<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 18, 1997.
REGISTRATION NO. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-4
REGISTRATION STATEMENT
UNDER THE
SECURITIES ACT OF 1933
------------------------
SAFELITE GLASS CORP.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 7536 13-3886709
(State or other jurisdiction (Primary Standard Industrial (IRS Employer
of incorporation) Classification Code Number) Identification No.)
</TABLE>
1105 SCHROCK ROAD, COLUMBUS, OHIO 43229 (614) 842-3000
(Address, including zip code, and telephone number, including area code, of
Registrant's principal executive offices)
------------------------
GAREN K. STAGLIN
CHAIRMAN OF THE BOARD AND CHIEF EXECUTIVE OFFICER
SAFELITE GLASS CORP.
1105 SCHROCK ROAD
COLUMBUS, OHIO 43229
(614) 842-3000
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
------------------------
WITH COPY TO:
CHARLES W. ROBINS, ESQ.
HUTCHINS, WHEELER & DITTMAR
A PROFESSIONAL CORPORATION
101 FEDERAL STREET
BOSTON, MASSACHUSETTS 02110
(613) 951-6600
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the effective date of this Registration Statement.
If the securities being registered on this Form are being offered in connection
with the formation of a holding company and there is compliance with General
Instruction G, check the following box. [ ]
------------------------
CALCULATION OF REGISTRATION FEE
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<CAPTION>
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PROPOSED PROPOSED
AMOUNT MAXIMUM MAXIMUM
TITLE OF EACH CLASS OF TO BE OFFERING PRICE AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED PER UNIT OFFERING PRICE REGISTRATION FEE
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<S> <C> <C> <C> <C>
9 7/8% Series B Senior
Subordinated Notes due 2006..... $100,000,000 100% $100,000,000 $30,303
====================================================================================================
</TABLE>
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
================================================================================
<PAGE> 2
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED FEBRUARY 18, 1997
PROSPECTUS
$100,000,000
[SAFELITE LOGO]
OFFER TO EXCHANGE $1,000 IN PRINCIPAL AMOUNT OF
9 7/8% SERIES B SENIOR SUBORDINATED NOTES DUE 2006 FOR EACH $1,000 IN PRINCIPAL
AMOUNT OF OUTSTANDING 9 7/8% SENIOR SUBORDINATED NOTES DUE 2006
Safelite Glass Corp. (the "Company") hereby offers to exchange (the "Exchange
Offer") up to $100,000,000 in aggregate principal amount of its 9 7/8% Series B
Senior Subordinated Notes due 2006 (the "Exchange Notes") for $100,000,000 in
aggregate principal amount of its outstanding 9 7/8% Senior Subordinated Notes
due 2006 (the "Initial Notes"; and together with the Exchange Notes, the
"Notes").
The terms of the Exchange Notes are substantially identical in all respects
(including principal amount, interest rate and maturity) to the terms of the
Initial Notes for which they may be exchanged pursuant to this offer, except
that the Exchange Notes are freely transferable by holders thereof (except as
provided in the next paragraph below) and are issued without any covenant upon
the Company regarding registration. The Exchange Notes will be issued under the
indenture governing the Initial Notes. For a complete description of the terms
of the Exchange Notes, see "Description of the Exchange Notes." There will be no
cash proceeds to the Company from this offer. The Initial Notes and the Exchange
Notes are unsecured obligations of the Company.
The Initial Notes were originally issued and sold on December 20, 1996 in a
transaction not registered under the Securities Act of 1933, as amended (the
"Securities Act"), in reliance upon the exemption provided in Section 4(2) of
the Securities Act. Accordingly, the Initial Notes may not be reoffered, resold
or otherwise pledged, hypothecated or transferred in the United States unless so
registered or unless an applicable exemption from the registration requirements
of the Securities Act is available. Based upon interpretations by the Staff of
the Securities and Exchange Commission issued to third parties, the Company
believes that Exchange Notes issued pursuant to the Exchange Offer in exchange
for Initial Notes may be offered for sale, resold and otherwise transferred by
holders thereof (other than any holder which is an "affiliate" of the Company
within the meaning of Rule 405 under the Securities Act) without compliance with
the registration and prospectus delivery provisions of the Securities Act
provided that such Exchange Notes are acquired in the ordinary course of such
holders' business and such holders have no arrangement with any person to
participate in the distribution of such Exchange Notes. Each broker-dealer that
receives Exchange Notes for its own account pursuant to the Exchange Offer must
acknowledge that it will deliver a prospectus in connection with any resale of
such Exchange Notes. The Letter of Transmittal (as defined herein) states that
by so acknowledging and by delivering a prospectus, a broker-dealer will not be
deemed to admit that it is an "underwriter" within the meaning of the Securities
Act. This Prospectus, as it may be amended or supplemented from time to time,
may be used by a broker-dealer in connection with resales of Exchange Notes
received in exchange for Initial Notes where such Exchange Notes were acquired
by such broker-dealer as a result of market-making activities or other trading
activities. The Company has agreed that, for a period of 180 days after the
Expiration Date (as defined herein), it will make this Prospectus available to
any broker-dealer for use in connection with any such resale. See "Plan of
Distribution."
The Initial Notes and the Exchange Notes constitute new issues of securities
with no established trading market. Any Initial Notes not tendered and accepted
in the Exchange Offer will remain outstanding. To the extent that Initial Notes
are tendered and accepted in the Exchange Offer, a holder's ability to sell
untendered and tendered but unaccepted Initial Notes could be adversely
affected. Following consummation of the Exchange Offer, the holders of Initial
Notes will continue to be subject to the existing restrictions on transfer
thereof and the Company will have no further obligation to such holders to
provide for the registration under the Securities Act of the Initial Notes held
by them. No assurance can be given as to the liquidity of the trading market for
either the Initial Notes or the Exchange Notes.
The Exchange Offer is not conditioned upon any minimum aggregate principal
amount of Initial Notes being tendered for exchange. The Exchange Offer will
expire at 5:00 p.m., New York City time, on , 1997, unless extended
(the "Expiration Date"). The date of acceptance for exchange for the Initial
Notes (the "Exchange Date") will be the first business day following the
Expiration Date. Initial Notes tendered pursuant to the Exchange Offer may be
withdrawn at any time prior to the Expiration Date; otherwise such tenders are
irrevocable.
Interest on the Exchange Notes shall accrue from the last June 15 or December 15
(an "Interest Payment Date") on which interest was paid on the Initial Notes so
surrendered or, if no interest has been paid on such Notes, from December 20,
1996.
SEE "RISK FACTORS" FOR A DESCRIPTION OF CERTAIN FACTORS THAT SHOULD BE
CONSIDERED BY PARTICIPANTS IN THE EXCHANGE OFFER.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS, ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
, 1997
<PAGE> 3
AVAILABLE INFORMATION
The Company has filed with the Commission a Registration Statement on Form
S-4 (the "Registration Statement," which term shall include all amendments,
exhibits, annexes and schedules thereto) pursuant to the Securities Act, and the
rules and regulations promulgated thereunder, covering the Exchange Notes being
offered hereby. This Prospectus does not contain all the information set forth
in the Registration Statement, certain parts of which are omitted in accordance
with the rules and regulations of the Commission and to which reference is
hereby made. Statements made in this Prospectus as to the contents of any
contract, agreement or other document referred to are not necessarily complete.
With respect to each such contract, agreement or other document filed as an
exhibit to the Registration Statement, reference is made to the exhibit for a
more complete description of the matter involved, and each such statement shall
be deemed qualified in its entirety by such reference.
For further information with respect to the Company and the Notes,
reference is made to such Registration Statement. A copy of the Registration
Statement can be inspected and copied at the public reference facilities
maintained by the Commission at Room 1024, Judiciary Plaza, 450 Fifth St., N.W.,
Washington, D.C. 20549, and at the Regional Offices of the Commission at 7 World
Trade Center, 13th Floor, New York, New York 10048 and Northwestern Atrium
Center, 500 West Madison Street Suite 1400, Chicago, Illinois 60661-2511. Copies
of such materials can be obtained from the public reference facilities of the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed
rates. The Commission maintains a Web site that contains reports, proxy and
information statements and other information regarding registrants that file
electronically with the Commission. The address of such site is
http://www.sec.gov.
The Company intends, and is required by the terms of the Indenture dated as
of December 20, 1996 (the "Indenture") between the Company and Fleet National
Bank, as Trustee, under which the Notes are issued, to furnish the holders of
the Notes with annual reports containing financial statements audited by its
independent certified public accountants and with quarterly reports containing
unaudited financial statements for each of the first three quarters of each
fiscal year.
------------------------
NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS IN
CONNECTION WITH THE EXCHANGE OFFER COVERED BY THIS PROSPECTUS. IF GIVEN OR MADE,
SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE ISSUER. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL,
OR A SOLICITATION OF AN OFFER TO BUY, THE EXCHANGE NOTES IN ANY JURISDICTION
WHERE, OR TO ANY PERSON TO WHOM, IT IS UNLAWFUL TO MAKE SUCH OFFER OR
SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATIONS THAT THERE HAS
NOT BEEN ANY CHANGE IN THE FACTS SET FORTH IN THIS PROSPECTUS OR IN THE AFFAIRS
OF THE ISSUER SINCE THE DATE HEREOF.
------------------------
UNTIL , ALL DEALERS EFFECTING TRANSACTIONS IN THE REGISTERED
SECURITIES, WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED
TO DELIVER A PROSPECTUS. THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO
DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR
UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
2
<PAGE> 4
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PROSPECTUS SUMMARY
The following summary is qualified in its entirety by, and should be read
in conjunction with, the more detailed information, risk factors and financial
statements, including the related notes, appearing elsewhere in this Prospectus.
Unless otherwise referred to herein or the context otherwise requires,
references to "Safelite" and the "Company" shall mean Safelite Glass Corp., a
Delaware corporation and its consolidated subsidiaries, including Lear Siegler
Holdings Corp. and its consolidated subsidiaries. Unless otherwise referred to
herein or the context otherwise requires, references to "Lear Siegler" shall
mean Lear Siegler Holdings Corp., a Delaware corporation, or one or more of its
subsidiaries. Unless otherwise indicated, all references to fiscal years in this
Prospectus are to the fiscal years ending on the Saturday closest to December 31
of each year. Unless otherwise stated, all references to market share data in
this Prospectus are estimates made by the Company's management based on Company
and industry data and are expressed in units, except with respect to insurance
customer segment data which is expressed in dollar volume. Unless the context
otherwise requires, references to the "Exchange Offer" refer to the offer to
exchange the Exchange Notes for the Initial Notes.
THE COMPANY
COMPANY OVERVIEW
Safelite is the largest provider of auto glass replacement and repair
services in the United States. The Company installed approximately 1.6 million
replacement units in 1996 for insurance companies, commercial fleet leasing and
rental car companies, car dealerships and body shops, government agencies and
individual consumers. The Company provides these installation services through
its network of 491 service centers, approximately 1,000 mobile vans, 43
centralized telephone/dispatch centers and 66 warehouses. The Company has
targeted its marketing efforts principally towards auto insurance companies
which management believes, through their policyholders, directly or indirectly
influence approximately 70% of the selections of auto glass replacement
providers. The Company has developed fully integrated claims processing
solutions for auto insurance companies which reduce their glass loss expenses
and total administrative costs and provide a higher level of customer service to
their policyholders. Management believes that this outsourcing capability,
coupled with the convenience of nationwide coverage, consistently high quality
service and low costs, have provided the Company with a significant competitive
advantage in the insurance segment of the market. Since 1992, the Company
estimates that it has increased its leading market share in this segment from
approximately 10% to 18% resulting in improved financial performance as
demonstrated by compound annual growth in sales and adjusted EBITDA (as defined)
of 8.6% and 21% respectively, from 1992 to 1996. Sales and adjusted EBITDA for
the year ended December 28, 1996 were $438.3 million and $35.0 million,
respectively. Pro forma adjusted EBITDA (as defined) for the year ended December
28, 1996 was $43.4 million.
The auto glass replacement and repair industry in 1996 was a $2.7 billion
market, representing the installation of approximately 12.5 million replacement
units. The replacement and repair of auto glass is driven by the incidence of
breakage. Over the past 10 years, management estimates that total industry sales
have grown at approximately 4% per year, primarily as a result of growth in the
aggregate number of vehicles on the road, the increasing number of miles driven
and increases in price, which principally reflect the increasing size and design
complexity of auto glass. Such growth has been fairly consistent year to year,
with some variations resulting primarily from fluctuations in weather
conditions.
The auto glass replacement and repair industry is highly fragmented with
approximately 20,000 competitors. Safelite is the industry leader with an
overall market share of approximately 13% in 1996 and currently has an estimated
18% market share in the insurance segment of the market. From 1990 to 1996, the
industry has been consolidating as evidenced by an increase in market share for
the top three industry participants from an estimated 24% to an estimated 30%
and a decline in market share for small "mom and pop" providers from an
estimated 70% to an estimated 60% during the same period. Management expects
this consolidation to continue, as insurance companies and large fleet lessors
require nationwide coverage and consistent service while seeking to reduce costs
by outsourcing their
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3
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auto glass claims. For insurance companies, auto glass repair and replacement
claims represent a disproportionate administrative burden. Management estimates
such claims account for less than 6% of the dollar value of all auto claims paid
but over 30% of the total number of auto claims processed.
COMPETITIVE STRENGTHS
Industry Leadership and Nationwide Coverage. Safelite is the largest
competitor in the highly fragmented auto glass replacement and repair industry.
The Company operates service centers in 95 of the top 100 Metropolitan
Statistical Areas ("MSAs") in the United States, with its closest competitor,
the Company believes, operating in 75 MSAs. Through its nationwide network, the
Company can directly serve 70% of the cars and light trucks in the United States
and, through its authorized independent installation centers, achieves 100%
coverage. Management believes that the Company's leadership position and breadth
of geographic coverage is a significant competitive advantage in working with
insurance companies, commercial fleet lessors and other large customers which
increasingly demand consistent quality in both claims processing and auto glass
repair and replacement services on a nationwide basis.
Strong, Established Relationships with Major Insurance Companies. The
Company has successfully established strong relationships with the nation's
major auto insurance companies, and management believes it has more program
relationships with these companies than any of its competitors. The top 30 auto
insurers represent approximately 70% of total auto insurance premiums written in
the United States. Safelite has entered into Total Customer Solution ("TCS")
arrangements with 24 of those insurers including State Farm Mutual Automobile
Insurance, Farmers Insurance Group, United Services Automobile Association,
Prudential Insurance Company of America, Travelers Group and Safeco Corporation.
Under a TCS arrangement, Safelite typically serves as one of a few recommended
auto glass replacement providers for an insurance company and provides a range
of additional claims management services, including computerized referral
management, policyholder call management, electronic auditing and billing
services and management reporting. Of the Company's total 41 TCS arrangements,
those with Nationwide Mutual Insurance Company, GEICO Corporation, Liberty
Mutual Insurance Company, CNA Insurance Group, Metropolitan Property and
Casualty Insurance Company and National General Insurance are also Master
Provider ("MP") relationships. Under an MP program, Safelite administers 100% of
an insurance company's auto glass claims. As sole administrator, Safelite
administers the allocation of the auto glass replacement and repair business
between Safelite and other approved providers based on the insurance company's
predetermined criteria. TCS and MP programs significantly lower the processing
costs and loss expenses for the insurance companies, provide more consistent and
rapid service for policyholders, and increase Safelite's volume with each
insurance account. In addition, the Company has entered into similar
arrangements with major fleet and rental car companies including GE Capital
Fleet Services, PHH Vehicle Management Services Corporation, USL Capital Fleet
Services, Hertz Corporation and Budget Rent-A-Car Systems, Inc. Of these
arrangements, those with PHH Vehicle Management and USL Capital Fleet are also
MP relationships. By entering into these arrangements with insurance, fleet and
rental car companies, Safelite has substantially increased its volume with these
accounts and enhanced its base of recurring revenues.
Low Cost Provider. Management believes the Company has a significant total
cost advantage compared to its competitors as a result of its manufacturing
facilities, its productivity incentive programs, the efficiency of its
nationwide distribution network and the critical mass of its centralized
customer service, claims processing and information network. Safelite is the
only industry competitor to manufacture a substantial percentage of its
replacement glass. Safelite produces only high volume units to maximize
efficiency, manufacturing approximately 75% of its windshield requirements at
two production sites. The Company utilizes excess manufacturing capacity to
produce windshields for sale in the wholesale market and purchases low volume
units. The Company's management estimates that its performance incentive program
has increased the productivity of its installation associates from 2.5
installations per day in 1991 to 3.9 per day in 1996 (while the industry
averages an estimated 3.0 installations per day). As a result of the significant
economies of scale in its manufacturing, information
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4
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systems, distribution and installation infrastructure, management believes it
has the capacity to add incremental contracts and units at relatively low
marginal cost.
Sophisticated Information Systems. The Company's information systems allow
Safelite to effectively handle all aspects of an insured auto glass claim, from
the initial phone call placed by the insured policyholder to the automatic
billing of the insurance company. Through Safelite's fully integrated network
("SAFENET[Trademark]"), the Company can provide full service to the policyholder
by electronically accessing the insurance company's database, verifying the
policyholder's coverage status, scheduling the glass installation, checking
relevant inventories, ordering delivery (when necessary) of auto glass to a
Safelite service center, repairing or replacing the glass, electronically
billing the insurance company and, if applicable, paying the service providers.
The insurance company's role is limited to funding the claim payment and
updating its policy files. The Company's information systems can also generate
detailed financial and operating performance statistics, comprehensively track
and report customer satisfaction and monitor speed of service for its customers.
Management believes the Company's information systems represent an important
competitive advantage for Safelite.
Proven Management Team. Garen K. Staglin, Chairman and CEO and John F.
Barlow, President and COO, joined Safelite in late 1991. Messrs. Staglin and
Barlow hired and developed a team of executives who brought to the Company
experience in insurance claims processing and the automotive aftermarket. In
late 1991, the new management team undertook a comprehensive review of the
Company's operations. This review resulted in a shift in Safelite's strategy
towards its key markets. In addition, the new management team recognized that
insurance companies and large fleet owners were responsible for the majority of
auto glass replacement purchasing decisions in the U.S. and focused the Company
on providing a total claims management solution. The initiatives associated with
the execution of the Company's strategies resulted in restructuring charges in
fiscal 1992, 1993 and 1995 of $10.0 million, $4.6 million and $6.3 million,
respectively. From 1992, the first full year of operations under the current
management team, to the twelve months ended December 28, 1996, the Company's
sales and adjusted EBITDA have increased from $314.4 million to $438.3 million
and from $16.4 million to $35.0 million, respectively, growing at compound
annual rates of 8.6% and 21%, respectively. Pro forma adjusted EBITDA for the
year ended December 28, 1996 was $43.4 million.
STRATEGIES FOR GROWTH
Expand and Enhance Relationships with Insurance Companies. The Company's
principal growth strategy is to increase its share in the segment of the auto
glass replacement and repair market influenced by the insurance companies by
expanding the breadth and depth of its existing relationships. The Company
currently provides its auto glass replacement and repair services for the
policyholders of virtually every significant auto insurance company in the U.S.
The Company focuses its marketing and sales strategy on demonstrating to
insurance companies that as it processes increasing proportions of an insurance
company's auto glass replacement and repair claims it can continue to reduce the
loss expenses and administrative costs of such claims for the insurance company
while improving policyholder satisfaction through faster, more reliable and
consistent installation service. Specifically, Safelite seeks to convert
existing insurance company relationships into TCS arrangements, achieve greater
allocations of existing TCS arrangements and ultimately migrate TCS arrangements
to MP relationships, each of which increases the Company's sales.
The Company believes it has been successful in implementing this strategy
of "program migration" for insurance company clients. During 1995, the Company
established MP relationships with three leading insurance companies, and during
1996, sales to those customers increased approximately 157% ($38.5 million) over
1995. In addition, sales to the Company's other 21 TCS clients which rank among
the top 30 auto insurers increased approximately 17% ($15.7 million), while
sales to all other insurance clients increased approximately 11% ($3.9 million).
The Company is currently in discussions with a number of insurance companies to
enter into TCS arrangements and MP relationships and announced a new MP program
with GEICO Corporation in early 1997. Management also focuses on a similar
program migration strategy with its large fleet and rental car company
customers.
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In addition to program migration, the Company seeks to grow its sales
through improved policyholder "compliance" with an insurance company's auto
glass referral program. An auto insurance policyholder has the freedom to choose
its own auto glass replacement provider, rather than comply with the insurer's
recommendations. As a result, Safelite may actually perform a lower proportion
of an insurance customer's installations than the insurance company would
otherwise recommend under the TCS or MP program. Management believes that over
time Safelite can improve compliance within its existing TCS and MP programs
through continued demonstration of the program's benefits, resulting in
increased sales and profitability.
Expand Nationwide Coverage. The Company plans to expand the scope of its
nationwide network by selectively acquiring regional auto glass replacement and
repair businesses and opening new service center locations. The Company believes
that it can enhance its sales and operating results through the integration of
well-targeted acquisitions into Safelite's nationwide network. In addition, the
Company expects to open 10 to 20 additional service centers annually to
complement its existing network.
Provide Additional Outsourcing Services to Insurance and Fleet
Companies. Management believes that Safelite can leverage its existing customer
relationships and claims processing infrastructure to provide outsourcing
services in addition to auto glass replacement, such as pre-insurance vehicle
inspection, towing referral and post-collision rental car referral. Similar to
auto glass replacement, these services are characterized by significant
administrative burdens, high processing costs and low dollar loss values. The
Company is evaluating plans to offer these services as a natural extension of
its core auto glass business.
The Company maintains its executive headquarters at 1105 Schrock Road,
Columbus, Ohio 43229, telephone (614) 842-3000.
SUMMARY OF THE TRANSACTIONS
On December 20, 1996, a series of related transactions described below
involving the Company were completed. Prior to such date Safelite was an
indirect subsidiary of Lear Siegler Holdings Corp. and was the only remaining
operating entity within Lear Siegler. In order to effect the Transactions, Lite
Acquisition Corp. was formed and was capitalized by Thomas H. Lee Equity Fund
III, L.P. (the "THL Equity Fund"), certain affiliates of Thomas H. Lee Company
and certain other investors (collectively, "THL"), who made an approximate $117
million aggregate equity investment (the "THL Equity Investment") in Safelite.
Pursuant to the Recapitalization Agreement and Plan of Merger and Stock Purchase
Agreement dated as of November 8, 1996 (the "Recapitalization Agreement"), Lite
Acquisition Corp. was merged with and into Safelite, with Safelite surviving the
merger (the "Merger").
THL owns approximately 88% of the voting stock of Safelite, and certain
existing stockholders, including management of Safelite, own approximately 12%
of Safelite's voting stock. The aggregate cash consideration received by the
prior stockholders of Safelite, including LSNWY Corp. ("LSNWY"), a wholly-owned
subsidiary of Lear Siegler, was approximately $300 million. Immediately
following the Merger, Safelite acquired (the "Stock Purchase") substantially all
of the outstanding capital stock of Lear Siegler (including LSNWY) from its
existing stockholders for a promissory note equal to the cash Merger
consideration for Safelite received by LSNWY (the "Seller Note") and Lear
Siegler was merged with and into L.S. Acquisition Corp., a wholly-owned
subsidiary of the Company, with L.S. Acquisition Corp. surviving the merger and
changing its name to Lear Siegler Holdings Corp. As a result, Lear Siegler
became a wholly-owned subsidiary of the Company upon completion of the
Transactions. LSNWY distributed the Merger consideration to a subsidiary of
Safelite which repaid the Seller Note. See "The Transactions."
As part of the Transactions, the proceeds of the THL Equity Investment,
together with approximately $250 million of aggregate proceeds from the debt
financings described below, were used to (i) repay approximately $42 million of
existing indebtedness, (ii) pay approximately $300 million of stock purchase
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price and Merger consideration, (iii) pay $17 million of transaction fees and
expenses and (iv) pay transaction bonuses aggregating approximately $7 million
to certain members of Safelite management.
The Transactions were financed with (i) the THL Equity Investment, (ii)
$180 million in credit facilities comprised of a $150 million term loan facility
(the "Term Loan Facility") and a $30 million revolving credit facility (the
"Revolving Credit Facility"; together with the Term Loan Facility, the "Senior
Credit Facilities") and (iii) $100 million of the Notes (collectively, the
"Financings" and together with the Merger, the Stock Purchase and the related
transactions, the "Transactions"). After completion of the Transactions (the
"Closing"), the Company had $30 million of availability under the Revolving
Credit Facility (less approximately $4.9 million of outstanding letters of
credit).
The sources and uses of funds for the Transactions, which occurred on
December 20, 1996, were as follows:
SOURCES AND USES
<TABLE>
<CAPTION>
AMOUNT
---------------------
(DOLLARS IN MILLIONS)
<S> <C>
SOURCES:
Term Loan Facility(1)..................................................... $150.0
Senior Subordinated Notes................................................. 100.0
THL Equity Investment(2).................................................. 116.9
Management Retained Equity(3)............................................. 7.9
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$374.8
======
USES:
Working Capital........................................................... $ 0.9
Merger Consideration(4)................................................... 300.1
Repayment of Existing Debt................................................ 41.9
Management Transaction Bonuses(5)......................................... 6.9
Management Retained Equity(3)............................................. 7.9
Fees and Expenses......................................................... 17.1
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$374.8
======
</TABLE>
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(1) After the Closing, the Company had, excluding Lear Siegler and the uses
described above, approximately $5 million of cash on the balance sheet and
no borrowings under the $30 million Revolving Credit Facility (availability
under which was reduced by approximately $4.9 million in outstanding letters
of credit).
(2) Comprised of $58.7 million of common equity and $58.2 million of preferred
equity.
(3) Represents value of Safelite Class A Common Stock retained by management.
(4) Includes $2.3 million paid directly by THL to certain current stockholders
of Safelite for Safelite common stock.
(5) These bonuses were accrued in fiscal 1996 and paid in January 1997.
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7
<PAGE> 9
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THE EXCHANGE OFFER
The Exchange Offer......... The Company is offering to exchange up to
$100,000,000 aggregate principal amount of 9 7/8%
Series B Senior Subordinated Notes due 2006 for
$100,000,000 aggregate principal amount of its
outstanding 9 7/8% Senior Subordinated Notes due
2006. The terms of the Exchange Notes are
substantially identical in all respects (including
principal amount, interest rate and maturity) to
the terms of the Initial Notes for which they may
be exchanged pursuant to the Exchange Offer, except
that the Exchange Notes are freely transferable by
holders thereof (except as provided herein -- see
"The Exchange Offer -- Terms of the Exchange" and
"-- Terms and Conditions of the Letter of
Transmittal"), and are not subject to any covenant
regarding registration under the Securities Act.
Interest Payments.......... Interest on the Exchange Notes shall accrue from
December 20, 1996 or from the last Interest Payment
Date on which interest was paid on the Initial
Notes so surrendered.
Minimum Condition.......... The Exchange Offer is not conditioned upon any
minimum aggregate principal amount of Initial Notes
being tendered for exchange.
Expiration Date............ The Exchange Offer will expire at 5:00 p.m., New
York time, on , 1997, unless extended.
Exchange Date.............. The date of acceptance for exchange of the Initial
Notes will be the first business day following the
Expiration Date.
Conditions of the Exchange
Offer.................... The obligation of the Issuer to consummate the
Exchange Offer is subject to certain conditions.
See "The Exchange Offer -- Conditions to the
Exchange Offer." The Issuer reserves the right to
terminate or amend the Exchange Offer at any time
prior to the Expiration Date upon the occurrence of
such conditions.
Withdrawal Rights.......... Tenders may be withdrawn at any time prior to the
Expiration Date. Otherwise, all tenders are
irrevocable. Any Initial Notes not accepted for any
reason will be returned without expense to the
tendering holders thereof as promptly as
practicable after the expiration or termination of
the Exchange Offer.
Procedures for Tendering
Initial Notes.............. See "The Exchange Offer -- How to Tender."
Federal Income Tax
Consequences............. The exchange of Initial Notes for Exchange Notes
should be treated as a "non-event" for Federal
income tax purposes. See "Income Tax
Considerations."
Effects on Holders of
Initial Notes.............. As a result of the making of, and upon acceptance
for exchange of all validly tendered Initial Notes
pursuant to the terms of, this Exchange Offer, the
Issuer will have fulfilled a covenant contained in
the terms of the Initial Notes and the Exchange and
Registration Rights Agreement as amended (the
"Exchange and Registration Rights Agreement") dated
December 20, 1996 between the Issuer, Chase
Securities Inc., BT Securities Corporation and
Smith Barney Inc. (collectively, the "Initial
Purchasers") and, accordingly, there will be
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8
<PAGE> 10
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no increase in the interest rate on the Initial
Notes pursuant to the terms of the Exchange and
Registration Rights Agreement, the Initial Notes or
the Indenture. The holders of the Initial Notes
will have no further registration rights under the
Exchange and Registration Rights Agreement with
respect to the Initial Notes. Holders of the
Initial Notes who do not tender their Notes in the
Exchange Offer will continue to hold such Initial
Notes and their rights under such Initial Notes
will not be altered, except for any such rights
under the Exchange and Registration Rights
Agreement, which by their terms terminate or cease
to have further effectiveness as a result of the
making of, and the acceptance for exchange of all
validly tendered Initial Notes pursuant to, the
Exchange Offer. All untendered and tendered but
unaccepted Initial Notes will continue to be
subject to the restrictions on transfer provided
for in the Initial Notes and in the Indenture. To
the extent that Initial Notes are tendered and
accepted in the Exchange Offer, the trading market
for untendered Initial Notes could be adversely
affected.
TERMS OF THE EXCHANGE NOTES
Issuer..................... Safelite Glass Corp.
Securities Offered......... $100 million aggregate principal amount of 9 7/8%
Series B Senior Subordinated Notes due 2006.
Maturity................... December 15, 2006.
Interest Payment Dates..... June 15 and December 15, commencing June 15, 1997.
Sinking Fund............... None.
Optional Redemption........ The Exchange Notes are redeemable in whole or in
part, at the option of the Company on or after
December 15, 2001, at the redemption prices set
forth herein plus accrued and unpaid interest, if
any, to the date of redemption. In addition, prior
to December 15, 1999, the Company, at its option,
may redeem up to $35 million of the aggregate
principal amount of the Notes originally issued
with the net cash proceeds of one or more Equity
Offerings, at a redemption price equal to 109.875%
of the principal amount thereof plus accrued and
unpaid interest, if any, to the date of redemption;
provided that at least $65 million of the original
principal amount of Notes remains outstanding after
any such redemption.
Change of Control.......... Upon a Change of Control Triggering Event, the
Company will be required to make an offer to
repurchase the Notes at a price equal to 101% of
the principal amount thereof, together with accrued
and unpaid interest, if any, to the date of
repurchase. There can be no assurance that the
Company would have the financial resources
necessary to repurchase the Notes upon a Change of
Control Triggering Event. The occurrence of certain
of the events which would constitute a Change of
Control Triggering Event would constitute a default
under the credit agreement evidencing the Senior
Credit Facilities (the "Bank Credit Agreement"). As
of December 28, 1996 the aggregate indebtedness
that would have become due upon the occurrence of a
Change of Control Triggering Event under the
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9
<PAGE> 11
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Indenture and a default under the Bank Credit
Agreement was $250 million.
Ranking.................... The Exchange Notes will be general unsecured
obligations of the Company and will be subordinated
in right of payment to all existing and future
Senior Indebtedness of the Company. The Exchange
Notes will rank pari passu with any future Senior
Subordinated Indebtedness of the Company and will
rank senior to all future subordinated indebtedness
of the Company. As of December 28, 1996, the
Company had approximately $163.7 million of Senior
Indebtedness (excluding $4.9 million in outstanding
letters of credit). The Indenture permits the
Company to incur indebtedness in addition to the
Notes and the Term Loan Facility of up to
approximately $40 million (including the Revolving
Credit Facility) and certain other indebtedness as
described in the definition of "Permitted
Indebtedness," as well as an additional amount
pursuant to a fixed charge coverage ratio test that
as of December 28, 1996, would not permit the
incurrence of any additional indebtedness. See
"Description of Notes--Limitation on Incurrence of
Additional Indebtedness." The Indenture permits all
of such additional indebtedness to be Senior
Indebtedness or Secured Indebtedness. The Senior
Indebtedness under the Senior Credit Facilities
will be Secured Indebtedness. See "Description of
Other Indebtedness."
Restrictive Covenants...... The Indenture contains certain covenants that limit
the ability of the Company and certain of its
subsidiaries to, among other things, incur
additional indebtedness, pay dividends or make
certain other restricted payments, consummate
certain asset sales, enter into certain
transactions with affiliates, incur indebtedness
that is subordinate in right of payment to any
Senior Indebtedness and senior in right of payment
to the Notes, incur liens, impose restrictions on
the ability of a subsidiary to pay dividends or
make certain payments to the Company and its
subsidiaries, merge or consolidate with any other
person or sell, assign, transfer, lease, convey or
otherwise dispose of all or substantially all of
the assets of the Company. The Indenture permits
the Company to incur substantial additional
indebtedness under certain circumstances. However,
all of these limitations and prohibitions are
subject to a number of important qualifications and
exceptions. See "Ranking" above.
Future Guarantees.......... The Indenture provides that any subsidiary of the
Company which guarantees the Company's indebtedness
under the Bank Credit Agreement will guarantee the
Notes on an unsecured senior subordinated basis.
Absence of a Public
Market for the Notes..... The Exchange Notes are new securities and there is
currently no established market for the Exchange
Notes. The Exchange Notes will generally be freely
transferable (subject to the restrictions discussed
elsewhere herein) but will be new securities for
which there will not initially be a market.
Accordingly, there can be no assurance as to the
development or liquidity of any market for the
Exchange Notes. The Exchange Notes have been
designated for trading in the PORTAL market. The
Initial Purchasers have advised the Company that
they currently intend to make a market in the
Exchange Notes. However,
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10
<PAGE> 12
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the Initial Purchasers are not obligated to do so,
and any market making with respect to the Exchange
Notes may be discontinued at any time without
notice. The Company does not intend to apply for a
listing of the Exchange Notes on any securities
exchange or on any automated dealer quotation
system.
RISK FACTORS
Prospective investors should carefully consider all of the information set
forth in this Prospectus and, in particular, should evaluate the specific
factors set forth under "Risk Factors" for risks involved with an investment in
the Exchange Notes.
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11
<PAGE> 13
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SUMMARY HISTORICAL AND PRO FORMA FINANCIAL INFORMATION
The following Summary Historical and Pro Forma Financial Information of
Safelite was prepared giving retroactive effect to the Transactions on December
20, 1996, which were accounted for as a recapitalization of Safelite and in
accordance with the provisions of FASB Technical Bulletin No. 85-5. See "The
Transactions." The statement of operations data set forth below with respect to
fiscal years ended December 31, 1994, December 30, 1995 and December 28, 1996
and the balance sheet data at December 30, 1995 and December 28, 1996 are
derived from the financial statements included elsewhere in this Prospectus
which have been audited by Deloitte & Touche LLP, independent public
accountants. The pro forma consolidated financial data have been derived from
the Unaudited Pro Forma Consolidated Income Statement (as defined) and the
related notes thereto included elsewhere in this Prospectus. The pro forma
information does not purport to represent what the Company's results would have
actually been if the Transactions and the application of the proceeds therefrom
had occurred at the date indicated nor does such information purport to project
the results of the Company for any future period. The summary financial data
below should be read in conjunction with "Management's Discussion and Analysis
of Financial Condition and Results of Operations," "Unaudited Pro Forma
Consolidated Income Statement" and the financial statements and notes thereto
included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
FISCAL YEAR(1)
----------------------------------------------------------------
PRO FORMA
1992 1993 1994 1995 1996 1996
------ ------ ------ ------ ------ ---------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Sales.............................................. $314.4 $328.3 $357.4 $372.1 $438.3 $ 438.3
Cost of sales...................................... 236.9 229.7 246.1 261.7 299.6 298.7
------ ------ ------ ------ ------ ---------
Gross profit....................................... 77.5 98.6 111.3 110.4 138.7 139.6
Selling, general & administrative expenses......... 91.2 100.4 90.8 93.5 107.3 107.7
Other operating expenses(2)........................ -- -- 21.1 -- 7.6 --
Restructuring expense(3)........................... 10.0 4.6 -- 6.3 -- --
------ ------ ------ ------ ------ ---------
Income (loss) from operations...................... (23.7) (6.4) (0.6) 10.6 23.8 31.9
Interest expense................................... (41.4) (15.5) (4.5) (6.0) (6.7) (24.5)
Interest income.................................... 1.9 0.3 2.2 2.9 2.1 2.1
------ ------ ------ ------ ------ ---------
Income (loss) from continuing operations before
income taxes, minority interest and extraordinary
items............................................ (63.2) (21.6) (2.9) 7.5 19.2 $ 9.5
=========
Income tax benefit (provision)(4).................. 0.1 0.3 (0.2) (0.1) 17.6
Minority interest(5)............................... -- 0.1 (2.7) (1.1) (10.2)
Discontinued operations(6)......................... (24.0) (43.2) -- -- 1.7
Extraordinary loss(7).............................. -- -- (1.5) -- (0.5)
------ ------ ------ ------ ------
Net income (loss).................................. $(87.1) $(64.4) $ (7.3) $ 6.3 $ 27.8
====== ====== ====== ====== ======
OTHER FINANCIAL DATA:
EBITDA(8).......................................... $ 3.5 $ 10.2 $ 6.6 $ 24.5 $ 31.8 $ 38.9
EBITDA margin...................................... 1.1% 3.1% 1.8% 6.6% 7.3% 8.9%
Adjusted EBITDA(9)................................. 16.4 22.0 29.1 25.5 35.0 43.4
Adjusted EBITDA to cash interest expense........... 1.9x
Depreciation and amortization...................... $ 17.2 $ 12.0 $ 7.2 $ 7.6 $ 8.0 $ 7.0
Capital expenditures............................... 5.7 7.7 14.2 12.0 12.8 12.8
BALANCE SHEET DATA:
Working capital.................................... $ 6.1 $ 41.0 $ 41.9 $ 58.1 $ 50.7
Total assets(10)................................... 360.2 169.8 193.7 188.3 216.2
Total indebtedness(10)............................. 486.8 35.0 63.8 69.0 263.7
Stockholders' equity (deficit)..................... (285.2) 7.7 0.2 (0.6) (128.5)
</TABLE>
- ---------------
(1) The Company's fiscal year ends on the Saturday closest to December 31 of
each year.
(2) Other operating expenses in 1994 is comprised of a $2.5 one-time charge
recorded by the Company to conform its method of accounting to Statement
of Position (SOP) No. 93-7, "Reporting on Advertising Costs" and $18.6
million primarily related to curtailment and settlement losses for pension
plans of previously disposed Lear Siegler subsidiaries. Other operating
expenses in 1996 is comprised of management transaction bonuses of $6.9
million and estimated costs (primarily severance) of $0.7 million to exit
the activities of Lear Siegler. See Notes 1 and 2 to the Company's
Consolidated Financial Statements and "Management's Discussion and
Analysis of Financial Condition and Results of Operations."
(3) In 1992, restructuring charges totaling approximately $10.0 million were
recorded, consisting of (i) $4.9 million for severance costs, facility
relocations and consolidation of the Company's sales and administrative
functions; (ii) $2.7 million in connection with the planned closing of 72
service center locations; and (iii) $2.4 million to cover the cost of
closing one manufacturing plant, disposition of the Company's
architectural flat glass product line and related facilities, and
discontinuance of the Company's long-haul trucking function. In 1993, the
Company recorded $4.6 million in restructuring charges related to the
planned closing of approximately 70 service center locations. In 1995, the
Company recorded $6.3 million in restructuring charges. Of this amount,
$5.6 million related to the planned closing of 100 service center
locations and
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12
<PAGE> 14
$0.7 million related to field management reorganization. See Note 3 to the
Company's Consolidated Financial Statements and "Management's Discussion and
Analysis of Financial Condition and Results of Operations."
(4) The adoption of SFAS No. 109, "Accounting for Income Taxes" in 1993 was
not material to the Company's consolidated results of operations or its
financial condition. During 1996, the valuation allowance provided against
the Company's deferred tax assets was reduced by $25.9 million. See Note
12 to the Company's Consolidated Financial Statements and "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
(5) The summary historical and pro forma financial information of Safelite was
prepared giving retroactive effect to the Transactions on December 20,
1996 and accounted for as a recapitalization of Safelite and in accordance
with the provisions of FASB Technical Bulletin No. 85-5. Accordingly, the
common stock ownership of Safelite held other than by Lear Siegler
(primarily management of Safelite) has been accounted for prior to the
Transactions as a minority interest.
(6) In 1992, one operating business of Lear Siegler was sold and a resulting
loss on sale of discontinued operations of $34.9 million was recognized.
1992 income from operations of this business as well as five operating
businesses sold in 1993 was $10.9 million. In 1993, five operating
businesses of Lear Siegler were sold and a resulting loss on sale of
discontinued operations of $45.2 million was recognized. 1993 income from
operations of such businesses was $2.0 million. In 1996, a gain from
discontinued operations totalling approximately $1.7 million was recorded,
consisting of $27.2 million in favorable resolution of various tax
contingencies of previously discontinued Lear Siegler operations offset by
$25.5 million of settlement costs for various liability issues related to
previously disposed of Lear Siegler subsidiaries.
(7) In 1994 and 1996, extraordinary losses of $1.5 million and $0.5 million,
respectively, were recorded, net of minority interest and income tax of
$0.3 million and $0.3 million, respectively, as a result of expensing
unamortized loan origination fees related to the early retirement of the
associated debt.
(8) "EBITDA" is defined herein as income (loss) from operations plus the sum
of depreciation, amortization and restructuring expenses. EBITDA is
presented in this Prospectus as it is a basis upon which the Company
assesses its financial performance and because certain covenants in the
Company's borrowing arrangements are tied to similar measures. EBITDA
should not be considered as an alternative to net income as a measure of
operating results or to cash flows as a measure of liquidity (each as
determined in accordance with generally accepted accounting principles).
(9) "Adjusted EBITDA" is defined herein as EBITDA plus the operating expenses
of Lear Siegler (which has been treated as an exited activity). The
estimated costs to exit Lear Siegler activities, consisting primarily of
severance costs, have been accrued in 1996. In addition, the Pro Forma
1996 Adjusted EBITDA includes Safelite insurance cost savings of $2
million. Insurance cost savings are based on a program which was put in
place effective upon completion of the Transactions versus Safelite's
historical coverage. See "Unaudited Pro Forma Consolidated Income
Statement."
(10) Reflects the purchase of approximately $12.0 million in prepaid insurance
and the buyout of approximately $4.4 million in Safelite self-insured
liabilities which were partially financed by $13.7 million in premium
financing indebtedness. The purchase and buyout were made on December 20,
1996 in connection with the insurance program discussed in Note 9 above.
See Note 10 to the Company's Consolidated Financial Statements.
13
<PAGE> 15
RISK FACTORS
In addition to the other information in this Prospectus, the following
factors should be considered carefully in evaluating the purchase of the
Exchange Notes offered hereby:
SUBSTANTIAL LEVERAGE AND ABILITY TO SERVICE DEBT; NEED TO REFINANCE NOTES
As a result of the Transactions, the Company has significant debt service
obligations. As of December 28, 1996, after giving effect to the sale of the
Notes, the application of the estimated net proceeds therefrom, and consummation
of the Transactions (including the Financings), the Company had aggregate
outstanding indebtedness of approximately $263.7 million, of which $150 million
represented aggregate outstanding indebtedness under the Bank Credit Agreement
(which amount excludes outstanding letters of credit), and stockholders' deficit
of $128.5 million. The Company may incur additional indebtedness in the future,
subject to certain limitations contained in the instruments governing its
indebtedness, including the Indenture.
The degree to which the Company is leveraged could have important
consequences to holders of the Notes, including the following: (i) the Company's
ability to obtain additional financing for working capital, capital
expenditures, acquisitions, general corporate purposes and other purposes may be
impaired; (ii) a substantial portion of the Company's cash flow from operations
must be dedicated to the payment of the principal and interest on its
indebtedness thereby reducing the funds available to finance operations; (iii)
the Company may be more highly leveraged than certain of its competitors, which
may place the Company at a competitive disadvantage; (iv) certain of the
Company's borrowings will be at variable rates of interest (including borrowings
under the Bank Credit Agreement) which will expose the Company to the risk of
fluctuating interest rates; (v) the Company's substantial degree of leverage
will limit its flexibility to adjust to changing market conditions, reduce its
ability to withstand competitive pressures and make it more vulnerable to a
downturn in economic conditions; and (vi) the Company's ability to refinance the
Notes in order to pay the principal of the Notes at maturity or upon a Change of
Control Triggering Event may be adversely affected.
The Company's ability to satisfy its interest payment obligations under its
indebtedness will depend largely on its future performance, which, in turn, is
subject to prevailing economic conditions and to financial, business and other
factors beyond its control. In addition, all amounts owing under the Bank Credit
Agreement will become due prior to the time the principal payments on the
Exchange Notes will become due and such amounts will need to be refinanced.
Furthermore, the Company does not expect to be able to repay the principal
amount of the Notes at maturity and accordingly will need to refinance the
Notes, or repay the Notes with the proceeds of an equity offering, at or prior
to their maturity. There can be no assurance that the Company will be able to
generate sufficient cash flow to service its interest payment obligations under
its indebtedness or that future borrowings or equity financing will be available
for the payment or refinancing of the Company's indebtedness. To the extent that
the Company is not successful in negotiating renewals of its borrowings or in
arranging new financing, it may have to sell significant assets, which would
have a material adverse effect on the Company's business and results of
operations. Among the factors that will affect the Company's ability to effect
an offering of its capital stock or refinance the Notes are financial market
conditions and the value and performance of the Company at the time of such
offering or refinancing. There can be no assurance that any such offering or
refinancing can be successfully completed. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Liquidity and
Capital Resources" and "Description of Other Indebtedness."
DEBT RESTRICTIONS; COMPLIANCE WITH CERTAIN COVENANTS; ASSET ENCUMBRANCES
The Indenture and the Bank Credit Agreement impose restrictions that
affect, among other things, the ability of the Company and its subsidiaries, as
the case may be, to incur debt, pay dividends, sell assets, create liens, make
capital expenditures and investments and otherwise enter into certain
transactions outside the ordinary course of business. The Bank Credit Agreement
also requires the Company to maintain specified financial ratios and meet
certain financial tests. Although the Company is currently in compliance with
the covenants and restrictions contained in the Bank Credit Agreement, the
14
<PAGE> 16
Company's ability to continue to comply may be affected by events beyond its
control. The breach of any of these covenants or restrictions could result in a
default under the Bank Credit Agreement, which in turn could result in the
acceleration of indebtedness under other instruments evidencing indebtedness
that may contain cross-acceleration or cross-default provisions. In the event of
any such default, the lenders under the Bank Credit Agreement could elect to
declare all amounts borrowed thereunder, together with accrued interest, to be
due and payable, or the lenders could cease making additional revolving loans.
If, as a result thereof, a default occurs with respect to Senior Indebtedness,
the subordination provisions in the Indenture would likely restrict payments to
the holders of the Exchange Notes.
In connection with the Bank Credit Agreement, the Company has granted the
lenders thereunder a first priority lien on substantially all of its assets. If
the Company were unable to repay such amounts, the lenders could foreclose upon
the assets pledged to secure such repayment, and the holders of the Exchange
Notes might not be able to receive payments, if any, until the payment default
was cured or waived, any such acceleration was rescinded, or the indebtedness
under the Bank Credit Agreement was discharged or paid in full.
SUBORDINATION OF NOTES TO SENIOR INDEBTEDNESS
The Company's obligations under the Notes are subordinate and junior in
right of payment to all existing and future Senior Indebtedness of the Company.
As of December 28, 1996, after giving effect to the Transactions, the Company
had (i) approximately $163.7 million of Senior Indebtedness (which amount
excludes outstanding letters of credit) and (ii) approximately $30 million
available under the Revolving Credit Facility (less $4.9 million in outstanding
letters of credit), to fund the future liquidity needs of the Company, if any,
all of which would be Senior Indebtedness, if borrowed. Additional Senior
Indebtedness may be incurred by the Company from time to time, subject to
certain restrictions. By reason of such subordination, in the event of an
insolvency, liquidation, or other reorganization of the Company, the lenders
under the Bank Credit Agreement and other creditors who are holders of Senior
Indebtedness must be paid in full before the holders of the Notes may be paid;
accordingly, there may be insufficient assets remaining after payment of prior
claims to pay amounts due on the Notes. In addition, under certain
circumstances, no payments may be made with respect to the Notes if a default
exists with respect to certain Senior Indebtedness. See "Description of
Notes -- Ranking of Notes."
CHANGE OF CONTROL
The Indenture provides that, upon the occurrence of a Change of Control
Triggering Event, the Company will make an offer to purchase all of the Notes at
a price in cash equal to 101% of the aggregate principal amount thereof together
with accrued and unpaid interest to the date of purchase. The Bank Credit
Agreement prohibits the Company from repurchasing any Notes, except with the
proceeds of one or more equity offerings. The Bank Credit Agreement also
provides that certain change of control events with respect to the Company would
constitute a default thereunder. Any future credit agreements or other
agreements relating to Senior Indebtedness to which the Company becomes a party
may contain similar restrictions and provisions. In the event a Change of
Control Triggering Event occurs at a time when the Company is prohibited from
purchasing the Notes, or if the Company is required to make a Net Proceeds Offer
(as defined) pursuant to the terms of the Notes, the Company could seek the
consent of its lenders to the purchase of the Notes or could attempt to
refinance the borrowings that contain such prohibition. If the Company does not
obtain such a consent or repay such borrowings, the Company will remain
prohibited from purchasing the Notes. In such case, the Company's failure to
purchase tendered Notes would constitute an Event of Default under the
Indenture. If, as a result thereof, a default occurs with respect to any Senior
Indebtedness, the subordination provisions in the Indenture would likely
restrict payments to the holders of the Notes. The provisions relating to a
Change of Control Triggering Event included in the Indenture may increase the
difficulty of a potential acquiror obtaining control of the Company. See
"Description of Exchange Notes -- Change of Control."
DEPENDENCE ON CERTAIN CUSTOMERS; POTENTIAL ADVERSE IMPACT OF GOVERNMENT
REGULATION
During fiscal 1996 the Company's five largest customers accounted for
approximately 30% of the Company's sales. No customer accounted for more than
10% of the Company's sales during fiscal 1996. The Company is highly dependent
on recurring revenues generated by its insurance company customers
15
<PAGE> 17
and could be adversely affected by changes in such insurance companies' policies
concerning coverage for auto glass replacement claims. Failure by insurance
companies to cover auto glass replacement claims or the imposition of increased
deductibles with respect to coverage of auto glass replacement claims, could
significantly reduce the Company's sales generated through its insurance company
customers. Certain of the Company's TCS arrangements and MP relationships with
insurance company customers are not evidenced by written contracts and are
therefore terminable at any time. A significant decrease in business from the
Company's insurance company customers would have a material adverse effect on
the Company's results of operations and financial condition. See
"Business -- Customers" and "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
Many states have statutes or regulations prohibiting certain referral
practices of insurers. Approximately 30 states currently have statutes or
regulations which would prohibit an insurance company from requiring a
policyholder to use a particular vendor. In addition, new laws or regulations
relating to the referral practices of insurance companies may be adopted in
these or other states. The Company does not enter into arrangements with
insurance companies pursuant to which such insurance companies require
policyholders to use the Company for auto glass replacement or repair services.
Although the Company does not believe that existing government regulation of
insurance company referral practices will have a material adverse effect on the
Company, no assurance can be given that future regulation of such referral
practices will not have a material adverse effect on the Company.
COST AND AVAILABILITY OF RAW MATERIALS
The major raw materials used in the manufacturing of the Company's products
include glass and vinyl. Most of the raw materials used in the Company's
products are available from multiple sources. However, several raw materials
used in the Company's products are currently obtained from a single source. The
Company does not have guaranteed supply arrangements with any of its suppliers
and there can be no assurance that these suppliers will continue to meet the
Company's requirements. An extended interruption in the supply of glass or vinyl
could have a material adverse effect on the Company's operating results. There
can be no assurance that severe shortages of raw materials will not occur in the
future which could increase the cost or delay the shipment of the Company's
products and have a material adverse effect on the Company's operating results.
Significant increases in the prices of these raw materials could also have a
material adverse effect on the Company's operating results since the Company may
not be able to adjust product pricing to reflect the increases in raw material
costs. See "Business -- Suppliers and Raw Materials."
RELIANCE ON CENTRALIZED MANUFACTURING
All of the Company's manufacturing occurs at facilities in Enfield, North
Carolina and Wichita, Kansas. The Company's manufacturing operations utilize
certain equipment which, if damaged or otherwise rendered inoperable, would
result in the disruption of the Company's manufacturing operations. Although the
Company maintains business interruption insurance which the Company believes is
adequate, any extended interruption of the operations at these facilities could
have a material adverse effect on the Company's operating results. See "Business
- -- Operations -- Manufacturing."
POTENTIAL RISK OF PRODUCT LIABILITY
The manufacture and sale of windshields entails risk of product liability
claims. To date, no such material product liability claims have been made
against the Company relating to its manufacture and sale of windshields. There
can be no assurance, however, that such claims will not be made in the future. A
successful product liability claim (or series of claims) against the Company in
excess of its insurance coverage could have a material adverse effect on the
Company's business, financial condition and results of operations.
COMPETITION
The industries in which the Company competes are very competitive. In the
installation and related services market, competition is based on price,
customer service, technical capabilities, quality and geographic coverage. This
market is highly fragmented with approximately 20,000 competitors. Although
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the Company is the market leader in installation and related services, it does
compete against several other large competitors in this market, the largest two
of which had market shares estimated to be 10% and 7% in 1996. In addition, many
of the Company's competitors have incurred substantially less debt than the
Company, which may allow them greater flexibility than the Company in managing
their operations. There can be no assurance that the Company will be able to
continue to compete effectively with these or other competitors. State Farm, one
of the Company's largest customers, has informed the Company that it intends to
use a competitor to function as its glass claims call center and bill processing
administrator in a region by region roll-out commencing in the summer of 1997.
The Company does not expect that this arrangement will have a material impact on
its relationship with State Farm; however, there can be no assurance that this
arrangement will not have an impact on the Company's business with State Farm.
See "Business -- Competition."
Competition in the wholesale market is based principally on price and
quality. The Company is a relatively small participant in the wholesale market,
which is dominated by several significantly larger companies.
Future growth in the Company's revenues will depend upon the Company's
ability to maintain and increase its market share in the installation and
related services market while continuing to provide high levels of customer
service to insurers and fleet owners, and its ability to access the wholesale
market in order to utilize excess manufacturing capacity. No assurance can be
given that the Company will be successful in obtaining these objectives.
EFFECT OF WEATHER CONDITIONS; SEASONAL EARNINGS
The severity of weather has historically affected the Company's sales and
operating income, with severe winters generating increased sales and income and
mild winters generating lower sales and income. Accordingly, mild weather
conditions may adversely affect the Company's results of operations.
The Company's business is somewhat seasonal, with the fourth quarter
traditionally its slowest period of activity. This reduced level of sales in the
fourth quarter has resulted in a disproportionate decline in EBITDA during the
fourth quarter due to the Company's significant operating leverage. The Company
believes such seasonal trends will continue for the foreseeable future.
POTENTIAL LIABILITIES OF NON-OPERATING SUBSIDIARIES
Upon completion of the Transactions, Lear Siegler and its subsidiaries
became subsidiaries of the Company. The current and former subsidiaries of Lear
Siegler engaged in a wide variety of manufacturing activities including, without
limitation, the manufacture and sale of firearms, small aircraft, motorcycle
helmets, baby products, heaters for mobile homes and products made with
asbestos. While Lear Siegler and its current subsidiaries no longer engage in
manufacturing or selling activities, their former activities and the activities
of former subsidiaries may expose Lear Siegler or its subsidiaries to a variety
of potential environmental liabilities, asbestos and non-asbestos product
liability claims and certain other contingent liabilities.
Environmental Claims. Lear Siegler's current or former subsidiaries are
currently involved in 18 environmental matters relating to the former operation
of manufacturing and other facilities and the cleanup of a number of disposal
sites. Of these matters, Lear Siegler is entitled to indemnification for seven
which are being actively managed by the current owners of the disposed business
unit. Lear Siegler has not received notification of any material additional
sites in two years. However, there can be no assurance that additional,
potentially material, claims will not be made against Lear Siegler in the
future. The purchasers of a number of Lear Siegler's former operations assumed
the environmental liabilities related to those operations. If those purchasers
are unwilling or unable to address those liabilities in the future, Lear Siegler
could be held responsible for the assumed liabilities.
Asbestos Claims. Lear Siegler has exposure to asbestos claims arising out
of the use or installation of automotive brakes manufactured by Lear Siegler
from the late 1960s through 1987. A Lear Siegler subsidiary has been named as a
defendant in approximately 860 lawsuits relating to asbestos claims since 1988,
of which approximately 270 remain active. This Lear Siegler subsidiary has
already
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expended approximately $2.9 million in handling asbestos claims, of which $2.3
million has been expended in defense costs, $0.1 million has been expended in
settlements and $0.5 million has been paid to a third party administrator. In
addition, workers in Lear Siegler's former automotive brake plants may assert
claims in the future for medical conditions relating to exposure to asbestos.
Non-Asbestos Product Liability Claims. Although Lear Siegler sold its last
operating unit other than Safelite in 1993, Lear Siegler has ongoing exposure
for product liability claims relating to the products sold by certain operating
units prior to divestiture. In the majority of divestitures, the purchaser of
the business unit assumed liability for all product liability claims, regardless
of when the underlying products were sold. In certain divestitures, however,
liability for product liability claims attributable to products delivered prior
to the sale of the business unit was retained. In several cases, the buyer's
subsequent financial difficulties required Lear Siegler to respond to product
liability claims. L.S. Acquisition Corp., Lear Siegler's post-Transactions
parent corporation, purchased an insurance policy which became effective at the
Closing that provided certain coverages relating to product liability claims.
Insurance Claims and Miscellaneous Claims. A Lear Siegler subsidiary is
liable under certain insurance policies for retroactive insurance premium
adjustments. In addition, such Lear Siegler subsidiary in the past has made
payments for self-insured retention payments relating to a liability policy for
a divested unit although the contract of sale relating to such unit requires the
purchaser to make such payments. Lear Siegler does not anticipate additional
liability under such policy, although one liability claim for a relevant policy
year remains unresolved.
Benefit Plans and Other Matters. Lear Siegler has potential liabilities
under certain employee benefit plans and other matters, including certain tax
liabilities. Following the Transactions, the Company is responsible for
maintaining certain pension plans of the Company and Lear Siegler. According to
actuarial studies, the pension plans are adequately funded on an on-going basis
and cash contributions by the Company to the pension plans are expected to
aggregate approximately $1 million annually.
In addition to the reserves established by Lear Siegler in connection with
the potential liabilities discussed above, pursuant to the terms of the
Recapitalization Agreement, L.S. Acquisition Corp. obtained insurance coverage
with respect to certain product liability claims against Lear Siegler (with no
deductible and subject to a $15 million per year limit) for occurrences from
December 20, 1996 to December 31, 2001. Additional insurance coverage was
obtained with respect to other liabilities of Lear Siegler and Lear Siegler may
in the future obtain additional insurance. There can be no assurance that such
insurance will be sufficient to cover all such product liability claims and
other intended covered liabilities. Such coverage does not include claims
relating to asbestos, aircraft product liability claims or environmental
matters.
Based on a claim and loss analysis performed in connection with the
Transactions, the Company believes that the insurance acquired at the time of
the Transactions and the existing liquid assets of Lear Siegler, which consist
primarily of cash and $7.6 million of tax refunds expected to be received in
1997 (which amount the former stockholders of Lear Siegler have placed in escrow
and agreed to pay to Lear Siegler if such refund is not paid), will be adequate
to cover the liabilities of Lear Siegler. There can be no assurance, however,
that the existing assets of Lear Siegler and the insurance acquired at the time
of the Transactions will be sufficient to pay all the potential liabilities of
Lear Siegler. In addition, there can be no assurance that the Company's insurers
will not challenge the coverage provided to the Company in their policies. If
such liabilities exceed the assets and insurance coverage of Lear Siegler,
claims may be made against the Company and if successful, the Company could
incur significant liabilities and expenses which could have a material adverse
effect on the financial condition of the Company.
ENVIRONMENTAL REGULATION, POSSIBLE CHANGES AND RELATED MATTERS
The Company's manufacturing operations in Wichita, Kansas and Enfield,
North Carolina involve the handling of materials and the generation of waste
materials that are classified as hazardous. The Company is subject to federal,
state and local laws and regulations concerning the handling and disposal of
hazardous materials, and therefore in the ordinary course of its business, the
Company in its
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manufacturing operations incurs compliance costs. The Company does not
anticipate that compliance with federal, state and local provisions regarding
the use and disposal of materials into the environment or otherwise relating to
the protection of the environment will have any material adverse effect upon the
earnings or competitive position of the Company and does not anticipate any
material capital expenditures for environmental control facilities for the
remainder of the Company's current fiscal year or the succeeding fiscal year.
Actions by federal, state and local governments concerning environmental
matters, however, could increase the costs of producing the products
manufactured by the Company. In addition, the future costs of compliance with
environmental laws and regulations and liabilities resulting from currently
unknown circumstances or developments could be substantial or could have a
material adverse effect on the Company. Regulations resulting from the 1990
amendments to the Clean Air Act (the "1990 Amendments") that will pertain to the
Company's manufacturing operations are currently not expected to be promulgated
until 1997 or later. The Company cannot predict the level of required capital
expenditures resulting from future environmental regulations; however, the
Company does not anticipate that expenditures required by such regulations, if
any, will have a material adverse effect on the Company.
INDUSTRY INVESTIGATION
The Company, along with other domestic companies, has received a subpoena
to produce documents to a grand jury investigating possible violations of
federal antitrust laws in the automobile glass replacement industry. The
investigation is directed towards possible anti-competitive or collusive pricing
practices. Neither the Company nor any director, officer or employee has been
charged in connection with the investigation. The investigation is in its
preliminary stages.
If the investigation were to uncover evidence of anti-competitive or
collusive behavior by the Company or its employees, it could result in the
Company or such employees being subject to monetary fines, penalties and other
sanctions and expenses. A finding of anti-competitive or collusive behavior by
the Company could lead to civil litigation against the Company by persons
claiming to have paid higher prices as a result of the alleged improper
activity. Private plaintiffs in antitrust suits are entitled, if successful, to
recover treble damages, attorneys fees and costs.
Management does not believe that the Company or its employees have engaged
in any anti-competitive or collusive activities and does not believe that this
investigation will result in a material adverse effect on the Company. However,
no assurance can be given that the Company will not be found to have engaged in
anti-competitive or collusive activities or be liable for such fines, penalties,
damages and costs or, that if it were liable, that they will not have a material
adverse effect on the Company.
The Company, along with three other industry defendants, has been sued by
eight local auto glass replacement companies in the U.S. District Court for the
Eastern District of Texas, claiming violation of federal antitrust laws and
interference with contract. Management believes these claims are without merit
and intends to defend them vigorously.
DEPENDENCE ON KEY PERSONNEL
The success of the Company depends in large part on the Company's senior
management, including Garen K. Staglin, John F. Barlow and Douglas A. Herron,
and its ability to attract and retain other highly qualified management
personnel. The Company faces competition for such personnel from other companies
and other organizations. There can be no assurance that the Company will be
successful in hiring or retaining key personnel. The Company entered into
employment agreements with each of Messrs. Staglin, Barlow and Herron in
connection with the Transactions. The Company does not maintain key man life
insurance on any of its executives. See "Management -- Directors and Executive
Officers."
CONCENTRATION OF OWNERSHIP
THL owns approximately 88% of the outstanding voting stock of the Company
and Messrs. DiNovi, Lawry and Sperling, affiliates of Thomas H. Lee Company,
serve on Safelite's Board of Directors. THL
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owns all of the outstanding non-voting preferred stock of the Company. As a
result of the Stockholders' Agreement, THL has the right to elect a majority of
the members of the Company's Board of Directors. The Company anticipates that
additional independent members of the Board of Directors may be appointed.
Because THL has more than 50% of the outstanding common stock of the Company and
has the right to control the Board of Directors, THL has the exclusive ability
to determine the outcome of fundamental corporate transactions such as
refinancing indebtedness of the Company or causing a Change of Control
Triggering Event to occur. There can be no assurance that the interests of THL
will not conflict with the interests of the holders of the Notes. See "Security
Ownership of Certain Beneficial Owners and Management."
FRAUDULENT CONVEYANCE
The net proceeds from the sale of the Initial Notes were used to finance a
portion of the cash consideration paid to the prior shareholders of the Company
and Lear Siegler in the Transactions. The obligations of the Company incurred
under the Indenture and the Notes may be subject to review under relevant
federal and state fraudulent conveyance statutes (the "fraudulent conveyance
statutes") in a bankruptcy, reorganization or rehabilitation case or similar
proceeding or a lawsuit by or on behalf of unpaid creditors of the Company. The
requirements for establishing a fraudulent conveyance or revocatory transfer
vary depending on the law of the jurisdiction which is being applied. If under
relevant fraudulent conveyance statutes a court were to find that, at the time
the Initial Notes were issued, (i) the Company issued the Initial Notes with the
intent of hindering, delaying or defrauding current or future creditors of the
Company, or (ii) (a) the Company received less than reasonably equivalent value
or fair consideration for issuing the Initial Notes and (b) the Company (A) was
insolvent or was rendered insolvent by reason of the issuance of the Initial
Notes, (B) was engaged or about to engage in a business or transaction for which
its assets constituted unreasonably small capital, (C) intended to incur, or
believed that it would incur, indebtedness beyond its ability to pay as such
indebtedness matured (as all of the foregoing terms are defined in or
interpreted under the applicable fraudulent conveyance statutes) or (D) was a
defendant in an action for money damages, or had a judgment for money damages
docketed against it (if, in either case, the judgment is unsatisfied after the
final judgment), such court could avoid or subordinate the Notes to presently
existing and future indebtedness of the Company and take other action
detrimental to the holders of the Notes, including, under certain circumstances,
invalidating the Notes.
The measure of insolvency for purposes of the foregoing considerations will
vary depending upon the federal or local law that is being applied in any such
proceeding. Generally, however the Company would be considered insolvent if, at
the time it incurs the indebtedness constituting the Initial Notes, either (i)
the fair market value (or fair saleable value) of its assets is less than the
amount required to pay the probable liability on its total existing debts and
liabilities (including contingent liabilities) as they become absolute and
matured or (ii) it is incurring indebtedness beyond its ability to pay as such
indebtedness matures.
The Company believes that at the time of issuance of the Initial Notes it
received reasonably equivalent value or fair consideration for issuing the
Initial Notes and that it (i) will be (a) neither insolvent nor rendered
insolvent thereby for purposes of the foregoing standards, (b) in possession of
sufficient capital to meet its obligations as such obligations mature or become
due and to operate its business effectively and (c) incurring obligations within
its ability to pay such obligations as they mature or become due and (ii) will
have sufficient assets to satisfy any probable money judgment against it in any
pending action. No assurance can be given, however, that a court passing on such
issues would reach the same conclusions.
LACK OF PUBLIC MARKET; RESTRICTIONS ON TRANSFERABILITY
The Company does not intend to apply for a listing of the Exchange Notes on
a securities exchange or on any automated dealer quotation system. There is
currently no established market for the Exchange Notes and there can be no
assurance as to the liquidity of markets that may develop for the Exchange
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Notes, the ability of the holders of the Exchange Notes to sell their Exchange
Notes or the price at which such holders would be able to sell their Exchange
Notes. If such markets were to exist, the Exchange Notes could trade at prices
that may be lower than the initial market value of the Initial Notes or the
Exchange Notes depending on many factors, including prevailing interest rates
and the markets for similar securities. The Exchange Notes are expected to be
designated for trading in the PORTAL market. The Initial Purchasers have advised
the Company that they currently intend to make a market with respect to the
Notes. However, the Initial Purchasers are not obligated to do so, and any
market making with respect to the Notes, may be discontinued at any time without
notice.
The Exchange Offer will not be conditioned upon any minimum or maximum
aggregate principal amount of Initial Notes being tendered for exchange. No
assurance can be given as to the liquidity of the trading market for the
Exchange Notes, or, in the case of nonexchanging holders of Initial Notes, the
trading market for the Notes following the Exchange Offer.
The liquidity of, and trading market for, the Notes also may be adversely
affected by general declines in the market for similar securities. Such a
decline may adversely affect such liquidity and trading markets independent of
the financial performance of, and prospects for, the Company.
CONSEQUENCES OF FAILURE TO EXCHANGE
Holders of Initial Notes who do not exchange their Initial Notes for
Exchange Notes pursuant to the Exchange Offer will continue to be subject to the
restrictions on transfer of Initial Notes set forth in the legend thereon as a
consequence of the issuance of the Initial Notes pursuant to an exemption from,
or in a transaction not subject to, the registration requirements of the
Securities Act. In general, the Initial Notes may not be offered or sold, unless
registered under the Securities Act, except pursuant to an exemption from, or in
a transaction not subject to, the Securities Act and applicable state securities
laws. The Company does not currently anticipate that it will register the
Initial Notes under the Securities Act.
FORWARD-LOOKING STATEMENTS
This Prospectus contains forward-looking statements concerning the
Company's operations, economic performance and financial condition, including,
in particular, the likelihood of the Company's success in developing and
expanding its business. These statements are based upon a number of assumptions
and estimates which are inherently subject to significant uncertainties and
contingencies, many of which are beyond the control of the Company, and reflect
future business decisions which are subject to change. Some of these assumptions
inevitably will not materialize, and unanticipated events will occur which will
affect the Company's results.
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THE EXCHANGE OFFER
PURPOSE OF THE EXCHANGE OFFER
The Initial Notes were originally issued and sold on December 20, 1996.
Such sales were not registered under the Securities Act in reliance upon the
exemption provided by Section 4(2) of the Securities Act. In connection with the
sale of the Initial Notes, the Issuer agreed to file with the Commission a
registration statement relating to an exchange offer (the "Exchange Offer
Registration Statement") pursuant to which the Exchange Notes would be offered
in exchange for Initial Notes tendered at the option of the holders thereof or,
if applicable interpretations of the staff of the Commission did not permit the
Company to effect such an exchange offer or any holder of Initial Notes is
either not eligible to participate in the exchange offer or does not receive
freely transferrable securities in the exchange offer. The Issuer agreed, at its
cost, to file a shelf registration statement covering resales of the Initial
Notes (the "Resale Registration Statement") and to have such Resale Registration
Statement declared effective and kept effective for a period of three years from
the effective date thereof or such shorter period that will terminate when
either (i) all of the Initial Notes. In the event that (i) the Issuer fails to
file the Exchange Offer Registration Statement, (ii) the Exchange Offer
Registration Statement is not declared effective by the Commission, or (iii) the
Exchange Offer is not consummated or the Resale Registration Statement is not
declared effective by the Commission, in each case within specified time
periods, the interest rate borne by the Notes shall increase, which interest
will accrue and be payable in cash until completion of such filing, declaration
of effectiveness or completion of such exchange. See "Exchange and Registration
Rights Agreement."
The sole purpose of the Exchange Offer is to fulfill obligations of the
Issuer with respect to the foregoing agreement. Following the consummation of
the Exchange Offer, the Issuer does not currently anticipate registering any
untendered Initial Notes under the Securities Act and will not be obligated to
do so.
ACCOUNTING TREATMENT
The Exchange Notes will be recorded at the carrying value of the Initial
Notes that are exchanged. Therefore, no gain or loss will be recorded in the
Company's financial statements as a result of the transaction.
TERMS OF THE EXCHANGE
The Issuer hereby offers to exchange, subject to the conditions set forth
herein and in the Letter of Transmittal accompanying this Prospectus, $1,000 in
principal amount of Exchange Notes for each $1,000 in principal amount of the
Initial Notes. The terms of the Exchange Notes are identical in all respects to
the terms of the Initial Notes, for which they may be exchanged pursuant to this
Exchange Offer, except that the Exchange Notes will generally be freely
transferable by holders thereof and the holders of the Exchange Notes (as well
as remaining holders of any Initial Notes, other than those who were not
eligible to participate in this Exchange Offer) will not be entitled to
registration rights under the Exchange and Registration Rights Agreement. See
"Exchange and Registration Rights Agreement." The Exchange Notes will evidence
the same debt as the Initial Notes and will be entitled to the benefits of the
Indenture. See "Description of the Exchange Notes."
The Exchange Offer is not conditioned upon any minimum aggregate principal
amount of Initial Notes being tendered for exchange.
Based on interpretations by the staff of the Commission set forth in
no-action letters issued to third parties, the Issuer believes the Exchange
Notes issued pursuant to the Exchange Offer in exchange for Initial Notes may be
offered for sale, resold or otherwise transferred by any holder of such Exchange
Notes (other than any such holder which is an "affiliate" of the Issuer within
the meaning of Rule 405 under the Securities Act) without compliance with the
registration and prospectus delivery provisions of the Security Act, provided
that such Exchange Notes are acquired in the ordinary course of such holder's
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business and such holder has no arrangement or understanding with any person to
participate in the distribution of such Exchange Notes. Any holder who tenders
in the Exchange Offer for the purpose of participating in a distribution of the
Exchange Notes cannot rely on such interpretations by the staff of the
Commission and must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with any secondary resale
transaction. Each broker-dealer that receives Exchange Notes for its own account
in exchange for Initial Notes, where such Initial Notes were acquired by such
broker-dealer as a result of market-making activities or other trading
activities, must acknowledge that it will deliver a prospectus in connection
with any resale of such Exchange Notes. See "Plan of Distribution."
Interest on the Exchange Notes shall accrue from December 20, 1996 or from
the last Interest Payment Date on which interest was paid on the Initial Notes
so surrendered.
Tendering holders of the Initial Notes will not be required to pay
brokerage commissions or fees or, subject to the instructions in the Letter of
Transmittal, transfer taxes with respect to the exchange of the Initial Notes
pursuant to the Exchange Offer.
EXPIRATION DATE; EXTENSIONS; TERMINATION; AMENDMENTS
The Exchange Offer shall expire on the Expiration Date. The term
"Expiration Date" means 5:00 p.m. New York City time, on , 1997,
unless the Issuer, in its sole discretion, extends the period during which the
Exchange Offer is open, in which event the term "Expiration Date" shall mean the
latest time and date on which the Exchange Offer, as so extended by the Company,
shall expire. The Company reserves the right to extend the Exchange Offer at any
time and from time to time by giving oral or written notice to Fleet National
Bank (the "Exchange Agent") and by timely public announcement communicated,
unless otherwise required by applicable law or regulation, by making a release
to the Dow Jones News Service. During any extension of the Exchange Offer, all
Initial Notes previously tendered pursuant to the Exchange Offer will remain
subject to the Exchange Offer.
The Exchange Date will be the first business day following the Expiration
Date. The Company expressly reserves the right to (i) terminate the Exchange
Offer and not accept for exchange any Initial Notes if either of the events set
forth below under "Conditions to the Exchange Offer" shall have occurred and
shall not have been waived by the Company and (ii) amend the terms of the
Exchange Offer in any manner which, in its good faith judgment, is advantageous
to the holders of the Initial Notes, whether before or after any tender of the
Initial Notes. If any such termination or amendment occurs, the Company will
notify the Exchange Agent and will either issue a press release or give oral or
written notice to the holders of the Initial Notes as promptly as practicable.
Unless the Company terminates the Exchange Offer prior to 5:00 p.m., New York
City time, on the Expiration Date, the Company will exchange the Exchange Notes
for the Initial Notes on the Exchange Date.
HOW TO TENDER
The tender to the Company of Initial Notes by a holder thereof pursuant to
one of the procedures set forth below will constitute an agreement between such
holder and the Company in accordance with the terms and subject to the
conditions set forth herein and in the Letter of Transmittal.
A holder of an Initial Note may tender the same by (i) properly completing
and signing the Letter of Transmittal or a facsimile thereof (all reference in
this Prospectus to the Letter of Transmittal shall be deemed to include a
facsimile thereof) and delivering the same, together with the certificate or
certificates representing the Initial Notes being tendered and any required
signature guarantees, to the Exchange Agent at its address set forth on the back
cover of this Prospectus on or prior to the Expiration Date, (ii) complying with
the procedure for book entry transfer described below or (iii) complying with
the guaranteed delivery procedures described below.
If tendered Initial Notes are registered in the name of the signer of the
Letter or Transmittal and the Exchange Notes to be issued in exchange therefor
are to be issued (and any untendered Initial Notes are to be reissued) in the
name of the registered holder (which term, for the purposes described herein,
shall
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include any participant in The Depository Trust Company ("DTC") (also referred
to as a book-entry transfer facility) whose name appears on a security listing
as the owner of Initial Notes), the signature of such signer need not be
guaranteed. In any other case, the tendered Initial Notes must be endorsed or
accompanied by written instruments of transfer in form satisfactory to the
Issuer and duly executed by the registered holder and the signature on the
endorsement or instrument of transfer must be guaranteed by a commercial bank or
trust company located or having an office or correspondent in the United States,
or by a member firm of a national securities exchange or of the National
Association of Securities Dealers, Inc. (any of the foregoing hereinafter
referred to as an "Eligible Institution"). If the Exchange Notes and/or Initial
Notes not exchanged are to be delivered to an address other than that of the
registered holder appearing on the note register for the Initial Notes, the
signature in the Letter of Transmittal must be guaranteed by an Eligible
Institution.
The method of delivery of Initial Notes and all other documents is at the
election and risk of the holder. If sent by mail, it is recommended that
registered mail, return receipt requested, be used, proper insurance obtained,
and the mailing be made sufficiently in advance of the Expiration Date to permit
delivery to the Exchange Agent on or before the Expiration Date.
The Exchange Agent and DTC have confirmed that any financial institution
that is a participant in DTC's system (a "Participant") may utilize DTC's
Automated Tender Offer Program ("ATOP") to tender Initial Notes.
The Exchange Agent will request that DTC establish an account with respect
to the Initial Notes for purposes of the Exchange Offer within two business days
after the date of this Prospectus. Any Participant may make book-entry delivery
of Initial Notes by causing DTC to transfer such Initial Notes into the Exchange
Agent's account in accordance with DTC's ATOP procedures for transfer. However,
the exchange for the Initial Notes so tendered will only be made after timely
confirmation (a "Book-Entry Confirmation") of such book-entry transfer of
Initial Notes into the Exchange Agent's account, and timely receipt by the
Exchange Agent of an Agent's Message (as such term is defined in the next
sentence) and any other documents required by the Letter of Transmittal. The
term "Agent's Message" means a message, transmitted by DTC and received by the
Exchange Agent and forming part of a Book-Entry Confirmation, which states that
DTC has received an express acknowledgment from a Participant tendering Initial
Notes which are the subject of such Book-Entry Confirmation that such
Participant has received and agrees to be bound by the terms of the Letter of
Transmittal and that the Issuer may enforce such agreement against such
Participant.
If a holder desires to accept the Exchange Offer and time will not permit a
Letter of Transmittal or Initial Notes to reach the Exchange Agent before the
Expiration Date or the procedure for book-entry transfer cannot be completed on
a timely basis, a tender may be effected if the Exchange Agent has received at
its office listed on the back cover hereof on or prior to the Expiration Date a
letter, telegram or facsimile transmission from an Eligible Institution setting
forth the name and address of the tendering holder, the names in which the
Initial Notes are registered and, if possible, the certificate numbers of the
Initial Notes to be tendered, and stating that the tender is being made thereby
and guaranteeing that within five New York Stock Exchange trading days after the
date of execution of such letter, telegram or facsimile transmission by the
Eligible Institution, the Initial Notes, in proper form for transfer (or a
confirmation of book-entry transfer of such Initial Notes into the Exchange
Agent's account at the book-entry transfer facility), will be delivered by such
Eligible Institution together with a properly completed and duly executed Letter
of Transmittal (and any other required documents). Unless Initial Notes being
tendered by the above-described method are deposited with the Exchange Agent
within the time period set forth above (accompanied or preceded by a properly
completed Letter of Transmittal and any other required documents), the Company
may, at its option, reject the tender. Copies of a Notice of Guaranteed Delivery
which may be used by Eligible Institutions for the purposes described in this
paragraph are available from the Exchange Agent.
A tender will be deemed to have been received as of the date when (i) the
tendering holder's properly completed and duly signed Letter of Transmittal
accompanied by the Initial Notes is received by
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the Exchange Agent, (ii) a confirmation of book-entry transfer of such Initial
Notes into the Exchange Agent's account at the book-entry transfer facility is
received by the Exchange Agent, or (iii) a Notice of Guaranteed Delivery or
letter, telegram or facsimile transmission to similar effect (as provided above)
for an Eligible Institution is received by the Exchange Agent. Issuances of
Exchange Notes in exchange for Initial Notes tendered pursuant to a Notice of
Guaranteed Delivery or letter, telegram or facsimile transmission to similar
effect (as provided above) by an Eligible Institution will be made only against
deposit of the Letter of Transmittal (and any other required documents) and the
tendered Initial Notes.
All questions as to the validity, form, eligibility (including time of
receipt) and acceptance for exchange of any tender of Initial Notes will be
determined by the Company, whose determination will be final and binding. The
Company reserves the absolute right to reject any or all tenders not in proper
form or the acceptances for exchange of which may, in the opinion of the counsel
of the Company, be unlawful. The Company also reserves the absolute right to
waive any of the conditions of the Exchange Offer or any defect or irregularity
in the tender of any Initial Notes. None of the Company, the Exchange Agent or
any other person will be under any duty to give notification of any defects or
irregularities in tenders or incur any liability for failure to give any such
notification.
TERMS AND CONDITIONS OF THE LETTER OF TRANSMITTAL
The Letter of Transmittal contains, among other things, the following terms
and conditions, which are part of the Exchange Offer.
The party tendering Initial Notes for exchange (the "Transferor")
exchanges, assigns and transfer the Initial Notes to the Company and irrevocably
constitutes and appoints the Exchange Agent as the Transferor's agent and
attorney-in-fact to cause the Initial Notes to be assigned, transferred and
exchanged. The Transferor represents and warrants that it has full power and
authority to tender, exchange, assign and transfer the Initial Notes and to
acquire Exchange Notes issuable upon the exchange of such tendered Initial
Notes, and that, when the same are accepted for exchange, the Company will
acquire good and unencumbered title to the tendered Initial Notes, free and
clear of all liens, restrictions, charges and encumbrances and not subject to
any adverse claim. The Transferor also warrants that it will, upon request,
execute and deliver any additional documents deemed by the Company to be
necessary or desirable to complete the exchange, assignment and transfer of
tendered Initial Notes or transfer ownership of such Initial Notes on the
account books maintained by a book-entry transfer facility. The Transferor
further agrees that acceptance of any tendered Initial Notes by the Issuer and
the issuance of Exchange Notes in exchange therefor shall constitute performance
in full by the Issuer of its obligations under the Exchange and Registration
Rights Agreement and that the Company shall have no further obligations or
liabilities thereunder. All authority conferred by the Transferor will survive
the death or incapacity of the Transferor and every obligation of the Transferor
shall be binding upon the heirs, legal representatives, successors, assigns,
executors and administrators of such Transferor.
By tendering Initial Notes, the Transferor certifies that it is not an
"affiliate" of the Company within the meaning of Rule 405 under the Securities
Act and that it is acquiring the Exchange Notes offered hereby in the ordinary
course of such Transferor's business and that such Transferor has no arrangement
with any person to participate in the distribution of such Exchange Notes.
WITHDRAWAL RIGHTS
Initial Notes tendered pursuant to the Exchange Offer may be withdrawn at
any time prior to the Expiration Date.
For a withdrawal to be effective, a written, telegraphic, telex or
facsimile transmission notice of withdrawal must be timely received by the
Exchange Agent at its address set forth on the back cover of this Prospectus.
Any such notice of withdrawal must specify the person named in the Letter of
Transmittal as having tendered Initial Notes to be withdrawn, the certificate
numbers of Initial Notes to be withdrawn, the principal amount of Initial Notes
to be withdrawn, a statement that such holder is
25
<PAGE> 27
withdrawing his election to have such Initial Notes exchanged, and the name of
the registered holder of such Initial Notes, and must be signed by the holder in
the same manner as the original signature on the Letter of Transmittal
(including any required signature guarantees) or be accompanied by evidence
satisfactory to the issuer that the person withdrawing the tender has succeeded
to the beneficial ownership of the Initial Notes being withdrawn. The Exchange
Agent will return the properly withdrawn Initial Notes promptly following
receipt of notice of withdrawal. If Initial Notes have been tendered pursuant to
the procedures for book-entry transfer,any notice of withdrawal must specify the
name and number of the account at the book-entry transfer facility to be
credited with the withdrawn Initial Notes or otherwise comply with book-entry
transfer facility procedure. All questions as to the validity of notices of
withdrawals, including time of receipt, will be determined by the Issuer, and
such determination will be final and binding on all parties.
ACCEPTANCE OF NOTES FOR EXCHANGE; DELIVERY OF EXCHANGE NOTES
Upon the terms and subject to the conditions of the Exchange Offer, the
acceptance of Initial Notes validly tendered and not withdrawn and issuance of
the Exchange Notes will be made on the Exchange Date. For the purpose of the
Exchange Offer, the Company shall be deemed to have accepted for exchange
validly tendered Initial Notes when, as and if the Company has given oral or
written notice thereof to the Exchange Agent.
The Exchange Agent will act as agent for the tendering holders of Initial
Notes for the purpose of receiving Exchange Notes from the Company and causing
the Initial Notes to be assigned, transferred and exchanged. Upon the terms and
subject to the conditions of the Exchange Offer, delivery of Exchange Notes to
be issued in exchange for accepted Initial Notes will be made by the Exchange
Agent promptly after acceptance of the tendered Initial Notes. Initial Notes not
accepted for exchange by the Company will be returned without expense to the
tendering holders promptly following the Expiration Date or, if the Company
terminates the Exchange Offer prior to the Expiration Date, promptly after the
Exchange Offer is so terminated.
CONDITIONS TO THE EXCHANGE OFFER
Notwithstanding any other provision of the Exchange Offer, or any extension
of the Exchange Offer, the Company will not be required to issue Exchange Notes
in respect of any properly tendered Initial Notes not previously accepted and
may terminate the Exchange Offer (by oral or written notice to the Exchange
Agent and by timely public announcement communicated, unless otherwise required
by applicable law or regulation, by making a release to the Dow Jones News
Service) or, at its option, modify or otherwise amend the Exchange Offer, if
there shall be threatened, instituted or pending any action or proceeding
before, or any injunction, order or decree shall have been issued by, any court
or governmental agency or other governmental regulatory or administrative agency
or commission, (i) seeking to restrain or prohibit the making or consummation of
the Exchange Offer or any other transaction contemplated by the Exchange Offer,
or assessing or seeking any damages as a result thereof, or (ii) resulting in a
material delay in the ability of the Issuer to accept for exchange or exchange
some or all of the Initial Notes pursuant to the Exchange Offer, or any statute,
rule, regulation, order or injunction shall be sought, proposed, introduced,
enacted, promulgated or deemed applicable to the Exchange Offer or any of the
transactions contemplated by the Exchange Offer by any government or
governmental authority, domestic or foreign, or any action shall have been
taken, proposed or threatened, by any government, governmental authority, agency
or court, domestic or foreign, that in the reasonable judgment of the Company,
might directly or indirectly result in any of the consequences referred to in
clauses (i) or (ii) above or, in the reasonable judgment of the Company, might
result in the holders of Exchange Notes having obligations with respect to
resales and transfers of Exchange Notes which are greater than those described
in the interpretations of the Commission referred to on the cover page of this
Prospectus, or would otherwise make it inadvisable to proceed with the Exchange
Offer.
In addition, the Company will not accept for exchange any Initial Notes
tendered and no Exchange Notes will be issued in exchange for any such Initial
Notes, if at such time any stop order shall be
26
<PAGE> 28
threatened or in effect with respect to the Registration Statement of which this
Prospectus constitutes a part or qualification of Indenture under the Trust
Indenture Act of 1939 (the "Trust Indenture Act").
The Company expressly reserves the right to terminate the Exchange Offer
and not accept for exchange any Initial Notes upon the occurrence of either of
the foregoing conditions (which represent all of the material conditions to the
acceptance by the Company of properly tendered Initial Notes). In addition, the
Company may amend the Exchange Offer at any time prior to the Expiration Date if
either of the conditions set forth above occur. Moreover, regardless of whether
either of such conditions has occurred, the Company may amend the Exchange Offer
in any manner which, in its good faith judgment, is advantageous to holders of
the Initial Notes.
The foregoing conditions are for the sole benefit of the Company and may be
waived by the Company, in whole part, if, in its reasonable judgment, such
waiver is not disadvantageous to holders of the Initial Notes. Any determination
made by the Company concerning an event, development or circumstance described
or referred to above will be final and binding on all parties.
EXCHANGE AGENT
Fleet National Bank has been appointed as the Exchange Agent for the
Exchange Offer. Letters of Transmittal must be addressed to the Exchange Agent
at its address set forth on the back cover of this Prospectus.
Delivery to an address other than as set forth herein, or transmissions of
instructions via a facsimile or telex number other than the ones set forth
herein, will not constitute a valid delivery.
SOLICITATION OF TENDERS; EXPENSES
The Company has not retained any dealer-manager or similar agent in
connection with the Exchange Offer and will not make any payments to brokers,
dealers or others for soliciting acceptances of the Exchange Offer. The Company
will, however, pay the Exchange Agent reasonable and customary fees for its
services and will reimburse it for reasonable out-of-pocket expenses in
connection therewith. The Company will also pay brokerage houses and other
custodians, nominees and fiduciaries the reasonable out-of-pocket expenses
incurred by them in forwarding copies of this Prospectus and related documents
to the beneficial owners of the Initial Notes and in handling or forwarding
tenders for their customers.
No person has been authorized to give any information or to make any
representations in connection with the Exchange Offer other than those contained
in this Prospectus. If given or made, such information or representations should
not be relied upon as having been authorized by the Issuer. Neither the delivery
of this Prospectus nor any exchange made hereunder shall, under any
circumstances, create any implication that there has been no change in the
affairs of the Company since the respective dates as of which information is
given herein. The Exchange Offer is not being made to (nor will tenders be
accepted from or on behalf of) holders of Initial Notes in any jurisdiction in
which the making of the Exchange Offer or the acceptance thereof would not be in
compliance with the laws of such jurisdiction. However, the Company may, at its
discretion, take such action as it may deem necessary to make the Exchange Offer
in any such jurisdiction and extend the Exchange Offer to holders of Initial
Notes in such jurisdiction. In any jurisdiction the securities laws or blue sky
laws of which require the Exchange Offer to be made by a licensed broker or
dealer, the Exchange Offer is being made on behalf of the Issuer by one or more
registered brokers or dealers which are licensed under the laws of such
jurisdiction.
OTHER
Participation in the Exchange Offer is voluntary and holders should
carefully consider whether to accept. Holders of the Initial Notes are urged to
consult their financial and tax advisors in making their own decisions on what
action to take.
As a result of the making of, and upon acceptance for exchange of all
validly tendered Initial Notes pursuant to the terms of, this Exchange Offer,
the Company will have fulfilled a covenant contained in the
27
<PAGE> 29
terms of the Exchange and Registration Rights Agreement. Eligible holders of the
Initial Notes who do not tender their certificates in the Exchange Offer will
continue to hold such certificates and their rights under such Initial Notes
will not be altered, except for any such rights under the Exchange and
Registration Rights Agreement, which by their terms terminate or cease to have
further effect as a result of the making of this Exchange Offer. See
"Description of the Initial Notes." All untendered Initial Notes will continue
to be subject to the restrictions on transfer set forth in the Indenture. To the
extent that Initial Notes are tendered and accepted in the Exchange Offer, the
trading market for untendered Initial Notes could be adversely affected.
The Company may in the future seek to acquire untendered Initial Notes in
open market or privately negotiated transactions, through subsequent exchange
offers or otherwise. The Issuer has no present plan to acquire any Initial Notes
which are not tendered in the Exchange Offer or to file a registration statement
to permit resales of any Initial Notes which are not tendered pursuant to the
Exchange Offer.
28
<PAGE> 30
THE TRANSACTIONS
In order to effect the Transactions described below, Lite Acquisition Corp.
was formed and was capitalized by THL, which made a $117 million equity
investment in Safelite. Pursuant to the Recapitalization Agreement, Lite
Acquisition Corp. was merged with and into Safelite, with Safelite surviving the
Merger.
Upon completion of the Merger, THL owned approximately 88% of the voting
stock of Safelite and certain existing stockholders of the Company, including
management, retained approximately 12% of Safelite's voting stock. The aggregate
cash consideration received by the previous owners of Safelite, including LSNWY,
was approximately $300 million. Immediately following the Merger, Safelite
acquired substantially all of the outstanding capital stock of Lear Siegler
(including LSNWY) from its current owners for a promissory note equal to the
cash Merger consideration for Safelite received by LSNWY (the "Seller Note").
Lear Siegler was then merged with and into L.S. Acquisition Corp., a
wholly-owned subsidiary of the Company, with L.S. Acquisition Corp. surviving
the merger and changing its name to Lear Siegler Holdings Corp. As a result,
Lear Siegler became a wholly-owned subsidiary of the Company upon completion of
the Transactions. LSNWY distributed the Merger consideration to a subsidiary of
Safelite which repaid the Seller Note.
As part of the Transactions, the proceeds of the THL Equity Investment,
together with approximately $250 million of aggregate proceeds from the debt
financings described below, were used to (i) repay approximately $42 million of
existing indebtedness, (ii) pay approximately $300 million of stock purchase
price and Merger consideration, (iii) pay an estimated $17 million of
transaction fees and expenses and (iv) pay transaction bonuses aggregating
approximately $7 million to certain members of Safelite management. After the
Closing, the Company had $30 million of availability under the Revolving Credit
Facility (less approximately $4.9 million of outstanding letters of credit).
A summary schematic diagram of the structure of Safelite before the
Transactions and the corporate structure of Safelite following the Transactions
is set forth below.
[Pre-Transactions Structure Art] [Post-Transactions Structure Art]
29
<PAGE> 31
Prior to the Transactions, the capital stock of Safelite consisted of a
class of Preferential Common Stock, as well as Class A and Class B Common Stock.
The Preferential Common Stock was owned by LSNWY Corp., an indirect subsidiary
of Lear Siegler. The Class A Common Stock was owned by LSNWY and certain other
stockholders, including management of Safelite. The Class B Common Stock was
owned by LSNWY and certain other stockholders.
The Transactions occurred in three steps, each described below.
In the first step of the Transactions, THL acquired 169,000 shares of
Safelite Class A Common Stock for $13.40 per share from certain selling
stockholders for aggregate consideration of approximately $2.3 million. Except
for such shares and approximately 627,000 shares of Safelite Class A Common
Stock and 18,000 shares of Class B Common Stock owned by other existing
stockholders, primarily management of Safelite, all remaining shares of Safelite
were then owned by LSNWY.
In the second step of the Transactions, THL capitalized Lite Acquisition
Corp. with $56.4 million of common equity and $58.2 million of preferred equity
(which, together with the $2.3 million paid for Safelite Class A Common Stock in
the first step of the Transactions, comprise the $116.9 million THL Equity
Investment). Lite Acquisition Corp. then merged with and into Safelite, with
Safelite surviving the Merger. Immediately following the Merger, the Company
borrowed $150.0 million pursuant to the Bank Credit Agreement and consummated
the Offering of the Initial Notes, from which it received approximately $97.0
million. Upon effectiveness of the Merger:
(i) each share of Safelite Class A Common Stock outstanding prior to the
Merger (A) was converted into the right to receive cash in the amount
of $13.40 or (B) at the election of any holder thereof, remained
outstanding and unaffected by the Merger (LSNWY agreed that it would
not elect to retain any of the 310,000 shares of Safelite Class A
Common Stock owned by it and therefore received approximately $4.2
million for such shares in the Merger and other stockholders and
optionholders received approximately $0.6 million for their Class A
Common Stock and options);
(ii) each share of Safelite Class B Common Stock outstanding prior to the
Merger was converted into the right to receive cash equal to $.01;
(iii) each share of Safelite Preferential Common Stock outstanding prior to
the Merger was converted into the right to receive cash (in the
aggregate amount of approximately $293.1 million);
(iv) each share of Lite Acquisition Corp.'s common stock outstanding prior
to the Merger was converted into one share of Safelite Class A Common
Stock; and
(v) each share of Lite Acquisition Corp.'s preferred stock outstanding
prior to the Merger was converted into one share of Safelite 8%
Preferred Stock.
Safelite is now owned approximately 88% by THL, and certain existing
stockholders of the Company, including management, retained approximately 12% of
Safelite's voting stock.
In the final step of the Transactions, Safelite, through a new wholly-owned
subsidiary, L.S. Acquisition Corp., acquired in excess of 96% of the outstanding
capital stock of Lear Siegler (including all shares of Lear Siegler preference
stock) for a demand promissory note with a principal amount equal to the
consideration received by LSNWY in the Merger, which amount was approximately
$297.3 million. Lear Siegler was merged with and into L.S. Acquisition Corp.
with L.S. Acquisition Corp. surviving the merger and changing its name to Lear
Siegler Holdings Corp., making Lear Siegler a wholly-owned subsidiary of the
Company. On the closing date of the Transactions, all of the consideration
received by LSNWY in the Merger was distributed to L.S. Acquisition Corp. which
was used to repay the note delivered in connection with the purchase of Lear
Siegler's capital stock.
As a result of this three-step transaction, THL holds a direct equity
investment in Safelite and other stockholders of Safelite, primarily management,
retained their existing interest in Safelite. The Company
30
<PAGE> 32
believes that this resulting structure also more accurately reflects the
Company's operations, which consist entirely of the operations of Safelite, as
opposed to the prior Lear Siegler structure which was put in place at a time
when Safelite was only one of several operating subsidiaries owned within the
Lear Siegler consolidated group. See "Risk Factors -- Potential Liabilities of
Non-Operating Subsidiaries" for a description of certain potential liabilities
associated with Lear Siegler and its current and former subsidiaries.
The sources and uses of funds for the Transactions were as follows:
SOURCES AND USES
<TABLE>
<CAPTION>
AMOUNT
----------------------
(DOLLARS IN MILLIONS)
<S> <C>
SOURCES:
Term Loan Facility(1)................................................ $150.0
Senior Subordinated Notes............................................ 100.0
THL Equity Investment(2)............................................. 116.9
Management Retained Equity(3)........................................ 7.9
------
$374.8
======
USES:
Working Capital...................................................... $ 0.9
Merger Consideration(4).............................................. 300.1
Repayment of Existing Debt........................................... 41.9
Management Transaction Bonuses(5).................................... 6.9
Management Retained Equity(3)........................................ 7.9
Fees and Expenses.................................................... 17.1
------
$374.8
======
</TABLE>
- ---------------
(1) After the Closing, the Company had $30 million of availability under the
Revolving Credit Facility (less approximately $4.9 million in outstanding
letters of credit) and, excluding Lear Siegler and the uses described above,
approximately $5 million of cash on the balance sheet.
(2) Comprised of $58.7 million of common equity and $58.2 million of preferred
equity.
(3) Represents value of Safelite Class A Common Stock retained by management.
(4) Includes $2.3 million paid directly by THL to certain current stockholders
of Safelite for Safelite common stock.
(5) These bonuses were accrued in fiscal 1996 and paid in January 1997.
31
<PAGE> 33
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
The following unaudited pro forma consolidated income statement (the
"Unaudited Pro Forma Consolidated Income Statement") of the Company is based on
the audited financial statements of Safelite which are included elsewhere in
this Prospectus, as adjusted to illustrate the estimated effects of the
Transactions. The unaudited pro forma adjustments are based upon available
information and certain assumptions that the Company believes are reasonable.
The Unaudited Pro Forma Consolidated Statement of Operations and accompanying
notes should be read in conjunction with the historical financial statements of
Safelite and other financial information pertaining to the Company included
elsewhere in this Prospectus including "The Transactions," "Capitalization" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
The Unaudited Pro Forma Consolidated Income Statement has been prepared to
give effect to the Transactions as though such Transactions had occurred as of
December 31, 1995. The Transactions have been accounted for as a
recapitalization of Safelite and in accordance with the provisions of FASB
Technical Bulletin 85-5. See "The Transactions."
The Unaudited Pro Forma Consolidated Income Statement does not purport to
be indicative of what the Company's results of operation would actually have
been had the Transactions been completed at the beginning of the period
indicated or to project the Company's results of operations for any future date.
32
<PAGE> 34
UNAUDITED PRO FORMA CONSOLIDATED INCOME STATEMENT
FOR THE YEAR ENDED DECEMBER 28, 1996
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
HISTORICAL TRANSACTIONS PRO FORMA
SAFELITE ADJUSTMENTS SAFELITE
-------- ----------- ---------
<S> <C> <C> <C>
Sales:
Installation and related services.................... $380,142 $380,142
Wholesale............................................ 58,183 58,183
-------- --------
Total sales.................................. 438,325 438,325
Cost of sales.......................................... 299,623 (870)(1) 298,753
-------- --------
Gross profit........................................... 138,702 139,572
Selling, general and administrative.................... 107,350 500(2) 107,660
(190)(1)
Other expense.......................................... 7,558 (7,558)(3) --
-------- --------
Operating income....................................... 23,794 31,912
Interest expense....................................... (6,726) (17,770)(4) (24,496)
Interest income........................................ 2,094 2,094
-------- --------
Income from continuing operations...................... $ 19,162 $ 9,510
======== ========
Other data:
EBITDA(5).............................................. $ 38,883
Adjusted EBITDA(6)..................................... 43,412
Adjusted EBITDA to cash interest expense(3)............ 1.9x
</TABLE>
See Accompanying Notes to Unaudited Pro Forma Consolidated Income Statement
33
<PAGE> 35
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED INCOME STATEMENT
(DOLLARS IN THOUSANDS)
1. Reflects the reduction in depreciation of property, plant and equipment and
amortization of intangible assets associated with the adjustment of the
Safelite minority interest carrying value at the date of the Transactions to
the fair value of the minority shares acquired. Property, plant and equipment
amounts are being amortized over lives ranging from three to twenty years.
Intangible asset amounts are being amortized over twenty-five years. In
connection with the fair value adjustments described above, inventory was
written up by $1.6 million. It is anticipated that this fair value increase
to inventory will be charged to cost of sales within a twelve month period
following the Transactions. As this cost is non-recurring, it has been
excluded from the Unaudited Pro Forma Consolidated Income Statement.
2. Represents the annual management consulting fee of $500 to be paid to Thomas
H. Lee Company.
3. Reflects the transaction bonus paid to management of $6,858 and $700 of costs
(primarily severance) related to exiting the activities of Lear Siegler.
4. Reflects interest expense and amortization of deferred financing fees as a
result of the Financings.
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 28, 1996
-----------------
<S> <C>
Term Loan Facility at estimated interest rates:
Tranche A at 8.25%(a)................................. $ 6,188
Tranche B at 8.75%(a)................................. 6,562
The Notes at 9.875%..................................... 9,875
Revolving credit borrowings at historical levels and
interest rates........................................ 640
-------
Cash interest expense................................. 23,265
Amortization of deferred financing fees................. 1,231
-------
Pro forma interest expense.............................. 24,496
Less: Historical interest expense..................... (6,726)
-------
Pro forma adjustments................................... $17,770
=======
</TABLE>
(a) A 0.125 percent change in interest rates would change annual pro forma
interest expense by $188.
5. "Pro forma EBITDA" is defined herein as pro forma operating income plus the
sum of depreciation, amortization and restructuring expenses. EBITDA is
presented in this Prospectus as it is a basis upon which the Company assesses
its financial performance and because certain covenants in the Company's
borrowing arrangements are tied to similar measures. EBITDA should not be
considered as an alternative to net income as a measure of operating results
or to cash flows as a measure of liquidity (each as determined in accordance
with generally accepted accounting principles).
6. "Pro forma adjusted EBITDA" is defined herein as pro forma EBITDA plus the
sum of (i) operating expenses of Lear Siegler (which has been treated as an
exited activity, see Note 2 to the Company's Consolidated Financial
Statements) and (ii) annual insurance cost reductions of approximately $2.0
million for Safelite, which are based on a program put in place effective
upon completion of the Transactions versus Safelite's historical coverage.
The table below summarizes the adjustments.
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 28, 1996
-----------------
<S> <C>
EBITDA.................................................. $38,883
Lear Siegler operating expenses....................... 2,529
Insurance cost savings................................ 2,000
-------
Adjusted EBITDA......................................... $43,412
=======
</TABLE>
34
<PAGE> 36
SELECTED CONSOLIDATED FINANCIAL DATA
The following selected financial data of Safelite was prepared giving
retroactive effect to the Transactions on December 20, 1996, which were
accounted for as a recapitalization of Safelite and in accordance with the
provisions of FASB Technical Bulletin No. 85-5. See the "Transactions." The
statement of operations data set forth below with respect to fiscal years ended
December 31, 1994, December 30, 1995 and December 28, 1996 and the balance sheet
data at December 30, 1995 and December 28, 1996 are derived from the financial
statements included elsewhere in this Prospectus which have been audited by
Deloitte & Touche LLP, independent public accountants. The selected financial
data below should be read in conjunction with "Management's Discussion and
Analysis of Financial Condition and Results of Operations," "Unaudited Pro Forma
Consolidated Income Statement" and the financial statements and notes thereto
included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
FISCAL YEAR(1)
----------------------------------------------------
1992 1993 1994 1995 1996
------- ------ ------ ------ -------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Sales........................................ $ 314.4 $328.3 $357.4 $372.1 $ 438.3
Cost of sales................................ 236.9 229.7 246.1 261.7 299.6
------- ------ ------ ------ -------
Gross profit................................. 77.5 98.6 111.3 110.4 138.7
Selling, general & administrative expenses... 91.2 100.4 90.8 93.5 107.3
Other operating expenses (2)................. -- -- 21.1 -- 7.6
Restructuring expense (3).................... 10.0 4.6 -- 6.3 --
------- ------ ------ ------ -------
Income (loss) from operations................ (23.7) (6.4) (0.6) 10.6 23.8
Interest expense............................. (41.4) (15.5) (4.5) (6.0) (6.7)
Interest income.............................. 1.9 0.3 2.2 2.9 2.1
------- ------ ------ ------ -------
Income (loss) from continuing operations
before income taxes, minority interest and
extraordinary items........................ (63.2) (21.6) (2.9) 7.5 19.2
Income tax benefit (provision)(4)............ 0.1 0.3 (0.2) (0.1) 17.6
Minority interest (5)........................ -- 0.1 (2.7) (1.1) (10.2)
Discontinued operations (6).................. (24.0) (43.2) -- -- 1.7
Extraordinary loss (7)....................... -- -- (1.5) -- (0.5)
------- ------ ------ ------ -------
Net Income (loss)............................ $ (87.1) $(64.4) $ (7.3) $ 6.3 $ 27.8
======= ====== ====== ====== =======
OTHER FINANCIAL DATA:
Depreciation and amortization................ $ 17.2 $ 12.0 $ 7.2 $ 7.6 $ 8.0
Capital expenditures......................... 5.7 7.7 14.2 12.0 12.8
Ratio of earnings to fixed charges (8)....... -- -- -- 1.4x 2.0x
BALANCE SHEET DATA:
Working capital.............................. $ 6.1 $ 41.0 $ 41.9 $ 58.1 $ 50.7
Total assets (9)............................. 360.2 169.8 193.7 188.3 216.2
Total indebtedness (9)....................... 486.8 35.0 63.8 69.0 263.7
Stockholders' equity (deficit)............... (285.2) 7.7 0.2 (0.6) (128.5)
</TABLE>
- ---------------
(1) The Company's fiscal year ends on the Saturday closest to December 31 of
each year.
(2) Other operating expenses in 1994 is comprised of a $2.5 million one-time
charge recorded by the Company to conform its method of accounting to SOP
No. 93-7 "Reporting on Advertising Costs" and $18.6 million primarily
related to curtailment and settlement losses for pension plans of previously
disposed of Lear Siegler subsidiaries." Other operating expenses in 1996 is
comprised of management Transaction bonuses of $6.9 million and estimated
costs (primarily severance) of $0.7 million to exit the activities of Lear
Siegler. See Notes 1 and 2 to the Company's Consolidated Financial
Statements and "Management's Discussion and Analysis of Financial Condition
and Results of Operations."
(3) In 1992, restructuring charges totaling approximately $10.0 million were
recorded, consisting of (i) $4.9 million for severance costs, facility
relocations and consolidation of the Company's sales and administrative
functions; (ii) $2.7 million in connection with the planned closing of 72
service center locations; and (iii) $2.4 million to cover the cost of
closing one manufacturing plant, disposition of the Company's architectural
flat glass product line and related facilities, and discontinuance of the
Company's long-haul trucking function. In 1993, the Company recorded $4.6
million in restructuring charges related to the planned closing of
approximately 70
35
<PAGE> 37
service center locations. In 1995, the Company recorded $6.3 million in
restructuring charges. Of this amount, $5.6 million related to the planned
closing of 100 service center locations and $0.7 million related to field
management reorganization. See Note 3 to the Company's Consolidated
Financial Statements and "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
(4) The adoption of SFAS No. 109, "Accounting for Income Taxes" in 1993 was not
material to the Company's consolidated results of operations or its
financial condition. During 1996, the valuation allowance provided against
the Company's deferred tax assets was reduced by $25.9 million. See Note 12
to the Company's Consolidated Financial Statements and "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
(5) The summary historical and pro forma financial information of Safelite was
prepared giving retroactive effect to the Transactions on December 20, 1996
and accounted for as a recapitalization of Safelite and in accordance with
the provisions of FASB Technical Bulletin No. 85-5. Accordingly, the common
stock ownership of Safelite held other than by Lear Siegler (primarily
management of Safelite) has been accounted for prior to the Transactions as
a minority interest.
(6) In 1992, one operating business of Lear Siegler was sold and a resulting
loss on sale of discontinued operations of $34.9 million was recognized.
1992 income from operations of this business as well as five operating
businesses sold in 1993 was $10.9 million. In 1993, five operating business
of Lear Siegler were sold and a resulting loss on sale of discontinued
operations of $45.2 million was recognized. 1993 income from operations on
such businesses was $2.0 million. In 1996, a gain from discontinued
operations totalling approximately $1.7 million was recorded, consisting of
$27.2 million in favorable resolution of various tax contingencies of
previously discontinued Lear Siegler operations offset by $25.5 million of
settlement costs for various liability issues related to previously disposed
of Lear Siegler subsidiaries.
(7) In 1994 and 1996, extraordinary losses of $1.5 million and $0.5 million,
respectively, were recorded, net of minority interest and income tax of $0.3
million and $0.3 million, respectively, as a result of expensing unamortized
loan origination fees related to the early retirement of the associated
debt.
(8) For purposes of determining the ratio of earnings to fixed charges, earnings
are defined as earnings before income taxes and cumulative effect of
accounting changes, plus fixed charges. Fixed charges consist of interest
expense on all indebtedness and capitalized interest, amortization of
deferred financing costs and one-half of rental expense on operating leases,
representing that portion of rental expense deemed by the Company to be
attributable to interest. For fiscal 1992, 1993 and 1994 the deficiency of
earnings to fixed charges was $63.2 million, $21.6 million and $2.9 million,
respectively.
(9) Reflects the purchase of approximately $12.0 million in prepaid insurance
and the buyout of approximately $4.4 million in Safelite self-insured
liabilities which were partially financed by $13.7 million in premium
financing indebtedness. The purchase and buyout were made on December 20,
1996 in connection with an insurance program put in place effective upon
completion of the Transactions. See Note 10 to the Company's Consolidated
Financial Statements.
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<PAGE> 38
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Management's discussion and analysis has been prepared giving retroactive
effect to the Transactions which were completed on December 20, 1996. The
Transactions were accounted for as a recapitalization of Safelite and in
accordance with the provisions of FASB Technical Bulletin No. 85-5 (see Note 2
to the Company's Consolidated Financial Statements). The discussion and analysis
presented below should be read in conjunction with the Consolidated Financial
Statements and related notes thereto included elsewhere in this Prospectus.
OVERVIEW
Safelite is the largest provider of auto glass replacement and repair
services in the United States. The Company's installation and related services
customers include insurance companies, commercial fleet leasing and rental car
companies, car dealerships and body shops, government agencies and individual
consumers. In addition, Safelite also acts as a subcontractor for other auto
glass replacement and repair providers. Approximately 87%, or $380.1 million, of
the Company's sales for the year ended December 28, 1996 were derived from
installation and related services sales. Of these sales, approximately 88% were
generated through the Company's own service centers, mobile vans, centralized
telephone/dispatch centers and warehouses ("service center sales"). The
remainder of installation and related services sales, or $47.5 million, for the
year ended December 28, 1996 were derived from the Company's network of
independent auto glass installation providers which install glass for Safelite
under subcontracting arrangements ("network sales").
Insurance companies represent the largest installation and related services
customer segment comprising approximately 48% and 56% of installation and
related services sales in fiscal 1995 and 1996, respectively. The implementation
of Master Provider programs in the second half of 1995 and 1996 generated a
significant increase in the Company's sales to insurance companies, with a
related increase in lower margin network sales.
The Company manufactures approximately 75% of the windshields it installs
and utilizes its excess manufacturing capacity to produce windshields for sale
into the wholesale market. Wholesale customers are primarily regional and local
auto glass replacement and repair companies. Approximately 15% and 13% of
Safelite's sales for fiscal 1995 and 1996, respectively, were derived from
wholesale sales. Safelite's strategic focus for its wholesale operations is to
maintain sales and increase overall gross margins.
The Company's costs and expenses include cost of sales and selling, general
and administrative expenses. Cost of sales includes product and distribution
costs, installation labor, service center occupancy and vehicle expenses.
Selling, general and administrative expenses include costs of the Company's
national phone centers, sales force and other general and administrative
functions.
From 1992 to 1996, the Company's sales have increased from $314.4 million
to $438.3 million, and adjusted EBITDA has increased from $16.4 million to $35.0
million. Pro forma adjusted EBITDA was $43.4 million in 1996.
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<PAGE> 39
RESULTS OF OPERATIONS
The following table reflects the Company's sales, related expenses and
earnings expressed as a percentage of sales for the periods set forth below.
<TABLE>
<CAPTION>
FISCAL YEAR
-----------------------------------
1994 1995 1996
----- ----- -----
<S> <C> <C> <C>
SALES:
Installation and related services:
Service center................................ 82.0% 80.7% 75.9%
Network....................................... 1.5 4.1 10.8
Wholesale........................................ 16.5 15.2 13.3
----- ----- -----
Total sales........................................ 100.0% 100.0% 100.0%
Cost of sales...................................... 68.9 70.3 68.4
----- ----- -----
Gross profit....................................... 31.1 29.7 31.6
Selling, general and administrative
expenses......................................... 25.4 25.1 24.5
Other operating expenses........................... 5.9 -- 1.7
Restructuring expense.............................. -- 1.7 --
Interest expense................................... (1.2) (1.6) (1.5)
Interest income.................................... 0.6 0.7 0.5
----- ----- -----
Income (loss) before income taxes.................. (0.8) 2.0 4.4
Income tax benefit (provision)..................... (0.1) -- 4.0
Minority interest.................................. (0.7) (0.3) (2.4)
Discontinued operations............................ -- -- 0.3
Extraordinary loss................................. (0.4) -- --
----- ----- -----
Net income (loss).................................. (2.0)% 1.7% 6.3%
===== ===== =====
</TABLE>
1996 Compared with 1995
Sales. Sales in 1996 increased $66.2 million, or 17.8%, to $438.3 million,
from $372.1 million in 1995. Installation and related services sales grew $64.5
million, or 20.4% to $380.1 million. Approximately half of this growth was
attributable to increased service center sales while the remaining half was
provided by increased network sales. Service center sales increases were the
result of volume improvements associated with the continued implementation of
Master Provider programs and favorable pricing achieved through improved
customer mix. The $32.3 million increase in network sales to $47.5 million was a
direct result of the growth in the Company's Master Provider programs. Under a
Master Provider program, the Company administers 100% of an insurance company's
auto glass claims and, as a result, receives more referrals and is more likely
to use its network of independent auto glass installation providers to perform
subcontract work.
Wholesale sales rose 3.0% to $58.2 million as a result of price increases
which were partially offset by a decline in unit sales of 4.4%. These results
reflect the Company's strategic shift of wholesale sales efforts towards higher
margin local auto glass accounts and away from larger, more price-sensitive
regional customers.
Gross Profit. Gross profit in 1996 increased 25.6% to $138.7 million, from
$110.4 million in 1995. Gross profit margin increased to 31.6% in 1996, from
29.7% in 1995. This improvement in gross profit margin was primarily the result
of increased service center sales volume, higher prices, and reductions in the
Company's fixed cost structure as a result of the 1995 restructuring activities.
These improvements in gross profit margin were partially offset by increases in
the lower-margin network sales.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses rose 14.8% in 1996 to $107.3 million. As a percentage of
net sales, selling, general and administrative expenses declined to 24.5% from
25.1%. The overall increase in selling, general and administrative
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<PAGE> 40
expenses was related to the opening of the Company's third national phone
center, increased staffing to support the rapid growth in network sales and
higher incentive compensation. The decline in selling, general and
administrative expenses as a percentage of sales is a result of increased total
sales and the benefits of the Company's improved operating leverage.
Income Before Income Taxes. Income before income taxes increased 156.0% to
$19.2 million in 1996, from $7.5 million in 1995. Income before income taxes
increased from 2.0% of total sales to 4.4% of total sales as a result of the
improved gross profit margins and a decline in selling, general and
administrative expenses as a percentage of total sales described above,
partially offset by one-time charges for management transaction bonuses of $6.9
million and estimated costs (primarily severance) of $0.7 million to exit the
activities of Lear Siegler.
Income Taxes. In 1996, the Company recorded a credit provision for income
taxes of $17.6 million primarily as a result of reversing a valuation allowance
for certain deferred tax assets in accordance with the provisions of SFAS No.
109 and in recognition of the Company's improved profitability.
Net Income. The increase in net income to $27.8 million from $6.3 million
in 1995 was due primarily to the changes in income before taxes and the reversal
of the deferred tax valuation allowance described above, offset by an increase
in 1996 in the deduction for minority interest earnings of $9.1 million. Also
affecting net income in 1996 was a $1.7 million gain, related to Lear Siegler
discontinued operations. See Note 14 to the Company's consolidated financial
statements.
1995 Compared with 1994
Sales. Sales in 1995 increased 4.1% to $372.1 million from $357.4 million
in 1994. Installation and related services sales grew $17.1 million, or 5.7%.
Approximately half of this growth was from increased service center sales and
half was from increased network sales. Sales increases were primarily driven by
volume improvements associated with the initiation of Master Provider programs
in 1995. Industry unit volumes in 1995 were lower compared to the high unit
volumes in 1994 attributable to the harsh winter that year. Despite the more
moderate winter in 1995, the Company experienced year-over-year sales and unit
increases.
Wholesale sales declined 3.9% to $56.5 million reflecting the market
conditions discussed above.
Gross Profit. Gross profit in 1995 declined 0.8% to $110.4 million from
$111.3 million in 1994. Gross profit margin decreased as a percentage of sales
to 29.7% from 31.1% in 1994. The decline in gross profit as a percentage of
sales was caused by a higher mix of lower margin network sales and expenditures
made by the Company in anticipation of the Master Provider program
implementations.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased 3.0% in 1995 to $93.5 million. As a percentage
of sales, selling, general and administrative expenses decreased from 25.4% to
25.1% due to increased total sales and a decline in administrative costs
associated with Lear Siegler. The decline in Lear Siegler administration costs
was partially offset by higher telecommunications costs and the establishment of
a second national phone center related to the commencement of the MP program.
Income Before Income Taxes. Income before income taxes increased to $7.5
million in 1995 from a loss of $2.9 million in 1994. This increase was due
primarily to a reduction in other operating expenses from 1994 offset by (i) the
decrease in gross profit margin and increase in selling, general and
administrative expenses described above, and (ii) the recording of $5.6 million
in restructuring charges associated with the planned closing of 100 service
center locations and $0.7 million in related field reorganization expenses. See
"-- Restructuring Charges." Other operating expenses in 1994 consisted of a $2.5
million one-time charge recorded by the Company to conform its method of
accounting to SOP Number 93-7, "Reporting on Advertising Costs," and a charge of
$18.6 million primarily related to curtailment and settlement losses for pension
plans of previously disposed of Lear Siegler subsidiaries.
Net Income. The increase in net income to $6.3 million in 1995 from a $7.3
million loss in 1994 was due to the changes in income before income taxes
discussed above and a decrease in the 1995
39
<PAGE> 41
deduction for minority interest earnings of $1.6 million, partially offset by an
extraordinary loss of $1.5 million recorded in 1994 to expense unamortized loan
origination fees related to the early retirement of debt.
RESTRUCTURING CHARGES
During the period 1987 through 1990, the Company grew through acquisitions
and service center openings. In late 1991, the new management team undertook a
comprehensive review of the Company's operations. The new management team
recognized that insurance companies and large fleet owners were responsible for
the majority of auto glass replacement purchasing decisions in the U.S. and
focused the Company on providing a total claims management solution. In
addition, the Company reorganized its national network by introducing
sophisticated information systems that permitted the Company to close redundant
service center locations and consolidate certain administrative functions. The
initiatives associated with the execution of the Company's new strategy and
closing of non-strategic operations resulted in restructuring charges in fiscal
1992, 1993 and 1995.
In 1992, the Company recorded restructuring charges totaling approximately
$10.0 million consisting of (i) $4.9 million for severance costs, facility
relocations and consolidation of the Company's sales and administrative
functions; (ii) $2.7 million in connection with the planned closing of 72
service center locations; and (iii) $2.4 million to cover the cost of closing
one manufacturing plant, disposition of the Company's architectural flat glass
product line and related facilities, and discontinuance of the Company's
long-haul trucking function. In 1993, the Company recorded $4.6 million in
restructuring charges related to the planned closing of approximately 70 service
center locations. In 1995, the Company recorded restructuring charges of $5.6
million related to the planned closing of 100 service center locations and $0.7
million related to field management reorganization. Management believes that it
has completed its restructuring activities and does not anticipate any
additional restructuring charges. There were no restructuring charges during
1996. See Note 3 to the Company's Consolidated Financial Statements.
EFFECTIVE INCOME TAX RATE
The Company recorded a net income tax benefit of $17.6 million for fiscal
year 1996. This tax benefit resulted primarily from a reduction in the valuation
allowance relating to net operating loss carryforwards generated prior to 1994.
The reduction in the valuation allowance was based upon management's review of
the Company's historical and current pre-tax earnings, giving effect to
adjustments and limitations resulting from the Transactions. Based upon this
review, management believes that the Company will realize the benefit of a
portion of its existing deductible temporary differences. Accordingly, the
valuation allowance was reduced in 1996 by $25.9 million. See Note 12 to the
Company's Consolidated Financial Statements. Based on management's current
projections, management expects that an increase in interest expense which will
occur as a result of the Transactions combined with the Company's net operating
loss carryforwards may result in reduced Federal cash tax liabilities for a
period of up to 11 years.
EFFECTS OF INFLATION
Inflation has not been material to the Company's operations for the periods
presented.
40
<PAGE> 42
QUARTERLY DATA
The following table sets forth the Company's quarterly sales for fiscal
1994, 1995 and 1996.
NET SALES
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
1994 1995 1996
----------------- ----------------- -----------------
SALES % SALES % SALES %
------ --- ------ --- ------ ---
<S> <C> <C> <C> <C> <C> <C>
First Quarter........................................ $ 91.4 25% $ 85.6 23% $102.9 24%
Second Quarter....................................... 96.9 27 99.0 26 122.0 28
Third Quarter........................................ 92.2 26 99.5 27 115.8 26
Fourth Quarter....................................... 76.9 22 88.0 24 97.6 22
====== === ====== === ====== ===
Total Annual....................................... $357.4 100% $372.1 100% $438.3 100%
</TABLE>
Historically, the Company has experienced seasonal variations in revenues,
with lower revenues typically reported in the fourth quarter. See "-- Effect of
Weather Conditions; Seasonal Earnings."
EFFECT OF WEATHER CONDITIONS; SEASONAL EARNINGS
The severity of weather has historically affected the Company's sales and
operating income, with severe winters generating increased sales and income and
mild winters generating lower sales and income. Accordingly, mild weather
conditions may adversely affect the Company's results of operations.
The Company's business is somewhat seasonal, with the fourth quarter
traditionally its slowest period of activity. This reduced level of sales in the
fourth quarter has resulted in a disproportionate decline in EBITDA during the
fourth quarter due to the Company's significant operating leverage. The Company
believes such seasonal trends will continue for the foreseeable future.
ENVIRONMENTAL AND PRODUCT LIABILITIES
Current and former subsidiaries of Lear Siegler engaged in a wide variety
of manufacturing activities. While Lear Siegler and its current subsidiaries no
longer engage in manufacturing or selling activities, their former activities
and the activities of former subsidiaries exposed Lear Siegler to a variety of
potential environmental liabilities and asbestos and non-asbestos product
liability claims. See "Risk Factors -- Potential Liabilities of Non-Operating
Subsidiaries.
LIQUIDITY AND CAPITAL RESOURCES
Net cash used in operating activities for 1996 was ($2.3) million, an
increase in operating cash flow of $7.2 million from 1995. Excluding cash flows
used to settle Lear Siegler pension plan liabilities in 1995 and Lear Siegler
discontinued operations in 1996, the increase in cash flows was $17.8 million.
This $17.8 million improvement in cash flow was primarily due to improvements in
operating income and improved accounts receivable management, offset by the
purchase of insurance liability coverage for 1997 through 1999 for approximately
$12 million. Net cash used in operating activities in 1995 totaled ($9.5)
million, a decrease in operating cash flow of $15.9 million from the prior year.
This decrease was primarily a result of lower income from Safelite operations
combined with $11.0 million in cash payments related to the settlement of
pension liabilities of Lear Siegler discontinued operations.
The Company's investing activities consist mainly of capital expenditures
for new and existing service center and warehouse locations, capacity and
efficiency upgrades to manufacturing facilities, as well as information
technology equipment. Capital expenditures totaled $12.8 million, $12.0 million,
and $14.2 million for fiscal years 1996, 1995, and 1994, respectively. The
increased capital spending in 1994 reflects the Company's investment in
centralized DCC/CTUs. Included in 1995 capital spending is $3.5 million for the
purchase and renovation of the Company's manufacturing/distribution facilities
in Wichita, Kansas. The level of 1996 capital spending reflects expansion of
service center and warehouse coverage into new markets as well as upgrades to
the Company's manufacturing facilities. Management expects
41
<PAGE> 43
future capital spending levels to be consistent with historic amounts. Of those
amounts, management estimates maintenance levels of capital expenditures to be
approximately $6 million.
Historically, the Company has utilized internally generated funds and
borrowings under credit facilities to meet ongoing working capital and capital
expenditure requirements. In connection with the Transactions, the Company
incurred new indebtedness aggregating approximately $250 million. Substantially
all of the proceeds of such indebtedness was used to refinance existing debt, to
pay Merger consideration and to pay bonuses, fees and expenses related to the
Transactions. See "The Transactions."
As a result of the Transactions, the Company has significantly increased
cash requirements for debt service relating to the Notes and the Senior Credit
Facilities. See "Description of Other Indebtedness" for a description of the
amortization of the Term Loan Facility. The Company will rely on internally
generated funds and, to the extent necessary, on borrowings under the Revolving
Credit Facility, which provides for borrowings up to $30.0 million, to meet its
liquidity needs. At December 28, 1996, the Company had long-term borrowings of
$263.7 million and $30.0 million of availability under the Revolving Credit
Facility (less $4.9 million in letters of credit outstanding).
The Recapitalization Agreement restricts Lear Siegler's ability to
distribute cash or other assets to Safelite or Safelite's non-Lear Siegler
subsidiaries. Accordingly, cash and assets of Lear Siegler will not be available
to satisfy the obligations of the Company (other than those of Lear Siegler),
including the Notes.
Management believes that based on the current level of operations and
anticipated internal growth, cash flow from operations, together with other
available sources of funds, including borrowings under the Revolving Credit
Facility, will be adequate to make required payments of principal and interest
on the Company's indebtedness and to fund anticipated capital expenditures and
working capital requirements. However, actual capital requirements may change.
The ability of the Company to meet its debt service obligations and reduce its
total debt will be dependent on the future performance of the Company, which in
turn, will be subject to general economic conditions and to financial, business,
and other factors, including factors beyond the Company's control. A portion of
the Company's debt bears interest at floating rates; therefore, its financial
condition is and will continue to be affected by changes in prevailing interest
rates.
CHANGES IN ACCOUNTING STANDARDS
In March 1995, the Financial Accounting Standards Board (FASB) issued SFAS
No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed Of," which is effective for fiscal years beginning after
December 15, 1995. The adoption of this standard had no material effect on the
Company's consolidated results of operations or its financial condition.
In 1993, the Company adopted SFAS No. 109, "Accounting for Income Taxes."
The adoption of this standard had no material effect on the Company's 1993
consolidated results of operations or its financial condition.
In October 1995, FASB issued SFAS No. 123, "Accounting for Stock-Based
Compensation" which was effective for fiscal year 1996. The Company elected in
1996 to continue to account for stock based compensation using the intrinsic
value based method of accounting prescribed by APB Opinion No. 25. Therefore the
adoption of SFAS No. 123 had no effect on the Company's 1996 consolidated
results of operations or its financial condition.
42
<PAGE> 44
BUSINESS
COMPANY OVERVIEW
Safelite is the largest provider of auto glass replacement and repair
services in the United States. The Company installed approximately 1.6 million
replacement units in 1996 for insurance companies, commercial fleet leasing and
rental car companies, car dealerships and body shops, government agencies and
individual consumers. The Company provides these installation services through
its network of 491 service centers, approximately 1,000 mobile vans, 43
centralized telephone/dispatch centers and 66 warehouses. The Company has
targeted its marketing efforts principally towards auto insurance companies
which management believes, through their policyholders, directly or indirectly
influence approximately 70% of the selections of auto glass replacement
providers. The Company has developed fully integrated claims processing
solutions for auto insurance companies which reduce their glass loss expenses
and total administrative costs and provide a higher level of customer service to
their policyholders. Management believes that this outsourcing capability,
coupled with the convenience of nationwide coverage, consistently high quality
service and low costs, have provided the Company with a significant competitive
advantage in the insurance segment of the market. Since 1992, the Company
estimates that it has increased its leading market share in this segment from
approximately 10% to 18% resulting in improved financial performance as
demonstrated by compound annual growth in sales and adjusted EBITDA (as defined)
of 8.6% and 21% respectively, from 1992 to 1996. Sales and adjusted EBITDA for
the year ended December 28, 1996 were $438.3 million and $35.0 million,
respectively. Pro forma adjusted EBITDA for the year ended December 28, 1996 was
$43.4 million.
COMPETITIVE STRENGTHS
Industry Leadership and Nationwide Coverage. Safelite is the largest
competitor in the highly fragmented auto glass replacement and repair industry.
The Company operates service centers in 95 of the top 100 Metropolitan
Statistical Areas ("MSAs") in the United States, with its closest competitor,
the Company believes, operating in 75 MSAs. Through its nationwide network, the
Company can directly serve 70% of the cars and light trucks in the United States
and, through its authorized independent installation centers, achieves 100%
coverage. Management believes that the Company's leadership position and breadth
of geographic coverage is a significant competitive advantage in working with
insurance companies, commercial fleet lessors and other large customers which
increasingly demand consistent quality in both claims processing and auto glass
repair and replacement services on a nationwide basis.
Strong, Established Relationships with Major Insurance Companies. The
Company has successfully established strong relationships with the nation's
major auto insurance companies, and management believes it has more program
relationships with these companies than any of its competitors. The top 30 auto
insurers represent approximately 70% of total auto insurance premiums written in
the United States. Safelite has entered into Total Customer Solution ("TCS")
arrangements with 24 of those insurers including State Farm Mutual Automobile
Insurance, Farmers Insurance Group, United Services Automobile Association,
Prudential Insurance Company of America, Travelers Group and Safeco Corporation.
Under a TCS arrangement, Safelite typically serves as one of a few recommended
auto glass replacement providers for an insurance company and provides a range
of additional claims management services including computerized referral
management, policyholder call management, electronic auditing and billing
services and management reporting. Of the Company's total 41 TCS arrangements,
those with Nationwide Mutual Insurance Company, GEICO Corporation, Liberty
Mutual Insurance Company, CNA Insurance Group, Metropolitan Property and
Casualty Insurance Company and National General Insurance are also Master
Provider ("MP") relationships. Under an MP program, Safelite administers 100% of
an insurance company's auto glass claims. As sole administrator, Safelite
administers the allocation of the auto glass replacement business between
Safelite and other approved providers based on the insurance company's
predetermined criteria. TCS and MP programs significantly lower the processing
costs and loss expenses for the insurance companies, provide more consistent and
rapid service for policyholders,
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<PAGE> 45
and increase Safelite's volume with each insurance account. In addition, the
Company has entered into similar arrangements with major fleet and rental car
companies including GE Capital Fleet Services, PHH Vehicle Management Services
Corporation, USL Capital Fleet Services, Hertz Corporation and Budget Rent-A-Car
Systems, Inc. Of these arrangements, those with PHH Vehicle Management and USL
Capital Fleet are also MP relationships. By entering into these arrangements
with insurance, fleet and rental car companies, Safelite has substantially
increased its volume with these accounts and enhanced its base of recurring
revenues.
Low Cost Provider. Management believes the Company has a significant total
cost advantage compared to its competitors as a result of its manufacturing
facilities, its productivity incentive programs, the efficiency of its
nationwide distribution network and the critical mass of its centralized
customer service, claims processing and information network. Safelite is the
only industry competitor to manufacture a substantial percentage of its
replacement glass. Safelite produces only high volume units to maximize
efficiency, manufacturing approximately 75% of its windshield requirements at
two production sites. The Company utilizes excess manufacturing capacity to
produce windshields for sale in the wholesale market and purchases low volume
units. The Company's management estimates that its performance incentive program
has increased the productivity of its installation associates from 2.5
installations per day in 1991 to 3.9 per day in 1996 (while the industry
averages an estimated 3.0 installations per day). As a result of the significant
economies of scale in its manufacturing, information systems, distribution and
installation infrastructure, management believes it has the capacity to add
incremental contracts and units at relatively low marginal cost.
Sophisticated Information Systems. The Company's information systems allow
Safelite to effectively handle all aspects of an insured auto glass claim, from
the initial phone call placed by the insured policyholder to the automatic
billing of the insurance company. Through Safelite's fully integrated network
("SAFENET[Trademark]"), the Company can provide full service to the
policyholder by electronically accessing the insurance company's database,
verifying the policyholder's coverage status, scheduling the glass
installation, checking relevant inventories, ordering delivery (when necessary)
of auto glass to a Safelite service center, repairing or replacing the glass,
electronically billing the insurance company and, if applicable, paying the
service providers. The insurance company's role is limited to funding the claim
payment and updating its policy files. The Company's information systems can
also generate detailed financial and operating performance statistics,
comprehensively track and report customer satisfaction and monitor speed of
service for its customers. Management believes the Company's information
systems represent an important competitive advantage for Safelite.
Proven Management Team. Garen K. Staglin, Chairman and CEO and John F.
Barlow, President and COO, joined Safelite in late 1991. Messrs. Staglin and
Barlow hired and developed a team of executives who brought to the Company
experience in insurance claims processing and the automotive aftermarket. In
late 1991, the new management team undertook a comprehensive review of the
Company's operations. This review resulted in a shift in Safelite's strategy
towards its key markets. In addition, the new management team recognized that
insurance companies and large fleet owners were responsible for the majority of
auto glass replacement purchasing decisions in the U.S. and focused the Company
on providing a total claims management solution. The initiatives associated with
the execution of the Company's strategies resulted in restructuring charges in
fiscal 1992, 1993 and 1995 of $10.0 million, $4.6 million and $6.3 million,
respectively. From 1992, the first full year of operations under the current
management team, to 1996, the Company's sales and adjusted EBITDA have increased
from $314.4 million to $438.3 million and from $16.4 million to $35.0 million,
respectively, growing at compound annual rates of 8.6% and 21%, respectively.
Pro forma adjusted EBITDA for the year ended December 28, 1996 was $43.4
million.
STRATEGIES FOR GROWTH
Expand and Enhance Relationships with Insurance Companies. The Company's
principal growth strategy is to increase its share in the segment of the auto
glass replacement and repair market
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<PAGE> 46
influenced by the insurance companies by expanding the breadth and depth of its
existing relationships. The Company currently provides its auto glass
replacement and repair services for the policyholders of virtually every
significant auto insurance company in the U.S. The Company focuses its marketing
and sales strategy on demonstrating to insurance companies that as it processes
increasing proportions of an insurance company's auto glass replacement and
repair claims it can continue to reduce the loss expenses and administrative
costs of such claims for the insurance company while improving policyholder
satisfaction through faster, more reliable and consistent installation service.
Specifically, Safelite seeks to convert existing insurance company relationships
into TCS arrangements, achieve greater allocations of existing TCS arrangements
and ultimately migrate TCS arrangements to MP relationships, each of which
increases the Company's sales.
The Company believes it has been successful in implementing this strategy
of "program migration" for insurance company clients. During 1995, the Company
established MP relationships with three leading insurance companies, and in
1996, sales to those customers have increased approximately 157% ($38.5 million)
over 1995. In addition, sales to the Company's other 21 TCS clients which rank
among the top 30 auto insurers increased approximately 17% ($15.7 million),
while sales to all other insurance clients increased approximately 11% ($3.9
million). The Company is currently in discussions with a number of insurance
companies to enter into TCS arrangements and MP relationships and announced a
new MP program with GEICO Corporation, one of its principal TCS customers, in
early 1997. Management also focuses on a similar program migration strategy with
its large fleet and rental car company customers.
In addition to program migration, the Company seeks to grow its sales
through improved policyholder "compliance" with an insurance company's auto
glass referral program. An auto insurance policyholder has the freedom to choose
its own auto glass replacement provider, rather than comply with the insurer's
recommendations. As a result, Safelite may actually perform a lower proportion
of an insurance customer's installations than the insurance company would
otherwise recommend under the TCS or MP program. Management believes that over
time Safelite can improve compliance within its existing TCS and MP programs
through continued demonstration of the program's benefits, resulting in
increased sales and profitability.
Expand Nationwide Coverage. The Company plans to expand the scope of its
nationwide network by selectively acquiring regional auto glass replacement and
repair businesses and opening new service center locations. The Company believes
that it can enhance its sales and operating results through integration of
well-targeted acquisitions into Safelite's nationwide network. In addition, the
Company expects to open 10 to 20 additional service centers annually to
complement its existing network.
Provide Additional Outsourcing Services to Insurance and Fleet
Companies. Management believes that Safelite can leverage its existing customer
relationships and claims processing infrastructure to provide outsourcing
services in addition to auto glass replacement, such as pre-insurance vehicle
inspection, towing referral and post-collision rental car referral. Similar to
auto glass replacement, these services are characterized by significant
administrative burdens, high processing costs and low dollar loss values. The
Company is evaluating plans to offer these services as a natural extension of
its core auto glass business.
INDUSTRY OVERVIEW
The market consists of two segments, the manufacture and sale of auto glass
to large original equipment manufacturers ("OEMs") and the manufacturing and
installation of auto glass for the replacement market. The OEM market is
generally characterized as a high-volume, manufacturing intensive industry. By
contrast, the auto glass replacement market consists of service providers
focused on providing auto glass replacement installation to a broad base of
institutional and individual customers. Replacement auto glass is generally
purchased by installers from large OEM suppliers in the wholesale market.
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The auto glass replacement and repair industry in 1996 was an approximately
$2.7 billion industry representing the installation of approximately 12.5
million replacement units. The replacement and repair of auto glass is driven by
the incidence of breakage. The market for the installation of replacement auto
glass is highly fragmented with over 20,000 providers of auto glass replacement
services. Many competitors in the industry are small "mom & pop" installers who
do not have either the national networks or sophisticated information systems
required to effectively compete in a national market. From 1990 to 1996, the
industry has been consolidating as evidenced by an increase in market share for
the top three industry participants from an estimated 24% to an estimated 30%
while the market share for small "mom and pop" providers declined from an
estimated 70% to an estimated 60% during the same period. Management expects
this consolidation to continue, as insurance companies and large fleet lessors
require nationwide coverage and more consistent service while seeking to reduce
costs by outsourcing their auto glass claims. See "-- Customers -- Installation
Customers."
Over the past 10 years, management estimates that total industry sales have
grown at approximately 4% per year. Revenue growth has been due primarily to an
increase in the aggregate number of vehicles on the road, from approximately 157
million units in 1985 to approximately 193 million units in 1995 and the
increasing number of miles driven per year, from approximately 1.8 billion miles
in 1985 to 2.2 billion miles in 1995. Growth in industry sales have also been
driven by price increases which principally reflect the increasing size and
design complexity of auto glass. In the aggregate, industry growth has been
fairly consistent, with some variation resulting primarily from year-to-year
fluctuations in weather conditions.
Customers in the auto glass replacement industry include auto insurance
companies, commercial fleet leasing companies, rental car companies, car
dealerships, body shops, governmental agencies and individual consumers.
Insurance companies represent the largest segment of the market as a result
of their payment of replacement auto glass claims for their policyholders. The
Company believes that insurance companies through their policyholders, directly
or indirectly, influence approximately 70% of the selections of auto glass
replacement providers. As a result of this influence, insurance companies
represent the most important segment of the auto glass replacement market. Auto
insurance companies have been under pressure to improve policyholder service,
while simultaneously reducing their operating expenses. As a result, the
outsourcing of certain functions associated with high volume and low dollar
payouts is gaining increasing acceptance within the insurance industry. Auto
glass repair and replacement claims represent a disproportionate administrative
burden. Management estimates such claims account for less than 6% of the dollar
value of all auto claims paid but over 30% of the total number of auto claims
processed. By outsourcing the claims management function and spreading the costs
over a larger claims base, insurance companies can eliminate an estimated
$50-$100 of processing costs per claim. In addition, insurance companies can
reduce their loss severity through lower per unit pricing, and improved repair
ratios.
PRICING
The price of replacement auto glass is related to the list prices developed
by the National Auto Glass Specification ("NAGS"), an independent third party.
Changes to the NAGS list prices generally follow the wholesale price increases
announced by the OEMs. Prices charged in the auto glass replacement industry are
calculated using varying percentage discounts from the NAGS price list. Actual
revenue per unit ("RPU") charged in the industry has generally been increasing
as a result of increases in the NAGS list price, the increasing design
complexity of auto glass and the increasing level of claims processing services
associated with insurance-related replacement auto glass purchases.
CUSTOMERS
Safelite has a broad customer base across two primary segments: (i)
installation and related services and (ii) wholesale customers. The Company's
largest customer base is insurance companies, generating approximately 49% of
total sales for the year ending December 28, 1996 and 41% of total
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<PAGE> 48
sales in fiscal 1995. Safelite's top ten customers accounted for approximately
39% and 35% of the Company's consolidated sales in 1996 and 1995, respectively,
and no customer accounted for more than 10% of the Company's consolidated sales
during such years.
INSTALLATION CUSTOMERS. The Company's installation and related services
customers are described as follows:
Insurance. Insurance companies represent Safelite's primary area of
strategic focus. Safelite has aggressively pursued this customer group and is
the leader in this market with an industry-leading share currently estimated to
be 18%. From 1993 to 1996, the Company's sales to this market segment have grown
at a compound annual rate of approximately 18%. The Company has developed fully
integrated claims processing solutions for auto insurance companies which reduce
their glass loss expenses and total administrative costs and provide a higher
level of customer service to their policyholders. Management believes this
outsourcing capability, coupled with the convenience of nationwide coverage,
consistently high quality service and low costs, have provided the Company with
a significant competitive advantage in the insurance-influenced segment of the
market.
The Company has developed Total Customer Solution arrangements and Master
Provider relationships to service its auto insurance company customers. Under a
TCS arrangement, Safelite serves as one of a few recommended auto glass
replacement providers for an insurance company and typically provides a range of
additional claims management services including computerized referral
management, policyholder call management, electronic auditing and billing
services and management reporting. Under an MP program, Safelite administers
100% of an insurance company's auto glass claims. As sole administrator,
Safelite manages the allocation of the auto glass replacement business between
Safelite and other approved providers based on the insurance company's
predetermined criteria. The Company currently provides its auto glass
replacement and repair services for the policyholders of virtually every
significant auto insurance company in the U.S.
Following is a list of the Company's top insurance company customers ranked
by total auto insurance premiums written for 1995:
<TABLE>
<CAPTION>
MARKET POSITION NAME AUTO PREMIUMS WRITTEN
- --------------- ---- ---------------------
(DOLLARS IN BILLIONS)
<S> <C> <C>
1 State Farm................................................ $23.2
3 Farmers................................................... 6.3
4 Nationwide................................................ 4.4
5 USAA...................................................... 3.4
7 GEICO..................................................... 2.7
8 Liberty Mutual............................................ 2.1
9 CNA....................................................... 2.0
14 Prudential................................................ 1.5
20 Safeco.................................................... 1.2
21 Metropolitan.............................................. 1.1
</TABLE>
Source: Best's Review, October 1996
The Company believes that its ability to provide complete claims
outsourcing and a consistent level of high quality service on a nationwide basis
will continue to make it an attractive partner for the insurance industry.
Consumer. The Company defines consumers as cash and credit card customers.
Much of this business occurs on a "walk-in" basis as a result of Yellow Pages
advertising and insurance referrals. Safelite believes that its 43 Dispatch
Command Center/Central Telephone Units ("DCC/CTUs") enable the Company to close
more of these consumer sales by using scripted Customer Service Representa-
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<PAGE> 49
tives ("CSRs") and offering the most comprehensive mobile and in-store service
at competitive prices. This segment does not include individuals who file a
claim to be paid by insurance companies.
Dealer. The dealer segment is comprised of new and used car dealerships
and body shops. Sales are generated largely by the Company's experienced field
sales force, which is the largest in the industry. Safelite has dedicated
Customer Service Representatives at several DCC/CTU locations who only handle
customers in the dealer segment. Dealers generally request auto glass repair and
replacement services for work being done at their captive repair shops, and, to
a lesser extent, for mishaps with their car inventories. Body shops generally
perform their own installations.
Rental Car. The Company has national account relationships with most large
rental car companies, including significant arrangements with Budget Rent-A-Car
and Hertz. Management estimates that Safelite replaces over 90% of both Budget's
and Hertz's units. Customers in this segment are served in a cost effective
manner, with multiple jobs completed during a single visit to the customer's
rental car lot.
Fleet. Safelite has national account relationships with the major
commercial fleet lessors, including GE Capital Fleet, PHH Vehicle Management and
USL Capital Fleet. Of these, the Company has established Master Provider
relationships with PHH Vehicle Management and USL Capital Fleet. As fleet
companies concentrate their sales with a smaller group of providers who can
satisfy requirements for nationwide service and more sophisticated systems,
Safelite believes it is well positioned to increase its market share in this
segment. By outsourcing their auto glass replacement needs, large fleet
customers are able to take advantage of many of the same benefits provided to
Safelite's insurance clients, including lower costs and better service.
Subcontract. The subcontract segment represents business which is
subcontracted to Safelite by other glass companies. Safelite is an attractive
subcontractor because of its broad geographic coverage and ability to deliver
rapid and consistent service. In addition, Safelite's fully-automated systems
and top quality reputation make the Company an attractive business partner.
Government. The government segment includes sales to state and local
government agencies such as police and highway departments.
WHOLESALE CUSTOMERS. The Company utilizes its excess manufacturing
capacity to produce windshields sold into the wholesale market. Wholesale
customers include other auto glass replacement companies and distributors.
Almost all of the Company's wholesale customers are in the United States. The
Company's wholesale volume allows Safelite to maximize the efficiency of its
manufacturing facilities. As the Company grows its higher margin insurance
business, however, management expects the wholesale business to decline as a
percent of total sales.
OPERATIONS
SALES AND MARKETING. Safelite's sales organization, with 181 associates,
is the largest in the industry. The Company's sales associates are highly
trained and use a team selling approach when interacting with customers.
Safelite has 13 national "strategic account" representatives. These individuals
have built relationships with the major insurance, fleet and rental car company
decision makers and average 15 years of industry experience. The strategic
account representative system is designed to establish an environment of
confidence that positions Safelite to become the sole administrator for an
insurance company's glass claims. Safelite also utilizes 168 field sales
representatives to educate local insurance agents on the benefits of using
Safelite. The field sales representatives have been a critical component in
increasing compliance with insurance company auto glass programs.
PRICING. Safelite has a reputation for providing innovative pricing
solutions to its customers. Safelite's low cost position enables the Company to
be competitive on price. In addition, the Company's TCS and MP programs have
shifted the emphasis for auto insurance companies away from the price of an
installation to the all-in cost of an auto glass claim. The Company's prices are
generally calculated using a percentage discount from the NAGS price list.
Windshields carry higher unit prices than curved tempered glass, and glass parts
used in newer vehicle models tend to carry higher list prices than those used in
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<PAGE> 50
older models. In addition, due to the higher levels of service required for
outsourcing programs, insurance and fleet claims typically have a higher average
revenue per unit ("RPU"). Overall, Safelite's average RPU has increased from
$178 in 1992 to $221 in 1996, a compound annual growth rate of 5%.
CLAIMS MANAGEMENT PROCESS. Safelite is an industry leader in using
information systems and technology to improve customer service and better manage
its business. The Company's fully integrated network, SAFENET[Trademark],
connects its service centers, vans, central telephone units, warehouses and
distribution centers and provides associates with "real time" data for customer
information, scheduling, billing, sales and inventory management. The Company's
43 centralized DCC/CTU locations and three 24-hour National Referral Centers
serve as the local market "hubs," are strategically located in the Company's
major markets and receive "real time" data from SAFENET[Trademark].
Approximately 70% of the Company's total customer calls are routed to one of
the National Referral Centers or DCC/CTUs.
The Company's three National Referral Centers in Columbus, Ohio have
capacity for up to 2.5 million calls per year. These facilities provide overflow
capacity for local CTU operations and handle almost 65% and 35% respectively, of
the Company's auto insurance and fleet calls. Each auto insurance company that
outsources auto glass claims with Safelite receives a dedicated "1-800" number
which connects directly into one of the National Referral Centers.
At each of the Company's National Referral Centers and DCC/CTUs,
professional, scripted CSRs answer customer calls and input directly into a
computer the information necessary to schedule an installation, complete the
paperwork, order the glass and deliver it to the service location and issue
billing. Unlike any of its competitors, the Safelite CSRs can access scheduling
information for their entire local market of service centers and vans, as well
as monitor inventory levels to determine glass availability. Using
SAFENET[Trademark], the CSRs can schedule the customer at the most convenient
service center location and electronically send the customer's information to
the service center computer or arrange mobile van service. If there is no
nearby Safelite location, the CSRs can schedule the customer through one of the
Company's 3,000 authorized independent installation centers. On average, over
90% of Safelite's installations are done through a company owned service center
or mobile van. Safelite's DCC/CTUs operate extended evening and weekend hours,
enabling customers to make appointments with Safelite when many competitors are
closed. The National Referral Centers operate on a 24-hour per day basis.
Once the CSR schedules an appointment, the piece of glass is automatically
ordered and dispatched. The glass is loaded from the warehouse, which is
co-located with the DCC/CTU, onto a Glassmobile for mobile installation or
delivery to the appropriate service center location. The inventory movement is
recorded electronically by the SAFENET[Trademark] point-of-sale system. Based on
predetermined "optimal" inventory levels for each SKU at each warehouse, the
sale of a windshield automatically sends an order request to the distribution
center and manufacturing request to the production floor. The Company maintains
the majority of its inventory at its distribution centers and warehouses
(instead of at the service centers) in order to minimize inventory levels and
maximize flexibility/speed of delivery.
In addition to providing an integrated delivery system, SAFENET[Trademark]
also provides management and Safelite's customers with valuable information.
This "real time" data allows Safelite to track and monitor important statistics
including customer satisfaction, length of call, and speed of installation.
Safelite uses this data to improve its customer service and provide
comprehensive monthly management reports for its large insurance customers.
Reports include information which the insurance companies do not otherwise have
access to, including statistics on number of claims, price per claim and
percent of repairs versus replacement. Safelite believes it is the only company
in the industry currently providing such reports.
DISTRIBUTION. The Company has a three tiered distribution system which
enables Safelite to better serve its customers and minimize its inventory
levels. Two central distribution facilities are located at the Company's
manufacturing facilities in Enfield, North Carolina and Wichita, Kansas. These
central distribution facilities send inventory to the Company's 66 regional
warehouses (23 free-standing warehouses and 43 co-located with the Company's
CTUs). These facilities can then quickly and accurately stock the service
centers and vans in their local markets on an as-needed basis.
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<PAGE> 51
The Company's distribution system has been structured to optimize speed and
efficiency. Trucks pick up windshields from the distribution centers and follow
a fixed route schedule, making delivery stops at the Company's warehouses and
wholesale customers at almost exactly the same time each week. The same trucks
then pick up raw glass from the Company's suppliers and back haul it to
Safelite's central distribution facilities.
The back hauling process lowers Safelite's freight costs for its raw glass,
as Safelite is able to move the goods less expensively than its suppliers'
delivery rates. Safelite believes that its modern distribution centers are among
the lowest cost in the industry, and management believes the Company can double
the volume through its distribution centers with limited additional capital
investment.
MANUFACTURING. Safelite is the only full-scale vertically integrated auto
glass replacement company in the U.S., producing 75% of its windshield needs at
its two manufacturing plants in Enfield, North Carolina and Wichita, Kansas. The
Enfield facility encompasses 70,000 square feet of manufacturing space and has
an annual capacity of one million units. The Company recently reconfigured the
Enfield facility, doubling its capacity and improving operating efficiency. The
Wichita facility encompasses 66,000 square feet with an annual production
capacity of over 600,000 units.
Safelite produces only high-volume windshield models, manufacturing 550 of
the total 2,800 active windshield parts available in the industry. When a new
automobile model is introduced, Safelite waits until it has been on the market
for a year in order to assess the sales trends and estimate future windshield
demand. The Company then designs selected windshield models through a process of
reverse engineering. The manufacturing process is described as follows:
Cutting. Both the Enfield and Wichita plants have numerically controlled
(computer programmable) cutting machines and automated machines which follow a
cutting ring tool. Two pieces of glass are cut for each windshield; the outer
piece is slightly larger than the inner piece (they are later equalized in the
bending process). After cutting, the freshly cut edges are ground down to remove
any burrs or sharp corners. This process gives the windshield a safe and smooth
edge for handling. The glass is then washed and sprayed with a lubricant
(allowing the two pieces of glass to later bend independently without sticking
together).
Painting. The border or band of most new windshields is painted with a
ceramic (lead based) paint. The paint band hides the installation sealants
(urethane) and gives the windshield an improved cosmetic appearance. The paint
band designs are reverse engineered from actual OEM windshields and follow the
same specifications.
Bending. The flat pairs of glass are inspected prior to bending. The pairs
are then fitted into the bending tools (molds) that run along a conveyor system
through the furnace. This process is repeated every 30 seconds as the new
bending mold is readied for another windshield. The bending furnaces are gas
heated, time indexed and computer controlled.
Lamination. A Poly Vinyl Butyl ("PVB") is used to laminate the two pieces
of glass together. The vinyl layer is stored, cut and sandwiched between the
pairs of glass in environmentally controlled rooms. A vacuum channel is placed
around the sandwich to draw air out. While de-airing, the windshield is sealed
into a pressure vessel. The process of lamination begins by rapidly heating and
pressurizing the windshields. The heat and pressure are maintained for several
minutes and then the vessel is rapidly cooled. The entire process takes about
one hour and each autoclave has a capacity of approximately 100 windshields.
Encapsulation. Some windshields require a specialized molding to be
attached at the plant. This process, Reactive Injection Molding (RIM), is a
process whereby two chemicals meet and form a border (or gasket) around the
part. The attached gasket saves time for the windshield installer since
everything is attached at the plant. The Enfield plant has installed this
process and is capable of producing 75,000 units a year. The Company, however,
is currently outsourcing its encapsulation needs to a supplier.
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<PAGE> 52
Inspection. Each windshield is inspected through a process consisting of
four different functions of inspection and assembly. The finished goods scrap
rate has historically been less than 1%.
Scrap. The overall manufacturing process produces approximately 11% scrap
(as a percentage of original input). The excess glass trim in cutting and other
pre-laminated glass is recycled back to the supplier. Scrap glass which has
paint on it is disposed of as hazardous waste. Likewise, the vinyl trim is
collected and stored to be recycled back to the supplier.
Production Scheduling. Production scheduling is a shared responsibility by
the plant scheduler, the materials management department in Columbus, Ohio and
the Company's MIS system. The system receives daily updated sales and inventory
data from all Safelite facilities. This data is used to update the plant
schedule by recommending the parts that have the greatest need for
replenishment. A computerized schedule of manufacturing is created on a daily
basis to optimize inventory levels, plant capacity, plant tooling availability,
raw material availability and furnace scheduling.
PRODUCTS
Safelite's primary installation product is the auto windshield. Windshields
are made of laminated safety glass, which consists of two layers of glass bound
together with a thin layer of vinyl. The safety benefit of laminated glass comes
from the strength which the vinyl adds; the vinyl makes it very difficult to
penetrate the windshield upon impact. As part of Safelite's commitment to serve
all of its customers' auto glass needs, the Company also offers tempered auto
glass and other products. Tempered glass is generally used for side and rear car
and truck windows and is twice as strong as raw glass because of specialized
processing which causes the glass to break into dull-edged pebbles, reducing
glass-related injuries. Safelite also offers auto products and services
including flat glass, bipass glass, installation supplies, wiper blades, window
tinting, sunroofs, alarm systems and vehicle inspection services for insurance
companies.
SUPPLIERS AND RAW MATERIALS
Safelite generally purchases low volume windshields from third parties, as
well as raw glass, vinyl, paint, adhesives and tempered glass. The Company
sources 50% of its purchased glass from Libby-Owens-Ford. Safelite's volume with
Libby-Owens-Ford has enabled Safelite and Libby-Owens-Ford to form an alliance
which includes a national pricing agreement and an electronic link to
Libby-Owens-Ford's inventory data. The Company also utilizes other suppliers for
both domestic and foreign windshields. Safelite buys all of its raw glass from
Guardian Automotive, with the exception of solar resistant glass. Vinyl is
purchased from E.I. Du Pont De Nemours. The Company believes alternate sources
of vinyl are also available. With few exceptions, inventory is centrally
purchased at Safelite's headquarters in Columbus, Ohio. The Company believes
that its primary raw materials are widely available from numerous suppliers and
has not had material difficulty in sourcing windshields or raw materials in the
past.
PROPERTIES
Safelite leases 459 of its 491 installation service centers, with the terms
of its leases generally being five years with one or two five year renewal
options. Safelite also leases 63 of its 66 warehouses, with the terms of its
leases generally being five years with one or two five year renewal options. The
Company owns its manufacturing facilities in Enfield, North Carolina and
Wichita, Kansas. Safelite's principal corporate office is at 1105 Schrock Road
in Columbus, Ohio. Safelite leases this space pursuant to agreements expiring in
2001. The Company maintains administrative offices at 2400 Farmer's Drive in
Columbus, Ohio, which it leases pursuant to a lease expiring in November of
1998. The Company plans to renew this lease. The Company also maintains a
national referral center, regional DCC/CTU and regional warehouse at 760
Dearborn Park Lane in Columbus, Ohio. Safelite leases this space pursuant to
agreements expiring in 2001. The Company's leases generally provide that the
Company pay property tax, utilities, common area maintenance, and insurance
expenses. Safelite believes that its facilities are adequate for its current
needs and that suitable additional space will be available as required.
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EMPLOYEES
As of December 28, 1996, the Company employed 3,954 people. The Company has
approximately 330 employees covered by three unions, with one agreement expiring
in 1997 and the other two expiring in 1999. Safelite has experienced no labor
related work stoppages and believes that its employee relations are good.
COMPETITION
The industries in which the Company competes are very competitive. In the
auto glass replacement industry, competition is based on price, customer
service, technical capabilities, quality and geographic coverage. This industry
is highly fragmented with approximately 20,000 competitors. Although the Company
is the industry leader in the auto glass replacement industry, it does compete
against several other large competitors in this market, the largest two of which
had market shares estimated to be 10% and 7% in 1995. State Farm, one of the
Company's largest customers, has informed the Company that it intends to use a
competitor to function as its glass claims call center and bill processing
administrator in a region by region roll-out commencing in the summer of 1997.
The Company does not expect that this arrangement will have a material impact on
its relationship with State Farm; however, there can be no assurance that this
arrangement will not have an impact on the Company's business with State Farm.
Competition in the wholesale market is based principally on price and
quality. The Company is a relatively small participant in the wholesale market,
which is dominated by several significantly larger companies.
Future growth in the Company's revenues will depend upon the Company's
ability to maintain and increase its market share in the auto glass replacement
industry, while continuing to provide high levels of customer service to
insurance companies and fleet owners, and its ability to access the wholesale
market in order to utilize excess manufacturing capacity. See "Risk
Factors -- Competition."
ENVIRONMENTAL REGULATION
The Company's manufacturing operations in Wichita, Kansas and Enfield,
North Carolina involve handling of materials and the generation of waste
materials that are classified as hazardous. The Company is subject to federal,
state and local laws and regulations concerning the handling and disposal of
hazardous materials, and therefore in the ordinary course of its business, the
Company in its manufacturing operations incurs compliance costs. The Company
does not anticipate that compliance with federal, state and local provisions
regarding the use and disposal of materials into the environment or otherwise
relating to the protection of the environment will have any material adverse
effect upon the earnings or competitive position of the Company and does not
anticipate any material capital expenditures for environmental control
facilities for the remainder of the Company's current fiscal year or the
succeeding fiscal year. Actions by federal, state and local governments
concerning environmental matters, however, could increase the costs of producing
the products manufactured by the Company. In addition, the future costs of
compliance with environmental laws and regulations and liabilities resulting
from currently unknown circumstances or developments could be substantial or
could have a material adverse effect on the Company. Regulations resulting from
the 1990 amendments to the Clean Air Act that will pertain to the Company's
manufacturing operations are currently not expected to be promulgated until 1997
or later. The Company cannot predict the level of required capital expenditures
resulting from future environmental regulations; however, the Company does not
anticipate that expenditures required by such regulations, if any, will have a
material adverse effect on the Company.
INDUSTRY INVESTIGATION
The Company, along with other domestic companies, has received a subpoena
to produce documents to a grand jury investigating possible violations of
federal antitrust laws in the automobile glass replacement industry. The
investigation is directed towards possible collusive pricing practices.
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Neither the Company nor any director, officer or employee has been charged in
connection with the investigation. The investigation is in its preliminary
stages.
If the investigation were to uncover evidence of anti-competitive or
collusive behavior by the Company or its employees, it could result in the
Company or such employees being subject to monetary fines, penalties and other
sanctions and expenses. A finding of anti-competitive or collusive behavior by
the Company could lead to civil litigation against the Company by persons
claiming to have paid higher prices as a result of the alleged improper
activity. Private plaintiffs in antitrust suits are entitled, if successful, to
recover treble damages, attorneys fees and costs.
