<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 15, 1999.
REGISTRATION NO.
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- --------------------------------------------------------------------------------
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 13-3386709
(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)
------------------------
POE A. TIMMONS
VICE PRESIDENT -- FINANCE
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
(617) 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
<TABLE>
<CAPTION>
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PROPOSED PROPOSED
MAXIMUM MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO OFFERING PRICE AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED BE REGISTERED PER NOTE OFFERING PRICE REGISTRATION FEE
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<S> <C> <C> <C> <C>
9 7/8 Series D Senior Subordinated
Notes Due 2006................... $55,000,000 $1,000 $55,000,000 $15,290
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</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.
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<PAGE> 2
SUBJECT TO COMPLETION, DATED APRIL , 1999
PROSPECTUS
SAFELITE GLASS CORP.
OFFER TO EXCHANGE $1,000 IN PRINCIPAL AMOUNT OF
9 7/8% SERIES D SENIOR SUBORDINATED NOTES DUE 2006
FOR EACH $1,000 IN PRINCIPAL AMOUNT OF OUTSTANDING 9 7/8%
SERIES C SENIOR SUBORDINATED NOTES DUE 2006
-------------------------
Safelite Glass Corp. (the "Company") is offering to exchange up to
$55,000,000 in aggregate principal amount of its 9 7/8% Series D Senior
Subordinated Notes due 2006 for $55,000,000 in aggregate principal amount of its
outstanding 9 7/8% Series C Senior Subordinated Notes due 2006. The terms of the
Exchange Offer are as follows:
- Safelite will exchange all outstanding notes that are validly tendered
and not withdrawn prior to the expiration of the Exchange Offer.
- You may withdraw tendered outstanding notes at any time prior to the
expiration of the Exchange Offer.
- Safelite believes that the exchange of outstanding notes will not be a
taxable exchange for United States federal income tax purposes, but you
should see the section entitled "Income Tax Considerations" on page 133
for more information.
- The terms of the notes to be issued are substantially identical to the
terms of the outstanding notes, except for certain transfer restrictions
and registration rights relating to the outstanding notes.
- Safelite will not receive any proceeds from the Exchange Offer.
- There is no existing market for the notes to be issued, and Safelite does
not intend to apply for their listing on any securities exchange.
THIS INVESTMENT INVOLVES RISKS. PLEASE READ ALL OF THIS PROSPECTUS
CAREFULLY, INCLUDING THE SECTION ENTITLED "RISK FACTORS" THAT BEGINS ON PAGE 13
FOR A DISCUSSION OF THE RISKS THAT YOU SHOULD CONSIDER PRIOR TO TENDERING YOUR
OUTSTANDING NOTES FOR EXCHANGE.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES AND
EXCHANGE COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED
UPON THE ADEQUACY OR THE ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED.
SAFELITE MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED
WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT
AN OFFER TO SELL THESE SECURITIES AND IS NOT SOLICITING AN OFFER TO BUY THESE
SECURITIES IN ANY JURISDICTION WHERE THE OFFER TO SELL IS NOT PERMITTED.
-------------------------
The date of this prospectus is , 1999
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<S> <C>
Prospectus Summary.............. 3
Risk Factors.................... 13
Where You Can Find More
Information................... 23
Forward-Looking Statements...... 24
Use of Proceeds................. 24
Capitalization.................. 25
The Exchange Offer.............. 26
Transactions.................... 35
Unaudited Pro Forma Consolidated
Financial Statements.......... 38
Selected Financial Data......... 41
Management's Discussion and
Analysis of Financial
Condition And Results of
Operations.................... 44
Business........................ 58
Management...................... 69
Security Ownership of Certain
Beneficial Owners and
Management.................... 78
Relationships and Related
Transactions.................. 81
Description of Capital Stock.... 83
Description of Exchange Notes... 92
Description of Other Debt....... 131
Income Tax Considerations....... 133
Book-Entry; Delivery and Form... 139
Plan of Distribution............ 141
Legal Matters................... 141
Experts......................... 142
Index to Financial Statements... F-1
</TABLE>
2
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PROSPECTUS SUMMARY
The following summary highlights selected information from this prospectus,
but may not contain all the information which is important to you. For a
complete understanding of this Exchange Offer and for a more complete
description of the legal terms used to describe the Exchange Offer and the notes
you should read this entire prospectus carefully, as well as the additional
documents Safelite refers you to. See "Where You Can Find More Information" on
page 23. As you read this prospectus you should also note the following:
- Prior to 1998, Safelite's fiscal year ended on the Saturday closest to
December 31 of each year. Therefore references to fiscal years up to and
including 1997 are to years which end on the Saturday closest to December
31. On May 18, 1998, Safelite changed its fiscal year to the Saturday
closest to March 31.
- On December 19, 1997, Safelite merged with Vistar, Inc. in a transaction
that was accounted for as a purchase. As a result, information on the two
companies prior to that date is on a stand-alone basis and Safelite
information after that date includes the combined operations of Safelite
and Vistar.
- Safelite also has outstanding $100 million of 9 7/8% Series B Senior
Subordinated Notes due 2006. Those notes have been registered under the
Securities Act of 1933 and will be referred to in this prospectus as the
"Existing Notes" in order to differentiate them from the notes to which
this Exchange Offer applies.
- This prospectus contains various references to the automotive glass
replacement industry market size and market share data. The market size
and market share data are estimates made by management based on available
Safelite and industry data. Overall market size and share data is based
upon unit volumes. Insurance customer segment data has been estimated
using sales dollar volumes.
- This prospectus includes certain pro forma information to reflect the
impact of the issuance of the outstanding notes and a related equity
investment in Safelite made by Safelite shareholders. References to "on a
pro forma basis after giving effect to the issuances" assume that $50.4
million of gross proceeds from the issuance of the outstanding notes
along with $50.0 million of proceeds from the equity investment has been
used to (1) pay down $61.4 million of Safelite's term loan facility, (2)
pay down $35.0 of Safelite's revolving credit facility and (3) pay
approximately $4.0 million of fees and expenses. See "Use of Proceeds."
THE COMPANY
COMPANY OVERVIEW
Safelite is the largest provider of automotive glass replacement and repair
services in the United States. The Company installed approximately 1.7 million
replacement units in 1997 for insurance companies, commercial fleet leasing and
rental car companies, car dealerships and body shops, government agencies and
individual consumers. Safelite provides these services through its service
centers, mobile vans, centralized telephone/dispatch centers and its network of
independent automotive glass replacement and repair providers. Safelite 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 automotive glass replacement
and repair providers. Safelite has developed fully integrated claims processing
solutions for
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3
<PAGE> 5
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auto insurance companies which reduce their glass loss expenses and total
administrative costs and provide a higher level of customer service to their
policyholders.
On December 19, 1997, Safelite completed a merger with Vistar, Inc. Prior
to the merger, Vistar was the second largest provider of automotive glass
replacement and repair services in the United States. In connection with the
Vistar merger, Safelite took a number of actions in order to consolidate
redundant corporate overhead, service centers and sales and marketing activities
and achieve merger related synergies. While these actions are substantially
complete, the consolidation and integration of the Vistar operations has taken
longer, and has been more disruptive to Safelite's business, than was originally
anticipated. This disruption and delay has had an adverse impact on Safelite's
sales and results of operations.
As a result of Safelite's below expected operating performance in the first
half of fiscal 1999 (the six months ended October 3, 1999), management believed
it was possible that Safelite would not meet the interest coverage and debt
leverage covenants within its Bank Credit Agreement by the end of the Company's
third fiscal quarter (January 2, 1999). Discussions were held with Safelite's
lenders to create a plan which would (1) amend the Bank Credit Agreement so that
Safelite would be more likely to comply with its covenants and (2) reduce
near-term loan amortization requirements. The issuance of the outstanding notes
was part of the plan developed to accomplish these goals. See "About This
Transaction."
Safelite maintains its executive headquarters at 1105 Schrock Road,
Columbus, Ohio 43229, telephone (614) 842-3000.
ABOUT THIS TRANSACTION
On December 18, 1998, Safelite privately placed $55 million of 9 7/8%
Series C Senior Subordinated Notes due 2006. These are the current outstanding
notes to which this Exchange Offer applies. One of the terms of the outstanding
notes was that the net proceeds from the outstanding notes would be held in
escrow until Safelite received $50 million in net cash proceeds from the sale of
capital stock. This sale of capital stock had to be completed on or prior to
January 29, 1999 or Safelite would have to redeem the outstanding notes.
On December 18, 1998, Safelite also amended its Bank Credit Agreement. The
amendment changed covenants within the Bank Credit Agreement to make them less
restrictive and also provided for the use of proceeds from the sale of the
capital stock and the outstanding notes to repay approximately $61.4 million in
term loans and $35.0 million in revolving credit borrowings, with no reduction
in the aggregate availability under the revolving credit facility. The amendment
terms specified that it would cease to be effective after February 3, 1999 if
the sale of capital stock was not completed.
On January 29, 1999, Safelite completed the sale of $50 million in Series A
Convertible Participating Preferred Stock to current shareholders, including
management. This preferred stock sale satisfied the terms of both the
outstanding notes and the amendment to the Bank Credit Agreement. As a result,
on January 29, 1999, the proceeds from both the preferred stock and the
outstanding notes were used to repay the revolving credit borrowings and term
loans as described above. The remainder of the net proceeds, or approximately
$4.0 million, was used to pay fees and expenses related to these transactions.
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Simultaneously with the private placement, Safelite entered into an
exchange and registration rights agreement with the initial purchasers of the
outstanding notes, in which Safelite agreed to deliver this prospectus to you
and to complete this Exchange Offer on or before September 14, 1999. If Safelite
does not complete this exchange before September 14, 1999, it must pay
liquidated damages until the Exchange Offer is completed. In this Exchange
Offer, you may exchange your outstanding notes for new notes which have
substantially the same terms. You should read the discussion under the heading
"The Exchange Offer" and "Description of Exchange Notes" for further information
regarding the notes to be issued in the Exchange Offer.
ABOUT THE EXCHANGE OFFER
Securities Offered.............. $55 million in principal amount of new
9 7/8% Series D Senior Subordinated Notes
due 2006, which have been registered under
the Securities Act of 1933. The terms of the
notes offered in the Exchange Offer are
substantially identical to those of the
outstanding notes, except that certain
transfer restrictions, registration rights
and liquidated damages provisions relating
to the outstanding notes do not apply to the
new registered notes.
The Exchange Offer.............. Safelite is offering to issue registered
notes in exchange for a like principal
amount of the Company's outstanding 9 7/8%
Series C Senior Subordinated Notes due 2006.
Safelite is offering to issue these
registered notes to satisfy the Company's
obligations under an exchange and
registration rights agreement that it
entered into with the initial purchases of
the outstanding notes when Safelite sold
them in a transaction exempt from the
registration requirements of the Securities
Act. You may tender your outstanding notes
for exchange by following the procedures
described under the heading "The Exchange
Offer."
Tenders; Expiration Date;
Withdrawal.................... The Exchange Offer will expire at 5:00 p.m.,
New York City time, on , 1999,
unless Safelite extends it. If you decide to
exchange your outstanding notes for new
notes, you must acknowledge that you are not
engaging in, and do not intend to engage in,
a distribution of the new notes. You may
withdraw any notes that you tender for
exchange at any time prior to 5:00 p.m., New
York City time, on , 1999. If
we decide for any reason not to accept notes
you have tendered for exchange, those notes
will be returned to you without cost
promptly after the expiration or
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5
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termination of the Exchange Offer. See "The
Exchange Offer -- Terms of the Exchange
Offer."
United States Federal Income Tax
Considerations................ Your exchange of outstanding notes for notes
to be issued in the Exchange Offer will not
result in any gain or loss to you for
federal income tax purposes. See "Income Tax
Considerations."
Use of Proceeds................. Safelite will not receive any cash proceeds
from the Exchange Offer.
Exchange Agent.................. State Street Bank and Trust Company.
CONSEQUENCES OF EXCHANGING YOUR OUTSTANDING NOTES
If you do not exchange your outstanding notes in the Exchange Offer, they
will continue to be subject to the restrictions on transfer that are described
in the legend on the notes. In general, this means that you may offer or sell
your outstanding notes only if they are registered under, or offered or sold
under an exemption from, the Securities Act and applicable state securities
laws. Safelite does not currently intend to register the outstanding notes under
the Securities Act.
Based on interpretations of the staff of the Securities and Exchange
Commission, Safelite believes that you may offer for resale, resell or otherwise
transfer the notes that Safelite issues in the Exchange Offer without complying
with the registration and prospectus delivery requirements of the Securities Act
if:
- You acquire the notes issued in the Exchange Offer in the ordinary course
of your business;
- You are not participating, do not intend to participate, and have no
arrangement or undertaking with anyone to participate, in the
distribution of the notes issued to you in the Exchange Offer; and
- You are not an "affiliate" of Safelite, as defined in Rule 405 of the
Securities Act.
If any of these conditions are not satisfied and you transfer any notes
issued to you in the Exchange Offer without delivering a proper prospectus or
without qualifying for a registration exemption, you may incur liability under
the Securities Act. Safelite will not be responsible for or indemnify you
against any liability you may incur.
Any broker-dealer that acquires notes in the Exchange Offer for its own
account in exchange for outstanding notes which it acquired through
market-making or other trading activities, must acknowledge that it will deliver
a prospectus when it resells or transfers any notes issued in the Exchange
Offer. See "Plan of Distribution."
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TERMS OF THE EXCHANGE NOTES
The terms of the notes Safelite is issuing in this Exchange Offer and the
outstanding notes are identical in all material respects, except:
(1) the notes issued in the Exchange Offer will have been registered
under the Securities Act;
(2) the notes issued in the Exchange Offer will not contain transfer
restrictions and registration rights that relate to the outstanding notes;
and
(3) the notes issued in the Exchange Offer will not contain provisions
relating to the payment of liquidated damages to be made to the holders of
the outstanding notes under circumstances related to the timing of the
Exchange Offer.
A brief description of the material terms of the notes follows:
Securities Offered.............. $55 million in principal amount of 9 7/8%
Series D Senior Subordinated Notes due 2006,
registered under the Securities Act.
Maturity........................ December 15, 2006.
Interest Payment Dates.......... June 15 and December 15, beginning June 15,
1999.
Sinking Fund.................... None.
Optional Redemption............. On or after December 15, 2001, Safelite may
redeem some or all of the new notes at
redemption prices listed in "Description of
Exchange Notes" under the heading "Optional
Redemption."
Before December 15, 1999, Safelite may
redeem up to $19.25 million of the new notes
with the proceeds of an initial public
offering at a price listed in "Description
of Exchange Notes" under the heading
"Optional Redemption."
Change of Control............... If Safelite experiences specific kinds of
changes of control, Safelite must make an
offer to repurchase the new notes at a price
equal to 101% of the principal amount. See
"Description of Exchange Notes" under the
heading "Change of Control."
Ranking......................... The new notes will be general unsecured
senior subordinated obligations of Safelite.
The new notes will rank equally with the
Company's outstanding $100 million principal
amount 9 7/8% Series B Senior Subordinated
Notes due 2006 which are referred to in this
prospectus as the "Existing Notes". The new
notes will rank junior in right of payment
to Safelite's current and future senior
indebtedness. As of January 2, 1999, on a
pro forma basis after giving effect to the
issuances, Safelite would have had
approximately $340.8
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million of senior indebtedness (excluding
unused commitments and outstanding letters
of credit).
Restrictive Covenants........... The Indenture for the new notes is the same
as the indenture under which the outstanding
notes were issued. The indenture, among
other things, restricts Safelite's ability
to borrow money, pay dividends, enter into
transactions with affiliates, merge with or
into other companies or sell substantially
all of the assets of the Company. See
"Description of Exchange Notes" under the
section "Covenants."
Guarantees...................... The Indenture provides that if the Company
has a subsidiary in the future, and this
future subsidiary guarantees the Company's
indebtedness under the Bank Credit
Agreement, then that future subsidiary must
guarantee the new notes on an unsecured
senior subordinated basis. See "Description
of Exchange Notes" under the heading
"Subsidiary Guarantees."
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" beginning on page 13 for risks involved
with an investment in the notes issued with this Exchange Offer.
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SUMMARY HISTORICAL AND PRO FORMA FINANCIAL INFORMATION
The table below provides you with summary historical and pro forma
financial data for Safelite. As a result of the significance of the Vistar
merger, Safelite's results for periods prior to the Vistar merger are not
directly comparable to the results of the Company after the Vistar merger. The
statement of operations data for fiscal years 1995 through 1997, and the three
months ended April 4, 1998, and the balance sheet data at December 28, 1996,
January 3, 1998, and April 4, 1998 are derived from Safelite's audited financial
statements for those periods. These audited financial statements are included in
this prospectus.
The data provided for the three months ended March 29, 1997, and the nine
months ended January 3, 1998 and January 2, 1999 are unaudited, but include, in
the opinion of management, all adjustments (consisting only of normal recurring
adjustments) necessary to present fairly the data for these periods. Interim
results for the nine months ended January 2, 1999 are not necessarily indicative
of results that can be expected in future periods.
The table below also provides pro forma financial data for 1997. This data
was derived from the Unaudited Pro Forma Statement of Operations which is also
included in this prospectus and treats the Vistar merger and the sale of
Safelite's subsidiary Lear Siegler as if they happened at the beginning of
Safelite's 1997 fiscal year. The pro forma information does not give effect to
any impact of the issuance of the outstanding notes, the $50.0 million equity
investment or the related pay down of Safelite's debt under the Bank Credit
Agreement (except for pro forma cash interest expense for the nine months ended
January 2, 1999). The pro forma information also does not necessarily represent
what Safelite's results would have actually been had the Vistar merger and the
sale of Lear Siegler occurred at the beginning of 1997 nor does it intend to
project the results of Safelite for any future period.
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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 Financial Statements" and the
financial statements and accompanying notes which are also included in this
prospectus.
<TABLE>
<CAPTION>
FISCAL YEAR(1) THREE MONTHS ENDED NINE MONTHS ENDED
------------------------------------- -------------------- -----------------------
PRO FORMA MARCH 29, APRIL 4, JANUARY 3, JANUARY 2,
1995 1996 1997 1997 1997 1998 1998 1999
------ ------- ------ --------- --------- -------- ---------- ----------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Sales............................... $372.1 $ 438.3 $483.3 $879.8 $ 107.8 $213.8 $375.5 $659.0
Cost of sales....................... 261.7 299.6 331.7 679.8 75.8 155.5 255.9 488.5
------ ------- ------ ------ ------- ------ ------ ------
Gross profit........................ 110.4 138.7 151.6 200.0 32.0 58.3 119.6 170.5
Selling, general & administrative
expenses.......................... 93.5 107.3 111.8 186.7 26.0 46.5 85.8 140.7
Other operating expenses(2)......... -- 7.6 5.7 8.1 -- 3.1 5.7 3.6
Loss on sale of Lear Siegler........ -- -- 5.4 5.4 -- -- 5.4 --
Restructuring expense(3)............ 6.3 -- 2.9 2.9 -- 3.8 2.9 4.2
------ ------- ------ ------ ------- ------ ------ ------
Income (loss) from operations....... 10.6 23.8 25.8 (3.1) 6.0 4.9 19.8 22.0
Interest expense.................... (6.0) (6.7) (27.5) (44.5) (6.3) (10.9) (21.2) (34.3)
Interest income..................... 2.9 2.1 1.3 1.5 0.3 0.1 1.0 0.4
------ ------- ------ ------ ------- ------ ------ ------
Income (loss) from continuing
operations before income taxes,
minority interest and
extraordinary items............... 7.5 19.2 (0.4) (46.1) 0.0 (5.9) (0.4) (11.9)
Income tax benefit (provision)(4)... (0.1) 17.6 6.8 21.8 (0.1) 1.6 6.9 1.8
Minority interest................... (1.1) (10.2) -- -- -- -- -- --
------ ------- ------ ------ ------- ------ ------ ------
Income (loss) from continuing
operations before extraordinary
items............................. 6.3 26.6 6.4 $(24.3) (0.1) (4.3) 6.5 (10.1)
======
Discontinued operations(5).......... -- 1.7 -- -- -- -- --
Extraordinary loss(6)............... -- (0.5) (2.8) -- -- (2.8) --
------ ------- ------ ------- ------ ------ ------
Net income (loss)................... $ 6.3 $ 27.8 $ 3.6 $ (0.1) $ (4.3) $ 3.7 $(10.1)
====== ======= ====== ======= ====== ====== ======
OTHER FINANCIAL DATA:
EBITDA(7)(8)........................ $ 24.5 $ 31.8 $ 37.4 $ 8.0 $ 15.1 $ 29.4 $ 43.4
EBITDA margin....................... 6.6% 7.3% 7.7% 7.4% 7.1% 7.8% 6.6%
Adjusted EBITDA(8)(9)............... $ 25.5 $ 42.6 $ 49.6 $ 8.7 $ 18.2 $ 41.4 $ 47.0
Cash flows from operating
activities........................ (10.1) 0.1 2.4 (16.7) (15.6) 19.1 (21.1)
Cash flows from investing
activities........................ (34.7) 21.5 (85.4) (4.3) (5.2) (81.2) (16.8)
Cash flows from financing
activities........................ 5.2 (4.2) 59.2 6.3 23.7 52.9 35.4
Depreciation and amortization....... 7.6 8.0 8.7 2.0 6.4 6.7 17.2
Pro forma cash interest(10)......... 33.4
Ratio of Adjusted EBITDA to pro
forma cash interest(10)........... 1.4x
Capital expenditures................ $ 12.0 $ 12.8 $ 13.9 $ 4.2 $ 2.4 $ 9.6 $ 17.1
Ratio of earnings to fixed
charges(11)....................... 1.4x 2.0x -- 1.0x -- -- --
Deficiency of earnings to fixed
charges(11)....................... -- -- $ (0.4) $(46.1) -- $ (5.9) $ (0.4) $(11.9)
BALANCE SHEET DATA:
Working capital..................... $ 58.1 $ 56.6 $ 29.8 $ 56.6 $ 40.3 $ 29.8 $ 51.2
Total assets........................ 188.3 216.2 558.1 204.0 576.4 558.1 620.1
Total indebtedness(12).............. 69.0 263.7 479.9 270.0 503.6 479.9 587.6
Stockholders' equity (deficit)...... (0.6) (128.5) (46.9) (128.6) (48.4) (46.9) (58.5)
</TABLE>
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- -------------------------
(1) Prior to 1998, Safelite's fiscal year ended on the Saturday closest to
December 31 of each year. On May 18, 1998, Safelite changed its fiscal
year to the Saturday closest to March 31.
(2) Other operating expenses in 1996 is comprised of $6.9 million in
management transaction bonuses related to the recapitalization of
Safelite and estimated costs (primarily severance) of $0.7 million to
exit the activities of Lear Siegler. Other operating expenses in 1997
include $1.0 million of management transaction bonuses, $3.0 million
related to acceleration of vesting of management stock options and $0.5
million related to forgiveness of officer loans made in connection with
the Vistar merger. Also included in other operating expenses in 1997
are costs related to obtaining bondholder consent to the Vistar merger
of $1.2 million. Other operating expenses in the three months ended
April 4, 1998, the nine months ended January 3, 1998 and the nine
months ended January 2, 1999, consist solely of costs associated with
the integration of corporate systems, moving, relocation and other
expenses associated with the Vistar merger. See Notes 1, 2, 4 and 10 to
Safelite's financial statements and "Management's Discussion and
Analysis of Financial Condition and Results of Operations." Pro forma
results for 1997 also include $2.4 million in one-time integration
costs incurred by Vistar in connection with a merger it completed in
1996. This merger is described in "Business" under the heading "The
Vistar Merger." See also "Unaudited Pro Forma Statement of Operations."
(3) In 1995, Safelite 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. In 1997, Safelite recorded restructuring charges
totaling $2.9 million. These charges consisted of $0.4 million for
planned closing of Safelite service center locations and $2.5 million
related to Safelite employee severance. Restructuring charges of $3.8
million for the three months ended April 4, 1998 consisted of $2.5
million for planned closing of approximately 50 Safelite service center
locations and $1.3 million related to Safelite employee severance.
Restructuring charges of $2.9 million for the nine months ended January
3, 1998 consisted of $0.4 million for planned closing of Safelite
service centers and $2.5 million related to Safelite employee
severance. Restructuring charges of $4.2 million in the nine months
ended January 2, 1999 included $3.6 million for planned closing of 55
Safelite service centers, and $0.6 million for Safelite employee
severance. See Notes 4 and 5 to Safelite's financial statements and
"Management's Discussion and Analysis of Financial Condition and
Results of Operations."
