12





















 


(7)           that interest on any Note not tendered
or tendered but not purchased by the Company pursuant to the Offer to Purchase
will continue to accrue;


 


(8)           that on the Repurchase Date the
Purchase Price will become due and payable upon each Note being accepted for
payment pursuant to the Offer to Purchase and that interest thereon shall cease
to accrue on and after the Repurchase Date;


 


(9)           that each Holder electing to tender a
Note pursuant to the Offer to Purchase will be required to surrender such Note
at the place or places specified in the Offer prior to the close of business on
the Offer Expiration Date (such Note being, if the Company or the Trustee so
requires, duly endorsed by, or accompanied by a written instrument of transfer
in form satisfactory to the Company and the Trustee duly executed by, the
Holder thereof or his attorney duly authorized in writing);


 


(10)         that Holders will be entitled to
withdraw all or any portion of Notes tendered if the Company (or its Paying
Agent) receives, not later than the close of business on the Offer Expiration
Date, a telegram, facsimile transmission or letter setting forth the name of the
Holder, the principal amount of the Note the Holder tendered, the certificate
number of the Note the Holder tendered and a statement that such Holder is
withdrawing all or a portion of his tender;


 


(11)         that (a) if Notes in an aggregate
principal amount less than or equal to the Purchase Amount are duly tendered
and not withdrawn pursuant to the Offer to Purchase, the Company shall purchase
all such Notes and (b) if Notes in an aggregate principal amount in excess of
the Purchase Amount are tendered and not withdrawn pursuant to the Offer to
Purchase, the Company shall purchase Notes having an aggregate principal amount
equal to the Purchase Amount on a pro rata basis (with such adjustments as may
be deemed appropriate so that only Notes in denominations of $1,000 or integral
multiples thereof shall be purchased); and


 


(12)         that
in the case of any Holder whose Note is purchased only in part, the Company
shall execute, and the Trustee shall authenticate and deliver to the Holder of
such Note without service charge, a new Note or Notes, of any authorized
denomination as requested by such Holder, in an aggregate principal amount
equal to and in exchange for the unpurchased portion of the Note so tendered.


 


If any of the Notes subject to an Offer to Purchase is in global form,
then the Offer shall be modified by the Company to the extent necessary to
comply with the procedures of the Depository applicable to repurchases. Any
Offer to Purchase shall be governed by and effected in accordance with the
Offer for such Offer to Purchase.


 


“Open-End Indenture” shall have the meaning set forth in the recitals
hereto.


 


“Payment Blockage Period” shall have the meaning set forth in Section
6.04 of this Supplemental Indenture.


 


“Permitted Interest Rate, Currency or Commodity Price Agreement” of any
Person means any Interest Rate, Currency or Commodity Price Agreement entered
into with one


 


13





















 


or more financial institutions in the ordinary course of business that
is designed to protect such Person against fluctuations in interest rates or
currency exchange rates with respect to Debt Incurred or proposed to be
Incurred and which shall have a notional amount no greater than the payments
due with respect to the Debt being hedged thereby, or in the case of currency
or commodity protection agreements, against currency exchange rate or commodity
price fluctuations in the ordinary course of business relating to then existing
financial obligations or then existing or sold production and not for purposes
of speculation.


 


“Permitted Investments” means:


 


(1)           any Investment in the Company or a
Restricted Subsidiary or a Person that will become or be merged into or
consolidated with a Restricted Subsidiary as a result of such Investment;


 


(2)           any Investment in Cash Equivalents;


 


(3)           any
non-cash consideration received in connection with an Asset Disposition that
was made in compliance with Section 4.09 of this Supplemental Indenture;


 


(4)           Investments in Colchester necessary
to provide Colchester with the minimum amount of capital required under the
insurance laws of the state of Vermont plus the amount of any reasonable
general corporate and overhead expenses of Colchester; and


 


(5)           any other Investment that, when taken
together with all other Investments made pursuant to this clause (5) since the
Closing Date and outstanding on the date such Investment is made, does not
exceed $15,000,000.


 


“Proceeding” shall have the meaning set forth in Section 6.03 of this
Supplemental Indenture.


 


“Receivables” means receivables, chattel paper, instruments, documents
or intangibles evidencing or relating to the right to payment of money.


 


“Receivables Sale” of any Person means any sale of Receivables of such
Person (pursuant to a purchase facility or otherwise), other than in connection
with a disposition of the business operations of such Person relating thereto
or a disposition of defaulted Receivables for purposes of collection and not as
a financing arrangement.


 


“Redeemable Stock” of any Person means any Capital Stock of such Person
that by its terms (or by the terms of any security into which it is convertible
or for which it is exchangeable) or otherwise (including upon the occurrence of
an event) matures or is required to be redeemed (pursuant to any sinking fund
obligation or otherwise) or is convertible into or exchangeable for Debt or is
redeemable at the option of the holder thereof, in whole or in part, at any
time prior to the final Stated Maturity of the Notes.


 


“Redemption Date” shall have the meaning set forth in Section 3.01 of
this Supplemental Indenture.


 


14





















 


“Reference Treasury Dealer” means Goldman, Sachs & Co. or any of
its affiliates in the United States, and two or more additional primary U.S.
Government Securities dealers in New York City designated by the Company, and
their respective successors; provided, however, that if any of the foregoing
shall cease to be a primary U.S. Government securities dealer in New York City,
the Trustee will substitute another primary U.S. Government securities dealer
in New York City, as Reference Treasury Dealer.


 


“Reference Treasury Dealer Quotations” means, with respect to each
Reference Treasury Dealer and any Redemption Date, the average as determined by
the Trustee, of the bid and asked prices of the Comparable Treasury Issue
(expressed in each case as a percentage of its principal amount) quoted in
writing to the Trustee by such Reference Treasury Dealer at 5:00 p.m. on the
third Business Day preceding such Redemption Date.


 


“refinancing” shall have the meaning set forth in Section 4.04 of this
Supplemental Indenture.


 


“Remaining Authority” means, at any time of determination, an amount
equal to $100,000,000 less the amount expended by or on behalf of the Company
to purchase shares of its Common Stock from September 9, 2004 through such time
of determination.


 


“Replacement Assets” means (i) properties and assets (other than cash,
Cash Equivalents, or any Capital Stock or other security) that will be used in
the business of the Company and its Restricted Subsidiaries as conducted on the
Closing Date or any business ancillary thereto or supportive thereof,  (ii) Capital Stock of a business
substantially similar to the business of the Company and its Restricted
Subsidiaries as conducted on the Closing Date or any business ancillary thereto
or supportive thereof, provided that any entity so acquired in connection with
such an asset purchase shall be a Restricted Subsidiary and a Guarantor under
the Indenture upon such acquisition.


 


“Repurchase Date” shall have the meaning provided in the definition of
the term Offer to Purchase.


 


“Required Filing Dates” shall have the meaning set forth in Section
4.13 of this Supplemental Indenture.


 


“Restricted Payment” shall have the meaning set forth in Section 4.05
of this Supplemental Indenture.


 


“Restricted Subsidiary” means any Subsidiary of the Company, whether
existing on or after the Closing Date, unless such Subsidiary is an
Unrestricted Subsidiary.


 


“S&P” means Standard & Poor’s Ratings Services, a division of
The McGraw-Hill Companies, Inc., and its successors.


 


“Senior Credit Facility” means the Amended and Restated Loan and
Security Agreement dated August 1, 2003 among the Company, The Pep Boys Manny
Moe & Jack of California, Pep Boys – Manny, Moe & Jack of Delaware,
Inc., Pep Boys – Manny, Moe & Jack of Puerto Rico, Inc., as Borrowers, PBY
Corporation and Carrus Supply Corporation, as


 


15





















 


Guarantors, Congress Financial Corporation, as Agent, The CIT
Group/Business Credit, Inc. and General Electric Capital Corporation, as
Co-Documentation Agents and The Lenders from time to time parties thereto, as
amended, restated, refunded, renewed, replaced or refinanced, in whole or in
part, from time to time, provided that any such amendment, restatement,
refunding, renewal, replacement or refinancing shall not increase the aggregate
principal amount of Debt that may be Incurred thereunder to exceed
$400,000,000.


 


“Senior Debt” means, with respect to any Person:


 


(1)           the principal of (and premium, if any)
and interest (including interest accruing on or after the filing of any
petition in bankruptcy or for reorganization relating to such Person whether or
not such claim for post-petition interest is allowed in such proceeding) on,
and penalties and any obligation of such Person for reimbursement, indemnities
and fees relating to, the Senior Credit Facility;


 


(2)           the principal of (and premium, if any)
and interest on Debt of such Person for money borrowed, whether Incurred on or
prior to the Closing Date or thereafter, and any amendments, renewals,
extensions, modifications, refinancings and refundings of any such Debt; and


 


(3)           Permitted Interest Rate Agreements
and Permitted Currency Agreements entered into with respect to Debt described
in clauses (1) and (2) above.


 


Notwithstanding the preceding, the following shall not constitute
Senior Debt:


 


(1)           any Debt as to which
the terms of the instrument creating or evidencing the same provide that such
Debt is on a parity with, or is not superior in right of payment to, the Notes
or, in the case of a Subsidiary Guarantor, a Subsidiary Guarantee;


 


(2)           any Debt which is
subordinated in right of payment in any respect to any other Debt of such
Person, other than Debt under the Senior Credit Facility that is subordinated
to other Debt under the Senior Credit Facility solely by reason of priority
being granted under the Senior Credit Facility to “swingline”, overdraft or
similar tranches of Debt;


 


(3)           Debt evidenced by
the Notes or a Subsidiary Guarantee;


 


(4)           any Debt owed to an
entity which is a Subsidiary;


 


(5)           any obligation of
such Person with respect to any Capital Stock of such Person;


 


(6)           that portion of any
Debt which is Incurred in violation of the Indenture;


 


(7)           Debt which, when
Incurred and without respect to any election under Section 1111(b) of Title 11,
United States Code, is without recourse to such Person;


 


(8)           any liability for
federal, state, local or other taxes owed or owing by such Person;


 


16





















 


(9)           any Debt for the
purchase of goods, materials or services, or consisting of operating lease
rental payments, in the ordinary course of business or Debt consisting of trade
payables or other current liabilities (other than current liabilities for money
borrowed and the current portion of long-term Senior Debt);


 


(10)         Debt of or amounts
owed by such Person for compensation to employees or for services rendered; and


 


(11)         Debt issued as a
dividend on, or in redemption of or exchange for, Capital Stock of such Person.


 


“Senior Nonmonetary Default” shall have the meaning set forth in
Section 6.04 of this Supplemental Indenture.


 


“Senior Payment Default” shall have the meaning set forth in Section
6.04 of this Supplemental Indenture.


 


“Share Repurchase Plan” means the Company’s share repurchase plan in
the form and with such authority as disclosed in the Company’s public
announcement on September 9, 2004, pursuant to which the Company was authorized
to expend $100,000,000 to purchase shares of its Common Stock.


 


“Significant Restricted Subsidiary” means, at any date of
determination, any Restricted Subsidiary that, together with its Restricted
Subsidiaries represents 10% or more of the Company’s total consolidated assets
at the end of the most recent fiscal quarter for which financial information is
available or 10% or more of the Company’s consolidated net revenues or
consolidated operating income for the most recent four quarters for which
financial information is available.


 


“Subordinated Debt” means Debt of the Company as to which the payment
of principal of (and premium, if any) and interest and other payment
obligations in respect of such Debt shall be subordinate to the prior payment
in full of the Notes to at least the following extent:


 


(1)           no payments of
principal of (or premium, if any) or interest on or otherwise due in respect of
such Debt may be permitted for so long as any default in the payment of
principal (or premium, if any) or interest on the Notes exists;


 


(2)           in the event that
any other default that with the passing of time or the giving of notice, or
both, would constitute an event of default exists with respect to the Notes,
upon notice by 25% or more in principal amount of the Notes to the Trustee, the
Trustee shall have the right to give notice to the Company and the holders of
such Debt (or trustees or agents therefor) of a payment blockage, and
thereafter no payments of principal of (or premium, if any) or interest on or
otherwise due in respect of such Debt may be made for a period of 179 days from
the date of such notice; and


 


(3)           such Debt may not


 


17





















 


(A)          provide for payments of principal of
such Debt at the final stated maturity thereof or by way of a sinking fund
applicable thereto or by way of any mandatory redemption, defeasance,
retirement or repurchase thereof by the Company (including any redemption,
retirement or repurchase which is contingent upon events or circumstances, but
excluding any retirement required by virtue of acceleration of such Debt upon
an event of default thereunder), in each case prior to the final Stated
Maturity of the Notes or


 


(B)           permit redemption or other retirement
(including pursuant to an offer to purchase made by the Company) of such other
Debt at the option of the holder thereof prior to the final Stated Maturity of
the Notes, other than a redemption or other retirement at the option of the
holder of such Debt (including pursuant to an Offer to Purchase made by the
Company) which is conditioned upon a change of control of the Company pursuant
to provisions substantially similar to those provided under Section 4.11 of
this Supplemental Indenture (and which shall provide that such Debt will not be
repurchased pursuant to such provisions prior to the Company’s repurchase of
the Notes required to be repurchased by the Company pursuant to the provisions of
such Section 4.11).


 


“Subsidiary” of any Person means:


 


(1)           a corporation more than 50% of the
combined voting power of the outstanding Voting Stock of which is owned,
directly or indirectly, by such Person or by one or more other Subsidiaries of
such Person or by such Person and one or more Subsidiaries thereof or


 


(2)           any other Person (other than a
corporation) in which such Person, or one or more other Subsidiaries of such
Person or such Person and one or more other Subsidiaries thereof, directly or
indirectly, has at least a majority ownership and power to direct the policies,
management and affairs thereof.


 


“Subsidiary Guarantee” shall have the meaning set forth in Section 5.03
of this Supplemental Indenture.


 


“Subsidiary Guarantors” shall have the meaning set forth in the
preamble hereto.


 


“Supplemental Indenture” shall have the meaning set forth in the
preamble hereto.


 


“Synthetic Lease Facility” means the $132,000,000 Synthetic Lease
Financing Facility provided for under the Participation Agreement, dated as of
August 1, 2003, among The Pep Boys — Manny, Moe & Jack, The Pep Boys Manny
Moe & Jack of California, Pep Boys — Manny, Moe & Jack of Delaware,
Inc., as the Lessee, the Various Parties Thereto From Time to Time, as
Guarantors, Wachovia Development Corporation, as the Borrower and the Lessor,
The Various Banks and Other Lending Institutions, Parties Thereto from Time to
Time, as the Lenders, and Wachovia Bank, National Association, as the Agent for
the Lenders and respecting the Security Documents, as the Agent for the Secured
Parties, as the same may be amended, restated, refunded, renewed, replaced or
refinanced, in whole or in part, from time to time, provided that any such
amendment, restatement, refunding, renewal, replacement or refinancing shall
not increase the aggregate principal amount of Debt that may be Incurred
thereunder in excess of the amount that may be Incurred under the terms thereof
as of the Closing Date.


 


18





















 


“Trustee” shall have the
meaning set forth in the preamble hereto.


 


“Unrestricted Subsidiary”
means:


 


(1)                                  any Subsidiary designated as such by the
Board of Directors as set forth in Section 4.14 of
this Supplemental Indenture where:


 


(a)          neither
the Company nor any of its other Subsidiaries (other than another Unrestricted
Subsidiary) provides credit support for, or Guarantee of, any Debt of such
Subsidiary or any Subsidiary of such Subsidiary (including any undertaking,
agreement or instrument evidencing such Debt) or is directly or indirectly
liable for any Debt of such Subsidiary or any Subsidiary of such Subsidiary,
and


 


(b)         no
default with respect to any Debt of such Subsidiary or any Subsidiary of such
Subsidiary (including any right which the holders thereof may have to take
enforcement action against such Subsidiary) would permit (upon notice, lapse of
time or both) any holder of any other Debt of the Company and its Subsidiaries
(other than another Unrestricted Subsidiary) to declare a default on such other
Debt or cause the payment thereof to be accelerated or payable prior to its final
scheduled maturity;


 


(2)                                  any Subsidiary of an Unrestricted Subsidiary;
and


 


(3)                                  Carrus and Colchester.


 


“Voting Stock” of any Person
means Capital Stock of such Person which ordinarily has voting power for the
election of directors (or persons performing similar functions) of such Person,
whether at all times or only so long as no senior class of securities has such
voting power by reason of any contingency.


 


“Wholly Owned Subsidiary” of
any Person means a Subsidiary of such Person all of the outstanding Capital
Stock or other ownership interests of which (other than directors’ qualifying
shares) shall at the time be owned by such Person or by one or more Wholly
Owned Subsidiaries of such Person or by such Person and one or more Wholly
Owned Subsidiaries of such Person.


 


ARTICLE II

Establishment and Terms of the Notes


 


SECTION 2.01               Establishment of Series.


 


(a)           There
is hereby established a new series of Securities to be issued under the
Indenture, to be designated as the Company’s 7.50% Senior Subordinated Notes
due 2014 (the “Notes”).


 


(b)           Subject
to the provisions of the Open-End Indenture and this Supplemental Indenture,
Notes in an unlimited principal amount may be authenticated and


 


19





















 


delivered under the Indenture. 
The Notes that are to be authenticated and delivered on the date hereof
will be in an aggregate principal amount of $200,000,000.  The Notes shall be issued in definitive fully
registered form without coupons in denominations of $1,000 principal amount or
any integral multiple thereof.


 


(c)           With
respect to any Additional Notes the Company elects to issue, the Company shall
set forth in an Officers’ Certificate the principal amount of such Additional
Notes to be authenticated and delivered pursuant to the Indenture and the issue
price and the issue date of such Additional Notes, including the date from
which Interest shall accrue.  For
purposes of the Indenture, Notes will not be deemed to be Additional Notes
unless the maturity date, interest payment dates, record date, rate of interest
and subordination provisions are identical to those in the initial Notes.  The initial Notes and any Additional Notes
shall be considered collectively as a single class for all purposes of the
Indenture.  Holders of the initial Notes
and any Additional Notes will vote and consent together on all matters to which
such Holders are entitled to vote or consent as one class, and none of the
Holders of the Initial Notes or any Additional Notes shall have the right to
vote or consent as a separate class on any matter to which such Holders are
entitled to vote or consent.


 


(d)           The
Notes shall be issued in the form of one or more global Securities in
substantially the form set out in Exhibit A and with the terms
further provided herein.  The initial
Depository with respect to the Notes shall be The Depository Trust Company.


 


SECTION 2.02               Maturity, Payment of Principal and Interest.


 


(a)           Maturity.  The
Notes will mature on December 15, 2014 (the “Maturity Date”) and Holders
will be entitled to receive the full principal amount of their Notes on that
date, unless the Notes were earlier redeemed, repurchased, converted or
exchanged pursuant to the terms of the Indenture.


 


(b)           Interest.  The
Notes will bear interest at the rate of 7.50% per annum.  Interest (including post-petition interest in
any proceeding under a bankruptcy or insolvency law) on the Notes is payable
semi-annually on June 15 and December 15 of each year, commencing June 15,
2005.  The Company will make each interest
payment to the Holders of the Notes of record on the immediately preceding June
1 and December 1 (each, an “Interest Payment Record Date”).  The Notes will bear interest on overdue
principal and premium, if any, and, to the extent permitted by law, overdue
interest at the rate of 8.50% per annum. 
Interest on the Notes will be computed on the basis of a 360-day year of
twelve 30-day months.


 


The Company shall
pay or cause to be paid the principal of, premium, if any, and interest on the
Notes on the dates and in the manner provided in the Notes. Principal, premium,
if any, and interest shall be considered paid on the date due if the Paying
Agent, other than the Company or a Subsidiary thereof or an Affiliate of any
thereof, holds as of 10:00 a.m. Eastern Time on the due date money deposited by
the Company in immediately available funds and designated for and sufficient to
pay all principal, premium, if any, and interest then due.


 


(c)           Interest
and Principal Payments Generally.  (i) All payments of principal
and Interest on the Notes shall be made in accordance with the Open-End
Indenture, as


 


20





















 


supplemented hereby.  Payments on
the Notes will be made in U.S. Dollars at the office of the Paying Agent.  The Company may, at its option, make payments
by check mailed to the Holder’s registered address set forth in the Security
Register maintained by the Security Registrar or, with respect to global
Securities, by wire transfer to the accounts specified by the Depository.  All Interest will be computed on the basis of
a 360-day year comprised of twelve 30-day months.