Management does not believe that the Company or its employees have engaged
in any anti-competitive or collusive activities and does not believe that this
investigation will result in a material adverse effect on the Company. However,
no assurance can be given that the Company will not be found to have engaged in
anti-competitive or collusive activities or be liable for such fines, penalties,
damages and costs or, that if it were liable, that they will not have a material
adverse effect on the Company.
LITIGATION
Safelite is party to certain claims and litigation in the ordinary course
of business and litigation concerning environmental compliance which it does not
believe will result, individually or in the aggregate, in a material adverse
effect upon its financial condition or results of operations. See "--
Environmental Regulation."
Safelite is the subject of an industry-wide grand jury investigation of
pricing practices. See "-- Industry Investigation." In addition the Company,
along with three other industry defendants, has been sued by eight local auto
glass replacement companies in the U.S. District Court for the Eastern District
of Texas, claiming violation of federal antitrust laws and interference with
contracts. Management believes these claims are without merit and intends to
defend them vigorously.
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MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The following table provides information concerning the directors and
executive officers of the Company after giving effect to the Transactions. All
directors will hold office until the next annual meeting of stockholders of the
Company and until their successors have been duly elected and qualified. All
officers will serve at the discretion of the Board of Directors.
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Garen K. Staglin............. 51 Chairman of the Board, Chief Executive Officer and
Director
John F. Barlow............... 53 President, Chief Operating Officer and Director
Douglas A. Herron............ 47 Senior Vice President and Chief Financial Officer
Douglas R. Maehl............. 49 Senior Vice President, Manufacturing, Distribution and
Purchasing
Elizabeth A. Wolszon......... 42 Vice President, Marketing and Strategic Planning
James K. West................ 54 Vice President, Information Systems
Poe A. Timmons............... 36 Vice President and Corporate Controller
Anthony J. DiNovi............ 34 Director
Seth W. Lawry................ 32 Director
Morton Meyerson.............. 58 Director
Scott M. Sperling............ 39 Director
</TABLE>
A brief biography of each director and executive officer follows:
Garen K. Staglin has served as the Company's Chairman of the Board and
Chief Executive Officer since July 1991. From January 1979 to June 1991, Mr.
Staglin served in various management roles, most recently as President of the
Automotive Services Group, of ADP, Inc., a computer services firm. He currently
serves as a director for First Data Corp., QuickResponse Services, Inc. and
Cybercash, Inc. and serves on the Advisory Board of the Stanford Graduate School
of Business.
John F. Barlow has served as a director and the Company's President and
Chief Operating Officer since September 1991. From October 1986 to August 1991,
Mr. Barlow served as the President and Chief Executive Officer of Western Auto
Stores, a retailer of automobile parts.
Douglas A. Herron has served as the Company's Senior Vice President and
Chief Financial Officer since June 1992. From December 1989 to May 1992, Mr.
Herron served as Manager, Finance Operation of GE Medical Systems, a leading
manufacturer and supplier of diagnostic imaging equipment and financing products
to hospitals and clinics throughout the world.
Douglas R. Maehl has served as the Company's Vice President of
Manufacturing, Distribution and Purchasing since October 1991. From September
1978 to September 1991, Mr. Maehl served as Vice President of Merchandising for
Western Auto Stores, a retailer of automobile parts.
Elizabeth A. Wolszon has served as the Company's Vice President of
Marketing and Strategic Planning since July 1992. From January 1989 to June
1992, Ms. Wolszon served as Senior Vice President of Marketing for Western Auto
Stores, a retailer of automobile parts, and Director of Strategic Planning for
Sears Speciality Merchandising, a group of specialty retailing chains owned by
Sears Roebuck & Co.
James K. West has served as the Company's Vice President of Information
Systems since June 1990. From November 1987 to May 1990, Mr. West served as the
Director of Information Systems for Transworld Music, the largest record
retailer in the United States.
Poe A. Timmons has served as the Company's Vice President and Corporate
Controller since January 1996. Prior to 1996, Ms. Timmons was an audit partner
at Deloitte & Touche LLP, where she served clients in the manufacturing, retail
and service industries.
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<PAGE> 56
Anthony J. DiNovi has served as a director since the consummation of the
Merger. Mr. DiNovi has been employed by Thomas H. Lee Company, an investment
company, since 1988 and currently serves as a Managing Director. Mr. DiNovi is
also Vice President and Trustee of THL Equity Trust III, the general partner of
the THL Equity Advisors III Limited Partnership, which is the general partner of
the Thomas H. Lee Equity Fund III, L.P. and Vice President of Thomas H. Lee
Advisors I and T.H. Lee Mezzanine II, affiliates of ML-Lee Acquisition Fund,
L.P., ML-Lee Acquisition Fund II, L.P. and ML-Lee Acquisition Fund II
(Retirement Accounts), L.P., respectively. Mr. DiNovi also serves as a director
of First Alert, Inc. and several private corporations.
Seth W. Lawry has served as a director since the consummation of the
Merger. Since April 1994, Mr. Lawry has served as an Associate and Vice
President at Thomas H. Lee Company, an investment company. Mr. Lawry is also
Vice President of THL Equity Trust III, the general partner of the THL Equity
Advisors III Limited Partnership, which is the general partner of the Thomas H.
Lee Equity Fund III, L.P. Mr. Lawry also serves as a director of other private
corporations. From September 1992 to March 1994, Mr. Lawry served as an
Associate at Morgan Stanley & Co. Incorporated, an investment bank. From
September 1990 to June 1992, Mr. Lawry attended Stanford Graduate School of
Business.
Morton Meyerson has served as a director of the Company since January 1992.
Since June 1992, Mr. Meyerson has served as Chairman and Chief Executive Officer
of Perot Systems Corporation, an information systems and consulting firm. Mr.
Meyerson also serves as a director of Energy Services Company International,
Inc., Crescent Real Estate Equities, Inc., Harvard Medical School Board of
Fellows, Harry Ransom Center for Humanities Studies at the University of Texas
and the National Park Foundation.
Scott M. Sperling has served as a director since the consummation of the
Merger. Since July 1994, Mr. Sperling has served as a Managing Director of
Thomas H. Lee Company. Mr. Sperling is also Vice President and Trustee of THL
Equity Trust III, the general partner of Equity Advisors III Limited
Partnership, which is the general partner of Thomas H. Lee Equity Fund III, L.P.
Mr. Sperling also serves as a director of Beacon Properties, Inc., The Learning
Company, Livent, Inc., The General Chemical Group Inc., Object Design Inc. and
several private corporations. Prior to joining Thomas H. Lee Company in 1994,
Mr. Sperling was managing partner of Aeneas Group, Inc. an investment company
and a wholly-owned subsidiary of Harvard Management Company, Inc.
COMMITTEES OF THE BOARD OF DIRECTORS
It is expected that the Board of Directors will establish an Audit
Committee and a Compensation Committee, although such committees have not yet
been constituted. The Compensation Committee will make recommendations
concerning the salaries and incentive compensation of employees of and
consultants to Safelite, and will oversee and administer the Company's stock
option plans. The Audit Committee will be responsible for reviewing the results
and scope of audits and other services provided by Safelite's independent
auditors.
DIRECTOR COMPENSATION
Directors that are neither employees of the Company nor of Thomas H. Lee
Company receive $1,000 for every Board meeting they attend. Such directors are
also eligible to receive options under the Company's 1996 Stock Option Plan.
EMPLOYMENT AGREEMENTS
The Company entered into employment agreements on December 20, 1996 with
each of Messrs. Staglin, Barlow and Herron. Mr. Staglin serves as Chairman of
the Board and Chief Executive Officer of the Company with an annual base salary
of $700,000 and a performance bonus determined by the Board of Directors of the
Company. Mr. Barlow serves as President and Chief Operating Officer of the
Company with a base salary of $700,000 and a performance bonus determined by the
Board of Directors of the Company. Mr. Herron serves as Senior Vice President
and Chief Financial Officer of the Company with a
55
<PAGE> 57
base salary of $350,000 and an annual bonus to be determined by the Board of
Directors of the Company in accordance with an executive compensation plan.
Each of these agreements provides for an initial term of three years with
two year automatic renewal periods, unless either party gives notice of its
intent to terminate the employment agreement at least 30 days, but not more than
60 days, prior to the expiration of the original term or any renewal term. Each
of the agreements provides that in the event the executive is terminated due to
death or disability, (i) his base salary will continue for six months following
the date of termination, (ii) a pro rata portion of his bonus (based on days
worked) shall be paid (unless the Board of Directors determines to pay a greater
amount) and (iii) his additional benefits under his employment agreement will
continue for 12 months following the date of termination. If the executive is
terminated without cause, (i) his base salary will continue for the greater of
24 months following the date of such termination or the remaining portion of the
initial term of the agreement, (ii) he will receive a pro rata portion of his
bonus (unless the Board of Directors determines to pay a greater amount) and
(iii) his additional benefits will continue for 12 months following the date of
termination. Each of these agreements include non-disclosure provisions, as well
as non-competition provisions covering the period of time he is employed by the
Company plus one year, but in no event less than three years.
Safelite and Poe Timmons entered into an Employment Contract on January 2,
1996 for a three-year term expiring on January 2, 1999. Pursuant to that
agreement, Ms. Timmons is to be paid an annual base salary of at least $190,000.
Additionally, Ms. Timmons is eligible to participate in an executive bonus plan
adopted by Safelite during the term of the agreement and she was granted options
to purchase 8,758 shares of Safelite Class A Common Stock at $3.00 per share.
Should Safelite terminate Ms. Timmons without cause, however, Ms. Timmons is
entitled to an immediate single sum distribution equal to the aggregate
outstanding balance of her remaining base salary payments through January 2,
1999. Should Ms. Timmons terminate this agreement because of a breach by
Safelite or because of a change of control in the ownership of Safelite followed
by a reduction in her title, duties, responsibilities or status, Ms. Timmons
will also be entitled to receive the aggregate balance of her base salary
payments for the remaining term of the agreement.
STOCK OPTION PLANS
1996 Stock Option Plan. The Company's 1996 Stock Option Plan (the "1996
Plan") provides for grants of options to acquire up to 175,000 shares of Common
Stock. Incentive stock options may be granted to employees and officers of the
Company and non-qualified stock options may be granted to consultants,
directors, employees and officers of the Company.
The 1996 Plan is administered by the Board of Directors of the Company or a
committee thereof consisting of two or more directors. Subject to the provisions
of the 1996 Plan, the Board of Directors will have the authority to select
optionees and determine the terms of the options granted, including (i) the
number of shares subject to each option, (ii) when the option becomes
exercisable, (iii) the exercise price of the option (which in the case of an
incentive stock option cannot be less than the fair market value of the Common
Stock on the date of grant, or less than 110% of fair market value in the case
of employees or officers holding 10% or more of the voting stock of the
Company), (iv) the duration of the option and (v) the time, manner and form of
payment upon exercise of an option.
An option is not transferable by the optionee except by will or by the laws
of descent and distribution. Options are exercisable only while the optionee
remains in the employ of the Company or for a period of time thereafter. If an
optionee becomes disabled or dies while in the employ of the Company, the option
is exercisable prior to the last day of the third and sixth month, respectively,
following the date of termination of employment. If the optionee leaves the
employ of the Company for any other reason, the option terminates immediately
upon termination of employment; provided that the Board of Directors may extend
this period up to the original expiration date of such option. Options which are
exercisable following termination of employment are exercisable only to the
extent that the optionee was entitled to exercise such options on the date of
such termination.
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<PAGE> 58
1993 Restated Employee Stock Option Plan. The Company's 1993 Restated
Employee Stock Option Plan (the "1993 Restated Stock Option Plan") provides for
the grants of options to acquire up to 264,000 shares of Class A Common Stock,
in such amounts, on such terms and for such officers and other key employees as
the administrators of the 1993 Restated Stock Option Plan may select. Options
granted under the Plan are not intended to qualify as Incentive Stock Options
within the meaning of Section 422 of the Internal Revenue Code of 1986, as
amended. The 1993 Restated Stock Option Plan is administered by a committee (the
"Committee"), consisting of one or more persons appointed by the Board of
Directors of the Company, and provides that all of the options shall have a per
share exercise price established by the Committee in its sole discretion at the
time an option is granted. All options currently outstanding under the 1993
Restated Stock Option Plan became fully vested and exercisable upon the closing
of the Transactions. In connection with the Transactions, options to purchase
4,829 shares of Class A Common Stock at an exercise price of $3.00 per share
were redeemed for $10.40 per option and options to purchase 876 shares of Class
A Common Stock at an exercise price of $1.00 per share were redeemed for $12.40
per option. Following the Transactions, the Company had 50,629 options to
purchase shares under the 1993 Plan outstanding.
Options granted under the 1993 Restated Stock Option Plan become fully
exercisable no later than the fifth anniversary of the date of grant and no
option may have a term in excess of 10 years from the date of grant. The stock
option agreements pursuant to which options have been granted under the 1993
Restated Stock Option Plan provide for acceleration of the options upon the
occurrence of a terminating event, which includes the Transactions.
Options are exercisable only while the optionee remains an employee of the
Company, and the Company shall have the right, at its option, upon termination
of an optionee's employment to redeem the exercisable portion of the option, or
any portion thereof as determined by the Company. If the Company elects not to
exercise its right to redeem the exercisable portion of the option, the
terminated optionee shall have the right to exercise any unredeemed portion of
the then exercisable options at any time within 90 days after the notification
date. Options which are exercisable following termination of employment are
exercisable only to the extent that the optionee was entitled to exercise such
options on the date of such termination. All options are non-transferable other
than by will or the laws of descent and distribution. The Company has the right
to terminate the option in the event the optionee engages in any prohibited
activity, including disclosure of confidential or proprietary knowledge obtained
during the course of employment, solicitation of employment after termination of
any person who at the time of the solicitation is employed by the Company,
publishing any statement or making any statement critical of the Company,
engaging in any competitive activity during the optionee's employment or during
the three years following the optionee's termination or being convicted of a
crime against the Company or any of its affiliates.
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<PAGE> 59
EXECUTIVE COMPENSATION
The following table sets forth certain information with respect to the
compensation paid by Safelite for services rendered for the fiscal year ended
December 28, 1996, to its Chief Executive Officer and its four most highly paid
executive officers (the "Named Executive Officers").
SUMMARY COMPENSATION TABLE(1)
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
------------------------------------
OTHER ANNUAL ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION COMPENSATION
--------------------------- ---- -------- ---------- ------------ -------------
<S> <C> <C> <C> <C> <C>
Garen K. Staglin............... 1996 $666,827 $2,230,000 $75,628(2) $5,246(3)
Chairman of the Board and
Chief Executive Officer
John F. Barlow................. 1996 $573,798 $2,040,000 -- $5,024(4)
President and Chief Operating
Officer
Douglas A. Herron.............. 1996 $327,885 $ 691,713 -- $4,772(5)
Senior Vice President and
Chief Financial Officer
Elizabeth A. Wolszon........... 1996 $270,192 $ 430,703 -- $2,113(6)
Vice President Marketing and
Strategic Planning
Douglas R. Maehl............... 1996 $256,154 $ 419,702 -- $8,587(7)
Senior Vice President
Manufacturing,
Distribution and
Purchasing
</TABLE>
- ---------------
(1) In accordance with the rules of the Securities and Exchange Commission,
other compensation in the form of perquisites and other personal benefits
have been omitted because the aggregate amount of such perquisites and other
personal benefits constituted less than the lesser of $50,000 or 10% of the
total annual salary and bonuses for the Named Executive Officers for such
year. Amounts presented reflect compensation earned in the period presented,
although payment may have been made in other periods.
(2) Includes $60,591 for compensation related to reimbursement of certain
expenses.
(3) Represents $1,980 in Company contributions to the 401(k) plan and $3,266 in
medical plan benefits.
(4) Represents $1,980 in Company contributions to the 401(k) plan and $3,044 in
medical plan benefits.
(5) Represents $2,336 in Company contributions to the 401(k) plan and $2,436 in
medical plan benefits.
(6) Represents $2,024 in Company contributions to the 401(k) plan and $89 in
medical plan benefits.
(7) Represents $2,501 in Company contributions to the 401(k) plan and $6,086 in
medical plan benefits.
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<PAGE> 60
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the beneficial
ownership of the Company's Class A Common Stock as of December 28, 1996 (i) by
each person (or group of affiliated persons) known by the Company to be the
beneficial owner of more than 5% of the outstanding common stock, (ii) each
Director, (iii) the Company's Chief Executive Officer and the Company's other
named executive officers (as determined in accordance with the rules of the
Securities and Exchange Commission), and (iv) all of the Company's executive
officers and Directors as a group. Except as indicated in the footnotes to this
table, the Company believes that the persons named in this table have sole
voting and investment power with respect to all the shares of common stock
indicated.
<TABLE>
<CAPTION>
NUMBER OF SHARES
NAME OF BENEFICIAL OWNER OF COMMON STOCK(1) PERCENTAGE OF CLASS
------------------------ ------------------ -------------------
<S> <C> <C>
Garen K. Staglin(2)............................... 207,880 4.2%
John F. Barlow(2)(3).............................. 166,304 3.3%
Douglas A. Herron(2).............................. 41,576 *
Elizabeth A. Wolszon(2)........................... 21,902 *
Douglas R. Maehl(2)............................... 21,902 *
James K. West(2).................................. 21,902 *
Poe A. Timmons(2)(4).............................. 8,758 *
Anthony J. DiNovi(5).............................. 4,341,240 87.4%
Seth W. Lawry(5).................................. 4,341,240 87.4%
Morton Meyerson(2)(6)............................. 59,351 1.2%
Scott M. Sperling(5).............................. 4,341,240 87.4%
All Directors and Executive Officers as a Group
(11 persons).................................... 4,890,815 98.4%
5% Stockholders:
Thomas H. Lee Equity Fund, III, L.P.(7)........... 3,724,438 75.0%
THL-CCI Limited Partnership(8).................... 386,345 7.8%
</TABLE>
- ---------------
* Less than 1%
(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission and includes general voting power and/or
investment power with respect to securities. Shares of common stock subject
to options and warrants currently exercisable or exercisable within 60 days
of December 28, 1996 are deemed outstanding.
(2) The address of this stockholder is c/o Safelite Glass Corp., 1105 Schrock
Road, Columbus, Ohio 43229.
(3) Includes 33,260 shares owned of record by trusts established for the benefit
of Mr. Barlow's children.
(4) Comprised of options to purchase shares of Safelite Class A Common Stock.
(5) The address of this stockholder is c/o Thomas H. Lee Company, 75 State
Street, Boston, Massachusetts 02109. All such voting securities are owned by
THL and may be deemed to be beneficially owned by Messrs. DiNovi, Lawry and
Sperling, officers of the Thomas H. Lee Company, pursuant to the definition
of beneficial ownership provided in footnote(1). Each of such persons
disclaims beneficial ownership of such shares.
(6) In connection with the Transactions, Mr. Meyerson acquired beneficial
ownership of 37,449 shares of the Company's Class A Common Stock. These
shares are included in the number of shares owned by THL for purposes of
this Prospectus.
(7) THL Equity Advisors III Limited Partnership ("Advisors"), the general
partner of the THL Equity Fund and Thomas H. Lee Foreign Fund III, L.P., THL
Equity Trust III ("Equity Trust"), the general partner of Advisors, Thomas
H. Lee, Messrs. DiNovi and Sperling and other managing directors of Thomas
H. Lee Company, as Trustees of Equity Trust, and Thomas H. Lee as sole
shareholder of Equity Trust, may be deemed to be beneficial owners of the
shares of common stock held by the THL Equity Fund and Thomas H. Lee Foreign
Fund III, L.P. (which owns 230,457 shares of Class A Common Stock). Each of
such persons maintains a principal business address at Suite 2600, 75 State
Street, Boston, MA 02109. Each of such persons disclaims beneficial
ownership of such shares.
(8) THL Investment Management Corp., the general partner of THL-CCI Limited
Partnership, and Thomas H. Lee, as director and sole shareholder of THL
Investment Management Corp., may also be deemed to be beneficial owners of
the shares of common stock held by THL-CCI Limited Partnership. Each of such
persons maintains a principal business address at Suite 2600, 75 State
Street, Boston, MA 02109. Each of such persons disclaims beneficial
ownership of such shares.
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<PAGE> 61
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
THL owns approximately 88% of the Class A Common Stock and 100% of the 8%
Preferred Stock of the Company. See "The Transactions."
At Closing, the Company entered into a Management Agreement with Thomas H.
Lee Company pursuant to which the Company agreed to pay Thomas H. Lee Company a
closing fee of $5.0 million in connection with the Transactions and an annual
fee of $500,000 for each of five successive years, for management services to
the Company. Such management services consist of on-going operational,
financial, accounting and strategic planning analysis and advice. Following the
initial five year term of such agreement, such agreement automatically continues
for successive one year terms unless any party thereto, at least ninety days
prior to the end of any term, provides all other parties thereto with notice of
the intent to terminate the agreement.
The Company also entered into employment agreements with each of Messrs.
Staglin, Barlow and Herron in connection with the Transactions and is party to
an existing employment agreement with Ms. Timmons. See "Employment Agreements."
Each of the Company's executive officers is also entitled to participate in
stock option plans maintained by the Company. See "Management -- Stock Option
Plans." Members of management of the Company received a transaction bonus in
connection with the Closing of approximately $7 million.
The Company entered into a stockholders agreement (the "Stockholders'
Agreement") with THL, the Named Executive Officers and certain other management
stockholders of the Company in connection with the Transactions. Pursuant to the
Stockholders' Agreement, the stockholders party thereto are required to vote
their shares of Class A Common Stock to elect a Board of Directors of the
Company consisting of certain directors designated by THL and certain management
directors. THL has the right to elect a majority of the Board of Directors. The
Stockholders' Agreement also grants THL the right to require the Company to
effect the registration of shares of Class A Common Stock they hold for sale to
the public, subject to certain conditions and limitations. In addition, under
the terms of the Stockholders' Agreement, if the Company proposes to register
any of its securities under the Securities Act of 1933, as amended, whether for
its own account or otherwise, the stockholders party thereto are entitled to
notice of such registration and are entitled to include their shares therein,
subject to certain conditions and limitations. All fees, costs and expenses of
any registration effected on behalf of such stockholders under the Stockholders'
Agreement (other than underwriting discounts and commissions) will be paid by
the Company.
The Company made loans to certain executive officers of the Company in 1994
in connection with their purchase of shares of Safelite Class A Common Stock.
These loans are evidenced by promissory notes which bear interest at the average
rate of interest the Company must pay to borrow money, which was approximately
7.3% per annum for the five month period ended December 26, 1996. The principal
amounts of such loans are: Mr. Staglin, $138,594; Mr. Barlow, $110,689; Mr.
Herron, $27,000; Ms. Wolszon, $14,600; Mr. Maehl, $14,600; and Mr. West,
$14,000.
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<PAGE> 62
DESCRIPTION OF CAPITAL STOCK
The authorized capital stock of Safelite consists of 10,000,000 shares of
Safelite Class A Common Stock, 50,000 shares of Safelite Class B Common Stock,
and 1,000,000 shares of 8% Preferred Stock, $.01 par value per share (the "8%
Preferred Stock").
The following summary of certain provisions of the Safelite common stock
and 8% Preferred Stock does not purport to be complete and is subject to, and
qualified in its entirety by, the provisions of Safelite's Certificate of
Incorporation as amended (the "Certificate of Incorporation") and by the
provisions of applicable law.
COMMON STOCK
Class A Common Stock. Holders of Safelite Class A Common Stock are
entitled to one vote per share on matters to be voted upon by the stockholders.
There are no cumulative voting rights. Holders of Safelite Class A Common Stock
are entitled to receive ratable dividends when, as and if declared by the Board
of Directors out of funds legally available therefor, subject to any
preferential dividend rights of any then outstanding 8% Preferred Stock. Upon
the liquidation, dissolution or winding up of Safelite, holders of Safelite
Class A Common Stock share ratably in the assets of Safelite available for
distribution to its stockholders, subject to the preferential rights of any then
outstanding 8% Preferred Stock. The shares of Safelite Class A Common Stock
outstanding upon the effective date of this Offering Memorandum are fully paid
and nonassessable. The rights, preferences and privileges of holders of Safelite
Class A Common Stock are subject to, and may be adversely affected by, the
rights of holders of shares of any 8% Preferred Stock that Safelite may
designate in the future.
Class B Common Stock. Holders of Safelite Class B Common Stock are
entitled to one vote per share on matters to be voted upon by the stockholders.
There are no cumulative voting rights. Holders of Safelite Class B Common Stock
are entitled to receive ratable dividends when, as and if declared by the Board
of Directors out of funds legally available therefor, subject to any
preferential dividend rights of any then outstanding Class A Common Stock and 8%
Preferred Stock. Upon the liquidation, dissolution or winding up of Safelite,
holders of Safelite Class B Common Stock share ratably in the assets of Safelite
available for distribution to its stockholders, subject to the preferential
rights of any then outstanding Class A Common Stock and 8% Preferred Stock. At
December 28, 1996, there were no shares of Safelite Class B Common Stock
outstanding. The rights, preferences and privileges of holders of Safelite Class
B Common Stock are subject to, and may be adversely affected by, the rights of
holders of shares of any 8% Preferred Stock that Safelite may designate in the
future.
PREFERRED STOCK
The 8% Preferred Stock is an accumulating perpetual preferred stock issued
pursuant to the Transactions. The 8% Preferred Stock is part of the THL Equity
Investment.
Mandatory Redemption. The 8% Preferred Stock is not mandatorily
redeemable.
Optional Redemption. At any time on or after December 15, 2001, or upon
the occurrence of a Redemption Event (as defined), the Company may redeem the 8%
Preferred Stock at its option, in whole or in part, at $100 per share, together
with accumulated unpaid dividends thereon to the date fixed for redemption. For
purposes hereof, a "Redemption Event" shall mean (i) an underwritten initial
public offering of the common stock of the Company or (ii) a Change of Control.
The terms of the Bank Credit Agreement and the Indenture restrict the Company's
ability to redeem shares of the 8% Preferred Stock. Redemptions made upon an
initial public offering constituting a Redemption Event shall be limited to the
net proceeds of such initial public offering received by the Company. See
"Description of Other Indebtedness" and "Description of Notes."
Dividends. Dividends on the 8% Preferred Stock accumulate at an annual
rate of 8% of the stated value thereof and are payable if, when and as declared
by the Board of Directors. Accumulated dividends that are unpaid compound on a
semi-annual basis at the annual rate of 8%. As a result of restrictions
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<PAGE> 63
contained in the Indenture, dividends are not payable in respect of the 8%
Preferred Stock unless (i) the Company elects to redeem the 8% Preferred Stock
upon the occurrence of a Redemption Event or (ii) the Company exercises its
optional right to redeem the 8% Preferred Stock on or after December 15, 2001;
provided that the payment of such dividends will only be permitted if such
payment is in compliance with covenants contained in the Indenture. In the event
the Company elects not to redeem shares of 8% Preferred Stock upon the
occurrence of a Redemption Event, then immediately following such Redemption
Event the 8% annual dividend rate increases to 14% per annum and increase to 15%
and 16% per annum on the first and second anniversaries of such Redemption
Event.
Ranking. The 8% Preferred Stock, with respect to dividend and redemption
rights and rights upon liquidation, dissolution and winding up, ranks prior to
all other series of preferred stock of the Company and all classes of common
stock of the Company. No preferred stock or other class of equity securities of
the Company ranking senior to or pari passu with the 8% Preferred Stock, with
respect to dividends or redemption payments or upon dissolution, liquidation or
winding up, may be created without the consent of the holders of the 8%
Preferred Stock.
Liquidation Preference. In the event of any voluntary or involuntary
liquidation, dissolution or winding up of the Company, the holders of the shares
of 8% Preferred Stock then outstanding shall be entitled to receive out of the
assets of the Company available for distribution to its stockholders an amount
in cash equal to $100 per share outstanding, plus an amount in cash equal to all
accrued but unpaid dividends thereon to the date fixed for liquidation,
dissolution or winding up, before any payment shall be made or any assets
distributed to the holders of any other equity securities of the Company which
rank junior to the 8% Preferred Stock with respect to liquidation preference
rights.
Voting Rights. The holders of shares of 8% Preferred Stock shall not be
entitled to any voting rights except as otherwise provided by law.
CERTAIN CHARTER AND BY-LAW PROVISIONS
The Certificate of Incorporation of Safelite provides that no director
shall be personally liable to Safelite or its stockholders for monetary damages
for beach of fiduciary duty as a director, except for (i) any breach of the
director's duty of loyalty to Safelite or its stockholders; (ii) acts or
omissions not in good faith or which involve intentional misconduct; (iii) acts
or omissions in respect of certain unlawful dividends and payments or stock
redemptions or repurchases; or (iv) any transaction from which such director
derives improper personal benefit. The effect of this provision is to eliminate
the rights of Safelite and its stockholders through stockholders' derivative
suits on behalf of Safelite to recover monetary damages against a director for
breach of the fiduciary duty of care as a director (including breaches resulting
from negligent or grossly negligent behavior) except in the situations described
in clauses (i) through (iv) above. The limitations summarized above, however, do
not affect the ability of Safelite or its stockholders to seek non-monetary
based remedies, such as an injunction or rescission, against a director for
breach of his fiduciary duty nor would such limitations limit liability under
the Federal Securities Laws. Safelite's By-laws provide that Safelite, shall, to
the full extent permitted by the Delaware General Corporation Law as currently
in effect, indemnify and advance expenses to each of its currently acting and
former directors, officers, employees and agents arising in connection with
their acting in such capacities.
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DESCRIPTION OF OTHER INDEBTEDNESS
The description set forth below does not purport to be complete and is
qualified in its entirety by reference to certain agreements setting forth the
principal terms and conditions of the Bank Credit Agreement.
The Chase Manhattan Bank ("Chase") has provided the Company with senior
secured credit facilities (the "Bank Credit Agreement") in an aggregate
principal amount of $180.0 million under which $150.0 million was borrowed under
the Term Loan Facility (as defined below) and the Company had $30.0 million of
commitments available under the Revolving Credit Facility.
Structure. The Bank Credit Agreement consists of (a) a term loan facility
in an aggregate principal amount of $150.0 million (the "Term Loan Facility"),
consisting of two tranches in principal amounts of $75.0 million (the "Tranche A
Term Loan" and "Tranche B Term Loan", respectively), and (b) a revolving credit
facility providing for revolving loans to the Company and the issuance of
letters of credit for the account of the Company in an aggregate principal
amount (including the aggregate stated amount of letters of credit and the
aggregate reimbursement and other obligations in respect thereof) at any time
not to exceed $30.0 million (the "Revolving Credit Facility").
Availability. The availability of the Bank Credit Agreement is subject to
various conditions precedent typical for bank loans, and Chase's commitments to
provide the Bank Credit Agreement are also subject to, among other things, the
absence of any material adverse change with respect to the Company in particular
or the financial, banking or capital markets in general. The full amount of the
Term Loan Facility was drawn in a single drawing at the closing of the
Recapitalization and amounts repaid or prepaid under the Term Loan Facility may
not be reborrowed.
Repayment. The Tranche A Term Loan and the Revolving Credit Facility will
mature on the sixth anniversary of the Closing. The Tranche B Term Loan will
mature on the eighth anniversary of the Closing. The Tranche A Term Loan and the
Tranche B Term Loan will be subject to the following amortization schedule:
<TABLE>
<CAPTION>
REPAYMENT AMOUNTS
------------------------------------------
DATE TRANCHE A TERM LOAN TRANCHE B TERM LOAN
- ---- ------------------- -------------------
<S> <C> <C>
Last business day in September, December 1998.......... $2,500,000 $ 187,500
Last business day in March, June, September and
December 1999........................................ 2,500,000 187,500
Last business day in March, June, September and
December 2000........................................ 3,750,000 187,500
Last business day in March, June, September and
December 2001........................................ 5,000,000 187,500
Last business day in March, June, September 2002....... 6,250,000 187,500
December 20, 2002...................................... 6,250,000 --
Last business day in December 2002..................... -- 187,500
Last business day in March, June, September and
December 2003........................................ -- 8,953,125
Last business day in March, June and September 2004.... -- 8,953,125
December 20, 2004...................................... -- 8,953,125
</TABLE>
In addition, the Bank Credit Agreement is subject to mandatory principal
prepayment and commitment reductions (to be applied first to the Term Loan
Facility) in an amount equal to, subject to certain exceptions, (a) 100% of the
net proceeds of (i) certain debt and equity offerings by the Company or any of
its subsidiaries and (ii) certain asset sales or other dispositions and (b) 50%
of the Company's excess operating cash flow.
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Security. The Bank Credit Agreement is secured by security interests in
and pledges of or liens on substantially all the material tangible and
intangible assets of the Company, including pledges of all the capital stock of,
or other equity interests in, certain subsidiaries of Safelite.
Interest. At the Company's election, the interest rates per annum
applicable to the loans under the Bank Credit Agreement is a fluctuating rate of
interest measured by reference to either (a) an adjusted London inter-bank
offered rate ("LIBOR") plus a borrowing margin or (b) an alternate base rate
("ABR") (equal to the higher of Chase's published prime rate and the Federal
Funds effective rate plus 1/2 of 1% per annum) plus a borrowing margin. The
borrowing margins applicable to the Tranche A Term Loan and loans under the
Revolving Credit Facility are 1.50% per annum for ABR loans and 2.50% per annum
for LIBOR loans. These margins will be subject to reduction after the first
anniversary of the Closing if certain financial performance thresholds are met.
The interest rate borrowing margins applicable to the Tranche B Term Loan are
2.00% per annum for ABR loans and 3.00% per annum for LIBOR loans and are not
subject to reduction. Amounts under the Bank Credit Agreement not paid when due
bear interest at a default rate equal to 2.00% per annum above the rate
otherwise applicable.
Fees. The Company has agreed to pay certain fees with respect to the
Senior Credit Facilities, including (i) fees on the unused commitments of the
lenders equal to 1/2 of 1% per annum of the undrawn portion of the commitments
in respect of the facilities; (ii) letter of credit fees on the aggregate face
amount of outstanding letters of credit equal to the then applicable borrowing
margin for LIBOR loans under the Revolving Credit Facility plus a per annum
fronting bank fee for the letter of credit issuing bank; (iii) annual
administration fees; and (iv) agent, arrangement and other similar fees.
Covenants. The Bank Credit Agreement contains a number of covenants that,
among other things, will restrict the ability of the Company to dispose of
assets, incur additional indebtedness, incur guarantee obligations, prepay other
indebtedness or amend other debt instruments, pay dividends, create liens on
assets, make investments, loans or advances, make acquisitions, create
subsidiaries, engage in mergers or consolidations, change the business conducted
by the Company, make capital expenditures, or engage in certain transactions
with affiliates and otherwise restrict certain corporate activities. In
addition, under the Bank Credit Agreement, the Company is required to comply
with specified financial ratios and minimum tests, including minimum interest
coverage ratios, maximum leverage ratios and minimum EBITDA covenants.
The Bank Credit Agreement also contains provisions that limit the Company's
ability to amend or modify the Indenture and the Company's ability to prepay or
refinance the Notes without the consent of such lenders.
Events of Default. The Bank Credit Agreement contains customary events of
default including non-payment of principal, interest or fees, violation of
covenants, inaccuracy of representations or warranties in any material respect,
cross default and cross acceleration to certain other indebtedness, bankruptcy,
material judgments and liabilities and change of control.
During 1996, the Company purchased workers' compensation, automobile and
product liability coverage for the period December 20, 1996 through December 31,
1999. The cost of this insurance was partially financed by approximately $13.7
million in premium financing, payable in monthly installments, including
interest of 6.67% to 6.99%, of $514,000 in 1997 and $416,000 in 1998 and 1999.
Under the terms of the financing, if the Company cancels its insurance policies
for any reason, corresponding unearned premium refunds would be applied directly
against the outstanding principal balance. At December 28, 1996, the outstanding
principal balance of this premium financing was approximately $13.7 million.
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<PAGE> 66
DESCRIPTION OF EXCHANGE NOTES
The Exchange Notes will be issued under an indenture (the "Indenture"),
dated as of December 20, 1996 by and between the Company and Fleet National
Bank, as Trustee (the "Trustee"). References to the Notes include the Initial
Notes and the Exchange Notes unless the context otherwise requires. Upon the
issuance of the Exchange Notes, if any, or the effectiveness of a Shelf
Registration Statement, the Indenture will be subject to the Trust Indenture Act
of 1939, as amended (the "Trust Indenture Act"). The following summary of the
material provisions of the Indenture does not purport to be complete and is
subject to, and is qualified in its entirety by reference to, the Trust
Indenture Act, and to all of the provisions of the Indenture, including the
definitions of certain terms therein and those terms made a part of the
Indenture by reference to the Trust Indenture Act, as in effect on the date of
the Indenture. The definitions of certain capitalized terms used in the
following summary are set forth below under "Certain Definitions." For purposes
of this section, references to the "Company" include only the Company and not
its subsidiaries.
The Notes will be unsecured obligations of the Company, ranking subordinate
in right of payment to all Senior Indebtedness of the Company.
The Notes will be issued in fully registered form only, without coupons, in
denominations of $1,000 and integral multiples thereof. Initially, the Trustee
will act as Paying Agent and Registrar for the Notes. The Notes may be presented
for registration of transfer and exchange at the offices of the Registrar, which
initially will be the Trustee's corporate trust office. The Company may change
any Paying Agent and Registrar without notice to holders of the Notes (the
"Holders"). The Company will pay principal (and premium, if any) on the Notes at
the Trustee's corporate office in New York, New York. At the Company's option,
interest may be paid at the Trustee's corporate trust office or by check mailed
to the registered address of Holders.
Any Initial Notes that remain outstanding after the completion of the
Exchange Offer, together with the Exchange Notes issued in connection with the
Exchange Offer, will be treated as a single class of securities under the
Indenture.
PRINCIPAL, MATURITY AND INTEREST
The Notes are limited in aggregate principal amount to $100 million and
will mature on December 15, 2006. Interest on the Notes will accrue at the rate
of 9 7/8% per annum and will be payable semiannually in cash on each June 15 and
December 15 commencing on June 15, 1997, to the Persons who are registered
Holders at the close of business on the June 1 and December 1 immediately
preceding the applicable 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 issuance.
The Notes will not be entitled to the benefit of any mandatory sinking
fund.
REDEMPTION
Optional Redemption. The Notes will be redeemable, at the Company's
option, in whole at any time or in part from time to time, on and after December
15, 2001, upon not less than 30 nor more than 60 days' notice, at the following
redemption prices (expressed as percentages of the principal amount thereof) if
redeemed during the twelve-month period commencing on December 15 of the year
set forth below, plus, in each case, accrued interest to the date of redemption:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
---- ----------
<S> <C>
2001.............................................. 104.9375%
2002.............................................. 103.2917
2003.............................................. 101.6458
2004 and thereafter............................... 100.0000
</TABLE>
Optional Redemption Upon Equity Offerings. At any time, or from time to
time, on or prior to December 15, 1999, the Company may, at its option, use the
net cash proceeds of one or more Equity
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<PAGE> 67
Offerings (as defined below) to redeem up to $35 million of the aggregate
principal amount of Notes originally issued at a redemption price equal to
109.875% of the principal amount thereof plus accrued interest to the date of
redemption; provided that at least $65 million of the original principal amount
of Notes remains outstanding immediately after any such redemption. In order to
effect the foregoing redemption with the proceeds of any Equity Offering, the
Company shall make such redemption not more than 120 days after the consummation
of any such Equity Offering. "Equity Offering" means an offering of Qualified
Capital Stock of the Company.
SELECTION AND NOTICE
In case of a partial redemption, selection of the Notes or portions thereof
for redemption shall be made by the Trustee by lot, pro rata or in such manner
as it shall deem appropriate and fair and in such manner as complies with any
applicable legal requirements; provided, however, that if a partial redemption
is made with the proceeds of an Equity Offering, selection of the Notes or
portion thereof for redemption shall be made by the Trustee only on a pro rata
basis, unless such method is otherwise prohibited. Notes may be redeemed in part
in multiples of $1,000 principal amount only. Notice of redemption will be sent,
by first class mail, postage prepaid, at least 30 days and not more than 60 days
prior to the date fixed for redemption to each Holder whose Notes are to be
redeemed at the last address for such Holder then shown on the registry books.
If any Note is to be redeemed in part only, the notice of redemption that
relates to such Note shall state the portion of the principal amount thereof to
be redeemed. A new Note in principal amount equal to the unredeemed portion
thereof will be issued in the name of the Holder thereof upon cancellation of
the original Note. On and after any redemption date, interest will cease to
accrue on the Notes or part thereof called for redemption as long as the Company
has deposited with the Paying Agent funds in satisfaction of the redemption
price pursuant to the Indenture.
RANKING OF NOTES
The indebtedness evidenced by the Notes will be unsecured Senior
Subordinated Indebtedness of the Company, will be subordinated in right of
payment, as set forth in the Indenture, to all existing and future Senior
Indebtedness of the Company, will rank pari passu in right of payment with all
existing and future Senior Subordinated Indebtedness of the Company and will be
senior in right of payment to all existing and future Subordinated Obligations
of the Company. The Notes will also be effectively subordinated to any Secured
Indebtedness of the Company to the extent of the value of the assets securing
such Indebtedness, and to all Indebtedness of its Subsidiaries. However, payment
from the money or the proceeds of U.S. government obligations held in any
defeasance trust described under "--Legal Defeasance and Covenant Defeasance"
below is not subordinated to any Senior Indebtedness or subject to the
restrictions described above if the deposit to such trust which is used to fund
such payment was permitted at the time of such deposit.
As of December 28, 1996, the Company had approximately $163.7 million of
Senior Indebtedness outstanding (excluding unused commitments) all of which
would have been Secured Indebtedness (excluding $4.9 million of outstanding
letters of credit). Although the Indenture contains limitations on the amount of
additional Indebtedness which the Company and its Restricted Subsidiaries may
incur, under certain circumstances the amount of such Indebtedness could be
substantial and, in any case, such Indebtedness may be Senior Indebtedness or
Secured Indebtedness. See "--Certain Covenants--Limitation on Incurrence of
Additional Indebtedness" below.
Only Indebtedness of the Company that is Senior Indebtedness will rank
senior in right of payment to the Notes in accordance with the provisions of the
Indenture. The Notes will in all respects rank pari passu in right of payment
with all other Senior Subordinated Indebtedness of the Company. The Company has
agreed in the Indenture that it will not incur, directly or indirectly, any
Indebtedness which is expressly subordinate in right of payment to Senior
Indebtedness unless such Indebtedness is Senior Subordinated Indebtedness or is
expressly subordinated in right of payment to Senior Subordinated Indebtedness.
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<PAGE> 68
Without limiting the foregoing, unsecured Indebtedness is not deemed to be
subordinate or junior to Secured Indebtedness merely because it is unsecured.
The Company may not pay principal of, premium (if any) or interest on, or
any other amount in respect of, the Notes or make any deposit pursuant to the
provisions described under "--Legal Defeasance and Covenant Defeasance" below
and may not otherwise purchase, redeem or otherwise retire any Notes
(collectively, "pay the Notes") if (i) any Senior Indebtedness is not paid when
due in cash or Cash Equivalents or (ii) any other default on Senior Indebtedness
occurs and the maturity of such Senior Indebtedness is accelerated in accordance
with its terms unless, in either case, the default has been cured or waived and
any such acceleration has been rescinded or such Senior Indebtedness has been
paid in full in cash or Cash Equivalents. However, the Company may pay the Notes
without regard to the foregoing if the Company and the Trustee receive written
notice approving such payment from the Representative of the holders of the
Designated Senior Indebtedness with respect to which either of the events set
forth in clause (i) or (ii) of the immediately preceding sentence has occurred
and is continuing.
In addition, during the continuance of any default (other than a default
described in clause (i) or (ii) of the first sentence of the immediately
preceding paragraph) with respect to any Designated Senior Indebtedness pursuant
to which the maturity thereof may be accelerated immediately without further
notice (except such notice as may be required to effect such acceleration) or
the expiration of any applicable grace periods, the Company may not pay the
Notes for a period (a "Payment Blockage Period") commencing upon the receipt by
the Trustee (with a copy to the Company) of written notice (a "Blockage Notice")
of such default from the Representative of the holders of such Designated Senior
Indebtedness specifying an election to effect a Payment Blockage Period and
ending 179 days thereafter (or earlier if such Payment Blockage Period is
terminated (i) by written notice to the Trustee and the Company from the Person
or Persons who gave such Blockage Notice, (ii) because the default giving rise
to such Blockage Notice is no longer continuing or (iii) because such Designated
Senior Indebtedness has been repaid in full in cash or Cash Equivalents).
Notwithstanding the provisions described in the immediately preceding
paragraph, unless any of the events described in clause (i) or (ii) of the first
sentence of the second immediately preceding paragraph is then occurring, the
Company may resume payments on the Notes after the end of such Payment Blockage
Period, including any missed payments. Not more than one Blockage Notice may be
given in any consecutive 360-day period, irrespective of the number of defaults
with respect to Designated Senior Indebtedness during such period. However, if
any Blockage Notice within such 360-day period is given by or on behalf of any
holders of Designated Senior Indebtedness other than the Bank Indebtedness, a
Representative of holders of Bank Indebtedness may give another Blockage Notice
within such period. In no event, however, may the total number of days during
which any Payment Blockage Period or Periods is in effect exceed 179 days in the
aggregate during any 360 consecutive day period.
Upon any payment or distribution of the assets or securities of the Company
upon a total or partial liquidation or dissolution or reorganization of or
similar proceeding relating to the Company or its property or in a bankruptcy,
insolvency, receivership or similar proceeding relating to the Company or its
property, or in an assignment for the benefit of creditors or any marshalling of
the assets and liabilities of the Company, the holders of Senior Indebtedness
will be entitled to receive payment in full in cash or Cash Equivalents of the
Senior Indebtedness before the holders of the Notes are entitled to receive any
payment and, until the Senior Indebtedness is paid in full in cash or Cash
Equivalents, any payment or distribution to which holders of the Notes would be
entitled but for the subordination provisions of the Indenture will be made to
holders of the Senior Indebtedness as their interests may appear. If a payment
or distribution is made to holders of the Notes that due to the subordination
provisions should not have been made to them, such holders of the Notes are
required to hold it in trust for the holders of Senior Indebtedness and pay it
over to them as their interests may appear.
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If payment of the Notes is accelerated because of an Event of Default, the
Company or the Trustee shall promptly notify the holders of the Designated
Senior Indebtedness or the Representative of such holders of the acceleration.
The Company may not pay the Notes until five business days after such holders or
the Representative of the holders of Designated Senior Indebtedness receive
notice of such acceleration and, thereafter, may pay the Notes only if the
subordination provisions of the Indenture otherwise permit payment at that time.
By reason of such subordination provisions contained in the Indenture, in
the event of insolvency, creditors of the Company who are holders of Senior
Indebtedness may recover more, ratably, than the holders of the Notes, and
creditors of the Company who are not holders of Senior Indebtedness or of Senior
Subordinated Indebtedness (including the Notes) may recover less, ratably, than
holders of Senior Indebtedness and may recover more than the holders of Senior
Subordinated Indebtedness.
GUARANTEES
After the Issue Date, the Company will cause each Restricted Subsidiary of
the Company that guarantees payment of the Bank Indebtedness (each, a
"Subsidiary Guarantor") to execute and deliver to the Trustee a supplemental
indenture pursuant to which such Restricted Subsidiary will guarantee (each, a
"Guarantee") payment of the Notes. See "Certain Covenants--Future Guarantees."
Each such Subsidiary Guarantor will unconditionally guarantee, on a senior
subordinated basis, jointly and severally, to each Holder and the Trustee, the
full and prompt performance of the Company's obligations under the Indenture and
the Notes, including the payment of principal of and interest on the Notes. The
Guarantees will be subordinated to Guarantor Senior Indebtedness on the same
basis as the Notes are subordinated to Senior Indebtedness. The obligations of
each Subsidiary Guarantor are limited to the maximum amount which, after giving
effect to all other contingent and fixed liabilities of such Subsidiary
Guarantor and after giving effect to any collections from or payments made by or
on behalf of any other Subsidiary Guarantor in respect of the obligations of
such other Subsidiary Guarantor under its
Guarantee or pursuant to its contribution obligations under the Indenture, will
result in the obligations of such Subsidiary Guarantor under the Guarantee not
constituting a fraudulent conveyance or fraudulent transfer under federal or
state law. Each Subsidiary Guarantor that makes a payment or distribution under
a Guarantee shall be entitled to a contribution from each other Subsidiary
Guarantor in an amount pro rata, based on the Adjusted Net Assets (as defined in
the Indenture) of each Subsidiary Guarantor.
Each Subsidiary Guarantor may consolidate with or merge into, liquidate,
dissolve or sell its assets to the Company or another Subsidiary Guarantor that
is a Wholly Owned Restricted Subsidiary of the Company without limitation, or
with other Persons upon the terms and conditions set forth in the Indenture. See
"Certain Covenants--Merger, Consolidation and Sale of Assets." In the event that
(i) either all of the Capital Stock of a Subsidiary Guarantor is sold by the
Company (whether by merger, stock purchase or otherwise) or all or substantially
all of the assets of a Subsidiary Guarantor are sold by such Subsidiary
Guarantor and such sale complies with the provisions set forth in "Certain
Covenants--Limitation on Asset Sales" or (ii) the lenders under the Bank Credit
Agreement release a Subsidiary Guarantor of all guarantees under the Bank Credit
Agreement and release all Liens on the property and assets of such Subsidiary
Guarantor relating to the Bank Indebtedness, then in each case the Subsidiary
Guarantor's Guarantee will be released.
CHANGE OF CONTROL
The Indenture will provide that upon the occurrence of a Change of Control
Triggering Event, each Holder will have the right to require that the Company
purchase all or a portion of such Holder's Notes pursuant to the offer described
below (the "Change of Control Offer"), at a purchase price equal to 101% of the
principal amount thereof plus accrued interest to the date of purchase.
The Indenture will provide that, prior to the mailing of the notice
referred to below, but in any event within 30 days following any Change of
Control Triggering Event, the Company covenants to (i) repay in full and
terminate all commitments under the Bank Indebtedness or offer to repay in full
and terminate all
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commitments under all Bank Indebtedness and to repay the Bank Indebtedness owed
to each holder of Bank Indebtedness which has accepted such offer or (ii) obtain
the requisite consents under the Bank Credit Agreement to permit the repurchase
of the Notes as provided below. The Company shall first comply with the covenant
in the immediately preceding sentence before it shall be required to repurchase
Notes pursuant to the provisions described below. The Company's failure to
comply with this covenant shall constitute an Event of Default described in
clause (iii) and not in clause (ii) under "Events of Default" below.
Within 30 days following the date upon which the Change of Control
Triggering Event occurred, the Company must send, by first class mail, a notice
to each Holder, with a copy to the Trustee, which notice shall govern the terms
of the Change of Control Offer. Such notice shall state, among other things, the
purchase date, which must be no earlier than 30 days nor later than 45 days from
the date such notice is mailed, other than as may be required by law (the
"Change of Control Payment Date"). Holders electing to have a Note purchased
pursuant to a Change of Control Offer will be required to surrender the Note,
with the form entitled "Option of Holder to Elect Purchase" on the reverse of
the Note completed, to the Paying Agent at the address specified in the notice
prior to the close of business on the third business day prior to the Change of
Control Payment Date.
If a Change of Control Offer is made, there can be no assurance that the
Company will have available funds sufficient to pay the Change of Control
purchase price for all the Notes that might be delivered by Holders seeking to
accept the Change of Control Offer. In the event the Company is required to
purchase outstanding Notes pursuant to a Change of Control Offer, the Company
expects that it would seek third party financing to the extent it does not have
available funds to meet its purchase obligations. However, there can be no
assurance that the Company would be able to obtain such financing.
The definition of Change of Control includes a phrase relating to the sale,
lease, exchange or other transfer of "all or substantially all" of the Company's
assets as such phrase is defined in the Revised Model Business Corporation Act.
Although there is a developing body of case law interpreting the phrase
"substantially all," there is no precise definition of the phrase under
applicable law. Accordingly, in certain circumstances there may be a degree of
uncertainty in ascertaining whether a particular transaction would involve a
disposition of "all or substantially all" of the assets of the Company, and
therefore it may be unclear as to whether a Change of Control has occurred and
whether the Holders have the right to require the Company to repurchase such
Notes.
Neither the Board of Directors of the Company nor the Trustee may waive the
covenant relating to a Holder's right to redemption upon a Change of Control
Triggering Event. Restrictions in the Indenture described herein on the ability
of the Company and its Restricted Subsidiaries to incur additional Indebtedness,
to grant Liens on their properties, to make Restricted Payments and to make
Asset Sales may also make more difficult or discourage a takeover of the
Company, whether favored or opposed by the management of the Company.
Consummation of any such transaction in certain circumstances may require
redemption or repurchase of the Notes, and there can be no assurance that the
Company or the acquiring party will have sufficient financial resources to
effect such redemption or repurchase. Such restrictions and the restrictions on
transactions with Affiliates may, in certain circumstances, make more difficult
or discourage any leveraged buyout of the Company or any of its Subsidiaries by
the management of the Company. While such restrictions cover a wide variety of
arrangements which have traditionally been used to effect highly leveraged
transactions, the Indenture may not afford the Holders of Notes protection in
all circumstances from the adverse aspects of a highly leveraged transaction,
reorganization, restructuring, merger or similar transaction.
The Company will comply with the requirements of Rule 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder to the
extent such laws and regulations are applicable in connection with the
repurchase of Notes pursuant to a Change of Control Offer. To the extent that
the provisions of any securities laws or regulations conflict with the "Change
of Control" provisions of the Indenture, the Company shall comply with the
applicable securities laws and regulations and shall not be
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<PAGE> 71
deemed to have breached its obligations under the "Change of Control" provisions
of the Indenture by virtue thereof.
CERTAIN COVENANTS
The Indenture contains, among others, the following covenants:
Limitation on Restricted Payments. The Company will not, and will not
cause or permit any of its Restricted Subsidiaries to, directly or indirectly,
(a) declare or pay any dividend or make any distribution (other than dividends
or distributions payable in Qualified Capital Stock) on or in respect of shares
of Capital Stock of the Company to holders of such Capital Stock, (b) purchase,
redeem or otherwise acquire or retire for value any Capital Stock of the Company
or any warrants, rights or options to purchase or acquire shares of any class of
such Capital Stock, other than the exchange of such Capital Stock for Qualified
Capital Stock, or (c) make any Investment (other than Permitted Investments)
(each of the foregoing actions set forth in clauses (a), (b) and (c) being
referred to as a "Restricted Payment"), if at the time of such Restricted
Payment or immediately after giving effect thereto, (i) a Default or an Event of
Default shall have occurred and be continuing, (ii) the Company is not able to
incur at least $1.00 of additional Indebtedness (other than Permitted
Indebtedness) in compliance with the "Limitation on Incurrence of Additional
Indebtedness" covenant or (iii) the aggregate amount of Restricted Payments made
subsequent to the Issue Date shall exceed the sum of: (w) 50% of the cumulative
Consolidated Net Income (or if cumulative Consolidated Net Income shall be a
loss, minus 100% of such loss) of the Company earned subsequent to the Issue
Date and on or prior to the date the Restricted Payment occurs (the "Reference
Date") (treating such period as a single accounting period); plus (x) 100% of
the aggregate net cash proceeds received by the Company from any Person (other
than a Subsidiary of the Company) from the issuance and sale subsequent to the
Issue Date and on or prior to the Reference Date of Qualified Capital Stock of
the Company (including Capital Stock issued upon the conversion of convertible
Indebtedness or in exchange for outstanding Indebtedness); plus (y) without
duplication of any amounts included in clause (iii)(x) above, 100% of the
aggregate net cash proceeds of any equity contribution received by the Company
from a holder of the Company's Capital Stock (excluding any net cash proceeds
from such equity contribution to the extent used to redeem Notes in accordance
with the optional redemption provisions of the Notes); plus (z) to the extent
that any Investment (other than a Permitted Investment) that was made after the
Issue Date is sold for cash or otherwise liquidated or repaid for cash, the
lesser of (A) the cash received with respect to such sale, liquidation or
repayment of such Investment (less the cost of such sale, liquidation or
repayment, if any) and (B) the initial amount of such Investment.
Notwithstanding the foregoing, the provisions set forth in the immediately
preceding paragraph do not prohibit: (1) the payment of any dividend or the
consummation of any irrevocable redemption within 60 days after the date of
declaration of such dividend or notice of such redemption if the dividend or
payment of the redemption price, as the case may be, would have been permitted
on the date of declaration or notice; (2) if no Event of Default shall have
occurred and be continuing as a consequence thereof, the acquisition of any
shares of Capital Stock of the Company, either (i) solely in exchange for shares
of Qualified Capital Stock of the Company, or (ii) through the application of
net proceeds of a substantially concurrent sale (other than to a Subsidiary of
the Company) of shares of Qualified Capital Stock of the Company; (3) payments
for the purpose of and in an amount equal to the amount required to permit the
Company to redeem or repurchase shares of its Capital Stock or options in
respect thereof, in each case in connection with the repurchase provisions under
employee stock option or stock purchase agreements or other agreements to
compensate management employees; provided that such redemptions or repurchases
pursuant to this clause (3) shall not exceed $2 million (which amount shall be
increased by the amount of any cash proceeds to the Company from (x) sales of
its Capital Stock to management employees subsequent to the Issue Date and (y)
any "key-man" life insurance policies which are used to make such redemptions or
repurchases) in the aggregate; (4) the payment of fees and compensation as
permitted under clause (i) of paragraph (b) of the "Transactions with
Affiliates" covenant; (5) so long as no Default or Event of Default shall have
occurred and be continuing, payments
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not to exceed $100,000 in the aggregate, to enable the Company to make payments
to holders of its Capital Stock in lieu of issuance of fractional shares of its
Capital Stock; (6) repurchases of Capital Stock deemed to occur upon the
exercise of stock options if such Capital Stock represents a portion of the
exercise price thereof; and (7) payments made on the Issue Date pursuant to the
Recapitalization Agreement. In determining the aggregate amount of Restricted
Payments made subsequent to the Issue Date in accordance with clause (iii) of
the immediately preceding paragraph, (a) amounts expended (to the extent such
expenditure is in the form of cash or other property other than Qualified
Capital Stock) pursuant to clauses (1), (2) and (3) of this paragraph shall be
included in such calculation, provided that such expenditures pursuant to clause
(3) shall not be included to the extent of cash proceeds received by the Company
from any "key man" life insurance policies and (b) amounts expended pursuant to
clause (4), (5), (6), and (7) shall be excluded from such calculation.
The Indenture will not permit the payment of dividends in respect of the 8%
Preferred Stock unless: (i) the Company elects to redeem the 8% Preferred Stock
upon the occurrence of a Redemption Event or (ii) the Company exercises its
optional right to redeem the 8% Preferred Stock on or after December 15, 2001;
provided that the payment of such dividends will only be permitted if such
payment is in compliance with the other provisions of the "Limitation on
Restricted Payments" convenant.
Limitation on Incurrence of Additional Indebtedness. The Company will not,
and will not permit any of its Restricted Subsidiaries to, directly or
indirectly, create, incur, assume, guarantee, acquire, become liable,
contingently or otherwise, with respect to, or otherwise become responsible for
payment of (collectively, "incur") any Indebtedness (other than Permitted
Indebtedness); provided, however, that if no Default or Event of Default shall
have occurred and be continuing at the time or as a consequence of the
incurrence of any such Indebtedness, the Company or any Subsidiary Guarantor may
incur Indebtedness if on the date of the incurrence of such Indebtedness, after
giving effect to the incurrence thereof, the Consolidated Fixed Charge Coverage
Ratio of the Company is greater than 2.0 to 1.0.
Limitations on Transactions with Affiliates. (a) The Company will not, and
will not permit any of its Restricted Subsidiaries to, directly or indirectly,
enter into or permit to exist any transaction or series of related transactions
(including, without limitation, the purchase, sale, lease or exchange of any
property or the rendering of any service) with, or for the benefit of, any of
its Affiliates (an "Affiliate Transaction"), other than (x) Affiliate
Transactions permitted under paragraph (b) below and (y) Affiliate Transactions
on terms that are no less favorable than those that might reasonably have been
obtained in a comparable transaction at such time on an arm's-length basis from
a Person that is not an Affiliate; provided, however, that for a transaction or
series of related transactions with an aggregate value of $2 million or more, at
the Company's option (i) such determination shall be made in good faith by a
majority of the disinterested members of the Board of the Directors of the
Company or (ii) the Board of Directors of the Company or any such Restricted
Subsidiary party to such Affiliate Transaction shall have received a favorable
opinion from a nationally recognized investment banking firm that such Affiliate
Transaction is on terms not materially less favorable than those that might
reasonably have been obtained in a comparable transaction at such time on an
arm's-length basis from a Person that is not an Affiliate; provided, further,
that for a transaction or series of related transactions with an aggregate value
of $5 million or more, the Board of Directors of the Company shall have received
a favorable opinion from a nationally recognized investment banking firm that
such Affiliate Transaction is on terms not materially less favorable than those
that might reasonably have been obtained in a comparable transaction at such
time on an arm's-length basis from a Person that is not an Affiliate.
(b) The foregoing restrictions shall not apply to (i) reasonable fees and
compensation paid to, and indemnity provided on behalf of, officers, directors,
employees or consultants of the Company or any Subsidiary of the Company as
determined in good faith by the Company's Board of Directors or senior
management; (ii) transactions exclusively between or among the Company and any
of its Wholly Owned Restricted Subsidiaries or exclusively between or among such
Wholly Owned Restricted Subsidiaries, provided such transactions are not
otherwise prohibited by the Indenture; (iii) transactions effected as part of a
Qualified Receivables Transaction; (iv) any agreement as in effect as of the
Issue Date or any amendment thereto or any transaction contemplated thereby
(including pursuant to any amendment
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thereto) in any replacement agreement thereto so long as any such amendment or
replacement agreement is not more disadvantageous to the Holders in any material
respect than the original agreement as in effect on the Issue Date; and (v)
Restricted Payments permitted by the Indenture.
Limitation on Liens. The Company will not, and will not permit any of its
Restricted Subsidiaries to, create, incur, assume or suffer to exist any Liens
of any kind against or upon any of its property or assets, or any proceeds
therefrom, unless (i) in the case of Liens securing Indebtedness that is
expressly subordinate or junior in right of payment to the Notes, the Notes are
secured by a Lien on such property, assets or proceeds that is senior in
priority to such Liens and (ii) in all other cases, the Notes are equally and
ratably secured, except for (A) Liens existing as of the Issue Date and any
extensions, renewals or replacements thereof; (B) Liens securing Senior
Indebtedness and Guarantor Senior Indebtedness; (C) Liens securing the Notes and
the Guarantees; (D) Liens of the Company or a Wholly Owned Restricted Subsidiary
on assets of any Subsidiary of the Company; (E) Liens securing Indebtedness
which is incurred to refinance Indebtedness which has been secured by a Lien
permitted under the Indenture and which has been incurred in accordance with the
provisions of the Indenture; provided, however, that such Liens do not extend to
or cover any property or assets of the Company or any of its Restricted
Subsidiaries not securing the Indebtedness so refinanced; and (F) Permitted
Liens.
Prohibition on Incurrence of Senior Subordinated Debt. Neither the Company
nor any Subsidiary Guarantor will incur or suffer to exist Indebtedness that is
senior in right of payment to the Notes or such Subsidiary Guarantor's Guarantee
and subordinate in right of payment to any other Indebtedness of the Company or
such Subsidiary Guarantor, as the case may be.
Limitation on Dividend and Other Payment Restrictions Affecting
Subsidiaries. The Company will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, create or otherwise cause or permit to
exist or become effective any encumbrance or restriction on the ability of any
Restricted Subsidiary to (a) pay dividends or make any other distributions on or
in respect of its Capital Stock; (b) make loans or advances or to pay any
Indebtedness or other obligation owed to the Company or any other Restricted
Subsidiary of the Company; or (c) transfer any of its property or assets to the
Company or any other Restricted Subsidiary of the Company, except for such
encumbrances or restrictions existing under or by reason of: (1) applicable law;
(2) the Indenture; (3) non-assignment provisions of any contract or any lease
entered into in the ordinary course of business; (4) any instrument governing
Acquired Indebtedness, which encumbrance or restriction is not applicable to the
Company or any Restricted Subsidiary of the Company, or the properties or assets
of any such Person, other than the Person or the properties or assets of the
Person so acquired; (5) agreements existing on the Issue Date (including,
without limitation, the Bank Credit Agreement and the Recapitalization
Agreement); (6) restrictions on the transfer of assets subject to any Lien
permitted under the Indenture imposed by the holder of such Lien; (7)
restrictions imposed by any agreement to sell assets permitted under the
Indenture to any Person pending the closing of such sale; (8) any agreement or
instrument governing Capital Stock of any Person that is acquired after the
Issue Date; (9) Indebtedness or other contractual requirements of a Receivables
Entity in connection with a Qualified Receivables Transaction; provided that
such restrictions apply only to such Receivables Entity; or (10) an agreement
effecting a refinancing, replacement or substitution of Indebtedness issued,
assumed or incurred pursuant to an agreement referred to in clause (2), (4) or
(5) above; provided, however, that the provisions relating to such encumbrance
or restriction contained in any such refinancing, replacement or substitution
agreement are no less favorable to the Company or the Holders in any material
respect as determined by the Board of Directors of the Company than the
provisions relating to such encumbrance or restriction contained in agreements
referred to in such clause (2), (4) or (5).
Limitation on Preferred Stock of Subsidiaries. The Company will not permit
any of its Restricted Subsidiaries to issue any Preferred Stock (other than to
the Company or to a Wholly Owned Restricted Subsidiary of the Company) or permit
any Person (other than the Company or a Wholly Owned Restricted Subsidiary of
the Company) to own any Preferred Stock of any Restricted Subsidiary of the
Company.
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Merger, Consolidation and Sale of Assets. The Company will not, in a
single transaction or a series of related transactions, consolidate with or
merge with or into, or sell, assign, transfer, lease, convey or otherwise
dispose of all or substantially all of its assets to, another Person or Persons
unless (i) either (A) the Company shall be the survivor of such merger or
consolidation or (B) the surviving Person is a corporation existing under the
laws of the United States, any state thereof or the District of Columbia and
such surviving Person shall expressly assume all the obligations of the Company
under the Notes and the Indenture; (ii) immediately after giving effect to such
transaction (on a pro forma basis, including any Indebtedness incurred or
anticipated to be incurred in connection with such transaction and including
adjustments that are (i) directly attributable to such transaction and (ii)
factually supportable), the Company or the surviving Person is able to incur at
least $1.00 of additional Indebtedness (other than Permitted Indebtedness) in
compliance with the "Limitation on Incurrence of Additional Indebtedness"
covenant; (iii) immediately before and immediately after giving effect to such
transaction (including any Indebtedness incurred or anticipated to be incurred
in connection with the Transactions), no Default or Event of Default shall have
occurred and be continuing; (iv) each Subsidiary Guarantor, unless it is the
other party to the Transactions, shall have by supplemental indenture confirmed
that after consummation of such transaction its Guarantee shall apply, as such
Guarantee applied on the date it was granted under the Indenture to the
obligations of the Company under the Indenture and the Notes, to the obligations
of the Company or such Person, as the case may be, under the Indenture and the
Notes; and (v) the Company has delivered to the Trustee an officers' certificate
and opinion of counsel, each stating that such consolidation, merger or transfer
complies with the Indenture, that the surviving Person agrees to be bound
thereby, and that all conditions precedent in the Indenture relating to such
transaction have been satisfied. For purposes of the foregoing, the transfer (by
lease, assignment, sale or otherwise, in a single transaction or series of
transactions) of all or substantially all of the properties and assets of one or
more Subsidiaries of the Company, the Capital Stock of which constitutes all or
substantially all of the properties and assets of the Company, shall be deemed
to be the transfer of all or substantially all of the properties and assets of
the Company. Notwithstanding the foregoing clauses (ii) and (iii) of the
preceding sentence, (a) any Restricted Subsidiary of the Company may consolidate
with, merge into or transfer all or part of its properties and assets to the
Company and (b) the Company may merge with an Affiliate incorporated solely for
the purpose of reincorporating the Company in another jurisdiction.
The Indenture will provide that upon any consolidation, combination or
merger or any transfer of all or substantially all of the assets of the Company
in accordance with the foregoing, the surviving entity shall succeed to, and be
substituted for, and may exercise every right and power of, the Company under
the Indenture and the Notes with the same effect as if such surviving entity had
been named as such; provided that solely for purposes of computing amounts
described in clause (iii) of the first paragraph of the covenant "Limitation on
Restricted Payments" above, any such surviving entity to the Company shall only
be deemed to have succeeded to and be substituted for the Company with respect
to periods subsequent to the effective time of such merger, consolidation,
combination or transfer of assets.
Each Subsidiary Guarantor (other than any Subsidiary Guarantor whose
Guarantee is to be released in accordance with the terms of its Guarantee and
the Indenture in connection with any transaction complying with the provisions
of "--Limitation on Asset Sales" or as otherwise provided in the Indenture) will
not, and the Company will not cause or permit any Subsidiary Guarantor to,
consolidate with or merge with or into any Person other than the Company or any
other Subsidiary Guarantor unless: (i) the entity formed by or surviving any
such consolidation or merger (if other than the Subsidiary Guarantor) or to
which such sale, lease, conveyance or other disposition shall have been made is
a corporation organized and existing under the laws of the United States or any
State thereof or the District of Columbia; (ii) such entity assumes by
supplemental indenture all of the obligations of the Subsidiary Guarantor on the
Guarantee; (iii) immediately after giving effect to such transaction, no Default
or Event of Default shall have occurred and be continuing; and (iv) immediately
after giving effect to such transaction and the use of any net proceeds
therefrom, on a pro forma basis, including adjustments that are (i) directly
attributable to such transaction and (ii) factually supportable, the Company
could satisfy the provisions of clause (ii) of the first paragraph of this
covenant.
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Limitation on Asset Sales. The Company will not, and will not permit any
of its Restricted Subsidiaries to, consummate an Asset Sale unless (i) the
Company or the applicable Restricted Subsidiary, as the case may be, receives
consideration at the time of such Asset Sale at least equal to the fair market
value of the assets sold or otherwise disposed of (as determined in good faith
by the Company's Board of Directors), (ii) at least 75% of the consideration
received by the Company or such Restricted Subsidiary, as the case may be, from
such Asset Sale shall be cash or Cash Equivalents and is received at the time of
such disposition; provided that the amount of (x) any liabilities (as shown on
the Company's or such Restricted Subsidiary's most recent balance sheet or in
the notes thereto) of the Company or such Restricted Subsidiary (other than
liabilities that are by their terms subordinated to the Notes or such Restricted
Subsidiary's Guarantee, if any) that are assumed by the transferee of any such
assets and (y) any notes or other obligations received by the Company or any
such Restricted Subsidiary from such transferee that are immediately converted
by the Company or any such Restricted Subsidiary into cash or Cash Equivalents
(to the extent of the cash or Cash Equivalents received) shall be deemed to be
cash for purposes of this provision; and (iii) upon the consummation of an Asset
Sale, the Company shall apply, or cause such Restricted Subsidiary to apply, the
Net Cash Proceeds relating to such Asset Sale within 365 days of receipt thereof
either (A) to prepay any Senior Indebtedness or Guarantor Senior Indebtedness
and, in the case of any Senior Indebtedness under any revolving credit facility,
effect a permanent reduction in the availability under such revolving credit
facility, (B) to reinvest in Productive Assets, or (C) a combination of
prepayment and investment permitted by the foregoing clauses (iii)(A) and
(iii)(B). On the 366th day after an Asset Sale or such earlier date, if any, as
the Board of Directors of the Company or of such Restricted Subsidiary
determines not to apply the Net Cash Proceeds relating to such Asset Sale as set
forth in clauses (iii)(A), (iii)(B) and (iii)(C) of the immediately preceding
sentence (each, a "Net Proceeds Offer Trigger Date"), such aggregate amount of
Net Cash Proceeds which have not been applied on or before such Net Proceeds
Offer Trigger Date as permitted in clauses (iii)(A), (iii)(B) and (iii)(C) of
the immediately preceding sentence (each a "Net Proceeds Offer Amount") shall be
applied by the Company or such Restricted Subsidiary to make an offer to
purchase (the "Net Proceeds Offer") on a date (the "Net Proceeds Offer Payment
Date") not less than 30 nor more than 45 days following the applicable Net
Proceeds Offer Trigger Date, from all Holders on a pro rata basis that amount of
Notes equal to the Net Proceeds Offer Amount at a price equal to 100% of the
principal amount of the Notes to be purchased, plus accrued and unpaid interest
thereon, if any, to the date of purchase; provided, however, that if at any time
any non-cash consideration received by the Company or any Restricted Subsidiary
of the Company, as the case may be, in connection with any Asset Sale is
converted into or sold or otherwise disposed of for cash (other than interest
received with respect to any such non-cash consideration), then such conversion
or disposition shall be deemed to constitute an Asset Sale hereunder and the Net
Cash Proceeds thereof shall be applied in accordance with this covenant.
Notwithstanding the foregoing, if a Net Proceeds Offer Amount is less than
$5 million, the application of the Net Cash Proceeds constituting such Net
Proceeds Offer Amount to a Net Proceeds Offer may be deferred until such time as
such Net Proceeds Offer Amount plus the aggregate amount of all Net Proceeds
Offer Amounts arising subsequent to the Net Proceeds Offer Trigger Date relating
to such initial Net Proceeds Offer Amount from all Asset Sales by the Company
and its Restricted Subsidiaries aggregates at least $5 million, at which time
the Company or such Restricted Subsidiary shall apply all Net Cash Proceeds
constituting all Net Proceeds Offer Amounts that have been so deferred to make a
Net Proceeds Offer (the first date the aggregate of all such deferred Net
Proceeds Offer Amounts is equal to $5 million or more shall be deemed to be a
"Net Proceeds Offer Trigger Date").
Notwithstanding the two immediately preceding paragraphs, the Company and
its Restricted Subsidiaries will be permitted to consummate an Asset Sale
without complying with such paragraphs to the extent (i) at least 75% of the
consideration for such Asset Sale constitutes Productive Assets and (ii) such
Asset Sale is for at least fair market value (as determined in good faith by the
Company's Board of Directors); provided that any consideration not constituting
Productive Assets received by the Company or any of its Restricted Subsidiaries
in connection with any Asset Sale permitted to be consummated under this
paragraph shall constitute Net Cash Proceeds and shall be subject to the
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provisions of the two preceding paragraphs; provided, that at the time of
entering into such transaction or immediately after giving effect thereto, no
Default or Event of Default shall have occurred or be continuing or would occur
as a consequence thereof.
Each Net Proceeds Offer will be mailed to the record Holders as shown on
the register of Holders within 25 days following the Net Proceeds Offer Trigger
Date, with a copy to the Trustee, and shall comply with the procedures set forth
in the Indenture. Upon receiving notice of the Net Proceeds Offer, Holders may
elect to tender their Notes in whole or in part in integral multiples of $1,000
in exchange for cash. To the extent Holders properly tender Notes in an amount
exceeding the Net Proceeds Offer Amount, Notes of tendering Holders will be
purchased on a pro rata basis (based on amounts tendered). A Net Proceeds Offer
shall remain open for a period of 20 business days or such longer period as may
be required by law. To the extent that the aggregate amount of Notes tendered
pursuant to a Net Proceeds Offer is less than the Net Proceeds Offer Amount, the
Company may use any remaining Net Proceeds Offer Amount for general corporate
purposes. Upon completion of any such Net Proceeds Offer, the Net Proceeds Offer
Amount shall be reset at zero.
The Company will comply with the requirements of Rule 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder to the
extent such laws and regulations are applicable in connection with the
repurchase of Notes pursuant to a Net Proceeds Offer. To the extent that the
provisions of any securities laws or regulations conflict with the "Asset Sale"
provisions of the Indenture, the Company shall comply with the applicable
securities laws and regulations and shall not be deemed to have breached its
obligations under the "Asset Sale" provisions of the Indenture by virtue
thereof.
Future Guarantees. The Company will not permit any of its Restricted
Subsidiaries, directly or indirectly, to incur, guarantee or secure through the
granting of Liens the payment of the Bank Indebtedness or any refunding or
refinancing thereof, in each case unless such Restricted Subsidiary, the Company
and the Trustee execute and deliver a supplemental indenture evidencing such
Restricted Subsidiary's Guarantee, such Guarantee to be a senior subordinated
unsecured obligation of such Restricted Subsidiary. Neither the Company nor any
such Subsidiary Guarantor shall be required to make a notation on the Notes or
the Guarantees to reflect any such subsequent Guarantee. Nothing in this
covenant shall be construed to permit any Restricted Subsidiary of the Company
to incur Indebtedness otherwise prohibited by the "Limitation on Incurrence of
Additional Indebtedness" covenant. Thereafter, such Restricted Subsidiary shall
be a Subsidiary Guarantor for all purposes of the Indenture.
Conduct of Business. The Company and its Restricted Subsidiaries will not
engage in any businesses which are not the same, similar, related or ancillary
to the businesses in which the Company and its Restricted Subsidiaries are
engaged on the Issue Date.
EVENTS OF DEFAULT
The following events are defined in the Indenture as "Events of Default":
(i) the failure to pay interest on any Notes when the same becomes due and
payable and the default continues for a period of 30 days (whether or not such
payment shall be prohibited by the subordination provisions of the Indenture);
(ii) the failure to pay the principal on any Notes, when such principal becomes
due and payable, at maturity, upon redemption or otherwise (including the
failure to make a payment to purchase Notes tendered pursuant to a Change of
Control Offer or a Net Proceeds Offer) (whether or not such payment shall be
prohibited by the subordination provisions of the Indenture); (iii) a default in
the observance or performance of any other covenant or agreement contained in
the Indenture which default continues for a period of 30 days after the Company
receives written notice specifying the default (and demanding that such default
be remedied) from the Trustee or the Holders of at least 25% of the outstanding
principal amount of the Notes; (iv) the failure to pay at final maturity (giving
effect to any applicable grace periods and any extensions thereof) the principal
amount of any Indebtedness of the Company or any Restricted Subsidiary (other
than a Receivables Entity) of the Company, or the acceleration of the final
stated maturity of any such Indebtedness if the aggregate principal amount of
such Indebtedness, together with the principal amount of any other such
Indebtedness in default for
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failure to pay principal at final maturity or which has been accelerated,
aggregates $10 million or more at any time; (v) one or more judgments in an
aggregate amount in excess of $10 million shall have been rendered against the
Company or any of its Significant Subsidiaries and such judgments remain
undischarged, unpaid or unstayed for a period of 60 days after such judgment or
judgments become final and non-appealable, and in the event such judgment is
covered by insurance, an enforcement proceeding has been commenced by any
creditor upon such judgment which is not promptly stayed; (vi) certain events of
bankruptcy affecting the Company or any of its Significant Subsidiaries; and
(vii) any of the Guarantees of the Subsidiary Guarantors that are also
Significant Subsidiaries of the Company ceases to be in full force and effect or
any of such Guarantees is declared to be null and void and unenforceable or any
of such Guarantees is found to be invalid or any of such Subsidiary Guarantors
denies its liability under its Guarantee (other than by reason of release of
such Subsidiary Guarantor in accordance with the terms of the Indenture).
Upon the happening of any Event of Default specified in the Indenture, the
Trustee or the Holders of at least 25% in principal amount of outstanding Notes
may declare the principal of and accrued interest on all the Notes to be due and
payable by notice in writing to the Company and the Trustee specifying the
respective Event of Default and that it is a "notice of acceleration", and the
same shall become immediately due and payable. If an Event of Default with
respect to bankruptcy proceedings of the Company occurs and is continuing, then
such amount shall ipso facto become and be immediately due and payable without
any declaration or other act on the part of the Trustee or any holder of Notes.
The Indenture will provide that, at any time after a declaration of
acceleration with respect to the Notes as described in the preceding paragraph,
the Holders of a majority in principal amount of the Notes may rescind and
cancel such declaration and its consequences (i) if the rescission would not
conflict with any judgment or decree, (ii) if all existing Events of Default
have been cured or waived except nonpayment of principal or interest that has
become due solely because of the acceleration, (iii) to the extent the payment
of such interest is lawful, interest on overdue installments of interest and
overdue principal, which has become due otherwise than by such declaration of
acceleration, has been paid, (iv) if the Company has paid the Trustee its
reasonable compensation and reimbursed the Trustee for its expenses,
disbursements and advances and (v) in the event of the cure or waiver of an
Event of Default of the type described in clause (vi) or (vii) of the
description above of Events of Default, the Trustee shall have received an
officers' certificate and an opinion of counsel that such Event of Default has
been cured or waived. The holders of a majority in principal amount of the Notes
may waive any existing Default or Event of Default under the Indenture, and its
consequences, except a default in the payment of the principal of or interest on
any Notes.
NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND STOCKHOLDERS
No director, officer, employee, incorporator or stockholder of the Company
shall have any liability for any obligations of the Company under the Notes or
the Indenture or for any claim based on, in respect of, or by reason of, such
obligations or their creation. Each Holder of 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
Commission that such a waiver is against public policy.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
The Company may, at its option and at any time, elect to have its
obligations and the obligations of the Subsidiary Guarantors discharged with
respect to the outstanding Notes ("Legal Defeasance"). Such Legal Defeasance
means that the Company shall be deemed to have paid and discharged the entire
indebtedness represented by the outstanding Notes, except for (i) the rights of
holders of the Notes to receive payments in respect of the principal of,
premium, if any, and interest on the Notes when such payments are due, (ii) the
Company's obligations with respect to the Notes concerning issuing temporary
Notes, registration of Notes, mutilated, destroyed, lost or stolen Notes and the
maintenance of an office or agency for payments, (iii) the rights, powers,
trust, duties and immunities of the Trustee and
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the Company's obligations in connection therewith and (iv) the Legal Defeasance
provisions of the Indenture. In addition, the Company may, at its option and at
any time, elect to have the obligations of the Company released with respect to
certain covenants that are described in the Indenture ("Covenant Defeasance")
and thereafter any omission to comply with such obligations shall not constitute
a Default or Event of Default with respect to the Notes. In the event Covenant
Defeasance occurs, certain events (not including non-payment, bankruptcy,
receivership, reorganization and insolvency events) described under "Events of
Default" will no longer constitute an Event of Default with respect to the
Notes.
In order to exercise either Legal Defeasance or Covenant Defeasance, (i)
the Company must irrevocably deposit with the Trustee, in trust, for the benefit
of the holders of the Notes cash in U.S. dollars, non-callable U.S. government
obligations, or a combination thereof, in such amounts as will be sufficient, in
the opinion of a nationally recognized firm of independent public accountants,
to pay the principal of, premium, if any, and interest on the Notes on the
stated date for payment thereof or on the applicable redemption date, as the
case may be; (ii) in the case of Legal Defeasance, the Company shall have
delivered to the Trustee an opinion of counsel in the United States reasonably
acceptable to the Trustee confirming that (A) the Company has received from, or
there has been published by, the Internal Revenue Service a ruling or (B) since
the date of the Indenture, there has been a change in the applicable federal
income tax law, in either case to the effect that, and based thereon such
opinion of counsel shall confirm that, the holders of the Notes will not
recognize income, gain or loss for federal income tax purposes as a result of
such Legal Defeasance and will be subject to federal income tax on the same
amounts, in the same manner and at the same times as would have been the case if
such Legal Defeasance had not occurred; (iii) in the case of Covenant
Defeasance, the Company shall have delivered to the Trustee an opinion of
counsel in the United States reasonably acceptable to the Trustee confirming
that the holders of the Notes will not recognize income, gain or loss for
federal income tax purposes as a result of such Covenant Defeasance and will be
subject to federal income tax on the same amounts, in the same manner and at the
same times as would have been the case if such Covenant Defeasance had not
occurred; (iv) no Default or Event of Default shall have occurred and be
continuing on the date of such deposit (other than a Default or Event of Default
with respect to the Indenture resulting from the incurrence of Indebtedness, all
or a portion of which will be used to defease the Notes concurrently with such
incurrence); (v) such Legal Defeasance or Covenant Defeasance shall not result
in a breach or violation of, or constitute a default under the Indenture or any
other material agreement or instrument to which the Company or any of its
Subsidiaries is a party or by which the Company or any of its Subsidiaries is
bound; (vi) the Company shall have delivered to the Trustee an officers'
certificate stating that the deposit was not made by the Company with the intent
of preferring the holders of the Notes over any other creditors of the Company
or with the intent of defeating, hindering, delaying or defrauding any other
creditors of the Company or others; (vii) the Company shall have delivered to
the Trustee an officers' certificate and an opinion of counsel, each stating
that all conditions precedent provided for or relating to the Legal Defeasance
or the Covenant Defeasance have been complied with; (viii) the Company shall
have delivered to the Trustee an opinion of counsel to the effect that (A) the
trust funds will not be subject to any rights of holders of Indebtedness of the
Company other than the Notes and (B) assuming no intervening bankruptcy of the
Company between the date of deposit and the 91st day following the deposit and
that no Holder of the Notes is an insider of the Company, after the 91st day
following the deposit, the trust funds will not be subject to the effect of any
applicable bankruptcy, insolvency, reorganization or similar laws affecting
creditors' rights generally; and (ix) certain other customary conditions
precedent are satisfied.
SATISFACTION AND DISCHARGE
The Indenture will be discharged and will cease to be of further effect
(except as to surviving rights or registration of transfer or exchange of the
Notes, as expressly provided for in the Indenture) as to all outstanding Notes
when (i) either (a) all the Notes theretofore authenticated and delivered
(except lost, stolen or destroyed Notes which have been replaced or paid and
Notes for whose payment money has theretofore been deposited in trust or
segregated and held in trust by the Company and thereafter repaid to the Company
or discharged from such trust) have been delivered to the Trustee for
cancellation or
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(b) all Notes not theretofore delivered to the Trustee for cancellation have
become due and payable and the Company has irrevocably deposited or caused to be
deposited with the Trustee funds in an amount sufficient to pay and discharge
the entire Indebtedness on the Notes not theretofore delivered to the Trustee
for cancellation, for principal of, premium, if any, and interest on the Notes
to the date of deposit together with irrevocable instructions from the Company
directing the Trustee to apply such funds to the payment thereof at maturity or
redemption, as the case may be; (ii) the Company has paid all other sums payable
under the Indenture by the Company; and (iii) the Company has delivered to the
Trustee an officers' certificate and an opinion of counsel stating that all
conditions precedent under the Indenture relating to the satisfaction and
discharge of the Indenture have been complied with.
MODIFICATION OF THE INDENTURE
From time to time, the Company, the Subsidiary Guarantors and the Trustee,
without the consent of the Holders of the Notes, may amend the Indenture for
certain specified purposes, including curing ambiguities, defects or
inconsistencies, so long as such change does not, in the opinion of the Trustee,
adversely affect the rights of any of the Holders in any material respect. In
formulating its opinion on such matters, the Trustee will be entitled to rely on
such evidence as it deems appropriate, including, without limitation, solely on
an opinion of counsel. Other modifications and amendments of the Indenture may
be made with the consent of the Holders of a majority in principal amount of the
then outstanding Notes issued under the Indenture, except that, without the
consent of each holder of the Notes affected thereby, no amendment may: (i)
reduce the amount of Notes whose holders must consent to an amendment; (ii)
reduce the rate of or change or have the effect of changing the time for payment
of interest, including defaulted interest, on any Notes; (iii) reduce the
principal of or change or have the effect of changing the fixed maturity of any
Notes, or change the date on which any Notes may be subject to redemption or
repurchase, or reduce the redemption or repurchase price therefor; (iv) make any
Notes payable in money other than that stated in the Notes; (v) make any change
in provisions of the Indenture protecting the right of each holder of a Note to
receive payment of principal of and interest on such Note on or after the due
date thereof or to bring suit to enforce such payment, or permitting holders of
a majority in principal amount of the Notes to waive Defaults or Events of
Default (other than Defaults or Events of Default with respect to the payment of
principal of or interest on the Notes); (vi) amend, change or modify in any
material respect the obligation of the Company to make and consummate a Change
of Control Offer in the event of a Change of Control Triggering Event or make
and consummate a Net Proceeds Offer with respect to any Asset Sale that has been
consummated or modify any of the provisions or definitions with respect thereto;
(vii) modify the subordination provisions (including the related definitions) of
the Indenture to adversely affect the holders of Notes in any material respect;
or (viii) release any Subsidiary Guarantor that is a Significant Subsidiary of
the Company from any of its obligations under its Guarantee or the Indenture
otherwise than in accordance with the terms of the Indenture.
ADDITIONAL INFORMATION
The Indenture provides that the Company will deliver to the Trustee within
15 days after the filing of the same with the Commission, copies of the
quarterly and annual reports and of the information, documents and other
reports, if any, which the Company is required to file with the Commission
pursuant to Section 13 or 15(d) of the Exchange Act. The Indenture further
provides that, notwithstanding that the Company may not be subject to the
reporting requirements of Section 13 or 15(d) of the Exchange Act, the Company
will file with the Commission, to the extent permitted, and provide the Trustee
and Holders with such annual reports and such information, documents and other
reports specified in Sections 13 and 15(d) of the Exchange Act. The Company and
the Subsidiary Guarantors will also comply with the other provisions of TIA
[section]. 314(a).
CERTAIN DEFINITIONS
Set forth below is a summary of certain of the defined terms used in the
Indenture. Reference is made to the Indenture for the definition of other terms
used herein for which no definition is provided.
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"Acquired Indebtedness" means Indebtedness (i) of a Person or any of its
Subsidiaries existing at the time such Person becomes a Restricted Subsidiary of
the Company or (ii) assumed in connection with the acquisition of assets from
such Person, in each case whether or not incurred by such Person in connection
with, or in anticipation or contemplation of, such Person becoming a Restricted
Subsidiary of the Company or such acquisition. Acquired Indebtedness shall be
deemed to have been incurred, with respect to clause (i) of the preceding
sentence, on the date such Person becomes a Restricted Subsidiary of the Company
and, with respect to clause (ii) of the preceding sentence, on the date of
consummation of such acquisition of assets.
"Affiliate" means a Person who directly or indirectly through one or more
intermediaries controls, or is controlled by, or is under common control with,
the Company. The term "control" means the possession, directly or indirectly, of
the power to direct or cause the direction of the management and policies of a
Person, whether through the ownership of voting securities, by contract or
otherwise. Notwithstanding the foregoing, no Person (other than the Company or
any Subsidiary of the Company) in whom a Receivables Entity makes an Investment
in connection with a Qualified Receivables Transaction shall be deemed to be an
Affiliate of the Company or any of its Subsidiaries solely by reason of such
Investment.
"all or substantially all" shall have the meaning given such phrase in the
Revised Model Business Corporation Act.
"Asset Acquisition" means (a) an Investment by the Company or any
Restricted Subsidiary of the Company in any other Person pursuant to which such
Person shall become a Restricted Subsidiary of the Company or any Restricted
Subsidiary of the Company, or shall be merged with or into the Company or any
Restricted Subsidiary of the Company, or (b) the acquisition by the Company or
any Restricted Subsidiary of the Company of the assets of any Person which
constitute all or substantially all of the assets of such Person, any division
or line of business of such Person or any other properties or assets of such
Person other than in the ordinary course of business.
"Asset Sale" means any direct or indirect sale, issuance, conveyance,
transfer, lease (other than operating leases entered into in the ordinary course
of business), assignment or other transfer for value by the Company or any of
its Restricted Subsidiaries (including any Sale and Leaseback Transaction) to
any Person other than the Company or a Wholly Owned Restricted Subsidiary of the
Company of (a) any Capital Stock of any Restricted Subsidiary of the Company; or
(b) any other property or assets of the Company or any Restricted Subsidiary of
the Company other than in the ordinary course of business; provided, however,
that Asset Sales shall not include (i) a transaction or series of related
transactions for which the Company or its Restricted Subsidiaries receive
aggregate consideration of less than $1 million, (ii) the sale, lease,
conveyance, disposition or other transfer of all or substantially all of the
assets of the Company as permitted under "Merger, Consolidation and Sale of
Assets," (iii) the sale or discount, in each case without recourse, of accounts
receivable arising in the ordinary course of business, but only in connection
with the compromise or collection thereof, (iv) the factoring of accounts
receivable arising in the ordinary course of business pursuant to arrangements
customary in the industry, (v) the licensing of intellectual property, (vi)
disposals or replacements of obsolete equipment in the ordinary course of
business, (vii) the sale, lease, conveyance, disposition or other transfer by
the Company or any Restricted Subsidiary of assets or property to one or more
Wholly Owned Restricted Subsidiaries in connection with Investments permitted
under the "Limitations on Restricted Payments" covenant, (viii) sales of
accounts receivable and related assets of the type specified in the definition
of "Qualified Receivables Transaction" to a Receivables Entity for the fair
market value thereof, including cash in an amount at least equal to 75% of the
book value thereof as determined in accordance with GAAP, and (ix) transfers of
accounts receivable and related assets of the type specified in the definition
of "Qualified Receivables Transaction" (or a fractional undivided interest
therein) by a Receivables Entity in a Qualified Receivables Transaction. For the
purposes of clause (viii), Purchase Money Notes shall be deemed to be cash.
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"Bank Credit Agreement" means the Credit Agreement to be dated as of the
Issue Date, among the Company, the other borrowers thereto from time to time, if
any, the lenders party thereto from time to time and The Chase Manhattan Bank,
as agent, together with the related documents thereto (including, without
limitation, any guarantee agreements, promissory notes and collateral
documents), in each case as such agreements may be amended, supplemented or
otherwise modified from time to time, or refunded, refinanced, restructured,
replaced, renewed, repaid or extended from time to time (whether with the
original agents and lenders or other agents and lenders or otherwise, and
whether provided under the original Bank Credit Agreement or other credit
agreements or otherwise).
"Bank Indebtedness" means any and all amounts, whether outstanding on the
Issue Date or thereafter incurred, payable under or in respect of the Bank
Credit Agreement and any related notes, collateral documents, letters of credit
and guarantees, including principal, premium (if any), interest (including
interest accruing on or after the filing of any petition in bankruptcy or for
reorganization relating to the Company or any Restricted Subsidiary of the
Company whether or not a claim for post-filing interest is allowed in such
proceedings), fees, charges, expenses, reimbursement obligations, guarantees and
all other amounts payable thereunder or in respect thereof.
"Board of Directors" means, as to any Person, the board of directors of
such Person or any duly authorized committee thereof.
"Capitalized Lease Obligation" means, as to any Person, the obligations of
such Person under a lease that are required to be classified and accounted for
as capital lease obligations under GAAP and, for purposes of this definition,
the amount of such obligations at any date shall be the capitalized amount of
such obligations at such date, determined in accordance with GAAP.
"Capital Stock" means (i) with respect to any Person that is a corporation,
any and all shares, interests, participations or other equivalents (however
designated) of corporate stock, including each class of common stock and
preferred stock of such Person and (ii) with respect to any Person that is not a
corporation, any and all partnership or other equity interests of such Person.
"Cash Equivalents" means (i) marketable direct obligations issued by, or
unconditionally guaranteed by, the United States Government or issued by any
agency thereof and backed by the full faith and credit of the United States, in
each case maturing within one year from the date of acquisition thereof; (ii)
marketable direct obligations issued by any state of the United States of
America or any political subdivision of any such state or any public
instrumentality thereof maturing within one year from the date of acquisition
thereof and, at the time of acquisition, having one of the two highest ratings
obtainable from either S&P or Moody's; (iii) commercial paper maturing no more
than one year from the date of creation thereof and, at the time of acquisition,
having a rating of at least A-1 from S&P or at least P-1 from Moody's; (iv)
certificates of deposit or bankers' acceptances (or, with respect to foreign
banks, similar instruments) maturing within one year from the date of
acquisition thereof issued by any bank organized under the laws of the United
States of America or any state thereof or the District of Columbia or any U.S.
branch of a foreign bank having at the date of acquisition thereof combined
capital and surplus of not less than $200 million; (v) repurchase obligations
with a term of not more than seven days for underlying securities of the types
described in clause (i) above entered into with any bank meeting the
qualifications specified in clause (iv) above; and (vi) investments in money
market funds which invest substantially all their assets in securities of the
types described in clauses (i) through (v) above.
"Change of Control" means the occurrence of one or more of the following
events: (i) any sale, lease, exchange or other transfer (in one transaction or a
series of related transactions) of all or substantially all of the assets of the
Company to any Person or group of related Persons (other than the Principal or
its Related Parties) for purposes of Section 13(d) of the Exchange Act (a
"Group"), together with any Affiliates thereof (whether or not otherwise in
compliance with the provisions of the Indenture); (ii) the approval by the
holders of Capital Stock of the Company of any plan or proposal for the
liquidation or dissolution of the Company (whether or not otherwise in
compliance with the provisions of the Indenture); (iii) any Person or Group
(other than the Principal or its Related Parties) shall become the owner,
directly or indirectly, beneficially or of record, of shares representing more
than 50% of the
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aggregate ordinary voting power represented by the issued and outstanding
Capital Stock of the Company or (iv) the first day on which a majority of the
members of the Board of Directors of the Company are not Continuing Directors.
"Change of Control Triggering Event" means the occurrence of a Change of
Control and the failure of the Notes to have a Minimum Rating on the 30th day
after the occurrence of such Change of Control.
"Consolidated EBITDA" means, with respect to any Person, for any period,
the sum (without duplication) of (i) Consolidated Net Income and (ii) to the
extent Consolidated Net Income has been reduced thereby, (A) all income taxes of
such Person and its Restricted Subsidiaries paid or accrued in accordance with
GAAP for such period, (B) Consolidated Interest Expense and (C) Consolidated
Non-cash Charges.
"Consolidated Fixed Charge Coverage Ratio" means, with respect to any
Person, the ratio of Consolidated EBITDA of such Person during the four full
fiscal quarters (the "Four Quarter Period") ending on or prior to the date of
the transaction giving rise to the need to calculate the Consolidated Fixed
Charge Coverage Ratio (the "Transaction Date") to Consolidated Fixed Charges of
such Person for the Four Quarter Period. In addition to and without limitation
of the foregoing, for purposes of this definition, "Consolidated EBITDA" and
"Consolidated Fixed Charges" shall be calculated after giving effect on a pro
forma basis for the period of such calculation to (i) the incurrence of any
Indebtedness of such Person or any of its Restricted Subsidiaries (and the
application of the proceeds thereof) giving rise to the need to make such
calculation and any incurrence or repayment of other Indebtedness (and the
application of the proceeds thereof) occurring during the Four Quarter Period or
at any time subsequent to the last day of the Four Quarter Period and on or
prior to the Transaction Date, as if such incurrence or repayment, as the case
may be (and the application of the proceeds thereof), occurred on the first day
of the Four Quarter Period, (ii) any Asset Sales or Asset Acquisitions
(including, without limitation, any Asset Acquisition giving rise to the need to
make such calculation as a result of such Person or one of its Restricted
Subsidiaries (including any Person who becomes a Restricted Subsidiary as a
result of the Asset Acquisition) incurring, assuming or otherwise being liable
for Acquired Indebtedness and also including any Consolidated EBITDA (including
any pro forma expense and cost reductions that are (i) directly attributable to
such transaction and (ii) factually supportable) attributable to the assets
which are the subject of the Asset Acquisition or Asset Sale during the Four
Quarter Period) occurring during the Four Quarter Period or at any time
subsequent to the last day of the Four Quarter Period and on or prior to the
Transaction Date, as if such Asset Sale or Asset Acquisition (including the
incurrence, assumption or liability for any such Indebtedness or Acquired
Indebtedness) occurred on the first day of the Four Quarter Period, (iii) with
respect to any such Four Quarter Period commencing prior to the
Recapitalization, the Recapitalization (including any pro forma expense and cost
reductions related thereto that are (i) directly attributable to such
transaction and (ii) factually supportable) shall be deemed to have taken place
on the first day of such Four Quarter Period and (iv) any asset sales or asset
acquisitions (including any Consolidated EBITDA (including any pro forma expense
and cost reductions that are (i) directly attributable to such transaction and
(ii) factually supportable) attributable to the assets which are the subject of
the asset acquisition or asset sale during the Four Quarter Period) that have
been made by any Person that has become a Restricted Subsidiary of the Company
or has been merged with or into the Company or any Restricted Subsidiary of the
Company during the Four Quarter Period or at any time subsequent to the last day
of the Four Quarter Period and on or prior to the Transaction Date that would
have constituted Asset Sales or Asset Acquisitions had such transactions
occurred when such Person was a Restricted Subsidiary of the Company or
subsequent to such Person's merger into the Company, as if such asset sale or
asset acquisition (including the incurrence, assumption or liability for any
Indebtedness or Acquired Indebtedness in connection therewith) occurred on the
first day of the Four Quarter Period; provided that to the extent that clause
(ii) or (iv) of this sentence requires that pro forma effect be given to an
asset sale or asset acquisition, such pro forma calculation shall be based upon
the four full fiscal quarters immediately preceding the Transaction Date of the
Person, or division or line of business of the Person, that is acquired or
disposed for which financial information is available. If such Person or any of
its Restricted Subsidiaries directly or indirectly
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guarantees Indebtedness of a third Person, the preceding sentence shall give
effect to the incurrence of such guaranteed Indebtedness as if such Person or
any Restricted Subsidiary of such Person had directly incurred or otherwise
assumed such guaranteed Indebtedness. Furthermore, in calculating "Consolidated
Fixed Charges" for purposes of determining the denominator (but not the
numerator) of this "Consolidated Fixed Charge Coverage Ratio," (1) interest on
outstanding Indebtedness determined on a fluctuating basis as of the Transaction
Date and which will continue to be so determined thereafter shall be deemed to
have accrued at a fixed rate per annum equal to the rate of interest on such
Indebtedness in effect on the Transaction Date; (2) if interest on any
Indebtedness actually incurred on the Transaction Date may optionally be
determined at an interest rate based upon a factor of a prime or similar rate, a
eurocurrency interbank offered rate, or other rates, then the interest rate in
effect on the Transaction Date will be deemed to have been in effect during the
Four Quarter Period; and (3) notwithstanding clause (1) above, interest on
Indebtedness determined on a fluctuating basis, to the extent such interest is
covered by agreements relating to Interest Swap Obligations, shall be deemed to
accrue at the rate per annum resulting after giving effect to the operation of
such agreements.
"Consolidated Fixed Charges" means, with respect to any Person for any
period, the sum, without duplication, of (i) Consolidated Interest Expense
(excluding amortization or write-off of debt issuance costs in connection with
the Transactions) plus (ii) the product of (x) the amount of all dividend
payments on any series of Preferred Stock of such Person (other than dividends
paid in Qualified Capital Stock) times (y) a fraction, the numerator of which is
one and the denominator of which is one minus the then current effective
consolidated Federal, state and local tax rate of such Person expressed as a
decimal.
"Consolidated Interest Expense" means, with respect to any Person for any
period, the sum of, without duplication, (i) the aggregate of all cash and
non-cash interest expense with respect to all outstanding Indebtedness of such
Person and its Restricted Subsidiaries, including the net costs associated with
Interest Swap Obligations, for such period determined on a consolidated basis in
conformity with GAAP, and (ii) the interest component of Capitalized Lease
Obligations paid, accrued and/or scheduled to be paid or accrued by such Person
and its Restricted Subsidiaries during such period as determined on a
consolidated basis in accordance with GAAP.
"Consolidated Net Income" of the Company means, for any period, the
aggregate net income (or loss) of the Company and its Restricted Subsidiaries
for such period on a consolidated basis, determined in accordance with GAAP;
provided that there shall be excluded therefrom (a) gains and losses from Asset
Sales (without regard to the $1 million limitation set forth in the definition
thereof) or abandonments or reserves relating thereto and the related tax
effects according to GAAP and an increase in the valuation allowance relating to
deferred tax assets recorded in the fourth quarter of 1996 attributable to the
Transactions, (b) gains and losses due solely to fluctuations in currency values
and the related tax effects according to GAAP, (c) items classified as
extraordinary, unusual or nonrecurring gains and losses, and the related tax
effects according to GAAP, (d) the net income (or loss) of any Person acquired
in a pooling of interests transaction accrued prior to the date it becomes a
Restricted Subsidiary of the Company or is merged or consolidated with the
Company or any Restricted Subsidiary of the Company, (e) the net income of any
Restricted Subsidiary of the Company to the extent that the declaration of
dividends or similar distributions by that Restricted Subsidiary of that income
is restricted by contract, operation of law or otherwise, (f) only for purposes
of clause (iii) (w) of the first paragraph of the "Limitation on Restricted
Payments" covenant, any amounts included pursuant to clause (iii) (z) of the
first paragraph of such covenant, (g) the net loss of any Person other than a
Restricted Subsidiary of the Company, (h) the net income of any Person, other
than a Restricted Subsidiary, except to the extent of cash dividends or
distributions paid to the Company or a Restricted Subsidiary of the Company by
such Person unless, in the case of a Restricted Subsidiary of the Company who
receives such dividends or distributions, such Restricted Subsidiary is subject
to clause (e) above, (i) one time non-cash compensation charges, including any
arising from existing stock options resulting from any merger or
recapitalization transaction, (j) bonus payments to be paid to senior management
of the Company in connection with the Transactions in an aggregate amount
(together with the bonus payments made
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under clause (k)) not to exceed $7.0 million and (k) bonus payments to be paid
to senior management following the Closing (but no later than February 28, 1997)
in an aggregate amount not to exceed $400,000 and, together with the amounts
paid under clause (j) not to exceed $7.0 million in the aggregate.
"Consolidated Non-cash Charges" means, with respect to any Person for any
period, the aggregate depreciation, amortization and other non-cash expenses of
such Person and its Restricted Subsidiaries reducing Consolidated Net Income of
such Person and its Restricted Subsidiaries for such period, determined on a
consolidated basis in accordance with GAAP (excluding any such charges which
require an accrual of or a reserve for cash charges for any future period).
"Continuing Directors" means, as of any date of determination, any member
of the Board of Directors of the Company who (i) was a member of such Board of
Directors on the Issue Date, (ii) was nominated for election or elected to such
Board of Directors with, or whose election to such Board of Directors was
approved by, the affirmative vote of a majority of the Continuing Directors who
were members of such Board of Directors at the time of such nomination or
election or (iii) is any designee of the Principal or its Affiliates or was
nominated by the Principal or its Affiliates or any designees of the Principals
or their Affiliates on the Board of Directors.
"Currency Agreement" means any foreign exchange contract, currency swap
agreement or other similar agreement or arrangement designed to protect the
Company or any Restricted Subsidiary of the Company against fluctuations in
currency values.
"Default" means an event or condition the occurrence of which is, or with
the lapse of time or the giving of notice or both would be, an Event of Default.
"Designated Senior Indebtedness" means (i) the Bank Indebtedness and (ii)
any other Senior Indebtedness which, at the date of determination, has an
aggregate principal amount outstanding of, or under which, at the date of
determination, the holders thereof, are committed to lend up to, at least $25
million and is specifically designated by the Company in the instrument
evidencing or governing such Senior Indebtedness or another writing as
"Designated Senior Indebtedness" for purposes of the Indenture.
"Disqualified Capital Stock" means that portion of any Capital Stock which,
by its terms (or by the terms of any security into which it is convertible or
for which it is exchangeable), or upon the happening of any event (other than an
event which would constitute a Change of Control Triggering Event), matures
(excluding any maturity as the result of an optional redemption by the issuer
thereof) or is mandatorily redeemable, pursuant to a sinking fund obligation or
otherwise, or is redeemable at the sole option of the holder thereof (except, in
each case, upon the occurrence of a Change of Control Triggering Event) on or
prior to the final maturity date of the Notes.
"fair market value" means, unless otherwise specified, with respect to any
asset or property, the price which could be negotiated in an arm's-length, free
market transaction, for cash, between a willing seller and a willing and able
buyer, neither of whom is under undue pressure or compulsion to complete the
Transactions. Fair market value shall be determined by the Board of Directors of
the Company acting reasonably and in good faith and shall be evidenced by a
resolution of the Board of Directors of the Company delivered to the Trustee.
"GAAP" means generally accepted accounting principles in the United States
of America as in effect on the Issue Date, including, without limitation, those
set forth in the opinions and pronouncements of the Accounting Principles Board
of the American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as approved by a significant segment of the
accounting profession.
"Guarantor Senior Indebtedness" means, with respect to any Subsidiary
Guarantor, (i) any Indebtedness of such Subsidiary Guarantor under the Bank
Credit Agreement or in respect of Bank Indebtedness and (ii) all Indebtedness of
such Subsidiary Guarantor, including in the case of both (i)
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and (ii) interest thereon (including interest accruing on or after the filing of
any petition in bankruptcy or for reorganization relating to such Subsidiary
Guarantor whether or not a claim for post-filing interest is allowed in such
proceedings), whether outstanding on the Issue Date or thereafter incurred,
unless in the instrument creating or evidencing the same or pursuant to which
the same is outstanding it is expressly provided that such obligations are not
superior in right of payment to the Guarantee of such Subsidiary Guarantor;
provided, however, that Guarantor Senior Indebtedness shall not include (1) any
obligation of such Subsidiary Guarantor to a Subsidiary of such Subsidiary
Guarantor or to any Subsidiary of the Company, (2) any liability for Federal,
state, local or other taxes owed or owing by such Subsidiary Guarantor, (3) any
accounts payable or other liability to trade creditors arising in the ordinary
course of business (including guarantees thereof or instruments evidencing such
liabilities), (4) any Indebtedness of such Subsidiary Guarantor which is
expressly subordinate in right of payment to any other Indebtedness of such
Subsidiary Guarantor, (5) any obligations with respect to any Capital Stock or
(6) that portion of any indebtedness incurred in violation of the "Limitation on
Incurrence of Additional Indebtedness" covenant (but, as to any such obligation,
no such violation shall be deemed to exist for purposes of this clause (6) if
the holder(s) of such obligation or their representative and the Trustee shall
have received an Officers' Certificate of such Subsidiary Guarantor to the
effect that the incurrence of such Indebtedness does not (or, in the case of
revolving credit Indebtedness, that the incurrence of the entire committed
amount thereof at the date on which the initial borrowing thereunder is made
would not) violate such provisions of the Indenture).
"Indebtedness" means with respect to any Person, without duplication, (i)
all obligations of such Person for borrowed money, (ii) all obligations of such
Person evidenced by bonds, debentures, notes or other similar instruments, (iii)
all Capitalized Lease Obligations of such Person, (iv) all obligations of such
Person issued or assumed as the deferred purchase price of property, all
conditional sale obligations and all obligations under any title retention
agreement (but excluding trade accounts payable arising in the ordinary course
of business), (v) all obligations for the reimbursement of any obligor on any
letter of credit, banker's acceptance or similar credit transaction, (vi)
guarantees and other contingent obligations in respect of Indebtedness referred
to in clauses (i) through (v) above and clause (viii) below, (vii) all
obligations of any other Person of the type referred to in clauses (i) through
(vi) which are secured by any lien on any property or asset of such Person but
which obligations are not assumed by such Person, the amount of such obligation
being deemed to be the lesser of the fair market value of such property or asset
or the amount of the obligation so secured, (viii) all obligations under
currency swap agreements and interest swap agreements of such Person and (ix)
all Disqualified Capital Stock issued by such Person with the amount of
Indebtedness represented by such Disqualified Capital Stock being equal to the
greater of its voluntary or involuntary liquidation preference and its maximum
fixed repurchase price, but excluding accrued dividends, if any. For purposes
hereof, (x) the "maximum fixed repurchase price" of any Disqualified Capital
Stock which does not have a fixed repurchase price shall be calculated in
accordance with the terms of such Disqualified Capital Stock as if such
Disqualified Capital Stock were purchased on any date on which Indebtedness
shall be required to be determined pursuant to the Indenture, and if such price
is based upon, or measured by, the fair market value of such Disqualified
Capital Stock, such fair market value shall be determined reasonably and in good
faith by the Board of Directors of the issuer of such Disqualified Capital Stock
and (y) any transfer of accounts receivable or other assets which constitute a
sale for purposes of GAAP shall not constitute Indebtedness hereunder.
"Interest Swap Obligations" means the obligations of any Person, pursuant
to any arrangement with any other Person, whereby, directly or indirectly, such
Person is entitled to receive from time to time periodic payments calculated by
applying either a floating or a fixed rate of interest on a stated notional
amount in exchange for periodic payments made by such other Person calculated by
applying a fixed or a floating rate of interest on the same notional amount.
"Investment" means, with respect to any Person, any direct or indirect loan
or other extension of credit (including, without limitation, a guarantee) or
capital contribution to (by means of any transfer of cash or other property to
others or any payment for property or services for the account or use of
others),
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or any purchase or acquisition by such Person of any Capital Stock, bonds,
notes, debentures or other securities or evidences of Indebtedness issued by,
any Person. "Investment" shall exclude extensions of trade credit by the Company
and its Restricted Subsidiaries on commercially reasonable terms in accordance
with normal trade practices of the Company or such Restricted Subsidiary, as the
case may be. For the purposes of the "Limitation on Restricted Payments"
covenant, (i) "Investment" shall include and be valued at the fair market value
of the net assets of any Restricted Subsidiary at the time that such Restricted
Subsidiary is designated an Unrestricted Subsidiary and shall exclude the fair
market value of the net assets of any Unrestricted Subsidiary at the time that
such Unrestricted Subsidiary is designated a Restricted Subsidiary and (ii) the
amount of any Investment shall be the original cost of such Investment plus the
cost of all additional Investments by the Company or any of its Restricted
Subsidiaries, without any adjustments for increases or decreases in value, or
write-ups, write-downs or write-offs with respect to such Investment, reduced by
the payment of dividends or distributions (including tax sharing payments) in
connection with such Investment or any other amounts received in respect of such
Investment; provided that no such payment of dividends or distributions or
receipt of any such other amounts shall reduce the amount of any Investment if
such payment of dividends or distributions or receipt of any such amounts would
be included in Consolidated Net Income. If the Company or any Restricted
Subsidiary of the Company sells or otherwise disposes of any Common Stock of any
direct or indirect Restricted Subsidiary of the Company such that, after giving
effect to any such sale or disposition, the Company no longer owns, directly or
indirectly, 100% (or 80% in the case of clause (ix) of the definition of
"Permitted Investments") of the outstanding Common Stock of such Restricted
Subsidiary, the Company shall be deemed to have made an Investment on the date
of any such sale or disposition equal to the fair market value of the Common
Stock of such Restricted Subsidiary not sold or disposed of.
"Issue Date" means the date of original issuance of the Notes.
"Lien" means any lien, mortgage, deed of trust, pledge, security interest,
charge or encumbrance of any kind (including any conditional sale or other title
retention agreement, any lease in the nature thereof and any agreement to give
any security interest).
"Minimum Rating" means either (i) a rating of at least BBB- (or equivalent
successor rating) by S&P and (ii) a rating of at least Baa3 (or equivalent
successor rating) by Moody's.
"Moody's" means Moody's Investors Service, Inc. and its successors.
"Net Cash Proceeds" means, with respect to any Asset Sale, the proceeds in
the form of cash or Cash Equivalents including payments in respect of deferred
payment obligations when received in the form of cash or Cash Equivalents (other
than the portion of any such deferred payment constituting interest) received by
the Company or any of its Subsidiaries from such Asset Sale net of (a) out-of-
pocket expenses and fees relating to such Asset Sale (including, without
limitation, legal, accounting and investment banking fees and sales
commissions), (b) taxes paid or payable after taking into account any reduction
in consolidated tax liability due to available tax credits or deductions and any
tax sharing arrangements, (c) repayment of Senior Indebtedness that is required
to be repaid in connection with such Asset Sale, (d) any portion of cash
proceeds which the Company determines in good faith should be reserved for
post-closing adjustments, it being understood and agreed that on the day that
all such post-closing adjustments have been determined, the amount (if any) by
which the reserved amount in respect of such Asset Sale exceeds the actual
post-closing adjustments payable by the Company or any of its Subsidiaries shall
constitute Net Cash Proceeds on such date; provided that, in the case of the
sale by the Company of an asset constituting an Investment (other than a
Permitted Investment), the "Net Cash Proceeds" in respect of such Asset Sale
shall not include the lesser of (x) the cash received with respect to such Asset
Sale and (y) the initial amount of such Investment, less, in the case of clause
(y), all amounts (up to an amount not to exceed the initial amount of such
Investment) received by the Company with respect to such Investment, whether by
dividend, sale, liquidation or repayment, in each case prior to the date of such
Asset Sale.
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"Permitted Indebtedness" means, without duplication, (i) the Notes and the
Guarantees, (ii) Indebtedness incurred pursuant to the Bank Credit Agreement in
an aggregate principal amount at any time outstanding not to exceed $180 million
(A) less the aggregate amount of Indebtedness of a Receivables Entity in a
Qualified Receivables Transaction, (B) less the amount of all mandatory
principal payments actually made by the Company in respect of term loans
thereunder (excluding (1) any such payments to the extent refinanced at the time
of payment under a replaced Bank Credit Agreement and (2) any such payments
relating to the Sale of Excluded Assets in an aggregate amount not to exceed $30
million) and (C) in the case of a revolving facility, reduced by any required
permanent repayments (which are accompanied by a corresponding permanent
commitment reduction) thereunder, (iii) other Indebtedness of the Company and
its Restricted Subsidiaries outstanding on the Issue Date reduced by the amount
of any scheduled amortization payments or mandatory prepayments when actually
paid or permanent reductions thereon, (iv) Interest Swap Obligations of the
Company or any of its Restricted Subsidiaries covering Indebtedness of the
Company or any of its Restricted Subsidiaries; provided that any Indebtedness to
which any such Interest Swap Obligations correspond is otherwise permitted to be
incurred under the Indenture; provided, further, that such Interest Swap
Obligations are entered into, in the judgment of the Company, to protect the
Company and its Restricted Subsidiaries from fluctuation in interest rates on
their respective outstanding Indebtedness, (v) Indebtedness under Currency
Agreements, (vi) intercompany Indebtedness owed by the Company to any Wholly
Owned Restricted Subsidiary of the Company or by any Restricted Subsidiary of
the Company to the Company or any Wholly Owned Restricted Subsidiary of the
Company, (vii) Acquired Indebtedness of the Company or any Restricted Subsidiary
of the Company to the extent the Company could have incurred such Indebtedness
in accordance with the "Limitation on Incurrence of Additional Indebtedness"
covenant on the date such Indebtedness became Acquired Indebtedness; provided
that, in the case of Acquired Indebtedness of a Restricted Subsidiary of the
Company, such Acquired Indebtedness was not incurred in connection with, or in
anticipation or contemplation of, such Person becoming a Restricted Subsidiary
of the Company, (viii) guarantees by the Company and its Wholly Owned Restricted
Subsidiaries of each other's Indebtedness; provided that such Indebtedness is
permitted to be incurred under the Indenture, including, with respect to
guarantees by Wholly Owned Restricted Subsidiaries of the Company, the covenant
entitled "Future Guarantees," (ix) Indebtedness arising from the honoring by a
bank or other financial institution of a check, draft or other similar
instrument inadvertently drawn against insufficient funds in the ordinary course
of business; provided that such Indebtedness is extinguished within five
business days of its incurrence, (x) any refinancing, modification, replacement,
renewal, restatement, refunding, deferral, extension, substitution, supplement,
reissuance or resale of existing or future Indebtedness, including any
additional Indebtedness incurred to pay interest or premiums required by the
instruments governing such existing or future Indebtedness as in effect at the
time of issuance thereof ("Required Premiums") and fees in connection therewith;
provided that any such event shall not (1) result in an increase in the
aggregate principal amount of Permitted Indebtedness (except to the extent such
increase is a result of a simultaneous incurrence of additional Indebtedness (A)
to pay Required Premiums and related fees or (B) otherwise permitted to be
incurred under the Indenture) of the Company and its Restricted Subsidiaries and
(2) create Indebtedness with a Weighted Average Life to Maturity at the time
such Indebtedness is incurred that is less than the Weighted Average Life to
Maturity at such time of the Indebtedness being refinanced, modified, replaced,
renewed, restated, refunded, deferred, extended, substituted, supplemented,
reissued or resold (except that this subclause (2) will not apply in the event
the Indebtedness being refinanced, modified, replaced, renewed, restated,
refunded, deferred, extended, substituted, supplemented, reissued or resold was
originally incurred in reliance upon clause (vi) or (xvi) of this definition);
provided that no Restricted Subsidiary of the Company that is not a Subsidiary
Guarantor may refinance any Indebtedness pursuant to this clause (x) other than
its own Indebtedness, (xi) Indebtedness (including Capitalized Lease
Obligations) incurred by the Company or any of its Restricted Subsidiaries to
finance the purchase, lease or improvement of property (real or personal) or
equipment (whether through the direct purchase of assets or the Capital Stock of
any Person owning such assets) in an aggregate principal amount outstanding not
to exceed $5 million at the time of any incurrence thereof (which amount may,
but need not, be incurred in whole or in part under the Bank Credit Agreement),
(xii) the incurrence by a Receivables Entity of Indebtedness in a
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Qualified Receivables Transaction that is not recourse to the Company or any
Subsidiary of the Company (except for Standard Securitization Undertakings),
(xiii) Indebtedness incurred by the Company or any of its Restricted
Subsidiaries constituting reimbursement obligations with respect to letters of
credit issued in the ordinary course of business, including, without limitation,
letters of credit in respect of workers' compensation claims or self-insurance,
or other Indebtedness with respect to reimbursement type obligations regarding
workers' compensation claims, (xiv) Indebtedness arising from agreements of the
Company or a Restricted Subsidiary of the Company providing for indemnification,
adjustment of purchase price, earn out or other similar obligations, in each
case, incurred or assumed in connection with the disposition of any business,
assets or a Restricted Subsidiary of the Company, other than guarantees of
Indebtedness incurred by any Person acquiring all or any portion of such
business, assets or Restricted Subsidiary for the purpose of financing such
acquisition, provided that the maximum assumable liability in respect of all
such Indebtedness shall at no time exceed the gross proceeds actually received
by the Company and its Restricted Subsidiaries in connection with such
disposition, (xv) obligations in respect of performance and surety bonds and
completion guarantees provided by the Company or any Restricted Subsidiary of
the Company in the ordinary course of business, and (xvi) additional
Indebtedness of the Company and its Restricted Subsidiaries in an aggregate
principal amount not to exceed $10 million at any one time outstanding (which
amount may, but need not, be incurred in whole or in part under the Bank Credit
Agreement).
"Permitted Investments" means (i) Investments by the Company or any
Restricted Subsidiary of the Company in any Wholly Owned Restricted Subsidiary
of the Company (whether existing on the Issue Date or created thereafter) and
Investments in the Company by any Restricted Subsidiary of the Company; provided
that, in the case of an Investment by the Company or any Restricted Subsidiary
of the Company in any Wholly Owned Restricted Subsidiary of the Company, such
Wholly Owned Restricted Subsidiary is not restricted from making dividends or
similar distributions by contract, operation of law or otherwise; (ii) cash and
Cash Equivalents; (iii) Investments existing on the Issue Date and Investments
made on the Issue Date pursuant to the Recapitalization Agreement; (iv) loans
and advances to employees and officers of the Company and its Restricted
Subsidiaries not in excess of $1 million at any one time outstanding; (v)
accounts receivable created or acquired in the ordinary course of business; (vi)
Currency Agreements and Interest Swap Obligations entered into in the ordinary
course of the Company's or its Restricted Subsidiaries' businesses and otherwise
in compliance with the Indenture; (vii) Investments in securities of trade
creditors or customers received pursuant to any plan of reorganization or
similar arrangement upon the bankruptcy or insolvency of such trade creditors or
customers; (viii) guarantees by the Company or any of its Restricted
Subsidiaries of Indebtedness otherwise permitted to be incurred by the Company
or any of its Restricted Subsidiaries under the Indenture; (ix) Investments by
the Company or any Restricted Subsidiary of the Company in a Person, if as a
result of such Investment (A) such Person becomes a Wholly-Owned Restricted
Subsidiary of the Company or (B) such Person is merged, consolidated or
amalgamated with or into, or transfers or conveys all or substantially all of
its assets to, or is liquidated into, the Company or a Wholly Owned Restricted
Subsidiary of the Company; (x) additional Investments having an aggregate fair
market value, taken together with all other Investments made pursuant to this
clause (x) that are at the time outstanding, not exceeding $2 million at the
time of such Investment (with the fair market value of each Investment being
measured at the time made and without giving effect to subsequent changes in
value), plus an amount equal to (A) 100% of the aggregate net cash proceeds
received by the Company from any Person (other than a Subsidiary of the Company)
from the issuance and sale subsequent to the Issue Date of Qualified Capital
Stock of the Company (including Qualified Capital Stock issued upon the
conversion of convertible Indebtedness or in exchange for outstanding
Indebtedness or as capital contributions to the Company (other than from a
Subsidiary)) and (B) without duplication of any amounts included in clause
(x)(A) above, 100% of the aggregate net cash proceeds of any equity contribution
received by the Company from a holder of the Company's Capital Stock, that in
the case of amounts described in clause (x)(A) or (x)(B) are applied by the
Company within 180 days after receipt, to make additional Permitted Investments
under this clause (x) (such additional Permitted Investments being referred to
collectively as "Stock Permitted Investments"); (xi) any Investment by the
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Company or a Wholly Owned Subsidiary of the Company in a Receivables Entity or
any Investment by a Receivables Entity in any other Person in connection with a
Qualified Receivables Transaction; provided that any Investment in a Receivables
Entity is in the form of a Purchase Money Note or an equity interest; (xii)
Investments received by the Company or its Restricted Subsidiaries as
consideration for asset sales, including Asset Sales; provided in the case of an
Asset Sale, such Asset Sale is effected in compliance with the "Limitation on
Asset Sales" covenant. Any net cash proceeds that are used by the Company or any
of its Restricted Subsidiaries to make Stock Permitted Investments pursuant to
clause (x) of this definition shall not be included in subclauses(x) and (y) of
clause (iii) of the first paragraph of the covenant described under the caption
"Certain Covenants -- Limitation on Restricted Payments."
"Permitted Liens" means the following types of Liens:
(i) Liens for taxes, assessments or governmental charges or claims
either (a) not delinquent or (b) contested in good faith by appropriate
proceedings and as to which the Company or its Restricted Subsidiaries
shall have set aside on its books such reserves as may be required pursuant
to GAAP;
(ii) statutory Liens of landlords and Liens of carriers, warehousemen,
mechanics, suppliers, materialmen, repairmen and other Liens imposed by law
incurred in the ordinary course of business for sums not yet delinquent or
being contested in good faith, if such reserve or other appropriate
provision, if any, as shall be required by GAAP shall have been made in
respect thereof;
(iii) Liens incurred or deposits made in the ordinary course of
business in connection with workers' compensation, unemployment insurance
and other types of social security, including any Lien securing letters of
credit issued in the ordinary course of business consistent with past
practice in connection therewith, or to secure the performance of tenders,
statutory obligations, surety and appeal bonds, bids, leases, government
contracts, performance and return-of-money bonds and other similar
obligations (exclusive of obligations for the payment of borrowed money);
(iv) judgment Liens not giving rise to an Event of Default;
(v) easements, rights-of-way, zoning restrictions and other similar
charges or encumbrances in respect of real property not interfering in any
material respect with the ordinary conduct of the business of the Company
or any of its Restricted Subsidiaries;
(vi) any interest or title of a lessor under any Capitalized Lease
Obligation;
(vii) purchase money Liens to finance property or assets of the
Company or any Restricted Subsidiary of the Company acquired in the
ordinary course of business; provided, however, that (A) the related
purchase money Indebtedness shall not exceed the cost of such property or
assets and shall not be secured by any property or assets of the Company or
any Restricted Subsidiary of the Company other than the property and assets
so acquired and (B) the Lien securing such Indebtedness shall be created
within 90 days of such acquisition;
(viii) Liens upon specific items of inventory or other goods and
proceeds of any Person securing such Person's obligations in respect of
bankers' acceptances issued or created for the account of such Person to
facilitate the purchase, shipment, or storage of such inventory or other
goods;
(ix) Liens securing reimbursement obligations with respect to
commercial letters of credit which encumber documents and other property
relating to such letters of credit and products and proceeds thereof;
(x) Liens encumbering deposits made to secure obligations arising from
statutory, regulatory, contractual, or warranty requirements of the Company
or any of its Restricted Subsidiaries, including rights of offset and
set-off;
(xi) Liens securing Interest Swap Obligations which Interest Swap
Obligations relate to Indebtedness that is otherwise permitted under the
Indenture;
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(xii) Liens securing Indebtedness under Currency Agreements;
(xiii) Liens securing Acquired Indebtedness incurred in reliance on
clause (vii) of the definition of Permitted Indebtedness; provided that
such Liens do not extend to or cover any property or assets of the Company
or of any of its Restricted Subsidiaries other than the property or assets
that secured the Acquired Indebtedness prior to the time such Indebtedness
became Acquired Indebtedness of the Company or a Restricted Subsidiary of
the Company;
(xiv) Liens on assets transferred to a Receivables Entity or on assets
of a Receivables Entity, in either case incurred in connection with a
Qualified Receivables Transaction;
(xv) leases or subleases granted to others that do not materially
interfere with the ordinary course of business of the Company and its
Restricted Subsidiaries;
(xvi) Liens arising from filing Uniform Commercial Code financing
statements regarding leases;
(xvii) Liens on property of a Person existing at the time such Person
is acquired by, or such Person is merged into or consolidated or
amalgamated with, the Company or any Restricted Subsidiary of the Company;
provided that such Liens were not created in contemplation of such
acquisition, merger, consolidation or amalgamation and do not extend to any
assets other than those of the Person acquired by, or merged into or
consolidated or amalgamated with, the Company or any Restricted Subsidiary
of the Company.
(xviii) Liens in favor of customs and revenue authorities arising as a
matter of law to secure payment of custom duties in connection with the
importation of goods; and
(xix) Liens existing on the Issue Date, together with any Liens
securing Indebtedness incurred in reliance on clause (x) of the definition
of Permitted Indebtedness in order to refinance the Indebtedness secured by
Liens existing on the Issue Date; provided that the Liens securing the
refinancing Indebtedness shall not extend to property other than that
pledged under the Liens securing the Indebtedness being refinanced.
"Person" means an individual, partnership, corporation, unincorporated
organization, trust or joint venture, or a governmental agency or political
subdivision thereof.
"Preferred Stock" of any Person means any Capital Stock of such Person that
has preferential rights to any other Capital Stock of such Person with respect
to dividends or redemptions or upon liquidation.
"Principal" means Thomas H. Lee Company.
"Productive Assets" means assets (including Capital Stock) of a kind used
or usable in the businesses of the Company and its Restricted Subsidiaries as,
or related to such business, conducted on the date of the relevant Asset Sale.
"Purchase Money Note" means a promissory note of a Receivables Entity
evidencing a line of credit, which may be irrevocable, from the Company or any
Subsidiary of the Company in connection with a Qualified Receivables Transaction
to a Receivables Entity, which note shall be repaid from cash available to the
Receivables Entity, other than amounts required to be established as reserves
pursuant to agreements, amounts paid to investors in respect of interest,
principal and other amounts owing to such investors and amounts owing to such
investors and amounts paid in connection with the purchase of newly generated
receivables.
"Qualified Capital Stock" means any stock that is not Disqualified Capital
Stock.
"Qualified Receivables Transaction" means any transaction or series of
transactions that may be entered into by the Company or any of its Subsidiaries
pursuant to which the Company or any or its Subsidiaries may sell, convey or
otherwise transfer to (a) a Receivables Entity (in the case of a transfer by the
Company or any of its Subsidiaries) and (b) any other Person (in the case of a
transfer by a Receivables Entity), or may grant a security interest in, any
accounts receivable (whether now existing or arising in the future) of the
Company or any of its Subsidiaries, and any assets related thereto including,
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without limitation, all collateral securing such accounts receivable, all
contracts and all guarantees or other obligations in respect of such accounts
receivable, proceeds of such accounts receivable and other assets which are
customarily transferred or in respect of which security interests are
customarily granted in connection with asset securitization transactions
involving accounts receivable.
"Receivables Entity" means a Wholly Owned Subsidiary of the Company (or
another Person in which the Company or any Subsidiary of the Company makes an
Investment and to which the Company or any Subsidiary of the Company transfers
accounts receivable and related assets) which engages in no activities other
than in connection with the financing of accounts receivable and which is
designated by the Board of Directors of the Company (as provided below) as a
Receivables Entity (a) no portion of the Indebtedness or any other Obligations
(contingent or otherwise) of which (i) is guaranteed by the Company or any
Subsidiary of the Company (excluding guarantees of Obligations (other than the
principal of, and interest on, Indebtedness) pursuant to Standard Securitization
Undertakings), (ii) is recourse to or obligates the Company or any Subsidiary of
the Company in any way other than pursuant to Standard Securitization
Undertakings or (iii) subjects any property or asset of the Company or any
Subsidiary of the Company, directly or indirectly, contingently or otherwise, to
the satisfaction thereof, other than pursuant to Standard Securitization
Undertakings, (b) with which neither the Company nor any Subsidiary of the
Company has any material contract, agreement, arrangement or understanding other
than on terms no less favorable to the Company or such Subsidiary than those
that might be obtained at the time from Persons that are not Affiliates of the
Company, other than fees payable in the ordinary course of business in
connection with servicing accounts receivable, and (c) to which neither the
Company nor any Subsidiary of the Company has any obligation to maintain or
preserve such entity's financial condition or cause such entity to achieve
certain levels of operating results. Any such designation by the Board of
Directors of the Company shall be evidenced to the Trustee by filing with the
Trustee a certified copy of the resolution of the Board of Directors of the
Company giving effect to such designation and an Officers' Certificate
certifying that such designation complied with the foregoing conditions.
"Redemption Event" shall mean (i) an underwritten initial public offering
of the common stock of the Company or (ii) a Change of Control.
"Related Party" means Thomas H. Lee Company and any Affiliate of Thomas H.
Lee Company.
"Representative" means the indenture trustee or other trustee, agent or
representative in respect of any Designated Senior Indebtedness; provided that
if, and for so long as, any Designated Senior Indebtedness lacks such a
representative, then the Representative for such Designated Senior Indebtedness
shall at all times constitute the holders of a majority in outstanding principal
amount of such Designated Senior Indebtedness in respect of any Designated
Senior Indebtedness.
"Restricted Subsidiary" of any Person means any Subsidiary of such Person
which at the time of determination is not an Unrestricted Subsidiary.
"Sale of Excluded Assets" means an individual Asset Sale which results in
net proceeds of no less than $10 million and relates exclusively to property,
plant and equipment existing on the Issue Date, together with improvements,
repairs, modifications and additions thereon in the ordinary course of business.
"S&P" means Standard & Poor's Ratings Service, a division of The
McGraw-Hill Companies, Inc. and its successors.
"Sale and Leaseback Transaction" means any direct or indirect arrangement
with any Person or to which any such Person is a party, providing for the
leasing to the Company or a Restricted Subsidiary of any property, whether owned
by the Company or any Restricted Subsidiary at the Issue Date or later acquired,
which has been or is to be sold or transferred by the Company or such Restricted
Subsidiary to such Person or to any other Person from whom funds have been or
are to be advanced by such Person on the security of such Property.
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"Secured Indebtedness" means any Indebtedness of the Company secured by a
Lien.
"Senior Indebtedness" means (i) the Bank Indebtedness and (ii) all
Indebtedness of the Company, including interest thereon (including interest
accruing on or after the filing of any petition in bankruptcy or for
reorganization relating to the Company or any Restricted Subsidiary of the
Company whether or not a claim for post-filing interest is allowed in such
proceedings), whether outstanding on the Issue Date or thereafter incurred,
unless in the instrument creating or evidencing the same or pursuant to which
the same is outstanding it is expressly provided that such obligations are not
superior in right of payment to the Notes; provided, however, that Senior
Indebtedness shall not include (1) any obligation of the Company to any
Subsidiary of the Company, (2) any liability for Federal, state, local or other
taxes owed or owing by the Company, (3) any accounts payable or other liability
to trade creditors arising in the ordinary course of business (including
guarantees thereof or instruments evidencing such liabilities), (4) any
Indebtedness of the Company which is expressly subordinate in right of payment
to any other Indebtedness of the Company, including any Senior Subordinated
Indebtedness and any Subordinated Obligations, (5) any obligations with respect
to any Capital Stock or (6) that portion of any Indebtedness incurred in
violation of the Indenture provisions set forth under "Limitation on Incurrence
of Additional Indebtedness" (but, as to any such obligation, no such violation
shall be deemed to exist for purposes of this clause (6) if the holders(s) of
such obligation or their representative and the Trustee shall have received an
Officers' Certificate of the Company to the effect that the incurrence of such
Indebtedness does not (or, in the case of revolving credit Indebtedness, that
the incurrence of the entire committed amount thereof at the date on which the
initial borrowing thereunder is made would not) violate such provisions of the
Indenture).
"Senior Subordinated Indebtedness" means the Notes and any other
Indebtedness of the Company that specifically provides that such Indebtedness is
to rank pari passu with the Notes and is not by its express terms subordinate in
right of payment to any Indebtedness of the Company which is not Senior
Indebtedness.
"Significant Subsidiary" means, as of any date of determination, for any
Person, each Restricted Subsidiary of such Person which (i) for the most recent
fiscal year of such Person accounted for more than 10% of consolidated revenues
or consolidated net income of such Person or (ii) as at the end of such fiscal
year, was the owner of more than 10% of the consolidated assets of such Person.
"Standard Securitization Undertakings" means representations, warranties,
covenants and indemnities entered into by the Company or any Subsidiary of the
Company which are reasonably customary in an accounts receivable transaction.
"Subordinated Obligation" means any Indebtedness of the Company (whether
outstanding on the Issue Date or thereafter incurred) which is expressly
subordinate in right of payment to the Notes pursuant to a written agreement.
"Subsidiary" means, with respect to any Person, (i) any corporation of
which the outstanding Capital Stock having at least a majority of the votes
entitled to be cast in the election of directors under ordinary circumstances
shall at the time be owned, directly or indirectly, by such Person or (ii) any
other Person of which at least a majority of the voting interest under ordinary
circumstances is at the time, directly or indirectly, owned by such Person.
"Unrestricted Subsidiary" of any Person means (i) any Subsidiary of such
Person that at the time of determination shall be or continue to be designated
an Unrestricted Subsidiary by the Board of Directors of such Person in the
manner provided below and (ii) any Subsidiary of an Unrestricted Subsidiary. The
Board of Directors may designate any Subsidiary (including any newly acquired or
newly formed Subsidiary) to be an Unrestricted Subsidiary unless such Subsidiary
owns any Capital Stock of, or owns or holds any Lien on any property of, the
Company or any other Subsidiary of the Company that is not a Subsidiary of the
Subsidiary to be so designated; provided that (x) the Company certifies to the
Trustee that such designation complies with the "Limitation on Restricted
Payments" covenant and (y) each Subsidiary to be so designated and each of its
Subsidiaries has not at the time of designation, and does
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<PAGE> 93
not thereafter, create, incur, issue, assume, guarantee or otherwise become
directly or indirectly liable with respect to any Indebtedness pursuant to which
the lender has recourse to any of the assets of the Company or any of its
Restricted Subsidiaries. The Board of Directors may designate any Unrestricted
Subsidiary to be a Restricted Subsidiary only if (x) immediately after giving
effect to such designation and treating all Indebtedness of such Unrestricted
Subsidiary as being incurred on such date, the Company is able to incur at least
$1.00 of additional Indebtedness (other than Permitted Indebtedness) in
compliance with the "Limitation on Incurrence of Additional Indebtedness"
covenant and (y) immediately before and immediately after giving effect to such
designation, no Default or Event of Default shall have occurred and be
continuing. Any such designation by the Board of Directors shall be evidenced to
the Trustee by promptly filing with the Trustee a copy of the resolution giving
effect to such designation and an officers' certificate certifying that such
designation complied with the foregoing provisions.
"Weighted Average Life to Maturity" means, when applied to any Indebtedness
at any date, the number of years obtained by dividing (a) the then outstanding
aggregate principal amount of such Indebtedness into (b) the sum of the total of
the products obtained by multiplying (i) the amount of each then remaining
installment, sinking fund, serial maturity or other required payment of
principal, including payment at final maturity, in respect thereof, by (ii) the
number of years (calculated to the nearest one-twelfth) which will elapse
between such date and the making of such payment.
"Wholly Owned Restricted Subsidiary" of any Person means any Restricted
Subsidiary of such Person of which all the outstanding voting securities (other
than directors' qualifying shares or an immaterial amount of shares required to
be owned by other Persons pursuant to applicable law) are owned by such Person
or any Wholly Owned Restricted Subsidiary of such Person.
BOOK-ENTRY; DELIVERY AND FORM
The certificates representing the Exchange Notes will be issued in fully
registered form. The Exchange Notes initially will each be represented by a
single, permanent global certificate in definitive, fully registered form (the
"Global Note") and will be deposited with the Trustee as custodian for DTC and
registered in the name of a nominee of DTC.
The Global Note. Upon the issuance of the Global Note, DTC or its
custodian will credit, on its internal system, the respective principal amount
of Exchange Notes, of the individual beneficial interests represented by such
global securities to the respective accounts of persons who have accounts with
such depositary. Such accounts initially will be designated by or on behalf of
the Initial Purchasers. Ownership of beneficial interests in the Global Note
will be limited to persons who have accounts with DTC ("participants") or
persons who hold interests through participants. Ownership of beneficial
interests in the Global Note will be shown on, and the transfer of that
ownership will be effected only through records maintained by DTC or its nominee
(with respect to interests of participants) and the records of participants
(with respect to interests of persons other than participants).
So long as DTC, or its nominee, is the registered owner or holder of the
Global Note, DTC or such nominee, as the case may be, will be considered the
sole owner or holder of the Exchange Notes represented by such Global Note for
all purposes under the Indenture and the Exchange Notes. No beneficial owner of
an interest in the Global Note will be able to transfer that interest except in
accordance with DTC's applicable procedures, in addition to those provided for
under the Indenture.
Payments of the principal of, premium (if any) and interest on, the Global
Note, will be made to DTC or its nominee, as the case may be, as the registered
owner thereof. Neither the Company, the Trustee nor any paying agent will have
any responsibility or liability for any aspect of the records relating to or
payments made on account of beneficial ownership interests in the Global Note or
for maintaining, supervising or reviewing any records relating to such
beneficial ownership interest.
The Company expects that DTC or its nominee, upon receipt of any payment of
principal, premium, if any, or interest in respect of the Global Note, will
credit participants' accounts with payments in amounts proportionate to their
respective beneficial interests in the principal amount of such Global Note as
shown
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<PAGE> 94
on the records of DTC or its nominee. The Company also expects that payments by
participants will be governed by standing instructions and customary practice,
as is now the case with securities held for the accounts of customers registered
in the names of nominees for such customers. Such payments will be the
responsibility of such participants.
Transfers between participants in DTC will be effected in the ordinary way
in accordance with DTC rules and will be settled in clearinghouse funds. If a
holder requires physical delivery of a certificated note for any reason,
including to sell Exchange Notes to persons in states which require physical
delivery of such Exchange Notes, or to pledge such Exchange Notes, such holder
must transfer its interest in the Global Note, in accordance with the normal
procedures of DTC and the procedures set forth in the Indenture.
DTC has advised the Company that it will take any action permitted to be
taken by a holder of Exchange Notes (including the presentation of Exchange
Notes for exchange as described below) only at the direction of one or more
participants to whose account the DTC interests in the Global Note is credited
and only in respect of such portion of the aggregate principal amount of
Exchange Notes as to which such participant or participants has or have given
such direction. However, if there is an Event of Default under the Exchange
Notes, DTC will exchange the Global Note for certificated notes, which it will
distribute to its participants.
DTC has advised the Company as follows: DTC is a limited purpose trust
issuer organized under the laws of the State of New York, a member of the
Federal Reserve System, a "clearing corporation" within the meaning of the
Uniform Commercial Code and a "Clearing Agency" registered pursuant to the
provisions of Section 17A of the Exchange Act. DTC was created to hold
securities for its participants and facilitate the clearance and settlement of
securities transactions between participants through electronic book-entry
changes in accounts of its participants, thereby eliminating the need for
physical movement of certificates. Participants include securities brokers and
dealers, banks, trust companies and clearing corporations and certain other
organizations. Indirect access to the DTC system is available to others such as
banks, brokers, dealers and trust companies that clear through or maintain a
custodial relationship with a participant, either directly or indirectly
("indirect participants").
Although DTC has agreed to the foregoing procedures in order to facilitate
transfers of interests in the Global Note among participants of DTC, it is under
no obligation to perform such procedures, and such procedures may be
discontinued at any time. Neither the Company nor the Trustee will have any
responsibility for the performance by DTC or its participants or indirect
participants of their respective obligations under the rules and procedures
governing their operations.
Certificated Notes. If DTC is at any time unwilling or unable to continue
as a depositary for the Global Note and a successor depositary is not appointed
by the Issuer within 90 days, Certificated Notes will be issued in exchange for
the Global Note.
DESCRIPTION OF THE INITIAL NOTES
The terms of the Initial Notes are substantially identical in all respects
(including principal amount, interest rate and maturity) to the terms of the
Exchange Notes for which they may be exchanged pursuant to this Exchange Offer,
except that the Initial Notes are not freely transferable by holders thereof and
were issued subject to certain covenants regarding registration as provided
therein and in the Exchange and Registration Rights Agreement (which covenants
will, except as provided therein, terminate and be of no further force or effect
upon completion of this Exchange Offer). See "Exchange and Registration Rights
Agreement."
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<PAGE> 95
EXCHANGE AND REGISTRATION RIGHTS AGREEMENT
The Company and the Initial Purchasers entered into the Exchange and
Registration Rights Agreement prior to the issuance of the Exchange Notes
offered hereby. Pursuant to the Exchange and Registration Rights Agreement, the
Company agreed to (i) file with the Commission on or prior to 60 days after the
date of issuance of the Initial Notes (the "Issue Date") a registration
statement on Form S-1 or Form S-4, if the use of such forms is then available
(the "Exchange Offer Registration Statement"), relating to a registered exchange
offer (the "Exchange Offer") for the Initial Notes under the Securities Act and
(ii) use its reasonable best efforts to cause the Exchange Offer Registration
Statement to be declared effective under the Securities Act within 135 days
after the Issue Date. As soon as practicable after the effectiveness of the
Exchange Offer Registration Statement, the Company will offer to the holders of
the Notes who are not prohibited by any law or policy of the Commission from
participating in the Exchange Offer the opportunity to exchange their Initial
Notes for the Exchange Notes, identical in all material respects to the Initial
Notes (except that the Exchange Notes will not contain terms with respect to
transfer restrictions) that would be registered under the Securities Act. The
Company will keep the Exchange Offer open for not less than 30 days (or longer,
if required by applicable law) after the date notice of the Exchange Offer is
mailed to the holders of the Initial Notes. If (i) applicable interpretations of
the staff of the Commission do not permit the Company to effect the Exchange
Offer as contemplated thereby or (ii) any holder either (A) is not eligible to
participate in the Exchange Offer or (B) participates in the Exchange Offer and
does not receive freely transferrable Exchange Notes in exchange for tendered
Initial Notes, the Company will file with the Commission a shelf registration
statement (the "Shelf Registration Statement") to cover resales of Transfer
Restricted Securities by such holders who satisfy certain conditions relating
to, among other things, the provision of information in connection with the
Shelf Registration Statement. For purposes of the foregoing, "Transfer
Restricted Securities" means each Initial Note until (i) the date on which such
Initial Note has been exchanged for a freely transferable Exchange Note in the
Exchange Offer, (ii) the date on which such Initial Note has been effectively
registered under the Securities Act and disposed of in accordance with the Shelf
Registration Statement or (iii) the date on which such Initial Note is
distributed to the public pursuant to Rule 144 under the Securities Act or is
saleable pursuant to Rule 144(k) under the Securities Act.
The Company has agreed to use its reasonable best efforts to have the
Exchange Offer Registration Statement and, if applicable, a Shelf Registration
Statement (each a "Registration Statement") declared effective by the Commission
as promptly as practicable after the filing thereof. Unless the Exchange Offer
would not be permitted by a policy of the Commission, the Company will commence
the Exchange Offer and will use its best efforts to consummate the Exchange
Offer as promptly as practicable, but in any event prior to 165 days after the
Issue Date. If applicable, the Company will use its best efforts to keep the
Shelf Registration Statement effective for a period of three years after the
Issue Date, subject to certain exceptions, including suspending the
effectiveness thereof for certain valid business reasons. If (i) the applicable
Registration Statement is not filed with the Commission on or prior to 60 days
after the Issue Date, (ii) the Exchange Offer Registration Statement or the
Shelf Registration Statement, as the case may be, is not declared effective
within 135 days after the Issue Date (or in the case of a Shelf Registration
Statement required to be filed in response to a change in law or the applicable
interpretations of Commission's staff, if later, within 45 days after
publication of the change in law or interpretation), (iii) the Exchange Offer is
not consummated on or prior to 165 days after the Issue Date, or (iv) the Shelf
Registration Statement is filed and declared effective within 135 days after the
Issue Date (or in the case of a Shelf Registration Statement required to be
filed in response to a change in law or the applicable interpretations of
Commission's staff, if later, within 45 days after publication of the change in
law or interpretation), but shall thereafter cease to be effective (at any time
that the Company is obligated to maintain the effectiveness thereof) without
being succeeded within 60 days by an additional Registration Statement filed and
declared effective (each such event referred to in clauses (i) through (iv), a
"Registration Default"), the Company will generally be obligated to pay
liquidated damages to each holder of Transfer Restricted Securities, during the
period of such Registration Default, in an amount equal to $0.192 per week per
$1,000 principal amount of the Initial Notes constituting Transfer Restricted
Securities held by such holder until the applicable Registration Statement is
filed or declared effective,
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<PAGE> 96
the Exchange Offer is consummated or the Shelf Registration Statement again
becomes effective, as the case may be. All accrued liquidated damages shall be
paid to holders in the same manner as interest payments on the Initial Notes on
semi-annual payment dates which correspond to interest payment dates for the
Initial Notes. Following the cure of all Registration Defaults, the accrual of
liquidated damages will cease.
The Exchange and Registration Rights Agreement also provides that the
Company (i) shall make available for a period of 90 days after the consummation
of the Exchange Offer a prospectus meeting the requirements of the Securities
Act to any broker-dealer for use in connection with any resale of any such
Exchange Notes and (ii) shall pay all expenses incident to the Exchange Offer
(including the expenses of one counsel to the holders of the Initial Notes) and
will indemnify certain holders of the Initial Notes (including any
broker-dealer) against certain liabilities, including liabilities under the
Securities Act. A broker-dealer that delivers such a prospectus to purchasers in
connection with such resales will be subject to certain of the civil liability
provisions under the Securities Act, and will be bound by the provisions of the
Exchange and Registration Rights Agreement (including certain indemnification
rights and obligations).
Each holder of the Initial Notes that wishes to exchange such Initial Notes
for Exchange Notes in the Exchange Offer will be required to make certain
representations, including representations that (i) any Exchange Notes to be
received by it will be acquired in the ordinary course of its business, (ii) it
has no arrangement with any person to participate in the distribution of the
Exchange Notes and (iii) it is not an "affiliate," as defined in Rule 405 of the
Securities Act, of the Company or if it is an affiliate, it will comply with the
registration and prospectus delivery requirements of the Securities Act to the
extent applicable.
If a holder is not a broker-dealer, it will be required to represent that
it is not engaged in, and does not intend to engage in, the distribution of the
Exchange Notes. If a holder is a broker-dealer that will receive Exchange Notes
for its own account in exchange for Notes that were acquired as a result of
market making activities or other trading activities, it will be required to
acknowledge that it will deliver a prospectus in connection with any resale of
such Exchange Notes.
Holders of the Initial Notes will be required to make certain
representations to the Company (as described above) in order to participate in
the Exchange Offer, and will be required to deliver information to be used in
connection with the Shelf Registration Statement in order to have their Initial
Notes included in the Shelf Registration Statement and benefit from the
provisions regarding liquidated damages set forth in the preceding paragraphs. A
holder who sells Initial Notes pursuant to the Shelf Registration Statement
generally will be required to be named as a selling security holder in the
related prospectus and to deliver a prospectus to purchasers, will be subject to
certain of the civil liability provisions under the Securities Act in connection
with such sales and will be bound by the provisions of the Exchange and
Registration Rights Agreement which are applicable to such a holder (including
certain indemnification obligations).
For so long as the Initial Notes are outstanding, the Company will continue
to provide to holders of the Notes and to prospective purchasers of the Initial
Notes the information required by paragraph (d)(4) of Rule 144A under the
Securities Act ("Rule 144A"). The Company will provide a copy of the Exchange
and Registration Rights Agreement to prospective purchasers of Initial Notes
identified to the Company by an Initial Purchaser upon request.
The foregoing description of the Exchange and Registration Rights Agreement
is a summary only, does not purport to be complete and is qualified in its
entirety by reference to all provisions of the Exchange and Registration Rights
Agreement.
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<PAGE> 97
INCOME TAX CONSIDERATIONS
Holders of the Notes should consult their own tax advisors with respect to
their particular circumstances and with respect to the effects of state, local
or foreign tax laws to which they may be subject.
The Company believes that the following summary fairly describes the
material United States federal income tax consequences expected to apply to the
exchange of Initial Notes for Exchange Notes and the ownership and disposition
of Exchange Notes under currently applicable law. The discussion does not cover
all aspects of federal taxation that may be relevant to, or the actual tax
effect that any of the matters described herein will have on, particular
holders, and does not address state, local, foreign or other tax laws. Further,
the federal income tax treatment of a holder of the Initial Notes and the
Exchange Notes may vary depending on the holder's particular situation. Certain
holders (including insurance companies, tax-exempt organizations, financial
institutions, broker-dealers, taxpayers subject to the alternative minimum tax
and foreign persons) may be subject to special rules not discussed below. The
description assumes that holders of the Initial Notes and the Exchange Notes
will hold the Initial Notes and the Exchange Notes as "capital assets"
(generally, property held for investment purposes) within the meaning of Section
1221 of the Code.
THE EXCHANGE
An exchange of Initial Notes for Exchange Notes will be treated as a
"non-event" for federal income tax purposes because the Exchange Notes will not
be considered to differ materially in kind or extent from the Initial Notes. As
a result, no federal income tax consequences will result to holders exchanging
Initial Notes for Exchange Notes.
THE EXCHANGE NOTES
Interest Payments on the Exchange Notes. The Initial Notes were not issued
with original issue discount. The stated interest on the Initial Notes and
Exchange Notes should be considered to be "qualified stated interest" and,
therefore, will be includible in a holder's gross income (except to the extent
attributable to accrued interest at the time of purchase) as ordinary income for
federal income tax purposes in accordance with a holder's tax method of
accounting.
Tax Basis. A holder's adjusted tax basis (determined by taking into
account accrued interest at the time of purchase) in an Exchange Note received
in exchange for an Initial Note will equal the cost of the Initial Note to such
holder, increased by the amounts of market discount previously included in
income by the holder and reduced by any principal payments received by such
holder with respect to the Exchange Notes and by amortized bond premium. A
holder's adjusted tax basis in an Exchange Note purchased by such holder will be
equal to the price paid for such an Exchange Note (determined by taking into
account accrued interest at the time of purchase), increased by market discount
previously included in income by the holder and reduced by any principal
payments received by such holder with respect to an Exchange Note and by
amortized bond premium. See "Market Discount and Bond Premium" below.
Sale, Exchange or Retirement. Upon the sale, exchange or retirement of an
Exchange Note, a holder will recognize taxable gain or loss, if any, equal to
the difference between the amount realized on the sale, exchange or retirement
and such holder's adjusted tax basis in such Exchange Note. Such gain or loss
will be a capital gain or loss (except to the extent of any accrued market
discount), and will be a long-term capital gain or loss if the Exchange Note has
been held for more than one year at the time of such sale, exchange or
retirement.
Market Discount and Bond Premium. Holders should be aware that the market
discount provisions of the Code may affect the Exchange Notes. These rules
generally provide that a holder who purchases Exchange Notes for an amount which
is less than their principal amount will be considered to have purchased the
Exchange Notes at a "market discount" equal to the amount of such difference.
Such holder will be required to treat any gain realized upon the disposition of
the Exchange Note as interest income to the extent of the market discount that
is treated as having accrued during the period that such
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<PAGE> 98
holder held such Exchange Note, unless an election is made to include such
market discount in income on a current basis. A holder of an Exchange Note who
acquires the Exchange Note at a market discount and who does not elect to
include market discount in income on a current basis may also be required to
defer the deduction of a portion of the interest on any indebtedness incurred or
continued to purchase or carry the Exchange Note until the holder disposes of
such Exchange Note in a taxable transaction.
If a holder's tax basis in an Exchange Note immediately after acquisition
exceeds the stated redemption price at maturity of such Exchange Note, such
holder may be eligible to elect to deduct such excess as amortizable bond
premium pursuant to Section 171 of the Code.
Purchasers of the Exchange Notes should consult their own tax advisors as
to the application to such purchasers of the market discount and bond premium
rules.
HOLDERS OF THE INITIAL NOTES ARE URGED TO CONSULT THEIR TAX ADVISORS
REGARDING THE PARTICULAR TAX CONSEQUENCES TO THEM OF ACQUIRING, OWNING OR
DISPOSING OF THE INITIAL NOTES AND THE EXCHANGE NOTES, INCLUDING THE APPLICATION
OF FEDERAL, STATE, LOCAL AND FOREIGN TAX LAWS, AND POSSIBLE FUTURE CHANGES IN
SUCH FEDERAL TAX LAWS.
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<PAGE> 99
PLAN OF DISTRIBUTION
Each broker-dealer that receives Exchange Notes for its own account
pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Notes. This
Prospectus, as it may be amended or supplemented from time to time, may be
issued by a broker-dealer in connection with resales of Exchange Notes received
in exchange for Initial Notes where such Notes were acquired as a result of
market-making activities or other trading activities. The Company has agreed
that for a period of 90 days after the Expiration Date, it will make this
Prospectus, as amended or supplemented, available to any broker-dealer for use
in connection with any such resale. In addition, until 1997, all
dealers effecting transactions in the Exchange Notes may be required to deliver
a prospectus.
The Company will not receive any proceeds from any sale of Exchange Notes
by broker-dealers. Exchange Notes received by broker-dealers for their own
account pursuant to the Exchange Offer may be sold from time to time in one or
more transactions in the over-the-counter market, in negotiated transactions,
through the writing of options on the Exchange Notes or a combination of such
methods of resale, at market prices prevailing at the time of resale, at prices
related to such market prices or negotiated prices. Any such resale may be made
directly to purchasers or to or through brokers or dealers who may receive
compensation in the form of commissions or concessions from any such
brokerdealer and/or the purchasers of any such Exchange Notes. Any broker-dealer
that resells Exchange Notes that were received by it for its own account
pursuant to the Exchange Offer and any broker or dealer that participates in a
distribution of such Exchange Notes may be deemed to be an "underwriter" within
the meaning of the Securities Act and any profit on any such resale of Exchange
Notes and any commissions or concessions received by any such persons may be
deemed to be underwriting compensation under the Securities Act. The Letter of
Transmittal states that by acknowledging that it will deliver and by delivering
a prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
For a period of 90 days after the Expiration Date the Company will promptly
send additional copies of this Prospectus and any amendment or supplement to
this Prospectus to any broker-dealer that requests such documents in the Letter
of Transmittal. The Company has agreed to pay all expenses incident to the
Exchange Offer other than commissions or concessions of any brokers or dealers
and will indemnify the holders of the Notes (including any brokerdealers)
against certain liabilities, including liabilities under the Securities Act.
LEGAL MATTERS
The validity of the Exchange Notes offered hereby will be passed upon for
Safelite by Hutchins, Wheeler & Dittmar, A Professional Corporation, Boston,
Massachusetts.
INDEPENDENT AUDITORS
The consolidated balance sheets of Safelite Glass Corp. and its
subsidiaries as of December 30, 1995 and December 28, 1996 and the consolidated
statements of operations, stockholders' equity and cash flows for each of the
three years in the period ended December 28, 1996 included in this Prospectus
have been audited by Deloitte & Touche LLP, independent auditors, as stated in
their report herein, and are included in reliance upon the report of such firm
given upon their authority as experts in accounting and auditing.
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<PAGE> 100
<TABLE>
INDEX TO FINANCIAL STATEMENTS
FINANCIAL STATEMENTS OF SAFELITE GLASS CORP. AND SUBSIDIARIES:
<S> <C>
Independent Auditors' Report.......................................................... F-2
Consolidated Balance Sheets -- December 30, 1995 and December 28, 1996................ F-3
Consolidated Statements of Operations -- Years Ended December 31, 1994, December 30,
1995 and December 28, 1996.......................................................... F-4
Consolidated Statements of Stockholders' Equity (Deficit) -- December 31, 1994,
December 30, 1995 and December 28, 1996............................................. F-5
Consolidated Statements of Cash Flows -- Years Ended December 31, 1994, December 30,
1995 and December 28, 1996.......................................................... F-6
Notes to Consolidated Financial Statements............................................ F-7
</TABLE>
F-1
<PAGE> 101
INDEPENDENT AUDITORS' REPORT
Safelite Glass Corp.:
We have audited the accompanying consolidated balance sheets of Safelite
Glass Corp. and subsidiaries ("Company") as of December 30, 1995 and December
28, 1996, and the related consolidated statements of operations, stockholders'
equity (deficit), and cash flows for the years ended December 31, 1994, December
30, 1995 and December 28, 1996. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of the Company at December 30,
1995 and December 28, 1996, and the results of their operations and their cash
flows for the years ended December 31, 1994, December 30, 1995 and December 28,
1996, in conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Dayton, Ohio
February 12, 1997
F-2
<PAGE> 102
SAFELITE GLASS CORP. AND SUBSIDIARIES
<TABLE>
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<CAPTION>
DECEMBER 30, DECEMBER 28,
1995 1996
------------ ------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash...................................................... $ 13,782 $ 31,188
Short-term investments.................................... 34,654 --
Accounts receivable, net.................................. 32,026 29,647
Refundable taxes.......................................... 7,600
Inventories............................................... 40,150 42,454
Prepaid expenses.......................................... 2,511 6,684
Deferred income taxes..................................... 1,980
--------- ---------
Total current assets................................ 123,123 119,553
PROPERTY, PLANT AND EQUIPMENT -- Net........................ 39,361 40,119
INTANGIBLE ASSETS -- Net.................................... 21,151 17,832
OTHER ASSETS................................................ 4,627 18,970
DEFERRED INCOME TAXES....................................... 19,772
--------- ---------
TOTAL ASSETS........................................ $ 188,262 $ 216,246
========= =========
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES:
Accounts payable.......................................... $ 19,426 $ 23,703
Current portion -- long-term debt......................... 7,500 5,418
Accrued expenses:
Payroll and related items............................... 5,800 17,359
Self-insurance reserves................................. 6,788 9,086
Taxes................................................... 12,301 6,376
Legal................................................... 3,312 702
Restructuring........................................... 1,497 561
Other................................................... 8,418 5,647
--------- ---------
Total current liabilities........................... 65,042 68,852
LONG-TERM DEBT -- Less current portion...................... 61,500 258,322
OTHER LONG-TERM LIABILITIES:
Self-insurance reserves................................... 6,425 6,512
Pension................................................... 6,957 7,733
Restructuring............................................. 3,601 1,128
Taxes..................................................... 40,524 --
Other..................................................... 578 2,231
--------- ---------
Total other long-term liabilities................... 58,085 17,604
MINORITY INTEREST........................................... 4,249 --
STOCKHOLDERS' EQUITY (DEFICIT):
Preferred stock, 8%, $100 par value....................... 54,946
Preferential common stock, $0.01 par value................ 32
Class A common stock, $.01 par value...................... 11 53
Class B common stock; $.01 par value...................... 1 1
Additional paid-in capital................................ 393,567 185,672
Accumulated deficit....................................... (384,329) (356,555)
Other..................................................... (9,896) (12,649)
--------- ---------
Total stockholders' deficit......................... (614) (128,532)
--------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT................. $ 188,262 $ 216,246
========= =========
</TABLE>
See notes to consolidated financial statements.
