Pep Boys 2008 Annual Report Download - page 45

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39
an “assignment” or “change of control” that requires the consent of a third party or an applicable governmental
agency, none of which can be assured. Although we have not undertaken this costly definitive analysis, we know
that at a minimum a reincorporation transaction would require obtaining the consent of our lenders. Similarly, we
know that we would have to reprint and re-circulate all of our stock certificates, and prepare costly filings with the
SEC. To the extent that the consent of store landlords or automotive aftermarket retailing, repair and/or inspection
licensing authorities would also be required, the cost and potential disruption to our business—including the
possible loss of one or more operating locations—would rise dramatically.
No North Dakota Nexus. We have no business connection to North Dakota. Pep Boys has no existing
operations in the state of North Dakota nor are there any stores in development in such state. Becoming a North
Dakota corporation could subject us to taxation in that state and needlessly add to our company's tax burden.
Further, North Dakota is not a well-known jurisdiction for business corporations. We are concerned about the
consequences to director recruitment, investor interest and banking relationships associated with incorporating in a
jurisdiction that is largely unfamiliar to third parties. The proponent states what he asserts are advantages to be
realized from reincorporation. We believe that those purported advantages are anything but certain and remain very
much open to dispute.
Our Pennsylvania heritage and history. Pennsylvania is important to our culture. We were founded in
Pennsylvania in 1921 and our store support center is located in Pennsylvania. In addition, we operate 42 stores in
Pennsylvania, one of our top five states in store density. While we are actively involved in all of the communities
where our stores are located throughout the United States, we have a special relationship to Pennsylvania and the
City of Philadelphia because we were founded and maintain our store support center here. By virtue of being a
Pennsylvania corporation and maintaining a large corporate presence in Pennsylvania, we enjoy strong support from
the Commonwealth of Pennsylvania and its governmental subdivisions. The Pennsylvania legislature has a long
history of supporting the continued growth and prosperity of important Pennsylvania corporations such as ours, and
by having our legal residence in Pennsylvania, we have a more influential voice in the legislative process with
respect to corporate laws directly affecting us than we would have as a non-resident, North Dakota corporation.
Our departing from the ranks of Pennsylvania corporations could be negatively viewed by a community that has
supported us from inception.
Although we believe that the proponent is well intentioned and desires for our business to be successful, this
proposal would be both costly and potentially injurious to Pep Boys and its shareholders.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE
“AGAINST”
THE SHAREHOLDER PROPOSAL REGARDING
REINCORPORATING IN NORTH DAKOTA
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires our directors, executive officers and 10% Holders
to file initial reports of ownership and reports of changes in ownership of Pep Boys Stock. Based solely upon a
review of copies of such reports, we believe that during fiscal 2008, our directors, executive officers and 10%
Holders complied with all applicable Section 16(a) filing requirements.
COST OF SOLICITATION OF PROXIES
The expense of the solicitation of the proxies, including the cost of preparing and distributing material, the
handling and tabulation of proxies received and charges of brokerage houses and other institutions in forwarding
such documents to beneficial owners, will be paid by us. In addition to the mailing of the proxy materials,
solicitations may be made in person or by telephone by our directors, officers or employees or independent parties
engaged to solicit proxies.