(4) During 1996 and 1997, the valuation allowance provided against
Safelite's deferred tax assets was reduced by $25.9 million and $3.0
million. See Note 14 to Safelite's financial statements and
"Management's Discussion and Analysis of Financial Condition and
Results of Operations."
(5) In 1996, a gain from discontinued operations totaling 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. See Note 16 to Safelite's financial statements.
(6) In 1996 and 1997 Safelite recorded extraordinary losses as a result of
expensing unamortized loan origination fees related to the early
retirement of the associated debt. The amount recorded for 1996 was
$0.5 million, net of tax of $0.3 million. The amount recorded for 1997
was $2.8 million, net of tax of $1.9 million.
- --------------------------------------------------------------------------------
11
<PAGE> 13
- --------------------------------------------------------------------------------
(7) "EBITDA" is defined 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 Safelite
assesses its financial performance and because covenants in Safelite's
borrowing arrangements are tied to these measures. EBITDA as determined
by Safelite may not be comparable to EBITDA as reported by other
companies. EBITDA does not represent funds available for discretionary
uses and should not be considered as an alternative to operating income
(loss) or net income (loss) 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).
(8) The following is a reconciliation of operating income to EBITDA and
Adjusted EBITDA for the periods presented:
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
FISCAL YEAR -------------------- -----------------------
--------------------- MARCH 29, APRIL 4, JANUARY 3, JANUARY 2,
1995 1996 1997 1997 1998 1998 1999
----- ----- ----- --------- -------- ---------- ----------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C>
Income from operations.............................. $10.6 $23.8 $25.8 $6.0 $ 4.9 $19.8 $22.0
Depreciation and amortization....................... 7.6 8.0 8.7 2.0 6.4 6.7 17.2
Restructuring charges............................... 6.3 -- 2.9 -- 3.8 2.9 4.2
----- ----- ----- ---- ----- ----- -----
EBITDA.............................................. 24.5 31.8 37.4 8.0 15.1 29.4 43.4
Other operating expenses............................ -- 7.6 5.7 -- 3.1 5.7 3.6
Lear Siegler operating expenses..................... 1.0 3.2 1.1 0.7 -- 0.9 --
Loss on sale of Lear Siegler........................ -- -- 5.4 -- -- 5.4 --
----- ----- ----- ---- ----- ----- -----
Adjusted EBITDA..................................... $25.5 $42.6 $49.6 $8.7 $18.2 $41.4 $47.0
===== ===== ===== ==== ===== ===== =====
</TABLE>
- -------------------------
(9) "Adjusted EBITDA" is defined as EBITDA plus other operating expenses,
the operating expenses of Lear Siegler (which has been treated as an
exited activity) and the loss recognized by Safelite in connection with
the sale of Lear Siegler. The estimated costs to exit Lear Siegler
activities, consisting primarily of severance costs, were accrued in
1996. Adjusted EBITDA does not represent funds available for
discretionary uses and should not be considered as an alternative to
operating income (loss) or net income (loss) 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).
(10) Pro forma cash interest expense gives effect to the issuance of
outstanding notes, the $50.0 million equity investment, and the
related pay down of Safelite's debt under the Bank Credit Agreement as
if these transactions occurred on April 5, 1998.
(11) 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 (net of capitalized
interest). Fixed charges consist of interest expense on all debt plus
capitalized interest, amortization of deferred financing costs and
one-half of rental expense on operating leases. One-half of rent
expense represents that portion of rental expense which management
believes is attributable to interest.
(12) On a pro forma basis after giving effect to the issuances, total
indebtedness at January 2, 1999 would have been $491.2 million
(excluding unused commitments and outstanding letters of credit).
- --------------------------------------------------------------------------------
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<PAGE> 14
RISK FACTORS
In addition to the other information in this prospectus, the following risk
factors should be considered carefully in evaluating whether to tender your
outstanding notes for exchange in this Exchange Offer.
SAFELITE HAS SIGNIFICANT DEBT SERVICE OBLIGATIONS WHICH COULD IMPAIR ITS ABILITY
TO PAY AMOUNTS DUE UNDER THE NOTES.
Safelite has significant debt service obligations. As of January 2, 1999,
on a pro forma basis after giving effect to the issuances, Safelite would have
had aggregate outstanding debt of approximately $491.2 million (excluding unused
commitments and outstanding letters of credit). Of this pro forma debt, $332.6
million would have represented borrowings under Safelite's term loan facility
and revolving credit facilities which are provided by the Bank Credit Agreement.
Pro forma stockholders' deficit would have been $12.5 million.
The degree to which Safelite is leveraged could have a negative impact on
the Company which in turn could impair Safelite's ability to repay the notes.
Possible adverse consequences of Safelite's degree of leverage include:
- Safelite's ability to obtain additional financing for working capital,
capital expenditures, acquisitions, general corporate purposes and other
purposes may be impaired;
- A substantial portion of Safelite's cash flow from operations goes to the
payment of principal and interest on outstanding debt so there are less
funds available to finance operations;
- Safelite may be more highly leveraged than some of its competitors, which
may place Safelite at a competitive disadvantage;
- Some of Safelite's borrowings are at variable rates of interest,
including borrowings under the Bank Credit Agreement, which exposes
Safelite to the risk of fluctuating interest rates;
- Safelite'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
- Safelite's ability to refinance the notes or the Existing Notes in order
to pay the principal of these notes at maturity or upon a change of
control may be adversely affected.
Safelite is permitted to incur additional debt in the future. While the
terms of the Indenture and the Bank Credit Agreement limit Safelite's ability to
incur additional debt, they do not completely prohibit Safelite from doing so in
all circumstances. In addition, some of the additional debt that Safelite incurs
may rank senior to the notes. As of January 2, 1999, Safelite had approximately
$4.6 million available for borrowing as additional senior debt under the Bank
Credit Agreement. On a pro forma basis after giving effect to the issuances,
Safelite would have had approximately $39.6 million in borrowing availability as
of January 2, 1999. If new debt is added to Safelite's current debt levels, the
related risks that Safelite faces could increase.
Safelite's ability to pay principal and interest due under its indebtedness
will depend largely on its future performance. This performance could be
adversely impacted by
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<PAGE> 15
general economic conditions or financial, business and other factors beyond the
Company's control.
SAFELITE MAY NEED TO REFINANCE THE NOTES.
You should note that all amounts borrowed under the Bank Credit Agreement
will become due prior to the time the principal payments on the Existing Notes
and the notes will become due. As a result, these amounts will need to be
refinanced. In addition, Safelite does not expect to be able to repay the
principal amount of the Existing Notes or the notes at maturity. This means
Safelite will need to either (1) refinance the Existing Notes and the notes or
(2) repay the Existing Notes and the notes with the proceeds of an equity
offering.
There is no assurance that future borrowings or equity financing will be
available for the payment or refinancing of Safelite's debt. If Safelite 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 Safelite's business and results of operations. Factors that
will affect Safelite's ability to sell capital stock or refinance the Existing
Notes and the notes include financial market conditions and the value and
performance of the Company at the time of the capital stock offering or
refinancing. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations -- Liquidity and Capital Resources" and "Description
of Other Debt."
SAFELITE MAY NOT BE ABLE TO COMPLY WITH PROVISIONS IN THE AGREEMENTS GOVERNING
SAFELITE'S OUTSTANDING DEBT THAT RESTRICT SAFELITE'S ACTIONS AND REQUIRE
SAFELITE TO MAINTAIN FINANCIAL RATIOS.
The Indenture, the Existing Notes Indenture and the Bank Credit Agreement
impose restrictions that affect, among other things, the ability of Safelite, to
incur debt, pay dividends, sell assets, create liens, make capital expenditures
and investments and otherwise enter into transactions outside the ordinary
course of business. The Bank Credit Agreement also requires Safelite to maintain
specified financial ratios. The two principal financial ratios are the interest
coverage ratio (the ratio of EBITDA to interest expense, each as adjusted) and
the debt leverage ratio (the ratio of debt to EBITDA, each as adjusted).
Simultaneously with the issuance of the outstanding notes, Safelite entered into
an amendment to its Bank Credit Agreement to modify these two principal
financial covenants to make them less restrictive. There can be no assurance
that Safelite will be able to comply with these amended financial covenants
(which are more fully described in "Description of Other Debt") or that Safelite
will not require amendments and/or waivers in future periods to the other
covenants contained in the Bank Credit Agreement.
Safelite's ability to comply with these amended financial covenants will
depend upon its ability to improve sales, productivity and profitability and
realize cost savings from the Vistar merger, and may also 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 any other debt which contains cross-acceleration or
cross-default provisions. In the event of a default, the lenders under the Bank
Credit Agreement could elect to declare all amounts borrowed immediately due and
payable. If Safelite is unable to pay the amounts due then the senior lenders
could proceed against the collateral that secures the debt.
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<PAGE> 16
THE NOTES ARE SUBORDINATED TO SAFELITE'S SENIOR DEBT.
The notes rank behind all of Safelite's existing and future senior debt. As
a result, if Safelite declares bankruptcy, liquidates or reorganizes, Safelite
must repay all senior debt before Safelite will be able to make payments on the
notes.
Safelite currently has no subsidiaries. However, if Safelite has
subsidiaries in the future, the Bank Credit Agreement would require these
subsidiaries to be guarantors of the amounts borrowed under that agreement. Any
future subsidiary that guarantees that bank debt must also become a guarantor of
these notes. However, if any future subsidiary guarantor declares bankruptcy,
liquidates or reorganizes, that subsidiary guarantor would have to repay all of
its senior debt before it would be able to make any payment under its guarantee
of the notes.
Safelite's obligations under its Bank Credit Agreement are secured by
substantially all the assets of Safelite and would also be secured by the assets
of any future subsidiary. These notes are not secured and do not have the
benefit of any collateral. In any insolvency or liquidation effecting Safelite,
or a future subsidiary, the lenders under the Bank Credit Agreement will be
entitled to payment in full before any payment is made on the notes or any
future subsidiary guarantee. The collateral may be insufficient to satisfy all
of Safelite's creditors, including you as holder of the notes. See "Description
of Exchange Notes" and "Description of Other Debt."
SAFELITE MAY NOT BE ABLE TO COMPLY WITH ITS OBLIGATION UNDER THE INDENTURE TO
PURCHASE ALL OF THE NOTES UPON A CHANGE OF CONTROL. SAFELITE'S OBLIGATIONS TO
PURCHASE THE NOTES AND THE EXISTING NOTES UPON A CHANGE OF CONTROL COULD MAKE IT
MORE DIFFICULT FOR A THIRD PARTY TO OBTAIN CONTROL OF SAFELITE.
Upon the occurrence of a change of control, the Indenture provides that
Safelite will make an offer to purchase all of the notes at a price equal to
101% of the aggregate principal amount. The Bank Credit Agreement prohibits
Safelite from repurchasing any notes or Existing Notes, except with the proceeds
of one or more equity offerings. The Bank Credit Agreement also provides that
some change of control events would constitute a default under the agreement.
Any future credit agreements governing senior debt may contain similar
restrictions and provisions.
In the event a change of control occurs at a time when Safelite is
prohibited from purchasing the notes, Safelite may seek consent of its senior
lenders to purchase the notes or attempt to refinance the borrowings that
prohibit the purchase. If Safelite does not obtain this consent or repay those
borrowings, Safelite will remain prohibited from purchasing the notes. In that
case, Safelite's failure to repurchase the notes would constitute an Event of
Default which would, in turn, constitute a default under the Bank Credit
Agreement. In those circumstances the subordination provisions of the Indenture
would restrict payments to the holders of the notes.
The provisions relating to a change of control included in the Indenture
and the Existing Notes Indenture may increase the difficulty of a potential
acquiror obtaining control of Safelite. See "Description of Exchange
Notes -- Change of Control." The conversion of Safelite's Class B Non-Voting
Stock to Class A Voting Stock could result in a change of control under the
Indenture and the Existing Notes Indenture. See "Description of Capital
Stock -- Common Stock."
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<PAGE> 17
SAFELITE HAS EXPERIENCED AND MAY CONTINUE TO EXPERIENCE DIFFICULTIES IN
INTEGRATING VISTAR'S OPERATIONS INTO SAFELITE'S BUSINESS. SAFELITE MAY NOT BE
ABLE TO REALIZE THE DESIRED ECONOMIC BENEFITS FROM THE MERGER WITH VISTAR.
The consolidation and integration of the Vistar operations has taken
longer, and has been more disruptive to Safelite's business, than was originally
anticipated. This disruption and delay has had an adverse impact on Safelite's
sales and results of operations and could continue to have a negative impact on
Safelite's results of operations in the future. Management is devoting
substantial time and attention to return Safelite's sales growth and operating
efficiencies to expected levels. In addition, management expects substantial net
cost savings from the integration of Safelite and Vistar operations and the
related restructuring activities. These net cost savings are estimated to range
from $30 million to $35 million on an annualized basis. Approximately $7 million
of these net cost savings are reflected in Safelite's results of operations for
the nine months ended January 2, 1999, and approximately 40% are expected to be
reflected in total fiscal year ended April 3, 1999 results.
While management expects to achieve significant cost savings as a result of
the Vistar merger and that sales growth and operating efficiencies will improve,
there can be no assurance that these things will happen or that other factors
will not negate the realization of these savings. Safelite's results of
operations for the three months ended April 3, 1999 may vary compared to the
level of Adjusted EBITDA recorded in the comparable prior year period due to
disruptions in Safelite's business caused by the difficulties in integrating
Vistar's operations and the competitive pricing environment currently being
experienced in the automotive glass replacement industry. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations -- Vistar Merger and Current Operating Performance."
SAFELITE HAS A RECENT HISTORY OF LOSSES.
Safelite incurred losses from operations and net losses during its 1993 and
1994 fiscal years. These losses resulted principally from the discontinued
operations of Lear Siegler. Safelite's Adjusted EBITDA, which is defined herein
as EBITDA plus other operating expenses, the operating expenses of Lear Siegler
(which was treated as an exited activity) and the loss recognized by Safelite in
connection with the sale of Lear Siegler on September 12, 1997, was $22.0
million and $29.1 million, respectively, during those years. Safelite also had
net losses for the three months ended April 4, 1998 and the nine months ended
January 2, 1999. These losses resulted principally from restructuring charges
and one-time costs associated with the Vistar merger as well as Vistar merger
related disruptions. See "Summary Historical and Pro Forma Financial
Information."
SAFELITE DEPENDS HEAVILY ON ITS LARGEST CUSTOMERS AND ON RECURRING REVENUES
GENERATED BY ITS INSURANCE COMPANY CUSTOMERS.
During fiscal 1997 Safelite's five largest customers accounted for
approximately 31% of Safelite's sales and no customer accounted for more than
10% of Safelite's sales. During the three months ended April 4, 1998 and the
nine months ended January 2, 1999 Safelite's five largest customers accounted
for approximately 32% and 34%, of Safelite's sales. In those same two periods
one of those customers accounted for 12% and 14%, of Safelite's sales.
Safelite is highly dependent on recurring revenues generated by its
insurance company customers and could be adversely affected by changes in these
insurance company's
16
<PAGE> 18
policies concerning coverage for automotive glass replacement claims. Failure by
insurance companies to cover automotive glass replacement claims or a
substantial increase in deductibles for automotive glass replacement claims
coverage, could significantly reduce Safelite's sales generated through its
insurance company customers. Also, some of Safelite's "Total Customer Solutions"
arrangements and "Master Provider" relationships with insurance company
customers are not evidenced by written contracts and are therefore terminable at
any time. A significant decrease in business from Safelite's insurance company
customers would have a material adverse effect on Safelite's results of
operations and financial condition. See "Business -- Customers" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
SAFELITE COULD BE ADVERSELY AFFECTED BY A CHANGE IN GOVERNMENT REGULATION OF
INSURANCE COMPANY REFERRAL PRACTICES.
Many states have statutes or regulations prohibiting some types of 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. Safelite has no arrangements with insurance companies
where the insurance companies require policyholders to use Safelite for
automotive glass replacement or repair services. Although Safelite does not
believe that existing government regulation of insurance company referral
practices will have a material adverse effect on Safelite, no assurance can be
given that future regulation of these referral practices will not have a
material adverse effect on Safelite.
SAFELITE'S OPERATING PERFORMANCE COULD BE ADVERSELY AFFECTED BY SIGNIFICANT
INCREASES IN THE PRICES OF RAW MATERIALS THAT IT USES IN MANUFACTURING ITS
PRODUCTS OR BY AN EXTENDED INTERRUPTION IN THE SUPPLY OF THOSE RAW MATERIALS.
The major raw materials used in the manufacturing of Safelite's products
include glass and vinyl. Most of the raw materials used in Safelite's products
are available from multiple sources. Several raw materials used in Safelite's
products, however, are currently obtained from a single source. Safelite does
not have guaranteed supply arrangements with any of its suppliers and there can
be no assurance that these suppliers will continue to meet Safelite's
requirements. An extended interruption in the supply of glass or vinyl could
have a material adverse effect on Safelite's operating results. Significant
increases in the prices of raw materials could also have a material adverse
effect on Safelite's operating results since Safelite may not be able to adjust
product pricing to reflect the increases in raw material costs. See
"Business -- Suppliers and Raw Materials."
SAFELITE RELIES ON TWO MANUFACTURING FACILITIES TO PRODUCE ITS PRODUCTS. AN
EXTENDED INTERRUPTION IN THE OPERATION OF ANY THOSE FACILITIES COULD HAVE AN
ADVERSE IMPACT ON SAFELITE'S OPERATING RESULTS.
All of Safelite's manufacturing occurs at facilities in Enfield, North
Carolina and Wichita, Kansas. Safelite's manufacturing operations utilize
equipment which, if damaged or otherwise rendered inoperable, would result in
the disruption of Safelite's manufacturing operations. Although Safelite
maintains business interruption insurance which management believes is adequate,
any extended interruption of the operations at these facilities could have a
material adverse effect on Safelite's operating results. See
"Business -- Operations -- Manufacturing."
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<PAGE> 19
SAFELITE'S BUSINESS INVOLVES THE POTENTIAL FOR PRODUCT LIABILITY CLAIMS AGAINST
SAFELITE.
The manufacture and sale of windshields entails risk of product liability
claims. To date, no material product liability claims have been made against
Safelite relating to its manufacture and sale of windshields. There can be no
assurance, however, that these claims will not be made in the future. A
successful product liability claim (or series of claims) against Safelite in
excess of its insurance coverage could have a material adverse effect on
Safelite's business, financial condition and results of operations.
SAFELITE COMPETES WITH OTHER LARGE COMPANIES THAT PROVIDE AUTOMOTIVE GLASS
REPLACEMENT AND REPAIR SERVICES.
The markets for Safelite's products and services 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
Safelite 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 have market shares estimated to be 8% and 4%.
Safelite has experienced increasing levels of competition during fiscal
1999, particularly with respect to price. In addition, many of Safelite's
competitors have substantially less debt than Safelite, which may allow them
greater flexibility than Safelite in managing their operations. There can be no
assurance that Safelite will be able to continue to compete effectively with
these or other competitors.
In the summer of 1997, State Farm, one of Safelite's largest customers,
began to use a competitor to function as its glass claims call center and bill
processing administrator. The call center and bill processing functions were
moved to this competitor in a region by region rollout which was completed in
February 1998. Safelite's unit sales to State Farm declined substantially during
the nine months ended January 2, 1999 when compared to the combined units for
Safelite and Vistar during the nine months ended January 3, 1998. Management
believes that this decline was caused both by State Farm's new program and the
disruptions caused by the Vistar merger integration. Safelite is currently
taking actions which management believes will increase its unit sales to State
Farm. There can be no assurance that those actions will be successful or that
Safelite will not experience further declines in sales to State Farm. See
"Business -- Competition."
Competition in the wholesale market is based principally on price and
quality. Safelite is a relatively small participant in the wholesale market,
which is dominated by several significantly larger companies.
Future growth in Safelite's revenues will depend upon Safelite's ability to
(1) maintain and increase its market share in the installation and related
services market while continuing to provide high levels of customer service and
(2) access the wholesale market in order to utilize excess manufacturing
capacity. No assurance can be given that Safelite will be successful in
obtaining these objectives.
SAFELITE'S OPERATING RESULTS CAN BE AFFECTED BY SEASONALITY.
The severity of weather has historically affected Safelite'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 have an adverse affect on Safelite's results of operations.
18
<PAGE> 20
Safelite's business is somewhat seasonal, with the first and fourth
calendar quarters traditionally its slowest periods of activity. This reduced
level of sales in the first and fourth calendar quarters historically has
resulted in a disproportionate decline in operating income during these quarters
due to Safelite's significant operating leverage. Management believes such
seasonal trends will continue for the foreseeable future. See "Summary
Historical and Pro Forma Financial Information."
SAFELITE MAY EXPERIENCE DIFFICULTIES RELATED TO YEAR 2000 COMPUTER PROBLEMS.
Many computer systems in use today may be unable to correctly process data
or may not operate at all after December 31, 1999 because those systems
recognize the year within a date only by the last two digits. Some computer
programs may interpret the year "00" as 1900, instead of as 2000, causing errors
in calculations or the value "00" may be considered invalid by the computer
program, causing the system to fail. Year 2000 issues affect (1) Information
Technology (IT) utilized in Safelite's widely diversified business information
systems, including mainframe and client server hardware and software
communications, (2) non-IT systems utilized by Safelite, such as communications,
facilities management, and manufacturing and service equipment containing
embedded computer chips, and (3) IT and non-IT systems of significant customers
and suppliers.
Safelite could be adversely affected if Year 2000 issues are not resolved
by Safelite or its significant customers and suppliers before the Year 2000.
Possible adverse consequences include, but are not limited to (1) the inability
to obtain products or services used in business operations, (2) the inability to
transact business with customers, (3) the inability to execute transactions
through the financial markets, and (4) the inability to manufacture or deliver
goods or services sold to customers. Safelite's management believes that at
least some minor disruptions due to Year 2000 issues will occur. On a worst case
basis, if Safelite, one or more of its significant customers or suppliers, or
key government bodies are unable to implement timely and effective solutions to
the Year 2000 issues, Safelite could suffer material adverse effects. The
financial impact of these effects cannot currently be estimated.
Safelite relies heavily on computer technologies to operate its business.
As a result, Safelite continuously seeks to upgrade and improve its computer
systems in order to provide better service to its customers and to support
Safelite's growth. Safelite has initiated a program to prepare its computer
systems and applications for the Year 2000 change. As part of this program, a
team has been assigned to evaluate the nature and extent of the work required to
make Safelite's systems, products, electronic linkages with insurance company
customers and infrastructure Year 2000 compliant. Included in the scope of the
project are computer, network and communications hardware, systems and
applications software, telecommunication and point of sale equipment, "embedded
chip" issues within manufacturing and other facilities, as well as verification
with key suppliers and customers as to their readiness for the Year 2000 issue.
The assessment phase of the Year 2000 project is complete. Remediation for
Year 2000 compliance is underway and is currently estimated to be 70% complete
with final completion expected by August 1999. Implementation and testing is
underway and is scheduled to be complete by September 1999. Remediation of
systems and applications software is being effected through outside consultants,
"factory support", in-house staff and in some cases by the replacement of
software packages. Safelite is building an isolated test environment where
systems will be tested by resetting dates to various points beyond the year
2000.
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<PAGE> 21
Based on Safelite's latest assessments, the total cost of addressing the
Year 2000 issue is estimated to be in the range of $2.0 million to $3.0 million,
with the majority of these costs representing incremental business costs to
outside vendors and consultants. As of January 2, 1999, approximately $0.6
million of external costs have been incurred. Safelite does not separately track
the internal costs for the Year 2000 project, with these costs being principally
the related payroll costs for the management information systems staff.
Surveys of critical customers and suppliers are currently underway to
determine whether their systems will be timely converted. However, there can be
no assurance that the systems of other companies on which Safelite relies will
be timely converted or that any failure to convert by another company would not
have an adverse effect on Safelite's systems. Safelite has begun consideration
of contingency plans to deal with Year 2000 issues in the event that remediation
efforts are unsuccessful. These plans will be more fully developed in 1999 to
address specific areas of need.
Management expects that by the end of calendar 1999, all critical systems
that are currently not Year 2000 compliant will be corrected or replaced.
However, there is no assurance that significant Year 2000 related problems will
not immediately arise or that the impact of any failure to achieve Year 2000
compliance will not have a material adverse effect on Safelite's financial
condition.
SAFELITE IS SUBJECT TO REGULATIONS RELATED TO THE ENVIRONMENT. THE IMPACT OF ANY
FUTURE CHANGES IN, OR INCREASED COMPLIANCE COSTS RELATED TO, ENVIRONMENTAL
REGULATIONS CANNOT BE PREDICTED.
Safelite'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. Safelite is subject to federal, state and
local laws and regulations concerning the handling and disposal of hazardous
materials, and therefore incurs compliance costs in the ordinary course of its
business.