F-3
<PAGE> 103
SAFELITE GLASS CORP. AND SUBSIDIARIES
<TABLE>
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS)
<CAPTION>
YEAR ENDED
----------------------------------------------
DECEMBER 31, DECEMBER 30, DECEMBER 28,
1994 1995 1996
------------ ------------ ------------
<S> <C> <C> <C>
SALES:
Installation and related services............. $298,579 $315,642 $380,142
Wholesale..................................... 58,782 56,500 58,183
-------- -------- --------
Total sales........................... 357,361 372,142 438,325
COST OF SALES................................... 246,058 261,693 299,623
-------- -------- --------
GROSS MARGIN.................................... 111,303 110,449 138,702
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES.... 90,830 93,486 107,350
RESTRUCTURING EXPENSES.......................... 6,311
OTHER OPERATING EXPENSES........................ 21,115 7,558
-------- -------- --------
OPERATING INCOME (LOSS)......................... (642) 10,652 23,794
INTEREST EXPENSE................................ 4,474 6,000 6,726
INTEREST INCOME................................. 2,237 2,890 2,094
-------- -------- --------
INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE
INCOME TAX (PROVISION) BENEFIT AND MINORITY
INTEREST...................................... (2,879) 7,542 19,162
INCOME TAX (PROVISION) BENEFIT.................. (200) (157) 17,605
MINORITY INTEREST............................... (2,704) (1,059) (10,199)
-------- -------- --------
INCOME (LOSS) FROM CONTINUING OPERATIONS........ (5,783) 6,326 26,568
DISCONTINUED OPERATIONS......................... 1,706
EXTRAORDINARY ITEM -- Early extinguishment of
debt.......................................... (1,517) (500)
-------- -------- --------
NET INCOME (LOSS)............................... $ (7,300) $ 6,326 $ 27,774
======== ======== ========
</TABLE>
See notes to consolidated financial statements.
F-4
<PAGE> 104
SAFELITE GLASS CORP. AND SUBSIDIARIES
<TABLE>
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<CAPTION>
OTHER
--------------------------------
PREFERENTIAL CLASS A CLASS B ADDITIONAL STOCK MINIMUM
COMMON PREFERRED COMMON COMMON PAID-IN ACCUMULATED TREASURY SUBSCRIPTION PENSION
STOCK STOCK STOCK STOCK CAPITAL DEFICIT STOCK RECEIVABLE LIABILITY TOTAL
------------ --------- ------ ------ ---------- ----------- -------- ------------ ------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE, JANUARY
1, 1994......... $ 32 $ 5 $1 $ 393,711 $(383,355) $(1,243) $(1,453) $ 7,698
Purchase of 2,265
shares of Class
A treasury
stock........... (235) (14) (249)
Net loss.......... (7,300) (7,300)
Issuance of
616,928 shares
of Class A
common stock.... 6 86 525 $(372) 245
Minimum pension
liability
adjustment...... (178) (178)
---- ------- --- -- --------- --------- ------- ----- ------- ---------
BALANCE, DECEMBER
31, 1994........ 32 11 1 393,562 (390,655) (732) (372) (1,631) 216
Purchase of 5,256
shares of Class
A treasury
stock........... 5 (5)
Net income........ 6,326 6,326
Minimum pension
liability
adjustment...... (7,156) (7,156)
---- ------- --- -- --------- --------- ------- ----- ------- ---------
BALANCE, DECEMBER
30, 1995........ 32 11 1 393,567 (384,329) (737) (372) (8,787) (614)
Issuance of
4,209,689 shares
of Class A
common stock net
of issuance
costs........... 42 53,170 53,212
Issuance of
582,498 shares
of preferred
stock net of
issuance
costs........... $54,946 54,946
Redemption of
preferential
common stock.... (32) (293,107) (293,139)
Contributed
capital......... 21,314 21,314
Purchase of
353,557 shares
of Class A
treasury
stock........... (4,720) (4,720)
Exercise of 6,080
stock options... 63 (4) 59
Net income........ 27,774 27,774
Purchase of
minority
interest........ 10,665 10,665
Minimum pension
liability
adjustment...... 1,971 1,971
---- ------- --- -- --------- --------- ------- ----- ------- ---------
BALANCE, DECEMBER
28, 1996........ $ $54,946 $53 $1 $ 185,672 $(356,555) $(5,457) $(376) $(6,816) $(128,532)
==== ======= === == ========= ========= ======= ===== ======= =========
</TABLE>
See notes to consolidated financial statements.
F-5
<PAGE> 105
SAFELITE GLASS CORP. AND SUBSIDIARIES
<TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<CAPTION>
YEAR ENDED
----------------------------------------------
DECEMBER 31, DECEMBER 30, DECEMBER 28,
1994 1995 1996
------------ ------------ ------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)............................................ $ (7,300) $ 6,326 $ 27,774
Adjustments to reconcile net income (loss) to net cash flows
from operating activities:
Effect of change in accounting for advertising costs....... 2,576
Extraordinary item -- early extinguishment of debt......... 1,860 500
Depreciation and amortization.............................. 7,212 7,621 8,031
Income on disposition of assets............................ 167 654 258
Minority interest.......................................... 3,089 862 10,199
Deferred income taxes...................................... (19,715)
Income from discontinued operations........................ (1,706)
Change in operating assets and liabilities:
Accounts receivable...................................... (431) (5,011) 2,379
Inventories.............................................. (2,694) (5,159) (704)
Accounts payable......................................... (5,599) (1,532) 1,834
Accrued expenses......................................... 19,420 (25,939) 1,615
Other.................................................... (11,837) 12,696 (11,179)
Cash flows used in discontinued operations................. (21,604)
-------- -------- --------
Net cash flows provided by (used in) operating
activities........................................... 6,463 (9,482) (2,318)
-------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures......................................... (14,193) (11,986) (12,843)
Proceeds from sale of assets................................. 398 1,243 87
Acquisition of intangible assets............................. (514) (392)
Purchases of short term investments.......................... (9,804) (47,479) (29,570)
Maturities of short term investments......................... 23,500 64,224
-------- -------- --------
Net cash flows provided by (used in) investing
activities........................................... (24,113) (34,722) 21,506
-------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Outstanding checks in accounts payable....................... 1,528 (588) 2,443
Issuance of common stock..................................... 245 53,271
Issuance of preferred stock.................................. 54,946
Redemption of preferential common stock...................... (293,139)
Purchase of treasury stock................................... (249) (5) (4,720)
Payments on term loan........................................ (15,000) (7,500) (47,500)
Proceeds from term loan and subordinated debt................ 55,000 250,000
Proceeds from premium financing.............................. 13,740
Payments on revolver......................................... (25,000) (85,725) (25,550)
Borrowings on revolver....................................... 13,800 98,425 4,050
Debt issuance costs.......................................... (1,398) (9,323)
-------- -------- --------
Net cash flows provided by (used in) financing
activities........................................... 28,926 4,607 (1,782)
-------- -------- --------
NET INCREASE (DECREASE) IN CASH................................ 11,276 (39,597) 17,406
CASH AT BEGINNING OF PERIOD.................................... 42,103 53,379 13,782
-------- -------- --------
CASH AT END OF PERIOD.......................................... $ 53,379 $ 13,782 $ 31,188
======== ======== ========
SUPPLEMENTAL DISCLOSURES:
Cash paid for interest....................................... $ 8,944 $ 6,051 $ 5,127
======== ======== ========
Cash paid for income taxes................................... $ 454 $ 109 $ 350
======== ======== ========
Notes received for capital stock............................. $ 372
========
Contributed capital.......................................... $ 21,314
========
</TABLE>
See notes to consolidated financial statements.
F-6
<PAGE> 106
SAFELITE GLASS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED
DECEMBER 31, 1994, DECEMBER 30, 1995 AND DECEMBER 28, 1996
(IN THOUSANDS EXCEPT SHARE AND PER SHARE INFORMATION)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Description of Business Safelite Glass Corp. and subsidiaries (the
"Company") are engaged principally in the manufacture, distribution and
installation of replacement auto glass and related insurance claims processing.
The Company operates throughout the United States. Approximately 87% of the
Company's sales represent installation and related services with the balance
representing sales to wholesale customers.
Basis of Accounting The consolidated financial statements have been
prepared on the basis of generally accepted accounting principles. The
preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities, disclosure of contingent
assets and liabilities at the date of the consolidated financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Principles of Consolidation The consolidated financial statements include
the accounts of Safelite Glass Corp. and its wholly-owned subsidiaries, which as
discussed below includes the accounts of Lear Siegler Holdings Corp. ("Lear
Siegler").
As more fully described in Note 2, on December 20, 1996, Lite Acquisition
Corp. was merged with and into Safelite Glass Corp. and Safelite, through a
subsidiary, acquired substantially all of the outstanding common stock of its
ultimate parent, Lear Siegler. These transactions have been accounted for as a
recapitalization of Safelite and in accordance with the provisions of FASB
Technical Bulletin No. 85-5.
Fiscal Year The Company uses a 52 to 53 week fiscal year that ends on the
Saturday nearest December 31. The footnote references to year ends are as
follows: December 31, 1994 ("1994"), December 30, 1995 ("1995") and December 28,
1996 ("1996").
Cash The Company considers all short-term investments which have an
original maturity of three months or less to be cash equivalents. The carrying
amount approximates fair value because of the short maturity of those
instruments. Outstanding checks of $5,040 and $7,483 as of December 30, 1995 and
December 28, 1996, respectively, are included in accounts payable.
Short-Term Investments Short-term investments, consisting of U.S. treasury
bills maturing within one year are classified as held-to-maturity and are
carried at amortized cost of $34,654 which approximates fair value.
Concentration of Credit Risk Approximately 40% in 1995 and 38% in 1996 of
trade accounts receivable are due from insurance companies in connection with
sales to individual customers. The balance of trade accounts receivable is due
primarily from wholesale and other commercial customers. The number and relative
financial strength of the insurance companies limit the Company's exposure to
credit risk for insurance related receivables. The diversity and wide geographic
dispersion limits the credit risk of receivables from wholesale and other
commercial customers. The Company also performs ongoing credit evaluations of
the financial condition of its wholesale and other commercial customers' which
reduces its exposure to loss. The Company maintains reserves for potential
uncollectible accounts.
Inventories The Company accounts for inventories, which are primarily
finished goods, at the lower of standard cost, which approximates actual cost,
or market. Valuation allowances for obsolete and slow moving inventories were
$1,115 and $1,621 at December 30, 1995 and December 28, 1996, respectively.
F-7
<PAGE> 107
SAFELITE GLASS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
Property, Plant and Equipment Property, plant and equipment are recorded
at cost. Depreciation is provided using the straight-line method over the
following estimated useful lives:
<S> <C>
Buildings and improvements................................... 25 years
Leasehold improvements....................................... 5-10 years
Information technology equipment............................. 3-5 years
Other equipment and furniture................................ 3-7 years
</TABLE>
Intangible Assets Intangible assets consist principally of trademarks and
goodwill which are being amortized using the straight-line method over their
estimated useful lives of five to forty years. At each balance sheet date, a
determination is made by management to ascertain whether intangible assets have
been impaired based on several criteria, including but not limited to, sales
trends, undiscounted projected operating cash flows and other operating factors.
Impairment of Assets In March 1995, the Financial Accounting Standards
Board issued Statement of Financial Accounting Standards No. 121 "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed
Of," effective for fiscal years beginning after December 15, 1995. This standard
requires impairment losses to be recorded for long-lived assets and certain
intangible assets used in operations when an indication of impairment is present
and the undiscounted cash flows estimated to be generated by those assets are
less than the assets' carrying amount. The standard also addresses the
accounting for long-lived assets that are expected to be disposed of. Adoption
of this statement in 1996 did not have a material effect on the financial
statements.
Debt Issue Costs Debt issuance costs are amortized over the life of the
related debt.
Revenue Recognition Revenue from auto glass installation and related
services is recognized when the service is performed. Revenue from the
distribution of auto glass to wholesale customers is recognized when the product
is shipped.
Cost of Sales Cost of sales includes product and distribution costs as
well as installation labor, occupancy and vehicle expenses.
Advertising Costs Prior to 1994, the Company capitalized the cost of
yellow pages phone book advertising and amortized such costs over the twelve
month period following the publication of the yellow pages phone book in which
the advertising appeared. During 1994, the Company changed its method of
accounting for advertising costs to conform with the provisions of Statement of
Position Number 93-7 (SOP 93-7), "Reporting on Advertising Costs." Accordingly,
the Company expenses the costs of yellow pages advertising at the time the
yellow pages phone book is published. The effect of this change was to increase
advertising expense in 1994 by $2,576. Total advertising expense, including the
effect of adopting SOP 93-7, was $7,896, $5,910 and $7,123 in 1994, 1995 and
1996, respectively.
Reclassifications Certain reclassifications have been made to conform
balances with the 1996 presentation.
2. THE TRANSACTIONS
Prior to December 20, 1996, the Company was an indirect subsidiary of Lear
Siegler. The transactions described below, which occurred on December 20, 1996,
were pursuant to a Recapitalization Agreement and Plan of Merger and Stock
Purchase Agreement dated November 8, 1996. As a result of the transactions,
Safelite's preferential common shares were converted into the right to receive
cash. Thomas H. Lee Equity Fund III, L.P. together with certain of its
affiliates and certain other investors (collectively "THL") own 88% of Safelite
common stock and certain existing shareholders, primarily current Safelite
management, own the remaining interest. The Agreement also provided for
Safelite's
F-8
<PAGE> 108
SAFELITE GLASS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
acquisition (through a newly formed subsidiary) of substantially all of the
outstanding common stock of Lear Siegler, its former parent. Significant
components of the transactions are as follows:
(1) THL acquired 169,000 shares of Safelite Class A common stock from
certain selling shareholders for aggregate consideration of approximately
$2,265. Subsequent to this transaction, all remaining common stock, except
for 626,910 shares of Class A common and 17,991 shares of Class B common
stock owned by existing shareholders (primarily management), were owned by
LSNWY, a wholly-owned subsidiary of Lear Siegler.
(2) THL capitalized Lite Acquisition Corp. with $56,410 of common
equity and $58,250 of preferred equity. Lite Acquisition Corp. was then
merged with and into Safelite with Safelite surviving the merger
("Merger"). Upon effecting the Merger:
(i) each share of Safelite Class A Common Stock outstanding prior
to the Merger was converted into the right to receive $13.40 or, at the
election of the holder thereof, to remain outstanding and unaffected by
the Merger (LSNWY and certain other shareholders and option holders
elected to sell their shares and received in the aggregate $4,154 and
$507, respectively);
(ii) each share of Safelite Class B Common Stock outstanding prior
to the Merger was converted into the right to receive cash equal to
$0.01;
(iii) each share of Safelite Preferential Common Stock outstanding
prior to the Merger was converted into the right to receive cash, the
aggregate amount of which was approximately $293,139;
(iv) each share of Lite Acquisition Corp.'s Common Stock
outstanding prior to the Merger was converted into one share of Safelite
Class A Common Stock; and
(v) each share of Lite Acquisition Corp.'s Preferred Stock
outstanding prior to the Merger was converted into one share of Safelite
8% Preferred Stock.
(3) Immediately following the Merger, the Company borrowed $150,000
under a new senior credit facility, issued $100,000 in senior subordinated
notes and retired $41,875 in existing bank facility debt (see Note 8).
(4) Safelite acquired (through a newly formed subsidiary) all of the
outstanding common stock of Lear Siegler.
The Transactions were accounted for as a recapitalization of Safelite and
in accordance with the provisions of FASB Technical Bulletin No. 85-5.
Accordingly, the stock held by the former minority shareholders of Safelite was
treated as if it was acquired by Lear Siegler. The carrying value of the
minority interest exceeded the fair value of the minority shares acquired by
approximately $5,800. Inventory was increased by $1,600 and non-current assets
were reduced by $7,400 to allocate this fair value adjustment.
Prior to the Transactions, Lear Siegler operated as a holding company whose
principal activity was to oversee its discontinued operations. The Lear Siegler
activities do not provide future benefit to Safelite; thus on December 20, 1996,
management of Safelite adopted a formal plan to exit the activities of Lear
Siegler. Accordingly, severance, lease termination and related costs of $700 to
close Lear Siegler's office located in New Jersey have been accrued in
accordance with Emerging Issues Task Force Statement No. 94-3. This amount is
included in other operating expenses.
F-9
<PAGE> 109
SAFELITE GLASS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
In connection with the transactions, certain selling shareholders agreed to
reimburse the Company should the Company be required to pay tax liabilities of
Lear Siegler arising from disputes with various taxing authorities. An escrow
account was established for this purpose. Additional paid-in capital of $21,314,
the amount of tax liabilities recorded by Lear Siegler, was recorded to reflect
the assumption of the tax liabilities by the selling shareholders.
3. RESTRUCTURING EXPENSES
Prior to 1990, the Company grew through acquisitions and internal service
center openings. In 1991, a new management team developed a strategic plan to
focus the Company on its primary insurance customers. The plan called for growth
to be achieved by increasing the Company's share of the auto glass replacement
market through enhanced relationships with insurance companies and other large
volume clients. Automated solutions to address insurance claims processing costs
were and are an integral part of management's marketing strategy.
An additional element of the Company's strategic plan was a
market-by-market review of its distribution and service center configuration,
and the Company's customer service capabilities. The objective was to
restructure local markets as required to maximize service quality and capacity
at lower costs.
During 1993 and 1994, the Company refined its overall market based approach
with the development and testing of centralized Dispatch Command Center/Central
Telephone Units (DCC/CTU). These facilities serve as local market "hubs" which
connect company service centers, vans, central telephone units, warehouses and
distribution centers and provide "real time" data for scheduling, billing, sales
and inventory management. The success of the DCC/CTU concept led the Company in
1995 to restructure its field operations by closing approximately 100 service
centers and reorganizing field management. The 1995 provision for this
restructuring of $6,311 consists principally of planned service center closing
costs of $5,605 and field management reorganization costs of $706.
<TABLE>
The following summarizes the reserve activity:
<CAPTION>
1994 1995 1996
---- ------- -------
<S> <C> <C> <C>
Beginning balance.................................. $ 10 $ 0 $ 5,098
Restructuring provision............................ 6,311
Used for intended purpose.......................... (10) (1,213) (3,409)
---- ------- -------
Ending balance..................................... $ 0 $ 5,098 $ 1,689
==== ======= =======
</TABLE>
4. ACCOUNTS RECEIVABLE
<TABLE>
Accounts receivable consist of the following:
<CAPTION>
DECEMBER 30, DECEMBER 28,
1995 1996
----------- -----------
<S> <C> <C>
Trade receivables.................................... $34,439 $31,748
Less allowance for uncollectible accounts............ (2,413) (2,101)
------ ------
Net.................................................. $32,026 $29,647
====== ======
</TABLE>
F-10
<PAGE> 110
SAFELITE GLASS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
The allowance for uncollectible accounts consist of the following:
<CAPTION>
1994 1995 1996
------- ------- -------
<S> <C> <C> <C>
Balance, beginning of year.......................... $ 2,623 $ 2,301 $ 2,413
Provision........................................... 926 1,354 1,015
Charge-offs......................................... (1,248) (1,242) (1,327)
------- ------- -------
Balance, end of year................................ $ 2,301 $ 2,413 $ 2,101
======= ======= =======
</TABLE>
5. PROPERTY, PLANT AND EQUIPMENT
<TABLE>
Property, plant and equipment consist of the following:
<CAPTION>
DECEMBER 30, DECEMBER 28,
1995 1996
------------ ------------
<S> <C> <C>
Land..................................................... $ 4,672 $ 4,672
Buildings and leaseholds................................. 32,151 33,336
Equipment and furniture.................................. 48,953 52,764
-------- --------
Total.......................................... 85,776 90,772
Less accumulated depreciation............................ (46,415) (50,653)
-------- --------
Net...................................................... $ 39,361 $ 40,119
======== ========
</TABLE>
Depreciation expense was $6,472, $6,851 and $7,239 for the years ended
1994, 1995 and 1996, respectively.
6. INTANGIBLE AND OTHER ASSETS
<TABLE>
Intangible assets consist of the following:
<CAPTION>
DECEMBER 30, DECEMBER 28,
1995 1996
------------ ------------
<S> <C> <C>
Trademarks............................................... $27,087 $24,168
Goodwill................................................. 487 853
Non-compete agreements................................... 20 46
------- -------
Total.......................................... 27,594 25,067
Less accumulated amortization............................ (6,443) (7,235)
------- -------
Net...................................................... $21,151 $17,832
======= =======
</TABLE>
Amortization expense in 1994, 1995 and 1996 was $740, $770 and $792,
respectively.
7. LEASES
The Company leases many of its vehicles and service center locations under
operating leases. Most of the service center location leases provide renewal
options.
F-11
<PAGE> 111
SAFELITE GLASS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
Future minimum rental commitments under non-cancelable operating leases for
facilities (including closed service centers), vehicles and equipment at
December 28, 1996 are as follows:
<CAPTION>
AMOUNT
-------
<S> <C>
Year:
1997........................................................ $20,255
1998........................................................ 16,443
1999........................................................ 12,132
2000........................................................ 8,915
2001........................................................ 2,723
Thereafter.................................................. 2,814
-------
Total............................................... $63,282
=======
</TABLE>
For 1994, 1995 and 1996, rent expense under all operating leases was
$23,014, $24,028 and $25,180, respectively.
8. LONG-TERM DEBT
Prior to December 20, 1996, the Company could borrow a maximum of $55,000
under term loan provisions and $45,000 under revolving credit loan provisions,
which included letters of credit, subject to certain borrowing base limitations
as defined. The rate of interest on these borrowings was based on the prime rate
or Eurodollar rate, at the Company's option.
In connection with the transactions described in Note 2, the above credit
facility was repaid on December 20, 1996 and replaced with a new credit
facility. The new credit facility, which expires December 2004, consists of (a)
a term loan facility of $150,000, (a $75,000 "Tranche A Term Loan" and a $75,000
"Tranche B Term Loan") and (b) a revolving credit facility, including of letters
of credit, which provides up to a maximum of $30,000. At December 28, 1996, the
Company had not borrowed on its revolving credit line but had $4,871 in letters
of credit outstanding issued primarily in connection with the Company's
self-insurance program (see Note 10). The rate of interest on these borrowings
is based on the prime rate or Eurodollar rate, at the Company's option. At
December 28, 1996, the interest rates in effect were 8.19% and 8.69% on the
Tranche A and Tranche B Term Loans, respectively. A commitment fee of 1/2% per
cent per annum is required on the unused portion of the credit facility.
Borrowing under the new credit facility is collateralized by substantially all
assets of the Company. Certain financial ratios must be maintained and the
Company cannot pay dividends. The facility restricts the Company's ability to,
among other things, incur additional indebtedness including leases, prepay or
amend other debt instruments, make acquisitions or capital expenditures, engage
in mergers or consolidations, or engage in certain transactions with affiliates.
Because the interest rate on this debt fluctuates with prime or the Eurodollar
rate, the carrying amount of the debt approximates fair value.
In connection with the transactions described in Note 2, on December 20,
1996, the Company also issued $100,000 in 9 7/8% Senior Subordinated Notes due
December 15, 2006. The notes are subordinated in right of payment to all
existing and future senior indebtedness of the Company. Upon a change in control
triggering event, as defined, the Company is required to make an offer to
repurchase the notes at 101%. The notes are redeemable at the option of the
Company on or after December 15, 2001 at prices decreasing from 104 15/16 on
December 15, 2001 to par at December 15, 2004. In addition, prior to December
15, 1999, the Company, at its option, may redeem (at 109 7/8) up to $35,000 of
principal with the proceeds of one or more equity offerings.
F-12
<PAGE> 112
SAFELITE GLASS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
Maturities of the Company's long-term debt are as follows:
<CAPTION>
DECEMBER 28, 1996
------------------------------------------------
SENIOR
DUE DATE FOR TERM SUBORDINATED OTHER
YEAR ENDING: LOANS NOTES (NOTE 10) TOTAL
- ------------ ----- ------------ -------- -----
<S> <C> <C> <C> <C>
1997..................................... $ -- $ 5,418 $ 5,418
1998..................................... 5,375 4,546 9,921
1999..................................... 10,750 3,776 14,526
2000..................................... 15,750 15,750
2001..................................... 20,750 20,750
Thereafter............................... 97,375 $100,000 197,375
-------- -------- ------- --------
Total............................ $150,000 $100,000 $13,740 $263,740
======== ======== ======= ========
</TABLE>
The carrying amount of debt approximates its fair value.
9. CAPITAL STOCK
Effective with the closing of the transactions described in Note 2, the
authorized capital stock of Safelite consists of 10,000,000 shares of Class A
common stock, 50,000 shares of Class B common stock and 1,000,000 shares of 8%
Preferred stock. The Class A common and Class B common stock have one vote per
share. The 8% Preferred stock is not entitled to voting rights, but has a
preference on liquidation of $100 per share plus accrued but unpaid dividends.
Dividends on the 8% Preferred stock accumulate at an annual rate of 8%, with
accumulated unpaid dividends compounding on a semi-annual basis. Cumulative
undeclared preferred stock dividends at December 28, 1996 were $102. The Class A
common stock has certain priorities over Class B common stock with respect to
dividend payments and liquidation preference.
<TABLE>
The following represents the number of shares outstanding and held in
treasury for each class of stock at the respective dates:
<CAPTION>
DECEMBER 31, DECEMBER 30, DECEMBER 28,
1994 1995 1996
------------ ------------ ------------
<S> <C> <C> <C>
Preferred stock................................... -- -- 582,498
Preferential common stock......................... 3,245,251 3,245,251 --
Class A common stock issued....................... 1,112,918 1,112,918 5,326,935
Class A common stock held in treasury............. 5,256 358,813
Class B common stock issued....................... 50,000 50,000 50,000
Class B common stock held in treasury............. 9,009 9,009 50,000
</TABLE>
The Company has several stock option plans and agreements which provide for
the sale of Class A and Class B common stock to certain key associates,
consultants and members of the Board of Directors. Options vest in periods
ranging from zero to five years and are generally exercisable for a period of
ten years from the date of grant. All options granted have exercise prices which
were not less than fair market value at the date of grant. During 1995, the
Company increased the number of shares authorized for issuance under these plans
from 230,536 shares to 275,536 shares.
In 1994, options of 616,928 Class A common shares were exercised at an
option price of $1 per share. In consideration for these shares, the Company
received $372 in notes receivable and $245 in cash. The notes bear interest at
market rates, as defined, and are due on September 30, 1999.
F-13
<PAGE> 113
SAFELITE GLASS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
The following table summarizes the stock options available for grant and
outstanding:
<CAPTION>
CLASS A CLASS B
------------------------- -------------------------
OPTIONS PRICE PER OPTIONS PRICE PER
OUTSTANDING SHARE OUTSTANDING SHARE
----------- --------- ----------- ---------
<S> <C> <C> <C> <C>
Balance, January 1, 1994................... 641,274 $1-292 2,750 $1
Exercised.................................. (616,928) 1
Forfeited.................................. (4,144)
-------- ------ ------ --
Balance, December 31, 1994................. 20,202 $1-292 2,750 1
Granted.................................... 42,133 $ 3
Forfeited.................................. (3,353)
-------- ------ ------ --
Balance, December 30, 1995................. 58,982 $3-292 2,750 1
Granted.................................... 13,138 $ 3
Exercised.................................. (6,080) $ 3
Forfeited.................................. (11,262) (2,750)
-------- ------ ------ --
Balance, December 28, 1996................. 54,778 $3-292
======== ======= ====== ==
</TABLE>
The following information is as of December 28, 1996:
<TABLE>
<S> <C>
Options currently exercisable..................................... 6,701
=======
Options available for future grant................................ 186,439
=======
Aggregate exercise price.......................................... $ 2,379
=======
</TABLE>
In October 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" (SFAS 123) which became effective in 1996. While the Statement
defines and encourages the use of a fair value based method of accounting for
employee stock options and similar equity instruments, it permits plans to
continue using the intrinsic value based method of accounting prescribed by
Accounting Principles Board Opinion No. 25 (APB-25), "Accounting for Stock
Issued to Employees." The Company has elected to continue to account for
stock-based compensation using APB-25. For options granted in 1995 and 1996, the
fair value of the options, based on accounting prescribed in SFAS 123, is
nominal and the pro forma effect on net income is immaterial.
10. COMMITMENTS AND CONTINGENCIES
For certain of its worker's compensation, automobile, product and associate
health care liabilities, the Company is self-insured, subject to certain
stop-loss coverage. The estimated costs of reported claims and of
incurred-but-not-reported claims are accrued, generally using actuarial
estimates based on claims history. The amount the Company will ultimately incur
for these liabilities could differ from these estimates.
During 1996, the Company purchased insurance to cover Safelite's remaining
workers' compensation, automobile and product liabilities for the period July 1,
1989 through December 31, 1994. The Company no longer has any liability for
these contingencies, therefore, the self-insured accrual for this period has
been removed from the financial statements. No gain or loss was recognized as a
result of this transaction. During 1996, the Company also purchased workers'
compensation, automobile and product liability coverage for the period December
20, 1996 through December 31, 1999. The cost of this insurance was partially
financed by $13,740 in premium financing, payable in monthly installments,
including interest of 6.67% to 6.99%, of $514 in 1997 and $416 in 1998 and 1999.
Under the terms of the
F-14
<PAGE> 114
SAFELITE GLASS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
financing, if the Company cancels its insurance policies for any reason,
corresponding unearned premium refunds would be applied directly against the
outstanding principal balance. At December 28, 1996, the outstanding principal
balance of this premium financing was $13,740.
The Company is involved in various litigation and disputes arising in the
normal course of its business, primarily related to vehicle accidents and human
resource related issues. The Company is also involved in certain environmental
actions brought by the U.S. Environmental Protection Agency and certain state
agencies and, along with other domestic companies, the Company has received a
subpoena to produce documents to a grand jury investigating possible violations
of federal antitrust laws in the automobile glass replacement industry. The
ultimate resolution of these matters is not presently determinable but, in the
opinion of management, such resolution is not expected to have a significant
impact on the Company's financial position or results of operations.
11. SAVINGS AND RETIREMENT PLANS
Safelite Plans:
Safelite maintains a 401(k) savings plan, covering substantially all
associates, that provides basic employer matching contributions of up to 40%
(depending upon the participant's years of service) of the first 4% of each
participant's compensation. Bonus employer contributions up to 50% of the basic
employer contribution are also made depending upon the level of associate
participation in the plan. Safelite contributions were $580, $636 and $762 for
the years 1994, 1995 and 1996, respectively.
Safelite also has a defined benefit plan. The benefits were frozen and
fully vested to participants (substantially all associates of Safelite)
effective June 30, 1993. Benefits under the plan are based on years of service
and the participant's final average earnings at June 30, 1993. Safelite funding
policy is consistent with statutory requirements.
<TABLE>
Net periodic pension cost (income) included the following items:
<CAPTION>
1994 1995 1996
------- ------- -------
<S> <C> <C> <C>
Interest cost on projected benefit obligation............... $ 921 $ 954 $ 1,038
Actual (return) loss on plan assets......................... 286 (2,344) (2,106)
Net amortization and deferral -- gain (loss)................ (1,212) 1,480 1,124
------- ------- -------
Net periodic pension cost (income).......................... $ (5) $ 90 $ 56
======= ======= =======
</TABLE>
<TABLE>
The funded status of the defined benefit plan as of the year-end
measurement dates was as follows:
<CAPTION>
DECEMBER 30, DECEMBER 28,
1995 1996
------------ ------------
<S> <C> <C>
Accumulated and projected benefit obligation (all vested) for
services provided to date....................................... $ 15,105 $ 14,964
Less market value of plan assets.................................. (12,249) (14,319)
-------- --------
Projected benefit obligation in excess of plan assets............. 2,856 645
Unrecognized net loss resulting from past experience different
from that assumed............................................... 3,006 1,227
Adjustment to recognize minimum pension liability................. (3,006) (1,227)
-------- --------
Accrued pension cost.............................................. $ 2,856 $ 645
======== ========
</TABLE>
At December 30, 1995 and December 28, 1996, as required by Statement of
Financial Accounting Standards No. 87, Safelite recorded an additional minimum
pension liability of $3,006 and $1,227, respectively, related to certain
unfunded pension obligations. The corresponding cumulative charge to
F-15
<PAGE> 115
SAFELITE GLASS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
stockholders' equity for these amounts at December 30, 1995 and December 28,
1996, net of applicable taxes was $1,804 and $736, respectively.
Plan assets at December 30, 1995 and December 28, 1996 were invested in
common and preferred stock, corporate and U.S. government bonds, and money
market funds.
<TABLE>
The significant actuarial assumptions as of the year-end measurement dates
were as follows:
<CAPTION>
1994 1995 1996
----- ----- -----
<S> <C> <C> <C>
Discount rate.............................................. 8.0% 7.0% 7.5%
Expected long-term rate of return on plan assets........... 8.5% 8.5% 8.5%
</TABLE>
Lear Siegler:
Lear Siegler has a defined benefit pension plan covering certain former
employees of divisions that have been sold. The benefits are based on various
formulas, the principal factors of which are years of service and compensation
during the years immediately preceding retirement. Lear Siegler's funding policy
for these plans is to make the minimum annual contributions required by
applicable regulations.
In the case of business units sold, Lear Siegler ceased future benefit
accruals. For certain business units, benefits accrued through the date of the
sale either have been or will be settled by transferring plan assets to the
respective purchaser's plan or by making distributions to the plan's
participants of these respective business units.
During the year ended December 31, 1994, Lear Siegler recorded curtailment
losses of approximately $572 relating to previously disposed of subsidiaries.
Also, during the year ended December 31, 1994, Lear Siegler recorded expenses of
approximately $11,000 and a settlement loss of approximately $6,226 relating to
plan assets transferred and liabilities assumed by plans sponsored by companies
who previously acquired certain of Lear Siegler's businesses.
The cost for Lear Siegler's defined benefit plan for the respective periods
includes the following components:
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 30, DECEMBER 28,
1994 1995 1996
------------ ------------ ------------
(IN THOUSANDS)
<S> <C> <C> <C>
Service cost-benefit earned during the period... $ 26 $ 15
Interest cost on the projected benefit
obligation.................................... 8,950 2,265 $ 2,187
Actual return on plan assets.................... 3,286 (1,929) (630)
Net amortization and deferral................... (13,389) (541) (1,618)
-------- ------- -------
Net periodic pension income..................... $ (1,127) $ (190) $ (61)
======== ======= =======
</TABLE>
F-16
<PAGE> 116
SAFELITE GLASS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The following table sets forth the plan's funded status at December 30,
1995 and December 28, 1996:
<TABLE>
<CAPTION>
DECEMBER 30, DECEMBER 28,
1995 1996
------------ ------------
(IN THOUSANDS)
<S> <C> <C>
Actuarial present value of benefit obligations:
Vested benefit obligation....................................... $ 32,771 33,805
-------- --------
Accumulated benefit obligation.................................. 32,780 33,805
-------- --------
Projected benefit obligation.................................... 32,894 33,805
Less market value of plan assets.................................. (28,830) (26,717)
-------- --------
Projected benefit obligation less than plan assets................ 4,064 7,088
Unrecognized net loss............................................. 6,448 10,133
Adjustment to recognize minimum pension liability................. (6,334) (10,133)
-------- --------
Accrued pension cost.............................................. $ 3,950 $ 7,088
======== ========
</TABLE>
The projected benefit obligation assumes a discount rate of 8.0%, 7.0% and
7.5% in 1994, 1995 and 1996, respectively, and a rate of compensation increase
of 5% for each year. The expected long-term rate of return on plan assets is
8.75% in 1994 and 1995 and 8.5% in 1996. Plan assets consist primarily of
corporate debt securities, U.S. government obligations and cash equivalents.
At December 30, 1995 and December 28, 1996, Lear Siegler recorded an
additional minimum pension liability of $6,334 and $10,133, respectively,
related to certain unfunded pension obligations. The corresponding cumulative
charge to stockholders' equity for these amounts at December 30, 1995 and
December 28, 1996, net of applicable taxes in 1996, was $6,334 and $6,080,
respectively.
12. INCOME TAXES
Income taxes are provided for the amounts estimated to be payable on tax
returns for the current year. Deferred income taxes are provided for all
temporary differences between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for income tax purposes. If
necessary, based upon available evidence, a valuation allowance is provided for
the amount of deferred tax assets that are not expected to be realized.
The components of the income tax (provision) benefit before discontinued
operations and extraordinary item are as follows:
<TABLE>
<CAPTION>
1994 1995 1996
---- ---- --------
<S> <C> <C> <C>
Current......................................................... $200 $157 $ 2,110
Deferred........................................................ (19,715)
---- ---- --------
Total........................................................... $200 $157 $(17,605)
==== ==== ========
</TABLE>
F-17
<PAGE> 117
SAFELITE GLASS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The income tax provision or benefit differs from the amounts determined by
applying the statutory income tax rate as a result of the following:
<TABLE>
<CAPTION>
1994 1995 1996
------- ------- --------
<S> <C> <C> <C>
Income taxes at statutory rate............................. $(1,008) $ 2,640 $ 6,706
Reduction in valuation allowance........................... (2,000) (25,894)
State income taxes......................................... 750 312 958
Other...................................................... 458 (795) 625
------- ------- --------
Provision (benefit) for income taxes....................... $ 200 $ 157 $(17,605)
======= ======= ========
</TABLE>
Items comprising the Company's net deferred tax assets and liabilities are
as follows:
<TABLE>
<CAPTION>
DECEMBER 30, DECEMBER 28,
1995 1996
------------ ------------
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforwards............................... $ 35,496 $ 32,035
Differences between book and tax basis of inventories.......... 3,144 2,530
Reserves not currently deductible.............................. 24,964 17,406
Pension........................................................ 1,202 4,547
Other.......................................................... 198 2,738
Valuation allowance............................................ (62,076) (36,182)
-------- --------
Total.................................................. 2,928 23,074
-------- --------
Deferred tax liabilities:
Difference between book and tax basis of property, plant and
equipment................................................... 1,398 1,322
Other.......................................................... 1,530
-------- --------
Total.................................................. 2,928 1,322
-------- --------
Net deferred tax asset........................................... $ 0 $ 21,752
======== ========
</TABLE>
A valuation allowance reduces the amount of deferred tax assets that
management believes more likely than not will not be recognized. The valuation
allowance is based on available information at the balance sheet date including
historical earnings and other factors which may impact the Company's ability to
realize the tax benefits.
At December 30, 1995, a valuation allowance of $62,076 was recorded which
reduced the net deferred taxes to zero. Based upon the Company's historical,
current and expected pre-tax earnings, including adjustments and limitations
resulting from the transactions described in Note 2, management believes it is
more likely than not that the Company will realize the benefit of a portion of
its existing deductible temporary differences. Accordingly, the valuation
allowance was reduced in 1996.
At December 28, 1996, the Company had net operating loss carryforwards for
federal income tax purposes totaling approximately $79 million which expire
through 2006.
13. EXTRAORDINARY ITEM
During 1994 and 1996, the Company recorded an extraordinary loss of $1,517
and $500 net of minority interest of $343 in 1994 and net of income tax benefit
of $344 in 1996, respectively, as a result of expensing unamortized loan
origination fees related to the early retirement of the associated debt.
F-18
<PAGE> 118
SAFELITE GLASS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
14. DISCONTINUED OPERATIONS
In 1996, the Company recorded income from discontinued operations of
$1,706. This income was primarily the result of resolving, in 1996, various
liability and tax issues associated with operating units of Lear Siegler which
were discontinued in prior years. The following summarizes the significant
items:
<TABLE>
<S> <C>
Settlement of liability issues................................... $(25,500)
Adjustment of state tax contingencies............................ 19,606
Tax refund....................................................... 7,600
--------
$ 1,706
========
</TABLE>
F-19
<PAGE> 119
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS OFFERING MEMORANDUM AND, IF
GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED. THIS OFFERING MEMORANDUM DOES NOT CONSTITUTE AN OFFER TO
SELL OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE
SECURITIES TO WHICH IT RELATES OR ANY OFFER TO SELL OR THE SOLICITATION OF AN
OFFER TO BUY SUCH SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR
SOLICITATION IS UNLAWFUL. NEITHER THE DELIVERY OF THIS OFFERING MEMORANDUM NOR
ANY OFFER OR SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN
IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE
THE DATE HEREOF OR THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY
TIME SUBSEQUENT TO ITS DATE.
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
<TABLE>
<S> <C>
Prospectus Summary............................... 3
Risk Factors..................................... 14
The Exchange Offer............................... 22
The Transactions................................. 29
Unaudited Pro Forma Financial Data............... 32
Selected Consolidated Financial Data............. 35
Management's Discussion and Analysis of Financial
Condition and Results of Operations............ 37
Business......................................... 43
Management....................................... 54
Security Ownership of Certain Beneficial Owners
and Management................................. 59
Certain Relationships and Related
Transactions................................... 60
Description of Capital Stock..................... 61
Description of Other Indebtedness................ 63
Description of Exchange Notes.................... 65
Description of the Initial Notes................. 93
Exchange and Registration Rights
Agreement...................................... 94
Income Tax Considerations........................ 96
Plan of Distribution............................. 98
Legal Matters.................................... 98
Independent Auditors............................. 98
Index to Financial Statements.................... F-1
</TABLE>
PROSPECTUS
$100,000,000
SAFELITE GLASS CORP.
9 7/8% SERIES B SENIOR SUBORDINATED NOTES
DUE 2006
[SAFELITE LOGO]
, 1997
<PAGE> 120
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the General Corporation Law of the State of Delaware
provides as follows:
(a) A corporation may indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the corporation)
by reason of the fact that he is or was a director, officer, employee or
agent of the corporation, or is or was serving at the request of the
corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, against
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interest of the
corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. The termination of
any action, suit or proceeding by judgment, order, settlement, conviction
or upon a plea of nolo contendere or its equivalent, shall not, of itself,
create a presumption that the person did not act in good faith and in a
manner which he reasonably believed to be in or not opposed to the best
interests of the corporation, and, with respect to any criminal action or
proceeding, had reasonable cause to believe that his conduct was unlawful.
(b) A corporation may indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed
action or suit by or in the right of the corporation to procure a judgment
in its favor by reason of the fact that he is or was a director, officer,
employee or agent of the corporation, or is or was serving at the request
of the corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise against
expenses (including attorneys' fees) actually and reasonably incurred by
him in connection with the defense or settlement of such action or suit if
he acted in good faith and in a manner he reasonably believed to be in or
not opposed to the best interests of the corporation and except that no
indemnification shall be made in respect to any claim, issue or matter as
to which such person shall have been adjudged to be liable to the
corporation unless and only to the extent that the Court of Chancery or the
court in which such action or suit was brought shall determine upon
application that, despite the adjudication of liability but in view of all
the circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses which the Court of Chancery or such
other court shall deem proper.
(c) To the extent that a director, officer, employee or agent of a
corporation has been successful on the merits or otherwise in defense of
any action, suit or proceeding referred to in subsections (a) and (b) of
this section, or in defense of any claim, issue or matter therein, he shall
be indemnified against expenses (including attorneys' fees) actually and
reasonably incurred by him in connection therewith.
(d) Any indemnification under subsections (a) of this section (unless
ordered by a court) shall be made by the corporation only as authorized in
specific case upon a determination that indemnification of the director,
officer, employee or agent is proper in the circumstances because he has
met the applicable standard of conduct set forth in subsections (a) and (b)
of this section. Such determination shall be made (1) by a majority vote of
the board of directors who are not parties to such action, suit or
proceeding, even though less than a quorum, or (2) if there are no such
directors, or, if such directors so direct, by independent legal counsel in
a written opinion, or (3) by the shareholders.
(e) Expenses (including attorneys' fees) incurred by an officer or
director in defending any civil, criminal, administrative or investigative
action, suit or proceeding may be paid by the
II-1
<PAGE> 121
corporation in advance of the final disposition of such action, suit or
proceeding upon receipt of an undertaking by or on behalf of such director
or officer to repay such amount if it shall ultimately be determined that
he is not entitled to be indemnified by the corporation as authorized in
this section. Such expenses (including attorneys' fees) incurred by other
employees and agents may be so paid upon such terms and conditions, if any,
as the board of directors deems appropriate.
(f) The indemnification and advancement of expenses provided by, or
granted pursuant to, the other subsections of this section shall not be
deemed exclusive of any other rights to which those seeking indemnification
or advancement of expenses may be entitled under any bylaw, agreement, vote
of shareholders or disinterested directors or otherwise, both as to action
in his official capacity and as to action in another capacity while holding
such office.
(g) A corporation shall have power to purchase and maintain insurance
on behalf of any person who is or was a director, officer, employee, or
agent of the corporation, or is or was serving at the request of the
corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise against
any liability asserted against him and incurred by him in any such
capacity, or arising out of his status as such, whether or not the
corporation would have the power to indemnify him against such liability
under this section.
(h) For purposes of this section, references to the corporation shall
include, in addition to the resulting corporation, any constituent
corporation (including any constituent of a constituent) absorbed in a
consolidation or merger which, if its separate existence had continued,
would have had power and authority to indemnify its directors, officers,
and employees or agents, so that any person who is or was a director,
officer, employee or agent of such constituent corporation, or is or was
serving at the request of such constituent corporation as a director,
officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, shall stand in the same position under
this section with respect to the resulting or surviving corporation as he
would have with respect to such constituent corporation if its separate
existence had continued.
(i) For purposes of this section, references to other enterprises
shall include employee benefit plans; references to fines shall include any
excise taxes assessed on a person with respect to any employee benefit
plan; and references to serving at the request of the corporation shall
include any service as a director, officer, employee, or agent of the
corporation which imposes duties on, or involves services by, such
director, officer, employee or agent with respect to an employee benefit
plan, its participants or beneficiaries; and a person who acted in good
faith and in a manner he reasonably believed to be in the interest of the
participants and beneficiaries of an employee benefit plan shall be deemed
to have acted in a manner not opposed to the best interests of the
corporation as referred to in this section.
(j) The indemnification and advancement of expenses provided by, or
granted pursuant to, this section shall, unless otherwise provided when
authorized or ratified, continue as to a person who has ceased to be a
director, officer, employee or agent and shall inure to the benefit of the
heirs, executors and administrators of such a person.
The Company's By-Laws (Exhibit 3.2) provide that the Company shall
indemnify its directors and officers to the fullest extent permitted by Delaware
law.
The Company maintains insurance with respect to, among other things, the
liabilities that may arise under the statutory provisions referred to above. The
directors and officers of the Company also are insured against certain
liabilities, including certain liabilities arising under the Securities Act of
1933, which might be incurred by them in such capacities and against which they
are not indemnified by the Company.
II-2
<PAGE> 122
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits. Unless otherwise indicated, all Exhibits are filed herewith.
<TABLE>
<C> <S>
3.1 Restated Certificate of Incorporation of the Company, as amended.
3.2 By-Laws of the Company, as amended.
4.1 Indenture dated as of December 20, 1996 between the Company and Fleet National Bank,
as Trustee.
5.1* Opinion of Hutchins, Wheeler & Dittmar, A Professional Corporation regarding
legality of the securities being registered.
8* Opinion of Hutchins, Wheeler & Dittmar, A Professional Corporation regarding tax
matters.
10.1 Recapitalization Agreement and Plan of Merger and Stock Purchase Agreement, dated as
of November 8, 1996, by and among Lear Siegler Holdings Corp., The LS Selling
Stockholders (as defined therein), the Company, LSNWY Corp., LS Acquisition Corp.
and Lite Acquisition Corp.
10.2 Credit Agreement, dated as of December 20, 1996, by and among the Company, various
lending institutions, The Chase Manhattan Bank, Bankers Trust Company and Goldman
Sachs Credit Partners L.P.
10.3 Employment Agreement, dated as of December 20, 1996, by and between the Company and
Garen K. Staglin.
10.4 Employment Agreement, dated as of December 20, 1996, by and between the Company and
John F. Barlow.
10.5 Employment Agreement, dated as of December 20, 1996, by and between the Company and
Douglas A. Herron.
10.6 Employment Agreement, dated January 2, 1996, by and between the Company and Poe A.
Timmons.
10.7 Safelite Glass Corp. Non-Qualified Restated Employee Stock Option Plan.
10.8* Safelite Glass Corp. 1996 Stock Option Plan.
10.9 Management Agreement, dated as of December 20, 1996, by and between the Company and
Thomas H. Lee Company.
10.10 Safelite Glass Corp. Stockholders' Agreement, dated as of December 20, 1996, among
the Company and the stockholders named therein.
10.11 Pledge Agreement, dated as of December 20, 1996, made by the Company in favor of The
Chase Manhattan Bank, as Collateral Agent.
12.1* Computation of the Ratio of Earnings to Fixed Charges for the Company.
21.1 List of subsidiaries of the Company.
23.1 Consent of Deloitte & Touche LLP.
23.2* Consent of Hutchins, Wheeler & Dittmar, A Professional Corporation (included in
Exhibit 5.1).
24.1 Powers of Attorney (contained on the signature page hereto).
25.1* Statement on Form T-1 of the eligibility of the Trustee.
27.1 Financial Data Schedule.
99.1* Letter of Transmittal.
99.2* Notice of Guaranteed Delivery.
99.3* Form of Exchange Agent Agreement between the Company and Fleet National Bank.
</TABLE>
- ---------------
* To be filed by amendment.
(b) Financial Statement Schedules.
Schedules other than those listed above have been omitted since the
information is not applicable, not required or is included in the financial
statements or notes thereto.
II-3
<PAGE> 123
ITEM 22. UNDERTAKINGS.
(a)(1) The undersigned registrant hereby undertakes as follows: that prior
to any public reoffering of the securities registered hereunder through use of a
prospectus which is a part of this registration statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c), the
issuer undertakes that such reoffering prospectus will contain the information
called for by the applicable registration form with respect to the reofferings
by persons who may be deemed underwriters, in addition to the information called
for by the other Items of the applicable form.
(a)(2) The registrant undertakes that every prospectus (i) that is filed
pursuant to paragraph (1) immediately preceding or (ii) that purports to meet
the requirements of Section 10(a)(3) of the Act and is used in connection with
an offering of securities subject to Rule 415 (sec.230.415 of this chapter),
will be filed as a part of an amendment to the registration statement and will
not be used until such amendment is effective, and that, for purposes of
determining any liability under the Securities Act of 1933, each such
post-effective amendment shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(a)(3) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or otherwise,
the registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
(b) The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Items 4, 10(b), 11, or 13 of this Form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through the
date of responding to the request.
(c) The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
II-4
<PAGE> 124
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, THE REGISTRANT HAS DULY
CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF COLUMBUS, STATE OF OHIO,
ON THE 18TH DAY OF FEBRUARY 1997.
SAFELITE GLASS CORP.
By: /S/ GAREN K. STAGLIN
------------------------------------
GAREN K. STAGLIN
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that each person whose signature appears
below other than John F. Barlow constitutes and appoints Garen K. Staglin and
Anthony J. DiNovi, and each of them, with the power to act without the other,
his or her true and lawful attorney-in-fact and agent, with full power of
substitution and resubstitution, for him or her and in his or her name, place
and stead, in any and all capacities to sign any or all amendments or
post-effective amendments to this registration statement, and to file the same,
with all exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agent, and each of them, full power and authority to do and perform each and
every act and thing requisite or necessary to be done in and about the premises,
as fully to all intents and purposes as he or she might or could do in person,
hereby ratifying and confirming all that said attorneys-in-fact and agents or
either of them, or their or his substitutes, may lawfully do or cause to be done
by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities indicated and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ----------------------------------- --------------------------------- ------------------
<C> <S> <C>
/s/ GAREN K. STAGLIN Director, Chairman of the Board February 18, 1997
- ----------------------------------- and Chief Executive Officer
Garen K. Staglin (principal executive officer)
/s/ JOHN F. BARLOW Director, President and Chief February 18, 1997
- ----------------------------------- Operating Officer
John F. Barlow
/s/ DOUGLAS A. HERRON Senior Vice President, Treasurer February 18, 1997
- ----------------------------------- and Chief Financial Officer
Douglas A. Herron (principal financial and
accounting officer)
/s/ ANTHONY J. DINOVI Director February 18, 1997
- -----------------------------------
Anthony J. DiNovi
/s/ SETH W. LAWRY Director February 18, 1997
- -----------------------------------
Seth W. Lawry
/s/ MORTON MEYERSON Director February 18, 1997
- -----------------------------------
Morton Meyerson
/s/ SCOTT M. SPERLING Director February 18, 1997
- -----------------------------------
Scott M. Sperling
</TABLE>
II-5
<PAGE> 1
EXHIBIT 3.1
RESTATED CERTIFICATE OF INCORPORATION
OF
SAFELITE GLASS OF CORP.
Safelite Glass Corp. (the "Corporation"), a corporation organized and
existing under the laws of the State of Delaware, hereby certifies as follows:
1. The present name of the Corporation is Safelite Glass Corp. The name
under which the Corporation was originally incorporated in LS Acquisition Corp.
No. 23. The date of filing of its original Certificate of Incorporation with the
Secretary of State was January 13, 1987.
2. This Restated Certificate of Incorporation restates, integrates and
further amends the Restated Certificate of Incorporation, as amended, of the
Corporation to read as herein set forth in full:
FIRST: The name of the Corporation is Safelite Glass Corp.
SECOND: The address of the Corporation's registered office in the State of
Delaware is Corporation Trust Center, 1209 Orange Street in the City of
Wilmington, County of New Castle, Delaware 19801. The name of its registered
agent at such address is The Corporation Trust Company.
THIRD: The purpose of the Corporation is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of Delaware.
FOURTH: The aggregate number of shares of all classes of capital stock
which the Corporation shall have the authority to issue is 11,050,000 shares of
capital stock, of which 1,000,000 shares shall be designated 8% Cumulative
Preferred Stock, par value $.01 per share, 10,000,000 shares shall be designated
Class A Common Stock, par value $.01 per share, and 50,000 shares shall be
designated Class B Common Stock, par value $.01 per share.
A. The powers, preferences and rights of the shares of 8% Cumulative
Preferred Stock, and the qualifications, limitations or restrictions thereof are
as follows:
<PAGE> 2
1. DESIGNATION AND AMOUNT. The Corporation shall be authorized to issue
1,000,000 shares designated as 8% Cumulative Preferred Stock, par value $.01 per
share ("Preferred Stock"). The Preferred Stock shall have the preferences,
limitations and rights set forth below.
2. Dividends.
---------
(a) GENERAL OBLIGATION. The Corporation will pay cumulative
semi-annual dividends on the Preferred Stock if, when and as declared by the
Board of Directors of the Corporation, and to the extent permitted under the
General Corporation Law of the State of Delaware, which shall accrue on a daily
basis (computed on the basis of a 360-day year and actual days elapsed) at the
rate per annum of eight percent (8%) per share of Preferred Stock calculated as
a percentage of $100 (plus accrued and unpaid dividends), compounded
semi-annually, from and including December 20, 1996 until the redemption of the
Preferred Stock (with payment being calculated through the date on which full
payment shall be tendered to the holders of the Preferred Stock). This dividend
rate will automatically increase to (i) fourteen percent (14%) per annum upon
the occurrence of a Redemption Event (defined below), (ii) fifteen percent (15%)
per annum on the first annual anniversary date of such Redemption Event and
(iii) sixteen percent (16%) per annum on the second anniversary date of such
Redemption Event if the Corporation elects not to redeem the Preferred Stock
upon the occurrence of such Redemption Event. Such dividends will accrue and be
cumulative whether or not they have been declared and whether or not there are
profits, surplus or other funds of the Corporation legally available for the
payment of dividends. The date on which the Corporation initially issues any
shares of Preferred Stock will be deemed to be its "date of issuance" regardless
of the number of times transfer of such shares of Preferred Stock is made on the
stock records of the Corporation, and regardless of the number of certificates
which may be issued to evidence such shares of Preferred Stock.
(b) DISTRIBUTING PARTIAL DIVIDEND PAYMENTS. If at any time the
Corporation distributes less than the total amount of dividends then accrued
with respect to the Preferred Stock, such payment will be distributed among the
holders of the Preferred Stock so that an equal amount will be paid (as nearly
as possible) with respect to each outstanding share of Preferred Stock.
(c) PRIORITY. So long as any shares of Preferred Stock remain
outstanding, neither the Corporation nor any Subsidiary (which shall mean any
corporation, association or other business entity of which the Corporation
directly or indirectly owns at the time more than fifty percent (50%) of the
outstanding voting securities or equity interests) will redeem, purchase or
otherwise acquire any other equity security of the Corporation junior to the
Preferred Stock in right to payment now or hereafter outstanding, including,
without limitation, the Common Stock (all such securities collectively, the
"Junior Securities"), nor will the Corporation declare or pay any cash dividend
(including accrued dividends) or make any distribution of assets other than
2
<PAGE> 3
shares of Junior Securities upon any Junior Securities; provided nothing herein
shall prohibit the Corporation from acquiring Common Stock of the Corporation
pursuant to contractual rights approved by the Board of Directors of the
Corporation.
3. Liquidation, Dissolution or Winding Up.
--------------------------------------
(a) TREATMENT AT LIQUIDATION, DISSOLUTION AND WINDING UP. In the event
of a Liquidity Event (as herein defined), before any distribution or payment may
be made with respect to the Junior Securities, holders of each share of
Preferred Stock shall be entitled to be paid out of the assets of the
Corporation available for distribution to holders of the Corporation's capital
stock of all classes, whether such assets are capital, surplus, or capital
earnings, an amount in cash equal to $100 per share of Preferred Stock (which
amount, together with the other share and per share numbers used herein shall be
subject to equitable adjustment whenever there shall occur a stock split,
combination, reclassification or other similar event involving the class or
series of stock in question), plus accrued dividends from the date of issuance
thereof up to and including the date full payment shall be tendered to the
holders of the Preferred Stock with respect to such Liquidity Event (the
"Liquidation Amount"). The term "Liquidity Event" shall mean a liquidation,
dissolution or winding-up of the Corporation, whether voluntary or involuntary.
If upon any such Liquidity Event the assets of the Corporation available
for distribution to its shareholders shall be insufficient to permit payment to
the holders of the Preferred Stock of the full amount of the Liquidation Amount
to which they are entitled to be paid, the holders of shares of Preferred Stock
shall share ratably in any distribution of assets according to the amounts which
would be payable with respect to the shares of Preferred Stock held by them upon
such distribution if all amounts payable on or with respect to said shares were
paid in full.
After the payment of the Liquidation Amount shall have been made in full to
the holders of the Preferred Stock or funds necessary for such payment shall
have been set aside by the Corporation in trust for the account of holders of
the Preferred Stock so as to be available for such payments, the holders of the
Preferred Stock shall be entitled to no further participation in the
distribution of the assets of the Corporation, and the remaining assets of the
Corporation legally available for distribution to its shareholders shall be
distributed among the holders of other classes of securities of the Corporation
in accordance with their respective terms.
(b) DISTRIBUTIONS IN CASH. The Liquidation Amount shall be paid in
cash to the extent the Corporation has cash available. Whenever a distribution
provided for in this Section 3 is payable in property other than cash, the value
of such distribution shall be the fair market value of such property as
determined in good faith by the Corporation's Board of Directors.
-3-
<PAGE> 4
4. Voting Power.
------------
Except as otherwise required by law, the holders of the Preferred Stock
shall be not be entitled to vote on any corporate matters.
5. Redemption.
----------
(a) The Corporation may redeem the Preferred Stock at its option, in
whole or in part, at $100 per share plus accrued dividends from the date of
issuance thereof up and including the date full payment shall be tendered to
holders of the Preferred Stock with respect to such redemption (the "Redemption
Price"), at any time on or after December 15, 2001, or upon the occurrence of a
Redemption Event (the "Redemption Date"). A "Redemption Event" shall mean (i) an
underwritten initial public offering (a "Public Offering") of the Corporation's
capital stock pursuant to a registration statement effected under the Securities
Act of 1933, as amended or (ii) the occurrence of a Change in Control under the
terms of the Indenture, dated as of December 20, 1996, by and between the
Corporation and Fleet National Bank, Trustee.
(b) SURRENDER OF CERTIFICATES. Each holder of shares of Preferred
Stock to be redeemed under this Section 5 shall surrender the certificate or
certificates representing such shares to the Corporation at the principal office
of the Corporation, and thereupon the Redemption Price for such shares as set
forth in this Section 5 shall be paid to the order of the person whose name
appears on such certificate or certificates. Irrespective of whether the
certificates therefor shall have been surrendered, all shares of Preferred Stock
which are the subject to redemption shall be deemed to have been redeemed and
shall be canceled effective as of the closing of the Public Offering or the
Redemption Date, as the case may be, unless the Corporation shall default in the
payment of the Redemption Price.
(c) PARTIAL REDEMPTIONS. If at any time the Corporation redeems less
than all of the outstanding shares of Preferred Stock, such redemption will be
made from the holders of the Preferred Stock on a pro rata basis based upon the
number of shares of Preferred Stock held by each stockholder.
6. Restrictions and Limitations.
----------------------------
The Corporation shall not amend this Restated Certificate of Incorporation
without the approval, by vote or written consent, by the holders of at least a
majority of the then outstanding shares of Preferred Stock, voting together as a
separate class, if such amendment would amend any of the rights, preferences,
privileges or limitations provided for herein for the benefit of any shares of
Preferred Stock. Without limiting the generality of the preceding sentence, the
Corporation will not amend this Restated Certificate of Incorporation without
the approval by the
-4-
<PAGE> 5
holders of at least a majority of the then outstanding shares of Preferred
Stock, voting separately as a separate class, if such amendment would:
(i) change the relative seniority rights of the holders of Preferred
Stock as to the payment of dividends in relation to the holders of any other
capital stock of the Corporation;
(ii) reduce the amount payable to the holders of Preferred Stock upon
the voluntary or involuntary liquidation, dissolution or winding up of the
Corporation, or change the relative seniority of the liquidation preferences of
the holders of Preferred Stock to the rights upon liquidation of the holders of
other capital stock of the Corporation, or change the dividend rights of the
holders of Preferred Stock;
(iii) cancel or modify the redemption rights of the holders of the
Preferred Stock provided for in Section 5 herein; or
(iv) cancel or modify the rights of the holders of the Preferred Stock
provided for in this Section 6.
7. Notices of Record Date. In the event of
----------------------
(a) any taking by the Corporation of a record of the holders of any
class of securities for the purpose of determining the holders thereof who are
entitled tor receive any dividend or other distribution, or any right to
subscribe for, purchase or otherwise acquire any shares of stock of any class
or any other securities or property, or to receive any other right, or
(b) any capital reorganization of the Corporation, any reclassification
or recapitalization of the capital stock of the Corporation, any merger of the
Corporation, or any transfer of all or substantially all of the assets of the
Corporation to any other corporation, or any other entity or person, or
(c) any voluntary or involuntary dissolution, liquidation or winding up
of the Corporations
then and in each such event the Corporation shall mail or cause to be
mailed to each holder of Preferred Stock a notice specifying (i) the date on
which any such record is to be taken for the purpose of such dividend,
distribution or right and a description of such dividend, distribution or
right, (ii) the date on which any such reorganization, reclassification,
recapitalization, transfer, merger, dissolution, liquidation or winding up is
expected to become effective and (iii) the time, if any, that is to be fixed,
as to when the holders of record of Common Stock (or other securities,
including the Preferred Stock) shall be entitled to exchange their shares of
Common Stock (or
-5-
<PAGE> 6
other securities, including the Preferred Stock) for securities or other
property deliverable upon such reorganization, reclassification,
recapitalization, transfer, merger, dissolution, liquidation or winding up.
Such notice shall be mailed at least ten (10) business days prior to the date
specified in such notice on which such action is to be taken.
8. NO REISSUANCE OF PREFERRED STOCK. No share or shares of Preferred
Stock acquired by the Corporation by reason of redemption, purchase or otherwise
shall be reissued, and all such shares shall be canceled, retired and eliminated
from the shares which the Corporation shall be authorized to issue. The
Corporation may from time to time take such appropriate corporate action as may
be necessary to reduce the authorized number of shares of the Preferred Stock
accordingly.
B. The powers, preferences and rights of the shares of Class A Common
Stock and the Class B Common Stock, and the qualification, limitations or
restrictions thereof are as follows:
1. Dividends.
---------
Subject to the provisions of this paragraph 1 and the provisions of
Section A of this Article Fourth, the holders of shares of Class A Common Stock
and the holders of shares of Class B Common Stock shall be entitled to receive,
when, as and if declared by the Board of Directors of the Corporation, out of
the assets of the Corporation which are by law available therefor, dividends
payable either in cash or in property (including shares of capital stock of the
Corporation). Any dividend declared by the Board of Directors of the
Corporation (whether in cash or in property (including shares of capital stock
of the Corporation)) in respect of the Class A Common Stock and/or Class B
Common Stock shall be paid to the holders of the Class A Common Stock and the
Class B Common Stock as follows (the "Priority"): (a) the holders of the
outstanding shares of Class A Common Stock shall be entitled to receive payment
first, until the aggregate amount received by the holders of the Class A Common
Stock through the payment of the dividend and all prior dividends paid by the
Corporation after July 31, 1989 shall equal $292.20 per share of Class A
Common Stock, whereupon (b) the holders of the outstanding shares of Class B
Common Stock shall be entitled to receive payment next, until the aggregate
amount received by the holders of the Class B Common Stock through the payment
of the dividend and all prior dividends paid by the Corporation shall equal
$82.49 per share of Class B Common Stock, whereupon (c) the holders of the
outstanding shares of Class A Common Stock shall be entitled to receive payment
next, until the aggregate amount received by the holders of the Class A Common
Stock through payment of the dividend and all prior dividends paid by the
Corporation after July 31, 1989 shall equal $125.83 per share of Class A Common
Stock (in addition to the $292.20 referred to in clause (a) above), whereupon
(d) the holders of Class A Common Stock and the holders of Class B Common Stock
shall be entitled to share in the balance of the
-6-
<PAGE> 7
dividend payment, if any, and in any subsequent dividend declared and paid, as
a single class. Notwithstanding the foregoing, the Board of Directors of the
Corporation in declaring any dividend (whether in cash or in property
(including shares of capital stock of the Corporation)) may, in its sole
discretion, declare that the Priority shall not be applicable to all or any
portion of such dividend and that, instead, the holders of Class A Common Stock
and the holders of Class B Common Stock shall be entitled to share in such
dividend (or any portion thereof) as a single class. In the case of any
dividend which is payable in whole or in part in property (other than cash),
the Board of Directors of the Corporation shall (A) determine, in good faith,
the fair market value, as of the date the dividend is paid, of any property
(other than cash) distributed in any dividend to which the Priority shall be
applicable (and such fair market value shall be the amount received in the
dividend by the stockholders by reason of the distribution of the property),
and (B) determine, in its sole discretion, whether to value any property (other
than cash) distributed in any dividend to which the Priority shall not be
applicable at its fair market value or its book value, and, having made such
determination, further determine, in good faith, the fair market value or the
book value, as the case may be, as of the date the dividend is paid, of such
property (and such fair market value or book value, as the case may be, shall
be the amount received in the dividend by the stockholders by reason of the
distribution of the property). Any determinations made by the Board of
Directors of the Corporation pursuant to clauses (A) and (B) of this paragraph
1 shall be final and binding on the Corporation, all holders of Class A Common
Stock and all holders of Class B Common Stock.
2. Voting Rights.
-------------
At every annual or special meeting of stockholders of the Corporation,
every holder of shares of Class A Common Stock or Class B Common Stock shall be
entitled to one vote, in person or by proxy, for each share of Class A Common
Stock or Class B Common Stock standing in his name on the books of the
Corporation. All shares of Class A Common Stock and Class B Common Stock
entitled to vote on any matter (including the matters set forth in Article
Ninth hereof) shall vote together as a single class.
3. Dissolution, Liquidation or Winding-Up.
--------------------------------------
In the event of any dissolution, liquidation or winding-up of the
affairs of the Corporation, whether voluntary or involuntary, after payment or
provision for payment of the debts and other liabilities of the Corporation and
of the amounts to which the holders of any outstanding shares of any capital
stock ranking senior in preference to the Class A Common Stock and Class B
Common Stock, including, without limitation, the Preferred Stock,shall be
entitled, (a) the holders of the outstanding shares of Class A Common Stock
shall be entitled to receive an amount, in cash and/or other property, which,
when added to any amounts received by them after July 31, 1989 pursuant to
paragraph 1 of this Section B in payment of dividends,
-7-
<PAGE> 8
shall equal $292.20 per share of Class A Common Stock, whereupon (b) the
holders of the outstanding shares of Class B Common Stock shall be entitled to
receive an amount, in cash and/or other property, which, when added to any
amounts received by them pursuant to paragraph 1 of this Section B in payment
of dividends, shall equal $82.49 per share of Class B Common Stock, whereupon
(c) the holders of the outstanding shares of Class A Common Stock shall be
entitled to receive an amount, in cash and/or other property, which, when
added to any amounts received by them after July 31, 1989 pursuant to paragraph
1 of this Section B in payment of dividends, shall equal $125.83 per share of
Class A Common Stock (in addition to the $292.20 referred to in clause (a)
above), whereupon (d) the holders of Class A Common Stock and the holders of
Class B Common Stock shall be entitled to share in the remaining assets of the
Corporation, if any, as a single class. The Board of Directors of the
Corporation, in good faith, shall determine the fair market value, as of the
date of distribution, of any property (other than cash) distributed in the
event of any dissolution, liquidation or winding-up of the affairs of the
Corporation (and such fair market value shall be the amount received in such
dissolution, liquidation or winding-up by the stockholders by reason of the
distribution of the property). Any determination made by the Board of Directors
of the Corporation pursuant to this Section 3 shall be final and binding on the
Corporation, all holders of Class A Common Stock and all holders of Class B
Common Stock.
4. Restrictions on Transfer of Class A Common Stock.
------------------------------------------------
(a) GENERAL. Before January 1, 1991, no stockholder may sell, transfer,
assign, exchange or otherwise dispose of any shares of Class A Common Stock (a
"Transfer"), if at the time of the proposed Transfer, the stockholder, either
individually or together with any affiliates (as defined below), owns less than
25% of the then outstanding shares of Class A Common Stock (a "Holder"), except
that any Holder who, at the time of the proposed Transfer, is a party to an
agreement with the Corporation with respect to the shares of Class A Common
Stock owned by such Holder (a "Stockholder's Agreement") may Transfer such
shares in accordance with the provisions of such Stockholder's Agreement. On or
after January 1, 1991, a Holder may Transfer shares of Class A Common Stock, but
only in accordance with the provisions of paragraph 4(b) of this Section B or in
accordance with the provisions of any Stockholders Agreement to which such
Holder is a party. Any Transfer made in contravention or paragraph 4 of this
Section B shall be void and of no effect and shall not be recognized on the
books of the Corporation. As used in paragraph 4 of this Section B, the term
"affiliate" shall have the meaning set forth in the Securities Exchange Act of
1934, as amended, and the rules and regulations promulgated thereunder (the
"Exchange Act"), except that for the purposes of defining the term "Holder", a
Holder shall not be deemed to be an affiliate of (i) any company of which the
Holder is an officer or director or (ii) any direct or indirect stockholder of
such company.
-8-
<PAGE> 9
(b) RIGHT OF FIRST REFUSAL. If, on or after January 1, 1991, any Holder
shall desire to Transfer any or all of the shares of Class A Common Stock then
owned by such Holder to any individual or entity (a "Prospective Transferee"),
such Holder shall first give written notice (the "Transfer Notice") to the
Corporation stating that such Holder desires to effect such Transfer, the name
and address of the Prospective Transferee, the number of shares of Class A
Common Stock desired to be Transferred (the "Transfer Shares"), the price to be
paid by the Prospective Transferee (which shall be payable only in cash) (the
"Transfer Price") and the other terms and conditions pursuant to which the
Transfer is proposed to be effected, and certifying that the proposed Transfer
meets the criteria set forth in the next sentence of this paragraph 4(b) and
that the Prospective Transferee has acknowledged in writing to the Corporation
that any shares of Class A Common Stock which the Prospective Transferee
acquires in the Transfer will be subject to the restrictions contained in this
Restated Certificate of Incorporation, as the same may be amended from time to
time in accordance with applicable law. Such price, terms and conditions must
represent a BONA FIDE offer from the Prospective Transferee that the Holder will
accept if the Corporation does not exercise its right of first refusal
hereunder; PROVIDED, HOWEVER, that no such offer to any Holder by an affiliate
or by an "associate" (as such term is defined in the Exchange Act) of such
Holder shall be deemed to represent a BONA FIDE offer hereunder. The Corporation
shall have the right, exercisable within 30 days of the receipt of the Transfer
Notice (the "Exercise Period") by written notice to the Holder at his last
address as it shall appear on the Corporation's books, to purchase or cause its
designee to purchase all, but not less than all, of the Transfer Shares at the
Transfer Price.
If the Corporation elects to exercise its right to purchase or cause its
designee to purchase the Transfer Shares, the closing (the "Closing") of the
sale after be at the principal office of the Corporation on or before the 90th
day after the receipt of the Transfer Notice. At the Closing, the Holder shall
sell, convey, transfer, assign and deliver to the Corporation or its designee,
as the case may be, all right, title and interest in and to the Transfer
Shares, free and clear of all liens, security interests or adverse claims of any
kind and nature, and shall deliver to the Corporation or its designee, as the
case may be, a certificate representing the Transfer Shares duly endorsed for
transfer, or accompanied by appropriate stock transfer powers duly endorsed,
and with all necessary transfer tax stamps affixed thereto at the expense of
the Holder. The Corporation or its designee, as the case may be, shall deliver
to the Holder, in full payment of the Transfer Price for the Transfer Shares
purchased from the Holder, a certified or bank check payable to the order of
the Holder in the amount of the Transfer Price.
If the Corporation does not exercise its right of first refusal hereunder,
then the Holder shall have 60 days following the expiration of the Exercise
Period to consummate the sale of the Transfer Shares to the Prospective
Transferee at no less than the Transfer Price and on terms no more favorable to
the Prospective Transferee than those set forth in the Transfer
-9-
<PAGE> 10
Notice; PROVIDED, that no sale of the Transfer Shares may be consummated unless
the Prospective Transferee shall have acknowledged in writing to the
Corporation that the Prospective Transferee is purchasing shares of Class A
Common Stock subject to the restrictions contained in this Restated Certificate
of Incorporation, as the same may be amended from time to time in accordance
with applicable law. If such sale is not consummated as aforesaid, then the
restrictions on Transfer contained in paragraph 4 of this Section B shall remain
applicable.
(c) UNISSUED SECURITIES. The provisions of paragraph 4 of this Section B
shall likewise be applicable to any and all securities of any kind whatsoever of
the Corporation which may be issued after the date hereof in respect of, or in
exchange for, shares of Class A Common Stock pursuant to a merger,
consolidation, stock split, stock dividend, recapitalization of the Corporation
or otherwise.
5. Exchange of Class B Common Stock.
--------------------------------
(a) PUBLIC OFFERING. In the event there is a public offering of all or a
portion of the shares of Class A Common Stock, the Board of Directors of the
Corporation shall declare, at least 20 days prior to the commencement of the
public offering (which for purposes of this paragraph 5(a) and paragraph 5(c)
of this Section B shall mean having a registration statement declared
effective), that on the day of and immediately prior to the consummation of
the public offering (which for purposes of this paragraph 5(a) and paragraph
5(c) of this Section B shall mean the closing of such offering), all
outstanding shares of Class B Common Stock shall be exchanged for fully paid and
nonassessable shares of Class A Common Stock in accordance with the Exchange
Rate (as defined in paragraph 5(b) of this Section B below). Any such
declaration may be made contingent upon the consummation of the public
offering, in which event it may be revoked by the Board of Directors if the
public offering is not consummated.
(b) SALE TO UNAFFILIATED ENTITY. In the event that any holder of Class A
Common Stock other than a stockholder who is a Holder (a "Deemed 25%
Stockholder") proposes to sell all or a portion of his shares of Class A Common
Stock to an unaffiliated entity (a "Sale"), each holder of Class B Common Stock
shall be entitled to elect, by written notice to the Corporation and received
by the Corporation at least five days before the proposed Exchange Date (as
defined below), to exchange on the day of and immediately prior to the
consummation of the Sale, for fully paid and nonassessable shares of Class A
Common Stock at the Exchange Rate, the same percentage of the shares of Class
B Common Stock owned by him as the percentage which the aggregate number of
shares of Class A Common Stock to be sold by the Deemed 25% Stockholders in the
Sale represents of the aggregate holdings of Class A Common Stock of all Deemed
25% Stockholders (a holder of Class B Common Stock who makes such an election
to exchange his shares being hereinafter referred
-10-
<PAGE> 11
to as an "Exchanging Holder"). Any such exchange shall be contingent upon the
consummation of the Sale and the sale therein by the Exchanging Holder of all of
the shares of Class A Common Stock received by him in such exchange, and in the
event the Sale is not consummated or the Exchanging Holder does not sell all of
such shares of Class A Common Stock, the election by the Exchanging Holder to
exchange his shares for shares of Class A Common Stock (or such portion thereof
that is not sold in the Sale) shall be deemed revoked without any further
action by the Exchanging Holder or the Corporation.
(c) EXCHANGE RATE. The term "Exchange Rate" shall mean the fraction
(calculated to the nearest three decimal places) of one share of Class A Common
Stock for which one share of Class B Common Stock shall be exchangeable, which
fraction shall be determined by dividing (x) by (y), where (x) equals the
aggregate amount payable in respect of each share of Class B Common Stock, and
(y) equals the aggregate amount payable in respect of each share of Class A
Common Stock, in each case upon a dissolution, liquidation or winding-up of the
affairs of the Corporation pursuant to paragraph 3 of this Section B, assuming
the aggregate amount of assets available for distribution in respect of the
Class A Common Stock and Class B Common Stock were equal to the value of the
Corporation on a going-concern basis (after payment or provision for payment of
the debts and other liabilities of the Corporation and of the amounts to which
the holders of any outstanding shares of any capital stock ranking senior in
preference to the Class A Common Stock and Class B Common Stock, including,
without limitation, the Preferred Stock, shall be entitled) as of a date (the
"Valuation Date") not less than 30 nor more than 90 days prior to the
commencement of the public offering or the closing of the Sale, as the case may
be (the "Net Going-Concern Value") (utilizing the number of shares of Class A
Common Stock and of Class B Common Stock outstanding on the Valuation Date),
which value shall be determined in good faith by the Board of Directors of the
Corporation, whose determination shall be final and binding. The term "Exchange
Date" shall mean the date on which the exchange of Class B Common Stock for
Class A Common Stock occurs, which shall be, in the case of a public offering,
the date the offering is consummated and, in the case of a Sale, the date the
Sale is consummated.
(b) DIVIDENDS. If the Exchange Date shall be subsequent to the record date
for the payment of a dividend on or with respect to shares of Class B Common
Stock but prior to the payment thereof, the registered holders of such shares
at the close of business on such record date shall be entitled to receive the
dividend payable on such shares on the date set for payment of such dividend
notwithstanding the exchange of any of such shares for Class A Common Stock.
Any such dividend (as well as any like dividend payable on or with respect to
shares of Class A Common Stock) shall be taken into account for purposes of
calculating the Exchange Rate as though the dividend had been paid by the
Corporation and received by the stockholders prior to the Valuation Date.
-11-
<PAGE> 12
(e) EXCHANGE NOTICE. The Corporation shall give notice of any proposed
Exchange Date to each holder of Class B Common Stock, by mailing to such person
at his last address as it shall appear on the Corporation's books, not less
than 15 nor more than 60 days prior to the proposed Exchange Date, a written
notice (the "Exchange Notice"), which shall specify the proposed Exchange
Date and the Exchange Rate and shall state that the issuance of certificates
representing Class A Common Stock to be received upon exchange of shares of
Class B Common Stock shall be upon surrender of certificates representing such
shares of Class B Common Stock.
(f) SURRENDER OF CERTIFICATES REPRESENTING CLASS B COMMON STOCK.
Before any holder of shares of Class B Common Stock whose shares are exchanged
shall be entitled to receive certificates representing shares of Class A Common
Stock, he shall surrender, at such place as the Corporation shall specify, the
certificates for his shares of Class B Common Stock duly endorsed to the
Corporation or accompanied by proper instruments of transfer to the
Corporation, with signatures guaranteed by a commercial bank, trust company or
registered broker dealer, unless the Corporation shall waive any such
requirement. The Corporation, as soon as practicable after such surrender of
certificates representing shares of Class B Common Stock, shall issue and
deliver at the office of the transfer agent for the Class A Common Stock to the
person for whose account such shares of Class B Common Stock were so
surrendered, or to his nominee or nominees, a certificate or certificates
representing the number of shares (including fractions thereof) of Class A
Common Stock to which such person shall be entitled.
(g) RIGHTS OF HOLDER AFTER EXCHANGE DATE. From and after the Exchange
Date, all rights of a holder of shares of Class B Common Stock which were
exchanged for shares of Class A Common Stock shall terminate with respect to
such shares of Class B Common Stock except for the right, upon surrender of the
certificates representing such shares of Class B Common Stock, to receive
certificates representing shares of Class A Common Stock as contemplated by
paragraph 5(f) of this Section B and the right to receive dividends as provided
in paragraph 5(d) of this Section B. No holder of a certificate which
immediately prior to the Exchange Date represented shares of Class B Common
Stock which were exchanged for shares of Class A Common Stock shall be entitled
to receive any dividend or other distribution in respect of shares of Class A
Common Stock until surrender of such holder's certificate for a certificate or
certificates representing shares of Class A Common Stock, but upon such
surrender, there shall be paid to the holder the amount of any dividends or
other distributions (without interest) the record date for payment of which was
after the Exchange Date, but which were not paid by reason of the foregoing,
with respect to the number of shares of Class A Common Stock represented by the
certificate or certificates issued upon such surrender.
However, from and after the Exchange Date, the Corporation shall be
entitled to treat the unsurrendered certificates representing shares of Class B
Common Stock which were
-12-
<PAGE> 13
exchanged for shares of Class A Common Stock as evidencing the ownership of the
number of shares of Class A Common Stock for which the shares of Class B
Common Stock represented by such certificates shall have been exchanged,
notwithstanding the failure to surrender such certificates.
(h) TRANSFER TAXES. If any certificate for shares of Class A Common Stock
is to be issued in a name other than that in which the certificate representing
shares of Class B Common Stock surrendered in exchange therefor is registered,
it shall be a condition of such issuance that the person requesting such
issuance shall pay any transfer or other taxes required by reason of the
issuance of certificates for such shares of Class A Common Stock in a name other
than that of the record holder of the record holder of the certificate
surrendered, or shall establish to the satisfaction of the Corporation or its
agent that such tax has been paid or is not applicable. Notwithstanding anything
to the contrary in this paragraph 5(h), the Corporation shall not be liable to a
holder of shares of Class B Common Stock which have been exchanged for shares of
Class A Common Stock for any shares of Class A Common Stock or dividends or
distributions thereon delivered to a public official pursuant to any applicable
abandoned property, escheat or similar law.
(i) RESERVATION OF SHARES. At such time as any Exchange Notice is
delivered with respect to any shares of Class B Common Stock, the Corporation
shall have reserved and kept available, solely for the purpose of issuance upon
exchange of the outstanding shares of Class B Common Stock, such number of
shares of Class A Common Stock as shall be issuable upon the exchange of all of
the then outstanding shares of Class B Common Stock; PROVIDED, that nothing
contained herein shall be construed to preclude the Corporation from satisfying
its obligations in respect of the exchange of the outstanding shares of Class B
Common Stock by delivery of shares of Class A Common Stock which are held in
the treasury of the Corporation.
FIFTH: The Board of Directors is expressly authorized to adopt, amend, or
repeal the by-laws of the Corporation.
SIXTH: Elections of directions need not be by written ballot unless the
by-laws of the Corporation shall otherwise provide.
SEVENTH: A director of the Corporation shall not be personally liable to
the Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director; PROVIDED, HOWEVER, that the foregoing shall not eliminate or
limit the liability of a director (i) for any breach of the director's duty of
loyalty to the Corporation or its stockholders, (ii) for acts or omissions not
in good faith or which involve intentional misconduct or a knowing violation of
law, (iii) under Section 174 of the General Corporation
-13-
<PAGE> 14
Law of Delaware, or (iv) for any transaction from which the director derived an
improper personal benefit. If the General Corporation Law of Delaware is
hereafter amended to permit further elimination or limitation of the personal
liability of directors, then the liability of a director of the Corporation
shall be eliminated or limited to the fullest extent permitted by General
Corporation Law of Delaware as so amended. Any repeal or modification of this
Article Seventh by the stockholders of the Corporation or otherwise shall not
adversely affect any right or protection of a director of the Corporation
existing at the time of such repeal or modification.
EIGHTH: Whenever a compromise or arrangement is proposed between this
Corporation and its creditors or any class of them and/or between this
Corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of this Corporation or of any creditor or stockholder thereof or on the
application of any receiver or receivers appointed for this Corporation under
the provisions of Section 291 of Title 8 of the Delaware Code or on the
application of trustees in dissolution or of any receiver or receivers appointed
for this Corporation under the provisions of Section 279 of Title 8 of the
Delaware Code order a meeting of the creditors or class of creditors, and/or of
the stockholders or class of stockholders of this Corporation, as the case may
be, to be summoned in such manner as the said court directs. If a majority in
number representing three-fourths in value of the creditors or class of
creditors, and/or of the stockholders or class of stockholders of this
Corporation, as the case may be, agree to any compromise or arrangement and to
any reorganization of this Corporation as a consequence of such compromise or
arrangement, the said compromise or arrangement and the said reorganization
shall, if sanctioned by the court to which said application has been made, be
binding on all the creditors or class of creditors, and/or on all of the
stockholders or class of stockholders, of this Corporation, as the case may be,
and also on this Corporation.
NINTH: The number of authorized shares of any class of stock of the
Corporation may be increased or decreased (but not below the number of shares
thereof at the time outstanding) by the affirmative vote of the holders of a
majority of the stock of the Corporation entitled to vote thereon, with all
classes voting together as a single class.
TENTH: The Corporation reserves the right to amend, alter, change, or
repeal any provision contained in this Restated Certificate of Incorporation, in
the manner now or hereafter prescribed by stature, and all rights conferred upon
stockholders herein are granted subject to this reservation.
3. This Restated Certificate of Incorporation was duly adopted in
accordance with the provisions of Sections 242 and 245 of the General
Corporation Law of the State of Delaware.
-14-
<PAGE> 15
IN WITNESS WHEREOF, said Safelite Glass Corp. has caused this certificate
to be signed by John F. Barlow, President, and attested to by David Wood, its
Secretary, this 20th day of December, 1996.
SAFELITE GLASS CORP.
By: /s/ John F. Barlow
-----------------------
John F. Barlow
President
ATTEST:
By: /s/ David Wood
-----------------------
David Wood
Secretary
-15-
<PAGE> 1
EXHIBIT 3.2
AMENDED AND RESTATED BYLAWS OF
SAFELITE GLASS CORP.
(a Delaware corporation)
Adopted: October 21, 1991
----------------
<PAGE> 2
TABLE OF CONTENTS
ARTICLE I. OFFICES .......................................................... 1
Section 1. Registered Office .......................................... 1
Section 2. Other Offices .............................................. 1
ARTICLE II. MEETINGS OF STOCKHOLDERS ........................................ 1
Section 1. Place of Meetings .......................................... 1
Section 2. Annual Meeting ............................................. 1
Section 3. Special Metings ............................................ 1
Section 4. Notice of Meetings ......................................... 1
Section 5. List of Stockholders ....................................... 2
Section 6. Quorum, Adjournments ....................................... 2
Section 7. Organization ............................................... 3
Section 8. Order of Business .......................................... 3
Section 9. Voting ..................................................... 3
Section 10. Inspectors ................................................. 4
Section 11. Action by Consent .......................................... 4
ARTICLE III. BOARD OF DIRECTORS
Section 1. General Powers ............................................. 4
Section 2. Number, Qualifications, Election, and Term of Office ....... 4
Section 3. Place of Meetings .......................................... 5
Section 4. Annual Meeting ............................................. 5
Section 5. Regular Meetings ........................................... 5
Section 6. Special Meetings ........................................... 5
Section 7. Notice of Meetings ......................................... 5
Section 8. Quorum and Manner of Acting ................................ 6
Section 9. Organization ............................................... 6
Section 10. Resignations ............................................... 6
Section 11. Vacancies .................................................. 6
Section 12. Removal of Directors ....................................... 7
Section 13. Compensation ............................................... 7
Section 14. Committees ................................................. 7
Section 15. Action by Consent .......................................... 7
Section 16. Telephonic Meeting ......................................... 8
ARTICLE IV. OFFICERS ........................................................ 8
Section 1. Number and Qualifications .................................. 8
Section 2. Resignations ............................................... 8
Section 3. Removal .................................................... 8
Section 4. Chairman of the Board ...................................... 8
Section 5. President .................................................. 8
Section 6. Vice President(s) .......................................... 9
Section 7. Treasurer .................................................. 9
Section 8. Secretary .................................................. 9
Section 9. Assistant Trasurer(s) ...................................... 10
Section 10. Assistant Secretary(ies) ................................... 10
Section 11. Officers' Bonds or Other Security .......................... 10
Section 12. Compensation ............................................... 10
ARTICLE V. STOCK CERTIFICATES AND THEIR TRANSFER ............................ 11
<PAGE> 3
Section 1. Stock Certificates ......................................... 11
Section 2. Facsimile Signatures ....................................... 11
Section 3. Lost Certificates .......................................... 11
Section 4. Transfers of Stock ......................................... 12
Section 5. Transfer Agents and Registrars ............................. 12
Section 6. Regulations ................................................ 12
Section 7. Fixing the Record Date ..................................... 12
Section 8. Registered Stockholders .................................... 12
ARTICLE VI. INDEMNIFICATION OF DIRECTORS AND OFFICERS ....................... 13
Section 1. General .................................................... 13
Section 2. Derivative Actions ......................................... 13
Section 3. Indemnification in Certain Cases ........................... 14
Section 4. Procedure .................................................. 14
Section 5. Advances for Expenses ...................................... 14
Section 6. Rights Not Exclusive ....................................... 14
Section 7. Insurance .................................................. 14
Section 8. Definition of Corporation .................................. 15
Section 9. Survival of Rights ......................................... 15
ARTICLE VII. GENERAL PROVISIONS ............................................. 15
Section 1. Dividends .................................................. 15
Section 2. Reserves ................................................... 15
Section 3. Seal ....................................................... 15
Section 4. Fiscal Year ................................................ 15
Section 5. Checks, Notes, Drafts, Etc. ................................ 15
Section 6. Execution of Contracts, Deeds, Etc. ........................ 16
Section 7. Voting of Stock in Other Corporations ...................... 16
ARTICLE VIII. AMENDMENTS .................................................... 16
<PAGE> 4
AMENDED AND RESTATED BYLAWS OF
SAFELITE GLASS CORP.
(a Delaware corporation)
ARTICLE I. OFFICES
SECTION 1. REGISTERED OFFICE. The registered office of the Corporation
within the state of Delaware shall be in the city of Wilmington, county of New
Castle.
SECTION 2. OTHER OFFICES. The Corporation may also have an office or
offices other than said registered office at such place or places, either within
or outside of the state of Delaware, as the board of directors shall from time
to time determine or the business of the Corporation may require.
ARTICLE II. MEETINGS OF STOCKHOLDERS
SECTION 1. PLACE OF MEETINGS. All meetings of the stockholders for the
election of directors or for any other purpose shall be held at any such place,
either within or outside of the state of Delaware, as shall be designated from
time to time by the board of directors and stated in the notice of meeting or in
a duly-executed waiver thereof.
SECTION 2. ANNUAL MEETING. The annual meeting of stockholders shall be held
at 10:00 a.m. on the first Tuesday of October, if not a legal holiday, and if a
legal holiday, then on the next succeeding day not a legal holiday, at 10:00
a.m., or at such other date and time as shall be designated from time to time by
the board of directors and stated in the notice of meeting or in duly executed
waiver thereof. At such annual meeting, the stockholders shall elect, by a
plurality vote, a board of directors and transact such other business as may
properly be brought before the meeting.
SECTION 3. SPECIAL MEETINGS. Special meetings of stockholders, unless
otherwise prescribed by statute, may be called at any time by the board of
directors or the chairman of the board, and shall be called by the secretary
upon the request in writing of a stockholder or stockholders holding of record
at least fifty percent (50%) of the voting power of the issued and outstanding
shares of stock of the Corporation entitled to vote at such meeting.
SECTION 4. NOTICE OF MEETINGS. Except as otherwise expressly required by
statute, written notice of each annual and special meeting of stockholders
stating the date, place, and hour of the meeting, and, in the case of a special
meeting, the purpose or purposes for which the meeting is called, shall be given
to each stockholder of record entitled to vote thereat not fewer than ten
<PAGE> 5
(10) or more than sixty (60) days before the date of the meeting. Business
transacted at any special meeting of the stockholders shall be limited to the
purposes stated in the notice. Notice shall be given personally or by mail,
and, if by mail, shall be sent in a postage prepaid envelope, addressed to the
stockholder at his address as it appears on the records of the Corporation.
Notice by mail shall be deemed given at the time when the same shall be
deposited in the United States mail, postage prepaid. Notice of any meeting
shall not be required to be given to any person who attends such meeting,
except when such person attends the meeting in person or by proxy for the
express purpose of objecting, at the beginning of the meeting, to the
transaction of any business because the meeting is lawfully called or convened,
or who, either before or after the meeting, shall submit a signed, written
waiver of notice, in person or by proxy. Neither the business to be transacted
at nor the purpose of an annual or special meeting of stockholders need be
specified in any written waiver of notice.
SECTION 5. LIST OF STOCKHOLDERS. The officer who has charge of the stock
ledger of the corporation shall prepare and make, at least ten (10) days before
each meeting of stockholders, a complete list of the stockholders entitled to
vote at the meeting, arranged in alphabetical order, showing the address and the
number of shares registered in the name of each stockholder. Such list shall be
open to the examination of any stockholder, for any purpose germane to the
meeting, during ordinary business hours, for a period of at least ten (10) days
prior to the meeting, either at a place within the city, town, or village where
the meeting is to be held, which place shall be specified in the notice of
meeting, or, if not specified, at the place where the meeting is to be held. The
list shall be produced and kept at the time and place of the meeting during the
whole time thereof, and may be inspected by any stockholder who is present.
SECTION 6. QUORUM, ADJOURNMENTS. The holders of a majority of the voting
power of the issued and outstanding stock of the Corporation entitled to vote
thereat, present in person or represented by proxy, shall constitute a quorum
for the transaction of business at all meetings by stockholders, except as
otherwise provided by statute or by the certificate of incorporation of the
Corporation. If, however, such quorum shall not be present or represented by
proxy at any meeting of stockholders, the stockholders entitled to vote thereat,
present in person or represented by proxy, shall have the power to adjourn the
meeting from time to time, without notice other than announcement at the
meeting, until a quorum shall be present or represented by proxy. At such
adjourned meeting at which a quorum shall be present or represented by proxy,
any business may be transacted that might have been transacted at the meeting as
originally called. If the adjournment is for more than thirty (30) days, or if
after adjournment a new record date is set, a notice of the adjourned meeting
shall be
(2)
<PAGE> 6
given to each stockholder of record entitled to vote at the meeting.
SECTION 7. ORGANIZATION. At each meeting of stockholders, the chairman of
the board or, in his absence, the president shall act as chairman of the
meeting. The secretary or, in his absence or inability to act, the person whom
the chairman of the meeting shall appoint secretary of the meeting shall act as
secretary of the meeting and keep the minutes thereof.
SECTION 8. ORDER OF BUSINESS. The order of business at all meetings of the
stockholders shall be as determined by the chairman of the meeting.
SECTION 9. VOTING. Except as otherwise provided by statute or the
certificate of incorporation of the Corporation, each stockholder of the
Corporation shall be entitled at each meeting of stockholders to one (1) vote
for each share of capital stock of the Corporation standing in his name on the
record of stockholders of the Corporation:
(a) on the date fixed pursuant to the provisions of section 7 of
article V of these bylaws as the record date for the determination of the
stockholders who shall be entitled to notice of and to vote at such
meeting; or
(b) if no such record date shall have been so fixed, then at the close
of business on the day next preceding the day on which notice thereof shall
be given, or, if notice is waived, at the close of business on the date
next preceding the day on which the meeting is held.
Each stockholder entitled to vote at any meeting of stockholders may
authorize another person or persons to act for him by a proxy signed by such
stockholder or his attorney-in-fact, but no proxy shall be voted after three (3)
years from its date, unless the proxy provides for a longer period. Any such
proxy shall be delivered to the secretary of the meeting at or prior to the time
designated in the order of business for so delivering such proxies. When a
quorum is present at nay meeting, the vote of the holders of a majority of the
voting power of the issued and outstanding stock of the Corporation entitled to
vote thereon, present in person or represented by proxy, shall decide any
question brought before such meeting, unless the question is one upon which, by
express provision of statute or of the certificate of incorporation of the
Corporation or of these bylaws, a different vote is required, in which case such
express provision shall govern and control the decision of such question.
Unless required by statute, or determined by the chairman of the meeting to be
advisable, the vote on any question need not be by ballot. On a vote by ballot,
each ballot shall be signed by the stockholder voting, or by his proxy, if there
be such proxy, and shall state the number of shares voted.
(3)
<PAGE> 7
SECTION 10. INSPECTORS. The board of directors may, in advance of any
meeting of stockholders, appoint one (1) or more inspectors to act at such
meeting or any adjournment thereof. If any of the inspectors so appointed shall
fail to appear or act, the chairman of the meeting shall, or if inspectors shall
not have been appointed, the chairman of the meeting may, appoint one or more
inspectors. Each inspector, before entering upon the discharge of his duties,
shall take and sign an oath faithfully to execute the duties of inspector at
such meeting with strict impartiality and according to the best of his ability.
The inspectors shall determine the number of shares of capital stock of the
Corporation outstanding and the voting power of each, the number of shares
represented at the meeting, the existence of a quorum, and the validity and
effect of proxies, and shall receive votes, ballots, or consents; hear and
determine all challenges and questions arising in connection with the right to
vote; count and tabulate all votes, ballots, or consent; determine the results;
and do such acts as are proper to conduct the election or vote with fairness to
all stockholders. On request of the chairman of the meeting, the inspectors
shall make a report in writing of any challenge, request, or matter determined
by them and shall execute a certificate of any fact found by them. No director
or candidate for the office of director shall act as an inspector of an election
of directors. Inspectors need not be stockholders.
SECTION 11. ACTION BY CONSENT. Whenever the vote of stockholders at a
meeting thereof is required or permitted to be taken for or in connection with
any corporate action, by any provision of statute or of the certificate of
incorporation of the Corporation or of these bylaws, the meeting and vote of
stockholders may be dispensed with, and the action taken without such meeting
and vote, if a consent in writing, setting forth the action so taken, shall be
signed by the holders of outstanding stock having not fewer than the minimum
number of votes that would be necessary to authorize or take such action at a
meeting at which all shares of stock of the Corporation entitled to vote thereon
were present and voted.
ARTICLE III. BOARD OF DIRECTORS
SECTION 1. GENERAL POWERS. The business and affairs of the Corporation
shall be managed by or under the direction of the board of directors. The board
of directors may exercise all such authority and powers of the Corporation and
do all such lawful acts and things as are not by statute or the certificate of
incorporation of the Corporation directed or required to be exercised or done by
the stockholders.
SECTION 2. NUMBER, QUALIFICATIONS, ELECTION, AND TERM OF OFFICE. The number
of directors constituting the board of directors shall be fixed, from time to
time, by the affirmative vote of a majority of the entire board of directors or
by action of the
(4)
<PAGE> 8
stockholders of the Corporation. Any decrease in the number of directors shall
be effective at the time of the next succeeding annual meeting of stockholders
unless there shall be vacancies in the board of directors, in which case such
decrease may become effective at any time prior to the next succeeding annual
meeting to the extent of the number of such vacancies. directors need not be
stockholders. Each director shall hold office until his successor shall have
been elected and qualified, or until his death, or until he shall have
resigned, or have been removed, as hereinafter provided in these bylaws.
SECTION 3. PLACE OF MEETINGS. Meetings of the board of directors shall be
held at such place or places, within or outside of the state of Delaware, as the
board of directors may from time to time determine or as shall be specified in
the notice of any such meeting.
SECTION 4. ANNUAL MEETING. The board of directors shall meet for the
purpose of organization, the election of officers, and the transaction of other
business, as soon as practicable after each annual meeting of stockholders, on
the same day and at the same place where such annual meeting shall be held.
Notice of such meeting need not be given. In the event such annual meeting is
not so held, the annual meeting of the board of directors may be held at such
other time or place (within or outside of the state of Delaware) as shall be
specified in a notice thereof given as hereinafter provided in section 7 of this
article III.
SECTION 5. REGULAR MEETINGS. Regular meetings of the board of directors
shall be held at such time and place as the board of directors may fix. If any
day fixed for a regular meeting shall be a legal holiday a the place where the
meeting is to be held, then the meeting that would otherwise be held on that
day shall be held at the same hour on the next succeeding business day. Notice
of regular meetings of the board of directors need not be given except as
otherwise required by statute or these bylaws.
SECTION 6. SPECIAL MEETINGS. Special meetings of the board of directors may
be called by the chairman of the board, by two or more directors of the
Corporation, or by the president.
SECTION 7. NOTICE OF MEETINGS. Notice of each special meeting of the board
of directors (and of each regular meeting for which notice shall be required)
shall be given by the secretary as hereinafter provided in this section 7, in
which notice shall be stated the time and place of the meeting. Except as
otherwise required by these bylaws, such notice need not state the purposes of
such meeting. Notice of each such meeting shall be mailed, postage prepaid, to
each director, addressed to him at his residence or usual place of business, by
first class mail, at least two
(5)
<PAGE> 9
(2) days before the day on which such meeting is to be held, or shall be sent
addressed to him at such place by telegraph, cable, telex telecopier, or other
similar means, or be delivered to him personally or be given to him by
telephone or other similar means, at least twenty-four (24) hours before the
time at which such meeting is to be held. Notice of any such meeting need not
be given to any director who shall, wither before or after the meeting, submit
a signed waiver of notice or who shall attend such meeting, except when he
shall attend for the express purpose of objecting, at the beginning of the
meeting, to the transaction of any business because the meeting is not lawfully
called or convened.
SECTION 8. QUORUM AND MANNER OF ACTING. A majority of the entire board of
directors shall constitute a quorum for the transaction of business at any
meeting of the board of directors, and, except as otherwise expressly required
by statute, the certificate of incorporation of the Corporation, or these
bylaws, the act of a majority of the directors present at any meeting at which a
quorum is present shall be the act of the board of directors. In the absence of
a quorum at any meeting of the board of directors, a majority of the directors
present thereat may adjourn such meeting to another time and place. Notice of
the time and place of any such adjourned meeting shall be given to all of the
directors unless such time and place were announced at the meeting at which the
adjournment was taken, in which case such notice shall only be given to the
directors who were not present thereat. At any adjourned meeting at which a
quorum is present, any business may be transacted that might have been
transacted at the meeting as originally called. The directors shall act only as
a board and the individual directors shall have no power as such.
SECTION 9. ORGANIZATION. At each meeting of the board of directors, the
chairman of the board or, in the absence of the chairman of the board, the
president (or, in his absence, another director chosen by the majority of the
directors present) shall act as chairman of the meeting and preside thereat. The
secretary or, in his absence, any person appointed by the chairman of the
meeting shall act as secretary of the meeting and keep the minutes thereof.
SECTION 10. RESIGNATION. Any director of the Corporation may resign at any
time by giving written notice of his resignation to the Corporation. Any such
resignation shall take effect at the time specified therein or, if the time when
it shall become effective shall not be specified therein, immediately upon its
receipt. Unless otherwise specified therein, the acceptance of such resignation
shall not be necessary to make it effective.
SECTION 11. VACANCIES. Any vacancy in the board of directors, whether
arising from death, resignation, removal (with or without cause), an increase in
the number of directors, or any other cause, may be filled by the vote of a
majority of the
(6)
<PAGE> 10
directors then in office, though fewer than a quorum, or by the sole remaining
director, or by the stockholders at the next annual meeting thereof or at a
special meeting thereof. Each director so elected shall hold office until his
successor shall have been elected and qualified.
SECTION 12. REMOVAL OF DIRECTORS. Any director may be removed, either with
or without cause, at any time, by the holders of a majority of the voting power
of the issued and outstanding capital stock of the Corporation entitled to vote
at an election of directors.
SECTION 13. COMPENSATION. The board of directors shall have authority to
fix the compensation, including fees for reimbursement of expense, of directors
for services to the Corporation in any capacity.
SECTION 14. COMMITTEES. The board of directors may, by resolution passed by
a majority of the entire board of directors, designate one or more committees,
including an executive committee, each committee to consist of one or more of
the directors of the corporation. The board of directors may designate one or
more directors as alternate members of any committee, who may replace any absent
or disqualified member at any meeting of the committee. In addition, in the
absence or disqualification of a member of a committee, the member or members
thereof present at any meeting and not disqualified from voting, whether or not
he or they constitute a quorum, amy unanimously appoint another member of the
board of directors to act at the meeting in the place of any such absent or
disqualified member.
Except to the extent restricted by statute or the certificate of
incorporation of the Corporation, each such committee, to the extent provided in
the resolution creating it, shall have and may exercise all the powers and
authority of the board of directors and may authorize the seal of the
Corporation to be affixed to all papers that require it. Each such committee
shall serve at the pleasure of the board of directors and have such name as may
be determined from time to time by resolution adopted by the board of directors.
Each committee shall keep regular minutes of its meetings and report the same to
the board of directors.
SECTION 15. ACTION BY CONSENT. Unless restricted by the certificate of
incorporation of the Corporation, any action required or permitted to be taken
by the board of directors or any committee thereof may be taken without a
meeting if all members of the board of directors or such committee, as the case
may be, consent thereto in writing, and each writing is filed with the minutes
of the proceedings of the board of directors or such committee, as the case may
be.
(7)
<PAGE> 11
SECTION 16. TELEPHONIC MEETING. Unless restricted by the certificate of
incorporation of the Corporation, any one (1) or more members of the board of
directors or any committee thereof may participate in a meeting of the board of
directors or such committee by means of a conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other. Participation by such means shall constitute
presence in person at the meeting.
ARTICLE IV. OFFICERS
SECTION 1. NUMBER AND QUALIFICATIONS. The officers of the Corporation shall
be elected by the board of directors and shall include the chairman of the
board, the president, one or more vice presidents, the secretary, and the
treasurer. If the board of directors wishes, it may also elect other officers
(including one or more assistant treasurers and one or more assistant
secretaries) as may be necessary or desirable for the business of the
Corporation. Any two or more offices may be held by the same person, and no
officer, except the chairman of the board, need be a director. Each officer
shall held office until his successor shall have been duly elected and shall
have qualified, or until his death, or until he shall have resigned or have been
removed, as hereinafter provided in these bylaws.
SECTION 2. RESIGNATIONS. Any officer of the Corporation may resign at any
time by giving written notice of his resignation to the Corporation. Any such
resignation shall take effect at the time specified therein or, if the time when
it shall become effective shall not be specified therein, immediately upon
receipt. Unless otherwise specified therein, the acceptance of any such
resignation shall not be necessary to make it effective.
SECTION 3. REMOVAL. Any officer of the Corporation may be removed, either
with or without cause, at any time, by the board of directors at any meeting
thereof.
SECTION 4. CHAIRMAN OF THE BOARD. The chairman of the board shall be a
member of the board and shall be the chief executive officer of the corporation.
If present, the chairman of the board shall preside at each meeting of the board
of directors or the stockholders. He shall advise and counsel with the
president, and with other executives of the Corporation, and shall perform such
other duties as may from time to time be assigned to him by the board of
directors.
SECTION 5. PRESIDENT. The president shall, in the absence of the chairman
of the board, preside at each meeting of the board of directors or the
stockholders. The president shall perform all duties incident to the office of
president and such other duties as
(8)
<PAGE> 12
may from time to time be assigned to him by the chairman of the board or the
board of directors.
SECTION 6. VICE PRESIDENT(S). Each vice president shall perform all
such duties as from time to time may be assigned to him by the board of
directors, the chairman of the board, or the president. At the request of the
chairman of the board or the president, or in the absence of the president or
in the event of his inability or refusal to act, the vice president, or if
there shall be more than one (1), the vice presidents in the order determined
by the chairman of the board or the board of directors (or if there be no such
determination, then the vice presidents in the order of their election), shall
perform the duties of the president, and, when so acting, shall have the powers
of and be subject to the restrictions placed upon the president in respect of
the performance of such duties.
SECTION 7. TREASURER. The treasurer shall:
(a) have charge and custody of, and be responsible for, all the funds and
securities of the Corporation;
(b) keep full and accurate accounts of receipts and disbursements in
books belonging to the Corporation;
(c) deposit all moneys and other valuables to the credit of the
Corporation in such depositaries as may be designated by the board of
directors or pursuant to its direction;
(d) receive, and give receipt for, moneys due and payable to the
Corporation from any source whatsoever;
(e) disburse the funds of the Corporation and supervise the investments
of its funds, taking proper vouchers therefor;
(f) render to the board of directors, whenever the board of directors may
require, an account of the financial condition of the Corporation; and
(g) in general, perform all duties incident to the office of treasurer and
such other duties as from time to time may be assigned to him by the
board of directors.
SECTION 8. SECRETARY. The secretary shall:
(a) keep or cause to be kept in one (1) or more books provided for the
purpose, the minutes of all meetings of the board of directors, and
the stockholders;
(9)
<PAGE> 13
(b) see that all notices are duly given in accordance with the provisions
of these bylaws and as required by law;
(c) be custodian of the records and the seal of the Corporation and affix
and attest the seal to all certificates for shares of the Corporation
(unless the seal of the Corporation on such certificates shall be a
facsimile, as hereinafter provided) and affix and attest the seal to
all other documents to be executed on behalf of the Corporation under
its seal;
(d) see that the books, reports, statements, certificates, and other
documents and records required by law to be kept and filed are
properly kept and filed; and
(e) in general, perform all duties incident to the office of secretary and
such other duties as from time to time may be assigned to him by the
board of directors.
SECTION 9. ASSISTANT TREASURER(S). The assistant treasurer, or if there
shall be more than one, the assistant treasurer in the order determined by the
board of directors (or if there be no such determination, then in the order of
their election), shall, in the absence of the treasurer or in the event of this
inability or refusal to act, perform the duties and exercise the powers of the
treasurer and shall perform such other duties as from time to time may be
assigned by the board of directors.
SECTION 10. ASSISTANT SECRETARY(IES). The assistant secretary, or if
there shall be more than one, the assistant secretaries in the order determined
by the board of directors (or if there be no such determination, then in the
order of their election), shall, in the absence of the secretary or in the
event of his inability of refusal to act, perform the duties and exercise the
powers of the secretary and shall perform such other duties as from time to
time may be assigned by the board of directors.
SECTION 11. OFFICERS' BONDS OR OTHER SECURITY. If required by the board
of directors, any officer of the Corporation shall give a bond or other
security for the faithful performance of his duties, in such amount and with
such surety as the board of directors may require.
SECTION 12. COMPENSATION. The compensation of the officers of the
Corporation for their services as such officers shall be fixed from time to
time by the board of directors. An officer of the Corporation shall not be
prevented from receiving compensation by reason of the fact that he is also a
director of the Corporation.
(10)
<PAGE> 14
ARTICLE V. STOCK CERTIFICATES AND THEIR TRANSFER
SECTION 1. STOCK CERTIFICATES. Every holder of stock in the Corporation
shall be entitled to have a certificate, signed by, or in the name of the
Corporation by, the chairman of the board or the president or a vice president
and by the treasurer or an assistant treasurer or the secretary or an assistant
secretary of the Corporation, certifying the number of shares owned by him in
the Corporation. If the Corporation shall be authorized to issue more than one
(1) class of stock or more than one (1) series of any class, the designations,
preferences, and relative participating, optional, or other special rights of
each class of stock or series thereof and the qualifications, limitations, or
restriction of such preferences and/or rights shall be set forth in full or
summarized on the face or back of the certificate that the Corporation shall
issue to represent such class or series of stock, provided that, except as
otherwise provided in section 202 of the general corporation law of the state
of Delaware, in lieu of the foregoing requirements, there may be set forth on
the face or back of the certificate that the Corporation shall issue to
represent such class or series of stock, a statement that the Corporation will
furnish without charge to each stockholder who so requests the designations,
preferences, and relative participating, optional, or other special rights of
each class of stock or series thereof and the qualifications, limitations, or
restrictions of such preferences and/or rights.
SECTION 2. FACSIMILE SIGNATURES. Any or all of the signatures on a
certificate may be a facsimile. In case any officer, transfer agent, or
registrar who has signed or whose facsimile signature has been placed upon a
certificate shall have ceased to be such officer, transfer agent, or registrar
before such certificate is issued, it may be issued by the Corporation with the
same effect as if he were such officer, transfer agent, or registrar at the
date of issue.
SECTION 3. LOST CERTIFICATES. The board of directors may direct a new
certificate or certificates to be issued in place of any certificate or
certificates theretofore issued by the Corporation alleged to have been lost,
stolen, or destroyed. When authorizing such issue of a new certificate of
certificates, the board of directors may, in its discretion and as a condition
precedent to the issuance thereof, require the owner of such lost, stolen, or
destroyed certificate or certificates, or his legal representative, to give the
Corporation a bond in such sum as it may direct sufficient to indemnify it
against any claim that may be made against the Corporation on account of the
alleged loss, theft, or destruction of any such certificate or the issuance of
such new certificate.
(11)
<PAGE> 15
SECTION 4. TRANSFERS OF STOCK. Upon surrender to the Corporation or the
transfer agent of the Corporation of a certificate for shares duly endorsed or
accompanied by proper evidence of succession, assignment, or authority to
transfer, it shall be the duty of the Corporation to issue a new certificate to
the person entitled thereto, cancel the old certificate, and record the
transaction upon its records; provided, however, that the Corporation shall be
entitled to recognize and enforce any lawful restriction on transfer. Whenever
any transfer of stock shall be made for collateral security, and not
absolutely, it shall be so expressed in the entry of transfer if, when the
certificates are presented to the Corporation for transfer, both the transferor
and the transferee request the Corporation to do so.
SECTION 5. TRANSFER AGENTS AND REGISTRARS. The board of directors may
appoint, or authorize any officer or officers to appoint, one (1) or more
transfer agents and one (1) or more registrars.
SECTION 6. REGULATIONS. The board of directors may make such additional
rules and regulations, not inconsistent with these bylaws, as it may deem
expedient concerning the issue, transfer, and registration of certificates for
shares of stock of the Corporation.
SECTION 7. FIXING THE RECORD DATE. In order that the Corporation may
determine the stockholders entitled to notice of or to vote at any meeting of
stockholders or any adjournment thereof, or to express consent to corporate
action in writing without a meeting, or entitled to receive payment of any
dividend or other distribution or allotment of any rights, or entitled to
exercise any rights in respect of any change, conversion, or exchange of stock
or for the purpose of any other lawful action, the board of directors may fix,
in advance, a record date that shall not be more than sixty (60) or fewer than
ten (10) days before the date of such meeting, and not more than sixty (60)
days prior to any other action. A determination of stockholders of record
entitled to notice of or to vote at a meeting of stockholders shall apply to
any adjournment of the meeting; provided, however, that the board of directors
may fix a new record date for the adjourned meeting.
SECTION 8. REGISTERED STOCKHOLDERS. The Corporation shall be entitled to
recognize the exclusive right of a person registered on its records as the
owner of shares of stock to receive dividends and to vote as such owner, shall
be entitled to hold liable for calls and assessments a person registered on its
records as the owner of shares of stock, and shall not be bound to recognize
any equitable or other claim to or interest in such share or shares of stock on
the part of any other person, whether or not it shall have express or other
notice thereof, except as otherwise provided by the laws of Delaware.
(12)
<PAGE> 16
ARTICLE VI. INDEMNIFICATION OF DIRECTORS AND OFFICERS
SECTION 1. GENERAL. The Corporation shall indemnify any person who was
or is a party or is threatened to be made a party to any threatened, pending,
or completed action, suit, or proceeding, whether civil, criminal,
administrative, or investigative (other than an action by or in the right of
the Corporation), by reason of the fact that he is or was a director, officer,
employee, or agent of the Corporation, or is or was serving at the request of
the Corporation as a director, officer, employee, or agent of another
corporation, partnership, joint venture, trust, or other enterprise, against
expenses (including attorneys' fees), judgments, fines, and amounts paid in
settlement actually and reasonably incurred by him in connection with such
action, suit, or proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
Corporation, and, with respect to any criminal action or proceeding, has no
reasonable cause to believe his conduct was unlawful. The termination of any
action, suit, or proceeding by judgment, order, settlement, or conviction, or
upon a plea of NOLO CONTENDERE or its equivalent, shall not, of itself, create
a presumption that the person did not act in good faith and in a manner that he
reasonable believed to be in or not opposed to the best interests of the
Corporation, and, with respect to any criminal action or proceeding, had
reasonable cause to believe that his conduct was unlawful.
SECTION 2. DERIVATIVE ACTIONS. The Corporation shall indemnify any
person who was or is a party or is threatened to be made a party to any
threatened, pending, or completed action or suit by or in the right of the
Corporation to procure a judgment in its favor by reason of the fact that he is
or was a director, officer, employee, or agent of the Corporation, or is or was
serving at the request of the Corporation as a director, officer, employee, or
agent of another corporation, partnership, joint venture, trust, or other
enterprise, against expenses (including attorneys' fees) actually and
reasonably incurred by him in connection with the defense or settlement of such
action or suit if he acted in good faith and in a manner he reasonably believed
to be in or not opposed to the best interests of the Corporation, provided that
no indemnification shall be made in respect of any claim, issue, or matter as
to which such person shall have been adjudged to be liable to the Corporation
unless and only to the extent that the Court of Chancery of the state of
Delaware or the court in which such action or suit was brought shall determine
upon application that, despite the adjudication of liability but in view of
all the circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses that the Court of Chancery or such
other court shall deem proper.
(13)
<PAGE> 17
SECTION 3. INDEMNIFICATION IN CERTAIN CASES. To the extent that a director,
officer, employee, or agent of the Corporation has been successful on the merits
or otherwise in defense of any action, suit, or proceeding referred to in
sections 1 and 2 of this article VI, or in defense of any claim, issue, or
matter therein, he shall be indemnified against expenses (including attorneys'
fees) actually and reasonably incurred by him in connection therewith.
SECTION 4. PROCEDURE. Any indemnification under sections 1 and 2 of this
article VI (unless ordered by a court) shall be made by the Corporation only as
authorized in the specific case upon a determination that indemnification of the
director, officer, employee, or agent is proper in the circumstances because he
has met the applicable standard of conduct set forth in such sections 1 and 2.
Such determination shall be made (a) by the board of directors by a majority
vote of a quorum consisting of directors who were not parties to such action,
suit or proceeding, (b) if such quorum is not obtainable, or, even if
obtainable, a quorum of disinterested directors so directs, by independent legal
counsel in a written opinion, or (c) by the stockholders.
SECTION 5. ADVANCES FOR EXPENSES. Expenses incurred in defending a civil or
criminal actions, suit, or proceeding may be paid by the Corporation in advance
of the final disposition of such action, suit or proceeding upon receipt of an
undertaking by or on behalf of the director, officer, employee, or agent to
repay such amount if it shall be ultimately determined that he is not entitled
to be indemnified by the Corporation as authorized in this article VI.
SECTION 6. RIGHTS NOT EXCLUSIVE. The indemnification and advancement of
expenses provided by, or granted pursuant to, the other subsections of this
article VI shall not be deemed exclusive of any other rights to which those
seeking indemnification or advancement of expenses may be entitled under any
law, bylaw, agreement, vote of stockholders or disinterested directors, or
otherwise, both as to action in his official capacity and as to action in
another capacity while holding such office.
SECTION 7. INSURANCE. The Corporation shall have the power to purchase and
maintain insurance on behalf of any person who is or was director, officer,
employee, or agent of the Corporation, or is or was serving at the request of
the Corporation as a director, officer, employee, or agent of another
corporation, partnership, joint venture, trust or other enterprise, against any
liability asserted against him and incurred by him in any such capacity, or
arising out of his status as such, whether or not the Corporation would have the
power to indemnify him against such liability under the provisions of this
article VI.
<PAGE> 18
SECTION 8. DEFINITION OF CORPORATION. For the purposes of this article VI,
references to the "Corporation" include all constituent corporations absorbed in
a consolidation or merger as well as the resulting or surviving corporation so
that any person who is or was a director, officer, employee, or agent of such
constituent corporation or is or was serving at the request of such constituent
corporation as a director, officer, employee, or agent of another corporation,
partnership, joint venture, trust, or other enterprise shall stand in the same
position under the provisions of this article VI with respect to the resulting
or surviving corporation as he would have if he had served the resulting or
surviving corporation in the same capacity.
SECTION 9. SURVIVAL OF RIGHTS. The indemnification and advancement of
expenses provided by, or granted pursuant to, this article VI shall continue as
to a person who has ceased to be a director, officer, employee, or agent and
shall inure to the benefit of the heirs, executors, and administrators of such a
person.
ARTICLE VII. GENERAL PROVISIONS
SECTION 1. DIVIDENDS. Subject to the provisions of statute and the
certificate of incorporation of the Corporation, dividends upon the shares of
capital stock of the Corporation may be declared by the board of directors at
any regular or special meeting. Dividends may be paid in cash, in property, or
in shares of stock of the Corporation, unless otherwise provide by statute or
the certificate of incorporation of the of the Corporation.
SECTION 2. RESERVES. Before payment of any dividend, there may be set aside
out of any funds of the Corporation available for dividends such sum or sums as
the board of directors may, from time to time, in its absolute discretion, think
proper as a reserve or reserves to meet contingencies, or for equalizing
dividends, or for repairing or maintaining any property of the Corporation, or
for such other purpose as the board of directors may think conducive to the
interests of the Corporation. The board of directors may modify or abolish any
such reserves in the manner in which it was created.
SECTION 3. SEAL. The seal of the Corporation shall be in such form as shall
be approved by the board of directors.
SECTION 4. FISCAL YEAR. The fiscal year of the Corporation shall be fixed,
and once fixed, may thereafter be changed, by resolution of the board of
directors.
SECTION 5. CHECKS, NOTES, DRAFTS, ETC. All checks, notes, drafts, or other
orders for the payment of money of the Corporation shall be signed, endorsed, or
accepted in the name of the
(15)
<PAGE> 19
Corporation by such officer, officers, person, or persons as from time to time
may be designated by the board of directors or by an officer or officers
authorized by the board of directors to make such designation.
SECTION 6. EXECUTION OF CONTRACTS, DEEDS, ETC. The board of directors may
authorize any officer or officers, and any agent or agents, in the name and on
behalf of the Corporation, to enter into or execute and deliver any and all
deeds, bonds, mortgages, contracts, and other obligations or instruments, and
such authority may be general or confined to specific instances.
SECTION 7. VOTING OF STOCK IN OTHER CORPORATIONS. Unless otherwise provided
by resolution of the board of directors, the chairman of the board of the
president, from time to time, may (or may appoint one (1) of more attorneys or
agents to) cast the votes that the Corporation may be entitled to cast as a
stockholder or otherwise in any other corporation, any of whose shares or
securities may be held by the Corporation, at meetings of the holders of the
shares or other securities of such other corporation. In the event one (1) or
more attorneys or agents are appointed, the chairman of the board or the
president may instruct the person or persons so appointed as to the manner of
casting such votes or giving such consent. The chairman of the board or the
president may, or may instruct the attorneys or agents appointed to, executed or
cause to be executed in the name and on behalf of the Corporation and under its
seal or otherwise, such written proxies, consents, waivers, or other instruments
as may be necessary or proper in the circumstances.
ARTICLE VIII. AMENDMENTS
These bylaws may be amended or repealed or new bylaws adopted (a) by action
of the stockholders entitled to vote thereon at any annual or special meeting of
stockholders or (b) if the certificate of incorporation of the Corporation so
provides, by action of the board of directors at a regular or special meeting
thereof. Any bylaw made by the board of directors may be amended or repealed by
action of the stockholders at any annual or special meeting of stockholders.
<PAGE> 20
EXHIBIT 3.2
ANNEX I
AMENDMENT
OF THE
AMENDED AND RESTATED BYLAWS OF
SAFELITE GLASS CORP.
Article VI of the Amended and Restated Bylaws of Safelite Glass Corp. is
amended to read in its entirety as follows:
ARTICLE VI. Indemnification of Directors and Officers
SECTION 1. GENERAL. The Corporation shall indemnify any person who was
or is a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative
or investigative (other than an action by or in the right of the Corporation)
by reason of the fact that he is or was a director, officer, employee or
agent of the Corporation, or is or was serving at the request of the
Corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, against expenses
(including attorney's fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by him in connection with such action, suit or
proceeding if he acted in good faith and in a manner he reasonably believed to
be in or not opposed to the best interests of the Corporation, and, with
respect to any criminal action or proceeding, had no reasonable cause to
believe his conduct was unlawful. The termination of any action, suit or
proceeding by judgment, order, settlement, conviction, or upon a plea of NOLO
CONTENDERE or its equivalent, shall not, of itself, create a presumption that
the person did not act in good faith and in a manner which he reasonably
believed to be in or not opposed to the best interests of the Corporation, and,
with respect to any criminal action or proceeding, had reasonable cause to
believe that his conduct was unlawful.
SECTION 2. DERIVATIVE ACTIONS. The Corporation shall indemnify any
person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action or suit by or in the right of the
Corporation to procure a judgment in its favor by reason of the fact that he is
or was a director, officer, employee or agent of the Corporation, or is or was
serving at the request of the Corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise against expenses (including attorney's fees) actually and reasonably
incurred by him in connection with the defense or settlement of such action or
suit if he acted in good faith and in a manner he reasonably believed to be in
or not opposed to the best interests of the Corporation, provided that no
indemnification shall be
<PAGE> 21
made in respect of any claim, issue or matter as to which such person shall
have been adjudged to be liable to the Corporation unless and only to the
extent that the Court of Chancery of the State of Delaware or the court in
which such action or suit was brought shall determine upon application that,
despite the adjudication of liability but in view of all the circumstances of
the case, such person is fairly and reasonably entitled to indemnity for such
expenses which the Court of Chancery or such other court shall deem proper.
SECTION 3. INDEMNIFICATION IN CERTAIN CASES. To the extent that a
director, officer, employee or agent of the Corporation has been successful on
the merits or otherwise in defense of any action, suit or proceeding referred
to in Section 1 and 2 of this Article VI, or in defense of any claim, issue or
matter therein, he shall be indemnified against expenses (including attorney's
fees) actually and reasonably incurred by him in connection therewith.
SECTION 4. PROCEDURE. Any indemnification under Section 1 and 2 of this
Article VI (unless ordered by a court) shall be made by the Corporation only as
authorized in the specific case upon a determination that indemnification of
the director, officer, employee or agent is proper in the circumstances because
he has met the applicable standard of conduct set forth in such Section 1 and
2. Such determination shall be made (a) by the Board of Directors by a majority
vote of the directors who were not parties to such action, suit or proceeding,
even though less than a quorum, or (b) if there are no such directors, or, even
if such directors so direct, by independent legal counsel in a written opinion,
or (c) by the stockholders.
SECTION 5. ADVANCES FOR EXPENSES. Expenses (including attorneys' fees)
incurred in defending any civil, criminal, administrative or investigative
action, suit or proceeding may be paid by the Corporation in advance of the
final disposition of such action, suit or proceeding upon receipt of an
undertaking by or on behalf of the director, officer, employee or agent to
repay such amount if it shall be ultimately determined that he is not entitled
to be indemnified by the Corporation as authorized in this Article VI.
SECTION 6. RIGHTS NOT-EXCLUSIVE. The indemnification and advancement of
expenses provided by, or granted pursuant to, the other Sections of this
Article VI shall not be deemed exclusive of any other rights to which those
seeking indemnification or advancement of expenses may be entitled under any
law, by-law, agreement, vote of stockholders or disinterested directors or
otherwise, both as to action in his official capacity and as to action in
another capacity while holding such office.
SECTION 7. INSURANCE. The Corporation shall have power to purchase and
maintain insurance on behalf of any person who is or was a director, officer,
employee or agent of the Corporation, or is or was serving at the request of
the Corporation as a
<PAGE> 22
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against any liability asserted against him
and incurred by him in any such capacity, or arising out of his status as such,
whether or not the Corporation would have the power to indemnify him against
such liability under the provisions of this Article VI.
SECTION 8. DEFINITION OF CORPORATION. For the purposes of this Article VI,
references to "the Corporation" include all constituent corporations (including
any constituent of a constituent) absorbed in a consolidation or merger as well
as the resulting or surviving corporation which, if its separate existence had
continued, would have had the power and authority to indemnify its directors,
officers, and employees or agents, so that any person who is or was a director,
officer, employee or agent of such a constituent corporation or is or was
serving at the request of such constituent corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise shall stand in the same position under the provisions of this
Article VI with respect to the resulting or surviving corporation as he would
have with respect to such constituent corporation if its separate existence had
continued.
SECTION 9. SURVIVAL OF RIGHTS. The indemnification and advancement of
expenses provided by, or granted pursuant to this Article VI shall continue as
to a person who has ceased to be a director, officer, employee or agent and
shall inure to the benefit of the heirs, executors and administrators of such a
person.
SECTION 10. OTHER DEFINITIONS. For purposes of this Article VI, references
to "other enterprises" shall include employee benefit plans; references to
"fines" shall include any excise taxes assessed on a person with respect to any
employee benefit plan; and references to "serving at the request of the
Corporation" shall include any service as a director, officer or agent of the
corporation which imposes duties on, or involves services by, such director,
officer or agent with respect to an employee benefit plan, its participants or
beneficiaries; and a person who acted in good faith and in a manner he
reasonably believed to be in the interest of the participants and beneficiaries
of an employee benefit plan shall be deemed to have acted in a manner "not
opposed the best interests of the Corporation" as referred to in this Article
VI.
3
<PAGE> 1
EXECUTION COPY
--------------
EXHIBIT 4.1
===============================================================================
SAFELITE GLASS CORP.
9 7/8% Senior Subordinated Notes due 2006
===================
INDENTURE
Dated as of December 20, 1996
===================
FLEET NATIONAL BANK,
Trustee
===============================================================================
<PAGE> 2
CROSS-REFERENCE TABLE
TIA Indenture
Section Section
- ------- -------
310(a)(1) ....................................... 7.10
(a)(2) ....................................... 7.10
(a)(3) ....................................... N.A.
(a)(4) ....................................... N.A.
(b) ....................................... 7.8; 7.10
(c) ....................................... N.A.
311(a) ....................................... 7.11
(b) ....................................... 7.11
(c) ....................................... N.A.
312(a) ....................................... 2.5
(b) ....................................... N.A.
(c) ....................................... N.A.
313(a) ....................................... 7.6
(b)(1) ....................................... N.A.
(b)(2) ....................................... 7.6
(c) ....................................... 7.6
(d) ....................................... 7.6
314(a) ....................................... 4.18
4.19; 13.2
(b) ....................................... N.A.
(c)(1) ....................................... 13.4
(c)(2) ....................................... 13.4
(c)(3) ....................................... N.A.
(d) ....................................... N.A.
(e) ....................................... 13.5
(f) ....................................... 4.19
315(a) ....................................... 7.1
(b) ....................................... 7.5; 13.2
(c) ....................................... 7.1
(d) ....................................... 7.1
(e) ....................................... 6.11
316(a)(last sentence)................................... 13.6
(a)(1)(A) ....................................... 6.5
(a)(1)(B) ....................................... 6.4
(a)(2) ....................................... N.A.
(b) ....................................... 6.7
317(a)(1) ....................................... 6.8
(a)(2) ....................................... 6.9
(b) ....................................... 2.4
318(a) ....................................... 13.1
N.A. means Not Applicable.
- ---------------
Note: This Cross-Reference Table shall not, for any purpose, be deemed to be
part of the Indenture.
<PAGE> 3
TABLE OF CONTENTS
Page
ARTICLE I
Definitions and Incorporation by Reference.......................... 1
SECTION 1.1. Definitions............................................... 1
SECTION 1.2. Other Definitions......................................... 25
SECTION 1.3. Incorporation by Reference of Trust
Indenture Act......................................... 25
SECTION 1.4. Rules of Construction..................................... 26
ARTICLE II
The Securities............................... 26
SECTION 2.1. Form and Dating........................................... 26
SECTION 2.2. Execution and Authentication.............................. 28
SECTION 2.3. Registrar and Paying Agent................................ 28
SECTION 2.4. Paying Agent To Hold Money in Trust....................... 29
SECTION 2.5. Securityholder Lists...................................... 29
SECTION 2.6. Transfer and Exchange..................................... 30
SECTION 2.7. Replacement Securities.................................... 38
SECTION 2.8. Outstanding Securities.................................... 38
SECTION 2.9. Temporary Securities...................................... 38
SECTION 2.10. Cancellation.............................................. 39
SECTION 2.11. Defaulted Interest........................................ 39
SECTION 2.12. CUSIP Numbers............................................. 39
ARTICLE III
Redemption................................. 40
SECTION 3.1. Notices to Trustee........................................ 40
SECTION 3.2. Selection of Securities To Be Redeemed.................... 40
SECTION 3.3. Notice of Redemption...................................... 40
SECTION 3.4. Effect of Notice of Redemption............................ 41
SECTION 3.5. Deposit of Redemption Price............................... 42
SECTION 3.6. Securities Redeemed in Part............................... 42
ARTICLE IV
Covenants................................. 42
SECTION 4.1. Payment of Securities..................................... 42
SECTION 4.2. Limitation on Liens....................................... 43
SECTION 4.3. Limitation on Incurrence of Additional
Indebtedness.......................................... 43
SECTION 4.4. Limitation on Restricted Payments......................... 43
SECTION 4.5. Limitation on Dividend and Other
Payment Restrictions Affecting
Subsidiaries.......................................... 45
- i -
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Page
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SECTION 4.6. Limitation on Asset Sales................................. 46
SECTION 4.7. Limitation on Transactions with
Affiliates. .......................................... 48
SECTION 4.8. Change of Control......................................... 49
SECTION 4.9. Limitation on Incurrence of Senior
Subordinated Debt..................................... 50
SECTION 4.10. Limitation on Preferred Stock of
Subsidiaries.......................................... 50
SECTION 4.11. Limitation on Future Guarantees........................... 50
SECTION 4.12. Conduct of Business....................................... 51
SECTION 4.13. Maintenance of Office or Agency........................... 51
SECTION 4.14. Corporate Existence....................................... 51
SECTION 4.15. Payment of Taxes and Other Claims......................... 51
SECTION 4.16. Maintenance of Properties and
Insurance............................................. 52
SECTION 4.17. Compliance with Laws...................................... 52
SECTION 4.18. Additional Information.................................... 52
SECTION 4.19. Further Instruments and Acts.............................. 53
ARTICLE V
Successor Company............................. 53
SECTION 5.1. When Company May Merge or Transfer
Assets................................................ 53
ARTICLE VI
Defaults and Remedies........................... 55
SECTION 6.1. Events of Default......................................... 55
SECTION 6.2. Acceleration.............................................. 57
SECTION 6.3. Other Remedies............................................ 58
SECTION 6.4. Waiver of Past Defaults................................... 58
SECTION 6.5. Control by Majority....................................... 58
SECTION 6.6. Limitation on Suits....................................... 58
SECTION 6.7. Rights of Holders to Receive Payment...................... 59
SECTION 6.8. Collection Suit by Trustee................................ 59
SECTION 6.9. Trustee May File Proofs of Claim.......................... 59
SECTION 6.10. Priorities................................................ 59
SECTION 6.11. Undertaking for Costs..................................... 60
ARTICLE VII
Trustee.................................. 60
SECTION 7.1. Duties of Trustee......................................... 60
SECTION 7.2. Rights of Trustee......................................... 62
SECTION 7.3. Individual Rights of Trustee.............................. 62
SECTION 7.4. Trustee's Disclaimer...................................... 62
SECTION 7.5. Notice of Defaults........................................ 62
SECTION 7.6. Reports by Trustee to Holders............................. 63
SECTION 7.7. Compensation and Indemnity................................ 63
SECTION 7.8. Replacement of Trustee.................................... 64
- ii -
<PAGE> 5
Page
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SECTION 7.9. Successor Trustee by Merger............................... 65
SECTION 7.10. Eligibility; Disqualification............................. 65
SECTION 7.11. Preferential Collection of Claims
Against Company....................................... 65
ARTICLE VIII
Discharge of Indenture; Defeasance..................... 66
SECTION 8.1. Discharge of Liability on Securities...................... 66
SECTION 8.2. Legal Defeasance and Covenant
Defeasance............................................ 67
SECTION 8.3. Conditions to Defeasance.................................. 68
SECTION 8.4. Application of Trust Money................................ 70
SECTION 8.5. Repayment to Company or the Subsidiary
Guarantors............................................ 71
SECTION 8.6. Reinstatement............................................. 71
ARTICLE IX
Amendments................................. 72
SECTION 9.1. Without Consent of Holders................................ 72
SECTION 9.2. With Consent of Holders................................... 73
SECTION 9.3. Compliance with Trust Indenture Act....................... 74
SECTION 9.4. Revocation and Effect of Consents and
Waivers............................................... 74
SECTION 9.5. Notation on or Exchange of Securities..................... 75
SECTION 9.6. Trustee To Sign Amendments................................ 75
ARTICLE X
Subordination............................... 75
SECTION 10.1. Agreement To Subordinate.................................. 75
SECTION 10.2. Liquidation, Dissolution, Bankruptcy...................... 75
SECTION 10.3. Default on Senior Indebtedness............................ 76
SECTION 10.4. Acceleration of Payment of Securities..................... 77
SECTION 10.5. When Distribution Must Be Paid Over....................... 77
SECTION 10.6. Subrogation............................................... 77
SECTION 10.7. Relative Rights........................................... 77
SECTION 10.8. Subordination May Not Be Impaired by
Company............................................... 78
SECTION 10.9. Rights of Trustee and Paying Agent........................ 78
SECTION 10.10. Distribution or Notice to
Representative........................................ 78
SECTION 10.11. Article X Not To Prevent Events of
Default or Limit Right To Accelerate.................. 78
SECTION 10.12. Trust Moneys Not Subordinated............................. 79
SECTION 10.13. Trustee Entitled To Rely.................................. 79
SECTION 10.14. Trustee To Effectuate Subordination....................... 79
SECTION 10.15. Trustee Not Fiduciary for Holders of
Senior Indebtedness................................... 79
- iii -
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Page
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SECTION 10.16. Reliance by Holders of Senior
Indebtedness on Subordination
Provisions............................................ 80
ARTICLE XI
Subsidiary Guarantee............................ 80
SECTION 11.1. Subsidiary Guarantee...................................... 80
SECTION 11.2. Unconditional Guarantee................................... 80
SECTION 11.3. Subordination of Guarantee................................ 81
SECTION 11.4. Severability.............................................. 81
SECTION 11.5. Release of a Subsidiary Guarantor......................... 81
SECTION 11.6. Limitation of Subsidiary Guarantor's
Liability............................................. 82
SECTION 11.7. Subsidiary Guarantors May Consolidate,
etc., on Certain Terms................................ 82
SECTION 11.8. Contribution.............................................. 83
SECTION 11.9. Waiver of Subrogation..................................... 84
SECTION 11.10. Waiver of Stay, Extension or Usury
Laws.................................................. 85
ARTICLE XII
SUBORDINATION OF GUARANTEES........................ 85
SECTION 12.1. Agreement To Subordinate.................................. 85
SECTION 12.2. Liquidation, Dissolution, Bankruptcy...................... 85
SECTION 12.3. Default on Guarantor Senior
Indebtedness.......................................... 86
SECTION 12.4. Acceleration of Payment of Securities..................... 87
SECTION 12.5. When Payment or Distribution Must Be
Paid Over............................................. 87
SECTION 12.6. Subrogation............................................... 87
SECTION 12.7. Relative Rights........................................... 88
SECTION 12.8. Subordination May Not Be Impaired by
Subsidiary Guarantor.................................. 88
SECTION 12.9. Rights of Trustee and Paying Agent........................ 88
SECTION 12.10. Distribution or Notice to
Representative........................................ 88
SECTION 12.11. Article XII Not To Prevent Events of
Default or Limit Right To Accelerate.................. 89
SECTION 12.12. Trust Moneys Not Subordinated............................. 89
SECTION 12.13. Trustee Entitled to Rely.................................. 89
SECTION 12.14. Trustee To Effectuate Subordination....................... 89
SECTION 12.15. Trustee Not Fiduciary for Holders of
Guarantor Senior Indebtedness......................... 90
SECTION 12.16. Reliance by Holders of Guarantor Senior
Indebtedness on Subordination
Provisions............................................ 90
- iv -
<PAGE> 7
Page
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ARTICLE XIII
Miscellaneous............................... 90
SECTION 13.1. Trust Indenture Act Controls.............................. 90
SECTION 13.2. Notices................................................... 90
SECTION 13.3. Communication by Holders with other
Holders............................................... 91
SECTION 13.4. Certificate and Opinion as to
Conditions Precedent.................................. 91
SECTION 13.5. Statements Required in Certificate or
Opinion............................................... 91
SECTION 13.6. When Securities Disregarded............................... 92
SECTION 13.7. Rules by Trustee, Paying Agent and
Registrar............................................. 92
SECTION 13.8. Legal Holidays............................................ 92
SECTION 13.9. Governing Law............................................. 92
SECTION 13.10. No Recourse Against Others................................ 92
SECTION 13.11. Successors................................................ 93
SECTION 13.12. Multiple Originals........................................ 93
SECTION 13.13. Variable Provisions....................................... 93
SECTION 13.14. Qualification of Indenture................................ 93
SECTION 13.15. Table of Contents; Headings............................... 93
EXHIBITS
- --------
EXHIBIT A FORM OF NOTE
EXHIBIT B FORM OF EXCHANGE NOTE
EXHIBIT C FORM OF TRANSFEREE LETTER OF REPRESENTATION
EXHIBIT D FORM OF SUPPLEMENTAL INDENTURE
- v -
<PAGE> 8
INDENTURE dated as of December 20, 1996, among SAFELITE GLASS CORP., a
Delaware corporation (as further defined below, the "COMPANY"), SGC FRANCHISING
CORP. and FLEET NATIONAL BANK, a national banking association, as trustee (the
"TRUSTEE").
Each party agrees as follows for the benefit of the other parties and
for the equal and ratable benefit of the Holders of the Company's 9 7/8% Senior
Subordinated Notes due 2006 (the "INITIAL NOTES") and, if and when issued in
exchange for Initial Notes as provided in the Registration Rights Agreement (as
hereinafter defined), the Company's 9 7/8% Senior Subordinated Notes due 2006
(the "EXCHANGE NOTES" and, together with the Initial Notes, the "SECURITIES"):
ARTICLE I
Definitions and Incorporation by Reference
------------------------------------------
SECTION 1.1. Definitions.
-----------
"Acquired Indebtedness" means Indebtedness (i) of a Person or any of
its Subsidiaries existing at the time such Person becomes a Restricted
Subsidiary of the Company or (ii) assumed in connection with the acquisition of
assets from such Person, in each case whether or not incurred by such Person in
connection with, or in anticipation or contemplation of, such Person becoming a
Restricted Subsidiary of the Company or such acquisition. Acquired Indebtedness
shall be deemed to have been incurred, with respect to clause (i) of the
preceding sentence, on the date such Person becomes a Restricted Subsidiary of
the Company and, with respect to clause (ii) of the preceding sentence, on the
date of consummation of such acquisition of assets.
"Affiliate" means a Person who directly or indirectly through one or
more intermediaries controls, or is controlled by, or is under common control
with, the Company. The term "control" means the possession, directly or
indirectly, of the power to direct or cause the direction of the management and
policies of a Person, whether through the ownership of voting securities, by
contract or otherwise. Notwithstanding the foregoing, no Person (other than the
Company or any Subsidiary of the Company) in whom a Receivables Entity makes an
Investment in connection with a Qualified Receivables Transaction shall be
deemed to be an Affiliate of the Company or any of its Subsidiaries solely by
reason of such Investment.
"all or substantially all" shall have the meaning given such phrase in
the Revised Model Business Corporation Act.
"Asset Acquisition" means (a) an Investment by the Company or any
Restricted Subsidiary of the Company in any other Person pursuant to which such
Person shall become a Restricted
<PAGE> 9
2
Subsidiary of the Company or any Restricted Subsidiary of the Company, or shall
be merged with or into the Company or any Restricted Subsidiary of the Company,
or (b) the acquisition by the Company or any Restricted Subsidiary of the
Company of the assets of any Person which constitute all or substantially all of
the assets of such Person, any division or line of business of such Person or
any other properties or assets of such Person other than in the ordinary course
of business.
"Asset Sale" means any direct or indirect sale, issuance, conveyance,
transfer, lease (other than operating leases entered into in the ordinary course
of business), assignment or other transfer for value by the Company or any of
its Restricted Subsidiaries (including any Sale and Leaseback Transaction) to
any Person other than the Company or a Wholly Owned Restricted Subsidiary of the
Company of (a) any Capital Stock of any Restricted Subsidiary of the Company; or
(b) any other property or assets of the Company or any Restricted Subsidiary of
the Company other than in the ordinary course of business; PROVIDED, HOWEVER,
that Asset Sales shall not include (i) a transaction or series of related
transactions for which the Company or its Restricted Subsidiaries receive
aggregate consideration of less than $1 million, (ii) the sale, lease,
conveyance, disposition or other transfer of all or substantially all of the
assets of the Company as permitted under Article V, (iii) the sale or discount,
in each case without recourse, of accounts receivable arising in the ordinary
course of business, but only in connection with the compromise or collection
thereof, (iv) the factoring of accounts receivable arising in the ordinary
course of business pursuant to arrangements customary in the industry, (v) the
licensing of intellectual property, (vi) disposals or replacements of obsolete
equipment in the ordinary course of business, (vii) the sale, lease, conveyance,
disposition or other transfer by the Company or any Restricted Subsidiary of
assets or property to one or more Wholly Owned Restricted Subsidiaries in
connection with Investments permitted under Section 4.4, (viii) sales of
accounts receivable and related assets of the type specified in the definition
of "Qualified Receivables Transaction" to a Receivables Entity for the fair
market value thereof, including cash in an amount at least equal to 75% of the
book value thereof as determined in accordance with GAAP, and (ix) transfers of
accounts receivable and related assets of the type specified in the definition
of "Qualified Receivables Transaction" (or a fractional undivided interest
therein) by a Receivables Entity in a Qualified Receivables Transaction. For the
purposes of clause (viii), Purchase Money Notes shall be deemed to be cash.
"Bank Credit Agreement means the Credit Agreement to be dated as of
the Issue Date, among the Company, the other borrowers thereto from time to
time, if any, the lenders party thereto from time to time and The Chase
Manhattan Bank, as agent, together with the related documents thereto
(including, without limitation, any guarantee agreements, promissory notes and
<PAGE> 10
3
collateral documents), in each case as such agreements may be amended,
supplemented or otherwise modified from time to time, or refunded, refinanced,
restructured, replaced, renewed, repaid or extended from time to time (whether
with the original agents and lenders or other agents and lenders or otherwise,
and whether provided under the original Bank Credit Agreement or other credit
agreements or otherwise).
"Bank Indebtedness" means any and all amounts, whether outstanding on
the Issue Date or thereafter incurred, payable under or in respect of the Bank
Credit Agreement and any related notes, collateral documents, letters of credit
and guarantees, including principal, premium (if any), interest (including
interest accruing on or after the filing of any petition in bankruptcy or for
reorganization relating to the Company or any Restricted Subsidiary of the
Company whether or not a claim for post-filing interest is allowed in such
proceedings), fees, charges, expenses, reimbursement obligations, guarantees and
all other amounts payable thereunder or in respect thereof.
"Board of Directors" means, as to any Person, the board of directors
of such Person or any duly authorized committee thereof.
"Business Day" means each day which is not a Legal Holiday.
"Capitalized Lease Obligation" means, as to any Person, the
obligations of such Person under a lease that are required to be classified and
accounted for as capital lease obligations under GAAP and, for purposes of this
definition, the amount of such obligations at any date shall be the capitalized
amount of such obligations at such date, determined in accordance with GAAP.
"Capital Stock" means (i) with respect to any Person that is a
corporation, any and all shares, interests, participations or other equivalents
(however designated) of corporate stock, including each class of common stock
and preferred stock of such Person and (ii) with respect to any Person that is
not a corporation, any and all partnership or other equity interests of such
Person.
"Cash Equivalents" means (i) marketable direct obligations issued by,
or unconditionally guaranteed by, the United States Government or issued by any
agency thereof and backed by the full faith and credit of the United States, in
each case maturing within one year from the date of acquisition thereof; (ii)
marketable direct obligations issued by any state of the United States of
America or any political subdivision of any such state or any public
instrumentality thereof maturing within one year from the date of acquisition
thereof and, at the time of acquisition, having one of the two highest ratings
obtainable from either S&P or Moody's; (iii) commercial paper
<PAGE> 11
4
maturing no more than one year from the date of creation thereof and, at the
time of acquisition, having a rating of at least A-1 from S&P or at least P-1
from Moody's; (iv) certificates of deposit or bankers' acceptances (or, with
respect to foreign banks, similar instruments) maturing within one year from the
date of acquisition thereof issued by any bank organized under the laws of the
United States of America or any state thereof or the District of Columbia or any
U.S. branch of a foreign bank having at the date of acquisition thereof combined
capital and surplus of not less than $200 million; (v) repurchase obligations
with a term of not more than seven days for underlying securities of the types
described in clause (i) above entered into with any bank meeting the
qualifications specified in clause (iv) above; and (vi) investments in money
market funds which invest substantially all their assets in securities of the
types described in clauses (i) through (v) above.
"Change of Control" means the occurrence of one or more of the
following events: (i) any sale, lease, exchange or other transfer (in one
transaction or a series of related transactions) of all or substantially all of
the assets of the Company to any Person or group of related Persons (other than
the Principal or its Related Parties) for purposes of Section 13(d) of the
Exchange Act (a "GROUP"), together with any Affiliates thereof (whether or not
otherwise in compliance with the provisions of this Indenture); (ii) the
approval by the holders of Capital Stock of the Company of any plan or proposal
for the liquidation or dissolution of the Company (whether or not otherwise in
compliance with the provisions of this Indenture); (iii) any Person or Group
(other than the Principal or its Related Parties) shall become the owner,
directly or indirectly, beneficially or of record, of shares representing more
than 50% of the aggregate ordinary voting power represented by the issued and
outstanding Capital Stock of the Company or (iv) the first day on which a
majority of the members of the Board of Directors of the Company are not
Continuing Directors.
"Change of Control Triggering Event" means the occurrence of a Change
of Control and the failure of the Securities to have a Minimum Rating on the
30th day after the occurrence of such Change of Control.
"Closing" means the date of the closing of the Transactions.
"Code" means the Internal Revenue Code of 1986, as amended.
"Company" means Safelite Glass Corp. until a successor replaces it
and, thereafter, means the successor and, for purposes of any provision
contained herein and required by the TIA, each other obligor on the indenture
securities.
<PAGE> 12
5
"Consolidated EBITDA" means, with respect to any Person, for any
period, the sum (without duplication) of (i) Consolidated Net Income and (ii) to
the extent Consolidated Net Income has been reduced thereby, (A) all income
taxes of such Person and its Restricted Subsidiaries paid or accrued in
accordance with GAAP for such period, (B) Consolidated Interest Expense and (C)
Consolidated Non-cash Charges.
"Consolidated Fixed Charge Coverage Ratio" means, with respect to any
Person, the ratio of Consolidated EBITDA of such Person during the four full
fiscal quarters (the "FOUR QUARTER PERIOD") ending on or prior to the date of
the Transactions giving rise to the need to calculate the Consolidated Fixed
Charge Coverage Ratio (the "TRANSACTIONS DATE") to Consolidated Fixed Charges of
such Person for the Four Quarter Period. In addition to and without limitation
of the foregoing, for purposes of this definition, "Consolidated EBITDA" and
"Consolidated Fixed Charges" shall be calculated after giving effect on a pro
forma basis for the period of such calculation to (i) the incurrence of any
Indebtedness of such Person or any of its Restricted Subsidiaries (and the
application of the proceeds thereof) giving rise to the need to make such
calculation and any incurrence or repayment of other Indebtedness (and the
application of the proceeds thereof) occurring during the Four Quarter Period or
at any time subsequent to the last day of the Four Quarter Period and on or
prior to the Transactions Date, as if such incurrence or repayment, as the case
may be (and the application of the proceeds thereof), occurred on the first day
of the Four Quarter Period, (ii) any Asset Sales or Asset Acquisitions
(including, without limitation, any Asset Acquisition giving rise to the need to
make such calculation as a result of such Person or one of its Restricted
Subsidiaries (including any Person who becomes a Restricted Subsidiary as a
result of the Asset Acquisition) incurring, assuming or otherwise being liable
for Acquired Indebtedness and also including any Consolidated EBITDA (including
any pro forma expense and cost reductions that are (i) directly attributable to
such transaction and (ii) factually supportable) attributable to the assets
which are the subject of the Asset Acquisition or Asset Sale during the Four
Quarter Period) occurring during the Four Quarter Period or at any time
subsequent to the last day of the Four Quarter Period and on or prior to the
Transactions Date, as if such Asset Sale or Asset Acquisition (including the
incurrence, assumption or liability for any such Indebtedness or Acquired
Indebtedness) occurred on the first day of the Four Quarter Period, (iii) with
respect to any such Four Quarter Period commencing prior to the Transactions,
the Transactions (including any pro forma expense and cost reductions related
thereto that are (i) directly attributable to such transaction and (ii)
factually supportable) shall be deemed to have taken place on the first day of
such Four Quarter Period and (iv) any asset sales or asset acquisitions
(including any Consolidated EBITDA (including any pro forma expense and cost
reductions that are (i) directly attributable to such transaction and (ii)
factually supportable) attributable to
<PAGE> 13
6
the assets which are the subject of the asset acquisition or asset sale during
the Four Quarter Period) that have been made by any Person that has become a
Restricted Subsidiary of the Company or has been merged with or into the Company
or any Restricted Subsidiary of the Company during the Four Quarter Period or at
any time subsequent to the last day of the Four Quarter Period and on or prior
to the Transactions Date that would have constituted Asset Sales or Asset
Acquisitions had such transactions occurred when such Person was a Restricted
Subsidiary of the Company or subsequent to such Person's merger into the
Company, as if such asset sale or asset acquisition (including the incurrence,
assumption or liability for any Indebtedness or Acquired Indebtedness in
connection therewith) occurred on the first day of the Four Quarter Period;
PROVIDED that to the extent that clause (ii) or (iv) of this sentence requires
that pro forma effect be given to an asset sale or asset acquisition, such pro
forma calculation shall be based upon the four full fiscal quarters immediately
preceding the Transactions Date of the Person, or division or line of business
of the Person, that is acquired or disposed for which financial information is
available. If such Person or any of its Restricted Subsidiaries directly or
indirectly guarantees Indebtedness of a third Person, the preceding sentence
shall give effect to the incurrence of such guaranteed Indebtedness as if such
Person or any Restricted Subsidiary of such Person had directly incurred or
otherwise assumed such guaranteed Indebtedness. Furthermore, in calculating
"Consolidated Fixed Charges" for purposes of determining the denominator (but
not the numerator) of this "Consolidated Fixed Charge Coverage Ratio," (1)
interest on outstanding Indebtedness determined on a fluctuating basis as of the
Transactions Date and which will continue to be so determined thereafter shall
be deemed to have accrued at a fixed rate per annum equal to the rate of
interest on such Indebtedness in effect on the Transactions Date; (2) if
interest on any Indebtedness actually incurred on the Transactions Date may
optionally be determined at an interest rate based upon a factor of a prime or
similar rate, a eurocurrency interbank offered rate, or other rates, then the
interest rate in effect on the Transactions Date will be deemed to have been in
effect during the Four Quarter Period; and (3) notwithstanding clause (1) above,
interest on Indebtedness determined on a fluctuating basis, to the extent such
interest is covered by agreements relating to Interest Swap Obligations, shall
be deemed to accrue at the rate per annum resulting after giving effect to the
operation of such agreements.
"Consolidated Fixed Charges" means, with respect to any Person for any
period, the sum, without duplication, of (i) Consolidated Interest Expense
(excluding amortization or write-off of debt issuance costs in connection with
the Transactions) plus (ii) the product of (x) the amount of all dividend
payments on any series of Preferred Stock of such Person (other than dividends
paid in Qualified Capital Stock) times (y) a fraction, the numerator of which is
one and the denominator of which is one
<PAGE> 14
7
minus the then current effective consolidated Federal, state and local tax rate
of such Person expressed as a decimal.
"Consolidated Interest Expense" means, with respect to any Person for
any period, the sum of, without duplication, (i) the aggregate of all cash and
non-cash interest expense with respect to all outstanding Indebtedness of such
Person and its Restricted Subsidiaries, including the net costs associated with
Interest Swap Obligations, for such period determined on a consolidated basis in
conformity with GAAP, and (ii) the interest component of Capitalized Lease
Obligations paid, accrued and/or scheduled to be paid or accrued by such Person
and its Restricted Subsidiaries during such period as determined on a
consolidated basis in accordance with GAAP.
"Consolidated Net Income" of the Company means, for any period, the
aggregate net income (or loss) of the Company and its Restricted Subsidiaries
for such period on a consolidated basis, determined in accordance with GAAP;
PROVIDED that there shall be excluded therefrom (a) gains and losses from Asset
Sales (without regard to the $1 million limitation set forth in the definition
thereof) or abandonments or reserves relating thereto and the related tax
effects according to GAAP and an increase in the valuation allowance relating to
deferred tax assets recorded in the fourth quarter of 1996 attributable to the
Transactions, (b) gains and losses due solely to fluctuations in currency values
and the related tax effects according to GAAP, (c) items classified as
extraordinary, unusual or nonrecurring gains and losses, and the related tax
effects according to GAAP, (d) the net income (or loss) of any Person acquired
in a pooling of interests transaction accrued prior to the date it becomes a
Restricted Subsidiary of the Company or is merged or consolidated with the
Company or any Restricted Subsidiary of the Company, (e) the net income of any
Restricted Subsidiary of the Company to the extent that the declaration of
dividends or similar distributions by that Restricted Subsidiary of that income
is restricted by contract, operation of law or otherwise, (f) only for purposes
of clause (iii) (w) of Section 4.4(a), any amounts included pursuant to clause
(iii) (z) of Section 4.4(a), (g) the net loss of any Person other than a
Restricted Subsidiary of the Company, (h) the net income of any Person, other
than a Restricted Subsidiary, except to the extent of cash dividends or
distributions paid to the Company or a Restricted Subsidiary of the Company by
such Person unless, in the case of a Restricted Subsidiary of the Company who
receives such dividends or distributions, such Restricted Subsidiary is subject
to clause (e) above, (i) one time non-cash compensation charges, including any
arising from existing stock options resulting from any merger or
recapitalization transaction, (j) bonus payments to be paid to senior management
of the Company in connection with the Transactions in an aggregate amount
(together with the bonus payments made under clause (k) below) not to exceed
$7.0 million and (k) bonus payments to be paid to senior management following
the Closing (but no later than February 28, 1997) in an aggregate
<PAGE> 15
8
amount not to exceed $400,000 and, together with the amounts paid under clause
(j) not to exceed $7.0 million in the aggregate.
"Consolidated Non-cash Charges" means, with respect to any Person for
any period, the aggregate depreciation, amortization and other non-cash expenses
of such Person and its Restricted Subsidiaries reducing Consolidated Net Income
of such Person and its Restricted Subsidiaries for such period, determined on a
consolidated basis in accordance with GAAP (excluding any such charges which
require an accrual of or a reserve for cash charges for any future period).
"Continuing Directors" means, as of any date of determination, any
member of the Board of Directors of the Company who (i) was a member of such
Board of Directors on the Issue Date, (ii) was nominated for election or elected
to such Board of Directors with, or whose election to such Board of Directors
was approved by, the affirmative vote of a majority of the Continuing Directors
who were members of such Board of Directors at the time of such nomination or
election or (iii) is any designee of the Principal or its Affiliates or was
nominated by the Principal or its Affiliates or any designees of the Principals
or their Affiliates on the Board of Directors.
"Currency Agreement" means any foreign exchange contract, currency
swap agreement or other similar agreement or arrangement designed to protect the
Company or any Restricted Subsidiary of the Company against fluctuations in
currency values.
"Default" means an event or condition the occurrence of which is, or
with the lapse of time or the giving of notice or both would be, an Event of
Default.
"Depository" means The Depository Trust Company, its nominees and
their respective successors and assigns, or such other depository institution
hereinafter appointed by the Company.
"Designated Senior Indebtedness" means (i) the Bank Indebtedness and
(ii) any other Senior Indebtedness which, at the date of determination, has an
aggregate principal amount outstanding of, or under which, at the date of
determination, the holders thereof, are committed to lend up to, at least $25
million and is specifically designated by the Company in the instrument
evidencing or governing such Senior Indebtedness or another writing as
"Designated Senior Indebtedness" for purposes of this Indenture.
"Disqualified Capital Stock" means that portion of any Capital Stock
which, by its terms (or by the terms of any security into which it is
convertible or for which it is exchangeable), or upon the happening of any event
(other than an event which would constitute a Change of Control Triggering
<PAGE> 16
9
Event), matures (excluding any maturity as the result of an optional redemption
by the issuer thereof) or is mandatorily redeemable, pursuant to a sinking fund
obligation or otherwise, or is redeemable at the sole option of the holder
thereof (except, in each case, upon the occurrence of a Change of Control
Triggering Event) on or prior to the final maturity date of the Securities.
"Equity Offering" means an offering of Qualified Capital Stock of the
Company.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"fair market value" means, unless otherwise specified, with respect to
any asset or property, the price which could be negotiated in an arm's-length,
free market transaction, for cash, between a willing seller and a willing and
able buyer, neither of whom is under undue pressure or compulsion to complete
the Transactions. Fair market value shall be determined by the Board of
Directors of the Company acting reasonably and in good faith and shall be
evidenced by a resolution of the Board of Directors of the Company delivered to
the Trustee.
"GAAP" means generally accepted accounting principles in the United
States of America as in effect on the Issue Date, including, without limitation,
those set forth in the opinions and pronouncements of the Accounting Principles
Board of the American Institute of Certified Public Accountants and statements
and pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as approved by a significant segment of the
accounting profession.
"guarantee" means any obligation, contingent or otherwise, of any
Person directly or indirectly guaranteeing any Indebtedness of any other Person
and any obligation, direct or indirect, contingent or otherwise, of such Person
(i) to purchase or pay (or advance or supply funds for the purchase or payment
of) such Indebtedness of such other Person (whether arising by virtue of
partnership arrangements, or by agreement to keep-well, to purchase assets,
goods, securities or services, to take-or-pay, or to maintain financial
statement conditions or otherwise) or (ii) entered into for purposes of assuring
in any other manner the obligee of such Indebtedness of the payment thereof or
to protect such obligee against loss in respect thereof (in whole or in part);
PROVIDED, HOWEVER, that the term "guarantee" shall not include endorsements for
collection or deposit in the ordinary course of business.