 


(ii)  In the event that any
Interest becomes payable on the Notes, a Holder of Notes at the close of
business on an Interest Payment Record Date shall be entitled to receive such
Interest on the corresponding Interest Payment Date; provided, however,
that if the Company redeems such Notes under Section 3.01 of this Supplemental
Indenture, or such Holder elects to require the Company to repurchase such
Notes under Section 3.02 of this Supplemental Indenture, on a Redemption Date
or Repurchase Date, as the case may be, that is after such Interest Payment
Record Date and on or prior to the corresponding Interest Payment Date, the
Company will pay accrued and unpaid Interest on the Note being redeemed or
repurchased to, but excluding, the Redemption Date or Repurchase Date, as the
case may be, to the same Person to whom the principal amount of such Note is
paid.


 


SECTION 2.03               Sinking Fund.  The Notes do not have the benefit of any
sinking fund obligations.


 


SECTION 2.04               Paying Agent and Registrar.  The Company initially appoints
the Trustee as Paying Agent and as Security Registrar with respect to the
Notes.  The Company may appoint and
change any Paying Agent without prior notice to the Trustee or the
Holders.  The Place of Payment for the
Notes shall be an office maintained by the Paying Agent at its Corporate Trust
Office, initially at 123 South Broad Street, Corporate Trust Administration –
PA 1249, Philadelphia, Pennsylvania 19109.


 


ARTICLE III

Redemption and Repurchase


 


SECTION 3.01               Applicability of
Article XI of the Open-End Indenture; Notices to Trustee.  Article XI of the Open-End Indenture shall not
apply to the Notes and, for purposes of the Notes only and not for the purposes
of any other Securities under the Open-End Indenture other than the Notes
unless specified in a subsequent supplemental indenture, and the provisions of
this Article III shall apply instead.


 


If the Company elects to redeem Notes pursuant to the optional
redemption provisions of Section 3.07 of this Supplemental Indenture, it shall
furnish to the Trustee, at least 30 days but not more than 60 days before the
date designated for redemption (the “Redemption Date”), an Officers’
Certificate setting forth (i) the clause of the Indenture pursuant to which the
redemption shall occur, (ii) the Redemption Date, (iii) the principal amount of
Notes to be redeemed and (iv) the redemption price.


 


SECTION 3.02               Selection of Notes to
be Redeemed.  If less than all of the
Notes are to be redeemed or purchased in an offer to purchase at any time, the
Trustee shall select the Notes to be redeemed or purchased among the Holders of
the Notes in compliance with the requirements of the principal national
securities exchange, if any, on which the Notes are


 


21





















 


listed or, if the Notes are not so listed, on a pro rata basis or by
lot.  In the event of partial redemption
by lot, the particular Notes to be redeemed shall be selected, unless otherwise
provided herein, not less than 30 nor more than 60 days prior to the Redemption
Date by the Trustee from the outstanding Notes not previously called for
redemption.


 


The Trustee shall promptly notify the Company in writing of the Notes
selected for redemption and, in the case of any Note selected for partial
redemption, the principal amount thereof to be redeemed. Notes and portions of
Notes selected shall be in amounts of $1,000 or whole multiples of $1,000;
except that if all of the Notes of a Holder are to be redeemed, the entire
outstanding amount of Notes held by such Holder, even if not a multiple of
$1,000, shall be redeemed. Except as provided in the preceding sentence,
provisions of the Indenture that apply to Notes called for redemption also
apply to portions of Notes called for redemption. The Trustee shall notify the
Company promptly of the Notes or portions of Notes to be redeemed.


 


SECTION 3.03               Notice of Redemption.  At least 30 days but not more than 60 days
before a Redemption Date, the Company shall mail or cause to be mailed, by
first class mail, a notice of redemption to each Holder whose Notes are to be
redeemed at such Holder’s registered address.


 


The notice shall identify the Notes to be redeemed, including
applicable CUSIP numbers, and shall state:


 


(1)                                  the
Redemption Date;


 


(2)                                  the
redemption price;


 


(3)                                  if
any Note is being redeemed in part, the portion of the principal amount of such
Note to be redeemed and that, after the Redemption Date upon surrender of such
Note, a new Note or Notes in principal amount equal to the unredeemed portion
shall be issued upon cancellation of the original Note;


 


(4)                                  the
name and address of the Paying Agent;


 


(5)                                  that
Notes called for redemption must be surrendered to the Paying Agent to collect
the redemption price;


 


(6)                                  that,
unless the Company defaults in making such redemption payment or the Paying
Agent is prohibited from making such payment pursuant to the terms of the
Indenture, interest on Notes called for redemption ceases to accrue on and
after the Redemption Date;


 


(7)                                  the
paragraph of the Notes and/or Section of the Indenture pursuant to which the
Notes called for redemption are being redeemed; and


 


(8)                                  that
no representation is made as to the correctness or accuracy of the CUSIP
number, if any, listed in such notice or printed on the Notes.


 


22





















 


At the Company’s written request delivered at least 15 days prior to
the date such notice is to be given (unless a shorter period shall be
acceptable to the Trustee), the Trustee shall give the notice of redemption as
prepared by the Company in the Company’s name and at its expense.


 


SECTION 3.04               Effect of Notice of
Redemption.  Once notice of
redemption is mailed in accordance with Section 3.03 of this Supplemental Indenture, Notes called for redemption
become irrevocably due and payable on the Redemption Date at the redemption
price stated in the notice. A notice of redemption may not be conditional.


 


SECTION 3.05               Deposit of Redemption
Price.  One Business Day prior to the
Redemption Date, the Company shall deposit with the Trustee or with the Paying Agent
money sufficient to pay the redemption price of and accrued interest on all
Notes to be redeemed on that date. The Trustee or the Paying Agent shall
promptly return to the Company any money deposited with the Trustee or the
Paying Agent by the Company in excess of the amounts necessary to pay the
redemption price of, and accrued interest on, all Notes to be redeemed.


 


If the Company complies with the provisions of the preceding paragraph,
on and after the Redemption Date, interest shall cease to accrue on the Notes
or the portions of Notes called for redemption. If a Note is redeemed on or
after an interest record date but on or prior to the related interest payment
date, then any accrued and unpaid interest shall be paid to the Person in whose
name such Note was registered at the close of business on such record date. If
any Note called for redemption shall not be so paid upon surrender for
redemption because of the failure of the Company to comply with the preceding
paragraph, interest shall be paid on the unpaid principal, from the Redemption
Date until such principal is paid, and to the extent lawful on any interest not
paid on such unpaid principal, in each case at the rate provided in the Notes
and in Section 2.02(b) of this Supplemental Indenture.


 


SECTION 3.06               Notes Redeemed in Part.  Upon surrender of a Note that is redeemed in
part, the Company shall issue and, upon the Company’s written request, the
Trustee shall authenticate for the Holder at the expense of the Company a new
Note equal in principal amount to the unredeemed portion of the Note
surrendered.


 


SECTION 3.07               Optional Redemption.  (a)          
The Company shall have the option to redeem all or a portion of the Notes, on
and after December 15, 2009, at the redemption prices (expressed as percentages
of principal amount) set forth below plus accrued and unpaid interest on the
Notes redeemed, to but excluding the Redemption Date, if redeemed during the
twelve-month period beginning on December 15 of the years indicated below:


 


	
  Year

  	
   

  	
  Percentage

  	
   

  
	
  2009

  	
   

  	
  103.75

  	
  %

  
	
  2010

  	
   

  	
  102.50

  	
  %

  
	
  2011

  	
   

  	
  101.25

  	
  %

  
	
  2012 and thereafter

  	
   

  	
  100.00

  	
  %

  



 


(b)           At any time on or prior to
December 15, 2009, the Company may on any one or more occasions redeem up
to 35% of the aggregate principal amount of the Notes


 


23





















 


(including
any Additional Notes) at a redemption price equal to 107.50% of the aggregate
principal amount thereof, plus accrued and unpaid interest thereon to but
excluding the Redemption Date with the net cash proceeds of one or more Equity
Offerings, provided that:


 


(1)                                  at
least 65% of the aggregate principal amount of the Notes originally issued
remains outstanding immediately after the occurrence of such redemption
(excluding Notes held by the Company or any of its Subsidiaries or Affiliates);
and


 


(2)                                  the
Redemption Date occurs within 90 days of the date of the closing of such Equity
Offering and the Company provides not less than 30 and not more than 60 days’
notice of the redemption.


 


(c)           Prior to December 15, 2009 the Company may redeem
all or a part of the Notes upon not less than 30 nor more than 60 days’ notice,
at a redemption price equal to the greater of:


 


(1)                                  100%
of the principal amount thereof; or


 


(2)                                  the present value, as determined by an Independent Investment Banker, of


 


(a)                                  103.75%
of the principal amount of the Notes being redeemed payable at December 15,
2009, plus


 


(b)                                 all
required interest payments due on such Notes through December 15, 2009,


 


discounted to the Redemption Date on a semi-annual
basis (assuming a 360-day year consisting of twelve 30-day months) at the
Adjusted Treasury Rate,


 


plus, in each case,
accrued interest to but excluding the Redemption Date.


 


(d)           Any redemption pursuant to this Section 3.07 shall
be made pursuant to the provisions of Section 3.01 through 3.06 of this
Supplemental Indenture.


 


(e)           The Company will not be required to (1) issue,
register the transfer of or exchange any note during a period beginning at the
opening of business 15 days before the day of mailing of a notice of redemption
of any Note that may be selected for redemption and ending at the close of
business on the day of such mailing or (2) register the transfer of or exchange
any Note so selected for redemption, in whole or in part, except the unredeemed
portion of any such Note being redeemed in part.


 


24





















 


ARTICLE IV

Additional Covenants


 


SECTION 4.01               Application of Article
X of the Open-End Indenture.  In
addition to the covenants provided in Article X of the Open-End Indenture, the
covenants set forth in the succeeding sections of this Article IV apply to the
Notes and shall not apply to any other Securities under the Open-End Indenture
unless specified in a subsequent supplemental indenture.


 


SECTION 4.02               Payment of Taxes and
Other Claims.  The Company shall pay,
and shall cause each of its Restricted Subsidiaries to pay, prior to
delinquency, all material taxes, assessments, and governmental levies except
such as are contested in good faith and by appropriate proceedings or where the
failure to effect such payment would not reasonably be expected to be
materially adverse to the interests of the Holders of the Notes.


 


SECTION 4.03               Stay, Extension and
Usury Laws.  The Company and each of
the Subsidiary Guarantors covenants (to the extent that it may lawfully do so)
that it shall not at any time insist upon, plead, or in any manner whatsoever
claim or take the benefit or advantage of, any stay, extension or usury law
wherever enacted, now or at any time hereafter in force, that may affect the
covenants or the performance of the Indenture; and the Company and each of the Subsidiary
Guarantors (to the extent that it may lawfully do so) hereby expressly waives
all benefit or advantage of any such law, and covenants that it shall not, by
resort to any such law, hinder, delay or impede the execution of any power
herein granted to the Trustee, but shall suffer and permit the execution of
every such power as though no such law has been enacted.


 


SECTION 4.04               Limitation on
Incurrence of Debt.  The Company
shall not, and shall not permit any Restricted Subsidiary to, Incur any Debt
except that the Company and any Restricted Subsidiary (but not any Restricted
Subsidiary that is not a Subsidiary Guarantor) may Incur Debt if after giving
pro forma effect to the Incurrence of such Debt and the receipt and application
of the proceeds thereof the Consolidated Cash Flow Coverage Ratio of the
Company would be greater than 2.0 to 1.


 


Notwithstanding the preceding limitation, the following Debt may be
Incurred:


 


(1)                                  Debt of the Company or any Subsidiary
Guarantor under the Senior Credit Facility in an aggregate principal amount at
any one time not to exceed $400,000,000;


 


(2)                                  Debt owed by the Company to any Restricted
Subsidiary for which fair value has been received or Debt owed by a Restricted
Subsidiary to the Company or a Restricted Subsidiary; provided, however, that
upon either the transfer or other disposition by such Restricted Subsidiary or
the Company of any Debt so permitted to a Person other than the Company or
another Restricted Subsidiary or the issuance (other than directors’ qualifying
shares), sale, lease, transfer or other disposition of shares of Capital Stock
(including by consolidation or merger) of such Restricted Subsidiary to a
Person other than the Company or another such Restricted Subsidiary, the
provisions of this clause (2) shall no longer be applicable to such Debt and
such Debt shall be deemed to have been Incurred at the time of such transfer or
other disposition;


 


25





















 


(3)                                  Debt consisting of the Notes (other than any
Additional Notes), the Subsidiary Guarantees and Guarantees by Restricted
Subsidiaries of any Debt Incurred to refinance or refund the Notes;


 


(4)                                  Debt of the Company or any of its Restricted
Subsidiaries represented by Capital Lease Obligations, mortgage financings or
purchase money obligations, in each case, Incurred for the purpose of financing
all or any part of the purchase price or cost of construction or improvement of
property, plant or equipment used in the business of the Company or such
Restricted Subsidiary, in an aggregate principal amount, including all Debt
Incurred to refund or refinance any Debt Incurred pursuant to this clause (4), not
to exceed, at any time outstanding, $20,000,000;


 


(5)                                  Debt of the Company or any Restricted
Subsidiary Incurred under the Synthetic Lease Facility;


 


(6)                                  Debt of the Company or any Restricted
Subsidiary consisting of Permitted Interest Rate, Currency or Commodity Price
Agreements;


 


(7)                                  Debt which is exchanged for or the proceeds
of which are used to refinance or refund, or any extension or renewal of (each
of the foregoing, a “refinancing”),


 


(a)                                  the
Notes,


 


(b)                                 outstanding
Debt that is not described in any other clause hereof that was outstanding as
of the Closing Date,


 


(c)                                  outstanding
Debt Incurred pursuant to the first paragraph of this Section 4.04, and


 


(d)                                 Debt
previously Incurred pursuant to this clause (7),


 


in each case in an aggregate
principal amount not to exceed the principal amount of the Debt so refinanced
plus the amount of any premium required to be paid in connection with such
refinancing pursuant to the terms of the Debt so refinanced or the amount of
any premium reasonably determined by the Company as necessary to accomplish
such refinancing by means of a tender offer or privately negotiated repurchase,
plus the expenses of the Company or the Restricted Subsidiary, as the case may
be, incurred in connection with such refinancing; provided, however, that:


 


(w)          Incurrence of (i) Debt the proceeds of which are used to
refinance the Notes, or (ii) Debt which is pari passu with
or subordinate in right of payment to the Notes or the Subsidiary Guarantees,
as the case may be, shall only be permitted if (A) in the case of any
refinancing of the Notes or Debt which is pari passu to
the Notes or the Subsidiary Guarantees, as the case may be, the refinancing
Debt is made pari passu to the Notes or the
Subsidiary Guarantees, as the case may be, or subordinated to the Notes or the
Subsidiary Guarantees, as the case may be, and (B) in the case of any


 


26





















 


refinancing of Debt which
is  subordinated to the Notes or the
Subsidiary Guarantees, as the case may be, the refinancing Debt constitutes
Debt that is subordinated to the Notes or the Subsidiary Guarantees, as the
case may be, at least to the same extent as the Debt being refinanced;


 


(x)            the refinancing Debt by its terms, or by the terms of any
agreement or instrument pursuant to which such Debt is issued, (A) does not
have an Average Life that is less than the remaining Average Life of the Debt
being refinanced and (B) does not permit redemption or other retirement
(including pursuant to an offer to purchase) of such Debt at the option of the
holder thereof prior to the final stated maturity of the Debt being refinanced,
other than a redemption or other retirement at the option of the holder of such
Debt (including pursuant to an offer to purchase) which is conditioned upon
provisions substantially similar to those provided under Sections 4.09 and 4.11
of this Supplemental Indenture;


 


(y)           (I) in the case of any refinancing of Debt of the Company,
the refinancing Debt may be Incurred only by the Company, provided that such
refinancing Debt may be guaranteed by one or more Restricted Subsidiaries, and
(II) in the case of any refinancing of Debt of a Restricted Subsidiary, the
refinancing Debt may be Incurred only by such Restricted Subsidiary or the
Company; and


 


(z)            in the case of any refinancing of Preferred Stock of a
Restricted Subsidiary, such Preferred Stock may be refinanced only with
Preferred Stock of such Restricted Subsidiary;


 


(8)                                  Debt of the Company or any Subsidiary
Guarantor not otherwise permitted to be Incurred pursuant to clauses (1)
through (7) above, which, together with any other outstanding Debt Incurred
pursuant to this clause (8), and in both such cases including any renewals,
extensions, substitutions, refinancings or replacements of such Debt, has an
aggregate principal amount not in excess of $50,000,000 at any time
outstanding; and


 


(9)                                  unsecured Debt of the Company or any
Restricted Subsidiary to Colchester in an aggregate principal amount at any
time outstanding not to exceed $80,000,000.


 


For purposes of determining compliance with, and the outstanding
principal amount of any particular Debt incurred pursuant to and in compliance
with, this Section 4.04:


 


(1)                                  in
the event that Debt meets the criteria of more than one of the types of Debt
described in the first and second paragraphs of this Section 4.04, the Company,
in its sole discretion, will classify such item of Debt on the date of
Incurrence (or later classify or reclassify such Debt, in its sole discretion)
and only be required to include the amount and type of such Debt in one of such
clauses;


 


27





















 


(2)                                  Guarantees of, or obligations in respect of
letters of credit relating to, Debt which is otherwise included in the
determination of a particular amount of Debt shall not be included;


 


(3)                                  the principal amount of any Redeemable Stock
or Preferred Stock of the Company or a Restricted Subsidiary will be equal to
the greater of the maximum redemption or repurchase price (not including, in
either case, any redemption or repurchase premium) or the liquidation
preference thereof;


 


(4)                                  Debt permitted by this Section 4.04 need not
be permitted solely by reference to one provision permitting such Debt but may
be permitted in part by one such provision and in part by one or more other
provisions of this Section 4.04 permitting such Debt;


 


(5)                                  any Receivables Sale shall be the amount for
which there is recourse to the seller; and


 


(6)                                  the amount of Debt issued at a price that is
less than the principal amount thereof will be equal to the amount of the
liability in respect thereof determined in accordance with generally accepted
accounting principles.


 


Accrual of interest, accrual of dividends, the accretion of accreted
value, the payment of interest in the form of additional Debt and the payment
of dividends in the form of additional shares of Preferred Stock or Redeemable
Stock will not be deemed to be an Incurrence of Debt for purposes of this
Section 4.04.


 


For purposes of determining compliance with any U.S. dollar-denominated
restriction on the Incurrence of Debt, the U.S. dollar-equivalent principal
amount of Debt denominated in a foreign currency shall be calculated based on
the relevant currency exchange rate in effect on the date such Debt was
Incurred, in the case of term Debt, or first committed, in the case of
revolving credit Debt; provided that if such Debt is Incurred to refinance
other Debt denominated in a foreign currency, and such refinancing would cause
the applicable U.S. dollar-dominated restriction to be exceeded if calculated
at the relevant currency exchange rate in effect on the date of such
refinancing, such U.S. dollar-dominated restriction shall be deemed not to have
been exceeded so long as the principal amount of such refinancing Debt does not
exceed the principal amount of such Debt being refinanced. Notwithstanding any
other provision of this Section 4.04, the maximum amount of Debt that the
Company may Incur pursuant to this Section 4.04 shall not be deemed to be
exceeded solely as a result of fluctuations in the exchange rate of currencies.


 


SECTION 4.05               Limitation on Restricted Payments.