Safelite 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 Safelite. In
addition, Safelite does not anticipate any material capital expenditures for
environmental control facilities for the remainder of Safelite'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 Safelite. 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 Safelite. Regulations
resulting from the 1990 amendments to the Clean Air Act (the "1990 Amendments")
that will pertain to Safelite's manufacturing operations are currently not
expected to be promulgated until 1999 or later. Safelite cannot predict the
level of required capital expenditures resulting from future environmental
regulations; however, management does not anticipate that expenditures required
by these regulations, if any, will have a material adverse effect on Safelite.
SAFELITE DEPENDS ON ITS KEY PERSONNEL.
The success of Safelite depends in large part on Safelite'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. Safelite faces competition
20
<PAGE> 22
for personnel from other companies and other organizations. There can be no
assurance that Safelite will be successful in hiring or retaining key personnel.
Safelite has employment agreements with Messrs. Staglin, Barlow and Herron.
Safelite does not maintain key man life insurance on any of its executives. See
"Management -- Directors and Executive Officers."
OWNERSHIP OF SAFELITE IS CONCENTRATED.
Thomas H. Lee Equity Fund III, L.P., and affiliates of Thomas H. Lee
Company, collectively, "THL", and several members of management own
approximately 50.5% of the outstanding Class A Voting Stock of Safelite and
32.0% of the outstanding Class B Non-Voting Common Stock. Belron owns
approximately 49.5% of the Class A Voting Common Stock and 43.1% of the Class B
Non-Voting Common Stock. The shareholders agreement (as amended), which was
entered into in connection with the Vistar merger, gives THL and Belron each the
right to elect half of the members of Safelite's Board of Directors. In
addition, the shareholders agreement gives THL the exclusive right for a three
year period after the date of the Vistar merger to require Safelite to undertake
an initial public offering. The shareholders agreement also requires that THL
approve any debt or equity financing transactions where Safelite is expected to
receive net proceeds in excess of $25 million. See "Transactions -- The Vistar
Merger."
Because THL and members of management own more than 50% of the outstanding
voting common stock of Safelite and THL has the exclusive ability to determine
the outcome of fundamental corporate transactions such as refinancing
indebtedness or causing an initial public offering to occur, there can be no
assurance that the interests of THL and these members of management will not
conflict with the interests of the holders of the notes. See "Security Ownership
of Certain Beneficial Owners and Management."
FRAUDULENT CONVEYANCE LAWS APPLY TO THE NOTES.
Safelite's obligations under the outstanding notes could be subject to
review under federal and state fraudulent conveyance statutes in the event that
a bankruptcy, reorganization or rehabilitation case by or on behalf of unpaid
creditors of Safelite were to occur. Under these laws, the obligation of
Safelite to repay the notes could be voided, or the notes could be subordinated
to all other creditors of Safelite, including general unsecured creditors, if at
the time the notes were issued, any of the following were true:
(1) Safelite was insolvent or was rendered insolvent by reason of
issuing the outstanding notes,
(2) Safelite was engaged or about to engage in a business or
transaction with unreasonably small capital; or
(3) Safelite intended to incur, or believed that it would incur, debt
beyond its ability to pay as matured.
The measure of insolvency under fraudulent conveyance statutes will vary
depending upon the federal or local law that is being applied. Generally,
however, Safelite would be considered insolvent if, at the time it issued the
outstanding notes, either (1) the fair market value of its assets was less than
the amount required to pay the probable liability on its total existing debts
and liabilities as they become due or (2) Safelite had incurred debt beyond its
ability to pay that debt as it became due.
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<PAGE> 23
Management believes that at the time the outstanding notes were issued to
Safelite, Safelite received reasonably equivalent value or fair consideration
for issuing the outstanding notes. In addition, management believes that at the
time the outstanding notes were issued Safelite:
(1) was not insolvent or rendered insolvent by issuing the outstanding
notes,
(2) was and remains in possession of sufficient capital to meet its
obligations as those obligations mature or become due and to operate its
business effectively,
(3) did (and continues to) incur obligations within its ability to pay
those obligations as they mature or become due; and
(4) will have sufficient assets to satisfy any probable money judgment
against Safelite in any pending action.
No assurance can be given, however, that a court asked to rule on these
issues would reach the same conclusions.
THERE IS NO ESTABLISHED MARKET FOR THE NOTES AND NO ASSURANCE THAT THERE WILL BE
A LIQUID TRADING MARKET IN THE FUTURE.
Safelite does not intend to apply for a listing of the notes on a
securities exchange or on any automated dealer quotation system. There is
currently no established market for the notes and there can be no assurance that
a liquid market will exist so that the holders of the notes can sell their
notes. In addition, there can be no assurance as to the price at which holders
would be able to sell their notes. If markets for the notes exist, the notes
could trade at prices lower than the note's initial market value. The market
value of the notes will depend on many factors, including prevailing interest
rates and the markets for similar securities.
The Exchange Offer is not conditioned upon any minimum or maximum aggregate
principal amount of outstanding notes being tendered for exchange. No assurance
can be given as to the liquidity of the trading market for the notes, or, in the
case of nonexchanging holders of outstanding notes, the trading market for the
outstanding notes following the Exchange Offer.
OUTSTANDING NOTES THAT ARE NOT EXCHANGED IN THE EXCHANGE OFFER WILL CONTINUE TO
BE SUBJECT TO RESTRICTIONS ON TRANSFER.
Holders of outstanding notes who do not exchange the outstanding notes for
new notes as part of this Exchange Offer will continue to be subject to the
restrictions on transfer of the outstanding notes. These restrictions are
described in the legend to the outstanding notes. In general, the outstanding
notes may not be offered or sold unless (1) they are registered under the
Securities Act or (2) an exemption from the registration requirements of the
Securities Act and applicable state securities laws is available. Safelite does
not currently anticipate that it will register the outstanding notes under the
Securities Act.
22
<PAGE> 24
WHERE YOU CAN FIND MORE INFORMATION
Safelite files annual, quarterly and special reports, proxy statements and
other information with the SEC. You may read and copy any reports, statements or
other information Safelite files at the SEC's public reference rooms in
Washington, D.C., New York, New York and Chicago, Illinois. Please call the SEC
at 1-800-SEC-0330 for further information on the public reference rooms.
Safelite's SEC filings are also available to the public from commercial document
retrieval services and at the Website maintained by the SEC at www.sec.gov.
Safelite has filed a registration statement to register with the SEC notes to be
issued in the Exchange Offer. This prospectus is part of that registration
statement. As allowed by SEC rules, this prospectus does not contain all of the
information you can find in the registration statement or the exhibits to the
registration statement.
You should rely on the information contained in this prospectus to decide
whether to participate in the exchange offer. Safelite has not authorized anyone
to provide you with information that is different from what is contained in this
prospectus. You should not assume that the information contained in this
prospectus is accurate as of any date other than [ ,] 1999. This
prospectus does not constitute an offer to sell or a solicitation of an offer to
buy any securities in any jurisdiction in which, or to any person to whom, it is
unlawful to make any such offer or solicitation.
23
<PAGE> 25
FORWARD-LOOKING STATEMENTS
Investors are cautioned that there are statements contained in this
document, including but not limited to those under the caption Year 2000 Issues,
which are "forward-looking" statements within the meaning of the Private
Securities Litigation Reform Act of 1995 (the "Act"). Forward-looking statements
include statements which are predictive in nature, which depend upon or refer to
future events or conditions, which include words such as "expects",
"anticipates", "intends", "plans", "believes", "estimates", or similar
expressions. In addition, any statements concerning future financial performance
(including future revenues, earnings or growth rates), ongoing business
strategies or prospects, and possible future Company actions, which may be
provided by management are also forward-looking statements as defined by the
Act. Forward-looking statements are based on current expectations and
projections about future events and are subject to risks, uncertainties, and
assumptions about the Company, economic and market factors and the industries in
which Safelite does business, among other things. These statements are not
guaranties of future performance and Safelite has no specific intention to
update these statements.
These forward-looking statements, like any forward-looking statements,
involve risks and uncertainties that could cause actual results to differ
materially from those projected or anticipated. The risks and uncertainties
include product demand, regulatory uncertainties, the effect of economic
conditions, the impact of competitive products and pricing, changes in
customers' ordering patterns and costs and expenses associated with any Year
2000 issues associated with Safelite, including updating software and hardware
and potential system interruptions. This list should not be construed as
exhaustive.
USE OF PROCEEDS
Safelite will not receive any proceeds from the Exchange Offer. The net
proceeds from the issuance of the outstanding notes in December 1998 along with
proceeds from the equity investment in January 1999 were used to repay revolver
and term loans outstanding under the Bank Credit Agreement. This debt accrued
interest at the average rate of 7.7% during the three month period ended January
2, 1999. The repayment of the revolver and term loans outstanding occurred on
January 29, 1999. The remainder of the gross proceeds was used to pay fees and
expenses related to the issuance of the outstanding notes. As discussed in
"About This Transaction" the outstanding notes contained a provision which
required that the note proceeds be held in escrow until Safelite received an
equity investment of at least $50 million. As a result, from December 18, 1998
to January 29, 1999, the net proceeds from the issuance of the outstanding notes
were held in escrow by a collateral agent.
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<PAGE> 26
CAPITALIZATION
The following table shows the unaudited actual and "as adjusted"
capitalization of Safelite as of January 2, 1999. The "as adjusted" column shows
Safelite's capitalization on a pro forma basis after giving effect to the
issuances as if the issuances were completed on January 2, 1999.
<TABLE>
<CAPTION>
JANUARY 2, 1999
-------------------------
HISTORICAL AS ADJUSTED
---------- -----------
(DOLLARS IN MILLIONS)
<S> <C> <C>
Cash and cash collateral for outstanding notes.......... $ 54.2 $ 7.8
====== ======
Long-term debt (including current maturities):
Revolving Credit Facility(1).......................... $ 79.0 $ 44.0
Term Loan Facility:
Tranche A.......................................... 150.0 123.6
Tranche B.......................................... 100.0 82.5
Tranche C.......................................... 100.0 82.5
Other long-term debt.................................. 8.2 8.2
Existing Notes........................................ 100.0 100.0
Outstanding Notes(2).................................. 50.4 50.4
------ ------
Total long-term debt.......................... 587.6 491.2
Total stockholders' deficit............................. (58.5) (12.5)(3)
------ ------
Total capitalization.................................... $529.1 $478.7
====== ======
</TABLE>
- ---------------
(1) The revolving credit facility provides for borrowings of up to $100 million.
As of January 2, 1999, Safelite's actual availability under the revolving
credit facility was $4.6 million (net of outstanding letters of credit which
reduce Safelite's ability to borrow under the revolving credit facility). On
a pro forma basis after giving effect to the issuances, availability under
the revolving credit facility would have been $39.6 million (net of
outstanding letters of credit).
(2) Reflects original issue discount of $4.6 million.
(3) Reflects (a) the $50.0 million equity investment, (b) the net of tax impact
of expensing of $5.2 million in unamortized debt issue costs relating to the
"pre-amended" Bank Credit Agreement and (c) the net of tax impact of
expensing $1.5 million in fees for the amendment to the Bank Credit
Agreement. The tax benefit from items (b) and (c) totaled $2.7 million.
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<PAGE> 27
THE EXCHANGE OFFER
PURPOSE OF THE EXCHANGE OFFER
When Safelite sold the outstanding notes in December 1998, it entered into
an exchange and registration rights agreement with the initial purchasers of
those notes. Under the exchange and registration rights agreement, Safelite
agreed to file a registration statement regarding the exchange of the
outstanding notes for notes which are registered under the Securities Act of
1933. Safelite also agreed to use its reasonable best efforts to cause the
registration statement to become effective with the Securities and Exchange
Commission, and to conduct this Exchange Offer after the registration statement
is declared effective. The exchange and registration rights agreement provides
that Safelite will be required to pay liquidated damages to the holders of the
outstanding notes if:
(1) the registration statement is not filed by April 17, 1999;
(2) the registration statement is not declared effective by August 15,
1999; or
(3) the Exchange Offer has not been completed by September 14, 1999.
A copy of the exchange and registration rights agreement is filed as an
exhibit to the registration statement.
TERMS OF THE EXCHANGE OFFER
Upon the terms and subject to the conditions set forth in this prospectus
and in the accompanying letter of transmittal (which together constitute the
Exchange Offer), Safelite will accept for exchange outstanding notes which are
properly tendered on or before the Expiration Date and are not withdrawn as
permitted below. As used in this prospectus, "Expiration Date" means 5:00 p.m.,
New York City time, on , 1999, or any later date and time to
which Safelite, in its sole discretion, extends the Exchange Offer.
The form and terms of the notes being issued in the Exchange Offer are the
same as the form and terms of the outstanding notes, except that:
(1) the notes being issued in the Exchange Offer will have been
registered under the Securities Act;
(2) the notes issued in the Exchange Offer will not bear the
restrictive legends restricting their transfer under the Securities Act;
and
(3) the notes being issued in the Exchange Offer will not be entitled
to the registration rights and liquidated damages provisions contained in
the exchange and registration rights agreement related to the outstanding
notes.
Notes tendered in the Exchange Offer must be in denominations of the
principal amount of $1,000 and/or any integral multiple of $1,000.
Safelite expressly reserves the right, in its sole discretion:
(1) to extend the Expiration Date;
(2) to delay accepting any outstanding notes;
(3) if any of the conditions set forth below under "-- Conditions to
the Exchange Offer" have not been satisfied, to terminate the Exchange
Offer and not accept any notes for exchange; or
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<PAGE> 28
(4) to amend the Exchange Offer in any manner.
If Safelite exercises its right to extend the Expiration Date, it will give
oral or written notice of the extension to State Street Bank and Trust Company,
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 an extension, all outstanding notes previously tendered will remain
subject to the Exchange Offer and may be accepted for exchange by Safelite. Any
outstanding notes not accepted for exchange for any reason will be returned
without cost to the holder that tendered them as promptly as practicable after
the expiration or termination of the Exchange Offer.
HOW TO TENDER NOTES FOR EXCHANGE
When the holder of outstanding notes tenders, and Safelite accepts, notes
for exchange, a binding agreement between Safelite and the tendering holder is
created, subject to the terms and conditions set forth in this prospectus and
the accompanying letter of transmittal. Except as set forth below, a holder of
outstanding notes who wishes to tender notes for exchange must do the following
on or prior to the Expiration Date:
(1) transmit a properly completed and duly executed letter of
transmittal, including all other documents required by the letter of
transmittal, to State Street Bank and Trust Company, the "Exchange Agent"
for this Exchange Offer, at the address set forth in the letter of
transmittal; or
(2) if notes are tendered pursuant to the book-entry procedures set
forth below, the tendering holder must transmit an agent's message to the
Exchange Agent at the address set forth in the letter of transmittal.
In addition, either:
(1) the Exchange Agent must receive the certificates for the
outstanding notes and the letter of transmittal;
(2) the Exchange Agent must receive, prior to the Expiration Date, a
timely confirmation of the book-entry transfer of the notes being tendered
into the Exchange Agent's account at the Depository Trust Company (the
"DTC"), along with the letter of transmittal or an agent's message; or
(3) the holder must comply with the guaranteed delivery procedures
described below.
The term "agent's message" means a message, transmitted to the DTC and
received by the Exchange Agent and forming a part of a book-entry transfer (a
"book-entry confirmation"), which states that the DTC has received an express
acknowledgment that the tendering holder agrees to be bound by the letter of
transmittal and that Safelite may enforce the letter of transmittal against the
holder.
THE METHOD OF DELIVERY OF THE OUTSTANDING NOTES, THE LETTERS OF TRANSMITTAL
AND ALL OTHER REQUIRED DOCUMENTS IS AT THE ELECTION AND RISK OF THE HOLDERS. IF
THE DELIVERY IS BY MAIL, SAFELITE RECOMMENDS REGISTERED MAIL, PROPERLY INSURED,
WITH RETURN RECEIPT REQUESTED. IN ALL CASES, YOU SHOULD ALLOW SUFFICIENT TIME TO
ASSURE TIMELY DELIVERY. NO LETTERS OF TRANSMITTAL OR NOTES SHOULD BE SENT
DIRECTLY TO SAFELITE.
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<PAGE> 29
Signatures on a letter of transmittal or a notice of withdrawal, as the
case may be, must be guaranteed unless the notes surrendered for exchange are
tendered:
(1) by a holder of outstanding notes who has not completed the box
entitled "Special Issuance Instructions" or "Special Delivery Instructions"
on the letter of transmittal; or
(2) for the account of an eligible institution.
An "eligible institution" is a firm which is a member of a registered
national securities exchange or a member of the National Association of
Securities Dealers, Inc., or a commercial bank or trust company having an office
or correspondent in the United States.
If signatures on a letter of transmittal or notice of withdrawal are
required to be guaranteed, the guarantor must be an eligible institution. If
notes are registered in the name of a person other than the signer of the letter
of transmittal, the notes surrendered for exchange must be endorsed or
accompanied by a written instrument or instruments of transfer or exchange in
form satisfactory to Safelite in its sole discretion, and duly executed by the
registered holder with the holder's signature guaranteed by an eligible
institution.
Safelite will determine all questions as to the validity, form, eligibility
(including time of receipt) and acceptance of notes tendered for exchange in its
sole discretion. Safelite's determination will be final and binding. Safelite
reserves the absolute right to:
(1) reject any and all tenders of any note improperly tendered;
(2) refuse to accept any note if, in Safelite's judgment or the
judgment of Safelite's counsel, acceptance of the note may be deemed
unlawful; and
(3) waive any defects or irregularities or conditions of the Exchange
Offer as to any particular note either before or after the Expiration Date,
including the right to waive the ineligibility of any holder who seeks to
tender notes in the Exchange Offer.
Safelite's interpretation of the terms and conditions of the Exchange Offer
as to any particular notes either before or after the Expiration Date, including
the letter of transmittal and the instructions to it, will be final and binding
on all parties. Holders must cure any defects and irregularities in connection
with tenders of notes for exchange in what is in Safelite's determination a
reasonable time period, unless Safelite waives these defects or irregularities.
Neither Safelite, the Exchange Agent nor any other person shall be under any
duty to give notification of any defect or irregularity with respect to any
tender of notes for exchange, nor will any of them incur any liability for
failure to give this notification.
If a person or persons other than the registered holder or holders of the
outstanding notes tendered for exchange signs the letter of transmittal, the
tendered notes must be endorsed or accompanied by appropriate powers of
attorney, in either case signed exactly as the name or names of the registered
holder or holders that appear on the outstanding notes.
If trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporations or others acting in a fiduciary or representative
capacity sign the letter of transmittal or any notes or any power of attorney,
these persons should so indicate when signing, and you must submit proper
evidence satisfactory to Safelite of this person's authority to so act unless
Safelite waives this requirement.
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<PAGE> 30
By tendering, each holder will represent to Safelite, among other things,
that the person acquiring notes in the Exchange Offer is obtaining them in the
ordinary course of its business, whether or not the person is the holder, and
that neither the holder nor other person acquiring the notes has any arrangement
or understanding with any person to participate in the distribution of the notes
issued in the Exchange Offer. If any holder or other person acquiring the notes
is (a) an "affiliate," as defined under Rule 405 of the Securities Act, of
Safelite, or (b) is engaged in or intends to engage in or has an arrangement or
understanding with any person to participate in a distribution of the notes to
be acquired in the Exchange Offer, the holder or other person acquiring the
notes:
(1) may not rely on the applicable interpretations of the staff of the
SEC; and
(2) must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with any resale
transaction.
Each broker-dealer who acquired its outstanding notes as a result of
market-making activities or other trading activities and thereafter receives
notes issued for its own account in the Exchange Offer, must acknowledge that it
will deliver a prospectus in connection with any resale of the notes issued in
the Exchange Offer. See "Plan of Distribution." The letter of transmittal 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.
ACCEPTANCE OF OUTSTANDING NOTES FOR EXCHANGE; DELIVERY OF NOTES ISSUED IN THE
EXCHANGE OFFER
Upon satisfaction or waiver of all of the conditions to the Exchange Offer,
Safelite will accept, promptly after the Expiration Date, all outstanding notes
properly tendered and will issue notes registered under the Exchange Act. See
"-- Conditions to the Exchange Offer." For purposes of the Exchange Offer,
Safelite shall be deemed to have accepted properly tendered outstanding notes
for exchange when, as and if it has given oral or written notice to the Exchange
Agent, with written confirmation of any oral notice to be given promptly
thereafter.
For each outstanding note accepted for exchange, the holder will receive a
note registered under the Securities Act having a principal amount equal to that
of the surrendered outstanding note. Accordingly, registered holders of notes
issued in the Exchange Offer on the relevant record date for the first interest
payment date following the consummation of the Exchange Offer will receive
interest accruing from the most recent date to which interest has been paid or,
if no interest has been paid on the outstanding notes, from December 15, 1998.
Outstanding notes that Safelite accepts for exchange will stop accruing interest
on the date of consummation of the Exchange Offer. Under the exchange and
registration rights agreement, Safelite may be required to make additional
payments in the form of liquidated damages to the holders of the outstanding
notes under circumstances relating to the timing of the Exchange Offer.
In all cases, Safelite will issue notes in the Exchange Offer for
outstanding notes that are accepted for exchange only after the Exchange Agent
timely receives:
(1) certificates for the outstanding notes or a timely book-entry
confirmation of the outstanding notes into the Exchange Agent's account at
the DTC;
(2) a properly completed and duly executed letter of transmittal or an
agent's message; and
29
<PAGE> 31
(3) all other required documents.
If for any reason set forth in the terms and conditions of the Exchange
Offer Safelite does not accept any tendered outstanding notes, or if a holder
submits outstanding notes for a greater principal amount than the holder desires
to exchange, Safelite will return the unaccepted or non-exchanged notes without
cost to the tendering holder. In the case of notes tendered by book-entry
transfer into the Exchange Agent's account at the DTC, the non-exchanged notes
will be credited to an account maintained with the DTC. Safelite will return the
notes or have them credited to the DTC account as promptly as practicable after
the expiration or termination of the Exchange Offer.
BOOK ENTRY TRANSFERS
The Exchange Agent will make a request to establish an account with respect
to the outstanding notes at the DTC for purposes of the Exchange Offer within 2
business days after the date of this prospectus. Any financial institution that
is a participant in the DTC's systems must make book-entry delivery of
outstanding notes by causing the DTC to transfer the outstanding notes into the
Exchange Agent's account at the DTC in accordance with the DTC's procedures for
transfer. The participant should transmit its acceptance to the DTC on or prior
to the Expiration Date or comply with the guaranteed delivery procedures
described below. DTC will verify the acceptance, execute a book-entry transfer
of the tendered outstanding notes into the Exchange Agent's account at DTC and
then send to the Exchange Agent confirmation of the book-entry transfer. The
confirmation of the book-entry transfer will include an agent's message
confirming that DTC has received an express acknowledgment from the participant
that the participant has received and agrees to be bound by the letter of
transmittal and that Safelite may enforce the letter of transmittal against the
participant. Delivery of notes issued in the Exchange Offer may be effected
through book-entry transfer at DTC. However, the letter of transmittal or
facsimile thereof or an agent's message, with any required signature guarantees
and any other required documents, must:
(1) be transmitted to and received by the Exchange Agent at the
address set forth below under "-- Exchange Agent" on or prior to the
Expiration Date; or
(2) comply with the guaranteed delivery procedures described below.
GUARANTEED DELIVERY PROCEDURES
If a holder of outstanding notes desires to tender the notes and the
holder's notes are not immediately available, or time will not permit the
holder's notes or other required documents 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:
(1) the holder tenders the notes through an eligible institution;
(2) prior to the Expiration Date, the Exchange Agent receives from the
eligible institution a properly completed and duly executed notice of
guaranteed delivery, substantially in the form Safelite has provided, by
telegram, telex, facsimile transmission, mail or hand delivery, setting
forth the name and address of the holder of the notes being tendered and
the amount of the notes being tendered. The notice of guaranteed delivery
will state that the tender is being made and guarantee that within 3 New
York Stock Exchange ("NYSE") trading days after the date of execution of
the notice of guaranteed delivery, the certificates for all physically
tendered notes, in proper form for transfer, or a book-entry confirmation,
as the case may be, together
30
<PAGE> 32
with a properly completed and duly executed letter of transmittal or
agent's message with any required signature guarantees and any other
documents required by the letter of transmittal will be deposited by the
eligible institution with the Exchange Agent; and
(3) the Exchange Agent receives the certificates for all physically
tendered outstanding notes, in proper form for transfer, or a book-entry
confirmation, as the case may be, together with a properly completed and
duly executed letter of transmittal or agent's message with any required
signature guarantees and any other documents required by the letter of
transmittal, within 3 New York Stock Exchange trading days after the date
of execution of the notice of guaranteed delivery.