"Guarantee" means the guarantee of the Subsidiary Guarantors set forth
in Article XI and any additional guarantee of the Securities executed by any
Subsidiary of the Company as evidenced by a supplemental indenture substantially
in the form of Exhibit D.
<PAGE> 17
10
"Guarantor Senior Indebtedness" means, with respect to any Subsidiary
Guarantor, (i) any Indebtedness of such Subsidiary Guarantor under the Bank
Credit Agreement or in respect of Bank Indebtedness and (ii) all Indebtedness of
such Subsidiary Guarantor, including in the case of both (i) and (ii) interest
thereon (including interest accruing on or after the filing of any petition in
bankruptcy or for reorganization relating to such Subsidiary Guarantor whether
or not a claim for post-filing interest is allowed in such proceedings), whether
outstanding on the Issue Date or thereafter incurred, unless in the instrument
creating or evidencing the same or pursuant to which the same is outstanding it
is expressly provided that such obligations are not superior in right of payment
to the Guarantee of such Subsidiary Guarantor; PROVIDED, HOWEVER, that Guarantor
Senior Indebtedness shall not include (1) any obligation of such Subsidiary
Guarantor to a Subsidiary of such Subsidiary Guarantor or to any Subsidiary of
the Company, (2) any liability for Federal, state, local or other taxes owed or
owing by such Subsidiary Guarantor, (3) any accounts payable or other liability
to trade creditors arising in the ordinary course of business (including
guarantees thereof or instruments evidencing such liabilities), (4) any
Indebtedness of such Subsidiary Guarantor which is expressly subordinate in
right of payment to any other Indebtedness of such Subsidiary Guarantor, (5) any
obligations with respect to any Capital Stock or (6) that portion of any
indebtedness incurred in violation of Section 4.3 (but, as to any such
obligation, no such violation shall be deemed to exist for purposes of this
clause (6) if the holder(s) of such obligation or their representative and the
Trustee shall have received an Officers' Certificate of such Subsidiary
Guarantor to the effect that the incurrence of such Indebtedness does not (or,
in the case of revolving credit Indebtedness, that the incurrence of the entire
committed amount thereof at the date on which the initial borrowing thereunder
is made would not) violate such provisions of this Indenture).
"Holder" or "Securityholder" means the Person in whose name a Security
is registered on the Registrar's books.
"Indebtedness" means with respect to any Person, without duplication,
(i) all obligations of such Person for borrowed money, (ii) all obligations of
such Person evidenced by bonds, debentures, notes or other similar instruments,
(iii) all Capitalized Lease Obligations of such Person, (iv) all obligations of
such Person issued or assumed as the deferred purchase price of property, all
conditional sale obligations and all obligations under any title retention
agreement (but excluding trade accounts payable arising in the ordinary course
of business), (v) all obligations for the reimbursement of any obligor on any
letter of credit, banker's acceptance or similar credit transaction, (vi)
guarantees and other contingent obligations in respect of Indebtedness referred
to in clauses (i) through (v) above and clause (viii) below, (vii) all
obligations
<PAGE> 18
11
of any other Person of the type referred to in clauses (i) through (vi) which
are secured by any lien on any property or asset of such Person but which
obligations are not assumed by such Person, the amount of such obligation being
deemed to be the lesser of the fair market value of such property or asset or
the amount of the obligation so secured, (viii) all obligations under currency
swap agreements and interest swap agreements of such Person and (ix) all
Disqualified Capital Stock issued by such Person with the amount of Indebtedness
represented by such Disqualified Capital Stock being equal to the greater of its
voluntary or involuntary liquidation preference and its maximum fixed repurchase
price, but excluding accrued dividends, if any. For purposes hereof, (x) the
"maximum fixed repurchase price" of any Disqualified Capital Stock which does
not have a fixed repurchase price shall be calculated in accordance with the
terms of such Disqualified Capital Stock as if such Disqualified Capital Stock
were purchased on any date on which Indebtedness shall be required to be
determined pursuant to this Indenture, and if such price is based upon, or
measured by, the fair market value of such Disqualified Capital Stock, such fair
market value shall be determined reasonably and in good faith by the Board of
Directors of the issuer of such Disqualified Capital Stock and (y) any transfer
of accounts receivable or other assets which constitute a sale for purposes of
GAAP shall not constitute Indebtedness hereunder.
"Indenture" means this Indenture as amended or supplemented from time
to time.
"Interest Swap Obligations" means the obligations of any Person,
pursuant to any arrangement with any other Person, whereby, directly or
indirectly, such Person is entitled to receive from time to time periodic
payments calculated by applying either a floating or a fixed rate of interest on
a stated notional amount in exchange for periodic payments made by such other
Person calculated by applying a fixed or a floating rate of interest on the same
notional amount.
"Investment" means, with respect to any Person, any direct or indirect
loan or other extension of credit (including, without limitation, a guarantee)
or capital contribution to (by means of any transfer of cash or other property
to others or any payment for property or services for the account or use of
others), or any purchase or acquisition by such Person of any Capital Stock,
bonds, notes, debentures or other securities or evidences of Indebtedness issued
by, any Person. "Investment" shall exclude extensions of trade credit by the
Company and its Restricted Subsidiaries on commercially reasonable terms in
accordance with normal trade practices of the Company or such Restricted
Subsidiary, as the case may be. For the purposes of Section 4.4, (i)
"Investment" shall include and be valued at the fair market value of the net
assets of any Restricted Subsidiary at the time that such Restricted Subsidiary
is designated an Unrestricted Subsidiary and shall exclude the fair market value
<PAGE> 19
12
of the net assets of any Unrestricted Subsidiary at the time that such
Unrestricted Subsidiary is designated a Restricted Subsidiary and (ii) the
amount of any Investment shall be the original cost of such Investment plus the
cost of all additional Investments by the Company or any of its Restricted
Subsidiaries, without any adjustments for increases or decreases in value, or
write-ups, write-downs or write-offs with respect to such Investment, reduced by
the payment of dividends or distributions (including tax sharing payments) in
connection with such Investment or any other amounts received in respect of such
Investment; PROVIDED that no such payment of dividends or distributions or
receipt of any such other amounts shall reduce the amount of any Investment if
such payment of dividends or distributions or receipt of any such amounts would
be included in Consolidated Net Income. If the Company or any Restricted
Subsidiary of the Company sells or otherwise disposes of any common stock of any
direct or indirect Restricted Subsidiary of the Company such that, after giving
effect to any such sale or disposition, the Company no longer owns, directly or
indirectly, 100% (or 80% in the case of clause (ix) of the definition of
"PERMITTED INVESTMENTS") of the outstanding common stock of such Restricted
Subsidiary, the Company shall be deemed to have made an Investment on the date
of any such sale or disposition equal to the fair market value of the common
stock of such Restricted Subsidiary not sold or disposed of.
"Issue Date" means the date of original issuance of the Securities.
"Legal Holiday" has the meaning ascribed in Section 13.8.
"Lien" means any lien, mortgage, deed of trust, pledge, security
interest, charge or encumbrance of any kind (including any conditional sale or
other title retention agreement, any lease in the nature thereof and any
agreement to give any security interest).
"Merger" means the merger of Lite Acquisition Corp., a Delaware
corporation, with and into the Company pursuant to the Recapitalization
Agreement.
"Minimum Rating" means either (i) a rating of at least BBB- (or
equivalent successor rating) by S&P or (ii) a rating of at least Baa3 (or
equivalent successor rating) by Moody's.
"Moody's" means Moody's Investors Service, Inc. and its successors.
"Net Cash Proceeds" means, with respect to any Asset Sale, the
proceeds in the form of cash or Cash Equivalents including payments in respect
of deferred payment obligations when received in the form of cash or Cash
Equivalents (other than the portion of any such deferred payment constituting
interest)
<PAGE> 20
13
received by the Company or any of its Subsidiaries from such Asset Sale net of
(a) out-of-pocket expenses and fees relating to such Asset Sale (including,
without limitation, legal, accounting and investment banking fees and sales
commissions), (b) taxes paid or payable after taking into account any reduction
in consolidated tax liability due to available tax credits or deductions and any
tax sharing arrangements, (c) repayment of Senior Indebtedness that is required
to be repaid in connection with such Asset Sale, (d) any portion of cash
proceeds which the Company determines in good faith should be reserved for
post-closing adjustments, it being understood and agreed that on the day that
all such post-closing adjustments have been determined, the amount (if any) by
which the reserved amount in respect of such Asset Sale exceeds the actual
post-closing adjustments payable by the Company or any of its Subsidiaries shall
constitute Net Cash Proceeds on such date; PROVIDED that, in the case of the
sale by the Company of an asset constituting an Investment (other than a
Permitted Investment), the "Net Cash Proceeds" in respect of such Asset Sale
shall not include the lesser of (x) the cash received with respect to such Asset
Sale and (y) the initial amount of such Investment, less, in the case of clause
(y), all amounts (up to an amount not to exceed the initial amount of such
Investment) received by the Company with respect to such Investment, whether by
dividend, sale, liquidation or repayment, in each case prior to the date of such
Asset Sale.
"Obligations" means all obligations for principal, premium, interest,
penalties, fees, indemnifications, reimbursements, damages and other liabilities
payable under the documentation governing any Indebtedness, without duplication.
"Offering Memorandum" means the Offering Memorandum dated December 13,
1996 relating to the Initial Notes; PROVIDED that after the issuance of Exchange
Notes, all references herein to "Offering Memorandum" shall be deemed references
to the prospectus relating to the Exchange Notes.
"Officer" means the Chairman of the Board, the President, any Vice
President, the Treasurer or the Secretary of the Company, as applicable.
"Officers' Certificate" means a certificate signed by two Officers.
"Opinion of Counsel" means a written opinion from legal counsel who is
reasonably acceptable to the Trustee. The counsel may be an employee of or
counsel to the Company or the Trustee.
"Permitted Indebtedness" means, without duplication, (i) the
Securities and the obligations under the Guarantees, (ii) Indebtedness incurred
pursuant to the Bank Credit Agreement in an aggregate principal amount at any
time outstanding not to exceed $180 million (A) less the aggregate amount of
Indebtedness of a
<PAGE> 21
14
Receivables Entity in a Qualified Receivables Transaction, (B) less the amount
of all mandatory principal payments actually made by the Company in respect of
term loans thereunder (excluding (1) any such payments to the extent refinanced
at the time of payment under a replaced Bank Credit Agreement and (2) any such
payments relating to the Sale of Excluded Assets in an aggregate amount not to
exceed $30 million) and (C) in the case of a revolving facility, reduced by any
required permanent repayments (which are accompanied by a corresponding
permanent commitment reduction) thereunder, (iii) other Indebtedness of the
Company and its Restricted Subsidiaries outstanding on the Issue Date reduced by
the amount of any scheduled amortization payments or mandatory prepayments when
actually paid or permanent reductions thereon, (iv) Interest Swap Obligations of
the Company or any of its Restricted Subsidiaries covering Indebtedness of the
Company or any of its Restricted Subsidiaries; PROVIDED that any Indebtedness to
which any such Interest Swap Obligations correspond is otherwise permitted to be
incurred under this Indenture; PROVIDED, FURTHER, that such Interest Swap
Obligations are entered into, in the judgment of the Company, to protect the
Company and its Restricted Subsidiaries from fluctuation in interest rates on
their respective outstanding Indebtedness, (v) Indebtedness under Currency
Agreements, (vi) intercompany Indebtedness owed by the Company to any Wholly
Owned Restricted Subsidiary of the Company or by any Restricted Subsidiary of
the Company to the Company or any Wholly Owned Restricted Subsidiary of the
Company, (vii) Acquired Indebtedness of the Company or any Restricted Subsidiary
of the Company to the extent the Company could have incurred such Indebtedness
in accordance with Section 4.3 on the date such Indebtedness became Acquired
Indebtedness; PROVIDED that, in the case of Acquired Indebtedness of a
Restricted Subsidiary of the Company, such Acquired Indebtedness was not
incurred in connection with, or in anticipation or contemplation of, such Person
becoming a Restricted Subsidiary of the Company, (viii) guarantees by the
Company and its Wholly Owned Restricted Subsidiaries of each other's
Indebtedness; PROVIDED that such Indebtedness is permitted to be incurred
hereunder, including, with respect to guarantees by Wholly Owned Restricted
Subsidiaries of the Company, Section 4.11, (ix) Indebtedness arising from the
honoring by a bank or other financial institution of a check, draft or other
similar instrument inadvertently drawn against insufficient funds in the
ordinary course of business; PROVIDED that such Indebtedness is extinguished
within five business days of its incurrence, (x) any refinancing, modification,
replacement, renewal, restatement, refunding, deferral, extension, substitution,
supplement, reissuance or resale of existing or future Indebtedness, including
any additional Indebtedness incurred to pay interest or premiums required by the
instruments governing such existing or future Indebtedness as in effect at the
time of issuance thereof ("REQUIRED PREMIUMS") and fees in connection therewith;
PROVIDED that any such event shall not (1) result in an increase in the
aggregate principal amount of Permitted Indebtedness (except to the extent such
increase is a result of a simultaneous incurrence
<PAGE> 22
15
of additional Indebtedness (A) to pay Required Premiums and related fees or (B)
otherwise permitted to be incurred under this Indenture) of the Company and its
Restricted Subsidiaries and (2) create Indebtedness with a Weighted Average Life
to Maturity at the time such Indebtedness is incurred that is less than the
Weighted Average Life to Maturity at such time of the Indebtedness being
refinanced, modified, replaced, renewed, restated, refunded, deferred, extended,
substituted, supplemented, reissued or resold (except that this subclause (2)
will not apply in the event the Indebtedness being refinanced, modified,
replaced, renewed, restated, refunded, deferred, extended, substituted,
supplemented, reissued or resold was originally incurred in reliance upon clause
(vi) or (xvi) of this definition); PROVIDED that no Restricted Subsidiary of the
Company that is not a Subsidiary Guarantor may refinance any Indebtedness
pursuant to this clause (x) other than its own Indebtedness, (xi) Indebtedness
(including Capitalized Lease Obligations) incurred by the Company or any of its
Restricted Subsidiaries to finance the purchase, lease or improvement of
property (real or personal) or equipment (whether through the direct purchase of
assets or the Capital Stock of any Person owning such assets) in an aggregate
principal amount outstanding not to exceed $5 million at the time of any
incurrence thereof (which amount may, but need not, be incurred in whole or in
part under the Bank Credit Agreement), (xii) the incurrence by a Receivables
Entity of Indebtedness in a Qualified Receivables Transaction that is not
recourse to the Company or any Subsidiary of the Company (except for Standard
Securitization Undertakings), (xiii) Indebtedness incurred by the Company or any
of its Restricted Subsidiaries constituting reimbursement obligations with
respect to letters of credit issued in the ordinary course of business,
including, without limitation, letters of credit in respect of workers'
compensation claims or self-insurance, or other Indebtedness with respect to
reimbursement type obligations regarding workers' compensation claims, (xiv)
Indebtedness arising from agreements of the Company or a Restricted Subsidiary
of the Company providing for indemnification, adjustment of purchase price, earn
out or other similar obligations, in each case, incurred or assumed in
connection with the disposition of any business, assets or a Restricted
Subsidiary of the Company, other than guarantees of Indebtedness incurred by any
Person acquiring all or any portion of such business, assets or Restricted
Subsidiary for the purpose of financing such acquisition, PROVIDED that the
maximum assumable liability in respect of all such Indebtedness shall at no time
exceed the gross proceeds actually received by the Company and its Restricted
Subsidiaries in connection with such disposition, (xv) obligations in respect of
performance and surety bonds and completion guarantees provided by the Company
or any Restricted Subsidiary of the Company in the ordinary course of business,
and (xvi) additional Indebtedness of the Company and its Restricted Subsidiaries
in an aggregate principal amount not to exceed $10 million at any one time
outstanding (which amount may, but need
<PAGE> 23
16
not, be incurred in whole or in part under the Bank Credit Agreement).
"Permitted Investments" means (i) Investments by the Company or any
Restricted Subsidiary of the Company in any Wholly Owned Restricted Subsidiary
of the Company (whether existing on the Issue Date or created thereafter) and
Investments in the Company by any Restricted Subsidiary of the Company; PROVIDED
that, in the case of an Investment by the Company or any Restricted Subsidiary
of the Company in any Wholly Owned Restricted Subsidiary of the Company, such
Wholly Owned Restricted Subsidiary is not restricted from making dividends or
similar distributions by contract, operation of law or otherwise; (ii) cash and
Cash Equivalents; (iii) Investments existing on the Issue Date and Investments
made on the Issue Date pursuant to the Recapitalization Agreement; (iv) loans
and advances to employees and officers of the Company and its Restricted
Subsidiaries not in excess of $1 million at any one time outstanding; (v)
accounts receivable created or acquired in the ordinary course of business; (vi)
Currency Agreements and Interest Swap Obligations entered into in the ordinary
course of the Company's or its Restricted Subsidiaries' businesses and otherwise
in compliance with this Indenture; (vii) Investments in securities of trade
creditors or customers received pursuant to any plan of reorganization or
similar arrangement upon the bankruptcy or insolvency of such trade creditors or
customers; (viii) guarantees by the Company or any of its Restricted
Subsidiaries of Indebtedness otherwise permitted to be incurred by the Company
or any of its Restricted Subsidiaries under this Indenture; (ix) Investments by
the Company or any Restricted Subsidiary of the Company in a Person, if as a
result of such Investment (A) such Person becomes a Wholly-Owned Restricted
Subsidiary of the Company or (B) such Person is merged, consolidated or
amalgamated with or into, or transfers or conveys all or substantially all of
its assets to, or is liquidated into, the Company or a Wholly Owned Restricted
Subsidiary of the Company; (x) additional Investments having an aggregate fair
market value, taken together with all other Investments made pursuant to this
clause (x) that are at the time outstanding, not exceeding $2 million at the
time of such Investment (with the fair market value of each Investment being
measured at the time made and without giving effect to subsequent changes in
value), plus an amount equal to (A) 100% of the aggregate net cash proceeds
received by the Company from any Person (other than a Subsidiary of the Company)
from the issuance and sale subsequent to the Issue Date of Qualified Capital
Stock of the Company (including Qualified Capital Stock issued upon the
conversion of convertible Indebtedness or in exchange for outstanding
Indebtedness or as capital contributions to the Company (other than from a
Subsidiary)) and (B) without duplication of any amounts included in clause
(x)(A) above, 100% of the aggregate net cash proceeds of any equity contribution
received by the Company from a holder of the Company's Capital Stock, that in
the case of amounts described in clause (x)(A) or (x)(B) are applied by the
Company within 180 days after receipt,
<PAGE> 24
17
to make additional Permitted Investments under this clause (x) (such additional
Permitted Investments being referred to collectively as "STOCK PERMITTED
INVESTMENTS"); (xi) any Investment by the Company or a Wholly Owned Subsidiary
of the Company in a Receivables Entity or any Investment by a Receivables Entity
in any other Person in connection with a Qualified Receivables Transaction;
PROVIDED that any Investment in a Receivables Entity is in the form of a
Purchase Money Note or an equity interest; (xii) Investments received by the
Company or its Restricted Subsidiaries as consideration for asset sales,
including Asset Sales; PROVIDED in the case of an Asset Sale, such Asset Sale is
effected in compliance with Section 4.6. Any net cash proceeds that are used by
the Company or any of its Restricted Subsidiaries to make Stock Permitted
Investments pursuant to clause (x) of this definition shall not be included in
subclauses (x) and (y) of clause (iii) of Section 4.4(a).
"Permitted Liens" means the following types of Liens:
(i) Liens for taxes, assessments or governmental charges or claims either
(a) not delinquent or (b) contested in good faith by appropriate proceedings and
as to which the Company or its Restricted Subsidiaries shall have set aside on
its books such reserves as may be required pursuant to GAAP;
(ii) statutory Liens of landlords and Liens of carriers, warehousemen,
mechanics, suppliers, materialmen, repairmen and other Liens imposed by law
incurred in the ordinary course of business for sums not yet delinquent or being
contested in good faith, if such reserve or other appropriate provision, if any,
as shall be required by GAAP shall have been made in respect thereof;
(iii)Liens incurred or deposits made in the ordinary course of business in
connection with workers' compensation, unemployment insurance and other types of
social security, including any Lien securing letters of credit issued in the
ordinary course of business consistent with past practice in connection
therewith, or to secure the performance of tenders, statutory obligations,
surety and appeal bonds, bids, leases, government contracts, performance and
return-of-money bonds and other similar obligations (exclusive of obligations
for the payment of borrowed money);
(iv) judgment Liens not giving rise to an Event of Default;
(v) easements, rights-of-way, zoning restrictions and other similar charges
or encumbrances in respect of real property not interfering in any material
respect with the ordinary conduct of the business of the Company or any of its
Restricted Subsidiaries;
(vi) any interest or title of a lessor under any Capitalized Lease
Obligation;
<PAGE> 25
18
(vii)purchase money Liens to finance property or assets of the Company or
any Restricted Subsidiary of the Company acquired in the ordinary course of
business; PROVIDED, HOWEVER, that (A) the related purchase money Indebtedness
shall not exceed the cost of such property or assets and shall not be secured by
any property or assets of the Company or any Restricted Subsidiary of the
Company other than the property and assets so acquired and (B) the Lien securing
such Indebtedness shall be created within 90 days of such acquisition;
(viii)Liens upon specific items of inventory or other goods and proceeds of
any Person securing such Person's obligations in respect of bankers' acceptances
issued or created for the account of such Person to facilitate the purchase,
shipment, or storage of such inventory or other goods;
(ix) Liens securing reimbursement obligations with respect to commercial
letters of credit which encumber documents and other property relating to such
letters of credit and products and proceeds thereof;
(x) Liens encumbering deposits made to secure obligations arising from
statutory, regulatory, contractual, or warranty requirements of the Company or
any of its Restricted Subsidiaries, including rights of offset and set-off;
(xi) Liens securing Interest Swap Obligations which Interest Swap
Obligations relate to Indebtedness that is otherwise permitted under this
Indenture;
(xii)Liens securing Indebtedness under Currency Agreements;
(xiii)Liens securing Acquired Indebtedness incurred in reliance on clause
(vii) of the definition of Permitted Indebtedness; PROVIDED that such Liens do
not extend to or cover any property or assets of the Company or of any of its
Restricted Subsidiaries other than the property or assets that secured the
Acquired Indebtedness prior to the time such Indebtedness became Acquired
Indebtedness of the Company or a Restricted Subsidiary of the Company;
(xiv)Liens on assets transferred to a Receivables Entity or on assets of a
Receivables Entity, in either case incurred in connection with a Qualified
Receivables Transaction;
(xv) leases or subleases granted to others that do not materially interfere
with the ordinary course of business of the Company and its Restricted
Subsidiaries;
(xvi)Liens arising from filing Uniform Commercial Code financing statements
regarding leases;
(xvii)Liens on property of a Person existing at the time such Person is
acquired by, or such Person is merged into or
<PAGE> 26
19
consolidated or amalgamated with, the Company or any Restricted Subsidiary of
the Company; PROVIDED that such Liens were not created in contemplation of such
acquisition, merger, consolidation or amalgamation and do not extend to any
assets other than those of the Person acquired by, or merged into or
consolidated or amalgamated with, the Company or any Restricted Subsidiary of
the Company.
(xviii)Liens in favor of customs and revenue authorities arising as a
matter of law to secure payment of custom duties in connection with the
importation of goods; and
(xix)Liens existing on the Issue Date, together with any Liens securing
Indebtedness incurred in reliance on clause (x) of the definition of Permitted
Indebtedness in order to refinance the Indebtedness secured by Liens existing on
the Issue Date; PROVIDED that the Liens securing the refinancing Indebtedness
shall not extend to property other than that pledged under the Liens securing
the Indebtedness being refinanced.
"Person" means an individual, partnership, corporation, unincorporated
organization, trust or joint venture, or a governmental agency or political
subdivision thereof.
"Preferred Stock" of any Person means any Capital Stock of such Person
that has preferential rights to any other Capital Stock of such Person with
respect to dividends or redemptions or upon liquidation.
"Principal" means Thomas H. Lee Company.
"Productive Assets" means assets (including Capital Stock) of a kind
used or usable in the businesses of the Company and its Restricted Subsidiaries
as, or related to such business, conducted on the date of the relevant Asset
Sale.
"Purchase Money Note" means a promissory note of a Receivables Entity
evidencing a line of credit, which may be irrevocable, from the Company or any
Subsidiary of the Company in connection with a Qualified Receivables Transaction
to a Receivables Entity, which note shall be repaid from cash available to the
Receivables Entity, other than amounts required to be established as reserves
pursuant to agreements, amounts paid to investors in respect of interest,
principal and other amounts owing to such investors and amounts owing to such
investors and amounts paid in connection with the purchase of newly generated
receivables.
"QIB" means any "qualified institutional buyer" (as defined under the
Securities Act).
"Qualified Capital Stock" means any stock that is not Disqualified
Capital Stock.
<PAGE> 27
20
"Qualified Receivables Transaction" means any transaction or series of
transactions that may be entered into by the Company or any of its Subsidiaries
pursuant to which the Company or any or its Subsidiaries may sell, convey or
otherwise transfer to (a) a Receivables Entity (in the case of a transfer by the
Company or any of its Subsidiaries) and (b) any other Person (in the case of a
transfer by a Receivables Entity), or may grant a security interest in, any
accounts receivable (whether now existing or arising in the future) of the
Company or any of its Subsidiaries, and any assets related thereto including,
without limitation, all collateral securing such accounts receivable, all
contracts and all guarantees or other obligations in respect of such accounts
receivable, proceeds of such accounts receivable and other assets which are
customarily transferred or in respect of which security interests are
customarily granted in connection with asset securitization transactions
involving accounts receivable.
"Recapitalization Agreement" means the Recapitalization Agreement and
Plan of Merger and Stock Purchase Agreement, dated as of November 8, 1996, among
the Company, Lear Siegler Holdings Corp., Lite Acquisition Corp., LSNWY Corp.,
The LS Selling Stockholders and L.S. Acquisition Corp.
"Receivables Entity" means a Wholly Owned Subsidiary of the Company
(or another Person in which the Company or any Subsidiary of the Company makes
an Investment and to which the Company or any Subsidiary of the Company
transfers accounts receivable and related assets) which engages in no activities
other than in connection with the financing of accounts receivable and which is
designated by the Board of Directors of the Company (as provided below) as a
Receivables Entity (a) no portion of the Indebtedness or any other Obligations
(contingent or otherwise) of which (i) is guaranteed by the Company or any
Subsidiary of the Company (excluding guarantees of Obligations (other than the
principal of, and interest on, Indebtedness) pursuant to Standard Securitization
Undertakings), (ii) is recourse to or obligates the Company or any Subsidiary of
the Company in any way other than pursuant to Standard Securitization
Undertakings or (iii) subjects any property or asset of the Company or any
Subsidiary of the Company, directly or indirectly, contingently or otherwise, to
the satisfaction thereof, other than pursuant to Standard Securitization
Undertakings, (b) with which neither the Company nor any Subsidiary of the
Company has any material contract, agreement, arrangement or understanding other
than on terms no less favorable to the Company or such Subsidiary than those
that might be obtained at the time from Persons that are not Affiliates of the
Company, other than fees payable in the ordinary course of business in
connection with servicing accounts receivable, and (c) to which neither the
Company nor any Subsidiary of the Company has any obligation to maintain or
preserve such entity's financial condition or cause such entity to achieve
certain levels of operating results. Any such designation by the Board of
Directors of the Company shall
<PAGE> 28
21
be evidenced to the Trustee by filing with the Trustee a certified copy of the
resolution of the Board of Directors of the Company giving effect to such
designation and an Officers' Certificate certifying that such designation
complied with the foregoing conditions.
"Redemption Event" shall mean (i) an underwritten initial public
offering of the common stock of the Company or (ii) a Change of Control.
"Registered Exchange Offer" shall have the meaning set forth in the
Registration Rights Agreement.
"Registration Rights Agreement" means the Exchange and Registration
Rights Agreement, dated December 20, 1996, among the Company, Chase Securities
Inc., BT Securities Corporation and Smith Barney Inc.
"Related Party" means Thomas H. Lee Company and any Affiliate of
Thomas H. Lee Company.
"Representative" means the indenture trustee or other trustee, agent
or representative in respect of any Designated Senior Indebtedness; PROVIDED
that if, and for so long as, any Designated Senior Indebtedness lacks such a
representative, then the Representative for such Designated Senior Indebtedness
shall at all times constitute the holders of a majority in outstanding principal
amount of such Designated Senior Indebtedness in respect of any Designated
Senior Indebtedness.
"Restricted Subsidiary" of any Person means any Subsidiary of such
Person which at the time of determination is not an Unrestricted Subsidiary.
"Sale of Excluded Assets" means an individual Asset Sale which results
in net proceeds of no less than $10 million and relates exclusively to property,
plant and equipment existing on the Issue Date, together with improvements,
repairs, modifications and additions thereon in the ordinary course of business.
"S&P" means Standard & Poor's Ratings Service, a division of The
McGraw-Hill Companies, Inc. and its successors.
"Sale and Leaseback Transaction" means any direct or indirect
arrangement with any Person or to which any such Person is a party, providing
for the leasing to the Company or a Restricted Subsidiary of any property,
whether owned by the Company or any Restricted Subsidiary at the Issue Date or
later acquired, which has been or is to be sold or transferred by the Company or
such Restricted Subsidiary to such Person or to any other Person from whom funds
have been or are to be advanced by such Person on the security of such Property.
<PAGE> 29
22
"Secured Indebtedness" means any Indebtedness of the Company secured
by a Lien.
"Securityholder" or "Holder" means the Person in whose name a Security
is registered on the Registrar's books.
"Senior Indebtedness" means (i) the Bank Indebtedness and (ii) all
Indebtedness of the Company, including interest thereon (including interest
accruing on or after the filing of any petition in bankruptcy or for
reorganization relating to the Company or any Restricted Subsidiary of the
Company whether or not a claim for post-filing interest is allowed in such
proceedings), whether outstanding on the Issue Date or thereafter incurred,
unless in the instrument creating or evidencing the same or pursuant to which
the same is outstanding it is expressly provided that such obligations are not
superior in right of payment to the Securities; PROVIDED, HOWEVER, that Senior
Indebtedness shall not include (1) any obligation of the Company to any
Subsidiary of the Company, (2) any liability for Federal, state, local or other
taxes owed or owing by the Company, (3) any accounts payable or other liability
to trade creditors arising in the ordinary course of business (including
guarantees thereof or instruments evidencing such liabilities), (4) any
Indebtedness of the Company which is expressly subordinate in right of payment
to any other Indebtedness of the Company, including any Senior Subordinated
Indebtedness and any Subordinated Obligations, (5) any obligations with respect
to any Capital Stock or (6) that portion of any Indebtedness incurred in
violation of Section 4.3 (but, as to any such obligation, no such violation
shall be deemed to exist for purposes of this clause (6) if the holders(s) of
such obligation or their representative and the Trustee shall have received an
Officers' Certificate of the Company to the effect that the incurrence of such
Indebtedness does not (or, in the case of revolving credit Indebtedness, that
the incurrence of the entire committed amount thereof at the date on which the
initial borrowing thereunder is made would not) violate such provisions of this
Indenture).
"Senior Subordinated Indebtedness" means the Securities and any other
Indebtedness of the Company that specifically provides that such Indebtedness is
to rank pari passu with the Securities and is not by its express terms
subordinate in right of payment to any Indebtedness of the Company which is not
Senior Indebtedness.
"Shelf Registration Statement" has the meaning ascribed thereto in the
Registration Rights Agreement.
"Significant Subsidiary" means, as of any date of determination, for
any Person, each Restricted Subsidiary of such Person which (i) for the most
recent fiscal year of such Person accounted for more than 10% of consolidated
revenues or consolidated net income of such Person or (ii) as at the end of
<PAGE> 30
23
such fiscal year, was the owner of more than 10% of the consolidated assets of
such Person.
"Standard Securitization Undertakings" means representations,
warranties, covenants and indemnities entered into by the Company or any
Subsidiary of the Company which are reasonably customary in an accounts
receivable transaction.
"Stated Maturity" means, with respect to any security, the date
specified in such security as the fixed date on which the payment of principal
of such security is due and payable, including pursuant to any mandatory
redemption provision.
"Subordinated Obligation" means any Indebtedness of the Company
(whether outstanding on the Issue Date or thereafter incurred) which is
expressly subordinate in right of payment to the Securities pursuant to a
written agreement.
"Subsidiary" means, with respect to any Person, (i) any corporation of
which the outstanding Capital Stock having at least a majority of the votes
entitled to be cast in the election of directors under ordinary circumstances
shall at the time be owned, directly or indirectly, by such Person or (ii) any
other Person of which at least a majority of the voting interest under ordinary
circumstances is at the time, directly or indirectly, owned by such Person.
"Subsidiary Guarantor" means (i) each of the Company's Subsidiaries
existing on the Issue Date that has guaranteed the Indebtedness under the Bank
Credit Agreement and (ii) each of the Company's Subsidiaries that in the future
executes a supplemental indenture in which such Subsidiary agrees to be bound by
the terms of this Indenture as a Subsidiary Guarantor whether pursuant to the
provisions set forth under Section 4.11 or otherwise.
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C.
[sections]77aaa-77bbbb) as in effect on the date of this Indenture.
"Transactions" means the recapitalization, Merger, stock purchase and
the other transactions contemplated by the Recapitalization Agreement and the
related financings.
"Transfer Restricted Securities" means Securities that bear or are
required to bear the legend set forth in Section 2.6 hereof.
"Trust Officer" means any officer of the Trustee assigned by the
Trustee to administer this Indenture, or in the case of a successor trustee, an
officer assigned to the department, division or group performing the corporation
trust work of such successor and assigned to administer this Indenture.
<PAGE> 31
24
"Unrestricted Subsidiary" of any Person means (i) any Subsidiary of
such Person that at the time of determination shall be or continue to be
designated an Unrestricted Subsidiary by the Board of Directors of such Person
in the manner provided below and (ii) any Subsidiary of an Unrestricted
Subsidiary. The Board of Directors may designate any Subsidiary (including any
newly acquired or newly formed Subsidiary) to be an Unrestricted Subsidiary
unless such Subsidiary owns any Capital Stock of, or owns or holds any Lien on
any property of, the Company or any other Subsidiary of the Company that is not
a Subsidiary of the Subsidiary to be so designated; PROVIDED that (x) the
Company certifies to the Trustee that such designation complies with Section 4.4
and (y) each Subsidiary to be so designated and each of its Subsidiaries has not
at the time of designation, and does not thereafter, create, incur, issue,
assume, guarantee or otherwise become directly or indirectly liable with respect
to any Indebtedness pursuant to which the lender has recourse to any of the
assets of the Company or any of its Restricted Subsidiaries. The Board of
Directors may designate any Unrestricted Subsidiary to be a Restricted
Subsidiary only if (x) immediately after giving effect to such designation and
treating all Indebtedness of such Unrestricted Subsidiary as being incurred on
such date, the Company is able to incur at least $1.00 of additional
Indebtedness (other than Permitted Indebtedness) in compliance with Section 4.3
and (y) immediately before and immediately after giving effect to such
designation, no Default or Event of Default shall have occurred and be
continuing. Any such designation by the Board of Directors shall be evidenced to
the Trustee by promptly filing with the Trustee a copy of the resolution giving
effect to such designation and an Officers' Certificate certifying that such
designation complied with the foregoing provisions.
"U.S. Government Obligations" means direct obligations of, and
obligations guaranteed by, the United States of America for the payment of which
the full faith and credit of the United States of America is pledged.
"U.S. Legal Tender" means such coin or currency of the United States
of America as at the time of payment shall be legal tender for the payment of
public and private debts.
"Weighted Average Life to Maturity" means, when applied to any
Indebtedness at any date, the number of years obtained by dividing (a) the then
outstanding aggregate principal amount of such Indebtedness into (b) the sum of
the total of the products obtained by multiplying (i) the amount of each then
remaining installment, sinking fund, serial maturity or other required payment
of principal, including payment at final maturity, in respect thereof, by (ii)
the number of years (calculated to the nearest one-twelfth) which will elapse
between such date and the making of such payment.
<PAGE> 32
25
"Wholly Owned Restricted Subsidiary" of any Person means any
Restricted Subsidiary of such Person of which all the outstanding voting
securities (other than directors' qualifying shares or an immaterial amount of
shares required to be owned by other Persons pursuant to applicable law) are
owned by such Person or any Wholly Owned Restricted Subsidiary of such Person.
SECTION 1.2. Other Definitions.
-----------------
Defined in
Term Section
---- ----------
"Affiliate Transaction"........................... 4.7
"Agent Member".................................... 2.1
"Bankruptcy Law".................................. 6.1
"Blockage Notice"................................. 10.3
"covenant defeasance option"...................... 8.1(b)
"Custodian"....................................... 6.1
"Definitive Securities"........................... 2.1
"Event of Default"................................ 6.1
"Global Security"................................. 2.1(b)
"legal defeasance option"......................... 8.1(b)
"Non-Global Purchaser"............................ 2.1
"Offer" .......................................... 4.6
"pay the Securities".............................. 10.3
"Paying Agent".................................... 2.3
"Payment Blockage Period"......................... 10.3
"Registrar"....................................... 2.3
"Restricted Payment".............................. 4.4
"Rule 144A" ...................................... 2.1(b)
"Successor Company"............................... 5.1
SECTION 1.3. INCORPORATION BY REFERENCE OF TRUST INDENTURE ACT. This
Indenture is subject to the mandatory provisions of the TIA which are
incorporated by reference in and made a part of this Indenture. The following
TIA terms have the following meanings:
"Commission" means the SEC.
"indenture securities" means the Securities.
"indenture security holder" means a Securityholder.
"indenture to be qualified" means this Indenture.
"indenture trustee" or "institutional trustee" means the Trustee.
"obligor" on the indenture securities means the Company and any other
obligor on the indenture securities.
<PAGE> 33
26
All other TIA terms used in this Indenture that are defined by the
TIA, defined by the TIA reference to another statute or defined by SEC rule have
the meanings assigned to them by such definitions.
SECTION 1.4. RULES OF CONSTRUCTION. Unless the context otherwise
requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the meaning assigned
to it in accordance with GAAP;
(3) "or" is not exclusive;
(4) "including" means including without limitation;
(5) words in the singular include the plural and words in the plural
include the singular;
(6) unsecured Indebtedness shall not be deemed to be subordinate or
junior to Secured Indebtedness merely by virtue of its nature as unsecured
Indebtedness;
(7) the principal amount of any noninterest bearing or other discount
security at any date shall be the principal amount thereof that would be
shown on a balance sheet of the issuer dated such date prepared in
accordance with GAAP; and
(8) the principal amount of any Preferred Stock shall be (i) the
maximum liquidation preference of such Preferred Stock or (ii) the maximum
mandatory redemption or mandatory repurchase price with respect to such
Preferred Stock, whichever is greater.
ARTICLE II
The Securities
--------------
SECTION 2.1. FORM AND DATING. (a) The Initial Notes and the Trustee's
certificate of authentication shall be substantially in the form of Exhibit A,
which is hereby incorporated in and expressly made a part of this Indenture. The
Exchange Notes and the Trustee's certificate of authentication shall be
substantially in the form of Exhibit B, which is hereby incorporated by
reference and expressly made a part of this Indenture. The Securities may have
notations, legends or endorsements required by law, stock exchange rule or
usage, in addition to those set forth on Exhibits A and B. The Company and the
Trustee shall approve the forms of the Securities and any notation, endorsement
or legend on them. Each Security shall be dated the date of its authentication.
The terms of the Securities set forth in Exhibit A and Exhibit B are part of the
<PAGE> 34
27
terms of this Indenture and, to the extent applicable, the Company, and the
Trustee, by their execution and delivery of this Indenture, expressly agree to
be bound by such terms.
(b) GLOBAL SECURITIES. The Initial Notes are being offered and sold by
the Company pursuant to a Purchase Agreement, dated December 13, 1996, among the
Company, Chase Securities Inc., BT Securities Corporation and Smith Barney Inc.
(the "PURCHASE AGREEMENT").
Initial Notes offered and sold to a QIB in reliance on Rule 144A under
the Securities Act ("RULE 144A") as provided in the Purchase Agreement, shall be
issued initially in the form of one or more permanent global Securities in
definitive, fully registered form without interest coupons with the Global
Securities Legend and Restricted Securities Legend set forth in Exhibit A hereto
(each, a "GLOBAL SECURITY"), which shall be deposited on behalf of the
purchasers of the Initial Notes represented thereby with the Trustee, at its
corporate trust office, as custodian for the Depository, and registered in the
name of the Depository or a nominee of the Depository, duly executed by the
Company and authenticated by the Trustee as hereinafter provided. The aggregate
principal amount of the Global Securities may from time to time be increased or
decreased by endorsements made on such Global Securities by the Trustee, the
Securities Custodian or the Depository or its nominee as hereinafter provided.
(c) BOOK-ENTRY PROVISIONS. This Section 2.1(c) shall apply only to
Global Securities deposited with the Trustee, as custodian for the Depository
(in such capacity, the "SECURITIES CUSTODIAN").
Members of, or participants in, the Depository ("AGENT MEMBERS") shall
have no rights under this Indenture with respect to any Global Security held on
their behalf by the Depository or by the Trustee as the custodian of the
Depository or under such Global Security, and the Depository may be treated by
the Company, the Trustee and any agent of the Company or the Trustee as the
absolute owner of such Global Security for all purposes whatsoever.
Notwithstanding the foregoing, nothing herein shall prevent the Company, the
Trustee or any agent of the Company or the Trustee from giving effect to any
written certification, proxy or other authorization furnished by the Depository
or impair, as between the Depository and its Agent Members, the operation of
customary practices of the Depository governing the exercise of the rights of a
holder of a beneficial interest in any Global Security.
(d) CERTIFICATED SECURITIES. Except as provided in Section 2.6, owners
of beneficial interests in Global Securities will not be entitled to receive
Definitive Securities (as hereinafter defined). Initial Notes offered and sold
to Persons who are not QIBs (referred to herein as the "NON-GLOBAL
<PAGE> 35
28
PURCHASERS"), as provided in the Purchase Agreement, shall be issued initially
to such Persons in the form of certificated Initial Notes bearing the Restricted
Securities Legend set forth in Exhibit A hereto ("DEFINITIVE SECURITIES");
PROVIDED, HOWEVER, that upon transfer of such Definitive Securities to a QIB,
such Definitive Securities will, unless the Global Security has previously been
exchanged, be exchanged for an interest in a Global Security pursuant to the
provisions of Section 2.6 hereof. Definitive Securities will bear the Restricted
Securities Legend set forth on Exhibit A unless removed in accordance with
Section 2.6(f) hereof.
SECTION 2.2. EXECUTION AND AUTHENTICATION. Two Officers shall sign the
Securities for the Company by manual or facsimile signature. The Company's seal
shall be impressed, affixed, imprinted or reproduced on the Securities and may
be in facsimile form.
If an Officer whose signature is on a Security no longer holds that
office at the time the Trustee authenticates the Security, the Security shall be
valid nevertheless.
A Security shall not be valid until an authorized signatory of the
Trustee manually authenticates the Security. The signature of the Trustee on a
Security shall be conclusive evidence that such Security has been duly and
validly authenticated and issued under this Indenture.
The Trustee shall authenticate and deliver: (1) Initial Notes for
original issue in an aggregate principal amount of $100 million and (2) Exchange
Notes for issue only in a Registered Exchange Offer pursuant to the Registration
Rights Agreement, and only in exchange for Initial Notes of an equal principal
amount, in each case upon a written order of the Company signed by two Officers
or by an Officer and either an Assistant Treasurer or an Assistant Secretary of
the Company. Such order shall specify the amount of the Securities to be
authenticated and the date on which the original issue of Securities is to be
authenticated and whether the Securities are to be Initial Notes or Exchange
Notes. The aggregate principal amount of Securities outstanding at any time may
not exceed $100 million except as provided in Section 2.7.
The Trustee may appoint an agent (the "AUTHENTICATING AGENT")
reasonably acceptable to the Company to authenticate the Securities. Unless
limited by the terms of such appointment, any such Authenticating Agent may
authenticate Securities whenever the Trustee may do so. Each reference in this
Indenture to authentication by the Trustee includes authentication by such
agent.
SECTION 2.3. REGISTRAR AND PAYING AGENT. The Company shall maintain an
office or agency where Securities may be presented for registration of transfer
or for exchange (the
<PAGE> 36
29
"REGISTRAR") and an office or agency where Securities may be presented for
payment (the "PAYING AGENT"). The Registrar shall keep a register of the
Securities and of their transfer and exchange. The Company may have one or more
co-registrars and one or more additional paying agents. The term "Paying Agent"
includes any additional paying agent.
The Company shall enter into an appropriate agency agreement with any
Registrar, Paying Agent or co-registrar not a party to this Indenture, which
shall incorporate the terms of the TIA. The agreement shall implement the
provisions of this Indenture that relate to such agent. The Company shall notify
the Trustee of the name and address of each such agent. If the Company fails to
maintain a Registrar or Paying Agent, the Trustee shall act as such and shall be
entitled to appropriate compensation therefor pursuant to Section 7.7. The
Company or any of its domestically incorporated Wholly Owned Restricted
Subsidiaries may act as Paying Agent, Registrar, co-registrar or transfer agent.
The Company initially appoints the Trustee as Registrar and Paying
Agent for the Securities.
SECTION 2.4. PAYING AGENT TO HOLD MONEY IN TRUST. By at least 10:00
A.M. (New York City time) on the date on which any principal of or interest on
any Security is due and payable, the Company shall deposit with the Paying Agent
a sum sufficient to pay such principal or interest when due. The Company shall
require each Paying Agent (other than the Trustee) to agree in writing that such
Paying Agent shall hold in trust for the benefit of Securityholders or the
Trustee all money held by such Paying Agent for the payment of principal of or
interest on the Securities and shall notify the Trustee of any default by the
Company in making any such payment. If the Company or a Subsidiary acts as
Paying Agent, it shall segregate the money held by it as Paying Agent and hold
it as a separate trust fund. The Company at any time may require a Paying Agent
(other than the Trustee) to pay all money held by it to the Trustee and to
account for any funds disbursed by such Paying Agent. Upon complying with this
Section, the Paying Agent (if other than the Company or a Subsidiary) shall have
no further liability for the money delivered to the Trustee. Upon any
bankruptcy, reorganization or similar proceeding with respect to the Company,
the Trustee shall serve as Paying Agent for the Securities.
SECTION 2.5. SECURITYHOLDER LISTS. The Trustee shall preserve in as
current a form as is reasonably practicable the most recent list available to it
of the names and addresses of Securityholders. If the Trustee is not the
Registrar, the Company shall furnish to the Trustee, in writing at least seven
Business Days before each interest payment date and at such other times as the
Trustee may request in writing, a list in such form and as of such date as the
Trustee may reasonably require of the names and addresses of Securityholders.
<PAGE> 37
30
SECTION 2.6. Transfer and Exchange.
---------------------
(a) TRANSFER AND EXCHANGE OF DEFINITIVE SECURITIES. When Definitive
Securities are presented by a Holder to the Registrar or a co-registrar with a
request:
(x) to register the transfer of such Definitive Securities; or
(y) to exchange such Definitive Securities for an equal principal
amount of Definitive Securities of other authorized denominations,
the Registrar or co-registrar shall register the transfer or make the exchange
as requested if its reasonable requirements for such transaction are met;
PROVIDED, HOWEVER, that:
(i) such Definitive Securities shall be duly endorsed or accompanied
by a written instrument of transfer in form reasonably satisfactory to the
Company and the Registrar or co-registrar, duly executed by such Holder or
his attorney duly authorized in writing; and
(ii) if such Definitive Securities are Transfer Restricted Securities,
such Definitive Securities shall also be accompanied by the following
additional information and documents, as applicable:
(A) if such Transfer Restricted Securities are being delivered to
the Registrar by a Holder for registration in the name of such Holder,
without transfer, a certification from such Holder to that effect (in
the form set forth on the reverse of the Security); or
(B) if such Transfer Restricted Securities are being transferred
(x) to the Company or to a QIB in accordance with Rule 144A under the
Securities Act or (y) pursuant to an effective registration statement
under the Securities Act, a certification from such Holder to that
effect (in the form set forth on the reverse of the Security); or
(C) if such Transfer Restricted Securities are being transferred
(w) pursuant to an exemption from registration in accordance with Rule
144 or Regulation S under the Securities Act; or (x) to an
institutional "accredited investor" within the meaning of Rule
501(a)(1), (2), (3) or (7) under the Securities Act that is acquiring
the security for its own account, or for the account of such an
institutional accredited investor, in each case in a minimum principal
amount of the Securities of $250,000 for investment purposes and not
with a view to, or for offer or sale in connection
<PAGE> 38
31
with, any distribution in violation of the Securities Act; or (y) in
reliance on another exemption from the registration requirements of
the Securities Act: (i) a certification to that effect from such
Holder (in the form set forth on the reverse of the Security), (ii) if
the Company or the Trustee so requests, an Opinion of Counsel
reasonably acceptable to the Company and to the Trustee to the effect
that such transfer is in compliance with the Securities Act and (iii)
in the case of clause (x), a signed letter from the transferee
substantially in the form of Exhibit C hereto.
(b) RESTRICTIONS ON TRANSFER OF A DEFINITIVE SECURITY FOR A BENEFICIAL
INTEREST IN A GLOBAL SECURITY. A Definitive Security may not be exchanged for a
beneficial interest in a Global Security except upon satisfaction of the
requirements set forth below. Upon receipt by the Trustee of a Definitive
Security, duly endorsed or accompanied by appropriate instruments of transfer,
in form satisfactory to the Trustee, together with:
(i) certification, in the form set forth on the reverse of the
Security, to the effect that such Definitive Security is being transferred
to a QIB in accordance with Rule 144A under the Securities Act; and
(ii) written instructions from the Holder thereof directing the
Trustee to make, or to direct the Securities Custodian to make, an
endorsement on the Global Security to reflect an increase in the aggregate
principal amount of the Securities represented by the Global Security,
then the Trustee shall cancel such Definitive Security and cause, or direct the
Securities Custodian to cause, in accordance with the standing instructions and
procedures existing between the Depository and the Securities Custodian, the
aggregate principal amount of Securities represented by the Global Security to
be increased accordingly. If no Global Securities are then outstanding, the
Company shall issue and the Trustee shall authenticate, upon written order of
the Company in the form of an Officers' Certificate, a new Global Security in
the appropriate principal amount. The Trustee shall deliver copies of each
certification and instruction received by it pursuant to clauses (i) and (ii)
above to the Depository and, upon receipt thereof, the Depository shall make
appropriate adjustments to its books and records to reflect exchange of such
Definitive Security for an interest in the Global Security in accordance with
Section 2.6(c).
<PAGE> 39
32
(c) TRANSFER AND EXCHANGE OF GLOBAL SECURITIES. (i) The transfer and
exchange of Global Securities or beneficial interests therein shall be effected
through the Depository, in accordance with this Indenture (including applicable
restrictions on transfer set forth herein, if any) and the procedures of the
Depository therefor.
(ii) A Global Security deposited with the Depository or with the
Trustee as custodian for the Depository pursuant to Section 2.1 shall be
transferred to the beneficial owners thereof only if such transfer complies with
this Section 2.6 and (i) the Depository notifies the Company that it is
unwilling or unable to continue as Depository for such Global Security or if at
any time such Depository ceases to be a "clearing agency" registered under the
Exchange Act and a successor depositary is not appointed by the Company within
90 days of such notice, or (ii) an Event of Default has occurred and is
continuing and the Registrar has received a request from the Depository or the
Trustee to issue Definitive Securities.
(iii) Any Global Security that is transferable to the beneficial
owners thereof pursuant to this Section shall be surrendered by the Depository
to the Trustee to be so transferred, in whole or from time to time in part,
without charge, and the Company shall sign and the Trustee shall authenticate
and deliver, upon such transfer of each portion of such Global Security, an
equal aggregate principal amount of Definitive Securities of authorized
denominations. Each Definitive Security delivered in exchange for any portion of
a Global Security transferred pursuant to this Section shall be executed,
authenticated and delivered only in denominations of $1,000 and any integral
multiple thereof and shall be registered in such names as the Depository shall
direct. Any Definitive Security delivered in exchange for an interest in the
Global Security shall, except as otherwise provided in Section 2.6(f), bear the
Restricted Securities Legend set forth in Exhibit A hereto.
(iv) The registered Holder of a Global Security may grant proxies and
otherwise authorize any Person, including Agent Members and Persons that may
hold interests through Agent Members, to take any action which a Holder is
entitled to take under this Indenture or the Securities.
(v) In the event of the occurrence of either of the events specified
in Section 2.6(c)(ii), the Company will promptly make available to the Trustee a
reasonable supply of certificated Securities in definitive, fully registered
form without interest coupons.
(d) Restriction on Transfer of a Beneficial Interest in a Global
Security for a Definitive Security.
<PAGE> 40
33
(i) Any person having a beneficial interest in a Global Security may
upon request exchange such beneficial interest for a Definitive Security of
the same aggregate principal amount; PROVIDED that such request is
accompanied by the information specified below. Upon receipt by the Trustee
of written instructions (or such other form of instructions as is customary
for the Depository) from the Depository or its nominee on behalf of any
Person having a beneficial interest in a Global Security and, in the case
of a Transfer Restricted Security, the following additional information and
documents (all of which may be submitted by facsimile):
(A) if such beneficial interest is being transferred to the
Person designated by the Depository as being the owner of a beneficial
interest in a Global Security, a certification from such Person to
that effect (in the form set forth on the reverse of the Security); or
(B) if such beneficial interest is being transferred (x) to a QIB
in accordance with Rule 144A under the Securities Act and such QIB
does not desire to hold such transferred interest through beneficial
ownership in a Global Security or (y) pursuant to an effective
registration statement under the Securities Act, a certification from
such person to that effect (in the form set forth on the reverse of
the Security); or
(C) if such beneficial interest is being transferred (w) pursuant
to an exemption from registration in accordance with Rule 144 or
Regulation S under the Securities Act; or (x) to an institutional
"accredited investor" within the meaning of Rule 501(a)(1), (2), (3)
or (7) under the Securities Act that is acquiring the security for its
own account, or for the account of such an institutional accredited
investor, in each case in a minimum principal amount of the Securities
of $250,000 for investment purposes and not with a view to, or for
offer or sale in connection with, any distribution in violation of the
Securities Act; or (y) in reliance on another exemption from the
registration requirements of the Securities Act: (i) a certification
to that effect from the transferee (in the form set forth on the
reverse of the Security), (ii) if the Company or the Trustee so
requests, an Opinion of Counsel reasonably acceptable to the Company
and to the Trustee to the effect that such transfer is in compliance
with the Securities Act, and (iii) in the case of clause (x), a signed
letter from the transferee in the form of Exhibit C hereto;
<PAGE> 41
34
then the Securities Custodian, at the direction of the Trustee, will
cause, in accordance with the standing instructions and procedures
existing between the Depository and the Securities Custodian, the
aggregate principal amount of the Global Security to be reduced
accordingly and, following such reduction, the Company will execute
and the Trustee will authenticate and deliver to the transferee one or
more Definitive Securities in accordance with clause (ii) below.
(ii) Definitive Securities issued in exchange for a beneficial
interest in a Global Security pursuant to this Section 2.6(d) shall be
registered in such names and in such authorized denominations as the
Depository, pursuant to instructions from its direct or indirect
participants or otherwise, shall instruct the Trustee in writing. The
Trustee shall deliver such Definitive Securities to the Persons in
whose names such Definitive Securities are to be so registered in
accordance with the instructions of the Depository.
(e) RESTRICTIONS ON TRANSFER AND EXCHANGE OF GLOBAL SECURITIES.
Notwithstanding any other provisions of this Indenture (other than the
provisions set forth in subsection (c) of this Section 2.6), a Global Security
may not be transferred as a whole except by the Depository to a nominee of the
Depository or by a nominee of the Depository to the Depository or another
nominee of the Depository or by the Depository or any such nominee to a
successor Depository or a nominee of such successor Depository.
(f) Legend.
------
(i) Except as permitted by the following paragraph (ii) each
Security certificate evidencing Global Securities and Definitive
Securities (and all Securities issued in exchange therefor or
substitution thereof) shall bear a legend in substantially the
following form:
"THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE
SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY INTEREST OR
PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED,
TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE
ABSENCE OF SUCH REGISTRATION UNLESS SUCH TRANSACTION IS EXEMPT
FROM, OR NOT SUBJECT TO, REGISTRATION.
THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO
OFFER, SELL OR OTHERWISE TRANSFER SUCH SECURITY, PRIOR TO THE
DATE (THE "RESALE RESTRICTION TERMINATION DATE") WHICH IS THREE
YEARS AFTER THE LATER
<PAGE> 42
35
OF THE ORIGINAL ISSUE DATE HEREOF AND THE LAST DATE ON WHICH THE
COMPANY, ANY SUBSIDIARY GUARANTOR OR ANY AFFILIATE OF THE COMPANY
OR ANY SUBSIDIARY GUARANTOR WAS THE OWNER OF THIS SECURITY (OR
ANY PREDECESSOR OF SUCH SECURITY), ONLY (A) TO THE COMPANY, (B)
PURSUANT TO A REGISTRATION STATEMENT THAT HAS BEEN DECLARED
EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO LONG AS THE
SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A, TO A
PERSON IT REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL
BUYER" AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT THAT
PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED
INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS
BEING MADE IN RELIANCE ON RULE 144A, (D) PURSUANT TO OFFERS AND
SALES THAT OCCUR OUTSIDE THE UNITED STATES WITHIN THE MEANING OF
REGULATION S UNDER THE SECURITIES ACT, (E) TO AN INSTITUTIONAL
ACCREDITED INVESTOR WITHIN THE MEANING OF RULE 501(a)(1), (2),
(3) OR (7) UNDER THE SECURITIES ACT THAT IS ACQUIRING THE
SECURITY FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF SUCH AN
INSTITUTIONAL ACCREDITED INVESTOR, IN EACH CASE IN A MINIMUM
PRINCIPAL AMOUNT OF THE SECURITIES OF $250,000, FOR INVESTMENT
PURPOSES AND NOT WITH A VIEW TO OR FOR OFFER OR SALE IN
CONNECTION WITH ANY DISTRIBUTION IN VIOLATION OF THE SECURITIES
ACT, OR (F) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE
COMPANY'S AND THE TRUSTEE'S RIGHT PRIOR TO ANY SUCH OFFER, SALE
OR TRANSFER PURSUANT TO CLAUSES (D), (E) AND (F) TO REQUIRE THE
DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER
INFORMATION SATISFACTORY TO EACH OF THEM, AND IN EACH CASE, ONLY
IF A CERTIFICATE OF TRANSFER IN THE FORM APPEARING ON THE OTHER
SIDE OF THIS SECURITY IS COMPLETED AND DELIVERED BY THE
TRANSFEROR TO THE COMPANY AND THE TRUSTEE. THIS LEGEND WILL BE
REMOVED UPON THE REQUEST OF THE HOLDER AFTER THE RESALE
RESTRICTION TERMINATION DATE."
(ii) Upon any sale or transfer of a Transfer Restricted Security
(including any Transfer Restricted Security represented by a Global
Security) pursuant to Rule 144 under the Securities Act or pursuant to
an effective registration statement under the Securities Act:
(A) in the case of any Transfer Restricted Security that is
a Definitive Security, the Registrar shall permit the Holder
thereof to exchange such Transfer Restricted Security for a
Definitive Security that does not bear the legend set forth in
paragraph (i) above and rescind any restriction on the transfer
of such Security; and
<PAGE> 43
36
(B) in the case of any such Transfer Restricted Security
represented by a Global Security, such Transfer Restricted
Security shall not be required to bear the legend set forth in
paragraph (i) above, although it shall continue to be subject to
the provisions of Section 2.6(c) hereof; PROVIDED, HOWEVER, that
with respect to any request for an exchange of a Transfer
Restricted Security that is represented by a Global Security for
a Definitive Security that does not bear the legend set forth in
paragraph (i) above, which request is made in reliance upon Rule
144, the Holder thereof shall certify in writing to the Trustee
that such request is being made pursuant to Rule 144 (such
certification to be in the form set forth on the reverse of the
Security).
(g) CANCELLATION OR ADJUSTMENT OF GLOBAL SECURITY. At such time as all
beneficial interests in a Global Security have either been exchanged for
Definitive Securities, redeemed, repurchased or canceled, such Global Security
shall be retained and canceled by the Trustee. At any time prior to such
cancellation, if any beneficial interest in a Global Security is exchanged for
Definitive Securities, redeemed, repurchased or canceled, the principal amount
of Securities represented by such Global Security shall be reduced and an
endorsement shall be made on such Global Security by the Securities Custodian to
reflect such reduction.
(h) Obligations with Respect to Transfers and Exchanges of Securities.
-----------------------------------------------------------------
(i) To permit registrations of transfers and exchanges, the Company
shall, subject to the other terms and conditions of this Article II,
execute and the Trustee shall authenticate Definitive Securities and Global
Securities at the Registrar's or co-registrar's request.
(ii) No service charge shall be made to a Holder for any registration
of transfer or exchange, but the Company, Registrar or co-registrar may
require payment of a sum sufficient to cover any transfer tax, assessments,
or similar governmental charge payable in connection therewith (other than
any such transfer taxes or similar governmental charges payable upon
exchange or transfer pursuant to Sections 4.6, 4.8 or 9.5 or pursuant to
paragraph 5 of the Securities).
(iii) The Registrar or co-registrar shall not be required to register
the transfer of or exchange of (a) any Definitive Security selected for
redemption in whole or in part pursuant to Article III, except the
unredeemed portion of any Definitive Security being redeemed in part, or
(b) any Security for a period beginning (1) 15 Business Days before the
mailing of a notice of an offer to repurchase or
<PAGE> 44
37
redeem Securities and ending at the close of business on the day of such
mailing or (2) 15 Business Days before an interest payment date and ending
on such interest payment date.
(iv) Prior to the due presentation for registration of transfer of any
Security, the Company, the Trustee, the Paying Agent, the Registrar or any
co-registrar may deem and treat the person in whose name a Security is
registered as the absolute owner of such Security for the purpose of
receiving payment of principal of and interest on such Security and for all
other purposes whatsoever, whether or not such Security is overdue, and
none of the Company, the Trustee, the Paying Agent, the Registrar or any
co-registrar shall be affected by notice to the contrary.
(v) All Securities issued upon any transfer or exchange pursuant to
the terms of this Indenture shall evidence the same debt and shall be
entitled to the same benefits under this Indenture as the Securities
surrendered upon such transfer or exchange.
(i) NO OBLIGATION OF THE TRUSTEE. (i) The Trustee shall have no
responsibility or obligation to any beneficial owner of a Global Security, a
member of, or a participant in, the Depository or other Person with respect to
the accuracy of the records of the Depository or its nominee or of any
participant or member thereof, with respect to any ownership interest in the
Securities or with respect to the delivery to any participant, member,
beneficial owner or other Person (other than the Depository) of any notice
(including any notice of redemption) or the payment of any amount or delivery of
any Securities (or other security or property) under or with respect to such
Securities. All notices and communications to be given to the Holders and all
payments to be made to Holders in respect of the Securities shall be given or
made only to or upon the order of the registered Holders (which shall be the
Depository or its nominee in the case of a Global Security). The rights of
beneficial owners in any Global Security shall be exercised only through the
Depository subject to the applicable rules and procedures of the Depository. The
Trustee may rely and shall be fully protected in relying upon information
furnished by the Depository with respect to its members, participants and any
beneficial owners.
(ii) The Trustee shall have no obligation or duty to monitor,
determine or inquire as to compliance with any restrictions on transfer imposed
under this Indenture or under applicable law with respect to any transfer of any
interest in any Security (including any transfers between or among Depository
participants, members or beneficial owners in any Global Security) other than to
require delivery of such certificates and other documentation or evidence as are
expressly required by, and to do so if and when expressly required by, the terms
of this
<PAGE> 45
38
Indenture, and to examine the same to determine substantial compliance as to
form with the express requirements hereof.
SECTION 2.7. REPLACEMENT SECURITIES. If a mutilated Security is
surrendered to the Registrar or if the Holder of a Security claims that the
Security has been lost, destroyed or wrongfully taken, the Company shall issue
and the Trustee shall authenticate a replacement Security if the requirements of
Section 8-405 of the Uniform Commercial Code are met and the Holder satisfies
any other reasonable requirements of the Trustee. If required by the Trustee or
the Company, such Holder shall furnish an indemnity bond sufficient in the
judgment of the Company and the Trustee to protect the Company, the Trustee, the
Paying Agent, the Registrar and any co-registrar from any loss which any of them
may suffer if a Security is replaced. The Company and the Trustee may charge the
Holder for their expenses in replacing a Security. Every replacement Security is
an additional obligation of the Company.
SECTION 2.8. OUTSTANDING SECURITIES. Securities outstanding at any
time are all Securities authenticated by the Trustee except for those canceled
by it, those delivered to it for cancellation and those described in this
Section as not outstanding. A Security does not cease to be outstanding because
the Company or an Affiliate of the Company holds the Security.
If a Security is replaced pursuant to Section 2.7, it ceases to be
outstanding unless the Trustee and the Company receive proof satisfactory to
them that the replaced Security is held by a bona fide purchaser.
If the Paying Agent segregates and holds in trust, in accordance with
this Indenture, on a redemption date or maturity date money sufficient to pay
all principal and interest payable on that date with respect to the Securities
(or portions thereof) to be redeemed or maturing, as the case may be, and the
Paying Agent is not prohibited from paying such money to the Securityholders on
that date pursuant to the terms of this Indenture, then on and after that date
such Securities (or portions thereof) cease to be outstanding and interest on
them ceases to accrue.
SECTION 2.9. TEMPORARY SECURITIES. Until Definitive Securities are
ready for delivery, the Company may prepare and the Trustee shall authenticate
temporary Securities. Temporary Securities shall be substantially in the form of
Definitive Securities but may have variations that the Company considers
appropriate for temporary Securities. Without unreasonable delay, the Company
shall prepare and the Trustee shall authenticate Definitive Securities. After
the preparation of Definitive Securities, the temporary Securities shall be
exchangeable for Definitive Securities upon surrender of the temporary
Securities at any office or agency maintained by the Company for that purpose
and such exchange shall be without
<PAGE> 46
39
charge to the Holder. Upon surrender for cancellation of any one or more
temporary Securities, the Company shall execute, and the Trustee shall
authenticate and deliver in exchange therefor, one or more Definitive Securities
representing an equal principal amount of Securities. Until so exchanged, the
Holder of temporary Securities shall in all respects be entitled to the same
benefits under this Indenture as a holder of Definitive Securities.
SECTION 2.10. CANCELLATION. The Company at any time may deliver
Securities to the Trustee for cancellation. The Registrar and the Paying Agent
shall forward to the Trustee any Securities surrendered to them for registration
of transfer, exchange or payment. The Trustee and no one else shall cancel and
destroy (subject to the record retention requirements of the Exchange Act) all
Securities surrendered for registration of transfer, exchange, payment or
cancellation and deliver a certificate of such destruction to the Company unless
the Company directs the Trustee to deliver canceled Securities to the Company.
The Company may not issue new Securities to replace Securities it has redeemed,
paid or delivered to the Trustee for cancellation.
SECTION 2.11. DEFAULTED INTEREST. If the Company defaults in a payment
of interest on the Securities, the Company shall pay defaulted interest (plus
interest on such defaulted interest to the extent lawful) in any lawful manner.
The Company may pay the defaulted interest to the persons who are
Securityholders on a subsequent special record date. The Company shall fix or
cause to be fixed (or upon the Company's failure to do so the Trustee shall fix)
any such special record date and payment date to the reasonable satisfaction of
the Trustee which specified record date shall not be less than 10 days prior to
the payment date for such defaulted interest and shall promptly mail or cause to
be mailed to each Securityholder a notice that states the special record date,
the payment date and the amount of defaulted interest to be paid. The Company
shall notify the Trustee in writing of the amount of defaulted interest proposed
to be paid on each Security and the date of the proposed payment, and at the
same time the Company shall deposit with the Trustee an amount of money equal to
the aggregate amount proposed to be paid in respect of such defaulted interest
or shall make arrangements satisfactory to the Trustee for such deposit prior to
the date of the proposed payment, such money when so deposited to be held in
trust for the benefit of the Person entitled to such defaulted interest as
provided in this Section.
SECTION 2.12. CUSIP NUMBERS. The Company in issuing the Securities may
use "CUSIP" numbers (if then generally in use) and, if so, the Trustee shall use
"CUSIP" numbers in notices of redemption as a convenience to Holders, PROVIDED,
HOWEVER, that any such notice may state that no representation is made as to the
correctness of such numbers either as printed on the Securities or as contained
in any notice of a redemption and that
<PAGE> 47
40
reliance may be placed only on the other identification numbers printed on the
Securities, and any such redemption shall not be affected by any defect in or
omission of such numbers.
ARTICLE III
Redemption
----------
SECTION 3.1. NOTICES TO TRUSTEE. If the Company elects to redeem
Securities pursuant to paragraph 5 of the Securities, it shall notify the
Trustee in writing of the redemption date and the principal amount of Securities
to be redeemed.
The Company shall give each notice to the Trustee provided for in this
Section at least 60 days before the redemption date unless the Trustee consents
to a shorter period. Such notice shall be accompanied by an Officers'
Certificate from the Company to the effect that such redemption will comply with
the conditions herein. If fewer than all the Securities are to be redeemed, the
record date relating to such redemption shall be selected by the Company and set
forth in the related notice given to the Trustee, which record date shall be not
less than 15 days after the date of such notice.
SECTION 3.2. SELECTION OF SECURITIES TO BE REDEEMED. If fewer than all
the Securities are to be redeemed, the Trustee shall select the Securities to be
redeemed pro rata or by lot or by a method that complies with applicable legal
and securities exchange requirements, if any, and that the Trustee considers
fair and appropriate and in accordance with methods generally used at the time
of selection by fiduciaries in similar circumstances; PROVIDED, HOWEVER, that if
a partial redemption is made with the proceeds of an Equity Offering, selection
of the Securities or portion thereof for redemption shall be made by the Trustee
only on a pro rata basis, unless such method is otherwise prohibited. The
Trustee shall make the selection from outstanding Securities not previously
called for redemption. The Trustee may select for redemption portions of the
principal of Securities that have denominations larger than $1,000. Securities
and portions of them the Trustee selects shall be in amounts of $1,000 or a
whole multiple of $1,000. Provisions of this Indenture that apply to the
entirety of Securities called for redemption also apply to portions of
Securities called for redemption. The Trustee shall notify the Company promptly
of the Securities or portions of Securities to be redeemed.
SECTION 3.3. NOTICE OF REDEMPTION. At least 30 days but not more than
60 days prior to the date fixed for redemption of Securities, the Company shall
mail a notice of redemption by first-class mail, postage prepaid, to each Holder
of Securities to be redeemed at the last address for such Holder then shown on
the Registrar's books.
<PAGE> 48
41
The notice shall identify the Securities to be redeemed and shall
state:
(1) the redemption date;
(2) the redemption price;
(3) the name and address of the Paying Agent;
(4) that Securities called for redemption must be surrendered to the
Paying Agent to collect the redemption price;
(5) the subparagraph of the Securities pursuant to which such
redemption is being made;
(6) if fewer than all the outstanding Securities are to be redeemed,
the identification and principal amounts of the particular Securities to be
redeemed;
(7) 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 this Indenture, interest on Securities (or portion thereof)
called for redemption ceases to accrue on and after the redemption date;
(8) the CUSIP number, if any, printed on the Securities being
redeemed; and
(9) 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
Securities.
At the Company's request, the Trustee shall give the notice of
redemption in the Company's name and at the Company's expense. In such event,
the Company shall provide the Trustee with the information required by this
Section.
SECTION 3.4. EFFECT OF NOTICE OF REDEMPTION. Once notice of redemption
is mailed, Securities called for redemption become due and payable on the
redemption date and at the redemption price stated in the notice. Upon surrender
to the Paying Agent, such Securities shall be paid at the redemption price
stated in the notice, plus accrued interest to the redemption date; PROVIDED
that if the redemption date is after a regular record date and on or prior to
the interest payment date, the accrued interest shall be payable to the
Securityholder of the redeemed Securities registered on the relevant record
date. Failure to give notice or any defect in the notice to any Holder shall not
affect the validity of the notice to any other Holder.
<PAGE> 49
42
SECTION 3.5. DEPOSIT OF REDEMPTION PRICE. By at least 10:00 A.M. (New
York City time) on the date on which any principal of or interest on any
Security is due and payable, the Company shall deposit with the Paying Agent
(or, if the Company or a Subsidiary is the Paying Agent, shall segregate and
hold in trust) money sufficient to pay the redemption price of and accrued
interest on all Securities to be redeemed on that date other than Securities or
portions of Securities called for redemption which are owned by the Company or a
Subsidiary and have been delivered by the Company or such Subsidiary to the
Trustee for cancellation.
If the Company complies with the preceding paragraph, then, unless the
Company defaults in the payment of such redemption price or the Paying Agent is
prohibited from making such payment, interest on the Securities to be redeemed
will cease to accrue on and after the applicable redemption date, whether or not
such Securities are presented for payment.
SECTION 3.6. SECURITIES REDEEMED IN PART. Upon surrender of a Security
that is redeemed in part, the Company shall execute and the Trustee shall
authenticate for the Holder (at the Company's expense) a new Security equal in a
principal amount to the unredeemed portion of the Security surrendered.
ARTICLE IV
Covenants
---------
SECTION 4.1. PAYMENT OF SECURITIES. The Company shall promptly pay the
principal of (and premium, if any) and interest on the Securities on the dates
and in the manner provided in the Securities and in this Indenture. Principal
(and premium, if any) and interest shall be considered paid on the date due if
on such date the Trustee or the Paying Agent holds in accordance with this
Indenture money sufficient to pay all principal (and premium, if any) and
interest then due and the Trustee or the Paying Agent, as the case may be, is
not prohibited from paying such money to the Securityholders on that date
pursuant to the terms of this Indenture.
The Company shall pay interest on overdue principal at the rate
specified therefor in the Securities, and it shall pay interest on overdue
installments of interest at the same rate to the extent lawful.
Notwithstanding anything to the contrary contained in this Indenture,
the Paying Agent may, to the extent it is required to do so by law, deduct or
withhold income or other similar taxes imposed by the United States of America
from principal or interest payments hereunder.
<PAGE> 50
43
SECTION 4.2. LIMITATION ON LIENS. The Company will not, and will not
permit any of its Restricted Subsidiaries to, create, incur, assume or suffer to
exist any Liens of any kind against or upon any of its property or assets, or
any proceeds therefrom, unless (i) in the case of Liens securing Indebtedness
that is expressly subordinate or junior in right of payment to the Securities,
the Securities are secured by a Lien on such property, assets or proceeds that
is senior in priority to such Liens and (ii) in all other cases, the Securities
are equally and ratably secured, except for (A) Liens existing as of the Issue
Date and any extensions, renewals or replacements thereof; (B) Liens securing
Senior Indebtedness and Guarantor Senior Indebtedness; (C) Liens securing the
Securities and the Guarantees; (D) Liens of the Company or a Wholly Owned
Restricted Subsidiary on assets of any Subsidiary of the Company; (E) Liens
securing Indebtedness which is incurred to refinance Indebtedness which has been
secured by a Lien permitted under this Indenture and which has been incurred in
accordance with the provisions of this Indenture; PROVIDED, HOWEVER, that such
Liens do not extend to or cover any property or assets of the Company or any of
its Restricted Subsidiaries not securing the Indebtedness so refinanced; and (F)
Permitted Liens.
SECTION 4.3. LIMITATION ON INCURRENCE OF ADDITIONAL INDEBTEDNESS. The
Company will not, and will not permit any of its Restricted Subsidiaries to,
directly or indirectly, create, incur, assume, guarantee, acquire, become
liable, contingently or otherwise, with respect to, or otherwise become
responsible for payment of (collectively, "INCUR") any Indebtedness (other than
Permitted Indebtedness); PROVIDED, HOWEVER, that if no Default or Event of
Default shall have occurred and be continuing at the time or as a consequence of
the incurrence of any such Indebtedness, the Company or any Subsidiary Guarantor
may incur Indebtedness if on the date of the incurrence of such Indebtedness,
after giving effect to the incurrence thereof, the Consolidated Fixed Charge
Coverage Ratio of the Company is greater than 2.0 to 1.0.
SECTION 4.4. LIMITATION ON RESTRICTED PAYMENTS. (a) The Company shall
not, and shall not permit any of its Restricted Subsidiaries, directly or
indirectly, (a) declare or pay any dividend or make any distribution (other than
dividends or distributions payable in Qualified Capital Stock) on or in respect
of shares of Capital Stock of the Company to holders of such Capital Stock, (b)
purchase, redeem or otherwise acquire or retire for value any Capital Stock of
the Company or any warrants, rights or options to purchase or acquire shares of
any class of such Capital Stock, other than the exchange of such Capital Stock
for Qualified Capital Stock, or (c) make any Investment (other than Permitted
Investments) (each of the foregoing actions set forth in clauses (a), (b) and
(c) being referred to as a "RESTRICTED PAYMENT"), if at the time of such
Restricted Payment or immediately after giving effect thereto, (i) a Default or
an Event of Default shall have occurred and be
<PAGE> 51
44
continuing, (ii) the Company is not able to incur at least $1.00 of additional
Indebtedness (other than Permitted Indebtedness) in compliance with Section 4.3
or (iii) the aggregate amount of Restricted Payments made subsequent to the
Issue Date shall exceed the sum of: (w) 50% of the cumulative Consolidated Net
Income (or if cumulative Consolidated Net Income shall be a loss, minus 100% of
such loss) of the Company earned subsequent to the Issue Date and on or prior to
the date the Restricted Payment occurs (the "REFERENCE DATE") (treating such
period as a single accounting period); plus (x) 100% of the aggregate net cash
proceeds received by the Company from any Person (other than a Subsidiary of the
Company) from the issuance and sale subsequent to the Issue Date and on or prior
to the Reference Date of Qualified Capital Stock of the Company (including
Capital Stock issued upon the conversion of convertible Indebtedness or in
exchange for outstanding Indebtedness); plus (y) without duplication of any
amounts included in clause (iii)(x) above, 100% of the aggregate net cash
proceeds of any equity contribution received by the Company from a holder of the
Company's Capital Stock (excluding any net cash proceeds from such equity
contribution to the extent used to redeem Securities in accordance with the
optional redemption provisions of the Securities); plus (z) to the extent that
any Investment (other than a Permitted Investment) that was made after the Issue
Date is sold for cash or otherwise liquidated or repaid for cash, the lesser of
(A) the cash received with respect to such sale, liquidation or repayment of
such Investment (less the cost of such sale, liquidation or repayment, if any)
and (B) the initial amount of such Investment.
(b) Notwithstanding clause (a) above, the provisions set forth in the
immediately preceding paragraph do not prohibit: (1) the payment of any dividend
or the consummation of any irrevocable redemption within 60 days after the date
of declaration of such dividend or notice of such redemption if the dividend or
payment of the redemption price, as the case may be, would have been permitted
on the date of declaration or notice; (2) if no event of Default shall have
occurred and be continuing as a consequence thereof, the acquisition of any
shares of Capital Stock of the Company, either (i) solely in exchange for shares
of Qualified Capital Stock of the Company, or (ii) through the application of
net proceeds of a substantially concurrent sale (other than to a Subsidiary of
the Company) of shares of Qualified Capital Stock of the Company; (3) payments
for the purpose of and in an amount equal to the amount required to permit the
Company to redeem or repurchase shares of its Capital Stock or options in
respect thereof, in each case in connection with the repurchase provisions under
employee stock option or stock purchase agreements or other agreements to
compensate management employees; PROVIDED that such redemptions or repurchases
pursuant to this clause (3) shall not exceed $2 million (which amount shall be
increased by the amount of any cash proceeds to the Company from (x) sales of
its Capital Stock to management employees subsequent to the Issue Date and (y)
any
<PAGE> 52
45
"key-man" life insurance policies which are used to make such redemptions or
repurchases) in the aggregate; (4) the payment of fees and compensation as
permitted under clause (i) of Section 4.7(b); (5) so long as no Default or Event
of Default shall have occurred and be continuing, payments not to exceed
$100,000 in the aggregate, to enable the Company to make payments to holders of
its Capital Stock in lieu of issuance of fractional shares of its Capital Stock;
(6) repurchases of Capital Stock deemed to occur upon the exercise of stock
options if such Capital Stock represents a portion of the exercise price
thereof; and (7) payments made on the Issue Date pursuant to the
Recapitalization Agreement. In determining the aggregate amount of Restricted
Payments made subsequent to the Issue Date in accordance with clause (iii) of
the immediately preceding paragraph, (a) amounts expended (to the extent such
expenditure is in the form of cash or other property other than Qualified
Capital Stock) pursuant to clauses (1), (2) and (3) of this Section 4.4(b) shall
be included in such calculation, PROVIDED that such expenditures pursuant to
clause (3) shall not be included to the extent of cash proceeds received by the
Company from any "key man" life insurance policies and (b) amounts expended
pursuant to clause (4), (5), (6), and (7) shall be excluded from such
calculation.
(c) The Company shall not permit the payment of dividends in respect
of its 8% Cumulative Preferred Stock unless (i) the Company elects to redeem the
8% Cumulative Preferred Stock upon the occurrence of a Redemption Event or (ii)
the Company exercises its optional right to redeem the 8% Cumulative Preferred
Stock on or after December 15, 2001 (the payment of such dividends to occur at
the time of redemption); PROVIDED that the payment of such dividends will only
be permitted if such payment is in compliance with clauses (a) and (b) of this
Section 4.4.
SECTION 4.5. LIMITATION ON DIVIDEND AND OTHER PAYMENT RESTRICTIONS
AFFECTING SUBSIDIARIES. The Company will not, and will not permit any of its
Restricted Subsidiaries to, directly or indirectly, create or otherwise cause or
permit to exist or become effective any encumbrance or restriction on the
ability of any Restricted Subsidiary to (a) pay dividends or make any other
distributions on or in respect of its Capital Stock; (b) make loans or advances
or to pay any Indebtedness or other obligation owed to the Company or any other
Restricted Subsidiary of the Company; or (c) transfer any of its property or
assets to the Company or any other Restricted Subsidiary of the Company, except
for such encumbrances or restrictions existing under or by reason of: (1)
applicable law; (2) this Indenture; (3) non-assignment provisions of any
contract or any lease entered into in the ordinary course of business; (4) any
instrument governing Acquired Indebtedness, which encumbrance or restriction is
not applicable to the Company or any Restricted Subsidiary of the Company, or
the properties or assets of any such Person, other than the Person or the
properties or assets of the Person so acquired; (5) agreements existing on the
Issue Date (including,
<PAGE> 53
46
without limitation, the Bank Credit Agreement and the Recapitalization
Agreement); (6) restrictions on the transfer of assets subject to any Lien
permitted under this Indenture imposed by the holder of such Lien; (7)
restrictions imposed by any agreement to sell assets permitted under this
Indenture to any Person pending the closing of such sale; (8) any agreement or
instrument governing Capital Stock of any Person that is acquired after the
Issue Date; (9) Indebtedness or other contractual requirements of a Receivables
Entity in connection with a Qualified Receivables Transaction; PROVIDED that
such restrictions apply only to such Receivables Entity; or (10) an agreement
effecting a refinancing, replacement or substitution of Indebtedness issued,
assumed or incurred pursuant to an agreement referred to in clause (2), (4) or
(5) above; PROVIDED, HOWEVER, that the provisions relating to such encumbrance
or restriction contained in any such refinancing, replacement or substitution
agreement are no less favorable to the Company or the Holders in any material
respect as determined by the Board of Directors of the Company than the
provisions relating to such encumbrance or restriction contained in agreements
referred to in such clause (2), (4) or (5).
SECTION 4.6. LIMITATION ON ASSET SALES. (a) The Company will not, and
will not permit any of its Restricted Subsidiaries to, consummate an Asset Sale
unless (i) the Company or the applicable Restricted Subsidiary, as the case may
be, receives consideration at the time of such Asset Sale at least equal to the
fair market value of the assets sold or otherwise disposed of (as determined in
good faith by the Company's Board of Directors), (ii) at least 75% of the
consideration received by the Company or such Restricted Subsidiary, as the case
may be, from such Asset Sale shall be cash or Cash Equivalents and is received
at the time of such disposition; PROVIDED that the amount of (x) any liabilities
(as shown on the Company's or such Restricted Subsidiary's most recent balance
sheet or in the notes thereto) of the Company or such Restricted Subsidiary
(other than liabilities that are by their terms subordinated to the Securities
or such Restricted Subsidiary's Guarantee, if any) that are assumed by the
transferee of any such assets and (y) any notes or other obligations received by
the Company or any such Restricted Subsidiary from such transferee that are
immediately converted by the Company or any such Restricted Subsidiary into cash
or Cash Equivalents (to the extent of the cash or Cash Equivalents received)
shall be deemed to be cash for purposes of this provision; and (iii) upon the
consummation of an Asset Sale, the Company shall apply, or cause such Restricted
Subsidiary to apply, the Net Cash Proceeds relating to such Asset Sale within
365 days of receipt thereof either (A) to prepay any Senior Indebtedness or
Guarantor Senior Indebtedness and, in the case of any Senior Indebtedness under
any revolving credit facility, effect a permanent reduction in the availability
under such revolving credit facility, (B) to reinvest in Productive Assets, or
(C) a combination of prepayment and investment permitted by the foregoing
clauses (iii)(A) and (iii)(B). On the 366th day
<PAGE> 54
47
after an Asset Sale or such earlier date, if any, as the Board of Directors of
the Company or of such Restricted Subsidiary determines not to apply the Net
Cash Proceeds relating to such Asset Sale as set forth in clauses (iii)(A),
(iii)(B) and (iii)(C) of the immediately preceding sentence (each, a "NET
PROCEEDS OFFER TRIGGER DATE"), such aggregate amount of Net Cash Proceeds which
have not been applied on or before such Net Proceeds Offer Trigger Date as
permitted in clauses (iii)(A), (iii)(B) and (iii)(C) of the immediately
preceding sentence (each a "NET PROCEEDS OFFER AMOUNT") shall be applied by the
Company or such Restricted Subsidiary to make an offer to purchase (the "NET
PROCEEDS OFFER") on a date (the "NET PROCEEDS OFFER PAYMENT DATE") not less than
30 nor more than 45 days following the applicable Net Proceeds Offer Trigger
Date, from all Holders on a pro rata basis that amount of Securities equal to
the Net Proceeds Offer Amount at a price equal to 100% of the principal amount
of the Securities to be purchased, plus accrued and unpaid interest thereon, if
any, to the date of purchase; PROVIDED, HOWEVER, that if at any time any
non-cash consideration received by the Company or any Restricted Subsidiary of
the Company, as the case may be, in connection with any Asset Sale is converted
into or sold or otherwise disposed of for cash (other than interest received
with respect to any such non-cash consideration), then such conversion or
disposition shall be deemed to constitute an Asset Sale hereunder and the Net
Cash Proceeds thereof shall be applied in accordance with this Section 4.6(a).
Notwithstanding the foregoing, if a Net Proceeds Offer Amount is less
than $5 million, the application of the Net Cash Proceeds constituting such Net
Proceeds Offer Amount to a Net Proceeds Offer may be deferred until such time as
such Net Proceeds Offer Amount plus the aggregate amount of all Net Proceeds
Offer Amounts arising subsequent to the Net Proceeds Offer Trigger Date relating
to such initial Net Proceeds Offer Amount from all Asset Sales by the Company
and its Restricted Subsidiaries aggregates at least $5 million, at which time
the Company or such Restricted Subsidiary shall apply all Net Cash Proceeds
constituting all Net Proceeds Offer Amounts that have been so deferred to make a
Net Proceeds Offer (the first date the aggregate of all such deferred Net
Proceeds Offer Amounts is equal to $5 million or more shall be deemed to be a
"NET PROCEEDS OFFER TRIGGER DATE").
Notwithstanding the two immediately preceding paragraphs, the Company
and its Restricted Subsidiaries will be permitted to consummate an Asset Sale
without complying with such paragraphs to the extent (i) at least 75% of the
consideration for such Asset Sale constitutes Productive Assets and (ii) such
Asset Sale is for at least fair market value (as determined in good faith by the
Company's Board of Directors); PROVIDED that any consideration not constituting
Productive Assets received by the Company or any of its Restricted Subsidiaries
in connection with any Asset Sale permitted to be consummated under this
<PAGE> 55
48
paragraph shall constitute Net Cash Proceeds and shall be subject to the
provisions of the two preceding paragraphs; PROVIDED, that at the time of
entering into such transaction or immediately after giving effect thereto, no
Default or Event of Default shall have occurred or be continuing or would occur
as a consequence thereof.
(b) Each Net Proceeds Offer will be mailed to the record Holders as
shown on the register of Holders within 15 days following the Net Proceeds Offer
Trigger Date, with a copy to the Trustee, and shall comply with the procedures
set forth in this Indenture. Upon eceiving notice of the Net Proceeds Offer,
Holders may elect to tender their Securities in whole or in part in integral
multiples of $1,000 in exchange for cash. To the extent Holders properly tender
Securities in an amount exceeding the Net Proceeds Offer Amount, Securities of
tendering Holders will be purchased on a pro rata basis (based on amounts
tendered). A Net Proceeds Offer shall remain open for a period of 20 business
days or such longer period as may be required by law. To the extent that the
aggregate amount of Securities tendered pursuant to a Net Proceeds Offer is less
than the Net Proceeds Offer Amount, the Company may use any remaining Net
Proceeds Offer Amount for general corporate purposes. Upon completion of any
such Net Proceeds Offer, the Net Proceeds Offer Amount shall be reset at zero.
(c) The Company will comply with the requirements of Rule 14e-1 under
the Exchange Act and any other securities laws and regulations thereunder to
the extent such laws and regulations are applicable in connection with the
repurchase of Securities pursuant to a Net Proceeds Offer. To the extent that
the provisions of any securities laws or regulations conflict with this Section
4.6, the Company shall comply with the applicable securities laws and
regulations and shall not be deemed to have breached its obligations under this
Section 4.6 by virtue thereof.
SECTION 4.7. LIMITATION ON TRANSACTIONS WITH AFFILIATES. (a) The
Company will not, and will not permit any of its Restricted Subsidiaries to,
directly or indirectly, enter into or permit to exist any transaction or series
of related transactions (including, without limitation, the purchase, sale,
lease or exchange of any property or the rendering of any service) with, or for
the benefit of, any of its Affiliates (an "AFFILIATE TRANSACTION"), other than
(x) Affiliate Transactions permitted under paragraph (b) below and (y) Affiliate
Transactions on terms that are no less favorable than those that might
reasonably have been obtained in a comparable transaction at such time on an
arm's-length basis from a Person that is not an Affiliate; PROVIDED, HOWEVER,
that for a transaction or series of related transactions with an aggregate value
of $2 million or more, at the Company's option (i) such determination shall be
made in good faith by a majority of the disinterested members of the Board of
the Directors of the Company or (ii) the Board of
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49
Directors of the Company or any such Restricted Subsidiary party to such
Affiliate Transaction shall have received a favorable opinion from a nationally
recognized investment banking firm that such Affiliate Transaction is on terms
not materially less favorable than those that might reasonably have been
obtained in a comparable transaction at such time on an arm's-length basis from
a Person that is not an Affiliate; PROVIDED, FURTHER, that for a transaction or
series of related transactions with an aggregate value of $5 million or more,
the Board of Directors of the Company shall have received a favorable opinion
from a nationally recognized investment banking firm that such Affiliate
Transaction is on terms not materially less favorable than those that might
reasonably have been obtained in a comparable transaction at such time on an
arm's-length basis from a Person that is not an Affiliate.
(b) The foregoing restrictions shall not apply to (i) reasonable fees
and compensation paid to, and indemnity provided on behalf of, officers,
directors, employees or consultants of the Company or any Subsidiary of the
Company as determined in good faith by the Company's Board of Directors or
senior management; (ii) transactions exclusively between or among the Company
and any of its Wholly Owned Restricted Subsidiaries or exclusively between or
among such Wholly Owned Restricted Subsidiaries, PROVIDED such transactions are
not otherwise prohibited by this Indenture; (iii) transactions effected as part
of a Qualified Receivables Transaction; (iv) any agreement as in effect as of
the Issue Date or any amendment thereto or any transaction contemplated thereby
(including pursuant to any amendment thereto) in any replacement agreement
thereto so long as any such amendment or replacement agreement is not more
disadvantageous to the Holders in any material respect than the original
agreement as in effect on the Issue Date; and (v) Restricted Payments permitted
by this Indenture.
SECTION 4.8. CHANGE OF CONTROL. (a) Upon the occurrence of a Change of
Control Triggering Event, each Holder will have the right to require that the
Company purchase all or a portion of such Holder's Securities pursuant to the
offer described below (the "CHANGE OF CONTROL OFFER"), at a purchase price equal
to 101% of the principal amount thereof plus accrued interest to the date of
purchase. Prior to the mailing of the notice referred to below, but in any event
within 30 days following any Change of Control Triggering Event, the Company
covenants to (i) repay in full and terminate all commitments under the Bank
Indebtedness or offer to repay in full and terminate all commitments under all
Bank Indebtedness and to repay the Bank Indebtedness owed to each holder of Bank
Indebtedness which has accepted such offer or (ii) obtain the requisite consents
under the Bank Credit Agreement to permit the repurchase of the Securities as
provided below. The Company shall first comply with the covenant in the
immediately preceding sentence before it shall be required to repurchase
Securities
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50
pursuant to the provisions described below. The Company's failure to comply with
this Section 4.8 shall constitute an Event of Default under Section 6.1(3) and
not under 6.1(2).
(b) Within 30 day following the date upon which the Change of Control
Triggering Event occurred, the Company must send, by first class mail, a notice
to each Holder, with a copy to the Trustee, which notice shall govern the terms
of the Change of Control Offer. Such notice shall state, among other things, the
purchase date, which must be no earlier than 30 days nor later than 45 days from
the date such notice is mailed, other than as may be required by law (the
"CHANGE OF CONTROL PAYMENT DATE"). Holders electing to have a Security purchased
pursuant to a Change of Control Offer will be required to surrender the
Security, with the form entitled "Option of Holder to Elect Purchase" on the
reverse of the Security completed, to the Paying Agent at the address specified
in the notice prior to the close of business on the third business day prior to
the Change of Control Payment Date.
(c) The Company will comply with the requirements of Rule 14e-1 under
the Exchange Act and any other securities laws and regulations thereunder to the
extent such laws and regulations are applicable in connection with the
repurchase of Securities pursuant to a Change of Control Offer. To the extent
that the provisions of any securities laws or regulations conflict with this
Section 4.8, the Company shall comply with the applicable securities laws and
regulations and shall not be deemed to have breached its obligations under this
Section 4.8 by virtue thereof.
SECTION 4.9. LIMITATION ON INCURRENCE OF SENIOR SUBORDINATED DEBT.
Neither the Company nor any Subsidiary Guarantor will incur or suffer to exist
Indebtedness that is senior in right of payment to the Securities or such
Subsidiary Guarantor's Guarantee and subordinate in right of payment to any
other Indebtedness of the Company or such Subsidiary Guarantor, as the case may
be.
SECTION 4.10. LIMITATION ON PREFERRED STOCK OF SUBSIDIARIES. The
Company will not permit any of its Restricted Subsidiaries to issue any
Preferred Stock (other than to the Company or to a Wholly Owned Restricted
Subsidiary of the Company) or permit any Person (other than the Company or a
Wholly Owned Restricted Subsidiary of the Company) to own any Preferred Stock of
any Restricted Subsidiary of the Company.
SECTION 4.11. LIMITATION ON FUTURE GUARANTEES. The Company will not
permit any of its Restricted Subsidiaries, directly or indirectly, to incur,
guarantee or secure through the granting of Liens the payment of the Bank
Indebtedness or any refunding or refinancing thereof, in each case unless such
Restricted Subsidiary, the Company and the Trustee execute and deliver a
supplemental indenture evidencing such Restricted
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51
Subsidiary's Guarantee, such Guarantee to be a senior subordinated unsecured
obligation of such Restricted Subsidiary. Neither the Company nor any such
Subsidiary Guarantor shall be required to make a notation on the Securities or
the Guarantees to reflect any such subsequent Guarantee. Nothing in this
covenant shall be construed to permit any Restricted Subsidiary of the Company
to incur Indebtedness otherwise prohibited by Section 4.3. Thereafter, such
Restricted Subsidiary shall be a Subsidiary Guarantor for all purposes of this
Indenture.
SECTION 4.12. CONDUCT OF BUSINESS. The Company and its Restricted
Subsidiaries will not engage in any businesses which are not the same, similar,
related or ancillary to the businesses in which the Company and its Restricted
Subsidiaries are engaged on the Issue Date.
SECTION 4.13. MAINTENANCE OF OFFICE OR AGENCY. The Company shall
maintain the office or agency required under Section 2.3. The Company shall give
prior written notice to the Trustee of the location, and any change in the
location, of such office or agency. If at any time the Company shall fail to
maintain any such required office or agency or shall fail to furnish the Trustee
with the address thereof, such presentations, surrenders, notices and demands
may be made or served at the address of the Trustee set forth in Section 13.2.
SECTION 4.14. CORPORATE EXISTENCE. Except as otherwise permitted by
Article V, the Company shall do or cause to be done, at its own cost and
expense, all things necessary to preserve and keep in full force and effect its
corporate existence and the corporate existence of each of its Subsidiaries in
accordance with the respective organizational documents of each such Subsidiary
and the material rights (charter and statutory) and franchises of the Company
and each such Subsidiary; PROVIDED, HOWEVER, that the Company shall not be
required to preserve, with respect to itself, any material right or franchise
and, with respect to any of its Subsidiaries, any such existence, material right
or franchise, if the Board of Directors of the Company shall determine in good
faith that the preservation thereof is no longer desirable in the conduct of the
business of the Company and the Subsidiaries, taken as a whole.
SECTION 4.15. PAYMENT OF TAXES AND OTHER CLAIMS. The Company shall pay
or discharge or cause to be paid or discharged, before the same shall become
delinquent, (i) all material taxes, assessments and governmental charges
(including withholding taxes and any penalties, interest and additions to taxes)
levied or imposed upon it or any of its Subsidiaries or properties of it or any
of its Subsidiaries and (ii) all lawful claims for labor, materials and supplies
that, if unpaid, might by law become a Lien upon the property of it or any of
its Subsidiaries; PROVIDED, HOWEVER, that the Company shall not be required to
pay or discharge or cause to be paid or discharged any such tax, assessment,
charge or claim whose amount, applicability or
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validity is being contested in good faith by appropriate proceedings properly
instituted and diligently conducted for which adequate reserves, to the extent
required under GAAP, have been taken.
SECTION 4.16. MAINTENANCE OF PROPERTIES AND INSURANCE. (a) The Company
shall, and shall cause each of its Subsidiaries to, maintain its material
properties in good working order and condition (subject to ordinary wear and
tear) and make all necessary repairs, renewals, replacements, additions,
betterments and improvements thereto and actively conduct and carry on its
business; PROVIDED, HOWEVER, that nothing in this Section 4.16 shall prevent the
Company or any of its Subsidiaries from discontinuing the operation and
maintenance of any of its properties, if such discontinuance is, in the good
faith judgment of the Board of Directors of the Company or the Subsidiary, as
the case may be, desirable in the conduct of their respective businesses and is
not disadvantageous in any material respect to the Holders.
(b) The Company shall provide or cause to be provided, for itself and
each of its Subsidiaries, insurance (including appropriate self-insurance)
against loss or damage of the kinds that, in the good faith judgment of the
Board of Directors of the Company, are adequate and appropriate for the conduct
of the business of the Company and such Subsidiaries in a prudent manner, with
reputable insurers or with the government of the United States of America or any
agency or instrumentality thereof, in such amounts, with such deductibles, and
by such methods as shall be customary, in the good faith judgment of the Board
of Directors of the Company, for companies similarly situated in the industry.
SECTION 4.17. COMPLIANCE WITH LAWS. The Company shall comply, and
shall cause each of its Subsidiaries to comply, with all applicable statutes,
rules, regulations, orders and restrictions of the United States of America, all
states and municipalities thereof, and of any governmental department,
commission, board, regulatory authority, bureau, agency and instrumentality of
the foregoing, in respect of the conduct of their respective businesses and the
ownership of their respective properties, except for such noncompliances as are
not in the aggregate reasonably likely to have a material adverse effect on the
financial condition or results of operations of the Company and its
Subsidiaries, taken as a whole.
SECTION 4.18. ADDITIONAL INFORMATION. The Company will deliver to the
Trustee within 15 days after the filing of the same with the Commission, copies
of the quarterly and annual reports and of the information, documents and other
reports, if any, which the Company is required to file with the Commission
pursuant to Section 13 or 15(d) of the Exchange Act. Notwithstanding that the
Company may not be subject to the reporting requirements of Section 13 or 15(d)
of the Exchange
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53
Act, the Company will file with the Commission, to the extent permitted, and
provide the Trustee and Holders with such annual reports and such information,
documents and other reports specified in Sections 13 and 15(d) of the Exchange
Act. The Company and the Subsidiary Guarantors will also comply with the other
provisions of TIA [Section]314(a).
SECTION 4.19. FURTHER INSTRUMENTS AND ACTS. Upon request of the
Trustee, the Company will execute and deliver such further instruments and do
such further acts as may be reasonably necessary or proper to carry out more
effectively the purpose of this Indenture.
ARTICLE V
Successor Company
-----------------
SECTION 5.1. WHEN COMPANY MAY MERGE OR TRANSFER ASSETS. (a) The
Company will not, in a single transaction or a series of related transactions,
consolidate with or merge with or into, or sell, assign, transfer, lease, convey
or otherwise dispose of all or substantially all of its assets to, another
Person or Persons unless:
(i) either (A) the Company shall be the survivor of such merger or
consolidation or (B) the surviving Person is a corporation existing under
the laws of the United States, any state thereof or the District of
Columbia and such surviving Person shall expressly assume all the
obligations of the Company under the Securities and this Indenture;
(ii) immediately after giving effect to such transaction (on a pro
forma basis, including any Indebtedness incurred or anticipated to be
incurred in connection with such transaction and including adjustments that
are (i) directly attributable to such transaction and (ii) factually
supportable), the Company or the surviving Person is able to incur at least
$1.00 of additional Indebtedness (other than Permitted Indebtedness) in
compliance with Section 4.3;
(iii) immediately before and immediately after giving effect to such
transaction (including any Indebtedness incurred or anticipated to be
incurred in connection with such transaction), no Default or Event of
Default shall have occurred and be continuing;
(iv) each Subsidiary Guarantor, unless it is the other party to such
transaction, shall have by execution of a supplemental indenture confirmed
that after consummation of such transaction its Guarantee shall apply, as
such Guarantee applied on the date it was granted to the obligations of the
Company under this Indenture and the
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Securities, to the obligations of the Company or such Person, as the case
may be, under this Indenture and the Securities;
(v) the Company has delivered to the Trustee an Officers' Certificate
and Opinion of Counsel, each stating that such consolidation, merger or
transfer complies with this Indenture, that the surviving Person agrees to
be bound thereby, and that all conditions precedent in this Indenture
relating to such transaction have been satisfied.
For purposes of the foregoing, the transfer (by lease, assignment,
sale or otherwise, in a single transaction or series of transactions) of all or
substantially all of the properties and assets of one or more Subsidiaries of
the Company, the Capital Stock of which constitutes all or substantially all of
the properties and assets of the Company, shall be deemed to be the transfer of
all or substantially all of the properties and assets of the Company.
Notwithstanding the foregoing clauses (ii) and (iii) above, (a) any Restricted
Subsidiary of the Company may consolidate with, merge into or transfer all or
part of its properties and assets to the Company and (b) the Company may merge
with an Affiliate incorporated solely for the purpose of reincorporating the
Company in another jurisdiction.
(b) Upon any consolidation, combination or merger or any transfer of
all or substantially all of the assets of the Company in accordance with the
foregoing, the surviving entity shall succeed to, and be substituted for, and
may exercise every right and power of, the Company under this Indenture and the
Securities with the same effect as if such surviving entity had been named as
such; PROVIDED that solely for purposes of computing amounts described in clause
(iii) of Section 4.4(a), any such surviving entity to the Company shall only be
deemed to have succeeded to and be substituted for the Company with respect to
periods subsequent to the effective time of such merger, consolidation,
combination or transfer of assets.
(c) Each Subsidiary Guarantor (other than any Subsidiary Guarantor
whose Guarantee is to be released in accordance with the terms of its Guarantee
and this Indenture in connection with any transaction complying with the
provisions of Section 4.6 or as otherwise provided in this Indenture) will not,
and the Company will not cause or permit any Subsidiary Guarantor to,
consolidate with or merge with or into any Person other than the Company or any
other Subsidiary Guarantor unless: (i) the entity formed by or surviving any
such consolidation or merger (if other than the Subsidiary Guarantor) or to
which such sale, lease, conveyance or other disposition shall have been made is
a corporation organized and existing under the laws of the United States or any
State thereof or the District of Columbia; (ii) such entity assumes by
supplemental indenture all of the obligations of the Subsidiary Guarantor on the
Guarantee; (iii) immediately after giving effect to such transaction, no Default
<PAGE> 62
55
or Event of Default shall have occurred and be continuing; and (iv) immediately
after giving effect to such transaction and the use of any net proceeds
therefrom, on a pro forma basis, including adjustments that are (A) directly
attributable to such transaction and (B) factually supportable, the Company
could satisfy the provisions of Section 5.1(a)(ii).
ARTICLE VI
Defaults and Remedies
SECTION 6.1. EVENTS OF DEFAULT. An "Event of Default" occurs if:
(1) the Company defaults in any payment of interest on any Security
when the same becomes due and payable, whether or not such payment shall be
prohibited by Article X, and such default continues for a period of 30
days;
(2) the Company defaults in the payment of the principal of any
Security when the same becomes due and payable at its Stated Maturity, upon
optional redemption, upon required repurchase pursuant to a Change of
Control Offer or a Net Proceeds Offer, upon declaration or otherwise,
whether or not such payment shall be prohibited by Article X;
(3) the Company defaults in the observance or performance of any other
covenant or agreement contained in this Indenture which default continues
for a period of 30 days after the Company receives written notice
specifying the default (and demanding that such default be remedied) from
the Trustee or the Holders of at least 25% of the outstanding principal
amount of the Securities;
(4) the Company fails to pay at final maturity (giving effect to any
applicable grace periods and any extensions thereof) the principal amount
of any Indebtedness of the Company or any Restricted Subsidiary (other than
a Receivables Entity) of the Company, or the acceleration of the final
stated maturity of any such Indebtedness if the aggregate principal amount
of such Indebtedness, together with the principal amount of any other such
Indebtedness in default for failure to pay principal at final maturity or
which has been accelerated, aggregates $10 million or more at any time;
(5) one or more judgments in an aggregate amount in excess of $10
million shall have been rendered against the Company or any of its
Significant Subsidiaries and such judgments remain undischarged, unpaid or
unstayed for a period of 60 days after such judgment or judgments become
final and non-appealable, and in the event such judgment is
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56
covered by insurance, an enforcement proceeding has been commenced by any
creditor upon such judgment which is not promptly stayed;
(6) the Company or a Significant Subsidiary pursuant to or within the
meaning of any Bankruptcy Law:
(A) commences a voluntary case or proceeding;
(B) consents to the entry of judgment, decree or order for relief
against it in an involuntary case or proceeding;
(C) consents to the appointment of a Custodian of it or for any
substantial part of its property;
(D) makes a general assignment for the benefit of its creditors;
(E) consents to or acquiesces in the institution of a bankruptcy
or an insolvency proceeding against it;
(F) takes any corporate action to authorize or effect any of the
foregoing;
or takes any comparable action under any foreign laws relating to
insolvency;
(7) a court of competent jurisdiction enters an order or decree under
any Bankruptcy Law that:
(A) is for relief against the Company or any Significant
Subsidiary in an involuntary case;
(B) appoints a Custodian of the Company or any Significant
Subsidiary or for any substantial part of its property; or
(C) orders the winding up or liquidation of the Company or any
Significant Subsidiary;
or any similar relief is granted under any foreign laws and the order,
decree or relief remains unstayed and in effect for 60 days; or
(8) any of the Guarantees of the Subsidiary Guarantors that are also
Significant Subsidiaries of the Company ceases to be in full force and
effect or any of such Guarantees is declared to be null and void and
unenforceable or any of such Guarantees is found to be invalid or any of
such Subsidiary Guarantors denies its liability under its Guarantee (other
than by reason of release of such Subsidiary Guarantor in accordance with
the terms of this Indenture).
<PAGE> 64
57
The foregoing will constitute Events of Default whatever the reason
for any such Event of Default and whether it is voluntary or involuntary or is
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.
The term "Bankruptcy Law" means Title 11, UNITED STATES CODE, or any
similar Federal or state law for the relief of debtors. The term "Custodian"
means any receiver, trustee, assignee, liquidator, custodian or similar official
under any Bankruptcy Law.
The Company shall deliver to the Trustee, within 30 days after the
occurrence thereof, written notice in the form of an Officers' Certificate of
any Event of Default under clauses (3), (5) or (8) of this Section 6.1.
SECTION 6.2. ACCELERATION. (a) If an Event of Default (other than an
Event of Default specified in 6.1(6) or (7)) occurs and is continuing, the
Trustee or the Holders of at least 25% in principal amount of outstanding
Securities may declare the principal of and accrued interest on all the
Securities to be due and payable by notice in writing to the Company and the
Trustee specifying the respective Event of Default and that it is a "notice of
acceleration", and the same shall become immediately due and payable.
(b) If an Event of Default specified in Sections 6.1(6) and (7) occurs
and is continuing, then the principal of and accrued interest on all the
Securities shall ipso facto become and be immediately due and payable without
any declaration or other act on the part of the Trustee or any holder of
Securities.
(c) At any time after a declaration of acceleration with respect to
the Securities as described in Section 6.2(a) or (b) above, the Holders of a
majority in principal amount of the Securities may rescind and cancel such
declaration and its consequences (i) if the rescission would not conflict with
any judgment or decree, (ii) if all existing Events of Default have been cured
or waived except nonpayment of principal or interest that has become due solely
because of the acceleration, (iii) to the extent the payment of such interest is
lawful, interest on overdue installments of interest and overdue principal,
which has become due otherwise than by such declaration of acceleration, has
been paid, (iv) if the Company has paid the Trustee its reasonable compensation
and reimbursed the Trustee for its expenses, disbursements and advances and (v)
in the event of the cure or waiver of an Event of Default of the type described
in Section 6.1(6), (7) or (8), the Trustee shall have received an Officers'
Certificate and an Opinion of Counsel that such Event of Default has been cured
or waived.
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SECTION 6.3. OTHER REMEDIES. If an Event of Default occurs and is
continuing, the Trustee may pursue any available remedy to collect the payment
of principal of or interest on the Securities or to enforce the performance of
any provision of the Securities or this Indenture.
The Trustee may maintain a proceeding even if it does not possess any
of the Securities or does not produce any of them in the proceeding. A delay or
omission by the Trustee or any Securityholder in exercising any right or remedy
accruing upon an Event of Default shall not impair the right or remedy or
constitute a waiver of or acquiescence in the Event of Default. No remedy is
exclusive of any other remedy. All available remedies are cumulative.
SECTION 6.4. WAIVER OF PAST DEFAULTS. The holders of a majority in
principal amount of the Securities may waive any existing Default or Event of
Default under this Indenture, and its consequences, except (i) a default in the
payment of the principal of or interest on any Securities or (ii) a Default or
Event of Default in respect of a provision that under Section 9.2 cannot be
amended without the consent of each Securityholder affected. When a Default or
Event of Default is waived, it is deemed cured, but no such waiver shall extend
to any subsequent or other Default or Event of Default or impair any consequent
right.
SECTION 6.5. CONTROL BY MAJORITY. The Holders of a majority in
principal amount of the Securities may direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee or of
exercising any trust or power conferred on the Trustee. However, the Trustee may
refuse to follow any direction that conflicts with law or this Indenture or,
subject to Section 7.1, that the Trustee determines is unduly prejudicial to the
rights of other Securityholders or would involve the Trustee in personal
liability; PROVIDED, HOWEVER, that the Trustee may take any other action deemed
proper by the Trustee that is not inconsistent with such direction. Prior to
taking any action hereunder, the Trustee shall be entitled to indemnification
satisfactory to it in its sole discretion against all losses and expenses caused
by taking or not taking such action.
SECTION 6.6. LIMITATION ON SUITS. A Securityholder may not pursue any
remedy with respect to this Indenture or the Securities unless:
(1) the Holder gives to the Trustee written notice stating that an
Event of Default is continuing;
(2) the Holders of at least 25% in outstanding principal amount of the
Securities make a written request to the Trustee to pursue the remedy;
<PAGE> 66
59
(3) such Holder or Holders offer to the Trustee reasonable security or
indemnity against any loss, liability or expense;
(4) the Trustee does not comply with the request within 45 days after
receipt of the request and the offer of security or indemnity; and
(5) the Holders of a majority in principal amount of the Securities do
not give the Trustee a direction inconsistent with the request during such
45-day period.
A Securityholder may not use this Indenture to prejudice the rights of
another Securityholder or to obtain a preference or priority over another
Securityholder.
SECTION 6.7. RIGHTS OF HOLDERS TO RECEIVE PAYMENT. Notwithstanding any
other provision of this Indenture, the right of any Holder to receive payment of
principal of and interest on the Securities held by such Holder, on or after the
respective due dates expressed in the Securities, or to bring suit for the
enforcement of any such payment on or after such respective dates, shall not be
impaired or affected without the consent of such Holder.
SECTION 6.8. COLLECTION SUIT BY TRUSTEE. If an Event of Default
specified in Section 6.1(1) or (2) occurs and is continuing, the Trustee may
recover judgment in its own name and as trustee of an express trust against the
Company for the whole amount then due and owing (together with interest on any
unpaid interest to the extent lawful) and the amounts provided for in Section
7.7.
SECTION 6.9. TRUSTEE MAY FILE PROOFS OF CLAIM. The Trustee may file
such proofs of claim and other papers or documents as may be necessary or
advisable in order to have the claims of the Trustee and the Securityholders
allowed in any judicial proceedings relative to the Company, its Subsidiaries or
their respective creditors or properties and, unless prohibited by law or
applicable regulations, may vote on behalf of the Holders in any election of a
trustee in bankruptcy or other Person performing similar functions, and any
Custodian in any such judicial proceeding is hereby authorized by each Holder to
make payments to the Trustee and, in the event that the Trustee shall consent to
the making of such payments directly to the Holders, to pay to the Trustee any
amount due it for the reasonable compensation, expenses, disbursements and
advances of the Trustee, its agents and its counsel, and any other amounts due
the Trustee under Section 7.7.
SECTION 6.10. PRIORITIES. If the Trustee collects any money or
property pursuant to this Article VI, it shall pay out the money or property in
the following order:
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60
FIRST: to the Trustee for amounts due under Section 7.7;
SECOND: to holders of Senior Indebtedness and Guarantor Senior
Indebtedness to the extent required by Article X;
THIRD: to Securityholders for amounts due and unpaid on the Securities
for principal and interest, rateably, without preference or priority of any
kind, according to the amounts due and payable on the Securities for
principal and interest, respectively; and
FOURTH: to the Company or any other obligors on the Securities as
their interests may appear, or as a court of competent jurisdiction may
direct.
The Trustee may fix a record date and payment date for any payment to
Securityholders pursuant to this Section. At least 15 days before such record
date, the Trustee shall mail to each Securityholder and the Company a notice
that states the record date, the payment date and amount to be paid.
SECTION 6.11. UNDERTAKING FOR COSTS. In any suit for the enforcement
of any right or remedy under this Indenture or in any suit against the Trustee
for any action taken or omitted by it as Trustee, a court in its discretion may
require the filing by any party litigant in the suit of an undertaking to pay
the costs of the suit, and the court in its discretion may assess reasonable
costs, including reasonable attorneys' fees, against any party litigant in the
suit, having due regard to the merits and good faith of the claims or defenses
made by the party litigant. This Section does not apply to a suit by the
Trustee, a suit by a Holder pursuant to Section 6.7 or a suit by Holders of more
than 10% in outstanding principal amount of the Securities.
ARTICLE VII
Trustee
-------
SECTION 7.1. DUTIES OF TRUSTEE. (a) If an Event of Default has
occurred and is continuing, the Trustee shall exercise the rights and powers
vested in it by this Indenture and use the same degree of care and skill in
their exercise as a prudent Person would exercise or use under the circumstances
in the conduct of such Person's own affairs.
(b) Except during the continuance of an Event of Default:
(1) the Trustee undertakes to perform such duties and only such duties
as are specifically set forth in this
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Indenture and no implied covenants or obligations shall be read into this
Indenture against the Trustee; and
(2) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness of
the opinions expressed therein, upon certificates or opinions furnished to
the Trustee and conforming to the requirements of this Indenture. However,
the Trustee shall examine the certificates and opinions to determine
whether or not they conform to the requirements of this Indenture.
(c) The Trustee may not be relieved from liability for its own
negligent action, its own negligent failure to act or its own wilful misconduct,
except that:
(1) this paragraph does not limit the effect of paragraph (b) of this
Section;
(2) the Trustee shall not be liable for any error of judgment made in
good faith by a Trust Officer unless it is proved that the Trustee was
negligent in ascertaining the pertinent facts; and
(3) the Trustee shall not be liable with respect to any action it
takes or omits to take in good faith in accordance with a direction
received by it pursuant to Section 6.5.
(d) Every provision of this Indenture that in any way relates to the
Trustee is subject to paragraphs (a), (b) and (c) of this Section.
(e) The Trustee shall not be liable for interest on any money received
by it except as the Trustee may agree in writing with the Company.
(f) Money held in trust by the Trustee need not be segregated from
other funds except to the extent required by law.
(g) No provision of this Indenture shall require the Trustee to expend
or risk its own funds or otherwise incur financial liability in the performance
of any of its duties hereunder or in the exercise of any of its rights or
powers, if it shall have reasonable grounds to believe that repayment of such
funds or adequate indemnity against such risk or liability is not reasonably
assured to it.
(h) Every provision of this Indenture relating to the conduct or
affecting the liability of or affording protection to the Trustee shall be
subject to the provisions of this Section and to the provisions of the TIA.
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SECTION 7.2. RIGHTS OF TRUSTEE. (a) The Trustee may rely on any
document believed by it to be genuine and to have been signed or presented by
the proper person. The Trustee need not investigate any fact or matter stated in
the document.
(b) Before the Trustee acts or refrains from acting, it may require an
Officers' Certificate or an Opinion of Counsel. The Trustee shall not be liable
for any action it takes or omits to take in good faith in reliance on the
Officers' Certificate or Opinion of Counsel.
(c) The Trustee may act through agents and shall not be responsible
for the misconduct or negligence of any agent appointed with due care.
(d) The Trustee shall not be liable for any action it takes or omits
to take in good faith which it believes to be authorized or within its rights or
powers; PROVIDED, HOWEVER, that the Trustee's conduct does not constitute wilful
misconduct or negligence.
(e) The Trustee may consult with counsel, and the advice or opinion of
counsel with respect to legal matters relating to this Indenture and the
Securities shall be full and complete authorization and protection from
liability in respect to any action taken, omitted or suffered by it hereunder in
good faith and in accordance with the advice or opinion of such counsel.
SECTION 7.3. INDIVIDUAL RIGHTS OF TRUSTEE. The Trustee in its
individual or any other capacity may become the owner or pledgee of Securities
and may otherwise deal with the Company or its Affiliates with the same rights
it would have if it were not Trustee. Any Paying Agent, Registrar, co-registrar
or co-paying agent may do the same with like rights. However, the Trustee must
comply with Sections 7.10 and 7.11.
SECTION 7.4. TRUSTEE'S DISCLAIMER. The Trustee shall not be
responsible for and makes no representation as to the validity or adequacy of
this Indenture or the Securities, it shall not be accountable for the Company's
use of the proceeds from the Securities, and it shall not be responsible for any
statement of the Company in this Indenture or in any document issued in
connection with the sale of the Securities or in the Securities other than the
Trustee's certificate of authentication.
SECTION 7.5. NOTICE OF DEFAULTS. If a Default or Event of Default
occurs and is continuing and if a Trust Officer has actual knowledge thereof,
the Trustee shall mail to each Securityholder notice of the Default or Event of
Default within 30 days after it occurs. Except in the case of a Default or Event
of Default in payment of principal of or interest on any Security (including
payments pursuant to the optional redemption
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or required repurchase provisions of such Security, if any), the Trustee may
withhold the notice if and so long as its board of directors, the Executive
Committee of its board of directors or a committee of its Trust Officers in good
faith determines that withholding the notice is in the interests of
Securityholders.
SECTION 7.6. REPORTS BY TRUSTEE TO HOLDERS. As promptly as practicable
after each May 15 beginning with the May 15 following the date of this
Indenture, and in any event prior to July 15 in each year, the Trustee shall
mail to each Securityholder a brief report dated as of such May 15 that complies
with TIA [Section]313(a). The Trustee also shall comply with TIA
[Section]313(b). The Trustee shall also transmit by mail all reports required
by TIA [Section]313(c).
A copy of each report at the time of its mailing to Securityholders
shall be filed with the SEC if required by law and each stock exchange (if any)
on which the Securities are listed. The Company agrees to notify promptly the
Trustee whenever the Securities become listed on any stock exchange and of any
delisting thereof.
SECTION 7.7. COMPENSATION AND INDEMNITY. The Company shall pay to the
Trustee from time to time reasonable compensation for its services. The
Trustee's compensation shall not be limited by any law on compensation of a
trustee of an express trust. The Company shall reimburse the Trustee upon
request for all reasonable out-of-pocket expenses incurred or made by it,
including costs of collection, costs of preparing and reviewing reports,
certificates and other documents, costs of preparation and mailing of notices to
Securityholders and reasonable costs of counsel retained by the Trustee in
connection with the delivery of an Opinion of Counsel or otherwise, in addition
to the compensation for its services. Such expenses shall include the reasonable
compensation and expenses, disbursements and advances of the Trustee's agents,
counsel, accountants and experts. The Company shall indemnify the Trustee
against any and all loss, liability or expense (including reasonable attorneys'
fees) incurred by it in connection with the administration of this trust and the
performance of its duties hereunder, including the costs and expenses of
enforcing this Indenture (including this Section 7.7) and of defending itself
against any claims (whether asserted by any Securityholder, the Company or
otherwise). The Trustee shall notify the Company promptly of any claim for which
it may seek indemnity. Failure by the Trustee to so notify the Company shall not
relieve the Company of its obligations hereunder. The Company shall defend the
claim and the Trustee may have separate counsel and the Company shall pay the
fees and expenses of such counsel. The Company need not reimburse any expense or
indemnify against any loss, liability or expense incurred by the Trustee through
the Trustee's own wilful misconduct, negligence or bad faith.
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To secure the Company's payment obligations in this Section, the
Trustee shall have a lien prior to the Securities on all money or property held
or collected by the Trustee other than money or property held in trust to pay
principal of and interest on particular Securities. The Trustee's right to
receive payment of any amounts due under this Section 7.7 shall not be
subordinate to any other liability or indebtedness of the Company.
The Company's payment obligations pursuant to this Section shall
survive the discharge of this Indenture. When the Trustee incurs expenses after
the occurrence of a Default specified in Section 6.1(6) or (7) with respect to
the Company, the expenses are intended to constitute expenses of administration
under any Bankruptcy Law.
SECTION 7.8. REPLACEMENT OF TRUSTEE. The Trustee may resign at any
time by so notifying the Company. The Holders of a majority in principal amount
of the Securities may remove the Trustee by so notifying the Trustee and may
appoint a successor Trustee. The Company shall remove the Trustee if:
(1) the Trustee fails to comply with Section 7.10;
(2) the Trustee is adjudged bankrupt or insolvent;
(3) a receiver or other public officer takes charge of the Trustee or
its property; or
(4) the Trustee otherwise becomes incapable of acting.
If the Trustee resigns or is removed by the Company or by the Holders
of a majority in principal amount of the Securities and such Holders do not
reasonably promptly appoint a successor Trustee, or if a vacancy exists in the
office of Trustee for any reason (the Trustee in such event being referred to
herein as the retiring Trustee), the Company shall promptly appoint a successor
Trustee.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Thereupon the
resignation or removal of the retiring Trustee shall become effective, and the
successor Trustee shall have all the rights, powers and duties of the Trustee
under this Indenture. The successor Trustee shall mail a notice of its
succession to Securityholders. The retiring Trustee shall promptly transfer all
property held by it as Trustee to the successor Trustee, subject to the lien
provided for in Section 7.7.
If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee or the Holders of
10% in principal amount of the
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Securities may petition any court of competent jurisdiction for the appointment
of a successor Trustee.
If the Trustee fails to comply with Section 7.10, any Securityholder
may petition any court of competent jurisdiction for the removal of the Trustee
and the appointment of a successor Trustee.
Notwithstanding the replacement of the Trustee pursuant to this
Section, the Company's obligations under Section 7.7 shall continue for the
benefit of the retiring Trustee.
SECTION 7.9. SUCCESSOR TRUSTEE BY MERGER. If the Trustee consolidates
with, merges or converts into, or transfers all or substantially all its
corporate trust business or assets to, another corporation or banking
association, the resulting, surviving or transferee corporation without any
further act shall be the successor Trustee.
In case at the time such successor or successors by merger,
conversion, consolidation or transfer to the Trustee shall succeed to the trusts
created by this Indenture, any of the Securities shall have been authenticated
but not delivered, any such successor to the Trustee may adopt the certificate
of authentication of any predecessor trustee, and deliver such Securities so
authenticated; and in case at that time any of the Securities shall not have
been authenticated, any successor to the Trustee may authenticate such
Securities either in the name of any predecessor hereunder or in the name of the
successor to the Trustee; and in all such cases such certificates shall have the
full force which it is anywhere in the Securities or in this Indenture provided
that the certificate of the Trustee shall have.
SECTION 7.10. ELIGIBILITY; DISQUALIFICATION. The Trustee shall at all
times satisfy the requirements of TIA [section]310(a). The Trustee shall have a
combined capital and surplus of at least $50 million as set forth in its most
recent published annual report of condition. The Trustee shall comply with TIA
[section]310(b); PROVIDED, HOWEVER, that there shall be excluded from the
operation of TIA [section]310(b)(1) any indenture or indentures under which
other securities or certificates of interest or participation in other
securities of the Company are outstanding if the requirements for such exclusion
set forth in TIA [section]310(b)(1) are met.
SECTION 7.11. PREFERENTIAL COLLECTION OF CLAIMS AGAINST COMPANY. The
Trustee shall comply with TIA [section]311(a), excluding any creditor
relationship listed in TIA [section]311(b). A Trustee who has resigned or been
removed shall be subject to TIA [section]311(a) to the extent indicated.
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ARTICLE VIII
Discharge of Indenture; Defeasance
----------------------------------
SECTION 8.1. DISCHARGE OF LIABILITY ON SECURITIES. (a) The Company may
terminate its obligations under the Securities and this Indenture, except those
obligations referred to in Section 8.1(b), if all Securities previously
authenticated and delivered (other than destroyed, lost or stolen Securities
which have been replaced or paid or Securities for whose payment money has
theretofore been deposited with the Trustee or the Paying Agent in trust or
segregated and held in trust by the Company and thereafter repaid to the
Company, as provided in Section 8.5) have been delivered to the Trustee for
cancellation and the Company has paid all sums payable by it hereunder, or if:
(i) either (A) pursuant to Article III, the Company shall have given
notice to the Trustee and mailed a notice of redemption to each Holder of
the redemption of all of the Securities under arrangements satisfactory to
the Trustee for the giving of such notice or (B) all Securities have
otherwise become due and payable hereunder;
(ii) the Company shall have irrevocably deposited or caused to be
deposited with the Trustee or a trustee satisfactory to the Trustee, under
the terms of an irrevocable trust agreement in form and substance
satisfactory to the Trustee, as trust funds in trust solely for the benefit
of the Holders for that purpose, money in such amount as is sufficient
without consideration of reinvestment of such money, to pay principal of,
premium on, if any, and interest on the outstanding Securities to maturity
or redemption, as the case may be; PROVIDED that the Trustee shall have
been irrevocably instructed to apply such money to the payment of said
principal, premium, if any, and interest with respect to the Securities
and, PROVIDED, FURTHER, that from and after the time of deposit, the money
deposited shall not be subject to the rights of holders of Senior
Indebtedness pursuant to the provisions of Article X;
(iii) no Default or Event of Default with respect to this Indenture or
the Securities shall have occurred and be continuing on the date of such
deposit or shall occur as a result of such deposit and such deposit will
not result in a breach or violation of, or constitute a default under, any
other instrument to which the Company is a party or by which it is bound;
(iv) the Company shall have paid all other sums payable by it
hereunder; and
(v) the Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each
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stating that all conditions precedent providing for the termination of the
Company's obligations under the Securities and this Indenture have been
satisfied. Such Opinion of Counsel shall also state that such satisfaction
and discharge does not result in a default under the Bank Credit Agreement
(if then in effect) or any other agreement or instrument then known to such
counsel that binds or affects the Company.
(b) Notwithstanding the foregoing paragraph, the Company's obligations
in Sections 2.2, 2.5, 2.6, 2.7, 2.8, 4.1, 4.13, 4.14, 4.15, 4.17, 7.7, 8.4, 8.5,
and 8.6 shall survive until the Securities are no longer outstanding pursuant to
the last paragraph of Section 2.8. After the Securities are no longer
outstanding, the Company's obligations in Sections 7.7, 8.4, 8.5, and 8.6 shall
survive.
After such delivery or irrevocable deposit, the Trustee upon request
shall acknowledge in writing the discharge of the Company's obligations under
the Securities and this Indenture except for those surviving obligations
specified above.
SECTION 8.2. LEGAL DEFEASANCE AND COVENANT DEFEASANCE. (a) The Company
may, at its option by Board Resolution of the Board of Directors of the Company,
at any time, elect to have either paragraph (b) or (c) below be applied to all
outstanding Securities upon compliance with the conditions set forth in Section
8.3.
(b) Upon the Company's exercise under paragraph (a) hereof of the
option applicable to this paragraph (b), the Company and the Subsidiary
Guarantors, if any, shall, subject to the satisfaction of the conditions set
forth in Section 8.3, be deemed to have been discharged from its obligations
with respect to all outstanding Securities on the date the conditions set forth
below are satisfied (hereinafter, "LEGAL DEFEASANCE"). For this purpose, Legal
Defeasance means that the Company shall be deemed to have paid and discharged
the entire Indebtedness represented by the outstanding Securities, which shall
thereafter be deemed to be "outstanding" only for the purposes of Section 8.4
hereof and the other Sections of this Indenture referred to in (i) through (iv)
below, and to have satisfied all its other obligations under such Securities and
this Indenture (and the Trustee, on demand of and at the expense of the Company,
shall execute proper instruments acknowledging the same), and the following
provisions shall survive until otherwise terminated or discharged hereunder: (i)
the rights of Holders of outstanding Securities to receive solely from the trust
fund described in Sections 8.3 and 8.4 hereof, and as more fully set forth in
such Sections, payments in respect of the principal of (and premium, if any, on)
and interest on such Securities when such payments are due, (ii) the Company's
obligations with respect to such Securities under Article II and Section 4.13
hereof, (iii) the rights, powers, trusts, duties and immunities of the Trustee
<PAGE> 75
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hereunder and the Company's obligations in connection therewith and (iv) this
Article VIII. The Holders of the Securities and any amounts deposited under
Section 8.3 hereof shall cease to be subject to any obligations to, or the
rights of, any holder of Senior Indebtedness or Guarantor Senior Indebtedness
under Article X or otherwise. Subject to compliance with this Article VIII, the
Company may exercise its option under this paragraph (b) notwithstanding the
prior exercise of its option under paragraph (c) hereof.
(c) Upon the Company's exercise under paragraph (a) hereof of the
option applicable to this paragraph (c), the Company shall, subject to the
satisfaction of the conditions set forth in Section 8.3 hereof, be released from
its obligations under the covenants contained in Sections 4.2 through 4.12 and
Article V hereof with respect to the outstanding Securities on and after the
date the conditions set forth below are satisfied (hereinafter, "COVENANT
DEFEASANCE"), and the Securities shall thereafter be deemed not "outstanding"
for the purposes of any direction, waiver, consent or declaration or act of
Holders (and the consequences of any thereof) in connection with such covenants,
but shall continue to be deemed "outstanding" for all other purposes hereunder
(it being understood that such Securities shall not be deemed outstanding for
accounting purposes) and Holders of the Securities and any amounts deposited
under Sections 8.3 and 8.4 hereof shall cease to be subject to any obligations
to, or the rights of, any holder of Senior Indebtedness or Guarantor Senior
Indebtedness under Article X or otherwise. For this purpose, such Covenant
Defeasance means that, with respect to the outstanding Securities, the Company
may omit to comply with and shall have no liability in respect of any term,
condition or limitation set forth in any such covenant, whether directly or
indirectly, by reason of any reference elsewhere herein to any such covenant or
by reason of any reference in any such covenant to any other provision herein or
in any other document and such omission to comply shall not constitute a Default
or an Event of Default under Section 6.1(3) hereof, but, except as specified
above, the remainder of this Indenture and such Securities shall be unaffected
thereby.
SECTION 8.3. CONDITIONS TO DEFEASANCE. The Company may exercise its
Legal Defeasance option or its Covenant Defeasance option only if:
(1) the Company irrevocably deposits with the Trustee, in trust, for
the benefit of the holders of the Securities cash in U.S. dollars,
non-callable U.S. Government Obligations, or a combination thereof, in such
amounts as will be sufficient, in the opinion of a nationally recognized
firm of independent public accountants expressed in a written certification
thereof delivered to the Trustee, to pay the principal of, premium, if any,
and interest on the Securities on the stated date for payment thereof or on
the applicable redemption date, as the case may be;
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PROVIDED that the Trustee shall have received an irrevocable written order
from the Company instructing the Trustee to apply such cash in U.S. dollars
or the proceeds of such U.S. Government Obligations to said payments with
respect to the Securities;
(2) in the case of a Legal Defeasance, the Company shall have
delivered to the Trustee an Opinion of Counsel in the United States
reasonably acceptable to the Trustee confirming that (i) the Company has
received from, or there has been published by, the Internal Revenue Service
a ruling, or (ii) since the date of this Indenture there has been a change
in the applicable Federal income tax law, in either case to the effect
that, and based thereon such Opinion of Counsel shall confirm that, the
Securityholders will not recognize income, gain or loss for Federal income
tax purposes as a result of such defeasance and will be subject to Federal
income tax on the same amounts, in the same manner and at the same times as
would have been the case if such Legal Defeasance had not occurred;
(3) in the case of a Covenant Defeasance, the Company shall have
delivered to the Trustee an Opinion of Counsel in the United States
reasonably acceptable to the Trustee confirming that the Securityholders
will not recognize income, gain or loss for Federal income tax purposes as
a result of such Covenant Defeasance and will be subject to Federal income
tax on the same amounts, in the same manner and at the same times as would
have been the case if such Covenant Defeasance had not occurred;
(4) no Default or Event of Default or event which with notice or lapse
of time or both would become a Default or an Event of Default with respect
to the Securities shall have occurred and be continuing on the date of such
deposit (other than a Default or Event of Default with respect to this
Indenture resulting from the incurrence of Indebtedness, all or a portion
of which will be used to defease the Securities concurrently with such
incurrence) or insofar as Sections 6.1(6) and 6.1(7) hereof are concerned,
at any time in the period ending on the 91st day after the date of such
deposit;
(5) such Legal Defeasance or Covenant Defeasance shall not result in a
breach or violation of, or constitute a default under this Indenture or any
other material agreement or instrument to which the Company or any of its
Subsidiaries is a party or by which the Company or any of its Subsidiaries
is bound;
(6) the Company shall have delivered to the Trustee an Officers'
Certificate stating that the deposit was not made by the Company with the
intent of preferring the Holders over any other creditors of the Company or
with the intent
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of defeating, hindering, delaying or defrauding any other creditors of the
Company or others;
(7) the Company delivers to the Trustee an Officers' Certificate and
an Opinion of Counsel, each stating that all conditions precedent to the
defeasance and discharge of the Securities and this Indenture as
contemplated by this Article VIII have been complied with;
(8) the Company shall have delivered to the Trustee an Opinion of
Counsel to the effect that (A) the trust funds will not be subject to any
rights of holders of Indebtedness of the Company other than the Securities
and (B) assuming no intervening bankruptcy of the Company between the date
of deposit and the 91st day following the deposit and that no Holder is an
insider of the Company, after the 91st day following the deposit, the trust
funds will not be subject to the effect of any applicable bankruptcy,
insolvency, reorganization or similar laws affecting creditors' rights
generally; and
(9) the Company delivers to the Trustee an Opinion of Counsel to the
effect that the trust resulting from the deposit does not constitute, or is
qualified as, a regulated investment company under the Investment Company
Act of 1940.
Before or after a deposit, the Company may make arrangements
satisfactory to the Trustee for the redemption of Securities at a future date in
accordance with Article III.
SECTION 8.4. APPLICATION OF TRUST MONEY. The Trustee or Paying Agent
shall hold in trust U.S. Legal Tender or U.S. Government Obligations deposited
with it pursuant to this Article VIII, and shall apply the deposited U.S. Legal
Tender and the money from U.S. Government Obligations in accordance with this
Indenture to the payment of principal of, premium, if any, and interest on the
Securities. The Trustee shall be under no obligation to invest said U.S. Legal
Tender or U.S. Government Obligations except as it may agree with the Company.
The Company shall pay and indemnify the Trustee against any tax, fee
or other charge imposed on or assessed against the U.S. Legal Tender or U.S.
Government Obligations deposited pursuant to Section 8.3 hereof or the
principal, premium, if any, and interest received in respect thereof other than
any such tax, fee or other charge which by law is for the account of the Holders
of the outstanding Securities.
Anything in this Article VIII to the contrary notwithstanding, the
Trustee shall deliver or pay to the Company from time to time upon the Company's
request any U.S. Legal Tender or U.S. Government Obligations held by it as
provided in Section 8.3 hereof which, in the opinion of a nationally recognized
firm of independent public accountants expressed in a
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written certification thereof delivered to the Trustee, are in excess of the
amount thereof that would then be required to be deposited to effect an
equivalent Legal Defeasance or Covenant Defeasance.
SECTION 8.5. REPAYMENT TO COMPANY OR THE SUBSIDIARY GUARANTORS.
Subject to Article VIII, the Trustee and the Paying Agent shall promptly pay to
the Company, or if deposited with the Trustee by any Subsidiary Guarantor, to
such Subsidiary Guarantor, upon request any excess U.S. Legal Tender or U.S.
Government Obligations held by them at any time and thereupon shall be relieved
from all liability with respect to such money. The Trustee and the Paying Agent
shall pay to the Company, or if deposited with the Trustee by any Subsidiary
Guarantor, to such Subsidiary Guarantor, upon request any money held by them for
the payment of principal or interest that remains unclaimed for two years;
PROVIDED that the Trustee or such Paying Agent, before being required to make
any payment, may at the expense of the Company cause to be published once in a
newspaper of general circulation in the City of New York or mail to each Holder
entitled to such money notice that such money remains unclaimed and that after a
date specified therein which shall be at least 30 days from the date of such
publication or mailing any unclaimed balance of such money then remaining will
be repaid to the Company or a Subsidiary Guarantor. After payment to the Company
or a Subsidiary Guarantor, as the case may be, Holders entitled to such money
must look to the Company for payment as general creditors unless an applicable
law designates another Person.
SECTION 8.6. REINSTATEMENT. If the Trustee or Paying Agent is unable
to apply any U.S. Legal Tender or U.S. Government Obligations in accordance with
Article VIII by reason of any legal proceeding or by reason of any order or
judgment of any court or governmental authority enjoining, restraining or
otherwise prohibiting such application, the Company's obligations under this
Indenture and the Securities (and each Subsidiary Guarantor's obligations under
a Guarantee) shall be revived and reinstated as though no deposit had occurred
pursuant to Article VIII until such time as the Trustee or Paying Agent is
permitted to apply all such U.S. Legal Tender or U.S. Government Obligations in
accordance with Article VIII; PROVIDED that if the Company or any Subsidiary
Guarantor, as the case may be, has made any payment of interest on or principal
of any Securities because of the reinstatement of its obligations, the Company
or any Subsidiary Guarantor, as the case may be, shall be subrogated to the
rights of the Holders of such Securities to receive such payment from the U.S.
Legal Tender or U.S. Government Obligations held by the Trustee or Paying Agent.
<PAGE> 79
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ARTICLE IX
Amendments
----------
SECTION 9.1. WITHOUT CONSENT OF HOLDERS. The Company and the Trustee
may amend this Indenture or the Securities without notice to or consent of any
Securityholder:
(1) to cure any ambiguity, omission, defect or inconsistency; PROVIDED
that such amendment does not in the opinion of the Trustee, adversely
affect the rights of any Holder in any material respect;
(2) to comply with Article V;
(3) to provide for uncertificated Securities in addition to or in
place of certificated Securities; PROVIDED, HOWEVER, that the
uncertificated Securities are issued in registered form for purposes of
Section 163(f) of the Code or in a manner such that the uncertificated
Securities are described in Section 163(f)(2)(B) of the Code;
(4) to make any change in Article X that would limit or terminate the
benefits available to any holder of Senior Indebtedness or Guarantor Senior
Indebtedness (or Representatives therefor) under Article X;
(5) to add Guarantees with respect to the Securities or to secure the
Securities;
(6) to add to the covenants of the Company for the benefit of the
Holders or to surrender any right or power herein conferred upon the
Company;
(7) to comply with any requirements of the SEC in connection with
qualifying this Indenture under the TIA;
(8) to make any change that does not adversely affect the rights of
any Securityholder; or
(9) to provide for the issuance of the Exchange Notes, which will have
terms substantially identical in all material respects to the Initial Notes
(except that the transfer restrictions contained in the Initial Notes and
provisions relating to an increase in interest rates in the event the
Securities are not registered under the Securities Act will be modified or
eliminated, as appropriate), and which will be treated, together with any
outstanding Initial Notes, as a single issue of securities.
An amendment under this Section may not make any change that adversely
affects the rights under Article X of any holder of Senior Indebtedness or
Guarantor Senior Indebtedness then
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73
outstanding unless the holders of such Senior Indebtedness or Guarantor Senior
Indebtedness (or any group or representative thereof authorized to give a
consent) consent to such change.
After an amendment under this Section becomes effective, the
Company shall mail to Securityholders a notice briefly describing such
amendment. The failure to give such notice to all Securityholders, or any defect
therein, shall not impair or affect the validity of an amendment under this
Section.
SECTION 9.2. WITH CONSENT OF HOLDERS. The Company and the
Trustee may amend this Indenture or the Securities without notice to any
Securityholder but with the written consent of the Holders of at least a
majority in principal amount of the Securities. However, without the consent of
each Securityholder affected, an amendment may not:
(1) reduce the amount of Securities whose Holders must
consent to an amendment;
(2) reduce the rate of or change or have the effect of
changing the time for payment of interest, including defaulted
interest, on any Security;
(3) reduce the principal of or change or have the effect of
changing the Stated Maturity of any Security, or change the date on
which any Securities may be subject to redemption or repurchase, or
reduce the redemption or repurchase price therefor;
(4) make any Security payable in money other than that
stated in the Security;
(5) make any change in provisions of this Indenture protecting
the right of each Holder to receive payment of principal of, premium,
if any, and interest on such Security on or after the due date thereof
or to bring suit to enforce such payment, or permitting holders of a
majority in principal amount of the Securities to waive Defaults or
Events of Default (other than Defaults or Events of Default with
respect to the payment of principal of, premium, if any, or interest on
the Securities);
(6) amend, change or modify in any material respect the
obligation of the Company to make and consummate a Change of Control
Offer in the event of a Change of Control Triggering Event or make and
consummate a Net Proceeds Offer with respect to any Asset Sale that has
been consummated or modify any of the provisions or definitions with
respect thereto;
(7) modify Article X or the definitions used in Article X of
this Indenture to adversely affect the Holders in any material respect;
or
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(8) release any Subsidiary Guarantor that is a Significant
Subsidiary of the Company from any of its obligations under its
Guarantee or this Indenture otherwise than in accordance with the terms
of this Indenture.
It shall not be necessary for the consent of the Holders under
this Section to approve the particular form of any proposed amendment, but it
shall be sufficient if such consent approves the substance thereof.
An amendment under this Section may not make any change that
adversely affects the rights under Article X of any holder of Senior
Indebtedness or Guarantor Senior Indebtedness then outstanding unless the
holders of such Senior Indebtedness or Guarantor Senior Indebtedness (or any
group or representative thereof authorized to give a consent) consent to such
change.
After an amendment under this Section becomes effective, the
Company shall mail to Securityholders a notice briefly describing such
amendment. The failure to give such notice to all Securityholders, or any defect
therein, shall not impair or affect the validity of an amendment under this
Section.
SECTION 9.3. COMPLIANCE WITH TRUST INDENTURE ACT. Every
amendment to this Indenture or the Securities shall comply with the TIA as then
in effect.
SECTION 9.4. REVOCATION AND EFFECT OF CONSENTS AND WAIVERS. A
consent to an amendment or a waiver by a Holder of a Security shall bind the
Holder and every subsequent Holder of that Security or portion of the Security
that evidences the same debt as the consenting Holder's Security, even if
notation of the consent or waiver is not made on the Security. However, any such
Holder or subsequent Holder may revoke the consent or waiver as to such Holder's
Security or portion of the Security if the Trustee receives the notice of
revocation before the date the amendment or waiver becomes effective. After an
amendment or waiver becomes effective, it shall bind every Securityholder,
unless it makes a change described in any of clauses (1) through (8) of Section
9.2, in which case, the amendment or waiver shall bind only each Securityholder
who has consented to it and every subsequent Holder of a Security or portion of
a Security that evidences the same debt as the consenting Holder; PROVIDED that
any such waiver shall not impair or affect the right of any Holder to receive
payment of principal of, premium, if any, and interest on a Security, on or
after the respective due dates expressed in such Security, or to bring suit for
the enforcement of any such payment on or after such respective dates without
the consent of such Holder.
The Company may, but shall not be obligated to, fix a record
date for the purpose of determining the Securityholders entitled to give their
consent or take any other action described
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above or required or permitted to be taken pursuant to this Indenture. If a
record date is fixed, then notwithstanding the immediately preceding paragraph,
those Persons who were Securityholders at such record date (or their duly
designated proxies), and only those Persons, shall be entitled to give such
consent or to revoke any consent previously given or to take any such action,
whether or not such Persons continue to be Holders after such record date. No
such consent shall become valid or effective more than 120 days after such
record date.
SECTION 9.5. NOTATION ON OR EXCHANGE OF SECURITIES. If an
amendment changes the terms of a Security, the Trustee may require the Holder of
the Security to deliver it to the Trustee. The Trustee may place an appropriate
notation on the Security regarding the changed terms and return it to the
Holder. Alternatively, if the Company or the Trustee so determines, the Company
in exchange for the Security shall issue and the Trustee shall authenticate a
new Security that reflects the changed terms. Failure to make the appropriate
notation or to issue a new Security shall not affect the validity of such
amendment.
SECTION 9.6. TRUSTEE TO SIGN AMENDMENTS. The Trustee shall
sign any amendment authorized pursuant to this Article IX if the amendment does
not adversely affect the rights, duties, liabilities or immunities of the
Trustee. If it does, the Trustee may but need not sign it. In signing such
amendment the Trustee shall be entitled to receive indemnity reasonably
satisfactory to it and to receive, and (subject to Section 7.1) shall be fully
protected in relying upon, an Officers' Certificate and an Opinion of Counsel
stating that such amendment is authorized or permitted by this Indenture.
ARTICLE X
Subordination
-------------
SECTION 10.1. AGREEMENT TO SUBORDINATE. The Company agrees,
and each Securityholder by accepting a Security agrees, that the Indebtedness
evidenced by the Securities is subordinated in right of payment, to the extent
and in the manner provided in this Article X, to the prior payment of all Senior
Indebtedness and that the subordination is for the benefit of and enforceable by
the holders of Senior Indebtedness. The Securities shall in all respects rank
PARI PASSU with all other Senior Subordinated Indebtedness of the Company and
only Indebtedness of the Company which is Senior Indebtedness will rank senior
to the Securities in accordance with the provisions set forth herein. All
provisions of this Article X shall be subject to Section 10.12.
SECTION 10.2. LIQUIDATION, DISSOLUTION, BANKRUPTCY. Upon any
payment or distribution of the assets or securities of the Company to creditors
upon a total or partial liquidation or dissolution or reorganization or similar
proceeding of the
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Company or in a bankruptcy, reorganization, insolvency, receivership or similar
proceeding relating to the Company or its properties, or in an assignment for
the benefit of creditors or any marshalling of the assets and liabilities of the
Company:
(1) holders of Senior Indebtedness shall be entitled to
receive payment in full in cash or Cash Equivalents of all Senior
Indebtedness before Securityholders shall be entitled to receive any
payment of principal of, premium, if any, or interest on or other
amounts with respect to the Securities; and
(2) until the Senior Indebtedness is paid in full in cash or
Cash Equivalents, any payment or distribution to which Securityholders
would be entitled but for this Article X shall be made to holders of
Senior Indebtedness as their interests may appear.
SECTION 10.3. DEFAULT ON SENIOR INDEBTEDNESS. Neither the
Company nor any Subsidiary Guarantor may pay the principal of, premium (if any)
or interest on or other amounts with respect to the Securities or make any
deposit pursuant to Article VIII or repurchase, redeem or otherwise retire any
Securities (collectively, "PAY THE SECURITIES") if (i) any Senior Indebtedness
is not paid when due in cash or Cash Equivalents or (ii) any other default on
Senior Indebtedness occurs and the maturity of such Senior Indebtedness is
accelerated in accordance with its terms unless, in either case, (x) the default
has been cured or waived and any such acceleration has been rescinded or (y)
such Senior Indebtedness has been paid in full in cash or Cash Equivalents;
PROVIDED, HOWEVER, that the Company may pay the Securities without regard to the
foregoing if the Company and the Trustee receive written notice approving such
payment from the Representative of the Senior Indebtedness with respect to which
either of the events set forth in clause (i) or (ii) of this sentence has
occurred and is continuing. During the continuance of any default (other than a
default described in clause (i) or (ii) of the preceding sentence) with respect
to any Designated Senior Indebtedness pursuant to which the maturity thereof may
be accelerated immediately without further notice (except such notice as may be
required to effect such acceleration) or the expiration of any applicable grace
periods, the Company may not pay the Securities for a period (a "PAYMENT
BLOCKAGE PERIOD") commencing upon the receipt by the Trustee (with a copy to the
Company) of written notice (a "BLOCKAGE NOTICE") of such default from the
Representative of the holders of such Designated Senior Indebtedness specifying
an election to effect a Payment Blockage Period and ending 179 days thereafter
(or earlier if such Payment Blockage Period is terminated (i) by written notice
to the Trustee and the Company from the Person or Persons who gave such Blockage
Notice, (ii) by repayment in full in cash or Cash Equivalents of such Designated
Senior Indebtedness or (iii) because the default giving rise to such Blockage
Notice is no longer continuing). Notwithstanding the provisions of the
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immediately preceding sentence (unless the events described in clause (i) or
(ii) of the first sentence of this Section 10.3 shall have occurred and be
continuing), the Company may resume payments on the Securities after such
Payment Blockage Period, including any missed payments. Not more than one
Blockage Notice may be given in any consecutive 360-day period, irrespective of
the number of defaults with respect to Designated Senior Indebtedness during
such period; PROVIDED, HOWEVER, that if any Blockage Notice within such 360-day
period is given by or on behalf of any holders of Designated Senior Indebtedness
other than the Bank Indebtedness, a Representative of holders of Bank
Indebtedness may give another Blockage Notice within such period; PROVIDED,
FURTHER, that in no event may the total number of days during which any Payment
Blockage Period or Periods is in effect exceed 179 days in the aggregate during
any 360 consecutive day period.
SECTION 10.4. ACCELERATION OF PAYMENT OF SECURITIES. If
payment of the Securities is accelerated because of an Event of Default, the
Company shall promptly notify the holders of the Designated Senior Indebtedness
(or their Representatives) of the acceleration and provide copies of such
notices to the Trustee.
If any Designated Senior Indebtedness is outstanding at the time of
such acceleration, the Company may not pay the Securities until five Business
Days after the holder or Representative of such Designated Senior Indebtedness
receives notice of such acceleration and, thereafter, may pay the Securities
only if this Article X otherwise permits payments at that time.
SECTION 10.5. WHEN DISTRIBUTION MUST BE PAID OVER. If a
payment or distribution is made to Securityholders that because of this Article
X should not have been made to them, the Securityholders who receive the
distribution shall hold it in trust for holders of Senior Indebtedness and
promptly pay it over to them as their respective interests may appear.
SECTION 10.6. SUBROGATION. After all Senior Indebtedness is
paid in full in cash and until the Securities are paid in full, Securityholders
shall be subrogated to the rights of holders of Senior Indebtedness to receive
distributions applicable to Senior Indebtedness. A distribution made under this
Article X to holders of Senior Indebtedness which otherwise would have been made
to Securityholders is not, as between the Company and Securityholders, a payment
by the Company of Senior Indebtedness.
SECTION 10.7. RELATIVE RIGHTS. This Article X defines the
relative rights of Securityholders and holders of Senior Indebtedness. Nothing
in this Indenture shall:
(1) impair, as between the Company and Securityholders, the
obligation of the Company, which is
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absolute and unconditional, to pay principal of and interest on the
Securities in accordance with their terms; or
(2) prevent the Trustee or any Securityholder from exercising
its available remedies upon a Default or Event of Default, subject to
the rights of holders of Senior Indebtedness to receive distributions
otherwise payable to Securityholders.
SECTION 10.8. SUBORDINATION MAY NOT BE IMPAIRED BY COMPANY. No
right of any holder of Senior Indebtedness to enforce the subordination of the
Indebtedness evidenced by the Securities shall be impaired by any act or failure
to act by the Company or by the failure of the Company to comply with this
Indenture.
SECTION 10.9. RIGHTS OF TRUSTEE AND PAYING AGENT.
Notwithstanding Section 10.3, the Trustee or Paying Agent may continue to make
payments on the Securities and shall not be charged with knowledge of the
existence of facts that would prohibit the making of any such payments unless,
not less than two Business Days prior to the date of such payment, a Trust
Officer of the Trustee receives written notice satisfactory to it that payments
may not be made under this Article X. The Company, the Registrar or
co-registrar, the Paying Agent, a Representative or a holder of Senior
Indebtedness may give the notice.
The Trustee in its individual or any other capacity may hold
Senior Indebtedness with the same rights it would have if it were not Trustee.
The Registrar and co-registrar and the Paying Agent may do the same with like
rights. The Trustee shall be entitled to all the rights set forth in this
Article X with respect to any Senior Indebtedness which may at any time be held
by it, to the same extent as any other holder of Senior Indebtedness; and
nothing in Article VII shall deprive the Trustee of any of its rights as such
holder. Nothing in this Article X shall apply to claims of, or payments to, the
Trustee under or pursuant to Section 7.7.
SECTION 10.10. DISTRIBUTION OR NOTICE TO REPRESENTATIVE.
Whenever a distribution is to be made or a notice given to holders of Senior
Indebtedness, the distribution may be made and the notice given to their
Representative (if any).
SECTION 10.11. ARTICLE X NOT TO PREVENT EVENTS OF DEFAULT OR
LIMIT RIGHT TO ACCELERATE. The failure to make a payment in respect of the
Securities by reason of any provision in this Article X shall not be construed
as preventing the occurrence of a Default or Event of Default. Nothing in this
Article X shall have any effect on the right of the Secu-rityholders or the
Trustee to accelerate the maturity of the Securities or to make a claim for
payment under a Guarantee.
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SECTION 10.12. TRUST MONEYS NOT SUBORDINATED. Notwithstanding
anything contained herein to the contrary, payments from money or the proceeds
of U.S. Legal Tender or U.S. Government Obligations held in trust under Article
VIII by the Trustee for the payment of principal of and interest on the
Securities shall not be subordinated to the prior payment of any Senior
Indebtedness or subject to the restrictions set forth in this Article X, and
none of the Securityholders shall be obligated to pay over any such amount to
the Company, any holder of Senior Indebtedness of the Company or any other
creditor of the Company.
SECTION 10.13. TRUSTEE ENTITLED TO RELY. Upon any payment or
distribution pursuant to this Article X, the Trustee and the Securityholders
shall be entitled to rely (i) upon any order or decree of a court of competent
jurisdiction in which any proceedings of the nature referred to in Section 10.2
are pending, (ii) upon a certificate of the liquidating trustee or agent or
other Person making such payment or distribution to the Trustee or to the
Securityholders or (iii) upon the Representatives for the holders of Senior
Indebtedness for the purpose of ascertaining the Persons entitled to participate
in such payment or distribution, the holders of Senior Indebtedness 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 X. In the event that the Trustee determines, in good faith, that
evidence is required with respect to the right of any Person as a holder of
Senior Indebtedness to participate in any payment or distribution pursuant to
this Article X, the Trustee may request such Person to furnish evidence to the
reasonable satisfaction of the Trustee as to the amount of Senior Indebtedness
held by such Person, the extent to which such Person is entitled to participate
in such payment or distribution and other facts pertinent to the rights of such
Person under this Article X, 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. The provisions of Sections 7.1 and
7.2 shall be applicable to all actions or omissions of actions by the Trustee
pursuant to this Article X.
SECTION 10.14. TRUSTEE TO EFFECTUATE SUBORDINATION. Each
Securityholder by accepting a Security authorizes and directs the Trustee on his
behalf to take such action as may be necessary or appropriate to acknowledge or
effectuate the subordination between the Securityholders and the holders of
Senior Indebtedness as provided in this Article X and appoints the Trustee as
attorney-in-fact for any and all such purposes.
SECTION 10.15. TRUSTEE NOT FIDUCIARY FOR HOLDERS OF SENIOR
INDEBTEDNESS. The Trustee shall not be deemed to owe any fiduciary duty to the
holders of Senior Indebtedness and shall not be liable to any such holders if it
shall mistakenly pay over or distribute to Securityholders or the Company or any
other
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Person, money or assets to which any holders of Senior Indebtedness shall be
entitled by virtue of this Article X or otherwise.
SECTION 10.16. RELIANCE BY HOLDERS OF SENIOR INDEBTEDNESS ON
SUBORDINATION PROVISIONS. Each Securityholder by accepting a Security
acknowledges and agrees that the foregoing subordination provisions are, and are
intended to be, an inducement and a consideration to each holder of any Senior
Indebtedness, whether such Senior Indebtedness was created or acquired before or
after the issuance of the Securities, to acquire and continue to hold, or to
continue to hold, such Senior Indebtedness and such holder of Senior
Indebtedness shall be deemed conclusively to have relied on such subordination
provisions in acquiring and continuing to hold, or in continuing to hold, such
Senior Indebtedness.
ARTICLE XI
Subsidiary Guarantee
--------------------
SECTION 11.1. SUBSIDIARY GUARANTEE. (a) After the Issue Date,
the Company shall cause each Restricted Subsidiary of the Company that
guarantees payment of the Bank Indebtedness to execute and deliver to the
Trustee a supplemental indenture pursuant to which such Restricted Subsidiary
shall agree to the provisions of this Article XI.
SECTION 11.2. UNCONDITIONAL GUARANTEE. Each Subsidiary
Guarantor hereby unconditionally, jointly and severally, guarantees, subject to
Article XII, to each Holder of a Security authenticated and delivered by the
Trustee and to the Trustee and its successors and assigns, that: (i) the
principal of and interest on the Securities will be promptly paid in full when
due, subject to any applicable grace period, whether at maturity, by
acceleration or otherwise and interest on the overdue principal, if any, and
interest on any interest, to the extent lawful, of the Securities 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 (ii) in case of any extension of time of payment or
renewal of any Securities or of any such other obligations, the same will be
promptly paid in full when due or performed in accordance with the terms of the
extension or renewal, subject to any applicable grace period, whether at stated
maturity, by acceleration or otherwise, subject, however, in the case of clauses
(i) and (ii) above, to the limitations set forth in Section 11.6. Each
Subsidiary Guarantor hereby agrees that its obligations hereunder shall be
unconditional, irrespective of the validity, regularity or enforceability of the
Securities or this Indenture, the absence of any action to enforce the same, any
waiver or consent by any Holder of the Securities with respect to any provisions
hereof or
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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 covenants that this Guarantee will not be discharged except by complete
performance of the obligations contained in the Securities, this Indenture and
in this Guarantee. If any Holder or the Trustee is required by any court or
otherwise to return to the Company, any Subsidiary Guarantor, or any custodian,
trustee, liquidator or other similar official acting in relation to the Company
or any Subsidiary Guarantor, any amount paid by the Company or any Subsidiary
Guarantor to the Trustee or such Holder, this Guarantee, to the extent
theretofore discharged, shall be reinstated in full force and effect. Each
Subsidiary Guarantor further agrees that, as between each Subsidiary Guarantor,
on the one hand, and the Holders and the Trustee, on the other hand, (x) the
maturity of the obligations guaranteed hereby may be accelerated as provided in
Article VI for the purposes of this 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 acceleration of such
obligations as provided in Article VI, such obligations (whether or not due and
payable) shall forthwith become due and payable by each Subsidiary Guarantor for
the purpose of this Guarantee.
SECTION 11.3. SUBORDINATION OF GUARANTEE. The obligations of
each Subsidiary Guarantor to the Holders of Securities and to the Trustee
pursuant to the Guarantee and this Indenture are expressly subordinate and
subject in right of payment to the prior payment in full of all Guarantor Senior
Indebtedness of such Subsidiary Guarantor, to the extent and in the manner
provided in Article XII.
SECTION 11.4. SEVERABILITY. In case any provision of this
Guarantee shall be invalid, illegal or unenforceable, the validity, legality,
and enforceability of the remaining provisions shall not in any way be affected
or impaired thereby.
SECTION 11.5. RELEASE OF A SUBSIDIARY GUARANTOR. Upon (i) the
release by the lenders under the Bank Credit Agreement, related documents and
future refinancings thereof of all guarantees of a Subsidiary Guarantor and all
Liens on the property or assets of said Subsidiary Guarantor relating to such
Indebtedness or (ii) the sale or disposition (whether by merger, stock purchase,
asset sale or otherwise) of a Subsidiary Guarantor (or all or substantially all
its assets) to an entity which is not a Subsidiary of the Company and which sale
or disposition is otherwise in compliance with the terms of this Indenture, such
Subsidiary Guarantor shall be deemed released
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from all obligations under this Article XI without any further action required
on the part of the Trustee or any Holder; PROVIDED, HOWEVER, that any such
termination shall occur only to the extent that all obligations of such
Subsidiary Guarantor under the Bank Credit Agreement and all of its guarantees
of, and under all of its pledges of assets or other security interests which
secure, such Indebtedness of the Company or the Subsidiary Guarantor shall also
terminate upon such release, sale or transfer.