 


The Company:


 


(1)                                  shall not, and shall not permit any
Restricted Subsidiary to, directly or indirectly, declare or pay any dividend or
make any distribution (including any payment in connection with any merger or
consolidation derived from assets of the Company


 


28





















 


or any Restricted Subsidiary) in respect of
its Capital Stock or to the holders thereof (in their capacity as holders of
Capital Stock), other than:


 


(a)                                  any
dividends or distributions by the Company payable solely in shares of its
Capital Stock (other than Redeemable Stock) or in options, warrants or other
rights to acquire its Capital Stock (other than Redeemable Stock),


 


(b)                                 in
the case of a Restricted Subsidiary, dividends or distributions payable to the
Company or a Restricted Subsidiary or pro rata dividends or distributions;


 


(2)                                  shall not, and shall not permit any Restricted
Subsidiary to, purchase, redeem, or otherwise acquire or retire for value:


 


(a)                                  any
Capital Stock of the Company or any Restricted Subsidiary or


 


(b)                                 any
options, warrants or other rights to acquire shares of Capital Stock of the
Company or any Restricted Subsidiary (but excluding any debt securities
convertible or exchangeable into shares of Capital Stock of the Company or any
Restricted Subsidiary), except, in the case of Capital Stock of a Restricted
Subsidiary, from the Company or a Restricted Subsidiary;


 


(3)                                  may not make, or permit any Restricted
Subsidiary to make, any Investment in any Unrestricted Subsidiary or any
Affiliate or any Person that would become an Affiliate after giving effect
thereto, other than a Permitted Investment; and


 


(4)                                  may not, and may not permit any Restricted
Subsidiary to, redeem, repurchase, defease or otherwise acquire or retire for
value prior to any scheduled maturity, repayment or sinking fund payment Debt
of the Company or any Subsidiary Guarantor which is subordinate in right of
payment to the notes or the Subsidiary Guarantee of such Subsidiary Guarantor,
as the case may be (each of clauses (1) through (4) being a “Restricted Payment”)
unless, in the case of each of clauses (1) through (4):


 


(a)                                  no
Event of Default, or an event that with the passing of time or the giving of
notice, or both, would constitute an Event of Default, has occurred and is
continuing or would result from such Restricted Payment;


 


(b)                                 after
giving pro forma effect to such Restricted Payment as if such Restricted
Payment had been made at the beginning of the applicable four-fiscal-quarter
period, the Company could Incur at least $1.00 of additional Debt pursuant to
the terms of the first paragraph of Section 4.04 of this Supplemental Indenture;
and


 


(c)                                  upon
giving effect to such Restricted Payment, the aggregate of all Restricted
Payments from the Closing Date does not exceed the sum of:


 


29





















 


(x)            50% of cumulative Consolidated Net Income (or, in the
case Consolidated Net Income shall be negative, less 100% of such deficit) of
the Company since the first day of the fiscal quarter of the initial issuance
of the notes through the last day of the last full fiscal quarter ending
immediately preceding the date of such Restricted Payment for which quarterly
or annual financial statements are available (taken as a single accounting
period); plus


 


(y)           100% of (I) the aggregate net cash proceeds received by the
Company after the Closing Date from contributions of capital or the issuance
and sale (other than to a Subsidiary of the Company) of Capital Stock (other
than Redeemable Stock) of the Company, options, warrants or other rights to
acquire Capital Stock (other than Redeemable Stock) of the Company and (II) the
principal amount of Debt of the Company that is converted into or exchanged for
Capital Stock (other than Redeemable Stock and other than by or from a
Subsidiary of the Company) of the Company after the Closing Date, provided that
any such net proceeds received by the Company from an employee stock ownership
plan financed by loans from the Company or a Subsidiary of the Company shall be
included only to the extent such loans have been repaid with cash on or prior
to the date of determination; plus


 


(z)            an amount equal to the net reduction in Investments by
the Company and its Restricted Subsidiaries, subsequent to the Closing Date, in
any Person subject to clause (3) above upon the disposition, liquidation or
repayment (including by way of dividends) thereof or from redesignations of
Unrestricted Subsidiaries as Restricted Subsidiaries, but only to the extent
such amounts are not included in Consolidated Net Income and not to exceed in
the case of any one Person the amount of Investments previously made by the
Company and its Restricted Subsidiaries in such Person.


 


Notwithstanding the preceding, so long as no Event of Default, or event
that with the passing of time or the giving of notice, or both, would
constitute an Event of Default, shall have occurred and is continuing or would
result therefrom:


 


(1)                                  the
Company and any Restricted Subsidiary may pay any dividend on Capital Stock of
any class within 60 days after the declaration thereof if, on the date when the
dividend was declared, the Company or such Restricted Subsidiary could have
paid such dividend in accordance with the terms of this Section 4.05;


 


(2)                                  the
Company may refinance any Debt otherwise permitted by clause (6) of the second
paragraph of Section 4.04 of this Supplemental Indenture or redeem, acquire or
retire any Debt solely in exchange for, by conversion into or out of the net
proceeds of the substantially concurrent sale (other than from or to a
Subsidiary of the Company or from or to an employee stock ownership plan


 


30





















 


financed
by loans from the Company or a Subsidiary of the Company) of shares of Capital
Stock (other than Redeemable Stock) of the Company;


 


(3)                                  the
Company may purchase, redeem, acquire or retire any shares of Capital Stock of
the Company solely in exchange for, by conversion into or out of the net
proceeds of the substantially concurrent sale (other than from or to a
Subsidiary of the Company or from or to an employee stock ownership plan
financed by loans from the Company or a Subsidiary of the Company) of shares of
Capital Stock (other than Redeemable Stock) of the Company;


 


(4)                                  the
Company may purchase or redeem any Debt from Net Available Proceeds to the
extent permitted by Section 4.09 of this Supplemental Indenture;


 


(5)                                  the
Company may acquire shares of its Capital Stock in connection with the exercise
of employee or director stock options or stock appreciation rights by way of
cashless exercise;


 


(6)                                  the
Company may acquire shares of its Capital Stock pursuant to equity repurchases
from present or former directors or employees in an amount of up to $2,000,000
per year;


 


(7)                                  the
Company may declare and pay regular quarterly cash dividends in respect of the
Company’s Common Stock in an amount not to exceed $0.0675 per share (such
amount to be adjusted from time to time to account for any stock splits, stock
dividends or similar occurrences), provided that the aggregate amount of such
cash dividends will be included as Restricted Payments for purposes of
determining the amount of Restricted Payments that may be made pursuant to the
preceding paragraph;


 


(8)                                  the
Company may purchase shares of its common stock in accordance with the Share
Repurchase Plan, in an amount not to exceed the Company’s Remaining Authority
as of the Closing Date; and


 


(9)                                  the
Company may make other Restricted Payments since the Closing Date in an
aggregate amount not to exceed $25,000,000.


 


Any payment made pursuant to clauses (1), (6) and (7) of this paragraph
shall be a Restricted Payment for purposes of calculating aggregate Restricted
Payments pursuant to the preceding paragraph and the amount of net proceeds
from any exchange for, conversion into or sale of Capital Stock of the Company
pursuant to clause (2) or (3) of this paragraph shall be excluded from the
calculation of the amount available for Restricted Payments pursuant to clause
(c)(y) above.


 


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SECTION 4.06               Limitation on Dividend and Other Payment Restrictions Affecting
Restricted Subsidiaries.


 


The Company shall not, and shall not permit any Restricted Subsidiary
to, directly or indirectly, create or otherwise cause or suffer to exist or
become effective any encumbrance or restriction on the ability of any
Restricted Subsidiary:


 


(1)                                  to pay dividends (in cash or otherwise) or
make any other distributions in respect of its Capital Stock owned by the
Company or any other Restricted Subsidiary or pay any Debt or other obligation
owed to the Company or any other Restricted Subsidiary;


 


(2)                                  to make loans or advances to the Company or
any other Restricted Subsidiary; or


 


(3)                                  to transfer any of its property or assets to
the Company or any other Restricted Subsidiary.


 


Notwithstanding the preceding, the Company may, and may permit any
Restricted Subsidiary to, suffer to exist any such encumbrance or restriction:


 


(1)                                  pursuant
to any agreement in effect on the Closing Date (including the Senior Credit
Facility);


 


(2)                                  pursuant to an agreement relating to any Debt
Incurred by a Person (other than a Restricted Subsidiary existing on the
Closing Date or any Restricted Subsidiary carrying on any of the businesses of
any such Restricted Subsidiary) prior to the date on which such Person became a
Restricted Subsidiary and outstanding on such date and not Incurred in
anticipation of becoming a Restricted Subsidiary, which encumbrance or
restriction is not applicable to any Person, or the properties or assets of any
Person, other than the Person so acquired, provided that the Incurrence of such
Debt is permitted under Section 4.04 of this Supplemental Indenture;


 


(3)                                  pursuant to an agreement effecting a renewal,
refunding or extension of Debt Incurred pursuant to an agreement referred to in
clause (1) or (2) of this paragraph; provided, however, that the provisions
contained in such renewal, refunding or extension agreement relating to such
encumbrance or restriction are not materially more restrictive, taken as a
whole, than the provisions contained in the agreement the subject thereof;


 


(4)                                  in the case of a restriction described in
clause (3) of the preceding paragraph, contained in any security agreement
(including a capital lease) securing Debt of a Restricted Subsidiary otherwise
permitted under the Indenture, but only to the extent such restrictions restrict
the transfer of the assets or property subject to such security agreement;


 


(5)                                  in the case of a restriction described in
clause (3) of the preceding paragraph, consisting of customary nonassignment
provisions entered into in the ordinary course of business in leases and other
contracts to the extent such provisions restrict the transfer or subletting of
any such lease or the assignment of rights under any such contract;


 


32





















 


(6)                                  with respect to a Restricted Subsidiary,
imposed pursuant to an agreement which has been entered into for the sale or
disposition of all or substantially all of the Capital Stock or assets of such
Restricted Subsidiary, provided that such restriction terminates if such
transaction is closed or abandoned;


 


(7)                                  in bona fide contracts for the sale of any
property or assets; or


 


(8)                                  if such encumbrance or restriction is the
result of applicable laws or regulations.


 


SECTION 4.07               Limitation on Ranking of Certain Debt.


 


The Company:


 


(1)                                  shall not Incur any Debt which by its terms
is both subordinate in right of payment to any Senior Debt of the Company and
senior in right of payment to the Notes;


 


(2)                                  shall not permit any Subsidiary Guarantor to
Incur any Debt which by its terms is both subordinate in right of payment to
any Senior Debt of such Subsidiary Guarantor and senior in right of payment to
the Subsidiary Guarantee of such Subsidiary Guarantor; and


 


(3)                                  shall not permit any Restricted Subsidiary to
Guarantee any Debt of the Company that is subordinate in right of payment to
the Notes unless:


 


(a)                                  the
Guarantee by such Restricted Subsidiary of such other Debt shall be
subordinated to such Restricted Subsidiary’s Subsidiary Guarantee at least to
the same extent as such Debt of the Company is subordinated to the Notes and


 


(b)                                 such
Restricted Subsidiary waives, and agrees that it will not in any manner
whatsoever claim or take the benefit or advantage of, any rights of
reimbursement, indemnity or subrogation or any other rights against the Company
or any other Restricted Subsidiary as a result of any payment by such
Restricted Subsidiary under its Guarantee of such other Debt of the Company
until the Notes have been paid in full.


 


For purposes of this Section 4.07, no Debt shall be deemed subordinate
in right of payment to any other Debt solely by reason of such other Debt
having the benefit of a security interest.


 


SECTION 4.08               Limitation on Liens Securing Pari Passu or
Subordinated Debt.


 


The Company shall not, and shall not permit any Restricted Subsidiary
to, Incur or suffer to exist any Lien on or with respect to any property or
assets now owned or hereafter acquired to secure any Debt that is expressly by
its terms pari passu, subordinate or junior in
right of payment to the Notes or the Subsidiary Guarantee of a Restricted
Subsidiary without


 


33





















 


making, or causing such Restricted Subsidiary to make, effective
provision for securing the Notes or such Restricted Subsidiary’s Subsidiary Guarantee
(1) in the event such Debt is pari passu with
the Notes or such Subsidiary Guarantee, equally and ratably with such Debt as
to such property or assets for so long as such Debt will be so secured or (2)
in the event such Debt is subordinate in right of payment to the Notes or such
Subsidiary Guarantee, prior to such Debt as to such property or assets for so
long as such Debt will be so secured.


 


SECTION 4.09               Limitation on Asset Dispositions.


 


The Company shall not, and shall not permit any Restricted Subsidiary
to, make any Asset Disposition in one or more related transactions unless:


 


(1)                                  the Company or the Restricted Subsidiary, as
the case may be, receives consideration for such disposition at least equal to
the fair market value for the assets sold or disposed of as determined by the
Board of Directors in good faith and evidenced by a resolution of the Board of
Directors filed with the Trustee;


 


(2)                                  at least 75% of the consideration for such
disposition consists of:


 


(a)                                  cash
or Cash Equivalents;


 


(b)                                 the
assumption of Debt of the Company or such Restricted Subsidiary (other than
Debt that is subordinated to the notes or such Restricted Subsidiary’s
Subsidiary Guarantee) relating to such assets and release from all liability on
the Debt assumed;


 


(c)                                  Replacement
Assets; or


 


(d)                                 a
combination of the foregoing;


 


provided that the amount of
any consideration received by the Company or such Restricted Subsidiary that is
converted into cash within 180 days of the closing of such Asset Disposition
shall be deemed to be cash for purposes of this provision (to the extent of the
cash received); and


 


(3)                                  all Net Available Proceeds, less any amounts
invested within 360 days of such disposition in Replacement Assets, are applied
within 360 days of such disposition:


 


(a)                                  first,
to the permanent repayment or reduction of Senior Debt of the Company or any
Subsidiary Guarantor then outstanding under any agreements or instruments which
would require such application or prohibit payments pursuant to clause (b)
following;


 


(b)                                 second,
to the extent of remaining Net Available Proceeds, to make an Offer to Purchase
outstanding notes at 100% of their principal amount plus accrued interest to
the date of purchase and, to the extent required by the terms thereof, any
other Debt of the Company that is pari passu with


 


34





















 


the notes at a
price no greater than 100% of the principal amount thereof plus accrued interest
to the date of purchase;


 


(c)                                  third,
to the extent of any remaining Net Available Proceeds following the completion
of the Offer to Purchase, to the repayment of other Debt of the Company or Debt
of a Restricted Subsidiary, to the extent permitted under the terms thereof;
and


 


(d)                                 fourth,
to the extent of any remaining Net Available Proceeds, to any other use as
determined by the Company which is not otherwise prohibited by the Indenture.


 


Notwithstanding the preceding, the Company shall not be permitted to
make an Offer to Purchase pursuant to clause 3(b) above if the remaining Net
Available Proceeds after giving effect to the application required by clause
3(a) is less than $10,000,000.


 


If any portion of the Net Available Proceeds from Asset Dispositions is
not applied or invested as provided in clauses (a) and (c) through (d) of
paragraph (3) above, such amount will constitute “Excess Proceeds”. When the
aggregate amount of Excess Proceeds exceeds $10,000,000, the Company shall make
an Offer to Purchase to holders of the Notes (and, to the extent required by
the terms thereof, to holders of other Debt of the Company that is pari passu with the Notes).


 


SECTION 4.10               Transactions with Affiliates.


 


The Company shall not, and shall not permit any Restricted Subsidiary
to, enter into any transaction (or series of related transactions) with an
Affiliate of the Company or a Restricted Subsidiary, including any Investment,
either directly or indirectly, unless such transaction is on terms no less
favorable to the Company or such Restricted Subsidiary than those that could be
obtained in a comparable arm’s-length transaction with an entity that is not an
Affiliate and is in the best interests of such Company or such Restricted
Subsidiary. For any transaction that involves in excess of $5,000,000, it shall
be a condition to entering into any such transaction that a majority of the
disinterested members of the Board of Directors shall determine that the
transaction satisfies the above criteria and shall evidence such a
determination by a Board Resolution filed with the Trustee. For any transaction
that involves in excess of $10,000,000 (other than leases of property or
equipment entered into in the ordinary course of business), it shall be an
additional condition to entering into any such transaction that the Company obtain
an opinion from a nationally recognized expert with experience in appraising
the terms and conditions of the type of transaction (or series of related  transactions) for which the opinion is
required stating that such transaction (or series of related transactions) is
on terms no less favorable to the Company or such Restricted Subsidiary than
those that could be obtained in a comparable arm’s-length transaction with an
entity that is not an Affiliate of the Company, which opinion shall be filed
with the Trustee.


 


The preceding requirements shall not apply to:


 


(1)                                  any transaction pursuant to agreements in
effect on the Closing Date;


 


35





















 


(2)                                  any employment agreement or employee benefit
arrangements with any officer or director, including under any stock option or
stock incentive plans, entered into by the Company or any of its Restricted
Subsidiaries in the ordinary course of business of the Company or such
Restricted Subsidiary or approved by a majority of the disinterested members of
the Board of Directors;


 


(3)                                  transactions between or among the Company
and/or its Restricted Subsidiaries;


 


(4)                                  transactions between the Company or any
Restricted Subsidiary and Colchester that are directly related to the provision
by Colchester of insurance to the Company or such Restricted Subsidiary in
accordance with the established course of business between the Company and the
Restricted Subsidiaries, on the one hand, and Colchester, on the other hand, as
of the Closing Date, provided that such transactions (i) are on terms no less
favorable to the Company or such Restricted Subsidiary than those that could be
obtained in a comparable arm’s-length transaction with an entity that is not an
Affiliate and (ii) are in the best interests of the Company or such Restricted
Subsidiary.


 


(5)                                  payment of reasonable directors fees to
Persons who are not otherwise employees of the Company;


 


(6)                                  indemnities of officers, directors and
employees of the Company or any Subsidiary of the Company pursuant to bylaws,
or statutory provisions or indemnification agreements or the purchase of
indemnification insurance for any director or officer;


 


(7)                                  any Restricted Payment that is permitted to
be made under Section 4.05 of this Supplemental Indenture; and


 


(8)                                  written agreements entered into or assumed in
connection with acquisitions of other businesses with Persons who were not
Affiliates prior to such transactions.


 


SECTION 4.11               Offer to Repurchase
Upon Change of Control.  Within 30
days of the occurrence of a Change of Control, the Company shall make an Offer
to Purchase all outstanding Notes at a purchase price equal to 101% of their
principal amount plus accrued interest to the date of such purchase. A “Change
of Control” will be deemed to have occurred at such time as either:


 


(1)                                  any Person or any Persons acting together
that would constitute a “group” (a “Group”) for purposes of Section 13(d) of
the Exchange Act, or any successor provision thereto, shall beneficially own
(within the meaning of Rule 13d-3 under the Exchange Act, or any successor
provision thereto) at least 50% of the aggregate voting power of all classes of
Voting Stock of the Company; or


 


(2)                                  any Person or Group shall succeed in having a
sufficient number of its nominees elected to the Board of Directors of the
Company such that such nominees, when added to any existing director remaining
on the Board of Directors of the Company after such election who was a nominee
of or is an Affiliate of such


 


36





















 


Person or Group, will constitute a majority
of the Board of Directors of the Company;


 


provided, that a transaction
effected to create a holding company of the Company, (a) pursuant to which the
Company becomes a Wholly Owned Subsidiary of such holding company, and (b) as a
result of which the holders of Capital Stock of such holding company are
substantially the same as the holders of Capital Stock of the Company
immediately prior to such transaction, shall not be deemed to involve a “Change
of Control;” provided further that following such a holding company
transaction, references in this definition of “Change of Control” shall
thereafter be treated as references to such holding company.


 


SECTION 4.12               Payments for Consent.  The Company shall not, and shall not permit
any of its Subsidiaries to, directly or indirectly, pay or cause to be paid any
consideration, whether by way of interest, fee or otherwise, to any Holder for
or as an inducement to any consent, waiver or amendment of any of the terms or provisions
of the Indenture, the Notes or any Subsidiary Guarantee unless such
consideration is offered to be paid or is paid to all Holders of the Notes that
consent, waive or agree to amend in the time frame set forth in the
solicitation documents relating to such consent, waiver or agreement.


 


SECTION 4.13               Provision of Financial
Information.  Whether or not the
Company is required to be subject to Section 13(a) or 15(d) of the Exchange
Act, or any successor provision thereto, the Company shall file with the
Commission the annual reports, quarterly reports and other documents which the
Company would have been required to file with the Commission pursuant to such
Section 13(a) or 15(d) or any successor provision thereto if the Company were
so required, such documents to be filed with the Commission on or prior to the
respective dates (the “Required Filing Dates”) by which the Company would have
been required so to file such documents if the Company were so required.  If filing such documents by the Company with
the Commission is not permitted under the Exchange Act, the Company shall also
promptly supply copies of such documents to any prospective Holder and the
Trustee.


 


Delivery of such
reports, information and documents to the Trustee is for informational purposes
only and the Trustee’s receipt of such shall not constitute constructive notice
of any information contained therein or determinable from information contained
therein, including the Company’s compliance with any of its covenants hereunder
(as to which the Trustee is entitled to rely exclusively on Officers’
Certificates).


 


SECTION 4.14               Designation of
Restricted and Unrestricted Subsidiaries.  The Company may designate any Restricted
Subsidiary to be an “Unrestricted Subsidiary” as provided below in which event
such Subsidiary and each other Person that is then or thereafter becomes a
Subsidiary of such Subsidiary will be deemed to be an Unrestricted Subsidiary.


 


The Board of Directors may designate any Subsidiary to be an
Unrestricted Subsidiary unless such Subsidiary owns any Capital Stock of, or
owns or holds any Lien on any property of, any other Restricted Subsidiary
which is not a Subsidiary of the Subsidiary to be so designated or otherwise an
Unrestricted Subsidiary, provided that (i) such Subsidiary meets the
requirements set forth in subclauses (a) and (b) of clause (1) of the
definition of Unrestricted Subsidiary and (ii) the Company could make a
Restricted Payment in an amount equal to the


 


37





















 


greater of the fair market value and book value of its Investment in
such Subsidiary pursuant to Section 4.05 of this Supplemental Indenture and
such amount is thereafter treated as a Restricted Payment for the purpose of
calculating the aggregate amount available for Restricted Payments thereunder.