WITHDRAWAL RIGHTS
You may withdraw tenders of your outstanding notes at any time prior to
5:00 p.m., New York City time, on the Expiration Date.
For a withdrawal to be effective, you must send a written notice of
withdrawal to the Exchange Agent at one of the addresses set forth in the letter
of transmittal. Any notice of withdrawal must:
(1) specify the name of the person having tendered the outstanding
notes to be withdrawn;
(2) identify the outstanding notes to be withdrawn, including the
principal amount of the outstanding notes; and
(3) where certificates for outstanding notes are transmitted, specify
the name in which outstanding notes are registered, if different from that
of the withdrawing holder.
If certificates for outstanding notes have been delivered or otherwise
identified to the Exchange Agent, then, prior to the release of the certificates
the withdrawing holder must also submit the serial numbers of the particular
certificates to be withdrawn and a signed notice of withdrawal with signatures
guaranteed by an eligible institution unless the holder is an eligible
institution. If notes have been tendered pursuant to the procedure for book-
entry transfer described above, any notice of withdrawal must specify the name
and number of the account at the DTC to be credited with the withdrawn notes and
otherwise comply with the procedures of the facility. Safelite will determine
all questions as to the validity, form and eligibility (including time of
receipt) of these notices and Safelite's determination will be final and binding
on all parties. Any tendered notes so withdrawn will be deemed not to have been
validly tendered for exchange for purposes of the Exchange Offer.
Any notes which have been tendered for exchange but which are not exchanged
for any reason will be returned to the holder without cost to the holder. In the
case of notes tendered by book-entry transfer into the Exchange Agent's account
at the DTC, the notes withdrawn will be credited to an account maintained with
the DTC for the outstanding notes. The notes will be returned or credited to the
DTC account as soon as practicable after withdrawal, rejection of tender or
termination of the Exchange Offer. Properly withdrawn notes may be re-tendered
by following one of the procedures described under "-- How to Tender Notes for
Exchange" above at anytime on or prior to 5:00 p.m., New York City time, on the
Expiration Date.
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<PAGE> 33
CONDITIONS TO THE EXCHANGE OFFER
Safelite is not required to accept for exchange, or to issue notes in the
Exchange Offer for any outstanding notes. Safelite may terminate or amend the
Exchange Offer, if at any time before the acceptance of the outstanding notes
for exchange:
(1) any federal law, statute, rule or regulation has been adopted or
enacted which, in Safelite's judgment, would reasonably be expected to
impair Safelite's ability to proceed with the Exchange Offer;
(2) any stop order is threatened or in effect with respect to the
registration statement or the qualification of the Indenture under the
Trust Indenture Act of 1939, as amended; or
(3) there is a change in the current interpretation by SEC staff which
permits the notes issued in the Exchange Offer in exchange for the
outstanding notes to be offered for resale, resold and otherwise
transferred by the holders (other than broker-dealers and any holder which
is an "affiliate" of Safelite 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 the notes acquired
in the Exchange Offer are acquired in the ordinary course of the holder's
business and the holder has no arrangement or understanding with any person
to participate in the distribution of the notes issued in the Exchange
Offer.
The preceding conditions are for Safelite's sole benefit and Safelite may
assert them regardless of the circumstances giving rise to any of these
conditions. Safelite may waive these conditions in whole or in part at any time
in its sole discretion. If Safelite does so, the Exchange Offer will remain open
for at least 3 business days following any waiver of these conditions.
Safelite's failure at any time to exercise the foregoing rights shall not be
considered a waiver of any of these rights and each right will be considered an
ongoing right which Safelite may assert at any time.
THE EXCHANGE AGENT
State Street Bank and Trust Company has been appointed as Safelite's
Exchange Agent for the Exchange Offer. All executed letters of transmittal
should be directed to the Exchange Agent at the address set forth in the letter
of transmittal.
DELIVERY OF THE LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN THE ONE
LISTED IN THE LETTER OR TRANSMISSION OF THE LETTER OR TRANSMITTAL VIA FACSIMILE
OTHER THAN TO A NUMBER LISTED IN THE LETTER WILL NOT CONSTITUTE A VALID DELIVERY
OF THE LETTER OF TRANSMITTAL.
FEES AND EXPENSES
Safelite will not make any payment to brokers, dealers, or others
soliciting acceptance of the Exchange Offer except for reimbursement of mailing
expenses.
TRANSFER TAXES
Holders who tender their outstanding notes for exchange will not be
obligated to pay any transfer taxes in connection with the exchange. If,
however, notes issued in the Exchange Offer are to be delivered to, or are to be
issued in the name of, any person other than the holder of the notes tendered,
or if a transfer tax is imposed for any reason other than the exchange of
outstanding notes in connection with the Exchange Offer, then the holder must
pay these transfer taxes, whether imposed on the registered holder or on the
32
<PAGE> 34
other person to which the notes are being issued. If satisfactory evidence of
payment of, or exemption from, these taxes is not submitted with the letter of
transmittal, the amount of these transfer taxes will be billed directly to the
tendering holder.
CONSEQUENCES OF FAILURE TO EXCHANGE OUTSTANDING NOTES
Holders who desire to tender their outstanding notes in exchange for notes
registered under the Securities Act should allow sufficient time to ensure
timely delivery. Neither the Exchange Agent nor Safelite is under any duty to
give notification of defects or irregularities with respect to the tenders of
notes for exchange.
Outstanding notes that are not tendered or are tendered but not accepted
will, following the consummation of the Exchange Offer, continue to be subject
to (1) the provisions in the Indenture regarding the transfer and exchange of
the outstanding notes and (2) the existing restrictions on transfer set forth in
the legend on the outstanding notes and in the related offering memorandum dated
December 18, 1998.
Outstanding notes, unless registered under the Securities Act, may not be
offered or sold except pursuant to an exemption from, or in a transaction not
subject to, the Securities Act and applicable state securities laws. Safelite
does not currently anticipate that it will take any action to register the
outstanding notes under the Securities Act or under any state securities laws.
If outstanding notes are tendered and accepted in the Exchange Offer, a
holder's ability to sell untendered outstanding notes could be adversely
affected.
Upon completion of the Exchange Offer, holders of the outstanding notes
will not be entitled to any further registration rights under the exchange and
registration rights agreement.
Holders of the notes issued in the Exchange Offer and any outstanding notes
which remain outstanding after consummation of the Exchange Offer will vote
together as a single class for purposes of determining whether holders of the
requisite percentage of the class have taken actions or exercised rights under
the Indenture.
CONSEQUENCES OF EXCHANGING OUTSTANDING NOTES
Based on interpretations of the staff of the SEC as set forth in no-action
letters to third parties, Safelite believes that the notes issued in the
Exchange Offer may be offered for resale, resold or otherwise transferred by
holders of the notes. The exception to this would be any holder which is an
"affiliate" of Safelite within the meaning of Rule 405 under the Securities Act.
The notes issued in this Exchange Offer may be offered for resale, resold or
otherwise transferred without compliance with the registration and prospectus
delivery provisions of the Securities Act, if:
(1) the notes are acquired in the ordinary course of the holder's
business; and
(2) the holder, other than broker-dealers, has no arrangement or
understanding with any person to participate in the distribution of the
notes issued in the Exchange Offer.
It should be noted that the SEC has not considered this Exchange Offer in
the context of a no-action letter. As a result, Safelite cannot assure that the
staff of the SEC would make a similar determination related to this Exchange
Offer as they have in these other circumstances.
33
<PAGE> 35
Each holder, other than a broker-dealer, must furnish a written
representation, at Safelite's request, that:
(1) it is not an affiliate of Safelite;
(2) it is not engaged in, and does not intend to engage in, a
distribution of the notes issued in the Exchange Offer and has no
arrangement or understanding to participate in a distribution of notes
issued in the Exchange Offer; and
(3) it is acquiring the notes issued in the Exchange Offer in the
ordinary course of its business.
Each broker-dealer that receives notes issued in the Exchange Offer for its
own account must acknowledge that the outstanding notes were acquired by that
broker-dealer as a result of market-making or other trading activities and that
it will deliver a prospectus in connection with any resale of the notes issued
in the Exchange Offer. See "Plan of Distribution."
In addition, to comply with state securities laws of some jurisdictions,
the notes issued in the Exchange Offer may not be offered or sold in any state
unless (1) they have been registered or qualified for sale in the state or an
exemption from registration or (2) qualification is available and complied with
by the holders selling the notes. Safelite has agreed in the exchange and
registration rights agreement that, prior to any public offering of transfer
restricted securities, Safelite will register or qualify the transfer restricted
securities for offer or sale under the securities laws of any jurisdiction
requested by a holder. Unless a holder requests, Safelite currently does not
intend to register or qualify the sale of the notes issued in the Exchange Offer
in any state where an exemption from registration or qualification is required
and not available. "Transfer restricted securities" means each note until:
(1) the date on which the note has been exchanged by a person other
than a broker-dealer for a note in the Exchange Offer;
(2) following the exchange by a broker-dealer in the Exchange Offer of
a note for a note issued in the Exchange Offer, the date on which the note
issued in the Exchange Offer is sold to a purchaser who receives from the
broker-dealer on or prior to the date of the sale a copy of this
prospectus;
(3) the date on which the note has been effectively registered under
the Securities Act and disposed of in accordance with a shelf registration
statement that Safelite files in accordance with the exchange and
registration rights agreement; or
(4) the date on which the note is distributed to the public in a
transaction under Rule 144 of the Securities Act.
34
<PAGE> 36
TRANSACTIONS
THE THL TRANSACTIONS
Prior to December 20, 1996, Safelite Glass Corp. was a subsidiary of LSNWY
Corp., and an indirect subsidiary of Lear Siegler Diversified Holdings Corp. On
December 20, 1996, Safelite completed a series of related transactions which
resulted in Thomas H. Lee Equity Fund III, L.P., other affiliates of Thomas H.
Lee Company and certain other investors, collectively, "THL", acquiring
approximately 88% of Safelite's voting stock and all of the outstanding shares
of Safelite's 8% Cumulative Preferred Stock. Some existing stockholders,
including members of management, retained ownership of approximately 12% of
Safelite's voting stock. These transactions also resulted in Safelite acquiring,
through a newly formed subsidiary, substantially all of the outstanding common
stock of Lear Siegler, its former parent. The transactions described above will
be referred to in this prospectus as the "THL Transactions." The THL
Transactions were made pursuant to a Recapitalization Agreement and a Plan of
Merger and Stock Purchase Agreement dated November 8, 1996. This
"Recapitalization Agreement" is filed as an exhibit to Safelite's registration
statement for these notes.
A summary schematic diagram of the structure of Safelite before the THL
Transactions and the corporate structure of Safelite following the THL
Transactions is set forth below.
[PRE-THL TRANSACTIONS STRUCTURE CHART & POST-THL TRANSACTIONS STRUCTURE CHART]
The Pre-THL Transactions Structure Chart shows the following organizational
structure: Lear Siegler Holdings Corp. as the parent corporation, with LSNWY
Corp. and "Other Lear Siegler Subsidiaries" as direct subsidiaries of Lear
Siegler Holdings Corp., and Safelite Glass Corp. as a direct subsidiary of LSNWY
Corp. The chart also indicates that the pre-THL Transactions stockholders of
Safelite Glass Corp. were LSNWY Corp. and other stockholders (including
management), as described in more detail in the text following the chart.
The Post-THL Transactions Structure Chart shows the following organizational
structure: Safelite Glass Corp. as the parent corporation, with L.S. Aquisition
Corp. as a direct subsidiary of Safelite Glass Corp., Lear Siegler Holdings
Corp. as a direct subsidiary of L.S. Acquisition Corp., and LSNWY Corp. and
"Other Lear Siegler Subsidiaries" as direct subsidiaries of Lear Siegler
Holdings Corp. The chart also indicates that the post-THL Transactions
stockholders of Safelite Glass Corp. were THL and certain other stockholders
(including management), as described in more detail in the text following the
chart.
As a result of the THL Transactions, THL held a direct equity investment in
Safelite and other stockholders of Safelite, primarily management, retained
their existing interest in Safelite. Management believed that this resulting
structure accurately reflected the
35
<PAGE> 37
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.
SALE OF LEAR SIEGLER
On September 12, 1997, Safelite sold all of the issued and outstanding
shares of the capital stock of Lear Siegler to BPLSI Investment Company, a
Delaware corporation. The sale was made pursuant to a stock purchase agreement
between Lear Siegler, Safelite, BPLSI and James F. Mathews, the former President
of Lear Siegler and the sole shareholder of BPLSI. The purchase price for the
Lear Siegler Stock was $100,000 in cash plus a promissory note delivered by
BPLSI to Safelite. The promissory note is not for a fixed dollar amount but
instead provides that BPLSI must pay to Safelite an amount equal to 50% of the
net proceeds realized, directly or indirectly, by Lear Siegler from the
liquidation or other disposition, if any, of the assets belonging to Lear
Siegler which were seized by the Cuban government when Fidel Castro came to
power. Due to restrictions in the acquisition documents governing the THL
Transactions, it is not expected that BPLSI will be able to make any payment
under the promissory note until June 21, 2003. Also, due to the
wholly-contingent nature of the ability of Lear Siegler or any of its
subsidiaries to realize any proceeds from the liquidation or other disposition
of any of the "Cuban Assets," there can be no assurance that BPLSI will make any
payments to Safelite under the promissory note. Accordingly, Safelite has
recorded the promissory note at a net book value of zero, and recorded a loss of
$5.4 million in fiscal 1997 related to the sale of Lear Siegler.
The operations of Lear Siegler, a former industrial conglomerate whose
subsidiaries manufactured a range of products, were never an integral part of
Safelite's automotive glass replacement and repair business. Management believes
that the sale of Lear Siegler enables Safelite to focus on its core business.
THE CONSENT SOLICITATION
On November 28, 1997, Safelite began a solicitation of consents, from the
holders of the Existing Notes, to make amendments to the Existing Notes
Indenture. The consent solicitation requested, among other things, permission
for Safelite to (1) make a distribution to its shareholders and (2) increase the
amount of its senior bank debt in order to make this distribution and to
consummate the Vistar merger. See "-- The Vistar Transactions." On December 12,
1997, Safelite successfully completed the consent solicitation by receiving the
requisite consents to the amendments to the Existing Notes Indenture from the
holders of the Existing Notes. Upon consummation of the distribution, Safelite
made consent payments totaling $5.0 million ($50.00 for each $1,000.00 in
Existing Notes principal amount outstanding).
THE VISTAR TRANSACTIONS
On December 19, 1997, Safelite completed the Vistar merger, whereby Vistar
was merged with and into Safelite, with Safelite as the surviving corporation.
Prior to the Vistar Merger, Safelite:
(1) declared and paid a dividend on its outstanding shares of Class A
Common Stock totaling approximately $67.2 million,
36
<PAGE> 38
(2) declared and paid a dividend on its outstanding shares of 8%
Cumulative Preferred Stock equal to the accrued and unpaid dividends
thereon of approximately $4.7 million, and
(3) redeemed all outstanding shares of its 8% Cumulative Preferred
Stock at an aggregate redemption price of $58.2 million.
The three items above are referred to as the "Distribution." After the
Distribution, but prior to consummation of the Vistar merger, Safelite effected
a 1 for 3 reverse stock split of its Class A common stock, which was
reclassified as Class A Voting Common Stock. At the same time, Safelite
reclassified its currently authorized class of Class B common stock as Class B
Non-Voting common stock. Safelite then declared and paid a dividend on each
share of Class A Voting Stock outstanding after the reverse stock split in the
form of two shares of Class B Non-Voting Stock. Safelite also authorized the
creation of a new series of preferred stock, designated as Non-Voting 8%
Preferred Stock. See "Description of Capital Stock -- Non-Voting Preferred
Stock." The purpose of the reverse stock split and the authorization of the new
non-voting preferred stock was to create the appropriate classes of stock to use
as part of the purchase consideration for Vistar.
Upon consummation of the Vistar merger, Vistar shareholders received merger
consideration consisting of 1,690,101 shares of Class A Voting Stock, 6,959,771
shares of Class B Non-Voting Stock, 40,000 shares of Non-Voting Preferred Stock
($40 million aggregate liquidation preference) and $65 million cash. As a result
of the Vistar merger, Safelite shareholders retained ownership of 50.5% of the
outstanding Class A Voting Stock and became the owners of approximately 33% of
the outstanding Class B Non-Voting Stock (including shares subject to
exercisable options to acquire Class B Non-Voting Stock). Vistar shareholders
became the owners of 49.5% of the outstanding Class A Voting Stock,
approximately 67% of the outstanding Class B Non-Voting Stock and 100% of the
outstanding Non-Voting Preferred Stock. See "Security Ownership of Certain
Beneficial Owners and Management." The Class B Non-Voting Stock may convert into
Class A Voting Stock in some circumstances. See "Description of Capital
Stock -- Common Stock."
In connection with the Vistar merger, substantially all of the Safelite
shareholders and all of the Vistar shareholders entered into a Shareholders
Agreement which established rights and restrictions with respect to the
management of Safelite and transfers of the Class A Voting Stock and the Class B
Non-Voting Stock. The shareholders of both companies also entered into a
Registration Agreement providing for rights to cause the Company to register its
Class A Voting Stock and the Class B Non-Voting Stock under the Securities Act
of 1933. The Shareholders Agreement was amended as of March 26, 1998, to provide
for additional board designation rights. Unless otherwise noted, references in
this prospectus to the Shareholders Agreement shall mean the Shareholders
Agreement, as amended. See "Relationships and Related Transactions."
37
<PAGE> 39
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
The following unaudited pro forma consolidated statement of operations of
Safelite is based on the audited financial statements of Safelite and Vistar, as
adjusted to illustrate the estimated effects of the Vistar merger and sale of
Lear Siegler. The unaudited pro forma adjustments are based on available
information and assumptions that management 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 Vistar and other financial information pertaining to both companies
included in this prospectus including "Vistar Transactions" and "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
The Unaudited Pro Forma Consolidated Statement of Operations has been
prepared to give effect to the Vistar merger and sale of Lear Siegler as though
these transactions had occurred on December 29, 1996, the first day of
Safelite's 1997 fiscal year. This data is presented for illustrative purposes
only and is not necessarily indicative of what Safelite's results of operations
would actually have been had the Vistar merger and sale of Lear Siegler been
completed at the beginning of the period indicated nor is it necessarily
indicative of future operating results. In addition, the Unaudited Pro Forma
Consolidated Statement of Operations does not reflect any impact of the issuance
of the outstanding notes, the $50 million equity investment or the related pay
down of revolver and term loan balances.
SAFELITE GLASS CORP.
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS(1)
FOR THE YEAR ENDED JANUARY 3, 1998
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
LEAR SIEGLER VISTAR SAFELITE
SAFELITE VISTAR PRO FORMA PRO FORMA PRO FORMA
HISTORICAL(2) HISTORICAL ADJUSTMENTS ADJUSTMENTS COMBINED
------------- ---------- ------------ ----------- ---------
<S> <C> <C> <C> <C> <C>
Sales:
Installation and related services...... $430,290 $434,245 $ $(15,446)(3) $826,789
(22,300)(4)
Wholesale................................ 53,014 -- 53,014
-------- -------- --------
Total sales......................... 483,304 434,245 879,803
Cost of sales............................ 331,658 363,545 (15,446)(3) 679,757
-------- -------- --------
Gross profit............................. 151,646 70,700 200,046
Selling, general and administrative...... 111,815 80,575 (1,107)(5) (5,079)(6) 186,704
500(7)
Restructuring expenses................... 2,865 -- 2,865
Loss on sale of Lear Siegler............. 5,418 5,418
Other operating expenses................. 5,704 2,409 8,113
-------- -------- --------
Operating income (loss).................. 25,844 (12,284) (3,054)
Interest expense......................... (27,517) (1,554) 72(5) (15,536)(8) (44,535)
Interest income.......................... 1,254 710 (483)(5) 1,481
-------- -------- --------
Income (loss) from continuing operations
before income taxes.................... (419) (13,128) (46,108)
Income tax benefit (provision)........... 6,842 (88) (278)(5) 15,334(9) 21,810
-------- -------- --------
Income (loss) from continuing
operations............................. $ 6,423 $(13,216) $(24,298)
======== ======== ========
</TABLE>
See Notes to Unaudited Pro Forma Consolidated Statement of Operations.
38
<PAGE> 40
SAFELITE GLASS CORP.
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
(DOLLARS IN THOUSANDS)
1. The pro forma financial data do not give effect to any potential synergies
that could result from the Vistar merger.
2. The Safelite Historical Statement of Operations includes the operations of
Vistar from December 19, 1997 (the date of the Vistar merger) through the
Company's fiscal year end.
3. Represents the elimination of inter-company sales between Safelite and
Vistar.
4. Reflects estimated impact of customer contractual arrangements as a result
of the merger of the two companies.
5. Represents the operating expenses, interest expense, interest income and
related tax impact of Lear Siegler.
6. Adjusts goodwill amortization to reflect the purchase of Vistar using a
thirty year estimated useful life. The allocation of the purchase price to
the tangible and intangible assets of Vistar acquired is detailed below:
<TABLE>
<S> <C>
Accounts receivable......................................... $ 25,839
Inventory................................................... 5,654
Prepaids and other current assets........................... 1,457
Property, plant and equipment............................... 17,878
Deferred taxes.............................................. 39,180
Goodwill.................................................... 272,518
Other assets................................................ 2,726
Accounts payable............................................ (14,900)
Other current liabilities................................... (13,133)
Restructuring reserves...................................... (28,722)
Other liabilities........................................... (8,697)
Long-term debt.............................................. (17,716)
--------
Total....................................................... $282,084
========
</TABLE>
7. Represents the increase in management fees payable to THL as a result of the
Amended and Restated Management Agreement. See "Relationships and Related
Transactions."
39
<PAGE> 41
SAFELITE GLASS CORP.
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS -- (CONTINUED)
8. Reflects the adjustment to interest expense and amortization of deferred
financing fees as a result of the Vistar merger as detailed below. This does
not reflect any impact of the issuance of the outstanding notes, the $50
million equity investment, the Bank Credit Agreement Amendment or the
related paydown of revolver and term loan balances.
<TABLE>
<CAPTION>
YEAR ENDED
JANUARY 3, 1998
---------------
<S> <C>
Senior Credit Facilities borrowings at estimated interest
rates(a):
Revolving Credit Facility at 7.50% (includes premium
financing)................................................ $ 4,175
Term Loan A at 7.60%...................................... 11,400
Term Loan B at 8.10%...................................... 8,100
Term Loan C at 8.35%...................................... 8,350
Existing Notes at 9.875%.................................... 9,875
Vistar unsecured notes payable.............................. 600
--------
Cash interest expense....................................... 42,500
Amortization of deferred financing fees..................... 2,035
--------
Pro forma interest expense.................................. 44,535
Less: Historical interest expense........................... (28,999)
--------
Pro forma adjustments....................................... $ 15,536
========
</TABLE>
- -------------------------
(a) A 0.125 percent change in interest rates would change annual pro forma
interest expense by $500.
9. Represents the tax effect of adjustments to reflect the Vistar merger.
40
<PAGE> 42
SELECTED FINANCIAL DATA
The selected financial data of Safelite below for fiscal years ended 1995,
1996, and 1997, and the three months ended April 4, 1998 are derived from
audited financial statements. The data presented for the three months ended
March 29, 1997 and the nine months ended January 3, 1998 are derived from
unaudited financial statements. These unaudited financial statements include, in
the opinion of management, all adjustments (consisting only of normal recurring
adjustments) necessary to present fairly the data for such periods. The selected
financial data below should be read in conjunction with "Management's Discussion
and Analysis of Financial Condition and Results of Operations" and the financial
statements and accompanying notes also included in this prospectus.