The Trustee shall execute an appropriate instrument delivered
by the Company evidencing such release upon receipt of a request by the Company
accompanied by an Officers' Certificate and Opinion of Counsel certifying as to
the compliance with this Section 11.5. Any Subsidiary Guarantor not so released
remains liable for the full amount of principal of and interest on the
Securities as provided in this Article XI.
SECTION 11.6. LIMITATION OF SUBSIDIARY GUARANTOR'S LIABILITY.
Each Subsidiary Guarantor and by its acceptance hereof each Holder hereby
confirms that it is the intention of all such parties that the guarantee by such
Subsidiary Guarantor pursuant to its Guarantee not constitute a fraudulent
transfer or conveyance for purposes of the Bankruptcy Law, the Uniform
Fraudulent Conveyance Act, the Uniform Fraudulent Transfer Act or any similar
Federal or state law. To effectuate the foregoing intention, the Holders and
such Subsidiary Guarantor hereby irrevocably agree that the obligations of such
Subsidiary Guarantor under the Guarantee shall be limited to the maximum amount
as will, after giving effect to all other contingent and fixed liabilities of
such Subsidiary Guarantor (including, but not limited to, the Guarantor Senior
Indebtedness of such Subsidiary Guarantor) and after giving effect to any
collections from or payments made by or on behalf of any other Subsidiary
Guarantor in respect of the obligations of such other Subsidiary Guarantor under
its Guarantee or pursuant to Section 11.8, result in the obligations of such
Subsidiary Guarantor under the Guarantee not constituting such fraudulent
transfer or conveyance.
SECTION 11.7. SUBSIDIARY GUARANTORS MAY CONSOLIDATE, ETC., ON
CERTAIN TERMS. (1) Nothing contained in this Indenture or in any of the
Securities shall prevent any consolidation or merger of a Subsidiary Guarantor
with or into the Company or another Subsidiary Guarantor that is a Wholly Owned
Restricted Subsidiary of the Company or shall prevent any sale of assets or
conveyance of the property of a Subsidiary Guarantor as an entirety or
substantially as an entirety, to the Company or another Subsidiary Guarantor
that is a Wholly Owned Restricted Subsidiary of the Company. Upon any such
consolidation, merger, sale or conveyance, the Guarantee given by such
Subsidiary Guarantor shall no longer have any force or effect.
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(2) Except as set forth in Article IV, Article V and this
Article XI, nothing contained in this Indenture or in any of the Securities
shall prevent any consolidation or merger of a Subsidiary Guarantor with or into
a corporation or corporations other than the Company or another Subsidiary
Guarantor (whether or not affiliated with the Subsidiary Guarantor) or shall
prevent any sale of assets or conveyance of the property of a Subsidiary
Guarantor as an entirety or substantially as an entirety, to a corporation or
corporations other than the Company or another Subsidiary Guarantor (whether or
not affiliated with the Subsidiary Guarantor); PROVIDED, HOWEVER, that, subject
to Sections 11.5 and 11.7(a), (i) immediately after such transaction and giving
effect thereto, such transaction does not (a) violate any covenants set forth
herein or (b) result in a Default or Event of Default under this Indenture that
is continuing, (ii) upon any such consolidation, merger, sale or conveyance, the
Guarantee of such Subsidiary Guarantor set forth in this Article XI, and the due
and punctual performance and observance of all of the covenants and conditions
of this Indenture to be performed by such Subsidiary Guarantor, shall be
expressly assumed (in the event that the Subsidiary Guarantor is not the
surviving corporation in the merger), by supplemental indenture satisfactory in
form to the Trustee and in compliance with Section 9.6, executed and delivered
to the Trustee, by the corporation formed by such consolidation, or into which
the Subsidiary Guarantor shall have merged, or by the corporation that shall
have acquired such property, (iii) in the event that such Subsidiary Guarantor
is not the surviving corporation in the merger, such surviving corporation shall
be a corporation organized and existing under the laws of the United States or
any State thereof or the District of Columbia and (iv) immediately after giving
effect to such transaction (on a pro forma basis, including any Indebtedness
incurred or anticipated to be incurred in connection with such transaction and
including adjustments that are (i) directly attributable to such transaction and
(ii) factually supportable), the Company is able to incur at least $1.00 of
additional Indebtedness (other than Permitted Indebtedness) in compliance with
Section 4.3. In the 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 due and punctual performance of all of the covenants and conditions of this
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.
SECTION 11.8. CONTRIBUTION. In order to provide for just and
equitable contribution among the Subsidiary Guarantors, the Subsidiary
Guarantors agree, INTER SE, that in the event any payment or distribution is
made by any Subsidiary Guarantor (a "Funding Subsidiary Guarantor") under the
Guarantee, such Funding Subsidiary Guarantor shall be entitled to a contribution
from all
<PAGE> 91
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other Subsidiary Guarantors in a pro rata amount based on the Adjusted Net
Assets of each Subsidiary Guarantor (including the Funding Subsidiary Guarantor)
for all payments, damages and expenses incurred by that Funding Subsidiary
Guarantor in discharging the Company's obligations with respect to the
Securities or any other Subsidiary Guarantor's obligations with respect to the
Guarantee. "Adjusted Net Assets" of such Subsidiary Guarantor at any date shall
mean the lesser of the amount by which (x) the fair value of the property of
such Subsidiary Guarantor exceeds the total amount of liabilities, including,
without limitation, contingent liabilities (after giving effect to all other
fixed and contingent liabilities incurred or assumed on such date and after
giving effect to any collection from any Subsidiary of such Guarantee in respect
of the obligation of such Subsidiary under the Guarantee), but excluding
liabilities under the Guarantee, of such Subsidiary Guarantor at such date and
(y) the present fair saleable value of the assets of such Subsidiary Guarantor
at such date exceeds the amount that will be required to pay the probable
liability of such Subsidiary Guarantor on its debts including, without
limitation, Guarantor Senior Indebtedness (after giving effect to all other
fixed and contingent liabilities incurred or assumed on such date and after
giving effect to any collection from any Subsidiary of such Subsidiary Guarantor
in respect of the obligations of such Subsidiary under the Guarantee), excluding
debt in respect of the Guarantee of such Subsidiary Guarantor, as they become
absolute and matured.
SECTION 11.9. WAIVER OF SUBROGATION. Until all Obligations are
paid in full each Subsidiary Guarantor hereby irrevocably waives any claim or
other rights which it may now or hereafter acquire against the Company that
arise from the existence, payment, performance or enforcement of such Subsidiary
Guarantor's obligations under the Guarantees and this Indenture, including,
without limitation, any right of subrogation, reimbursement, exoneration,
indemnification, and any right to participate in any claim or remedy of any
Holder of Securities against the Company, whether or not such claim, remedy or
right arises in equity, or under contract, statute or common law, including,
without limitation, the right to take or receive from the Company, directly or
indirectly, in cash or other property or by set-off or in any other manner,
payment or security on account of such claim or other rights. If any amount
shall be paid to any Subsidiary Guarantor in violation of the preceding sentence
and the Securities shall not have been paid in full, such amount shall have been
deemed to have been paid to such Subsidiary Guarantor for the benefit of, and
held in trust for the benefit of, the Holders of the Securities, and shall,
subject to the provisions of Section 11.3, Article X and Article XII, forthwith
be paid to the Trustee for the benefit of such Holders to be credited and
applied upon the Securities, whether matured or unmatured, in accordance with
the terms of this Indenture. Each Subsidiary Guarantor acknowledges that it will
receive direct and indirect benefits from the financing arrangements
contemplated by
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this Indenture and that the waiver set forth in this Section 11.9 is knowingly
made in contemplation of such benefits.
SECTION 11.10. WAIVER OF STAY, EXTENSION OR USURY LAWS. Each
Subsidiary Guarantor covenants (to the extent that it may lawfully do so) that
it will not at any time insist upon, plead, or in any manner whatsoever claim or
take the benefit or advantage of, any stay or extension law or any usury law or
other law that would prohibit or forgive each such Subsidiary Guarantor from
performing its Guarantee as contemplated herein, wherever enacted, now or at any
time hereafter in force, or which may affect the covenants or the performance of
this Indenture; and (to the extent that it may lawfully do so) each such
Subsidiary Guarantor hereby expressly waives all benefit or advantage of any
such law, and covenants that it will not hinder, delay or impede the execution
of any power herein granted to the Trustee, but will suffer and permit the
execution of every such power as though no such law had been enacted.
ARTICLE XII
SUBORDINATION OF GUARANTEES
SECTION 12.1. AGREEMENT TO SUBORDINATE. Each Subsidiary
Guarantor agrees, and each Securityholder by accepting a Security agrees, that
the Indebtedness and other obligations evidenced by the Guarantees are
subordinated in right of payment, to the extent and in the manner provided in
this Article XII, to the prior payment in cash or Cash Equivalents of all
Guarantor Senior Indebtedness and that the subordination is for the benefit of
and enforceable by the holders of Guarantor Senior Indebtedness. The Guarantee
of each Subsidiary Guarantor shall in all respects rank PARI PASSU with all
other Senior Subordinated Indebtedness of such Subsidiary Guarantor and only
Indebtedness of each Subsidiary Guarantor which is Guarantor Senior Indebtedness
shall rank senior to the Guarantee of each Subsidiary Guarantor in accordance
with the provisions set forth herein. All provisions of this Article XII shall
be subject to Section 12.12.
SECTION 12.2. LIQUIDATION, DISSOLUTION, BANKRUPTCY. Upon any
payment or distribution of the assets or securities of any Subsidiary Guarantor
to creditors upon a total or partial liquidation or a dissolution or
reorganization of or similar proceeding relating to any Subsidiary Guarantor or
its property or in a bankruptcy, reorganization, insolvency, receivership or
similar proceeding relating to any Subsidiary Guarantor or its property, or in
an assignment for the benefit of creditors or any marshalling of the assets and
liabilities of any Subsidiary Guarantor:
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(a) holders of Guarantor Senior Indebtedness shall be entitled
to receive payment in full in cash or Cash Equivalents of the Guarantor
Senior Indebtedness before Holders shall be entitled to receive any
payment of principal of, premium, if any, or interest on or any other
amount in respect of the Securities from such Subsidiary Guarantor; and
(b) until the Guarantor Senior Indebtedness is paid in full in
cash or Cash Equivalents, any payment or distribution to which Holders
would be entitled from such Subsidiary Guarantor but for this Article
XII shall be made to holders of Guarantor Senior Indebtedness as their
interests may appear.
SECTION 12.3. DEFAULT ON GUARANTOR SENIOR INDEBTEDNESS. A
Subsidiary Guarantor may not directly or indirectly pay the principal of,
premium (if any) or interest on or any other amount in respect of the Securities
or make any deposit pursuant to Article VIII and may not repurchase, redeem or
otherwise retire any Securities or make any payments with respect to any
Obligations on the Guarantee of such Subsidiary Guarantor (collectively, "PAY
THE SECURITIES") if (i) any Senior Indebtedness or Guarantor Senior Indebtedness
is not paid when due or (ii) any other default on Senior Indebtedness or
Guarantor Senior Indebtedness occurs and the maturity of such Senior
Indebtedness or Guarantor Senior Indebtedness is accelerated in accordance with
its terms unless, in either case, (x) the default has been cured or waived and
any such acceleration has been rescinded or (y) such Senior Indebtedness or
Guarantor Senior Indebtedness has been paid in full in cash or Cash Equivalents;
PROVIDED, HOWEVER, that each Subsidiary Guarantor may pay the Securities in
respect to any Obligations on the Guarantee of such Subsidiary Guarantor without
regard to the foregoing if the Company and the Trustee receive written notice
approving such payment from the Representatives of the holders of the Senior
Indebtedness or Guarantor Senior Indebtedness with respect to which either of
the events set forth in clause (i) and (ii) above has occurred and is
continuing. During the continuance of any default (other than a default
described in clause (i) or (ii) of the preceding sentence) with respect to any
Senior Indebtedness or Guarantor Senior Indebtedness pursuant to which the
maturity thereof may be accelerated immediately without further notice (except
such notice as may be required to effect such acceleration) or the expiration of
any applicable grace periods, each Subsidiary Guarantor may not pay the
Securities during the Payment Blockage Period (as defined in Section 10.3)
commencing upon the receipt by the Trustee (with a copy to the Company) of the
Blockage Notice (as defined in Section 10.3) of such default from the
Representative of the holders of such Senior Indebtedness or Guarantor Senior
Indebtedness specifying an election to effect a Payment Blockage Period and
ending 179 days thereafter (or earlier if such Payment Blockage Period is
terminated (i) by written notice to the Trustee and the Company
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from the Person or Persons who gave such Blockage Notice, (ii) because such
Senior Indebtedness or Guarantor Senior Indebtedness has been repaid in full in
cash or Cash Equivalents or (iii) because the default giving rise to such
Blockage Notice is no longer continuing). Notwithstanding the provisions
described in the immediately preceding sentence (unless the events described in
the first sentence of this Section 12.3 shall have occurred and be continuing),
such Subsidiary Guarantor may resume payments on the Securities after the end of
such Payment Blockage Period, including any missed payments. Not more than one
Blockage Notice may be given in any consecutive 360-day period, irrespective of
the number of defaults with respect to Senior Indebtedness or Guarantor Senior
Indebtedness during such period; PROVIDED, HOWEVER, that if any Blockage Notice
within such 360-day period is given by or on behalf of any holders of Designated
Senior Indebtedness other than the Bank Indebtedness, a Representative of
holders of Bank Indebtedness may give another Blockage Notice within such
period; PROVIDED, FURTHER, HOWEVER, that in no event may the total number of
days during which any Payment Blockage Period or Periods is in effect exceed 179
days in the aggregate during any 360 consecutive day period.
SECTION 12.4. ACCELERATION OF PAYMENT OF SECURITIES. If
payment of the Securities is accelerated because of an Event of Default, each
Subsidiary Guarantor shall promptly notify the holders of the Bank Indebtedness
of the acceleration and provide copies of such notices to the Trustee.
If payment of the Securities is accelerated, each Subsidiary
Guarantor shall not pay the Securities with respect to any Obligations on the
Guarantee of such Subsidiary Guarantor until five Business Days after such
holders (or their Representatives) receive notice of such acceleration and,
thereafter, may pay the Securities only if permitted under this Article XII.
SECTION 12.5. WHEN PAYMENT OR DISTRIBUTION MUST BE PAID OVER.
If a payment or distribution is made to Holders that because of this Article XII
should not have been made to them, the Holders who receive the payment or
distribution shall hold it in trust for holders of Guarantor Senior Indebtedness
and pay it over to them as their interests may appear.
SECTION 12.6. SUBROGATION. After all Guarantor Senior
Indebtedness is paid in full in cash or Cash Equivalents and until the
Securities are paid in full, Holders shall be subrogated to the rights of
holders of Guarantor Senior Indebtedness to receive distributions applicable to
Guarantor Senior Indebtedness. A distribution made under this Article XII to
holders of Guarantor Senior Indebtedness which otherwise would have been made to
Holders is not, as between each Subsidiary Guarantor and Holders, a payment by
each Subsidiary Guarantor on Guarantor Senior Indebtedness.
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SECTION 12.7. RELATIVE RIGHTS. This Article XII defines the
relative rights of Holders and holders of Guarantor Senior Indebtedness. Nothing
in this Indenture shall:
(a) impair, as between each Subsidiary Guarantor and Holders,
the obligation of each Subsidiary Guarantor, which is absolute and
unconditional, to guarantee the payment of principal of and interest on
the Securities in accordance with the terms of the Securities and the
Guarantees; or
(b) prevent the Trustee or any Holder from exercising its
available remedies upon a Default, subject to the rights of holders of
Guarantor Senior Indebtedness to receive payments and distributions
otherwise payable to Holders.
SECTION 12.8. SUBORDINATION MAY NOT BE IMPAIRED BY SUBSIDIARY
GUARANTOR. No right of any holder of Guarantor Senior Indebtedness to enforce
the subordination of the Indebtedness and other obligations evidenced by the
Guarantees shall be impaired by any act or failure to act by any Subsidiary
Guarantor or by its failure to comply with this Indenture.
SECTION 12.9. RIGHTS OF TRUSTEE AND PAYING AGENT.
Notwithstanding Section 12.3, the Trustee or Paying Agent may continue to make
payments on the Securities and shall not be charged with knowledge of the
existence of facts that would prohibit the making of any such payments unless,
not less than two Business Days prior to the date of such payment, a Trust
Officer of the Trustee receives written notice satisfactory to it that payments
may not be made under this Article XII. Each Subsidiary Guarantor, the Registrar
or co-registrar, the Paying Agent, a Representative or a holder of Guarantor
Senior Indebtedness may give the notice.
The Trustee in its individual or any other capacity may hold
Guarantor Senior Indebtedness with the same rights it would have if it were not
Trustee. The Registrar and co-registrar and the Paying Agent may do the same
with like rights. The Trustee shall be entitled to all the rights set forth in
this Article XII with respect to any Guarantor Senior Indebtedness which may at
any time be held by it, to the same extent as any other holder of Guarantor
Senior Indebtedness; and nothing in Article VII shall deprive the Trustee of any
of its rights as such holder. Nothing in this Article XII shall apply to claims
of, or payments to, the Trustee under or pursuant to Section 7.7.
SECTION 12.10. DISTRIBUTION OR NOTICE TO REPRESENTATIVE.
Whenever a payment or distribution is to be made or a notice given to holders of
Guarantor Senior Indebtedness, the payment or distribution may be made and the
notice given to their Representative (if any).
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SECTION 12.11. ARTICLE XII NOT TO PREVENT EVENTS OF DEFAULT OR
LIMIT RIGHT TO ACCELERATE. The failure to make a payment pursuant to the
Securities and the Guarantees by reason of any provision in this Article XII
shall not be construed as preventing the occurrence of a Default. Nothing in
this Article XII shall have any effect on the right of the Holders or the
Trustee to accelerate the maturity of the Securities.
SECTION 12.12. TRUST MONEYS NOT SUBORDINATED. Notwithstanding
anything contained herein to the contrary, payments from U.S. Legal Tender or
the proceeds of U.S. Government Obligations held in trust under Article VIII by
the Trustee for the payment of principal of and interest on the Securities shall
not be subordinated to the prior payment of any Guarantor Senior Indebtedness or
subject to the restrictions set forth in this Article XII, and none of the
Holders shall be obligated to pay over any such amount to any Subsidiary
Guarantor or any holder of Guarantor Senior Indebtedness of such Subsidiary
Guarantor or any other creditor of such Subsidiary Guarantor.
SECTION 12.13. TRUSTEE ENTITLED TO RELY. Upon any payment or
distribution pursuant to this Article XII, the Trustee and the Holders shall be
entitled to rely (i) upon any order or decree of a court of competent
jurisdiction in which any proceedings of the nature referred to in Section 12.2
are pending, (ii) upon a certificate of the liquidating trustee or agent or
other Person making such payment or distribution to the Trustee or to the
Holders or (iii) upon the Representatives for the holders of Guarantor Senior
Indebtedness for the purpose of ascertaining the Persons entitled to participate
in such payment or distribution, the holders of the Guarantor Senior
Indebtedness and other Indebtedness of each 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 XII. In the event that
the Trustee determines, in good faith, that evidence is required with respect to
the right of any Person as a holder of Guarantor Senior Indebtedness to
participate in any payment or distribution pursuant to this Article XII, the
Trustee may request such Person to furnish evidence to the reasonable
satisfaction of the Trustee as to the amount of Guarantor Senior Indebtedness
held by such Person, the extent to which such Person is entitled to participate
in such payment or distribution and other facts pertinent to the rights of such
Person under this Article XII, 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. The provisions of Sections
7.1 and 7.2 shall be applicable to all actions or omissions of actions by the
Trustee pursuant to this Article XII.
SECTION 12.14. TRUSTEE TO EFFECTUATE SUBORDINATION. Each
Holder by accepting a Security authorizes and directs the Trustee on his behalf
to take such action as may be necessary or appropriate to acknowledge or
effectuate the subordination
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between the Holders and the holders of Guarantor Senior Indebtedness as provided
in this Article XII and appoints the Trustee as attorney-in-fact for any and all
such purposes.
SECTION 12.15. TRUSTEE NOT FIDUCIARY FOR HOLDERS OF GUARANTOR
SENIOR INDEBTEDNESS. The Trustee shall not be deemed to owe any fiduciary duty
to the holders of Guarantor Senior Indebtedness and shall not be liable to any
such holders if it shall mistakenly pay over or distribute to Holders or any
Subsidiary Guarantor or any other Person, money or assets to which any holders
of Guarantor Senior Indebtedness shall be entitled by virtue of this Article XII
or otherwise.
SECTION 12.16. RELIANCE BY HOLDERS OF GUARANTOR SENIOR
INDEBTEDNESS ON SUBORDINATION PROVISIONS. Each Holder by accepting a Security
acknowledges and agrees that the foregoing subordination provisions are, and are
intended to be, an inducement and a consideration to each holder of any
Guarantor Senior Indebtedness, whether such Guarantor Senior Indebtedness was
created or acquired before or after the issuance of the Securities, to acquire
and continue to hold, or to continue to hold, such Guarantor Senior Indebtedness
and such holder of Guarantor Senior Indebtedness shall be deemed conclusively to
have relied on such subordination provisions in acquiring and continuing to
hold, or in continuing to hold, such Guarantor Senior Indebtedness.
ARTICLE XIII
Miscellaneous
-------------
SECTION 13.1. TRUST INDENTURE ACT CONTROLS. If any provision
of this Indenture limits, qualifies or conflicts with another provision which is
required to be included in this Indenture by the TIA, the provision required by
the TIA shall control.
SECTION 13.2. NOTICES. Any notice or communication shall be
in writing and delivered in person or mailed by first-class mail addressed as
follows:
if to the Company:
Safelite Glass Corp.
1105 Schrock Road
Columbus, Ohio 43229
Attention of General Counsel
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if to the Trustee:
Fleet National Bank
One Federal Street
Boston, Massachusetts 02110
Attention of Corporate Trust Administration
The Company or the Trustee by notice to the other may
designate additional or different addresses for subsequent notices or
communications.
Any notice or communication mailed to a Securityholder shall
be mailed to the Securityholder at the Securityholder's address as it appears on
the registration books of the Registrar and shall be sufficiently given if so
mailed within the time prescribed.
Failure to mail a notice or communication to a Securityholder
or any defect in it shall not affect its sufficiency with respect to other
Securityholders. If a notice or communication is mailed in the manner provided
above, it is duly given, whether or not the addressee receives it.
SECTION 13.3. COMMUNICATION BY HOLDERS WITH OTHER HOLDERS.
Securityholders may communicate pursuant to TIA [Section]312(b) with other
Securityholders with respect to their rights under this Indenture or the
Securities. The Company, the Trustee, the Registrar and anyone else shall have
the protection of TIA[Section] 312(c).
SECTION 13.4. CERTIFICATE AND OPINION AS TO CONDITIONS
PRECEDENT. Upon any request or application by the Company to the Trustee to take
or refrain from taking any action under this Indenture, the Company, upon
request, shall furnish to the Trustee:
(1) an Officers' Certificate in form and substance reasonably
satisfactory to the Trustee stating that, in the opinion of the
signers, all conditions precedent, if any, provided for in this
Indenture relating to the proposed action have been complied with; and
(2) an Opinion of Counsel in form and substance reasonably
satisfactory to the Trustee stating that, in the opinion of such
counsel, all such conditions precedent have been complied with.
SECTION 13.5. STATEMENTS REQUIRED IN CERTIFICATE OR OPINION.
Each certificate or opinion with respect to compliance with a covenant or
condition provided for in this Indenture shall include:
<PAGE> 99
92
(1) a statement that the individual making such certificate
or opinion has read such covenant or condition;
(2) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions
contained in such certificate or opinion are based;
(3) a statement that, in the opinion of such individual, he
has made such examination or investigation as is necessary to enable
him to express an informed opinion as to whether or not such covenant
or condition has been complied with; and
(4) a statement as to whether or not, in the opinion of such
individual, such covenant or condition has been complied with.
SECTION 13.6. WHEN SECURITIES DISREGARDED. In determining
whether the Holders of the required principal amount of Securities have
concurred in any direction, waiver or consent, Securities owned by the Company
or by any Person directly or indirectly controlling or controlled by or under
direct or indirect common control with the Company shall be disregarded and
deemed not to be outstanding, except that, for the purpose of determining
whether the Trustee shall be protected in relying on any such direction, waiver
or consent, only Securities which the Trustee knows are so owned shall be so
disregarded. Also, subject to the foregoing, only Securities outstanding at the
time shall be considered in any such determination.
SECTION 13.7. RULES BY TRUSTEE, PAYING AGENT AND REGISTRAR.
The Trustee may make reasonable rules for action by or a meeting of
Securityholders. The Registrar and the Paying Agent may make reasonable rules
for their functions.
SECTION 13.8. LEGAL HOLIDAYS. A "LEGAL HOLIDAY" is a Saturday,
a Sunday or a day on which banking institutions are not required to be open in
the State of New York or in the state in which the corporate trust office of the
Trustee is located. If a payment date is a Legal Holiday, payment shall be made
on the next succeeding day that is not a Legal Holiday, and no interest shall
accrue for the intervening period. If a regular record date is a Legal Holiday,
the record date shall not be affected.
SECTION 13.9. GOVERNING LAW. This Indenture and the Securities
shall be governed by, and construed in accordance with, the laws of the State of
New York 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.
SECTION 13.10. NO RECOURSE AGAINST OTHERS. A director,
officer, employee or stockholder, as such, of the
<PAGE> 100
93
Company shall not have any liability for any obligations of the Company under
the Securities or this Indenture or for any claim based on, in respect of or by
reason of such obligations or their creation. By accepting a Security, each
Securityholder shall waive and release all such liability. The waiver and
release shall be part of the consideration for the issue of the Securities.
SECTION 13.11. SUCCESSORS. All agreements of the Company and
the Subsidiary Guarantors in this Indenture and the Securities shall bind their
respective successors. All agreements of the Trustee in this Indenture shall
bind its successors.
SECTION 13.12. MULTIPLE ORIGINALS. The parties may sign any
number of copies of this Indenture. Each signed copy shall be an original, but
all of them together represent the same agreement. One signed copy is enough to
prove this Indenture.
SECTION 13.13. VARIABLE PROVISIONS. The Company initially
appoints the Trustee as Paying Agent and Registrar and custodian with respect to
any Global Securities.
SECTION 13.14. QUALIFICATION OF INDENTURE. The Company shall
qualify this Indenture under the TIA in accordance with the terms and conditions
of the Registration Rights Agreement and shall pay all reasonable costs and
expenses (including attorneys' fees for the Company, the Trustee and the
Holders) incurred in connection therewith, including, but not limited to, costs
and expenses of qualification of this Indenture and the Securities and printing
this Indenture and the Securities. The Trustee shall be entitled to receive from
the Company any such Officers' Certificates, Opinions of Counsel or other
documentation as it may reasonably request in connection with any such
qualification of this Indenture under the TIA.
SECTION 13.15. TABLE OF CONTENTS; HEADINGS. The table of
contents, cross-reference sheet and headings of the Articles and Sections of
this Indenture have been inserted for convenience of reference only, are not
intended to be considered a part hereof and shall not modify or restrict any of
the terms or provisions hereof.
<PAGE> 101
94
IN WITNESS WHEREOF, the parties have caused this Indenture to
be duly executed as of the date first written above.
SAFELITE GLASS CORP.
By: /s/ Douglas A. Herron
------------------------------
Name: Douglas A. Herron
Title: Senior Vice President
and Chief Financial
Officer
SGC FRANCHISING CORP., as Guarantor
By: /s/ Douglas A. Herron
------------------------------
Name: Douglas A. Herron
Title: Senior Vice President
and Chief Financial
Officer
FLEET NATIONAL BANK, as Trustee
By: /s/ Shawn P. George
------------------------------
Name: Shawn P. George
Title: Corporate Trust Officer
<PAGE> 1
Exhibit 10.1
RECAPITALIZATION AGREEMENT AND
PLAN OF MERGER AND STOCK PURCHASE AGREEMENT
by and among
LEAR SIEGLER HOLDINGS CORP.,
THE LS SELLING STOCKHOLDERS,
SAFELITE GLASS CORP.,
LSNWY CORP.,
L.S. ACQUISITION CORP.
and
LITE ACQUISITION CORP.
Dated as of November 8, 1996
<PAGE> 2
Table of Contents
-----------------
ARTICLE I
TRANSACTIONS
1.01. Safelite Stock Sale ................................................... 1
1.02. The Closing ........................................................... 2
1.03. Safelite Merger ....................................................... 2
1.04. Certificate of Incorporation and By-Laws .............................. 3
1.05. Directors and Officers ................................................ 3
1.06. Conversion of Shares; Closing of Transfer Books ....................... 3
1.07. Aggregate Merger Consideration ........................................ 5
1.08. Indebtedness Payment and Certain Closing Deliveries ................... 8
1.09. Dissenters' Rights .................................................... 9
1.10. Certain Corporate Actions ............................................. 10
1.11. Lear Siegler Sale ..................................................... 10
1.12. Note Payment .......................................................... 11
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
2.01. Capitalization ........................................................ 12
2.02. Subsidiaries .......................................................... 13
2.03. Organization .......................................................... 14
2.04. Financial Statements .................................................. 14
2.05. Absence of Certain Changes or Events .................................. 15
2.06. Title to Assets ....................................................... 16
2.07. Patents, Trademarks, Etc .............................................. 17
2.08. Power and Authority; Effect of Agreement .............................. 17
2.09. Commitments ........................................................... 18
2.10. Undisclosed Liabilities ............................................... 20
2.11. Litigation ............................................................ 20
2.12. Compliance with Laws .................................................. 21
2.13. Taxes ................................................................. 23
2.14. Employee Benefit Plans ................................................ 26
2.15. Consents .............................................................. 29
2.16. Insurance ............................................................. 29
2.17. Labor Matters ......................................................... 30
i
<PAGE> 3
2.18. Fees .................................................................. 31
2.19. Disclaimer ............................................................ 31
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF LSAC AND NEWCO
3.01. Organization .......................................................... 32
3.02. Power and Authority; Effect of Agreement .............................. 32
3.03. Litigation ............................................................ 33
3.04. Availability of Funds ................................................. 34
3.05. Consents .............................................................. 34
3.06. Fees .................................................................. 34
ARTICLE IV
COVENANTS OF THE COMPANY
4.01. Cooperation by the Company ............................................ 35
4.02. Conduct of Business ................................................... 35
4.03. Access ................................................................ 38
4.04. No Solicitation ....................................................... 39
4.05. Tax Returns ........................................................... 40
4.06. Stockholder Approval .................................................. 40
ARTICLE V
COVENANTS OF LSAC AND NEWCO
5.01. Cooperation by LSAC and Newco ......................................... 40
5.02. Indemnification; Insurance ............................................ 41
5.03. Employee Benefits ..................................................... 45
5.04. Bridge Financing ...................................................... 46
5.05. Insurance ............................................................. 46
5.06. Lear Siegler Dividend and Asset Transfer Restrictions ................. 47
5.07. Solvency Letters ...................................................... 47
5.08. Offering Documents .................................................... 48
5.09. Restriction on Merger, Etc. ........................................... 49
ii
<PAGE> 4
ARTICLE VI
CONDITIONS TO LSAC'S AND NEWCO'S OBLIGATIONS
6.01. Representations, Warranties and Covenants of the Company .............. 49
6.02. No Prohibition ........................................................ 50
6.03. Consents .............................................................. 50
6.04. Escrow Agreement ...................................................... 50
6.05. FIRPTA Certificate .................................................... 50
6.06. Financing ............................................................. 50
ARTICLE VII
CONDITIONS TO THE LS SELLING STOCKHOLDERS' AND THE
COMPANY'S, SAFELITE'S AND LSNWY'S OBLIGATIONS
7.01. Representations, Warranties and Covenants of LSAC and Newco ........... 51
7.02. No Prohibition ........................................................ 52
7.03. Consents .............................................................. 52
7.04. Insurance ............................................................. 52
7.05. Solvency Letters ...................................................... 52
7.06. Escrow Agreement ...................................................... 52
ARTICLE VIII
TERMINATION
8.01. Termination ........................................................... 52
8.02. Effect on Obligations ................................................. 53
ARTICLE IX
MISCELLANEOUS
9.01. Survival .............................................................. 53
9.02. Knowledge ............................................................. 54
9.03. Entire Agreement ...................................................... 54
9.04. Successors and Assigns ................................................ 54
9.05. Parties in Interest ................................................... 55
9.06. Headings .............................................................. 55
9.07. Amendment ............................................................. 55
iii
<PAGE> 5
9.08. Waivers ............................................................... 56
9.09. Expenses .............................................................. 56
9.10. Notices ............................................................... 56
9.11. Transfer Taxes ........................................................ 58
9.12. Access to Certain Records ............................................. 58
9.13. Governing Law, Etc. ................................................... 59
9.14. Public Announcements .................................................. 59
9.15. Counterparts .......................................................... 59
iv
<PAGE> 6
RECAPITALIZATION AGREEMENT AND
------------------------------
PLAN OF MERGER AND STOCK PURCHASE AGREEMENT
-------------------------------------------
This Recapitalization Agreement and Plan of Merger and Stock Purchase
Agreement, dated as of the 8th day of November, 1996, by and among Lear Siegler
Holdings Corp., a Delaware corporation (the "Company"),' the LS Selling
Stockholders (as defined in Section 1.11), Safelite Glass Corp., a Delaware
corporation ("Safelite"), LSNWY Corp., a Delaware corporation ("LSNWY"), L.S.
Acquisition Corp., a Delaware corporation ("LSAC"), and Lite Acquisition Corp.,
a Delaware corporation ("Newco").
ARTICLE I
TRANSACTIONS
------------
1.01. SAFELITE STOCK SALE. Upon the terms and subject to the conditions of
this Agreement, on the Closing Date (as defined in Section 1.02 hereof), LS
Panners, Lear Siegler Panners, Forstmann Little & Co. Subordinated Debt and
Equity Management Buyout Partnership-II and Forstmann Little & Co. Subordinated
Debt and Equity Management Buyout Partnership-III (individually, a "Pannership
Seller" and collectively, the "Partnership Sellers") shall sell to stockholders
of Newco designated by Newco, and Newco shall cause such designated stockholders
to purchase from the Partnership Sellers, all of the shares of Class A Common
Stock, par value $.01 per share, of Safelite ("Safelite Class A Common Stock")
and Class B Common Stock, par value $.01 per share, of Safelite ("Safelite Class
B Common Stock") then held by the Partnership Sellers, in exchange for payment
in cash of $13.40 per share of Safelite Class A Common Stock (the "Class A Share
Merger Consideration") and $0.01 per share of Safelite Class B Common Stock. At
the request of the Partnership Sellers, concurrently with the purchase from the
Partnership Sellers, the designated stockholders shall purchase up to 7,115
shares of Safelite Class A Common Stock from other
<PAGE> 7
stockholders of Safelite designated by the Partnership Sellers (other than
LSNWY) at a price per share equal to the Class A Share Merger Consideration.
1.02. THE CLOSING. Upon the terms and subject to the conditions of this
Agreement, including, without limitation, the satisfaction or waiver of the
conditions contained in Article VI and Article VII, the closing of the
transactions contemplated by Section 1.01 hereof(the "Safelite Sale Closing")
shall take place at 9:00 a.m., local time, on December 20, 1996, at the offices
of Fried, Frank, Harris, Shriver & Jacobson, One New York Plaza, New York, New
York, or at such other time, date and place as Newco and the Company may agree.
The date on which the Safelite Sale Closing occurs is hereinafter referred to as
the "Closing Date."
1.03. SAFELITE MERGER. Prior to the Effective Time, Safelite's Amended and
Restated Certificate of Incorporation shall be further amended (i) to create an
authorized class of preferred stock having such attributes of which Newco has
previously advised Safelite in writing, and (ii) to increase the number of
authorized shares of Safelite Class A Common Stock as directed by Newco in
writing. Upon the terms and subject to the conditions of this Agreement, at the
Effective Time (as defined below), Newco shall be merged with and into Safelite
(the "Merger") in accordance with this Agreement and the Delaware General
Corporation Law (the "DGCL"). Following the Merger, Safelite shall continue as
the surviving corporation (sometimes hereinafter referred to as the "Surviving
Corporation") and the separate corporate existence of Newco shall cease. The
Merger shall have the effects set forth in the DGCL. On the Closing Date, the
parties hereto shall cause a Certificate of Merger meeting the requirements of
Section 251 of the DGCL (the "Certificate of Merger") to be properly executed
and filed immediately following Safelite Sale Closing in accordance with such
Section 251. The Merger shall become effective at the time of filing of the
Certificate of Merger with the Secretary of State of the State of Delaware in
accordance with the DGCL (the "Effective Time").
2
<PAGE> 8
1.04. CERTIFICATE OF INCORPORATION AND BY-LAWS. The Certificate of
Incorporation and By-Laws of Safelite in effect immediately prior to the
Effective Time shall be the Certificate of Incorporation and By-Laws of the
Surviving Corporation as of the Effective Time, until duly amended in accordance
with applicable law; PROVIDED THAT the provisions set forth in Annex A hereto
shall be included in such Certificate of Incorporation and By-Laws.
1.05. DIRECTORS AND OFFICERS. The directors and officers of Newco
immediately prior to the Effective Time shall be the directors and officers of
the Surviving Corporation as of the Effective Time.
1.06. CONVERSION OF SHARES; CLOSING OF TRANSFER BOOKS. At the Effective
Time, by virtue of the Merger and without any action on the part of any party:
(a) each share of common stock, par value $.01 per share, of Newco
issued and outstanding immediately prior to the Effective Time shall be
converted into one share of Safelite Class A Common Stock, so that after
the Effective Time the stockholders of Newco shall hold shares of Safelite
Class A Common Stock with a per share cost basis equal to the Class A Share
Merger Consideration;
(b) each share of preferred stock, par value $.01 per share, of Newco
issued and outstanding immediately prior to the Effective Time shall be
converted into one share of preferred stock, par value $.01 per share, of
the Surviving Corporation;
(c) each share of capital stock of Safelite (the "Safelite Common
Stock") issued and outstanding immediately prior to the Effective Time
(each, an "Outstanding Share" and collectively, the "Outstanding Shares")
except for
3
<PAGE> 9
Dissenting Shares (as defined in Section 1.09), if any, shall be converted
in the following manner:
(i) each Outstanding Share of Preferential Common Stock, par
value $.01 per share, of Safelite (the "Safelite Preferential Common
Stock") shall be converted into the right to receive the amount,
without interest, in cash, which would be allocable to such
Outstanding Share of Safelite Preferential Common Stock (the
"Preferential Share Merger Consideration"), pursuant to Safelite's
Amended and Restated Certificate of Incorporation, in the event of a
dissolution, liquidation or winding up of affairs of Safelite,
assuming the assets available for distribution in respect of all
Outstanding Shares aggregate an amount equal to the Aggregate Merger
Consideration (as defined in Section 1.07(a)) less the sum of (1) the
product of(A) the number of shares of Safelite Class A Common Stock
issued and outstanding immediately prior to the Effective Time
multiplied by (B) the Class A Share Merger Consideration plus (2) the
product of (A) the number of shares of Safelite Class B Common Stock
issued and outstanding immediately prior to the Effective Time
multiplied by (B) the Class B Share Merger Consideration; and such
Outstanding Share of Safelite Preferential Common Stock shall
otherwise cease to be outstanding, shall be cancelled and retired and
shall cease to exist;
(ii) each Outstanding Share of Safelite Class A Common Stock
shall be converted into the right to receive the Class A Share Merger
Consideration, without interest, in cash; PROVIDED, HOWEVER, that in
lieu of such conversion, each holder of shares of Safelite Class A
Common Stock may instead, at its option, elect, by execution and
delivery to Newco or the Surviving Corporation of a Notice of
Election, to have all or any portion of
4
<PAGE> 10
the shares of Safelite Class A Common Stock held by it remain
outstanding after the Effective Time (the "Stock Election"); each
Outstanding Share of Safelite Class A Common Stock (other than shares
with respect to which a Stock Election has been made as aforesaid to
remain outstanding after the Effective Time) shall otherwise cease to
be outstanding, shall be canceled and retired and shall cease to
exist; and
(iii) each Outstanding Share of Class B Common Stock shall be
converted into the right to receive the greater of (x) the amount, if
any, without interest, in cash, which would be allocable to such
Outstanding Share of Safelite Class B Common Stock pursuant to
Safelite's Amended and Restated Certificate of Incorporation, in the
event of a dissolution, liquidation or winding up of affairs of the
Company, assuming the assets available for distribution in respect of
all Outstanding Shares aggregate an amount equal to the Aggregate
Merger Consideration, or (y) $0.01 (the "Class B Share Merger
Consideration"); and such Outstanding Share of Class B Common Stock
shall otherwise cease to be outstanding, shall be canceled and retired
and shall cease to exist.
1.07. AGGREGATE MERGER CONSIDERATION. (a) The Aggregate Merger
Consideration shall be an amount equal to (x) $301,315,206 plus (y) the Class A
Net Merger Consideration less (z) the Bridge Expenses (each of the foregoing
terms as defined in Section 1.07(b)).
If the amount of the Aggregate Merger Consideration which is payable in
cash (the "Cash Merger Consideration") to LSNWY is not paid on the Closing Date
in sufficient time for LSNWY to earn interest thereon for the day on which the
Closing Date occurs, the Cash Merger Consideration shall be increased by an
amount equal to the
5
<PAGE> 11
interest which otherwise would have been earned on the portion of the Cash
Merger Consideration payable to LSNWY had the Cash Merger Consideration been
held overnight at Chase Manhattan Bank ("Chase").
(b) For purposes of this Agreement, the following terms shall have the
following meanings:
(i) The "Class A Net Merger Consideration" shall mean the product of
(x) the Class A Share Merger Consideration multiplied by (y) the difference
between (1) the number of issued and outstanding shares of Safelite Class A
Common Stock and (2) 498,180.
(ii) "Bridge Expenses" shall mean (A) if the Bridge Facility (as
defined in Section 5.04) is not required to be drawn upon, or if the
Closing Date is later than December 20, 1996, the amount of the commitment
fees paid by the Surviving Corporation to obtain the Bridge Facility up to
a maximum amount of $1.5 million, or (B) if the Bridge Facility is required
by either the Partnership Sellers or the Surviving Corporation to be drawn
upon on the Closing Date and the Closing Date occurs on or before December
20, 1996, then "Bridge Expenses" shall mean the lesser of(x) $3 million and
(y) the commitment fee (up to $1.5 million) plus the facility fees of the
Bridge Facility to the extent such fees exceed 3% of the principal amount
drawn upon from the Bridge Facility.
(c) The portion of the Aggregate Merger Consideration, if any, payable to
each holder of a certificate or certificates ("Certificates") which immediately
prior to the Effective Time represented Outstanding Shares in respect of such
holders Outstanding Shares shall be payable by the Surviving Corporation. Each
holder of a Certificate which immediately prior to the Effective Time
represented Outstanding Shares constituting Safelite Preferential Common Stock
will be entitled to receive, upon
6
<PAGE> 12
surrender to the Surviving Corporation of such Certificate for cancellation, and
in accordance with the terms of this Agreement, cash in an amount equal to the
product of the number of Outstanding Shares constituting shares of Safelite
Preferential Common Stock previously represented by such Certificate multiplied
by the Preferential Share Merger Consideration. Each holder of a Certificate
which immediately prior to the Effective Time represented Outstanding Shares
constituting Safelite Class A Common Stock will be entitled to receive, upon
surrender to the Surviving Corporation of such Certificate for cancellation, and
in accordance with the terms of this Agreement, cash in an amount equal to the
product of the number of Outstanding Shares constituting shares of Safelite
Class A Common Stock previously represented by such Certificate multiplied by
the Class A Share Merger Consideration, PROVIDED that to the extent the holder
of such Certificate has made a Stock Election, each Outstanding Share of
Safelite Class A Common Stock subject to such Stock Election shall remain
outstanding unchanged after the Effective Time. Each holder of a Certificate
which immediately prior to the Effective Time represented Outstanding Shares
constituting Safelite Class B Common Stock will be entitled to receive, upon
surrender to the Surviving Corporation of such Certificate for cancellation and
in accordance with the terms of this Agreement, cash in an amount equal to the
product of the number of Outstanding Shares constituting shares of Safelite
Class B Common Stock previously represented by such Certificate multiplied by
the Class B Share Merger Consideration. All payments to holders of Certificates
shall be subject to any required withholding of taxes. No interest shall accrue
or be paid on the cash payable upon the surrender of Certificates. If payment is
to be made to a person other than the person in whose name the surrendered
Certificates are registered, it shall be a condition of payment that the
Certificates so surrendered shall be properly endorsed or otherwise in proper
form for transfer and that the person requesting such payment shall pay any
transfer or other taxes required by reason of the payment to a person other than
the registered holder of the surrendered Certificates or establish to the
satisfaction of the
7
<PAGE> 13
Surviving Corporation that such tax has been paid or is not applicable. Neither
the Surviving Corporation nor any party hereto shall be liable to a holder of
Outstanding Shares for any cash or interest thereon delivered to a public
official pursuant to any applicable abandoned property, escheat or similar laws.
If any Certificates shall not have been surrendered within five years after the
Effective Time (or immediately prior to such earlier date on which any payment
in respect hereof would otherwise escheat to or become the property of any
governmental unit or agency), the payment in respect of such Certificates shall,
to the extent permitted by applicable law, become the property of the Surviving
Corporation, free and clear of all claims or interests of any person previously
entitled thereto. As soon as practicable (but in any event within five business
days) after the Effective Time, the Surviving Corporation will mail to each
record holder of Certificates a letter of transmittal (which will specify that
delivery will be effected, and risk of loss and title to the Certificates will
pass, only upon proper delivery of the Certificates to the Surviving
Corporation) (the "Letter of Transmittal") and instructions for use in effecting
the surrender of the Certificates for payment therefor, together with a Notice
of Election to each record holder of a Certificate representing Safelite Class A
Common Stock who has not previously delivered a Notice of Election.
(d) LSNWY covenants and agrees that it will not make a Stock Election in
connection with the Merger.
1.08. INDEBTEDNESS PAYMENT AND CERTAIN CLOSING DELIVERIES. (a) For purposes
of this Agreement, "Indebtedness Payment" shall mean an amount equal to, as of
the Closing Date, the outstanding principal of, accrued and unpaid interest on,
any prepayment penalties or premiums on, and any other amounts payable with
respect to, all indebtedness of Safelite and its subsidiaries under the Credit
Agreement, dated as of August 11, 1994, among Chase, as agent, and the financial
institutions party thereto, as amended (the "Credit Agreement"), but not
including any undrawn amounts under
8
<PAGE> 14
outstanding letters of credit. Immediately after the Effective Time, the
Surviving Corporation shall pay to Chase (for the benefit of the financial
institutions party to the Credit Agreement), by wire transfer of immediately
available funds, an amount in cash equal to the Indebtedness Payment.
(b) Immediately after the Effective Time, the Surviving Corporation shall
replace all then outstanding letters of credit under the Credit Agreement.
1.09. DISSENTERS' RIGHTS. Notwithstanding any provision of this Agreement
to the contrary, any Outstanding Shares that are held immediately prior to the
Effective Time by a holder who has neither voted in favor of the Merger nor
consented thereto in writing and who has demanded and perfected the right, if
any, for appraisal of such Outstanding Shares within 20 days after the date of
mailing of notice.to such holder of the effective date of the Merger (the
"Stockholder Notice") in accordance with the provisions of Section 262 of the
DGCL and has not withdrawn or lost such right to such appraisal ("Dissenting
Shares") shall not be convened into or represent a right to receive an allocable
portion of the Aggregate Merger Consideration represented thereby, but the
holder of such Outstanding Shares shall only be entitled to such appraisal
rights as are granted by the DGCL. If a holder of Outstanding Shares who demands
appraisal of such Outstanding Shares under the DGCL shall thereafter effectively
withdraw or lose (through failure to perfect or otherwise) the right to
appraisal with respect to such Outstanding Shares, then, as of the occurrence of
such event, such Outstanding Shares shall be deemed to have been convened into
and represent only the right to receive such Outstanding Shares' allocable
portion of the Aggregate Merger Consideration, without interest, upon the
surrender of the Certificate or Certificates representing such Outstanding
Shares and upon delivery of a duly executed Letter of Transmittal. In accordance
with the provisions of Sections 228(d) and 262(d)(2) of the DGCL, not later than
the fifth business day following the Closing Date, and simultaneously with the
9
<PAGE> 15
mailing by the Surviving Corporation of the Letters of Transmittal to the
record holders of Certificates, the Surviving Corporation shall mail to all
holders of Outstanding Shares notice of the Merger as required by the DGCL.
1.10. CERTAIN CORPORATE ACTIONS. Concurrently with the Effective Time, the
Company shall cause all directors and officers of the Company and its
subsidiaries, except for those directors and officers as advised by Newco to the
Company by prior written notice, to resign their positions as directors or
officers of the Company or any of its subsidiaries.
1.11. LEAR SIEGLER SALE. Immediately after the Effective Time, and upon the
terms and subject to the conditions of this Agreement, the Partnership Sellers
shall sell to LSAC, and LSAC shall purchase from the Partnership Sellers, all of
the shares of Preferential Common Stock, par value $.01 per share, of the
Company (the "LS Preferential Common Stock"), Class A Common Stock, par value
$.01 per share, of the Company (the "LS Class A Common Stock"), and Class B
Common Stock, par value $.01 per share, of the Company (the "LS Class B Common
Stock"; together with the LS Preferential Common Stock and the LS Class A Common
Stock, the "Lear Siegler Common Stock") held by the Partnership Sellers, as set
forth opposite the name of each Partnership Seller on Exhibit 1.1 l(a) hereto.
Each of the Partnership Sellers covenants and agrees that it shall assert its
rights under the various subscription and stockholders agreements with the
holders of LS Class B Common Stock, and otherwise use its best efforts, to cause
such holders to comply with the provisions of such agreements requiring such
holders to sell their shares upon the sale of all of the shares of LS Class A
Common Stock held by the Partnership Sellers; PROVIDED, HOWEVER, that such best
efforts shall not include the commencement of Litigation or any payment to any
stockholder in excess of $.01 per share of LS Class B Common Stock. The
stockholders of the Company who sell their shares of LS Preferential Common
Stock or of LS Class A Common Stock or of LS
10
<PAGE> 16
Class B Common Stock pursuant to this Section 1.11 are hereinafter referred to
as the "LS Selling Stockholders" and are listed in Exhibit 1.1 l(a) hereto, as
Exhibit 1.1 l(a) may be amended by the Company prior to the Closing Date to
include additional sellers (together with the Partnership Sellers and the
holders of Safelite Common Stock immediately prior to the Merger, the "Seller
Group"). Payment for such shares shall be comprised of a note (the "Note") of
LSAC to LS Partners as representative for and for the benefit of the LS Selling
Stockholders (the "Representative"), which shall be in the form of Exhibit 1.11
(b) hereto, with an aggregate principal amount equal to the portion of the
Aggregate Merger Consideration received by LSNWY in the Merger in respect of its
shares of Safelite Common Stock. The Note shall be held by the Representative on
behalf of the LS Selling Stockholders. The closing of the transactions
contemplated by this Section 1.11 shall be referred to herein as the "LSH
Closing."
1.12. NOTE PAYMENT. On the Closing Date, immediately following the LSH
Closing, LSAC shall pay the Note by payment of cash in the amount of its
obligations under the Note by wire transfer of(i) $39,800,000 in accordance with
the Escrow Agreement in the form attached as Exhibit 1.12 hereto (the "Escrow
Agreement"), and (ii) the balance to the Representative for the benefit of the
LS Selling Stockholders. The proceeds of the Note (including any amounts
released from escrow in accordance with the Escrow Agreement) (the "Note
Proceeds") shall be allocated among the outstanding shares of Lear Siegler
Common Stock in accordance with the Company's Amended and Restated Certificate
of Incorporation as though there were a dissolution, liquidation or winding-up
of the Company, assuming the assets available for distribution in respect of
such outstanding shares of Lear Siegler Common Stock were equal to the amount of
the Note Proceeds.
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ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
---------------------------------------------
The Company hereby represents and warrants to LSAC and Newco as follows:
2.01. CAPITALIZATION. (a) As of the date hereof, the authorized capital
stock of the Company consists of 583,000 shares of Lear Siegler Common Stock,
divided into three classes consisting of(i) 210,000 shares of Preferential
Common Stock, of which 207,000 shares are issued and outstanding, (ii) 272,000
shares of Class A Common Stock, of which 169,000 shares are issued and
outstanding, and (iii) 101,000 shares of Class B Common Stock, of which 97,420
shares are issued and outstanding. Schedule 2.01(a) hereto sets forth the
record owners of the Lear Siegler Common Stock and the number of shares held by
each as set forth in the records of the Company. All of the issued and
outstanding shares of Lear Siegler Common Stock are validly issued, fully paid
and non-assessable. As of the date hereof, there are outstanding Options to
acquire (or, in the case of Stock Appreciation Rights, in respect of) 3,000
shares of Class A Common Stock and 4,900 shares of Class B Common Stock. Except
as set forth in this Section 2.01(a) or in the disclosure schedule delivered by
the Company to LSAC and Newco in connection herewith (the "Disclosure
Schedule"), there are outstanding no securities convertible into, exchangeable
for, or carrying the right to acquire, or any voting agreements with respect to,
any equity securities of the Company, or subscriptions, warrants, options,
rights or other arrangements or commitments obligating the Company to issue or
acquire any of its equity securities or any ownership interest therein. On the
Closing Date, all of the outstanding Options will be terminated without cost to
the Company and the Company will have no further obligations to the holders
thereof with respect thereto.
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(b) As of the date hereof, the authorized capital stock of Safelite
consists of 4,600,000 shares of Safelite Common Stock, divided into three
classes consisting of(i) 3,300,000 shares of Preferential Common Stock, of which
3,245,251 shares are issued and outstanding, (ii) 1,250,000 shares of Class A
Common Stock, of which 1,105,910 shares are issued and outstanding, and (iii)
50,000 shares of Class B Common Stock, of which 40,991 shares are issued and
outstanding. Schedule 2.02 hereto sets forth the record owners of the Safelite
Common Stock and the number of shares held by each as set forth in the records
of Safelite. All of the issued and outstanding shares of Safelite Common Stock
are validly issued, fully paid and non-assessable. As of the date hereof, there
are outstanding Options to acquire the shares of Class A Common Stock and Class
B Common Stock as set forth on Schedule 2.02. Except as set forth in this
Section 2.01 (b) or in the Disclosure Schedule, there are outstanding no
securities convertible into, exchangeable for, or carrying the right to acquire,
or any voting agreements with respect to, any equity securities of Safelite, or
subscriptions, warrants, options, rights or other arrangements or commitments
obligating Safelite to issue or acquire any of its equity securities or any
ownership interest therein. on the Closing Date, all of the outstanding Options
issued under the Safelite Stock Option Plan (1989) will be terminated and
Safelite will have no further obligations to the holders thereof with respect
thereto. The Safelite Employees Stock Option Plan (1993) will be continued by
the Surviving Corporation.
2.02. SUBSIDIARIES. The Disclosure Schedule sets forth a list, as of the
date hereof, of all direct or indirect subsidiaries of the Company other than
those which individually or in the aggregate would not constitute a "Significant
Subsidiary" as defined in Rule 1-02(w) of Regulation S-X (the "Subsidiaries").
Except as set forth in the Disclosure Schedule, the Company owns, either
directly or indirectly through one or more Subsidiaries, all of the capital
stock of the Subsidiaries free and clear of any mortgage,
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pledge, hypothecation, lien, security interest or other encumbrance (each an
"Encumbrance"). All of the issued and outstanding shares of capital stock of the
Subsidiaries are validly issued, fully paid and non-assessable. Except as set
forth in the Disclosure Schedule, there are outstanding no securities
convertible into, exchangeable for, or carrying the right to acquire, or any
voting agreements with respect to, any equity securities of any of the
Subsidiaries, or subscriptions, warrants, options, rights or other arrangements
or commitments obligating any Subsidiary to issue or acquire any of its equity
securities or any ownership interest therein.
2.03. ORGANIZATION. The Company and each of the Subsidiaries are
corporations duly organized and validly existing under the laws of their
respective jurisdictions of incorporation and have all requisite corporate power
and authority to carry on their businesses as they are now being conducted. The
Company and each of the Subsidiaries are duly qualified to do business and are
in good standing as foreign corporations in all jurisdictions where the nature
of the property owned or leased by them, or the nature of the business conducted
by them, makes such qualification necessary and the absence of such
qualification would, individually or in the aggregate, have a material adverse
effect on the business, assets, results of operations or financial condition of
the Company and the Subsidiaries taken as a whole or on the business, assets,
results of operations or financial condition of Safelite and its subsidiaries
taken as a whole (a "Material Adverse Effect"). True and complete copies of the
Certificates of Incorporation and By-Laws of the Company and each of the
Subsidiaries have previously been made available to LSAC and Newco.
2.04. FINANCIAL STATEMENTS. The Company has delivered to LSAC and Newco (a)
an audited consolidated balance sheet and an audited consolidated statement of
operations of the Company and its Subsidiaries as of and for the years ended
December 31, 1994 and December 31, 1995, (b) an unaudited consolidated balance
sheet
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<PAGE> 20
and an unaudited consolidated statement of operations of the Company and its
Subsidiaries as of and for the eight months ended August 31, 1996, (c) an
audited consolidated balance sheet and an audited consolidated statement of
operations of Safelite and its subsidiaries as of and for the years ended
December 31, 1994 and December 31, 1995 and (d) an unaudited consolidated
balance sheet and an unaudited consolidated statement of operations of Safelite
and its subsidiaries as of and for the eight months ended August 31, 1996
(collectively, the "Financial Statements"), a copy of each of which is included
in the Disclosure Schedule. The Financial Statements present fairly, in all
material respects, the consolidated financial position and the results of
operations of the Company and its Subsidiaries and of Safelite and its
subsidiaries, respectively, as of their respective dates and for the respective
periods then ended in conformity with generally accepted accounting principles
except as set forth in the footnotes thereto or in the Disclosure Schedule, and
except that the unaudited financial statements were prepared on an interim
basis, are subject to normal year-end adjustments and do not contain all of the
footnote disclosures required by generally accepted accounting principles.
2.05. ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as set forth in the
Disclosure Schedule or permitted or contemplated by this Agreement, since August
31, 1996, neither the Company nor any of the Subsidiaries has (a) suffered any
damage, destruction or casualty loss to its physical properties which,
individually or in the aggregate, has a Material Adverse Effect; (b) incurred or
discharged any obligation or liability or entered into any other transaction
except in the ordinary course of business and except for obligations,
liabilities and transactions that do not individually or in the aggregate have a
Material Adverse Effect; (c) suffered any changes which individually or in the,
aggregate have a Material Adverse Effect; (d) increased the rate or terms of
compensation payable or to become payable by the Company or any of its
Subsidiaries to any of their respective directors, officers or key employees, or
increased the rate or terms
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<PAGE> 21
of any bonus, pension or other employee benefit plan covering any of their
respective directors, officers or key employees, except in each case increases'
occurring in the ordinary course of business in accordance with their respective
customary practices (including normal periodic performance reviews and related
compensation and benefit increases) or as required by any pre-existing
Commitment (as defined in Section 2.09); (e) declared or paid any dividend or
made any other distribution on or with respect to any shares of its capital
stock or redeemed, purchased or otherwise acquired any outstanding shares of its
capital stock; (f) incurred any long-term indebtedness for borrowed money
(including capital lease obligations) or issued any debt securities or assumed,
guaranteed or endorsed the obligations of any other firm other than in the
ordinary course of business; (g) sold, transferred or otherwise disposed of any
of its material properties or assets; or (h) created any Encumbrance (other than
Permitted Encumbrances (as defined in Section 2.06)).
2.06. TITLE TO ASSETS. The Company and the Subsidiaries have good (and, in
the case of real property, marketable) title to all of the assets and properties
which they purport to own (except for assets and properties sold, consumed or
otherwise disposed of in the ordinary course of business since August 31, 1996)
and which are material to the business, assets, results of operations or
financial condition of the Company and the Subsidiaries taken as a whole or to
Safelite and its subsidiaries taken as a whole ("Material"), free and clear of
Encumbrances, except (a) as set forth in the Disclosure Schedule, (b) liens for
taxes not yet due or being contested in good faith by appropriate proceedings
for which adequate reserves have been established on the books and records of
the Company and its Subsidiaries to the extent required by the Company's
accounting practices, and (c) Encumbrances which individually or in the
aggregate do not have a Material Adverse Effect (collectively, the "Permitted
Encumbrances").
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<PAGE> 22
2.07. PATENTS, TRADEMARKS. ETC. The Disclosure Schedule sets forth a list,
as of the date hereof, of all Material registered United States and foreign
patents, trademarks, trade names, copyrights and applications therefor which are
used by the Company or any of the Subsidiaries in the conduct of the business of
the Company and the Subsidiaries (the "Patent and Trademark Rights"). Except as
set forth in the Disclosure Schedule, (a) the Company and the Subsidiaries own
or possess adequate licenses or other valid rights to use all Patent and
Trademark Rights; (b) to the Company's knowledge, the conduct of the business of
the Company and the Subsidiaries as now being conducted does not conflict with
any valid patents, trademarks, trade names or copyrights of others in any way
which, individually or in the aggregate, has a Material Adverse Effect; and (c)
to the Company's knowledge, none of the Patent and Trademark Rights is being
infringed upon by others in any way which, individually or in the aggregate, has
a Material Adverse Effect.
2.08. POWER AND AUTHORITY: EFFECT OF AGREEMENT. (a) The Partnership
Sellers, the Company, Safelite and LSNWY each has all requisite partnership or
corporate (as the case may be) power and authority to execute, deliver and
perform this Agreement and to consummate the transactions contemplated hereby.
The execution, delivery and performance by the Partnership Sellers, the
Company, Safelite and LSNWY of this Agreement and the consummation by each of
them of the transactions contemplated hereby have been duly authorized by their
respective general partners or Boards of Directors (as the case may be) and, in
the case of Safelite, immediately following the execution and delivery of this
Agreement, will be authorized by the holders of a majority of the outstanding
shares of capital stock of Safelite. No other partnership or corporate action on
the part of the Partnership Sellers, the Company, Safelite or LSNWY (other than
any notice to stockholders which may be required under Section 228(d) of the
DGCL) or its partners or stockholders (as the case may be) is necessary to
authorize this
17
<PAGE> 23
Agreement or the transactions contemplated hereby. This Agreement has been duly
and validly executed and delivered by the Partnership Sellers, the Company,
Safelite and LSNWY and, assuming the due authorization, execution and delivery
by LSAC and Newco, constitutes a valid and binding obligation of each of them,
enforceable against each of them in accordance with its terms, except to the
extent that such enforceability (i) may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws relating to creditors' rights
generally and (ii) is subject to general principles of equity.
(b) The execution, delivery and performance by the Company, Safelite and
LSNWY of this Agreement and the consummation by each of them of the transactions
contemplated hereby will not, with or without the giving of notice or the lapse
of time, or both, subject to obtaining any required consents, approvals,
authorizations, exemptions or waivers referred to in Section 2.15, (i) violate
any provision of law, rule or regulation to which the Company or any Subsidiary
is subject, (ii) violate any order, judgment or decree applicable to the Company
or any of the Subsidiaries, or (iii) conflict with or result in a breach or
violation of the provisions of, or constitute a default under, (A) the
Certificate of Incorporation or By-Laws of the Company, Safelite or LSNWY, or
(B) any agreement reflecting obligations of the Company, Safelite or LSNWY for
borrowed money, except in the case of clause (i), (ii) or (iii)(B) of this
Section 2.08(b), for violations, conflicts, breaches or defaults which
individually or in the aggregate would not materially hinder or impair the
consummation of the transactions contemplated hereby or have a Material Adverse
Effect.
2.09. COMMITMENTS. The Disclosure Schedule sets forth a list, as of the
date hereof, of each contract or agreement to which the Company or any of the
Subsidiaries is a party or by which the Company or any of the Subsidiaries is
bound (collectively, the "Commitments") (a) which provides for future payments
thereunder of
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<PAGE> 24
more than $250,000 per year, including, without limitation, all such Commitments
which are (i) Commitments for capital expenditures, (ii) distribution, dealer or
sales agency Commitments, (iii) guarantees of third party obligations, and (iv)
Commitments for the sale of any assets, but excluding purchase orders or other
Commitments for the purchase of raw materials, components or supplies and sales
orders or other Commitments for the sale of finished goods entered into in the
ordinary course of business; (b) which restricts the kinds of businesses in
which the Company or any of the Subsidiaries may engage or the geographical area
in which any of them may conduct their business; (c) which is an indenture,
mortgage, loan agreement or other Commitment for the borrowing of money or a
line of credit; (d) which is a collective bargaining agreement; (e) which is a
Material license (whether as licensor or licensee) or similar agreement
permitting the use of any Material Patent and Trademark Rights; (f) which is a
brokerage or finder's.agreement; (g) which is a joint venture, partnership or
similar agreement; (h) which is a stock purchase agreement, asset purchase
agreement or other acquisition or divestiture agreement; (i) which is a written
agreement between the Company or any Subsidiary, on the one hand, and any
stockholder, or any affiliate partnership or general partner thereof, director
or officer, on the other hand (which agreements, if they are between the Company
or any Subsidiary and any of the Partnership Sellers or any affiliated.
partnership or any of their general partners, will be terminated as of the
Closing Date (other than (i) agreements, if any, relating to insurance or
indemnification, (ii) the Release referred to in the Disclosure Schedule and
(iii) this Agreement and any agreement entered into in connection herewith but
including the Warrant to Purchase 4,929 shares of Class A Common Stock, dated
June 15, 1992)); or (j) which is not of the foregoing type and is Material.
Except as set forth in the Disclosure Schedule, each of such Commitments is a
valid and binding obligation of the Company or a Subsidiary and is enforceable
against the Company or a Subsidiary in accordance with its terms, except to the
extent that such enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium or
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other similar laws relating to creditors' rights generally and is subject to
general principles of equity and neither the Company nor any Subsidiary nor, to
the knowledge of the Company, any other party, is in default under any
Commitment, except in each case for such failures to be valid, binding and
enforceable and for such defaults which, individually or in the aggregate, would
not have a Material Adverse Effect.
2.10. UNDISCLOSED LIABILITIES. The Company and its subsidiaries do not have
any liabilities of any nature that would be required by generally accepted
accounting principles to be reflected on a balance sheet or in the notes thereto
of the Company and its subsidiaries or of Safelite and its subsidiaries, other
than (i) liabilities that are reflected in the Financial Statements; (ii)
liabilities disclosed or referred to in the Disclosure Schedule (including
liabilities for present or future performance under any of the documents listed
in the Disclosure Schedule); (iii) liabilities as to which no disclosure is'
required pursuant to this Article II (for example, because the making of the
representation and warranty is disclaimed or because the liability involves an
amount which is less than the threshold above which disclosure is required);
(iv) liabilities arising since August 31, 1996 in the ordinary course of
business; and (v) liabilities which individually or in the aggregate are not
Material.
2.11. LITIGATION. Except as set forth in the Disclosure Schedule, there is
no action, litigation or proceeding in any court or before any governmental
authority ("Litigation") pending or, to the Company's knowledge, threatened
against the Company or any of the Subsidiaries or any Company Benefit Plan (as
defined in Section 2.14) (i) with respect to which there is a reasonable
likelihood of a determination which, individually or in the aggregate, would
have a Material Adverse Effect or (ii) which seeks to enjoin or obtain damages
in respect of the consummation of the transactions contemplated hereby. Except
as set forth in the Disclosure Schedule, the Company has not been notified in
writing of any Litigation involving any property or rights of the
20
<PAGE> 26
Company or any of its Subsidiaries with respect to which there is a reasonable
likelihood of a determination which, individually or in the aggregate, would
have a Material Adverse Effect. Except as set forth in the Disclosure Schedule,
neither the Company nor any of the Subsidiaries is subject to any outstanding
injunctions, orders, rulings, judgments or decrees that, individually or in the
aggregate, have a Material Adverse Effect.
2.12. COMPLIANCE WITH LAWS. Except as set forth in the Disclosure Schedule,
the Company and the Subsidiaries are in compliance with all applicable federal,
state, local and foreign laws, rules and regulations currently in effect,
including, without limitation, those relating to Environmental Matters (as
defined below) and equal employment opportunity practices, except where the
failure to comply therewith, individually or in the aggregate, does not have a
Material Adverse Effect. The Company and the Subsidiaries have all governmental
permits, licenses and authorizations necessary for the conduct of their
businesses as presently conducted, except where the absence thereof,
individually or in the aggregate, does not have a Material Adverse Effect.
Except as set forth in the Disclosure Schedule, in the twelve months prior to
the date hereof (a) no notice, citation, summons or order has been issued, (b)
no complaint has been filed to commence any Litigation, (c) no penalty has been
assessed and (d) no formal investigation is pending or threatened, in each case
by any governmental or other entity and of which the Company or any Subsidiary
has received written notice with respect to any (i) alleged violation by any of
the Company or the Subsidiaries of any laws regarding Environmental Matters; or
(ii) alleged failure by any of the Company or the Subsidiaries to have any
permit relating to Environmental Matters; or (iii) use, possession, generation,
treatment, storage, recycling, transportation or disposal (collectively,
"Management") or release of any hazardous, toxic or polluting substance, waste,
pollutant or contaminant, including petroleum products and radioactive materials
("Hazardous Substances"), by or
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<PAGE> 27
on behalf of the Company and any Subsidiaries except, in the case of each of
clause (i), (ii) and (iii) of this sentence, where the cost of such violations,
failures, Management or releases, individually or in the aggregate, would not
have a Material Adverse Effect. To the Company's knowledge, except as set forth
in the Disclosure Schedule, no Hazardous Substance has been treated, stored,
disposed of, discharged or released into 'the environment on or from the
premises of the Company or any of the Subsidiaries, which is currently required
by applicable law, rule or regulation to be remediated by or at the expense of
the Company or of any of the Subsidiaries where the cost of such remediation,
individually or in the aggregate, would have a Material Adverse Effect. Except
as set forth on the Disclosure Schedule, neither the Company nor any Subsidiary
has received any request for information, notice of claim, demand or
notification, in each of the foregoing cases, in writing, that it is or may be
potentially responsible with respect to any investigation or clean-up of any
threatened or actual release of any Hazardous Substance where the cost of such
investigation or cleanup, individually or in the aggregate, would have a
Material Adverse Effect. Except as set forth in the Disclosure Schedule, to the
knowledge of the Company and the Subsidiaries, (i) no polychlorinated byphenyls
("PCBs") or asbestos containing materials are or have been present at any of the
premises of the Company or any Subsidiary which presence, individually or in the
aggregate, would have a Material Adverse Effect, and (iii) there are no
underground storage tanks, active or abandoned, at any of said premises the
presence of which, individually or in the aggregate, would have a Material
Adverse Effect. To the knowledge of the Company and the Subsidiaries, (i) there
are no environmental liens on any of the premises of the Company, which liens,
individually or in the aggregate, would have a Material Adverse Effect, and (ii)
no government actions have been taken or are in process or pending which could
subject any of such premises to such liens, which liens, individually or in the
aggregate would have a Material Adverse Effect. The parties hereto agree that
the only representations and warranties of the Company made herein as to any
Environmental
22
<PAGE> 28
Matters are those contained in this Section 2.12. As used herein, the term
"Environmental Matter" means any matter arising out of or relating to the
environment, safety or health or the production, storage, handling, use,
emission, release, discharge or disposal of any substance, product or waste
which is hazardous or toxic or which is regulated by law.
2.13. TAXES. (a) Except as set forth in the Disclosure Schedule, all
Material federal, state, local and foreign Tax Returns required to be filed with
respect to the Company and the Subsidiaries have been filed in a timely manner
(taking into account all extensions of due dates). Such Tax Returns are correct
and complete in all respects, except (i) where the failure to be correct and
complete would not have a Material Adverse Effect and (ii) that, except as
provided in subsection (j) of this Section 2.13, no representation or warranty
is made with respect to any item which could affect any net operating losses of
the Company or any of the Subsidiaries.
(b) The Company and the Subsidiaries have paid, or reserved for on the
Financial Statements, all Taxes that are due whether or not shown on the Tax
Returns described in Section 2.13(a), above, other than (i) Taxes the nonpayment
of which would not have a Material Adverse Effect and (ii) Taxes which the
Company or the Subsidiaries are contesting in good faith and that are set forth
in the Disclosure Schedule.
(c) Except as set forth in the Disclosure Schedule, no waivers of statutes
of limitation are in effect in respect of federal income Taxes for the Company
or any of the Subsidiaries.
(d) Except as set forth in the Disclosure Schedule, no deficiencies for any
income or franchise Taxes have been asserted or assessed in writing against the
Company or any of the Subsidiaries which remain Unpaid and which individually or
in the aggregate are Material.
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<PAGE> 29
(e) Neither the Company nor any of the Subsidiaries has, with respect to
any assets or property held, acquired or to be acquired by any of them, filed a
consent to the application of Section 341(f) of the Internal Revenue Code of
1986, as amended (the "Code"), which consent is currently in effect.
(f) Except as set forth in the Disclosure Schedule, no claim has been made
in writing at any time during the five-year period beginning five years prior to
the date hereof by any taxing authority in a jurisdiction where the Company or
its Subsidiaries do not file Tax Returns that they are or may be subject to
taxation by that jurisdiction.
(g) Except as set forth in the Disclosure Schedule, the Company and the
Subsidiaries each has withheld and paid all Material Taxes required to have been
withheld and paid by them in connection with amounts paid or owing to any
employee, independent contractor, creditor, stockholder or other third party.
(h) Schedule 2.13 of the Disclosure Schedule lists all federal income Tax
Returns filed with respect to any of the Company and its Subsidiaries for open
taxable periods, indicates all such returns that have been audited and indicates
those income Tax Returns that currently are the subject of an audit. The Sellers
have made available to LSAC and Newco complete copies of all federal, state,
local and foreign Tax Returns, examination reports, closing agreements, waivers
of statutes of limitations on assessment and/or collection of Taxes and
statements of deficiencies assessed against or agreed to by any of the Company
and the Subsidiaries for all open taxable periods.
(i) The Company and the Subsidiaries have not agreed, and are not required,
to make any Material adjustment under Section 481 of the Code by mason of a
change in accounting method.
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(j) Since July 1, 1989, there has not been an ownership .change (within the
meaning of Section 382 of the Code) with respect to the Company or the
Subsidiaries (other than by reason of the transactions contemplated hereby).
(k) The tax basis of LSNWY in its shares of Safelite as of December 20,
1996 will be, in the aggregate, at least $310 million. There is no Material
deferred gain or loss allocable to the Company or the Subsidiaries arising out
of any deferred intercompany transaction under Treasury Regulations Section
1.1502-13 or 1.1502-14, nor any Material excess loss account (as defined in
Treasury Regulation Section 1.1502-19) of the Company or any of the
Subsidiaries, that would be triggered as a result of the sale of Safelite, the
Company or any other transaction contemplated hereby.
For purposes of this Agreement, "Tax" means all federal, state, local and
foreign taxes, levies, deficiencies or other assessments and other charges of
whatever nature (including income, gross receipts, license, payroll, employment,
excise, severance, stamp, occupation, premium, windfall profits, environmental,
capital stock, franchise, profits, withholding, social security, unemployment,
disability, real property, personal property, sales, use, transfer,
registration, value added, alternative or add-on minimum, estimated) imposed by
any taxing authority, as well as any obligation to contribute to the payment of
Taxes determined on a consolidated, combined or unitary basis with respect to
the Company or any affiliate, including any interest, penalty (civil or
criminal), or addition thereto, whether disputed or not, and "Tax Return" means
any federal, state, local and foreign return, declaration, report, claim for
refund, amended return, declarations or estimated Tax or information return or
statement relating to Taxes, and any schedule or attachment thereto, filed or
maintained, or required to be filed or maintained in connection with the
calculation, determination, assessment or collection of any Tax, and including
any amendment thereof, as well as, where elected or required,
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combined or consolidated returns for any group of entities that include the
Company or any Subsidiary.
2.14. EMPLOYEE BENEFIT PLANS. (a) The Disclosure Schedule lists (i) each
employee benefit plan (within the meaning of Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA")) which provides for
payments in excess of $50,000 annually, and (ii) each stock purchase, stock
option, restricted stock, incentive, severance, employment, change in control,
disability, deferred compensation, retiree medical, or other employee benefit
plan, program, or arrangement which is maintained or contributed to by the
Company or any of the Subsidiaries or for which the Company or any of the
Subsidiaries has any liability or contingent liability and, in each case, which
provides for payments in excess of $50,000 annually (the "Company Benefit
Plans"). The Company has provided to LSAC and Newco (i) true and complete copies
of all Company Benefit Plans (or to the extent no such copy exists, an accurate
description thereof); (ii) the most recent annual actuarial evaluation, if any,
prepared for each Company Benefit Plan; (iii) the most recent annual report
(series 5500), if any, required under ERISA with respect to each Company Benefit
Plan; (iv) the most recent determination letter received from the Internal
Revenue Service (the "IRS"), if any, and any Summaries of Material Modifications
thereto, for each Company Benefit Plan; and (v) the most recent Summary Plan
Description, if any, required under ERISA with respect to each Company Benefit
Plan.
(b) Except as set forth in the Disclosure Schedule, (i) with respect to
each Company Benefit Plan that is intended to be qualified under Section 401(a)
of the Code, and is maintained by the Company or any of the Subsidiaries for any
of their employees, (x) the Company or such Subsidiary has obtained a favorable
determination letter from the IRS, (y) there are no amendments to any such plans
which are not the subject of a favorable determination letter, and (z) to the
Company's knowledge, nothing
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has occurred which could cause the loss of such qualification that cannot be.
corrected without liability to the Company that would have a Material Adverse
Effect; (ii) the Company and the Subsidiaries are not, and have not been, and to
the Company's knowledge no other person is, or has been, engaged in a
transaction prohibited by Section 4975 of the Code or Section 406 of ERISA, or
breached any fiduciary duty under ERISA, which would result in a liability to
the Company and the Subsidiaries which would, individually or in the aggregate,
have a Material Adverse Effect; (iii) each Company Benefit Plan has been
operated in accordance with its terms and in all respects with ERISA, the Code,
and all other applicable law except for any non-compliance that would not
individually or in the aggregate have a Material Adverse Effect; and (iv) none
of the Company Benefit Plans is, to the knowledge of the Company, the subject of
any investigation, examination, or audit by the Internal Revenue Service, united
States Department of Labor, or any other governmental agency which would have a
Material Adverse Effect.
(c) Except as set forth in the Disclosure Schedule, (i) each Company
Benefit Plan which is subject to Part III of Subtitle B of Title I of ERISA or
Section 412 of the Code has been maintained in compliance with the minimum
funding standards of ERISA and the Code except for any .failure to comply which
would not, individually or in the aggregate, have a Material Adverse Effect;
(ii) no reportable event, within the meaning of Section 4043 of ERISA, has
occurred with respect to any Company Benefit Plan which is subject to Title IV
of ERISA, other than reportable events with respect to which notice has been
waived by the Pension Benefit Guaranty Corporation ("PBGC") or which would not,
individually or in the aggregate, have a Material Adverse Effect; (iii) no
Company Benefit Plan has incurred any "accumulated funding deficiency" (as
defined by Section 302 of ERISA or Section 412 of the Code), whether or not
waived; (iv) the PBGC has not instituted or, to the knowledge of the Company,
threatened to institute
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proceedings to terminate any Company Benefit Plan, and no condition exists that
presents a Material risk that such proceedings will be instituted; (v) none of
the Company Benefit Plans provides for any unpredictable contingent event
benefit (as that term is defined in Section 302(d)(7)(B) of ERISA or Section
412(l)(7)(B) of the Code); (vi) the Company and its Subsidiaries have made all
required premium payments when due to the PBGC; (vii) neither the Company or any
of its Subsidiaries is subject to any liability to the PBGC for any plan
termination occurring on or prior to the date hereof; (viii) no amendment has
occurred which has required or could require the Company or any Subsidiary to
provide security pursuant to Section 307 of ERISA or Section 401(a)(29) of the
Code; (ix) no Company Benefit Plan is a plan described in Section 4063(a) of
ERISA; and (x) none of the Company or any of its Subsidiaries has engaged in a
transaction which could subject it to Material liability under Section 4069 of
ERISA.
(d) Except as set forth in the Disclosure Schedule, with respect to any
multiemployer plan (within the meaning of Section 400l(a)(3) of ERISA) to which
the Company, or any of its Subsidiaries, has any liability or contingent
liability, or contributes (or has at any time within the past five years
contributed or had an obligation to contribute): (i) the Company and its
Subsidiaries, and to the knowledge of the Company, all other members of the
"Lear Siegler Affiliated Group" (as defined in Section 5.03 of this Agreement),
will make, or as of the Effective Time will have made, all contributions to each
such multiemployer plan required by the terms of such multiemployer plan or any
collective bargaining agreement; (ii) none of the Company or any Subsidiary has
incurred any Material withdrawal liability under Title IV of ERISA that has not
been paid in full; (iii) to the knowledge of the Company, no such multiemployer
plan is in reorganization or insolvent (as those terms are defined in Sections
4241 and 4245, respectively, of ERISA); and (iv) none of the Company or any
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Subsidiary has engaged in a transaction which would subject it to liability
under Section 4212(c) of ERISA.
(e) Without regard to any agreements made or any actions taken after the
Effective Time, none of the Company and its Subsidiaries has made any payments,
is obligated to make any payments, or is a party to any agreement that could
obligate it to make any payment that will not be deductible under Section 280G
of the Code or that would be subject to an excise tax under Section 4999 of the
Code.
(f) Except as set forth in the Disclosure Schedule, other than coverage
mandated by applicable statute, none of the Company or any Subsidiary is under
any obligation or liability to provide medical benefits or death benefits
(including through insurance) to retirees or any group of former employees,
officers, or directors of the Company, any Subsidiary, or any member of the Lear
Siegler Affiliated Group, or their respective dependents, the provision of which
benefits would have a Material Adverse Effect.
2.15. CONSENTS. Except as set forth in the Disclosure Schedule, no consent,
approval or authorization of, or .exemption by, or filing with, any governmental
authority, other than pursuant to the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended, and the rules and regulations promulgated thereunder
(the "HSR Act"), and the filing of the Certificate of Merger with the Secretary
of State of the State of Delaware, is required in connection with the execution,
delivery and performance by the Company of this Agreement or the taking by it of
any other action contemplated hereby, excluding, however, consents, approvals,
authorizations, exemptions and filings, if any, which LSAC or Newco is required
to obtain or make.
2.16. INSURANCE. The Disclosure Schedule sets forth a list, as of the date
hereof, of all Material casualty, general liability and other insurance
maintained by the
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Company or any of the Subsidiaries (the "Insurance Policies"). Each of the
Insurance-Policies is in full force and effect and no written notice has been
received by the Company or any of the Subsidiaries from any insurance carrier
purporting to cancel coverage under any of the Insurance Policies which
cancellation would have, individually or in the aggregate, a Material Adverse
Effect. Except as set forth in the Disclosure Schedule, there are no pending
Material claims against the Insurance Policies by the Company or any of the
Subsidiaries as to which the insurers have denied liability by written notice to
the Company or a Subsidiary. The Company and the Subsidiaries have made timely
premium payments with respect to all of the Insurance Policies. The Company
makes no representation or warranty that insurance coverage under the Insurance
Policies will be continued or is continuable after the Safelite Stock Sale
Closing.
2.17. LABOR MATTERS. Except as set forth in the Disclosure Schedule,
neither the Company nor any of the Subsidiaries is a party to any collective
bargaining agreement nor does any labor union or collective bargaining agent
represent any of the employees of the Company or any of the Subsidiaries. Except
as set forth in the Disclosure Schedule, there is no labor strike, slow-down,
stoppage or union organizing effort pending or, to the Company's knowledge,
threatened by the employees of the Company or any of the Subsidiaries. The
Company and its Subsidiaries are in compliance with all applicable laws relating
to employment and employment practices, terms and conditions of employment and
wages and hours except for any noncompliance which, individually or in the
aggregate, would not have a Material Adverse Effect, and, to the Company's
knowledge, the Company and its Subsidiaries are not engaged in any unfair labor
practice with respect to their employees, except for any such practice which,
individually or in the aggregate, would not have a Material Adverse Effect.
There is no unfair labor practice, complaint, charge or other matter against or
involving the Company
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or any of its Subsidiaries pending before the National Labor Relations Board,
the Equal Employment Opportunity Commission or any other governmental agency or
regulatory body except for any such practices, complaints, charges or other
matter which, individually or in the aggregate, would not have a Material
Adverse Effect.
2.18. FEES. Except for the fees payable to Goldman, Sachs & Co., neither
the Company nor any of the Subsidiaries has employed any broker, finder or
intermediary paid or become obligated to pay any fee or commission to any
broker, finder or intermediary in connection with the transactions contemplated
hereby.
2.19. DISCLAIMER. THE COMPANY SHALL NOT BE DEEMED TO HAVE MADE ANY
REPRESENTATION OR WARRANTY OTHER THAN AS EXPRESSLY MADE BY THE COMPANY IN
SECTIONS 2.01 THROUGH 2.18 HEREOF. IN ANY EVENT, THE COMPANY MAKES NO WARRANTY
OF MERCHANTIBILITY, SUITABILITY OR FITNESS FOR A PARTICULAR PURPOSE, OR QUALITY,
WITH RESPECT TO ANY OF THE TANGIBLE ASSETS OF THE COMPANY OR ANY OF ITS
SUBSIDIARIES, OR AS TO THE CONDITION OR WORKMANSHIP THEREOF OR THE ABSENCE OF
ANY DEFECTS THEREIN, WHETHER LATENT OR PATENT (OR ANY OTHER REPRESENTATION OR
WARRANTY REFERRED TO IN SECTION 2-312 OF THE NYS UNIFORM COMMERCIAL CODE OR THE
UNIFORM COMMERCIAL CODE OF ANY OTHER JURISDICTION OR IN ANY STATUTE APPLICABLE
TO REAL PROPERTY), AND LSAC AND NEWCO SHALL RELY UPON ITS OWN EXAMINATION
THEREOF. WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, AND NOTWITHSTANDING
ANY OTHERWISE EXPRESS REPRESENTATIONS AND WARRANTIES MADE BY THE COMPANY IN
SECTIONS 2.01 THROUGH 2.18 HEREOF, THE COMPANY MAKES NO REPRESENTATION OR
WARRANTY WITH RESPECT TO ANY PROTECTIONS, ESTIMATES OR BUDGETS
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HERETOFORE DELIVERED TO OR MADE AVAILABLE TO LSAC OR NEWCO OF FUTURE REVENUES,
EXPENSES OR EXPENDITURES OR FUTURE RESULTS OF OPERATIONS OF THE COMPANY OR ANY
OF ITS SUBSIDIARIES.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF LSAC AND NEWCO
------------------------------------------------
LSAC and Newco hereby represent and warrant to the Company as follows:
3.01. ORGANIZATION. LSAC and Newco are corporations duly organized, validly
existing and in good standing under the laws of their respective jurisdictions
of incorporation, and have all requisite corporate power and authority to carry
on their businesses as they are now being conducted. LSAC and Newco are
corporations newly formed for the purpose of consummating the transactions
contemplated hereby. Neither LSAC nor Newco has any assets, other than those
held, or any liabilities, other than those incurred, in connection with the
transactions contemplated hereby.
3.02. POWER AND AUTHORITY: EFFECT OF AGREEMENT. (a) Each of LSAC and Newco
has all requisite power and authority to execute, deliver and perform this
Agreement and to consummate the transactions contemplated hereby. The execution,
delivery and performance by LSAC and by Newco of this Agreement and the
consummation by each of them of the transactions contemplated hereby have been
duly authorized by the respective Boards of Directors of LSAC and Newco and by
the sole stockholder of each of them, and no other corporate action on the part
of LSAC and Newco or any of their respective stockholders or affiliates is
necessary to authorize this Agreement or the consummation of the transactions
contemplated hereby. This Agreement has been duly and validly executed and
delivered by LSAC and by Newco and, assuming the due authorization, execution
and delivery thereof by the Company and
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the other parties hereto, constitutes a valid and binding obligation of each of
them, enforceable against each of them in accordance with its terms, except to
the extent that such enforceability (i) may be limited by bankruptcy,
insolvency, reorganization, moratorium or other similar laws relating to
creditors' fights generally and (ii) is subject to general principles of equity.
(b) The execution, delivery and performance by LSAC and by Newco of this
Agreement and the consummation by .each of them of the transactions contemplated
hereby will not, with or without the giving of notice or the lapse of time, or
both, subject to obtaining any required consents, approvals, authorizations,
exemptions or waivers referred to in Section 3.05, (i) violate any provision of
law, rule or regulation to which LSAC or Newco is subject, (ii) violate any
order, judgment or decree applicable to LSAC or Newco or any of their
subsidiaries, or (iii) conflict with or result in a breach of the provisions of,
or constitute a default under, (A) the Certificate of Incorporation or ByLaws of
LSAC or Newco, or (B) any agreement reflecting obligations of LSAC or Newco or
any of their subsidiaries, for borrowed money, except in the case of clause (i),
(ii) or (iii)(B) of this Section 3.02(b), for violations, conflicts, breaches or
defaults which individually or in the aggregate would not materially hinder or
impair the consummation of the transactions contemplated hereby.
3.03. LITIGATION. There is no Litigation pending or threatened against LSAC
or Newco (i) with respect to which there is a reasonable likelihood of a
determination which would, individually or in the aggregate, have a material
adverse effect on the ability of LSAC or Newco to perform its obligations under
this Agreement, or (ii) which seeks to enjoin or obtain damages in respect of
the consummation of the transactions contemplated hereby. Neither LSAC nor Newco
is subject to any outstanding orders, rulings, judgments or decrees which,
individually or in the aggregate,
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would have a material adverse effect on the ability of LSAC or Newco to perform
its obligations under this Agreement.
3.04. AVAILABILITY OF FUNDS. Subject to the fulfillment of any conditions
contained in the commitment letters to be provided to the Company no later than
November 13, 1996, for senior and senior subordinated indebtedness, LSAC and
Newco or the Surviving Corporation Will have available on the Closing Date
sufficient funds, including equity from the Thomas H. Lee Equity Fund III, L.P.
and its affiliates, to enable them to consummate the transactions contemplated
by this Agreement.
3.05. CONSENTS. Except as set forth in the Disclosure Schedule, no consent,
approval or authorization of, or exemption by, or filing with, any governmental
authority, other than pursuant to the HSR Act and the filing of the Certificate
of Merger with the Secretary of State of the State of Delaware, is required in
connection with the execution, delivery and performance by LSAC or Newco of this
Agreement, or the taking by them of any other action contemplated hereby,
excluding, however, consents, approvals, authorizations, exemptions and filings,
if any, which the Company or any other party is required to obtain or make.
3.06. FEES. Except for fees payable in connection with the financing
described in Section 3.04, neither LSAC, Newco nor any of their affiliates has
employed any broker, finder or intermediary or paid or become obligated to pay
any fee or commission to any broker, finder or intermediary in connection with
the transactions contemplated hereby.
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ARTICLE IV
COVENANTS OF THE COMPANY
------------------------
The Company hereby covenants and agrees with LSAC and Newco as follows:
4.01. COOPERATION BY THE COMPANY. From the date hereof and prior to the LSH
Closing, the Company shall use its best efforts, and will cooperate with LSAC
and Newco, to secure all necessary consents, approvals, authorizations,
exemptions and waivers from third parties as shall be required in order to
enable the transactions contemplated hereby to be effected, and shall otherwise
use its best efforts to cause the consummation of such transactions in
accordance with the terms and conditions hereof. The Company shall file with the
Department of Justice and the Federal Trade Commission a Pre-Merger Notification
and Report Form pursuant to the HSR Act in respect of the transactions
contemplated hereby within five business days of the date of this Agreement.
4.02. CONDUCT OF BUSINESS. (a) Except as may be otherwise contemplated by
this Agreement or required by any of the documents listed in the Disclosure
Schedule or except as LSAC or Newco may otherwise consent to in writing (which
consent shall not be unreasonably withheld), from the date hereof and prior to
the LSH Closing, the Company shall, and shall cause each of the Subsidiaries to,
(i) in all material respects, conduct its business only in the ordinary course;
(ii) use its reasonable efforts to preserve intact its properties, assets and
business organization; (iii) maintain its properties, machinery and equipment in
sufficient operating condition and repair to enable it to conduct its business
in all material respects in the manner in which its business is currently
conducted, except for maintenance required by reason of fire, flood, earthquake
or other acts of God; (iv) continue all Material existing insurance policies (or
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comparable insurance) in full force and effect; (v) use its reasonable efforts
to keep available until the LSH Closing the services of its present officers,
employees and agents (as a group); (vi) not increase the rate or terms of
compensation payable or to become payable by the Company or any of its
Subsidiaries to any of their respective directors, officers or key employees,
and not increase the rate or terms of any bonus, pension or other employee
benefit plan covering any of their respective directors, officers or key
employees, except in each case increases occurring in the ordinary course of
business in accordance with their respective customary practices (including
normal periodic reviews and related compensation and benefit increases); and
(vii) use its reasonable efforts to preserve its relationships with its Material
lenders, suppliers, customers, licensors and licensees and others having
Material business dealings with the Company and the Subsidiaries such that its
business will not be Materially impaired.
Without limiting the generality of the foregoing, and except as may be
otherwise contemplated by this Agreement or required by any of the documents
listed in the Disclosure Schedule, neither the Company nor any of its
Subsidiaries will, prior to the LSH Closing, without the prior written consent
of LSAC or Newco (which consent shall not be unreasonably withheld):
(i) issue, sell or pledge, or authorize or propose the issuance, sale
or pledge of, (x) additional shares of capital stock of any class
(including Lear Siegler Common Stock or Safelite Common Stock), or
securities convertible into or exchangeable for any such shares, or any
rights, warrants or options to acquire any such shares or other convertible
securities, other than the issuance of Lear Siegler Common Stock or shares
of Class A Common Stock of Safelite pursuant to the exercise of options
outstanding on the date hereof or (y) any other securities in respect of,
in lieu of, or in substitution for, shares outstanding on the date hereof;
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(ii) declare or pay any dividend or distribution on any shares of
capital stock;
(iii) redeem, purchase or otherwise acquire any outstanding shares of
capital stock;
(iv) propose or adopt any amendment to the Restated Certificate of
Incorporation or By-Laws of the Company or Safelite;
(v) except for revolving loans incurred in the ordinary course of
business pursuant to the terms of the Credit Agreement, (x) incur any
indebtedness for borrowed money (including capital lease obligations) or
issue any debt securities, or assume, guarantee or endorse the obligations
of any other person except in the ordinary course of business or (y) repay
any indebtedness for borrowed money;
(vi) (x) increase the rate or terms of compensation of any of its
directors, officers or other employees, except such increases as are
granted in the ordinary course of business in accordance with customary
practice (including normal periodic performance reviews and related
compensation increases) or as required by any pre-existing Commitment, (y)
pay or agree to pay any pension, retirement allowance or other employee
benefit not required by any existing employee benefit plan or other
Commitment to any such director, officer or employee, whether past or
present, or (z) enter into or amend any employment, bonus, severance or
retirement contract or adopt any employee benefit plan;
(vii) (i) sell, transfer or otherwise dispose of any of its Material
property or assets or (ii) create any Material Encumbrance (other than
Permitted Encumbrances) on any of its Material property or assets;
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(viii) accelerate payment of receivables, delay payment of payables or
liquidate inventory, except in the ordinary course of business consistent
with past practice;
(ix) make any Material capital expenditure or commitment other than as
provided in the capital expenditure budget previously delivered to LSAC and
Newco; or
(x) make any loans, advances or capital contributions, except in the
ordinary course of business consistent with past practice;
(xi) enter into other Material Commitments except Commitments made in
the ordinary course of business consistent with past practice; or
(xii) agree in writing to take any of the foregoing actions.
(b) Without limiting any rights of Newco or LSAC under Section 6.01, the
Company shall not be liable to Newco or LSAC for the breach of any covenant or
agreement contained in Section 4.02(a) with respect to any action taken or
omitted to be taken by the Company or any Subsidiary unless such action was
taken or omitted to be taken at the written direction or written concurrence of
the Partnership Sellers or the management of the Company located in Florham
Park, New Jersey.
4.03. ACCESS. From the date hereof and prior to the LSH Closing, the
Company shall, and shall cause the Subsidiaries to, provide LSAC and Newco with
such information as LSAC and Newco may from time to time reasonably request with
respect to the Company and the Subsidiaries and the transactions contemplated by
this Agreement (including without limitation all information reasonably required
by Newco to enable Newco to complete the financing for the Merger), and the
Company shall, and shall cause the Subsidiaries to, provide LSAC and Newco and
their representatives reasonable access during regular business hours and upon
reasonable notice to the
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properties, books and records of the Company and the Subsidiaries as LSAC and
Newco may from time to time reasonably request; PROVIDED that the Company and
the Subsidiaries shall not be obligated to provide LSAC or Newco with any
information which would violate any law, rule or regulation or term of any
Commitment, or if the provision thereof would adversely affect the ability of
the Company or any of the Subsidiaries or any of their respective affiliates to
assert attorney-client, attorney work product or other similar privilege. Any
disclosure whatsoever during such investigation by LSAC or Newco shall not
constitute an enlargement of or additional representations or warranties of the
Company beyond those specifically set forth in this Agreement. All such
information and access shall be subject to the terms and conditions of the
letter agreement dated August 14, 1996 between Thomas H. Lee Company and
Safelite (the "Confidentiality Agreement").
4.04. NO SOLICITATION. From and after the date hereof, neither the Company
nor any LS Selling Stockholder shall directly or indirectly, solicit, initiate
or encourage (including by way of furnishing information) any Acquisition
Proposal (as defined below) from any person, or engage in or continue
discussions or negotiations relating to, any Acquisition Proposal, and the
Company and LS Selling Stockholders shall direct their respective shareholders,
partners, directors, officers, financial advisors and other authorized
representatives to refrain from taking any such action. "Acquisition Proposal"
means any proposal or offer for, or any written statement of intention (by
public announcement or otherwise) by any person or group to effect, any sale of
shares of capital stock, recapitalization, merger or consolidation with, or
acquisition of substantially all of the assets of, share exchange or other
business combination or similar transaction involving, the Company or any of the
Subsidiaries, or any written inquiry by any person or group with respect to the
Company's willingness to receive or discuss any of the foregoing.
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4.05 TAX RETURNS. All Material income Tax Returns filed before December 20,
1996 and after the date hereof shall be subject to the review and consent of
Newco prior to the filing thereof, which consent shall not be unreasonably
withheld.
4.06 STOCKHOLDER APPROVAL. Each of the LS Selling Stockholders and LSNWY
shall vote all shares of capital stock of Safelite held by it in favor of this
Agreement and the transactions contemplated hereby.
ARTICLE V
COVENANTS OF LSAC AND NEWCO
---------------------------
LSAC and Newco hereby covenant and agree with the Seller Group as follows:
5.01. COOPERATION BV LSAC AND NEWCO. From the date hereof and prior to the
LSH Closing, LSAC and Newco shall use their best efforts, and shall cooperate
with the Company, to secure all necessary consents, approvals, authorizations,
exemptions and waivers from third parties as shall be required in order to
enable LSAC and Newco to effect the transactions contemplated hereby, and will
otherwise use their best efforts to cause the consummation of such transactions
in accordance with the terms and conditions hereof. Without limiting the
foregoing provisions of this Section 5.01, LSAC and Newco shall file with the
Department of Justice and the Federal Trade Commission a Pre-Merger Notification
and Report Form pursuant to the HSR Act in respect of the transactions
contemplated hereby within five business days of this Agreement, and LSAC and
Newco shall use, and shall cause each of its affiliates to use, its best efforts
to take or cause to be taken all actions necessary, including to promptly and
fully comply with any requests for information from regulatory authorities, to
obtain
40
<PAGE> 46
any consent, waiver, approval or authorization relating to the HSR Act that is
necessary to enable the parties to consummate the transactions contemplated by
this Agreement.
5.02. INDEMNIFICATION; INSURANCE. (a) From and after the Effective Time,
the Surviving Corporation shall indemnify and hold harmless to the fullest
extent permitted under applicable law each person who is now, or has been at any
time prior to the date hereof, an officer, director, employee or agent of the
Company or any of its present or former subsidiaries or parent corporations
(individually, an "Indemnified Party" and collectively, the "Indemnified
Parties"), against all losses, claims, damages, liabilities, costs or expenses,
including reasonable attorneys' fees, judgments, fines, penalties and amounts
paid in settlement (collectively, "Losses") incurred by an Indemnified Party in
connection with any claim, action, suit, proceeding or investigation (an
"Action") in any way arising out of, pertaining to or resulting from acts or
omissions, or alleged acts or omissions, by any of them in their capacities as
such, whether commenced, asserted or claimed before or after the Effective Time
and including, without limitation, any Losses incurred by any Indemnified Party
in any way arising out of or relating to this Agreement, the Merger, or any of
the other transactions contemplated hereby. In the event of any such Action, (i)
the Surviving Corporation shall pay on an as-incurred basis the reasonable fees
and expenses of counsel selected by the Indemnified Party in advance of the
final disposition of any such Action to the fullest extent permitted by
applicable law, upon receipt of any undertaking required by applicable law, and
(ii) the Surviving Corporation shall cooperate in the defense of any such matter
at its own expense; PROVIDED, HOWEVER, that the Surviving Corporation shall not
be liable for any settlement effected without its written consent (which consent
shall not be unreasonably withheld).
(b) The Certificate of Incorporation and By-Laws of the Surviving
Corporation shall contain the provisions providing for exculpation of director
and officer
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liability and indemnification set forth in Annex A hereto. The Surviving
Corporation shall maintain in effect such provisions in the Certificate of
Incorporation and By-Laws of the Surviving Corporation providing for exculpation
of director and officer liability and indemnification to the fullest extent
permitted from time to time under the DGCL, which provisions shall not be
amended except as required by applicable law or except to make changes permitted
by applicable law that would enlarge the Indemnified Parties' right of
indemnification.
(c) For a period of six years after the Effective Time, the Surviving
Corporation shall cause to be maintained officers' and directors' liability
insurance covering the Indemnified Parties who are currently covered, in their
capacities as officers and directors, by the Company's or any Subsidiary's
existing officers' and directors' liability insurance policies on terms
substantially no less advantageous to the Indemnified Parties than such existing
insurance; PROVIDED, HOWEVER, that the Surviving Corporation shall not be
required in order to maintain or procure such coverage to pay an annual premium
in excess of two and one-half times the aggregate of the current annual premiums
paid by the Company and Safelite for their existing coverage (the "Cap"); and
provided, further, that if equivalent coverage cannot be obtained, or can be
obtained only by paying an annual premium in excess of the Cap, the Surviving
Corporation shall only be required to obtain as much coverage as can be obtained
by paying an annual premium equal to the Cap.
(d) From and after the Effective Time, the Surviving Corporation shall
indemnify and hold harmless each person who is a stockholder of the Company or
any of its subsidiaries on the date hereof, and any person which controls or is
a general or limited partner or an affiliate or an employee of any of the
foregoing persons (individually, a "Stockholder Indemnified Party" and
collectively, the "Stockholder Indemnified Parties") against all Losses incurred
by a Stockholder Indemnified Party in
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connection with any Action in any way arising out of, pertaining to or resulting
from this Agreement, the Merger, or any of the other transactions contemplated
hereby, or any act or omission or alleged act or omission related thereto
(including any corporate action taken or omitted to be taken in connection
therewith), whether commenced, asserted or claimed before or after the Effective
Time and including without limitation any Losses incurred by reason of the
assertion by any present or former stockholder of the Company or any of its
subsidiaries of any claim against a Stockholder Indemnified Party or any other
such stockholder; provided, however, that the Surviving Corporation shall not be
liable for any settlement effected without its written consent (which consent
shall not be unreasonable withheld).
(e) From and after the Effective Time, the Surviving Corporation shall
indemnify and hold harmless each Stockholder Indemnified Party against all
Losses incurred by such Stockholder Indemnified Party in connection with any
Action in any way arising out of, pertaining to or resulting from any liability
or obligation of, or arising out of or relating to, the Company or any of its
present or former subsidiaries, including any attempt by any third party
(whether or not successful) to impose any liability in respect thereof on any of
the Stockholder Indemnified Parties by reason of their share ownership or
otherwise; PROVIDED that, without limiting the rights of any Stockholder
Indemnified Party under any other provision of this Section 5.02 or otherwise, a
Stockholder Indemnified Party shall not be entitled to indemnification under
this subsection (e): (i) against Losses arising out of any matter with respect
to which the Stockholder Indemnified Party was found by final non-appealable
judgment of a court of competent jurisdiction to have been guilty of willful
misconduct in connection with such matter, or (ii) in respect of claims brought
against the Stockholder Indemnified Party by any present or former stockholder
of the Company or Safelite to the extent such claims are with respect to such
person's equity ownership in the Company or Safelite; and
43
<PAGE> 49
provided further, that the Surviving Corporation shall not be liable for any
settlement-effected without its written consent (which consent shall not be
unreasonably withheld).
(f) The provisions of subsections (d) and (e) of this Section 5.02 are
intended to accord separate and independent rights to the Stockholder
Indemnified Parties, and the parties agree that so long as one of these
subsections would entitle a Stockholder Indemnified Party to be indemnified
against a particular matter, then such Stockholder Indemnified Party shall be
entitled to full indemnification with respect to such matter notwithstanding
that the Stockholder Indemnified Party is not or may not be entitled to
indemnification against such matter under the other of these subsections.
(g) In the event of any Action referred to in subsection (d) or (e) of this
Section 5.02, the Surviving Corporation shall pay on an as-incurred basis the
reasonable fees and expenses of counsel selected by the Stockholder Indemnified
Party in advance of the final disposition of any such Action, and the Surviving
Corporation shall cooperate in the defense of any such Action at its own
expense; provided, however, that the Surviving Corporation shall not be liable
for any settlement effected without its written consent (which consent shall not
be unreasonably withheld).
(h) The Surviving Corporation shall pay all expenses, including attorneys'
fees, that may be incurred by any Indemnified Party or any Stockholder
Indemnified Party in enforcing the indemnity and other obligations provided for
in this Section 5.02.
(i) The rights of each Indemnified Party and Stockholder Indemnified Party
hereunder shall be in addition to any other rights such Indemnified Party or
Stockholder Indemnified Party, as the case may be; may have under the
Certificate of Incorporation or By-Laws of the Company or the Surviving
Corporation or any subsidiary, under the DGCL or otherwise. Notwithstanding
anything to the contrary
44
<PAGE> 50
contained in this Agreement or otherwise, the provisions of this Section 5.02
shall survive the consummation of the Merger and the other transactions
contemplated hereby, and each Indemnified Party and Stockholder Indemnified
Party shall, for all purposes, be a third-party beneficiary of the covenants and
agreements of the Surviving Corporation under this Section 5.02 and,
accordingly, shall be treated as a party to this Agreement for purposes of the
rights and remedies relating to enforcement of such covenants and agreements and
shall be entitled to enforce any such rights and exercise any such remedies
directly.
(j) In no event shall any shareholder, officer, director, employee, trustee
or agent of the Surviving Corporation, nor shall any person which controls or is
a general partner or a limited partner or affiliate of any of the foregoing,
have any liability of any kind or nature under this Section 5.02.
5.03. EMPLOYEE BENEFITS. After the Effective Time, the Surviving
Corporation shall grant to all individuals who are, as of the Effective Time,
employees of the Company or any of its Subsidiaries credit for all service with
the Company, any of its present and former subsidiaries, any other affiliate of
the Company and their respective predecessors (collectively, the "Lear Siegler
Affiliated Group") prior to the Effective Time for all purposes for which
service is recognized under each Company Benefit Plan. Benefit plans which
provide medical, dental or life insurance benefits after the Effective Time to
any individual who is an active or former employee of the Lear Siegler
Affiliated Group as of the Effective Time (an "Employee") or a dependent of an
Employee (a "Dependent") shall, with respect to such individuals, waive any
waiting periods and any pre-existing conditions and actively-at-work exclusions
to the extent so waived under present policy and shall provide that any
expenses-incurred on or before the Effective Time by such individuals shall be
taken into account under such plans for purposes of satisfying applicable
deductible, coinsurance and maximum out-of-pocket provisions to
45
<PAGE> 51
the extent taken into account under present policy. Without limiting the
generality of any other provision of this Agreement, after the Effective Time
the Surviving Corporation shall, and shall cause the Subsidiaries to, honor and
fully perform all the obligations under (i) all written Commitments with any
Employee; and (ii) all Company Benefit Plans. After the Effective Time, the
Company Benefit Plans shall not be terminated or amended in any manner that
would adversely affect the rights, benefits or protections provided thereunder
to any Employee or Dependent which have accrued and vested prior to the
Effective Time, provided that nothing herein shall prevent or restrict the
Surviving Corporation from terminating any Company Benefit Plan at any time or
from amending or otherwise modifying the terms of such Company Benefit Plan with
respect to benefits accrued or amounts earned after the Effective Time.
5.04. BRIDGE FINANCING. Newco will deliver to the Company a signed
commitment letter no later than November 13, 1996 providing the Surviving
Corporation with the senior subordinated debt portion of the financing required
to finance the transactions contemplated hereby, on a bridge financing basis
(the "Bridge Facility"). Newco covenants and agrees (subject to the fulfillment
of the conditions set forth in Article VI other than that relating to senior
subordinated indebtedness financing contained in Section 6.06) that, if and to
the extent senior subordinated notes have not been sold in the amount required
to enable the Merger and the other transactions contemplated hereby to be
consummated by December 20, 1996, Newco shall cause the Merger to occur on that
date and the Surviving Corporation shall draw upon the Bridge Facility in that
amount.
5.05. INSURANCE. Immediately prior to the Effective Time, LSAC shall
procure policies for insurance (the "LS Insurance"); which shall not be at the
expense of the Company or any of its subsidiaries other than Safelite and its
subsidiaries (collectively, the "LS Companies"), covering product liability
claims and workers'
46
<PAGE> 52
compensation claims against the LS Companies and having such other terms as are
set forth in Exhibit 5.05 on behalf and for the benefit of the LS Companies.
Within three years of the date hereof, the Surviving Corporation shall, at its
own expense, procure a renewal of the LS Insurance effective from the fifth
anniversary of the Effective Time through the sixth anniversary of the Effective
Time.
5.06. LEAR SIEGLER DIVIDEND AND ASSET TRANSFER RESTRICTIONS. From and after
the LSH Closing and the payment in full of all amounts owing under the Note, the
Company shall not declare (or otherwise permit to be paid) any dividends on any
shares of any class of capital stock of the Company, or make any payment on
account of the purchase, redemption, retirement or other acquisition of any
shares of any class of capital stock of the Company, or make any other
distribution in respect thereof, either directly or indirectly, whether in cash
or property or in obligations of the Company or any of its subsidiaries. The
Company shall not, and shall cause its subsidiaries not to, convey, sell, lease,
assign, pledge, transfer or otherwise dispose of any of their respective
properties or assets, whether now owned or hereafter acquired, except (i) in
satisfaction of liabilities of any of the LS Companies or (ii) in bona fide
arm's length transactions with third parties in exchange for fair value, the
proceeds of which shall be held by the Company or a subsidiary of the Company,
as applicable, in accordance with the terms of this Agreement. Without limiting
the generality of the foregoing, none of the assets or stock of any of the LS
Companies shall be pledged or otherwise encumbered as security for any
indebtedness for borrowed money of any person other than the LS Companies. LSAC
shall not sell any of the stock of the Company other than to a party which
agrees to be bound by the provisions of this Section 5.06. The agreements and
covenants contained in this Section 5.06 shall expire six years and six months
from the Closing Date.
5.07. SOLVENCY LETTERS. Newco, on behalf of the Surviving Corporation,
shall deliver to the Seller Group at the LSH Closing and the Merger the solvency
letters
47
<PAGE> 53
with respect to the Company and any of its Subsidiaries delivered by Newco or
the Surviving Corporation to the lenders of the Surviving Corporation, which
letters shall be addressed to the Seller Group.
5.08. OFFERING DOCUMENTS. From and after the date hereof, Newco shall
include, or cause to be included, in every offering document used by Newco, on
behalf of the Surviving Corporation, or any of its affiliates to raise funds for
the transactions contemplated hereby, or otherwise to raise funds prior to the
Closing Date, whether or not any of the LS Selling Stockholders, the Company,
Safelite, LSNWY or any of their affiliates are named therein, and whether by
private or public sales of securities, borrowings, or other means (collectively,
"Offering Documents"), a prominent, boldfaced statement in substantially the
following form:
"THIS DOCUMENT HAS BEEN PREPARED BY NEWCO
IN CONSULTATION WITH THE MANAGEMENT OF
SAFELITE GLASS CORP. NEITHER SAFELITE NOR
LEAR SIEGLER HOLDINGS CORP. SHALL HAVE ANY
LIABILITY WITH RESPECT TO THE [NOTES] PRIOR
TO THE CLOSING OF THE MERGER OF NEWCO INTO
SAFELITE AND THE ACQUISITION OF LEAR SIEGLER
BY LSAC. NONE OF THE STOCKHOLDERS OF LEAR
SIEGLER OR ANY OF THEIR AFFILIATES WILL HAVE
ANY LIABILITY FOR THIS OFFERING."
Newco further agrees that, while Newco may make such disclosures as it deems
appropriate under applicable law with respect to this Agreement, Newco shall
describe the Company and the Subsidiaries and any of their affiliates in any
Offering Documents only with the prior approval of the Company as to such
description. If Newco requests the approval of the Company pursuant hereto, the
Company shall respond to such request in a reasonably expeditious manner and
will not unreasonably withhold such approval. The parties acknowledge that the
Offering Documents may describe Safelite Glass Corp.
48
<PAGE> 54
as the issuer of any securities or the borrower of any borrowings, so long as.
any such - description expressly states that such references are to Safelite
Glass Corp. the Surviving Corporation after the Merger and not to the current
Safelite Glass Corp.
5.09. RESTRICTION ON MERGER, ETC. LSAC shall not, for a period of at least
two years following the Closing Date, enter into a merger, consolidation or
other business combination pursuant to which it is not the surviving
corporation. Nothing herein shall prohibit LSAC from entering into any of the
foregoing transactions in which it is the surviving corporation.
AKTICLE VI
CONDITIONS TO LSAC'S AND NEWCO'S OBLIGATIONS
--------------------------------------------
The obligations of LSAC and Newco to consummate the transactions
contemplated hereby shall be subject to the satisfaction (or waiver, where
permissible) at or prior to the Effective Time of all of the following
conditions:
6.01. REPRESENTATIONS. WARRANTIES AND COVENANTS OF THE COMPANY. The Company
shall have complied in all material respects with its agreements and covenants
contained herein to be performed on or prior to the Closing Date, and the
representations and warranties of the Company contained herein shall be true in
all material respects (or, in the case of any representations or warranties of
the Company contained herein that are already qualified by Materiality or
Material Adverse Effect, shall be true as written) on and as of the Closing Date
with the same effect as though made on and as of the Closing Date, except (a) as
otherwise contemplated hereby, and (b) to the extent that such representations
and warranties were made as of a specified date and as to such representations
and warranties the same shall continue on the Closing Date to have been true in
all material respects (or true as written, as applicable) as of the specified
date.
49
<PAGE> 55
LSAC and Newco shall have received a certificate executed by an executive
officer of the Company, dated as of the Closing Date, certifying as to the
fulfillment of the conditions set forth in this Section 6.01.
6.02. NO PROHIBITION. No statute, rule or regulation or order of any court
or administrative agency shall be in effect which prohibits LSAC or Newco from
consummating the transactions contemplated hereby.
6.03. CONSENTS. The applicable waiting period under the HSR Act shall have
expired or been terminated and all other consents, approvals, authorizations,
exemptions and waivers from governmental agencies that shall be required in
order to enable LSAC and Newco to consummate the transactions contemplated
hereby shall have been obtained (except for such consents, approvals,
authorizations, exemptions and waivers, the absence of which would not prohibit
consummation of such transactions or render such consummation illegal).
6.04. ESCROW AGREEMENT. Certain of the Partnership Sellers shall have
entered into the Escrow Agreement.
6.05. FIRPTA CERTIFICATE. Each of the Company and Safelite shall have
provided to LSAC and Newco, respectively, a statement, in a form reasonably
satisfactory to LSAC and Newco, respectively, pursuant to Section 1.897-2(h) of
the Treasury Regulations, certifying that interests in each of the Company and
Safelite, respectively, are not U.S. real property interests within the meaning
of Section 897(c)(1) of the Code and dated not more than 30 days prior to the
Closing Date.
6.06. FINANCING. The lenders under the commitment letters referred to in
Section 3.04 (other than the commitment letter of Thomas H. Lee Equity Fund III,
L.P. and its affiliates, receipt of the funds from which is not a condition to
Newco's and
50
<PAGE> 56
LSAC's obligations to close) shall have made available to the Surviving
CorPoration and LSAC the Financing contemplated thereby.
ARTICLE VII
CONDITIONS TO THE LS SELLING STOCKHOLDERS'
------------------------------------------
AND THE COMPANY'S, SAFELITE'S AND LSNWY'S
------------------------------------------
OBLIGATIONS
-----------
The obligation of the LS Selling Stockholders, the Company, Safelite and
LSNWY to consummate the transactions contemplated hereby shall be subject to the
satisfaction (or waiver, where permissible) at or prior to the Effective Time of
all of the following conditions:
7.01. REPRESENTATIONS. WARRANTIES AND COVENANTS OF LSAC AND NEWCO. LSAC and
Newco shall have complied in all material respects with each of their agreements
and covenants contained herein to be performed on or prior to the Closing Date,
and the representations and warranties of LSAC and Newco contained herein shall
be true in all material respects (or, in the case of any representations and
warranties of Newco contained herein that are already qualified by materiality
or material adverse effect qualifiers, such representations and warranties shall
be true as written) on and as of the Closing Date with the same effect as
though made on and as of the Closing Date, except (a) as otherwise contemplated
hereby, and (b) to the extent that such representations and warranties were made
as of a specified date and as to such representations and warranties the same
shall continue on the Closing Date to have been true in all material respects
(or true as written, as applicable) as of the specified date. The LS Selling
Stockholders, the Company, Safelite and LSNWY' shall have received a certificate
executed by an executive officer of LSAC and Newco, dated as of the Closing
Date, certifying as to the fulfillment of the conditions set forth in this
Section 7.01.
51
<PAGE> 57
7.02. NO PROHIBITION. No statute, rule or regulation or order of any court
or administrative agency shall be in effect which prohibits any office LS
Selling Stockholders, the Company, Safelite or LSNWY from consummating the
transactions contemplated hereby.
7.03. CONSENTS. The applicable waiting period under the HSR Act shall have
expired or been terminated and all other consents, approvals, authorizations,
exemptions and waivers from governmental agencies set forth in the Disclosure
Schedule that shall be required in order to enable the LS Selling Stockholders,
the Company, Safelite and LSNWY to consummate the transactions contemplated
hereby shall have been obtained (except for such consents, approvals,
authorizations, exemptions and waivers, the absence of which would not prohibit
consummation of such transactions or render such consummation illegal).
7.04. INSURANCE. LSAC shall have procured the LS Insurance set forth in
Exhibit 5.05.
7.05. SOLVENCY LETTERS. Newco, on behalf of the Surviving Corporation,
shall have delivered to the LS Selling Stockholders the solvency letters
required to be delivered pursuant to Section 5.07.
7.06. ESCROW AGREEMENT. The Company shall have entered into the Escrow
Agreement.
ARTICLE VIII
TERMINATION
-----------
8.01. TERMINATION. This Agreement may be terminated, and the Merger
contemplated hereby may be abandoned, at any time prior to the Effective Time,
whether
52
<PAGE> 58
prior to or after the execution and delivery of the consent of the stockholders
of Safelite thereto,
(a) by the mutual written consent of Newco and the Company; or
(b) by either the Company or Newco if the Merger shall not have
occurred on or before December 20, 1996 (in the case of the Company's
ability to terminate) or February 28, 1997 (in the case of Newco's ability
to terminate).
8.02. EFFECT ON OBLIGATIONS. Termination of this Agreement pursuant to this
Article VIII shall terminate all rights and obligations of the parties hereunder
and. none of the parties shall have any liability to the other parties
hereunder, except that Sections 9.09, 9.13 and 9.14, the Confidentiality
Agreement, the last sentence of Section 4.03 and this Section 8.02 shall remain
in effect, and provided that nothing herein shall relieve any party from
liability for any breach of any covenant or agreement in this Agreement prior to
such termination.
ARTICLE IX
MISCELLANEOUS
-------------
9.01. SURVIVAL. The representations and warranties made in this Agreement
or in any agreement, certificate or other document executed in connection
herewith (an "Ancillary Document") shall not survive the Effective Time. The
covenants and agreements contained herein to be performed or complied with prior
to the Safelite Sale Closing or the LSH Closing shall not survive such Closing.
The covenants and agreements contained herein to be performed or complied with
at or after the Safelite Sale Closing or the LSH Closing shall survive such
Closing until the expiration of the' applicable statute of limitations.
53
<PAGE> 59
9.02. KNOWLEDGE. Whenever used in this Agreement, "to the Company's
knowledge" or "to the knowledge of the Company" shall mean the actual knowledge
of the persons listed on Schedule 9.02 of the Disclosure Schedule and shall only
include their actual knowledge obtained in their respective capacities as such.
The burden of proving that a party or person had knowledge shall be on the party
asserting that such knowledge existed.
9.03. ENTIRE AGREEMENT. This Agreement (including the Disclosure Schedule
and all Exhibits hereto), the Ancillary Documents and the Confidentiality
Agreement constitute the sole understanding of the parties with respect to the
subject matter hereof and supersede all prior agreements among the parties
hereto with respect to the subject matter hereof. Matters disclosed by the
Company to Newco and LSAC pursuant to any Section of this Agreement shall be
deemed to be disclosed with respect to all Sections of this Agreement.
9.04. SUCCESSORS AND ASSIGNS. The terms and conditions of this Agreement
shall inure to the benefit of and be binding upon the respective successors and
assigns of the parties hereto; PROVIDED, HOWEVER, that this Agreement may not be
assigned by LSAC or Newco without the prior written consent of the Company
except that LSAC or Newco may assign its rights under this Agreement to a direct
or indirect wholly-owned subsidiary so long as (a) the representations and
warranties of LSAC or Newco, as applicable, made herein are equally true of any
such assignee of LSAC or Newco and (b) such assignment does not have any adverse
consequences to the Company or any of its affiliates (including, without
limitation, any adverse tax consequences or any adverse effect on the ability of
LSAC or Newco to timely consummate the transactions contemplated hereby), but no
such assignment of this Agreement or any of the rights or obligations hereunder
shall relieve LSAC or Newco of any of their obligations under this Agreement.
Such assignee shall execute a counterpart of this Agreement agreeing to be
54
<PAGE> 60
bound by the provisions hereof as "Newco" or "LSAC," as applicable, and agreeing
to be jointly and severally liable with the assignor and any other assignee for
all 0fthe obligations of the assignor hereunder. Notwithstanding anything in
this Section 9.04 to the contrary, effective upon the LSH Closing, Newco and
LSAC shall be entitled to assign their rights under this Agreement to their
lenders if required to do so by such lenders.
9.05. PARTIES IN INTEREST. Notwithstanding anything contained in this
Agreement to the contrary, except for the provisions of Section 5.02 (the "Third
Party Provisions"), nothing in this Agreement, express or implied, is intended
to confer on any person other than the parties hereto or their respective heirs,
successors, executors, administrators and assigns any rights, remedies,
obligations or liabilities under or by reason of this Agreement. The Third Party
Provisions may be enforced directly by the Indemnified Parties and the
Stockholder Indemnified Parties.
9.06. HEADINGS. The headings of the articles, sections and paragraphs of
this Agreement are inserted for convenience only and shall not be deemed to
constitute part of this Agreement or to affect the construction hereof.
9.07. AMENDMENT. This Agreement may be amended by the parties hereto at any
time, but no amendment shall be made at or after the Effective Time which alters
or changes (i) the amount or kind of shares, securities, cash, property and/or
rights to be received in exchange for or on conversion of any of the shares of
stock of Newco or Safelite, or (ii) any of the Third Party Provisions or this
Section 9.07. This Agreement may not be amended except by an instrument in
writing signed by or on behalf of each of the parties hereto.
55
<PAGE> 61
9.08. WAIVERS. The waiver by any party hereto of a breach.of any provision
hereunder shall not operate or be construed as a waiver of any prior or
subsequent breach of the same or any other provision hereunder.
9.09. EXPENSES. Each party shall pay all costs and expenses incurred by it
in connection with this Agreement and the transactions contemplated hereby;
PROVIDED that the Transaction Expenses (as hereinafter defined) shall be borne
by the Partnership Sellers. The term "Transaction Expenses" shall mean any fees
and expenses of Goldman Sachs & Co., Fried, Frank, Harris, Shriver & Jacobson
and Deloitte & Touche LLP incurred since August 31, 1996 in connection with the
transactions contemplated by this Agreement and the amount of the bonus payments
payable under the five bonus agreements dated October 28, 1996 between the
Company and five employees of Lear Siegler Management Corp. The Company
covenants and agrees that from and after the date hereof it will not pay and
will cause Safelite not to pay any Transaction Expenses incurred by it.
9.10. NOTICES. Any notice, request, instruction or other document to be
given hereunder by any party hereto to any other party shall be in writing and
shall be given (and will be deemed to have been duly given upon receipt) by
delivery in person, by electronic facsimile transmission, cable, telegram, telex
or other standard forms of written telecommunications, by overnight courier or
by registered or certified mail, postage prepaid:
If to the Company or LSNWY, to it:
c/o Lear Siegler Holdings Corp.
25 Vreeland Road, Building A
Florham Park, New Jersey 07932
Attention: President
Telecopy: (201) 966-5171
56
<PAGE> 62
with a copy to:
Safelite Glass Corp.
1105 Schrock Road
Columbus, Ohio 43229
Attention: Chief Financial Officer
Telecopy: (614) 842-3111
and a copy to:
Fried, Frank, Harris, Shriver & Jacobson
One New York Plaza
New York, New York 10004
Attention: Aviva Diamant, Esq.
Telecopy: (212) 859-4000
If to the LS Selling Stockholders, to them:
c/o Forstmann Little & Co.
767 Fifth Ave., 44th Floor
New York, NY 10153
Attention: Mr. Nicholas C. Forstmann
Telecopy: (212) 759-9059
with a copy to:
Fried, Frank, Harris, Shriver & Jacobson
One New York Plaza
New York, New York 10004
Attention: Aviva Diamant, Esq.
Telecopy: (212) 859-4000
If to LSAC or Newco, to it:
c/o Thomas H. Lee Company
75 State Street, Suite 2600
Boston, Massachusetts 02109
Attention: Mr. Scott M. Sperling
Telecopy: (617) 227-3514
57
<PAGE> 63
with a copy to:
Hutchins, Wheeler & Dittmar
101 Federal Street
Boston, Massachusetts 02110
Attention: Charles Robins, Esq.
Telecopy: (617) 951-1295
or at such other address for a party as shall be specified by like notice.
9.11 TRANSFER TAXES. LSAC and Newco shall pay all sales, use, transfer,
real property transfer, recording, gains, stock transfer and other similar Taxes
and fees, including without limitation any Delaware or New York state gains or
transfer Taxes (collectively, "Transfer Taxes") arising out of or in connection
with the transactions effected pursuant to this Agreement, and shall indemnify,
defend and hold harmless the LS Selling Stockholders with respect to such
Transfer Taxes. LSAC and Newco shall timely file as necessary documentation and
Tax Returns with respect to such Transfer Taxes.
9.12. ACCESS TO CERTAIN RECORDS. After the Closing Date, each person who is
an LS Selling Stockholder agrees to provide (or cause to be provided) to the IRS
any relevant records and other information reasonably requested by the IRS, or
reasonably requested by the Company to be provided to the IRS, and in each such
person's possession, and agrees to request the cooperation of the Company's
current auditors, in each case, in connection with any audit of the Company or
the Subsidiaries relating to Section 382 of the Code with respect to taxable
periods of the Company ending on or before the close of business on the Closing
Date. No LS Selling Stockholder shall be liable for any other LS Selling
Stockholder of the latter's breach of this Section 9.12.
58
<PAGE> 64
9.13. GOVERNING LAW, ETC. This Agreement shall be construed in accordance
with and governed by the laws of the State of New York applicable to agreements
made and to be performed wholly within such jurisdiction. Each of the parties
hereto hereby irrevocably and unconditionally consents to submit to the
exclusive jurisdiction of the courts of the State of New York and of the United
States of America in each case located in the County of New York for any
Litigation arising out of or relating to this Agreement and the transactions
contemplated hereby (and agrees not to commence any Litigation relating thereto
except in such courts), and further agrees that service of any process, summons,
notice or document by U.S. registered mail to its respective address set forth
in Section 9.l0 shall be effective service of process for any Litigation
brought against it in any such court. Each of the parties hereto hereby
irrevocably and unconditionally waives any objection to the laying of venue of
any Litigation arising out of this Agreement or the transactions contemplated
hereby in the courts of the State of New York or the United States of America in
each case located in the County of New York, and hereby further irrevocably and
unconditionally waives and agrees not to plead or claim in any such court that
any such Litigation brought in any such court has been brought in an
inconvenient forum.
9.14. PUBLIC ANNOUNCEMENTS. The Company and Newco will consult with each
other with respect to the issuance of any press releases and the making of any
other public statements relating to the transactions contemplated hereby.
9.15. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall for all purposes be deemed to be an original
and all of which shall constitute the same instrument.
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to
be executed on its behalf as of the date first above written.
59
<PAGE> 65
LEAK SIEGLER HOLDINGS CORP.
By: /s/ James F. Matthews
-------------------------------
Name: James F. Matthews
Title: President
SAFELITE GLASS CORP.
By:
-------------------------------
Name:
Title:
LSNWY CORP.
By: /s/ James F. Matthews
-------------------------------
Name: James F. Matthews
Title: President
<PAGE> 66
LEAK SIEGLER HOLDINGS CORP.
By:
-------------------------------
Name:
Title:
SAFELITE GLASS CORP.
By: /s/ Garen K. Staglin
-------------------------------
Name: Garen K. Staglin
Title: Chief Executive Officer
LSNWY CORP.
By:
-------------------------------
Name:
Title:
<PAGE> 67
LEAR SIEGLER PARTNERS
By: FLC XVII Partnership,
its general partner
By: /s/ Nicholas C. Forstmann
---------------------------
a general partner
LS PARTNERS
By: FLC XVII Partnership,
its general partner
By: /s/ Nicholas C. Forstmann
---------------------------
a general partner
FORSTMANN LITTLE & CO. SUBORDINATED DEBT
AND EQUITY MANAGEMENT BUYOUT
PARTNERSHIP - II
By: FLC Pannership, L.P.
its general parmer
By: /s/ Nicholas C. Forstmann
---------------------------
a general partner
FORSTMANN LITTLE & CO. SUBORDINATED DEBT
AND EQUITY MANAGEMENT BUYOUT
PARTNERSHIP - III
By: FLC Partnership, L.P.
its general partner
By: /s/ Nicholas C. Forstmann
---------------------------
a general partner
<PAGE> 68
L.S. ACQUISITION CORP.
By: /s/ Scott M. Sperling
--------------------------------
Name: Scott M. Sperling
Title: President
LITE ACQUISITION CORP.
By: /s/ Scott M. Sperling
--------------------------------
Name: Scott M. Sperling
Title: President
<PAGE> 1
EXHIBIT 10.2
================================================================================
CREDIT AGREEMENT
among
SAFELITE GLASS CORP.,
VARIOUS LENDING INSTITUTIONS,
THE CHASE MANHATTAN BANK,
AS ADMINISTRATIVE AGENT,
BANKERS TRUST COMPANY,
AS SYNDICATION AGENT,
AND
GOLDMAN SACHS CREDIT PARTNERS L.P.,
AS DOCUMENTATION AGENT,
--------------------------------
Dated as of December 20, 1996
--------------------------------
================================================================================
<PAGE> 2
TABLE OF CONTENTS
-----------------
Page
SECTION 1. Amount and Terms of Credit ...................................... 1
--------------------------
1.01 Commitments ...................................................... 1
-----------
1.02 Minimum Borrowing Amounts, etc. .................................. 3
------------------------------
1.03 Notice of Borrowing .............................................. 4
-------------------
1.04 Disbursement of Funds ............................................ 4
---------------------
1.05 Evidence of Debt ................................................. 5
----------------
1.06 Conversions ...................................................... 6
-----------
1.07 Pro Rata Borrowings .............................................. 6
-------------------
1.08 Interest ......................................................... 7
--------
1.09 Interest Periods ................................................. 7
----------------
1.10 Increased Costs, Illegality, etc. ................................ 8
--------------------------------
1.11 Compensation ..................................................... 10
------------
1.12 Change of Lending Office ......................................... 11
------------------------
1.13 Replacement of Banks ............................................. 11
--------------------
SECTION 2. Letters of Credit ............................................... 12
-----------------
2.01 Letters of Credit ................................................ 12
-----------------
2.02 Letter of Credit Requests; Notices of Issuance ................... 13
----------------------------------------------
2.03 Agreement to Repay Letter of Credit Drawings ..................... 14
--------------------------------------------
2.04 Letter of Credit Participations .................................. 14
-------------------------------
2.05 Increased Costs .................................................. 16
---------------
SECTION 3. Fees; Commitments ............................................... 17
-----------------
3.01 Fees ............................................................. 17
----
3.02 Voluntary Termination or Reduction of Commitments ................ 18
-------------------------------------------------
3.03 Mandatory Adjustments of Commitments, etc. ....................... 19
-----------------------------------------
SECTION 4. Payments ........................................................ 20
--------
4.01 Voluntary Prepayments ............................................ 20
---------------------
4.02 Mandatory Prepayments ............................................ 21
---------------------
4.03 Method and Place of Payment ...................................... 25
---------------------------
4.04 Net Payments ..................................................... 26
------------
SECTION 5. Conditions Precedent ............................................ 27
--------------------
5.01 Execution of Agreement; Notes .................................... 27
-----------------------------
5.02 No Default; Representations and Warranties ....................... 27
------------------------------------------
5.03 Officer's Certificate ............................................ 28
---------------------
5.04 Opinions of Counsel .............................................. 28
-------------------
5.05 Corporate Proceedings ............................................ 28
---------------------
5.06 Adverse Change, etc. ............................................. 28
-------------------
5.07 Litigation ....................................................... 29
----------
5.08 Approvals ........................................................ 29
---------
5.09 Consummation of the Transaction .................................. 29
-------------------------------
(i)
<PAGE> 3
PAGE
5.10 Security Documents................................................ 30
------------------
5.11 Fees and Expenses................................................. 31
-----------------
5.12 Mortgages; Title Insurance........................................ 31
--------------------------
5.13 Existing Indebtedness Agreements; Shareholders' Agreements;
-----------------------------------------------------------
Management Agreements; Tax Allocation Agreements.............. 32
------------------------------------------------
5.14 Solvency Opinions; Evidence of Insurance.......................... 32
----------------------------------------
5.15 Pro Forma Balance Sheet; Minimum EBITDA........................... 33
---------------------------------------
5.16 Projections....................................................... 33
-----------
5.17 Existing Indebtedness............................................. 33
---------------------
5.18 Payment of Fees................................................... 34
---------------
5.19 Notice of Borrowing; Letter of Credit Request..................... 34
---------------------------------------------
SECTION 6. Representations, Warranties and Agreements....................... 34
------------------------------------------
6.01 Corporate Status.................................................. 34
----------------
6.02 Corporate Power and Authority..................................... 34
-----------------------------
6.03 No Violation...................................................... 35
------------
6.04 Litigation........................................................ 35
----------
6.05 Use of Proceeds; Margin Regulations............................... 35
-----------------------------------
6.06 Governmental Approvals............................................ 36
----------------------
6.07 Investment Company Act............................................ 36
----------------------
6.08 Public Utility Holding Company Act................................ 36
----------------------------------
6.09 True and Complete Disclosure...................................... 36
-----------------------------
6.10 Financial Condition; Financial Statements......................... 36
-----------------------------------------
6.11 Security Interests................................................ 38
------------------
6.12 Representations and Warranties in Other Documents................. 38
-------------------------------------------------
6.13 Transaction....................................................... 38
-----------
6.14 Special Purpose Corporation....................................... 38
---------------------------
6.15 Compliance with ERISA............................................. 38
---------------------
6.16 Capitalization.................................................... 39
--------------
6.17 Subsidiaries...................................................... 40
------------
6.18 Intellectual Property............................................. 40
---------------------
6.19 Compliance with Statutes, etc. ................................... 40
------------------------------
6.20 Environmental Matters............................................. 40
---------------------
6.21 Properties........................................................ 41
----------
6.22 Labor Relations................................................... 41
---------------
6.23 Tax Returns and Payments.......................................... 41
------------------------
6.24 Existing Indebtedness............................................. 42
---------------------
6.25 Senior Subordinated Notes......................................... 42
-------------------------
6.26 LS Tax Sharing Agreement.......................................... 42
------------------------
SECTION 7. Affirmative Covenants............................................ 42
----------------------
7.01 Information Covenants............................................. 43
---------------------
7.02 Books, Records and Inspections.................................... 46
------------------------------
7.03 Insurance......................................................... 46
---------
7.04 Payment of Taxes.................................................. 46
----------------
7.05 Corporate Franchises.............................................. 46
--------------------
(ii)
<PAGE> 4
PAGE
----
11.01 Appointment...................................................... 92
-----------
11.02 Delegation of Duties............................................. 92
--------------------
11.03 Exculpatory Provisions........................................... 92
----------------------
11.04 Reliance by Administrative Agent................................. 93
--------------------------------
11.05 Notice of Default................................................ 93
-----------------
11.06 Nonreliance on Administrative Agent and other Banks.............. 93
---------------------------------------------------
11.07 Indemnification.................................................. 94
---------------
11.08 Administrative Agent in its Individual Capacity.................. 94
-----------------------------------------------
11.09 Holders.......................................................... 95
-------
11.10 Resignation of the Administrative Agent; Successor
--------------------------------------------------
Administrative Agent........................................ 95
--------------------
11.11 Documentation Agent, Syndication Agent and Co-Agents............. 95
----------------------------------------------------
11.12 Letter of Credit Issuer.......................................... 95
-----------------------
SECTION 12. Miscellaneous................................................... 95
-------------
12.01 Payment of Expenses, etc. ....................................... 95
-------------------------
12.02 Right of Setoff.................................................. 96
---------------
12.03 Notices.......................................................... 97
-------
12.04 Benefit of Agreement............................................. 97
--------------------
12.05 No Waiver; Remedies Cumulative................................... 99
------------------------------
12.06 Payments Pro Rata................................................ 99
-----------------
12.07 Calculations; Computations....................................... 100
--------------------------
12.08 Governing Law; Submission to Jurisdiction; Venue................. 100
------------------------------------------------
12.09 Counterparts..................................................... 101
------------
12.10 Effectiveness.................................................... 101
-------------
12.11 Headings Descriptive............................................. 101
--------------------
12.12 Amendment or Waiver; etc. ....................................... 101
------------------------
12.13 Survival......................................................... 102
--------
12.14 Domicile of Loans................................................ 102
-----------------
12.15 Confidentiality.................................................. 103
---------------
12.16 Waiver of Jury Trial............................................. 103
--------------------
12.17 Integration...................................................... 103
-----------
(iv)
<PAGE> 5
ANNEX I List of Banks and Commitments
ANNEX II Bank Addresses
SCHEDULE 2.01 Existing Letters of Credit
SCHEDULE 5.16 Projections
SCHEDULE 6.04 Litigation
SCHEDULE 6.16 Capital Stock of the Borrower
SCHEDULE 6.17 Subsidiaries
SCHEDULE 6.21 Real Properties
SCHEDULE 6.24 Existing Indebtedness
SCHEDULE 8.03 Existing Liens
SCHEDULE 8.06 Existing Investments
EXHIBIT A-1 Form of Notice of Borrowing
EXHIBIT A-2 Form of Letter of Credit Request
EXHIBIT B-1 Form of A Term Note
EXHIBIT B-2 Form of B Term Note
EXHIBIT B-3 Form of Revolving Note
EXHIBIT B-4 Form of Swingline Note
EXHIBIT C Form of Section 4.04(b)(ii) Certificate
EXHIBIT D Form of Opinion of Hutchins, Wheeler & Dittmar
EXHIBIT E Form of Officers' Certificate
EXHIBIT F Form of Pledge Agreement
EXHIBIT G Form of Security Agreement
EXHIBIT H Form of Subsidiary Guaranty
EXHIBIT I Form of Subordination Provisions
EXHIBIT J Form of Assignment and Assumption Agreement
EXHIBIT K Form of Intercompany Note
EXHIBIT L Form of Shareholder Subordinated Note
(v)
<PAGE> 6
CREDIT AGREEMENT, dated as of December 20, 1996, among SAFELITE GLASS
CORP., a Delaware corporation (the "Borrower"), the lenders from time to time
party hereto (each a "Bank" and, collectively, the "Banks"), THE CHASE MANHATTAN
BANK, as Administrative Agent (in such capacity, the "Administrative Agent"),
BANKERS TRUST COMPANY, as Syndication Agent (in such capacity, the "Syndication
Agent"), and GOLDMAN SACHS CREDIT PARTNERS L.P., as Documentation Agent (in such
capacity, the "Documentation Agent"). Unless otherwise defined herein, all
capitalized terms used herein and defined in Section 10 are used herein as so
defined.
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, subject to and upon the terms and conditions herein set
forth, the Banks are willing to make available the credit facilities provided
for herein;
NOW, THEREFORE, IT IS AGREED:
SECTION 1. Amount and Terms of Credit.
--------------------------
1.01 COMMITMENTS. (A) Subject to and upon the terms and conditions
herein set forth, each Bank severally agrees to make a loan or loans to the
Borrower which loans shall be drawn, to the extent such Bank has a commitment
under such Facility, under the A Term Loan Facility, the B Term Loan Facility
and the Revolving Credit Facility, as set forth below:
(a) Each loan under the A Term Loan Facility (each an "A Term Loan"
and, collectively, the "A Term Loans") (i) shall be made pursuant to a
single drawing, which shall be on the Initial Borrowing Date, (ii) shall be
denominated in U.S. Dollars, (iii) shall be made as Base Rate Loans or
Eurodollar Loans and, except as hereinafter provided, may, at the option of
the Borrower, be maintained as and/or converted into Base Rate Loans or
Eurodollar Loans, PROVIDED that (x) all A Term Loans made by all Banks
pursuant to the same Borrowing shall, unless otherwise specifically
provided herein, consist entirely of A Term Loans of the same Type and (y)
unless the Administrative Agent has determined that the Syndication Date
has occurred (at which time this clause (y) shall no longer be applicable),
no more than three Borrowings of A Term Loans to be maintained as
Eurodollar Loans may be incurred prior to the 90th day after the Initial
Borrowing Date (each of which Borrowings of Eurodollar Loans may only have
an Interest Period of one month, and the first of which Borrowings may only
be made on the Initial Borrowing Date, the second of which Borrowings may
only be made on the last day of the Interest Period of the first such
Borrowing and the third of which Borrowings may only be made on the last
day of the Interest Period of the second such Borrowing), and (iv) shall
not exceed for any Bank at the time of incurrence thereof on the Initial
Borrowing Date that aggregate principal amount which equals the A Term Loan
Commitment, if any, of such Bank at such time. Once repaid, A Term Loans
may not be reborrowed.
<PAGE> 7
(b) Each loan under the B Term Loan Facility (each a "B Term Loan"
and, collectively, the "B Term Loans") (i) shall be made pursuant to a
single drawing, which shall be on the Initial Borrowing Date, (ii) shall be
denominated in U.S. Dollars, (iii) shall be made as Base Rate Loans or
Eurodollar Loans and, except as hereinafter provided, may, at the option of
the Borrower, be maintained as and/or converted into Base Rate Loans or
Eurodollar Loans, PROVIDED that (x) all B Term Loans made by all Banks
pursuant to the same Borrowing shall, unless otherwise specifically
provided herein, consist entirely of B Term Loans of the same Type and (y)
unless the Administrative Agent has determined that the Syndication Date
has occurred (at which time this clause (y) shall no longer be applicable),
no more than three Borrowings of B Term Loans to be maintained as
Eurodollar Loans may be incurred prior to the 90th day after the Initial
Borrowing Date (each of which Borrowings of Eurodollar Loans may only have
an Interest Period of one month, and the first of which Borrowings may only
be made on the same date as the initial Borrowing of A Term Loans that are
maintained as Eurodollar Loans, the second of which Borrowings may only be
made on the last day of the Interest Period of the first such Borrowing and
the third of which Borrowings may only be made on the last day of the
Interest Period of the second such Borrowing) and (iv) shall not exceed for
any Bank at the time of incurrence thereof on the Initial Borrowing Date
that aggregate principal amount which equals the B Term Loan Commitment, if
any, of such Bank at such time. Once repaid, B Term Loans may not be
reborrowed.
(c) Each loan under the Revolving Credit Facility (each a "Revolving
Loan" and, collectively, the "Revolving Loans") (i) shall be made at any
time and from time to time on or after the Initial Borrowing Date and prior
to the Revolving Loan Maturity Date, (ii) shall be denominated in U.S.
Dollars, (iii) except as hereinafter provided, may, at the option of the
Borrower, be incurred and maintained as and/or converted into Base Rate
Loans or Eurodollar Loans, PROVIDED that (x) all Revolving Loans made as
part of the same Borrowing shall, unless otherwise specifically provided
herein, consist of Revolving Loans of the same Type and (y) unless the
Administrative Agent has determined that the Syndication Date has occurred
(at which time this clause (y) shall no longer be applicable), no more than
three Borrowings of Revolving Loans to be maintained as Eurodollar Loans
may be incurred prior to the 90th day after the Initial Borrowing Date
(each of which Borrowings of Eurodollar Loans may only have an Interest
Period of one month, and the first of which Borrowings may only be made on
the same date as the initial Borrowing of A Term Loans that are maintained
as Eurodollar Loans, the second of which Borrowings may only be made on the
last day of the Interest Period of the first such Borrowing and the third
of which Borrowings may only be made on the last day of the Interest Period
of the second such Borrowing), (iv) may be repaid and reborrowed in
accordance with the provisions hereof and (v) shall not exceed for any Bank
at any time outstanding that aggregate principal amount which equals such
Bank's Revolving Percentage of the Total Unutilized Revolving Credit
Commitment at such time.
(B) Subject to and upon the terms and conditions herein set forth,
Chase in its individual capacity agrees to make at any time and from time to
time after the Initial Borrowing Date and prior to the Swingline Expiry Date, a
loan or loans to the Borrower (each a "Swingline Loan" and, collectively, the
"Swingline Loans"), which Swingline Loans (i) shall be made and maintained as
Base Rate Loans, (ii) shall be denominated in U.S. Dollars, (iii) may be repaid
and
-2-
<PAGE> 8
reborrowed in accordance with the provisions hereof, (iv) shall not exceed in
aggregate principal amount at any time outstanding, when combined with the
aggregate principal amount of all Revolving Loans then outstanding and the
Letter of Credit Outstandings (exclusive of Unpaid Drawings relating to Letters
of Credit which are repaid with the proceeds of, and simultaneously with the
incurrence of, the respective incurrence of such Swingline Loans) at such time,
an amount equal to the Total Revolving Credit Commitment then in effect and (v)
shall not exceed in aggregate principal amount at any time outstanding the
Maximum Swingline Amount. Chase shall not be obligated to make any Swingline
Loans at a time when a Bank Default exists unless Chase has entered into
arrangements satisfactory to it and the Borrower to eliminate Chase's risk with
respect to the Defaulting Bank's or Banks' participation in such Swingline
Loans, including by cash collateralizing such Defaulting Bank's or Banks'
Revolving Percentage of the outstanding Swingline Loans. Chase will not make a
Swingline Loan after it has received written notice from the Borrower or the
Required Banks stating that a Default or an Event of Default exists until such
time as Chase shall have received a written notice of (i) rescission of such
notice from the party or parties originally delivering the same or (ii) a waiver
of such Default or Event of Default from the Majority Banks under the Revolving
Credit Facility.
(C) On any Business Day, Chase may, in its sole discretion, give
notice to the Revolving Banks that its outstanding Swingline Loans shall be
funded with a Borrowing of Revolving Loans (PROVIDED that each such notice shall
be deemed to have been automatically given upon the occurrence of a Default or
an Event of Default under Section 9.05 or upon the exercise of any of the
remedies provided in the last paragraph of Section 9), in which case a Borrowing
of Revolving Loans constituting Base Rate Loans (each such Borrowing, a
"Mandatory Borrowing") shall be made on the immediately succeeding Business Day
by all Revolving Banks PRO RATA based on each Revolving Bank's Revolving
Percentage, and the proceeds thereof shall be applied directly to repay Chase
for such outstanding Swingline Loans. Each Revolving Bank hereby irrevocably
agrees to make Base Rate Loans upon one Business Day's notice pursuant to each
Mandatory Borrowing in the amount and in the manner specified in the preceding
sentence and on the date specified in writing by Chase notwithstanding (i) that
the amount of the Mandatory Borrowing may not comply with the Minimum Borrowing
Amount otherwise required hereunder, (ii) whether any conditions specified in
Section 5 are then satisfied, (iii) whether a Default or an Event of Default has
occurred and is continuing, (iv) the date of such Mandatory Borrowing and (v)
any reduction in the Total Revolving Credit Commitment after any such Swingline
Loans were made. In the event that any Mandatory Borrowing cannot for any reason
be made on the date otherwise required above (including, without limitation, as
a result of the commencement of a proceeding under the Bankruptcy Code in
respect of the Borrower), each Revolving Bank (other than Chase) hereby agrees
that it shall forthwith purchase from Chase (without recourse or warranty) such
assignment of the outstanding Swingline Loans as shall be necessary to cause the
Revolving Banks to share in such Swingline Loans ratably based upon their
respective Revolving Percentages, PROVIDED that all interest payable on the
Swingline Loans shall be for the account of Chase until the date the respective
assignment is purchased and, to the extent attributable to the purchased
assignment, shall be payable to the Revolving Bank purchasing same from and
after such date of purchase.
1.02 MINIMUM BORROWING AMOUNTS, ETC. The aggregate principal amount of
each Borrowing under a Facility shall not be less than the Minimum Borrowing
Amount for such
-3-
<PAGE> 9
Facility. More than one Borrowing may be incurred on any day; PROVIDED that at
no time shall there be outstanding more than sixteen (16) Borrowings of
Eurodollar Loans.
1.03 NOTICE OF BORROWING. (a) Whenever the Borrower desires to incur
Loans under any Facility (excluding Borrowings of Swingline Loans and Mandatory
Borrowings), it shall give the Administrative Agent at its Notice Office, prior
to 3:00 P.M. (New York time), at least three Business Days' prior written notice
(or telephonic notice promptly confirmed in writing) of each Borrowing of
Eurodollar Loans and at least one Business Day's prior written notice (or
telephonic notice promptly confirmed in writing) of each Borrowing of Base Rate
Loans to be made hereunder. Each such notice (each a "Notice of Borrowing")
shall, except as provided in Section 1.10, be irrevocable, and, in the case of
each written notice and each confirmation of telephonic notice, shall be in the
form of Exhibit A-1, appropriately completed to specify (i) the Facility
pursuant to which such Borrowing is to be made, (ii) the aggregate principal
amount of the Loans to be made pursuant to such Borrowing, (iii) the date of
such Borrowing (which shall be a Business Day) and (iv) whether the respective
Borrowing shall consist of Base Rate Loans or, to the extent permitted
hereunder, Eurodollar Loans and, if Eurodollar Loans, the Interest Period to be
initially applicable thereto. The Administrative Agent shall promptly give each
Bank written notice (or telephonic notice promptly confirmed in writing) of each
proposed Borrowing, of such Bank's proportionate share thereof, if any, and of
the other matters covered by the Notice of Borrowing.
(b) (i) Whenever the Borrower desires to borrow Swingline Loans
hereunder, it shall give Chase not later than 12:00 Noon (New York time) on the
day such Swingline Loan is to be made, written notice (or telephonic notice
promptly confirmed in writing) of each Swingline Loan to be made hereunder. Each
such notice shall be irrevocable and shall specify in each case (x) the date of
such Borrowing (which shall be a Business Day) and (y) the aggregate principal
amount of the Swingline Loan to be made pursuant to such Borrowing.
(ii) Mandatory Borrowings shall be made upon the notice specified in
Section 1.01(C), with the Borrower irrevocably agreeing, by its incurrence of
any Swingline Loan, to the making of Mandatory Borrowings as set forth in such
Section 1.01(C).
(c) Without in any way limiting the obligation of the Borrower to
confirm in writing any telephonic notice permitted to be given hereunder, the
Administrative Agent or Chase (in the case of a Borrowing of Swingline Loans) or
the Letter of Credit Issuer (in the case of the issuance of Letters of Credit),
as the case may be, may prior to receipt of written confirmation act without
liability upon the basis of such telephonic notice, believed by the
Administrative Agent, Chase or the Letter of Credit Issuer, as the case may be,
in good faith to be from an Authorized Officer of the Borrower. In each such
case, the Borrower hereby waives the right to dispute the Administrative
Agent's, Chase's or the Letter of Credit Issuer's record of the terms of such
telephonic notice (except in the case of gross negligence or bad faith).
1.04 DISBURSEMENT OF FUNDS. (a) Not later than 1:00 P.M. (New York
time) on the date specified in each Notice of Borrowing (or (x) in the case of
Swingline Loans, not later than 2:00 P.M. (New York time) on the date specified
in Section 1.03(b)(i) or (y) in the case of Mandatory Borrowings, not later than
12:00 Noon (New York time) on the date specified in Section 1.01(C)), each Bank
with a Commitment under the respective Facility will make available
-4-
<PAGE> 10
its PRO RATA share, if any, of each Borrowing requested to be made on such date
(or in the case of Swingline Loans, Chase shall make available the full amount
thereof) in the manner provided below. All amounts shall be made available to
the Administrative Agent in U.S. dollars and immediately available funds at the
Payment Office and the Administrative Agent promptly will make available to the
Borrower by depositing to its account at the Payment Office the aggregate of the
amounts so made available in the type of funds received. Unless the
Administrative Agent shall have been notified by any Bank prior to the date of
Borrowing that such Bank does not intend to make available to the Administrative
Agent its portion of the Borrowing or Borrowings to be made on such date, the
Administrative Agent may assume that such Bank has made such amount available to
the Administrative Agent on such date of Borrowing, and the Administrative
Agent, in reliance upon such assumption, may (in its sole discretion and without
any obligation to do so) make available to the Borrower a corresponding amount.
If such corresponding amount is not in fact made available to the Administrative
Agent by such Bank and the Administrative Agent has made available same to the
Borrower, the Administrative Agent shall be entitled to recover such
corresponding amount from such Bank. If such Bank does not pay such
corresponding amount forthwith upon the Administrative Agent's demand therefor,
the Administrative Agent shall promptly notify the Borrower, and the Borrower
shall immediately pay such corresponding amount to the Administrative Agent. The
Administrative Agent shall also be entitled to recover from the Bank or the
Borrower, as the case may be, interest on such corresponding amount in respect
of each day from the date such corresponding amount was made available by the
Administrative Agent to the Borrower to the date such corresponding amount is
recovered by the Administrative Agent, at a rate per annum equal to (x) if paid
by such Bank, the overnight Federal Funds rate or (y) if paid by the Borrower,
the then applicable rate of interest, calculated in accordance with Section
1.08, for the respective Loans.
(b) Nothing herein shall be deemed to relieve any Bank from its
obligation to fulfill its commitments hereunder or to prejudice any rights which
the Borrower may have against any Bank as a result of any default by such Bank
hereunder.
1.05 EVIDENCE OF DEBT. (a) Each Bank shall maintain in accordance with
its usual practice an account or accounts evidencing indebtedness of the
Borrower to such Bank resulting from each Loan of such Bank from time to time,
including the amounts of principal and interest payable and paid to such Bank
from time to time under this Agreement.
(b) The Administrative Agent shall maintain the Register pursuant to
subsection 12.04(c), and a subaccount therein for each Bank, in which shall be
recorded (i) the amount of each Revolving Loan and Term Loan made hereunder, the
Type thereof and each Interest Period applicable thereto, (ii) the amount of any
principal or interest due and payable or to become due and payable from the
Borrower to each Bank hereunder and (iii) both the amount of any sum received by
the Administrative Agent hereunder from the Borrower and each Bank's share
thereof.
(c) The entries made in the Register and the accounts of each Bank
maintained pursuant to subsection 1.05(a) shall, to the extent permitted by
applicable law, be PRIMA FACIE evidence of the existence and amounts of the
obligations of the Borrower therein recorded; PROVIDED, HOWEVER, that the
failure of any Bank or the Administrative Agent to maintain the Register or any
such account, or any error therein, shall not in any manner affect the
obligation of
-5-
<PAGE> 11
the Borrower to repay (with applicable interest) the Loans made to such Borrower
by such Bank in accordance with the terms of this Agreement.
(d) The Borrower agrees that, upon the request to the Administrative
Agent by any Bank, the Borrower will execute and deliver to such Bank (i) a
promissory note of the Borrower evidencing the Revolving Loans of such Bank,
substantially in the form of Exhibit B-3 with appropriate insertions as to date
and principal amount (a "Revolving Note"), (ii) a promissory note of the
Borrower evidencing the A Term Loan of such Bank, substantially in the form of
Exhibit B-1 with appropriate insertions as to date and principal amount (an
"A-Term Note"), (iii) a promissory note of the Borrower evidencing the B Term
Loan of such Bank, substantially in the form of Exhibit B-2 with appropriate
insertions as to date and principal amount (a "B-Term Note"), (iv) a promissory
note of the Borrower evidencing the Swingline Loan of such Bank, substantially
in the form of Exhibit B-4 with appropriate insertions as to date and principal
amount (a "Swingline Note").
1.06 CONVERSIONS. The Borrower shall have the option to convert on any
Business Day occurring on or after the Initial Borrowing Date, all or a portion
at least equal to the applicable Minimum Borrowing Amount of the outstanding
principal amount of the Loans (other than Swingline Loans which at all times
shall be maintained as Base Rate Loans) owing by the Borrower pursuant to a
single Facility into a Borrowing or Borrowings of another Type of Loan under
such Facility; PROVIDED that (i) except as otherwise provided in Section
1.10(b), no partial conversion of a Borrowing of Eurodollar Loans shall reduce
the outstanding principal amount of the Eurodollar Loans made pursuant to such
Borrowing to less than the Minimum Borrowing Amount applicable thereto, (ii)
Base Rate Loans may only be converted into Eurodollar Loans if no Default or
Event of Default is in existence on the date of the conversion unless the
Required Banks otherwise agree, (iii) unless the Administrative Agent has
determined that the Syndication Date has occurred (at which time this clause
(iii) shall no longer be applicable), prior to the 90th day after the Initial
Borrowing Date, conversions of Base Rate Loans into Eurodollar Loans may only be
made if any such conversion is effective on the first day of the first, second
or third Interest Periods referred to in clause (y) of each of Sections
1.01(A)(a)(iii), 1.01(A)(b)(iii) and 1.01(A)(c)(iii) and so long as such
conversion does not result in a greater number of Borrowings of Eurodollar Loans
prior to the 90th day after the Initial Borrowing Date as are permitted under
such Sections and (iv) Borrowings of Eurodollar Loans resulting from this
Section 1.06 shall be limited in number as provided in Section 1.02. Each such
conversion shall be effected by the Borrower by giving the Administrative Agent
at its Notice Office, prior to 3:00 P.M. (New York time), at least three
Business Days' (or one Business Day's in the case of a conversion into Base Rate
Loans) prior written notice (or telephonic notice promptly confirmed in writing)
(each a "Notice of Conversion") specifying the Loans to be so converted, the
Type of Loans to be converted into and, if to be converted into a Borrowing of
Eurodollar Loans, the Interest Period to be initially applicable thereto. The
Administrative Agent shall give each Bank prompt notice of any such proposed
conversion affecting any of its Loans.
1.07 PRO RATA BORROWINGS. All Borrowings of Loans (other than
Swingline Loans) under this Agreement shall be made by the Banks PRO RATA on the
basis of their A Term Loan Commitments, B Term Loan Commitments or Revolving
Credit Commitments, as the case may be. It is understood that no Bank shall be
responsible for any default by any other Bank of its obligation to make Loans
hereunder and that each Bank shall be obligated to make the Loans
-6-
<PAGE> 12
to be made by it hereunder regardless of the failure of any other Bank to
fulfill its commitments hereunder.
1.08 INTEREST. (a) The unpaid principal amount of each Base Rate Loan
shall bear interest from the date of the Borrowing thereof until the earlier of
(i) the maturity (whether by acceleration or otherwise) of such Base Rate Loan
and (ii) the conversion of such Base Rate Loan to a Eurodollar Loan pursuant to
Section 1.06, at a rate per annum which shall at all times be the Applicable
Base Rate Margin plus the Base Rate in effect from time to time.
(b) The unpaid principal amount of each Eurodollar Loan shall bear
interest from the date of the Borrowing thereof until the earlier of (i) the
maturity (whether by acceleration or otherwise) of such Eurodollar Loan and (ii)
the conversion of such Eurodollar Loan to a Base Rate Loan pursuant to Section
1.06, 1.09 or 1.10(b), as applicable, at a rate per annum which shall at all
times be the Applicable Eurodollar Margin plus the relevant Eurodollar Rate.
(c) Overdue principal and, to the extent permitted by law, overdue
interest in respect of each Loan and other amounts (which other amounts are
overdue more than five days) owed by any Credit Party under the Credit Documents
shall bear interest at a rate per annum equal to (x) in the case of principal,
the rate which is 2% in excess of the rate then borne by such Loans, (y) in the
case of interest, the rate which is 2% in excess of the rate otherwise
applicable to Base Rate Loans of the applicable Facility from time to time and
(z) in the case of such other amounts, the rate which is 2% in excess of the
rate otherwise applicable to Base Rate Loans of the Revolving Facility from time
to time. Interest which accrues under this Section 1.08(c) shall be payable on
demand.
(d) Interest shall accrue from and including the date of any Borrowing
to but excluding the date of any repayment thereof and shall be payable (i) in
respect of each Base Rate Loan, quarterly in arrears on each Quarterly Payment
Date, (ii) in respect of each Eurodollar Loan, on (x) the date of any prepayment
or repayment thereof (on the amount prepaid or repaid), (y) the date of any
conversion into a Base Rate Loan pursuant to Section 1.06, 1.09 or 1.10(b), as
applicable (on the amount converted) and (z) the last day of each Interest
Period applicable thereto and, in the case of an Interest Period in excess of
three months, on each date occurring at three month intervals after the first
day of such Interest Period and (iii) in respect of each Loan, at maturity
(whether by acceleration or otherwise) and, after such maturity, on demand.
(e) All computations of interest hereunder shall be made in accordance
with Section 12.07(b).
(f) The Administrative Agent, upon determining the interest rate for
any Borrowing of Eurodollar Loans for any Interest Period, shall promptly notify
the Borrower and the Banks thereof.