 


The Board of
Directors of the Company may at any time designate any Unrestricted Subsidiary,
other than Carrus or Colchester, to be a Restricted Subsidiary, provided that
such designation will be deemed to be an Incurrence of Debt by a Restricted
Subsidiary of the Company of any outstanding Debt of such Unrestricted
Subsidiary and such designation will only be permitted if: (i) such Incurrence
of Debt is permitted under Section 4.04 of this Supplemental Indenture,
calculated on a pro forma basis as if such designation had occurred at the
beginning of the four-quarter reference period; and (ii) no Event of Default or
an occurrence that with the passing of time or the giving of notice, or both,
would constitute an Event of Default, would occur or be in existence following
such designation.


 


SECTION 4.15               Limitation on Business
and Activities of Colchester and Carrus. 
The Company shall not cause or permit, or permit its Subsidiaries to
cause or permit, (i) Colchester to engage in any business or activity other
than a business or activity in which Colchester is engaged on the Closing Date,
or a business or activity ancillary thereto or supportive thereof, or (ii)
Carrus to engage in any business or activity.


 


SECTION 4.16               Additional Subsidiary
Guarantees.  The Company shall cause:


 


(1)                                  any newly-formed domestic Subsidiary of the
Company, and any domestic Subsidiary of the Company which Incurs any Debt,
simultaneously with such Incurrence (or, if the domestic Subsidiary has
outstanding Debt at the time of its creation or acquisition, at the time of
such creation or acquisition), to become a Subsidiary Guarantor in accordance
with Article V of this Supplemental Indenture and execute and deliver to the
Trustee a supplemental indenture pursuant to which such Subsidiary will agree
to guarantee the Company’s obligations under the Notes pursuant to Article V of
this Supplemental Indenture; and


 


(2)                                  PBY Corporation, no later than the date that
is 30 days after the Closing Date, to become a Subsidiary Guarantor in
accordance with Article V of this Supplemental Indenture and execute and
deliver to the Trustee a supplemental indenture pursuant to which such
Subsidiary will agree to guarantee the Company’s obligations under the Notes
pursuant to Article V of this Supplemental Indenture.


 


Notwithstanding clauses (1) and (2) of this Section 4.16, all
Subsidiaries that have properly been designated as Unrestricted Subsidiaries in
accordance with Section 4.14 of this Supplemental Indenture, for so long as
they continue to constitute Unrestricted Subsidiaries, will not have to comply
with the requirements of this Section 4.16.


 


In the event that a non-Guarantor Subsidiary of the Company ceases to
meet the requirements applicable to an Unrestricted Subsidiary, as provided in
Section 4.14 of this Supplemental Indenture, the Company shall promptly cause
such Subsidiary to become a Subsidiary Guarantor.


 


38





















 


SECTION 4.17               Maintenance of
Properties.  The Company will cause
all properties used or useful in the conduct of its business or the business of
any Subsidiary to be maintained and kept in good condition, repair and working
order (reasonable wear and tear excepted) and supplied with all necessary
equipment and will cause to be made all necessary repairs, renewals,
replacements, betterments and improvements thereof, all as in the judgment of
the Company may be necessary so that the business carried on in connection
therewith may be properly and advantageously conducted at all times; provided,
however, that nothing in this Section shall prevent the Company from
discontinuing the operation or maintenance of any of such properties if such
discontinuance is, in the judgment of the Company, desirable in the conduct of
its business or the business of any Subsidiary and not disadvantageous in any
material respect to the Holders.


 


SECTION 4.18               Maintenance of
Insurance.  The Company shall, and
shall cause its Subsidiaries to, keep at all times all of their properties
which are of an insurable nature insured against loss or damage with insurers
believed by the Company to be responsible to the extent that property of
similar character is usually so insured by corporations similarly situated and
owning like properties in accordance with good business practice.


 


ARTICLE V

Subsidiary Guarantees


 


SECTION 5.01               Subsidiary Guarantees.  Subject to this Article V, each of the
Subsidiary Guarantors hereby, jointly and severally, unconditionally guarantees
to each Holder of a Note authenticated and delivered by the Trustee and to the
Trustee and its successors and assigns, irrespective of the validity and
enforceability of this Supplemental Indenture, the Open-End Indenture, the
Notes or the obligations of the Company hereunder or thereunder, that: (a) the
principal of and premium, if any, and interest on the Notes will be promptly
paid in full when due, whether at Stated Maturity, by acceleration, redemption
or otherwise, and interest on the overdue principal of and premium, if any, and
interest on the Notes, if any, if lawful, and all other obligations of the
Company to the Holders or the Trustee hereunder or thereunder will be promptly
paid in full or performed, all in accordance with the terms hereof and thereof;
and (b) in case of any extension of time of payment or renewal of any Notes or
any of such other obligations, that same will be promptly paid in full when due
or performed in accordance with the terms of the extension or renewal, whether
at Stated Maturity, by acceleration or otherwise.  In addition to the foregoing, each Subsidiary
Guarantor also agrees, unconditionally and jointly and severally with each
other Subsidiary Guarantor, to pay any and all expenses (including, without
limitation, counsel fees and expenses) incurred by the Trustee under this
Supplemental Indenture and the Open-End Indenture in enforcing any rights under
a Subsidiary Guarantee with respect to a Subsidiary Guarantor.  Failing payment when due of any amount so
guaranteed or any performance so guaranteed for whatever reason, the Subsidiary
Guarantors shall be jointly and severally obligated to pay the same
immediately.  Each Subsidiary Guarantor
agrees that this is a guarantee of payment and not a guarantee of collection.


 


The Subsidiary Guarantors hereby agree that their obligations hereunder
shall be unconditional, irrespective of the validity, regularity or
enforceability of the Notes, this Supplemental Indenture or the Open-End
Indenture, the absence of any action to enforce the


 


39





















 


same, any waiver or consent by any Holder of the Notes with respect to
any provisions hereof or thereof, the recovery of any judgment against the
Company, any action to enforce the same or any other circumstance which might
otherwise constitute a legal or equitable discharge or defense of a
guarantor.  Each Subsidiary Guarantor
hereby waives diligence, presentment, demand of payment, filing of claims with
a court in the event of insolvency or bankruptcy of the Company, any right to
require a proceeding first against the Company, protest, notice and all demands
whatsoever and covenant that this Subsidiary Guarantee shall not be discharged
except by complete performance of the obligations contained in the Notes and the
Indenture.


 


If any Holder or the Trustee is required by any court or otherwise to
return to the Company, the Subsidiary Guarantors or any custodian, trustee,
liquidator or other similar official acting in relation to either the Company
or the Subsidiary Guarantors, any amount paid by either to the Trustee or such
Holder, this Subsidiary Guarantee, to the extent theretofore discharged, shall
be reinstated in full force and effect.


 


Each Subsidiary Guarantor agrees that it shall not be entitled to any
right of subrogation in relation to the Holders in respect of any obligations
guaranteed hereby until payment in full of all obligations guaranteed hereby.
Each Subsidiary Guarantor further agrees that, as between the Subsidiary
Guarantors, on the one hand, and the Holders and the Trustee, on the other
hand, (x) the Stated Maturity of the obligations guaranteed hereby may be
accelerated as provided in Article V of the Open-End Indenture for the purposes
of this Subsidiary Guarantee, notwithstanding any stay, injunction or other
prohibition preventing such acceleration in respect of the obligations
guaranteed hereby, and (y) in the event of any declaration of acceleration of
such obligations as provided in Article V of the Open-End Indenture, such
obligations (whether or not due and payable) shall forthwith become due and
payable by the Guarantors for the purpose of this Subsidiary Guarantee. The
Subsidiary Guarantors shall have the right to seek contribution from any
non-paying Subsidiary Guarantor so long as the exercise of such right does not
impair the rights of the Holders under the Subsidiary Guarantee.


 


SECTION 5.02               Limitation on Guarantor
Liability.  Each Guarantor, and by
its acceptance of Notes, each Holder, hereby confirms that it is the intention
of all such parties that the Subsidiary Guarantee of such Guarantor not
constitute a fraudulent transfer or conveyance for purposes of Bankruptcy Law,
the Uniform Fraudulent Conveyance Act, the Uniform Fraudulent Transfer Act or
any similar federal or state law to the extent applicable to any Subsidiary
Guarantee. To effectuate the foregoing intention, the Trustee, the Holders and
the Guarantors hereby irrevocably agree that the obligations of such Guarantor
will, after giving effect to such maximum amount and all other contingent and
fixed liabilities of such Guarantor that are relevant under such laws, and
after giving effect to any collections from, rights to receive contribution
from or payments made by or on behalf of any other Guarantor in respect of the
obligations of such other Guarantor under this Article V, result in the
obligations of such Guarantor under its Subsidiary Guarantee not constituting a
fraudulent transfer or conveyance.


 


SECTION 5.03               Execution and Delivery
of Subsidiary Guarantees.  To evidence
its Subsidiary Guarantee (“Subsidiary Guarantee”) set forth in Section 5.01 of this Supplemental Indenture, each
Guarantor hereby agrees that a notation of such Subsidiary Guarantee
substantially in the form included in Exhibit B shall be endorsed by an Authorized
Officer of such Guarantor or by its duly appointed attorney-in-fact on each
Note authenticated


 


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and delivered by the Trustee and that this Supplemental Indenture shall
be executed on behalf of such Guarantor by an Authorized Officer or by its duly
appointed attorney-in-fact.


 


Each Guarantor hereby agrees that its Subsidiary Guarantee set forth in
Section 5.01 of this Supplemental Indenture shall remain in full force and
effect notwithstanding any failure to endorse on each Note a notation of such
Subsidiary Guarantee.  The execution of a
Subsidiary Guarantee on behalf of a Guarantor by its attorney-in-fact shall
constitute a representation and warranty on the part of such Guarantor hereunder
of the due appointment of such attorney-in-fact.


 


If an Officer or duly appointed attorney-in-fact whose signature is on
this Supplemental Indenture or on a Subsidiary Guarantee no longer holds that
office or maintains such appointment, as the case may be, at the time the
Trustee authenticates the Note on which a Subsidiary Guarantee is endorsed, the
Subsidiary Guarantee shall be valid nevertheless.


 


The delivery of any Note by the Trustee, after the authentication
thereof hereunder, shall constitute due delivery of the Subsidiary Guarantee
set forth in this Supplemental Indenture on behalf of the Guarantors and each
of them.


 


SECTION 5.04               Guarantors May
Consolidate, etc., on Certain Terms. 
Except as otherwise provided in Section 5.05 of this Supplemental Indenture,
no Subsidiary Guarantor may sell or otherwise dispose of all or substantially
all of its assets to, or consolidate with or merge with or into (whether or not
such Subsidiary Guarantor is the surviving Person) another Person whether or
not an Affiliate of such Subsidiary Guarantor unless:


 


(1)                                  immediately after giving effect to that
transaction, no Event of Default, or event that with the passing of time
or the giving of notice, or both, would constitute an Event of Default; and


 


(2)                                  either:


 


(a)                                  the
Person acquiring the property in any such sale or disposition or the Person
formed by or surviving any such consolidation or merger, if other than such
Subsidiary Guarantor, assumes all the obligations of that Subsidiary Guarantor
under the Indenture and its Subsidiary Guarantee pursuant to a supplemental
indenture in form and substance reasonably satisfactory to the Trustee; or


 


(b)                                 the
Net Available Proceeds, if any, of such sale or other disposition are applied
in accordance with the provisions of Section 4.09 of this Supplemental
Indenture;


 


In case of any such consolidation, merger, sale or conveyance and upon
the assumption by the successor Person, by supplemental indenture, executed and
delivered to the Trustee and satisfactory in form to the Trustee, of the
Subsidiary Guarantee endorsed upon the Notes and the due and punctual
performance of all of the covenants and conditions of this Supplemental
Indenture to be performed by the Subsidiary Guarantor, such successor Person
shall succeed to and be substituted for the Subsidiary Guarantor with the same
effect as if it had


 


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been named herein as a Subsidiary Guarantor. Such successor Person
thereupon may cause to be signed any or all of the Subsidiary Guarantees to be
endorsed upon all of the Notes issuable hereunder which theretofore shall not
have been signed by the Company and delivered to the Trustee. All the
Subsidiary Guarantees so issued shall in all respects have the same legal rank
and benefit under this Supplemental Indenture as the Subsidiary Guarantees
theretofore and thereafter issued in accordance with the terms of this
Supplemental Indenture as though all of such Subsidiary Guarantees had been
issued at the date of the execution hereof.


 


Except as set forth in Article IV hereof, and notwithstanding clauses
(a) and (b) above, nothing contained in the Indenture or the Notes shall
prevent any consolidation or merger of a Subsidiary Guarantor with or into the
Company or another Subsidiary Guarantor, or shall prevent any sale or
conveyance of the property of a Subsidiary Guarantor as an entirety or
substantially as an entirety to the Company or another Subsidiary Guarantor.


 


SECTION 5.05               Releases of Subsidiary
Guarantees.  In the event of a sale
or other disposition of all or substantially all of the assets of any
Subsidiary Guarantor, by way of merger, consolidation or otherwise, or a sale
or other disposition of all of the capital stock of any Subsidiary Guarantor,
in each case to a Person that is not (either before or after giving effect to
such transactions) a Restricted Subsidiary of the Company, then such Subsidiary
Guarantor (in the event of a sale or other disposition, by way of merger,
consolidation or otherwise, of all of the capital stock of such Subsidiary
Guarantor) or the corporation acquiring the property (in the event of a sale or
other disposition of all or substantially all of the assets of such Guarantor)
will be released and relieved of any obligations under its Subsidiary Guarantee;
provided that the Net Available Proceeds, if any, of such sale or other
disposition are applied in accordance with the applicable provisions of the
Indenture, including, without limitation, Section 4.09 of this Supplemental Indenture. Upon delivery by the Company to
the Trustee of an Officers’ Certificate and an Opinion of Counsel to the effect
that such sale or other disposition was made by the Company in accordance with
the provisions of the Indenture, including, without limitation, Section 4.09 of this Supplemental Indenture, the
Trustee shall execute any documents reasonably required in order to evidence
the release of any Subsidiary Guarantor from its obligations under its
Subsidiary Guarantee.


 


Each Subsidiary Guarantor shall be released from its respective
Subsidiary Guarantee upon the Company’s defeasance of the Notes pursuant to Article
IV of the Open-End Indenture as modified for purposes of the Notes by Article X
of this Supplemental Indenture.  Any
Subsidiary Guarantor designated by the Company as an Unrestricted Subsidiary in
accordance with the terms of Section 4.14 of this Supplemental Indenture shall
be released from its Subsidiary Guarantee.


 


Any Subsidiary Guarantor not released from its obligations under its
Subsidiary Guarantee shall remain liable for the full amount of principal of
and premium, if any, and interest on the Notes and for the other obligations of
any Subsidiary Guarantor under this Supplemental Indenture as provided in this
Article V.


 


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ARTICLE VI

Subordination of the Notes


 


SECTION 6.01               Application of Article
XVI of the Open-End Indenture.  Article
XVI of the Open-End Indenture shall not apply to the Notes and, for purposes of
the Notes only and not for the purposes of any other Securities under the
Open-End Indenture unless specified in a subsequent supplemental indenture, the
provisions of this Article VI shall apply instead.


 


SECTION 6.02               Notes Subordinate to
Senior Debt.  The Company covenants
and agrees, and each Holder of a Note, by his acceptance thereof, likewise
covenants and agrees, that, to the extent and in the manner hereinafter set
forth in this Article (subject to the provisions of Article IV of the Open-End
Indenture, as modified for purposes of the Notes by Article X of this
Supplemental Indenture), the payment of the principal of (and premium, if any)
and interest on each and all of the Notes are 
hereby expressly made subordinate and subject in right of payment to the
prior payment in full of all Senior Debt of the Company.


 


No provisions of this Article VI shall prevent the occurrence of any
Event of Default.


 


SECTION 6.03               Payment Over of
Proceeds Upon Dissolution, Etc.  In
the event of (a) any insolvency or bankruptcy case or proceeding, or any
receivership, liquidation, reorganization or other similar case or proceeding
in connection therewith, relative to the Company or to its creditors, as such,
or to its assets, or (b) any liquidation, dissolution or other winding up of
the Company, whether voluntary or involuntary and whether or not involving
insolvency or bankruptcy, or (c) any assignment for the benefit of creditors or
any other marshalling of assets and liabilities of the Company, then and in any
such event specified in (a), (b) or (c) above (each such event, if any, herein
sometimes referred to as a “Proceeding”) the holders of Senior Debt of the
Company shall be entitled to receive payment in full of all amounts due or to
become due on or in respect of all Senior Debt of the Company, or provision
shall be made for such payment in cash or cash equivalents or otherwise in a
manner satisfactory to the holders of Senior Debt of the Company, before the
Holders of the Notes are entitled to receive any payment or distribution of any
kind or character, whether in cash, property or securities (including any
payment or distribution which may be payable or deliverable by reason of the
payment of any other indebtedness of the Company subordinated to the payment of
the Notes, such payment or distribution being hereinafter referred to as a “Junior
Subordinated Payment”), on account of principal of (or premium, if any) or
interest on the Notes or on account of any purchase or other acquisition of
Notes by the Company or any Subsidiary of the Company (all such payments,
distributions, purchases and acquisitions, other than the payment or
distribution of stock or securities of the Company referred to in the second
succeeding paragraph, herein referred to, individually and collectively, as a “Notes
Payment”), and to that end the holders of Senior Debt of the Company shall be
entitled to receive, for application to the payment thereof, any Notes Payment
which may be payable or deliverable in respect of the Notes in any such
Proceeding.


 


In the event that, notwithstanding the foregoing provisions of this
Section, the Trustee or the Holder of any Note shall have received any Notes
Payment before all Senior Debt of the Company is paid in full or payment
thereof provided for in cash or cash equivalents or otherwise in a manner satisfactory
to the holders of Senior Debt of the Company, and if such fact shall, at or
prior to the time of such Notes Payment, have been made known to the Trustee
or, as the case may be, such Holder, then and in such event such Notes Payment
shall be paid over or


 


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delivered forthwith to the trustee in bankruptcy, receiver, liquidating
trustee, custodian, assignee, agent or other Person making payment or
distribution of assets of the Company for application to the payment of all
Senior Debt of the Company remaining unpaid, to the extent necessary to pay all
Senior Debt of the Company in full, after giving effect to any concurrent
payment or distribution to or for the holders of Senior Debt of the Company.


 


For purposes of this Article only, the words “any payment or
distribution of any kind or character, whether in cash, property or securities”
shall not be deemed to include a payment or distribution of stock or securities
of the Company provided for by a plan of reorganization or readjustment
authorized by an order or decree of a court of competent jurisdiction in a
reorganization proceeding under any applicable bankruptcy law or of any other
corporation provided for by such plan of reorganization or readjustment which
stock or securities are  subordinated in
right of payment to all then outstanding Senior Debt of the Company to
substantially the same extent as the Notes are so subordinated as provided in
this Article. The consolidation of the Company with, or the merger of the
Company into, another Person or the liquidation or dissolution of the Company
following the conveyance or transfer of all or substantially all of its assets
to another Person upon the terms and conditions set forth in Article VIII of the
Open-End Indenture and Article VII of this Supplemental Indenture shall not be
deemed a Proceeding for the purposes of this Section if the Person formed by
such consolidation or into which the Company is merged or the Person which
acquires by conveyance or transfer such assets, as the case may be, shall, as a
part of such consolidation, merger, conveyance or transfer, comply with the
conditions set forth in Article VIII of the Open-End Indenture and Article VII
of this Supplemental Indenture.


 


SECTION 6.04               No Payment When Senior
Debt of the Company in Default.  In
the event that any Senior Payment Default (as defined below) shall have
occurred and be continuing, then no Notes Payment shall be made unless and
until such Senior Payment Default shall have been cured or waived or shall have
ceased to exist or all amounts then due and payable in respect of Senior Debt
of the Company shall have been paid in full, or provision shall have been made
for such payment in cash or cash equivalents or otherwise in a manner
satisfactory to the holders of Senior Debt of the Company.


 


“Senior Payment Default” means any default in the payment of principal
of (or premium, if any) or interest on any Senior Debt of the Company when due,
whether at the Stated Maturity of any such payment or by declaration of
acceleration, call for redemption or otherwise.