<TABLE>
<CAPTION>
THREE MONTHS
ENDED NINE MONTHS ENDED
FISCAL YEAR(1) -------------------- -----------------------
------------------------------------------- MARCH 29, APRIL 4, JANUARY 3, JANUARY 2,
1993 1994 1995 1996 1997 1997 1998 1998 1999
------ ------ ------ ------- ------ --------- -------- ---------- ----------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Sales............................ $328.3 $357.4 $372.1 $ 438.3 $483.3 $ 107.8 $213.8 $375.5 $659.0
Cost of sales.................... 229.7 246.1 261.7 299.6 331.7 75.8 155.5 255.9 488.5
------ ------ ------ ------- ------ ------- ------ ------ ------
Gross profit..................... 98.6 111.3 110.4 138.7 151.6 32.0 58.3 119.6 170.5
Selling, general & administrative
expenses....................... 100.4 90.8 93.5 107.3 111.8 26.0 46.5 85.8 140.7
Other operating expenses(2)...... -- 21.1 -- 7.6 5.7 -- 3.1 5.7 3.6
Loss on sale of Lear Siegler..... -- -- -- -- 5.4 -- -- 5.4 --
Restructuring expense(3)......... 4.6 -- 6.3 -- 2.9 -- 3.8 2.9 4.2
------ ------ ------ ------- ------ ------- ------ ------ ------
Income (loss) from operations.... (6.4) (0.6) 10.6 23.8 25.8 6.0 4.9 19.8 22.0
Interest expense................. (15.5) (4.5) (6.0) (6.7) (27.5) (6.3) (10.9) (21.2) (34.3)
Interest income.................. 0.3 2.2 2.9 2.1 1.3 0.3 0.1 1.0 0.4
------ ------ ------ ------- ------ ------- ------ ------ ------
Income (loss) from continuing
operations before income taxes,
minority interest and
extraordinary items............ (21.6) (2.9) 7.5 19.2 (0.4) 0.0 (5.9) (0.4) (11.9)
Income tax benefit
(provision)(4)................. 0.3 (0.2) (0.1) 17.6 6.8 (0.1) 1.6 6.9 1.8
Minority interest................ 0.1 (2.7) (1.1) (10.2) -- -- -- -- --
------ ------ ------ ------- ------ ------- ------ ------ ------
Income (loss) from continuing
operations before extraordinary
items.......................... (21.2) (5.8) 6.3 26.6 6.4 (0.1) (4.3) 6.5 (10.1)
Discontinued operations(5)....... (43.2) -- -- 1.7 -- -- -- -- --
Extraordinary loss(6)............ -- (1.5) -- (0.5) (2.8) -- -- (2.8) --
------ ------ ------ ------- ------ ------- ------ ------ ------
Net income (loss)................ $(64.4) $ (7.3) $ 6.3 $ 27.8 $ 3.6 $ (0.1) $ (4.3) $ 3.7 $(10.1)
====== ====== ====== ======= ====== ======= ====== ====== ======
OTHER FINANCIAL DATA:
Depreciation and amortization.... $ 12.0 $ 7.2 $ 7.6 $ 8.0 $ 8.7 $ 2.0 $ 6.4 $ 6.7 $ 17.2
Capital expenditures............. 7.7 14.2 12.0 12.8 13.9 4.2 2.4 9.6 17.1
Ratio of earnings to fixed
charges(7)..................... -- -- 1.4x 2.0x -- 1.0x -- -- --
Deficiency of earnings to fixed
charges(7)..................... $(21.6) $ (2.9) -- -- $ (0.4) -- $ (5.9) $ (0.4) $(11.9)
BALANCE SHEET DATA:
Working capital.................. $ 41.0 $ 41.9 $ 58.1 $ 56.6 $ 29.8 $ 56.6 $ 40.3 $ 29.8 $ 51.2
Total assets..................... 169.8 193.7 188.3 216.2 558.1 204.0 576.4 558.1 620.1
Total indebtedness............... 35.0 63.8 69.0 263.7 479.9 270.0 503.6 479.9 587.6
Stockholders' equity (deficit)... 7.7 0.2 (0.6) (128.5) (46.9) (128.6) (48.4) (46.9) (58.5)
</TABLE>
41
<PAGE> 43
- -------------------------
(1) Prior to 1998, Safelite's fiscal year ended on the Saturday closest to
December 31 of each year. On May 18, 1998, Safelite changed its fiscal year
to the Saturday closest to March 31.
(2) Other operating expenses in 1994 are comprised of a $2.5 million one-time
charge recorded by Safelite 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 are comprised of management transaction bonuses related to
the THL Transactions of $6.9 million and estimated costs (primarily
severance) of $0.7 million to exit the activities of Lear Siegler. Other
operating expenses in 1997 include $1.0 million of management transaction
bonuses, $3.0 million related to acceleration of vesting of management stock
options and $0.5 million related to forgiveness of officer loans made in
connection with the Vistar merger. Also included in other operating expenses
in 1997 are costs related to obtaining bondholder consent to the Vistar
merger of $1.2 million. Other operating expenses in the three months ended
April 4, 1998, the nine months ended January 2, 1999 and the nine months
ended January 3, 1998, consist solely of costs associated with the
integration of corporate systems, moving, relocation and other expenses
associated with the Vistar merger. See Notes 1, 2, 4 and 10 to Safelite's
financial statements and "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
(3) In 1993, Safelite recorded $4.6 million in restructuring charges related to
the planned closing of approximately 70 service center locations. In 1995,
Safelite 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. In 1997,
Safelite recorded restructuring charges totaling $2.9 million consisting of
$0.4 million for planned closing of Safelite service center locations and
$2.5 million related to Safelite employee severance resulting from the
consolidation of Safelite and Vistar field and administrative activities.
Restructuring charges of $3.8 million for the three months ended April 4,
1998 consisted of $2.5 million for planned closing of 50 Safelite service
center locations and $1.3 million related to Safelite employee severance.
Restructuring charges of $4.2 million for the nine months ended January 2,
1999 consisted of $3.6 million for planned closing of 55 Safelite service
centers and $0.6 million related to Safelite employee severance. See Notes 4
and 5 to Safelite's 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 Safelite's consolidated results of operations or its financial
condition. During 1996 and 1997, the valuation allowance provided against
Safelite's deferred tax assets was reduced by $25.9 million and $3.0
million. See Note 14 to Safelite's financial statements and "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
(5) 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 on these businesses was $2.0 million. In 1996, a
gain from discontinued operations totaling 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. See Note 16 to Safelite's
financial statements.
(6) In each of the fiscal years 1994, 1996 and 1997, Safelite recorded
extraordinary losses as a result of expensing unamortized loan origination
fees related to the early retirement of the associated debt. The amount
recorded for 1994 was $1.5 million, net of minority interest and income tax
of
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<PAGE> 44
$0.3 million. The amount recorded for 1996 was $0.5 million, net of tax of
$0.3 million. The amount recorded for 1997 was $2.8 million, net of tax of
$1.9 million.
(7) 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 (net of capitalized interest). Fixed
charges consist of interest expense on all debt plus capitalized interest,
amortization of deferred financing costs and one-half of rental expense on
operating leases. One-half of rent expense represents that portion of rental
expense which management believes is attributable to interest.
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<PAGE> 45
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
Safelite is the largest provider of automotive 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. Safelite also acts as a subcontractor for other automotive glass
replacement and repair providers. Approximately 94%, or $621.7 million, of
Safelite's sales for the nine months ended January 2, 1999 were installation and
related services sales. Of these sales, approximately 78% were generated through
Safelite's own service centers, mobile vans, and centralized telephone/dispatch
centers ("service center sales"). The remainder of installation and related
services sales, or $136.1 million, for the nine months ended January 2, 1999
were derived from Safelite's network of independent automotive glass
installation and repair providers which install or repair glass for Safelite
under subcontracting arrangements ("network sales").
Insurance companies represent the largest installation and related services
customer segment comprising approximately 59% of installation and related
services sales in 1997 and 68% in the nine months ended January 2, 1999.
Safelite manufactures approximately 65% 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
automotive glass replacement and repair companies. Approximately 11% of
Safelite's sales for 1997 were wholesale sales. In both the three months ended
April 4, 1998 and the nine months ended January 2, 1999, wholesale sales
represented approximately 6% of Safelite's sales. Safelite's strategic focus for
its wholesale operations is to maintain sales and increase overall gross
margins.
Safelite'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 Safelite's
national phone centers, sales force and other general and administrative
functions.
VISTAR MERGER AND CURRENT OPERATING PERFORMANCE
On December 19, 1997, Safelite acquired Vistar, the second largest
automotive glass replacement and repair company in the United States. As a
result, Safelite's results of operations for the three months ended April 4,
1998 and the nine months ended January 2, 1999 are not directly comparable to
results recorded in prior periods.
In connection with the Vistar merger, Safelite took a number of actions in
order to consolidate redundant overhead in both field and corporate operations,
eliminate redundant service center locations and eliminate redundant sales and
marketing activities. These actions included the closing of 179 service center
locations, the conversion of all remaining Vistar service center locations to
the Safelite point of sale system, the closing of the former Vistar corporate
headquarters, the conversion of Vistar call center and billing systems to
Safelite systems, and the elimination of redundant field management, sales and
marketing activities.
Most redundant corporate overhead, sales and marketing activities were
consolidated prior to May 1, 1998 in accordance with management's original
integration plan. By
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<PAGE> 46
January 2, 1999, substantially all remaining actions required to achieve
merger-related cost savings were completed. The completion of these remaining
activities, however, occurred later than management's original plan which would
have had much of the field and call-center integration processes completed
before the summer of 1998. The summer months are traditionally Safelite's
highest volume sales months as automobile miles driven increase significantly in
that period.
Management estimates annual net cost savings related to the Vistar merger
will total $30 million to $35 million, which is consistent with the original
plan. Approximately $7 million of these net cost savings are reflected in
Safelite's results of operations for the nine months ended January 2, 1999 and
approximately 40% are expected to be reflected in total fiscal year ended April
3, 1999 results. The entire net cost savings are expected to be realized in
Safelite's fiscal year ended April 1, 2000. There can be no assurance, however,
that these cost savings will be achieved or that other factors will not negate
the realization of the savings.
At the time of the Vistar merger, management estimated that merger-related
closing and consolidation costs would range from $37 million to $42 million. In
addition, management estimated that Safelite would incur between $5 million and
$10 million in one-time expenses associated with the integration of corporate
systems, temporary services fees, training, moving and other costs related to
the Vistar merger. Actual results for these items were in line with management's
estimates. As of January 2, 1999, Safelite has recorded $38.0 million in Vistar
merger related closing and consolidation costs and $6.7 million in one-time
merger integration costs. Management expects to incur no further Vistar merger
related restructuring or one-time charges.
As discussed above, the consolidation and elimination of redundant service
centers and related field operations activities took longer, and was more
disruptive to Safelite's business, than was originally anticipated. This
disruption and delay, combined with lower overall automotive glass replacement
industry unit volumes, has had an adverse impact on Safelite's sales and results
of operations.
Key items which have impacted Safelite's performance are described below:
- The focus of the field sales force on merger integration activities has
adversely impacted unit sales. This has resulted in reduced sales to
local commercial accounts such as car dealerships, body shops and local
car rental companies compared to pre-merger combined results for Safelite
and Vistar. Sales to insurance customers, most notably State Farm, where
Safelite does not have a Total Customer Solution or Master Provider
relationship have also been negatively affected.
- Field operations management likewise has been focused on integrating the
two companies, which had different operating cultures and strategies.
This has resulted in both lower sales to individual consumers than the
combined companies had experienced prior to the merger and lower
productivity levels than had been previously achieved by Safelite.
- A higher proportion of sales have been serviced through the Company's
network of independent automotive glass installation providers than had
been experienced by Safelite prior to the Vistar merger. The gross profit
margin on network sales is substantially lower than on Safelite-owned
service center sales.
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<PAGE> 47
- The overall automotive glass replacement industry has experienced a
decline in unit volumes and increased price competition during the
current fiscal year-to-date period.
Management is devoting substantial time and attention in an effort to
address these issues and to improve Safelite's sales growth and operating
efficiencies to expected levels. Specific actions taken or to be taken include
continued training of former Vistar field operations and call center associates
on Safelite systems and market-based operating strategies, refocusing Safelite's
field sales force on sales growth, and aligning service center and warehouse
headcount with current unit volumes. In addition, management has recently
completed changes related to key leadership positions in field operations, field
sales and call center management at the former Vistar call center. All such
positions are now held solely by experienced Safelite associates.
While management believes that these actions will improve sales and
operating performance, there can be no assurances regarding the timing within
which these actions may have impact or that these efforts will be ultimately
successful. Safelite's results of operations for the three months ended April 3,
1999 may vary compared to the level of adjusted EBITDA recorded in the
comparable period of the prior year due to disruptions in Safelite's business
caused by the difficulties in integrating Vistar's operations and the
competitive pricing environment currently being experienced by the automotive
glass replacement industry.
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<PAGE> 48
RESULTS OF OPERATIONS
The following table reflects Safelite's sales, related expenses and
earnings expressed as a percentage of sales for the periods set forth below.
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
FISCAL YEAR -------------------- -----------------------
--------------------- MARCH 29, APRIL 4, JANUARY 3, JANUARY 2,
1995 1996 1997 1997 1998 1998 1999
----- ----- ----- --------- -------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
SALES:
Installation and
related
services:
Service
center........ 80.7% 75.9% 75.3% 77.0% 75.4% 74.9% 73.7%
Network......... 4.1 10.8 13.7 11.4 18.9 14.3 20.6
Wholesale.......... 15.2 13.3 11.0 11.6 5.7 10.8 5.7
----- ----- ----- ----- ----- ----- -----
Total sales.......... 100.0 100.0 100.0 100.0 100.0 100.0 100.0
Cost of sales........ 70.3 68.4 68.6 70.3 72.7 68.1 74.1
----- ----- ----- ----- ----- ----- -----
Gross profit......... 29.7 31.6 31.4 29.7 27.3 31.9 25.9
Selling, general and
administrative
expenses........... 25.1 24.5 23.2 24.1 21.7 22.9 21.4
Restructuring
expense............ 1.7 -- 0.6 -- 1.8 0.8 0.7
Other operating
expenses........... -- 1.7 1.2 -- 1.5 1.5 0.5
Loss on sale of Lear
Siegler............ -- -- 1.1 -- -- 1.4 --
Interest expense..... (1.6) (1.5) (5.7) (5.9) (5.1) (5.6) (5.2)
Interest income...... 0.7 0.5 0.3 0.3 -- 0.2 0.1
----- ----- ----- ----- ----- ----- -----
Income (loss) before
income taxes....... 2.0 4.4 (0.1) 0.0 (2.8) (0.1) (1.8)
Income tax benefit... -- 4.0 1.4 -- 0.8 1.8 0.3
Minority interest.... (0.3) (2.4) -- -- -- -- --
Discontinued
operations......... -- 0.4 -- -- -- -- --
Extraordinary loss... -- (0.1) (0.6) -- -- (0.7) --
----- ----- ----- ----- ----- ----- -----
Net income (loss).... 1.7% 6.3% 0.7% 0.0% (2.0)% 1.0% (1.5)%
===== ===== ===== ===== ===== ===== =====
</TABLE>
NINE MONTHS ENDED JANUARY 2, 1999 COMPARED WITH NINE MONTHS ENDED JANUARY 3,
1998
SALES. Sales for the nine months ended January 2, 1999, increased $283.6
million, or 75.5%, to $659.1 million, from $375.5 million in the comparable nine
months of 1997. Installation and related services grew $286.6 million, or 85.6%
to $621.7 million. Approximately 72% of this growth was derived through service
center sales while the remainder was provided by increased network sales. Most
of the sales growth in installation
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<PAGE> 49
and related services is attributable to the Vistar merger. While sales have
increased substantially over last year due to the Vistar merger, Safelite's
focus on the complexities of merger integration activities has had an adverse
effect on post-merger sales growth. Overall installation and related services
unit volumes for the nine months ended January 2, 1999 are down 8% from the
combined pre-merger unit sales volumes of Safelite and Vistar in the comparable
prior year period.
Wholesale sales for the nine months ended January 2, 1999, fell 7.7% to
$37.4 million as a result of a 5% decline in unit sales further impacted by
lower prices. These results reflect the soft market conditions currently being
experienced in the auto glass replacement market.
GROSS PROFIT. Gross profit for the nine months ended January 2, 1999,
increased 42.6% to $170.5 million, from $119.6 million in the comparable nine
months of 1997, mainly as a result of increased sales volume from the Vistar
merger. Gross profit margin decreased to 25.9% as compared to 31.9% in the
comparable period of the prior year, due primarily to the higher percentage of
network business relative to total sales, offset partially by higher prices and
improved customer mix. The gross profit margin on network sales is substantially
lower than on work performed through Safelite owned service centers. Additional
gross margin compression occurred as a result of decreased productivity in
service center and warehouse operations during the merger integration period.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses rose 64.0% in the first nine months of fiscal 1999 to
$140.7 million as a result of the Vistar merger. Selling, general and
administrative expenses as a percent of sales decreased to 21.4% in the nine
months ended January 2, 1999, from 22.9% in the corresponding prior year period.
This decrease is due to the achievement of merger synergies. Selling, general
and administrative expenses as a percent of sales was negatively impacted by
slower post-merger sales growth.
INCOME BEFORE INCOME TAXES. Income before income taxes decreased to a loss
of $11.9 million in the first nine months of fiscal 1999 from a loss of $0.4
million in the same period of the prior year. In addition to the impact of
merger integration on sales and gross profit described above, income before
income taxes in the nine months ended January 2, 1999 was adversely affected by
$13.1 million in increased interest costs. Income before income taxes in the
nine months ended January 3, 1998 included a $5.4 million loss on sale of
Safelite's former parent, Lear Siegler.
INCOME TAXES. In the first nine months of fiscal 1999, Safelite's
provision for income taxes was significantly above income taxes computed using
statutory rates primarily due to non-deductible amortization of goodwill arising
from the Vistar merger.
NET INCOME. Net income (loss) for the nine months ended January 2, 1999,
was $(10.1) million, down from income of $3.7 million in the same period of the
prior year. The decrease in net income from 1997 was primarily due to the
changes in income before income taxes described above.
THREE MONTHS ENDED APRIL 4, 1998 COMPARED WITH THREE MONTHS ENDED
MARCH 29, 1997
SALES. Sales increased $106.0 million in the three months ended April 4,
1998, or 98.3%, to $213.8 million, from $107.8 million in the three months ended
March 29, 1997. Installation and related services grew $106.4 million, or 111.7
% to $201.7 million. Approximately 73% of this growth was attributable to
service center sales while the
48
<PAGE> 50
remainder was provided by increased network sales. The growth in installation
and related services revenue over the prior year was due primarily to the Vistar
merger and favorable pricing, as overall market volumes were soft in the first
three months of calendar 1998.
Wholesale sales fell 3.5 % to $12.1 million despite an 8.0% increase in
unit sales. Soft market conditions and greater industry capacity increased
competition at the wholesale level, particularly in the higher margin smaller
local glass chains and shops. As a result, much of the increase in unit sales
was derived from the more price sensitive truckload buyers who were purchasing
in advance of the industry-wide NAGS price increase which took effect March 16,
1998.
GROSS PROFIT. Gross profit increased 81.8% to $58.3 million in the three
months ended April 4, 1998, from $32.0 million in the corresponding period of
the prior year. Gross profit margin decreased to 27.3% in the first three months
of 1998, from 29.7% in the corresponding prior year period, as the impact of
improved installation and related services pricing and customer mix was more
than offset by the higher growth rate of network business relative to total
sales.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses rose 78.8% in the first three months of 1998 to $46.5
million, with the Vistar merger accounting for substantially all of the
increase. As a percentage of sales, selling, general and administrative expenses
declined to 21.7% in the first three months of 1998 from 24.1% for the
corresponding prior year period. This decline in selling, general and
administrative expenses as a percent of sales was a result of Safelite's
improved operating leverage.
INCOME BEFORE INCOME TAXES. Income before taxes declined to a loss of $5.9
million for the three months ended April 4, 1998, compared with essentially
break-even performance for the corresponding prior year period. The decline in
income before income taxes despite higher overall gross margin dollars and lower
selling general and administrative expenses as a percent of sales was caused
primarily by $6.9 million in restructuring charges and one-time integration
costs and $4.6 million in increased interest costs associated with the Vistar
merger.
INCOME TAXES. Safelite recorded an income tax benefit in the first three
months of 1998 of $1.6 million, compared to a $0.1 million income tax provision
for the first three months of 1997. The income tax benefit (provision) in both
periods differed from amounts computed using statutory rates due primarily to
amortization of goodwill.
NET INCOME. Net income declined to a loss of $4.3 million for the three
months ended April 4, 1998 from a loss of $0.1 million in the corresponding
prior year period due to the changes described above.
1997 COMPARED WITH 1996
SALES. Sales increased $45.0 million in 1997, or 10.3%, to $483.3 million,
from $438.3 million in 1996. Installation and related services grew $50.1
million, or 13.2% to $430.3 million. Approximately 63% of this growth was
attributable to service center sales while the remainder was provided by
increased network sales. The growth in installation and related services revenue
over the prior year was due primarily to favorable pricing and improved customer
mix. Instrumental to the improved customer mix was the addition of new
multi-year "Master Provider" programs with several large insurers, most notably
GEICO. Under a Master Provider program, Safelite administers 100% of an
insurance company's automotive glass claims and, as a result, receives more
referrals both to be
49
<PAGE> 51
performed in its own service centers and through its network of independent
automotive glass installation providers. The increase in insurance customer
sales volume was partially offset by a decline in subcontracting sales volume,
as overall market conditions were soft in 1997.
Wholesale sales fell 8.9% to $53.0 million as a result of a 13% decline in
unit sales partially offset by increased pricing. The pricing improvement came
about through a shift of business from more price sensitive truckload buyers to
smaller local glass chains and shops. The wholesale business performance
reflected the soft market conditions and resulting competition at the wholesale
level.
GROSS PROFIT. Gross profit increased 9.3% to $151.6 million, from $138.7
million in 1996. Gross profit margin remained virtually constant in 1997 at
31.4% compared to 31.6% in 1996, as the impact of improved installation and
related services pricing and customer mix was partially offset by higher product
and installation costs. Also negatively affecting the gross margin percentage
was the higher growth rate of network business relative to total sales.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses rose 4.2% in 1997 to $111.8 million. Vistar selling,
general and administrative expenses from the December 19, 1997 merger date
through year-end accounted for nearly all of the total increase. As a percentage
of sales, selling, general and administrative expenses declined to 23.2% in 1997
from 24.5% in 1996.
INCOME BEFORE INCOME TAXES. Income before income taxes decreased to a loss
of ($0.4) million in 1997 from income of $19.2 million in 1996. The decrease was
due primarily to $20.8 million in higher interest costs incurred as a result of
Safelite's December 20, 1996 recapitalization, coupled with a $5.4 million loss
on the sale of Lear Siegler and $2.9 million in restructuring charges. Partially
offsetting these items was a decline in other operating expenses of $1.9
million. Other operating expenses in 1997 consisted of one-time charges related
to the Vistar merger as follows: (1) $3.0 million for acceleration of vesting of
management stock options, (2) $1.0 million in management transaction bonuses,
(3) $0.5 million related to the forgiveness of officer loans and (4) $1.2
million in costs associated with obtaining bondholder consent to amend the terms
of the Existing Notes and approve the Vistar merger.
INCOME TAXES. In 1997, Safelite recorded a tax benefit substantially in
excess of the statutory rate primarily due to a reduction of Safelite's
valuation allowance for deferred tax assets in recognition of Safelite's
improved profitability, and the recognition of the right to use previously
unrecognized federal net operating loss carryforwards obtained in connection
with the Lear Siegler sale transaction. The credit provision for income tax in
1997 was $10.8 million less than 1996. The valuation allowance was substantially
reduced in 1996 in recognition of Safelite's improved profitability at that
time.
NET INCOME. Net income declined to $3.6 million from $27.8 million in 1996
primarily as a result of the changes described above as well as the elimination
of the adjustment for minority interest as a result of the THL Transactions in
1996. Also contributing to the change was a $2.8 million extraordinary loss in
1997 for the early extinguishment of debt which was made in connection with
obtaining new financing for the Vistar merger.
50
<PAGE> 52
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 remainder 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, favorable pricing and improved customer mix. The $32.3
million increase in network sales to $47.5 million was a direct result of the
growth in Safelite's Master Provider programs.
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
reflected Safelite's strategic shift of wholesale sales efforts towards higher
margin local automotive 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
Safelite'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 expenses was
related to the opening of Safelite'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 was a result of increased total sales and the benefits of
Safelite'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 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, Safelite recorded a tax benefit 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 Safelite'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.
RESTRUCTURING CHARGES
In late 1991, the current management team recognized that insurance
companies and large fleet owners were responsible for the majority of automotive
glass replacement purchasing decisions in the U.S., and focused Safelite on
providing a total claims
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<PAGE> 53
management solution. In 1993, Safelite reorganized its national network by
introducing sophisticated information systems that permitted Safelite to close
redundant service center locations and consolidate certain administrative
functions. These initiatives resulted in restructuring charges in 1993 and 1995
to close service center locations and reorganize field management. Safelite
recorded restructuring charges in 1995 of $5.6 million related to the closing of
100 service center locations and $0.7 million related to field management
reorganization. There were no restructuring charges during 1996.
As a result of the Vistar merger, Safelite took actions to consolidate
redundant overhead in both field and corporate operations, eliminate redundant
service center locations and eliminate redundant sales and marketing activities.