1.09 INTEREST PERIODS. At the time the Borrower gives a Notice of
Borrowing or Notice of Conversion in respect of the making of, or conversion
into, a Borrowing of Eurodollar Loans (in the case of the initial Interest
Period applicable thereto) or prior to 3:00 P.M. (New York time) on the third
Business Day prior to the expiration of an Interest Period applicable
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to a Borrowing of Eurodollar Loans, it shall have the right to elect by giving
the Administrative Agent written notice (or telephonic notice promptly confirmed
in writing) of the Interest Period applicable to such Borrowing, which Interest
Period shall, at the option of the Borrower, be a one, two, three or six month
period. Notwithstanding anything to the contrary contained above:
(i) all Eurodollar Loans comprising a Borrowing shall have the same
Interest Period;
(ii) the initial Interest Period for any Borrowing of Eurodollar
Loans shall commence on the date of such Borrowing (including the date of
any conversion from a Borrowing of Base Rate Loans) and each Interest
Period occurring thereafter in respect of such Borrowing shall commence on
the day on which the next preceding Interest Period expires;
(iii) if any Interest Period begins on a day for which there is no
numerically corresponding day in the calendar month at the end of such
Interest Period, such Interest Period shall end on the last Business Day of
such calendar month;
(iv) if any Interest Period would otherwise expire on a day which is
not a Business Day, such Interest Period shall expire on the next
succeeding Business Day, PROVIDED that if any Interest Period would
otherwise expire on a day which is not a Business Day but is a day of the
month after which no further Business Day occurs in such month, such
Interest Period shall expire on the next preceding Business Day;
(v) no Interest Period for a Borrowing under a Facility may be
elected if it would extend beyond the respective Maturity Date for such
Facility;
(vi) no Interest Period may be elected at any time when a Default or
an Event of Default is then in existence unless the Required Banks
otherwise agree; and
(vii) no Interest Period with respect to any Borrowing of Term Loans
shall extend beyond any date upon which a mandatory prepayment of such Term
Loans is required to be made under Section 4.02(A)(b) (i), (ii) or (iii),
as the case may be, if, after giving effect to the selection of such
Interest Period, the aggregate principal amount of such Term Loans
maintained as Eurodollar Loans with Interest Periods ending after such date
of mandatory repayment would exceed the aggregate principal amount of such
Term Loans permitted to be outstanding after such mandatory prepayment.
If upon the expiration of any Interest Period, the Borrower has failed to elect,
or is not permitted to elect by virtue of the application of clause (vi) above,
a new Interest Period to be applicable to the respective Borrowing of Eurodollar
Loans as provided above, the Borrower shall be deemed to have elected to convert
such Borrowing into a Borrowing of Base Rate Loans effective as of the
expiration date of such current Interest Period.
1.10 INCREASED COSTS, ILLEGALITY, ETC. (a) In the event that (x) in
the case of clause (i) below, the Administrative Agent or (y) in the case of
clauses (ii) and (iii) below, any Bank,
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shall have determined (which determination shall, absent manifest error, be
final and conclusive and binding upon all parties hereto):
(i) on any date for determining the Eurodollar Rate for any Interest
Period, that, by reason of any changes arising after the date of this
Agreement affecting the interbank Eurodollar market, adequate and fair
means do not exist for ascertaining the applicable interest rate on the
basis provided for in the definition of Eurodollar Rate; or
(ii) at any time, that such Bank shall incur increased costs or
reductions in the amounts received or receivable hereunder with respect to
any Eurodollar Loans (other than any increased cost or reduction in the
amount received or receivable resulting from the imposition of or a change
in the rate of net income taxes, assessments or similar charges imposed in
lieu of net income taxes) because of (x) any change since the date of this
Agreement in any applicable law, governmental rule, regulation, guideline,
order or request (whether or not having the force of law), or in the
interpretation or administration thereof and including the introduction of
any new law or governmental rule, regulation, guideline, order or request
(such as, for example, but not limited to, a change in official reserve
requirements, but, in all events, excluding reserves required under
Regulation D to the extent included in the computation of the Eurodollar
Rate) and/or (y) other circumstances affecting such Bank, the interbank
Eurodollar market or the position of such Bank in such market; or
(iii) at any time since the date of this Agreement, that the making or
continuance of any Eurodollar Loan has become unlawful by compliance by
such Bank in good faith with any law, governmental rule, regulation,
guideline or order (or would conflict with any such governmental rule,
regulation, guideline or order not having the force of law but with which
such Bank customarily complies even though the failure to comply therewith
would not be unlawful), or has become impracticable as a result of a
contingency occurring after the date of this Agreement which materially and
adversely affects the interbank Eurodollar market;
then, and in any such event, such Bank (or the Administrative Agent in the case
of clause (i) above) shall (x) on such date and (y) within five Business Days of
the date on which such event no longer exists give notice (by telephone
confirmed in writing) to the Borrower and (except in the case of clause (i)) to
the Administrative Agent of such determination (which notice the Administrative
Agent shall promptly transmit to each of the other Banks). Thereafter, (x) in
the case of clause (i) above, Eurodollar Loans shall no longer be available
until such time as the Administrative Agent notifies the Borrower and the Banks
that the circumstances giving rise to such notice by the Administrative Agent no
longer exist, and any Notice of Borrowing or Notice of Conversion given by the
Borrower with respect to Eurodollar Loans which have not yet been incurred shall
be deemed rescinded by the Borrower, (y) in the case of clause (ii) above, the
Borrower agrees to pay to such Bank, upon written demand therefor (accompanied
by the written notice referred to below), such additional amounts (in the form
of an increased rate of, or a different method of calculating, interest or
otherwise as such Bank in its sole discretion shall determine) as shall be
required to compensate such Bank for such increased costs or reductions in
amounts received or receivable hereunder (a written notice as to the additional
amounts owed to such Bank, showing the basis for the calculation thereof,
submitted to the Borrower by such Bank
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<PAGE> 15
shall, absent manifest error, be presumed to be final and conclusive and binding
upon all parties hereto) and (z) in the case of clause (iii) above, the Borrower
shall take one of the actions specified in Section 1.10(b) as promptly as
possible and, in any event, within the time period required by law.
(b) At any time that any Eurodollar Loan is affected by the
circumstances described in Section 1.10(a)(ii) or (iii), the Borrower may (and
in the case of a Eurodollar Loan affected pursuant to Section 1.10(a)(iii) the
Borrower shall) either (i) if the affected Eurodollar Loan is then being made
pursuant to a Borrowing, cancel said Borrowing by giving the Administrative
Agent telephonic notice (confirmed promptly in writing) thereof on the same date
that the Borrower was notified by a Bank pursuant to Section 1.10(a)(ii) or
(iii)), or (ii) if the affected Eurodollar Loan is then outstanding, upon at
least three Business Days' notice to the Administrative Agent, require the
affected Bank to convert each such Eurodollar Loan into a Base Rate Loan (which
conversion, in the case of the circumstances described in Section 1.10(a)(iii),
shall occur no later than the last day of the Interest Period then applicable to
such Eurodollar Loan (or such earlier date as shall be required by applicable
law)); PROVIDED that if more than one Bank is affected at any time, then all
affected Banks must be treated the same pursuant to this Section 1.10(b).
(c) If any Bank shall have determined that after the date hereof, the
adoption or effectiveness of any applicable law, rule or regulation regarding
capital adequacy, or any change therein, or any change in the interpretation or
administration thereof by any governmental authority, central bank or comparable
agency charged with the interpretation or administration thereof, or compliance
by such Bank or any corporation controlling such Bank with any request or
directive regarding capital adequacy issued after the date hereof (whether or
not having the force of law) of any such authority, central bank or comparable
agency, has or would have the effect of reducing the rate of return on such
Bank's or such other corporation's capital or assets as a consequence of such
Bank's Commitments or obligations hereunder to a level below that which such
Bank or such other corporation could have achieved but for such adoption,
effectiveness, change or compliance (taking into consideration such Bank's or
such other corporation's policies with respect to capital adequacy), then from
time to time, upon written demand by such Bank (with a copy to the
Administrative Agent), accompanied by the notice referred to in the last
sentence of this clause (c), the Borrower shall pay to such Bank such additional
amount or amounts as will compensate such Bank or such other corporation for
such reduction. Each Bank, upon determining in good faith that any additional
amounts will be payable pursuant to this Section 1.10(c), will give prompt
written notice thereof to the Borrower, which notice shall set forth the basis
of the calculation of such additional amounts, although the failure to give any
such notice shall not release or diminish the Borrower's obligations to pay
additional amounts pursuant to this Section 1.10(c) upon the subsequent receipt
of such notice.
1.11 COMPENSATION. The Borrower shall compensate each Bank, upon its
written request (which request shall set forth the basis for requesting such
compensation), for all reasonable losses, expenses and liabilities (including,
without limitation, any loss, expense or liability incurred by reason of the
liquidation or reemployment of deposits or other funds required by such Bank to
fund its Eurodollar Loans but excluding loss of anticipated profit with respect
to any Eurodollar Loans) which such Bank may sustain: (i) if for any reason
(other than a default by such Bank or the Administrative Agent) a Borrowing of
Eurodollar Loans does not occur on a
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<PAGE> 16
date specified therefor in a Notice of Borrowing or Notice of Conversion
(whether or not withdrawn by the Borrower or deemed withdrawn pursuant to
Section 1.10(a)); (ii) if any repayment (including any repayment made pursuant
to Section 4.01 or 4.02 or as a result of an acceleration of the Loans pursuant
to Section 9) or conversion of any Eurodollar Loans occurs on a date which is
not the last day of an Interest Period applicable thereto; (iii) if any
prepayment of any Eurodollar Loans is not made on any date specified in a notice
of prepayment given by the Borrower; or (iv) as a consequence of (x) any other
default by the Borrower to repay its Eurodollar Loans when required by the terms
of this Agreement or (y) an election made pursuant to Section 1.10(b).
Calculation of all amounts payable to a Bank under this Section 1.11 shall be
made as though that Bank had actually funded its relevant Eurodollar Loan
through the purchase of a Eurodollar deposit bearing interest at the Eurodollar
Rate in an amount equal to the amount of that Loan, having a maturity comparable
to the relevant Interest Period and through the transfer of such Eurodollar
deposit from an offshore office of that Bank to a domestic office of that Bank
in the United States of America; PROVIDED, HOWEVER, that each Bank may fund each
of its Eurodollar Loans in any manner it sees fit and the foregoing assumption
shall be utilized only for the calculation of amounts payable under this Section
1.11. It is further understood and agreed that if any repayment of Eurodollar
Loans pursuant to Section 4.01 or any conversion of Eurodollar Loans pursuant to
Section 1.06 in either case occurs on a date which is not the last day of an
Interest Period applicable thereto, such repayment or conversion shall be
accompanied by any amounts owing to any Bank pursuant to this Section 1.11.
1.12 CHANGE OF LENDING OFFICE. Each Bank agrees that, upon the
occurrence of any event giving rise to the operation of Section 1.10(a)(ii) or
(iii), 1.10(c), 2.05 or 4.04 with respect to such Bank, it will, if requested by
the Borrower, use reasonable efforts (subject to overall policy considerations
of such Bank) to designate another lending office for any Loans or Letters of
Credit affected by such event; PROVIDED that such designation is made on such
terms that, in the sole judgment of such Bank, such Bank and its lending office
suffer no economic, legal or regulatory disadvantage, with the object of
avoiding the consequences of the event giving rise to the operation of any such
Section. Nothing in this Section 1.12 shall affect or postpone any of the
obligations of the Borrower or the right of any Bank provided in Section 1.10,
2.05 or 4.04.
1.13 REPLACEMENT OF BANKS. (x) If any Bank becomes a Defaulting Bank,
(y) upon the occurrence of any event giving rise to the operation of Section
1.10(a)(ii) or (iii), Section 1.10(c), Section 2.05 or Section 4.04 with respect
to any Bank which results in such Bank charging to the Borrower increased costs
in excess of those being generally charged by the other Banks or (z) in the case
of a refusal by a Bank to consent to a proposed change, waiver, discharge or
termination with respect to this Agreement which has been approved by the
Required Banks as provided in Section 12.12(b), the Borrower shall have the
right, if no Default or Event of Default then exists or, in the case of clause
(z) above, would exist after giving effect to such replacement, to replace such
Bank (the "Replaced Bank") with one or more other Eligible Transferee or
Eligible Transferees, none of whom shall constitute a Defaulting Bank at the
time of such replacement (collectively, the "Replacement Bank") and each of whom
shall be reasonably acceptable to the Administrative Agent, PROVIDED that (i) at
the time of any replacement pursuant to this Section 1.13, the Replacement Bank
shall enter into one or more Assignment and Assumption Agreements pursuant to
Section 12.04(b) (and with all fees payable pursuant to said Section 12.04(b) to
be paid by the Replacement Bank) pursuant to which the Replacement Bank
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<PAGE> 17
shall acquire all of the Commitments and outstanding Loans of, and in each case
participations in Letters of Credit and Swingline Loans by, the Replaced Bank
and, in connection therewith, shall pay to (x) the Replaced Bank in respect
thereof an amount equal to the sum of (A) an amount equal to the principal of,
and all accrued interest on, all outstanding Loans of the Replaced Bank, (B) an
amount equal to all Unpaid Drawings that have been funded by (and not reimbursed
to) such Replaced Bank, together with all then unpaid interest with respect
thereto at such time and (C) an amount equal to all accrued, but theretofore
unpaid, Fees owing to the Replaced Bank pursuant to Section 3.01, (y) the Letter
of Credit Issuer an amount equal to such Replaced Bank's Revolving Percentage of
any Unpaid Drawing relating to a Letter of Credit (which at such time remains an
Unpaid Drawing) to the extent such amount was not theretofore funded by such
Replaced Bank and (z) Chase an amount equal to such Replaced Bank's Revolving
Percentage of any Mandatory Borrowing to the extent such amount was not
theretofore funded by such Replaced Bank, and (ii) all obligations of the
Borrower owing to the Replaced Bank (other than those specifically described in
clause (i) above in respect of which the assignment purchase price has been, or
is concurrently being, paid) shall be paid in full to such Replaced Bank
concurrently with such replacement. Upon the execution of the respective
Assignment and Assumption Agreements, the payment of amounts referred to in
clauses (i) and (ii) above, recordation of the assignment on the Register by the
Administrative Agent pursuant to Section 7.13 and, if so requested by the
Replacement Bank, delivery to the Replacement Bank of the appropriate Note or
Notes executed by the Borrower, the Replacement Bank shall become a Bank
hereunder and the Replaced Bank shall cease to constitute a Bank hereunder,
except with respect to indemnification provisions under this Agreement, which
shall survive as to such Replaced Bank.
SECTION 2. Letters of Credit.
-----------------
2.01 LETTERS OF CREDIT. (a) The Existing Letters of Credit were issued
prior to the Initial Borrowing Date. On the Initial Borrowing Date, the Existing
Letters of Credit shall become Letters of Credit hereunder. Subject to and upon
the terms and conditions herein set forth, the Borrower may request the Letter
of Credit Issuer at any time and from time to time on or after the Initial
Borrowing Date and prior to the fifth Business Day (or the 30th day in the case
of trade Letters of Credit) preceding the Revolving Loan Maturity Date to issue,
for the account of the Borrower and in support of (i) trade obligations of the
Borrower or any of its Subsidiaries that arise in the ordinary course of
business and are in respect of general corporate purposes of the Borrower or any
of its Subsidiaries, as the case may be, and/or (ii) on a standby basis, L/C
Supportable Indebtedness of the Borrower or any of its Subsidiaries to any other
Person, irrevocable letters of credit in such form as may be approved by the
Letter of Credit Issuer, and subject to and upon the terms and conditions herein
set forth, the Letter of Credit Issuer in each case agrees to issue from time to
time Letters of Credit (each Existing Letter of Credit and each such letter of
credit issued pursuant to this paragraph (a), a "Letter of Credit" and,
collectively, the "Letters of Credit"). Notwithstanding the foregoing, the
Letter of Credit Issuer shall not be under any obligation to issue any Letter of
Credit if at the time of such issuance:
(x) any order, judgment or decree of any governmental authority or
arbitrator shall purport by its terms to enjoin or restrain the Letter of
Credit Issuer from issuing such Letter of Credit or any requirement of law
applicable to the Letter of Credit Issuer or any
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<PAGE> 18
request or directive (whether or not having the force of law) from any
governmental authority with jurisdiction over the Letter of Credit Issuer
shall prohibit, or request that the Letter of Credit Issuer refrain from,
the issuance of letters of credit generally or such Letter of Credit in
particular or shall impose upon the Letter of Credit Issuer with respect to
such Letter of Credit any restriction or reserve or capital requirement
(for which the Letter of Credit Issuer is not otherwise compensated) not in
effect on the date hereof, or any unreimbursed loss, cost or expense which
was not applicable, in effect or known to the Letter of Credit Issuer as of
the date hereof and which the Letter of Credit Issuer in good faith deems
material to it; or
(y) the Letter of Credit Issuer shall have received notice from the
Borrower or the Required Banks prior to the issuance of such Letter of
Credit of the type described in clause (vi) of Section 2.01(b).
(b) Notwithstanding the foregoing, (i) no Letter of Credit shall be
issued the Stated Amount of which, when added to the Letter of Credit
Outstandings (exclusive of Unpaid Drawings relating to Letters of Credit which
are repaid on the date of, and prior to the issuance of, the respective Letter
of Credit) at such time, would exceed either (x) $20,000,000 or (y) when added
to the aggregate principal amount of all Revolving Loans and Swingline Loans
then outstanding, the Total Revolving Credit Commitment at such time; (ii) (x)
each standby Letter of Credit shall have an expiry date occurring not later than
one year after such Letter of Credit's date of issuance, PROVIDED that any such
Letter of Credit may be automatically extendable for periods of up to one year
so long as such Letter of Credit provides that the Letter of Credit Issuer
retains an option, satisfactory to the Letter of Credit Issuer, to terminate
such Letter of Credit within a specified period of time prior to each scheduled
extension date and (y) each trade Letter of Credit shall have an expiry date
occurring not later than 180 days after such Letter of Credit's date of
issuance; (iii)(x) no standby Letter of Credit shall have an expiry date
occurring later than the fifth Business Day next preceding the Revolving Loan
Maturity Date and (y) no trade Letter of Credit shall have an expiry date
occurring later than 30 days prior to the Revolving Loan Maturity Date; (iv)
each Letter of Credit shall be denominated in U.S. Dollars; (v) the Stated
Amount of each Letter of Credit shall not be less than $100,000 or such lesser
amount as is acceptable to the Letter of Credit Issuer; and (vi) the Letter of
Credit Issuer will not issue any Letter of Credit after it has received written
notice from the Borrower or the Required Banks stating that a Default or an
Event of Default exists until such time as the Letter of Credit Issuer shall
have received a written notice of (x) rescission of such notice from the party
or parties originally delivering the same or (y) a waiver of such Default or
Event of Default by the Majority Banks under the Revolving Credit Facility.
(c) Notwithstanding the foregoing, in the event a Bank Default exists,
the Letter of Credit Issuer shall not be required to issue any Letter of Credit
unless the Letter of Credit Issuer has entered into arrangements satisfactory to
it and the Borrower to eliminate the Letter of Credit Issuer's risk with respect
to the participation in Letters of Credit of the Defaulting Bank or Banks,
including by cash collateralizing such Defaulting Bank's or Banks' Revolving
Percentage of the applicable Letter of Credit Outstandings.
2.02 LETTER OF CREDIT REQUESTS; NOTICES OF ISSUANCE. (a) Whenever it
desires that a Letter of Credit be issued, the Borrower shall give the
Administrative Agent and the Letter of
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Credit Issuer written notice (or telephonic notice confirmed in writing) thereof
prior to 12:00 Noon (New York time) at least five Business Days (or such shorter
period as may be acceptable to the Letter of Credit Issuer) prior to the
proposed date of issuance (which shall be a Business Day) which written notice
shall be in the form of Exhibit A-2 (each, a "Letter of Credit Request"). Each
Letter of Credit Request shall include any other documents as the Letter of
Credit Issuer customarily requires in connection therewith. The Administrative
Agent shall promptly transmit copies of each Letter of Credit Request to each
Bank.
(b) The Letter of Credit Issuer shall, on the date of each issuance
of, or amendment or modification to, a Letter of Credit issued by it, give the
Administrative Agent, each Bank and the Borrower written notice of the issuance
of, or amendment or modification to, such Letter of Credit, accompanied by a
copy to the Administrative Agent of the Letter of Credit or Letters of Credit
issued by it and each such amendment or modification thereto.
2.03 AGREEMENT TO REPAY LETTER OF CREDIT DRAWINGS. (a) The Borrower
hereby agrees to reimburse the Letter of Credit Issuer, by making payment to the
Administrative Agent in immediately available funds at the Payment Office, for
any payment or disbursement made by the Letter of Credit Issuer under any Letter
of Credit issued by it (each such amount so paid or disbursed until reimbursed,
an "Unpaid Drawing") no later than two Business Days following the date of such
payment or disbursement, with interest on the amount so paid or disbursed by the
Letter of Credit Issuer, to the extent not reimbursed prior to 1:00 P.M. (New
York time) on the date of such payment or disbursement, from and including the
date paid or disbursed to but not including the date the Letter of Credit Issuer
is reimbursed therefor at a rate per annum which shall be the Applicable Base
Rate Margin plus the Base Rate as in effect from time to time for Revolving
Loans (plus an additional 2% per annum if not reimbursed by the third Business
Day after the date of such payment or disbursement), such interest also to be
payable on demand. The Letter of Credit Issuer shall provide the Borrower prompt
notice of any payment or disbursement made by it under any Letter of Credit
issued by it, although the failure of, or delay in, giving any such notice shall
not release or diminish the obligations of the Borrower under this Section
2.03(a) or under any other Section of this Agreement.
(b) The Borrower's obligation under this Section 2.03 to reimburse the
Letter of Credit Issuer with respect to Unpaid Drawings (including, in each
case, interest thereon) shall be absolute and unconditional under any and all
circumstances and irrespective of any setoff, counterclaim or defense to payment
which the Borrower or any of its Subsidiaries may have or have had against the
Letter of Credit Issuer, any Agent or any Bank, including, without limitation,
any defense based upon the failure of any drawing under a Letter of Credit to
conform to the terms of the Letter of Credit or any nonapplication or
misapplication by the beneficiary of the proceeds of such drawing; PROVIDED,
HOWEVER, that the Borrower shall not be obligated to reimburse the Letter of
Credit Issuer for any wrongful payment made by the Letter of Credit Issuer under
a Letter of Credit as a result of acts or omissions constituting willful
misconduct or gross negligence on the part of the Letter of Credit Issuer.
2.04 LETTER OF CREDIT PARTICIPATIONS. (a) Effective on the Initial
Borrowing Date (in the case of each Existing Letter of Credit) and effective
immediately upon the issuance by the Letter of Credit Issuer of any Letter of
Credit (in the case of any Letter of Credit issued on or after the Initial
Borrowing Date), the Letter of Credit Issuer in respect of such Letter of Credit
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<PAGE> 20
shall be deemed to have sold and transferred to each other Revolving Bank, and
each such Revolving Bank (each a "Participant") shall be deemed irrevocably and
unconditionally to have purchased and received from such Letter of Credit
Issuer, without recourse or warranty, an undivided interest and participation,
to the extent of such Participant's Revolving Percentage, in such Letter of
Credit, each substitute letter of credit, each drawing made thereunder and the
obligations of the Borrower under this Agreement with respect thereto (although
Letter of Credit Fees shall be payable directly to the Administrative Agent for
the account of the Revolving Banks as provided in Section 3.01(b) and the
Participants shall have no right to receive any portion of any Facing Fees with
respect to such Letters of Credit) and any security therefor or guaranty
pertaining thereto. Upon any change in the Revolving Credit Commitments of the
Revolving Banks pursuant to Section 1.13 or 12.04(b), it is hereby agreed that,
with respect to all outstanding Letters of Credit and Unpaid Drawings with
respect thereto, there shall be an automatic adjustment to the participations
pursuant to this Section 2.04 to reflect the new Revolving Percentages of the
assigning and assignee Bank.
(b) In determining whether to pay under any Letter of Credit, the
Letter of Credit Issuer shall not have any obligation relative to the respective
Participants other than to determine that any documents required to be delivered
under such Letter of Credit have been delivered and that they appear to
substantially comply on their face with the requirements of such Letter of
Credit. Any action taken or omitted to be taken by the Letter of Credit Issuer
under or in connection with any Letter of Credit if taken or omitted in the
absence of gross negligence or willful misconduct, shall not create for the
Letter of Credit Issuer any resulting liability.
(c) In the event that the Letter of Credit Issuer makes any payment
under any Letter of Credit and the Borrower shall not have reimbursed such
amount in full to the Letter of Credit Issuer pursuant to Section 2.03(a), the
Letter of Credit Issuer shall promptly notify the Administrative Agent, and the
Administrative Agent shall promptly notify each Participant of such failure, and
each such Participant shall promptly and unconditionally pay to the
Administrative Agent for the account of the Letter of Credit Issuer, the amount
of such Participant's Revolving Percentage of such payment in U.S. Dollars and
in same day funds; PROVIDED, HOWEVER, that no Participant shall be obligated to
pay to the Administrative Agent its Revolving Percentage of such unreimbursed
amount for any wrongful payment made by the Letter of Credit Issuer under a
Letter of Credit as a result of acts or omissions constituting willful
misconduct or gross negligence on the part of the Letter of Credit Issuer. If
the Administrative Agent so notifies any Participant prior to 11:00 A.M. (New
York time) on any Business Day, such Participant shall make available to the
Administrative Agent for the account of the Letter of Credit Issuer such
Participant's Revolving Percentage of the amount of such payment on such
Business Day in same day funds. If and to the extent such Participant shall not
have so made its Revolving Percentage of the amount of such payment available to
the Administrative Agent for the account of the Letter of Credit Issuer, such
Participant agrees to pay to the Administrative Agent for the account of the
Letter of Credit Issuer, forthwith on demand such amount, together with interest
thereon, for each day from such date until the date such amount is paid to the
Administrative Agent for the account of the Letter of Credit Issuer at the
overnight Federal Funds rate. The failure of any Participant to make available
to the Administrative Agent for the account of the Letter of Credit Issuer its
Revolving Percentage of any payment under any Letter of Credit shall not relieve
any other Participant of its obligation hereunder to make available to the
Administrative Agent for the account of the Letter of Credit Issuer its
Revolving Percentage of any payment under any Letter
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<PAGE> 21
of Credit on the date required, as specified above, but no Participant shall be
responsible for the failure of any other Participant to make available to the
Administrative Agent for the account of the Letter of Credit Issuer such other
Participant's Revolving Percentage of any such payment.
(d) Whenever the Letter of Credit Issuer receives a payment of a
reimbursement obligation as to which the Administrative Agent has received for
the account of the Letter of Credit Issuer any payments from the Revolving
Participants pursuant to clause (c) above, the Letter of Credit Issuer shall pay
to the Administrative Agent and the Administrative Agent shall promptly pay to
each such Participant which has paid its Revolving Percentage thereof, in U.S.
Dollars and in same day funds, an amount equal to such Participant's Revolving
Percentage of the principal amount thereof and interest thereon accruing after
the purchase of the respective participations.
(e) The obligations of the Participants to make payments to the
Administrative Agent for the account of the Letter of Credit Issuer with respect
to Letters of Credit shall be irrevocable and not subject to counterclaim,
set-off or other defense or any other qualification or exception whatsoever and
shall be made in accordance with the terms and conditions of this Agreement
under all circumstances, including, without limitation, any of the following
circumstances:
(i) any lack of validity or enforceability of this Agreement or any
of the other Credit Documents;
(ii) the existence of any claim, set-off, defense or other right
which the Borrower or any of its Subsidiaries may have at any time against
a beneficiary named in a Letter of Credit, any transferee of any Letter of
Credit (or any Person for whom any such transferee may be acting), the
Administrative Agent, the Letter of Credit Issuer, any Bank, or other
Person, whether in connection with this Agreement, any Letter of Credit,
the transactions contemplated herein or any unrelated transactions
(including any underlying transaction between the Borrower or any of its
Subsidiaries and the beneficiary named in any such Letter of Credit);
(iii) any draft, certificate or other document presented under the
Letter of Credit proving to be forged, fraudulent, invalid or insufficient
in any respect or any statement therein being untrue or inaccurate in any
respect;
(iv) the surrender or impairment of any security for the performance
or observance of any of the terms of any of the Credit Documents; or
(v) the occurrence of any Default or Event of Default.
2.05 INCREASED COSTS. If after the date hereof, the adoption or
effectiveness of any applicable law, rule or regulation, or any change therein,
or any change in the interpretation or administration thereof by any
governmental authority, central bank or comparable agency charged with the
interpretation or administration thereof, or compliance by the Letter of Credit
Issuer or any Participant with any request or directive issued after the date
hereof (whether or not having the force of law) by any such authority, central
bank or comparable agency shall either (i) impose,
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<PAGE> 22
modify or make applicable any reserve, deposit, capital adequacy or similar
requirement against Letters of Credit issued by the Letter of Credit Issuer or
such Participant's participation therein, or (ii) impose on the Letter of Credit
Issuer or any Participant any other conditions affecting this Agreement, any
Letter of Credit or such Participant's participation therein; and the result of
any of the foregoing is to increase the cost to the Letter of Credit Issuer or
such Participant of issuing, maintaining or participating in any Letter of
Credit, or to reduce the amount of any sum received or receivable by the Letter
of Credit Issuer or such Participant hereunder, then, upon written demand to the
Borrower by the Letter of Credit Issuer or such Participant (a copy of which
notice shall be sent by the Letter of Credit Issuer or such Participant to the
Administrative Agent), accompanied by the certificate described in the last
sentence of this Section 2.05, the Borrower shall pay to the Letter of Credit
Issuer or such Participant such additional amount or amounts as will compensate
the Letter of Credit Issuer or such Participant for such increased cost or
reduction. A certificate submitted to the Borrower by the Letter of Credit
Issuer or such Participant, as the case may be (a copy of which certificate
shall be sent by the Letter of Credit Issuer or such Participant to the
Administrative Agent), setting forth the basis for the determination of such
additional amount or amounts necessary to compensate the Letter of Credit Issuer
or such Participant as aforesaid shall be final and conclusive and binding on
the Borrower absent manifest error, although the failure to deliver any such
certificate shall not release or diminish the Borrower's obligations to pay
additional amounts pursuant to this Section 2.05 upon subsequent receipt of such
certificate.
SECTION 3. FEES; COMMITMENTS.
3.01 FEES. (a) The Borrower shall pay to the Administrative Agent for
distribution to each Bank a commitment fee (the "Commitment Fee") for the period
from the Effective Date to but not including the date the Total Commitment has
been terminated, computed at the rate of 1/2 of 1% per annum on the daily
Aggregate Unutilized Commitment of such Bank. Accrued Commitment Fees shall be
due and payable quarterly in arrears on the Initial Borrowing Date, each
Quarterly Payment Date and the date upon which the Total Commitment is
terminated. From and after the first day of any Margin Reduction Period (the
"Start Date") to and including the last day of such Margin Reduction Period, the
Commitment Fee shall be the respective percentage per annum set forth in clause
(A) or (B) below if, but only if, as of the last day of the most recent fiscal
quarter or year, as the case may be, ended immediately prior to such Start Date
(the "Test Date"), the conditions set forth in clause (A) or (B) below are met:
(A) 1/2 of 1% per annum if the Leverage Ratio on such Test Date is
greater than or equal to 3.75:1.0; or
(B) 3/8 of 1% per annum if the Leverage Ratio on such Test Date is
less than 3.75:1.0.
Notwithstanding anything to the contrary contained in the immediately preceding
sentence, (i) the Commitment Fee shall be 1/2 of 1% per annum at any time when
an Event of Default shall exist and (ii) the Commitment Fee shall be 1/2 of 1%
per annum prior to the first anniversary of the Initial Borrowing Date.
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<PAGE> 23
(b) The Borrower shall pay to the Administrative Agent for the account
of the Revolving Banks PRO RATA on the basis of their Revolving Percentages, a
fee in respect of each Letter of Credit (the "Letter of Credit Fee") computed at
a rate per annum equal to the Applicable Eurodollar Margin then in effect with
respect to Revolving Loans on the daily Stated Amount of such Letter of Credit.
Accrued Letter of Credit Fees shall be due and payable quarterly in arrears on
each Quarterly Payment Date and upon the first day on or after the termination
of the Total Revolving Credit Commitment upon which no Letters of Credit remain
outstanding.
(c) The Borrower shall pay to the Administrative Agent for the account
of the Letter of Credit Issuer a fee in respect of each Letter of Credit issued
by the Letter of Credit Issuer (the "Facing Fee") computed at the rate of 1/4 of
1% per annum on the daily Stated Amount of such Letter of Credit, PROVIDED that
in no event shall the annual Facing Fee with respect to each Letter of Credit be
less than $500; it being agreed that, on the date of issuance of any Letter of
Credit and on each anniversary thereof prior to the termination of such Letter
of Credit, if $500 will exceed the amount of Facing Fees that will accrue with
respect to such Letter of Credit for the immediately succeeding 12-month period,
the full $500 shall be payable on the date of issuance of such Letter of Credit
and on each such anniversary thereof prior to the termination of such Letter of
Credit. Except as provided in the immediately preceding sentence, accrued Facing
Fees shall be due and payable quarterly in arrears on each Quarterly Payment
Date and upon the first day on or after the termination of the Total Commitment
upon which no Letters of Credit remain outstanding.
(d) The Borrower shall pay directly to the Letter of Credit Issuer
upon each issuance of, drawing under, and/or amendment of, a Letter of Credit
such amount as shall at the time of such issuance, drawing or amendment be the
administrative charge which the Letter of Credit Issuer is customarily charging
for issuances of, drawings under or amendments of, letters of credit issued by
it.
(e) The Borrower shall pay to each Agent, for its own account, such
fees as may be agreed to from time to time between the Borrower and such Agent,
when and as due.
(f) All computations of Fees shall be made in accordance with Section
12.07(b).
3.02 VOLUNTARY TERMINATION OR REDUCTION OF COMMITMENTS. (a) Upon at
least two Business Days' prior written notice (or telephonic notice promptly
confirmed in writing) to the Administrative Agent at its Notice Office (which
notice the Administrative Agent shall promptly transmit to each of the Banks),
the Borrower shall have the right, without premium or penalty, to terminate or
partially reduce the Total Unutilized Revolving Credit Commitment, PROVIDED that
(x) any such termination or partial reduction shall apply to proportionately and
permanently reduce the Revolving Credit Commitment of each of the Revolving
Banks and (y) any partial reduction pursuant to this Section 3.02 shall be in
the amount of at least $500,000 and increments of $100,000 in excess thereof.
(b) In the event of certain refusals by a Bank to consent to certain
proposed changes, waivers, discharges or terminations with respect to this
Agreement which have been approved by the Required Banks as provided in Section
12.12(b), the Borrower shall have the right, upon five Business Days' prior
written notice to the Administrative Agent at its Notice
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<PAGE> 24
Office (which notice the Administrative Agent shall promptly transmit to each of
the Banks), to (i) require such Bank to assign its entire Revolving Credit
Commitment and all Loans, Fees and other amounts owing to such Bank to another
Bank or Banks (which would agree to provide the consent refused by the assignor
Bank) pursuant to subsection 12.04(b), if such other Bank or Banks consent to
such assignment, or (ii) terminate the entire Revolving Credit Commitment of
such Bank, so long as all Loans, together with accrued and unpaid interest, Fees
and all other amounts, owing to such Bank are repaid concurrently with the
effectiveness of such termination pursuant to Section 4.01(b) and the Borrower
shall pay to the Administrative Agent at such time an amount in cash and/or Cash
Equivalents equal to such Bank's Revolving Percentage of the outstanding Letters
of Credit (which cash and/or Cash Equivalents shall be held by the
Administrative Agent as security for the obligations of the Borrower hereunder
in respect of the outstanding Letters of Credit pursuant to a cash collateral
agreement to be entered into in form and substance reasonably satisfactory to
the Administrative Agent, which shall permit certain investments in Cash
Equivalents reasonably satisfactory to the Administrative Agent until the
proceeds are applied to the secured obligations or are released to the Borrower
upon termination of the respective Letter of Credit) (at which time Annex I
shall be deemed modified to reflect such changed amounts), and at such time,
such Bank shall no longer constitute a "Bank" for purposes of this Agreement,
except with respect to indemnifications under this Agreement (including, without
limitation, Sections 1.10, 1.11, 2.05, 4.04, 12.01 and 12.06), which shall
survive as to such repaid Bank.
3.03 MANDATORY ADJUSTMENTS OF COMMITMENTS, ETC. (a) The Total
Commitment shall terminate in its entirety on December 31, 1996 unless the
Initial Borrowing Date has occurred on or before such date.
(b) Each of the Total A Term Loan Commitment and the Total B Term Loan
Commitment shall terminate in its entirety on the Initial Borrowing Date, after
giving effect to the making of the respective Term Loans on such date.
(c) The Total Revolving Credit Commitment (and the Revolving Credit
Commitment of each Revolving Bank) shall terminate in their entirety on the
earlier of (i) the date on which a Change of Control Event occurs and (ii) the
Revolving Loan Maturity Date.
(d) From and after payment in full of the Term Loans, on each date
upon which a mandatory repayment of Term Loans pursuant to Section 4.02(A)(c),
(d), (e) or (f) would otherwise be required, the Total Revolving Credit
Commitment shall be permanently reduced by the amount, if any, required to be
applied pursuant to said Sections.
(e) Each reduction of the Total A Term Loan Commitment, the Total B
Term Loan Commitment or the Total Revolving Credit Commitment pursuant to this
Section 3.03 shall apply proportionately to the A Term Loan Commitment, the B
Term Loan Commitment or the Revolving Credit Commitment, as the case may be, of
each Bank.
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<PAGE> 25
SECTION 4. Payments.
--------
4.01 VOLUNTARY PREPAYMENTS. (a) The Borrower shall have the right to
prepay the Loans, in whole or in part, without premium or penalty except as
otherwise provided in this Agreement, from time to time on the following terms
and conditions: (i) the Borrower shall give the Administrative Agent at its
Notice Office written notice (or telephonic notice promptly confirmed in
writing) of its intent to prepay the Loans, whether such Loans are A Term Loans,
B Term Loans, Revolving Loans or Swingline Loans, the amount of such prepayment
and (in the case of Eurodollar Loans) the specific Borrowing(s) pursuant to
which made, which notice shall be given by the Borrower prior to 3:00 P.M. (New
York time) (x) at least one Business Day prior to the date of such prepayment in
the case of Term Loans or Revolving Loans and (y) on the date of such prepayment
in the case of Swingline Loans, which notice shall, except in the case of
Swingline Loans, promptly be transmitted by the Administrative Agent to each of
the Banks; (ii) each prepayment shall be in an aggregate principal amount of at
least $500,000 (or $25,000 in the case of Swingline Loans) and in increments of
$100,000 (or $10,000, in the case of Swingline Loans) in excess thereof,
PROVIDED that no partial prepayment of Eurodollar Loans made pursuant to a
Borrowing shall reduce the aggregate principal amount of the Loans outstanding
pursuant to such Borrowing to an amount less than the Minimum Borrowing Amount
applicable thereto; (iii) each prepayment in respect of any Loans made pursuant
to a Borrowing shall be applied PRO RATA among such Loans, PROVIDED that at the
Borrower's election in connection with any prepayment of Revolving Loans
pursuant to this Section 4.01(a), such prepayment shall not be applied to any
Revolving Loans of a Defaulting Bank at any time when the aggregate amount of
Revolving Loans of any Non-Defaulting Bank exceeds such Non-Defaulting Bank's
Revolving Percentage of all Revolving Loans then outstanding; (iv) each
prepayment of Term Loans pursuant to this Section 4.01(a) must consist of a
prepayment of A Term Loans (in an amount equal to the A TL Percentage of such
prepayment) and B Term Loans (in an amount equal to the B TL Percentage of such
prepayment); (v) each prepayment of A Term Loans pursuant to this Section
4.01(a) shall reduce the then remaining Scheduled A Repayments on a PRO RATA
basis (based upon the then remaining principal amount of each such Scheduled A
Repayment); and (vi) each prepayment of B Term Loans pursuant to this Section
4.01(a) shall reduce the then remaining Scheduled B Repayments on a PRO RATA
basis (based upon the then remaining principal amount of each such Scheduled B
Repayment).
(b) In the event of certain refusals by a Bank to consent to certain
proposed changes, waivers, discharges or terminations with respect to this
Agreement which have been approved by the Required Banks as provided in Section
12.12(b), the Borrower shall have the right, upon five Business Days' prior
written notice to the Administrative Agent at its Notice Office (which notice
the Administrative Agent shall promptly transmit to each of the Banks) to repay
all Loans, together with accrued and unpaid interest, Fees and all other amounts
owing to such Bank in accordance with said Section 12.12(b) so long as (A) in
the case of the repayment of Revolving Loans of any Revolving Bank pursuant to
this paragraph (b) the Revolving Credit Commitment of such Revolving Bank is
terminated concurrently with such repayment pursuant to Section 3.02(b) (at
which time Annex I shall be deemed modified to reflect the changed Revolving
Credit Commitments) and (B) in the case the repayment of Loans of any Bank the
consents required by Section 12.12(b) in connection with the repayment pursuant
to this paragraph (b) shall have been obtained.
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<PAGE> 26
4.02 MANDATORY PREPAYMENTS.
---------------------
(A) REQUIREMENTS:
------------
(a) If on any date the sum of (i) the aggregate outstanding principal
amount of Revolving Loans and Swingline Loans (after giving effect to all other
repayments thereof on such date) plus (ii) the Letter of Credit Outstandings on
such date exceeds the Total Revolving Credit Commitment as then in effect, the
Borrower shall repay on such date the principal of Swingline Loans, and if no
Swingline Loans are or remain outstanding, Revolving Loans in an aggregate
amount equal to such excess. If, after giving effect to the prepayment of all
outstanding Swingline Loans and Revolving Loans, the aggregate amount of Letter
of Credit Outstandings exceeds the Total Revolving Credit Commitment as then in
effect, the Borrower shall pay to the Administrative Agent on such date an
amount in cash and/or Cash Equivalents equal to such excess (up to the aggregate
amount of Letter of Credit Outstandings at such time) and the Administrative
Agent shall hold such payment as security for the obligations of the Borrower
hereunder pursuant to a cash collateral agreement to be entered into in form and
substance reasonably satisfactory to the Administrative Agent (which shall
permit certain investments in Cash Equivalents reasonably satisfactory to the
Administrative Agent until the proceeds are applied to the secured obligations
or are released to the Borrower upon termination of the applicable Letter of
Credit).
(b) (i) The Borrower shall be required to repay the principal amount
of A Term Loans on each date set forth below in the amount set forth opposite
such date below (each such repayment, as the same may be reduced as provided in
Sections 4.01 and 4.02(B)(b), a "Scheduled A Repayment"):
Scheduled A Repayment Date Amount
-------------------------- ------
the last Business Day in September, 1998 $2,500,000
the last Business Day in December, 1998 $2,500,000
the last Business Day in March, 1999 $2,500,000
the last Business Day in June, 1999 $2,500,000
the last Business Day in September, 1999 $2,500,000
the last Business Day in December, 1999 $2,500,000
the last Business Day in March, 2000 $3,750,000
the last Business Day in June, 2000 $3,750,000
the last Business Day in September, 2000 $3,750,000
the last Business Day in December, 2000 $3,750,000
the last Business Day in March, 2001 $5,000,000
the last Business Day in June, 2001 $5,000,000
the last Business Day in September, 2001 $5,000,000
the last Business Day in December, 2001 $5,000,000
the last Business Day in March, 2002 $6,250,000
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<PAGE> 27
the last Business Day in June, 2002 $6,250,000
the last Business Day in September, 2002 $6,250,000
A Term Loan Maturity Date $6,250,000
(ii) The Borrower shall be required to repay the principal amount of B
Term Loans on each date set forth below in the amount set forth opposite such
date below (each such repayment, as the same may be reduced as provided in
Sections 4.01 and 4.02(B)(b), a "Scheduled B Repayment"):
Scheduled B Repayment Date Amount
-------------------------- ------
the last Business Day in September, 1998 $ 187,500
the last Business Day in December, 1998 $ 187,500
the last Business Day in March, 1999 $ 187,500
the last Business Day in June, 1999 $ 187,500
the last Business Day in September, 1999 $ 187,500
the last Business Day in December, 1999 $ 187,500
the last Business Day in March, 2000 $ 187,500
the last Business Day in June, 2000 $ 187,500
the last Business Day in September, 2000 $ 187,500
the last Business Day in December, 2000 $ 187,500
the last Business Day in March, 2001 $ 187,500
the last Business Day in June, 2001 $ 187,500
the last Business Day in September, 2001 $ 187,500
the last Business Day in December, 2001 $ 187,500
the last Business Day in March, 2002 $ 187,500
the last Business Day in June, 2002 $ 187,500
the last Business Day in September, 2002 $ 187,500
the last Business Day in December, 2002 $ 187,500
the last Business Day in March, 2003 $8,953,125
the last Business Day in June, 2003 $8,953,125
the last Business Day in September, 2003 $8,953,125
the last Business Day in December, 2003 $8,953,125
the last Business Day in March, 2004 $8,953,125
the last Business Day in June, 2004 $8,953,125
the last Business Day in September, 2004 $8,953,125
B Term Loan Maturity Date $8,953,125
(c) On the Business Day after the date of receipt thereof by the
Borrower and/or any of its Subsidiaries of Cash Proceeds from any Asset Sale, an
amount equal to 100% of the Net Cash Proceeds from such Asset Sale shall be
applied as a mandatory repayment of principal
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<PAGE> 28
of the Term Loans (with the A TL Percentage of such amount to be applied as a
repayment of the A Term Loans and the B TL Percentage of such amount to be
applied as a repayment of the B Term Loans, in each case subject to modification
of such application as set forth in Section 4.02(C)), PROVIDED that with respect
to no more than $3,000,000 in the aggregate of such Net Cash Proceeds in any
fiscal year of the Borrower, such Net Cash Proceeds shall not be required to be
so applied on such date to the extent that no Default or Event of Default then
exists and the Borrower delivers a certificate to the Administrative Agent on or
prior to such date stating that such Net Cash Proceeds shall be used to purchase
assets used or to be used in the businesses referred to in Section 8.01(a)
(including without limitation (but only to the extent permitted by Section
8.02), capital stock of a corporation engaged in any such business) within 180
days following the date of such Asset Sale (which certificate shall set forth
the estimates of the proceeds to be so expended), and PROVIDED FURTHER, that (1)
if all or any portion of such Net Cash Proceeds not so applied to the repayment
of Term Loans are not so used (or contractually committed to be used) within
such 180 day period, such remaining portion shall be applied on the last day of
such period as a mandatory repayment of principal of outstanding Term Loans as
provided above in this Section 4.02(A)(c) and (2) if all or any portion of such
Net Cash Proceeds are not required to be applied on the 180th day referred to in
clause (1) above because such amount is contractually committed to be used and
subsequent to such date such contract is terminated or expires without such
portion being so used, then such remaining portion shall be applied on the date
of such termination of expiration as a mandatory repayment of principal of
outstanding Term Loans as provided above in this Section 4.02(A)(c).
Notwithstanding the foregoing, and in addition to the exemption from repayment
described in the immediately preceding sentence, Net Cash Proceeds from any
Asset Sale in the ordinary course of business shall not be required to be
applied to the making of mandatory repayments pursuant to this paragraph (c) as
long as no Default or Event of Default then exists or would exist after giving
effect thereto.
(d) On the Business Day after the date of the receipt thereof by the
Borrower and/or any of its Subsidiaries, an amount equal to 100% of the cash
proceeds (net of underwriting discounts and commissions and other reasonable
costs associated therewith) of the incurrence of Indebtedness or the issuance or
sale of equity securities by the Borrower and/or any of its Subsidiaries (other
than Indebtedness permitted to be incurred by Section 8.04 as such section is in
effect on the Effective Date) shall be applied as a mandatory repayment of
principal of the Term Loans (with the A TL Percentage of such amount to be
applied as a repayment of the A Term Loans and the B TL Percentage of such
amount to be applied as a repayment of the B Term Loans, in each case subject to
modification of such application as set forth in Section 4.02(C)); PROVIDED that
proceeds of equity applied in accordance with Section 8.07(iii) and/or Section
8.13 shall not be required to be applied as a mandatory prepayment pursuant to
this Section 4.02(A)(d).
(e) On each Excess Cash Payment Date, an amount equal to 50% of Excess
Cash Flow of the Borrower and its Subsidiaries for the most recent Excess Cash
Flow Period ending prior to such Excess Cash Payment Date shall be applied as a
mandatory repayment of principal of the Term Loans (with the A TL Percentage of
such amount to be applied as a repayment of the A Term Loans and the B TL
Percentage of such amount to be applied as a repayment of the B Term Loans, in
each case subject to modification of such application as set forth in Section
4.02(C)).
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<PAGE> 29
(f) Within 10 days following each date on which the Borrower or any of
its Subsidiaries receives any proceeds from any Recovery Event, an amount equal
to 100% of the proceeds of such Recovery Event (net of reasonable costs and
taxes incurred in connection with such Recovery Event) shall be applied as a
mandatory repayment of principal of the Term Loans (with the A TL Percentage of
such amount to be applied as a repayment of the A Term Loans and the B TL
Percentage of such amount to be applied as a repayment of the B Term Loans, in
each case subject to modification of such application as set forth in Section
4.02(C)), PROVIDED that so long as no Default or Event of Default then exists,
such proceeds shall not be required to be so applied on such date to the extent
that the Borrower has delivered a certificate to the Administrative Agent on or
prior to such date stating that such proceeds shall be used to replace or
restore any properties or assets in respect of which such proceeds were paid
within 360 days following the date of the receipt of such proceeds (which
certificate shall set forth the estimates of the proceeds to be so expended),
and PROVIDED FURTHER, that (i) if all or any portion of such proceeds not
required to be applied to the repayment of Term Loans pursuant to the preceding
proviso are not so used (or contractually committed to be used) within 360 days
after the date of the receipt of such proceeds, such remaining portion shall be
applied on the last day of such period as a mandatory repayment of principal of
the Term Loans as provided above in this Section 4.02(A)(f) and (ii) if all or
any portion of such proceeds are not required to be applied on the 360th day
referred to in clause (i) above because such amount is contractually committed
to be used and subsequent to such date such contract is terminated or expires
without such portion being so used, then such remaining portion shall be applied
on the date of such termination or expiration as a mandatory repayment of
principal of outstanding Term Loans as provided in this Section 4.02(A)(f).
(g) Notwithstanding anything to the contrary contained elsewhere in
this Agreement, (i) all then outstanding Swingline Loans shall be repaid in full
on the Swingline Expiry Date and (ii) all other then outstanding Loans of the
respective Facility shall be repaid in full on the Maturity Date for such
Facility.
(B) Application:
-----------
(a) Any amount required to be applied to A Term Loans or B Term Loans,
as the case may be, shall apply to the repayment of the outstanding principal
amount of A Term Loans and B Term Loans, respectively, of the respective
Facility.
(b) All repayments of A Term Loans and B Term Loans pursuant to
Section 4.02(A)(c), (d), (e) or (f) shall be applied to reduce the then
remaining Scheduled Repayments of the respective Facility PRO RATA based on the
then remaining Scheduled Repayments of the respective Facility.
(c) With respect to each repayment of Loans required by this Section
4.02, the Borrower may designate the Types of Loans which are to be repaid and
the specific Borrowing(s) under the affected Facility pursuant to which made;
PROVIDED that (i) Eurodollar Loans made pursuant to a specific Facility may be
designated for repayment pursuant to this Section 4.02 only on the last day of
an Interest Period applicable thereto unless all Eurodollar Loans made pursuant
to such Facility with Interest Periods ending on such date of required
prepayment and all Base Rate Loans made pursuant to such Facility have been paid
in full; (ii) if any repayment of
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<PAGE> 30
Eurodollar Loans made pursuant to a single Borrowing shall reduce the
outstanding Loans made pursuant to such Borrowing to an amount less than the
Minimum Borrowing Amount, such Borrowing shall be immediately converted into
Base Rate Loans; and (iii) each repayment of any Loans made pursuant to a
Borrowing shall be applied PRO RATA among such Loans; PROVIDED that no repayment
pursuant to Section 4.02(A)(a) shall be applied to any Revolving Loans of a
Defaulting Bank at any time when the aggregate amount of the Revolving Loans of
any NonDefaulting Bank exceeds such Non-Defaulting Bank's Revolving Percentage
of Revolving Loans then outstanding. In the absence of a designation by the
Borrower as described in the preceding sentence, the Administrative Agent shall,
subject to the above, make such designation in its sole discretion with a view,
but no obligation, to minimize breakage costs owing under Section 1.11.
(C) Waiver of Certain Mandatory Repayments By B Banks
--------------------------------------------------
Notwithstanding anything to the contrary contained in this Section
4.02 or elsewhere in this Agreement (including, without limitation, in Section
12.12), Banks with outstanding B Term Loans (the "B Banks") may waive a
mandatory repayment of such Loans pursuant to Section 4.02(A)(c), (d), (e)
and/or (f) (each such repayment, a "Waivable Mandatory Repayment") upon the
terms and provisions set forth in this Section 4.02(C). The Borrower shall give
to the Administrative Agent written notice of its intention to make a Waivable
Mandatory Repayment at least five Business Days prior to such repayment, which
notice the Administrative Agent shall promptly forward to all B Banks
(indicating in such notice the amount of such repayment to be applied to each
such Bank's outstanding Term Loans under such Facilities). Any B Bank may waive
all or any part of any such Waivable Mandatory Repayment. In the event any such
B Bank desires to waive such Bank's right to receive any such Waivable Mandatory
Repayment in whole or in part, such Bank shall so advise the Administrative
Agent no later than the close of business two Business Days after the date of
such notice from the Administrative Agent, which notice shall also include the
amount such Bank desires to receive in respect of such repayment. If any Bank
does not reply to the Administrative Agent within the two Business Days, it will
be deemed not to have waived any part of such repayment. If any Bank does not
specify an amount it wishes to receive, it will be deemed to have accepted 100%
of the total payment. In the event that any such Bank waives all or part of such
right to receive any such Waivable Mandatory Repayment, the Administrative Agent
shall apply 100% of the amount so waived by such Bank to the A Term Loans in
accordance with Section 4.02(B).
4.03 METHOD AND PLACE OF PAYMENT. Except as otherwise specifically
provided herein, all payments under this Agreement shall be made to the
Administrative Agent for the ratable account of the Banks entitled thereto, not
later than 12:00 Noon (New York time) on the date when due and shall be made in
immediately available funds and in U.S. Dollars at the Payment Office, it being
understood that written, telex or facsimile transmission notice by the Borrower
to the Administrative Agent to make a payment from the funds in the Borrower's
account at the Payment Office shall constitute the making of such payment to the
extent of such funds held in such account. Any payments under this Agreement
which are made later than 12:00 Noon (New York time) shall be deemed to have
been made on the next succeeding Business Day. Whenever any payment to be made
hereunder shall be stated to be due on a day which is not a Business Day, the
due date thereof shall be extended to the next succeeding Business Day and,
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with respect to payments of principal, interest shall be payable during such
extension at the applicable rate in effect immediately prior to such extension.
4.04 NET PAYMENTS. (a) All payments made by the Borrower hereunder or
under any Note will be made without setoff, counterclaim or other defense.
Except as provided in Section 4.04(b), all such payments will be made free and
clear of, and without deduction or withholding for, any present or future taxes,
levies, imposts, duties, fees, assessments or other charges of whatever nature
now or hereafter imposed by any jurisdiction or by any political subdivision or
taxing authority thereof or therein with respect to such payments (but
excluding, except as provided in the second succeeding sentence, any tax imposed
on or measured by the net income or net profits of a Bank pursuant to the laws
of the jurisdiction in which it is organized or the jurisdiction in which the
principal office or applicable lending office of such Bank is located or any
subdivision thereof or therein) and all interest, penalties or similar
liabilities with respect thereto (all such nonexcluded taxes, levies, imposts,
duties, fees, assessments or other charges being referred to collectively as
"Taxes"). If any Taxes are so levied or imposed, the Borrower agrees to pay the
full amount of such Taxes, and such additional amounts as may be necessary so
that every payment of all amounts due under this Agreement or under any Note,
after withholding or deduction for or on account of any Taxes, will not be less
than the amount provided for herein or in such Note. If any amounts are payable
in respect of Taxes pursuant to the preceding sentence, the Borrower agrees to
reimburse each Bank, upon the written request of such Bank, for taxes imposed on
or measured by the net income or net profits of such Bank pursuant to the laws
of the jurisdiction in which the principal office or applicable lending office
of such Bank is located or under the laws of any political subdivision or taxing
authority of any such jurisdiction in which the principal office or applicable
lending office of such Bank is located and for any withholding of taxes as such
Bank shall determine are payable by, or withheld from, such Bank in respect of
such amounts so paid to or on behalf of such Bank pursuant to the preceding
sentence and in respect of any amounts paid to or on behalf of such Bank
pursuant to this sentence. The Borrower will furnish to the Administrative Agent
within 45 days after the date the payment of any Taxes is due pursuant to
applicable law certified copies of tax receipts evidencing such payment by the
Borrower. The Borrower agrees to indemnify and hold harmless each Bank, and
reimburse such Bank upon its written request, for the amount of any Taxes so
levied or imposed and paid by such Bank.
(b) Each Bank that is not a United States person (as such term is
defined in Section 7701(a)(30) of the Code) agrees to deliver to the Borrower
and the Administrative Agent on or prior to the Effective Date, or in the case
of a Bank that is an assignee or transferee of an interest under this Agreement
pursuant to Section 1.13 or 12.04 (unless the respective Bank was already a Bank
hereunder immediately prior to such assignment or transfer), on the date of such
assignment or transfer to such Bank, (i) two accurate and complete original
signed copies of Internal Revenue Service Form 4224 or 1001 (or successor forms)
certifying to such Bank's entitlement to a complete exemption from United States
withholding tax with respect to payments to be made under this Agreement and
under any Note, or (ii) if the Bank is not a "bank" within the meaning of
Section 881(c)(3)(A) of the Code and cannot deliver either Internal Revenue
Service Form 1001 or 4224 pursuant to clause (i) above, (x) a certificate
substantially in the form of Exhibit C (any such certificate, a "Section
4.04(b)(ii) Certificate") and (y) two accurate and complete original signed
copies of Internal Revenue Service Form W-8 (or successor form) certifying to
such Bank's entitlement to a complete exemption from United States withholding
tax
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with respect to payments of interest to be made under this Agreement and under
any Note. In addition, each Bank agrees that from time to time after the
Effective Date, when a lapse in time or change in circumstances renders the
previous certification obsolete or inaccurate in any material respect, it will
deliver to the Borrower and the Administrative Agent two new accurate and
complete original signed copies of Internal Revenue Service Form 4224 or 1001,
or Form W-8 and a Section 4.04(b)(ii) Certificate, as the case may be, and such
other forms as may be required in order to confirm or establish the entitlement
of such Bank to a continued exemption from or reduction in United States
withholding tax with respect to payments under this Agreement and any Note, or
it shall immediately notify the Borrower and the Administrative Agent of its
inability to deliver any such Form or Certificate. Notwithstanding anything to
the contrary contained in Section 4.04(a), but subject to Section 12.04(b) and
the immediately succeeding sentence, (x) the Borrower shall be entitled, to the
extent it is required to do so by law, to deduct or withhold income or similar
taxes imposed by the United States (or any political subdivision or taxing
authority thereof or therein) from interest, fees or other amounts payable
hereunder for the account of any Bank which is not a United States person (as
such term is defined in Section 7701(a)(30) of the Code) for U.S. Federal income
tax purposes to the extent that such Bank has not provided to the Borrower U.S.
Internal Revenue Service Forms that establish a complete exemption from such
deduction or withholding and (y) the Borrower shall not be obligated pursuant to
Section 4.04(a) hereof to gross-up payments to be made to a Bank in respect of
income or similar taxes imposed by the United States if (I) such Bank has not
provided to the Borrower the Internal Revenue Service Forms required to be
provided to the Borrower pursuant to this Section 4.04(b). Notwithstanding
anything to the contrary contained in the preceding sentence or elsewhere in
this Section 4.04 and except as set forth in Section 12.04(b), the Borrower
agrees to pay additional amounts and to indemnify each Bank in the manner set
forth in Section 4.04(a) (without regard to the identity of the jurisdiction
requiring the deduction or withholding) in respect of any amounts deducted or
withheld by it as described in the immediately preceding sentence as a result of
any changes after the Effective Date in any applicable law, treaty, governmental
rule, regulation, guideline or order, or in the interpretation thereof, relating
to the deducting or withholding of income or similar Taxes.
SECTION 5. CONDITIONS PRECEDENT. The obligation of each Bank to make
each Loan to the Borrower hereunder, and the obligation of the Letter of Credit
Issuer to issue each Letter of Credit hereunder, is subject, at the time of each
such Credit Event (except as otherwise hereinafter indicated), to the
satisfaction of the following conditions:
5.01 EXECUTION OF AGREEMENT; NOTES. On or prior to the Initial
Borrowing Date, (i) the Effective Date shall have occurred and (ii) there shall
have been delivered to the Administrative Agent for the account of each Bank
which has requested such Notes, the appropriate A Term Note, B Term Note and
Revolving Note, if any, and to Chase, the Swingline Note, in each case executed
by the Borrower and in the amount, maturity and as otherwise provided herein.
5.02 NO DEFAULT; REPRESENTATIONS AND WARRANTIES. At the time of each
Credit Event and also after giving effect thereto (i) there shall exist no
Default or Event of Default and (ii) all representations and warranties
contained herein and in the other Credit Documents in effect at such time shall
be true and correct in all material respects with the same effect as though such
representations and warranties had been made on and as of the date of such
Credit Event, unless
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stated to relate to a specific earlier date, in which case such representations
and warranties shall be true and correct in all material respects as of such
earlier date.
5.03 OFFICER'S CERTIFICATE. On the Initial Borrowing Date, the
Administrative Agent shall have received a certificate dated such date signed by
an appropriate officer of the Borrower stating that all of the applicable
conditions set forth in Sections 5.02, 5.07, 5.08 and 5.09 exist as of such
date.
5.04 OPINIONS OF COUNSEL. On the Initial Borrowing Date, the
Administrative Agent shall have received opinions, addressed to the
Administrative Agent and each of the Banks and dated the Initial Borrowing Date,
from (i) Hutchins, Wheeler & Dittmar, counsel to the Credit Parties, which
opinion shall cover the matters contained in Exhibit D and such other matters
incident to the transactions contemplated herein as the Administrative Agent may
reasonably request and (ii) local and other counsel to the Credit Parties and/or
the Administrative Agent reasonably satisfactory to the Administrative Agent,
which opinions shall cover such matters incident to the transactions
contemplated herein and in the other Credit Documents as the Administrative
Agent may reasonably request and shall be in form and substance reasonably
satisfactory to the Administrative Agent.
5.05 CORPORATE PROCEEDINGS. (a) On the Initial Borrowing Date, the
Administrative Agent shall have received from each Credit Party a certificate,
dated the Initial Borrowing Date, signed by the chairman, a vice chairman, the
president or any vice-president of such Credit Party, and attested to by the
secretary or any assistant secretary of such Credit Party, in the form of
Exhibit E with appropriate insertions, together with copies of the Certificate
of Incorporation and By-Laws of such Credit Party and the resolutions of such
Credit Party referred to in such certificate and all of the foregoing (including
each such Certificate of Incorporation and By-Laws) shall be reasonably
satisfactory to the Administrative Agent.
(b) On the Initial Borrowing Date, all corporate and legal proceedings
and all instruments and agreements in connection with the transactions
contemplated by this Agreement and the other Documents shall be reasonably
satisfactory in form and substance to the Administrative Agent, and the
Administrative Agent shall have received all information and copies of all
certificates, documents and papers, including good standing certificates,
bring-down certificates and any other records of corporate proceedings and
governmental approvals, if any, which the Administrative Agent reasonably may
have requested in connection therewith, such documents and papers, where
appropriate, to be certified by proper corporate or governmental authorities.
5.06 ADVERSE CHANGE, ETC. Since August 31, 1996, except as set forth
in the Disclosure Schedule to the Recapitalization Agreement (including without
limitation payment of the Transaction Bonuses) or as permitted or contemplated
by the Recapitalization Agreement, the Borrower and its Subsidiaries shall not
have (a) suffered any damage, destruction or casualty loss to its physical
properties which, individually or in the aggregate, has a Material Adverse
Effect (as defined in the Recapitalization Agreement); (b) incurred or
discharged any obligation or liability or entered into any other transaction
except in the ordinary course of business and except for obligations,
liabilities and transactions that do not individually or in the aggregate have a
Material Adverse Effect (as defined in the Recapitalization Agreement); (c)
suffered any changes which
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individually or in the aggregate have a Material Adverse Effect (as defined in
the Recapitalization Agreement); (d) increased the rate or terms of compensation
payable or to become payable by the Borrower or any of its Subsidiaries to any
of their respective directors, officers or key employees, or increased the rate
or terms of any bonus, pension or other employee benefit plan covering any of
their respective directors, officers or key employees, except in each case
increases occurring in the ordinary course of business in accordance with their
respective customary practices (including normal periodic performance reviews
and related compensation and benefit increases) or as required by any
pre-existing Commitment (as defined in the Recapitalization Agreement); (e)
declared or paid any dividend or made any other distribution on or with respect
to any shares of its capital stock or redeemed, purchased or otherwise acquired
any outstanding shares of its capital stock; (f) incurred any long-term
indebtedness for borrowed money or Capital Lease Obligations or issued any debt
securities or assumed or incurred any Guarantee Obligation other than in the
ordinary course of business; (g) sold, transferred or otherwise disposed of any
of its material properties or assets; or (h) created any Encumbrance (other than
Permitted Encumbrances (each as defined in the Recapitalization Agreement)).
5.07 LITIGATION. On the Initial Borrowing Date, there shall be no
actions, suits or proceedings pending or threatened (a) with respect to this
Agreement or any other Document or (b) which the Administrative Agent or the
Required Banks shall determine could reasonably be expected to (i) have a
Material Adverse Effect or (ii) have a material adverse effect on the
Transaction, the rights or remedies of the Banks or the Administrative Agent
hereunder or under any other Credit Document or on the ability of any Credit
Party to perform its respective obligations to the Banks or the Administrative
Agent hereunder or under any other Credit Document.
5.08 APPROVALS. On or prior to the Initial Borrowing Date, all
necessary governmental (domestic and foreign) and third party approvals in
connection with the Transaction, the transactions contemplated by the Documents
and otherwise referred to herein or therein shall have been obtained and remain
in effect (other than any such approvals with respect to the Recapitalization
which the Borrower reasonably believes both individually and in the aggregate
are not material to the operations of the Borrower and its Subsidiaries taken as
a whole), and all applicable waiting periods shall have expired without any
action being taken by any competent authority which restrains, prevents or
imposes materially adverse conditions upon the consummation of the Transaction,
the transactions contemplated by the Documents and otherwise referred to herein
or therein. Additionally, there shall not exist any judgment, order, injunction
or other restraint issued or filed or a hearing seeking injunctive relief or
other restraint pending or notified prohibiting or imposing materially adverse
conditions upon the consummation of the Transaction or the making of Loans or
the issuance of the Letters of Credit.
5.09 CONSUMMATION OF THE TRANSACTION. (a) On the Initial Borrowing
Date, the Recapitalization shall have been consummated in accordance with the
Recapitalization Documents and all applicable laws, and each of the conditions
precedent to the consummation of the Recapitalization (including, without
limitation, the accuracy in all material respects of the representations and
warranties contained in the Recapitalization Agreement) shall have been
satisfied and not waived, except with the consent of the Administrative Agent
and the Required Banks, to the satisfaction of the Administrative Agent and the
Required Banks.
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(b) On or prior to the Initial Borrowing Date (i) the Borrower shall
have received cash proceeds of at least $114,500,000 from the sale of Borrower
Common Stock and Borrower Preferred Stock in connection with the
Recapitalization and (ii) the Banks shall have received complete and correct
copies of all documents executed and delivered in connection with such sale of
Borrower Common Stock and Borrower Preferred Stock, each of which shall be in
full force and effect and shall be in form and substance reasonably satisfactory
to the Administrative Agent and the Required Banks.
(c) On or prior to the Initial Borrowing Date (i) the Borrower shall
have received at least $100,000,000 of gross cash proceeds from the sale or
issuance of the Senior Subordinated Notes, which cash proceeds, when aggregated
with the proceeds of the Loans made on the Initial Borrowing Date and the equity
referred to in Section 5.09(b), shall be sufficient to repay the
Recapitalization Demand Note on the Initial Borrowing Date and (ii) the Banks
shall have received complete and correct copies of all documents executed and
delivered in connection with such sale and issuance, each of which shall be in
full force and effect and in form and substance reasonably satisfactory to the
Administrative Agent and the Required Banks.
(d) On or prior to the Initial Borrowing Date, there shall have been
delivered to the Administrative Agent true and correct copies of all Documents
entered into on or prior to such date in connection with the Transaction, and
all of the terms and conditions of such Documents, as well as the structure of
the Transaction and the ownership interests in AcquisitionCo and the Borrower
prior to and after giving effect to the Transaction, shall be in form and
substance satisfactory to the Agents and the Required Banks (it being
acknowledged that the terms and conditions of the Recapitalization Agreement as
in effect on the Initial Borrowing Date is satisfactory to the Agents).
(e) On the Initial Borrowing Date, the Agents shall have received
evidence in form, scope and substance reasonably satisfactory to them that the
matters set forth in this Section 5.09 have been satisfied on such date.
5.10 SECURITY DOCUMENTS. (a) On the Initial Borrowing Date the
Borrower shall have duly authorized, executed and delivered a Pledge Agreement
in the form of Exhibit F (as modified, amended or supplemented from time to time
in accordance with the terms thereof and hereof, the "Pledge Agreement") and
shall have delivered to the Collateral Agent, as pledgee thereunder, all of the
Pledged Securities referred to therein, endorsed in blank in the case of
promissory notes or accompanied by executed and undated stock powers in the case
of capital stock, and the Pledge Agreement shall be in full force and effect.
(b) On the Initial Borrowing Date, the Borrower and each of its
material Subsidiaries, if any, shall have duly authorized, executed and
delivered a Security Agreement in the form of Exhibit G (as modified, amended or
supplemented from time to time in accordance with the terms thereof and hereof,
the "Security Agreement") covering all of the Security Agreement Collateral,
together with:
(A) executed copies of Financing Statements (Form UCC-1) or
appropriate local equivalent in appropriate form for filing under the UCC
or appropriate local equivalent of
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each jurisdiction as may be necessary to perfect the security interests
purported to be created by the Security Agreement;
(B) certified copies of Requests for Information or Copies (Form
UCC-11), or equivalent reports, each of a recent date listing all effective
financing statements that name AcquisitionCo, the Borrower or any of their
Domestic Subsidiaries as debtor and that are filed in the jurisdictions
referred to in clause (A) above, together with copies of such financing
statements that name AcquisitionCo, the Borrower or any of their Domestic
Subsidiaries as debtor (none of which shall cover the Collateral except (x)
those with respect to which appropriate termination statements executed by
the secured lender thereunder have been delivered to the Administrative
Agent and (y) to the extent evidencing Permitted Liens);
(C) evidence of the completion of all other recordings and filings of,
or with respect to, the Security Agreement as may be necessary or, in the
reasonable opinion of the Collateral Agent, desirable, to perfect the
security interests purported to be created by the Security Agreement; and
(D) evidence that all other actions necessary or, in the reasonable
opinion of the Collateral Agent, desirable, to perfect the security
interests purported to be created by the Security Agreement have been
taken;
and the Security Agreement shall be in full force and effect.
(c) On the Initial Borrowing Date, each of the Borrower's material
Subsidiaries, if any, shall have duly authorized, executed and delivered a
Subsidiary Guaranty in the form of Exhibit H (as modified, amended or
supplemented from time to time in accordance with the terms thereof and hereof,
the "Subsidiary Guaranty").
5.11 FEES AND EXPENSES. The aggregate amount of all fees and expenses
to be paid in connection with the Transaction shall not exceed $25,000,000.
5.12 MORTGAGES; TITLE INSURANCE. (a) On the Initial Borrowing Date,
the Collateral Agent shall have received fully executed counterparts of deeds of
trust, mortgages and similar documents in each case in form and substance
satisfactory to the Collateral Agent (as amended, modified or supplemented from
time to time in accordance with the terms thereof and hereof, each a "Mortgage"
and, collectively, the "Mortgages") with respect to each of the Mortgaged
Properties, and arrangements reasonably satisfactory to the Collateral Agent
shall be in place to provide that counterparts of such Mortgages shall be
recorded on the Initial Borrowing Date in all places to the extent necessary or
desirable, in the judgment of the Collateral Agent, effectively to create a
valid and enforceable first priority mortgage Lien, subject only to Permitted
Encumbrances, on each such Mortgaged Property in favor of the Collateral Agent
(or such other trustee as may be required or desired under local law) for the
benefit of the Secured Creditors.
(b) On the Initial Borrowing Date, the Collateral Agent shall have
received mortgagee title insurance policies (or binding commitments to issue
such title insurance policies) issued by title insurers reasonably satisfactory
to the Collateral Agent (the "Mortgage Policies") in
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amounts reasonably satisfactory to the Collateral Agent and assuring the
Collateral Agent that the Mortgages are valid and enforceable first priority
mortgage Liens on the respective Mortgaged Properties, free and clear of all
defects and encumbrances except Permitted Encumbrances. Such Mortgage Policies
shall be in form and substance reasonably satisfactory to the Collateral Agent
and (i) shall include (to the extent available in the respective jurisdiction of
each Mortgaged Property) an endorsement for future advances under this
Agreement, the Notes and the Mortgages, and for such other matters that the
Collateral Agent in its discretion may reasonably request, (ii) shall not
include an exception for mechanics' liens, and (iii) shall provide for
affirmative insurance and such reinsurance (including direct access agreements)
as the Collateral Agent in its discretion may reasonably request.
5.13 EXISTING INDEBTEDNESS AGREEMENTS; SHAREHOLDERS' AGREEMENTS;
MANAGEMENT AGREEMENTS; TAX ALLOCATION AGREEMENTS. On or prior to the Initial
Borrowing Date, there shall have been delivered to the Administrative Agent
copies, certified as true and correct by an appropriate officer of the Borrower,
of:
(a) all agreements evidencing or relating to the Existing Indebtedness
that are to remain in effect after giving effect to the consummation of the
Transaction (collectively, the "Existing Indebtedness Agreements");
(b) all agreements entered into by AcquisitionCo, the Borrower or any
of their Subsidiaries governing the terms and relative rights of its
capital stock, and any agreements entered into by shareholders relating to
any such entity with respect to their capital stock, in each case that are
to remain in effect after giving effect to the consummation of the
Transaction (collectively, the "Shareholders' Agreements");
(c) any material agreements (or the forms thereof) with members of, or
with respect to, the management of AcquisitionCo, the Borrower or any of
their Subsidiaries that are to remain in effect after giving effect to the
consummation of the Transaction (collectively, the "Management
Agreements"); and
(d) any tax sharing or tax allocation agreements entered into by
AcquisitionCo, the Borrower or any of their Subsidiaries (collectively, the
"Tax Allocation Agreements");
all of which Existing Indebtedness Agreements, Shareholders' Agreements,
Management Agreements and Tax Allocation Agreements shall be in form and
substance reasonably satisfactory to the Administrative Agent and shall be in
full force and effect on the Initial Borrowing Date.
5.14 SOLVENCY OPINIONS; EVIDENCE OF INSURANCE. On the Initial
Borrowing Date, the Administrative Agent shall have received:
(a) a solvency opinion from Murray, Devine & Co, addressed to the
Agents and each of the Banks and dated the Initial Borrowing Date and
supporting the conclusions, that, after giving effect to the Transaction
and the incurrence of all financings contemplated herein, the Borrower (on
a stand alone basis) and the Borrower and its Subsidiaries and the LS
Companies (on a consolidated basis) are not insolvent and will not
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be rendered insolvent by the indebtedness incurred in connection herewith,
will not be left with unreasonably small capital with which to engage in
their respective businesses and will not have incurred debts beyond their
ability to pay such debts as they mature and become due; and
(b) evidence of insurance complying with the requirements of Section
7.03 for the business and properties of the Borrower and its Subsidiaries,
in scope, form and substance reasonably satisfactory to the Administrative
Agent and the Required Banks and naming the Collateral Agent as an
additional insured and/or loss payee, and stating that such insurance shall
not be cancelled or revised without at least 30 days' (or 10 days' in the
case of non-payment of premium) prior written notice by the insurer to the
Collateral Agent.
5.15 Pro Forma Balance Sheet; Minimum Ebitda.
---------------------------------------
(a) On or prior the Initial Borrowing Date, there shall have been
delivered to the Administrative Agent, an unaudited PRO FORMA consolidated
balance sheet of the Borrower and its Subsidiaries and the LS Companies
after giving effect to the Transaction and prepared in accordance with
GAAP, together with a related statement of operations, which PRO FORMA
balance sheets and statement of operations shall be reasonably satisfactory
in form and substance to the Administrative Agent and the Required Banks.
(b) The financial statements described in Section 5.15(a) shall
demonstrate that Adjusted Pro Forma Consolidated EBITDA for the nine-month
period ended September 28, 1996 was at least $39,200,000.
5.16 PROJECTIONS. On or prior to the Initial Borrowing Date, the Banks
shall have received the financial projections (the "Projections") set forth on
Schedule 5.16, which include the projected results of the Borrower and its
Subsidiaries for the eight fiscal years ended after the Initial Borrowing Date.
5.17 EXISTING INDEBTEDNESS. On the Initial Borrowing Date and after
giving effect to the Transaction and the Loans incurred on the Initial Borrowing
Date, neither the Borrower nor any of its Subsidiaries shall have any preferred
stock or Indebtedness outstanding except for the Borrower Preferred Stock, the
Obligations and the Existing Indebtedness. The Borrower's existing credit
agreement shall have been repaid in full from the proceeds of the Term Loans
and, together with any security interests granted in connection therewith,
terminated pursuant to documentation in form and substance satisfactory to the
Administrative Agent. On and as of the Initial Borrowing Date, all of the
Existing Indebtedness shall remain outstanding after giving effect to the
Transaction and the other transactions contemplated hereby without any default
or event of default existing thereunder or arising as a result of the
Transaction and the other transactions contemplated hereby, and there shall not
be any amendments or modifications to the Existing Indebtedness Agreements other
than as requested or approved by the Administrative Agent or the Required Banks.
On and as of the Initial Borrowing Date, the Administrative Agent and the
Required Banks shall be satisfied with the terms and conditions of the Borrower
Preferred Stock and the amount of and the terms and conditions of all Existing
Indebtedness.
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5.18 PAYMENT OF FEES. On the Initial Borrowing Date, all costs, fees
and expenses, and all other compensation contemplated by this Agreement, due to
the Agents or the Banks (including, without limitation, legal fees and expenses)
shall have been paid to the extent due.
5.19 NOTICE OF BORROWING; LETTER OF CREDIT REQUEST. The Administrative
Agent shall have received a Notice of Borrowing satisfying the requirements of
Section 1.03 with respect to each incurrence of Loans; and the Administrative
Agent and the Letter of Credit Issuer shall have received a Letter of Credit
Request satisfying the requirements of Section 2.02 with respect to each
issuance of a Letter of Credit.
The acceptance of the benefits of each Credit Event shall constitute a
representation and warranty by each Credit Party to the Administrative Agent and
each of the Banks that all of the applicable conditions specified above exist as
of the date of such Credit Event. All of the certificates, legal opinions and
other documents and papers referred to in this Section 5, unless otherwise
specified, shall be delivered to the Administrative Agent at its Notice Office
for the account of each of the Banks and, except for the Notes, in sufficient
counterparts for each of the Banks and shall be satisfactory in form and
substance to the Administrative Agent and the Required Banks.
SECTION 6. REPRESENTATIONS, WARRANTIES AND AGREEMENTS. In order to
induce the Banks to enter into this Agreement and to make the Loans and issue
and/or participate in the Letters of Credit provided for herein, the Borrower
makes the following representations, warranties and agreements with the Banks in
each case after giving effect to the Transaction, all of which shall survive the
execution and delivery of this Agreement, the making of the Loans and the
issuance of the Letters of Credit (with the occurrence of each Credit Event
being deemed to constitute a representation and warranty that the matters
specified in this Section 6 are true and correct in all material respects on and
as of the date of each such Credit Event, unless stated to relate to a specific
earlier date, in which case all representations and warranties specifically
relating to an earlier date shall be true and correct in all material respects
as of such earlier date):
6.01 CORPORATE STATUS. Each of the Borrower and each of its
Subsidiaries (i) is a duly organized and validly existing corporation in good
standing under the laws of the jurisdiction of its organization, (ii) has the
corporate power and authority to own its property and assets and to transact the
business in which it is engaged and presently proposes to engage and (iii) is
duly qualified and is authorized to do business and is in good standing in all
jurisdictions where it is required to be so qualified and where the failure to
be so qualified would have a Material Adverse Effect.
6.02 CORPORATE POWER AND AUTHORITY. Each Credit Party has the
corporate power and authority to execute, deliver and carry out the terms and
provisions of the Documents to which it is a party and has taken all necessary
corporate action to authorize the execution, delivery and performance of the
Documents to which it is a party. Each Credit Party has duly executed and
delivered each Document to which it is a party and each such Document
constitutes the legal, valid and binding obligation of such Credit Party
enforceable in accordance with its terms, except to the extent that the
enforceability thereof may be limited by applicable bankruptcy, insolvency,
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reorganization, moratorium or similar laws generally affecting creditors' rights
and by equitable principles (regardless of whether enforcement is sought in
equity or at law).
6.03 NO VIOLATION. Neither the execution, delivery or performance by
any Credit Party of the Documents to which it is a party nor compliance by any
Credit Party with the terms and provisions thereof, nor the consummation of the
transactions contemplated herein or therein, (i) will materially contravene any
applicable provision of any law, statute, rule or regulation, or any order,
writ, injunction or decree of any court or governmental instrumentality, (ii)
will materially conflict or be inconsistent with or result in any breach of, any
of the terms, covenants, conditions or provisions of, or constitute a default
under, or (other than pursuant to the Security Documents) result in the creation
or imposition of (or the obligation to create or impose) any Lien upon any of
the property or assets of the Borrower or any of its Subsidiaries pursuant to
the terms of any indenture, mortgage, deed of trust, loan agreement, credit
agreement or any other material agreement or instrument to which the Borrower or
any of its Subsidiaries is a party or by which it or any of its property or
assets are bound or to which it may be subject, except for such conflicts,
inconsistencies, breaches or defaults which, either individually or in the
aggregate, could not reasonably be expected to have a Material Adverse Effect,
or (iii) will violate any provision of the Certificate of Incorporation or
By-Laws of the Borrower or any of its Subsidiaries.
6.04 LITIGATION. There are no actions, suits or proceedings pending
or, to the knowledge of the Borrower or any of its Subsidiaries, threatened,
with respect to the Borrower or any of its Subsidiaries (i) that are likely to
have a Material Adverse Effect or (ii) that could reasonably be expected to have
a material adverse effect on the rights or remedies of any Agent or the Banks or
on the ability of any Credit Party to perform its respective obligations to the
Agents or the Banks hereunder and under the other Credit Documents to which it
is, or will be, a party. Additionally, there does not exist any judgment, order
or injunction prohibiting or imposing material adverse conditions upon the
occurrence of any Credit Event. Schedule 6.04 describes a federal grand jury
investigation involving the Borrower which as of the Initial Borrowing Date the
Borrower does not expect will have a Material Adverse Effect. Since the Initial
Borrowing Date, there has been no change in the status of such investigation
which could reasonably be expected to have a Material Adverse Effect.
6.05 USE OF PROCEEDS; MARGIN REGULATIONS. (a) The proceeds of all Term
Loans incurred on the Initial Borrowing Date shall be utilized to finance a
portion of the cash consideration price to be paid in connection with the
Recapitalization, to pay the fees and expenses incurred in connection therewith
and to refinance existing Indebtedness in an amount not to exceed $43,000,000.
(b) The proceeds of all Revolving Loans and Swingline Loans shall be
utilized for the working capital purposes of the Borrower and its Subsidiaries.
Letters of Credit shall be utilized solely in the ordinary course of business of
the Borrower and its Subsidiaries.
(c) Neither the making of any Loan, nor the use of the proceeds
thereof, will violate the provisions of Regulation G, T, U or X of the Board of
Governors of the Federal Reserve System and no part of the proceeds of any Loan
will be used to purchase or carry any Margin Stock or to extend credit for the
purpose of purchasing or carrying any Margin Stock.
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6.06 GOVERNMENTAL APPROVALS. All orders, consents, approvals,
licenses, authorizations, or validations of, or filings, recordings or
registrations with, or exemptions by, any foreign or domestic governmental or
public body or authority, or any subdivision thereof, which may be required to
authorize (i) the execution, delivery and performance by the Borrower or any
Subsidiary of any Document or (ii) the legality, validity, binding effect or
enforceability of any Document have been obtained or made.
6.07 INVESTMENT COMPANY ACT. Neither the Borrower nor any of its
Subsidiaries is an "investment company" or a company "controlled" by an
"investment company," within the meaning of the Investment Company Act of 1940,
as amended.
6.08 PUBLIC UTILITY HOLDING COMPANY ACT. Neither the Borrower nor any
of its Subsidiaries is a "holding company," or a "subsidiary company" of a
"holding company," or an "affiliate" of a "holding company" or of a "subsidiary
company" of a "holding company," within the meaning of the Public Utility
Holding Company Act of 1935, as amended.
6.09 TRUE AND COMPLETE DISCLOSURE. All factual information (taken as a
whole) heretofore or contemporaneously furnished by or on behalf of the Borrower
or any of its Subsidiaries in writing to any Agent or any Bank (including,
without limitation, all information contained in the Documents) for purposes of
or in connection with this Agreement or any transaction contemplated herein is,
and all other such factual information (taken as a whole) hereafter furnished by
or on behalf of any such Persons in writing to any Agent or any Bank will be,
true and accurate in all material respects on the date as of which such
information is dated or certified and not incomplete by omitting to state any
material fact necessary to make such information (taken as a whole) not
misleading at such time in light of the circumstances under which such
information was provided.
6.10 FINANCIAL CONDITION; FINANCIAL STATEMENTS. (a) On and as of the
Initial Borrowing Date, on a PRO FORMA basis after giving effect to the
Transaction and to all Indebtedness incurred, and to be incurred, and Liens
created, and to be created, by each Credit Party in connection therewith, with
respect to the Borrower and its Subsidiaries (on a consolidated basis) and of
the Borrower (on a stand alone basis) (x) the sum of the assets, at a fair
valuation, of each of the Borrower and its Subsidiaries and the LS Companies (on
a consolidated basis) and of the Borrower (on a stand alone basis) will exceed
its debts, (y) it has not incurred nor intended to, nor believes that it will,
incur debts beyond its ability to pay such debts as such debts mature and (z) it
will have sufficient capital with which to conduct its business. For purposes of
this Section 6.10, "debt" means any liability on a claim, and "claim" means (i)
right to payment whether or not such a right is reduced to judgment, liquidated,
unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed,
legal, equitable, secured or unsecured or (ii) right to an equitable remedy for
breach of performance if such breach gives rise to a payment, whether or not
such right to an equitable remedy is reduced to judgment, fixed, contingent,
matured, unmatured, disputed, undisputed, secured or unsecured.
(b) The consolidated balance sheets of Safelite and its Subsidiaries
at each of FYE 1995 and 1994 and at September 28, 1996 and the related
consolidated statements of income, stockholders' equity and cash flows of
Safelite and its Subsidiaries for the fiscal year or nine-month period, as the
case may be, ended as of said dates (all of which FYE financial statements
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have been audited by Deloitte & Touche LLP and all of which September 28, 1996
financial statements have been certified by the chief financial officer of
Safelite), copies of which have heretofore been furnished to each Bank, are true
and correct in all material respects and present fairly in all material respects
the combined financial position of Safelite and its Subsidiaries at the dates of
said statements and the results for the periods covered thereby. All such
financial statements have been prepared in accordance with GAAP consistently
applied except to the extent provided in the notes to said financial statements
and subject, in the case of the September 28, 1996 statements, to normal
year-end audit adjustments and the absence of footnotes.
(c) The consolidated balance sheets of Lear Siegler and its
Subsidiaries at FYE 1995 and 1994 and at September 28, 1996 and the related
statements of income, stockholders' equity and cash flows of Lear Siegler and
its Subsidiaries for the fiscal year or nine-month period, as the case may be,
ended as of said dates (all of which FYE financial statements have been audited
by Deloitte & Touche LLP and all of which September 28, 1996 financial
statements have been certified by the President of Lear Siegler), copies of
which have heretofore been furnished to each Bank, are true and correct in all
material respects and present fairly in all material respects the consolidated
financial position of Lear Siegler and its Subsidiaries at the dates of said
statements and the results for the periods covered thereby (it being noted that
purchase accounting adjustments to such September 28, 1996 financial statements
have been made and appear in the adjusted PRO FORMA balance sheet referred to in
Section 5.15(a) hereof). All such financial statements have been prepared in
accordance with GAAP consistently applied except to the extent provided in the
notes to said financial statements and subject, in the case of the September 28,
1996 statements, to normal year-end audit adjustments and the absence of
footnotes.
(d) Since August 31, 1996, except as set forth in the Disclosure
Schedule to the Recapitalization Agreement (including, without limitation, as to
the Transaction Bonuses) or permitted or contemplated by the Recapitalization
Agreement, nothing has occurred that has had or could reasonably be expected to
have a Material Adverse Effect.
(e) Except as fully reflected in the financial statements described in
Sections 5.15(a) and 6.10(b) and (c) and the Indebtedness incurred under this
Agreement, there were as of the Initial Borrowing Date (and after giving effect
to any Loans made on such date), no liabilities or obligations (excluding
current obligations incurred in the ordinary course of business) with respect to
Safelite, Lear Siegler or any of their Subsidiaries (whether absolute, accrued,
contingent or otherwise and whether or not due), and neither the Borrower nor
any of its Subsidiaries know of any basis for the assertion against Safelite,
Lear Siegler or any of their Subsidiaries of any such liability or obligation,
which, either individually or in the aggregate, are or would be reasonably
likely to have, a Material Adverse Effect.
(f) The Projections are based on good faith estimates and assumptions
made by the management of the Borrower, and on the Initial Borrowing Date such
management believed that the Projections were reasonable and attainable, it
being recognized by the Banks, however, that projections as to future events are
not to be viewed as facts and that the actual results during the period or
periods covered by the Projections probably will differ from the projected
results and that the differences may be material.
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6.11 SECURITY INTERESTS. On and after the Initial Borrowing Date, each
of the Security Documents creates (or after the execution and delivery thereof
will create), as security for the Obligations, a valid and enforceable perfected
security interest in and Lien on all of the Collateral subject thereto, superior
to and prior to the rights of all third Persons, and subject to no other Liens
(except that the Security Agreement Collateral, the Mortgaged Properties and the
Collateral covered by the Additional Security Documents may be subject to
Permitted Liens relating thereto), in favor of the Collateral Agent. No filings
or recordings are required in order to perfect the security interests created
under any Security Document except for filings or recordings required in
connection with any such Security Document which shall have been made on or
prior to the Initial Borrowing Date as contemplated by Section 5.10(b) or on or
prior to the execution and delivery thereof as contemplated by Sections 7.11,
7.13 and 8.15.
6.12 REPRESENTATIONS AND WARRANTIES IN OTHER DOCUMENTS. All
representations and warranties of the Credit Parties set forth in the other
Documents, and, to the knowledge of the Borrower, all representations and
warranties of the other parties set forth in the other Documents, were true and
correct in all material respects as of the time such representations and
warranties were made and shall be true and correct in all material respects as
of the Initial Borrowing Date as if such representations and warranties were
made on and as of such date, unless stated to relate to a specific earlier date,
in which case such representations and warranties shall be true and correct in
all material respects as of such earlier date.
6.13 TRANSACTION. At the time of consummation thereof, the Transaction
shall have been consummated in accordance with the terms of the respective
Documents and all applicable laws. At the time of consummation thereof, all
consents and approvals of, and filings and registrations with, and all other
actions in respect of, all governmental agencies, authorities or
instrumentalities required to make or consummate the Transaction have been
obtained, given, filed or taken or waived and are or will be in full force and
effect (or effective judicial relief with respect thereto has been obtained)
except where the failure to obtain, give, file, or take would not reasonably be
expected to have a Material Adverse Effect. All applicable waiting periods with
respect thereto have or, prior to the time when required, will have, expired
without, in all such cases, any action being taken by any competent authority
which restrains, prevents, or imposes material adverse conditions upon the
Transaction. Additionally, there does not exist any judgment, order or
injunction prohibiting or imposing material adverse conditions upon the
Transaction, or the occurrence of any Credit Event or the performance by any
Credit Party of their obligations under the Documents and all applicable laws.
The Transaction has been consummated in accordance with the respective Documents
and all applicable laws.
6.14 SPECIAL PURPOSE CORPORATION. Prior to the consummation of the
Transaction, AcquisitionCo had no significant assets or liabilities (other than
those rights and liabilities under the Documents to which it is a party).
6.15 COMPLIANCE WITH ERISA. (a) Except for any noncompliance,
liabilities and obligations that would not individually or in the aggregate have
a Material Adverse Effect: each Plan is in substantial compliance with ERISA and
the Code; no Reportable Event has occurred with respect to a Plan during the
five year period prior to the date on which this representation is made or
deemed made with respect to any Plan; no Multiemployer Plan is insolvent or in
reorganization; no Plan has an Unfunded Current Liability; no Plan has an
accumulated or waived
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funding deficiency, has permitted decreases in its funding standard account or
has applied for a waiver of the minimum funding standard or an extension of any
amortization period within the meaning of Section 412 of the Code during the
five year period prior to the date on which this representation is made or
deemed made with respect to any Plan; all contributions required to be made with
respect to each Plan, Multiemployer Plan and Foreign Pension Plan have been
timely made; neither the Borrower nor any of its Subsidiaries nor any ERISA
Affiliate has incurred any material liability to or on account of a Plan
pursuant to Section 409, 502(i), 502(l), 515, 4062, 4063, 4064, 4069, 4201, 4204
or 4212 of ERISA or Section 401(a)(29), 4971, 4975 or 4980 of the Code or
reasonably expects to incur any material liability (including any indirect,
contingent or secondary liability) under any of the foregoing Sections with
respect to any Plan (other than liabilities of any ERISA Affiliate which could
not, by operation of law or otherwise, become a liability of the Borrower or any
of its Subsidiaries); no proceedings have been instituted to terminate, or to
appoint a trustee to administer, any Plan; no condition exists which presents a
material risk to the Borrower or any of its Subsidiaries or any ERISA Affiliate
of incurring a liability to or on account of a Plan pursuant to the foregoing
provisions of ERISA and the Code; using actuarial assumptions and computation
methods consistent with subpart 1 of subtitle E of Title IV of ERISA, the
aggregate liabilities of the Borrower and its Subsidiaries and its ERISA
Affiliates to all Plans which are multiemployer plans (as defined in Section
4001(a)(3) of ERISA) in the event of a complete withdrawal therefrom, as of the
close of the most recent fiscal year of each such Plan ended prior to the date
of the most recent Credit Event, would not result in a Material Adverse Effect;
no lien imposed under the Code or ERISA on the assets of the Borrower or any of
its Subsidiaries or any ERISA Affiliate exists or is likely to arise on account
of any Plan; and the Borrower and its Subsidiaries do not maintain or contribute
to any Retiree Welfare Plan.
(b) Except for any noncompliance, liabilities and obligations that
would not individually or in the aggregate have a Material Adverse Effect: any
Foreign Pension Plan has been maintained in substantial compliance with its
terms and with the requirements of any and all applicable laws, statutes, rules,
regulations and orders and has been maintained, where required, in good standing
with applicable regulatory authorities. Neither the Borrower nor any of its
Subsidiaries has incurred any material obligation in connection with the
termination of or withdrawal from any Foreign Pension Plan. The present value of
the accrued benefit liabilities (whether or not vested) under any Foreign
Pension Plan which is funded, determined as of the end of the most recently
ended fiscal year of the Borrower on the basis of actuarial assumptions, each of
which is reasonable, did not exceed the current value of the assets of such
Foreign Pension Plan, and for any Foreign Pension Plan which is not funded, the
obligations of such Foreign Pension Plan are properly accrued.
6.16 CAPITALIZATION. On the Initial Borrowing Date and after giving
effect to the Transaction and the other transactions contemplated hereby, the
authorized and issued capital stock of the Borrower shall be as set forth on
Schedule 6.16. All outstanding shares of capital stock of the Borrower have been
duly and validly issued, and are fully paid and nonassessable. The Borrower does
not have outstanding any securities convertible into or exchangeable for its
capital stock or outstanding any rights to subscribe for or to purchase, or any
options for the purchase of, or any agreements providing for the issuance
(contingent or otherwise) of, or any calls, commitments or claims of any
character relating to, its capital stock, except as set forth on Schedule 6.16.
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6.17 SUBSIDIARIES. (a) Prior to the consummation of the Transaction
(i) AcquisitionCo has no direct Subsidiaries and (ii) the Borrower has no
Subsidiaries other than as set forth on Schedule 6.17. All such Subsidiaries
other than SGC Franchising Corp. will be merged into the Borrower on or before
the Initial Borrowing Date.
(b) On and as of the Initial Borrowing Date and after giving effect to
the consummation of the Transaction, AcquisitionCo shall have been merged into
the Borrower in accordance with the Recapitalization Documents and the Borrower
shall have no Subsidiaries other than the Subsidiary listed on Schedule 6.17 as
a Subsidiary remaining after the Initial Borrowing Date; the net book value of
such Subsidiary is set forth on Schedule 6.17. Schedule 6.17 correctly sets
forth, as of the Initial Borrowing Date and after giving effect to the
Transaction, the percentage ownership (direct and indirect) of the Borrower in
each class of capital stock of each of its Subsidiaries and also identifies the
direct owner thereof.
(c) Schedule 6.17 correctly sets forth, as of the Initial Borrowing
Date and after giving effect to the Transaction, the percentage ownership
(direct and indirect) of the Borrower in each class of capital stock of each of
the LS Companies and also identifies the direct owner thereof.
6.18 INTELLECTUAL PROPERTY. Each of the Borrower and each of its
Subsidiaries owns or holds a valid license to use all the material patents,
trademarks, permits, service marks, trade names, technology, know-how and
formulas or other rights with respect to the foregoing, free from restrictions
that are materially adverse to the use thereof, that are used in the operation
of the business of the Borrower and each of its Subsidiaries as presently
conducted.
6.19 COMPLIANCE WITH STATUTES, ETC. The Borrower and each of its
Subsidiaries is in compliance with all applicable statutes, regulations and
orders of, and all applicable restrictions imposed by, all governmental bodies,
domestic or foreign, in respect of the conduct of its business and the ownership
of its property (including compliance with all applicable Environmental Laws
with respect to any Real Property or governing its business and the requirements
of any permits issued under such Environmental Laws with respect to any such
Real Property or the operations of the Borrower or any of its Subsidiaries),
except such non-compliance as is not likely to, individually or in the
aggregate, have a Material Adverse Effect.
6.20 ENVIRONMENTAL MATTERS. (a) Each of the Borrower and each of its
Subsidiaries has complied with, and on the date of each Credit Event is in
compliance with, all applicable Environmental Laws and the requirements of any
permits issued under such Environmental Laws. There are no pending or, to the
best knowledge of the Borrower, past or threatened Environmental Claims against
the Borrower or any of its Subsidiaries or any Real Property owned or operated
by the Borrower or any of its Subsidiaries. There are no facts, circumstances,
conditions or occurrences on any Real Property owned or operated by the Borrower
or any of its Subsidiaries or, to the best knowledge of the Borrower, on any
property adjoining or in the vicinity of any such Real Property that would
reasonably be expected (i) to form the basis of an Environmental Claim against
the Borrower or any of its Subsidiaries or any such Real Property or (ii) to
cause any such Real Property to be subject to any restrictions on the ownership,
occupancy, use or transferability of such Real Property by the Borrower or any
of its Subsidiaries under any applicable Environmental Law.
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(b) Hazardous Materials have not at any time been generated, used,
treated or stored on, or transported to or from, any Real Property owned or
operated by the Borrower or any of its Subsidiaries where such generation, use,
treatment or storage has violated or would reasonably be expected to violate any
Environmental Law. Hazardous Materials have not at any time been Released on or
from any Real Property owned or operated by the Borrower or any of its
Subsidiaries in a manner that would reasonably be expected to form the basis for
an Environmental Claim against the Borrower or any of its Subsidiaries. There
are not now any underground storage tanks located on any Real Property owned or
operated by the Borrower or any of its Subsidiaries which could reasonably be
expected to form the basis for an Environmental Claim against the Borrower or
any of its Subsidiaries.
(c) Notwithstanding anything to the contrary in this Section 6.20, the
representations made in this Section 6.20 shall only be untrue if the aggregate
effect of all conditions, failures, noncompliances, Environmental Claims,
Releases and presence of underground storage tanks, in each case of the types
described above, would reasonably be expected to have a Material Adverse Effect.
6.21 PROPERTIES. All Real Property owned by the Borrower or any of its
Subsidiaries and all material Leaseholds leased by the Borrower or any of its
Subsidiaries, in each case as of the Initial Borrowing Date and after giving
effect to the Transaction, and the nature of the interest therein, is correctly
set forth in Schedule 6.21. Each of the Borrower and each of its Subsidiaries
has good and marketable title to, or a validly subsisting leasehold interest in,
all material properties owned or leased by it, including all Real Property
reflected in Schedule 6.21 or in the financial statements referred to in Section
6.10(b), free and clear of all Liens, other than Permitted Liens.
6.22 LABOR RELATIONS. Neither the Borrower nor any of its Subsidiaries
is engaged in any unfair labor practice that could reasonably be expected to
have a Material Adverse Effect. There is (i) no unfair labor practice complaint
pending against the Borrower or any of its Subsidiaries or, to the best
knowledge of the Borrower, threatened against any of them, before the National
Labor Relations Board, and no grievance or arbitration proceeding arising out of
or under any collective bargaining agreement is so pending against the Borrower
or any of its Subsidiaries or, to the best knowledge of the Borrower, threatened
against any of them, (ii) no strike, labor dispute, slowdown or stoppage pending
against the Borrower or any of its Subsidiaries or, to the best knowledge of the
Borrower, threatened against the Borrower or any of its Subsidiaries and (iii)
to the best knowledge of the Borrower, no union representation question existing
with respect to the employees of the Borrower or any of its Subsidiaries and, to
the best knowledge of the Borrower, no union organizing activities are taking
place, except (with respect to any matter specified in clause (i), (ii) or (iii)
above, either individually or in the aggregate) such as is not reasonably likely
to have a Material Adverse Effect.
6.23 TAX RETURNS AND PAYMENTS. All Federal, material state and other
material returns, statements, forms and reports for taxes (the "Returns")
required to be filed by or with respect to the income, properties or operations
of the Borrower and/or any of its Subsidiaries have been timely filed (taking
into account all extensions of due dates) with the appropriate taxing authority.
The Returns accurately reflect all liability for taxes of the Borrower and its
Subsidiaries for the periods covered thereby. The Borrower and each of its
Subsidiaries have paid all taxes
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payable by them other than immaterial taxes and other taxes which are not yet
due and payable, and other than taxes contested in good faith and for which
adequate reserves have been established in accordance with GAAP. Except as
disclosed in the financial statements referred to in Section 6.10(b) and in
Schedule 2.13 of the Recapitalization Agreement, there is no material action,
suit, proceeding, investigation, audit, or claim now pending or, to the
knowledge of the Borrower, threatened by any authority regarding any material
taxes relating to the Borrower or any of its Subsidiaries. As of the Initial
Borrowing Date, and except as disclosed in Schedule 2.13 of the Recapitalization
Agreement, neither the Borrower nor any of its Subsidiaries has entered into an
agreement or waiver or been requested to enter into an agreement or waiver
extending any statute of limitations relating to the payment or collection of
material taxes of the Borrower or any of its Subsidiaries, or is aware of any
circumstances that would cause the taxable years or other taxable periods of the
Borrower or any of its Subsidiaries not to be subject to the normally applicable
statute of limitations. Neither the Borrower nor any of its Subsidiaries has
provided, with respect to themselves or property held by them, any consent under
Section 341 of the Code. Neither the Borrower nor any of its Subsidiaries has
incurred, or will incur, any material tax liability in connection with the
Transaction and the other transactions contemplated hereby.
6.24 EXISTING INDEBTEDNESS. Schedule 6.24 sets forth a true and
complete list of all Indebtedness of AcquisitionCo, Safelite and their
Subsidiaries (other than Indebtedness which in the aggregate does not exceed
$100,000) as of the Initial Borrowing Date and which is to remain outstanding
after giving effect to the Transaction and the incurrence of Loans on such date
(excluding the Loans and the Letters of Credit, the "Existing Indebtedness"), in
each case showing the aggregate principal amount thereof and the name of the
respective borrower and any other entity which directly or indirectly guaranteed
such debt.
6.25 SENIOR SUBORDINATED NOTES. On and after the issuance thereof, the
subordination provisions contained in the Senior Subordinated Note Documents are
enforceable against the Borrower, the respective Guarantors and the holders
thereof, and all Obligations and Guaranteed Obligations (as defined herein and
in the Subsidiary Guaranty) are within the definition of "Senior Indebtedness"
or "Guarantor Senior Indebtedness," as the case may be, included in such
subordination provisions.
6.26 LS TAX SHARING AGREEMENT. The LS Tax Sharing Agreement contains
terms and conditions substantially as favorable to the Borrower and its
Subsidiaries as would be reasonably expected to be obtainable by the Borrower
and its Subsidiaries in a comparable arm's- length transaction with a Person
other than an Affiliate.
SECTION 7. AFFIRMATIVE COVENANTS. The Borrower hereby covenants and
agrees that as of the Effective Date and thereafter for so long as this
Agreement is in effect and until the Commitments have terminated, no Letters of
Credit (other than Letters of Credit, together with all Fees that have accrued
and will accrue thereon through the stated termination date of such Letters of
Credit, which have been cash collaterialized in a manner reasonably satisfactory
to the Letter of Credit Issuer) or Notes are outstanding and the Loans and
Unpaid Drawings, together with interest, Fees and all other Obligations (other
than any indemnities described in Section 12.13 which are not then due and
payable) incurred hereunder, are paid in full:
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7.01 INFORMATION COVENANTS. The Borrower will furnish to each Bank:
(a) MONTHLY REPORTS. Within 45 days after the end of each fiscal month
of the Borrower (commencing with the fiscal month ending on FYE 1996), the
consolidated balance sheet of the Borrower and its Subsidiaries as at the
end of such fiscal month and the related consolidated statements of income
and retained earnings and of cash flows for such fiscal month and for the
elapsed portion of the fiscal year ended with the last day of such fiscal
month, in each case setting forth comparative figures for the corresponding
fiscal month in the prior fiscal year and comparable budgeted figures for
such fiscal month, all of which shall be certified by the chief financial
officer or other Authorized Officer of the Borrower, subject to normal
year-end audit adjustments and the absence of footnotes.
(b) QUARTERLY FINANCIAL STATEMENTS. (i) Within 45 days after the close
of each quarterly accounting period in each fiscal year of the Borrower,
the consolidated balance sheet of the Borrower and its Subsidiaries as at
the end of such quarterly accounting period and the related consolidated
statements of income and retained earnings and of cash flows for such
quarterly accounting period and for the elapsed portion of the fiscal year
ended with the last day of such quarterly accounting period; all of which
shall be in reasonable detail and certified by the chief financial officer
or other Authorized Officer of the Borrower that they fairly present in all
material respects the financial condition of the Borrower and its
Subsidiaries as of the dates indicated and the results of their operations
and changes in their cash flows for the periods indicated, subject to
normal year-end audit adjustments and the absence of footnotes.
(ii) Within 45 days after the close of each quarterly accounting
period in each fiscal year of the Borrower, Consolidated EBITDA for such
quarterly accounting period and for the elapsed portion of the fiscal year
ended with the last day of such quarterly accounting period; all of which
shall be in reasonable detail and certified by the chief financial officer
or other Authorized Officer of the Borrower that they fairly represent the
information contained therein for the periods indicated, subject to normal
year-end audit adjustments and the absence of footnotes.
(c) ANNUAL FINANCIAL STATEMENTS. (i) Within 90 days after the close of
each fiscal year of the Borrower, the consolidated balance sheet of the
Borrower and its Subsidiaries as at the end of such fiscal year and the
related consolidated statements of income and retained earnings and of cash
flows for such fiscal year and setting forth comparative consolidated
figures for the preceding fiscal year (except for the financial statements
delivered for the 1996 fiscal year) and comparable budgeted figures for
such fiscal year and (except for such comparable budgeted figures)
certified by Deloitte & Touche LLP or such other independent certified
public accountants of recognized national standing as shall be reasonably
acceptable to the Administrative Agent, in each case to the effect that
such statements fairly present the financial condition of the Borrower and
its Subsidiaries as of the dates indicated and the results of their
operations and changes in cash flows, together with a certificate of such
accounting firm stating that in the course of its regular audit of the
business of the Borrower and its Subsidiaries, which audit was conducted in
accordance with generally accepted auditing standards, no Default or Event
of Default
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which has occurred and is continuing has come to their attention or, if
such a Default or an Event of Default has come to their attention a
statement as to the nature thereof.
(ii) Within 90 days after the close of each fiscal year of the
Borrower, Consolidated EBITDA for such fiscal year; all of which shall be
in reasonable detail and certified by the chief financial officer or other
Authorized Officer of the Borrower that they fairly present the information
contained therein for the periods indicated.
(d) BUDGETS, ETC. Not more than 60 days after the commencement of each
fiscal year of the Borrower, budgets of the Borrower and its Subsidiaries
in reasonable detail for each of the four fiscal quarters of such fiscal
year and for the immediately succeeding fiscal year taken as a whole, in
each case as customarily prepared by management for its internal use
setting forth, with appropriate discussion, the principal assumptions upon
which such budgets are based. Together with each delivery of financial
statements pursuant to Section 7.01(b) and (c), a comparison of the current
year to date financial results (other than in respect of the balance sheets
included therein) against the budgets required to be submitted pursuant to
this clause (d) shall be presented.
(e) OFFICER'S CERTIFICATES. At the time of the delivery of the
financial statements provided for in Section 7.01(b) and (c), (i) a
certificate of the chief financial officer or other Authorized Officer of
the Borrower to the effect that no Default or Event of Default exists or,
if any Default or Event of Default does exist, specifying the nature and
extent thereof, which certificate shall set forth the calculations required
to establish whether the Borrower and its Subsidiaries were in compliance
with the provisions of Sections 8.04(e), 8.06 and 8.09 through and
including 8.12, as at the end of such fiscal quarter or year, as the case
may be and (ii) a narrative discussion and analysis of the financial
condition and results of operations of the Borrower and its Subsidiaries
for the period covered by such financial statements, as compared to the
portion of the Projections covering such period and to the comparable
period of the previous year. In addition, at the time of the delivery of
the financial statements provided for in Section 7.01(c)(i), a certificate
of the chief financial officer or other Authorized Officer of the Borrower
setting forth (i) the amount of, and calculations required to establish the
amount of, Excess Cash Flow for the Excess Cash Flow Period ending on the
last day of the respective fiscal year and (ii) the calculations required
to establish whether the Borrower was in compliance with Section 4.02(A)(c)
for the respective fiscal year.
(f) NOTICE OF DEFAULT OR LITIGATION. Promptly, and in any event within
three Business Days (or 10 Business Days in the case of clause (y) below)
after any officer of the Borrower obtains knowledge thereof, notice of (x)
the occurrence of any event which constitutes a Default or an Event of
Default, which notice shall specify the nature thereof, the period of
existence thereof and what action the Borrower proposes to take with
respect thereto and (y) the commencement of, or threat of, or any
significant development in, any litigation or governmental proceeding
pending against the Borrower or any of its Subsidiaries (i) in which the
amount involved is $5,000,000 or more or (ii) which is likely to have a
Material Adverse Effect, or a material adverse effect on the ability of any
Credit Party to perform its respective obligations hereunder or under any
other Credit Document.
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(g) AUDITORS' REPORTS. Promptly upon receipt thereof, a copy of each
report or "management letter" submitted to the Borrower or any of its
Subsidiaries by its independent accountants in connection with any annual,
interim or special audit made by them of the books of the Borrower or any
of its Subsidiaries.
(h) ENVIRONMENTAL MATTERS. Promptly after obtaining knowledge of any
of the following, written notice of:
(i) any pending or threatened material Environmental Claim
against the Borrower or any of its Subsidiaries or any Real Property
owned or operated by the Borrower or any of its Subsidiaries;
(ii) any condition or occurrence on any Real Property owned or
operated by the Borrower or any of its Subsidiaries that (x) results
in material noncompliance by the Borrower or any of its Subsidiaries
with any applicable Environmental Law or (y) could reasonably be
anticipated to form the basis of a material Environmental Claim
against the Borrower or any of its Subsidiaries or any such Real
Property;
(iii) any condition or occurrence on any Real Property owned or
operated by the Borrower or any of its Subsidiaries that could
reasonably be anticipated to cause such Real Property to be subject to
any material restrictions on the ownership, occupancy, use or
transferability by the Borrower or its Subsidiary, as the case may be,
of its interest in such Real Property under any Environmental Law; and
(iv) the taking of any material removal or remedial action in
response to the actual or alleged presence of any Hazardous Material
on any Real Property owned or operated by the Borrower or any of its
Subsidiaries.
All such notices shall describe in reasonable detail the nature of the
claim, investigation, condition, occurrence or removal or remedial action
and the Borrower's response thereto. In addition, the Borrower agrees to
provide the Banks with copies of all material written communications by the
Borrower or any of its Subsidiaries with any Person, government or
governmental agency relating to any of the matters set forth in clauses
(i)-(iv) above, and such detailed reports relating to any of the matters
set forth in clauses (i)-(iv) above as may reasonably be requested by the
Administrative Agent or the Required Banks.
(i) INFORMATION CONCERNING LS COMPANIES. Promptly upon request, such
information and documents concerning the LS Companies as the Administrative
Agent or any Bank shall reasonably request.
(j) OTHER INFORMATION. Promptly upon transmission thereof, copies of
any filings and registrations with, and reports to, the SEC by the Borrower
or any of its Subsidiaries and copies of all financial statements, proxy
statements, notices and reports as the Borrower or any of its Subsidiaries
shall send generally to analysts, the holders of their capital stock or of
the Senior Subordinated Notes in their capacity as such holders (in each
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case to the extent not theretofore delivered to the Banks pursuant to this
Agreement) and, with reasonable promptness, such other information or
documents (financial or otherwise) as the Administrative Agent on its own
behalf or on behalf of the Required Banks may reasonably request from time
to time.
7.02 BOOKS, RECORDS AND INSPECTIONS. The Borrower will, and will cause
each of its Subsidiaries to, permit, upon two Business Days' prior notice to the
chief financial officer or other Authorized Officer of the Borrower (except when
a Default or Event of Default has occurred and is continuing, in which case, no
notice shall be required), officers and designated representatives of any Agent
or any Bank to visit and inspect any of the properties or assets of the Borrower
and any of its Subsidiaries in whomsoever's possession, and to examine the books
of account of the Borrower and any of its Subsidiaries and discuss the affairs,
finances and accounts of the Borrower and of any of its Subsidiaries with, and
be advised as to the same by, their officers and independent accountants, all at
such reasonable times and intervals and to such reasonable extent as any Agent
or any Bank may desire, PROVIDED that all such visits and inspections shall be
coordinated through an Agent.
7.03 INSURANCE. The Borrower will, and will cause each of its
Subsidiaries to, at all times from and after the Effective Date maintain in full
force and effect insurance with reputable and solvent insurance carriers in such
amounts, covering such risks and liabilities and with such deductibles or
self-insured retentions as are in accordance with normal industry practice, and
shall furnish to the Administrative Agent upon written request full information
as to the insurance so carried.
7.04 PAYMENT OF TAXES. The Borrower will pay and discharge, and will
cause each of its Subsidiaries to pay and discharge, all taxes, assessments and
governmental charges or levies imposed upon it or upon its income or profits, or
upon any properties belonging to it, prior to the date on which material
penalties attach thereto, and all lawful claims for sums that have become due
and payable which, if unpaid, might become a Lien not otherwise permitted under
Section 8.03(a) or charge upon any properties of the Borrower or any of its
Subsidiaries; PROVIDED that neither the Borrower nor any of its Subsidiaries
shall be required to pay any such tax, assessment, charge, levy or claim which
is being contested in good faith and by proper proceedings if it has maintained
adequate reserves with respect thereto in accordance with GAAP.
7.05 CORPORATE FRANCHISES. The Borrower will do, and will cause each
of its Subsidiaries to do, or cause to be done, all things necessary to preserve
and keep in full force and effect its existence and its material rights,
franchises and authority to do business; PROVIDED, HOWEVER, that any transaction
permitted by Section 8.02 will not constitute a breach of this Section 7.05.
7.06 COMPLIANCE WITH STATUTES, ETC. The Borrower will, and will cause
each of its Subsidiaries to, comply with all applicable statutes, regulations
and orders of, and all applicable restrictions imposed by, all governmental
bodies, domestic or foreign, in respect of the conduct of its business and the
ownership of its property (including applicable statutes, regulations, orders
and restrictions relating to environmental standards and controls) except for
such noncompliance as would not have a Material Adverse Effect or a material
adverse effect on the ability of any Credit Party to perform its obligations
under any Credit Document to which it is a party.
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7.07 COMPLIANCE WITH ENVIRONMENTAL LAWS. (a) The Borrower will pay,
and will cause each of its Subsidiaries to pay, all costs and expenses incurred
by it in keeping in compliance with all Environmental Laws, and will keep or
cause to be kept all Real Properties owned or operated by the Borrower or any of
its Subsidiaries free and clear of any Liens imposed pursuant to such
Environmental Laws; and (b) neither the Borrower nor any of its Subsidiaries
will generate, use, treat, store, release or dispose of, or permit the
generation, use, treatment, storage, release or disposal of, Hazardous Materials
on any Real Property owned or operated by the Borrower or any of its
Subsidiaries, or transport or permit the transportation of Hazardous Materials
to or from any such Real Property, unless the failure to comply with the
requirements specified in clause (a) or (b) above, either individually or in the
aggregate, would not reasonably be expected to have a Material Adverse Effect.
If the Borrower or any of its Subsidiaries, or any tenant or occupant of any
Real Property owned or operated by the Borrower or any of its Subsidiaries,
cause or permit any intentional or unintentional act or omission resulting in
the presence or Release of any Hazardous Material (except in compliance with
applicable Environmental Laws), the Borrower agrees to undertake, and/or to
cause any of its Subsidiaries, tenants or occupants to undertake, at their sole
expense, any clean up, removal, remedial or other action required pursuant to
Environmental Laws to remove and clean up any Hazardous Materials from any Real
Property except where the failure to do so would not reasonably be expected to
have a Material Adverse Effect; PROVIDED that neither the Borrower nor any of
its Subsidiaries shall be required to comply with any such order or directive
which is being contested in good faith and by proper proceedings so long as it
has maintained adequate reserves with respect to such compliance to the extent
required in accordance with GAAP.
7.08 ERISA. As soon as possible and, in any event, within 10 days
after the Borrower or any Subsidiary of the Borrower or any ERISA Affiliate
knows or has reason to know of the occurrence of any of the following events to
the extent that one or more of such events is reasonably likely to result in a
material liability to the Borrower or any Subsidiary of the Borrower, the
Borrower will deliver to each of the Banks a certificate of the chief financial
officer or other Authorized Officer of the Borrower setting forth details as to
such occurrence and the action, if any, which the Borrower, such Subsidiary or
such ERISA Affiliate is required or proposes to take, together with any notices
required or proposed to be given to or filed with or by the Borrower, the
Subsidiary, the ERISA Affiliate, the PBGC, a Plan participant or the Plan
administrator with respect thereto: that a Reportable Event has occurred, that
an accumulated funding deficiency has been incurred or an application may be or
has been made to the Secretary of the Treasury for a waiver or modification of
the minimum funding standard (including any required installment payments) or an
extension of any amortization period under Section 412 of the Code with respect
to a Plan; that a contribution required to be made to a Plan, Multiemployer Plan
or Foreign Pension Plan has not been timely made; that a Plan has been or may be
terminated, reorganized, partitioned or declared insolvent under Title IV of
ERISA; that a Plan has an Unfunded Current Liability giving rise to a lien under
ERISA or the Code; that proceedings may be or have been instituted by the PBGC
to terminate or appoint a trustee to administer a Plan; that a proceeding has
been instituted pursuant to Section 515 of ERISA to collect a delinquent
contribution to a Multiemployer Plan; that the Borrower, any Subsidiary of the
Borrower or any ERISA Affiliate will or could reasonably be expected to incur
any material liability (including any contingent or secondary liability) to or
on account of the termination of or withdrawal from a Plan or Multiemployer Plan
under Section 4062, 4063, 4064, 4069, 4201, 4204 or 4212 of ERISA or with
respect to a Plan under Section 401(a)(29), 4971, 4975 or 4980 of the
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Code or Section 409, 502(i) or 502(l) of ERISA; or that the Borrower or any
Subsidiary of the Borrower has or may incur any material liability under any
Retiree Welfare Plan or Foreign Pension Plan. At the request of any Bank, the
Borrower will deliver to such Bank a complete copy of the annual report (Form
5500) of each Plan required to be filed with the Internal Revenue Service. In
addition to any certificates or notices delivered to the Banks pursuant to the
first sentence hereof, copies of annual reports and any notices received by the
Borrower or any Subsidiary of the Borrower or any ERISA Affiliate with respect
to any Plan or Foreign Pension Plan shall be delivered to the Banks no later
than 10 days after the date such report has been filed with the Internal Revenue
Service or received by the Borrower or the Subsidiary or the ERISA Affiliate.
7.09 GOOD REPAIR. The Borrower will, and will cause each of its
Subsidiaries to, ensure that its material properties and equipment used in its
business are kept in good repair, working order and condition, normal wear and
tear and damage by casualty excepted, and, subject to Section 8.09, that from
time to time there are made in such properties and equipment all needful and
proper repairs, renewals, replacements, extensions, additions, betterments and
improvements thereto, to the extent and in the manner useful or customary for
companies in similar businesses.
7.10 END OF FISCAL YEARS; FISCAL QUARTERS. The Borrower will, for
financial reporting purposes, cause (i) each of its, and each of its
Subsidiaries', fiscal years to end on FYE of each year and (ii) each of its, and
each of its Subsidiaries', fiscal quarters to end on FQE1, FQE2, FQE3 and FYE of
each year.
7.11 ADDITIONAL SECURITY; FURTHER ASSURANCES. (a) The Borrower will,
and will cause each of its Domestic Subsidiaries (and subject to Section 7.13,
each of its Foreign Subsidiaries) to, grant to the Collateral Agent security
interests and mortgages in such assets and properties of the Borrower and its
Subsidiaries as are not covered by the original Security Documents, and as may
be requested from time to time by the Administrative Agent or the Required Banks
(collectively, the "Additional Security Documents"). All such security interests
and mortgages shall be granted pursuant to documentation reasonably satisfactory
in form and substance to the Administrative Agent and shall constitute valid and
enforceable perfected security interests and mortgages superior to and prior to
the rights of all third Persons and subject to no other Liens except for
Permitted Liens. The Additional Security Documents or instruments related
thereto shall have been duly recorded or filed in such manner and in such places
as are required by law to establish, perfect, preserve and protect the Liens in
favor of the Collateral Agent required to be granted pursuant to the Additional
Security Documents and all taxes, fees and other charges payable in connection
therewith shall have been paid in full.
(b) The Borrower will, and will cause each of its Subsidiaries to, at
the expense of the Borrower, make, execute, endorse, acknowledge, file and/or
deliver to the Collateral Agent from time to time such vouchers, invoices,
schedules, confirmatory assignments, conveyances, financing statements, transfer
endorsements, powers of attorney, certificates, real property surveys, reports
and other assurances or instruments and take such further steps relating to the
collateral covered by any of the Security Documents as the Collateral Agent may
reasonably require. Furthermore, the Borrower shall cause to be delivered to the
Collateral Agent such opinions of
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counsel, title insurance and other related documents as may be reasonably
requested by the Administrative Agent to assure themselves that this Section
7.11 has been complied with.
(c) If the Administrative Agent or the Required Banks determine that
they are required by law or regulation to have appraisals prepared in respect of
the Real Property of the Borrower and its Subsidiaries constituting Collateral,
the Borrower shall provide to the Administrative Agent appraisals which satisfy
the applicable requirements of the Real Estate Appraisal Reform Amendments of
the Financial Institution Reform, Recovery and Enforcement Act of 1989 and which
shall be in form and substance reasonably satisfactory to the Administrative
Agent.
(d) The Borrower agrees that each action required above by this
Section 7.11 shall be completed within 90 days after such action is either
requested to be taken by the Administrative Agent or the Required Banks or
required to be taken by the Borrower and its Subsidiaries pursuant to the terms
of this Section 7.11; PROVIDED that in no event shall the Borrower be required
to take any action, other than using its reasonable commercial efforts, to
obtain consents from third parties with respect to its compliance with this
Section 7.11.
(e) Within 60 days following the Initial Borrowing Date, the Borrower
shall cause to be delivered to the Collateral Agent surveys in form and
substance reasonably satisfactory to the Collateral Agent of each Mortgaged
Property designated as "owned" on Schedule 6.21, dated a recent date reasonably
acceptable to the Collateral Agent, certified in a manner reasonably
satisfactory to the Collateral Agent by a licensed professional surveyor
reasonably satisfactory to the Collateral Agent. At the time of the delivery of
such surveys for such Mortgaged Properties, the Mortgage Policies with respect
to such Mortgaged Properties shall be amended in a manner reasonably
satisfactory to the Collateral Agent to remove therefrom any "survey exception"
noted therein or cause the title company providing such Mortgage Policies to
insure over the same in a manner reasonably satisfactory to the Collateral
Agent. In addition, by such date, the Borrower also shall cause to be delivered
to the Collateral Agent such estoppel letters, landlord waiver letters,
non-disturbance letters and similar assurances as may have been reasonably
requested (and not waived) by the Collateral Agent with respect to Mortgaged
Properties that are Leaseholds, which letters shall be in form and substance
reasonably satisfactory to the Collateral Agent.
7.12 INTEREST RATE PROTECTION. The Borrower shall no later than 90
days following the Initial Borrowing Date enter into Interest Rate Protection
Agreements, satisfactory to the Administrative Agent, with a term of at least
three years, establishing a fixed or maximum interest rate acceptable to the
Administrative Agent in respect of at least 50% of the sum of the then
outstanding Term Loans.
7.13 FOREIGN SUBSIDIARIES SECURITY. If following a change in the
relevant sections of the Code or the regulations, rules, rulings, notices or
other official pronouncements issued or promulgated thereunder, counsel for the
Borrower reasonably acceptable to the Administrative Agent does not within 30
days after a request from the Administrative Agent or the Required Banks deliver
evidence, in form and substance mutually satisfactory to the Administrative
Agent and the Borrower, with respect to any Foreign Subsidiary of the Borrower
which has not already had all of its stock pledged pursuant to the Pledge
Agreement that (i) a pledge (x) of 66-2/3% or more of the total combined voting
power of all classes of capital stock of such Foreign Subsidiary
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entitled to vote, and (y) of any promissory note issued by such Foreign
Subsidiary to the Borrower or any of its Domestic Subsidiaries, (ii) the
entering into by such Foreign Subsidiary of a security agreement in
substantially the form of the Security Agreement and (iii) the entering into by
such Foreign Subsidiary of a guaranty in substantially the form of the
Subsidiary Guaranty, in any such case would cause the undistributed earnings of
such Foreign Subsidiary as determined for Federal income tax purposes to be
treated as a deemed dividend to such Foreign Subsidiary's United States parent
for Federal income tax purposes, then in the case of a failure to deliver the
evidence described in clause (i) above, that portion of such Foreign
Subsidiary's outstanding capital stock or any promissory notes so issued by such
Foreign Subsidiary, in each case not theretofore pledged pursuant to the Pledge
Agreement shall be pledged to the Collateral Agent for the benefit of the
Secured Creditors pursuant to the Pledge Agreement (or another pledge agreement
in substantially similar form, if needed), and in the case of a failure to
deliver the evidence described in clause (ii) above, such Foreign Subsidiary
shall execute and deliver the Security Agreement (or another security agreement
in substantially similar form, if needed), granting the Secured Creditors a
security interest in all of such Foreign Subsidiary's assets and securing the
Obligations of the Borrower under the Credit Documents and under any Interest
Rate Protection Agreement or Other Hedging Agreement and, in the event the
Subsidiary Guaranty shall have been executed by such Foreign Subsidiary, the
obligations of such Foreign Subsidiary thereunder, and in the case of a failure
to deliver the evidence described in clause (iii) above, such Foreign Subsidiary
shall execute and deliver the Subsidiary Guaranty (or another guaranty in
substantially similar form, if needed), guaranteeing the Obligations of the
Borrower under the Credit Documents and under any Interest Rate Protection
Agreement or Other Hedging Agreement, in each case to the extent that the
entering into such Security Agreement or Subsidiary Guaranty is permitted by the
laws of the respective foreign jurisdiction and with all documents delivered
pursuant to this Section 7.13 to be in form and substance reasonably
satisfactory to the Administrative Agent.
7.14 PLEDGE OF BORROWER'S STOCK. In the event that at any time after
the Initial Borrowing Date a holding company shall be formed to own the voting
stock of the Borrower, the Borrower will promptly cause such holding company to
pledge to the Collateral Agent, for the benefit of the Secured Creditors, all
voting stock of the Borrower pursuant to documentation (including legal opinions
related thereto) reasonably satisfactory to the Collateral Agent.
SECTION 8. NEGATIVE COVENANTS. The Borrower hereby covenants and
agrees that as of the Effective Date and thereafter for so long as this
Agreement is in effect and until the Commitments have terminated, no Letters of
Credit (other than Letters of Credit, together with all Fees that have accrued
and will accrue thereon through the stated termination date of such Letters of
Credit, which have been cash collaterialized in a manner reasonably satisfactory
to the Letter of Credit Issuer) or Notes are outstanding and the Loans, together
with interest, Fees and all other Obligations (other than any indemnities
described in Section 12.13 which are not then due and payable) incurred
hereunder, are paid in full:
8.01 CHANGES IN BUSINESS. The Borrower and its Subsidiaries will not
engage in any businesses which are not the same, similar, related or ancillary
to the businesses in which the Borrower and its Subsidiaries are engaged on the
Initial Borrowing Date.
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8.02 CONSOLIDATION, MERGER, SALE OR PURCHASE OF ASSETS, ETC. The
Borrower will not, and will not permit any of its Subsidiaries to, wind up,
liquidate or dissolve its affairs or enter into any transaction of merger or
consolidation, or convey, sell, lease or otherwise dispose of (or agree to do
any of the foregoing at any future time) all or any part of its property or
assets (other than inventory in the ordinary course of business), or enter into
any partnerships, joint ventures or sale-leaseback transactions, or purchase or
otherwise acquire (in one or a series of related transactions) any part of the
property or assets (other than purchases or other acquisitions of inventory,
materials, equipment and databases in the ordinary course of business) of any
Person, except that the following shall be permitted:
(a) the consummation of the Recapitalization;
(b) the Borrower and its Subsidiaries may, as lessee, enter into
operating leases in the ordinary course of business with respect to real or
personal property;
(c) Capital Expenditures by the Borrower and its Subsidiaries to the
extent not in violation of Section 8.09;
(d) the advances, investments and loans permitted pursuant to Section
8.06;
(e) the Borrower and its Subsidiaries may sell assets, PROVIDED that
(i) the aggregate sale proceeds from all assets subject to such sales
pursuant to this clause (e) (other than in the ordinary course of business,
the Net Cash Proceeds of which are not required to be applied to the making
of mandatory prepayments pursuant to the last sentence of Section
4.02(A)(c)) shall not exceed $3,000,000 in any fiscal year of the Borrower
and (ii) the Net Cash Proceeds from sales described in (i) above are either
applied to repay Term Loans as provided in Section 4.02(A)(c) or reinvested
in replacement assets to the extent permitted by Section 4.02(A)(c);
(f) the Borrower and its Subsidiaries may sell other assets, PROVIDED
that the aggregate sale proceeds from all such asset sales pursuant to this
clause (f) does not exceed $50,000 in any fiscal year of the Borrower;
(g) the Borrower and its Subsidiaries may sell or discount, in each
case without recourse, accounts receivable arising in the ordinary course
of business, but only in connection with the compromise or collection
thereof;
(h) the Borrower and its Subsidiaries may sell or exchange any item of
equipment, so long as the purpose of each such sale or exchange is to
acquire (and results within 90 days before or after such sale or exchange
in the acquisition of) replacement items of equipment which are the
functional equivalent of the item of equipment so sold or exchanged;
(i) the Borrower and its Subsidiaries may, in the ordinary course of
business, license patents, trademarks, copyrights and know-how to third
Persons and to one another, so long as each such license is permitted to be
assigned pursuant to the Security Agreement (to the extent that a security
interest in such patents, trademarks, copyrights
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and know-how is granted thereunder) and does not otherwise prohibit the
granting of a Lien by the Borrower or any of its Subsidiaries pursuant to
the Security Agreement in the intellectual property covered by such
license;
(j) any Subsidiary of the Borrower may be merged or consolidated with
or into the Borrower (PROVIDED that the Borrower shall be the continuing or
surviving corporation) or with or into any one or more wholly owned
Subsidiary Guarantors (PROVIDED that the wholly owned Subsidiary or
Subsidiaries shall be the continuing or surviving corporation);
(k) any wholly owned Subsidiary may sell, lease, transfer or otherwise
dispose of any or all of its assets (upon voluntary liquidation or
otherwise) to the Borrower or any other wholly owned Subsidiary Guarantor;
(l) the Borrower may dissolve any Subsidiary that is inactive and
holds minimal assets and the continued existence of which is of no value to
the Borrower, any other Credit Party or the interests of the Banks;
(m) so long as no Default or Event of Default then exists or would
result therefrom, the Borrower may acquire assets or the capital stock of
any Person (any such acquisition permitted by this clause (m), a "Permitted
Acquisition"), other than any of the LS Companies, PROVIDED that (i) such
Person (or the assets so acquired) was, immediately prior to such
acquisition, engaged (or used) primarily in the business permitted pursuant
to Section 8.01, (ii) if such acquisition is structured as a stock
acquisition, then either (A) the Person so acquired becomes a Wholly-Owned
Domestic Subsidiary of the Borrower or (B) such Person is merged with and
into a Wholly-Owned Domestic Subsidiary of the Borrower (with such
Wholly-Owned Domestic Subsidiary being the surviving corporation of such
merger), and in any case, all of the provisions of Section 8.14 have been
complied with in respect of such Person, (iii) any Liens or Indebtedness
assumed or issued in connection with such acquisition are otherwise
permitted under Section 8.03 or 8.04, as the case may be, and (iv) the
aggregate amount expended (including any deferred compensation or payment
arrangements) by the Borrower for all such acquisitions shall not exceed
$5,000,000; and
(n) leases or subleases granted by the Borrower or any of its
Subsidiaries to third Persons not interfering in any material respect with
the business of the Borrower or any of its Subsidiaries.
To the extent the Required Banks waive the provisions of this Section 8.02 with
respect to the sale or other disposition of any Collateral, or any Collateral is
sold or otherwise disposed of as permitted by this Section 8.02, such Collateral
in each case shall be sold or otherwise disposed of free and clear of the Liens
created by the Security Documents and the Administrative Agent shall take such
actions (including, without limitation, directing the Collateral Agent to take
such actions) as are appropriate in order to effectuate the release and
discharge of such Liens as to such Collateral.
8.03 LIENS. The Borrower will not, and will not permit any of its
Subsidiaries to, create, incur, assume or suffer to exist any Lien upon or with
respect to any property or assets of
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any kind (real or personal, tangible or intangible) of the Borrower or any of
its Subsidiaries, whether now owned or hereafter acquired, or sell any such
property or assets subject to an understanding or agreement, contingent or
otherwise, to repurchase such property or assets (including sales of accounts
receivable or notes with recourse to the Borrower or any of its Subsidiaries) or
assign any right to receive income, except for the following (collectively, the
"Permitted Liens"):
(a) inchoate Liens for taxes, assessments or governmental charges or
levies not yet due or Liens for taxes, assessments or governmental charges
or levies being contested in good faith and by appropriate proceedings for
which adequate reserves have been established in accordance with GAAP;
(b) Liens in respect of property or assets of the Borrower or any of
its Subsidiaries imposed by law which were incurred in the ordinary course
of business and which have not arisen to secure Indebtedness for borrowed
money, such as carriers', warehousemen's and mechanics' Liens, statutory
landlord's Liens, and other similar Liens arising in the ordinary course of
business, and which either (x) do not in the aggregate materially detract
from the value of such property or assets or materially impair the use
thereof in the operation of the business of the Borrower or any of its
Subsidiaries or (y) are being contested in good faith by appropriate
proceedings, which proceedings have the effect of preventing the forfeiture
or sale of the property or asset subject to such Lien;
(c) Liens created by or pursuant to this Agreement and the Security
Documents;
(d) Liens in existence on the Initial Borrowing Date which are listed,
and the property subject thereto described, in Schedule 8.03, without
giving effect to any extensions or renewals thereof;
(e) Liens arising from judgments, decrees or attachments in
circumstances not constituting an Event of Default under Section 9.09;
(f) Liens incurred or deposits made (x) in the ordinary course of
business in connection with workers' compensation, unemployment insurance
and other types of social security, or to secure the performance of
tenders, statutory obligations, surety and appeal bonds, bids, government
contracts, performance and return-of-money bonds and other similar
obligations incurred in the ordinary course of business (exclusive of
obligations in respect of the payment for borrowed money); and (y) to
secure the performance of leases of Real Property, to the extent incurred
or made in the ordinary course of business;
(g) licenses, leases or subleases granted to third Persons not
interfering in any material respect with the business of the Borrower or
any of its Subsidiaries;
(h) easements, rights-of-way, restrictions, minor defects or
irregularities in title and other similar charges or encumbrances not
interfering in any material respect with the ordinary conduct of the
business of the Borrower or any of its Subsidiaries;
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(i) Liens arising from precautionary UCC financing statements
regarding operating leases permitted by this Agreement;
(j) any interest or title of a licensor, lessor or sublessor under any
license or lease permitted by this Agreement;
(k) Liens created pursuant to Capital Leases permitted pursuant to
Section 8.04(e);
(l) Permitted Encumbrances;
(m) Liens arising pursuant to purchase money mortgages or security
interests securing Indebtedness representing the purchase price (or
financing of the purchase price within 90 days after the respective
purchase) of assets acquired after the Initial Borrowing Date, PROVIDED
that (i) any such Liens attach only to the assets so purchased, (ii) the
Indebtedness secured by any such Lien does not exceed 100%, nor is less
than 70%, of the lesser of the fair market value or the purchase price of
the property being purchased at the time of the incurrence of such
Indebtedness and (iii) the Indebtedness secured thereby is permitted to be
incurred pursuant to Section 8.04(e);
(n) Liens on property or assets acquired pursuant to a Permitted
Acquisition, or on property or assets of a Subsidiary of the Borrower in
existence at the time such Subsidiary is acquired pursuant to a Permitted
Acquisition, PROVIDED that (i) any Indebtedness that is secured by such
Liens is permitted to exist under Section 8.04(k), and (ii) such Liens are
not incurred in connection with, or in contemplation or anticipation of,
such Permitted Acquisition and do not attach to any other asset of the
Borrower or any of its Subsidiaries; and
(o) additional Liens incurred by the Borrower and its Subsidiaries so
long as the value of the property subject to such Liens, and the
Indebtedness and other obligations secured thereby, do not exceed $250,000
in the aggregate at any time.
8.04 INDEBTEDNESS. The Borrower will not, and will not permit any of
its Subsidiaries to, contract, create, incur, assume or suffer to exist any
Indebtedness, except:
(a) Indebtedness incurred pursuant to this Agreement and the other
Credit Documents;
(b) Existing Indebtedness outstanding on the Initial Borrowing Date
and listed on Schedule 6.24, without giving effect to any subsequent
extension, renewal or refinancing thereof;
(c) Indebtedness of the Borrower and the Subsidiary Guarantors
incurred under one or more Senior Subordinated Note Indentures and Senior
Subordinated Notes and the other Senior Subordinated Note Documents
delivered in connection therewith so long as (A) all of the terms and
conditions (and the documentation) in connection therewith (including,
without limitation, the issuer, amortization, maturities, interest rates,
limitations on cash interest payable, covenants, defaults, remedies,
sinking fund provisions,
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subordination provisions and other terms), taken as a whole, are not
materially less favorable to the Borrower, and the subordination provisions
thereof are not less favorable to the Banks, than those described in the
Offering Memorandum dated December 13, 1996 relating to the Senior
Subordinated Notes and (B) the aggregate principal amount of outstanding
Senior Subordinated Notes under the Senior Subordinated Note Indenture
shall not exceed $100,000,000 at any time plus the amount of additional
Senior Subordinated Notes issued to pay interest in lieu of payment of
interest in cash;
(d) Indebtedness under Interest Rate Protection Agreements entered
into to protect the Borrower against fluctuations in interest rates in
respect of the Obligations;
(e) Capitalized Lease Obligations and Indebtedness of the Borrower and
its Subsidiaries incurred pursuant to purchase money Liens permitted under
Section 8.03(m), PROVIDED that (i) all such Capitalized Lease Obligations
are permitted under Section 8.09, and (ii) the sum of (x) the aggregate
Capitalized Lease Obligations outstanding at any time plus (y) the
aggregate principal amount of such purchase money Indebtedness outstanding
at such time shall not exceed $10,000,000;
(f) Indebtedness constituting Intercompany Loans to the extent
permitted by Section 8.06(h);
(g) Indebtedness of the Borrower under the Shareholder Subordinated
Notes to the extent permitted by Section 8.07(ii);
(h) Indebtedness under Other Hedging Agreements providing protection
against fluctuations in currency values in connection with the Borrower's
or any of its Subsidiaries' operations so long as management of the
Borrower or such Subsidiary, as the case may be, has determined that the
entering into of such Other Hedging Agreements are bona fide hedging
activities;
(i) Indebtedness of Foreign Subsidiaries to the Borrower or any of its
Domestic Subsidiaries as a result of any investment made pursuant to
Section 8.06(l);
(j) Indebtedness consisting of guaranties (x) by the Borrower of
Indebtedness, leases and any other obligation or liability permitted to be
incurred by Wholly-Owned Domestic Subsidiaries of the Borrower, (y) by
Domestic Subsidiaries of the Borrower of Indebtedness, leases and any other
obligation or liability permitted to be incurred by the Borrower or other
Wholly-Owned Domestic Subsidiaries of the Borrower, and (z) by Foreign
Subsidiaries of the Borrower of Indebtedness, leases and any other
obligation or liability permitted to be incurred by other Wholly-Owned
Foreign Subsidiaries of the Borrower;
(k) Indebtedness of a Subsidiary acquired pursuant to a Permitted
Acquisition (or Indebtedness assumed at the time of a Permitted Acquisition
of an asset securing such Indebtedness), PROVIDED that (i) such
Indebtedness was not incurred in connection with, or in anticipation or
contemplation of, such Permitted Acquisition and (ii) at the time of such
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Permitted Acquisition such Indebtedness does not exceed 10% of the total
value of the assets of the Subsidiary so acquired, or of the asset so
acquired, as the case may be;
(l) Insurance Debt;
(m) Indebtedness of the Borrower evidenced by the Recapitalization
Demand Note; PROVIDED that such Indebtedness is paid in full on the Initial
Borrowing Date; and
(n) additional Indebtedness of the Borrower and its Subsidiaries not
otherwise permitted hereunder not exceeding $7,500,000 in aggregate
principal amount at any time outstanding.
8.05 DESIGNATED SENIOR DEBT. The Borrower will not, and will not
permit any of its Subsidiaries to, designate any Indebtedness (other than the
Obligations) as "Designated Senior Debt" for purposes of, and as defined in, the
Senior Subordinated Note Documents.
8.06 ADVANCES, INVESTMENTS AND LOANS. The Borrower will not, and will
not permit any of its Subsidiaries to, lend money or credit or make advances to
any Person, or purchase or acquire any stock, obligations or securities of, or
any other interest in, or make any capital contribution to, any Person, or
purchase or own a futures contract or otherwise become liable for the purchase
or sale of currency or other commodities at a future date in the nature of a
futures contract, or hold any cash, Cash Equivalents or Foreign Cash
Equivalents, except:
(a) the Borrower and its Subsidiaries may invest in cash and Cash
Equivalents, and Foreign Subsidiaries of the Borrower may invest in Foreign
Cash Equivalents;
(b) the Borrower and its Subsidiaries may acquire and hold receivables
owing to them, if created or acquired in the ordinary course of business
and payable or dischargeable in accordance with customary trade terms
(including the dating of receivables and extensions of payment in the
ordinary course of business consistent with past practices) of the Borrower
or such Subsidiary;
(c) the Borrower and its Subsidiaries may acquire and own investments
(including debt obligations) received in connection with the bankruptcy or
reorganization of suppliers and customers and in settlement of delinquent
obligations of, and other disputes with, customers and suppliers arising in
the ordinary course of business;
(d) Interest Rate Protection Agreements entered into in compliance
with Section 8.04(d) shall be permitted;
(e) advances, loans and investments in existence on the Initial
Borrowing Date and listed on Schedule 8.06 shall be permitted, without
giving effect to any additions thereto or replacements thereof;
(f) (i) the Borrower may acquire and hold obligations of one or more
officers or other employees of the Borrower or its Subsidiaries in
connection with such officers' or employees' acquisition of shares of the
Borrower Common Stock so long as no cash is
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paid by the Borrower or any of its Subsidiaries in connection with the
acquisition of any such obligations, (ii) the Borrower may extend loans to
officers and employees of the Borrower and its Subsidiaries on or after the
date on which any such officers and employees exercise their options to
purchase capital stock of the Borrower issued to them in connection with
the Transaction so long as the proceeds of such loans are promptly used by
such officers and employees to pay taxes payable by them as a result of
such exercise and (iii) investments consisting of loans by the Borrower or
its Subsidiaries to employees of the Borrower or its Subsidiaries made
solely for the purpose of funding purchases by such employees of Borrower
Common Stock; PROVIDED that the aggregate principal amount at any time
outstanding of the obligations and loans extended pursuant to clauses (i),
(ii) and (iii) shall not exceed $3,000,000;
(g) deposits made in the ordinary course of business consistent with
past practices to secure the performance of leases shall be permitted;
(h) the Borrower may make intercompany loans and advances to any of
its Subsidiaries and any Subsidiary of the Borrower may make intercompany
loans and advances to the Borrower or any other Subsidiary of the Borrower
(collectively, "Intercompany Loans"), PROVIDED that (w) at no time shall
the aggregate outstanding principal amount of all Intercompany Loans made
pursuant to this clause (h) when added to the amount of contributions,
capitalizations and forgiveness theretofore made pursuant to Section
8.06(n), exceed $3,000,000 (determined without regard to any write-downs or
write-offs of such loans and advances), (x) each Intercompany Loan made by
a Foreign Subsidiary or a non-Wholly-Owned Domestic Subsidiary to the
Borrower or a Wholly- Owned Domestic Subsidiary of the Borrower shall
contain the subordination provisions set forth on Exhibit I, (y) each
Intercompany Loan shall be evidenced by an Intercompany Note and (z) each
such Intercompany Note (other than (1) Intercompany Notes issued by Foreign
Subsidiaries of the Borrower to the Borrower or any of its Domestic
Subsidiaries and (2) Intercompany Notes held by Foreign Subsidiaries of the
Borrower, in each case except to the extent provided in Section 7.13) shall
be pledged to the Collateral Agent pursuant to the Pledge Agreement;
(i) loans and advances by the Borrower and its Subsidiaries to
employees of the Borrower and its Subsidiaries for moving and travel
expenses and other similar expenses, in each case incurred in the ordinary
course of business, in an aggregate outstanding principal amount not to
exceed $1,000,000 at any time (determined without regard to any write-downs
or write-offs of such loans and advances), shall be permitted;
(j) Other Hedging Agreements entered into in compliance with Section
8.04(h) shall be permitted;
(k) Permitted Acquisitions shall be permitted;
(l) the Borrower and its Subsidiaries may make investments in their
respective Subsidiaries in connection with the transfers of those assets
permitted to be transferred pursuant to Section 8.02(k), it being
understood that the Borrower and its Subsidiaries may
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convert any investment initially made as an equity investment to
intercompany Indebtedness held by the Borrower or such Subsidiary;
(m) [Reserved]
(n) the Borrower and its Wholly-Owned Domestic Subsidiaries may make
cash capital contributions to non-Wholly-Owned Domestic Subsidiaries and
Foreign Subsidiaries of the Borrower, and may capitalize or forgive any
Indebtedness owed to them by a non-Wholly-Owned Domestic Subsidiary or
Foreign Subsidiary of the Borrower, and outstanding under clause (h) of
this Section 8.06, PROVIDED that the aggregate amount of such
contributions, capitalizations and forgiveness, when added to the aggregate
outstanding principal amount of Intercompany Loans made under such clause
(h) (determined without regard to any write-downs or write-offs thereof),
shall not exceed $3,000,000;
(o) the Borrower may contribute cash to one or more of its
Wholly-Owned Domestic Subsidiaries, formed after the Initial Borrowing Date
in accordance with Section 8.14, so long as the aggregate amount of such
cash so contributed to all such Wholly- Owned Domestic Subsidiaries does
not exceed $500,000;
(p) the Borrower and its Subsidiaries may own the capital stock of
their respective Subsidiaries created or acquired in accordance with the
terms of this Agreement;
(q) the Borrower may make loans or cash capital contributions to the
LS Companies in an aggregate amount not exceeding $5,000,000 at any time
outstanding, and may fund or assume pension plan obligations of the LS
Companies in an amount not exceeding $750,000 per year; and
(r) the Recapitalization.
8.07 DIVIDENDS, ETC. The Borrower will not, and will not permit any of
its Subsidiaries to, declare or pay any dividends (other than dividends payable
solely in common stock of the Borrower or any such Subsidiary, as the case may
be) or return any capital to, its stockholders or authorize or make any other
distribution, payment or delivery of property or cash to its stockholders as
such, or redeem, retire, purchase or otherwise acquire, directly or indirectly,
for a consideration, any shares of any class of its capital stock, now or
hereafter outstanding (or any warrants for or options or stock appreciation
rights in respect of any of such shares), or set aside any funds for any of the
foregoing purposes, and the Borrower will not permit any of its Subsidiaries to
purchase or otherwise acquire for consideration any shares of any class of the
capital stock of the Borrower or any Subsidiary, as the case may be, now or
hereafter outstanding (or any options or warrants or stock appreciation rights
issued by such Person with respect to its capital stock) (all of the foregoing
"Dividends"), except that:
(i) any Subsidiary of the Borrower may pay Dividends to the Borrower
or any Wholly-Owned Subsidiary of the Borrower;
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(ii) the Borrower may redeem or purchase shares of Borrower Common Stock
and Additional Permitted Preferred Stock or options to purchase Borrower Common
Stock or Additional Permitted Preferred Stock, as the case may be, held by
former employees of the Borrower or any of its Subsidiaries following the
termination of their employment and/or by existing employees of the Borrower or
any of its Subsidiaries who satisfy the "deemed hardship distribution standards"
within the meaning of Treas. Reg. [Section] 1.401(k)-1(d)(2)(iv) and who the
Borrower designates, in its discretion, as eligible for such redemption or
purchase; PROVIDED that (w) the only consideration paid by the Borrower in
respect of such redemptions and/or purchases shall be cash and Shareholder
Subordinated Notes, (x) the sum of (A) the aggregate amount paid by the Borrower
in cash in respect of all such redemptions and/or purchases plus (B) the
aggregate amount of all principal and interest payments made (other than
payments solely in the form of additional Shareholder Subordinated Notes) on
Shareholder Subordinated Notes shall not exceed $1,500,000 in any fiscal year of
the Borrower, PROVIDED that such amount shall be increased by an amount (not to
exceed $5,000,000 for purposes of this clause (ii)) equal to the proceeds
received by the Borrower after the Initial Borrowing Date and during such fiscal
year from the sale or issuance of Borrower Common Stock or Additional Permitted
Preferred Stock, as the case may be, to management of the Borrower or any of its
Subsidiaries and (y) at the time of any cash payment permitted to be made
pursuant to this Section 8.07(ii), including any cash payment under a
Shareholder Subordinated Note, no Default or Event of Default shall then exist
or result therefrom;
(iii) so long as no Default or Event of Default then exists or would result
therefrom, the Borrower may redeem shares of Preferred Stock (i) with the
proceeds of the sale of Borrower Common Stock, if, after giving pro forma effect
to such sale of common stock and such redemption of Preferred Stock as if such
events had occurred on the last day of the most recently ended Test Period, the
Leverage Ratio would be less than or equal to 4.5 to 1.0 and (ii) with the
proceeds of Additional Permitted Preferred Stock; and
(iv) Borrower Preferred Stock issued as a dividend on other Borrower
Preferred Stock.
8.08 TRANSACTIONS WITH AFFILIATES. The Borrower will not, and will not
permit any of its Subsidiaries to, enter into any transaction or series of
transactions with any Affiliate other than on terms and conditions substantially
as favorable to the Borrower or such Subsidiary as would be reasonably expected
to be obtainable by the Borrower or such Subsidiary at the time in a comparable
arm's-length transaction with a Person other than an Affiliate; PROVIDED that
the following shall in any event be permitted: (i) the Transaction; (ii) the
payment on the Initial Borrowing Date of one time fees to Lee and/or the Lee
Affiliates in an aggregate amount (for all such Persons taken together) not to
exceed $5,000,000 (plus reasonable out-of-pocket expenses incurred by such
Persons in providing services to the Borrower); (iii) the payment, on a
quarterly basis, of management fees to Lee and/or Lee Affiliates in an aggregate
amount (for all such Persons taken together) not to exceed $125,000 in any
fiscal quarter of the Borrower, PROVIDED that if during any fiscal quarter of
the Borrower a Default or an Event of Default exists, only one-half of such fee
for such fiscal quarter may be paid and the remaining one-half of
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such fee may be paid at such time as all Defaults and Events of Default
have been cured or waived; (iv) the reimbursement of Lee and/or Lee
Affiliates for their reasonable out-of-pocket expenses incurred by them in
connection with performing management services to the Borrower and its
Subsidiaries; (v) the payment of one time fees to Lee and/or the Lee
Affiliates in connection with each acquisition of a company or a line of
business by the Borrower or its Subsidiaries, such fees to be payable at
the time of each such acquisition and not to exceed 1% of the aggregate
consideration paid by the Borrower and its Subsidiaries for any such
acquisition and (vi) the Transaction Bonuses. Notwithstanding anything to
the contrary contained in this Section 8.08, at no time will the Borrower
or any of its Subsidiaries make any payments to Lee and/or any of its
Affiliates in an amount which would exceed that amount permitted to be paid
pursuant to the Senior Subordinated Note Indenture at such time.
8.09 CAPITAL EXPENDITURES. (a) The Borrower will not, and will not
permit any of its Subsidiaries to, make any Capital Expenditures, except that
during any fiscal year set forth below, the Borrower and its Subsidiaries may
make Capital Expenditures so long as the aggregate amount of such Capital
Expenditures does not exceed in any fiscal year set forth below the amount set
forth opposite such fiscal year below:
Fiscal Year Ending Amount
------------------ ------
FYE 1996 $12,500,000
FYE 1997 $12,000,000
FYE 1998 $12,500,000
FYE 1999 $13,000,000
FYE 2000 $13,500,000
FYE 2001 $14,000,000
FYE 2002 $14,500,000
FYE 2003 $15,000,000
FYE 2004 $15,500,000
(b) Notwithstanding the foregoing, in the event that the amount of
Capital Expenditures permitted to be made by the Borrower and its Subsidiaries
pursuant to clause (a) above in any fiscal year (before giving effect to any
increase in such permitted expenditure amount pursuant to this clause (b)) is
greater than the amount of such Capital Expenditures made by the Borrower and
its Subsidiaries during such fiscal year, such excess (the "Rollover Amount")
may be carried forward and utilized to make Capital Expenditures in succeeding
fiscal years, PROVIDED that in no event shall the aggregate amount of Capital
Expenditures made by the
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Borrower and its Subsidiaries during any fiscal year pursuant to Section 8.09(a)
exceed 125% of the amount set forth opposite such fiscal year as set forth in
the table in such Section 8.09(a).
(c) Notwithstanding the foregoing, the Borrower and its Subsidiaries
may make Capital Expenditures (which Capital Expenditures will not be included
in any determination under the foregoing clause (a)) with the Net Cash Proceeds
of Asset Sales to the extent such proceeds are not required to be applied to
repay Term Loans pursuant to Section 4.02(A)(c).
(d) Notwithstanding the foregoing, the Borrower and its Subsidiaries
may make Capital Expenditures (which Capital Expenditures will not be included
in any determination under the foregoing clause (a)) with the insurance proceeds
received by the Borrower or any of its Subsidiaries from any Recovery Event so
long as such Capital Expenditures are to replace or restore any properties or
assets in respect of which such proceeds were paid within 360 days following the
date of the receipt of such insurance proceeds to the extent such insurance
proceeds are not required to be applied to repay Term Loans pursuant to Section
4.02(A)(f).
(e) Notwithstanding the foregoing, the Borrower may make Capital
Expenditures (which Capital Expenditures will not be included in any
determination under the foregoing clause (a)) constituting Permitted
Acquisitions.
(f) Notwithstanding the foregoing, the Borrower may make Capital
Expenditures (which Capital Expenditures will not be included in any
determination under the foregoing clause (a)) in an amount equal to the net cash
proceeds of any equity offering by the Borrower not required to be prepaid
pursuant to Section 4.02(A)(d).
8.10 MINIMUM CONSOLIDATED EBITDA. The Borrower will not permit
Consolidated EBITDA for any Test Period ending on a date set forth below to be
less than the amount set forth opposite such date:
Date Amount
---- ------
FQE1 1997 $39,000,000
FQE2 1997 $40,000,000
FQE3 1997 $40,000,000
FYE 1997 $42,000,000
FQE1 1998 $42,000,000
FQE2 1998 $42,000,000
FQE3 1998 $42,000,000
FYE 1998 $45,000,000
FQE1 1999 $45,000,000
FQE2 1999 $45,000,000
FQE3 1999 $45,000,000
FYE 1999 $52,000,000
FQE1 2000 $52,000,000
FQE2 2000 $52,000,000
FQE3 2000 $52,000,000
FYE 2000 $58,000,000
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FQE1 2001 $58,000,000
FQE2 2001 $58,000,000
FQE3 2001 $58,000,000
FYE 2001 $65,000,000
FQE1 2002 $65,000,000
FQE2 2002 $65,000,000
FQE3 2002 $65,000,000
FYE 2002 $70,000,000
FQE1 2003 $70,000,000
FQE2 2003 $70,000,000
FQE3 2003 $70,000,000
FYE 2003 $75,000,000
FQE1 2004 $75,000,000
FQE2 2004 $75,000,000
FQE3 2004 $75,000,000
FYE 2004 $80,000,000
8.11 INTEREST COVERAGE RATIO. The Borrower will not permit the
Interest Coverage Ratio for any Test Period ending on a date set forth below to
be less than the ratio set forth opposite such date:
Date Ratio
---- -----
FQE1 1997 1.50:1.00
FQE2 1997 1.50:1.00
FQE3 1997 1.50:1.00
FYE 1997 1.70:1.00
FQE1 1998 1.70:1.00
FQE2 1998 1.70:1.00
FQE3 1998 1.70:1.00
FYE 1998 2.00:1.00
FQE1 1999 2.00:1.00
FQE2 1999 2.00:1.00
FQE3 1999 2.00:1.00
FYE 1999 2.35:1.00
FQE1 2000 2.35:1.00
FQE2 20001 2.35:1.00
FQE3 2000 2.35:1.00
FYE 2000 2.80:1.00
FQE1 2001 2.80:1.00
FQE2 2001 2.80:1.00
FQE3 2001 2.80:1.00
FYE 2001 3.00:1.00
FQE1 2002 3.00:1.00
FQE2 2002 3.00:1.00
FQE3 2002 3.00:1.00
FYE 2002 3.00:1.00
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FQE1 2003 3.00:1.00
FQE2 2003 3.00:1.00
FQE3 2003 3.00:1.00
FYE 2003 3.00:1.00
FQE1 2004 3.00:1.00
FQE2 2004 3.00:1.00
FQE3 2004 3.00:1.00
FYE 2004 3.00:1.00
8.12 LEVERAGE RATIO. The Borrower will not permit the Leverage Ratio
on the last day of any fiscal quarter ending on or about any date set forth
below to be more than the ratio set forth opposite such date:
Period Ratio
------ -----
FQE1 1997 6.75:1.00
FQE2 1997 6.75:1.00
FQE3 1997 6.75:1.00
FYE 1997 6.00:1.00
FQE1 1998 6.00:1.00
FQE2 1998 6.00:1.00
FQE3 1998 6.00:1.00
FYE 1998 5.00:1.00
FQE1 1999 5.00:1.00
FQE2 1999 5.00:1.00
FQE3 1999 5.00:1.00
FYE 1999 4.20:1.00
FQE1 2000 4.20:1.00
FQE2 2000 4.20:1.00
FQE3 2000 4.20:1.00
FYE 2000 3.40:1.00
FQE1 2001 3.40:1.00
FQE2 2001 3.40:1.00
FQE3 2001 3.40:1.00
FYE 2001 3.00:1.00
FQE1 2002 3.00:1.00
FQE2 2002 3.00:1.00
FQE3 2002 3.00:1.00
FYE 2002 3.00:1.00
FQE1 2003 3.00:1.00
FQE2 2003 3.00:1.00
FQE3 2003 3.00:1.00
FYE 2003 3.00:1.00
FQE1 2004 3.00:1.00
FQE2 2004 3.00:1.00
FQE3 2004 3.00:1.00
FYE 2004 3.00:1.00
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8.13 LIMITATION ON VOLUNTARY PAYMENTS AND MODIFICATIONS OF
INDEBTEDNESS; MODIFICATIONS OF CERTIFICATE OF INCORPORATION, BY-LAWS AND CERTAIN
OTHER AGREEMENTS; ISSUANCES OF CAPITAL STOCK; ETC. The Borrower will not, and
will not permit any of its Subsidiaries to:
(i) make (or give any notice in respect of) any voluntary or
optional payment or prepayment on or redemption or defeasance or
acquisition for value of (including, without limitation, by way of
depositing with the trustee with respect thereto or any other Person money
or securities before due for the purpose of paying when due) any Existing
Indebtedness or any Senior Subordinated Note;
(ii) make (or give any notice in respect of) any prepayment or
redemption or acquisition for value or defeasance as a result of any asset
sale, change of control or similar event (including, without limitation, by
way of depositing with the trustee with respect thereto or any other Person
money or securities before due for the purpose of paying when due) with
respect to any Senior Subordinated Note; or pay interest in cash on any
Senior Subordinated Note to the extent the relevant obligor has an option
to make such payment by the issuance of additional Senior Subordinated
Notes;
(iii) make (or give any notice in respect of) any principal or
interest payment on, or any redemption or acquisition for value of, any
Shareholder Subordinated Note, except to the extent permitted by Section
8.07(ii);
(iv) amend or modify, or permit the amendment or modification of, any
provision of any Senior Subordinated Note Document or any Shareholder
Subordinated Notes which is in any way adverse to the interest of the Banks
in the opinion of the Administrative Agent in its sole discretion;
(v) amend, modify or change in any way adverse to the interests of
the Banks, any Tax Allocation Agreement, any Management Agreement, any
Recapitalization Document, its Certificate of Incorporation (including,
without limitation, by the filing or modification of any certificate of
designation) or By-Laws, or any agreement entered into by it, with respect
to its capital stock (including any Shareholders' Agreement), or enter into
any new agreement with respect to its capital stock which in any way could
be adverse to the interests of the Banks; and
(vi) issue any class of capital stock other than non-redeemable
common stock, the Borrower Preferred Stock and Additional Permitted
Preferred Stock.