 


In the event that any Senior Nonmonetary Default (as defined below)
shall have occurred and be continuing, then, upon the receipt by the Company,
the Subsidiary Guarantors and the Trustee of written notice of such Senior
Nonmonetary Default from the agent for the Designated Senior Debt which is the
subject of such Senior Nonmonetary Default, no Notes Payment shall be made
during the period (the “Payment Blockage Period”) commencing on the date of
such receipt of such written notice and ending on the earlier of (i) the date
on which such Senior Nonmonetary Default shall have been cured or waived or
shall have ceased to exist or all Designated Senior Debt the subject of such
Senior Nonmonetary Default shall have been discharged; (ii) the 179th day after
the date of such receipt of such written notice; or (iii) the date on which the
Payment Blockage Period shall have been terminated by written notice to the
Company, any Subsidiary Guarantor or the Trustee from the agent for the
Designated Senior


 


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Debt initiating the Payment Blockage Period. No more than one Payment
Blockage Period may be commenced with respect to the Notes during any 360-day
period and there shall be a period of at least 181 consecutive days in each
360-day period when no Payment Blockage Period is in effect. For all purposes
of this paragraph, no Senior Nonmonetary Default that existed or was continuing
on the date of commencement of any Payment Blockage Period shall be, or be
made, the basis for the commencement of a subsequent Payment Blockage Period,
whether or not within a period of 360 consecutive days, unless such Senior
Nonmonetary Default shall have been cured for a period of not less than 90
consecutive days.


 


“Senior Nonmonetary Default” means the occurrence or existence and
continuance of any event of default with respect to any Designated Senior Debt,
other than a Senior Payment Default, permitting the holders of such Designated
Senior Debt (or a trustee or agent on behalf of the holders thereof) to declare
such Designated Senior Debt due and payable prior to the date on which it would
otherwise become due and payable.


 


In the event that, notwithstanding the foregoing, the Company shall
make any Notes Payment to the Trustee or any Holder prohibited by the foregoing
provisions of this Section, and if such fact shall, at or prior to the time of
such Notes Payment, have been made known to the Trustee or, as the case may be,
such Holder, then and in such event such Notes Payment shall be paid over and
delivered forthwith to the Company.


 


The provisions of this Section shall not apply to any Notes Payment
with respect to which Section 6.03 of this Supplemental Indenture would be
applicable.


 


SECTION 6.05               Payment Permitted If No
Default.  Nothing contained in this
Article or elsewhere in the Indenture or in the Notes shall prevent (a) the
Company, at any time except during the pendency of any Proceeding referred to
in Section 6.03 of this Supplemental Indenture or under the conditions
described in Section 6.04 of this Supplemental Indenture, from making Notes
Payments, or (b) the application by the Trustee of any money deposited with it
hereunder to Notes Payments or the retention of such Notes Payment by the
Holders, if, at the time of such application by the Trustee, it did not have
knowledge that such Notes Payment would have been prohibited by the provisions
of this Article.


 


SECTION 6.06               Subrogation to Rights
of Holders of Senior Debt of the Company. 
Subject to the payment in full of all amounts due or to become due on or
in respect of Senior Debt of the Company, or the provision for such payment in
cash or cash equivalents or otherwise in a manner satisfactory to the holders
of Senior Debt of the Company, the Holders of the Notes shall be subrogated to
the rights of the holders of such Senior Debt of the Company to receive
payments and distributions of cash, property and securities applicable to the
Senior Debt of the Company until the principal of (and premium, if any) and
interest on the Notes shall be paid in full. For purposes of such subrogation,
no payments or distributions to the holders of the Senior Debt of the Company
of any cash, property or securities to which the Holders of the Notes or the
Trustee would be entitled except for the provisions of this Article, and no
payments over pursuant to the provisions of this Article to the holders of
Senior Debt of  the Company by Holders of
the Notes or the Trustee, shall, as among the Company, its creditors other than
holders of Senior Debt of the Company and the Holders of the Notes, be deemed
to be a payment or distribution by the Company to or on account of the Senior
Debt of the Company.


 


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SECTION 6.07               Provisions Solely to
Define Relative Rights.  The
provisions of this Article are and are intended solely for the purpose of
defining the relative rights of the Holders on the one hand and the holders of
Senior Debt of the Company on the other hand. Nothing contained in this Article
or elsewhere in the Indenture or the Notes is intended to or shall (a) impair,
as among the Company, its creditors other than holders of Senior Debt of the
Company and the Holders of the Notes, the obligation of the Company, which is
absolute and unconditional (and which, subject to the rights under this Article
of the holders of Senior Debt of the Company, is intended to rank equally with
all other general obligations of the Company), to pay to the Holders of the
Notes the principal of (and premium, if any) and interest on the Notes as and
when the same shall become due and payable in accordance with their terms; or
(b) affect the relative rights against the Company of the Holders of the Notes
and creditors of the Company other than the holders of Senior Debt of the
Company; or (c) prevent the Trustee or the Holder of any Note from exercising
all remedies otherwise permitted by applicable law upon default under the
Indenture, subject to the rights, if any, under this Article of the holders of
Senior Debt of the Company to receive cash, property and securities otherwise
payable or deliverable to the Trustee or such Holder.


 


SECTION 6.08               Trustee to Effectuate
Subordination.  Each Holder of a Note
by his acceptance thereof authorizes and directs the Trustee on his behalf to
take such action as may be necessary or appropriate to effectuate the
subordination provided in this Article and appoints the Trustee his
attorney-in-fact for any and all such purposes.


 


SECTION 6.09               No Waiver of
Subordination Provisions.  No right
of any present or future holder of any Senior Debt of the Company to enforce
subordination as herein provided shall at any time in any way be  prejudiced or impaired by any act or failure
to act on the part of the Company or by any act or failure to act, in good
faith, by any such holder, or by any noncompliance by the Company with the
terms, provisions and covenants of the Indenture, regardless of any knowledge
thereof any such holder may have or be otherwise charged with.


 


Without in any way limiting the generality of the foregoing paragraph,
the holders of Senior Debt of the Company may, at any time and from time to
time, without the consent of or notice to the Trustee or the Holders of the
Notes, without incurring responsibility to the Holders of the Notes and without
impairing or releasing the subordination provided in this Article or the
obligations hereunder of the Holders of the Notes to the holders of Senior Debt
of the Company, do any one or more of the following: (i) change the manner,
place or terms of payment or extend the time of payment of, or renew or alter,
Senior Debt of the Company, or otherwise amend or supplement in any manner
Senior Debt of the Company or any instrument evidencing the same or any
agreement under which Senior Debt of the Company is outstanding; (ii) sell,
exchange, release or otherwise deal with any property pledged, mortgaged or
otherwise securing Senior Debt of the Company; (iii) release any Person liable
in any manner for the collection of Senior Debt of the Company; and (iv)
exercise or refrain from exercising any rights against the Company and any
other Person.


 


SECTION 6.10               Notice to Trustee.  The Company shall give prompt written notice
to the Trustee of any fact known to the Company which would prohibit the making
of any payment to or by the Trustee in respect of the Notes. Notwithstanding
the provisions of this Article or any other provision of the Indenture, the
Trustee shall not be charged with knowledge


 


46





















 


of the existence of any facts which would prohibit the making of any
payment to or by the Trustee in respect of the Notes, unless and until the
Trustee shall have received written notice thereof from the Company or a holder
of Senior Debt of the Company or from any trustee therefor; and, prior to the
receipt of any such written notice, the Trustee, subject to the provisions of
Section 6.1 of the Open-End Indenture, shall be entitled in all respects to
assume that no such facts exist; provided, however, that if the Trustee shall
not have received the notice provided for in this Section at least three
Business Days prior to the date upon which by the terms hereof any money may
become payable for any purpose (including, without limitation, the payment of
the principal of (and premium, if any) or interest on any Note), then, anything
herein contained to the contrary notwithstanding, the Trustee shall have full
power and authority to receive such money and to apply the same to the purpose
for which such money was received and shall not be affected by any notice to
the contrary which may be received by it within three (3) Business Days prior
to such date.


 


Subject to the provisions of Section 6.1 of the Open-End Indenture, the
Trustee shall be entitled to rely on the delivery to it of a written notice by
a Person representing himself to be a holder of Senior Debt of the Company (or
a trustee therefor) to establish that such notice has been given by a holder of
Senior Debt of the Company (or a trustee therefor). In the event that the
Trustee determines in good faith that further evidence is required with respect
to the right of any Person as a holder of Senior Debt of the Company to
participate in any payment or distribution pursuant to this Article, the
Trustee may request such Person to furnish evidence to the reasonable
satisfaction of the Trustee as to the amount of Senior Debt of the Company held
by such Person, the extent to which such Person is entitled to participate in such
payment or distribution and any other facts pertinent to the rights of such
Person under this Article, and if such evidence is not furnished, the Trustee
may defer any payment to such Person pending judicial determination as to the
right of such Person to receive such payment.


 


SECTION 6.11               Reliance on Judicial
Order or Certificate of Liquidating Agent. 
Upon any payment or distribution of assets of the Company referred to in
this Article, the Trustee, subject to the provisions of Section 6.1 of the
Open-End Indenture, and the Holders of the Notes shall be entitled to rely upon
any order or decree entered by any court of competent jurisdiction in which
such Proceeding is pending, or a certificate of the trustee in bankruptcy, receiver,
liquidating trustee, custodian, assignee for the benefit of creditors, agent or
other Person making such payment or distribution, delivered to the Trustee or
to the Holders of Notes, for the purpose of ascertaining the Persons entitled
to participate in such payment or distribution, the holders of the Senior Debt
of the Company and other indebtedness of the Company, the amount thereof or
payable thereon, the amount or amounts paid or distributed thereon and all
other facts pertinent thereto or to this Article.


 


SECTION 6.12               Trustee Not Fiduciary
for Holders of Senior Debt of the Company. 
The Trustee shall not be deemed to owe any fiduciary duty to the holders
of Senior Debt of the Company and shall not be liable to any such holders if it
shall in good faith mistakenly pay over or distribute to Holders of Notes or to
the Company, a Subsidiary Guarantor or to any other Person cash, property or
securities to which any holders of Senior Debt of the Company shall be entitled
by virtue of this Article or otherwise.


 


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SECTION 6.13               Rights of Trustee as
Holder of Senior Debt of the Company; Preservation of Trustee’s Rights.  The Trustee in its individual capacity shall
be entitled to all the rights set forth in this Article with respect to any
Senior Debt of the Company which may at any time be held by it, to the same
extent as any other holder of Senior Debt of the Company, and nothing in the
Indenture shall deprive the Trustee of any of its rights as such holder.


 


Nothing in this Article shall apply to claims of, or payments to, the
Trustee under or pursuant to Section 6.7 of the Open-End Indenture.


 


SECTION 6.14               Article
Applicable to Paying Agents.  In case
at any time any Paying Agent other than the Trustee shall have been appointed
by the Company and be then acting hereunder, the term “Trustee” as used in this
Article shall in such case (unless the context otherwise requires) be construed
as extending to and including such Paying Agent within its meaning as fully for
all intents and purposes as if such Paying Agent were named in this Article in
addition to or in place of the Trustee; provided, however, that Section 6.13 of
this Supplemental Indenture shall not apply to the Company, any Subsidiary
Guarantor or any Affiliate of the Company if it or such Subsidiary Guarantor or
Affiliate acts as Paying Agent.


 


SECTION 6.15               Defeasance
of this Article VI.  The
subordination of the Notes provided by this Article VI is expressly made
subject to the provisions for defeasance or covenant defeasance provided in
Article IV of the Open-End Indenture, as modified for purposes of the Notes by
Article X hereof and, anything herein to the contrary notwithstanding, upon the
effectiveness of any such defeasance or covenant defeasance, the Notes then
Outstanding shall thereupon cease to be subordinated pursuant to this Article
VI.


 


ARTICLE VII

Consolidation, Merger, Sale or Transfer


 


SECTION 7.01               Consolidation, Merger, Sale or Transfer.  (a)
Section 8.1 of the Open-End Indenture shall not apply to the Notes and, for the
purposes of the Notes only and not for the purposes of any Securities under the
Open-End Indenture other than the Notes unless specified in a subsequent
supplemental indenture, the following provisions shall apply instead:


 


The Company may not, in a single transaction or a series of related
transactions: (1) consolidate with or merge into any other Person or permit any
other Person to consolidate with or merge into the Company or (2) directly or
indirectly, transfer, sell, lease or otherwise dispose of all or substantially
all of its assets unless:


 


(1)                                  in a transaction in which the Company does
not survive or in which the Company transfers, sells, leases or otherwise
disposes of all or substantially all of its assets, the successor entity to the
Company is organized under the laws of the United States of America or any
State thereof or the District of Columbia and shall expressly assume, by a
supplemental indenture executed and delivered to the Trustee in form
satisfactory to the Trustee, all of the Company’s obligations under the
Indenture and the Notes;


 


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(2)                                  immediately before and after giving pro forma
effect to such transaction and treating any Debt which becomes an obligation of
the Company or a Restricted Subsidiary as a result of such transaction as
having been Incurred by the Company or such Restricted Subsidiary at the time
of the transaction, no Event of Default or event that with the passing of time
or the giving of notice, or both, would constitute an Event of Default shall
have occurred and be continuing;


 


(3)                                  except in the case of any such consolidation
or merger of the Company with or into a Restricted Subsidiary, immediately
after giving pro forma effect to such transaction and treating any Debt which
becomes an obligation of the Company or a Restricted Subsidiary as a result of
such transaction as having been Incurred by the Company or such Restricted
Subsidiary at the time of the transaction, the Company (including any successor
entity to the Company) could Incur at least $1.00 of additional Debt pursuant
to the provisions of the first paragraph of Section 4.04 of this Supplemental
Indenture; and


 


(4)                                  if, as a result of any such transaction,
property or assets of the Company would become subject to a Lien prohibited by
the provisions of Section 4.08 of this Supplemental Indenture, the Company or
the successor entity to the Company shall have secured the Notes as required by
said covenant.


 


(b)           Section 8.2 of the Open-End Indenture
shall apply to the Notes, except that for purposes of the Notes only and not
for purposes of any other Securities under the Open-End Indenture unless
specified in a subsequent supplemental indenture, the reference in such Section
to Section 8.1 of the Open-End Indenture shall be deemed to be a reference to
Section 7.01(a) of this Supplemental Indenture.


 


ARTICLE VIII

Remedies


 


SECTION 8.01               Application of Article
V of the Open-End Indenture.  Article
V of the Open-End Indenture, with respect to the Notes only and not for the
purposes of any Securities under the Open-End Indenture other than the Notes
unless specified in a subsequent supplemental indenture, is amended as follows:


 


(a)           Events of Default.  Section 5.1 of the Open-Ended Indenture is
replaced with the following: ““Event of Default”, with respect to the Notes,
means any one of the following events (whatever the reason for such Event of
Default and whether it shall be occasioned by the provisions of Articles VI or
XI of this Supplemental Indenture or be voluntary or involuntary or be effected
by operation of law or pursuant to any judgment, decree or order of any court
or any order, rule or regulation of any administrative or governmental body):


 


(1)                                  failure to pay principal of (or premium, if any, on) any
Note when due;


 


(2)                                  failure to pay any interest on any Note when due, continued
for 30 days;


 


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(3)                                  default
in the payment of principal and interest on Notes required to be purchased
pursuant to an Offer to Purchase under Section 4.09 or Section 4.11 of this
Supplemental Indenture when due and payable;


 


(4)                                  failure to perform or comply with the provisions of Article
VII of this Supplemental Indenture and Section 8.2 of the Open-End Indenture,
as amended hereby for purposes of the Notes;


 


(5)                                  failure
to perform any other covenant or agreement of the Company under the Indenture
or the Notes (other than a covenant or agreement that has expressly been
included in the Indenture solely for the benefit of another series of Debt)
continued for 60 days after written notice to the Company by the Trustee or
Holders of at least 25% in aggregate principal amount of Outstanding Notes;


 


(6)                                  default
under the terms of any instrument evidencing or securing any Debt of the
Company or any Restricted Subsidiary having an outstanding principal amount of
$10,000,000 individually or in the aggregate which default results in the
acceleration of the payment of all or any portion of such Debt (which
acceleration is not rescinded within a period of 10 days from the occurrence of
such acceleration) or constitutes the failure to pay all or any portion of the
principal amount of such Debt when due;


 


(7)                                  the
rendering of a final judgment or judgments (not subject to appeal) against the
Company or any Restricted Subsidiary in an amount in excess of $10,000,000
which remains undischarged or unstayed for a period of 60 days after the date
on which the right to appeal has expired;


 


(8)                                  the
entry by a court having jurisdiction in the premises of (A) a decree or order
for relief in respect of the Company, any Significant Restricted Subsidiary or
any group of Restricted Subsidiaries that together would constitute a
Significant Restricted Subsidiary in an involuntary case or proceeding under
any applicable Federal or State bankruptcy, insolvency, reorganization or other
similar law or (B) a decree or order adjudging the Company, any Significant
Restricted Subsidiary or any group of Restricted Subsidiaries that together
would constitute a Significant Restricted Subsidiary a bankrupt or insolvent,
or approving as properly filed a petition seeking reorganization, arrangement,
adjustment or composition of or in respect of the Company, any Significant
Restricted Subsidiary or any group of Subsidiaries that together would
constitute a Significant Restricted Subsidiary under any applicable Federal or
State law, or appointing a custodian, receiver, liquidator, assignee, trustee,
sequestrator or other similar official of the Company, any Significant
Restricted Subsidiary or any group of Restricted Subsidiaries that together
would constitute a Significant Restricted Subsidiary or of any substantial part
of its or their property, or ordering the winding up or liquidation of its or
their affairs, and the continuance of any such decree or order for relief or
any such other decree or order unstayed and in effect for a period of 60
consecutive days;


 


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(9)                                  the
commencement by the Company, any Significant Restricted Subsidiary or any group
of Restricted Subsidiaries that together would constitute a Significant
Restricted Subsidiary of a voluntary case or proceeding under any applicable
Federal or State bankruptcy, insolvency, reorganization or other similar law or
of any other case or proceeding to be adjudicated a bankrupt or insolvent, or
the consent by it or them to the entry of a decree or order for relief in
respect of the Company, any Significant Restricted Subsidiary or any group of
Restricted Subsidiaries that together would constitute a Significant Restricted
Subsidiary in an involuntary case or proceeding under any applicable Federal or
State bankruptcy, insolvency, reorganization or other similar law or to the
commencement of any bankruptcy or insolvency case or proceeding against it or them,
or the filing by it or them of a petition or answer or consent seeking
reorganization or relief under any applicable Federal or State law, or the
consent by it or them to the filing of such petition or to the appointment of
or taking possession by a custodian, receiver, liquidator, assignee, trustee,
sequestrator or other similar official of the Company, any Significant
Restricted Subsidiary or any group of Restricted Subsidiaries that together
would constitute a Significant Restricted Subsidiary or of any substantial part
of its or their property, or the making by it or them of an assignment for the
benefit of creditors, or the admission by it or them in writing of its or their
inability to pay its or their debts generally as they become due, or the taking
of corporate action by the Company, any Significant Restricted Subsidiary or
any group of Restricted Subsidiaries that together would constitute a
Significant Restricted Subsidiary in furtherance of any such action; or


 


(10)                            the
Subsidiary Guarantee of any Subsidiary Guarantor is held by a final
non-appealable order or judgment of a court of competent jurisdiction to be
unenforceable or invalid or ceases for any reason to be in full force and
effect (other than in accordance with the terms of the Indenture) or any
Subsidiary Guarantor or any Person acting on behalf of any Subsidiary Guarantor
denies or disaffirms such Subsidiary Guarantor’s obligations under its
Subsidiary Guarantee (other than by reason of a release of such Subsidiary
Guarantor from its Subsidiary Guarantee in accordance with the terms of the
Indenture).”


 


(b)           With respect to the Notes only and
not with respect to any other Securities under the Indenture unless specified
in a supplemental indenture, references in Section 5.2 of the Open-End
Indenture to Sections 5.1(7) and 5.1(8) of the Open-End Indenture are deemed to
be references to Sections 8.01(a)(9) and 8.01(a)(10),
respectively, of this Supplemental Indenture.