Merger-related closing and consolidation costs totaled $38 million of which
$27.1 million was recorded as purchase accounting adjustments and $10.9 million
was recorded as restructuring charges.
The $27.1 million of purchase accounting adjustments relate to Vistar
employee severance, closure of Vistar service center locations and elimination
of duplicative Vistar corporate functions. The restructuring charges of $2.9
million recorded in fiscal 1997, $3.8 million in the three months ended April 4,
1998 and $4.2 million in the nine months ended January 2, 1999, relate to
Safelite employee severance and closing of Safelite service centers. As of
January 2, 1999, Safelite has made approximately $25.6 million in cash payments
in connection with these items. Safelite anticipates additional cash payments of
$2.0 million in the remainder of fiscal 1999, $4.1 million in fiscal 2000 and
$2.2 million in fiscal 2001 relating to these accruals.
EFFECTIVE INCOME TAX RATE
For the quarter ended April 4, 1998 and the nine months ended January 2,
1999, Safelite's provision for income taxes was above the statutory rate due to
permanent differences, primarily amortization of non-deductible goodwill.
Safelite recorded a tax benefit of $6.8 million for fiscal year 1997. This tax
benefit resulted primarily from a reduction in the valuation allowance relating
to net operating loss carryforwards generated prior to 1994, and from obtaining
the right to use approximately $16.2 million of previously unrecognized federal
net operating loss carryforwards as part of the Lear Siegler sale transaction.
The reduction in the valuation allowance was based upon management's review of
Safelite's historical and current pre-tax earnings, giving effect to adjustments
and statutory limitations resulting from the THL Transactions and the Vistar
merger. Based upon this review, management believes that Safelite will realize
the benefit of a portion of its existing deductible temporary differences.
Management expects that the increase in interest expense which will occur as a
result of the Vistar merger combined with Safelite's net operating loss
carryforwards may result in reduced Federal tax payments for a period of up to
10 years.
EFFECTS OF INFLATION
Inflation has not been material to Safelite's operations for the periods
presented.
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<PAGE> 54
QUARTERLY DATA
The following table shows Safelite's quarterly sales for fiscal 1995, 1996,
and 1997.
NET SALES
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
1995 1996 1997
------------ ------------ ------------
SALES % SALES % SALES %
------ --- ------ --- ------ ---
<S> <C> <C> <C> <C> <C> <C>
First Calendar Quarter.............. $ 85.6 23% $102.9 24% $107.8 22%
Second Calendar Quarter............. 99.0 26 122.0 28 129.1 27
Third Calendar Quarter.............. 99.5 27 115.8 26 126.3 26
Fourth Calendar Quarter............. 88.0 24 97.6 22 120.1 25
------ --- ------ --- ------ ---
Total Annual.............. $372.1 100% $438.3 100% $483.3 100%
====== === ====== === ====== ===
</TABLE>
Historically, Safelite has experienced seasonal variations in revenues,
with lower revenues typically reported in the first and fourth calendar quarters
of each year. See "-- Effect of Weather Conditions; Seasonal Earnings."
EFFECT OF WEATHER CONDITIONS; SEASONAL EARNINGS
The severity of weather has historically affected Safelite'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 have an adverse affect Safelite's results of operations.
Safelite's business is somewhat seasonal, with the first and fourth
calendar quarters of each year traditionally being its slowest periods of
activity. This reduced level of sales in the first and fourth calendar quarters
has resulted in a disproportionate decline in operating income during those
quarters due to Safelite's significant operating leverage. Management believes
these seasonal trends will continue for the foreseeable future.
YEAR 2000 ISSUES
Many computer systems in use today may be unable to correctly process data
or may not operate at all after December 31, 1999 because those systems
recognize the year within a date only by the last two digits. Some computer
programs may interpret the year "00" as 1900, instead of as 2000, causing errors
in calculations or the value "00" may be considered invalid by the computer
program, causing the system to fail. Year 2000 issues affect (1) Information
Technology (IT) utilized in Safelite's widely diversified business information
systems, including mainframe and client server hardware and software
communications, (2) non-IT systems utilized by Safelite, such as communications,
facilities management, and manufacturing and service equipment containing
embedded computer chips, and (3) IT and non-IT systems of significant customers
and suppliers.
Safelite could be adversely affected if Year 2000 issues are not resolved
by Safelite or its significant customers and suppliers before the Year 2000.
Possible adverse consequences include, but are not limited to (1) the inability
to obtain products or services used in business operations, (2) the inability to
transact business with customers, (3) the inability to execute transactions
through the financial markets, and (4) the inability to manufacture or deliver
goods or services sold to customers. Safelite's management believes that at
least some minor disruptions due to Year 2000 issues will occur. On a worst case
basis, if Safelite, one or more of its significant customers or suppliers, or
key government bodies are
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unable to implement timely and effective solutions to the Year 2000 issues,
Safelite could suffer material adverse effects. The financial impact of these
effects cannot currently be estimated.
Safelite relies heavily on computer technologies to operate its business.
As a result, Safelite continuously seeks to upgrade and improve its computer
systems in order to provide better service to its customers and to support the
Company's growth. Safelite has initiated a program to prepare its computer
systems and applications for the Year 2000 change ("Year 2000"). As part of this
program, a team has been assigned to evaluate the nature and extent of the work
required to make Safelite's systems, products, electronic linkages with
insurance company customers and infrastructure Year 2000 compliant. Included in
the scope of the project are computer, network and communications hardware,
systems and applications software, telecommunication and point of sale
equipment, "embedded chip" issues within manufacturing and other facilities, as
well as verification with key suppliers and customers as to their readiness for
the Year 2000 issue.
The assessment phase of the Year 2000 project is complete. Remediation for
Year 2000 compliance is underway and is currently estimated to be 70% complete
with final completion expected by August 1999. Implementation and testing is
underway and is scheduled to be complete by September 1999. Remediation of
systems and applications software is being effected through outside consultants,
"factory support" in-house staff and in some cases by the replacement of
software packages. Safelite is building an isolated test environment where
systems will be tested by resetting dates to various points beyond the year
2000.
Based on Safelite's latest assessments, the total cost of addressing the
Year 2000 issue is estimated to be in the range of $2.0 million to $3.0 million,
with the majority of these costs representing incremental business costs to
outside vendors and consultants. As of January 2, 1999, approximately $0.6
million of external costs have been incurred. Safelite does not separately track
the internal costs for the Year 2000 project, with these costs being principally
the related payroll costs for the management information systems staff.
Surveys of critical customers and suppliers are currently underway to
determine whether their systems will be timely converted. However, there can be
no assurance that the systems of other companies on which Safelite relies will
be timely converted or that any failure to convert by another company would not
have an adverse effect on Safelite's systems. Safelite has begun consideration
of contingency plans to deal with Year 2000 issues in the event that remediation
efforts are unsuccessful. These plans will be more fully developed in 1999 to
address specific areas of need.
Management expects that by the end of calendar 1999, all critical systems
that are currently not Year 2000 compliant will be corrected or replaced.
However, there is no assurance that significant Year 2000 related problems will
not immediately arise with Safelite's business partners or that the impact of
any failure to achieve Year 2000 compliance will not have a material adverse
effect on Safelite's financial condition.
LIQUIDITY AND CAPITAL RESOURCES
NET CASH USED IN OPERATING ACTIVITIES
Net cash used in operating activities for the nine months ended January 2,
1999 was $21.1 million, an increase in cash usage of $40.3 million from the
corresponding prior year period. Excluding the cash flows associated with Lear
Siegler discontinued operations during the nine month period ended January 3,
1998, the increase in cash usage of $32.3
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million was primarily due to restructuring cash payments as well as debt service
associated with the Vistar merger.
Net cash used in operating activities for the three months ended April 4,
1998 was $15.6 million, a decrease in cash usage of $1.1 million from the
corresponding prior year period. Excluding Lear Seigler discontinued operations
in the quarter ended March 29, 1997, cash usage increased by $2.8 million,
primarily due to increases in accounts receivable, inventory and debt service
associated with the Vistar merger.
Net cash provided by operating activities for 1997 was $2.4 million, an
increase in operating cash flows of $2.3 million from 1996. Excluding Lear
Siegler discontinued operations, cash flows decreased by $23.3 million in 1997.
The primary factor in this decrease was the additional cash required to service
the increase in debt which resulted from the THL Transactions in December 1996.
Net cash generated by operating activities for 1996 was $0.1 million, an
increase of $10.2 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 flow from operating activities was
$20.8 million. This $20.8 million improvement in cash flow was primarily due to
improvements in operating income and improved working capital management, offset
by the purchase of insurance liability coverage for 1997 through 1999 for
approximately $12.0 million.
CAPITAL EXPENDITURES
Safelite's investing activities consist mainly of capital expenditures for
new and existing service center and warehouse locations, capacity and efficiency
upgrades to manufacturing facilities, and information technology equipment.
Capital expenditures totaled $17.1 million for the nine months ended January 2,
1999 and $9.6 million for the corresponding period of the prior year. The
increase in capital spending during the nine months ended January 2, 1999
reflects spending for merger integration related activities as well as the
increase in the size of the business as a result of the Vistar merger.
Capital expenditures totaled $4.2 million and $2.4 million for the three
months ended March 29, 1997 and April 4, 1998. Capital spending during the three
months ended April 4, 1998 reflects Safelite's focus on planning merger
consolidation activities.
Capital spending in each of the three years ended 1997 were as follows:
<TABLE>
<S> <C> <C>
1997 = $13.9 million
1996 = $12.8 million
1995 = $12.0 million
</TABLE>
Included in 1995 capital spending is $3.5 million for the purchase and
renovation of Safelite's manufacturing/distribution facilities in Wichita,
Kansas. The level of 1996 capital expenditures reflects expansion of service
center and warehouse coverage into new markets and an upgrade to Safelite's
manufacturing facilities. The increase in capital spending during 1997 reflects
Safelite's expansion of service center and warehouse coverage and the purchase
of new point of sale equipment at the end of the year for the former Vistar
service centers.
Management expects post-integration capital spending levels to approximate
$22.0 million annually after the Vistar merger, with maintenance spending
approximately $10.0 million to $12.0 million annually. Additional
integration-related capital expenditures of
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$3.0 million to $5.0 million in both fiscal years 1999 and 2000 are expected as
a result of (1) converting Vistar service centers and mobile vans to the
Safelite logo and format and (2) expansion of certain centralized
telephone/dispatch center locations.
LIQUIDITY
Historically, Safelite has utilized internally generated funds and
borrowings under credit facilities to meet ongoing working capital and capital
expenditure requirements. In connection with the Distribution and the Vistar
merger, Safelite retired existing debt of approximately $150 million and
incurred new debt aggregating approximately $365 million. Substantially all of
the proceeds of this debt were used to refinance existing bank debt, to fund the
Distribution, to pay Vistar merger consideration and to pay bonuses, fees and
expenses related to the Vistar merger.
As a result of the Vistar merger, Safelite has significantly increased cash
requirements for debt service relating to Safelite's credit facilities. See Note
10 to Safelite's financial statements for a description of the amortization of
the term loan facility. Safelite will rely on internally generated funds and, to
the extent necessary, on borrowings under its revolving credit facility, which
provides for borrowings up to $100 million, to meet its liquidity needs.
At January 2, 1999, Safelite had long-term borrowings of $587.6 million and
$4.6 million of availability under the revolving credit facility. As of January
2, 1999, on a pro forma basis after giving effect to the issuances, Safelite
would have had total borrowings of $491.2 million and $39.6 million of
availability under the revolving credit facility.
Safelite's credit facilities contain financial and other covenants that
limit the ability of the Company to, among other things, dispose of assets,
borrow money, make guarantees, prepay other debt or amend other debt
instruments, pay dividends, create liens on assets, make investments, loans or
advances, make acquisitions, create subsidiaries, engage in mergers, or engage
in transactions with affiliates and otherwise restrict certain corporate
activities. In addition, Safelite is required to comply with financial
covenants, including specified financial ratios, minimum interest coverage
ratios and maximum leverage ratios.
At the same time Safelite issued the Series C Senior Subordinated Notes,
Safelite obtained an amendment to its Bank Credit Agreement to make the interest
coverage ratio and debt leverage ratio less restrictive. There can be no
assurance that Safelite will be able to comply with these amended financial
covenants (which are more completely described in "Description of Other Debt")
or that Safelite will not require amendments and/or waivers in future periods to
these or other covenants contained in the Bank Credit Agreement.
The ability of Safelite to operate its business, service 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 Safelite's control. A portion of Safelite's debt bears interest at
floating rates; therefore, its financial condition is and will continue to be
effected by changes in prevailing interest rates. Safelite uses interest rate
exchange agreements to manage exposure associated with interest rate
fluctuations.
CHANGES IN ACCOUNTING STANDARDS
In June 1997, FASB issued SFAS No. 131, "Disclosure about Segments of an
Enterprise and Related Information" which is effective for Safelite's fiscal
year ended
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March 1999. This statement establishes standards for the way that business
enterprises report information about operating segments and may result in
additional financial statement disclosures for Safelite.
In February 1998, FASB issued SFAS No. 132, "Employers' Disclosures about
Pensions and Other Postretirement Benefits" which is effective for Safelite's
fiscal year ended March 1999. The statement will result in revised financial
statement disclosures regarding employers' pensions and other retiree benefits.
In June 1998, FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities." The statement requires derivatives to be
recorded on the balance sheet as assets or liabilities, measured at fair value.
Gains or losses resulting from changes in fair value of the derivatives are
recorded depending upon whether the instruments meet the criterion for hedge
accounting. This statement is effective for fiscal years beginning after June
15, 1999. The impact of adopting this statement has not been determined.
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BUSINESS
COMPANY OVERVIEW
Safelite is the largest provider of automotive glass replacement and repair
services in the United States. Safelite is the industry leader with an estimated
overall market share of approximately 23% and the leading market share in the
insurance segment of the market. The Company installed approximately 1.7 million
replacement units in 1997 for insurance companies, commercial fleet leasing and
rental car companies, car dealerships and body shops, government agencies and
individual consumers. Safelite provides these installation services through its
service centers, mobile vans, centralized telephone/dispatch centers and its
network of independent automotive glass replacement and repair providers.
Safelite 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 automotive glass
replacement and repair providers. Safelite 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, has provided Safelite with a significant
competitive advantage in the insurance segment of the market. As a result of
this competitive advantage, management believes that Safelite has the leading
market share in this segment. At January 2, 1999, Safelite had two manufacturing
facilities, 76 warehouses, 51 centralized telephone/dispatch centers,
approximately 2,000 mobile vans and 674 service center locations across the
United States. Sales and adjusted EBITDA for the nine months ended January 2,
1999 were $659.0 million and $47.0 million, respectively. See "Summary
Historical and Pro Forma Financial Information."
THE VISTAR MERGER
On December 19, 1997, Safelite completed a merger with Vistar whereby
Vistar was merged with and into Safelite, with Safelite as the surviving
corporation. Prior to the merger, Vistar was the second largest provider of
automotive glass replacement and repair services in the United States. Vistar
was created on February 29, 1996 by the merger of Windshields America Inc., a
wholly owned subsidiary of Belron, and Globe Glass and Mirror Company. Vistar
installed or repaired approximately 1.6 million units in its fiscal year ended
March 31, 1997 for insurance companies, commercial fleet leasing and rental car
companies, car dealerships and body shops, government agencies and individual
consumers. Vistar provided these installation services through its 356 service
centers and approximately 1,000 mobile vans and its network of independent
automotive glass replacement and repair providers. Vistar net sales for its
fiscal year ended March 31, 1997 were $413.5 million and its operating income
was $8.8 million. For the nine months ended December 19, 1997, Vistar had sales
of $339.5 million and a loss of $8.2 million. See "Transactions -- The Vistar
Transactions." The integration of Vistar into Safelite's operations is discussed
in the sections of this prospectus titled "Risk Factors" and "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
Vistar's financial statements are also included in this prospectus.
COMPETITIVE STRENGTHS
INDUSTRY LEADERSHIP AND NATIONWIDE COVERAGE. Safelite is the largest
competitor in the highly fragmented automotive glass replacement and repair
industry. The Company
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operates service centers in all of the top 100 Metropolitan Statistical Areas in
the United States. Through its nationwide network, Safelite can directly serve
70% of the cars and light trucks in the United States and, through its
authorized independent replacement and repair providers, achieves over 90%
coverage. Safelite has the largest number of service center locations and the
largest network of independent automotive glass replacement and repair providers
in the United States. Management believes that Safelite'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 automotive glass repair and replacement services on a nationwide basis.
STRONG, ESTABLISHED RELATIONSHIPS WITH MAJOR INSURANCE COMPANIES. Safelite
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
influence approximately 55% of all repairs and replacements in the United
States. Safelite has entered into Total Customer Solution, or "TCS" arrangements
with approximately 25 of those insurers including Farmers Insurance Group,
United Services Automobile Association, Auto Club of Southern California, and
Safeco Corporation. Under a TCS arrangement, Safelite typically serves as one of
a few recommended automotive 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 Safelite's
approximately 45 TCS arrangements, those with Allstate, Nationwide Mutual
Insurance Company, GEICO, Liberty Mutual Insurance Company, Travelers Group, CNA
Insurance Group, Metropolitan Property and Casualty Insurance Company,
California State Auto Association and National General Insurance are also Master
Provider, or "MP" relationships. Under an MP program, Safelite acts as the
administrator of an insurance company's automotive glass claims. 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, Safelite has entered into TCS 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, GE Capital Fleet Services 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. Safelite has a 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. Management believes that Safelite is the only full-scale
vertically integrated automotive glass replacement company in the U.S.
Safelite uses a three tiered distribution system 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 76 regional warehouses (25 free-standing warehouses and 51 co-located
with Safelite's Central Telephone Units). 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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Every Safelite employee participates in some form of incentive compensation
plan which rewards productivity and/or profitability of the Company. Management
estimates that Safelite's performance incentive program has increased
productivity of its installation associates from 2.5 installations per day in
1991 to approximately 3.8 per day in the first three quarters of fiscal 1999. 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 handle all aspects of an insured automotive glass claim effectively
and cost efficiently, from the initial phone call placed by the insured
policyholder to the automatic billing of an insurance company. Through
Safelite's fully integrated network called "SAFENET(TM)", Safelite 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 automotive 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.
In addition to providing an integrated delivery system, SAFENET(TM) 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.
These reports include information to which the insurance companies otherwise do
not generally have access, 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 these types of detailed
reports.
BUSINESS STRATEGY
COMPLETE INTEGRATION OF VISTAR MERGER. To achieve the full benefits of the
Vistar merger, management has begun implementing a variety of actions to improve
unit sales and productivity. These measures include improved training of
telephone service representatives, increased centralization and focus on
market-based sales and management and the alignment of field operations
headcount to current unit volumes through the reduction of approximately 450
associates. In addition, the Company has recently named experienced Safelite
managers to key positions in field operations, field sales and the Chicago call
center.
EXPAND AND ENHANCE RELATIONSHIPS WITH INSURANCE COMPANIES. Safelite's
principal business strategy is to increase its share in the segment of the
automotive glass replacement and repair market influenced by insurance companies
by expanding the breadth and depth of its existing relationships. Safelite
currently provides its replacement and repair services to the policyholders of
virtually every major automotive insurance company in the U.S. Safelite focuses
its marketing and sales strategy on adding new insurance relationships and
increasing its share of business with its existing insurance clients.
Management believes that as it processes greater proportions of an
insurance company's replacement and repair claims, it can continue to reduce
related loss expenses
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and administrative costs for the insurance company, while improving policyholder
satisfaction through faster, more reliable and consistent service.
Safelite continually strives to enhance the value it provides to insurance
company clients while improving profitability through increased market share.
Recent examples include (1) improving repair performance through creation of
"Repair Medics", Safelite's repair-only technician workforce, (2) development of
on-line call center scheduling capability for faster, more efficient
policyholder service and (3) creation of a SmartPay process under which
insurance companies pay only "reasonable and customary" prices for glass claims
serviced by non-program providers.
EXPAND NATIONWIDE COVERAGE. Safelite plans to continue expanding the
breadth and depth of its nationwide network by selectively acquiring regional
automotive glass replacement and repair businesses and opening new service
center and warehouse locations. Safelite believes that it can enhance its sales
and results through the integration of well-targeted acquisitions into
Safelite's nationwide network and through the selective opening of additional
service center and warehouse locations.
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 additional
outsourcing services to insurance and fleet companies for items such as
pre-insurance vehicle inspection, towing referral, post-collision rental car
referral, after hours loss reporting and residential glass claims processing.
These services are characterized by significant administrative burdens, high
processing costs and low dollar loss values like the automotive glass
replacement and repair service that Safelite otherwise provides to insurance and
fleet companies efficiently and cost-effectively. Safelite is evaluating plans
to offer these services as a natural extension of its core automotive glass
business.
INDUSTRY OVERVIEW
The market consists of two segments, the manufacture and sale of automotive
glass to large OEMs and the manufacturing and installation of automotive glass
for the replacement market. The OEM market is generally characterized as a
high-volume, manufacturing intensive industry. By contrast, the automotive glass
replacement market consists of service providers focused on providing automotive
glass replacement installation to a broad base of institutional and individual
customers. Replacement automotive glass is generally purchased by installers
from large OEM suppliers in the wholesale market.
The automotive glass replacement and repair industry in 1997 was an
estimated $3.0 billion industry representing the installation of approximately
12.5 million replacement units. The replacement and repair of automotive glass
is driven by the incidence of breakage. The market for the installation of
replacement automotive glass is highly fragmented with over 20,000 providers of
automotive 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. Since the early 1990s, the industry has been consolidating and
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 automotive glass claims.
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
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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
automotive 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 automotive 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 automotive glass claims for their policyholders.
Management believes that insurance companies through their policyholders,
directly or indirectly, influence approximately 70% of the selections of
automotive glass replacement providers. As a result of this influence, insurance
companies represent the most important segment of the automotive 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 functions associated with high volume and low
dollar payouts is gaining increasing acceptance within the insurance industry.
Automotive 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 automotive glass is related to the list prices
developed by the National Auto Glass Specification, an independent third party.
Changes to the NAGS list prices generally have followed the wholesale price
increases announced by the OEMs. Prices charged in the automotive glass
replacement industry are calculated using varying percentage discounts from the
NAGS price list. Actual revenue per unit, or "RPU" charged in the industry has
generally been increasing as a result of increases in the NAGS list price, the
increasing design complexity of automotive glass and the increasing level of
claims processing services associated with insurance-related replacement
automotive glass purchases.
NAGS list prices and offsetting discounts from NAGS list prices have
increased significantly over the past five years. Historically, these NAGS list
price increases and offsetting increases in discounts occurred following NAGS'
semi-annual announcement of revised price lists. The impact on Safelite's
financial results of NAGS price increases depends on the level of discounts
granted by Safelite to its customers and the level of discounts that Safelite
can obtain from its glass suppliers.
CUSTOMERS
Safelite has a broad customer base across two primary segments: (1)
installation and related services and (2) wholesale customers. Safelite's
largest customer base is insurance
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companies. Insurance companies and Safelite's top 10 customers have represented
the following percentages of Safelite's total sales:
<TABLE>
<CAPTION>
TOP 10 INSURANCE
CUSTOMERS COMPANIES
--------- ---------
<S> <C> <C>
Nine months ended 1/2/99........................ 44% 64%
Three months ended 4/4/98....................... 41% 58%
Fiscal 1997..................................... 42% 53%
Fiscal 1996..................................... 39% 48%
</TABLE>
Approximately 14% and 12% of Safelite's consolidated sales were from
Allstate Insurance in the nine months ended January 2, 1999 and the three month
period ended April 4, 1998, respectively. No customer accounted for more than
10% of Safelite's consolidated sales during 1997 and 1996.
INSTALLATION CUSTOMERS. Safelite'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 segment. From 1993 to 1997, Safelite's sales to this
market segment have grown at a compound annual rate of approximately 17%.
Safelite 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, has provided Safelite with a significant competitive advantage in the
insurance-influenced segment of the market.
Safelite currently provides its automotive glass replacement and repair
services for the policyholders of virtually every significant auto insurance
company in the U.S. Safelite 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. Safelite 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 51 Dispatch
Command Center/Central Telephone Units, or "DCC/CTUs" enable Safelite to close
more of these consumer sales by using scripted customer service representatives
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 automotive 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. Safelite has national account relationships with most large
rental car companies, including significant arrangements with Budget Rent-A-Car
and Hertz.
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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 MP 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
automotive 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. Safelite utilizes its excess manufacturing capacity
to produce windshields sold into the wholesale market. Wholesale customers
include other automotive glass replacement companies and distributors. Almost
all of the Company's wholesale customers are in the United States. Safelite's
wholesale volume allows Safelite to maximize the efficiency of its manufacturing
facilities. As Safelite 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 approximately 230
associates, is the largest in the industry. Safelite's sales associates are
highly trained and use a team selling approach when interacting with customers.