Notwithstanding the foregoing (a) the Senior Subordinated Notes may be
refinanced in accordance with the provisions of Section 8.04(c) without
limitation by this Section 8.13 and (b) so long as no Default or Event of
Default exists or would result after giving effect thereto, (i) the Senior
Subordinated Notes and accrued interest thereon may be repaid with the proceeds
of the issuance of common stock by the Borrower and (ii) the Senior Subordinated
Notes issued under the Senior Subordinated Note Indenture and accrued interest
thereon may be repaid with the proceeds of the sale of common stock by the
Borrower to the extent permitted by the "equity clawback" provisions of the
Senior Subordinated Note Indenture; PROVIDED that in the case of any repayment
with proceeds of common stock under the foregoing clauses (i) or (ii), after
giving pro forma
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effect to the sale of such common stock and such repayment as if such events had
occurred on the last day of the most recently ended Test Period, the Leverage
Ratio would have been less than or equal to 4.5 to 1.0.
8.14 LIMITATION ON CERTAIN RESTRICTIONS ON SUBSIDIARIES. The Borrower
will not, and will not permit any of its Subsidiaries to, directly or
indirectly, create or otherwise cause or suffer to exist or become effective any
encumbrance or restriction on the ability of any such Subsidiary to (a) pay
dividends or make any other distributions on its capital stock or any other
interest or participation in its profits owned by the Borrower or any Subsidiary
of the Borrower or pay any Indebtedness owed to the Borrower or a Subsidiary of
the Borrower, (b) make loans or advances to the Borrower or any of the
Borrower's Subsidiaries or (c) transfer any of its properties or assets to the
Borrower or any of its Subsidiaries, except for such encumbrances or
restrictions existing under or by reason of (i) applicable law, (ii) this
Agreement and the other Credit Documents, (iii) customary provisions restricting
subletting or assignment of any lease governing a leasehold interest of the
Borrower or a Subsidiary of the Borrower, (iv) customary provisions restricting
assignment of any licensing agreement entered into by the Borrower or a
Subsidiary of the Borrower in the ordinary course of business, (v) the Senior
Subordinated Note Documents, (vi) the Existing Indebtedness Agreements and (vii)
customary provisions restricting the transfer of assets subject to Liens
permitted under Sections 8.03(k) and (m).
8.15. LIMITATION ON THE CREATION OF SUBSIDIARIES. Notwithstanding
anything to the contrary contained in this Agreement, the Borrower will not, and
will not permit any of its Subsidiaries to, establish, create or acquire after
the Initial Borrowing Date any Subsidiary; PROVIDED that the Borrower and its
Wholly-Owned Subsidiaries shall be permitted to establish or create (x)
Subsidiaries as a result of investments made pursuant to Section 8.06(n), (o)
and (p) and (y) Wholly-Owned Subsidiaries so long as (i) at least 30 days' prior
written notice thereof is given to the Administrative Agent, (ii) the capital
stock of such new Subsidiary is pledged pursuant to, and to the extent required
by, the Pledge Agreement and the certificates representing such stock, together
with stock powers duly executed in blank, are delivered to the Collateral Agent,
(iii) such new Subsidiary (other than a Foreign Subsidiary except to the extent
otherwise required pursuant to Section 7.13) executes a counterpart of the
Subsidiary Guaranty, the Pledge Agreement and the Security Agreement, and (iv)
to the extent requested by the Administrative Agent or the Required Banks, takes
all actions required pursuant to Section 7.11. In addition, each new
Wholly-Owned Subsidiary shall execute and deliver, or cause to be executed and
delivered, all other relevant documentation of the type described in Section 5
as such new Subsidiary would have had to deliver if such new Subsidiary were a
Credit Party on the Initial Borrowing Date.
8.16. LIMITATION ON LS COMPANIES. Notwithstanding anything to the
contrary contained in this Agreement, and except (i) for the LS Tax Sharing
Agreement, (ii) the intercompany Indebtedness referred to on Schedule 6.24 in an
aggregate amount (including principal, interest, fees and other amounts) not to
exceed $1,100,000 and (iii) as permitted by Section 8.06(q), the Borrower will
not, and will not permit any of its Subsidiaries to, engage in any of the
following transactions, activities or relationships with any of the LS
Companies: (a) any transaction of merger or consolidation, (b) any conveyance,
sale, lease, grant of a security or other interest in or other disposition of
(or agree to do any of the foregoing at any future time) all or part of its
property, assets or liabilities, (c) enter into any partnership, joint venture,
or sale-
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leaseback transaction, (d) any acquisition of any property, assets or
liabilities, (e) borrow from or loan any money or credit or make advances to,
(f) purchase or acquire any stock, obligations or securities of, or any other
interest in, or make any capital contribution to or investment in, (g)
capitalize or forgive any Indebtedness or other obligation owed, (h) pay any
dividends to, (i) guaranty any obligations of or (j) enter into or engage in any
other transactions, relationship or activity.
8.17. MAINTENANCE OF CORPORATE SEPARATENESS; ETC. The Borrower will
not, and will not permit any of its Subsidiaries or the LS Companies to, (a)
fail to satisfy customary corporate formalities, including, without limitation,
(i) the holding of regular board of directors' and shareholders' meetings, (ii)
the maintenance of separate corporate offices and records and (iii) the
maintenance of separate bank accounts in its own name; (b) fail to act solely in
its own corporate name and through its authorized officers and agents; (c) in
the case of each of the LS Companies, at all times cause at least one director
of such LS Company to be an individual who is not an officer, employee, director
or shareholder of the Borrower or any of its Subsidiaries; (d) commingle any
money or other assets of the Borrower or any of its Subsidiaries with any money
or other assets of any LS Company; (e) distribute financial statements to any
creditor which fail to clearly establish the separateness of each LS Company
from the Borrower and each of its Subsidiaries; or (f) take any action, or
conduct its affairs in a manner, which could reasonably be expected to result in
the separate corporate existence of each of the Borrower and each of its
Subsidiaries from the LS Companies being ignored, or the assets and liabilities
of the Borrower of any of its Subsidiaries being substantively consolidated with
those of any LS Company in a bankruptcy, reorganization or other insolvency
proceeding.
SECTION 9. EVENTS OF DEFAULT. Upon the occurrence of any of the
following specified events (each an "Event of Default"):
9.01 PAYMENTS. The Borrower shall (i) default in the payment when due
of any principal of the Loans or (ii) default, and such default shall continue
for three or more days, in the payment when due of any Unpaid Drawing, any
interest on the Loans or any Fees or any other amounts owing hereunder or under
any other Credit Document;
9.02 REPRESENTATIONS, ETC. Any representation, warranty or statement
made by any Credit Party herein or in any other Credit Document or in any
statement or certificate delivered pursuant hereto or thereto shall prove to be
untrue in any material respect on the date as of which made or deemed made; or
9.03 COVENANTS. Any Credit Party shall (a) default in the due
performance or observance by it of any term, covenant or agreement contained in
Section 7.11, 7.14 or 8, or (b) default in the due performance or observance by
it of any term, covenant or agreement (other than those referred to in Section
9.01, 9.02 or clause (a) of this Section 9.03) contained in this Agreement and
such default shall continue unremedied for a period of at least 30 days after
notice to the defaulting party by any Agent or the Required Banks; or
9.04 DEFAULT UNDER OTHER AGREEMENTS. (a) The Borrower or any of its
Subsidiaries shall (i) default in any payment with respect to any Indebtedness
(other than the Obligations) beyond the period of grace, if any, provided in the
instrument or agreement under
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which Indebtedness was created or (ii) default in the observance or performance
of any agreement or condition relating to any such Indebtedness or contained in
any instrument or agreement evidencing, securing or relating thereto, or any
other event shall occur or condition exist, the effect of which default or other
event or condition is to cause, or to permit the holder or holders of such
Indebtedness (or a trustee or agent on behalf of such holder or holders) to
cause any such Indebtedness to become due prior to its stated maturity; or (b)
any Indebtedness (other than the Obligations) of the Borrower or any of their
Subsidiaries shall be declared to be due and payable, or shall be required to be
prepaid other than by a regularly scheduled required prepayment or as a
mandatory prepayment (unless such required prepayment or mandatory prepayment
results from a default thereunder or an event of the type that constitutes an
Event of Default), prior to the stated maturity thereof; PROVIDED that it shall
not constitute an Event of Default pursuant to clause (a) or (b) of this Section
9.04 unless the principal amount of any one issue of such Indebtedness, or the
aggregate amount of all such Indebtedness referred to in clauses (a) and (b)
above, exceeds $5,000,000 at any one time; or
9.05 BANKRUPTCY, ETC. The Borrower or any of its Subsidiaries shall
commence a voluntary case concerning itself under Title 11 of the United States
Code entitled "Bankruptcy," as now or hereafter in effect, or any successor
thereto (the "Bankruptcy Code"); or an involuntary case is commenced against the
Borrower or any of its Subsidiaries and the petition is not controverted within
10 days, or is not dismissed within 60 days, after commencement of the case; or
a custodian (as defined in the Bankruptcy Code) is appointed for, or takes
charge of, all or substantially all of the property of the Borrower or any of
its Subsidiaries; or the Borrower or any of its Subsidiaries commences any other
proceeding under any reorganization, bankruptcy, arrangement, adjustment of
debt, relief of debtors, dissolution, insolvency or liquidation or similar law
of any jurisdiction whether now or hereafter in effect relating to the Borrower
or any of its Subsidiaries; or there is commenced against the Borrower or any of
its Subsidiaries any such proceeding which remains undismissed for a period of
60 days; or the Borrower or any of its Subsidiaries is adjudicated insolvent or
bankrupt; or any order of relief or other order approving any such case or
proceeding is entered; or the Borrower or any of its Subsidiaries suffers any
appointment of any custodian or the like for it or any substantial part of its
property to continue undischarged or unstayed for a period of 60 days; or the
Borrower or any of its Subsidiaries makes a general assignment for the benefit
of creditors; or any corporate action is taken by the Borrower or any of its
Subsidiaries for the purpose of effecting any of the foregoing; or
9.06 ERISA. (a) Any Plan shall fail to satisfy the minimum funding
standard required for any plan year or part thereof or a waiver of such standard
or extension of any amortization period is sought or granted under Section 412
of the Code, any Plan shall have had or is likely to have a trustee appointed to
administer such Plan, any Plan is, shall have been or is likely to be terminated
or the subject of termination proceedings under ERISA, any Plan shall have an
Unfunded Current Liability, a contribution required to be made to a Plan or a
Foreign Pension Plan has not been timely made, the Borrower or any of its
Subsidiaries or any ERISA Affiliate has incurred or is likely to incur a
liability to or on account of a Plan under Section 409, 502(i), 502(l), 515,
4062, 4063, 4064, 4069, 4201, 4204 or 4212 of ERISA or Section 401(a)(29), 4971,
4975 or 4980 of the Code, or the Borrower or any of its Subsidiaries has
incurred or is likely to incur liabilities pursuant to one or more Retiree
Welfare Plan or Foreign Pension Plans; (b) there shall result from any such
event or events the imposition of a lien, the granting of a security interest,
or a liability or a material risk of incurring a liability; and (c) which lien,
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security interest or liability which arises from such event or events will have
a Material Adverse Effect; or
9.07 SECURITY DOCUMENTS. (a) Except in each case to the extent
resulting from the failure of the Collateral Agent to retain possession of the
applicable Pledged Securities, any Security Document shall cease to be in full
force and effect, or shall cease to give the Collateral Agent the Liens, rights,
powers and privileges purported to be created thereby in favor of the Collateral
Agent, (including, without limitation, a perfected security interest in, and
Lien on, all of the Collateral, other than Collateral with an aggregate value of
less than or equal to $50,000), or (b) any Credit Party shall default in the due
performance or observance of any term, covenant or agreement on its part to be
performed or observed pursuant to any such Security Document and such default
(except to the extent that same will adversely affect the continued perfection
and priority of the Liens created by any such Security Document in Collateral
with an aggregate value in excess of $50,000, in which case clause (a) of this
Section 9.07 will be applicable) shall continue unremedied for a period of 30
days; or
9.08 GUARANTIES. The Guaranties or any provision thereof shall cease
to be in full force and effect, or any Guarantor or any Person acting by or on
behalf of such Guarantor shall deny or disaffirm such Guarantor's obligations
under any Guaranty or any Guarantor shall default in the due performance or
observance of any term, covenant or agreement on its part to be performed or
observed pursuant to any Guaranty; or
9.09 JUDGMENTS. One or more judgments or decrees shall be entered
against the Borrower or any of its Subsidiaries involving a liability (to the
extent not paid or not fully covered by insurance) in excess of $5,000,000 for
all such judgments and decrees and all such judgments or decrees shall not have
been vacated, discharged or stayed or bonded pending appeal within 60 days from
the entry thereof; or
9.10 OWNERSHIP. A Change of Control Event shall have occurred;
then, and in any such event, and at any time thereafter, if any Event of Default
shall then be continuing, the Administrative Agent shall, upon the written
request of the Required Banks, by written notice to the Borrower, take any or
all of the following actions, without prejudice to the rights of any Agent or
any Bank to enforce its claims against any Guarantor or the Borrower, except as
otherwise specifically provided for in this Agreement (PROVIDED, that if an
Event of Default specified in Section 9.05 shall occur with respect to the
Borrower or a Subsidiary Guarantor, the result which would occur upon the giving
of written notice by the Administrative Agent as specified in clauses (i) and
(ii) below shall occur automatically without the giving of any such notice): (i)
declare the Total Commitment terminated, whereupon the Commitment of each Bank
shall forthwith terminate immediately and any Commitment Fees shall forthwith
become due and payable without any other notice of any kind; (ii) declare the
principal of and any accrued interest in respect of all Loans and all
Obligations owing hereunder (including Unpaid Drawings) to be, whereupon the
same shall become, forthwith due and payable without presentment, demand,
protest or other notice of any kind, all of which are hereby waived by the
Borrower; (iii) enforce, as Collateral Agent (or direct the Collateral Agent to
enforce), any or all of the Liens and security interests created pursuant to the
Security Documents; (iv) terminate any Letter of Credit which may be terminated
in accordance with its terms; and (v) direct the Borrower to pay (and the
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Borrower hereby agrees upon receipt of such notice, or upon the occurrence of
any Event of Default specified in Section 9.05, to pay) to the Collateral Agent
at the Payment Office such additional amounts of cash, to be held as security
for the Borrower's reimbursement obligations in respect of Letters of Credit
then outstanding, equal to the aggregate Stated Amount of all Letters of Credit
then outstanding.
SECTION 10. DEFINITIONS. As used herein, the following terms shall
have the meanings herein specified unless the context otherwise requires.
Defined terms in this Agreement shall include in the singular number the plural
and in the plural the singular:
"A Term Loan" shall have the meaning provided in Section 1.01(A)(a).
"A Term Loan Commitment" shall mean, with respect to each Bank, the
amount set forth opposite such Bank's name in Annex I directly below the column
entitled "A Term Loan Commitment," as the same may be terminated pursuant to
Section 3.03 and/or Section 9.
"A Term Loan Facility" shall mean the Facility evidenced by the Total
A Term Loan Commitment.
"A Term Loan Maturity Date" shall mean the sixth anniversary of the
Initial Borrowing Date.
"A Term Note" shall have the meaning provided in Section 1.05(a).
"A TL Percentage" shall mean, at any time, a fraction (expressed as a
percentage) the numerator of which is equal to the sum of the aggregate
principal amount of all A Term Loans outstanding at such time and the
denominator of which is equal to the sum of the aggregate principal amount of
all Term Loans outstanding at such time.
"AcquisitionCo" shall mean Lite Acquisition Corp.
"Additional Permitted Preferred Stock" shall mean preferred stock of
the Borrower the terms of which shall be required to be reasonably acceptable to
the Administrative Agent.
"Additional Security Documents" shall have the meaning provided in
Section 7.11(a).
"Adjusted Pro Forma Consolidated EBITDA" shall mean, for the
nine-month period ended September 28, 1996, Consolidated EBITDA for such period
adjusted to give pro forma effect to Safelite's cost savings resulting from the
Transaction.
"Administrative Agent" shall have the meaning provided in the first
paragraph of this Agreement and shall include any successor to the Agent
appointed pursuant to Section 11.10.
"Affiliate" shall mean, with respect to any Person, any other Person
directly or indirectly controlling (including but not limited to all directors
and officers of such Person), controlled by, or under direct or indirect common
control with such Person. A Person shall be
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deemed to control a corporation if such Person possesses, directly or
indirectly, the power (i) to vote 10% or more of the securities having ordinary
voting power for the election of directors of such corporation or (ii) to direct
or cause the direction of the management and policies of such corporation,
whether through the ownership of voting securities, by contract or otherwise. In
addition, for the purpose of this Agreement, an Affiliate of Lee shall include
any Lee Investor or any investment fund under common control with the Lee
Investors. Notwithstanding the foregoing, none of the Banks or any of their
respective affiliates shall be deemed to be Affiliates of the Borrower or its
Subsidiaries.
"Agents" shall mean the Administrative Agent, the Collateral Agent,
the Documentation Agent and the Syndication Agent.
"Aggregate Unutilized Commitment" with respect to any Bank at any time
shall mean the sum of (i) such Bank's A Term Loan Commitment at such time, if
any, (ii) such Bank's B Term Loan Commitment at such time, if any, and (iii)
such Bank's Revolving Credit Commitment at such time, if any, less the sum of
(x) the aggregate outstanding principal amount of all Revolving Loans made by
such Bank and (y) such Bank's Revolving Percentage of the Letter of Credit
Outstandings at such time.
"Agreement" shall mean this Credit Agreement, as the same may be from
time to time modified, amended and/or supplemented.
"Applicable Base Rate Margin" shall mean (i) in the case of A Term
Loans, Revolving Loans and Swingline Loans, 1.50%, less, for each day occurring
after the first anniversary of the Initial Borrowing Date, the then applicable
Interest Reduction Discount, if any, and (ii) in the case of B Term Loans,
2.00%.
"Applicable Eurodollar Margin" shall mean (i) in the case of A Term
Loans and Revolving Loans, 2.50%, less, for each day occurring after the first
anniversary of the Initial Borrowing Date, the then applicable Interest
Reduction Discount, if any, and (ii) in the case of B Term Loans, 3.00%.
"Arranger" shall mean Chase Securities Inc.
"Asset Sale" shall mean any sale, transfer or other disposition by the
Borrower or any of its Subsidiaries to any Person other than the Borrower or any
Wholly-Owned Subsidiary of the Borrower of any asset (including, without
limitation, any capital stock or other securities of another Person, but
excluding the sale by such Person of its own capital stock) of the Borrower or
any such Subsidiary other than (i) sales, transfers or other dispositions of
inventory made in the ordinary course of business and (ii) sales of assets
pursuant to Sections 8.02(f), (g), (h), (i) and (k).
"Assignment and Assumption Agreement" shall mean the Assignment and
Assumption Agreement substantially in the form of Exhibit J (appropriately
completed).
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"Authorized Officer" shall mean any senior officer of the Borrower
designated as such in writing to the Administrative Agent by the Borrower, in
each case to the extent reasonably acceptable to the Agent.
"B Banks" shall have the meaning provided in Section 4.02(C).
"B Term Loan" shall have the meaning provided in Section 1.01(A)(b).
"B Term Loan Commitment" shall mean, with respect to each Bank, the
amount set forth opposite such Bank's name in Annex I directly below the column
entitled "B Term Loan Commitment," as the same may be terminated pursuant to
Section 3.03 and/or Section 9.
"B Term Loan Facility" shall mean the Facility evidenced by the Total
B Term Loan Commitment.
"B Term Loan Maturity Date" shall mean the eighth anniversary of the
Initial Borrowing Date.
"B Term Note" shall have the meaning provided in Section 1.05(a).
"B TL Percentage" shall mean, at any time, a fraction (expressed as a
percentage) the numerator of which is equal to the aggregate principal amount of
all B Term Loans outstanding at such time and the denominator of which is equal
to the sum of the aggregate principal amount of all Term Loans outstanding at
such time.
"Bank" shall have the meaning provided in the first paragraph of this
Agreement.
"Bank Default" shall mean (i) the refusal (which has not been
retracted) of a Revolving Bank to make available its portion of any Borrowing
(including any Mandatory Borrowing) or to fund its portion of any unreimbursed
payment under Section 2.04(c) or (ii) a Revolving Bank having notified the
Administrative Agent and/or the Borrower that it does not intend to comply with
the obligations under Section 1.01(A)(d), 1.01(C) or 2.04(c), in the case of
either clause (i) or (ii) above as a result of the appointment of a receiver or
conservator with respect to such Bank at the direction or request of any
regulatory agency or authority.
"Bankruptcy Code" shall have the meaning provided in Section 9.05.
"Base Rate" for any day shall mean the higher of (x) the rate which is
1/2 of 1% in excess of the Federal Funds Effective Rate in effect on such day
and (y) the Prime Rate in effect on such day.
"Base Rate Loan" shall mean each Loan bearing interest at the rates
provided in Section 1.08(a).
"Borrower" shall have the meaning provided in the first paragraph of
this Agreement.
"Borrower Common Stock" shall be as described in Schedule 6.16.
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"Borrower Preferred Stock" shall be as described in Schedule 6.16,
PROVIDED that such preferred stock shall only pay non-cash dividends and shall
not mature prior to 2007.
"Borrowing" shall mean the incurrence of one Type of Loan pursuant to
a single Facility by the Borrower from all of the Banks having Commitments with
respect to such Facility on a PRO RATA basis on a given date (or resulting from
conversions on a given date), having in the case of Eurodollar Loans the same
Interest Period; PROVIDED that Base Rate Loans incurred pursuant to Section
1.10(b) shall be considered part of any related Borrowing of Eurodollar Loans.
"Business Day" shall mean (i) for all purposes other than as covered
by clause (ii) below, any day excluding Saturday, Sunday and any day which shall
be in the City of New York a legal holiday or a day on which banking
institutions are authorized by law or other governmental actions to close and
(ii) with respect to all notices and determinations in connection with, and
payments of principal and interest on, Eurodollar Loans, any day which is a
Business Day described in clause (i) and which is also a day for trading by and
between banks in U.S. dollar deposits in the interbank Eurodollar market.
"Capital Expenditures" shall mean, with respect to any Person, all
expenditures by such Person for plant, property and equipment which should be
capitalized in accordance with GAAP (including, without limitation, expenditures
for maintenance and repairs which should be capitalized in accordance with
GAAP).
"Capital Lease," as applied to any Person, shall mean any lease of any
property (whether real, personal or mixed) by that Person as lessee which, in
conformity with GAAP, is accounted for as a capital lease on the balance sheet
of that Person.
"Capitalized Lease Obligations" shall mean all obligations under
Capital Leases of the Borrower or any of its Subsidiaries in each case taken at
the amount thereof accounted for as liabilities in accordance with GAAP.
"Cash Equivalents" shall mean (i) securities issued or directly and
fully guaranteed or insured by the United States of America or any agency or
instrumentality thereof (PROVIDED that the full faith and credit of the United
States of America is pledged in support thereof) having maturities of not more
than one year from the date of acquisition, (ii) U.S. dollar denominated time
deposits, certificates of deposit and bankers acceptances of (x) any Bank or (y)
any bank, or holding company of such bank, whose short-term commercial paper
rating or that of its parent company from S&P is at least A-1 or the equivalent
thereof or from Moody's is at least P-1 or the equivalent thereof (any such bank
or Bank, an "Approved Bank"), in each case with maturities of not more than one
year from the date of acquisition, (iii) commercial paper issued by any Approved
Bank or by the parent company of any Approved Bank and commercial paper issued
by, or guaranteed by, any industrial or financial company with a short-term
commercial paper rating of at least A-1 or the equivalent thereof by S&P or at
least P-1 or the equivalent thereof by Moody's, or guaranteed by any industrial
company with a long term unsecured debt rating of at least A or A2, or the
equivalent of each thereof, from S&P or Moody's, as the case may be, and in each
case maturing within one year after the date of acquisition, (iv) marketable
direct obligations issued by any state of the United States of America or any
political subdivision of any such state or any public instrumentality thereof
maturing within one year from the date of
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acquisition thereof and, at the time of acquisition, having one of the two
highest ratings obtainable from either S&P or Moody's and (v) investments in
money market funds substantially all the assets of which are comprised of
securities of the types described in clauses (i) through (iv) above.
"Cash Proceeds" shall mean, with respect to any Asset Sale, the
aggregate cash payments (including any cash received by way of deferred payment
pursuant to a note receivable issued in connection with such Asset Sale, other
than the portion of such deferred payment constituting interest, but only as and
when so received) received by the Borrower and/or any of its Subsidiaries from
such Asset Sale.
"Change of Control Event" shall mean (a) prior to the date of an
initial registered public offering by the Borrower of Borrower Common Stock, the
Permitted Holders shall cease to own on a fully diluted basis in the aggregate
at least 51% of the economic and voting interest in the Borrower's capital stock
free of Liens except Liens created by the Pledge Agreement, (b) on or after the
date of an initial registered public offering by the Borrower of Borrower Common
Stock, (A) any other Person or "group" (within the meaning of Rules 13d-3 and
13d-5 under the Securities Exchange Act of 1934, as in effect on the Initial
Borrowing Date) shall own more than 20% of the voting and/or economic interest
in the Borrower's capital stock, (B) the Board of Directors of the Borrower
shall cease to consist of a majority of Continuing Directors or (C) the
Permitted Holders shall cease to own on a fully diluted basis in the aggregate
at least 30% of the economic and voting interest in the Borrower's capital stock
free of Liens except Liens created by the Pledge Agreement, or (c) a "change of
control" or similar event shall occur as provided in the Senior Subordinated
Note Indenture.
"Chase" shall mean The Chase Manhattan Bank, in its individual
capacity, and any successor corporation thereto by merger, consolidation or
otherwise.
"Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time, and the regulations promulgated and rulings issued thereunder.
Section references to the Code are to the Code, as in effect at the date of this
Agreement and any subsequent provisions of the Code amendatory thereof,
supplemental thereto or substituted therefor.
"Collateral" shall mean all of the Collateral as defined in each of
the Security Documents.
"Collateral Agent" shall mean the Administrative Agent acting as
collateral agent for the Secured Creditors.
"Commitment" shall mean, with respect to each Bank, such Bank's A Term
Loan Commitment, B Term Loan Commitment and Revolving Credit Commitment.
"Commitment Fee" shall have the meaning provided in Section 3.01(a).
"Confidential Information Memorandum" shall mean the Confidential
Information Memorandum dated November 1996 relating to the Facilities.
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"Consolidated Current Assets" shall mean, at any time, the current
assets (other than cash, Cash Equivalents and deferred income taxes to the
extent included in current assets) of the Borrower and its Subsidiaries at such
time determined on a consolidated basis.
"Consolidated Current Liabilities" shall mean, at any time, the
current liabilities of the Borrower and its Subsidiaries determined on a
consolidated basis, but excluding deferred income taxes and the current portion
of and accrued but unpaid interest on any Indebtedness under this Agreement and
any other long-term Indebtedness which would otherwise be included therein.
"Consolidated Debt" shall mean, at any time, all Indebtedness
(excluding Indebtedness of the type described in clause (vii) of the definition
of Indebtedness) of the Borrower and its Subsidiaries determined on a
consolidated basis which would be reflected on a consolidated balance sheet at
such time in accordance with GAAP.
"Consolidated EBIT" shall mean, for any period, Consolidated Net
Income of the Borrower and its Subsidiaries, before total interest expense
(whether cash or non-cash) and provisions for taxes based on income, and
determined (i) without giving effect to any extraordinary gains or losses but
with giving effect to gains or losses from sales of assets sold in the ordinary
course of business, (ii) without giving effect to any impact from the LIFO
method of inventory accounting, (iii) without giving effect to any noncash
charge (other than depreciation or amortization) deducted in determining
Consolidated Net Income for such period, including non-cash charges related to
the issuance by the Borrower or any of its Subsidiaries of stock, warrants or
options to management (or any exercise of any such warrants or options), (iv)
without giving effect to any compensation expense incurred in connection with
the Recapitalization (including, without limitation, the Transaction Bonuses),
(v) without giving effect to nonrecurring charges, noncash charges or documented
cash charges, in each case deducted in determining Consolidated Net Income for
such period and related to the Transaction and (vi) without giving effect to
management fees permitted to be paid to Lee and the Lee Affiliates pursuant to
Section 8.08.
"Consolidated EBITDA" shall mean, for any period, Consolidated EBIT,
adjusted by adding thereto the amount of all depreciation expense and
amortization expense that were deducted in determining Consolidated EBIT for
such period.
"Consolidated Interest Expense" shall mean, for any period, total
interest expense (including that attributable to Capital Leases in accordance
with GAAP) of the Borrower and its Subsidiaries determined on a consolidated
basis with respect to all outstanding Indebtedness of the Borrower and its
Subsidiaries, including, without limitation, all commissions, discounts and
other fees and charges owed with respect to letters of credit and bankers'
acceptance financing and net costs or benefits under Interest Rate Protection
Agreements, but excluding, however, amortization of original issue discount, any
payments made to obtain any Interest Rate Protection Agreement, deferred
financing costs and any interest expense on deferred compensation arrangements
and any other non-cash interest to the extent included in total interest
expense.
"Consolidated Net Income" shall mean, for any period, the net income
(or loss), after provision for taxes and before any pay-in-kind or non-cash
accumulating dividend on Preferred Stock, of the Borrower and its Subsidiaries
on a consolidated basis for such period taken
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as a single accounting period, but excluding any unrealized losses and gains for
such period resulting from mark-to-market of Other Hedging Agreements.
"Contingent Obligations" shall mean as to any Person any obligation of
such Person guaranteeing or intended to guarantee any Indebtedness, leases,
dividends or other obligations ("primary obligations") of any other Person (the
"primary obligor") in any manner, whether directly or indirectly, including,
without limitation, any obligation of such Person, whether or not contingent,
(a) to purchase any such primary obligation or any property constituting direct
or indirect security therefor, (b) to advance or supply funds (x) for the
purchase or payment of any such primary obligation or (y) to maintain working
capital or equity capital of the primary obligor or otherwise to maintain the
net worth or solvency of the primary obligor, (c) to purchase property,
securities or services primarily for the purpose of assuring the owner of any
such primary obligation of the ability of the primary obligor to make payment of
such primary obligation or (d) otherwise to assure or hold harmless the owner of
such primary obligation against loss in respect thereof; PROVIDED, HOWEVER, that
the term Contingent Obligation shall not include endorsements of instruments for
deposit or collection or standard contractual indemnities entered into, in each
case in the ordinary course of business. The amount of any Contingent Obligation
shall be deemed to be an amount equal to the stated or determinable amount of
the primary obligation in respect of which such Contingent Obligation is made
or, if not stated or determinable, the maximum reasonably anticipated liability
in respect thereof (assuming such Person is required to perform thereunder) as
determined by such Person in good faith.
"Continuing Directors" shall mean the directors of the Borrower on the
Effective Date and each other director if such director's nomination for the
election to the Board of Directors of the Borrower is recommended by a majority
of the then Continuing Directors.
"Credit Documents" shall mean this Agreement, the Notes, the
Guaranties and each Security Document.
"Credit Event" shall mean the making of a Loan (other than a Revolving
Loan made pursuant to a Mandatory Borrowing) or the issuance of a Letter of
Credit.
"Credit Party" shall mean the Borrower and each Subsidiary Guarantor.
"Default" shall mean any event, act or condition which with notice or
lapse of time, or both, would constitute an Event of Default.
"Defaulting Bank" shall mean any Bank with respect to which a Bank
Default is in effect.
"Deficiency" shall have the meaning provided in Section 8.09(b).
"Dividends" shall have the meaning provided in Section 8.07.
"Documentation Agent" shall have the meaning provided in the first
paragraph of this Agreement.
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"Documents" shall mean the Credit Documents, the Recapitalization
Documents and the Senior Subordinated Note Documents.
"Domestic Subsidiary" shall mean each Subsidiary of the Borrower
incorporated or organized in the United States or any State or territory
thereof.
"Effective Date" shall have the meaning provided in Section 12.10.
"Eligible Transferee" shall mean and include (i) a commercial bank,
financial institution, fund which is regularly engaged in making, purchasing or
investing in loans of the type provided for herein or other "qualified
institutional buyer" (as defined in Rule 144A of the Securities Act) and (ii)
any other Person approved by the Borrower (such approval not to be unreasonably
withheld).
"Environmental Claims" shall mean any and all administrative,
regulatory or judicial actions, suits, demands, demand letters, claims, liens,
notices of non-compliance or violation, investigations or proceedings relating
in any way to any violation (or alleged violation) by the Borrower or any of its
Subsidiaries under any Environmental Law (hereafter "Claims") or any permit
issued to the Borrower or any of its Subsidiaries under any such law, including,
without limitation, (a) any and all Claims by governmental or regulatory
authorities for enforcement, cleanup, removal, response, remedial or other
actions or damages pursuant to any applicable Environmental Law, and (b) any and
all Claims by any third party seeking damages, contribution, indemnification,
cost recovery, compensation or injunctive relief resulting from Hazardous
Materials or arising from alleged injury or threat of injury to health, safety
or the environment.
"Environmental Law" shall mean any federal, state or local policy,
statute, law, rule, regulation, ordinance, code or rule of common law now or
hereafter in effect and in each case as amended, and any judicial or
administrative interpretation thereof, including any judicial or administrative
order, consent, decree or judgment (for purposes of this definition
("collectively, Laws")), relating to the environment, or Hazardous Materials or
health and safety to the extent such health and safety issues arise under the
Occupational Safety and Health Act of 1970, as amended, or any such similar
Laws.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended from time to time, and the regulations promulgated and the
rulings issued thereunder. Section references to ERISA are to ERISA as in effect
at the date of this Agreement and any subsequent provisions of ERISA amendatory
thereof, supplemental thereto or substituted therefor.
"ERISA Affiliate" shall mean each person (as defined in Section 3(9)
of ERISA) which together with the Borrower or any of its Subsidiaries would be
deemed, at any time following the Initial Borrowing Date, to be a "single
employer" within the meaning of Section 414(b), (c), (m) or (o) of the Code.
"Eurodollar Loans" shall mean each Loan bearing interest at the rates
provided in Section 1.08(b).
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"Eurodollar Rate" shall mean with respect to each Interest Period for
a Eurodollar Loan, (i) the rate per annum equal to the rate at which Chase is
offered Dollar deposits at or about 10:00 A.M., New York City time, two Business
Days prior to the beginning of such Interest Period in the interbank eurodollar
market where the eurodollar and foreign currency and exchange operations in
respect of its Eurodollar Loans are then being conducted for delivery on the
first day of such Interest Period for the number of days comprised therein and
in an amount comparable to the amount of its Eurodollar Loan to be outstanding
during such Interest Period (and rounded upward to the next whole multiple of
1/16 of 1%) divided by (ii) a percentage equal to 100% minus the then stated
maximum rate of all reserve requirements (including, without limitation, any
basic, marginal, emergency, supplemental, special or other reserves under any
regulations of the Board of Governors of the Federal Reserve System or other
Governmental Authority having jurisdiction with respect thereto) dealing with
reserve requirements prescribed for eurocurrency funding (currently referred to
an "Eurocurrency Liabilities" in Regulation D of such Board) maintained by a
member bank of such System.
"Event of Default" shall have the meaning provided in Section 9.
"Excess Cash Flow" shall mean, for any period (i) the sum of (A)
Consolidated Net Income for such period PLUS (B) the amount of all non-cash
charges (including, without limitation or duplication, depreciation,
amortization and non-cash interest expense, but excluding those non-cash charges
that had the effect of decreasing Working Capital for such period) included in
determining Consolidated Net Income for such period plus (C) the decrease, if
any, in Working Capital from the first day to the last day of such period, minus
(ii) the sum of (A) any non-cash credits (including from sales or other
dispositions of assets) included in determining Consolidated Net Income for such
period, (B) gains from sales or other dispositions of assets (other than sales
of inventory in the ordinary course of business) included in determining
Consolidated Net Income for such period, (C) an amount equal to (1) all Capital
Expenditures (other than Capital Expenditures made pursuant to Section 8.09(d),
(e) or (f)) made during such period that are not financed by Indebtedness
(including Capitalized Lease Obligations but excluding Loans hereunder) plus (or
minus, if negative) (2) the Rollover Amount for such period to be carried
forward to the next period less the Rollover Amount (if any) for the preceding
period carried forward to the current period, (D) the amount expended in respect
of Permitted Acquisitions during such period, except to the extent constituting
Capital Expenditures, (E) the aggregate principal amount of permanent principal
payments of Indebtedness for borrowed money of the Borrower and its Subsidiaries
(other than repayments of Loans, PROVIDED that repayments of Loans shall be
deducted in determining Excess Cash Flow if such repayments were (x) required as
a result of a Scheduled A Repayment or a Scheduled B Repayment under Section
4.02(A)(b) or (y) made as a voluntary prepayment with internally generated funds
(but in the case of a voluntary prepayment of Revolving Loans, only to the
extent accompanied by a voluntary reduction to the Total Revolving Credit
Commitment)) during such period, (F) non-cash charges added back in a previous
period pursuant to clause (i)(B) above to the extent any such charge has become
a cash item in the current period, (G) the amount of expenditures which are not
classified Capital Expenditures but which were capitalized and not expensed
during such period, (H) the increase, if any, in Working Capital from the first
day to the last day of such period, (I) any cash disbursements made against
noncurrent liabilities (such as transition reserves and deferred taxes) to the
extent not deducted in determining Consolidated Net Income for such period and
(J) the amount of unusual or non-recurring charges that decreased Working
Capital during such period.
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"Excess Cash Flow Period" shall mean each fiscal year of the Borrower
commencing with the fiscal year ending FYE 1997.
"Excess Cash Payment Date" shall mean the date occurring 90 days after
the last day of a fiscal year of the Borrower (beginning with its fiscal year
ending FYE 1997).
"Existing Indebtedness" shall have the meaning provided in Section
6.24.
"Existing Indebtedness Agreements" shall have the meaning provided in
Section 5.13.
"Existing Letters of Credit" shall mean the letters of credit
described in Schedule 2.01.
"Expenditures for Intangible Assets" shall mean, with respect to any
Person, the amount of expenditures which are not classified as Capital
Expenditures but which were capitalized and not expensed during such period,
including the expenditures for the acquisition or development of data bases and
for research and development.
"FQE1", "FQE2" or "FQE3" shall mean, respectively, the last day of the
Borrower's first, second and third fiscal quarters. The first fiscal quarter of
each fiscal year begins on the Saturday closest to the last day of the prior
calendar year, and continues for 13 calendar weeks. The second and third fiscal
quarters continue for successive periods of 13 weeks each, and the fourth fiscal
quarter continues for the period of 13 or 14 weeks, as the case may be, until
the end of such fiscal year.
"FYE" shall mean the end of the designated fiscal year of the
Borrower. Each fiscal year ends on the Saturday following closest to the last
day of the designated year (which Saturday may fall in the succeeding calendar
year).
"Facility" shall mean any of the credit facilities established under
this Agreement, I.E., the A Term Loan Facility, the B Term Loan Facility or the
Revolving Credit Facility.
"Facing Fee" shall have the meaning provided in Section 3.01(c).
"Federal Funds Effective Rate" shall mean, for any day, the weighted
average of the rates on overnight federal funds transactions with members of the
Federal Reserve System arranged by federal funds brokers, as published on the
next succeeding Business Day by the Federal Reserve Bank of New York, or, if
such rate is not so published for any day which is a Business Day, the average
of the quotations for the day of such transactions received by the
Administrative Agent from three federal funds brokers of recognized standing
selected by it. Any change in the Base Rate due to a change in the Federal Funds
Effective Rate shall be effective as of the opening of business on the effective
day of such change in the Federal Funds Effective Rate.
"Fees" shall mean all amounts payable pursuant to, or referred to in,
Section 3.01.
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"Foreign Cash Equivalents" shall mean certificates of deposit or
bankers acceptances of any bank organized under the laws of Canada, Japan or any
country that is a member of the European Economic Community whose short-term
commercial paper rating from S&P is at least A-1 or the equivalent thereof or
from Moody's is at least P-1 or the equivalent thereof, in each case with
maturities of not more than six months from the date of acquisition.
"Foreign Pension Plan" shall mean any plan, fund (including, without
limitation, any superannuation fund) or other similar program established or
maintained outside the United States of America by the Borrower or any one or
more of its Subsidiaries primarily for the benefit of employees of the Borrower
or such Subsidiaries residing outside the United States of America, which plan,
fund or other similar program provides, or results in, retirement income, a
deferral of income in contemplation of retirement or payments to be made upon
termination of employment, and which plan is not subject to ERISA or the Code.
"Foreign Subsidiary" shall mean each Subsidiary of the Borrower other
than a Domestic Subsidiary.
"GAAP" shall mean generally accepted accounting principles in the
United States of America as promulgated by FASB and as in effect from time to
time; it being understood and agreed that determinations in accordance with GAAP
for purposes of Section 8, including defined terms as used therein, are subject
(to the extent provided therein) to Section 12.07(a).
"Guaranteed Creditors" shall mean and include each of the
Administrative Agent, the Documentation Agent, the Collateral Agent, the Banks
and each party (other than any Credit Party) party to an Interest Rate
Protection Agreement or Other Hedging Agreement to the extent that such party
constitutes a Secured Creditor under the Security Documents.
"Guaranteed Obligations" shall mean (i) the principal and interest on
each Note issued by the Borrower to each Bank, and Loans made, under this
Agreement and all reimbursement obligations and Unpaid Drawings with respect to
Letters of Credit, together with all the other obligations (including
obligations which, but for the automatic stay under Section 362(a) of the
Bankruptcy Code, would become due) and liabilities (including, without
limitation, indemnities, fees and interest thereon) of the Borrower to such
Bank, the Administrative Agent, the Documentation Agent and the Collateral Agent
now existing or hereafter incurred under, arising out of or in connection with
this Agreement or any other Credit Document and the due performance and
compliance with all the terms, conditions and agreements contained in the Credit
Documents by the Borrower and (ii) all obligations (including obligations which,
but for the automatic stay under Section 362(a) of the Bankruptcy Code, would
become due) and liabilities of the Borrower or any of its Subsidiaries owing
under any Interest Rate Protection Agreement or Other Hedging Agreement entered
into by the Borrower or any of its Subsidiaries with any Bank or any affiliate
thereof (even if such Bank subsequently ceases to be a Bank under this Agreement
for any reason) so long as such Bank or affiliate participates in such Interest
Rate Protection Agreement or Other Hedging Agreement, and their subsequent
assigns, if any, whether now in existence or hereafter arising, and the due
performance and compliance with all terms, conditions and agreements contained
therein.
"Guarantor" shall mean each Subsidiary Guarantor.
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"Guaranty" shall mean each Subsidiary Guaranty.
"Hazardous Materials" shall mean (a) any petrochemical or petroleum
products, radioactive materials, asbestos in any form that is or could become
friable, urea formaldehyde foam insulation, transformers or other equipment that
contain dielectric fluid containing levels of polychlorinated biphenyls, and
radon gas; and (b) any chemicals, materials or substances defined as or included
in the definition of "hazardous substances," "hazardous wastes," "hazardous
materials," "restricted hazardous materials," "extremely hazardous wastes,"
"restrictive hazardous wastes," "toxic substances," "toxic pollutants,"
"contaminants" or "pollutants," or words of similar meaning and regulatory
effect.
"Indebtedness" of any Person shall mean, without duplication, (i) all
indebtedness of such Person for borrowed money, (ii) the deferred purchase price
of assets or services payable to the sellers thereof or any of such seller's
assignees which in accordance with GAAP would be shown on the liability side of
the balance sheet of such Person but excluding deferred rent as determined in
accordance with GAAP, (iii) the face amount of all letters of credit issued for
the account of such Person and, without duplication, all drafts drawn
thereunder, (iv) all Indebtedness of a second Person secured by any Lien on any
property owned by such first Person, whether or not such Indebtedness has been
assumed, (v) all Capitalized Lease Obligations of such Person, (vi) all
obligations of such Person to pay a specified purchase price for goods or
services whether or not delivered or accepted, I.E., take-or-pay and similar
obligations, (vii) all obligations under Interest Rate Protection Agreements and
Other Hedging Agreements and (viii) all Contingent Obligations of such Person,
PROVIDED that Indebtedness shall not include trade payables and accrued
expenses, in each case arising in the ordinary course of business.
"Initial Borrowing Date" shall mean the date upon which the Term Loans
are incurred hereunder.
"Insurance Debt" shall mean Indebtedness of the Borrower, in an
aggregate amount not exceeding $14,000,000, in respect of deferred premium
payments under liability, casualty or other insurance policies of the Borrower.
"Intercompany Loan" shall have the meaning provided in Section
8.06(h).
"Intercompany Notes" shall mean promissory notes, in the form of
Exhibit K, evidencing Intercompany Loans.
"Interest Coverage Ratio" shall mean, for any period, the ratio of
Consolidated EBITDA to Consolidated Interest Expense for such period; PROVIDED
that for purposes of calculating such ratio on a specific date in the 1997
fiscal year, Consolidated Interest Expense shall be the sum of (a) actual
Consolidated Interest Expense for each fiscal quarter of such fiscal year ended
on or prior to such date and (b) $5,845,000 per fiscal quarter for each fiscal
quarter in the portion of the 1997 fiscal year remaining subsequent to such
date.
"Interest Period" with respect to any Eurodollar Loan, shall mean the
interest period applicable thereto, as determined pursuant to Section 1.09.
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"Interest Rate Protection Agreement" shall mean any interest rate swap
agreement, interest rate cap agreement, interest rate collar agreement, interest
rate hedging agreement or other similar agreement or arrangement.
"Interest Reduction Discount" shall mean initially zero, PROVIDED that
from and after the first day of any Margin Reduction Period (the "Start Date")
to and including the last day of such Margin Reduction Period, the Interest
Reduction Discount shall be the respective percentage per annum set forth in
clause (A), (B), (C), (D) or (E) below if, but only if, as of the last day of
the most recent fiscal quarter or year, as the case may be, ended immediately
prior to such Start Date (the "Test Date"), the conditions set forth in clause
(A), (B), (C), (D) or (E) below are met:
(A) 0.00% if the Leverage Ratio on such Test Date is greater than or
equal to 4.25;
(B) .25% if the Leverage Ratio on such Test Date is greater than or
equal to 3.75:1.0 and less than 4.25;
(C) .50% if the Leverage Ratio on such Test Date is greater than or
equal to 3.25:1.0 and less than 3.75;
(D) .75% if the Leverage Ratio on such Test Date is greater than or
equal to 2.75:1.0 and less than 3.25; or
(E) 1.00% if the Leverage Ratio on such Test Date is less than 2.75.
Notwithstanding anything to the contrary contained above in this definition, (i)
the Interest Reduction Discount shall be zero at any time when an Event of
Default shall exist and (ii) no Interest Reduction Discount shall apply prior to
the first anniversary of the Initial Borrowing Date.
"L/C Supportable Indebtedness" shall mean (i) obligations of the
Borrower or its Subsidiaries incurred in the ordinary course of business with
respect to insurance obligations and workers' compensation, surety bonds and
other similar statutory obligations and (ii) such other obligations of the
Borrower or any of its Subsidiaries as are reasonably acceptable to the
Administrative Agent and the Letter of Credit Issuer and otherwise permitted to
exist pursuant to the terms of this Agreement.
"Lear Siegler" shall mean Lear Siegler Holdings Corp., a Delaware
corporation.
"Leasehold" of any Person shall mean all of the right, title and
interest of such Person as lessee or licensee in, to and under leases or
licenses of land, improvements and/or fixtures.
"Lee" shall mean Thomas H. Lee Company, a sole proprietorship located
in Massachusetts.
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"Lee Affiliates" shall mean any Affiliate of Lee, PROVIDED that for
purposes of the definition of "Change of Control Event", the term Lee Affiliate
shall not include any portfolio company of either Lee or any Affiliate of Lee.
"Lee Investor" shall mean and include Thomas H. Lee Equity Fund, III
L.P., Thomas H. Lee Foreign Fund III, L.P. and THL-CCI Limited Partnership, or
any limited or general partner, stockholder, officer, employee or consultant of
such Lee Investor or any officer, employee or consultant of Lee; PROVIDED that
for the purposes of making calculations under the definition of "Change of
Control Event", the aggregate amount of equity of the Borrower attributable to
consultants of Lee and consultants of Lee Investors may not exceed $3,000,000.
"Letter of Credit" shall have the meaning provided in Section 2.01(a).
"Letter of Credit Fees" shall have the meaning provided in Section
3.01(b)(i).
"Letter of Credit Issuer" shall mean (i) in respect of the Existing
Letters of Credit, The Chase Manhattan Bank and (ii) in respect of other Letters
of Credit, Chase Manhattan Bank Delaware.
"Letter of Credit Outstandings" shall mean, at any time, the sum of,
without duplication, (i) the aggregate Stated Amount of all outstanding Letters
of Credit and (ii) the aggregate amount of all Unpaid Drawings in respect of all
Letters of Credit.
"Letter of Credit Request" shall have the meaning provided in Section
2.02(a).
"Leverage Ratio" shall mean, at any time, the ratio of (x)
Consolidated Debt at such time (excluding Insurance Debt) to (y) Consolidated
EBITDA for the Test Period then last ended.
"Lien" shall mean any mortgage, pledge, security interest,
encumbrance, lien or charge of any kind (including any agreement to give any of
the foregoing, any conditional sale or other title retention agreement, any
financing or similar statement or notice filed under the UCC or any similar
recording or notice statute, and any lease having substantially the same effect
as the foregoing).
"Loan" shall mean each and every Loan made by any Bank hereunder,
including A Term Loans, B Term Loans, Revolving Loans or Swingline Loans.
"LSAC" shall mean L.S. Acquisition Corp., a Delaware corporation.
"LS Companies" shall mean LSAC and its subsidiaries, as listed on
Schedule 6.17.
"LSNWY" shall mean LSNWY Corp., a Delaware corporation.
"LS Partners" shall have the meaning provided in the Recapitalization
Agreement.
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"LS Tax Sharing Agreement" shall mean the Tax Sharing Agreement
between the Borrower and Lear Siegler in a form reasonably satisfactory to the
Administrative Agent.
"Management Agreements" shall have the meaning provided in Section
5.13.
"Mandatory Borrowing" shall have the meaning provided in Section
1.01(C).
"Majority Banks" of any Facility shall mean those Non-Defaulting Banks
which would constitute the Required Banks under, and as defined in, this
Agreement if all outstanding Obligations of the other Facilities under this
Agreement were repaid in full and all Commitments with respect thereto were
terminated.
"Margin Reduction Period" shall mean each period which shall commence
on a date on which the financial statements are delivered pursuant to Section
7.01(b)(i) or (c)(i), as the case may be, and which shall end on the earlier of
(i) the date of actual delivery of the next financial statements pursuant to
Section 7.01(b)(i) or (c)(i), as the case may be, and (ii) the latest date on
which the next financial statements are required to be delivered pursuant to
Section 7.01(b)(i) or (c)(i), as the case may be.
"Margin Stock" shall have the meaning provided in Regulation U.
"Material Adverse Effect" shall mean a material adverse effect on the
business, properties, assets, liabilities or condition (financial or otherwise)
of the Borrower and its Subsidiaries taken as a whole.
"Maturity Date" with respect to any Facility shall mean either the A
Term Loan Maturity Date, the B Term Loan Maturity Date or the Revolving Loan
Maturity Date, as the case may be.
"Maximum Swingline Amount" shall mean $5,000,000.
"Merger" shall mean the merger of AcquisitionCo and Safelite with
Safelite as the surviving company.
"Minimum Borrowing Amount" shall mean (i) for Term Loans, $5,000,000;
(ii) for Revolving Loans, $500,000 and (iii) for Swingline Loans, $50,000.
"Moody's" shall mean Moody's Investors Service, Inc.
"Mortgage" shall have the meaning provided in Section 5.12(a).
"Mortgage Policies" shall have the meaning provided in Section
5.12(b).
"Mortgaged Properties" shall mean and include the Real Properties
owned or leased by the Borrower and its Domestic Subsidiaries to the extent
designated as such on Schedule 6.21. Notwithstanding the foregoing, leased Real
Property so designated on Schedule 6.21 shall not be Mortgaged Property under
this Agreement if the consent of the owner or lessor
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is required to grant a Mortgage on such Real Property and the Borrower is unable
to obtain such consent after using its reasonable efforts to do so.
"Multiemployer Plan" shall mean any multiemployer plan (within the
meaning of section 4001(a)(3) of ERISA) to which the Company or any of its
Subsidiaries has any liability or contributes (or has at any time within the
past five years contributed to or had any liability to contribute).
"Net Cash Proceeds" shall mean, with respect to any Asset Sale, the
Cash Proceeds resulting therefrom net of (a) cash expenses of sale (including
brokerage fees, if any, transfer taxes and payment of principal, premium and
interest of Indebtedness other than the Loans required to be repaid as a result
of such Asset Sale) and (b) incremental income taxes paid or payable as a result
thereof.
"Non-Defaulting Bank" shall mean each Bank other than a Defaulting
Bank.
"Note" shall mean each A Term Note, each B Term Note, each Revolving
Note and the Swingline Note.
"Notice of Borrowing" shall have the meaning provided in Section
1.03(a).
"Notice of Conversion" shall have the meaning provided in Section
1.06.
"Notice Office" shall mean the office of the Administrative Agent
located at 270 Park Avenue, New York, New York 10017 or such other office as the
Administrative Agent may designate to the Borrower and the Banks from time to
time.
"Obligations" shall mean all amounts, direct or indirect, contingent
or absolute, of every type or description, and at any time existing, owing to
any Agent or any Bank pursuant to the terms of this Agreement or any other
Credit Document.
"Other Hedging Agreements" shall mean any foreign exchange contracts,
currency swap agreements or other similar agreements or arrangements designed to
protect against fluctuations in currency values.
"Participant" shall have the meaning provided in Section 2.04(a).
"Payment Office" shall mean the office of the Administrative Agent
located at 270 Park Avenue, New York, New York 10017 or such other office as the
Administrative Agent may designate to the Borrower and the Banks from time to
time.
"PBGC" shall mean the Pension Benefit Guaranty Corporation established
pursuant to Section 4002 of ERISA, or any successor thereto.
"Permitted Acquisition" shall have the meaning provided in Section
8.02(m).
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"Permitted Encumbrances" shall mean (i) those liens, encumbrances and
other matters affecting title to any Mortgaged Property listed in the Mortgage
Policies in respect thereof and found reasonably acceptable by the
Administrative Agent, (ii) as to any particular Mortgaged Property at any time,
such easements, encroachments, covenants, rights of way, minor defects,
irregularities or encumbrances on title which do not, in the reasonable opinion
of the Administrative Agent, materially impair such Mortgaged Property for the
purpose for which it is held by the mortgagor thereof, or the lien held by the
Collateral Agent, (iii) zoning and other municipal ordinances which are not
violated in any material respect by the existing improvements and the present
use made by the mortgagor thereof of the Premises (as defined in the respective
Mortgage), (iv) general real estate taxes and assessments not yet delinquent,
and (v) such other items as the Administrative Agent may consent to (such
consent not to be unreasonably withheld).
"Permitted Holders" shall mean (a) Lee and the Lee Affiliates, (b) the
Lee Investors, (c) each other holder of common stock of the Borrower on the
Initial Borrowing Date, (d) senior management employees and directors of the
Borrower who acquire common stock of the Borrower within 90 days after the
Initial Borrowing Date for an aggregate purchase price not in excess of
$5,000,000 and (e) other Persons to which Lee and the Lee Affiliates may
transfer common stock of the Borrower for an aggregate purchase price not
exceeding $17,000,000.
"Permitted Liens" shall have the meaning provided in Section 8.03.
"Person" shall mean any individual, partnership, joint venture, firm,
corporation, limited liability company, association, trust or other enterprise
or any government or political subdivision or any agency, department or
instrumentality thereof.
"Plan" shall mean any employee pension benefit plan (within the
meaning of section 3(2) of ERISA) which is maintained or contributed to by the
Borrower or any of its Subsidiaries, or for which the Company or any of its
Subsidiaries has any liability or contingent liability, other than a
Multiemployer Plan.
"Pledge Agreement" shall have the meaning provided in Section 5.10(a).
"Pledge Agreement Collateral" shall mean all "Collateral" as defined
in the Pledge Agreement.
"Pledged Securities" shall mean all the Pledged Securities as defined
the Pledge Agreement.
"Preferred Stock" shall mean the Borrower Preferred Stock and any
Additional Permitted Preferred Stock.
"Prime Rate" shall mean the rate of interest per annum publicly
announced from time to time by Chase as its prime rate in effect at its
principal office in New York City, the Prime Rate to change when and as such
publicly announced rate changes. The Prime Rate is a reference rate and does not
necessarily represent the lowest or best rate actually charged to any customer.
Chase may make commercial loans or other loans at rates of interest at, above or
below the Prime Rate.
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"Projections" shall have the meaning provided in Section 5.16.
"Quarterly Payment Date" shall mean the last Business Day of each
March, June, September and December.
"Real Property" of any Person shall mean all of the right, title and
interest of such Person in and to land, improvements and fixtures, including
Leaseholds.
"Recapitalization" shall mean the recapitalization of the Borrower
pursuant to, and in accordance with the terms of, the Recapitalization
Documents.
"Recapitalization Agreement" shall mean the Recapitalization Agreement
and Plan of Merger and Stock Purchase Agreement dated as of November 8, 1996, as
amended and as in effect on the Initial Borrowing Date by and among Lear
Siegler, The LS Selling Stockholders (as defined therein), the Borrower, LSNWY,
LSAC and AcquisitionCo.
"Recapitalization Demand Note" shall mean the Demand Note payable by
LSAC to the LS Partners in the original principal amount of $298,800,000
delivered pursuant to Section 1.11 of the Recapitalization Agreement.
"Recapitalization Documents" shall mean the Recapitalization Agreement
and all other agreements and documents relating to the Recapitalization.
"Recovery Event" shall mean the receipt by the Borrower or any of its
Subsidiaries of any insurance or condemnation proceeds payable (i) by reason of
theft, physical destruction or damage or any other similar event with respect to
any properties or assets of the Borrower or any of its Subsidiaries, (ii) by
reason any condemnation, taking, seizing or similar event with respect to any
properties or assets of the Borrower or any of its Subsidiaries and (iii) under
any policy of insurance required to be maintained under Section 7.03.
"Register" shall have the meaning provided in subsection 12.04(c).
"Regulation D" shall mean Regulation D of the Board of Governors of
the Federal Reserve System as from time to time in effect and any successor to
all or a portion thereof establishing reserve requirements.
"Regulation G" shall mean Regulation G of the Board of Governors of
the Federal Reserve System as from time to time in effect and any successor to
all or any portion thereof.
"Regulation T" shall mean Regulation T of the Board of Governors of
the Federal Reserve System as from to time in effect and any successor to all or
any portion thereof.
"Regulation U" shall mean Regulation U of the Board of Governors of
the Federal Reserve System as from time to time in effect and any successor to
all or a portion thereof.
"Regulation X" shall mean Regulation X of the Board of Governors of
the Federal Reserve System as from time to time in effect and any successor to
all or any portion thereof.
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"Release" means disposing, discharging, injecting, spilling, pumping,
leaking, leaching, dumping, emitting, escaping, emptying, seeping, placing,
pouring and the like, into or upon any land or water or air, or otherwise
entering into the environment.
"Replaced Bank" shall have the meaning provided in Section 1.13.
"Replacement Bank" shall have the meaning provided in Section 1.13.
"Reportable Event" shall mean an event described in Section 4043(c) of
ERISA with respect to a Plan as to which the 30-day notice requirement has not
been waived by the PBGC.
"Required Banks" shall mean collectively (and not individually)
Non-Defaulting Banks the sum of whose outstanding Term Loans, Term Loan
Commitments, Revolving Credit Commitments (or, if after the Total Revolving
Credit Commitment has been terminated, outstanding Revolving Loans and Revolving
Percentages of outstanding Swingline Loans and Letter of Credit Outstandings)
constitute greater than 50% of the sum of (i) the total outstanding Term Loans
of Non-Defaulting Banks, or the Total Term Loan Commitment then in effect and
(ii) the Total Revolving Credit Commitment less the aggregate Revolving Credit
Commitments of Defaulting Banks (or, if after the Total Revolving Credit
Commitment has been terminated, the total outstanding Revolving Loans of
Non-Defaulting Banks and the aggregate Revolving Percentages of all
Non-Defaulting Banks of the total outstanding Swingline Loans and Letter of
Credit Outstandings at such time).
"Retiree Welfare Plan" shall mean any employee welfare benefit plan
(within the meaning of section 3(1) of ERISA) which provides benefits to retired
or other former employees of the Borrower or any of its Subsidiaries (other than
continuation of group health plan coverage under the Consolidated Omnibus Budget
Reconciliation Act of 1985, as amended, or pursuant to applicable State law).
"Returns" shall have the meaning provided in Section 6.23.
"Revolving Bank" shall mean at any time each Bank with a Revolving
Credit Commitment or with outstanding Revolving Loans.
"Revolving Credit Commitment" shall mean, with respect to each Bank,
the amount set forth opposite such Bank's name in Annex I directly below the
column entitled "Revolving Credit Commitment," as the same may be reduced from
time to time pursuant to Section 3.02, Section 3.03 and/or Section 9.
"Revolving Credit Facility" shall mean the Facility evidenced by the
Total Revolving Credit Commitment.
"Revolving Loan" shall have the meaning provided in Section
1.01(A)(c).
"Revolving Loan Maturity Date" shall mean the sixth anniversary of the
Initial Borrowing Date.
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"Revolving Note" shall have the meaning provided in Section 1.05(a).
"Revolving Percentage" shall mean at any time for each Revolving Bank,
with respect to Revolving Loans, Swingline Loans and Letters of Credit, the
percentage obtained by dividing such Revolving Bank's Revolving Credit
Commitment by the Total Revolving Credit Commitment, PROVIDED that if the Total
Revolving Credit Commitment has been terminated, the Revolving Percentage of
each Revolving Bank shall be determined by dividing such Revolving Bank's
Revolving Credit Commitment immediately prior to such termination by the Total
Revolving Credit Commitment immediately prior to such termination.
"Rollover Amount" shall have the meaning provided in Section 8.09(b).
"Scheduled A Repayment" shall have the meaning provided in Section
4.02(A)(b)(i).
"Scheduled B Repayment" shall have the meaning provided in Section
4.02(A)(b)(ii).
"Scheduled Repayment" shall mean any Scheduled A Repayment or any
Scheduled B Repayment.
"SEC" shall mean the Securities and Exchange Commission or any
successor thereto.
"Section 4.04(b)(ii) Certificate" shall have the meaning provided in
Section 4.04(b)(ii).
"Secured Creditors" shall have the meaning provided in the Security
Documents.
"Security Agreement" shall have the meaning provided in Section
5.10(b).
"Security Agreement Collateral" shall mean all "Collateral" as defined
in the Security Agreement.
"Security Documents" shall mean and include the Security Agreement,
the Pledge Agreement, each Mortgage, and each Additional Security Document, if
any.
"Senior Subordinated Note Documents" shall mean and include each of
the Senior Subordinated Note Indenture and the Senior Subordinated Notes, as the
same may be entered into, modified, supplemented or amended from time to time
pursuant to the terms hereof and thereof.
"Senior Subordinated Note Indenture" shall mean one or more Indentures
that will be entered into by and between the Borrower and the Subsidiary
Guarantors and the trustee for the holders of the Senior Subordinated Notes or
the purchasers of the Senior Subordinated Notes, as applicable, in the form
referred to in, or having the terms permitted by, Section 8.04(c), as the same
may be entered into, modified, amended or supplemented from time to time in
accordance with the terms hereof and thereof.
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"Senior Subordinated Notes" shall mean the senior subordinated notes
of the Borrower that may be issued pursuant to a Senior Subordinated Note
Indenture and as the same may be modified, supplemented or amended from time to
time pursuant to the terms hereof and thereof.
"Shareholder Subordinated Note" shall mean an unsecured junior
subordinated note issued by the Borrower or any of its Subsidiaries in the form
of Exhibit L.
"Shareholders' Agreements" shall have the meaning set forth in Section
5.13.
"S&P" shall mean Standard & Poor's Corporation Ratings Services, a
division of McGraw-Hill.
"Stated Amount" of each Letter of Credit shall mean the maximum amount
available to be drawn thereunder (regardless of whether any conditions for
drawing could then be met).
"Subsidiary" of any Person shall mean and include (i) any corporation
more than 50% of whose stock of any class or classes having by the terms thereof
ordinary voting power to elect a majority of the directors of such corporation
(irrespective of whether or not at the time stock of any class or classes of
such corporation shall have or might have voting power by reason of the
happening of any contingency) is at the time owned by such Person directly or
indirectly through Subsidiaries and (ii) any partnership, association, joint
venture or other entity (other than a corporation) in which such Person directly
or indirectly through Subsidiaries, has more than a 50% equity interest at the
time; PROVIDED that the LS Companies shall not be deemed to be Subsidiaries of
the Borrower.
"Subsidiary Guarantor" shall mean each Subsidiary of the Borrower
(other than a Foreign Subsidiary except to the extent otherwise provided in
Section 7.13) that is or becomes a party to the Subsidiary Guaranty.
"Subsidiary Guaranty" shall mean each subsidiary guaranty, in the form
of Exhibit H (as modified, amended or supplemented from time to time in
accordance with the terms thereof and hereof).
"Supermajority Banks" of the Facilities shall mean collectively (and
not individually) Non-Defaulting Banks the sum of whose outstanding Term Loans,
Revolving Credit Commitments (or, after the Total Revolving Credit Commitment
has been terminated, outstanding Revolving Loans and Revolving Percentages of
outstanding Swingline Loans and Letter of Credit Outstandings) constitute
greater than 66-2/3% of the sum of (i) the total outstanding Term Loans of
Non-Defaulting Banks and (ii) the Total Revolving Credit Commitment less the
aggregate Revolving Credit Commitments of Defaulting Banks (or, after the Total
Revolving Credit Commitment has been terminated, the total outstanding Revolving
Loans of Non-Defaulting Banks and the aggregate Revolving Percentages of all
Non-Defaulting Banks of the total outstanding Swingline Loans and Letter of
Credit Outstandings at such time).
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"Swingline Expiry Date" shall mean the date which is five Business
Days prior to the Revolving Loan Maturity Date.
"Swingline Loan" shall have the meaning provided in Section 1.01(B).
"Swingline Note" shall have the meaning provided in Section 1.05(a).
"Syndication Agent" shall have the meaning provided in the first
paragraph of this Agreement.
"Syndication Date" shall mean that date upon which the Agents
determine (and notify the Borrower) that the primary syndication (and resultant
addition of Persons as Banks pursuant to Section 12.04(b)) has been completed.
"Tax Allocation Agreements" shall have the meaning provided in Section
5.13.
"Taxes" shall have the meaning provided in Section 4.04.
"Term Loan" shall mean each A Term Loan and each B Term Loan.
"Term Loan Commitment" shall mean, with respect to each Bank at any
time, the sum of the A Term Loan Commitment and the B Term Loan Commitment of
such Bank at such time.
"Term Loan Facilities" shall mean the A Term Loan Facility and the B
Term Loan Facility.
"Test Period" shall mean for any determination made on a specific
date, the four consecutive fiscal quarters of the Borrower then last ended
(taken as one accounting period).
"Total A Term Loan Commitment" shall mean the sum of the A Term Loan
Commitments of each of the Banks.
"Total B Term Loan Commitment" shall mean the sum of the B Term Loan
Commitments of each of the Banks.
"Total Commitment" shall mean the sum of the Total Term Loan
Commitment and the Total Revolving Credit Commitment.
"Total Revolving Credit Commitment" shall mean the sum of the
Revolving Credit Commitments of each of the Banks.
"Total Term Loan Commitment" shall mean the sum of the Total A Term
Loan Commitment and the Total B Term Loan Commitment.
"Total Unutilized Revolving Credit Commitment" shall mean, at any
time, (i) the Total Revolving Credit Commitment at such time LESS (ii) the sum
of the aggregate principal
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amount of all Revolving Loans and Swingline Loans at such time plus the Letter
of Credit Outstandings at such time.
"Transaction" shall mean, collectively, (i) the Recapitalization, (ii)
the incurrence of Loans and the issuance of Letters of Credit on the Initial
Borrowing Date, (iii) the entering into of the Senior Subordinated Note
Documents and the issuance of the Senior Subordinated Notes pursuant thereto and
(iv) the payment of fees and expenses in connection with the foregoing.
"Transaction Bonuses" shall mean, collectively, the bonuses in an
aggregate amount of up to $7,000,000 paid to members of management of the
Borrower in connection with the Transaction.
"Type" shall mean any type of Loan determined with respect to the
interest option applicable thereto, I.E., a Base Rate Loan or a Eurodollar Loan.
"UCC" shall mean the Uniform Commercial Code as in effect from time to
time in the relevant jurisdiction.
"Unfunded Current Liability" of any Plan shall mean the amount, if
any, by which the actuarial present value of the accumulated plan benefits under
the Plan as of the close of its most recent plan year exceeds the fair market
value of the assets allocable thereto, each determined in accordance with
Statement of Financial Accounting Standards No. 35, based upon the actuarial
assumptions used by the Plan's actuary in the most recent annual valuation of
the Plan.
"Unpaid Drawing" shall have the meaning provided in Section 2.03(a).
"U.S. Dollars" and the sign "$" shall each mean freely transferable
lawful money of the United States of America.
"Waivable Mandatory Repayment" shall have the meaning provided in
Section 4.02(C).
"Wholly-Owned Domestic Subsidiary" shall mean, as to any Person, any
Wholly-Owned Subsidiary of such Person which is a Domestic Subsidiary.
"Wholly-Owned Foreign Subsidiary" shall mean, as to any Person, any
Wholly-Owned Subsidiary of such Person which is a Foreign Subsidiary.
"Wholly-Owned Subsidiary" shall mean, as to any Person, (i) any
corporation 100% of whose capital stock (other than director's qualifying shares
and/or other nominal amounts of shares required to be held other than by such
Person under applicable law) is at the time owned by such Person and/or one or
more Wholly-Owned Subsidiaries of such Person and (ii) any partnership,
association, joint venture or other entity in which such Person and/or one or
more Wholly-Owned Subsidiaries of such Person has a 100% equity interest at such
time.
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"Working Capital" shall mean the excess of Consolidated Current Assets
over Consolidated Current Liabilities.
"Written" (whether lower or upper case) or "in writing" shall mean any
form of written communication or a communication by means of telex, facsimile
device, telegraph or cable.
SECTION 11. The Agents.
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11.01 APPOINTMENT. Each Bank hereby irrevocably designates and
appoints Chase as Administrative Agent of such Bank (such term to include for
purposes of this Section 11, Chase acting as Collateral Agent) to act as
specified herein and in the other Credit Documents, and each such Bank hereby
irrevocably authorizes Chase as the Administrative Agent to take such action on
its behalf under the provisions of this Agreement and the other Credit Documents
and to exercise such powers and perform such duties as are expressly delegated
to the Administrative Agent by the terms of this Agreement and the other Credit
Documents, together with such other powers as are reasonably incidental thereto.
The Administrative Agent agrees to act as such upon the express conditions
contained in this Section 11. Notwithstanding any provision to the contrary
elsewhere in this Agreement or in any other Credit Document, the Administrative
Agent shall not have any duties or responsibilities, except those expressly set
forth herein or in the other Credit Documents, or any fiduciary relationship
with any Bank, and no implied covenants, functions, responsibilities, duties,
obligations or liabilities shall be read into this Agreement or otherwise exist
against the Administrative Agent. The provisions of this Section 11 are solely
for the benefit of the Administrative Agent and the Banks, and neither the
Borrower nor any of its Subsidiaries shall have any rights as a third party
beneficiary of any of the provisions hereof. In performing its functions and
duties under this Agreement, the Administrative Agent shall act solely as agent
of the Banks and the Administrative Agent does not assume and shall not be
deemed to have assumed any obligation or relationship of agency or trust with or
for the Borrower or any of its Subsidiaries.
11.02 DELEGATION OF DUTIES. The Administrative Agent may execute any
of its duties under this Agreement or any other Credit Document by or through
agents or attorneys-in-fact and shall be entitled to advice of counsel
concerning all matters pertaining to such duties. The Administrative Agent shall
not be responsible for the negligence or misconduct of any agents or
attorneys-in-fact selected by it with reasonable care except to the extent
otherwise required by Section 11.03.
11.03 EXCULPATORY PROVISIONS. Neither the Administrative Agent nor any
of its officers, directors, employees, agents, attorneys-in-fact or affiliates
shall be (i) liable for any action lawfully taken or omitted to be taken by it
or such Person under or in connection with this Agreement or the other Credit
Documents (except for its or such Person's own gross negligence or willful
misconduct) or (ii) responsible in any manner to any of the Banks for any
recitals, statements, representations or warranties made by the Borrower, any of
its Subsidiaries or any of their respective officers contained in this Agreement
or the other Credit Documents, any other Document or in any certificate, report,
statement or other document referred to or provided for in, or received by the
Administrative Agent under or in connection with, this Agreement or any other
Document or for any failure of the Borrower or any of its Subsidiaries or any of
their respective
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officers to perform its obligations hereunder or thereunder. The Administrative
Agent shall not be under any obligation to any Bank to ascertain or to inquire
as to the observance or performance of any of the agreements contained in, or
conditions of, this Agreement or the other Documents, or to inspect the
properties, books or records of the Borrower or any of its Subsidiaries. The
Administrative Agent shall not be responsible to any Bank for the effectiveness,
genuineness, validity, enforceability, collectability or sufficiency of this
Agreement or any other Document or for any representations, warranties, recitals
or statements made herein or therein or made in any written or oral statement or
in any financial or other statements, instruments, reports, certificates or any
other documents in connection herewith or therewith furnished or made by the
Administrative Agent to the Banks or by or on behalf of the Borrower or any of
its Subsidiaries to the Administrative Agent or any Bank or be required to
ascertain or inquire as to the performance or observance of any of the terms,
conditions, provisions, covenants or agreements contained herein or therein or
as to the use of the proceeds of the Loans or of the existence or possible
existence of any Default or Event of Default.
11.04 RELIANCE BY ADMINISTRATIVE AGENT. The Administrative Agent shall
be entitled to rely, and shall be fully protected in relying, upon any note,
writing, resolution, notice, consent, certificate, affidavit, letter, cablegram,
telegram, facsimile, telex or teletype message, statement, order or other
document or conversation believed by it to be genuine and correct and to have
been signed, sent or made by the proper Person or Persons and upon advice and
statements of legal counsel (including, without limitation, counsel to the
Borrower or any of its Subsidiaries), independent accountants and other experts
selected by the Administrative Agent. The Administrative Agent shall be fully
justified in failing or refusing to take any action under this Agreement or any
other Credit Document unless it shall first receive such advice or concurrence
of the Required Banks as it deems appropriate or it shall first be indemnified
to its satisfaction by the Banks against any and all liability and expense which
may be incurred by it by reason of taking or continuing to take any such action.
The Administrative Agent shall in all cases be fully protected in acting, or in
refraining from acting, under this Agreement and the other Credit Documents in
accordance with a request of the Required Banks, and such request and any action
taken or failure to act pursuant thereto shall be binding upon all the Banks.
11.05 NOTICE OF DEFAULT. The Administrative Agent shall not be deemed
to have knowledge or notice of the occurrence of any Default or Event of Default
unless the Administrative Agent has actually received notice from a Bank or the
Borrower referring to this Agreement, describing such Default or Event of
Default and stating that such notice is a "notice of default." In the event that
the Administrative Agent receives such a notice, the Administrative Agent shall
give prompt notice thereof to the Banks. The Administrative Agent shall take
such action with respect to such Default or Event of Default as shall be
reasonably directed by the Required Banks; PROVIDED that, unless and until the
Administrative Agent shall have received such directions, the Administrative
Agent may (but shall not be obligated to) take such action, or refrain from
taking such action, with respect to such Default or Event of Default as it shall
deem advisable in the best interests of the Banks.
11.06 NONRELIANCE ON ADMINISTRATIVE AGENT AND OTHER BANKS. Each Bank
expressly acknowledges that neither the Administrative Agent nor any of its
respective officers, directors, employees, agents, attorneys-in-fact or
affiliates have made any representations or warranties to it and that no act by
the Administrative Agent hereinafter taken, including any
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review of the affairs of the Borrower or any of its Subsidiaries, shall be
deemed to constitute any representation or warranty by the Administrative Agent
to any Bank. Each Bank represents to the Administrative Agent that it has,
independently and without reliance upon the Administrative Agent or any other
Bank, and based on such documents and information as it has deemed appropriate,
made its own appraisal of and investigation into the business, assets,
operations, property, financial and other condition, prospects and
creditworthiness of the Borrower and its Subsidiaries and made its own decision
to make its Loans hereunder and enter into this Agreement. Each Bank also
represents that it will, independently and without reliance upon the
Administrative Agent or any other Bank, and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
credit analysis, appraisals and decisions in taking or not taking action under
this Agreement, and to make such investigation as it deems necessary to inform
itself as to the business, assets, operations, property, financial and other
condition, prospects and creditworthiness of the Borrower and its Subsidiaries.
The Administrative Agent shall not have any duty or responsibility to provide
any Bank with any credit or other information concerning the business,
operations, assets, property, financial and other condition, prospects or
creditworthiness of the Borrower or any of its Subsidiaries which may come into
the possession of the Administrative Agent or any of its officers, directors,
employees, agents, attorneys-in-fact or affiliates.
11.07 INDEMNIFICATION. The Banks agree to indemnify the Administrative
Agent in its capacity as such ratably according to their respective
"percentages" as used in determining the Required Banks at such time (with such
"percentages" to be determined as if there are no Defaulting Banks), from and
against any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, reasonable expenses or disbursements of any
kind whatsoever which may at any time (including, without limitation, at any
time following the payment of the Obligations) be imposed on, incurred by or
asserted against the Administrative Agent in its capacity as such in any way
relating to or arising out of this Agreement or any other Credit Document, or
any documents contemplated by or referred to herein or the transactions
contemplated hereby or any action taken or omitted to be taken by the
Administrative Agent under or in connection with any of the foregoing, but only
to the extent that any of the foregoing is not paid by the Borrower or any of
its Subsidiaries; PROVIDED that no Bank shall be liable to the Administrative
Agent for the payment of any portion of such liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
resulting solely from the gross negligence or willful misconduct of the
Administrative Agent. To the extent any Bank would be required to indemnify the
Administrative Agent pursuant to the immediately preceding sentence but for the
fact that it is a Defaulting Bank, such Defaulting Bank shall not be entitled to
receive any portion of any payment or other distribution hereunder until each
other Bank shall have been reimbursed for the excess, if any, of the aggregate
amount paid by such Bank under this Section 11.07 over the aggregate amount such
Bank would have been obligated to pay had such first Bank not been a Defaulting
Bank. If any indemnity furnished to the Administrative Agent for any purpose
shall, in the opinion of the Administrative Agent be insufficient or become
impaired, the Administrative Agent may call for additional indemnity and cease,
or not commence, to do the acts indemnified against until such additional
indemnity is furnished. The agreements in this Section 11.07 shall survive the
payment of all Obligations.
11.08 ADMINISTRATIVE AGENT IN ITS INDIVIDUAL CAPACITY. The
Administrative Agent and its affiliates may make loans to, accept deposits from
and generally engage in any kind of
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business with the Borrower and its Subsidiaries as though the Administrative
Agent were not the Administrative Agent hereunder. With respect to the Loans
made by it and all Obligations owing to it, the Administrative Agent shall have
the same rights and powers under this Agreement as any Bank and may exercise the
same as though it were not the Administrative Agent and the terms "Bank" and
"Banks" shall include the Administrative Agent in its individual capacity.
11.09 HOLDERS. The Administrative Agent may deem and treat the payee
of any Note as the owner thereof for all purposes hereof unless and until a
written notice of the assignment, transfer or endorsement thereof, as the case
may be, shall have been filed with the Administrative Agent. Any request,
authority or consent of any Person or entity who, at the time of making such
request or giving such authority or consent, is the holder of any Note shall be
conclusive and binding on any subsequent holder, transferee, assignee or
indorsee, as the case may be, of such Note or of any Note or Notes issued in
exchange therefor.
11.10 RESIGNATION OF THE ADMINISTRATIVE AGENT; SUCCESSOR
ADMINISTRATIVE AGENT. The Administrative Agent may resign as the Administrative
Agent upon 20 days' notice to the Banks. Upon the resignation of the
Administrative Agent, the Required Banks shall appoint from among the Banks a
successor Administrative Agent which is a bank or a trust company for the Banks
subject to prior approval by the Borrower (such approval not to be unreasonably
withheld), whereupon such successor agent shall succeed to the rights, powers
and duties of the Administrative Agent, and the term "Administrative Agent"
shall include such successor agent effective upon its appointment, and the
resigning Agent's rights, powers and duties as the Administrative Agent shall be
terminated, without any other or further act or deed on the part of such former
Administrative Agent or any of the parties to this Agreement. After the
resignation of the Administrative Agent hereunder, the provisions of this
Section 11 shall inure to its benefit as to any actions taken or omitted to be
taken by it while it was Administrative Agent under this Agreement.
11.11 DOCUMENTATION AGENT, SYNDICATION AGENT AND CO-AGENTS. The
Documentation Agent and the Syndication Agent shall have no duties or
liabilities under the Credit Documents in such capacity.
11.12 LETTER OF CREDIT ISSUER. The provisions of this Section 11 shall
apply to the Letter of Credit Issuer in its capacity as such, MUTATIS MUTANDIS.
SECTION 12. Miscellaneous.
-------------
12.01 PAYMENT OF EXPENSES, ETC. The Borrower agrees to: (i) whether or
not the transactions herein contemplated are consummated, pay all reasonable
out-of-pocket costs and expenses of each Agent (including, without limitation,
the reasonable fees and disbursements of Simpson Thacher & Bartlett and local
counsel) in connection with the negotiation, preparation, execution and delivery
of the Credit Documents and the documents and instruments referred to therein
and any amendment, waiver or consent relating thereto and requested by the
Borrower and in connection with the Agents' syndication efforts with respect to
this Agreement; (ii) pay all reasonable out-of-pocket costs and expenses of each
Agent and each of the Banks in connection with the enforcement of the Credit
Documents and the documents and instruments referred to
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therein and, after an Event of Default shall have occurred and be continuing,
the protection of the rights of each of the Agents and each of the Banks
thereunder (including, without limitation, the reasonable fees and disbursements
of counsel for the Agents and the Banks), PROVIDED that the Borrower shall be
obligated to pay the fees and disbursements of only one counsel to the Agents
and the Banks pursuant to this clause (ii) unless an Agent or Bank notifies the
Borrower that it reasonably believes that its legal position differs from the
other Agents or Banks or that it may be subject to different claims or defenses
than the other Agents and Banks, in which case the Borrower will also pay the
reasonable fees and disbursements of counsel (including in-house counsel) of
such Agent or Bank; (iii) pay and hold each of the Banks harmless from and
against any and all present and future stamp and other similar taxes with
respect to the foregoing matters and save each of the Banks harmless from and
against any and all liabilities with respect to or resulting from any delay or
omission (other than to the extent attributable to such Bank) to pay such taxes;
and (iv) indemnify each Agent and each Bank, their respective officers,
directors, trustees, employees, representatives and agents from and hold each of
them harmless against any and all losses, liabilities, claims, damages or
expenses incurred by any of them as a result of, or arising out of, or in any
way related to, or by reason of, (a) any investigation, litigation or other
proceeding (whether or not any Agent or any Bank is a party thereto) related to
the entering into and/or performance of this Agreement or any other Document or
the use of the proceeds of any Loans hereunder or the Transaction or the
consummation of any other transactions contemplated in any Document (but
excluding any such losses, liabilities, claims, damages or expenses to the
extent incurred by reason of the gross negligence or willful misconduct of the
Person to be indemnified), or (b) the actual or alleged presence of Hazardous
Materials in the air, surface water or groundwater or on the surface or
subsurface of any Real Property or any Environmental Claim, in each case,
including, without limitation, the reasonable fees and disbursements of counsel
and independent consultants incurred in connection with any such investigation,
litigation or other proceeding.
12.02 RIGHT OF SETOFF. In addition to any rights now or hereafter
granted under applicable law or otherwise, and not by way of limitation of any
such rights, upon the occurrence of an Event of Default, each Agent and each
Bank is hereby authorized at any time or from time to time, without presentment,
demand, protest or other notice of any kind to the Borrower or any of its
Subsidiaries or to any other Person, any such notice being hereby expressly
waived, to set off and to appropriate and apply any and all deposits (general or
special) and any other Indebtedness at any time held or owing by such Agent or
such Bank (including, without limitation, by branches and agencies of such Agent
and such Bank wherever located) to or for the credit or the account of the
Borrower or any of its Subsidiaries against and on account of the Obligations
and liabilities of the Borrower or any of its Subsidiaries to such Agent or such
Bank under this Agreement or under any of the other Credit Documents, including,
without limitation, all interests in Obligations of the Borrower or any of its
Subsidiaries purchased by such Bank pursuant to Section 12.06(b), and all other
claims of any nature or description arising out of or connected with this
Agreement or any other Credit Document, irrespective of whether or not such Bank
shall have made any demand hereunder and although said Obligations, liabilities
or claims, or any of them, shall be contingent or unmatured. Notwithstanding
anything to the contrary contained in this Section 12.02, no Bank shall exercise
any such right of set-off without the prior consent of the Administrative Agent
or the Required Banks so long as the Obligations shall be secured by any Real
Property located in the State of California, it being understood and agreed,
however, that this sentence is for the sole benefit of the Banks and may be
amended, modified or
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waived in any respect by the Required Banks without the requirement of prior
notice to or consent by any Credit Party and does not constitute a waiver of any
rights against any Credit Party or against any Collateral.
12.03 NOTICES. Except as otherwise expressly provided herein, all
notices and other communications provided for hereunder shall be in writing
(including telegraphic, telex, facsimile or cable communication) and mailed,
telegraphed, telexed, telecopied, cabled or delivered, if to any Credit Party,
at the address specified opposite its signature below or in the other relevant
Credit Documents, as the case may be; if to any Bank, at its address specified
for such Bank on Annex II; or, at such other address as shall be designated by
any party in a written notice to the other parties hereto. All such notices and
communications shall be mailed, telegraphed, telexed, telecopied or cabled or
sent by overnight courier, and shall be effective when received.
12.04 BENEFIT OF AGREEMENT. (a) This Agreement shall be binding upon
and inure to the benefit of and be enforceable by the respective successors and
assigns of the parties hereto; PROVIDED, HOWEVER, the Borrower may not assign or
transfer any of its rights, obligations or interest hereunder or under any other
Credit Document without the prior written consent of all of the Banks and,
PROVIDED FURTHER, that, although any Bank may transfer, assign or grant
participations in its rights hereunder, such Bank shall remain a "Bank" for all
purposes hereunder (and may not transfer or assign all or any portion of its
Commitments hereunder except as provided in Section 12.04(b)) and the
transferee, assignee or participant, as the case may be, shall not constitute a
"Bank" hereunder and, PROVIDED FURTHER, that no Bank shall transfer or grant any
participation under which the participant shall have rights to approve any
amendment to or waiver of this Agreement or any other Credit Document except to
the extent such amendment or waiver would (i) extend the final scheduled
maturity of any Loan, Note or Letter of Credit (unless such Letter of Credit is
not extended beyond the Revolving Loan Maturity Date) in which such participant
is participating, or reduce the rate or extend the time of payment of interest
or Fees thereon (except in connection with a waiver of applicability of any
post-default increase in interest rates) or reduce the principal amount thereof,
or increase the amount of the participant's participation over the amount
thereof then in effect (it being understood that a waiver of any Default or
Event of Default or of a mandatory reduction in the Total Commitment shall not
constitute a change in the terms of such participation, and that an increase in
any Commitment or Loan shall be permitted without the consent of any participant
if the participant's participation is not increased as a result thereof), (ii)
consent to the assignment or transfer by the Borrower of any of its rights and
obligations under this Agreement or (iii) release all or substantially all of
the Collateral under all of the Security Documents (except as expressly provided
in the Credit Documents) supporting the Loans hereunder in which such
participant is participating. In the case of any such participation, the
participant shall not have any rights under this Agreement or any of the other
Credit Documents (the participant's rights against such Bank in respect of such
participation to be those set forth in the agreement executed by such Bank in
favor of the participant relating thereto) and all amounts payable by the
Borrower hereunder shall be determined as if such Bank had not sold such
participation.
(b) Notwithstanding the foregoing, any Bank (or any Bank together with
one or more other Banks) may (x) assign all or a portion of its Revolving Credit
Commitment (and related outstanding Obligations hereunder) and/or its
outstanding Term Loans to its parent
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company and/or any affiliate of such Bank which is at least 50% owned by such
Bank or its parent company or to one or more other Banks or (y) assign all, or
if less than all, a portion equal to at least $5,000,000 (or at least $1,000,000
in the case of any assignment by Chase within fourteen Business Days of the
Initial Borrowing Date) in the aggregate for the assigning Bank or assigning
Banks, of such Revolving Credit Commitments and/or outstanding principal amount
of Term Loans hereunder to one or more Eligible Transferees, each of which
assignees shall become a party to this Agreement as a Bank by execution of an
Assignment and Assumption Agreement, PROVIDED that (i) at such time Annex I
shall be deemed modified to reflect the Commitments (and/or outstanding Term
Loans, as the case may be) of such new Bank and of the existing Banks, (ii) upon
surrender of the old Notes, new Notes will be issued, at the Borrower's expense,
to such new Bank and to the assigning Bank to the extent it is retaining any
Commitments or Loans, such new Notes to be in conformity with the requirements
of Section 1.05 (with appropriate modifications) to the extent needed to reflect
the revised Commitments (and/or outstanding Term Loans, as the case may be),
(iii) the consent of the Administrative Agent shall be required in connection
with any such assignment pursuant to clause (y) of this Section 12.04(b) (which
consent shall not be unreasonably withheld) and (iv) the Administrative Agent
shall receive at the time of each such assignment, from the assigning or
assignee Bank, the payment of a non-refundable assignment fee of $3,500 and,
PROVIDED FURTHER, that such transfer or assignment will not be effective until
recorded by the Administrative Agent on the Register pursuant to Section
12.04(c). To the extent of any assignment pursuant to this Section 12.04(b), the
assigning Bank shall be relieved of its obligations hereunder with respect to
its assigned Commitments and/or Loans but shall continue to be entitled to the
benefit of all indemnities hereunder with respect to matters arising out of the
prior involvement of such assignor as a Bank hereunder. At the time of each
assignment pursuant to this Section 12.04(b) to a Person which is not already a
Bank hereunder and which is not a United States person (as such term is defined
in Section 7701(a)(30) of the Code) for Federal income tax purposes, the
respective assignee Bank shall provide to the Borrower and the Administrative
Agent the appropriate Internal Revenue Service Forms (and, if applicable a
Section 4.04(b)(ii) Certificate) described in Section 4.04(b). To the extent
that an assignment of all or any portion of a Bank's Commitments and related
outstanding Obligations pursuant to Section 1.13 or this Section 12.04(b) would,
at the time of such assignment, result in increased costs under Section 1.10,
1.11, 2.05 or 4.04 from those being charged by the respective assigning Bank
prior to such assignment, then the Borrower shall not be obligated to pay such
increased costs (although the Borrower shall be obligated to pay any other
increased costs of the type described above resulting from changes after the
date of the respective assignment).
(c) The Borrower hereby designates the Administrative Agent to serve
as the Borrower's agent, solely for purposes of this Section 12.04(c), to
maintain a register (the "Register") on which it will record the names and
addresses of the Banks and the Commitments from time to time of each of the
Banks, the Loans made by each of the Banks and each repayment in respect of the
principal amount of the Loans of each Bank. Failure to make any such
recordation, or any error in such recordation, shall not affect the Borrower's
obligations in respect of such Loans. With respect to any Bank, the transfer of
the Commitments of such Bank and the rights to the principal of, and interest
on, any Loan made pursuant to such Commitments shall not be effective until such
transfer is recorded on the Register maintained by the Administrative Agent with
respect to ownership of such Commitments and Loans and prior to such recordation
all amounts owing to the transferor with respect to such Commitments and Loans
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shall remain owing to the transferor. The registration of assignment or transfer
of all or part of any Commitments and Loans shall be recorded by the
Administrative Agent on the Register only upon the acceptance by the
Administrative Agent of a properly executed and delivered Assignment and
Assumption Agreement pursuant to Section 12.04(b). Coincident with the delivery
of such an Assignment and Assumption Agreement to the Administrative Agent for
acceptance and registration of assignment or transfer of all or part of a Loan,
or as soon thereafter as practicable, the assigning or transferor Bank shall
surrender the Note evidencing such Loan, and thereupon one or more new Notes in
the same aggregate principal amount shall be issued to the assigning or
transferor Bank and/or the new Bank. The Borrower agrees to indemnify the
Administrative Agent from and against any and all losses, claims, damages and
liabilities of whatsoever nature which may be imposed on, asserted against or
incurred by the Administrative Agent in performing its duties under this Section
12.04(c) except when caused by the gross negligence or willful misconduct of the
Administrative Agent.
(d) Nothing in this Agreement shall prevent or prohibit any Bank from
pledging its Loans and Notes hereunder to a Federal Reserve Bank in support of
borrowings made by such Bank from such Federal Reserve Bank.
12.05 NO WAIVER; REMEDIES CUMULATIVE. No failure or delay on the part
of any Agent or any Bank in exercising any right, power or privilege hereunder
or under any other Credit Document and no course of dealing between any Credit
Party and any Agent or any Bank shall operate as a waiver thereof; nor shall any
single or partial exercise of any right, power or privilege hereunder or under
any other Credit Document preclude any other or further exercise thereof or the
exercise of any other right, power or privilege hereunder or thereunder. The
rights and remedies herein expressly provided are cumulative and not exclusive
of any rights or remedies which any Agent or any Bank would otherwise have. No
notice to or demand on any Credit Party in any case shall entitle any Credit
Party to any other or further notice or demand in similar or other circumstances
or constitute a waiver of the rights of the Agents or the Banks to any other or
further action in any circumstances without notice or demand.
12.06 PAYMENTS PRO RATA. (a) The Administrative Agent agrees that
promptly after its receipt of each payment from or on behalf of any Credit Party
in respect of any Obligations of such Credit Party, it shall, except as
otherwise provided in this Agreement, distribute such payment to the Banks
(other than any Bank that has consented in writing to waive its PRO RATA share
of such payment) PRO RATA based upon their respective shares, if any, of the
Obligations with respect to which such payment was received.
(b) Each of the Banks agrees that, if it should receive any amount
hereunder (whether by voluntary payment, by realization upon security, by the
exercise of the right of setoff or banker's lien, by counterclaim or cross
action, by the enforcement of any right under the Credit Documents, or
otherwise) which is applicable to the payment of the principal of, or interest
on, the Loans, Unpaid Drawings or Fees, of a sum which with respect to the
related sum or sums received by other Banks is in a greater proportion than the
total of such Obligation then owed and due to such Bank bears to the total of
such Obligation then owed and due to all of the Banks immediately prior to such
receipt, then such Bank receiving such excess payment shall purchase for cash
without recourse or warranty from the other Banks an interest in the Obligations
of the respective Credit Party to such Banks in such amount as shall result in a
proportional participation
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by all of the Banks in such amount; PROVIDED that if all or any portion of such
excess amount is thereafter recovered from such Bank, such purchase shall be
rescinded and the purchase price restored to the extent of such recovery, but
without interest.
12.07 CALCULATIONS; COMPUTATIONS. (a) The financial statements to be
furnished to the Banks pursuant hereto shall be made and prepared in accordance
with GAAP consistently applied throughout the periods involved (except as set
forth in the notes thereto or as otherwise disclosed in writing by the Borrower
to the Banks); PROVIDED that except as otherwise specifically provided herein,
all computations determining compliance with Sections 4.02 and 8, including
definitions used therein, shall utilize accounting principles and policies in
effect at the time of the preparation of, and in conformity with those used to
prepare, the FYE 1996 financial statements delivered to the Banks pursuant to
Section 7.01(c) except that such computations shall not in any event (i) give
effect to purchase accounting adjustments required or permitted by APB 16
(including non-cash write-ups and non-cash charges relating to inventory and
fixed assets, in each case arising in connection with the Borrower) and APB 17
(including non-cash charges relating to intangibles and goodwill arising in
connection with the Borrower) or (ii) give effect to any charges in connection
with accounting for the Recapitalization.
(b) All computations of interest and Fees hereunder shall be made on
the actual number of days elapsed over a year of 360 days, PROVIDED that
interest on Base Rate Loans based on the Prime Rate shall be computed on the
actual number of days elapsed over a year of 365 or 366 days, as the case may
be.
12.08 GOVERNING LAW; SUBMISSION TO JURISDICTION; VENUE. (a) THIS
AGREEMENT AND THE OTHER CREDIT DOCUMENTS AND THE RIGHTS AND OBLIGATIONS OF THE
PARTIES HEREUNDER AND THEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE
GOVERNED BY THE LAW OF THE STATE OF NEW YORK. Any legal action or proceeding
with respect to this Agreement or any other Credit Document may be brought in
the courts of the State of New York or of the United States for the Southern
District of New York, and, by execution and delivery of this Agreement, each
Credit Party hereby irrevocably accepts for itself and in respect of its
property, generally and unconditionally, the jurisdiction of the aforesaid
courts. Each Credit Party hereby further irrevocably waives any claim that any
such courts lack jurisdiction over such Credit Party, and agrees not to plead or
claim, in any legal action or proceeding with respect to this Agreement or any
other Credit Document brought in any of the aforesaid courts, that any such
court lacks jurisdiction over such Credit Party. Each Credit Party irrevocably
consents to the service of process in any such action or proceeding by the
mailing of copies thereof by registered or certified mail, postage prepaid, to
such Credit Party, at its address for notices pursuant to Section 12.03, such
service to become effective 30 days after such mailing. Each Credit Party hereby
irrevocably waives any objection to such service of process and further
irrevocably waives and agrees not to plead or claim in any action or proceeding
commenced hereunder or under any other Credit Document that service of process
was in any way invalid or ineffective. Nothing herein shall affect the right of
any Agent, any Bank or the holder of any Note to serve process in any other
manner permitted by law or to commence legal proceedings or otherwise proceed
against any Credit Party in any other jurisdiction.
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(b) Each Credit Party hereby irrevocably waives any objection which it
may now or hereafter have to the laying of venue of any of the aforesaid actions
or proceedings arising out of or in connection with this Agreement or any other
Credit Document brought in the courts referred to in clause (a) above and hereby
further irrevocably waives and agrees not to plead or claim in any such court
that any such action or proceeding brought in any such court has been brought in
an inconvenient forum.
12.09 COUNTERPARTS. This Agreement may be executed in any number of
counterparts and by the different parties hereto on separate counterparts, each
of which when so executed and delivered shall be an original, but all of which
shall together constitute one and the same instrument. A complete set of
counterparts executed by all the parties hereto shall be lodged with the
Borrower and the Administrative Agent.
12.10 EFFECTIVENESS. This Agreement shall become effective on the date
(the "Effective Date") on which the Borrower, the Administrative Agent, the
Documentation Agent and each of the Banks shall have signed a counterpart hereof
(whether the same or different counterparts) and shall have delivered the same
to the Administrative Agent at the Notice Office or, in the case of the Banks,
shall have given to the Administrative Agent telephonic (confirmed in writing),
written, telex or facsimile notice (actually received) at such office that the
same has been signed and mailed to it. The Administrative Agent will give the
Borrower and each Bank prompt written notice of the occurrence of the Effective
Date.
12.11 HEADINGS DESCRIPTIVE. The headings of the several sections and
subsections of this Agreement are inserted for convenience only and shall not in
any way affect the meaning or construction of any provision of this Agreement.
12.12 AMENDMENT OR WAIVER; ETC. (a) Neither this Agreement nor any
other Credit Document nor any terms hereof or thereof may be changed, waived,
discharged or terminated unless such change, waiver, discharge or termination is
in writing signed by the respective Credit Parties party thereto and the
Required Banks, PROVIDED that no such change, waiver, discharge or termination
shall, without the consent of each Bank (other than a Defaulting Bank) (with
Obligations being directly affected thereby in the case of the following clause
(i)), (i) extend the final scheduled maturity of any Loan or Note or extend the
stated maturity of any Letter of Credit beyond the Revolving Loan Maturity Date,
or reduce the rate or extend the time of payment of interest or Fees thereon, or
reduce the principal amount thereof, (ii) release all or substantially all of
the Collateral (except as expressly provided in the Security Documents) under
all the Security Documents, (iii) amend, modify or waive any provision of this
Section 12.12, (iv) reduce the percentage specified in the definition of
Required Banks (it being understood that, with the consent of the Required
Banks, additional extensions of credit pursuant to this Agreement may be
included in the determination of the Required Banks on substantially the same
basis as the extensions of Term Loans and Revolving Credit Commitments are
included on the Effective Date) or (v) consent to the assignment or transfer by
the Borrower of any of its rights and obligations under this Agreement; PROVIDED
FURTHER, that no such change, waiver, discharge or termination shall (u)
increase the Commitments of any Bank over the amount thereof then in effect
without the consent of such Bank (it being understood that waivers or
modifications of conditions precedent, covenants, Defaults or Events of Default
or of a mandatory reduction in the Total Commitment shall not constitute an
increase of the Commitment of any Bank, and that an increase
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in the available portion of any Commitment of any Bank shall not constitute an
increase in the Commitment of such Bank), (v) without the consent of Chase or
the Letter of Credit Issuer, as the case may be, amend, modify or waive any
provision of Section 2 or alter its rights or obligations with respect to
Letters of Credit or Swingline Loans, (w) without the consent of any Agent,
amend, modify or waive any provision of Section 11 as same applies to such Agent
or any other provision as same relates to the rights or obligations of such
Agent, (x) without the consent of the Collateral Agent, amend, modify or waive
any provision relating to the rights or obligations of the Collateral Agent, (y)
without the consent of the Majority Banks of each Facility which is being
allocated a lesser prepayment or commitment reduction as a result of the actions
described below, alter the required application of any prepayments (or
commitment reduction), as between the various Facilities pursuant to Section
4.01(a) and 4.02(B)(b) (although the Required Banks may waive, in whole or in
part, any such prepayment, repayment or commitment reduction so long as the
application, as amongst the various Facilities, of any such prepayment,
repayment or commitment reduction which is still required to be made is not
altered), (z) without the consent of the Majority Banks of the respective
Facility, amend the definition of Majority Banks or amend, modify or waive the
order of the application of any payment or prepayment or (aa) without the
consent of the Majority Banks of each Facility, amend, modify or waive any
Scheduled Repayment of any Facility (without extending the final scheduled
maturity thereof). A waiver or amendment to cure any Default or Event of Default
shall not be effective for purposes of Section 5.02 unless such waiver or
amendment has been consented to by the Majority Banks under the Revolving Credit
Facility.
(b) If, in connection with any proposed change, waiver, discharge or
termination to any of the provisions of this Agreement as contemplated by clause
(a)(i) through (v), inclusive, of the first proviso to Section 12.12(a), the
consent of the Required Banks is obtained but the consent of one or more of such
other Banks whose consent is required is not obtained, then the Borrower shall
have the right, so long as all non-consenting banks whose individual consent is
required are treated as described in either clause (A) or (B) below, to either
(A) replace each such non-consenting Bank or Banks with one or more Replacement
Banks pursuant to Section 1.13 so long as at the time of such replacement, each
such Replacement Bank consents to the proposed change, waiver, discharge or
termination or (B) terminate such non-consenting Bank's Commitments and repay in
full its outstanding Loans, in accordance with Sections 3.02(b) and/or 4.01(b),
PROVIDED that, unless the Commitments terminated and Loans repaid pursuant to
preceding clause (B) are immediately replaced in full at such time through the
addition of new Banks or the increase of the Commitments and/or outstanding
Loans of existing Banks (who in each case must specifically consent thereto),
then in the case of any action pursuant to preceding clause (B) the Required
Banks (determined before giving effect to the proposed action) shall
specifically consent thereto, PROVIDED FURTHER, that the Borrower shall not have
the right to replace a Bank solely as a result of the exercise of such Bank's
rights (and the withholding of any required consent by such Bank) pursuant to
the second proviso to Section 12.12(a).
12.13 SURVIVAL. All indemnities set forth herein including, without
limitation, in Section 1.10, 1.11, 2.05, 4.04, 11.07 or 12.01, shall survive the
execution and delivery of this Agreement and the making, repayment and
assignment of the Loans.
12.14 DOMICILE OF LOANS. Each Bank may transfer and carry its Loans
at, to or for the account of any branch office, subsidiary or affiliate of such
Bank; PROVIDED, that the
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Borrower shall not be responsible for costs arising under Section 1.10, 1.11,
2.05 or 4.04 resulting from any such transfer (other than a transfer pursuant to
Section 1.12) to the extent such costs would not otherwise be applicable to such
Bank in the absence of such transfer.
12.15 CONFIDENTIALITY. (a) Each of the Banks agrees that it will use
its reasonable efforts not to disclose without the prior consent of the Borrower
(other than to its employees, auditors, counsel or other professional advisors,
to affiliates or to another Bank if the Bank or such Bank's holding or parent
company in its sole discretion determines that any such party should have access
to such information) any information with respect to the Borrower or any of its
Subsidiaries which is furnished pursuant to this Agreement; PROVIDED, that any
Bank may disclose any such information (a) as has become generally available to
the public, (b) as may be required or appropriate in any report, statement or
testimony submitted to any municipal, state or Federal regulatory body having or
claiming to have jurisdiction over such Bank or to the Federal Reserve Board or
the Federal Deposit Insurance Corporation or similar organizations (whether in
the United States or elsewhere) or their successors or to the National
Association of Insurance Commissioners (to the extent necessary to receive the
benefits of any law or regulation governing such Bank's investments), (c) as may
be required or appropriate in response to any summons or subpoena or in
connection with any litigation, (d) to comply with any law, order, regulation or
ruling applicable to such Bank, (e) to the National Association of Insurance
Commissioners or any similar organization or any nationally recognized rating
agency that requires access to information about such Bank's investment
portfolio in connection with ratings issued with respect to such Bank, (f) to
any prospective transferee or participant in connection with any contemplated
assignment, grant of a participation or transfer of any of the Commitments
and/or Loans or any interest therein by such Bank and (g) any direct or indirect
counterparty with a Bank or its affiliate in a swap agreement with respect to
such Bank's Loans; PROVIDED, that, in the case of clauses (f) and (g), such
prospective transferee or contractual counterparty executes an agreement with
such Bank, for the benefit of such Bank and the Borrower, containing provisions
substantially identical to those contained in this Section.
(b) Each of the Borrower hereby acknowledges and agrees that each Bank
may share with any of its affiliates any information related to the Borrower or
any of its Subsidiaries (including, without limitation, any nonpublic customer
information regarding the creditworthiness of the Borrower and its Subsidiaries,
provided that such Persons shall be subject to the provisions of this Section
12.15 to the same extent as such Bank).
12.16 WAIVER OF JURY TRIAL. EACH OF THE PARTIES TO THIS AGREEMENT
HEREBY IRREVOCABLY WAIVES ALL RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING
OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE OTHER CREDIT
DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.
12.17 INTEGRATION. This Agreement and the other Credit Documents
represent the entire agreement of the Credit Parties, the Agents and the Banks
with respect to the subject matter hereof and thereof, and there are no
promises, undertakings, representations or warranties by any Credit Party, any
Agent or any Bank relative to subject matter hereof or thereof not expressly set
forth or referred to herein or in the other Credit Documents.
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<PAGE> 109
12.18 PRE-FUNDING ESCROW ARRANGEMENTS. The Borrower currently intends
that the Initial Borrowing Date occur on December 20, 1996, and currently
desires that the Banks make on the Initial Borrowing Date A Term Loans in an
aggregate principal amount equal to $75,000,000 and B Term Loans in an aggregate
principal amount equal to $75,000,000 (such aggregate amount of the Loans to be
made on the Initial Borrowing Date, the "Initial Loan Amount"). In order to
ensure that the Initial Loan Amount will be available at 10:00 a.m., New York
City time, on December 20, 1996, the Borrower (a) will deliver a Notice of
Borrowing (the "Pre-Funding Request") to the Administrative Agent not later than
12:00 noon, New York City time, on December 18, 1996, and (b) desires that the
Banks, pursuant to the Pre-Funding Request, transfer an amount equal to the
Initial Loan Amount (such amount, the "Delivered Funds") to the account of the
Administrative Agent specified in Annex II (such account, solely for the
purposes of this Section 12.18, the "Escrow Account") on December 19, 1996. The
following agreements and understandings will apply with respect to (a) the
arrangements for the availability of funds to enable the funding by the Banks of
the Initial Loan Amount upon the satisfaction of the conditions precedent set
forth in Section 5 of this Agreement (the "CLOSING") and (b) the release of the
Delivered Funds as the Initial Loan Amount upon the Closing:
(i) The Administrative Agent, on behalf of the Banks, shall have
sole and exclusive dominion over and control of the Escrow Account and all
property from time to time deposited therein.
(ii) Upon receipt from the Borrower of the Pre-Funding Request on
December 18, 1996, the Administrative Agent will provide notice to each
Bank, in the manner that would be applicable to a Notice of Borrowing under
Section 1.03, that such Bank should make available to the Administrative
Agent not later than 2:00 p.m., New York City time, on December 19, 1996,
such Bank's pro rata portion of the Delivered Funds, as such pro rata
portion may be determined by the Administrative Agent pursuant to the
respective Commitments of the Banks as set forth in Annex I. Each Bank
shall make its pro rata portion of the Delivered Funds available to the
Administrative Agent by wire transfer of immediately available funds to the
Escrow Account.
(iii) Notwithstanding anything in this Agreement or any other document
to the contrary, (A) the Administrative Agent shall hold the Delivered
Funds for the account of the Banks pending release of the Delivered Funds
pursuant to paragraph (v) below and (B) the Borrower shall have no right,
title or interest in or to the Delivered Funds pending such release. To the
extent that the Administrative Agent has any interest in the Delivered
Funds, the Administrative Agent hereby grants a Lien on such interest to
the Collateral Agent for the benefit of the Banks. The Administrative Agent
shall use its reasonable efforts to invest (in any of (1) a time deposit
with the Nassau, Bahamas, branch of The Chase Manhattan Bank, (2) United
States government repurchase obligations or (3) commercial paper issued by
The Chase Manhattan Bank, as determined by the Administrative Agent) such
of the Delivered Funds as are on deposit in the Escrow Account at 2:00
p.m., New York City time, on December 19, 1996. All earnings on the
Delivered Funds (the "Investment Earnings") shall be paid into the Escrow
Account. The Administrative Agent shall not be liable to any Person for any
loss suffered in connection with any investment of funds made by it in
accordance with this Section 12.18.
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<PAGE> 110
(iv) The Borrower shall reimburse each Bank for its cost of delivery
of the Delivered Funds to the Administrative Agent. Such reimbursement
shall, as to each Bank, be equal to the product of (A) such Bank's pro rata
portion (determined as set forth above) of the Delivered Funds TIMES (B) a
percentage equal to the Base Rate plus the margin that would be applicable
to such Bank's Base Rate Loans as of the Initial Borrowing Date MULTIPLIED
BY (C) a fraction the numerator of which is the actual number of days
elapsed from December 19, 1996, to the date such Delivered Funds are
released pursuant to paragraph (v) below and the denominator of which is
365. Such reimbursement in respect of the Delivered Funds shall be paid by
the Borrower to the Administrative Agent on behalf of the Banks on the
first date to occur after the Initial Borrowing Date on which an interest
payment shall be due and payable pursuant to the terms of this Agreement;
PROVIDED, HOWEVER, that if the Delivered Funds are released to the Banks
(and not to the Borrower) pursuant to paragraph (v) below, such
reimbursement amount shall be payable by the Borrower immediately upon
release of the Delivered Funds.
(v) Upon the occurrence of the Closing on December 20, 1996, the
Administrative Agent is authorized to release to and thereby make available
to the Borrower (A) the Delivered Funds as the Initial Loan Amount and (B)
all Investment Earnings. If the Closing has not occurred by 11:59 p.m., New
York City time, on December 20, 1996, the Delivered Funds shall be
immediately released to the Administrative Agent for distribution to the
Banks on December 21, 1996, and all Investment Earnings shall be released
to the Administrative Agent to the extent necessary to offset amounts
payable by the Borrower to the Banks.
(vi) In order to induce the Administrative Agent to act under this
Section 12.18, the Borrower, the Administrative Agent and the Banks agree
that:
(A) The duties and obligations of the Administrative Agent under
this Section 12.18 are those herein specifically provided and no other.
The Administrative Agent shall not incur any liability whatsoever other
than for its own wilful misconduct or gross negligence.
(B) The Administrative Agent shall not have any responsibility for
the genuineness or validity of any document or other material presented
to or deposited with it pursuant to this Section 12.18, nor any
liability for any action taken, suffered or omitted in accordance with
any written instructions or certificates given to it hereunder and
believed by it to be signed by the proper party or parties pursuant to
this Section 12.18.
(C) In the event that the Administrative Agent shall be uncertain
as to its duties or rights hereunder or shall receive instructions,
claims or demands from any party hereto that, in its opinion, conflict
with any of the provisions under this Section 12.18, the Administrative
Agent shall be entitled to refrain from taking any action and its sole
obligation shall be to keep safely all property held in escrow until it
shall be directed otherwise in writing by all the other parties hereto
or by a final order or judgment of a court of competent jurisdiction.
-105-
<PAGE> 111
(D) The Administrative Agent shall not be bound by any
modification, amendment, termination, cancellation, rescission or
supersession of this Section 12.18 unless the same shall be in writing
and signed by all the other parties hereto, and, if its rights, duties
or immunities as Administrative Agent are affected thereby, unless it
shall have given its prior written consent thereto.
(E) This Section 12.18 sets forth exclusively the duties of the
Administrative Agent with respect to any and all matters pertinent to
this Section 12.18 and no implied duties or obligations shall be read
into this Section 12.18 against the Administrative Agent.
-106-
<PAGE> 112
IN WITNESS WHEREOF, the parties hereto have caused their duly
authorized officers to execute and deliver this Agreement as of the date first
above written.
SAFELITE GLASS CORP.
By: /s/ DOUGLAS A. HERRON
--------------------------------
Title: Chief Financial Officer
Address for Notices:
Safelite Glass Corp.
1105 Schrock Road
Columbus, OH 43229
Facsimile No.: (614) 842-3321
Attn: Douglas A. Herron
-107-
<PAGE> 113
THE CHASE MANHATTAN BANK, as
Administrative Agent and as a Bank
By: /s/ WILLIAM J. CAGGIANO
--------------------------------
Title: Managing Director
-108-
<PAGE> 114
BANKERS TRUST COMPANY, as
Syndication Agent and as a Bank
By: /s/ GINA S. THOMPSON
--------------------------------
Title: Vice President
-109-
<PAGE> 115
GOLDMAN SACHS CREDIT PARTNERS L.P.,
as Documentation Agent and as a Bank
By: /s/ EDWARD FORST
--------------------------------
Title: Authorized Signatory
-110-
<PAGE> 116
ALLSTATE INSURANCE COMPANY
By: /s/ CHARLES D. MIRES
--------------------------------
Title: Authorized Signatory
By: /s/ STEVEN M. LAUDE
--------------------------------
Title: Authorized Signatory
-111-
<PAGE> 117
THE FIRST NATIONAL BANK OF BOSTON
By: /s/ KIMBERLY F. HARRIS
--------------------------------
Title: Vice President
-112-
<PAGE> 118
THE BANK OF NEW YORK
By: /s/ WILLIAM BARNUM
--------------------------------
Title: Vice President
-113-
<PAGE> 119
THE BANK OF NOVA SCOTIA
By: /s/ MICHAEL R. BRADLEY
--------------------------------
Title: Authorized Signatory
-114-
<PAGE> 120
BANK ONE, COLUMBUS, NA
By: /s/ THOMAS IGOE
--------------------------------
Title: Senior Vice President
-115-
<PAGE> 121
CREDITANSTALT CORPORATE FINANCE, INC.
By: /s/ CHRISTINA T. SCHOEN
--------------------------------
Christina T. Schoen
Title: Vice President
By: /s/ CATHERINE K. MACDONALD
--------------------------------
Catherine K. MacDonald
Title: Senior Associate
-116-
<PAGE> 122
PRIME INCOME TRUST
By: /s/ HOWARD SCHLOSS
--------------------------------
Title: Senior Vice President
-117-
<PAGE> 123
FIRST UNION NATIONAL BANK OF NORTH
CAROLINA
By: /s/ JORGE GONZALES
--------------------------------
Title: Senior Vice President
-118-
<PAGE> 124
FLEET NATIONAL BANK
By: /s/ JAMES C. SILVA
--------------------------------
Title: Assistant Vice President
-119-
<PAGE> 125
NEW YORK LIFE INSURANCE COMPANY
By: /s/ STEVEN M. BENEVENTO
--------------------------------
Title: Assistant Vice President
-120-
<PAGE> 126
OAK HILL SECURITIES FUND, L.P.
By: Oak Hill Securities GenPar, L.P.
its General Partner
By: Oak Hill Securities MGP, Inc.,
its General Partner
By: /s/ SCOTT D. KRASE
--------------------------------
Scott D. Krase
Title: Vice President
-121-
<PAGE> 127
PILGRIM AMERICA PRIME RATE TRUST
By: /s/ HOWARD TIFFEN
--------------------------------
Howard Tiffen
Title: Senior Vice President
-122-
<PAGE> 128
PNC BANK, NATIONAL ASSOCIATION
By: /s/ MARK J. WILLIAMS
--------------------------------
Title: Vice President
-123-
<PAGE> 129
THE TRAVELERS INSURANCE COMPANY
By: /s/ ROBERT M. MILLS
--------------------------------
Robert M. Mills
Title: Investment Officer
-124-
<PAGE> 130
CRESCEN T/MACH I PARTNERS, L.P.
BY: TCW ASSET MANAGEMENT COMPANY,
Its Investment Manager
By: /s/ JUSTIN DRISCOLL
--------------------------------
Justin Driscoll
Title: Vice President
-125-
<PAGE> 131
KZH HOLDING CORPORATION
By: /s/ ROBERT GOODWIN
--------------------------------
Title: Authorized Agent
-126-
<PAGE> 132
VAN KAMPEN AMERICAN CAPITAL PRIME
RATE INCOME TRUST
By: /s/ KATHLEEN A. ZARNE
--------------------------------
Kathleen A. Zarne
Title: Vice President
-127-
<PAGE> 1
EXHIBIT 10.3
EXECUTION COPY
EMPLOYMENT AGREEMENT
--------------------
THIS AGREEMENT is entered into as of the 20th day of December, 1996, by and
between Safelite Glass Corp., a Delaware corporation, with a principal business
address at 1105 Schrock Road, Columbus, Ohio (the "Company"), and Garen K.
Staglin, an individual residing at 1570 Bella Oaks Road, Rutherford, California
(the "Executive").
WHEREAS, the Company desires the benefit of the experience, supervision and
services of the Executive and desires to employ the Executive upon the terms and
conditions hereinafter set forth; and
WHEREAS, the Executive is willing and able to accept such employment on
such terms and conditions.
NOW, THEREFORE, in consideration of the premises and mutual agreements
herein contained, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Company and the Executive
hereby agree as follows:
1. EMPLOYMENT DUTIES AND ACCEPTANCE. The Company hereby employs the
Executive, and the Executive agrees to serve and accept employment, initially as
the Chairman of the Board of Directors and Chief Executive Officer of the
Company, subject to the direction and control of the Board of Directors of the
Company (the "Board") and reporting directly to the Board. In connection
therewith, Executive shall, from and after January 1, 1997, have the authority
and responsibility to (i) oversee and direct the strategic planning for
acquisitions and the development of related services to be offered to insurance
clients, (ii) maintain and develop the Company's relationships with the
insurance and fleet sectors of the Company business, (iii) maintain and develop
the Company's relationships with financial institutions and the investment
community and (iv) to perform such other duties consistent with the
responsibilities of the Chairman of the Board, all subject to the direction and
control of the Board. During the term of the Executive's employment with the
Company hereunder, the Executive shall devote all of his working time to such
employment and appointment, shall devote his best efforts to advance the
interests of the Company and shall not engage in any other business activities,
as an employee, director, consultant or in any other capacity, whether or not he
receives any compensation therefor, without the prior written consent of the
Board; provided, however, that the Executive may continue his present
participation on the Board of Directors of First Data Corp., Quick Response
Services, Inc., Cybercash, Inc and Grimes Aerospace Corporation , as well as the
Advisory Board of the Stanford Graduate School of Business, and may engage in
any other investments or activities which does not, in the reasonable
determination of the Board, detract from the Executive's time, attention and
energy required to perform his duties to the Company hereunder.
<PAGE> 2
2. TERM OF EMPLOYMENT. The Executive's employment and appointment hereunder
shall commence on the date hereof and continue for a period of three years,
unless earlier terminated in accordance with Section 4 hereof (the "Term").
Unless either party hereto shall give the other party written notice at least
thirty (30) and not more than (60) days prior to the end of the Term, the Term
shall automatically extend for an additional two year period, which additional
two year period shall then be referred to as the Term. The Term shall continue
to be extended pursuant to the previous sentence unless the required notice is
given by either party.
3. COMPENSATION. In consideration of the performance by the Executive of
his duties hereunder, the Company shall pay or provide to the Executive the
following compensation which the Executive agrees to accept in full satisfaction
for his services provided pursuant hereto (necessary withholding taxes, FICA
contributions and the like shall be deducted from such compensation):
(a) BASE SALARY. A base salary, payable in accordance with the Company's
payroll practices, at the rate of Seven Hundred Thousand Dollars ($700,000) per
annum during the Term ("Base Salary"). The Board of Directors of the Company
will review from time to time the Base Salary payable to the Executive hereunder
and may, in its discretion, increase but not decrease, the Executive's rate of
compensation. Any such increased Base Salary shall be and become the "Base
Salary" for purposes of this Agreement.
(b) BONUS. A bonus (the "Bonus"), payable annually in arrears, of up to a
maximum of 100% of the Executive's Base Salary, as determined by the Board.
(c) STOCK OPTIONS. Pursuant to the Company's 1996 Stock Option Plan, the
Company shall grant the Executive 8,424 options (the "Options") to purchase
shares of the Company's Class A Common Stock, $0.01 par value per share.
(d) INSURANCE COVERAGES AND PENSION PLANS. Such medical, dental, life
insurance and pension benefits as are generally made available by the Company to
its executive officers ("Management") from time to time shall be made available
to the Executive.
(e) VACATION. The Executive shall be entitled to four (4) weeks vacation
each year.
(f) EXPENSES. Reimbursement of all reasonable and documented expenses
actually incurred or paid by the Executive in the performance of the Executive's
duties under this Agreement, upon presentation of expense statements, vouchers
or other supporting information in accordance with Company policy. In addition,
the Company shall pay, consistent with the Company's past practices, (i) the
Executive's reasonable travel expenses from his residence in California to the
Company's principal executive offices and (ii) the Executive's reasonable
expenses associated with maintaining an apartment near the Company's principal
executive offices.
- 2 -
<PAGE> 3
(g) INDEMNIFICATION. The Executive shall be entitled to indemnification
from the Company to the extent provided in its charter and by-laws and shall be
covered by the terms of the Company's policy of insurance for directors and
officers in effect from time to time (the "D&O Insurance"). Copies of the
Company's charter, by-laws and D&O Insurance will be made available to the
Executive upon request.
4. Termination.
-----------
(a) TERMINATION BY THE COMPANY WITH CAUSE. The Company shall have the right
at any time to terminate the Executive's employment hereunder without prior
notice upon the occurrence of any of the following (any such termination being
referred to as a termination for "Cause"):
(i) the commission by the Executive of any deliberate and
premeditated act taken by the Executive in bad faith against the
interests of the Company;
(ii) the Executive has been convicted of, or pleads NOLO
CONTENDERE with respect to, any felony, or of any lesser crime or
offense having as its predicate element fraud, dishonesty, or
misappropriation of the property of the Company;
(iii) the habitual drug addiction or intoxication of the
Executive which negatively impacts his job performance;
(iv) the willful failure or refusal of the Executive to perform
his duties as set forth herein or the willful failure or refusal to
follow the direction of the Board; or
(v) the Executive breaches any of the terms of this Agreement or
any other agreement between the Executive and the Company which breach
is not cured within 30 days subsequent to notice from the Company to
the Executive of such breach.
(b) TERMINATION BY COMPANY FOR DEATH OR DISABILITY. The Company shall have
the right at any time to terminate the Executive's employment hereunder without
prior notice if the Executive is unable to perform substantially all of his
duties and responsibilities hereunder by reason of any mental, physical or other
disability for an aggregate of one hundred eighty (180) days during any period
of three hundred sixty (360) consecutive calendar days (for purposes hereof,
"disability" has the same meaning as is defined for such term in the Company's
disability policy). The Company's obligations hereunder shall, subject to the
provisions of Section 5(b), also terminate upon the death of the Executive.
- 3 -
<PAGE> 4
(c) TERMINATION BY COMPANY WITHOUT CAUSE. The Company shall have the right
at any time to terminate the Executive's employment for any other reason without
Cause upon sixty (60) days prior written notice to the Executive.
(d) VOLUNTARY TERMINATION BY EXECUTIVE. The Executive shall be entitled to
terminate his employment and appointment hereunder upon sixty (60) days prior
written notice to the Company. Any such termination shall be treated as a
termination by the Company for "Cause" under Section 5.
(e) CONSTRUCTIVE TERMINATION BY THE EXECUTIVE. The Executive shall be
entitled to terminate his employment hereunder, upon notice delivered within
three (3) business days of the occurrence of a Constructive Termination. Any
such termination shall be treated as a termination by the Company without Cause.
For this purpose, a "Constructive Termination" shall mean:
(i) A reduction in Base Salary.
(ii) A reduction in annual Bonus opportunity.
(iii) Unless with the express written consent of the Executive,
(I) the assignment to the Executive of any duties inconsistent in any
substantial respect with the Executive's position, authority or
responsibilities as contemplated by Section 1 of this Agreement, or
(II) any other substantial change in such position, including titles,
authority or responsibilities from those contemplated by Section 1 of
this Agreement (it being specifically agreed that for so long as the
Executive's title includes either Chairman of the Board or Chief
Executive Officer, no change in Executive's title shall be a
Constructive Termination hereunder).
(iv) The acquisition of more than 50% of the then outstanding
Class A Common Stock of the Company by any of the following companies:
Apogee Enterprises, Inc., PPG Industries, Inc., Asahi Glass Co., Ltd.,
AFG Industries, Inc., Vistar, Inc., Belron International, Vitro
Sociedad Anonima, Guardian Industries, Saint- Gobian, Pilkington, PLC
or their affiliates.
(f) NOTICE OF TERMINATION. Any termination by the Company for Cause shall
be communicated by Notice of Termination to the other party hereto given in
accordance with Section 9. For purposes of this Agreement, a "Notice of
Termination" means a written notice given prior to the termination which (i)
indicates the specific termination provision in this Agreement relied upon, (ii)
sets forth in reasonable detail the facts and circumstances claimed to provide a
basis for termination of the Executive's employment under the provision so
indicated, and (iii) if the termination date is other than the date of receipt
of such notice, specifies the termination date of this Agreement (which date
shall be not more than fifteen (15) days after the giving of such notice). The
failure by any party to set forth in the Notice of
- 4 -
<PAGE> 5
Termination any fact or circumstance which contributes to a showing of Cause
shall not waive any right of such party hereunder or preclude such party from
asserting such fact or circumstance in enforcing its rights hereunder.
5. Effect of Termination of Employment.
-----------------------------------
(a) WITH CAUSE. If the Executive's employment is terminated with Cause, the
Executive's salary and other benefits specified in Section 3 shall cease at the
time of such termination, and the Executive shall not be entitled to any
compensation specified in Section 3 which has not been paid prior to such
termination; provided, however, that the Executive shall be entitled to continue
to participate in the Company's medical benefit plans to the extent required by
law.
(b) DEATH OR DISABILITY. If the Executive's employment is terminated by the
death or disability of the Executive (pursuant to Section 4(b)), the Executive's
compensation provided in Section 3 shall be paid to the Executive or, in the
event of the death of the Executive, the Executive's estate, as follows:
(i) the Executive's Base Salary specified in Section 3(a) shall
continue to be paid in monthly installments until the first to occur
of (i) six (6) months following such termination and (ii) such time as
the Executive breaches the provisions of Sections 6 or 7 of this
Agreement;
(ii) a pro rata portion (based on days worked) of the Bonus
payable to the Executive, if any, specified in Section 3(b) shall be
paid, unless the Board of Directors of the Company determines to pay a
greater amount in its sole discretion;
(iii) the Executive's additional benefits specified in Section
3(c) shall continue to be available to the Executive until the first
to occur of (i) twelve (12) months following such termination and (ii)
such time as the Executive breaches the provisions of Sections 6 or 7
of this Agreement.
(c) WITHOUT CAUSE. If the Executive's employment is terminated by the
Company without Cause (pursuant to Section 4(c) or 4(e)), the Executive's
compensation provided in Section 3 shall be paid as follows:
(i) the Executive's Base Salary specified in Section 3(a) shall
continue to be paid in monthly installments until the later to occur
of (i) the initial term of this Agreement or twenty-four (24) months
following such termination (it being specifically agreed that the
Executive has no obligation to mitigate the amounts otherwise payable
pursuant to this provision);
- 5 -
<PAGE> 6
(ii) a pro rata portion (based on days worked) of the Bonus
payable to the Executive, if any, specified in Section 3(b) shall be
paid, unless the Board of Directors of the Company determines to pay a
greater amount, in its sole discretion;
(iii) the Executive's additional benefits specified in Section
3(c) shall continue to be available to the Executive until the first
to occur of (i) twelve (12) months following such termination and (ii)
such time as the Executive breaches the provisions of Sections 6 or 7
of this Agreement; and
(iv) fifty percent (50%) of the Options granted to the Executive
which were not vested as of the date of such termination shall be
automatically vested.
6. Non-Competition; Non-Solicitation.
---------------------------------
(a) The Executive agrees that during the Non-Competition Period (defined
below) he will not in any capacity, either separately, jointly, or in
association with others, as an officer, director, consultant, agent, employee,
owner, partner or stockholder, engage or have a financial interest in any
business which is involved in auto glass replacement or repair business or any
other business which competes with the Company's current or currently planned
products as of the date of the employee's termination of Employment with the
Company (excepting only the ownership of not more than 5% of the outstanding
securities of any class listed on an exchange or regularly traded in the
over-the-counter market). The "Non-Competition Period" is (i) the period of the
Executive's employment hereunder plus (ii) a period of one (1) year thereafter;
provided, however, that the Non-Competition Period shall in no events be shorter
than three years from the date hereof; and provided, further, however, that in
the event of a termination of the Executive's employment pursuant to Sections
4(c) or 4(e) hereof, the Non-Competition Period shall be the period during which
the Executive is receiving any benefits pursuant to Section 5(c) hereof. The
Executive further agrees that during the Non-Competition Period he will not in
any capacity, either separately, jointly or in association with others, solicit
or otherwise contact any of the Company's customers or prospects, as shown by
the Company's records, that were customers or prospects of the Company at any
time during the Non-Competition Period if such solicitation or contact is for
the general purpose of selling products or services that satisfy the same
general needs as any products or services that the Company had available for
sale to its customers or prospects during the Non-Competition Period. For
purposes of this Section 6 and Section 7, the "Company" refers to the Company
and any incorporated or unincorporated affiliates of the Company.
(b) During the Non-Competition Period, the Executive will not solicit or
attempt to solicit any officer, director, consultant, executive or employee of
the Company or any of its affiliates to leave his or her engagement with the
Company or such affiliate.
- 6 -
<PAGE> 7
7. Secret Processes and Confidential Information.
---------------------------------------------
(a) For the Term and thereafter, (i) the Executive will not divulge,
directly or indirectly, other than in the regular and proper course of business
of the Company, any confidential knowledge or information with respect to the
operation or finances of the Company or with respect to confidential or secret
processes, techniques, machinery, customers, plans and products manufactured or
sold by the Company and (ii) the Executive will not use, directly or indirectly,
any confidential information for the benefit of anyone other than the Company;
provided, however, that the Executive has no obligation, express or implied, to
refrain from using or disclosing to others any such knowledge or information
which is or hereafter shall become available to the public other than through
disclosure by the Executive.
(b) The Executive will promptly disclose to the Company and to no other
person, firm or entity all inventions, discoveries, improvements, trade secrets,
formulas, techniques, processes, know-how and similar matters, whether or not
patentable and whether or not reduced to practice, which are conceived or
learned by the Executive during the period of the Executive's employment with
the Company, either alone or with others, which relate to or result from the
actual or anticipated business or research of the Company or which result, to
any extent, from the Executive's use of the Company's premises or property
(collectively called the "Inventions"). The Executive acknowledges and agrees
that all the Inventions shall be the sole property of the Company, and the
Executive hereby assigns to the Company all of the Executive's rights and
interests in and to all of the Inventions, it being acknowledged and agreed by
the Executive that all the Inventions are works made for hire. The Company shall
be the sole owner of all domestic and foreign rights and interests in the
Inventions. The Executive agrees to assist the Company at its expense to obtain
and from time to time enforce patents and copyrights on the Inventions.
(c) Upon the request of, and, in any event, upon termination of the
Executive's employment with the Company, the Executive shall promptly deliver to
the Company all documents, data, records, notes, drawings, manuals and all other
tangible information in whatever form which pertains to the Company, and the
Executive will not retain any such information or any reproduction or excerpt
thereof.
(d) The Company and the Executive agree that the provisions of this Section
7 and Section 6 above shall, as of the date hereof, supersede the terms of
Section 4 of that certain letter from the Company to the Executive dated as of
November , 1996 regarding a bonus to be paid to the Executive.
8. NOTICES. All notices or other communications hereunder shall be in
writing and shall be deemed to have been duly given (a) when delivered
personally, (b) upon confirmation of receipt when such notice or other
communication is sent by facsimile or telex, (c) one day after delivery to an
overnight delivery courier, or (d) on the fifth day following the date of
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<PAGE> 8
deposit in the United States mail if sent first class, postage prepaid, by
registered or certified mail. The addresses for such notices shall be as
follows:
(a) For notices and communications to the Company:
Safelite Glass Corp.
1105 Schrock Road
Columbus, OH 43216
Attention: President
with a copy to:
Hutchins, Wheeler & Dittmar
A Professional Corporation
101 Federal Street
Boston, MA 02110
Attention: Charles W. Robins, Esq.
(b) For notices and communications to the Executive:
Garen K. Staglin
P.O. Box 680
1570 Bella Oaks Road
Rutherford, CA 94573
with a copy to:
Seigfreid, Bingham, Levy, Selzer & Gee
A Professional Corporation
911 Main Street
Kansas City, MO 64105
Attention: Larry J. Bingham, Esq.
Any party hereto may, by notice to the other, change its address for receipt of
notices hereunder.
9. General.
-------
9.1 GOVERNING LAW. This Agreement shall be governed by, and enforced in
accordance with, the laws of the State of Delaware.
9.2 AMENDMENT; WAIVER. This Agreement may be amended, modified, superseded,
canceled, renewed or extended, and the terms hereof may be waived, only by a
written instrument executed by all of the parties hereto or, in the case of a
waiver, by the party waiving compliance. The failure of any party at any time or
times to require performance of
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<PAGE> 9
any provision hereof shall in no manner affect the right at a later time to
enforce the same. No waiver by any party of the breach of any term or covenant
contained in this Agreement, whether by conduct or otherwise, in any one or more
instances, shall be deemed to be, or construed as, a further or continuing
waiver of any such breach, or a waiver of the breach of any other term or
covenant contained in this Agreement.
9.3 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon the
Executive, without regard to the duration of his employment by the Company or
reasons for the cessation of such employment, and inure to the benefit of his
administrators, executors, heirs and assigns, although the obligations of the
Executive are personal and may be performed only by him. This Agreement shall
also be binding upon and inure to the benefit of the Company and its
subsidiaries, successors and assigns, including any corporation with which or
into which the Company or its successors may be merged or which may succeed to
their assets or business.
9.4 COUNTERPARTS. This Agreement may be executed in multiple counterparts,
each of which shall be considered to have the force and effect of an original.
9.5 ATTORNEYS' FEES. In the event that any action is brought to enforce any
of the provisions of this Agreement, or to obtain money damages for the breach
thereof, and such action results in the award of a judgment for money damages or
in the granting of any injunction in favor of one of the parties to this
Agreement, all expenses, including reasonable attorneys' fees, shall be paid by
the non-prevailing party.
9.6 NON-EXCLUSIVITY OF RIGHTS. Nothing in this Agreement shall prevent or
limit the Executive's continuing or future participation during his employment
hereunder in any benefit, bonus, incentive or other plan or program provided by
the Company or any of its affiliates and for which the Executive may qualify.
Amounts which are vested benefits or which the Executive is otherwise entitled
to receive under any plan or program of the Company or any affiliated company at
or subsequent to the date of the Executive's termination of employment with the
Company shall, subject to the terms hereof or any other agreement entered into
by the Company and the Executive on or subsequent to the date hereof, be payable
in accordance with such plan or program.
9.7 COOPERATION WITH REGARD TO LITIGATION. The Executive agrees to
cooperate with the Company during the Term and for a period of two years
thereafter by making himself reasonably available to testify on behalf of the
Company or its affiliates, in any action, suit or proceeding, whether civil,
criminal, administrative or investigative and to assist the Company or any of
its affiliates in any such action, suit or proceeding by providing information
and meeting and consulting with the Board of Directors or its counsel or counsel
to the Company or its affiliates, as reasonably requested by the Board or such
counsel. The Executive shall be reimbursed by the Company for any expenses
(including, but not limited to, legal fees) reasonably incurred by Executive in
connection with his compliance with the foregoing covenant.
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<PAGE> 10
9.8 SURVIVAL OF CERTAIN PROVISIONS. Provisions of this Agreement shall
survive any termination of employment if so provided herein or if necessary or
desirable fully to accomplish the purposes of such provision, including without
limitation, the obligations of the Executive pursuant to Sections 6, 7 and 9.7
hereof.
9.9 REMEDIES. It is specifically understood and agreed that any breach of
the provisions of Section 6 or 7 of this Agreement would result in irreparable
injuries to the Company, that the remedy at law for any such breach will be
inadequate and that upon breach of this provision, the Company, in addition to
all other available remedies, shall be entitled as a matter of right to
injunctive relief in any court of competent jurisdiction without the necessity
of proving the actual damage to the Company.
9.10 SEVERABLE PROVISIONS. The provisions of this Agreement are severable
and the invalidity of any one or more provisions shall not affect the validity
of any other provision. In the event that a court of competent jurisdiction
determines that any provision of this Agreement, or the application thereof, is
unenforceable in whole or in part because the duration or scope thereof are too
broad or otherwise unreasonable under applicable law, including with respect to
time or space, the parties hereto agree that said court in making such
determination shall have the power to reduce the duration and scope of such
provision to the extent necessary to make it enforceable, and that the Agreement
in its reduced form shall be valid and enforceable to the fullest extent
permitted by law.
9.11 ENTIRE AGREEMENT. This Agreement constitutes the entire understanding
of the parties hereto with respect to the subject matter hereof and supersede
all prior negotiations, discussions, writings and agreements between them.
9.12 WAIVER OF RIGHT TO JURY TRIAL. EACH OF THE COMPANY AND THE EXECUTIVE,
BY ITS OR HIS EXECUTION HEREOF, WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF
ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT OR ANY
DEALINGS BETWEEN THEM RELATING TO THE SUBJECT MATTER OF THIS TRANSACTION AND THE
RELATIONSHIP THAT IS BEING ESTABLISHED. THE SCOPE OF THIS WAIVER IS INTENDED TO
BE ALL ENCOMPASSING OF ANY AND ALL DISPUTES THAT MAY BE FILED IN ANY COURT AND
THAT RELATE TO THE SUBJECT MATTER OF THIS AGREEMENT, INCLUDING WITHOUT
LIMITATION, CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER
COMMON LAW AND STATUTORY CLAIMS. THE COMPANY AND THE EXECUTIVE ACKNOWLEDGE THAT
THIS WAIVER IS A MATERIAL INDUCEMENT TO ENTER INTO A BUSINESS RELATIONSHIP, THAT
EACH HAS ALREADY RELIED ON THE WAIVER IN ENTERING INTO THIS AGREEMENT AND THAT
EACH WILL CONTINUE TO RELY ON THE WAIVER IN THEIR RELATED FUTURE DEALINGS. THE
COMPANY AND THE EXECUTIVE FURTHER REPRESENT AND WARRANT THAT EACH HAS REVIEWED
THIS WAIVER WITH ITS OR HIS LEGAL COUNSEL, AND THAT EACH KNOWINGLY AND
VOLUNTARILY WAIVES ITS OR HIS JURY TRIAL RIGHTS FOLLOWING
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<PAGE> 11
CONSULTATION WITH LEGAL COUNSEL. THIS WAIVER IS IRREVOCABLE, MEANING THAT IT
SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS
TO THIS AGREEMENT OR TO ANY OTHER DOCUMENTS OR AGREEMENTS RELATING TO THE
TRANSACTION CONTEMPLATED HEREBY. IN THE EVENT OF ANY LITIGATION, THIS AGREEMENT
MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.
[Remainder of page intentionally left blank]
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<PAGE> 12
IN WITNESS WHEREOF, the parties have executed this Agreement as an
instrument under seal as of the date first above written.
SAFELITE GLASS CORP.
By: /s/ John Barlow
---------------
Name: John Barlow
Title: President
EXECUTIVE:
/s/ Garen K. Staglin
--------------------
Garen K. Staglin
12/18/96
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<PAGE> 1
EXHIBIT 10.4
EXECUTION COPY
EMPLOYMENT AGREEMENT
--------------------
THIS AGREEMENT is entered into as of the 20th day of December, 1996, by and
between Safelite Glass Corp., a Delaware corporation, with a principal business
address at 1105 Schrock Road, Columbus, Ohio (the "Company"), and John F.
Barlow, an individual residing at 4351 Gulf Shore Boulevard North, Residence
19N, Naples, Florida (the "Executive").
WHEREAS, the Company desires the benefit of the experience, supervision and
services of the Executive and desires to employ the Executive upon the terms and
conditions hereinafter set forth; and
WHEREAS, the Executive is willing and able to accept such employment on
such terms and conditions.
NOW, THEREFORE, in consideration of the premises and mutual agreements
herein contained, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Company and the Executive
hereby agree as follows:
1. EMPLOYMENT DUTIES AND ACCEPTANCE. The Company hereby employs the
Executive, and the Executive agrees to serve and accept employment, initially as
the President and Chief Operating Officer of the Company, subject to the
direction and control of the Board of Directors of the Company (the "Board") and
reporting directly to the Board. On or before July 1, 1997, Executive will be
granted the title of President and Co-Chief Executive Officer. In connection
therewith, Executive shall, from and after January 1, 1997, have the authority
and responsibility to oversee and direct all aspects of the glass business
activities of the Company, including without limitation, sales, manufacturing,
distribution, operations, staff functions and financial performance and to
perform such other duties consistent with the responsibilities of President and
Chief Executive Officer, all subject to the direction and control of the Board.
During the term of the Executive's employment with the Company hereunder, the
Executive shall devote all of his working time to such employment and
appointment, shall devote his best efforts to advance the interests of the
Company and shall not engage in any other business activities, as an employee,
director, consultant or in any other capacity, whether or not he receives any
compensation therefor, without the prior written consent of the Board.
2. TERM OF EMPLOYMENT. The Executive's employment and appointment hereunder
shall commence on the date hereof and continue for a period of three years,
unless earlier terminated in accordance with Section 4 hereof (the "Term").
Unless either party hereto shall give the other party written notice at least
thirty (30) and not more than (60) days prior to the end of the Term, the Term
shall automatically extend for an additional two year
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<PAGE> 2
period, which additional two year period shall then be referred to as the Term.
The Term shall continue to be extended pursuant to the previous sentence unless
the required notice is given by either party.
3. COMPENSATION. In consideration of the performance by the Executive of
his duties hereunder, the Company shall pay or provide to the Executive the
following compensation which the Executive agrees to accept in full satisfaction
for his services provided pursuant hereto (necessary withholding taxes, FICA
contributions and the like shall be deducted from such compensation):
(a) BASE SALARY. A base salary, payable in accordance with the Company's
payroll practices, at the rate of Seven Hundred Thousand Dollars ($700,000) per
annum during the Term ("Base Salary"). The Board of Directors of the Company
will review from time to time the Base Salary payable to the Executive hereunder
and may, in its discretion, increase but not decrease, the Executive's rate of
compensation. Any such increased Base Salary shall be and become the "Base
Salary" for purposes of this Agreement.
(b) BONUS. A bonus (the "Bonus"), payable annually in arrears, of up to a
maximum of 100% of the Executive's Base Salary, as determined by the Board.
(c) STOCK OPTIONS. Pursuant to the Company's 1996 Stock Option Plan, the
Company shall grant the Executive 50,000 options (the "Options") to purchase
shares of the Company's Class A Common Stock, $0.01 par value per share.
(d) INSURANCE COVERAGES AND PENSION PLANS. Such medical, dental, life
insurance and pension benefits as are generally made available by the Company to
its executive officers ("Management") from time to time shall be made available
to the Executive.
(e) VACATION. The Executive shall be entitled to four (4) weeks vacation
each year.
(f) EXPENSES. Reimbursement of all reasonable and documented expenses
actually incurred or paid by the Executive in the performance of the Executive's
duties under this Agreement, upon presentation of expense statements, vouchers
or other supporting information in accordance with Company policy. In addition,
the Company shall pay, consistent with the Company's past practices, (i) the
Executive's reasonable travel expenses from his residence in Florida to the
Company's principal executive offices and (ii) the Executive's reasonable
expenses associated with maintaining an apartment near the Company's principal
executive offices.
(g) INDEMNIFICATION. The Executive shall be entitled to indemnification
from the Company to the extent provided in its charter and by-laws and shall be
covered by the terms of the Company's policy of insurance for directors and
officers in effect from time to time (the
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<PAGE> 3
"D&O Insurance"). Copies of the Company's charter, by-laws and D&O Insurance
will be made available to the Executive upon request.
4. Termination.
------------
(a) TERMINATION BY THE COMPANY WITH CAUSE. The Company shall have the right
at any time to terminate the Executive's employment hereunder without prior
notice upon the occurrence of any of the following (any such termination being
referred to as a termination for "Cause"):
(i) the commission by the Executive of any deliberate and
premeditated act taken by the Executive in bad faith against the
interests of the Company;
(ii) the Executive has been convicted of, or pleads nolo
contendere with respect to, any felony, or of any lesser crime or
offense having as its predicate element fraud, dishonesty, or
misappropriation of the property of the Company;
(iii) the habitual drug addiction or intoxication of the
Executive which negatively impacts his job performance;
(iv) the willful failure or refusal of the Executive to perform
his duties as set forth herein or the willful failure or refusal to
follow the direction of the Board; or
(v) the Executive breaches any of the terms of this Agreement or
any other agreement between the Executive and the Company which breach
is not cured within 30 days subsequent to notice from the Company to
the Executive of such breach.
(b) TERMINATION BY COMPANY FOR DEATH OR DISABILITY. The Company shall have
the right at any time to terminate the Executive's employment hereunder without
prior notice if the Executive is unable to perform substantially all of his
duties and responsibilities hereunder by reason of any mental, physical or other
disability for an aggregate of one hundred eighty (180) days during any period
of three hundred sixty (360) consecutive calendar days (for purposes hereof,
"disability" has the same meaning as is defined for such term in the Company's
disability policy). The Company's obligations hereunder shall, subject to the
provisions of Section 5(b), also terminate upon the death of the Executive.
(c) TERMINATION BY COMPANY WITHOUT CAUSE. The Company shall have the right
at any time to terminate the Executive's employment for any other reason without
Cause upon sixty (60) days prior written notice to the Executive.
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<PAGE> 4
(d) VOLUNTARY TERMINATION BY EXECUTIVE. The Executive shall be entitled to
terminate his employment and appointment hereunder upon sixty (60) days prior
written notice to the Company. Any such termination shall be treated as a
termination by the Company for "Cause" under Section 5.
(e) CONSTRUCTIVE TERMINATION BY THE EXECUTIVE. The Executive shall be
entitled to terminate his employment hereunder, upon notice delivered within
three (3) business days of the occurrence of a Constructive Termination. Any
such termination shall be treated as a termination by the Company without Cause.
For this purpose, a "Constructive Termination" shall mean:
(i) A reduction in Base Salary.
(ii) A reduction in annual Bonus opportunity.
(iii) Unless with the express written consent of the Executive, (I)
the assignment to the Executive of any duties inconsistent in any
substantial respect with the Executive's position, authority or
responsibilities as contemplated by Section 1 of this Agreement, or (II)
any other substantial change in such position, including titles, authority
or responsibilities from those contemplated by Section 1 of this Agreement.
(iv) The acquisition of more than 50% of the then outstanding Class A
Common Stock of the Company by any of the following companies: Apogee
Enterprises, Inc., PPG Industries, Inc., Asahi Glass Co., Ltd., AFG
Industries, Inc., Vistar, Inc., Belron International, Vitro Sociedad
Anonima, Guardian Industries, Saint- Gobian, Pilkington, PLC or their
affiliates.
(f) NOTICE OF TERMINATION. Any termination by the Company for Cause shall
be communicated by Notice of Termination to the other party hereto given in
accordance with Section 9. For purposes of this Agreement, a "Notice of
Termination" means a written notice given prior to the termination which (i)
indicates the specific termination provision in this Agreement relied upon, (ii)
sets forth in reasonable detail the facts and circumstances claimed to provide a
basis for termination of the Executive's employment under the provision so
indicated, and (iii) if the termination date is other than the date of receipt
of such notice, specifies the termination date of this Agreement (which date
shall be not more than fifteen (15) days after the giving of such notice). The
failure by any party to set forth in the Notice of Termination any fact or
circumstance which contributes to a showing of Cause shall not waive any right
of such party hereunder or preclude such party from asserting such fact or
circumstance in enforcing its rights hereunder.
5. Effect of Termination of Employment.
-----------------------------------
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<PAGE> 5
(a) WITH CAUSE. If the Executive's employment is terminated with Cause, the
Executive's salary and other benefits specified in Section 3 shall cease at the
time of such termination, and the Executive shall not be entitled to any
compensation specified in Section 3 which has not been paid prior to such
termination; provided, however, that the Executive shall be entitled to continue
to participate in the Company's medical benefit plans to the extent required by
law.
(b) DEATH OR DISABILITY. If the Executive's employment is terminated by the
death or disability of the Executive (pursuant to Section 4(b)), the Executive's
compensation provided in Section 3 shall be paid to the Executive or, in the
event of the death of the Executive, the Executive's estate, as follows:
(i) the Executive's Base Salary specified in Section 3(a) shall
continue to be paid in monthly installments until the first to occur
of (i) six (6) months following such termination and (ii) such time as
the Executive breaches the provisions of Sections 6 or 7 of this
Agreement;
(ii) a PRO RATA portion (based on days worked) of the Bonus
payable to the Executive, if any, specified in Section 3(b) shall be
paid, unless the Board of Directors of the Company determines to pay a
greater amount in its sole discretion;
(iii) the Executive's additional benefits specified in Section
3(c) shall continue to be available to the Executive until the first
to occur of (i) twelve (12) months following such termination and (ii)
such time as the Executive breaches the provisions of Sections 6 or 7
of this Agreement.
(c) WITHOUT CAUSE. If the Executive's employment is terminated by the
Company without Cause (pursuant to Section 4(c) or 4(e)), the Executive's
compensation provided in Section 3 shall be paid as follows:
(i) the Executive's Base Salary specified in Section 3(a) shall
continue to be paid in monthly installments until the later to occur
of (i) the initial term of this Agreement or (ii) twenty-four (24)
months following such termination (it being specifically agreed that
the Executive has no obligation to mitigate the amounts otherwise
payable pursuant to this provision);
(ii) a pro rata portion (based on days worked) of the Bonus
payable to the Executive, if any, specified in Section 3(b) shall be
paid, unless the Board of Directors of the Company determines to pay a
greater amount, in its sole discretion;
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<PAGE> 6
(iii) the Executive's additional benefits specified in Section
3(c) shall continue to be available to the Executive until the first
to occur of (i) twelve (12) months following such termination and (ii)
such time as the Executive breaches the provisions of Sections 6 or 7
of this Agreement; and
(iv) fifty percent (50%) of the Options granted to the Executive
which were not vested as of the date of such termination shall be
automatically vested.
6. Non-Competition; Non-Solicitation.
---------------------------------
(a) The Executive agrees that during the Non-Competition Period (defined
below) he will not in any capacity, either separately, jointly, or in
association with others, as an officer, director, consultant, agent, employee,
owner, partner or stockholder, engage or have a financial interest in any
business which is involved in auto glass replacement or repair business or any
other business which competes with the Company's current or currently planned
products as of the date of the employee's termination of Employment with the
Company (excepting only the ownership of not more than 5% of the outstanding
securities of any class listed on an exchange or regularly traded in the
over-the-counter market). The "Non-Competition Period" is (i) the period of the
Executive's employment hereunder plus (ii) a period of one (1) year thereafter;
provided, however, that the Non-Competition Period shall in no events be shorter
than three years from the date hereof; and provided, further, however, that in
the event of a termination of the Executive's employment pursuant to Sections
4(c) or 4(e) hereof, the Non-Competition Period shall be the period during which
the Executive is receiving any benefits pursuant to Section 5(c) hereof. The
Executive further agrees that during the Non-Competition Period he will not in
any capacity, either separately, jointly or in association with others, solicit
or otherwise contact any of the Company's customers or prospects, as shown by
the Company's records, that were customers or prospects of the Company at any
time during the Non-Competition Period if such solicitation or contact is for
the general purpose of selling products or services that satisfy the same
general needs as any products or services that the Company had available for
sale to its customers or prospects during the Non-Competition Period. For
purposes of this Section 6 and Section 7, the "Company" refers to the Company
and any incorporated or unincorporated affiliates of the Company.
(b) During the Non-Competition Period, the Executive will not solicit or
attempt to solicit any officer, director, consultant, executive or employee of
the Company or any of its affiliates to leave his or her engagement with the
Company or such affiliate.
7. Secret Processes and Confidential Information.
---------------------------------------------
(a) For the Term and thereafter, (i) the Executive will not divulge,
directly or indirectly, other than in the regular and proper course of business
of the Company, any confidential knowledge or information with respect to the
operation or finances of the
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<PAGE> 7
Company or with respect to confidential or secret processes, techniques,
machinery, customers, plans and products manufactured or sold by the Company and
(ii) the Executive will not use, directly or indirectly, any confidential
information for the benefit of anyone other than the Company; provided, however,
that the Executive has no obligation, express or implied, to refrain from using
or disclosing to others any such knowledge or information which is or hereafter
shall become available to the public other than through disclosure by the
Executive.
(b) The Executive will promptly disclose to the Company and to no other
person, firm or entity all inventions, discoveries, improvements, trade secrets,
formulas, techniques, processes, know-how and similar matters, whether or not
patentable and whether or not reduced to practice, which are conceived or
learned by the Executive during the period of the Executive's employment with
the Company, either alone or with others, which relate to or result from the
actual or anticipated business or research of the Company or which result, to
any extent, from the Executive's use of the Company's premises or property
(collectively called the "Inventions"). The Executive acknowledges and agrees
that all the Inventions shall be the sole property of the Company, and the
Executive hereby assigns to the Company all of the Executive's rights and
interests in and to all of the Inventions, it being acknowledged and agreed by
the Executive that all the Inventions are works made for hire. The Company shall
be the sole owner of all domestic and foreign rights and interests in the
Inventions. The Executive agrees to assist the Company at its expense to obtain
and from time to time enforce patents and copyrights on the Inventions.
(c) Upon the request of, and, in any event, upon termination of the
Executive's employment with the Company, the Executive shall promptly deliver to
the Company all documents, data, records, notes, drawings, manuals and all other
tangible information in whatever form which pertains to the Company, and the
Executive will not retain any such information or any reproduction or excerpt
thereof.
(d) The Company and the Executive agree that the provisions of this Section
7 and Section 6 above shall, as of the date hereof, supersede the terms of
Section 4 of that certain letter from the Company to the Executive dated as of
November , 1996 regarding a bonus to be paid to the Executive.
8. NOTICES. All notices or other communications hereunder shall be in
writing and shall be deemed to have been duly given (a) when delivered
personally, (b) upon confirmation of receipt when such notice or other
communication is sent by facsimile or telex, (c) one day after delivery to an
overnight delivery courier, or (d) on the fifth day following the date of
deposit in the United States mail if sent first class, postage prepaid, by
registered or certified mail. The addresses for such notices shall be as
follows:
(a) For notices and communications to the Company:
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<PAGE> 8
Safelite Glass Corp.
1105 Schrock Road
Columbus, OH 43216
Attention: President
with a copy to:
Hutchins, Wheeler & Dittmar
A Professional Corporation
101 Federal Street
Boston, MA 02110
Attention: Charles W. Robins, Esq.
(b) For notices and communications to the Executive:
John F. Barlow
4351 Gulf Shore Boulevard North
Residence 19N
Naples, FL 34103
with a copy to:
Seigfreid, Bingham, Levy, Selzer & Gee
A Professional Corporation
911 Main Street
Kansas City, MO 64105
Attention: Larry J. Bingham, Esq.
Any party hereto may, by notice to the other, change its address for receipt of
notices hereunder.
9. General.
-------
9.1 GOVERNING LAW. This Agreement shall be governed by, and enforced in
accordance with, the laws of the State of Delaware.
9.2 AMENDMENT; WAIVER. This Agreement may be amended, modified, superseded,
canceled, renewed or extended, and the terms hereof may be waived, only by a
written instrument executed by all of the parties hereto or, in the case of a
waiver, by the party waiving compliance. The failure of any party at any time or
times to require performance of any provision hereof shall in no manner affect
the right at a later time to enforce the same. No waiver by any party of the
breach of any term or covenant contained in this Agreement, whether by conduct
or otherwise, in any one or more instances, shall be deemed to be, or
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<PAGE> 9
construed as, a further or continuing waiver of any such breach, or a waiver of
the breach of any other term or covenant contained in this Agreement.
9.3 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon the
Executive, without regard to the duration of his employment by the Company or
reasons for the cessation of such employment, and inure to the benefit of his
administrators, executors, heirs and assigns, although the obligations of the
Executive are personal and may be performed only by him. This Agreement shall
also be binding upon and inure to the benefit of the Company and its
subsidiaries, successors and assigns, including any corporation with which or
into which the Company or its successors may be merged or which may succeed to
their assets or business.
9.4 COUNTERPARTS. This Agreement may be executed in multiple counterparts,
each of which shall be considered to have the force and effect of an original.
9.5 ATTORNEYS' FEES. In the event that any action is brought to enforce any
of the provisions of this Agreement, or to obtain money damages for the breach
thereof, and such action results in the award of a judgment for money damages or
in the granting of any injunction in favor of one of the parties to this
Agreement, all expenses, including reasonable attorneys' fees, shall be paid by
the non-prevailing party.
9.6 NON-EXCLUSIVITY OF RIGHTS. Nothing in this Agreement shall prevent or
limit the Executive's continuing or future participation during his employment
hereunder in any benefit, bonus, incentive or other plan or program provided by
the Company or any of its affiliates and for which the Executive may qualify.
Amounts which are vested benefits or which the Executive is otherwise entitled
to receive under any plan or program of the Company or any affiliated company at
or subsequent to the date of the Executive's termination of employment with the
Company shall, subject to the terms hereof or any other agreement entered into
by the Company and the Executive on or subsequent to the date hereof, be payable
in accordance with such plan or program.
9.7 COOPERATION WITH REGARD TO LITIGATION. The Executive agrees to
cooperate with the Company during the Term and for a period of two years
thereafter by making himself reasonably available to testify on behalf of the
Company or its affiliates, in any action, suit or proceeding, whether civil,
criminal, administrative or investigative and to assist the Company or any of
its affiliates in any such action, suit or proceeding by providing information
and meeting and consulting with the Board of Directors or its counsel or counsel
to the Company or its affiliates, as reasonably requested by the Board or such
counsel. The Executive shall be reimbursed by the Company for any expenses
(including, but not limited to, legal fees) reasonably incurred by Executive in
connection with his compliance with the foregoing covenant.
9.8 SURVIVAL OF CERTAIN PROVISIONS. Provisions of this Agreement shall
survive any termination of employment if so provided herein or if necessary or
desirable fully to
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<PAGE> 10
accomplish the purposes of such provision, including without limitation, the
obligations of the Executive pursuant to Sections 6, 7 and 9.7 hereof.
9.9 REMEDIES. It is specifically understood and agreed that any breach of
the provisions of Section 6 or 7 of this Agreement would result in irreparable
injuries to the Company, that the remedy at law for any such breach will be
inadequate and that upon breach of this provision, the Company, in addition to
all other available remedies, shall be entitled as a matter of right to
injunctive relief in any court of competent jurisdiction without the necessity
of proving the actual damage to the Company.
9.10 SEVERABLE PROVISIONS. The provisions of this Agreement are severable
and the invalidity of any one or more provisions shall not affect the validity
of any other provision. In the event that a court of competent jurisdiction
determines that any provision of this Agreement, or the application thereof, is
unenforceable in whole or in part because the duration or scope thereof are too
broad or otherwise unreasonable under applicable law, including with respect to
time or space, the parties hereto agree that said court in making such
determination shall have the power to reduce the duration and scope of such
provision to the extent necessary to make it enforceable, and that the Agreement
in its reduced form shall be valid and enforceable to the fullest extent
permitted by law.
9.11 ENTIRE AGREEMENT. This Agreement constitutes the entire understanding
of the parties hereto with respect to the subject matter hereof and supersede
all prior negotiations, discussions, writings and agreements between them.