 


ARTICLE IX

Modification and Waiver


 


SECTION 9.01               Application of Article IX
of the Open End Indenture.  Article
IX of the Open-End Indenture, with respect to the Notes only, and not for
purposes of any other series of Securities under the Open-End Indenture unless
specified in a subsequent supplemental indenture, is amended as follows:


 


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(a)           Section 9.2 of the Open-End Indenture
is replaced with the following:


 


“With the consent
of the Holders of not less than a majority in principal amount of the Notes
Outstanding, by Act of said Holders delivered to the Company and the Trustee,
the Company (when authorized by or pursuant to a Company’s Board Resolution)
and the Trustee may amend or modify the Indenture for the purpose of adding any
provisions to or changing in any manner or eliminating any of the provisions of
the Indenture or of modifying in any manner the rights of the Holders of the
Notes; provided, however, that no such amendment or modification, without the
consent of the Holder of each Outstanding Note affected thereby, shall


 


(1)                                  change the Stated Maturity of the principal of, or any
premium or installment of interest on or any Additional Amounts with respect
to, any Note;


 


(2)                                  reduce
the principal amount of, or the premium or interest on, any Note;


 


(3)                                  change
the Place of Payment, Currency in which the principal of, any premium or
interest on, or any Additional Amounts with respect to the Notes;


 


(4)                                  impair
the right to institute suit for the enforcement of any payment on or with
respect to any Note;


 


(5)                                  reduce the percentage in principal amount of the Notes
Outstanding, the consent of whose Holders is required for any amendment,
supplement or modification of any of the provisions of the Indenture;


 


(6)                                  reduce
the percentage in principal amount of the Notes Oustanding, the consent of
whose Holders is required for any waiver of compliance with the provisions of
the Indenture or defaults under the Indenture and their consequences or reduce
the requirements for quorum or voting;


 


(7)                                  modify
any of the provisions of the Indenture relating to the subordination of the
Notes and the Subsidiary Guarantees in a manner adverse to Holders of the
Notes; or


 


(8)                                  following the mailing of any Offer to Purchase, modify any
Offer to Purchase for the Notes required under Section 4.09 or Section 4.11 of
this Supplemental Indenture in a manner adverse to the Holders of the Notes.


 


An amendment or
modification which changes or eliminates any covenant or other provision of the
Indenture which shall have been included expressly and solely for the benefit
of one or more particular series of Securities, or which modifies the rights of
the Holders of Securities of such series with respect to such covenant or other
provision, shall be deemed not to affect the rights under the Indenture of the
Holders of Securities of any other series.


 


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It shall not be
necessary for any Act of Holders of Notes under this Section to approve the
particular form of any proposed supplemental indenture, but it shall be sufficient
if such Act shall approve the substance thereof.”


 


(b)           References in Article IX of the
Open-End Indenture to Article XVI of the Open-End Indenture are deemed to be
references to Articles VI and XI of this Supplemental Indenture, and references
in Article IX of the Open-End Indenture to Section 9.2 of the Open-End
Indenture are deemed to be references to Section 9.1(a) of this Supplemental
Indenture.


 


ARTICLE X

Satisfaction and Discharge;
Defeasance and Covenant Defeasance


 


SECTION 10.01             Application of Article IV
of the Open-End Indenture.


 


(a)           Article IV of the Open-End Indenture, with respect
to the Notes only, and not for purposes of any other series of Securities under
the Open-End Indenture unless specified in a subsequent supplemental indenture,
is amended as follows:


 


(1)                                  Section
4.2(4)(b) is replaced with the following:


 


“(b)         Such defeasance or covenant defeasance
shall not result in a breach or violation, or constitute a default under, this
Indenture or any other agreement or instrument to which the Company or any
Restricted Subsidiary is a party or by which the Company or any Restricted
Subsidiary is bound.”


 


(2)                                  Section
4.2(4)(h) is replaced with the following:


 


“(h)         at the time of the deposit described in
paragraph (a), no default in the payment of all or a portion of principal of
(or premium, if any) or interest on or other obligations in respect of any of
the Senior Debt of the Company or any Subsidiary Guarantor shall have occurred
and be continuing and no other event of default with respect to any of such
Senior Debt shall have occurred and be continuing permitting after notice or
the lapse of time, or both, the acceleration thereof.


 


(i)            the
Company has delivered to the Trustee an Opinion of Counsel to the effect that
the deposit described in paragraph (a) shall not cause the Trustee or the trust
created thereby to be subject to the Investment Company Act of 1940, as
amended.”


 


(b)           References in Section 4.2(3) of the Open-End
Indenture to Section 5.1(4) of the Open-End Indenture are deemed to be
references to Section 8.01(a)(5) of this Supplemental
Indenture.


 


(c)           The Notes shall be defeasible pursuant to both of
Section 4.2(2) and (3) of the Open-End Indenture.  The Sections of this Supplemental Indenture
subject to defeasance under
Section 4.2(3) of the Open-End Indenture shall be Sections 4.04 through 4.10
and 4.14 through 4.18 of this Supplemental Indenture.


 


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ARTICLE XI

Subordination of Subsidiary
Guarantees


 


SECTION 11.01             Subsidiary Guarantees
Subordinate to Senior Debt of Subordinate Guarantors.  Each Subsidiary Guarantor covenants and
agrees, and each Holder of a Note, by his acceptance thereof, likewise
covenants and agrees, that, to the extent and in the manner hereinafter set
forth in this Article (subject to the provisions of Article Four and Article
Fifteen), the Subsidiary Guarantee of such Subsidiary Guarantor is hereby
expressly made subordinate and subject in right of payment to the prior payment
in full of all Senior Debt of such Subsidiary Guarantor.


 


No provisions of
this Article XI shall prevent the occurrence of any Event of Default.


 


SECTION 11.02             Payment
Over of Proceeds Upon Dissolution, Etc. 
In the event of (a) any insolvency or bankruptcy case or proceeding, or
any receivership, liquidation, reorganization or other similar case or
proceeding in connection therewith, relative to any Subsidiary Guarantor or to
its creditors, as such, or to its assets, or (b) any liquidation, dissolution
or other winding up of any Subsidiary Guarantor, whether voluntary or
involuntary and whether or not involving insolvency or bankruptcy, or (c) any
assignment for the benefit of creditors or any other marshalling of assets and
liabilities of any Subsidiary Guarantor, then and in any such event specified
in (a), (b) or (c) above (each such event, if any, herein sometimes referred to
as a “Guarantor Proceeding”) the holders of Senior Debt of such Subsidiary
Guarantor shall be entitled to receive payment in full of all amounts due or to
become due on or in respect of all Senior Debt of such Subsidiary Guarantor, or
provision shall be made for such payment in cash or cash equivalents or
otherwise in a manner satisfactory to the holders of Senior Debt of such
Subsidiary Guarantor, before the Holders of the Notes are entitled to receive
any payment or distribution of any kind or character, whether in cash, property
or securities (including any payment or distribution which may be payable or
deliverable by reason of the payment of any other indebtedness of such
Subsidiary Guarantor subordinated to the payment of the Notes, such payment or
distribution being hereinafter referred to as a “Guarantor Junior Subordinated
Payment”), on account of the Subsidiary Guarantee of such Subsidiary Guarantor
(all such payments, other than the payment or distribution of stock or
securities of a Subsidiary Guarantor referred to in the second succeeding
paragraph, herein referred to, individually and collectively, as a “Guarantee
Payment”), and to that end the holders of Senior Debt of such Subsidiary
Guarantor shall be entitled to receive, for application to the payment thereof,
any Guarantee Payment which may be payable or deliverable in respect of such
Subsidiary Guarantor’s Subsidiary Guarantee in any such Guarantor Proceeding.


 


In the event that,
notwithstanding the foregoing provisions of this Section, the Trustee or the
Holder of any Note shall have received any Guarantee Payment before all Senior
Debt of such Subsidiary Guarantor is paid in full or payment thereof provided
for in cash or cash equivalents or otherwise in a manner satisfactory to the
holders of Senior Debt of such Subsidiary Guarantor, and if such fact shall, at
or prior to the time of such Guarantee Payment, have been made known to the
Trustee or, as the case may be, such Holder, then and in such event such
Guarantee Payment shall be paid over or delivered forthwith to the trustee in
bankruptcy, receiver, liquidating trustee, custodian, assignee, agent or other
Person making payment or


 


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distribution of
assets of such Subsidiary Guarantor for application to the payment of all
Senior Debt of such Subsidiary Guarantor remaining unpaid, to the extent
necessary to pay all Senior Debt of such Subsidiary Guarantor in full, after
giving effect to any concurrent payment or distribution to or for the holders
of Senior Debt of such Subsidiary Guarantor.


 


For purposes of
this Article only, the words “any payment or distribution of any kind or
character, whether in cash, property or securities” shall not be deemed to
include a payment or distribution of stock or securities of a Subsidiary
Guarantor provided for by a plan of reorganization or readjustment authorized
by an order or decree of a court of competent jurisdiction in a reorganization
proceeding under any applicable bankruptcy law or of any other corporation
provided for by such plan of reorganization or Readjustment which stock or
securities are subordinated in right of payment to all then outstanding Senior
Debt of such Subsidiary Guarantor to substantially the same extent as the
Subsidiary Guarantees are so subordinated as provided in this Article. The
consolidation of a Subsidiary Guarantor with, or the merger of a Subsidiary
Guarantor into, another Person or the liquidation or dissolution of such
Subsidiary Guarantor following the conveyance or transfer of all or
substantially all of its assets to another Person upon the terms and conditions
set forth in Article V of this Supplemental Indenture shall not be deemed a
Guarantor Proceeding for the purposes of this Section if the Person formed by
such consolidation or into which such Subsidiary Guarantor is merged or the
Person which acquires by conveyance or transfer such assets, as the case may
be, shall, as a part of such consolidation, merger, conveyance or transfer,
comply with the conditions set forth in Article V of this Supplemental
Indenture.


 


SECTION 11.03             No Payment When Senior
Debt of such Subsidiary Guarantor in Default.  In the event that any Guarantor Senior
Payment Default (as defined below) shall have occurred and be continuing with
respect to a Subsidiary Guarantor , then no Guarantee Payment shall be made
unless and until such Subsidiary Senior Payment Default shall have been cured
or waived or shall have ceased to exist or all amounts then due and payable in
respect of the relevant Senior Debt of such Subsidiary Guarantor shall have
been paid in full, or provision shall have been made for such payment in cash
or cash equivalents or otherwise in a manner satisfactory to the holders of
such Senior Debt.


 


“Guarantor Senior Payment Default” means any default in the payment of
principal of (or premium, if any) or interest on any Senior Debt of a
Subsidiary Gurantor when due, whether at the stated maturity of any such
payment or by declaration of acceleration, call for redemption or otherwise.


 


In the event that
any Senior Nonmonetary Default shall have occurred and be continuing, then,
upon the receipt by the Company, the Subsidiary Guarantors and the Trustee of
written notice of such Senior Nonmonetary Default from any holder, or agent for
the holders, of any Designated Senior Debt of the Company, no Guarantee Payment
shall be made during the applicable Payment Blockage Period. No more than one
Payment Blockage Period may be commenced with respect to the Subsidiary
Guarantees during any 360-day period and there shall be a period of at least
181 consecutive days in each 360-day period when no Payment Blockage Period is
in effect. For all purposes of this paragraph, no Senior Nonmonetary Default
that existed or was continuing on the date of commencement of any Payment
Blockage Period shall be, or be made, the basis for the commencement of a
subsequent Payment Blockage Period,


 


55





















 


whether
or not within a period of 360 consecutive days, unless such Senior Nonmonetary
Default shall have been cured for a period of not less than 90 consecutive
days.


 


In the event that,
notwithstanding the foregoing, a Subsidiary Guarantor shall make any Guarantee
Payment to the Trustee or any Holder prohibited by the foregoing provisions of
this Section, and if such fact shall, at or prior to the time of such Guarantee
Payment, have been made known to the Trustee or, as the case may be, such
Holder, then and in such event such Guarantee Payment shall be paid over and
delivered forthwith to the Company.


 


The provisions of
this Section shall not apply to any Guarantee Payment with respect to which
Section 11.02 of this Supplemental Indenture would be applicable.


 


SECTION 11.04             Payment
Permitted If No Default.  Nothing
contained in this Article or elsewhere in this Indenture or in any of the
Subsidiary Guarantees shall prevent (a) a Subsidiary Guarantor, at any time
except during the pendency of any Guarantor Proceeding referred to in Section
11.02 of this Supplemental Indenture or under the conditions described in
Section 11.03 of this Supplemental Indenture, from making Guarantee Payments;
or (b) the application by the Trustee of any money deposited with it hereunder
to Guarantee Payments or the retention of such Guarantee Payment by the
Holders, if, at the time of such application by the Trustee, it did not have
knowledge that such Guarantee Payment would have been prohibited by the provisions
of this Article.


 


SECTION 11.05             Subrogation
to Rights of Holders of Senior Debt of such Subsidiary Guarantor.  Subject to the payment in full of all amounts
due or to become due on or in respect of Senior Debt of a Subsidiary Guarantor,
or the provision for such payment in cash or cash equivalents or otherwise in a
manner satisfactory to the holders of Senior Debt of such Subsidiary Guarantor,
the Holders of the Notes shall be subrogated to the rights of the holders of
such Senior Debt of such Subsidiary Guarantor to receive payments and
distributions of cash, property and securities applicable to the Senior Debt of
such Subsidiary Guarantor until the principal of (and premium, if any) and
interest on the Notes shall be paid in full. For purposes of such subrogation,
no payments or distributions to the holders of the Senior Debt of a Subsidiary
Guarantor of any cash, property or securities to which the Holders of the Notes
or the Trustee would be entitled except for the provisions of this Article, and
no payments over pursuant to the provisions of this Article to the holders of
Senior Debt of a Subsidiary Guarantor by Holders of the Notes or the Trustee,
shall, as among a Subsidiary Guarantor, its creditors other than holders of
Senior Debt of such Subsidiary Guarantor and the Holders of the Notes, be
deemed to be a payment or distribution by such Subsidiary Guarantor to or on
account of the Senior Debt of such Subsidiary Guarantor.


 


SECTION 11.06             Provisions Solely to
Define Relative Rights.  The provisions
of this Article are and are intended solely for the purpose of defining the
relative rights of the Holders on the one hand and the holders of Senior Debt
of a Subsidiary Guarantor on the other hand. Nothing contained in this Article
or elsewhere in this Indenture or in the Subsidiary Guarantees is intended to
or shall (a) impair, as among a Subsidiary Guarantor, its creditors other than
holders of Senior Debt of such Subsidiary Guarantor and the Holders of the
Notes, the obligation of such Subsidiary Guarantor, which is absolute and
unconditional (and which, subject to the rights under this Article of the
holders of Senior Debt of such Subsidiary Guarantor, is


 


56





















 


intended to rank equally with all other general obligations of such
Subsidiary Guarantor), to guarantee payment to the Holders of the Notes of the
principal of (and premium, if any) and interest on the Notes as and when the
same shall become due and payable in accordance with their terms; or (b) affect
the relative rights against a Subsidiary Guarantor of the Holders of the Notes
and creditors of such Subsidiary Guarantor other than the holders of Senior
Debt of such Subsidiary Guarantor; or (c) prevent the Trustee or the Holder of
any Note from exercising all remedies otherwise permitted by applicable law
upon default under this Indenture, subject to the rights, if any, under this
Article of the holders of Senior Debt of a Subsidiary Guarantor to receive
cash, property and securities otherwise payable or deliverable to the Trustee
or such Holder.


 


SECTION 11.07             Trustee
to Effectuate Subordination.  Each
Holder of a Note by his acceptance thereof authorizes and directs the Trustee
on his behalf to take such action as may be necessary or appropriate to
effectuate the subordination provided in this Article and appoints the Trustee
his attorney-in-fact for any and all such purposes.


 


SECTION 11.08             No Waiver of
Subordination Provisions.  No right
of any present or future holder of any Senior Debt of a Subsidiary Guarantor to
enforce subordination as herein provided shall at any time in any way be
prejudiced or impaired by any act or failure to act on the part of such
Subsidiary Guarantor or by any act or failure to act, in good faith, by any
such holder, or by any noncompliance by such Subsidiary Guarantor with the
terms, provisions and covenants of this Indenture, regardless of any knowledge
thereof any such holder may have or be otherwise charged with.


 


Without in any way
limiting the generality of the foregoing paragraph, the holders of Senior Debt
of a Subsidiary Guarantor may, at any time and from time to time, without the
consent of or notice to the Trustee or the Holders of the Notes, without
incurring responsibility to the Holders of the Notes and without impairing or
releasing the subordination provided in this Article or the obligations
hereunder of the Holders of the Notes to the holders of Senior Debt of such
Subsidiary Guarantor, do any one or more of the following: (i) change the
manner, place or terms of payment or extend the time of payment of, or renew or
alter, Senior Debt of such Subsidiary Guarantor, or otherwise amend or
supplement in any manner Senior Debt of such Subsidiary Guarantor or any
instrument evidencing the same or any agreement under which Senior Debt of such
Subsidiary Guarantor is outstanding; (ii) sell, exchange, release or otherwise
deal with any property pledged, mortgaged or otherwise securing Senior Debt of
such Subsidiary Guarantor; (iii) release any Person liable in any manner for
the collection of Senior Debt of such Subsidiary Guarantor; and (iv) exercise
or refrain from exercising any rights against such Subsidiary Guarantor and any
other Person.


 


SECTION 11.09             Notice
to Trustee.  Each Subsidiary
Guarantor shall give prompt written notice to the Trustee of any fact known to
such Subsidiary Guarantor which would prohibit the making of any payment to or
by the Trustee in respect of its Subsidiary Guarantee. Notwithstanding the
provisions of this Article or any other provision of this Indenture, the
Trustee shall not be charged with knowledge of the existence of any facts which
would prohibit the making of any payment to or by the Trustee in respect of the
Subsidiary Guarantees, unless and until the Trustee shall have received written
notice thereof from a Subsidiary Guarantor or a holder of Senior Debt of such
Subsidiary Guarantor or from any


 


57





















 


trustee therefor; and, prior to the receipt of any such written notice,
the Trustee, subject to the provisions of Section 6.1 of the Open-End Indenture,
shall be entitled in all respects to assume that no such facts exist; provided,
however, that if the Trustee shall not have received the notice provided for in
this Section at least three (3) Business Days prior to the date upon which by
the terms hereof any money may become payable for any purpose (including,
without limitation, the payment of the principal of (and premium, if any) or
interest on any Note), then, anything herein contained to the contrary
notwithstanding, the Trustee shall have full power and authority to receive
such money and to apply the same to the purpose for which such money was
received and shall not be affected by any notice to the contrary which may be received
by it within three Business Days prior to such date.


 


Subject to the
provisions of Section 6.1 of the Open-End Indenture, the Trustee shall be
entitled to rely on the delivery to it of a written notice by a Person
representing himself to be a holder of Senior Debt of a Subsidiary Guarantor
(or a trustee therefor) to establish that such notice has been given by a
holder of Senior Debt of such Subsidiary Guarantor (or a trustee therefor). In
the event that the Trustee determines in good faith that further evidence is
required with respect to the right of any Person as a holder of Senior Debt of
a Subsidiary Guarantor to participate in any payment or distribution pursuant
to this Article, the Trustee may request such Person to furnish evidence to the
reasonable satisfaction of the Trustee as to the amount of Senior Debt of such
Subsidiary Guarantor held by such Person, the extent to which such Person is
entitled to participate in such payment or distribution and any other facts
pertinent to the rights of such Person under this Article, and if such evidence
is not furnished, the Trustee may defer any payment to such Person pending
judicial determination as to the right of such Person to receive such payment.


 


SECTION 11.10             Reliance
on Judicial Order or Certificate of Liquidating Agent.  Upon any payment or distribution of assets of
a Subsidiary Guarantor referred to in this Article, the Trustee, subject to the
provisions of Section 6.1 of the Open-End Indenture, and the Holders of the
Notes shall be entitled to rely upon any order or decree entered by any court
of competent jurisdiction in which such Guarantor Proceeding is pending, or a
certificate of the trustee in bankruptcy, receiver, liquidating trustee,
custodian, assignee for the benefit of creditors, agent or other Person making
such payment or distribution, delivered to the Trustee or to the Holders of
Notes, for the purpose of ascertaining the Persons entitled to participate in
such payment or distribution, the holders of the Senior Debt of such Subsidiary
Guarantor and other indebtedness of such Subsidiary Guarantor, the amount
thereof or payable thereon, the amount or amounts paid or distributed thereon
and all other facts pertinent thereto or to this Article.


 


SECTION 11.11             Trustee not Fiduciary for Holders of Senior Debt of Subsidiary
Guarantors.  The Trustee shall not be
deemed to owe any fiduciary duty to the holders of Senior Debt of a Subsidiary
Guarantor and shall not be liable to any such holders if it shall in good faith
mistakenly pay over or distribute to Holders of Notes or to the Company, a
Subsidiary Guarantor, or to any other Person cash, property or securities to
which any holders of Senior Debt of such Subsidiary Guarantor shall be entitled
by virtue of this Article or otherwise.


 


SECTION 11.12             Rights of Trustee as
Holder of Senior Debt of such Subsidiary Guarantor; Preservation of Trustee’s
Rights.  The Trustee in its
individual capacity shall be entitled to all the rights set forth in this
Article with respect to any Senior Debt of a Subsidiary


 


58





















 


Guarantor which may at any time be held by it, to the same extent as
any other holder of Senior Debt of such Subsidiary Guarantor, and nothing in
this Indenture shall deprive the Trustee of any of its rights as such holder.