Safelite has 12 national "strategic account" representatives. These individuals
have built strong relationships with the major insurance, fleet and rental car
company decision makers and average 10 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 approximately 220 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 automotive 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, Safelite'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 automotive glass claim. Safelite'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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older models. In addition, due to the higher levels of service required for
outsourcing programs, insurance and fleet claims typically have a higher average
RPU.
INSTALLATION AND RELATED SERVICES. Safelite is an industry leader in using
information systems and technology to improve customer service and better manage
its business. Safelite's fully integrated network, SAFENET(TM), 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. Safelite's 51 centralized
DCC/CTU locations serve as the local market "hubs," are strategically located in
Safelite's major markets and receive "real time" data from SAFENET(TM).
Approximately 70% of Safelite's total customer calls are routed to one of the
National Referral Centers or DCC/CTUs.
Safelite's four National Referral Centers (three in Columbus, Ohio and one
in Chicago, Illinois) have capacity for over 6 million calls per year. These
facilities provide overflow capacity for local CTU operations and handle almost
65% and 35% respectively, of Safelite's auto insurance and fleet calls. Each
auto insurance company that outsources automotive glass claims with Safelite
receives a dedicated "1-800" number which connects directly into one of the
National Referral Centers.
At each of Safelite's National Referral Centers and DCC/CTUs, professional,
scripted customer service representative, or "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(TM), 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 Safelite's 5,000 authorized independent installation centers. On average,
over 80% 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(TM) point-of-sale system. Based on
predetermined "optimal" inventory levels for each stock-keeping-unit (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.
Safelite 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(TM) also
provides management and Safelite's customers with valuable information. The
reports generated through SAFENET(TM) include information otherwise generally
unavailable to the insurance companies, 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.
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MANUFACTURING. Safelite produces 65% of its windshield needs at its two
manufacturing plants in Enfield, North Carolina and Wichita, Kansas. The Enfield
facility encompasses 98,000 square feet of manufacturing space and has an annual
capacity of over one million units. The Wichita facility encompasses 146,000
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. Safelite
determines which windshield models to produce by assessing the sales trends and
estimating future windshield demand after a new automobile model has been on the
market for approximately one year. Safelite then designs selected windshield
models through a process of reverse engineering.
Production scheduling responsibility is shared by the plant scheduler, the
materials management department in Columbus, Ohio and Safelite's management
information systems. 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' automotive glass needs, the Company also offers tempered
automotive 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. In the year ended
January 3, 1998, the three months ended April 4, 1998 and the nine months ended
January 2, 1999, Safelite sourced 63%, 79% and 41%, respectively, of its
purchased glass from Libby-Owens-Ford. Safelite also utilizes other suppliers
for both domestic and foreign windshields. Safelite buys all of its raw glass
from AFG Industries, Inc. and Visteon, an enterprise of Ford Motor Company.
Vinyl is purchased from E.I. Du Pont De Nemours. Management believes alternate
sources of vinyl are also available. With few exceptions, inventory is centrally
purchased at Safelite's headquarters in Columbus, Ohio. Management believes that
Safelite's 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 641 of its 674 installation service centers, with the terms
of its leases generally being five years with one or two five year renewal
options. Safelite also leases 73
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of its 76 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 June 2001. Safelite maintains
administrative offices at 2400 Farmers Drive in Columbus, Ohio, which it leases
pursuant to a lease expiring in April 2003. The Company also has a call center
located at 2 North LaSalle Street, Chicago, Illinois under a lease expiring in
July 2005. Safelite also maintains a national referral center, local DCC/CTU and
regional warehouse at 760 Dearborn Park Lane in Columbus, Ohio. Safelite leases
this space pursuant to agreements expiring in April 2006. Safelite's leases
generally require Safelite to 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.
EMPLOYEES
As of January 2, 1999, Safelite employed approximately 6,200 people. The
Company has approximately 400 employees covered by four unions. Safelite has
experienced no labor related work stoppages and believes that its employee
relations are good.
COMPETITION
The markets for Safelite's products and services are very competitive. In
the automotive 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
Safelite is the industry leader in the automotive glass replacement industry, it
does compete against several other large competitors in this market, the largest
two of which have market shares estimated to be 8% and 4%. Safelite has
experienced increasing levels of competition during fiscal 1999, particularly
with respect to price.
In the summer of 1997, State Farm, one of Safelite's largest customers,
began to use a competitor to function as its glass claims call center and bill
processing administrator. The call center and bill processing functions were
moved to this competitor in a region by region rollout which was completed in
February 1998. Safelite's unit sales to State Farm declined substantially during
the nine months ended January 2, 1999 when compared to the combined nine months
ended January 3, 1998. Management believes that this decline was caused both by
State Farm's new program and the disruptions caused by the Vistar merger
integration. Safelite is currently taking strategic actions which management
believes will increase its unit sales to State Farm. There can be no assurance
that those actions will be successful or that Safelite will not experience
further declines in sales to State Farm.
Competition in the wholesale market is based principally on price and
quality. Safelite is a relatively small participant in the wholesale market,
which is dominated by several significantly larger companies.
Future growth in Safelite's revenues will depend upon Safelite's ability to
maintain and increase its market share in the automotive glass replacement
industry, while continuing to provide high levels of customer service, and its
ability to access the wholesale market in order to utilize excess manufacturing
capacity.
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ENVIRONMENTAL REGULATION
Safelite'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. Safelite is subject to federal, state and
local laws and regulations concerning the handling and disposal of hazardous
materials, and therefore incurs compliance costs in the ordinary course of its
manufacturing operations.
Safelite 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 Safelite. In
addition, Safelite does not anticipate any material capital expenditures for
environmental control facilities for the remainder of Safelite'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 Safelite. 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 Safelite. Regulations
resulting from the 1990 amendments to the Clean Air Act (the "1990 Amendments")
that will pertain to Safelite's manufacturing operations are currently not
expected to be promulgated until 1999 or later. Safelite cannot predict the
level of required capital expenditures resulting from future environmental
regulations; however, management does not anticipate that expenditures required
by such regulations, if any, will have a material adverse effect on Safelite.
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.
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MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The table below provides information on the directors and executive
officers of Safelite.
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
Garen K. Staglin............ 54 Chairman of the Board and Director
John F. Barlow.............. 55 President, Chief Executive Officer and
Director
Douglas A. Herron........... 49 Senior Vice President, Chief Financial
Officer and Director
Thomas M. Feeney............ 47 Senior Vice President, Client Sales and
Support
Douglas R. Maehl............ 50 Senior Vice President, Manufacturing,
Distribution and Purchasing
Elizabeth A. Wolszon........ 43 Senior Vice President, Marketing and
Strategic Planning
James K. West............... 55 Senior Vice President, Global Business
Development
Poe A. Timmons.............. 38 Vice President -- Finance
Anthony J. DiNovi........... 36 Director
Selwyn Herson............... 46 Director
Adrian F. Jones............. 45 Director
Seth W. Lawry............... 34 Director
Thomas H. Lee............... 55 Director
Gary Lubner................. 39 Director
Ronnie Lubner............... 65 Director
John E. Mason............... 50 Director
M. Louis Shakinovsky........ 54 Director
Scott M. Sperling........... 41 Director
Rodney Stansfield........... 59 Director
</TABLE>
A brief biography of each director and executive officer follows:
GAREN K. STAGLIN has served as Safelite's Chairman of the Board since July
1991 and served as Safelite's Chief Executive Officer from July 1991 through the
completion of the THL Transactions. 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., Cyber Cash, Inc. and QuickResponse Services, Inc.
and serves on the Advisory Board of the Stanford Graduate School of Business.
JOHN F. BARLOW has served as a director and Safelite's Chief Operating
Officer since September 1991. Mr. Barlow was made Chief Executive Officer
following the THL Transactions. From 1986 to August 1991, Mr. Barlow served as
the President and Chief Executive Officer of Western Auto Stores, a retailer of
automobile parts.
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DOUGLAS A. HERRON has served as Safelite's Senior Vice President and Chief
Financial Officer since June 1992. Mr. Herron was elected as a Director of
Safelite in March 1998. 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.
THOMAS M. FEENEY has served as Safelite's Senior Vice President Client
Sales and Support since 1991 and has been employed with Safelite's since 1988.
Prior to joining Safelite, Mr. Feeney was a Vice President with Tenneco
Automotive Retail.
DOUGLAS R. MAEHL has served as Safelite's Senior Vice President of
Manufacturing, Distribution and Purchasing since 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 Safelite's Senior 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 Specialty Merchandising, a group of specialty retailing chains owned by
Sears Roebuck & Co.
JAMES K. WEST served as Safelite's Senior Vice President of Information
Systems from June 1990 through February 1998 and recently assumed the role of
Senior Vice President, Global Business Development. 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 Safelite's Vice President-Finance 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.
ANTHONY J. DINOVI has served as a director since December 1996. 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 Acquisitions Fund II (Retirement Accounts),
L.P., respectively. Mr. DiNovi also serves as a director of Celpage, Inc., Eye
Care Centers of America, Inc., Fisher Scientific International Inc., LiveWire
Systems, LLC and The Learning Company, Inc.
SELWYN HERSON has served as a director since the Vistar merger. Mr. Herson
is the Founder and Managing Director of The Windsor Park Management Company, an
investment banking and strategic consulting firm based in Los Angeles. Mr.
Herson has consulted for Belron International on a number of major projects. Mr.
Herson also serves as a Director of S&K Famous Brands, Inc. and several private
corporations.
ADRIAN F. JONES has served as a director since the Vistar merger. Mr. Jones
is the Chief Financial Officer of Belron International which he joined in 1986.
Prior to joining Belron, Mr. Jones was a manager for Arthur Andersen LLP.
SETH W. LAWRY has served as a director since December 1996. Since April
1994, Mr. Lawry has been employed by Thomas H. Lee Company, an investment
company, and currently serves as a Managing Director. Mr. Lawry is also Vice
President of THL Equity
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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 Freedom Securities Corporation and
Syratech Corp. From September 1992 to March 1994, Mr. Lawry served as an
Associate at Morgan Stanley & Co. Incorporated, an investment bank.
THOMAS H. LEE has served as a director since March 1998. Mr. Lee is Founder
and President of Thomas H. Lee Company, an investment company. Mr. Lee is also
Chairman 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 President and a Trustee and beneficial owner 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 Acquisitions Fund II
(Retirement Accounts), L.P., respectively. Mr. Lee also serves as a director of
Finlay Enterprises, Inc., First Security Services Corporation, Livent, Inc.
(which filed for protection under Chapter 11 of the Federal Bankruptcy Code in
November 1998), Miller Import Corporation, Sondik Supply Company and Vail
Resorts, Inc.
GARY LUBNER has served as a director since March 1998. Mr. Lubner is
Managing Director of Autoglass Limited, the United Kingdom's leading automotive
glass repair and replacement company. Prior to his appointment as Managing
Director of Autoglass Limited in 1995, Mr. Lubner held various positions with
Plate Glass & Shatterprufe Industries Limited, South Africa's leading glass and
wood processor and distributor.
RONNIE LUBNER has served as a director since the Vistar merger. Mr. Lubner
is the Chairman and Chief Executive Officer of Plate Glass & Shatterprufe
Industries Limited which he joined in 1953. Mr. Lubner is also a director of
South African Breweries and Advanta Corporation.
JOHN E. MASON has served as a director since the Vistar merger. Mr. Mason
is the Chief Executive officer of Belron International which he joined in 1983
and an Executive Director of Plate Glass & Shatterprufe Industries Limited.
M. LOUIS SHAKINOVSKY has served as a director since the Vistar merger. Mr.
Shakinovsky is the Group Legal Services Director of Belron International and
Plate Glass & Shatterprufe Industries Limited which he joined in 1965.
SCOTT M. SPERLING has served as a director since December 1996. Since July
1994, Mr. Sperling has served as a Managing Director of Thomas H. Lee Company.
Mr. Sperling 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. Sperling also serves as a
director of Fisher Scientific International Inc., Livent, Inc. (which filed for
protection under Chapter 11 of the Federal Bankruptcy Code in November 1998),
LiveWire Systems, LLC, The General Chemical Group Inc. and The Learning Company.
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.
RODNEY STANSFIELD has served as a director since March 1998. Mr. Stansfield
was recently appointed Chief Executive Officer of Glass South Africa. Prior to
joining Glass South Africa, Mr. Stansfield served as Chief Executive Officer of
Libbey-Owens-Ford Co. Mr. Stansfield also serves as a director of Plate Glass &
Shatterprufe Industries Limited.
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COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors has established an Audit Committee and a
Compensation Committee. The Compensation Committee makes recommendations
concerning the salaries and incentive compensation of employees of and
consultants to Safelite, and oversees and administers Safelite's stock option
plans. Messrs. Barlow, DiNovi, Mason and Sperling are members of the
Compensation Committee. The Audit Committee is responsible for reviewing the
results and scope of audits and other services provided by Safelite's
independent auditors. Messrs. Jones, Lawry, Shakinovsky, and Staglin are members
of the Audit Committee.
DIRECTOR COMPENSATION
Directors that are not employees of Safelite, Thomas H. Lee Company or
Belron receive $1,000 for every Board meeting they attend. These directors are
also eligible to receive options under Safelite's 1996, 1998 and 1999 Stock
Option Plans.
EMPLOYMENT AGREEMENTS
Safelite entered into employment agreements with Messrs. Staglin, Barlow
and Herron in connection with the THL Transactions and the Vistar merger. The
employment agreements for Messrs. Barlow and Staglin were amended on April 30,
1997, to reflect a change in their titles. Mr. Staglin serves as Chairman of the
Board with an annual base salary of at least $700,000 and a performance bonus
determined by the Board of Directors. Mr. Barlow serves as President and Chief
Executive Officer of Safelite with a base salary of at least $700,000 and a
performance bonus determined by the Board of Directors of Safelite. Mr. Herron
serves as Senior Vice President and Chief Financial Officer of Safelite with a
base salary of at least $350,000 and an annual bonus to be determined by the
Board of Directors in accordance with an executive bonus plan.
Each of the agreements provides for the following:
(1) An initial term of three years, with automatic 2 year renewal
periods. Either party can elect not to renew by giving notice between 30
and 60 days prior to the expiration of the agreement.
(2) In the event the executive is terminated due to death or
disability:
- his base salary will continue for nine months
- a pro rata share of his bonus will be paid; and
- his additional benefits will continue for 12 months
(3) If the executive is terminated without cause:
- his base salary will continue for the greater of the remaining
term of the agreement or 24 months
- he will be paid a pro rata portion of his bonus; and
- his additional benefits will continue for a period of up to 12
months following the date of termination.
STOCK OPTION PLANS
1999 STOCK OPTION PLAN. Safelite's 1999 Stock Option Plan provides for
grants of options to acquire up to 525,000 shares of Class B Non-Voting Common
Stock. Incentive
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stock options may be granted to employees and officers of Safelite and
non-qualified stock options may be granted to consultants, directors, employees
and officers of Safelite.
The 1999 Plan is administered by the Board of Directors or a committee
thereof consisting of two or more directors. The Board of Directors has the
authority to select optionees and determine the terms of the options granted,
including (1) the number of shares subject to each option, (2) when the option
becomes exercisable, (3) 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
Safelite), (4) the duration of the option and (5) the time, manner and form of
payment upon exercise of an option. At January 2, 1999, Safelite had no options
outstanding under the 1999 Plan and 525,000 options available for future grant.
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 an employee of Safelite or for a period of time thereafter. If an
optionee becomes disabled while an employee of Safelite, the option is
exercisable prior to the last day of the third month following the date of
termination of employment. If an optionee dies while an employee of Safelite,
the option is exercisable prior to the last day of the ninth month following the
date of termination of employment. If the optionee leaves Safelite for any other
reason, the option terminates immediately upon termination of employment. The
Board of Directors, however, may extend this period up to the original
expiration date of the option. Options which are exercisable following
termination of employment are exercisable only to the extent that the options
were vested on the date of termination.
1998 STOCK OPTION PLAN. Safelite's 1998 Stock Option Plan provides for
grants of options to acquire up to 410,000 shares of Class B Non-Voting Common
Stock. Incentive stock options may be granted to employees and officers of
Safelite and non-qualified stock options may be granted to consultants,
directors, employees and officers of the Safelite.
The 1998 Plan is administered by the Board of Directors or a committee
thereof consisting of two or more directors. The Board of Directors has the
authority to select optionees and determine the terms of the options granted,
including (1) the number of shares subject to each option, (2) when the option
becomes exercisable, (3) 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
Safelite), (4) the duration of the option and (5) the time, manner and form of
payment upon exercise of an option. At January 2, 1999, Safelite had 365,000
options outstanding under the 1998 Plan and 45,000 options available for future
grant.
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 an employee of Safelite or for a period of time thereafter. If an
optionee becomes disabled while an employee of Safelite, the option is
exercisable prior to the last day of the third month following the date of
termination of employment. If an optionee dies while an employee of Safelite,
the option is exercisable prior to the last day of the ninth month following the
date of termination of employment. If the optionee leaves Safelite for any other
reason, the option terminates immediately upon termination of employment. The
Board of Directors, however, may extend this period up to the original
expiration date of the option. Options which are exercisable following
termination of employment are exercisable only to the extent that the options
were vested on the date of termination.
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1996 STOCK OPTION PLAN. Safelite's 1996 Stock Option Plan provides for
grants of options to acquire up to 175,000 shares of Class A Common Stock.
Incentive stock options may be granted to employees and officers of Safelite and
non-qualified stock options may be granted to consultants, directors, employees
and officers of the Safelite.
The 1996 Plan is administered by the Board of Directors or a committee
thereof consisting of two or more directors. The Board of Directors has the
authority to select optionees and determine the terms of the options granted,
including (1) the number of shares subject to each option, (2) when the option
becomes exercisable, (3) 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), (4) the duration of the option and (5) the time, manner and form of
payment upon exercise of an option. Prior to the Vistar merger, vesting of
options to purchase 160,000 shares of Class A Voting Common Stock issued under
the plan was accelerated and all 160,000 options were exercised. The remaining
15,000 outstanding options were converted into the right to purchase an equal
number of Class B Non-Voting Common Stock. At January 2, 1999, Safelite had
15,000 options outstanding under the 1996 Plan and no options available for
future grants.
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 an employee of Safelite or for a period of time thereafter. If an
optionee becomes disabled while an employee of Safelite, the option is
exercisable prior to the last day of the third month following the date of
termination of employment. If an optionee dies while an employee of Safelite,
the option is exercisable prior to the last day of the ninth month following the
date of termination of employment. If the optionee leaves Safelite for any other
reason, the option terminates immediately upon termination of employment. The
Board of Directors, however, may extend this period up to the original
expiration date of the option. Options which are exercisable following
termination of employment are exercisable only to the extent that the options
were vested on the date of termination.
1993 RESTATED EMPLOYEE STOCK OPTION PLAN. Safelite's 1993 Restated
Employee Stock Option Plan provided for the grants of options to acquire up to
264,000 shares of Class A Common Stock, in amounts and terms to officers and
other key employees which the administrators of the 1993 Restated Stock Option
Plan may chose. Options granted under the 1993 Restated Stock Option Plan were
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, consisting of one or more persons
appointed by the Board of Directors. All options currently outstanding under the
1993 Restated Stock Option Plan became fully vested and exercisable upon the
closing of the Vistar merger. In connection with the Vistar merger, options to
purchase 54,853 shares of Class A Common Stock for $3.00 per share were
exercised and outstanding options were converted into options to purchase an
equal number of Class B Non-Voting Common Stock. At January 2, 1999, Safelite
had 2,190 options to purchase Class B Non-Voting Common Stock under the 1993
Plan outstanding and no options available for future grants.
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 1993
Restated Stock Option Plan provides
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<PAGE> 76
for acceleration of the options upon the occurrence of a terminating event,
which included the Vistar merger.
EXECUTIVE COMPENSATION
The following table provides information about the compensation paid by
Safelite to its Chief Executive Officer and its four most highly paid executive
officers (the "Named Executive Officers"), for the three months ended April 4,
1998 and the fiscal years 1997 and 1996.
SUMMARY COMPENSATION TABLE(1)
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
--------------------------------------------------
SECURITIES
FISCAL OTHER ANNUAL UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION PERIOD(2) SALARY BONUS COMPENSATION OPTIONS (#) COMPENSATION
- --------------------------- --------- -------- ---------- ------------ ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Garen K. Staglin......... 1998 $175,000 $ 34,500 -- 10,000 $ 3,643(4)
Chairman of the Board 1997 $700,000 $ 502,851 $57,977(3) 8,424 $ 75(4)
1996 $666,827 $2,230,000 $75,628(3) -- $ 5,246(4)
John F. Barlow........... 1998 $175,000 $ 34,500 -- 40,000 $ 3,621(5)
President and Chief 1997 $693,269 $ 472,274 -- 50,000 $ 3,453(5)
Executive Officer 1996 $573,798 $2,040,000 -- -- $ 5,024(5)
Douglas A. Herron........ 1998 $ 96,250 $ 20,653 -- 17,500 $ 3,505(6)
Senior Vice President 1997 $374,904 $ 222,278 -- 23,370 $ 1,479(6)
and Chief Financial 1996 $327,885 $ 691,713 -- -- $ 4,772(6)
Officer
Elizabeth A. Wolszon..... 1998 $ 73,750 $ 15,825 -- 15,000 $ 3,200(7)
Senior Vice President 1997 $289,231 $ 163,602 -- 14,076 $ 1,270(7)
Marketing and 1996 $270,192 $ 430,703 -- -- $ 2,113(7)
Strategic Planning
Thomas M. Feeney......... 1998 $ 71,250 $ 15,289 -- 15,000 $ 6,929(8)
Senior Vice President 1997 $274,904 $ 557,587 -- 27,220 $ 3,270(8)
Client Sales and 1996 $248,077 $ 366,860 -- -- $11,664(8)
Support
</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 these perquisites and
other personal benefits were less than the lesser of $50,000 or 10% of the
total annual salary and bonuses for the Named Executive Officers for the
period. Amounts presented reflect compensation earned in the period
presented, although payment may have been made in other periods.
(2) References to fiscal periods above are as follows: three months ended April
4, 1998 ("1998"), year ended January 3, 1998 ("1997"), and year ended
December 28, 1996 ("1996").
(3) Includes $37,267 and $60,591, respectively, for compensation related to
reimbursement of certain expenses.
(4) Represents $3,200, $0 and $1,980, respectively, in Safelite contributions to
the 401(k) plan and $443, $75 and $3,266, respectively, in medical plan
benefits.
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<PAGE> 77
(5) Represents $3,200, $0 and $1,980, respectively, in Safelite contributions to
the 401(k) plan and $421, $3,453 and $3,044, respectively, in medical plan
benefits.
(6) Represents $3,200, $0 and $2,336, respectively, in Safelite contributions to
the 401(k) plan and $305, $1,479 and $2,436, respectively, in medical plan
benefits.
(7) Represents $3,200, $0 and $2,024, respectively, in Safelite contributions to
the 401(k) plan and $0, $1,270 and $89, respectively, in medical plan
benefits.
(8) Represents $3,200, $0 and $4,180, respectively, in Safelite contributions to
the 401(k) plan and $3,729, $3,270 and $7,484, respectively, in medical plan
benefits.
The following table provides information about stock options granted during
the three months ended April 4, 1998 and fiscal year 1997 to each of the
executive officers named in the Summary Compensation Table.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE
AT ASSUMED ANNUAL RATES
OF STOCK PRICE APPRECIATION
INDIVIDUAL GRANTS FOR OPTION TERM(1)
- ----------------------------------------------------------------------------- --------------------------------
% OF
NUMBER OF TOTAL
SECURITIES OPTIONS/
UNDERLYING SARS
OPTIONS/ GRANTED TO EXERCISE
SARS EMPLOYEES OR BASE
FISCAL GRANTED IN FISCAL PRICE EXP.