9.12 WAIVER OF RIGHT TO JURY TRIAL. EACH OF THE COMPANY AND THE EXECUTIVE,
BY ITS OR HIS EXECUTION HEREOF, WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF
ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT OR ANY
DEALINGS BETWEEN THEM RELATING TO THE SUBJECT MATTER OF THIS TRANSACTION AND THE
RELATIONSHIP THAT IS BEING ESTABLISHED. THE SCOPE OF THIS WAIVER IS INTENDED TO
BE ALL ENCOMPASSING OF ANY AND ALL DISPUTES THAT MAY BE FILED IN ANY COURT AND
THAT RELATE TO THE SUBJECT MATTER OF THIS AGREEMENT, INCLUDING WITHOUT
LIMITATION, CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER
COMMON LAW AND STATUTORY CLAIMS. THE COMPANY AND THE EXECUTIVE ACKNOWLEDGE THAT
THIS WAIVER IS A MATERIAL INDUCEMENT TO ENTER INTO A BUSINESS RELATIONSHIP, THAT
EACH HAS ALREADY RELIED ON THE WAIVER IN ENTERING INTO THIS AGREEMENT AND THAT
EACH WILL CONTINUE TO RELY ON THE WAIVER IN THEIR RELATED FUTURE DEALINGS. THE
COMPANY AND THE EXECUTIVE FURTHER REPRESENT AND WARRANT THAT EACH HAS REVIEWED
THIS WAIVER WITH ITS OR HIS LEGAL COUNSEL, AND THAT EACH KNOWINGLY AND
VOLUNTARILY WAIVES ITS OR HIS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH
LEGAL COUNSEL. THIS WAIVER IS IRREVOCABLE, MEANING THAT IT SHALL APPLY TO ANY
SUBSEQUENT AMENDMENTS,
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<PAGE> 11
RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT OR TO ANY OTHER
DOCUMENTS OR AGREEMENTS RELATING TO THE TRANSACTION CONTEMPLATED HEREBY. IN THE
EVENT OF ANY LITIGATION, THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A
TRIAL BY THE COURT.
[Remainder of page intentionally left blank]
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<PAGE> 12
IN WITNESS WHEREOF, the parties have executed this Agreement as an
instrument under seal as of the date first above written.
SAFELITE GLASS CORP.
By: /s/ Garen K. Staglin
-----------------------
Name: Garen K. Staglin
Title: Chairman
EXECUTIVE:
/s/ John F. Barlow
---------------------------
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<PAGE> 1
EXHIBIT 10.5
EXECUTION COPY
EMPLOYMENT AGREEMENT
--------------------
THIS AGREEMENT is entered into as of the 20th day of December, 1996, by and
between Safelite Glass Corp., a Delaware corporation, with a principal business
address at 1105 Schrock Road, Columbus, Ohio (the "Company"), and Douglas A.
Herron, an individual residing at 6605 Highland Lakes Place, Westerville, Ohio
(the "Executive").
WHEREAS, the Company desires the benefit of the experience, supervision and
services of the Executive and desires to employ the Executive upon the terms and
conditions hereinafter set forth; and
WHEREAS, the Executive is willing and able to accept such employment on
such terms and conditions.
NOW, THEREFORE, in consideration of the premises and mutual agreements
herein contained, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Company and the Executive
hereby agree as follows:
1. EMPLOYMENT DUTIES AND ACCEPTANCE. The Company hereby employs the
Executive, and the Executive agrees to serve and accept employment, initially as
the Senior Vice President and Chief Financial Officer of the Company, subject to
the direction and control of the Board of Directors of the Company (the "Board")
and reporting directly to the Board. In connection therewith, to oversee and
direct the operations of the Company and to perform such other duties consistent
with the responsibilities of Senior Vice President and Chief Financial Officer,
all subject to the direction and control of the Board. During the term of the
Executive's employment with the Company hereunder, the Executive shall devote
all of his working time to such employment and appointment, shall devote his
best efforts to advance the interests of the Company and shall not engage in any
other business activities, as an employee, director, consultant or in any other
capacity, whether or not he receives any compensation therefor, without the
prior written consent of the Board.
2. TERM OF EMPLOYMENT. The Executive's employment and appointment hereunder
shall commence on the date hereof and continue for a period of three years,
unless earlier terminated in accordance with Section 4 hereof (the "Term").
Unless either party hereto shall give the other party written notice at least
thirty (30) and not more than (60) days prior to the end of the Term, the Term
shall automatically extend for an additional two year period, which additional
two year period shall then be referred to as the Term. The Term shall continue
to be extended pursuant to the previous sentence unless the required notice is
given by either party.
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<PAGE> 2
3. COMPENSATION. In consideration of the performance by the Executive of
his duties hereunder, the Company shall pay or provide to the Executive the
following compensation which the Executive agrees to accept in full satisfaction
for his services provided pursuant hereto (necessary withholding taxes, FICA
contributions and the like shall be deducted from such compensation):
(a) BASE SALARY. A base salary, payable in accordance with the Company's
payroll practices, at the rate of Three Hundred Fifty Thousand Dollars
($350,000) per annum during the Term ("Base Salary"). The Board of Directors of
the Company will review from time to time the Base Salary payable to the
Executive hereunder and may, in its discretion, increase but not decrease, the
Executive's rate of compensation. Any such increased Base Salary shall be and
become the "Base Salary" for purposes of this Agreement.
(b) BONUS. A bonus (the "Bonus"), payable annually in arrears, of up to a
maximum of 100% of the Executive's Base Salary, as determined by the Board.
(c) STOCK OPTIONS. Pursuant to the Company's 1996 Stock Option Plan, the
Company shall grant the Executive 23,370 options (the "Options") to purchase
shares of the Company's Class A Common Stock, $0.01 par value per share.
(d) INSURANCE COVERAGES AND PENSION PLANS. Such medical, dental, life
insurance and pension benefits as are generally made available by the Company to
its executive officers ("Management") from time to time shall be made available
to the Executive.
(e) VACATION. The Executive shall be entitled to four (4) weeks vacation
each year.
(f) EXPENSES. Reimbursement of all reasonable and documented expenses
actually incurred or paid by the Executive in the performance of the Executive's
duties under this Agreement, upon presentation of expense statements, vouchers
or other supporting information in accordance with Company policy.
(g) INDEMNIFICATION. The Executive shall be entitled to indemnification
from the Company to the extent provided in its charter and by-laws and shall be
covered by the terms of the Company's policy of insurance for directors and
officers in effect from time to time (the "D&O Insurance"). Copies of the
Company's charter, by-laws and D&O Insurance will be made available to the
Executive upon request.
4. Termination.
-----------
(a) TERMINATION BY THE COMPANY WITH CAUSE. The Company shall have the right
at any time to terminate the Executive's employment hereunder without prior
notice upon the occurrence of any of the following (any such termination being
referred to as a termination for "Cause"):
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<PAGE> 3
(i) the commission by the Executive of any deliberate and
premeditated act taken by the Executive in bad faith against the
interests of the Company;
(ii) the Executive has been convicted of, or pleads NOLO
CONTENDERE with respect to, any felony, or of any lesser crime or
offense having as its predicate element fraud, dishonesty, or
misappropriation of the property of the Company;
(iii) the habitual drug addiction or intoxication of the
Executive which negatively impacts his job performance;
(iv) the willful failure or refusal of the Executive to perform
his duties as set forth herein or the willful failure or refusal to
follow the direction of the Board; or
(v) the Executive breaches any of the terms of this Agreement or
any other agreement between the Executive and the Company which breach
is not cured within 30 days subsequent to notice from the Company to
the Executive of such breach.
(b) TERMINATION BY COMPANY FOR DEATH OR DISABILITY. The Company shall have
the right at any time to terminate the Executive's employment hereunder without
prior notice if the Executive is unable to perform substantially all of his
duties and responsibilities hereunder by reason of any mental, physical or other
disability for an aggregate of one hundred eighty (180) days during any period
of three hundred sixty (360) consecutive calendar days (for purposes hereof,
"disability" has the same meaning as is defined for such term in the Company's
disability policy). The Company's obligations hereunder shall, subject to the
provisions of Section 5(b), also terminate upon the death of the Executive.
(c) TERMINATION BY COMPANY WITHOUT CAUSE. The Company shall have the right
at any time to terminate the Executive's employment for any other reason without
Cause upon sixty (60) days prior written notice to the Executive.
(d) VOLUNTARY TERMINATION BY EXECUTIVE. The Executive shall be entitled to
terminate his employment and appointment hereunder upon sixty (60) days prior
written notice to the Company. Any such termination shall be treated as a
termination by the Company for "Cause" under Section 5.
(e) CONSTRUCTIVE TERMINATION BY THE EXECUTIVE. The Executive shall be
entitled to terminate his employment hereunder, upon notice delivered within
three (3) business days of the occurrence of a Constructive Termination. Any
such termination shall be treated as a
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<PAGE> 4
termination by the Company without Cause. For this purpose, a "Constructive
Termination" shall mean:
(i) A reduction in Base Salary.
(ii) A reduction in annual Bonus opportunity.
(iii) A change of more than seventy-five (75) miles in the office or
location where the Executive is based.
(iv) Unless with the express written consent of the Executive, (I) the
assignment to the Executive of any duties inconsistent in any substantial
respect with the Executive's position, authority or responsibilities as
contemplated by Section 1 of this Agreement, or (II) any other substantial
change in such position, including titles, authority or responsibilities
from those contemplated by Section 1 of this Agreement.
(v) The acquisition of more than 50% of the then outstanding Class A
Common Stock of the Company by any of the following companies: Apogee
Enterprises, Inc., PPG Industries, Inc., Asahi Glass Co., Ltd., AFG
Industries, Inc., Vistar, Inc., Belron International, Vitro Sociedad
Anonima, Guardian Industries, Saint-Gobian, Pilkington, PLC or their
affiliates.
(f) NOTICE OF TERMINATION. Any termination by the Company for Cause shall
be communicated by Notice of Termination to the other party hereto given in
accordance with Section 9. For purposes of this Agreement, a "Notice of
Termination" means a written notice given prior to the termination which (i)
indicates the specific termination provision in this Agreement relied upon, (ii)
sets forth in reasonable detail the facts and circumstances claimed to provide a
basis for termination of the Executive's employment under the provision so
indicated, and (iii) if the termination date is other than the date of receipt
of such notice, specifies the termination date of this Agreement (which date
shall be not more than fifteen (15) days after the giving of such notice). The
failure by any party to set forth in the Notice of Termination any fact or
circumstance which contributes to a showing of Cause shall not waive any right
of such party hereunder or preclude such party from asserting such fact or
circumstance in enforcing its rights hereunder.
5. Effect of Termination of Employment.
-----------------------------------
(a) WITH CAUSE. If the Executive's employment is terminated with Cause, the
Executive's salary and other benefits specified in Section 3 shall cease at the
time of such termination, and the Executive shall not be entitled to any
compensation specified in Section 3 which has not been paid prior to such
termination; provided, however, that the Executive shall be entitled to continue
to participate in the Company's medical benefit plans to the extent required by
law.
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<PAGE> 5
(b) DEATH OR DISABILITY. If the Executive's employment is terminated by the
death or disability of the Executive (pursuant to Section 4(b)), the Executive's
compensation provided in Section 3 shall be paid to the Executive or, in the
event of the death of the Executive, the Executive's estate, as follows:
(i) the Executive's Base Salary specified in Section 3(a) shall
continue to be paid in monthly installments until the first to occur
of (i) six (6) months following such termination and (ii) such time as
the Executive breaches the provisions of Sections 6 or 7 of this
Agreement;
(ii) a pro rata portion (based on days worked) of the Bonus
payable to the Executive, if any, specified in Section 3(b) shall be
paid, unless the Board of Directors of the Company determines to pay a
greater amount in its sole discretion;
(iii) the Executive's additional benefits specified in Section
3(c) shall continue to be available to the Executive until the first
to occur of (i) twelve (12) months following such termination and (ii)
such time as the Executive breaches the provisions of Sections 6 or 7
of this Agreement.
(c) WITHOUT CAUSE. If the Executive's employment is terminated by the
Company without Cause (pursuant to Section 4(c) or 4(e)), the Executive's
compensation provided in Section 3 shall be paid as follows:
(i) the Executive's Base Salary specified in Section 3(a) shall
continue to be paid in monthly installments until the later to occur
of (i) the initial term of this Agreement or (ii) twenty-four (24)
months following such termination (it being specifically agreed that
the Executive has no obligation to mitigate the amounts otherwise
payable pursuant to this provision);
(ii) a pro rata portion (based on days worked) of the Bonus
payable to the Executive, if any, specified in Section 3(b) shall be
paid, unless the Board of Directors of the Company determines to pay a
greater amount, in its sole discretion;
(iii) the Executive's additional benefits specified in Section
3(c) shall continue to be available to the Executive until the first
to occur of (i) twelve (12) months following such termination and (ii)
such time as the Executive breaches the provisions of Sections 6 or 7
of this Agreement; and
(iv) fifty percent (50%) of the Options granted to the Executive
which were not vested as of the date of such termination shall be
automatically vested.
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<PAGE> 6
6. Non-Competition; Non-Solicitation.
---------------------------------
(a) The Executive agrees that during the Non-Competition Period (defined
below) he will not in any capacity, either separately, jointly, or in
association with others, as an officer, director, consultant, agent, employee,
owner, partner or stockholder, engage or have a financial interest in any
business which is involved in auto glass replacement or repair business or any
other business which competes with the Company's current or currently planned
products as of the date of the employee's termination of Employment with the
Company (excepting only the ownership of not more than 5% of the outstanding
securities of any class listed on an exchange or regularly traded in the
over-the-counter market). The "Non-Competition Period" is (i) the period of the
Executive's employment hereunder plus (ii) a period of one (1) year thereafter;
provided, however, that the Non-Competition Period shall in no events be shorter
than three years from the date hereof; and provided, further, however, that in
the event of a termination of the Executive's employment pursuant to Sections
4(c) or 4(e) hereof, the Non-Competition Period shall be the period during which
the Executive is receiving any benefits pursuant to Section 5(c) hereof. The
Executive further agrees that during the Non-Competition Period he will not in
any capacity, either separately, jointly or in association with others, solicit
or otherwise contact any of the Company's customers or prospects, as shown by
the Company's records, that were customers or prospects of the Company at any
time during the Non-Competition Period if such solicitation or contact is for
the general purpose of selling products or services that satisfy the same
general needs as any products or services that the Company had available for
sale to its customers or prospects during the Non-Competition Period. For
purposes of this Section 6 and Section 7, the "Company" refers to the Company
and any incorporated or unincorporated affiliates of the Company.
(b) During the Non-Competition Period, the Executive will not solicit or
attempt to solicit any officer, director, consultant, executive or employee of
the Company or any of its affiliates to leave his or her engagement with the
Company or such affiliate.
7. Secret Processes and Confidential Information.
---------------------------------------------
(a) For the Term and thereafter, (i) the Executive will not divulge,
directly or indirectly, other than in the regular and proper course of business
of the Company, any confidential knowledge or information with respect to the
operation or finances of the Company or with respect to confidential or secret
processes, techniques, machinery, customers, plans and products manufactured or
sold by the Company and (ii) the Executive will not use, directly or indirectly,
any confidential information for the benefit of anyone other than the Company;
provided, however, that the Executive has no obligation, express or implied, to
refrain from using or disclosing to others any such knowledge or information
which is or hereafter shall become available to the public other than through
disclosure by the Executive.
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<PAGE> 7
(b) The Executive will promptly disclose to the Company and to no other
person, firm or entity all inventions, discoveries, improvements, trade secrets,
formulas, techniques, processes, know-how and similar matters, whether or not
patentable and whether or not reduced to practice, which are conceived or
learned by the Executive during the period of the Executive's employment with
the Company, either alone or with others, which relate to or result from the
actual or anticipated business or research of the Company or which result, to
any extent, from the Executive's use of the Company's premises or property
(collectively called the "Inventions"). The Executive acknowledges and agrees
that all the Inventions shall be the sole property of the Company, and the
Executive hereby assigns to the Company all of the Executive's rights and
interests in and to all of the Inventions, it being acknowledged and agreed by
the Executive that all the Inventions are works made for hire. The Company shall
be the sole owner of all domestic and foreign rights and interests in the
Inventions. The Executive agrees to assist the Company at its expense to obtain
and from time to time enforce patents and copyrights on the Inventions.
(c) Upon the request of, and, in any event, upon termination of the
Executive's employment with the Company, the Executive shall promptly deliver to
the Company all documents, data, records, notes, drawings, manuals and all other
tangible information in whatever form which pertains to the Company, and the
Executive will not retain any such information or any reproduction or excerpt
thereof.
(d) The Company and the Executive agree that the provisions of this Section
7 and Section 6 above shall, as of the date hereof, supersede the terms of
Section 4 of that certain letter from the Company to the Executive dated as of
November , 1996 regarding a bonus to be paid to the Executive.
8. NOTICES. All notices or other communications hereunder shall be in
writing and shall be deemed to have been duly given (a) when delivered
personally, (b) upon confirmation of receipt when such notice or other
communication is sent by facsimile or telex, (c) one day after delivery to an
overnight delivery courier, or (d) on the fifth day following the date of
deposit in the United States mail if sent first class, postage prepaid, by
registered or certified mail. The addresses for such notices shall be as
follows:
(a) For notices and communications to the Company:
Safelite Glass Corp.
1105 Schrock Road
Columbus, OH 43216
Attention: President
with a copy to:
Hutchins, Wheeler & Dittmar
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<PAGE> 8
A Professional Corporation
101 Federal Street
Boston, MA 02110
Attention: Charles W. Robins, Esq.
(b) For notices and communications to the Executive:
Douglas A. Herron
6605 Highland Lakes Place
Westerville, OH 43082
with a copy to:
Seigfreid, Bingham, Levy, Selzer & Gee
A Professional Corporation
911 Main Street
Kansas City, MO 64105
Attention: Larry J. Bingham, Esq.
Any party hereto may, by notice to the other, change its address for receipt of
notices hereunder.
9. General.
-------
9.1 GOVERNING LAW. This Agreement shall be governed by, and enforced in
accordance with, the laws of the State of Delaware.
9.2 AMENDMENT; WAIVER. This Agreement may be amended, modified, superseded,
canceled, renewed or extended, and the terms hereof may be waived, only by a
written instrument executed by all of the parties hereto or, in the case of a
waiver, by the party waiving compliance. The failure of any party at any time or
times to require performance of any provision hereof shall in no manner affect
the right at a later time to enforce the same. No waiver by any party of the
breach of any term or covenant contained in this Agreement, whether by conduct
or otherwise, in any one or more instances, shall be deemed to be, or construed
as, a further or continuing waiver of any such breach, or a waiver of the breach
of any other term or covenant contained in this Agreement.
9.3 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon the
Executive, without regard to the duration of his employment by the Company or
reasons for the cessation of such employment, and inure to the benefit of his
administrators, executors, heirs and assigns, although the obligations of the
Executive are personal and may be performed only by him. This Agreement shall
also be binding upon and inure to the benefit of the Company and its
subsidiaries, successors and assigns, including any corporation with which or
into which the Company or its successors may be merged or which may succeed to
their assets or business.
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<PAGE> 9
9.4 COUNTERPARTS. This Agreement may be executed in multiple counterparts,
each of which shall be considered to have the force and effect of an original.
9.5 ATTORNEYS' FEES. In the event that any action is brought to enforce any
of the provisions of this Agreement, or to obtain money damages for the breach
thereof, and such action results in the award of a judgment for money damages or
in the granting of any injunction in favor of one of the parties to this
Agreement, all expenses, including reasonable attorneys' fees, shall be paid by
the non-prevailing party.
9.6 NON-EXCLUSIVITY OF RIGHTS. Nothing in this Agreement shall prevent or
limit the Executive's continuing or future participation during his employment
hereunder in any benefit, bonus, incentive or other plan or program provided by
the Company or any of its affiliates and for which the Executive may qualify.
Amounts which are vested benefits or which the Executive is otherwise entitled
to receive under any plan or program of the Company or any affiliated company at
or subsequent to the date of the Executive's termination of employment with the
Company shall, subject to the terms hereof or any other agreement entered into
by the Company and the Executive on or subsequent to the date hereof, be payable
in accordance with such plan or program.
9.7 COOPERATION WITH REGARD TO LITIGATION. The Executive agrees to
cooperate with the Company during the Term and for a period of two years
thereafter by making himself reasonably available to testify on behalf of the
Company or its affiliates, in any action, suit or proceeding, whether civil,
criminal, administrative or investigative and to assist the Company or any of
its affiliates in any such action, suit or proceeding by providing information
and meeting and consulting with the Board of Directors or its counsel or counsel
to the Company or its affiliates, as reasonably requested by the Board or such
counsel. The Executive shall be reimbursed by the Company for any expenses
(including, but not limited to, legal fees) reasonably incurred by Executive in
connection with his compliance with the foregoing covenant.
9.8 SURVIVAL OF CERTAIN PROVISIONS. Provisions of this Agreement shall
survive any termination of employment if so provided herein or if necessary or
desirable fully to accomplish the purposes of such provision, including without
limitation, the obligations of the Executive pursuant to Sections 6, 7 and 9.7
hereof.
9.9 REMEDIES. It is specifically understood and agreed that any breach of
the provisions of Section 6 or 7 of this Agreement would result in irreparable
injuries to the Company, that the remedy at law for any such breach will be
inadequate and that upon breach of this provision, the Company, in addition to
all other available remedies, shall be entitled as a matter of right to
injunctive relief in any court of competent jurisdiction without the necessity
of proving the actual damage to the Company.
9.10 SEVERABLE PROVISIONS. The provisions of this Agreement are severable
and the invalidity of any one or more provisions shall not affect the validity
of any other provision. In the event that a court of competent jurisdiction
determines that any provision of this
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<PAGE> 10
Agreement, or the application thereof, is unenforceable in whole or in part
because the duration or scope thereof are too broad or otherwise unreasonable
under applicable law, including with respect to time or space, the parties
hereto agree that said court in making such determination shall have the power
to reduce the duration and scope of such provision to the extent necessary to
make it enforceable, and that the Agreement in its reduced form shall be valid
and enforceable to the fullest extent permitted by law.
9.11 ENTIRE AGREEMENT. This Agreement constitutes the entire understanding
of the parties hereto with respect to the subject matter hereof and supersede
all prior negotiations, discussions, writings and agreements between them.
9.12 WAIVER OF RIGHT TO JURY TRIAL. EACH OF THE COMPANY AND THE EXECUTIVE,
BY ITS OR HIS EXECUTION HEREOF, WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF
ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT OR ANY
DEALINGS BETWEEN THEM RELATING TO THE SUBJECT MATTER OF THIS TRANSACTION AND THE
RELATIONSHIP THAT IS BEING ESTABLISHED. THE SCOPE OF THIS WAIVER IS INTENDED TO
BE ALL ENCOMPASSING OF ANY AND ALL DISPUTES THAT MAY BE FILED IN ANY COURT AND
THAT RELATE TO THE SUBJECT MATTER OF THIS AGREEMENT, INCLUDING WITHOUT
LIMITATION, CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER
COMMON LAW AND STATUTORY CLAIMS. THE COMPANY AND THE EXECUTIVE ACKNOWLEDGE THAT
THIS WAIVER IS A MATERIAL INDUCEMENT TO ENTER INTO A BUSINESS RELATIONSHIP, THAT
EACH HAS ALREADY RELIED ON THE WAIVER IN ENTERING INTO THIS AGREEMENT AND THAT
EACH WILL CONTINUE TO RELY ON THE WAIVER IN THEIR RELATED FUTURE DEALINGS. THE
COMPANY AND THE EXECUTIVE FURTHER REPRESENT AND WARRANT THAT EACH HAS REVIEWED
THIS WAIVER WITH ITS OR HIS LEGAL COUNSEL, AND THAT EACH KNOWINGLY AND
VOLUNTARILY WAIVES ITS OR HIS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH
LEGAL COUNSEL. THIS WAIVER IS IRREVOCABLE, MEANING THAT IT SHALL APPLY TO ANY
SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT
OR TO ANY OTHER DOCUMENTS OR AGREEMENTS RELATING TO THE TRANSACTION CONTEMPLATED
HEREBY. IN THE EVENT OF ANY LITIGATION, THIS AGREEMENT MAY BE FILED AS A WRITTEN
CONSENT TO A TRIAL BY THE COURT.
[Remainder of page intentionally left blank]
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<PAGE> 11
IN WITNESS WHEREOF, the parties have executed this Agreement as an
instrument under seal as of the date first above written.
SAFELITE GLASS CORP.
By: /s/ John Barlow
---------------------
Name: John Barlow
Title: President
EXECUTIVE:
/s/ Douglas A. Herron
------------------------
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<PAGE> 1
Exhibit 10.6
EMPLOYMENT CONTRACT
-------------------
Employment Contract dated as of January 2, 1996, between Safelite GLASS
Corp., a Delaware corporation ("Safelite"), and Poe A. Timmons, an individual
("Timmons").
AGREEMENT
---------
1. TERM. The term of this Employment Contract shall commence on the date
hereof and shall expire on January 2, 1999, unless terminated earlier pursuant
to the provisions set forth below. Notwithstanding the expiration or termination
of the term of this Employment Contract, the provisions of sections 9 through 12
of this Employment Contract shall survive and continue to be in full force and
effect.
2. DUTIES. During the term of this Employment Contract, Timmons shall
perform such duties as may be assigned to her by Safelite's Chief Financial
Officer. It is contemplated that Timmons will serve as Safelite's Vice President
- - Finance and Corporate Controller during the entire term of this Employment
Contract. Timmons will use her best efforts to perform such duties to the best
of her ability, and to the satisfaction of Safelite's Chief Financial Officer.
In connection therewith, Timmons shall devote such time and effort to the
performance of such duties as are necessary for the satisfactory performance
thereof.
3. COMPENSATION. As full consideration for the performance by Timmons of
all of her obligations under this Employment Contract, Safelite shall make the
payments and provide the benefits set forth below during the term of this
Employment Contract:
A. Annual Salary: One hundred ninety thousand dollars ($190,000.00)
per year, payable in periodic installments in accordance with
Safelite's policy relating to the payment of salaries generally.
Said salary will be reviewed annually and may be increased or
decreased (but not below one hundred ninety thousand dollars
($190,000.00) per year) by Safelite at that time.
B. Annual Bonus: Timmons will be eligible to participate in any
executive bonus plan adopted by Safelite for executives at her
level during the term of this Employment Contract.
C. Option Agreement: Timmons will be granted an option on Safelite's
standard form to purchase eight thousand seven hundred and
fifty-eight (8,758) shares of Class A Common Stock of Safelite at
three dollars ($3.00) per share.
D. Other: Such other benefits as may from time to time be provided
generally to salaried associates of Safelite.
4. PLACE OF PERFORMANCE. Timmons shall perform her duties under this
Employment Contract at the executive offices of Safelite in Columbus, Ohio. It
is understood that the
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<PAGE> 2
duties assigned to Timmons may require travel. In such cases, Safelite will
reimburse Timmons for reasonable expenses incurred by her in connection
therewith in accordance with Safelite's policy with respect thereto.
5. TERMINATION UPON DEATH OR DISABILITY. The term of this Employment
Contract shall terminate upon the death or permanent disability of Timmons.
6. TERMINATION BY SAFELITE FOR CAUSE. Safelite shall have the right to
terminate the term of this Employment Contract by notice to Timmons if:
A. Timmons breaches this Employment Contract, whether by violating
ANY specific directions of Safelite's Chief Financial Officer, by
failing or refusing to perform her duties under this Employment
Contract, or otherwise;
B. Timmons is convicted of any crime or offense involving money or
other property of Safelite, or of any felony; or
C. Timmons engages in any misconduct that could be injurious to
Safelite in any respect.
Safelite's right of termination as provided in this section shall be in
addition to, and shall not affect its rights and remedies under, any other
section of this Employment Contract, and such rights and remedies under such
other sections shall survive the termination of this Employment Contract and
Timmons' employment by Safelite hereunder. In the event of a termination of her
employment pursuant to the terms of this section, Timmons shall have no right to
receive any further compensation for any period subsequent to the effective date
of such termination.
7. TERMINATION BY SAFELITE WITHOUT CAUSE. Safelite shall have the right to
terminate Timmons without cause upon notice thereof and the payment of an amount
equal to the aggregate amount that she would have received for salary over the
remaining term of this Employment Contract but for said termination calculated
at the rate then in effect. Such termination shall not have any affect on any of
the other terms and conditions of this Employment Contract, or upon Safelite's
rights and remedies thereunder (nor shall it have any affect on any other
agreements entered into between Safelite and Timmons).
8. TERMINATION BY TIMMONS. Timmons shall have the right to terminate the
term of this Employment Contract by notice to Safelite if:
A. Safelite breaches this Employment Contract; or
B. If, following any change in the control of Safelite, Timmons'
title, duties, responsibilities, or status are reduced without
her consent; Timmons is assigned duties that are inconsistent
with her office without her consent; or Timmons is required to
relocate without her consent. For purposes of the foregoing,
there shall be no change of control deemed
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<PAGE> 3
to have occurred if, immediately following the change in
ownership in question, Neway Corp., Lear Siegler Partners, LS
Partners, Forstmann Little & Co. Subordinated Debt and Equity
Management Buyout Partnership-II, Forstmann Little & Co.
Subordinated Debt and Equity Management Buyout Partnership-Ill,
and their direct or indirect partners and any affiliates of any
of the foregoing continue to own, directly or indirectly, an
aggregate of more than fifty per cent (50%) of the outstanding
shares of Class A Common Stock and Class B Common Stock of
Safelite (treating Classes A and B as a single class).
If Timmons terminates the term of this Employment Contract pursuant to
subsection A or subsection B of this section, Safelite shall immediately pay
Timmons an amount equal to the aggregate amount that she would have received for
salary over the remaining term of this Employment Contract but for said
termination calculated at the rate then in effect.
No termination under this section shall have any affect on any of the other
terms and conditions of this Employment Contract, or upon Safelite's rights and
remedies thereunder (nor shall it have any affect on any other agreements
entered into between Safelite and Timmons).
9. NO DISPARAGEMENT. Timmons agrees that during the term of this Employment
Contract and at all times thereafter she will refrain from making any
disparaging remarks about Safelite or any of its officers, directors, employees,
agents, representatives, affiliates, products, or services. It is understood and
agreed, however, that this section is not intended to limit the right of Timmons
to give nonmalicious and truthful testimony should she be subpoenaed to give
testimony.
10. SEVERABILITY. If any of the covenants contained herein or any part
thereof are hereafter construed to be invalid or unenforceable, the remainder of
this Employment Contract and any application of the other provisions of this
Employment Contract shall not be affected thereby, but rather shall be enforced
to the greatest extent permitted by law.
11. ENTIRE AGREEMENT; Choice of Law. This Employment Contract contains the
entire agreement of the parties relating to the subject matter hereof and
supersedes all prior agreements or understandings, written or oral, with respect
to such subject. The internal laws of the state of Ohio without reference to its
choice of law or conflicts of laws provisions shall govern the validity,
interpretation, construction, performance, and enforcement of this Employment
Contract.
12. MISCELLANEOUS. No provision of this Employment Contract may be
modified, waived, or discharged unless such modification, waiver, or discharge
is agreed to in a writing signed by Timmons and on behalf of Safelite by an
officer other than Timmons specifically designated by the board of directors of
Safelite. No waiver by either party hereto at any time of any breach by the
other party hereto or of compliance with any condition or provision of this
Employment Contract to be performed by such other party shall be deemed a waiver
of similar or dissimilar provisions or conditions at the same or at any prior or
subsequent time. No agreements or representations, oral or otherwise, expressed
or implied, have been made by either party with respect to the subject matter
hereof that are not set forth expressly in this
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<PAGE> 4
Employment Contract. This Employment Contract shall be binding upon and shall
inure to the benefit of any successor or successors of Safelite.
In witness whereof, this Employment Contract has been executed by the
parties hereto in counterparts as of the date first written above.
SAFELITE: TIMMONS:
Safelite Glass Corp., /s/Poe A. Timmons
a Delaware corporation ----------------------------
Poe A. Timmons, individually
BY:/s/Garen K. Staglin
-------------------------------
Garen K. Staglin, its Chairman
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<PAGE> 1
EXHIBIT A
SAFELITE GLASS CORP.
RESTATED EMPLOYEE STOCK OPTION PLAN
1. PURPOSE. The purpose of the Safelite Glass Corp. Restated
Employee Stock Option Plan is to provide financial incentives to employees of
the corporation whose entreprenurial and management talents and commitments
will contribute to the continued growth and expansion of the Corporation's
business.
The options granted under the Plan are not intended to qualify as
Incentive Stock Options within the meaning of Section 422 of the Code.
2. DEFINITIONS. For purposes of this plan:
(a) "Affiliate" meaans any person directly or indirectly
controlling, controlled by or under common control with the the person of which
it is an Affiliate.
(b) "Board" means the Board of Directors of the Corporation.
(c) "Class A Common Stock" means the Class A Common Stock,
par value $.01 per share, of the Corporation and any other stock or securities
into which such shares are changed or for which such shares are exchanged as
described in Section 7 hereof, and "Class B Common Stock" means the Class B
Common Stock, par value $.01 per share, of the Corporation and any other stock
or securities into which such shares are changed or for which such shares are
exchanged.
(d) "Code" means the Internal Revenue Code of 1986, as amended.
(e) "Committee" means a committee consisting of one or more
persons appointed by the Board (or absent such appointment, the Board itself)
to administer the Plan and perform the functions set forth herein.
(f) "Corporation" means Safelite Glass Corp. a Delaware
corporation, and any successor to Safelite Glass Corp. by merger, consolidation
or otherwise.
(g) "Eligible Person" means any employee of the Corporation
<PAGE> 2
whom the Committee designates as eligible to recieve Options under the Plan.
(h) "FL & Co. Companies" means individually and collectively
Lear Siegler Partners. LS Partners. Forstmann Little & Co. Subordinated Debt
and Equity Management Buyout Partnership-II and Forstmann Little & Co.
Subordinated Debt and Equity Management Buyout Partnership-III, each a New
York limited partnership.
(i) "Initial Public Offering" means the first Public Offering.
(j) "Legal Representative" means the guardian, executor,
administrator or other legal representative of the Optionee. All references
herein to the Optionee shall be deemed to include references to the Optionee's
Legal Representative, if any, unless the context otherwise requires.
(k) "Option" means an option to purchase shares of Class A
Common Stock under the Plan.
(l) "Optionee" means a person to whom an Option has been
granted under the plan.
(m) "Option Price" means the price at which a share of Class A
Common Stock can be purchased pursuant to an Option.
(n) "Parent" means a parent corporation within the meaning of
Section 424(e) of the Code.
(o) "Plan" means the Safelite Glass Corp. Restated Employee
Stock Option Plan as set forth in this instrument and as it may be amended from
time to time.
(p) "Public Offering" means a public offering of Class A Common
Stock registered under the Securities Act of 1933, as amended.
(q) "Stock Option Agreement" means the written agreement between
an Optionee and the Corporation evidencing the grant of an Option under the
Plan and setting forth the terms and conditions of that Option.
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<PAGE> 3
(r) "Stockholders Agreement" means the Stockholder's Agreement governing
the rights, duties and obligations of present or former employees of the
Corporation with respect to shares of Class A Common Stock granted or sold to
such persons, or issued pursuant to options granted or sold to such persons, in
the form as is in use by the Corporation at the time of exercise of the Option
or any part thereof or such other form which the Corporation elects to require
the Optionee to execute in connection with his exercise of the Option. All
references in any Stock Option Agreement to sections of a Stockholder's
Agreement shall be to sections of any Stockholder's Agreement which may be
attached thereto or to the corresponding sections of any Stockholder's
Agreement in use by the Corporation at the time of exercise of any Option or
which the Corporation elects to require the Optionee to execute in connection
with his exercise of the Option.
(s) "Subsidiary" means a subsidiary corporation within the meaning of
Section 424(f) of the Code, substituting "issuer" for "employer" references
therein.
(t) "Successor Corporation" means a corporation, or a Parent or
Subsidiary of such corporation, which issues or assumes a stock option in a
transaction to which Section 424(a) of the Code applies without regard to the
limitations set forth in paragraphs (1) and (2) thereof.
(u) "Terminating Event" means the consummation of any of the following
events: (i) any merger or consolidation of the Corporation with or into another
corporation (other than a merger or consolidation in which the Corporation is
the surviving corporation and which does not result in any capital
reorganization or reclassification or other change of the then outstanding
shares of Class A Common Stock), or (ii) the liquidation of the Corporation, or
(iii) the sale to a Third Party of all of substantially all of the assets of
the Corporation pursuant to a plan of liquidation or
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<PAGE> 4
otherwise, or (iv) the sale to a Third Party of Class A Common Stock (including
through one or more Public Offerings): provided, that in the case of each of
clauses (i), (ii) and (iv) above, as a result thereof the FL & Co. Companies
and any partners of any of the FL & Co. Companies and any Affiliates of any of
the foregoing cease to own, directly or indirectly, any shares of the voting
stock of the Corporation.
(v) "Third Party" means any person or entity which is not any of the
FL & Co. Companies or an Affiliate or partner of any of the FL & Co. Companies.
3. ADMINISTRATION. The Plan shall be administered by the Committee which
shall hold meetings when it deems necessary and shall keep minutes of its
meetings. The Committee shall have all of the powers necessary to enable it to
carry out its duties under the Plan properly, including the power and duty to
construe and interpret the Plan and to determine all questions arising under it.
The Committee's interpretations and determinations shall be conclusive and
binding upon all persons. The Committee may also establish, from time to time,
such regulations, provisions, procedures and conditions regarding the Options
and granting of Options which in its opinion may be advisable in administering
the Plan. The acts of a majority of the total membership of the Committee at any
meeting, or the acts approved in writing by all of its members, shall be the
acts of the committee; provided, that if the Committee is the Board, the acts of
a majority of the members of the Board present at any meeting, or the acts
approved in writing by all of its members, shall be the acts of the Committee.
4. Shares Available for Option.
---------------------------
(a) The Committees shall have the authority to grant Options to
purchase up to an aggregate of $264,000 shares of Class A Common Stock.
(b) In the event that an Option granted under the Plan to any Eligible
Person expires, or is for any other reason terminated and unexercised as to any
shares of Class A Common Stock covered by the Option, those shares of Class A
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<PAGE> 5
Common Stock shall thereafter be available for the granting of future Options
under the Plan.
(c) The corporation may, but shall not be required to, reserve
out of its authorized but unissued shares of Classs A Common Stock, or out of
shares of Class A Common Stock held in treasury, or partly out of each,as may
be determined by the Board, shares of Class A Common Stock for issuance upon
exercise of any Option.
5. Granting Options
----------------
(a) Subject to the provisions of the Plan, the Committee shall
have full and final authority to select those Eligible Persons who will recieve
Options. The Committee may also grant more than one Option to a given Eligible
Person during the term of the Plan, either in addition to, or in substitution
for, one or more Options previously granted that Eligible Person. Options shall
be issued pursuant to a Stock Options Agreement, in form and substance approved
by the Committee, executed by the Corporation and the Optionee.
(b) The Committee, in its sole discretion, shall establish the
per share Option Price at the time an Option is granted.
(c) The terms of each Option granted under the Plan may differ
from those of other Options granted under the Plan at the same time.
(d) An option shall be exercisable in such installments which
need not be equal) and at such times as may be designated by the Committee and
set forth in the Stock Option Agreement. To the extent not exercised,
installments may accumulate and be exercisable, in whole or in part, at any
time after becoming exercisable, but not later than the date the Option
expires. The Committee may accelerate the exercisability of any Option or
portion thereof at any time. IN NO EVENT SHALL THE TERM OF ANY OPTION GRANTED
UNDER THE PLAN EXCEED 10 YEARS.
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<PAGE> 6
(e) Options granted under the Plan shall not be transferable by
the Optionee except as approved by the Committee as reflected in the Stock
Option Agreement.
(f) Subject to the terms and conditions and within the
limitations of the Plan, the Committee may modify, extend, replace or renew
outstanding Options granted under the Plan, or accept the surrender of
outstanding Options (to the extent they have not yet been exercised) and grant
new Options in substitution for them. Notwithstanding the foregoing, however,
no modification of an Option shall adversely alter or impair any rights or
obligations under that Option granted under the Plan without the affected
Optionee's consent.
6. Exercise of Options.
-------------------
(a) To exercise an Option, in whole or in part, the Optionee
shall deliver to the Committee a written notice of exercise specifying the
number of shares of Class A Common Stock in respect of which the Option is
being exercised. The Option Price shall be paid in full for those shars of
Class A Common Stock with respect to which the Option is being exercised. The
Stock Option Agreement shall set forth the minimum number of shares of Class A
Common Stock, if any, which may be purchased at any one time upon the exercise
of an Option. Each share of Class A Common Stock purchased upon exercise of an
Option shall be issued and delivered at the principal office of the Corporation
to the person entitled to receive it. An Optionee shall not be deemed the
holder of any shares of Class A Common Stock subject to the Option or have any
rights of a stockholder with respect therto until such shares of Class A Common
Stock have been issued and delivered to such Optionee. The Stock Option
Agreement may contain such other conditions to the exercise of an Option as the
Committe from time to time shall determine and may also contain provisions
relating to the ownership of the shares of Class A Common Stock issued upon the
exercise of the Option or may require
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<PAGE> 7
the Optionee, as a condition of exercise of the Option, to execute a
Stockholder's Agreement.
(b) Except as provided in the Stock Option Agreement, any Options held by
an Optionee shall not be exercisable after the termination of the Optionee's
employment with the Corporation, membership on the Board or other relationship
with the Corporation, as the case may be. In addition, except as provided in
the Stock Option Agreement. Options granted under the Plan shall be exercisable
only by the Optionee or his Legal Representative.
(c) All certificates representing shares of Class A Common Stock issued
pursuant to the exercise of an Option shall bear the following legend:
"The shares represented by this certificate have not been registered
under the Securities Act of 1933, as amended, or any securities
regulatory authority of any state, and may not be sold, transferred,
assigned, exchanged, pledged, encumbered or otherwise disposed of
except in accordance with the provisions of a Stockholder's Agreement
with the Corporation, a copy of which is available for inspection at
the offices of the Corporation."
or such other legend to the same effect as approved by the Committee.
(d) To the extent that an Option is not exercised prior to the expiration
of its term of such shorter period of time prescribed by the Plan and the Stock
Option Agreement, the Option shall lapse and all rights of the Optionee with
respect thereto shall terminate.
7. CHANGES IN CLASS A COMMON STOCK
(a) In the event that the outstanding shares of Class A Common Stock are
changed into or exchanged for a different number or kind of shares of stock or
other securities of the Corporation, whether through merger, consolidation,
reorganization, recapitalization, stock dividend, stock split-up or other
substitution of securities of the Corporation, the Committee shall make
appropriate adjustments to the
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<PAGE> 8
maximum number and kind of shares of stock as to which Options may be granted
under the Plan and the number and kind of shares of stock with respect to which
Options have been granted under the Plan, the Option Price for such shares and
any other economic terms of the Option. The Committee's adjustment shall be
final and binding for all purposes of the Plan and each Stock Option Agreement
entered into under the Plan. No adjustment provided for in this Section 7 shall
require the Corporation to issue a fractional share, and with respect to each
Stock Option Agreement the total adjustment as to the number of shares for
which Options have been granted shall be effected by rounding down to the
nearest whole number of shares.
(b) Upon the effective date of any Terminating Event, the Plan and any
unexercised Options granted under the Plan shall terminate unless provision
shall be made in writing in connection with such Terminating Event for the
continuance of the Plan and for the assumption of such unexercised Options by a
Successor Corporation or for the substitution for such unexercised Options of
new options covering shares of such Successor Corporation with appropriate
adjustments as to number and kind of shares and prices of shares subject to such
new options; provided however, that in connection with all or some of the
Terminating Events, the Committee may, in its discretion, authorize the
redemption of unexercised Options for a redemption price set forth in the Stock
Option Agreement. In the event that provision for continuance of the Plan is
made in writing in connection with a Terminating Event, the Plan and the
unexercised Options theretofore granted or the new options substituted therefor
shall continue in the manner and under the terms provided in the Plan and the
Stock Option Agreements and in such writing.
8. AMENDMENT OR TERMINATION OF PLAN. The Board shall have the right to
amend, suspend or terminate the Plan at any time. The rights of an Optionee
under any Option granted prior to an amendment, suspension or termination of the
Plan shall not be adversely affected by any such action of the Board except upon
the consent of the
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<PAGE> 9
Optionee; provided that an amendment to Section 4 of the Plan to increase the
number of shares of Class A Common Stock with respect to which Options may be
granted by the Committee shall not be deemed to adversely affect any Optionee.
9. INDEMNIFICATION OF STOCK OPTION COMMITTEE. The members of the
Committee shall be indemnified by the Corporation against all losses, claims,
damages and liabilities, joint or several (including all legal and other
expenses reasonably incurred in connection with the preparation for, or defense
of, any claim, action or proceeding, whether or not resulting in any
liability), for any acts or omissions which are within the scope of such
member's duties as a member of the Committee to the fullest extent permitted by
law.
10. COMPLIANCE WITH LAW AND OTHER CONDITIONS. All Options and Stock
Option Agreement shall be governed by, and construed and enforced in accordance
with the laws of the State of New York without giving effect to the principles
of conflicts of laws thereof, except that matters covered under the General
Corporation Law of the State of Delaware shall be governed thereby, to the
extent in either case not superseded by the laws of the United States.
Notwithstanding anything herein or in any agreements pursuant to which Options
are granted to the contrary, the Corporation shall not be required to issue
shares pursuant to the exercise of any Option granted under the Plan unless the
Corporation's counsel has advised the Corporation that such exercise and
issuance comply with all applicable laws including, without limitation, all
applicable federal and state securities laws.
11. MISCELLANEOUS. Nothing in the Plan or in any Stock Option Agreement
shall (a) confer on any employee any right to continue in the employ of the
Corporation or any Successor Corporation; or (b) affect the right of the
Corporation or any Successor Corporation to terminate the employment of an
employee at any time; or (c) be deemed da waiver or modification of nay
provision contained in any agreement
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<PAGE> 10
between the employee and the Corporation or any Successor Corporation.
12. EFFECTIVE DATE AND DURATION OF PLAN. The effective date of the Plan
shall be the date of its adoption by the Board, subject only to the approval of
the stockholders of the Corporation entitled to vote thereon. No Options may
be granted under the Plan after the date twenty years from the date the Plan
is adopted by the Board.
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<PAGE> 1
Exhibit 10.9
THL MANAGEMENT AGREEMENT
This Management Agreement (this "Agreement") is entered into as of the 20th
day of December 1996 by and between Safelite Glass Corp., a Delaware corporation
(the "Company"), and Thomas H. Lee Company, a sole proprietorship ("THL").
WHEREAS, on the date hereof the Company has consummated certain
transactions (such transactions being referred to herein as the
"Recapitalization"), pursuant to that certain Recapitalization Agreement and
Plan of Merger and Stock Purchase Agreement, dated as of November 8, 1996, by
and among Lear Siegler Holdings Corp., the LS Selling Stockholders, the Company,
LSNWY Corp., Lite Acquisition Corp. and L.S. Acquisition Corp.
WHEREAS, THL is providing advisory and other services to the Company in
connection with the senior secured financing (the "Senior Financing") being
provided in connection with the Recapitalization pursuant to a Credit Agreement
dated on the date hereof (the "Credit Agreement"), among the Company, The Chase
Manhattan Bank and Bankers Trust Company, as agents, and the lending
institutions from time to time party thereto;
WHEREAS, certain affiliates of THL have provided equity financing (the
"Equity Investments") in connection with the Recapitalization;
WHEREAS, THL has staff specifically skilled in corporate finance, strategic
corporate planning, and other management skills and services;
WHEREAS, the Company will require THL's special skills and management
advisory services in connection with its general business operations; and
WHEREAS, THL is willing to provide such skills and services to the Company.
NOW, THEREFORE, in consideration of the mutual covenants contained herein,
and for other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto, intending to be legally
bound, hereby agree as follows:
1. SERVICES. THL hereby agrees that, during the term of this Agreement (the
"Term"), it will:
a. provide the Company with advice in connection with the negotiation and
consummation of agreements, contracts, documents and instruments
necessary to provide the Company with financing from banks or other
financial institutions or other entities on terms and conditions
satisfactory to the Company; and
b. provide the Company with financial, managerial and operational advice
in connection with its day-to-day operations, including, without
limitation:
i. advice with respect to the investment of funds; and
<PAGE> 2
ii. advice with respect to the development and implementation of
strategies for improving the operating, marketing and financial
performance of the Company.
2. PAYMENT OF FEES. The Company hereby agrees to:
a. pay to THL (or its designee) a fee in the amount of $5,000,000 in
connection with the structuring of the Senior Financing for the
Recapitalization, together with reimbursement of THL's expenses
incurred on behalf of the Company through the Closing Date in
connection with the Recapitalization, such fees and expenses being
payable by the Company at the closing of the Recapitalization;
b. during the Term, pay to THL (or its designee) a management fee in an
amount equal to $500,000 per annum in exchange for the services
provided to the Company by THL, such fee being payable by the Company
quarterly in advance, the first such payment to be made at or after
the closing of the Recapitalization (provided, however, that if during
any fiscal quarter of the Company a Default or Event of Default (as
such terms are defined in the Credit Agreement) exists, only one-half
of such fee for such fiscal quarter may be paid and the remaining one-
half of such fee shall be paid at such time as all Defaults and Events
of Default (as defined in the Credit Agreement) have been cured or
waived); and
c. during the Term, allow THL to participate in the negotiation and
consummation of senior financing for any acquisition transactions by
the Company or any of its direct or indirect subsidiaries, and pay to
THL (or its designee) a fee in connection therewith equal to one
percent (1%) of the gross purchase price of the transaction (including
all liabilities assumed or otherwise included in the transaction),
such fee to be due and payable for the foregoing services at the
closing of such transaction, whether or not any such senior financing
is actually committed or drawn upon.
Each payment made pursuant to this Section 2 shall be paid by wire transfer
of immediately available federal funds to the account(s) specified by THL
(or its designee).
3. TERM. This Agreement shall continue in full force and effect, unless and
until terminated by mutual consent of the parties, for so long as THL (or
any successor or permitted assign, as the case may be) continues to carry
on the business of providing services of the type described in Section 1
above; provided, however, that either party may terminate this Agreement
following a material breach of the terms of this Agreement by the other
party hereto and a failure to cure such breach within 30 days following
written notice thereof; and provided further that each of (a) the
obligations of the Company under Section 4 below, (b) any and all accrued
and unpaid obligations of the Company owed under
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<PAGE> 3
Section 2 above and (c) the provisions of Section 7 shall survive any
termination of this Agreement to the maximum extent permitted under
applicable law.
4. EXPENSES; INDEMNIFICATION.
a. Expenses. The Company agrees to pay on demand all expenses incurred by
THL and its affiliates (or any of them) in connection with this
Agreement, the Recapitalization and such other transactions and all
operations hereunder or in respect of the Equity Investments or
otherwise incurred in connection with the Recapitalization or the
Company, including but not limited to (i) the fees and disbursements
of: (A) Hutchins, Wheeler & Dittmar A Professional Corporation,
counsel to THL, (B) KPMG Peat Marwick, accountant to THL, and (C) any
other consultants or advisors retained by THL or either of the parties
identified in clauses (A) and (B) arising in connection therewith
(including but not limited to the preparation, negotiation and
execution of this Agreement and any other agreement executed in
connection herewith or in connection with the Recapitalization, the
Senior Financing or the consummation of the other transactions
contemplated hereby (and any and all amendments, modifications,
restructurings and waivers, and exercises and preservations of rights
and remedies hereunder or thereunder) and the operations of the
Company and any of its subsidiaries), and (ii) any out-of-pocket
expenses incurred by THL in connection with the provision of services
hereunder or the attendance at any meeting of the board of directors
(or any committee thereof) of the Company or any of its affiliates.
b. Indemnity and Liability. In consideration of the execution and
delivery of this Agreement by THL, the Company hereby agrees to
indemnify, exonerate and hold each of THL, and its affiliates, and
each of their respective partners, shareholders, affiliates,
directors, officers, fiduciaries, employees and agents and each of the
partners, shareholders, affiliates, directors, officers, fiduciaries,
employees and agents of each of the foregoing (collectively, the
"Indemnitees") free and harmless fro m and against any and all
actions, causes of action, suits, losses, liabilities and damages, and
expenses in connection therewith, including without limitation
reasonable attorneys' fees and disbursements (collectively, the
"Indemnified Liabilities"), incurred by the Indemnitees or any of them
as a result of, or arising out of, or relating to the
Recapitalization, the execution, delivery, performance, enforcement or
existence of this Agreement or the transactions contemplated hereby or
thereby (including but not limited to any indemnification obligation
assumed or incurred by any Indemnitee to or on behalf of TRW, or its
accountants or other representatives, agents or affiliates) except for
any such Indemnified Liabilities arising on account of such
Indemnitee's gross negligence or willful misconduct, and if and to the
extent that the foregoing undertaking may be unenforceable for any
reason, the Company hereby agrees to make the
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<PAGE> 4
maximum contribution to the payment and satisfaction of each of the
Indemnified Liabilities which is permissible under applicable law.
None of the Indemnitees shall be liable to the Company or any of its
affiliates for any act or omission suffered or taken by such
Indemnitee that does not constitute gross negligence or willful gross
negligence or misconduct.
5. ASSIGNMENT, ETC. Except as provided below, neither party shall have the
right to assign this Agreement. THL acknowledges that its services under
this Agreement are unique. Accordingly, any purported assignment by THL
shall be void. Notwithstanding the foregoing, THL may assign all or part of
its rights and obligations hereunder to any affiliate of THL which provides
services similar to those called for by this Agreement, in which event THL
shall be released of all of its rights and obligations hereunder.
6. AMENDMENTS AND WAIVERS. No amendment or waiver of any term, provision or
condition of this Agreement shall be effective, unless in writing and
executed by each of THL and the Company. No waiver on any one occasion
shall extend to or effect or be construed as a waiver of any right or
remedy on any future occasion. No course of dealing of any person nor any
delay or omission in exercising any right or remedy shall constitute an
amendment of this Agreement or a waiver of any right or remedy of any party
hereto.
7. MISCELLANEOUS.
a. Choice of Law. This Agreement shall be governed by and construed in
accordance with the domestic substantive laws of The Commonwealth of
Massachusetts without giving effect to any choice or conflict of law
provision or rule that would cause the application of the domestic
substantive laws of any other jurisdiction.
b. Consent to Jurisdiction. Each of the parties agrees that all actions,
suits or proceedings arising out of or based upon this Agreement or
the subject matter hereof shall be brought and maintained exclusively
in the federal and state courts of The Commonwealth of Massachusetts.
Each of the parties hereto by execution hereof (i) hereby irrevocably
submits to the jurisdiction of the federal and state courts in The
Commonwealth of Massachusetts for the purpose of any action, suit or
proceeding arising out of or based upon this Agreement or the subject
matter hereof and (ii) hereby waives to the extent not prohibited by
applicable law, and agrees not to assert, by way of motion, as a
defense or otherwise, in any such action, suit or proceeding, any
claim that it is not subject personally to the jurisdiction of the
above-named courts, that it is immune from extraterritorial injunctive
relief or other injunctive relief, that its property is exempt or
immune from attachment or execution, that any such action, suit or
proceeding may not be brought or maintained in one of the above-named
courts, that any such action, suit
- 4 -
<PAGE> 5
or proceeding brought or maintained in one of the above-named courts
should be dismissed on grounds of FORUM NON CONVENIENS, should be
transferred to any court other than one of the above-named courts,
should be stayed by virtue of the pendency of any other action, suit
or proceeding in any court other than one of the above-named courts,
or that this Agreement or the subject matter hereof may not be
enforced in or by any of the above-named courts. Each of the parties
hereto hereby consents to service of process in any such suit, action
or proceeding in any manner permitted by the laws of The Commonwealth
of Massachusetts, agrees that service of process by registered or
certified mail, return receipt requested, at the address specified in
or pursuant to Section 9 is reasonably calculated to give actual
notice and waives and agrees not to assert by way of motion, as a
defense or otherwise, in any such action, suit or proceeding any claim
that service of process made in accordance with Section 9 does not
constitute good and sufficient service of process. The provisions of
this Section 7(b) shall not restrict the ability of any party to
enforce in any court any judgment obtained in a federal or state court
of The Commonwealth of Massachusetts.
c. Waiver of Jury Dial. TO THE EXTENT NOT PROHIBITED BY APPLICABLE LAW
WHICH CANNOT BE WAIVED, EACH OF THE PARTIES HERETO HEREBY WAIVES, AND
COVENANTS THAT IT WILL NOT ASSERT (WHETHER AS PLAINTIFF, DEFENDANT, OR
OTHERWISE), ANY RIGHT TO TRIAL BY JURY IN ANY FORUM IN RESPECT OF ANY
ISSUE, CLAIM, DEMAND, CAUSE OF ACTION, ACTION, SUIT OR PROCEEDING
ARISING OUT OF OR BASED UPON THIS AGREEMENT OR THE SUBJECT HEREOF, IN
EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING AND WHETHER IN
CONTRACT OR TORT OR OTHERWISE. Each of the parties hereto acknowledges
that it has been informed by each other party that the provisions of
this Section 7(c) constitute a material inducement upon which such
party is relying and will rely in entering into this Agreement and the
transactions contemplated hereby. Any of the parties hereto may file
an original counterpart or a copy of this Agreement with any court as
written evidence of the consent of each of the parties hereto to the
waiver of its right to trial by jury.
8. MERGER/ENTIRE AGREEMENT. This Agreement contains the entire understanding
of the parties with respect to the subject matter hereof and supersedes any
prior communication or agreement with respect thereto.
9. NOTICE. All notices, demands, and communications of any kind which any
party may require or desire to serve upon any other party under this
Agreement shall be in writing and shall be served upon such other party and
such other party's copied persons as specified below by personal delivery
to the address set forth for it below or to such other address as such
party shall have specified by notice to each other party or by mailing a
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<PAGE> 6
copy thereof by certified or registered mail, or by Federal Express or any
other reputable overnight courier service, postage prepaid, with return
receipt requested, addressed to such party and copied persons at such
addresses. In the case of service by personal delivery, it shall be deemed
complete on the first business day after the date of actual delivery to
such address. In case of service by mail or by overnight courier, it shall
be deemed complete, whether or not received, on the third day after the
date of mailing as shown by the registered or certified mail receipt or
courier service receipt. Notwithstanding the foregoing, notice to any party
or copied person of change of address shall be deemed complete only upon
actual receipt by an officer or agent of such party or copied person.
If to the Company, to it at:
Safelite Glass Corp.
1105 Schrock Road, 7th Floor
Columbus, OH 43229
Attention: Secretary
If to THL, to it at:
Thomas H. Lee Company
75 State Street
Boston, MA 02109
Attention: Mr. Scott M. Sperling
Mr. Anthony J. DiNovi
with a copy to:
Hutchins, Wheeler & Dittmar
A Professional Corporation
101 Federal Street
Boston, Massachusetts 02110
Attention: Charles W. Robins, Esq.
10. SEVERABILITY. If in any judicial or arbitral proceedings a court or
arbitrator shall refuse to enforce any provision of this Agreement, then
such unenforceable provision shall be deemed eliminated from this Agreement
for the purpose of such proceedings to the extent necessary to permit the
remaining provisions to be enforced. To the full extent, however, that the
provisions of any applicable law may be waived, they are hereby waived to
the end that this Agreement be, deemed to be valid and binding agreement
enforceable in accordance with its terms, and in the event that any
provision hereof shall be found to be invalid or unenforceable, such
provision shall be construed by limiting it so as to be valid
- 6 -
<PAGE> 7
and enforceable to the maximum extent consistent with and possible under
applicable law.
11. COUNTERPARTS. This Agreement may be executed in any number of counterparts
and by each of the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which
together shall constitute one and the same agreement.
IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
executed on its behalf as an instrument under seal as of the date first above
written by its officer or representative thereunto duly authorized.
THE COMPANY: SAFELITE GLASS CORP.
By:/s/ Doug Herron
-------------------------
Name: Doug Herron
Title: Treasurer
THL: THOMAS H. LEE COMPANY
By:/s/ Anthony J. DiNovi
-------------------------
Name: Anthony J. DiNovi
Title: Managing Director
- 7 -
<PAGE> 1
EXHIBIT 10.10
EXECUTION COPY
SAFELITE GLASS CORP.
STOCKHOLDERS' AGREEMENT
Dated as of December 20, 1996
<PAGE> 2
SAFELITE GLASS CORP.
STOCKHOLDERS' AGREEMENT
-----------------------
Table of Contents
-----------------
Page
----
ARTICLE I Definitions
ARTICLE II Covenants and Conditions
Section 2.1 Restrictions on Transfers; Right of First Refusal
Section 2.2 Call by the Company
Section 2.3 Come Along
Section 2.4 Take Along
Section 2.5 Preemptive Rights
Section 2.6 Synthetic Sales
Section 2.7 Corporate Governance
ARTICLE III Registration Rights
Section 3.1 General
Section 3.2 Demand Registrations
Section 3.3 Piggyback Registration
Section 3.4 Obligations of the Company
Section 3.5 Furnish Information
Section 3.6 Expenses of Registration
Section 3.7 Underwriting Requirements
Section 3.8 Indemnification
Section 3.9 Lock-Up Agreement
Section 3.10 No Inconsistent Agreements
Section 3.11 Stock Split
ARTICLE IV Miscellaneous
Section 4.1 Remedies
Section 4.2 Entire Agreement; Amendment; Waiver
Section 4.3 Severability
Section 4.4 Notices
Section 4.5 Binding Effect; Assignment
Section 4.6 Governing Law
Section 4.7 Termination
Section 4.8 Recapitalizations, Exchanges, Etc.
Section 4.9 Transaction with Affiliates
<PAGE> 3
Section 4.10 Action Necessary to Effectuate the Agreement
Section 4.11 Purchase for Investment; Legend on Certificate
Section 4.12 Effectiveness of Transfers
Section 4.13 Additional Stockholders
Section 4.14 No Waiver
Section 4.15 Counterpart
Section 4.16 Headings
Section 4.17 Number; Gender
EXHIBIT A Schedule of Stockholders
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<PAGE> 4
STOCKHOLDERS' AGREEMENT
-----------------------
This Stockholders' Agreement (this "Agreement") is entered into as of the
20th day of December, 1996, by and among Safelite Glass Corp., a Delaware
corporation (the "Company"), those persons listed as Lee Group Stockholders on
the signature pages hereof, including Thomas H. Lee Equity Fund III, L.P., a
Delaware limited partnership ("Equity Fund") (collectively, the "Lee Group
Stockholders"), and those persons listed as the Management Stockholders on the
signature pages hereof (the "Management Stockholders"). The Lee Group
Stockholders and the Management Stockholders are sometimes collectively referred
to herein as the "Stockholders".
WHEREAS, upon consummation of the transactions contemplated by that certain
Recapitalization Agreement and Plan of Merger and Stock Purchase Agreement dated
as of November 8, 1996 (the "Recapitalization Agreement") by and among Lear
Sieglar Holdings Corp., the LS Selling Stockholders, Safelite Glass Corp., LSNWY
Corp., L.S. Acquisition Corp. and Lite Acquisition Corp., the Stockholders will
own the number of shares of Common Stock set forth opposite their respective
names on EXHIBIT A hereto; and
WHEREAS, each of the Stockholders desires to enter into this Agreement for
the purpose of regulating certain aspects of the Stockholders' relationships
with regard to the Company and certain restrictions on the Common Stock owned by
the Stockholders; and
NOW, THEREFORE, in consideration of the mutual promises, representations,
warranties, covenants and conditions set forth in this Agreement, and other good
and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereby agree as follows:
ARTICLE I
Definitions
-----------
For the purposes of this Agreement, the following terms shall be defined as
follows:
1933 ACT. The "1933 Act" shall mean the Securities Act of 1933, as amended.
1934 ACT. The "1934 Act" shall mean the Securities Exchange Act of 1934, as
amended.
AFFILIATE. An "Affiliate" of a specified person, corporation or other
entity shall mean a person, corporation or other entity which, directly or
indirectly, through one or more intermediaries, controls, or is controlled by,
or is under common control with, the corporation or other entity specified and
when used with respect to the Company or any Subsidiary of the Company, shall
include any holder of at least 5% of the capital stock, or any officer or
director, of the Company.
<PAGE> 5
ASSOCIATE. "Associate," (i) when used to indicate a relationship with any
Person shall mean, (a) any corporation or organization of which such Person is
an officer or partner or is, directly or indirectly, the beneficial owner of ten
percent (10%) or more of any class of equity securities, (b) any trust or other
estate in which such Person has a substantial beneficial interest or as to which
such Person serves as a trustee or in a similar fiduciary capacity and (c) any
relative of such Person who has the same home as such Person, is a parent, aunt
or uncle, sibling, spouse, in-law, child, niece or nephew or grandchild of such
Person, or the spouse of any of them, or (ii) when used to indicate a
relationship with the Company, shall also mean a director or officer of the
Company or any Subsidiary. Neither the Company nor any of its Subsidiaries shall
be deemed an Associate of any Stockholder.
BOARD. The "Board" shall mean the Board of Directors of the Company as the
same shall be constituted from time to time.
CAUSE. "Cause" shall mean (i) the commission of any fraud, embezzlement or
other material act of dishonesty with respect to the Company or any of its
Subsidiaries (including the unauthorized disclosure of confidential or
proprietary information of the Company or any of its Subsidiaries), (ii) a
conviction of, or plea of guilty or NOLO CONTENDERE to, a felony or other crime
involving moral turpitude, (iii) willful misconduct or (iv) willful failure or
refusal to perform one's duties and responsibilities to the Company or any of
its Subsidiaries, which failure or refusal to perform is not remedied within
three (3) days after receipt of a written notice from the Company detailing such
failure or refusal to perform.
COMMON STOCK. "Common Stock" shall mean the Company's common stock, $.01
par value, that the Company may be authorized to issue from time to time, any
other securities of the Company into which such Common Stock may hereafter be
changed or for which such Common Stock may be exchanged after giving effect to
the terms of such change or exchange (by way of reorganization,
recapitalization, merger, consolidation or otherwise) and shall also include any
common stock of the Company hereafter authorized and any capital stock of the
Company of any other class hereafter authorized which is not preferred as to
dividends or distribution of assets in liquidation over any other class of
capital stock of the Company and which has ordinary voting power for the
election of directors of the Company.
THE COMPANY. The "Company" shall mean Safelite Glass Corp., a Delaware
corporation, and its successors and assigns.
PERMITTED TRANSFER. A "Permitted Transfer" shall mean:
(a) a Transfer of Shares by any Stockholder who is a natural person to
such Stockholder's spouse, children, grandchildren, parents or siblings, a
trust for the benefit of any of such persons or a family limited
partnership of which such persons are the only partners, provided such
Transfer is reasonably acceptable to the Company;
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<PAGE> 6
(b) a bona fide pledge of Shares by a Stockholder to a bank, financial
institution or other lender reasonably acceptable to the Company;
(c) a Transfer of Shares between any Stockholder who is a natural
person and such Stockholder's guardian or conservator;
(d) a bona fide gift of Shares by a Stockholder to a charitable
institution as defined in Section 501(c) of the Internal Revenue Code of
1986, as amended, provided such Transfer is reasonably acceptable to the
Company;
(e) a Transfer of Shares from any Stockholder which is a partnership
to its partners, provided such Transfer is reasonably acceptable to the
Company;
(f) a Transfer of Shares from any Stockholder which is a corporation
or partnership to any Affiliate of such Stockholder, provided such Transfer
is reasonably acceptable to the Company; or
(g) a Transfer of Shares by a Lee Group Stockholder to another Lee
Group Stockholder or other employee of Thomas H. Lee Company.
No Permitted Transfer shall be effective unless and until the transferee of the
Shares so transferred, if such transferee is not already a party to this
Agreement, executes and delivers to the Company an executed counterpart of this
Agreement in accordance with the terms of Section 4.13 hereof. No Permitted
Transfer shall conflict with or result in any violation of a judgment, order,
decree, statute, law, ordinance, rule or regulation.
PERMITTED TRANSFEREE. A "Permitted Transferee" shall mean any person or
entity who shall have acquired and who shall hold shares pursuant to a Permitted
Transfer described above.
PERSON. "Person" means an individual, corporation, partnership, trust, or
unincorporated association, or a government or any agency or political
subdivision thereof.
PUBLIC OFFERING. A "Public Offering" shall mean the completion of a sale of
Common Stock pursuant to a registration statement which has become effective
under the 1933 Act, excluding registration statements on Form S-4, S-8 or
similar limited purpose forms and also excluding the registration of any equity
security issued to non-Affiliates of the Company as part of a bona fide debt
offering of units comprised of such equity security and a debt security of the
Company.
REGISTRABLE SECURITIES. "Registrable Securities" shall mean all shares of
Common Stock held from time to time by any party hereto and any other securities
of the Company or any of its Subsidiaries issued in exchange for, upon a
reclassification of, or in a distribution
- 3 -
<PAGE> 7
with respect to, such Common Stock. As to any particular Registrable Securities,
such securities shall cease to be Registrable Securities when (a) a registration
statement with respect to the sale of such securities shall have become
effective under the 1933 Act and such securities shall have been disposed of in
accordance with such registration statement, (b) such securities shall have been
sold under a Rule 144 Transaction or (c) such securities shall have ceased to be
outstanding.
RULE 144 TRANSACTION. "Rule 144 Transaction" means a transfer of Shares (A)
complying with Rule 144 under the 1933 Act as such Rule or a successor thereto
is in effect on the date of such transfer (but not including a sale other than
pursuant to a "brokers transaction" as defined in clauses (i) and (ii) of
paragraph (g) of Rule 144 as in effect on the date hereof) and (B) occurring at
a time when Shares are registered pursuant to Section 12 of the 1934 Act.
SCHEDULE. "Schedule" shall refer to the Schedule of Stockholders attached
hereto as EXHIBIT A.
SHARES. "Shares" shall mean all (i) shares of Common Stock held by
Stockholders from time to time, (ii) shares of Common Stock subsequently held by
Permitted Transferees who acquire them in one or more Permitted Transfers, (iii)
securities of the Company issued in exchange for, upon reclassification of, or
as a distribution in respect of, any of the foregoing.
STOCKHOLDER. "Stockholder" shall have the meaning set forth in the first
paragraph of this Agreement.
SUBSIDIARY. "Subsidiary" with respect to any entity (the "parent") shall
mean any corporation, firm, association or trust of which such parent, at the
time in respect of which such term is used, (i) owns directly or indirectly more
than fifty percent (50%) of the equity or beneficial interest, on a consolidated
basis, and (ii) owns directly or controls with power to vote, indirectly through
one or more Subsidiaries, shares of capital stock or beneficial interest having
the power to cast for the election of directors, trustees, managers or other
officials having powers analogous to that of directors of a corporation. Unless
otherwise specifically indicated, when used herein the term Subsidiary shall
refer to a direct or indirect Subsidiary of the Company.
SYNTHETIC SALE. "Synthetic Sale" shall mean any hedge, sale or purchase of
any derivative security or other action (other than Transfers expressly
permitted by the terms hereof) having the effect of reducing a Stockholder's
economic interest in Shares or reducing a Stockholder's exposure to a decrease
in fair market value of Shares.
THIRD PARTY. "Third Party" shall mean any person other than the Company.
- 4 -
<PAGE> 8
TRANSFER. "Transfer" shall mean to transfer, sell, assign, pledge,
hypothecate, give, create a security interest in or lien on, place in trust
(voting or otherwise), assign or in any other way encumber or dispose of,
directly or indirectly and whether or not by operation of law or for value, any
Shares.
ARTICLE II
Covenants and Conditions
------------------------
2.1 RESTRICTIONS ON TRANSFERS; RIGHT OF FIRST REFUSAL. No Stockholder may
Transfer all or any part of the Shares owned by any of them to anyone other than
a Permitted Transferee except in accordance with the following procedures:
(a) If at any time a Stockholder desires to Transfer Shares to
anyone other than a Permitted Transferee (each, an "Offeror"), such
Offeror shall give notice of such offer (the "Transfer Notice") to the
Company. The Transfer Notice shall state the terms and conditions of
such offer, including the name of the prospective purchaser, the
proposed purchase price per share of such Shares (the "Offer Price"),
payment terms (including a description of any proposed non-cash
consideration), the type of disposition and the number of such Shares
to be transferred ("Offered Shares"). The Transfer Notice shall
further state (i) that the Company may acquire, in accordance with the
provisions of this Agreement, any of the Offered Shares for the price
and upon the other terms and conditions, including deferred payment
(if applicable), set forth therein, and (ii) that the Company may not
purchase any of such Offered Shares unless the Company purchases all
of such Offered Shares.
(b) For a period of thirty (30) business days after receipt of
the Transfer Notice (the "Option Period"), the Company may, by notice
in writing to the Offeror or Permitted Transferee delivering such
Transfer Notice, elect in writing to purchase all, but not less than
all, of the Offered Shares at the Offer Price. The closing of the
purchase of Offered Shares pursuant to Section 2.1(b) or Section
2.1(c), as the case may be, shall take place at the principal office
of the Company on the tenth (10th) day after the expiration of the
Option Period. At such Closing the Company shall deliver to the
Offeror against delivery of certificates duly endorsed and stock
powers representing the Offered Shares being acquired by the Company,
the Offer Price, on the same terms as set forth in the Transfer Notice
(including any non-cash consideration described therein), payable in
respect of the Offered Shares being purchased by the Company. All of
the foregoing deliveries will be deemed to be made simultaneously and
none shall be deemed completed until all have been completed.
(c) Notwithstanding anything set forth in this Section 2.1 to the
contrary, prior to the termination of the Option Period, the Board of
Directors of the Company (the "Board") may, in its sole discretion,
elect to assign the Company's right to
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<PAGE> 9
purchase all, but not less than all, of the Offered Shares pursuant to
this Section 2.1 to the Stockholders. If the Board so elects, the
Company shall give notice of such assignment to each Stockholder (the
"Assignment Notice"), indicating the number of Shares each such
Stockholder is entitled to purchase (including the right to
over-allotment of Offered Shares, if any), the Offer Price of such
Shares, and any other relevant payment terms. Within five (5) days of
the Assignment Notice, those Stockholders who intend to purchase the
Offered Shares pursuant to this Section 2.1(c) (the "Offered Shares
Electing Stockholders") shall notify the Company in writing of such
intention, indicating the number of Offered Shares (including
over-allotments, if any) they intend to purchase. The right to
purchase such Offered Shares shall be allocated to the Stockholders
PRO RATA (based on the number of Shares each Stockholder (together
with each such Stockholder's Permitted Transferees) owns in relation
to the total number of Shares owned by all of the Stockholders);
PROVIDED, HOWEVER, that if any Stockholder does not elect to purchase
the number of Offered Shares which such Stockholder (and its Permitted
Transferees) may purchase pursuant to this Section 2.1(c), then the
Offered Shares Electing Stockholders (and their Permitted Transferees)
may elect to purchase the remaining Offered Shares. The right to
purchase the remaining Offered Shares shall be allocated to the
Offered Shares Electing Stockholders pro rata (based on the number of
Shares each Offered Shares Electing Stockholder (together with their
Permitted Transferees) owns in relation to the total number of Shares
owned by all of the Offered Shares Electing Stockholders).
(d) If the Company or the Stockholders, as the case may be, do
not elect to purchase all of the Offered Shares, all, but not less
than all, of the Offered Shares may be Transferred, but only in
accordance with Sections 2.1(e) and 2.1(f) and the terms of the
Transfer Notice, within sixty (60) days after expiration of the Option
Period, after which, if the Offered Shares have not been Transferred,
all restrictions contained herein shall again be in full force and
effect.
(e) Five (5) days prior to the closing of the purchase of any
Offered Shares pursuant to Section 2.1(d) hereof (the "Closing"), the
Offeror shall notify the Company of the disposition of the Offered
Shares, including the name of each purchaser and the number of shares
bought by each purchaser. The Closing shall take place no later than
sixty (60) days after the expiration of the Option Period. At such
Closing, each purchaser of Offered Shares shall deliver to the Offeror
against delivery of certificates duly endorsed and stock powers
representing the Offered Shares being acquired by such purchaser, the
Offer Price, on the same terms as set forth in the Transfer Notice
(including any non-cash consideration described therein), payable in
respect of the Offered Shares being purchased by such purchaser. All
of the foregoing deliveries will be deemed to be made simultaneously
and none shall be deemed completed until all have been completed.
- 6 -
<PAGE> 10
(f) Any Transfer of Shares pursuant to this Section 2.1 shall
remain subject to the Transfer restrictions of this Agreement and each
intended transferee pursuant to this Section shall execute and deliver
to the Company a counterpart of this Agreement, which shall evidence
such transferee's agreement that the Shares intended to be transferred
shall continue to be subject to this Agreement and that as to such
Shares the transferee shall be bound by the restrictions of this
Agreement as a Stockholder hereunder.
(g) Any Stockholder who is the subject of an Involuntary Transfer
(as defined below) (the "Transferring Stockholder"), shall notify the
Company in writing within ten (10) days of such Involuntary Transfer
but the failure to give such notice shall not affect the rights of the
parties hereunder. Upon the Company's receipt of such notice, the
Company shall treat the Involuntary Transfer as an offer under this
Section 2.1. The Company shall act upon the deemed offer under this
Section within the time periods and following the applicable
procedures set forth in this Section 2.1, with the date of the deemed
offer being the later of the date of the Company's receipt of written
notice setting forth the existence of such an Involuntary Transfer and
the date of such Involuntary Transfer, such later date being the date
of notification for the purpose of Section 2.1.
(h) The purchase price for the Shares being transferred as a
result of an Involuntary Transfer under Sections 2.1(g) shall be fair
market value, as fair market value is agreed to by the Company and the
transferee in each such Involuntary Transfer, or if no such agreement
is reached, as determined by an independent appraiser selected by the
Company and reasonably acceptable to the transferee in such
Involuntary Transfer. All costs of any appraisal under this Section
2.1(h) shall be paid by the Company.
(i) For purposes of this Agreement, the term "Involuntary
Transfer" shall mean any involuntary sale, transfer, encumbrance or
other disposition by or in which any Stockholder shall be deprived or
divested of any right, title or interest in or to any Shares,
including without limitation, any levy of execution, transfer in
connection with bankruptcy, reorganization, insolvency or similar
proceedings or any transfer to a public officer or agency pursuant to
any abandoned property or escheat law. A Transfer pursuant to Section
2.2 hereof shall not be deemed to be an Involuntary Transfer.
(j) Except as otherwise provided herein, for two years from the
date hereof, no Lee Group Stockholder or Management Stockholder may
sell any Shares in a Rule 144 Transaction.
(k) The provisions of this Section 2.1 shall not apply to a
Transfer of Shares which is (i) a Permitted Transfer, (ii) pursuant to
a Public Offering, (iii) for any Lee
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<PAGE> 11
Group Stockholder, made after a Public Offering, pursuant to a Rule 144
Transaction or (iv) for any Management Stockholder, made after the
later of (A) a Public Offering and (B) two years (or such shorter
period of time as is required under Rule 144) from the date hereof, in
either case, pursuant to a Rule 144 Transaction.
2.2 Call by the Company.
-------------------
(a) If the employment of a Management Stockholder by the Company
or any of its Subsidiaries shall terminate (a "Call Event") prior to
the earlier of (i) three (3) years from the date hereof or (ii) the
completion of the Company's initial Public Offering, the Company shall
have the right to purchase (the "Call Option"), by delivery of a
written notice (the "Call Notice") to such terminated Management
Stockholder no later than ninety (90) days after the date of such Call
Event, and such Management Stockholder and such Management
Stockholder's Permitted Transferees (the "Call Group") shall be
required to sell all (but not less than all) of the Shares which are
owned by the members of the Call Group on the date of such Call Event
(collectively, the "Call Securities") at a price per share equal to
the Call Price (as defined in Section 2.2(c) below) applicable to such
Shares.
(b) Notwithstanding anything set forth in this Section 2.2 to the
contrary, prior to the exercise of the Call Option by the Company, the
Board may, in its sole discretion, elect to assign the Company's right
to exercise the Call Option to purchase all, but not less than all, of
the Call Securities to the Stockholders. If the Board so elects, the
Company shall give notice of such assignment to each Stockholder (the
"Call Assignment Notice"), indicating the number of Call Securities
each such Stockholder is entitled to purchase (including the right to
over-allotment of Call Securities, if any), the Call Price applicable
to such Shares and the date of the closing of such purchase under this
Section 2.2. Within five (5) days of the Call Assignment Notice, those
Stockholders who intend to purchase Call Securities pursuant to this
Section 2.2(b) (the "Call Securities Electing Stockholders"), shall
notify the Company in writing of such intention, indicating the number
of Call Securities (including over-allotments, if any) they intend to
purchase. The right to purchase such Call Securities shall be
allocated to the Stockholders pro rata (based on the number of Shares
each Stockholder (together with each such Stockholder's Permitted
Transferees) owns in relation to the total number of Shares owned by
all of the Stockholders); PROVIDED, HOWEVER, that if any Stockholder
does not elect to purchase the number of Call Securities which such
Stockholder (and its Permitted Transferees) may purchase pursuant to
this Section 2.2(b), then the Call Securities Electing Stockholders
(and their Permitted Transferees) may elect to purchase the remaining
Call Securities. The right to purchase the remaining Call Securities
shall be allocated to the Call Securities Electing Stockholders pro
rata (based on the number of Shares each Call Securities Electing
Stockholder (together with their Permitted Transferees) owns in
relation to the total number of Shares owned by all of the Call
Securities Electing Stockholders).
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<PAGE> 12
(c) For purposes of this Section 2.2, the term "Call Price" shall
mean (i) if the employment of the Management Stockholder is terminated
for Cause or if such Management Stockholder voluntarily terminates his
or her employment with the Company or one of its Subsidiaries, (A) for
Shares held as of the date hereof, the price per Share paid by the Lee
Group Stockholders pursuant to the Recapitalization Agreement, and (B)
for Shares acquired after the date hereof, the purchase price thereof;
and (ii) if the employment of the Management Stockholder is not
terminated for Cause and the Management Stockholder did not
voluntarily terminate his or her employment with the Company or one of
its Subsidiaries, the fair market value (as determined by the Board)
of the Shares; PROVIDED, HOWEVER, that for purposes of this subsection
(ii), for a period of twelve (12) months from the date hereof, the
term "fair market value" shall mean the Call Price as if determined
under clause (i) of this paragraph. If the Management Stockholder
objects to the fair market value of the Shares as determined by the
Board as provided in subsection (ii) above, the fair market value for
the Shares shall be as determined by an independent appraiser selected
by the Company and reasonably acceptable to the Management
Stockholder. All costs of any appraisal under this section shall be
paid by the Company.
(d) The closing of any purchase of Call Securities by the Company
pursuant to Sections 2.2(a) or 2.2(b) shall take place at the
principal office of the Company on the tenth (10th) business day after
the date of the Call Notice. At such closing, the Company, the
Stockholders or the Designated Employee, as the case may be, shall
deliver to the Call Group, against delivery of certificates duly
endorsed and stock powers representing the Call Securities, a
certified check or checks payable to the Management Stockholder and/or
the Permitted Transferees, as the case may be, in an amount equal to
the aggregate Call Price payable in respect of such Call Securities.
All of the foregoing deliveries will be deemed to be made
simultaneously and none shall be deemed completed until all have been
completed.
(e) Notwithstanding anything set forth in this Section 2.2 to
the contrary, prior to the exercise by the Company of its Call Option
to purchase Call Securities pursuant to this Section 2.2, one or more
new or existing employees of the Company or any Subsidiary may, in the
sole discretion of the Board, be designated by the Board (individually
a "Designated Employee" and collectively, "Designated Employees") who
shall have the right, but not the obligation, to exercise the Call
Option and to acquire, in lieu of the Company, some or all (as
determined by the Company) of the Call Securities that the Company is
entitled to purchase from the Call Group hereunder, for cash and on the
same terms and conditions as set forth in Section 2.2(d) which apply to
the repurchase of Call Securities by the Company. Concurrently with any
such purchase of Call Securities by any such Designated Employee, such
Designated Employee who is not already a Management Stockholder shall
execute a counterpart of this Agreement whereupon such Designated
Employee shall be deemed a
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<PAGE> 13
"Management Stockholder" and shall have the same rights and be bound
by the same obligations as a Management Stockholder hereunder.
(f) If neither the Company nor any Designated Employee elect to
exercise the Call Option and deliver a Call Notice within 90 days of a
Call Event, then the Call Option provided in this Section 2.2 shall
terminate but the Management Stockholder or his Permitted Transferees
shall continue to hold such Call Securities pursuant to all of the
other provisions of this Agreement.
2.3 COME ALONG. Except as provided in Section 2.3(c) hereof, no
Stockholder shall Transfer more than 15% of the outstanding Common Stock of the
Company to a Third Party who is not a Permitted Transferee without complying
with the terms and conditions set forth in Section 2.3(a) and 2.3(b) below and,
if applicable, the terms and conditions set forth in Section 4.1 below;
PROVIDED, HOWEVER, that this Section 2.3 shall not in any way limit or affect
the restrictions of Section 2.1.
(a) Any Stockholder, when desiring to Transfer Shares (the
"Transferor"), shall give not less than seven (7) days prior written
notice of such intended Transfer to each other Stockholder and to the
Company. Such notice (the "Participation Notice") shall set forth the
terms and conditions of such proposed Transfer, including the name of
the prospective transferee, the number of Shares proposed to be
transferred (the "Participation Securities") by the Transferor, the
purchase price per share proposed to be paid therefor and the payment
terms and type of transfer to be effectuated. Within five (5) days
following the delivery of the Participation Notice by the Transferor
to each other Stockholder and to the Company, each Stockholder
desiring to participate in such proposed Transfer (each, a
"Participating Offeree") shall, by notice in writing to the Transferor
and to the Company, have the opportunity and right to sell to the
purchasers in such proposed Transfer (upon the same terms and
conditions as the Transferor) up to that number of Shares owned by
such Participating Offeree as shall equal the product of (i) a
fraction, the numerator of which is the number of Shares owned by such
Participating Offeree as of the date of such proposed Transfer and the
denominator of which is the aggregate number of Shares actually owned
as of the date of such Participation Notice by the Transferor and by
all Participating Offerees, multiplied by (ii) the number of
Participation Securities. The amount of Participation Securities to be
sold by the Transferor shall be reduced to the extent necessary to
provide for such sales of Shares by Participating Offerees.
(b) At the closing of any proposed Transfer in respect of which a
Participation Notice has been delivered, the Transferor, together with
all Participating Offerees, shall deliver to the proposed transferee
certificates evidencing the Shares to be sold thereto duly endorsed
with stock powers and shall receive in exchange therefor the
consideration to be paid or delivered by the proposed transferee in
respect of such Shares as described in the Participation Notice.
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<PAGE> 14
(c) The provisions of this Section 2.3 shall not apply to (i) any
Permitted Transfer, (ii) any Transfer pursuant to or following a
Public Offering or (iii) any Transfer pursuant to Section 2.4.
2.4 Take Along.
----------
(a) If a Stockholder or group of Stockholders holding more than
50% of the then outstanding Shares (the "Take Along Group") determine
to sell or exchange (in a business combination or otherwise) in one or
a series of bona fide arms-length transactions to a Third Party who is
not an Affiliate of the Take Along Group, 50% or more of the Shares
owned by it or them then, upon five (5) days written notice by the
Take Along Group to each other Stockholder, which notice shall include
reasonable details of the proposed sale or exchange including the
proposed time and place of closing and the consideration to be
received by the Take Along Group (such notice being referred to as the
"Sale Request"), each other Stockholder (each, a "Seller") shall be
obligated to, and shall sell, transfer and deliver, or cause to be
sold, transferred and delivered, to such Third Party on the same terms
as the Take Along Group, that number of Shares owned by such Seller as
shall equal the product of (A) a fraction, the numerator of which is
the number of Shares proposed to be transferred by the Take Along
Group as of the date of such Sale Request and the denominator of which
is the aggregate number of Shares actually owned as of the date of
such Sale Request by the Take Along Group, multiplied by (B) the
number of Shares actually owned as of the date of such Sale Request by
such Seller. Each Seller shall (i) deliver certificates for all of its
Shares at the closing of the proposed Transfer, free and clear of all
claims, liens and encumbrances and (ii) if stockholder approval of the
transaction is required, vote his or her Shares in favor thereof.
(b) The provisions of this Section 2.4 shall not apply to (i) any
Transfer pursuant to a Public Offering, or (ii) a Permitted Transfer.
2.5 Preemptive Rights.
-----------------
(a) PREEMPTIVE RIGHT. The Company hereby grants to each
Stockholder so long as it shall own any Shares or, if sooner, until a
Public Offering, the right to purchase up to a PRO RATA portion of New
Securities (as defined in paragraph (b) below) which the Company, from
time to time, proposes to sell or issue following the date hereof. A
Stockholder's PRO RATA portion, for purposes of this Section 2.5, is
the product of (i) a fraction, the numerator of which is the number of
outstanding Shares which such Stockholder then owns and the
denominator of which is the total number of Shares of Common Stock
then actually outstanding on a fully diluted basis after giving effect
to the exercise of all options, warrants and the like and the
conversion of all securities convertible into or exchangeable for
Common Stock, multiplied by (ii) the number of New Securities the
Company proposes to sell or issue.
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<PAGE> 15
(b) DEFINITION OF NEW SECURITIES. "New Securities" shall mean any
Common Stock of the Company whether now authorized or not, any rights,
options or warrants to purchase Common Stock and any indebtedness or
preferred stock of the Company which is convertible into Common Stock
(or which is convertible into a security which is, in turn,
convertible into Common Stock); PROVIDED that the term "New
Securities" does not include (i) indebtedness of the Company; (ii)
Common Stock issued as a stock dividend to all holders of Common Stock
PRO RATA or upon any subdivision or combination of shares of Common
Stock; (iii) the issuance of securities of the Company pursuant to a
Public Offering or merger; (iv) any employee stock options approved by
the Board of Directors of the Company; (v) the issuance of any Common
Stock upon the exercise or conversion of any rights, options or
warrants to purchase Common Stock; or (vi) the issuance of any equity
security issued to non-Affiliates of the Company as part of a bona
fide debt offering of investment units comprised of such equity
security and a debt security of the Company or the issuance of Common
Stock upon the conversion of such equity security pursuant to its
terms.
(c) NOTICE FROM THE COMPANY. In the event the Company proposes to
issue New Securities, the Company shall give each Stockholder who has
a preemptive right under this Section 2.5 written notice of such
proposal, describing the type of New Securities and the price and the
terms upon which the Company proposes to issue the same. For a period
of five (5) days following the delivery of such notice by the Company,
the Company shall be deemed to have irrevocably offered to sell to
each Stockholder its PRO RATA share of such New Securities for the
price and upon the terms specified in the notice. Each Stockholder may
exercise its preemptive rights hereunder by giving written notice to
the Company and stating therein the quantity of New Securities to be
purchased.
(d) SALE BY THE COMPANY. In the event any Stockholder who has a
preemptive right under this Section 2.5 fails to exercise in full its
preemptive right within said five (5) day period, the Company shall
have one hundred twenty (120) days thereafter to sell the New
Securities with respect to which the preemptive right was not
exercised, at a price and upon terms no more favorable to the
purchasers thereof than specified in the Company's notice given
pursuant to Section 2.5(c).
(e) CLOSING. The Closing for any such issuance shall take place
as proposed by the Company with respect to the Shares to be issued, at
which Closing the Company shall deliver certificates for the shares in
the respective names of the purchasing Stockholders against receipt of
payment therefor.
2.6 SYNTHETIC SALES. Any Synthetic Sales by a Management Stockholder then
employed by the Company or any of its Subsidiaries shall require the prior
written approval of the Board.
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<PAGE> 16
2.7 Corporate Governance. Until the completion of a Public Offering by the
--------------------
Company:
(a) ELECTION OF DIRECTORS. The Company's Board of Directors shall
consist of persons designated by a majority in interest of the Lee
Group Stockholders; provided however, that for so long as each of
Garen K. Staglin and John F. Barlow are employees of the Company, they
shall be entitled to be included as directors of the Company to be
designated by the Lee Group Stockholders. The initial Board of
Directors shall consist of Garen K. Staglin, John F. Barlow, Anthony
J. DiNovi, Seth W. Lawry, Scott M. Sperling and Morton Meyerson.
(b) REMOVAL AND REPLACEMENT OF DIRECTOR DESIGNEES. With the
exception of Messrs. Staglin and Barlow, the Lee Group Stockholders
shall be entitled to request that the directors designated by the Lee
Group Stockholders pursuant to this Section 2.7 be removed or replaced
and the other Stockholders hereby agree to take any action, including
the voting of their Shares to take action to effectuate such request.
(c) RESTRICTIONS ON OTHER AGREEMENTS. No Stockholder shall grant
any proxy or enter into or agree to be bound by any voting trust with
respect to the Shares nor shall any Stockholder enter into any
stockholders agreements or arrangements of any kind with any person
with respect to the Shares on terms which conflict with the provisions
of this Agreement (whether or not such agreements and arrangements are
with other Stockholders), including but not limited to, agreements or
arrangements with respect to the acquisition, disposition or voting of
Shares inconsistent herewith.
(d) STOCKHOLDER ACTION. Each Stockholder agrees that, in its
capacity as a stockholder of the Company, such Stockholder will vote,
or grant proxies relating to such Shares to vote, all of its Shares of
Common Stock in favor of any merger, consolidation, sale or transfer
of Shares or any similar transaction pursuant to Section 2.4 hereof
if, and to the extent that, approval of the Company's stockholders is
required in order to effect such transaction.
ARTICLE III
Registration Rights
-------------------
3.1 GENERAL. For purposes of Article III: (a) the terms "register",
"registered" and "registration" refer to a registration effected by preparing
and filing a registration statement in compliance with the 1933 Act and the
declaration or ordering of effectiveness of such registration statement; and (b)
the term "Holder" means any Stockholder or Permitted Transferee thereof.
3.2 Demand Registrations.
--------------------
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<PAGE> 17
(a) If the Company shall receive a written request (specifying
that it is being made pursuant to this Section 3.2) from persons
owning a majority in interest of the Common Stock owned by the Lee
Group Stockholders, that the Company file a registration statement
under the 1933 Act, or a similar document pursuant to any other
statute then in effect corresponding to the 1933 Act, covering the
registration of Common Stock, then the Company shall not later than
ninety (90) days after receipt by the Company of a written request for
a demand registration pursuant to this Section 3.2, file a
registration statement with the Securities and Exchange Commission
(the "SEC") relating to such Registrable Securities as to which such
request for a demand registration relates (the "Requested Shares") and
the Company shall use its best efforts to cause the offering of such
Requested Shares to be registered under the 1933 Act. The Company
shall be obligated to effect _________ registrations of Registrable
Securities pursuant to this Section 3.2.
(b) Except as provided in subsection (c) below, if, pursuant to
Section 3.3, the total amount of Registrable Securities that all
Holders request to be included in an offering made pursuant to this
Section 3.2 exceeds the amount of securities that the underwriters
reasonably believe compatible with the success of the offering, then
the Company will include in such registration only the number of
securities which, in the good faith opinion of such underwriters, can
be sold, selected from the Registrable Securities requested to be
included by all Holders PRO RATA based on the number of Registrable
Securities which each of them owns.
(c) If, in the good faith opinion of the underwriters, the
success of any offering under this Section 3.2 or Section 3.3 would be
compromised due to the inclusion of Registrable Securities owned by
Management Stockholders, then the Company will include in such
registration only the number of securities which, in the good faith
opinion of such underwriters, can be sold, selected from the
Registrable Securities requested to be included by such Management
Stockholders PRO RATA based on the number of Registrable Securities
which each of them owns.
3.3 PIGGYBACK REGISTRATION. If, at any time, the Company determines to
register any of its equity securities, for its own account or for the account of
others under the 1933 Act in connection with the public offering of such
securities (other than the first Public Offering), the Company shall, at each
such time, promptly give each Holder written notice of such determination no
later than ten (10) days before the effective date of any such registration.
Upon the written request of any Holder received by the Company within five (5)
days after the giving of any such notice by the Company, the Company shall use
its best efforts to cause to be registered under the 1933 Act all of the
Registrable Shares of each Holder that such Holder has requested be registered.
If the total amount of Registrable Securities that are to be included by either
the Company (or other person (including any Stockholder) for whose account the
registration is made) for its own account and at the request of Holders pursuant
to this Section 3.3 exceeds the amount of securities that the underwriters
reasonably believe
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<PAGE> 18
compatible with the success of the offering, then the Company will include in
such registration only the number of securities which in the opinion of such
underwriters can be sold, in the following order:
(i) first, the equity securities of the Company (or other person
at whose request the registration is made, provided that if the
registration is made);
(ii) second, the Registrable Securities requested to be included
by the Holders PRO RATA based on the number of Registrable Securities
which each of them owns; PROVIDED, HOWEVER, that if an underwriter who
is not an Affiliate or Associate of any Stockholder or the Company, in
good faith, requests for the success of the offering that the number
of Registrable Securities to be sold by the Holders exercising
piggyback rights pursuant to this Section 3.3 be apportioned or
excluded, such number of Registrable Securities of such Holders shall
be reduced or not included to the extent so requested by said
underwriter.
3.4 Obligations of the Company.
--------------------------
(a) Whenever required under Sections 3.2 or 3.3 hereof to use its best
efforts to effect the registration of any Registrable Securities, the Company
shall:
(1) Prepare and file with the SEC a registration statement with
respect to such Registrable Securities and use its best efforts to cause
such registration statement to become and remain effective, including,
without limitation, filing of post-effective amendments and supplements to
any registration statement or prospectus necessary to keep the registration
statement current; provided, however, that if such registration statement
does not become effective, then any demand registration pursuant to Section
3.2 prompting such undertaking by the Company shall be deemed to be
rescinded and retracted and shall not be counted as, or deemed or
considered to be or to have been, a demand registration pursuant to Section
3.2 for any purpose;
(2) as expeditiously as reasonably possible, prepare and file with the
SEC such amendments and supplements to such registration statement and the
prospectus used in connection with such registration statement as may be
necessary to comply with the provisions of the 1933 Act with respect to the
disposition of all securities covered by such registration statement and to
keep each registration and qualification under this Agreement effective
(and in compliance with the 1933 Act) by such actions as may be necessary
or appropriate for a period of up to 180 days (if, in the reasonable
discretion of the Holders owning securities covered by such registration
statement, such period of time is necessary for the successful completion
of the offering of such securities) after the effective date of such
registration statement, all as requested by such Holders;
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<PAGE> 19
(3) as expeditiously as reasonably possible furnish to the Holders
such numbers of copies of a prospectus, including a preliminary prospectus,
in conformity with the requirements of the 1933 Act, and such other
documents as they may reasonably request in order to facilitate the
disposition of Registrable Securities owned by them;
(4) as expeditiously as reasonably possible use its best efforts to
register and qualify the securities covered by such registration statement
under such securities or "blue sky" laws of such jurisdictions as shall be
reasonably appropriate for the distribution of the securities covered by
the registration statement, PROVIDED that the Company shall not be required
in connection therewith or as a condition thereto to qualify to do business
or to file a general consent to service of process in any such
jurisdiction, and further provided that (anything in this Agreement to the
contrary notwithstanding with respect to the bearing of expenses) if any
jurisdiction in which the securities shall be qualified shall require that
expenses incurred in connection with the qualification of the securities in
that jurisdiction be borne by selling stockholders, then such expenses
shall be payable by selling stockholders PRO RATA, to the extent required
by such jurisdiction;
(5) use its best efforts to cause all Registrable Securities covered
by such registration statement to be registered with or approved by such
other governmental agencies or authorities as may be necessary to enable
the seller or sellers thereof to consummate the disposition or such
Registrable Securities;
(6) notify each seller of Registrable Securities covered by such
registration statement, at any time when a prospectus relating thereto is
required to be delivered under the 1933 Act, upon discovery that, or upon
the happening of any event as a result of which, the prospectus included in
such registration statement, as then in effect, includes an untrue
statement of a material fact or omits to state any material fact required
to be stated therein or necessary to make the statements therein not
misleading in the light of the circumstances under which they were made,
and at the request of any such seller or Holders promptly prepare to
furnish to such seller or Holders a reasonable number of copies of a
supplement to or an amendment of such prospectus as may be necessary so
that, as thereafter delivered to the purchasers of such securities, such
prospectus shall not include an untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary to make
the statements therein not misleading in the light of the circumstances
under which they were made;
(7) otherwise use its best efforts to comply with all applicable rules
and regulations of the SEC, and make available to its security holders, as
soon as reasonably practicable, an earnings statement covering the period
of at least twelve months, but not more than eighteen months, beginning
with the first full calendar month after the effective date of such
registration statement, which earnings statement
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<PAGE> 20
shall satisfy the provisions of Section 11(a) of the 1933 Act, and will
furnish to each such seller at least two business days prior to the filing
thereof a copy of any post-effective amendment or supplement to such
registration statement or prospectus and shall not file any thereof to
which any such seller shall have reasonably objected, except to the extent
required by law, on the grounds that such amendment or supplement does not
comply in all material respects with the requirements of the 1933 Act or of
the rules or regulations thereunder;
(8) provide and cause to be maintained a transfer agent and registrar
for all Registrable Securities covered by such registration statement from
and after a date not later than the effective date of such registration
statement; and
(9) use its best efforts to list all Registrable Securities covered by
such registration statement on any securities exchange on which any class
of Registrable Securities is then listed.
(b) The Company will furnish to each Holder on whose behalf
Registrable Securities have been registered pursuant to this Agreement a signed
counterpart, addressed to such Holder, an opinion of counsel for the Company
dated the effective date of such registration statement, and such opinion of
counsel shall cover those matters which are customarily covered in opinions of
issuer's counsel delivered to underwriters in connection with underwritten
public offerings of securities.
(c) Except as otherwise set forth in Section 3.3, if the Company at
any time proposes to register any of its securities under the 1933 Act, whether
or not for sale for its own account, and such securities are to be distributed
by or through one or more underwriters, then the Company will make reasonable
efforts, if requested by any Holder of Registrable Securities who requests
registration of Registrable Securities in connection therewith pursuant to
Section 3.2 or 3.3 hereof, to arrange for such underwriters to include such
Registrable Securities among the securities to be distributed by or through such
underwriters.
(d) In connection with the preparation and filing of each registration
statement registering Registrable Securities under this Agreement, the Company
will give the Holders of Registrable Securities on whose behalf such Registrable
Securities are to be so registered and their underwriters, if any, and their
respective counsel and accountants, the opportunity to participate in the
preparation of such registration statement, each prospectus included therein or
filed with the SEC, and each amendment thereof or supplement thereto, and will
give each of them such access to its books and records and such opportunities to
discuss the business of the Company with its officers, its counsel and the
independent public accountants who have certified its financial statements, as
shall be necessary, in the opinion of such Holders or such underwriters or their
respective counsel, in order to conduct a reasonable and diligent investigation
within the meaning of the 1933 Act.
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<PAGE> 21
3.5 FURNISH INFORMATION. It shall be a condition precedent to the
obligations of the Company to take any action pursuant to Article III that the
Holders shall furnish to the Company such information regarding them, the
Registrable Securities held by them, and the intended method of disposition of
such securities as the Company shall reasonably request and as shall be required
in connection with the action to be taken by the Company.
3.6 EXPENSES OF REGISTRATION. All expenses incurred in connection with a
registration pursuant to Sections 3.2 or 3.3 hereof (excluding underwriters'
discounts and commissions, which shall be borne by the sellers), including
without limitation all registration and qualification fees, printers' and
accounting fees, fees and disbursements of counsel for the Company and the
reasonable fees and disbursements of one counsel for the selling Holders (which
counsel shall be selected by a majority in interest of such Holders) shall be
borne by the Company; PROVIDED, HOWEVER, that the Holders requesting a demand
registration pursuant to Section 3.2 may withdraw such request, in which event
so long as such Holders agree to pay all expenses incurred by the Company in
connection with such requested registration, such withdrawn request shall be
deemed for all purposes herein not to have been made.
3.7 UNDERWRITING REQUIREMENTS. In connection with any registration of
Registrable Securities under this Agreement, the Company will, if requested by
the underwriters for any Registrable Securities included in such registration,
enter into an underwriting agreement with such underwriters for such offering,
such agreement to contain such representations and warranties by the Company,
and such other terms and provisions as are customarily contained in underwriting
agreements with respect to secondary distributions, including, without
limitation, provisions relating to indemnification and contribution. The Holders
on whose behalf Registrable Securities are to be distributed by such
underwriters shall be parties to any such underwriting agreement, and the
representations and warranties by, and the other agreements on the part of the
Company to and for the benefit of such underwriters shall be also made to and
for the benefit of such Holders of Registrable Securities. The Company shall use
its reasonable best efforts to cause the underwriting agreement to comply with
Section 3.8. Such underwriters shall be selected (i) by the Company, in the case
of a registration pursuant to Section 3.3, or (ii) by the Holders requesting a
demand registration, in the case of a registration pursuant to Section 3.2.
3.8 INDEMNIFICATION. In the event any Registrable Securities are included
in a registration statement under Article III:
(a) To the fullest extent permitted by law, the Company will indemnify
and hold harmless each Holder requesting or joining in a registration, any
underwriter (as defined in the 1933 Act) for it, and each person, if any,
who controls such Holder or such underwriter within the meaning of the 1933
Act, from and against any losses, claims, damages, expenses (including
reasonable attorneys' fees and expenses and reasonable costs of
investigation) or liabilities, joint or several, to which they or any of
them may become subject under the 1933 Act or otherwise, insofar as such
losses,
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<PAGE> 22
claims, damages, expenses or liabilities (or actions or proceedings,
whether commenced or threatened, in respect thereof) arise out of or are
based on any untrue or alleged untrue statement of any material fact
contained in such registration statement including any preliminary
prospectus or final prospectus contained therein or any amendments or
supplements thereto, or arise out of or are based upon the omission or
alleged omission to state therein a material fact required to be stated
therein, or necessary to make the statements therein not misleading, or
arise out of any alleged violation by the Company of any rule or regulation
promulgated under the 1933 Act applicable to the Company and relating to
action or inaction required of the Company in connection with any such
registration; PROVIDED, HOWEVER, that the indemnity agreement contained in
this Section 3.8(a) shall not apply to amounts paid in settlement of any
such loss, claim, damage, liability or action if such settlement is
effected without the consent of the Company (which consent shall not be
unreasonably withheld), nor shall the Company be liable to anyone for any
such loss claim, damage, liability or action to the extent that it arises
out of or is based upon an untrue statement or omission made in connection
with such registration statement, preliminary prospectus, final prospectus
or amendments or supplements thereto in reliance upon and in conformity
with written information furnished expressly for use in connection with
such registration by such Holder, underwriter or control person. Such
indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of such Holder, underwriter or control
person and shall survive the transfer of such securities by such Holder.
(b) To the fullest extent permitted by law, each Holder requesting or
joining in a registration will indemnify and hold harmless the Company, as
the case may be, each of its directors, each of its officers who has signed
the registration statement, each person, if any, who controls the Company
within the meaning of the 1933 Act, and each agent and any underwriter for
the Company and any person who controls any such agent or underwriter and
each other Holder and any person who controls such Holder (within the
meaning of the 1933 Act) against any losses, claims, damages or liabilities
to which the Company or any such director, officer, control person, agent,
underwriter, or other Holder may become subject, under the 1933 Act or
otherwise, insofar as such losses, claims, damages or liabilities (or
actions in respect thereto) arise out of or are based upon an untrue
statement of any material fact contained in such registration statement,
including any preliminary prospectus or final prospectus contained therein
or any amendments or supplements thereto, or arise out of or are based upon
the omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, in each case to
the extent, but only to the extent, that such untrue statement or omission
was made in such registration statement, preliminary or final prospectus,
or amendments or supplements thereto, in reliance upon and in conformity
with written information furnished by such Holder with respect to such
Holder expressly for use in connection with such registration; and such
Holder will reimburse any legal or other expenses reasonably incurred by
the
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<PAGE> 23
Company or any such director, officer, control person, agent, underwriter,
or other Holder in connection with investigating or defending any such
loss, claim, damage, liability or action; PROVIDED HOWEVER, the indemnity
obligation of each such Holder hereunder shall be limited to and shall not
exceed the proceeds actually received by such Holder upon a sale of
Registrable Securities pursuant to a registration statement hereunder; and
PROVIDED, further that the indemnity agreement contained in this Section
3.8(b) shall not apply to amounts paid in settlements effected without the
consent of such Holder (which consent shall not be unreasonably withheld).
Such indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of the Company or any such director,
officer, Holder, underwriter or control person and shall survive the
transfer of such securities by such Holder.
(c) Any person seeking indemnification under this Section 3.8 will (i)
give prompt notice to the indemnifying party of any claim with respect to
which it seeks indemnification (but the failure to give such notice will
not affect the right to indemnification hereunder, unless the indemnifying
party is materially prejudiced by such failure) and (ii) unless in such
indemnified party's reasonable judgment a conflict of interest may exist
between such indemnified and indemnifying parties with respect to such
claim, permit such indemnifying party, and other indemnifying parties
similarly situated, jointly to assume the defense of such claim with
counsel reasonably satisfactory to the parties. In the event that the
indemnifying parties cannot mutually agree as to the selection of counsel,
each indemnifying party may retain separate counsel to act on its behalf
and at its expense. The indemnified party shall in all events be entitled
to participate in such defense at its expense through its own counsel. If
such defense is not assumed by the indemnifying party, the indemnifying
party will not be subject to any liability for any settlement made without
its consent (but such consent will not be unreasonably withheld). No
indemnifying party will consent to entry of any judgment or enter into any
settlement which does not include as an unconditional term thereof the
giving by the claimant or plaintiff to such indemnified party of a release
from all liability in respect of such claim or litigation. An indemnifying
party who is not entitled to, or elects not to, assume the defense of a
claim will not be obligated to pay the fees and expenses of more than one
counsel for all parties indemnified by such indemnifying party with respect
to such claim, unless in the reasonable judgment of any indemnified party a
conflict of interest may exist between such indemnified party and any other
of such indemnified parties with respect to such claim, in which event the
indemnifying party shall be obligated to pay the reasonable fees and
expenses of such additional counsel.
(d) If for any reason the foregoing indemnification is unavailable to
any party or insufficient to hold it harmless as and to the extent
contemplated by the preceding paragraphs of this Section 3.8, then each
indemnifying party shall contribute to the amount paid or payable by the
indemnified party as a result of such loss, claim, damage expense or
liability in such proportion as is appropriate to reflect the relative
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<PAGE> 24
benefits received by the Company, on the one hand, and the applicable
indemnified party, as the case may be, on the other hand, and also the
relative fault of the Company and any applicable indemnified party, as the
case may be, as well as any other relevant equitable considerations.
3.9 LOCK-UP AGREEMENT. If required by the underwriter, each Stockholder
agrees not to sell or otherwise transfer or dispose of any Common Stock (or
other securities) of the Company held by such Stockholder (other than securities
included in the applicable registration statement or shares purchased in the
public market after the effective date of registration) or any interest or
future interest therein during such period (not to exceed 180 days) as is
acceptable to the underwriter following the effective date of each registration
statement of the Company filed under the 1933 Act which includes securities to
be sold to the public in an underwritten offering. The Company may impose stop
transfer instructions with respect to the shares (or securities) subject to the
foregoing restriction until the end of said period.
3.10 NO INCONSISTENT AGREEMENTS. The Company agrees that it has not entered
into, and it will not hereafter enter into, any Agreement with respect to the
registration of its securities that is inconsistent with (or superior to) the
rights granted to the Holders of Registrable Securities in this Agreement.
3.11 STOCK SPLIT. If, on or after the receipt by the Company of a request
for registration of a public offering pursuant to Section 3.2 hereof, the
proposed managing underwriter or underwriters of such offering reasonably
believes that the number of shares to be registered is less than the minimum
number necessary for the success of such offering, the Company use its best
efforts to cause each share of its outstanding Common Stock to be converted into
such number of shares of such Common Stock so that the number of shares of
Registrable Securities to be registered is equal to the minimum number which
such managing underwriter or underwriters reasonably believes is necessary for
the success of such offering. If necessary in connection therewith, the Company
shall use its best efforts to cause to be recommended, approved and adopted by
its Board of Directors and approved and adopted by its stockholders, and, if so
approved and adopted, file and cause to become effective, an amendment to its
certificate of incorporation increasing the number of shares of Common Stock
which the Company is authorized to issue. Each Stockholder, together with his or
its Permitted Transferees, hereby agrees to vote the Shares held by it in favor
of adopting such amendment.
ARTICLE IV
Miscellaneous
-------------
4.1 REMEDIES. The parties to this Agreement acknowledge and agree that the
covenants of the Company and the Stockholders set forth in this Agreement may be
enforced in equity by a decree requiring specific performance. In the event of a
breach of any material
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<PAGE> 25
provision of this Agreement, the aggrieved party will be entitled to institute
and prosecute proceeding in any court of competent jurisdiction to enforce
specific performance of such provision, as well as to obtain damages for breach
of this Agreement. Without limiting the foregoing, if any dispute arises
concerning the sale or other disposition of any of the Shares subject to this
Agreement or concerning any other provisions hereof or the obligations of the
parties hereunder, the parties to this Agreement agree that an injunction may be
issued in connection therewith (including, without limitation, restraining the
sale or other disposition of such Shares or rescinding any such sale or other
disposition). Such remedies shall be cumulative and non-exclusive and shall be
in addition to any other rights and remedies the parties may have under this
Agreement or otherwise.
4.2 ENTIRE AGREEMENT; AMENDMENT; WAIVER. This Agreement, together with the
Schedule hereto, sets forth the entire understanding of the parties, and as of
the Closing contemplated by the Recapitalization Agreement supersedes all prior
agreements and all other arrangements and communications, whether oral or
written, with respect to the subject matter hereof. The Schedule may be amended
to reflect changes in the composition of the Stockholders and changes in stock
ownership that may occur from time to time as a result of Permitted Transfers or
Transfers permitted under Article II hereof. Amendments to the Schedule
reflecting Permitted Transfers or Transfers permitted under Article II hereof
shall become effective when a copy of the Agreement as executed by any new
transferee, are filed with the Company, except as otherwise provided in Section
4.13 hereof. Any other amendments to, or the termination of, this Agreement
shall require the prior written consent of a majority in interest of each of the
Lee Group Stockholders and the Management Stockholders. Notwithstanding the
preceding sentence, no consent by a majority in interest of any such Stockholder
Group which owns less than 5% of the fully diluted Common Stock then outstanding
shall be necessary to make such other amendments to this Agreement; PROVIDED,
HOWEVER, that no amendment may adversely affect the Lee Group Stockholders or
the Management Stockholders at any time, unless consented to in writing by a
majority in interest of such adversely affected group. Notwithstanding any
provisions to the contrary contained herein, the Lee Group Stockholders, the
Management Stockholders or any party may waive any rights with respect to which
such party is entitled to the benefits under this Agreement. No waiver of or
consent to any departure from any provision of this Agreement shall be effective
unless signed in writing by the holders of a majority in interest of the stock
owned by the party entitled to the benefit thereof.
4.3 SEVERABILITY. The invalidity or unenforceability of any particular
provision of this Agreement shall not affect the other provisions hereof, and
this Agreement shall be construed in all respects as if the invalid or
unenforceable provision were omitted.
4.4 NOTICES. All notices and other communications necessary or contemplated
under this Agreement shall be in writing and shall be delivered in the manner
specified herein or, in the absence of such specification, shall be deemed to
have been duly given three business days after mailing by certified mail, when
delivered by hand upon confirmation of
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<PAGE> 26
receipt by facsimile, or one day after sending by overnight delivery service, to
the respective addresses of the parties set forth below:
(a) For notices and communications to the Management Stockholders, to
the respective addresses set forth in the Schedule, with a copy to in each case
to:
Seigfreid, Bingham, Levy, Selzer & Gee
A Professional Corporation
911 Main Street
Kansas City, MO 64105
Attention: Larry J. Bingham, Esq.
Facsimile No.: (816) 474-3447
(b)(i) for notices and communications to the Company:
Safelite Glass Corp.
1105 Schrock Road
Columbus, Ohio 43216
Attn: President
Facsimile No.: (614) 842-3355
(ii) for notices and communications to the Lee Group Stockholders, to
the respective addresses set forth in the Schedule;
(iii) in the case of each of (i) and (ii) above, with a copy to:
Hutchins, Wheeler & Dittmar
101 Federal Street
Boston, MA 02110
Attention: Charles W. Robins, Esq.
Facsimile No.: (617) 951-1295
By notice complying with the foregoing provisions of this Section 4.4, each
party shall have the right to change the mailing address for future notices and
communications to such party.
4.5 BINDING EFFECT; ASSIGNMENT. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and to their respective transferees,
successors and assigns; PROVIDED, HOWEVER, that the rights under this Agreement
may not be assigned except as expressly provided herein, it being understood
that the Company's rights hereunder may be assigned by the Company to any
corporation which is the surviving entity in a merger, consolidation or like
event involving the Company. No such assignment shall relieve an assignor of its
obligations hereunder.
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<PAGE> 27
4.6 GOVERNING LAW. This Agreement shall be governed by the laws of the
State of Delaware (regardless of the laws that might otherwise govern under
applicable Delaware principles of conflicts of law) as to all matters, including
but not limited to matters of validity, construction, effect, performance and
remedies.
4.7 TERMINATION. This Agreement shall terminate ten (10) years from the
date hereof, unless earlier terminated by the parties hereto pursuant to the
provisions of Section 4.2 hereof. Notwithstanding the preceding sentence, and
without affecting any other provision of this Agreement requiring termination of
any rights in favor of any Stockholder, Permitted Transferee or any other
transferee of Shares, the provisions of Articles II and III of this Agreement
shall terminate as to such Stockholder, Permitted Transferee or other
transferee, when, pursuant to and in accordance with this Agreement, such
Stockholder, Permitted Transferee or other transferee, as the case may be, no
longer owns any Shares; PROVIDED, that termination pursuant to this Section 4.7
shall only occur in respect of a Stockholder after all Permitted Transferees in
respect thereof also no longer own any Shares. As provided above, the provisions
of Sections 2.3 and 2.5 shall not apply to the Shares owned by Stockholders
following a Public Offering.
4.8 RECAPITALIZATIONS, EXCHANGES, ETC. The provisions of this Agreement
shall apply, to the full extent set forth herein with respect to Shares, to any
and all shares of capital stock of the Company or any successor or assign of the
Company (whether by merger, consolidation, sale of assets or otherwise) which
may be issued in respect of, in exchange for, or in substitution of the Shares,
by reason of a stock dividend, stock split, stock issuance, reverse stock split,
combination, recapitalization, reclassification, merger, consolidation or
otherwise.
4.9 TRANSACTIONS WITH AFFILIATES. The Company shall not enter into any
transactions, other than the Management Agreement as of the date hereof between
the Company and Thomas H. Lee Company, with any Person under common control with
the Company or any officer or director of the Company, unless such transaction
is on an arms-length basis, on terms no less advantageous to the Company then
those available to third parties.
4.10 ACTION NECESSARY TO EFFECTUATE THE AGREEMENT. The parties hereto agree
to take or cause to be taken all such corporate and other action as may be
necessary to effect the intent and purposes of this Agreement.
4.11 PURCHASE FOR INVESTMENT; LEGEND ON CERTIFICATE. Each of the parties
acknowledges that all of the Shares held by such party are being (or have been)
acquired for investment and not with a view to the distribution thereof and that
no transfer, hypothecation or assignment of Shares may be made except in
compliance with applicable federal and state securities laws. All the
certificates of Shares of the Company which are now or hereafter
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<PAGE> 28
owned by the Stockholders and which are subject to the terms of this Agreement
shall have endorsed in writing, stamped or printed, thereon the following
legend:
THESE SECURITIES ARE SUBJECT TO THE TERMS AND CONDITIONS, INCLUDING
RESTRICTIONS ON TRANSFER, OF A STOCKHOLDERS' AGREEMENT DATED AS OF
DECEMBER 20, 1996, AS AMENDED FROM TIME TO TIME. A COPY OF THE
STOCKHOLDERS' AGREEMENT IS ON FILE WITH THE SECRETARY OF THE COMPANY
AND WILL BE MAILED TO ANY PROPERLY INTERESTED PERSON WITHOUT CHARGE
UPON THE COMPANY'S RECEIPT OF A WRITTEN REQUEST THEREFOR.
All shares shall also bear all legends required by federal and state
securities laws.
4.12 EFFECTIVENESS OF TRANSFERS. All Shares transferred by a Stockholder
(other than pursuant to an effective registration statement under the 1933 Act
or pursuant to a Rule 144 Transaction) shall, except as otherwise expressly
stated herein, be held by the Transferee thereof pursuant to this Agreement.
Such Transferee shall, except as otherwise expressly stated herein, have all the
rights and be subject to all of the obligations of a Stockholder under this
Agreement (as though such party had so agreed pursuant to Section 4.13 hereof)
automatically and without requiring any further act by such transferee or by any
parties to this Agreement. Without affecting the preceding sentence, if such
transferee is not a Stockholder on the date of such transfer, then such
transferee, as a condition to such transfer, shall confirm such transferee's
obligations hereunder in accordance with Section 4.13 hereof. No Shares shall be
transferred on the Company's books and records, and no transfer of Shares shall
be otherwise effective, unless any such transfer is made in accordance with the
terms and conditions of this Agreement, and the Company is hereby authorized by
all of the Stockholders to enter appropriate stop transfer notations on its
transfer records to give effect to this Agreement.
4.13 ADDITIONAL STOCKHOLDERS. Subject to the restrictions on transfers of
Shares contained herein, any person or entity who is not already a Stockholder
acquiring Shares (except for transferees acquiring Shares in an offering
registered under the 1933 Act or in a Rule 144 Transaction), shall, on or before
the transfer or issuance to it of Shares, sign a counterpart signature page
hereto in form reasonably satisfactory to the Company and shall thereby become a
party to this Agreement to be bound hereunder as (i) a Management Stockholder if
a Permitted Transferee or an employee of the Company or any of its Subsidiaries
or (ii) a Lee Group Stockholder if a Permitted Transferee, Transferee or an
employee or affiliate of Thomas H. Lee Company; PROVIDED that a transferee which
is a Permitted Transferee under clause (b) of the definition of Permitted
Transferee shall not be obligated to so agree until foreclosure on its pledge.
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<PAGE> 29
4.14 NO WAIVER. No course of dealing and no delay on the part of any party
hereto in exercising any right, power or remedy conferred by this Agreement
shall operate as waiver thereof or otherwise prejudice such party's rights,
powers and remedies. No single or partial exercise of any rights, powers or
remedies conferred by this Agreement shall preclude any other or further
exercise thereof or the exercise of any other right, power or remedy.
4.15 COUNTERPART. This Agreement may be executed in two or more
counterparts each of which shall be deemed an original but all of which together
shall constitute one and the same instrument, and all signatures need not appear
on any one counterpart.
4.16 HEADINGS. All headings and captions in this Agreement are for purposes
of reference only and shall not be construed to limit or affect the substance of
this Agreement.
4.17 NUMBER; GENDER. When the context so requires, the singular shall
include the plural and the plural shall include the singular and the gender of
any pronoun shall include the other genders.
- 26 -
<PAGE> 30
SAFELITE GLASS CORP.
STOCKHOLDERS' AGREEMENT
Counterpart Signature Page
--------------------------
IN WITNESS WHEREOF, the parties have executed this Agreement as an
instrument under SEAL as of the date first above written.
SAFELITE GLASS CORP.
By: /s/ Douglas A. Herron
---------------------
Name: Douglas A. Herron
Title: Treasurer
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<PAGE> 31
SAFELITE GLASS CORP.
STOCKHOLDERS' AGREEMENT
Counterpart Signature Page
--------------------------
IN WITNESS WHEREOF, the parties have executed this Agreement as an
instrument under SEAL as of the date first above written.
LEE GROUP STOCKHOLDERS:
THOMAS H. LEE EQUITY FUND III, L.P.
By: THL Equity Advisors III Limited
Partnership, General Partner
By: THL Equity Trust, General Partner
By: /s/ Scott M. Sperling
---------------------
THOMAS H. LEE FOREIGN FUND III, L.P.
By: THL Equity Advisors III Limited
Partnership, General Partner
By: THL Equity Trust, General Partner
By: /s/ Scott M. Sperling
---------------------
THL-CCI INVESTORS LIMITED
PARTNERSHIP
By: THL Investment Management Corp.,
general partner
By: /s/ Wendy Masler
----------------
BIG BEND INVESTMENTS, L.P.
By: /s/ Morton H. Meyerson
----------------------
Name: Morton H. Meyerson
Title: General Partner
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<PAGE> 32
SAFELITE GLASS CORP.
STOCKHOLDERS' AGREEMENT
Counterpart Signature Page
IN WITNESS WHEREOF, the parties have executed this Agreement as an
instrument under SEAL as of the date first above written.
MANAGEMENT STOCKHOLDERS:
----------------------------------
Print Name:_______________________
Address:__________________________
----------------------------------
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<PAGE> 33
EXHIBIT A
---------
Schedule of Stockholders
No. of
Name and Address of Stockholder Shares
- ------------------------------- ------
LEE GROUP STOCKHOLDERS
Thomas H. Lee Equity Fund III, L.P. 3,724,438
Thomas H. Lee Foreign Fund III, L.P. 230,457
THL-CCI Investors Limited Partnership 386,345
c/o Thomas H. Lee Company
75 State Street
Boston, MA 02109
Attn: Anthony J. DiNovi
Facsimile No.: (617) 951-3514
Big Bend Investments, L.P. 37,449
4514 Cole Avenue
Suite 400
Dallas, TX 75205
Attn: Morton Meyerson
Facsimile No.: (214) 443-1980
MANAGEMENT STOCKHOLDERS
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<PAGE> 1
Exhibit 10.11
EXECUTION COPY
--------------
PLEDGE AGREEMENT
----------------
PLEDGE AGREEMENT, dated as of December 20, 1996 (as amended,
modified or supplemented from time to time, this "Agreement"), made by each of
the undersigned (each a "Pledgor" and, together with any other entity that
becomes a party hereto pursuant to Section 23 hereof, the "Pledgors"), in favor
of THE CHASE MANHATTAN BANK, as Collateral Agent (the "Pledgee"), for the
benefit of the Secured Creditors (as defined below). Except as otherwise defined
herein, terms used herein and defined in the Credit Agreement (as defined below)
shall be used herein as therein defined.
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, Safelite Glass Corp. (the "Borrower"), the lenders from
time to time party thereto (the "Banks"), Bankers Trust Company, as Syndication
Agent, Goldman Sachs Credit Partners L.P., as Documentation Agent, and The Chase
Manhattan Bank, as Administrative Agent (together with any successor agent, the
"Administrative Agent", and together with the Pledgee, the Banks, the
Syndication Agent and the Documentation Agent, the "Bank Creditors"), have
entered into a Credit Agreement, dated as of December 20, 1996 (as amended,
modified or supplemented from time to time, the "Credit Agreement"), providing
for the making of Loans to the Borrower and the issuance of, and participation
in, Letters of Credit for the account of the Borrower, all as contemplated
therein;
WHEREAS, the Borrower may from time to time be party to one or more
(i) interest rate agreements, interest rate cap agreements, interest rate collar
agreements or other similar agreements or arrangements, (ii) foreign exchange
contracts, currency swap agreements or similar agreements or arrangements
designed to protect against the fluctuations in currency values and\or (iii)
other types of hedging agreements from time to time (each such agreement or
arrangement with an Other Creditor (as hereinafter defined), an "Interest Rate
Protection Agreement or Other Hedging Agreement"), with a Bank or an affiliate
of a Bank (each such Bank or affiliate, even if the respective Bank subsequently
ceases to be a Bank under the Credit Agreement for any reason, together with
such Bank's or affiliate's successors and assigns, collectively, the "Other
Creditors", and together with Bank Creditors, the "Secured Creditors");
WHEREAS, pursuant to the Subsidiary Guaranty, each Pledgor (other
than the Borrower) has jointly and severally guaranteed to the Secured Creditors
the payment when due of all obligations and liabilities of the Borrower under or
with respect to the Credit Documents and the Interest Rate Protection Agreements
and Other Hedging Agreements;
<PAGE> 2
Page 2
WHEREAS, it is a condition precedent to the making of Loans to the
Borrower under the Credit Agreement that each Pledgor shall have executed and
delivered to the Pledgee this Agreement; and
WHEREAS, each Pledgor desires to execute this Agreement to satisfy
the conditions described in the preceding paragraph;
NOW, THEREFORE, in consideration of the benefits accruing to each
Pledgor, the receipt and sufficiency of which are hereby acknowledged, each
Pledgor hereby makes the following representations and warranties to the Pledgee
and hereby covenants and agrees with the Pledgee as follows:
1. SECURITY FOR OBLIGATIONS. This Agreement is made by each
Pledgor for the benefit of the Secured Creditors to secure:
(i) the full and prompt payment when due (whether at the stated
maturity, by acceleration or otherwise) of all obligations (including
obligations which, but for the automatic stay under Section 362(a) of the
Bankruptcy Code, would become due) and liabilities of such Pledgor, now
existing or hereafter incurred under, arising out of or in connection with
any Credit Document to which such Pledgor is a party and the due
performance and compliance by such Pledgor with the terms of each such
Credit Document (all such obligations and liabilities under this clause
(i), except to the extent consisting of obligations or indebtedness with
respect to Interest Rate Protection Agreements or Other Hedging
Agreements, being herein collectively called the "Credit Document
Obligations");
(ii) the full and prompt payment when due (whether at the stated
maturity, by acceleration or otherwise) of all obligations (including
obligations which, but for the automatic stay under Section 362(a) of the
Bankruptcy Code, would become due) and liabilities of such Pledgor, now
existing or hereafter incurred under, arising out of or in connection with
any Interest Rate Protection Agreement or Other Hedging Agreement
including, in the case of Pledgors other than the Borrower, all
obligations of such Pledgor under its Guaranty in respect of Interest Rate
Protection Agreements or Other Hedging Agreements (all such obligations
and liabilities under this clause (ii) being herein collectively called
the "Other Obligations");
(iii) any and all sums advanced by the Pledgee in order to preserve
the Collateral (as hereinafter defined) or preserve its security interest
in the Collateral;
<PAGE> 3
Page 3
(iv) in the event of any proceeding for the collection or enforcement
of any indebtedness, obligations, or liabilities referred to in clauses
(i), (ii) and (iii) above, after an Event of Default (such term, as used
in this Agreement, shall mean any Event of Default under, and as defined
in, the Credit Agreement, or any payment default by the Borrower under any
Interest Rate Protection Agreement or Other Hedging Agreement and shall in
any event include, without limitation, any payment default (after the
expiration of any applicable grace period) on any of the Obligations (as
hereinafter defined)) shall have occurred and be continuing, the
reasonable expenses of retaking, holding, preparing for sale or lease,
selling or otherwise disposing or realizing on the Collateral, or of any
exercise by the Pledgee of its rights hereunder, together with reasonable
attorneys' fees and court costs; and
(v) all amounts paid by any Secured Creditor as to which such
Secured Creditor has the right to reimbursement under Section 11 of this
Agreement;
all such obligations, liabilities, sums and expenses set forth in clauses (i)
through (v) of this Section 1 being herein collectively called the
"Obligations".
2. DEFINITION OF STOCK, NOTES, SECURITIES, ETC. As used herein:
(i) the term "Stock" shall mean (x) with respect to corporations incorporated
under the laws of the United States or any State or territory thereof (each a
"Domestic Corporation"), all of the issued and outstanding shares of capital
stock of any Domestic Corporation at any time owned by each Pledgor and (y) with
respect to corporations not Domestic Corporations (each a "Foreign
Corporation"), all of the issued and outstanding shares of capital stock at any
time owned by any Pledgor of any Foreign Corporation, PROVIDED that except as
provided in the last sentence of this Section 2, such Pledgor shall not be
required to pledge hereunder more than 65% of the total combined voting power of
all classes of capital stock of any Foreign Corporation entitled to vote; (ii)
the term "Notes" shall mean (x) all Intercompany Notes at any time issued to
each Pledgor and (y) all other promissory notes with a face amount of $500,000
or more from time to time issued to, or held by, each Pledgor, PROVIDED that
except as provided in the last sentence of this Section 2, no Pledgor shall be
required to pledge hereunder any promissory notes issued to such Pledgor by any
Subsidiary of such Pledgor which is a Foreign Corporation; and (iii) the term
"Securities" shall mean all of the Stock and Notes. Each Pledgor represents and
warrants that on the date hereof (i) each Subsidiary of such Pledgor, and the
direct ownership thereof, is listed in Annex A hereto; (ii) the Stock held by
such Pledgor consists of the number and type of shares of the stock of the
corporations as described in Annex B hereto; (iii) such Stock constitutes that
percentage of the issued and outstanding capital stock of the issuing
corporation as is set forth in Annex B hereto; (iv) the Notes held by such
Pledgor consist of the promissory notes described in Annex C hereto where such
Pledgor is listed
<PAGE> 4
Page 4
as the Bank; and (v) on the date hereof, such Pledgor owns no other Securities.
In the circumstances and to the extent provided in Section 7.14 of the Credit
Agreement, the 65% limitation set forth in clause (i)(y) and the limitation in
the proviso of clause (ii) in each case of this Section 2 and in Section 3.2
hereof shall no longer be applicable and such Pledgor shall duly pledge and
deliver to the Pledgee such of the Securities not theretofore required to be
pledged hereunder.
3. PLEDGE OF SECURITIES, ETC.
3.1. PLEDGE. To secure the Obligations and for the purposes set
forth in Section 1 hereof, each Pledgor hereby: (i) grants to the Pledgee a
security interest in all of the Collateral owned by such Pledgor; (ii) pledges
and deposits as security with the Pledgee the Securities owned by such Pledgor
on the date hereof, and delivers to the Pledgee certificates or instruments
therefor, duly endorsed in blank in the case of Notes and accompanied by undated
stock powers duly executed in blank by such Pledgor in the case of Stock, or
such other instruments of transfer as are acceptable to the Pledgee; and (iii)
assigns, transfers, hypothecates, mortgages, charges and sets over to the
Pledgee all of such Pledgor's right, title and interest in and to such
Securities (and in and to all certificates or instruments evidencing such
Securities), to be held by the Pledgee, upon the terms and conditions set forth
in this Agreement; PROVIDED, HOWEVER, that no Pledgor shall be required to grant
a security interest in any Pledged Securities to the extent that granting such
security interest in such Pledged Securities would violate any contractual
obligation to which such Pledgor is subject.
3.2. SUBSEQUENTLY ACQUIRED SECURITIES. If any Pledgor shall acquire
(by purchase, stock dividend or otherwise) any additional Securities at any time
or from time to time after the date hereof, such Pledgor will forthwith pledge
and deposit such Securities (or certificates or instruments representing such
Securities) as security with the Pledgee and deliver to the Pledgee certificates
therefor or instruments thereof, duly endorsed in blank in the case of Notes and
accompanied by undated stock powers duly executed in blank in the case of Stock,
or such other instruments of transfer as are acceptable to the Pledgee, and will
promptly thereafter deliver to the Pledgee a certificate executed by any
Authorized Officer of such Pledgor describing such Securities and certifying
that the same have been duly pledged with the Pledgee hereunder. Subject to the
last sentence of Section 2 hereof, no Pledgor shall be required at any time to
pledge hereunder any Stock which is more than 65% of the total combined voting
power of all classes of capital stock of any Foreign Corporation entitled
to vote.
3.3. UNCERTIFICATED SECURITIES. Notwithstanding anything to the
contrary contained in Sections 3.1 and 3.2 hereof, if any Securities (whether
now owned or hereafter
<PAGE> 5
Page 5
acquired) are uncertificated securities, the respective Pledgor shall promptly
notify the Pledgee thereof, and shall promptly take all actions required to
perfect the security interest of the Pledgee under applicable law (including, in
any event, under Sections 8-313 and 8-321 of the New York UCC, if applicable).
Each Pledgor further agrees to take such actions as the Pledgee deems reasonably
necessary or desirable to effect the foregoing and to permit the Pledgee to
exercise any of its rights and remedies hereunder, and agrees to provide an
opinion of counsel reasonably satisfactory to the Pledgee with respect to the
creation and perfection of any such pledge of uncertificated Securities promptly
upon request of the Pledgee.
3.4. DEFINITION OF PLEDGED STOCK, PLEDGED NOTES, PLEDGED SECURITIES
AND COLLATERAL. All Stock at any time pledged or required to be pledged
hereunder is hereinafter called the "Pledged Stock," all Notes at any time
pledged or required to be pledged hereunder are hereinafter called the "Pledged
Notes," and all of the Pledged Stock and Pledged Notes together are hereinafter
called the "Pledged Securities," which together with all proceeds thereof,
including any securities and moneys received and at the time held by the Pledgee
hereunder, is hereinafter called the "Collateral."
4. APPOINTMENT OF SUB-AGENTS; ENDORSEMENTS, ETC. The Pledgee shall
have the right to appoint one or more sub-agents for the purpose of retaining
physical possession of the Pledged Securities, which may be held (in the
discretion of the Pledgee) in the name of such Pledgor, endorsed or assigned in
blank or in favor of the Pledgee or any nominee or nominees of the Pledgee or a
sub-agent appointed by the Pledgee. The Pledgee agrees to promptly notify the
relevant Pledgor after the appointment of any sub-agent; PROVIDED, HOWEVER, that
the failure to give such notice shall not affect the validity of such
appointment.
5. VOTING, ETC., WHILE NO EVENT OF DEFAULT. Unless and until (i) an
Event of Default shall have occurred and be continuing and (ii) the relevant
Pledgor has knowledge of or written notice thereof shall have been given by the
Pledgee to the relevant Pledgor (PROVIDED that if an Event of Default specified
in Section 9.05 of the Credit Agreement shall occur, no such notice shall be
required), each Pledgor shall be entitled to exercise any and all voting and
other consensual rights pertaining to the Pledged Securities and to give all
consents, waivers or ratifications in respect thereof; PROVIDED that no vote
shall be cast or any consent, waiver or ratification given or any action taken
which would violate any of the terms of this Agreement, any other Credit
Document or any Interest Rate Protection Agreement or Other Hedging Agreement
(collectively, the "Secured Debt Agreements"), or which would have the effect of
impairing the position or interests of the Pledgee or any other Secured
Creditor. All such rights of such Pledgor to vote and to give
<PAGE> 6
Page 6
consents, waivers and ratifications shall cease in case an Event of Default
shall occur and be continuing, and Section 7 hereof shall become applicable.
6. DIVIDENDS AND OTHER DISTRIBUTIONS. Unless (i) an Event of Default
shall have occurred and be continuing and (ii) the relevant Pledgor has
knowledge of or written notice thereof shall have been given by the Pledgee to
the relevant Pledgor (PROVIDED that if an Event of Default specified in Section
9.05 of the Credit Agreement shall occur, no such notice shall be required), all
cash dividends payable in respect of the Pledged Stock and all payments in
respect of the Pledged Notes shall be paid to the respective Pledgor; PROVIDED
that all cash dividends payable in respect of the Pledged Stock which are
determined by the Pledgee to represent in whole or in part an extraordinary,
liquidating or other distribution in return of capital shall be paid, to the
extent so determined to represent an extraordinary, liquidating or other
distribution in return of capital, to the Pledgee and retained by it as part of
the Cash Collateral Account (as defined in the Security Agreement). The Pledgee
shall also be entitled to receive directly, and to retain as part of the
Collateral:
(i) all other or additional stock or other securities or property
(other than cash) paid or distributed by way of dividend or otherwise in
respect of the Pledged Stock;
(ii) all other or additional stock or other securities or property
(including cash) paid or distributed in respect of the Pledged Stock by
way of stock-split, spin-off, split-up, reclassification, combination of
shares or similar rearrangement; and
(iii) all other or additional stock or other securities or property
(including cash) which may be paid in respect of the Collateral by reason
of any consolidation, merger, exchange of stock, conveyance of assets,
liquidation or similar corporate reorganization;
7. REMEDIES IN CASE OF EVENT OF DEFAULT. In case an Event of Default
shall have occurred and be continuing, the Pledgee shall be entitled to exercise
all of the rights, powers and remedies (whether vested in it by this Agreement
or by any other Secured Debt Agreement or by law) for the protection and
enforcement of its rights in respect of the Collateral, and the Pledgee shall be
entitled, without limitation, to exercise the following rights, which each
Pledgor hereby agrees to be commercially reasonable:
(i) to receive all amounts payable in respect of the Collateral
payable to such Pledgor under Section 6 hereof;
<PAGE> 7
Page 7
(ii) to transfer all or any part of the Pledged Securities into the
Pledgee's name or the name of its nominee or nominees (the Pledgee agrees
to promptly notify the relevant Pledgor after such transfer; PROVIDED,
HOWEVER, that the failure to give such notice shall not affect the
validity of such transfer);
(iii) to accelerate any Pledged Note which may be accelerated in
accordance with its terms, and take any other action to collect upon any
Pledged Note (including, without limitation, to make any demand for
payment thereon);
(iv) subject to the giving of written notice to the relevant Pledgor
in accordance with clause (ii) of Section 5 hereof (to the extent required
by such Section 5), to vote all or any part of the Pledged Stock (whether
or not transferred into the name of the Pledgee) and give all consents,
waivers and ratifications in respect of the Collateral and otherwise act
with respect thereto as though it were the outright owner thereof (each
Pledgor hereby irrevocably constituting and appointing the Pledgee the
proxy and attorney-in-fact of such Pledgor, with full power of
substitution to do so); and
(v) at any time or from time to time to sell, assign and deliver, or
grant options to purchase, all or any part of the Collateral, or any
interest therein, at any public or private sale, without demand of
performance, advertisement or notice of intention to sell or of the time
or place of sale or adjournment thereof or to redeem or otherwise (all of
which are hereby waived by each Pledgor), for cash, on credit or for other
property, for immediate or future delivery without any assumption of
credit risk, and for such price or prices and on such terms as the Pledgee
in its absolute discretion may determine; PROVIDED that at least 10 days'
written notice of the time and place of any such sale shall be given to
such Pledgor. Each Pledgor hereby waives and releases to the fullest
extent permitted by law any right or equity of redemption with respect to
the Collateral, whether before or after sale hereunder, and all rights, if
any, of marshalling the Collateral and any other security for the
Obligations or otherwise. At any such sale, unless prohibited by
applicable law, the Pledgee on behalf of the Secured Creditors may bid for
and purchase all or any part of the Collateral so sold free from any such
right or equity of redemption. Neither the Pledgee nor any Secured
Creditor shall be liable for failure to collect or realize upon any or all
of the Collateral or for any delay in so doing nor shall any of them be
under any obligation to take any action whatsoever with regard thereto.
8. REMEDIES, ETC., CUMULATIVE. Each right, power and remedy of the
Pledgee provided for in this Agreement or now or hereafter existing at law or in
equity or by statute shall be cumulative and concurrent and shall be in addition
to every other such
<PAGE> 8
Page 8
right, power or remedy. The exercise or beginning of the exercise by the Pledgee
or any other Secured Creditor of any one or more of the rights, powers or
remedies provided for in this Agreement or now or hereafter existing at law or
in equity or by statute or otherwise shall not preclude the simultaneous or
later exercise by the Pledgee or any other Secured Creditor of all such other
rights, powers or remedies, and no failure or delay on the part of the Pledgee
or any other Secured Creditor to exercise any such right, power or remedy shall
operate as a waiver thereof. The Secured Creditors agree that this Agreement may
be enforced only by the action of the Administrative Agent or the Pledgee, in
each case acting upon the instructions of the Required Banks (or, after the date
on which all Credit Document Obligations have been paid in full, the holders of
at least the majority of the outstanding Other Obligations) and that no other
Secured Creditor shall have any right individually to seek to enforce or to
enforce this Agreement or to realize upon the security to be granted hereby, it
being understood and agreed that such rights and remedies may be exercised by
the Administrative Agent or the Pledgee, as the case may be, for the benefit of
the Secured Creditors upon the terms of this Agreement.
9. APPLICATION OF PROCEEDS. (a) All moneys collected by the Pledgee
upon any sale or other disposition of the Collateral pursuant to the terms of
this Agreement, together with all other moneys received by the Pledgee
hereunder, shall be applied in the manner provided in the Security Agreement.
(b) It is understood and agreed that the Pledgors shall remain
jointly and severally liable to the extent of any deficiency remaining in the
Obligations after receipt of the proceeds of Collateral.
10. PURCHASERS OF COLLATERAL. Upon any sale of the Collateral by the
Pledgee hereunder (whether by virtue of the power of sale herein granted,
pursuant to judicial process or otherwise), the receipt of the Pledgee or the
officer making the sale shall be a sufficient discharge to the purchaser or
purchasers of the Collateral so sold, and such purchaser or purchasers shall not
be obligated to see to the application of any part of the purchase money paid
over to the Pledgee or such officer or be answerable in any way for the
misapplication or nonapplication thereof.
11. INDEMNITY. Each Pledgor jointly and severally agrees to
indemnify and hold harmless the Pledgee in such capacity and each other Secured
Creditor from and against any and all claims, demands, losses, judgments and
liabilities of whatsoever kind or nature, including all costs and expenses,
including reasonable attorneys' fees, growing out of or resulting from this
Agreement or the exercise by the Pledgee of any right or remedy granted to it
hereunder or under any other Secured Debt Agreement (the "Indemnified
Liabilities") except for those Indemnified Liabilities arising from the
Pledgee's or such other
<PAGE> 9
Page 9
Secured Creditor's gross negligence or willful misconduct. In no event shall the
Pledgee be liable, in the absence of gross negligence or willful misconduct on
its part, for any matter or thing in connection with this Agreement other than
to account for moneys actually received by it in accordance with the terms
hereof. If and to the extent that the obligations of the Pledgors under this
Section 11 are unenforceable for any reason, each Pledgor hereby agrees to make
the maximum contribution to the payment and satisfaction of such obligations
which is permissible under applicable law.
12. FURTHER ASSURANCES. Each Pledgor agrees that it will join with the
Pledgee in executing and, at such Pledgor's own expense, file and refile under
the applicable UCC or appropriate local equivalent, such financing statements,
continuation statements and other documents in such offices as the Pledgee may
deem necessary or appropriate and wherever required or permitted by law in order
to perfect and preserve the Pledgee's security interest in the Collateral and
hereby authorizes the Pledgee to file financing statements and amendments
thereto relative to all or any part of the Collateral without the signature of
such Pledgor where permitted by law, and agrees to do such further acts and
things and to execute and deliver to the Pledgee such additional conveyances,
assignments, agreements and instruments as the Pledgee may reasonably require or
deem advisable to carry into effect the purposes of this Agreement or to further
assure and confirm unto the Pledgee its rights, powers and remedies hereunder.
13. THE PLEDGEE AS AGENT. (a) The Pledgee will hold in accordance with
this Agreement all items of the Collateral at any time received under this
Agreement. It is expressly understood and agreed that the obligations of the
Pledgee as holder of the Collateral and interests therein and with respect to
the disposition thereof, and otherwise under this Agreement, are only those
expressly set forth in this Agreement. The Pledgee shall act hereunder on the
terms and conditions set forth herein and in Section 11 of the Credit Agreement;
(b) The Pledgee's sole duty with respect to the custody,
safekeeping and physical preservation of the Collateral in its possession, under
Section 9-207 of the New York UCC or otherwise, shall be to deal with it in the
same manner as the Pledgee deals with similar securities and property for its
own account, except that the Pledgee shall have no obligation to invest funds
held in any Cash Collateral Account and may hold the same as demand deposits.
Neither the Pledgee, any Bank nor any of their respective directors, officers,
employees or agents shall be liable for failure to demand, collect or realize
upon any of the Collateral or for any delay in doing so or shall be under any
obligation to sell or otherwise dispose of any Collateral upon the request of
the Borrower or any other Person or to take any other action whatsoever with
regard to the Collateral or any part thereof.
<PAGE> 10
Page 10
14. TRANSFER BY PLEDGORS. Except for sales or dispositions of Collateral
permitted pursuant to the Credit Agreement, no Pledgor will sell or otherwise
dispose of, grant any option with respect to, or mortgage, pledge or otherwise
encumber any of the Collateral or any interest therein (except for the Liens and
security interests created by this Agreement).
15. REPRESENTATIONS, WARRANTIES AND COVENANTS OF PLEDGOR. Each Pledgor
represents, warrants and covenants that (i) it is the legal, record and
beneficial owner of, and has good and marketable title to, all Securities
pledged by it hereunder, subject to no pledge, lien, mortgage, hypothecation,
security interest, charge, option or other encumbrance whatsoever, except the
liens and security interests created by this Agreement and liens permitted under
clauses (a) and (e) of Section 8.03 of the Credit Agreement; (ii) it has full
power, authority and legal right to pledge all the Securities pledged by it
pursuant to this Agreement; (iii) this Agreement has been duly authorized,
executed and delivered by such Pledgor and constitutes a legal, valid and
binding obligation of such Pledgor enforceable in accordance with its terms,
except to the extent that the enforceability hereof may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting creditors' rights generally and by equitable principles (regardless of
whether enforcement is sought in equity or at law); (iv) no consent of any other
party (including, without limitation, any stockholder or creditor of such
Pledgor or any of its Subsidiaries) and no consent, license, permit, approval or
authorization of, exemption by, notice or report to, or registration, filing or
declaration with, any governmental authority is required to be obtained by such
Pledgor in connection with the execution, delivery or performance of this
Agreement, or in connection with the exercise of its rights and remedies
pursuant to this Agreement, except as may be required in connection with the
disposition of the Securities by laws affecting the offering and sale of
securities generally; (v) the execution, delivery and performance of this
Agreement by such Pledgor do not violate any provision of any applicable law or
regulation or of any order, judgment, writ, award or decree of any court,
arbitrator or governmental authority, domestic or foreign, or of the certificate
of incorporation or by-laws of such Pledgor or of any securities issued by such
Pledgor or any of its Subsidiaries, or of any mortgage, indenture, lease, deed
of trust, agreement, instrument or undertaking to which such Pledgor or any of
its Subsidiaries is a party or which purports to be binding upon such Pledgor or
any of its Subsidiaries or upon any of their respective assets and will not
result in the creation or imposition of any lien or encumbrance on any of the
assets of such Pledgor or any of its Subsidiaries except as contemplated by this
Agreement; (vi) all the shares of Stock of Subsidiaries of the Borrower have
been duly and validly issued, are fully paid and nonassessable; (vii) each of
the Pledged Notes constituting Intercompany Notes, when executed by the obligor
thereof, will be the legal, valid and binding obligation of such obligor,
enforceable in accordance with its terms, except to the extent that the
enforceability thereof may be limited by
<PAGE> 11
Page 11
applicable bankruptcy, insolvency, reorganization, moratorium or other similar
laws affecting creditors' rights generally and by equitable principles
(regardless of whether enforcement is sought in equity or at law); and (viii)
the pledge and assignment of the Securities pursuant to this Agreement, together
with the delivery of the Securities pursuant to this Agreement (which delivery
has been made), creates a valid and perfected first security interest in such
Securities and the proceeds thereof, subject to no prior lien or encumbrance or
to any agreement purporting to grant to any third party a lien or encumbrance on
the property or assets of such Pledgor which would include the Securities. Each
Pledgor covenants and agrees that it will defend the Pledgee's right, title and
security interest in and to the Securities and the proceeds thereof against the
claims and demands of all persons whomsoever; and such Pledgor covenants and
agrees that it will have like title to and right to pledge any other property at
any time hereafter pledged to the Pledgee as Collateral hereunder and will
likewise defend the right thereto and security interest therein of the Pledgee
and the other Secured Creditors.
16. PLEDGORS' OBLIGATIONS ABSOLUTE, ETC. The obligations of each Pledgor
under this Agreement shall be absolute and unconditional and shall remain in
full force and effect without regard to, and shall not be released, suspended,
discharged, terminated or otherwise affected by, any circumstance or occurrence
whatsoever, including, without limitation: (i) any renewal, extension, amendment
or modification of or addition or supplement to or deletion from any other
instrument or agreement referred to therein, or any assignment or transfer of
any thereof; (ii) any waiver, consent, extension, indulgence or other action or
inaction under or in respect of any such agreement or instrument or this
Agreement; (iii) any furnishing of any additional security to the Pledgee or its
assignee or any acceptance thereof or any release of any security by the Pledgee
or its assignee; (iv) any limitation on any party's liability or obligations
under any such instrument or agreement or any invalidity or unenforceability, in
whole or in part, of any such instrument or agreement or any term thereof; or
(v) any bankruptcy, insolvency, reorganization, composition, adjustment,
dissolution, liquidation or other like proceeding relating to such Pledgor or
any Subsidiary of such Pledgor, or any action taken with respect to this
Agreement by any trustee or receiver, or by any court, in any such proceeding,
whether or not such Pledgor shall have notice or knowledge of any of the
foregoing.
17. REGISTRATION, ETC. (a) If an Event of Default shall have occurred and
be continuing and any Pledgor shall have received from the Pledgee a written
request or requests that such Pledgor cause any registration, qualification or
compliance under any Federal or state securities law or laws to be effected with
respect to all or any part of the Pledged Stock, such Pledgor as soon as
practicable and at its expense will use its reasonable efforts, to the extent it
has the right and authority to do so, to cause the issuer of such Pledged Stock
to effect (and to keep effective) a registration and will use its
<PAGE> 12
Page 12
reasonable efforts to cause such qualification and compliance to be effected
(and be kept effective) as may be so requested and as would permit or facilitate
the sale and distribution of such Pledged Stock, including, without limitation,
registration under the Securities Act of 1933 as then in effect (or any similar
statute then in effect), appropriate qualifications under applicable blue sky or
other state securities laws and appropriate compliance with any other government
requirements; PROVIDED that the Pledgee shall furnish to such Pledgor such
information regarding the Pledgee as such Pledgor may request in writing and as
shall be required in connection with any such registration, qualification or
compliance. Such Pledgor will cause the Pledgee to be kept reasonably advised in
writing as to the progress of each such registration, qualification or
compliance and as to the completion thereof, will cause to be furnished to the
Pledgee by the issuer such number of prospectuses, offering circulars or other
documents incident thereto as the Pledgee from time to time may reasonably
request, and will indemnify the Pledgee, each other Secured Creditor and all
others participating in the distribution of the Pledged Stock against all
claims, losses, damages and liabilities caused by any untrue statement (or
alleged untrue statement) of a material fact contained therein (or in any
related registration statement, notification or the like) or by any omission (or
alleged omission) to state therein (or in any related registration statement,
notification or the like) a material fact required to be stated therein or
necessary to make the statements therein not misleading, except insofar as the
same may have been caused by an untrue statement or omission based upon
information furnished (or failed to be furnished) in writing to such Pledgor or
issuer by the Pledgee or such other Secured Creditor expressly for use therein.
(b) If at any time when the Pledgee shall determine to exercise its right
to sell all or any part of the Pledged Securities pursuant to Section 7 hereof,
such Pledged Securities or the part thereof to be sold shall not, for any reason
whatsoever, be effectively registered under the Securities Act of 1933, as then
in effect, the Pledgee may, in its sole and absolute discretion, sell such
Pledged Securities or part thereof by private sale in such manner and under such
circumstances as the Pledgee may deem necessary or advisable in order that such
sale may legally be effected without such registration; PROVIDED that at least
10 days' notice of the time and place of any such sale shall be given to such
Pledgor. Without limiting the generality of the foregoing, in any such event the
Pledgee, in its sole and absolute discretion: (i) may proceed to make such
private sale notwithstanding that a registration statement for the purpose of
registering such Pledged Securities or part thereof shall have been filed under
such Securities Act; (ii) may approach and negotiate with a single possible
purchaser to effect such sale; and (iii) may restrict such sale to a purchaser
who will represent and agree that such purchaser is purchasing for its own
account, for investment, and not with a view to the distribution or sale of such
Pledged Securities or part thereof. In the event of any such sale, the Pledgee
shall incur no responsibility or liability for selling all or any part of the
Pledged Securities at a price which the Pledgee, in its sole
<PAGE> 13
Page 13
and absolute discretion, may in good faith deem reasonable under the
circumstances, notwithstanding the possibility that a substantially higher price
might be realized if the sale were deferred until after registration as
aforesaid.
18. TERMINATION; RELEASE. (a) After the Termination Date (as defined
below), this Agreement shall terminate (provided that all indemnities set forth
herein including, without limitation, in Section 11 hereof shall survive any
such termination) and the Pledgee, at the request and expense of the respective
Pledgor, will promptly execute and deliver to such Pledgor a proper instrument
or instruments acknowledging the satisfaction and termination of this Agreement,
and will duly release from the security interest created hereby and assign,
transfer and deliver to such Pledgor (without recourse and without any
representation or warranty) such of the Collateral as may be in the possession
of the Pledgee and as has not theretofore been sold or otherwise applied or
released pursuant to this Agreement. As used in this Agreement, "Termination
Date" shall mean the date upon which the Total Commitment and all Interest Rate
Protection Agreements or Other Hedging Agreements have been terminated, no Note
(as defined in the Credit Agreement) or Letter of Credit is outstanding (other
than Letters of Credit, together with all Fees that have accrued and will accrue
thereon through the stated termination date of such Letters of Credit, which
have been supported in a manner satisfactory to the Letter of Credit Issuer as
provided in the Credit Agreement) and all other Obligations (other than
indemnities described in Section 11 hereof and in Section 12.13 of the Credit
Agreement which are not then due and payable) have been paid in full.
(b) In the event that any part of the Collateral is sold or otherwise
disposed in connection with a sale or other disposition permitted by Section
8.02 of the Credit Agreement or is otherwise released at the direction of the
Required Banks (or all the Banks if required by Section 12.12 of the Credit
Agreement), the Pledgee, at the request and expense of such Pledgor will duly
release from the security interest created hereby and assign, transfer and
deliver to such Pledgor (without recourse and without any representation or
warranty) such of the Collateral as is then being (or has been) so sold or
released and as may be in possession of the Pledgee and has not theretofore been
released pursuant to this Agreement and will execute all instruments as may be
reasonably necessary to accomplish the same.
(c) At any time that a Pledgor desires that Collateral be released as
provided in the foregoing Section 18(a) or (b), it shall deliver to the Pledgee
a certificate signed by an Authorized Officer of such Pledgor stating that the
release of the respective Collateral is permitted pursuant to Section 18(a) or
(b).
<PAGE> 14
Page 14
19. PLEDGOR'S RETAINED RIGHTS. In order to permit Pledgor to exercise the
voting and other rights which it is entitled to exercise pursuant to Section 5
hereof and/or to receive the dividends and distributions that it is authorized
to receive and retain pursuant to Section 6 hereof, the Pledgee shall, if
necessary, upon the written request of Pledgor, from time to time execute and
deliver to Pledgor all such proxies, dividend payment orders and other
instruments as Pledgor may reasonably request.
20. NOTICES, ETC. All notices and other communications hereunder shall be
in writing and shall be delivered or mailed by first class mail, postage
prepaid, addressed:
(a) if to any Pledgor, at its address set forth opposite its signature
below;
(b) if to the Pledgee, at:
The Chase Manhattan Bank
270 Park Avenue
New York, New York 10017
Attention: Richard Gallant
Telephone No.: (212) 270-3497
Telecopier No.: (212) 270-1063
(c) if to any Bank (other than the Pledgee), at such address as such
Bank shall have specified in the Credit Agreement;
(d) if to any Other Creditor, at such address as such Other Creditor
shall have specified in writing to each Pledgor and the Pledgee;
or at such other address as shall have been furnished in writing by any Person
described above to the party required to give notice hereunder.
21. WAIVER; AMENDMENT. None of the terms and conditions of this Agreement
may be changed, waived, modified or varied in any manner whatsoever unless in
writing duly signed by each Pledgor directly affected thereby and the Pledgee
(with the written consent of either (x) the Required Banks (or all the Banks if
required by Section 12.12 of the Credit Agreement) at all times prior to the
time on which all Credit Document Obligations have been paid in full or (y) the
holders of at least a majority of the outstanding Other Obligations at all times
after the time on which all Credit Document Obligations have been paid in full);
PROVIDED that any change, waiver, modification or variance affecting the rights
and benefits of a single Class (as defined below) of Secured Creditors (and not
all
<PAGE> 15
Page 15
Secured Creditors in a like or similar manner) shall require the written consent
of the Requisite Creditors (as defined below) of such Class. For the purpose of
this Agreement, the term "Class" shall mean each class of Secured Creditors,
I.E., whether (i) the Bank Creditors as holders of the Credit Document
Obligations or (ii) the Other Creditors as holders of the Other Obligations. For
the purpose of this Agreement, the term "Requisite Creditors" of any Class shall
mean each of (i) with respect to the Credit Document Obligations, the Required
Banks and (ii) with respect to the Other Obligations, the holders of at least a
majority of all obligations outstanding from time to time under the Interest
Rate Protection Agreements or Other Hedging Agreements.
22. MISCELLANEOUS. This Agreement shall be binding upon the successors
and assigns of each Pledgor and shall inure to the benefit of and be enforceable
by the Pledgee and its successors and assigns. THIS AGREEMENT SHALL BE CON-
STRUED AND ENFORCED IN ACCORDANCE WITH AND GOVERNED BY THE LAW OF THE STATE OF
NEW YORK. The headings in this Agreement are for purposes of reference only and
shall not limit or define the meaning hereof. This Agreement may be executed in
any number of counterparts, each of which shall be an original, but all of which
shall constitute one instrument.
23. ADDITIONAL PLEDGORS. It is understood and agreed that any Subsidiary
of the Borrower that is required to execute a counterpart of this Agreement
after the date hereof pursuant to Sections 7.13 and/or 8.15 of the Credit
Agreement shall automatically become a Pledgor hereunder by executing a
counterpart hereof and delivering the same to the Pledgee.
* * *
<PAGE> 16
Page 16
IN WITNESS WHEREOF, each Pledgor and the Pledgee have caused this
Agreement to be executed by their duly elected officers duly authorized as of
the date first above written.
Address: SAFELITE GLASS CORP.,
Safelite Glass Corp. as a Pledgor
1105 Schrock Road
Columbus, OH 43229
By /s/ Doug A. Herron
-------------------------------
Attention: Douglas A. Herron Title: Chief Financial Officer
THE CHASE MANHATTAN BANK,
as Collateral Agent
By /s/ William J. Caggiano
-------------------------------
Title: Managing Director
<PAGE> 1
<TABLE>
Exhibit 21.1
------------
<CAPTION>
Name State of Incorporation d/b/a
- ---- ---------------------- -----
<S> <C> <C>
Lear Siegler Holdings Corp. Delaware N/A
</TABLE>
<PAGE> 1
Exhibit 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Registration Statement of Safelite Glass Corp. on
Form S-4 of our report dated February 12, 1997, appearing in the Prospectus,
which is part of this Registration Statement. We also consent to the reference
to us under the headings "Summary Historical and Proforma Financial
Information", "Selected Consolidated Financial Data" and "Experts" in such
Prospectus.
DELOITTE & TOUCHE LLP
Dayton, Ohio
February 18, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
SAFELIFE GLASS CORP. AND SUBSIDIARIES CONSOLIDATED FINANCIAL STATEMENTS FOR
THE YEAR ENDED DECEMBER 28, 1996 INCLUDED IN FORM S-4. AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-28-1996
<PERIOD-START> DEC-31-1995
<PERIOD-END> DEC-28-1996
<EXCHANGE-RATE> 1
<CASH> 31,188
<SECURITIES> 0
<RECEIVABLES> 29,647
<ALLOWANCES> (2,101)
<INVENTORY> 42,454
<CURRENT-ASSETS> 119,553
<PP&E> 90,772
<DEPRECIATION> (50,653)
<TOTAL-ASSETS> 216,246
<CURRENT-LIABILITIES> 68,852
<BONDS> 258,322
0
54,946
<COMMON> 54
<OTHER-SE> (183,532)
<TOTAL-LIABILITY-AND-EQUITY> 216,246
<SALES> 0
<TOTAL-REVENUES> 438,325
<CGS> 0
<TOTAL-COSTS> 299,623
<OTHER-EXPENSES> 114,908
<LOSS-PROVISION> 1,015
<INTEREST-EXPENSE> 6,726
<INCOME-PRETAX> 19,162
<INCOME-TAX> (17,605)
<INCOME-CONTINUING> 26,568
<DISCONTINUED> 1,706
<EXTRAORDINARY> (500)
<CHANGES> 0
<NET-INCOME> 27,774
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