 


Nothing in this
Article shall apply to claims of, or payments to, the Trustee under or pursuant
to Section 6.7 of the Open-End Indenture.


 


SECTION 11.13             Article
Applicable to Paying Agents.  In case
at any time any Paying Agent other than the Trustee shall have been appointed
by the Company and be then acting hereunder, the term “Trustee” as used in this
Article shall in such case (unless the context otherwise requires) be construed
as extending to and including such Paying Agent within its meaning as fully for
all intents and purposes as if such Paying Agent were named in this Article in
addition to or in place of the Trustee; provided, however, that Section 11.12
of this Supplemental Indenture shall not apply to the Company, any Subsidiary
Guarantor or any Affiliate of the Company if it or such Subsidiary Guarantor or
Affiliate acts as Paying Agent.


 


SECTION 11.14             Defeasance
of this Article XI.  The
subordination of the Subsidiary Guarantees provided by this Article XI is expressly
made subject to the provisions for defeasance or covenant defeasance in Article
IV of the Open-End Indenture, as modified for purposes of the Notes by Article X
hereof and, anything herein to the contrary notwithstanding, upon the
effectiveness of any such defeasance or covenant defeasance with respect to the
Notes, the Subsidiary Guarantees of the Notes shall thereupon cease to be
subordinated pursuant to this Article XI.


 


ARTICLE XII

Miscellaneous


 


SECTION 12.01             Trustee Matters.  The recitals in this Supplemental Indenture
are made by the Company and the Subsidiary Guarantors only and not by the
Trustee, and all of the provisions contained in the Open-End Indenture in
respect of the rights, privileges, immunities, powers and duties of the Trustee
shall be applicable in respect of the Notes and of this Supplemental Indenture
as fully and with like effect as if set forth herein in full.


 


SECTION 12.02             Calculations.  The Company will make all calculations called
for by this Indenture with respect to the Notes.  The Company will make these calculations in
good faith and, absent manifest error, the Company’s
calculations shall be final and binding on all Holders of Notes.  The Company will promptly provide a schedule
of any calculations made hereunder to the Trustee and the Paying Agent, each of
which may rely upon the accuracy of the calculations without independent
verification.  The Trustee will forward
such schedule of any calculations to any Holder upon the request of such
Holder.


 


SECTION 12.03             Ratification.  The Open-End Indenture is in all respects
ratified and confirmed, and the Open-End Indenture and this Supplemental
Indenture shall be read, taken and construed as one and the same instrument.


 


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SECTION 12.04             Counterpart Originals.
 This Supplemental Indenture may be
simultaneously executed in several counterparts, each of which shall be deemed
to be an original, and such counterparts shall together constitute one and the
same instrument.


 


SECTION 12.05             Effect
of Headings.  The Article and Section
headings herein have been inserted for convenience of reference only, are not
to be considered a part hereof and shall in no way modify or restrict any of
the terms or provisions hereof.


 


SECTION 12.06             Governing Law.  This Supplemental Indenture, the Notes and
the Subsidiary Guarantees shall be governed by and construed in accordance with
the law of the State of New York, without giving effect to its conflicts of law
principles.


 


SECTION 12.07             Provisions for the Sole
Benefit of Parties and Holders. 
Nothing in the Indenture, the Subsidiary Guarantees or in the Notes,
expressed or implied, is intended or shall be construed to confer upon, or to
give or grant to, any Person, other than the Company, the Subsidiary
Guarantors, the Trustee, the Paying Agent and the registered owners of the
Notes, any legal or equitable right, remedy or claim under or by reason of the
Indenture, the Subsidiary Guarantees or the Notes or any covenant, condition or
stipulation hereof or thereof, and all covenants, stipulations, promises and
agreements in the Indenture, the Subsidiary Guarantees or the Notes made by or
on behalf of the Company or any Subsidiary Guarantor shall be for the sole and
exclusive benefit of the Company, the Subsidiary Guarantors, the Trustee, the Security
Registrar, the Paying Agent and the registered owners of the Notes.


 


60





















 


IN WITNESS WHEREOF, the parties hereto have caused this Supplemental
Indenture to be duly executed as of the day and year first above written.


 


	
   

  	
  THE PEP BOYS—MANNY, MOE
  & JACK,

  
	
   

  	
  as Issuer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name: Bernard K. McElroy

  
	
   

  	
   

  	
  Title: Vice
  President-Chief Accounting Officer and Treasurer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  WACHOVIA BANK, NATIONAL
  ASSOCIATION,

  
	
   

  	
  as Trustee

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name: Alan G. Finn

  
	
   

  	
   

  	
  Title: Vice President

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  As Subsidiary Guarantors:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  THE PEP BOYS MANNY MOE
  & JACK OF CALIFORNIA,

  
	
   

  	
  a California corporation

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name: Bernard K. McElroy

  
	
   

  	
   

  	
  Title: Vice President-Chief
  Accounting Officer and Treasurer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  PEP BOYS—MANNY, MOE &
  JACK OF DELAWARE, INC.,

  
	
   

  	
  a Delaware corporation

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name: Bernard K. McElroy

  
	
   

  	
   

  	
  Title: Vice
  President-Chief Accounting Officer and Treasurer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  PEP BOYS—MANNY, MOE &
  JACK OF PUERTO RICO, INC.,

  
	
   

  	
  a Delaware corporation

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name: Bernard K. McElroy

  
	
   

  	
   

  	
  Title: Vice President-Chief Accounting Officer and Treasurer

  



 


61





















 


EXHIBIT
A


 


[FORM
OF FACE OF NOTE]


 


THE
PEP BOYS –MANNY, MOE & JACK


 


THIS NOTE IS A GLOBAL NOTE WITHIN THE MEANING OF THE
INDENTURE HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A DEPOSITORY
OR A NOMINEE THEREOF. THIS NOTE MAY NOT BE EXCHANGED IN WHOLE OR IN PART FOR A
NOTE REGISTERED, AND NO TRANSFER OF THIS NOTE IN WHOLE OR IN PART MAY BE
REGISTERED, IN THE NAME OF ANY PERSON OTHER THAN SUCH DEPOSITORY OR A NOMINEE
THEREOF, EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE.


 


UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION (“DTC”),
NEW YORK, NEW YORK, TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER,
EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF
CEDE & CO. OR SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO., OR TO SUCH
OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC) ANY
TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON
IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN
INTEREST HEREIN.


 


A-1





















 


THE
PEP BOYS –MANNY, MOE & JACK


 


	
  No. 2004-1

  	
  $200,000,000

  



 


CUSIP No. 713278AQ2

ISIN No. US713278AQ29


 


7.50% Senior Subordinated Notes due 2014


 


The Pep Boys –Manny,
Moe & Jack, a Pennsylvania corporation, promises to pay to Cede & Co.,
or registered assigns, the principal sum of Two Hundred Million Dollars, or
such greater or lesser amount as may be indicated on Schedule A hereto, on
December 15, 2014.


 


Interest Payment
Dates: June 15 and December 15.


 


Regular Record
Dates: June 1 and December 1.


 


Additional
provisions of this Note are set forth on the other side of this Note.


 


	
   

  	
  THE PEP BOYS –MANNY, MOE & JACK

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
   

  
	
  TRUSTEE’S
  CERTIFICATE OF

  	
   

  
	
  AUTHENTICATION

  	
   

  
	
   

  	
   

  
	
  WACHOVIA
  BANK, NATIONAL ASSOCIATION,

  	
   

  
	
  as Trustee,
  certifies that

  	
   

  
	
  this is one
  of the Notes

  	
   

  
	
  referred
  to in the Indenture.

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By

  	
   

  	
   

  	
   

  
	
   

  	
  Authorized Signatory

  	
   

  	
   

  
	
   

  	
   

  
	
  Dated:
  December 14, 2004

  	
   

  



 


A-2





















 


[FORM
OF REVERSE SIDE OF NOTE]


 


7.50%
Senior Subordinated Notes due 2014


 


Capitalized terms
used herein but not defined shall have the meanings assigned to them in the
Indenture referred to below unless otherwise indicated.


 


1.             Interest.  The Pep Boys – Manny, Moe & Jack, a
Pennsylvania corporation (the “Company”), promises (i) to pay interest on the
principal amount of this Note at 7.50% per annum from December 14, 2004 until
maturity, provided that any principal and premium, and any installment of
interest, which is overdue shall bear interest at the rate of 8.50% per annum
(to the extent that the payment of such interest shall be legally enforceable).
The Company will pay interest semi-annually in arrears on June 15 and December
15 of each year, commencing June 15, 2005, or if any such day is not a Business
Day, on the next succeeding Business Day (each an “Interest Payment Date”).  Interest on the Notes will accrue from the
most recent date to which interest has been paid or, if no interest has been
paid, from the date of original issuance; provided, however, that if this Note
is authenticated between a Regular Record Date referred to on the face hereof and
the next succeeding Interest Payment Date, interest shall accrue from such next
succeeding Interest Payment Date, except in the case of the original issuance
of Notes, in which case interest shall accrue from the date of authentication.
Interest will be computed on the basis of a 360-day year of twelve 30-day
months.


 


2.             Method of Payment.  The Company will pay interest on the Notes to
the Persons who are registered Holders of Notes at the close of business on the
June 1 or December 1 (each a “Regular Record Date”) next preceding the Interest
Payment Date, even if such Notes are cancelled after such Regular Record Date
and on or before such Interest Payment Date, except as provided in Section 3.7
of the Open-End Indenture with respect to Defaulted Interest. Holders must
surrender Notes to the Paying Agent to collect payments of principal and
premium, if any. The Notes will be payable as to principal, premium, if any,
and interest at the Corporate Trust Office of the Trustee, or at the office or
agency of the Company maintained for such purpose within the Borough of
Manhattan, The City and State of New York, or, at the option of the Company,
payment of interest may be made by check mailed to the Holders at their
addresses set forth in the Security Register, and provided that payment by wire
transfer of immediately available funds will be required with respect to
principal of and interest, and premium on all Global Notes.  Such payment shall be in such coin or
currency of the United States of America as at the time of payment is legal
tender for payment of public and private debts.


 


3.             Paying Agent and Registrar.  Initially, Wachovia Bank, National
Association, the Trustee under the Indenture, will act as Paying Agent and
Security Registrar.  The Company may change
any Paying Agent or Security Registrar without notice to any Holder. The
Company may act in any such capacity.


 


4.             Indenture.  This Note is one of a duly authorized issue
of Securities of the Company, issued and to be issued under an Indenture dated as
of December 14, 2004 (“Open-End Indenture”), between the Company and the
Trustee, as supplemented by the First Supplemental Indenture thereto of even
date therewith (the “Supplemental Indenture”), among the Company, the Trustee
and the Subsidiary Guarantors parties thereto. 
The Open-End


 


A-3





















 


Indenture, as so supplemented, is referred to herein
as the “Indenture.”  The terms of the
Notes include those stated in the Indenture and those made part of the Indenture
by reference to the Trust Indenture Act of 1939, as amended (15 U.S. Code
Sections 77aaa-77bbbb).  The Notes are
subject to all such terms, and Holders are referred to the Indenture and such
Act for a statement of such terms.  The
Notes are unsecured obligations of the Company.


 


5.             Optional Redemption; Repurchase.  The Notes of this series are subject to
redemption upon not less than 30 nor more than 60 days’ notice by mail in the
event that on or before December 15, 2009 the Company receives net proceeds
from the sale of its Common Stock in one or more Equity Offerings, in which
case the Company may, at its option, use all or a portion of any such net
proceeds to redeem up to 35% of the aggregate principal amount of the Notes
(including any Additional Notes) issued under the Indenture, provided, however,
that at least 65% of the aggregate principal amount of the Notes (including any
Additional Notes) issued under the Indenture remains outstanding after each
such redemption. Any such redemption must occur on a Redemption Date within 90
days of any such sale at a Redemption Price of 107.50% of the principal amount
of the Notes, together in the case of any such redemption with accrued interest
to but excluding the Redemption Date.


 


The Notes are
further subject to redemption upon not less than 30 nor more than 60 days’
notice by mail, at any time on or after December 15, 2009, as a whole or in
part, at the election of the Company, at the following Redemption Prices
(expressed as percentages of the principal amount), if redeemed during the
12-month period beginning on December 15 of the years indicated:


 




	
  Year

  	
   

  	
  Redemption Price

  	
   

  
	
  2009

  	
   

  	
  103.75

  	
  %

  
	
  2010

  	
   

  	
  102.50

  	
  %

  
	
  2011

  	
   

  	
  101.25

  	
  %

  






 


and
thereafter at a Redemption Price equal to 100% of the principal amount, together
in the case of any such redemption with accrued interest to but excluding the
Redemption Date.


 


Prior to December
15, 2009, the Company may redeem all or a part of the Notes upon not less than
30 nor more than 60 days’ notice, at a Redemption Price equal to the greater
of:


 


(1)           100% of the principal amount thereof;
or


 


(2)           the present
value, as determined by an Independent Investment Banker, of


 


(A)          103.75% of the principal amount of the
Notes being redeemed payable on December 15, 2009, plus


 


(B)           all required
interest payments due on such Notes through December 15, 2009


 


discounted
to the Redemption Date on a semi-annual basis (assuming a 360-day year
consisting of twelve 30-day months) at the Adjusted Treasury Rate,


 


A-4





















 


plus
in each case accrued interest to but excluding the Redemption Date.


 


The Notes are also
subject to repurchase by the Company at the option of the Holders in the event
of a Change of Control or following certain Asset Dispositions, all as provided
in the Indenture.


 


In the event of
redemption or repurchase of this Note in part only, a new Note or Notes of like
tenor for the unredeemed or unrepurchased portion hereof will be issued in the
name of the Holder hereof upon the cancellation hereof.


 


6.             Subordination.  The indebtedness evidenced by this Note is,
to the extent provided in the Indenture, subordinate and subject in right of
payment to the prior payment in full of all Senior Debt of the Company, and
this Note is issued subject to the provisions of the Indenture with respect
thereto.


 


Each Holder of
this Note, by accepting the same, (a) agrees to and shall be bound by such
provisions, (b) authorizes and directs the Trustee on his behalf to take such
action as may be necessary or appropriate to effectuate the subordination so
provided and (c) appoints the Trustee his attorney-in-fact for any and all such
purposes.


 


7.             Subsidiary Guarantees. As
provided in the Indenture and subject to certain limitations therein set forth,
the obligations of the Company under this Note are guaranteed on a senior
subordinated basis pursuant to the Subsidiary Guarantees endorsed hereon. The
Indenture provides that a Subsidiary Guarantor shall be released from its
Subsidiary Guarantee upon compliance with certain conditions.


 


8.             Events of Default; Remedies,
Etc.  If an Event of Default with
respect to the Notes shall occur and be continuing, the principal of the Notes
may be declared due and payable in the manner and with the effect provided in
the Indenture.


 


As provided in and
subject to the provisions of the Indenture, the Holder of this Note shall not
have the right to institute any proceeding with respect to the Indenture or for
the appointment of a receiver or trustee or for any other remedy thereunder,
unless such Holder shall have previously given the Trustee written notice of a
continuing Event of Default with respect to the Notes, the Holders of not less
than 25% in principal amount of the Notes at the time Outstanding shall have
made written request to the Trustee to institute proceedings in respect of such
Event of Default as Trustee and offered the Trustee reasonable indemnity, and
the Trustee shall not have received from the Holders of a majority in principal
amount of Notes at the time outstanding a direction inconsistent with such
request, and shall have failed to institute any such proceeding, for 60 days
after receipt of such notice, request and offer of indemnity. The foregoing
shall not apply to any suit instituted by the Holder of this Note for the
enforcement of any payment of principal hereof or any premium or interest
hereon on or after the respective due dates expressed herein.


 


No reference
herein to the Indenture and no provision of this Note or of the Indenture shall
alter or impair the obligation of the Company, which is absolute and
unconditional, to pay the principal of and any premium and interest on this
Note at the times, place and rate, and in the coin or currency, herein
prescribed.


 


A-5





















 


9.             Amendments.  The Indenture permits, with certain
exceptions as therein provided, the amendment thereof and the modification of
the rights and obligations of the Company and the rights of the Holders of the
Notes to be affected under the Indenture at any time by the Company and the
Trustee with the consent of the Holders of a majority in principal amount of
the Notes at the time outstanding to be affected. The Indenture also contains
provisions permitting the Holders of a majority in principal amount of the
Notes at the time outstanding, on behalf of the Holders of all Notes, to waive
compliance by the Company with certain provisions of the Indenture and certain
past defaults under the Indenture and their consequences. Any such consent or
waiver by the Holder of this Note shall be conclusive and binding upon such
Holder and upon all future Holders of this Note and of any Note issued upon the
registration of transfer hereof or in exchange herefor or in lieu hereof,
whether or not notation of such consent or waiver is made upon this Note.


 


10.           Transfer and Exchange of Notes.  As provided in the Indenture and subject to
certain limitations therein set forth, the transfer of this Note is registrable
in the Security Register, upon surrender of this Note for registration of
transfer at the office or agency of the Company in any place where the
principal of and any premium and interest on this Note are payable, duly
endorsed by, or accompanied by a written instrument of transfer in form
satisfactory to the Company and the Security Registrar duly executed by, the
Holder hereof or his attorney duly authorized in writing, and thereupon one or
more new Notes of like tenor, of authorized denominations and for the same
aggregate principal amount, will be issued to the designated transferee or
transferees.


 


The Notes are
issuable only in registered form without coupons in denominations of $1,000 and
any integral multiple thereof. As provided in the Indenture and subject to
certain limitations therein set forth, Notes are exchangeable for a like
aggregate principal amount of Notes and of like tenor of a different authorized
denomination, as requested by the Holder surrendering the same.


 


No service charge
shall be made for any such registration of transfer or exchange, but the
Company may require payment of a sum sufficient to cover any tax or other
governmental charge payable in connection therewith.


 


11.           Owner.  Prior to due presentment of this Note for
registration of transfer, the Company, the Subsidiary Guarantors, the Trustee
and any agent of the Company or the Trustee may treat the Person in whose name
this Note is registered as the absolute owner hereof for all purposes, whether
or not this Note is overdue, and neither the Company, the Subsidiary
Guarantors, the Trustee nor any such agent shall be affected by notice to the
contrary.


 


12.           Defeasance and Discharge.  The Notes are subject to covenant defeasance,
defeasance and satisfaction and discharge upon the terms and conditions
specified in the Indenture.


 


13.           Trustee Dealings with Company.  The Trustee, in its individual or any other
capacity, may make loans to, accept deposits from, and perform services for the
Company or its Affiliates, and may otherwise deal with the Company or its
Affiliates, as if it were not the Trustee.


 


A-6





















 


14.           No Recourse Against
Others.  No past, present or future
director, officer, employee, incorporator, member, partner or stockholder or
other owner of Capital Stock of the Company or any Subsidiary Guarantor, as
such, shall have any liability for any obligations of the Company or any
Subsidiary Guarantor under the Notes, the Subsidiary Guarantees or the
Indenture or for any claim based on, in respect of, or by reason of, such
obligations or their creation. Each Holder by accepting a Note waives and
releases all such liability.  The waiver
and release are part of the consideration for the issuance of the Notes.


 


15.           Authentication.  This Note shall not be valid until
authenticated by the manual signature of an authorized signatory of the Trustee
or an Authenticating Agent.


 


16.           Abbreviations.  Customary abbreviations may be used in the
name of a Holder or an assignee, such as: TEN COM (= tenants in common), TEN
ENT (= tenants by the entireties), JT TEN (= joint tenants with right of
survivorship and not as tenants in common), CUST (= Custodian), and U/G/M/A (=
Uniform Gifts to Minors Act).


 


17.           CUSIP Numbers.  Pursuant to a recommendation promulgated by
the Committee on Uniform Security Identification Procedures, the Company has
caused CUSIP numbers to be printed on the Notes and the Trustee may use CUSIP
numbers and corresponding ISIN numbers in notices of redemption as a
convenience to Holders. No representation is made as to the accuracy of such
numbers either as printed on the Notes or as contained in any notice of
redemption and reliance may be placed only on the other identification numbers
placed thereon.


 


18.           Governing Law.  THE INDENTURE AND THIS NOTE SHALL BE GOVERNED
BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT
REGARD TO CONFLICTS OF LAWS PRINCIPLES.


 


19.           Successor Company.  In the event a successor assumes all the
obligations of the Company under the Notes and the Indenture, pursuant to the
terms thereof, the Company will be released from all such obligations.


 


The Company will
furnish to any Holder upon written request and without charge a copy of the
Indenture.  Requests may be made to:


 


The Pep Boys –Manny, Moe & Jack

3111 West Allegheny Avenue

Philadelphia, Pennsylvania 19132

Attention: Chief Financial Officer


 


A-7





















 


ASSIGNMENT
FORM


 


To assign this
Note, fill in the form below:


 


I or we assign and
transfer this Note to


 


	
   

  
	
  (Print or type
  assignee’s name, address and zip code)

  
	
   

  
	
  (Insert
  assignee’s soc. sec. or tax I.D. No.)

  



 


and
irrevocably appoint                                      
agent to transfer this Note on the books of the Company. The agent may
substitute another to act for him.


 


	
  Date:

  	
   

  	
   

  	
  Your Signature:

  	
   

  	
   

  
	
   

  	
  Sign exactly as your name appears on the other side
  of this Note.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Soc. Sec. or Tax Identification No.:

  	
   

  	
   

  
	
  Signature Guarantee: 

  	
   

  	
   

  
	
  (Signature must be guaranteed)

  
								



 


Signatures must be
guaranteed by an “eligible guarantor institution” meeting the requirements of
the Security Registrar, which requirements include membership or participation
in the Security Transfer Agent Medallion Program (“STAMP”) or such other “signature
guarantee program” as may be determined by the Registrar in addition to, or in
substitution for, STAMP, all in accordance with the Securities Exchange Act of
1934, as amended.


 


A-8





















 


SCHEDULE
A


 


SCHEDULE
OF INCREASES OR DECREASES IN GLOBAL NOTE


 


The following increases or decreases in this Global
Note have been made:


 


	
  Date

  	
   

  	
  Amount of decrease

  in Principal Amount

  of this Global Note

  	
   

  	
  Amount of increase

  in Principal Amount

  of this Global Note

  	
   

  	
  Principal Amount

  of this Global Note

  following such

  decrease or

  increase

  	
   

  	
  Signature of

  authorized officer

  of Trustee or

  Notes Custodian

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  



 


A-1





















 


EXHIBIT B


 


SUBSIDIARY
GUARANTEE


 


For value
received, each of the Subsidiary Guarantors named (or deemed herein to be
named) below hereby jointly and severally fully and unconditionally guarantees
to the Holder of the Note upon which this Subsidiary Guarantee is endorsed, and
to the Trustee on behalf of such Holder, the due and punctual payment of the
principal of (and premium, if any) and interest on such Note when and as the
same shall become due and payable, whether at the Stated Maturity, by
acceleration, call for redemption, offer to purchase or otherwise, according to
the terms thereof and of the Indenture referred to therein.  In case of the failure of the Company
punctually to make any such payment, each of the Subsidiary Guarantors hereby
jointly and severally agrees to cause such payment to be made punctually when
and as the same shall become due and payable, whether at the Stated Maturity or
by acceleration, call for redemption, offer to purchase or otherwise, and as if
such payment were made by the Company.


 


Each of the
Subsidiary Guarantors hereby jointly and severally agrees that its obligations
hereunder shall be absolute and unconditional, irrespective of, and shall be
unaffected by, the validity, regularity or enforceability of such Note or the
Indenture, the absence of any action to enforce the same or any release,
amendment, waiver or indulgence granted to the Company or any other guarantor,
or any consent to departure from any requirement of any other guarantee of all
or of any of the Notes, or any other circumstances which might otherwise
constitute a legal or equitable discharge or defense of a surety or guarantor;
provided, however, that, notwithstanding the foregoing, no such release,
amendment, waiver or indulgence shall, without the consent of such Subsidiary
Guarantor, increase the principal amount of such Note, or increase the interest
rate thereon, or alter the Stated Maturity thereof. Each of the Subsidiary
Guarantors hereby waives the benefits of diligence, presentment, demand of
payment, any requirement that the Trustee or any of the Holders protect,
secure, perfect or insure any security interest in or other lien on any
property subject thereto or exhaust any right or take any action against the
Company or any other Person or any collateral, filing of claims with a court in
the event of insolvency or bankruptcy of the Company, any right to require a
proceeding first against the Company, protest or notice with respect to such
Note or the indebtedness evidenced thereby and all demands whatsoever, and
covenants that this Subsidiary Guarantee will not be discharged except by
complete performance of the obligations contained in such Note and in this
Subsidiary Guarantee. Each Subsidiary Guarantor agrees that if, after the
occurrence and during the continuance of an Event of Default with respect to
the Notes, the Trustee or any of the Holders are prevented by applicable law
from exercising their respective rights to accelerate the maturity of the
Notes, to collect interest on the Notes, or to enforce or exercise any other
right or remedy with respect to the Notes, such Subsidiary Guarantor agrees to
pay to the Trustee for the account of the Holders, upon demand therefor, the
amount that would otherwise have been due and payable had such rights and
remedies been permitted to be exercised by the Trustee or any of the Holders.


 


The indebtedness
of each Subsidiary Guarantor evidenced by this Subsidiary Guarantee is, to the
extent provided in the Indenture, subordinate in right of payment to the prior
payment in full of all Senior Debt of such Subsidiary Guarantor, and the
Subsidiary Guarantee of each Subsidiary Guarantor is issued subject to the
provisions of the Indenture with respect thereto.


 


B-1





















 


No reference
herein to the Indenture and no provision of this Subsidiary Guarantee or of the
Indenture shall alter or impair the Subsidiary Guarantee of any Subsidiary
Guarantor, which is absolute and unconditional, of the due and punctual payment
of the principal (and premium, if any) and interest on the Note upon which this
Subsidiary Guarantee is endorsed.


 


Each Subsidiary
Guarantor shall be subrogated to all rights of the Holder of this Note against
the Company in respect of any amounts paid by such Subsidiary Guarantor on
account of this Note pursuant to the provisions of its Subsidiary Guarantee or
the Indenture; provided, however, that such Subsidiary Guarantor shall not be
entitled to enforce or to receive any payments arising out of, or based upon,
such right of subrogation until the principal of (and premium, if any) and
interest on this Note and all other Notes issued under the Indenture shall have
been paid in full.


 


This Subsidiary
Guarantee shall remain in full force and effect and continue to be effective
should any petition be filed by or against the Company for liquidation or
reorganization, should the Company become insolvent or make an assignment for
the benefit of creditors or should a receiver or trustee be appointed for all
or any part of the Company’s assets, and shall, to the fullest extent permitted
by law, continue to be effective or be reinstated, as the case may be, if at
any time payment and performance of the Notes is, pursuant to applicable law,
rescinded or reduced in amount, or must otherwise be restored or returned by
any Holder of the Notes, whether as a “voidable preference,” “fraudulent
transfer,” or otherwise, all as though such payment or performance had not been
made. In the event that any payment, or any part thereof, is rescinded,
reduced, restored or returned, the Notes shall, to the fullest extent permitted
by law, be reinstated and deemed reduced only by such amount paid and not so
rescinded, reduced, restored or returned.


 


The Subsidiary
Guarantors or any particular Subsidiary Guarantor shall be released from this
Subsidiary Guarantee upon the terms and subject to certain conditions provided
in the Indenture.


 


By delivery to the
Trustee of a supplement to the Indenture referred to in the Note upon which
this Subsidiary Guarantee is endorsed in accordance with the terms of the
Indenture, each Person that becomes a Subsidiary Guarantor after the date of
first issuance of the Notes will be deemed to have executed and delivered this
Subsidiary Guarantee for the benefit of the Holder of the Note upon which this
Subsidiary Guarantee is endorsed with the same effect as if such Subsidiary
Guarantor was named below and had executed and delivered this Subsidiary
Guarantee.


 


All terms used in
this Subsidiary Guarantee which are defined in the Indenture shall have the
meanings assigned to them in such Indenture.


 


This Subsidiary
Guarantee shall not be valid or obligatory for any purpose until the
certificate of authentication on the Note upon which this Subsidiary Guarantee
is endorsed shall have been executed by the Trustee under the Indenture by
manual signature.


 


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Reference is made
to the Indenture for further provisions with respect to this Subsidiary
Guarantee.


 


This Subsidiary
Guarantee shall be governed by and construed in accordance with the laws of the
State of New York, without regard to conflicts of laws principles.


 


IN WITNESS
WHEREOF, each of the Subsidiary Guarantors has caused this Subsidiary Guarantee
to be duly executed.


 


	
   

  	
  THE PEP BOYS –MANNY, MOE & JACK

  
	
   

  	
  OF CALIFORNIA

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  PEP BOYS –MANNY, MOE & JACK

  
	
   

  	
  OF DELAWARE, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  PEP BOYS –MANNY, MOE & JACK

  
	
   

  	
  OF PUERTO RICO, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  



 


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EXHIBIT
C


 


[FORM
OF SUPPLEMENTAL INDENTURE

TO BE DELIVERED BY SUBSEQUENT GUARANTORS]


 


SUPPLEMENTAL
INDENTURE (this “Supplemental Indenture”), dated as of                               ,
among                                   
(the “Guaranteeing Subsidiary”), a subsidiary of The Pep Boys –Manny, Moe &
Jack, a Pennsylvania corporation (or its permitted successor) (the “Company”),
the other Subsidiary Guarantors (as defined in the Indenture referred to
herein) and Wachovia Bank, National Association, as trustee under the indenture
referred to below (the “Trustee”).


 


W I T
N E S S E T H


 


WHEREAS, the
Company has heretofore executed and delivered to the Trustee an indenture,
dated as of December 14, 2004 (the “Open-End Indenture”), between the Company
and the Trustee, as supplemented by the First Supplemental Indenture to such
Open-End Indenture, dated as of December 14, 2004 (the “Supplemental Indenture”,
and, together with the Open-End Indenture, the “Indenture”), among the Company,
the Subsidiary Guarantors parties thereto and the Trustee providing for the
issuance of the Company’s 7.50% Senior Subordinated Notes due 2014 (the “Notes”);


 


WHEREAS, the
Indenture provides that under certain circumstances the Guaranteeing Subsidiary
shall execute and deliver to the Trustee a supplemental indenture pursuant to
which the Guaranteeing Subsidiary shall unconditionally guarantee all of the
Company’s Obligations under the Notes and the Indenture on the terms and
conditions set forth herein and in the Indenture (the “Subsidiary Guarantee”)
and become party to the Indenture, as supplemented by such supplemental
indenture; and


 


WHEREAS,
pursuant to Section 9.1(12) of the Open-End Indenture, the Trustee is
authorized to execute and deliver this Supplemental Indenture.


 


NOW THEREFORE, in
consideration of the foregoing and for other good and valuable consideration,
the receipt of which is hereby acknowledged, the Company, the Subsidiary Guarantors,
the Guaranteeing Subsidiary and the Trustee mutually covenant and agree for the
equal and ratable benefit of the Holders of the Notes as follows:


 


1.             CAPITALIZED TERMS. Capitalized
terms used herein without definition shall have the meanings assigned to them
in the Indenture.


 


2.             GUARANTEE. The Guaranteeing
Subsidiary hereby, together with the other Subsidiary Guarantors party to the
Indenture, jointly and severally fully and unconditionally guarantees to the
Holders of the Notes, and to the Trustee on behalf of such Holders, the due and
punctual payment of the principal of (and premium, if any) and interest on the
Notes when and as the same shall become due and payable, whether at the Stated
Maturity, by acceleration, call for redemption, offer to purchase or otherwise,
according to the terms thereof and of the Indenture referred to therein. In
case of the failure of the Company punctually to make any such payment, the
Guaranteeing Subsidiary, together with the other Subsidiary Guarantors party to
the Indenture, hereby jointly and severally agrees to cause such payment to be
made punctually when and as the same shall become due and payable, whether at
the Stated


 


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Maturity or by acceleration, call for redemption,
offer to purchase or otherwise, and as if such payment were made by the
Company.


 


The Guaranteeing
Subsidiary, together with the other Subsidiary Guarantors party to the
Indenture hereby jointly and severally agrees that its obligations hereunder
shall be absolute and unconditional, irrespective of, and shall be unaffected
by, the validity, regularity or enforceability of such Note or the Indenture,
the absence of any action to enforce the same or any release, amendment, waiver
or indulgence granted to the Company or any other guarantor, or any consent to
departure from any requirement of any other guarantee of all or of any of the
Notes, or any other circumstances which might otherwise constitute a legal or
equitable discharge or defense of a surety or guarantor; provided, however,
that, notwithstanding the foregoing, no such release, amendment, waiver or indulgence
shall, without the consent of the Guaranteeing Subsidiary, increase the
principal amount of the Notes, or increase the interest rate thereon, or alter
the Stated Maturity thereof.  The
Guaranteeing Subsidiary hereby waives the benefits of diligence, presentment,
demand of payment, any requirement that the Trustee or any of the Holders
protect, secure, perfect or insure any security interest in or other lien on
any property subject thereto or exhaust any right or take any action against
the Company or any other Person or any collateral, filing of claims with a
court in the event of insolvency or bankruptcy of the Company, any right to
require a proceeding first against the Company, protest or notice with respect
to the Notes or the indebtedness evidenced thereby and all demands whatsoever,
and covenants that its guarantee will not be discharged except by complete
performance of the obligations contained in the Notes and in the Subsidiary
Guarantee.  The Guaranteeing Subsidiary
agrees that if, after the occurrence and during the continuance of an Event of
Default with respect to the Notes, the Trustee or any of the Holders are
prevented by applicable law from exercising their respective rights to
accelerate the maturity of the Notes, to collect interest on the Notes, or to
enforce or exercise any other right or remedy with respect to the Notes, the
Guaranteeing Subsidiary agrees to pay to the Trustee for the account of the
Holders, upon demand therefor, the amount that would otherwise have been due
and payable had such rights and remedies been permitted to be exercised by the
Trustee or any of the Holders.


 


The indebtedness
of the Guaranteeing Subsidiary evidenced by this Subsidiary Guarantee is, to
the extent provided in the Indenture, subordinate in right of payment to the
prior payment in full of all Senior Debt of the Guaranteeing Subsidiary, and
the Subsidiary Guarantee of the Guaranteeing Subsidiary is issued subject to
the provisions of the Indenture with respect thereto.


 


No reference
herein to the Indenture and no provision of the Subsidiary Guarantee or of the
Indenture shall alter or impair the Subsidiary Guarantee of the Guaranteeing
Subsidiary, which is absolute and unconditional, of the due and punctual
payment of the principal (and premium, if any) and interest on the Notee upon
which the Subsidiary Guarantees are endorsed.


 


The Guaranteeing
Subsidiary shall be subrogated to all rights of the Holders of the Notes
against the Company in respect of any amounts paid by the Guaranteeing
Subsidiary on account of this Note pursuant to the provisions of its Subsidiary
Guarantee or the Indenture; provided, however, that the Guaranteeing Subsidiary
shall not be entitled to enforce or to receive any payments arising out of, or
based upon, such right of subrogation until the principal of (and


 


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premium,
if any) and interest on this Note and all other Notes issued under the
Indenture shall have been paid in full.


 


The Subsidiary
Guarantee shall remain in full force and effect and continue to be effective
should any petition be filed by or against the Company for liquidation or
reorganization, should the Company become insolvent or make an assignment for
the benefit of creditors or should a receiver or trustee be appointed for all
or any part of the Company’s assets, and shall, to the fullest extent permitted
by law, continue to be effective or be reinstated, as the case may be, if at
any time payment and performance of the Notes is, pursuant to applicable law,
rescinded or reduced in amount, or must otherwise be restored or returned by
any Holder of the Notes, whether as a “voidable preference,” “fraudulent
transfer,” or otherwise, all as though such payment or performance had not been
made. In the event that any payment, or any part thereof, is rescinded,
reduced, restored or returned, the Notes shall, to the fullest extent permitted
by law, be reinstated and deemed reduced only by such amount paid and not so
rescinded, reduced, restored or returned.


 


The Guaranteeing
Subsidiary shall be released from its Subsidiary Guarantee upon the terms and
subject to certain conditions provided in the Indenture.


 


3.             EXECUTION AND DELIVERY. Each
Guaranteeing Subsidiary agrees that the Subsidiary Guarantees shall remain in
full force and effect notwithstanding any failure to endorse on each Note a
notation of such Subsidiary Guarantee.


 


4.             GUARANTEEING SUBSIDIARY MAY
CONSOLIDATE, ETC. ON CERTAIN TERMS.


 


(a)           The Guaranteeing Subsidiary may not
sell or otherwise dispose of all or substantially all of its assets to or
consolidate with or merge with or into (whether or not such Guarantor is the
surviving Person) another corporation, Person or entity whether or not affiliated
with such Guarantor unless:


 


(i)            either


 


(A)          the Person acquiring the property in
any such sale or disposition or the Person formed by or surviving any such
consolidation or merger, if other than such Subsidiary Guarantor, assumes all
the obligations of that Subsidiary Guarantor under the Indenture and, its Subsidiary
Guarantee pursuant to a supplemental indenture in form and substance reasonably
satisfactory to the Trustee; or


 


(B)           the Net Available Proceeds, if any,
of such sale or other disposition are applied in accordance with the provisions
of Section 4.09 of the Supplemental Indenture; and


 


(ii)           immediately
after giving effect to such transaction, no Event of Default or occurrence that
with the passage of time or giving of notice would become an Event of Default
exists.


 


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(b)           In case of any such consolidation,
merger, sale or conveyance and upon the assumption by the successor
corporation, by supplemental indenture, executed and delivered to the Trustee
and satisfactory in form to the Trustee, of the Subsidiary Guarantee endorsed
upon the Notes and the due and punctual performance of all of the covenants and
conditions of the Indenture to be performed by the Subsidiary Guarantor, such
successor corporation shall succeed to and be substituted for the Subsidiary Guarantor
with the same effect as if it had been named herein as a Subsidiary Guarantor.
Such successor corporation thereupon may cause to be signed any or all of the
Subsidiary Guarantees to be endorsed upon all of the Notes issuable hereunder
which theretofore shall not have been signed by the Company and delivered to
the Trustee. All the Subsidiary Guarantees so issued shall in all respects have
the same legal rank and benefit under the Indenture as the Subsidiary
Guarantees theretofore and thereafter issued in accordance with the terms of
the Indenture as though all of such Subsidiary Guarantees had been issued at
the date of the execution hereof.


 


(c)           Except as set forth in Articles V and
X of the Open-End Indenture and Articles IV and VIII of the Supplemental
Indenture, and notwithstanding clauses (a) and (b) above, nothing contained in
the Indenture or in any of the Notes shall prevent any consolidation or merger
of a Subsidiary Guarantor with or into the Company or another Subsidiary
Guarantor, or shall prevent any sale or conveyance of the property of a
Subsidiary Guarantor as an entirety or substantially as an entirety to the
Company or another Subsidiary Guarantor.


 


5.             NO RECOURSE AGAINST OTHERS. No
past, present or future director, officer, employee, incorporator, stockholder
or agent of the Guaranteeing Subsidiary, as such, shall have any liability for
any obligations of the Company or any Guaranteeing Subsidiary under the Notes,
the Subsidiary Guarantee or the Indenture or for any claim based on, in respect
of, or by reason of, such obligations or their creation. Each Holder of the
Notes by accepting a Note waives and releases all such liability. The waiver
and release are part of the consideration for issuance of the Notes. Such
waiver may not be effective to waive liabilities under the federal securities
laws and it is the view of the Securities and Exchange Commission that such a
waiver is against public policy.


 


6.             NEW YORK LAW TO GOVERN. THE
INTERNAL LAW OF THE STATE OF NEW YORK SHALL GOVERN AND BE USED TO CONSTRUE THIS
SUPPLEMENTAL INDENTURE BUT WITHOUT GIVING EFFECT TO APPLICABLE PRINCIPLES OF
CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF THE LAWS OF ANOTHER
JURISDICTION WOULD BE REQUIRED THEREBY.


 


7.             COUNTERPARTS. The parties may sign
any number of copies of this Supplemental Indenture. Each signed copy shall be
an original, but all of them together represent the same agreement.


 


8.             EFFECT OF HEADINGS. The Section
headings herein are for convenience only and shall not affect the construction
hereof.


 


9.             THE TRUSTEE. The Trustee shall not
be responsible in any manner whatsoever for or in respect of the validity or
sufficiency of this Supplemental Indenture or for or


 


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in
respect of the recitals contained herein, all of which recitals are made solely
by the Guaranteeing Subsidiary and the Company.


 


IN WITNESS
WHEREOF, the parties hereto have caused this Supplemental Indenture to be duly
executed, all as of the date first above written.


 


	
  Dated as of
              , 200  

  	
   

  
	
   

  	
   

  
	
   

  	
  THE PEP BOYS –MANNY, MOE & JACK

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  THE PEP BOYS –MANNY, MOE & JACK

  
	
   

  	
  OF CALIFORNIA

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  PEP BOYS –MANNY, MOE & JACK

  
	
   

  	
  OF DELAWARE, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  PEP BOYS –MANNY, MOE & JACK

  
	
   

  	
  OF PUERTO RICO, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  
	
   

  	
  WACHOVIA BANK, NATIONAL ASSOCIATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  



 


C-5