NAME PERIOD(2) ($) PERIOD ($/SH)(4) DATE 5% ($) 10% ($)
---- --------- ---------- ---------- --------- -------- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Garen K. Staglin............ 1998 10,000 2.4% $19.00 3/26/08 $119,500 $ 302,811
Chairman of the Board 1997 8,424(3) 4.8% $13.40 2/14/07 $ 71,014 $ 179,937
John F. Barlow.............. 1998 40,000 9.8% $19.00 3/26/08 $478,000 $1,211,200
President and Chief 1997 50,000(3) 28.6% $13.40 2/14/07 $421,500 $1,068,000
Executive Officer
Douglas A. Herron........... 1998 17,500 4.3% $19.00 3/26/08 $209,125 $ 529,900
Senior Vice President and 1997 23,370(3) 13.4% $13.40 2/14/07 $197,009 $ 499,183
Chief Financial Officer
Elizabeth A. Wolszon........ 1998 15,000 3.7% $19.00 3/26/08 $179,250 $ 454,200
Senior Vice President 1997 14,076(3) 8.0% $13.40 2/14/07 $118,661 $ 300,663
Marketing and Strategic
Planning
Thomas M. Feeney............ 1998 15,000 3.7% $19.00 3/26/08 $179,250 $ 454,200
Senior Vice President 1997 27,220(3) 15.6% $13.40 2/14/07 $229,465 $ 581,419
Client Sales and Support
</TABLE>
- -------------------------
(1) The amounts under the columns labeled "5%($)" and "10%($)" are included by
Safelite pursuant to rules promulgated by the Securities and Exchange
Commission and are not intended to forecast future appreciation, if any, in
the price of Safelite's common stock. These amounts are based on the
assumption that the option holders hold the options granted for their full
term. The actual value of the options will vary in accordance with the
market price of Safelite's common stock.
(2) References to fiscal periods above are as follows: three months ended April
4, 1998 ("1998") and year ended January 3, 1998 ("1997").
(3) Vesting of options granted was accelerated immediately prior to the Vistar
merger.
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<PAGE> 78
(4) The exercise price of the options is the fair market value of the underlying
common stock at the date of the grant.
The following table provides information regarding the exercise of stock
options during the three months ended April 4, 1998 and the fiscal year ended
January 3, 1998, and the number and value of stock options held by the executive
officers named in the Summary Compensation Table as of January 3, 1998 and April
4, 1998.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS AT OPTIONS/SARS
SHARES FY-END(#) AT FY-END($)
FISCAL ACQUIRED VALUE EXERCISABLE/ EXERCISABLE/
NAME PERIOD(1) ON EXERCISE(#) REALIZED ($) UNEXERCISABLE UNEXERCISABLE
- ---- --------- -------------- ------------ ------------- -------------
<S> <C> <C> <C> <C> <C>
Garen K. Staglin.............. 1998 -- -- 10,000 --
Chairman of the Board 1997 8,424 $156,686 -- --
John F. Barlow................ 1998 -- -- 40,000 --
President and Chief 1997 50,000 $930,000 -- --
Executive Officer
Douglas A. Herron............. 1998 -- -- 17,500 --
Senior Vice President and 1997 23,370 $434,682 -- --
Chief Financial Officer
Elizabeth A. Wolszon.......... 1998 -- -- 15,000 --
Senior Vice President
Marketing 1997 14,076 $261,814 -- --
and Strategic Planning
Thomas M. Feeney.............. 1998 -- -- 15,000 --
Senior Vice President 1997 31,598 $633,254 -- --
Client Sales and Support
</TABLE>
- -------------------------
(1) References to fiscal periods above are as follows: as of and for the three
months ended April 4, 1998 ("1998") and as of and for the year ended January
3, 1998 ("1997").
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<PAGE> 79
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table provides information regarding the beneficial ownership
of Safelite's Class A Voting Stock, Class B Non-Voting Stock and Non-Voting
Preferred Stock, as of January 2, 1999 by (1) each person (or group of
affiliated persons) known by Safelite to be the beneficial owner of more than 5%
of the outstanding common stock, (2) each Director, (3) Safelite's Chief
Executive Officer and Safelite's other named executive officers (as determined
in accordance with the rules of the Securities and Exchange Commission), and (4)
all of Safelite's executive officers and Directors as a group. Except as
indicated in the footnotes to this table, Safelite believes that the persons
named in this table have sole voting and investment power with respect to all
the shares of common stock indicated. The following table does not reflect any
effect of the sale of preferred stock which occurred on January 29, 1999.
<TABLE>
<CAPTION>
NO. OF NO. OF NO. OF
SHARES OF SHARES OF SHARES OF
CLASS A CLASS B NON-VOTING
NAME OF VOTING % OF NON-VOTING % OF PREFERRED % OF
BENEFICIAL OWNER STOCK(1) CLASS STOCK(1) CLASS STOCK(1) CLASS
- ---------------- --------- ----- ---------- ----- ---------- -----
<S> <C> <C> <C> <C> <C> <C>
Garen K. Staglin(2)(3).............. 72,101 2.1% 154,203 1.4% -- --
John F. Barlow(2)(4)................ 72,101 2.1% 184,203 1.7% -- --
Douglas A. Herron(2)(5)............. 21,649 * 60,797 * -- --
Elizabeth A. Wolszon(2)(6).......... 11,993 * 38,985 * -- --
Douglas R. Maehl(2)(6).............. 11,993 * 38,985 * -- --
James K. West(2)(6)................. 11,993 * 38,985 * -- --
Thomas M. Feeney(2)(6).............. 11,993 * 38,985 * -- --
Poe A. Timmons(2)(7)................ 6,505 * 18,011 * -- --
Anthony J. DiNovi(8)................ 1,447,080 42.4% 2,894,160 26.7% -- --
Seth W. Lawry(8).................... 1,447,080 42.4% 2,894,160 26.7% -- --
Thomas H. Lee(8).................... 1,447,080 42.4% 2,894,160 26.7% -- --
Scott M. Sperling(8)................ 1,447,080 42.4% 2,894,160 26.7% -- --
Gary Lubner......................... -- -- -- -- -- --
Ronnie Lubner....................... -- -- -- -- -- --
M. Louis Shakinovsky................ -- -- -- -- -- --
John E. Mason....................... -- -- -- -- -- --
Adrian F. Jones..................... -- -- -- -- -- --
Selwyn Herson....................... -- -- -- -- -- --
Rodney Stansfield................... -- -- -- -- -- --
All Directors and Executive Officers
as a Group (19 Persons)........... 1,667,408 50.5% 3,467,314 32.0% -- --
5% Stockholders:
Belron (USA) BV..................... 1,690,101 49.5% 4,487,123 43.1% 20,000 50.0%
Kellman Shareholders(9)(10)......... -- -- 2,472,648 23.8% 20,000 50.0%
Thomas H. Lee Equity Fund, III,
L.P.(11).......................... 1,241,479 36.7% 2,482,959 23.9% -- --
THL-CCI Limited Partnership(12)..... 128,782 3.8% 257,563 2.5% -- --
</TABLE>
- -------------------------
* Less than 1%
(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission. Shares of common stock subject to
options and warrants currently exercisable within 60 days of January 3,
1998 are considered to be outstanding.
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<PAGE> 80
(2) The address of this stockholder is c/o Safelite Glass Corp., 1105 Schrock
Road, Columbus, Ohio 43229.
(3) Includes 54,076 shares of Class A Voting Stock, 108,152 shares of Class B
Non-Voting Stock and 10,000 options to purchase shares of Class B
Non-Voting Stock owned of record by a Charitable Remainder Unit Trust
established for the benefit of Mr. Staglin and his wife.
(4) Includes 11,087 shares of Class A Voting Stock and 22,173 shares of Class B
Non-Voting Stock owned of record by trusts established for the benefit of
Mr. Barlow's children. Also includes 40,000 options to purchase shares of
Class B Non-Voting Stock.
(5) Includes options to purchase 17,500 shares of Class B Non-Voting Stock.
(6) Includes options to purchase 15,000 shares of Class B Non-Voting Stock.
(7) Includes options to purchase 5,000 shares of Class B Non-Voting Stock.
(8) The address of this stockholder is c/o Thomas H. Lee Company, 75 State
Street, Boston, Massachusetts 02109. All of these securities are owned by
the THL Equity Fund, THL-CCI Limited Partnership and Thomas H. Lee Foreign
Fund III, L.P. and can be considered to be beneficially owned by Messrs.
Lee, DiNovi, Lawry and Sperling, officers of the Thomas H. Lee Company,
based on to the definition of beneficial ownership provided in footnote
(1). Each of these persons disclaims beneficial ownership of the shares.
(9) The Kellman Shareholders and their individual holdings consist of: (1)
Family Revocable Trust (2,225,141 shares of Class B Non-Voting Stock and
17,998 shares of Non-Voting Preferred Stock); (2) Jack Kellman Gift Trust
U/A/D 12/16/91 (137,833 shares of Class B Non-Voting Stock and 1,114 shares
of Non-Voting Preferred Stock); (3) Joseph Kellman 1995 Descendants Test
for the Family of Jack U/A/D 11/8/95 (13,716 shares of Class B Non-Voting
Stock and 111 shares of Non-Voting Preferred Stock); (4) Joseph Kellman
1995 Descendants Trust for the Family of Richard U/A/D 11/8/95 (13,716
shares of Class B Non-Voting Stock and 111 shares of Non-Voting Preferred
Stock); (5) Joseph Kellman 1995 Descendants Trust for the Family of Celia
U/A/D 11/8/95 (13,716 shares of Class B Non-Voting Stock and 111 shares of
Non-Voting Preferred Stock); (6) Joseph Kellman Gift Trust for the Family
of Jack U/A/D 11/8/95 (22,842 shares of Class B Non-Voting Stock and 185
shares of Non-Voting Preferred Stock); (7) Joseph Kellman Gift Trust for
the Family of Richard U/A/D 11/8/95 (22,842 shares of Class B Non-Voting
Stock and 185 shares of Non-Voting Preferred Stock); and (8) Joseph Kellman
Gift Trust for the Family of Celia U/A/D 11/8/95 (22,842 shares of Class B
Non-Voting Stock and 185 shares of Non-Voting Preferred Stock).
(10) Joseph Kellman is the Trustee of the Family Revocable Trust (which owns
2,225,141 shares of Class B Non-Voting Stock and 17,998 shares of
Non-Voting Preferred Stock). Joseph Kellman maintains a principal address
at 1000 North Lake Shore Drive, Apartment 47-B, Chicago, Illinois 60610.
Allan B. Muchin, Maurice Raizes and Marvin Zimmerman are the Trustees of
each of the other Kellman Shareholders listed above in footnote (9) (which
own an aggregate of 247,507 shares of Class B Non-Voting Stock and 2,002
shares of Non-Voting Preferred Stock). Messrs. Muchin, Raizes and Zimmerman
each maintain a principal business address
79
<PAGE> 81
at c/o Katten, Muchin & Zavis, 525 West Monroe Street, Suite 1600, Chicago,
Illinois 60661, and each disclaims beneficial ownership of these shares.
(11) THL Equity Advisors III Limited Partnership ("Advisors"), the general
partner of the THL Equity Fund and Thomas H. Lee Foreign Fund III, LP., 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, could be considered to be beneficial owners of
the shares held by the THL Equity Fund and Thomas H. Lee Foreign Fund III,
L.P. (which owns 76,819 shares of Class A Voting Stock and 153,638 shares
of Class B Non-Voting Stock). Each of these persons maintains a principal
business address at c/o Thomas H. Lee Company, 75 State Street, Suite 2600,
Boston, MA 02109. Each of these persons disclaims beneficial ownership of
the shares.
(12) 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., could also be considered to be beneficial
owners of the shares held by THL-CCI Limited Partnership. Each of these
persons maintains a principal business address at c/o Thomas H. Lee
Company, 75 State Street, Suite 2600, Boston, MA 02109. Each of these
persons disclaims beneficial ownership of the shares.
80
<PAGE> 82
RELATIONSHIPS AND RELATED TRANSACTIONS
SHAREHOLDERS' AGREEMENTS
At the time of the Vistar merger, Safelite entered into a Shareholders
Agreement with its shareholders. This Shareholders Agreement was subsequently
amended by Amendment No. 1 dated as of March 26, 1998. Unless otherwise noted,
references in this document to the Shareholders Agreement mean the Shareholders
Agreement, as amended. The Shareholders Agreement provides for the composition
of the Board of Directors of Safelite to be designated one half by Belron and
one half by THL and contains provisions relating to the transfer of Safelite's
capital stock, preemptive rights and voting rights. The Shareholders Agreement
is filed as an exhibit to the registration statement.
REGISTRATION AGREEMENT
At the closing of the Vistar merger, Safelite and some of its shareholders
(including Thomas H. Lee Equity Fund III, L.P., Thomas H. Lee Foreign Fund III,
L.P., THL-CCI Investors Limited Partnership, Belron, the Kellman shareholders
and certain management shareholders) entered into a Registration Agreement. The
"Registration Agreement," gives these shareholders so-called "demand" and
"piggy-back" rights to require Safelite to effect the registration of shares of
Registerable Securities (as defined in the Registration Agreement) they hold for
sale to the public. All fees, costs and expenses of any registration effected on
behalf of these shareholders under the Registration Agreement (other than
underwriting discounts and commission) will be paid by Safelite. The
Registration Agreement is filed as an exhibit to the registration statement.
MANAGEMENT AGREEMENTS
At the closing of the Vistar merger, Safelite entered into management
agreements with both Thomas H. Lee Company and Belron. Under the terms of the
management agreements, Safelite agreed to pay both Thomas H. Lee Company and
Belron an annual fee of $1 million for management services provided to Safelite.
These management services consist of on-going operational, financial, accounting
and strategic planning analysis and advice. The management agreements do not
have a specified termination date. However, either party may terminate the
management agreements if there is a material breach of the terms of the
agreements and the breach is not cured within 30 days following written notice
of the breach. Each of the management agreements also specifies that they will
automatically terminate upon the sale of shares of Safelite's common stock in an
initial public offering registered under the Securities Act. The management
agreements are filed as exhibits to the registration statement.
TRANSACTIONS WITH SAFELITE MANAGEMENT
Safelite also entered into employment agreements with Messrs. Staglin,
Barlow and Herron in connection with the THL Transactions. See
"Management -- Employment Agreements." Each of Safelite's executive officers is
also entitled to participate in stock option plans maintained by Safelite. See
"Management -- Stock Option Plans." Members of Safelite management received a
transaction bonus in connection with the THL Transactions of approximately $7
million. Of this amount, Mr. Staglin received $2,175,000, Mr. Barlow received
$2,040,000, Mr. Herron received $435,000, Mr. Feeney received $183,500, Mr.
Maehl received $229,000, Ms. Wolszon received $229,000, Mr. West received
$229,000 and Ms. Timmons received $160,000.
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<PAGE> 83
In connection with the closing of the Vistar merger, members of Safelite
management received bonuses aggregating $1.0 million. Of this amount, Mr.
Staglin received $212,000, Mr. Barlow received $212,000, Mr. Herron received
$109,886, Mr. Feeney received $81,344, Mr. Maehl received $74,209, Ms. Wolszon
received $84,198, Mr. West received $78,490 and Ms. Timmons received $57,084. In
addition, prior to consummation of the Distribution, vesting of stock options to
purchase an aggregate of 160,000 shares of Safelite's Class A Common Stock,
previously granted to Mr. Staglin (8,424 options), Mr. Barlow (50,000 options),
Mr. Herron (23,370 options), Mr. Feeney (27,220 options), Mr. Maehl (14,076
options), Ms. Wolszon (14,076 options), Mr. West (14,076 options), and Ms.
Timmons (8,758 options) under Safelite's existing stock option plans, was
accelerated, which permitted option holders to exercise those options and
participate in the Distribution with respect to those shares. The acceleration
of this vesting created a charge of approximately $3.0 million. See "Executive
Compensation -- Option/SAR Grants in Last Fiscal Year."
Former members of Vistar management received transaction bonuses totaling
approximately $5.2 million. In addition, former members of Vistar management
will and have received severance payments, subject to the terms and conditions
of their employment agreements.
In connection with consummation of the Vistar merger, Safelite forgave all
payments owed to Vistar by Joseph Kellman, formerly a Vistar shareholder and
currently a Safelite shareholder, under a promissory note with an outstanding
principal and interest amount due of approximately $3.5 million. Safelite also
forgave all payments owed to Safelite by members of management under notes with
outstanding amounts aggregating approximately $470,000. The total amount of
loans made to executive officers which were forgiven were as follows: Mr.
Staglin, $152,851; Mr. Barlow, $122,274; Mr. Herron, $29,778; Mr. Feeney,
$3,237; Ms. Wolszon, $16,102; Mr. Maehl, $16,102; and Mr. West, $15,440.
OTHER
Thomas H. Lee Company received $4.0 million in fees upon consummation of
the Vistar merger. In addition, Belron received fees totaling $3.0 million upon
consummation of the Vistar merger. Safelite also paid $2.7 million in advisory
fees to The Windsor Park Management Group as consideration for services provided
to Vistar in connection with the Vistar merger. Selwyn Herson, who became a
director of Safelite after consummation of the Vistar merger, is an affiliate of
The Windsor Park Management Group.
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<PAGE> 84
DESCRIPTION OF CAPITAL STOCK
The authorized capital stock of Safelite consists of 4,960,000 shares of
Class A Voting Common Stock, $0.01 par value per share, 33,000,000 shares of
Class B Non-Voting Common, $0.01 par value per share, 40,000 shares of
Non-Voting 8% Preferred Stock, $.01 par value per share and 50,000 shares of
Series A Convertible Participating Preferred Stock, $0.01 par value per share.
The following is only a summary of the provisions of the common stock and
preferred stock. For a full description of the capital stock you should read
Safelite's Restated Certificate of Incorporation, as amended, which is filed as
an exhibit to the registration statement.
COMMON STOCK
Except as otherwise provided below, all shares of Class A Voting Stock and
Class B Non-Voting Stock are identical in all respects and entitle holders to
the same rights, preferences and privileges, and subject holders to the same
qualifications, limitations and restrictions.
DIVIDENDS. When dividends are declared or paid with respect to shares of
common stock, (whether in cash, property or securities of the Safelite), the
holders of Class A Voting Stock and the holders of Class B Non-Voting Stock are
entitled to receive these dividends on a pro rata basis at the same rate. If
dividends are declared or paid in shares of common stock, however, the dividends
payable on shares of Class A Voting Stock are payable in shares of Class A
Voting Stock and the dividends payable on shares of Class B Non-Voting Stock are
payable in shares of Class B Non-Voting Stock. If the dividends consist of other
voting securities of Safelite, Safelite will pay to each holder of Class B
Non-Voting Stock dividends consisting of non-voting securities of Safelite
(except as otherwise required by law) which are otherwise identical to the
voting securities and which are convertible into these voting securities on the
same terms as the Class B Non-Voting Stock is convertible into the Class A
Voting Stock.
DISSOLUTION, LIQUIDATION OR WINDING-UP. The holders of the Class A Voting
Stock and the holders of the Class B Non-Voting are entitled to participate pro
rata at the same rate per share in all distributions to the holders of common
stock in any liquidation, dissolution or winding-up of Safelite. This
participation would be after payment or provision for payment of the debts and
other liabilities of Safelite and of the amounts to which the holders of any
outstanding shares of any capital stock ranking senior in preference to the
common stock are entitled, including, without limitation, the holders of
Non-Voting Preferred Stock, has been made. The Board of Directors of Safelite,
in good faith, will 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 Safelite. This
determination made by the Board of Directors of Safelite will be final and
binding on Safelite and all holders of common stock.
VOTING. Except as otherwise provided below or as otherwise required by
applicable law, the holders of Class A Voting Stock are entitled to one vote per
share on all matters to be voted on by Safelite's stockholders and, except as
otherwise required by law, the holders of Class B Non-Voting Stock have no right
to vote on any matters to be voted on by Safelite's stockholders.
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CONVERSION OF THE CLASS B NON-VOTING STOCK. Any holder of shares of Class
B Non-Voting Stock has the right to exchange their shares of Class B Non-Voting
Stock as follows:
(1) any time on or after the Triggering Day, all shares of Class B
Non-Voting Stock held by any person will be exchangeable, on a one-for-one
basis, for shares of Class A Voting Stock; and
(2) any time on or after the sale of Class B Non Non-Voting Stock
under circumstances which are not a Permitted Transfer, the shares of Class
B Non-Voting Stock which have been sold will be exchangeable for shares of
Class A Voting Stock.
The terms "Triggering Day" and "Permitted Transfer" are defined in the
Shareholders Agreement entered into in connection with the Vistar merger. This
Shareholders Agreement is filed as an exhibit to the registration statement. See
"Relationships and Related Transactions." The conversion of Class B Non-Voting
Stock to Class A Voting Stock could result in a change of control under the
terms of the Existing Notes Indenture and the Indenture.
The rights, preferences and privileges of holders of the common stock are
subject to, and may be adversely affected by, the rights of holders of shares of
the currently authorized preferred stock and any other preferred stock that
Safelite may designate in the future.
NON-VOTING PREFERRED STOCK
The Non-Voting Preferred Stock is an accumulating perpetual preferred
stock. The Non-Voting Preferred Stock was part of the merger consideration
issued pursuant to the Vistar merger.
DIVIDENDS. Safelite will pay cumulative semi-annual dividends on the
Non-Voting Preferred Stock if, when and as declared by the Board of Directors of
Safelite, and to the extent permitted under the General Corporation Law of the
State of Delaware. The dividends will accrue on a daily basis (computed on the
basis of a 360-day year and actual days elapsed) at the rate per annum of 8% per
share of Non-Voting Preferred Stock, calculated as a percentage of $1,000 (plus
accrued and unpaid dividends). The dividends will be compounded semiannually,
from and including the effective date of the Vistar merger until the redemption
of Non-Voting Preferred Stock (with payment being calculated through the date on
which payment is tendered to the holders of Non-Voting Preferred Stock). If
Safelite elects not to redeem Non-Voting Preferred Stock upon the occurrence of
a Non-Voting 8% Preferred Stock Optional Redemption Event (defined below), this
dividend rate will automatically increase to:
(1) 14% per annum upon the occurrence of a Non-Voting 8% Preferred
Stock Optional Redemption Event,
(2) 15% per annum on the first annual anniversary date of that
Non-Voting 8% Preferred Stock Optional Redemption Event; and
(3) 16% per annum on the second anniversary date of that Redemption
Event.
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
Safelite legally available for the
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payment of dividends. A "Non-Voting 8% Preferred Stock Optional Redemption
Event" means:
(1) an underwritten initial public offering of Safelite's capital
stock pursuant to a registration statement effected under the Securities
Act or
(2) the occurrence of a change in control under the terms of the
Existing Notes Indenture or the Indenture.
The date on which Safelite initially issues any shares of Non-Voting
Preferred Stock is considered to be its "date of issuance" regardless of the
number of times transfer of the shares of Non-Voting Preferred Stock is made on
the stock records of Safelite, and regardless of the number of certificates
issued to evidence the shares of Non-Voting Preferred Stock. If at any time
Safelite distributes less than the total amount of accrued dividends on the
Non-Voting Preferred Stock, the payment will be distributed among the holders of
Non-Voting Preferred Stock so that an equal amount will be paid (as nearly as
possible) on each outstanding share of Non-Voting Preferred Stock.
As a result of restrictions contained in the Existing Notes Indenture and
the Indenture, dividends are not payable on the Non-Voting Preferred Stock
unless the payment is in compliance with the Limitation on Restricted Payments
covenant contained in those indentures. The accrual of dividends, however, is
not restricted in the Existing Notes Indenture and the Indenture.
So long as any shares of Non-Voting Preferred Stock remain outstanding,
neither Safelite nor any future subsidiaries of Safelite will redeem, purchase
or otherwise acquire any other equity security of Safelite which is junior to
the Non-Voting Preferred Stock in right to payment. In addition, Safelite will
not declare or pay any cash dividend or make any distribution of assets to these
junior securities unless the distribution is in the form of shares of junior
securities. However, nothing in the Restated Certificate of Incorporation
prohibits Safelite from acquiring common stock of Safelite pursuant to
contractual rights approved by the Board of Directors.
LIQUIDATION, DISSOLUTION OR WINDING-UP. In the event of a Liquidity Event
(as defined below), before any distribution or payment may be made to holders of
junior securities, holders of each share of Non-Voting Preferred Stock will be
entitled to be paid out a liquidation amount in cash equal to $1,000 per share
of Non-Voting Preferred Stock, plus accrued but unpaid dividends. The term
"Liquidity Event" means a liquidation, dissolution or winding-up of the Company,
whether voluntary or involuntary.
If, upon a Liquidity Event, the assets of Safelite available for
distribution to its stockholders are insufficient to permit payment to the
holders of Non-Voting Preferred Stock of the full liquidation amount to which
they are entitled, the holders of shares of Non-Voting Preferred Stock will
share ratably in any distribution of assets. After the payment of the
liquidation amount has been made in full or funds necessary for this payment
have been set aside by Safelite in trust, the holders of Non-Voting Preferred
Stock will be entitled to no further participation in the distribution of the
assets of Safelite. The remaining assets of Safelite legally available for
distribution to its stockholders will be distributed among the holders of other
classes of securities of Safelite in accordance with their respective terms.
The liquidation amount will be paid in cash to the extent Safelite has cash
available. Whenever a distribution provided for above is payable in property
other than cash, the
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value of the distribution will be the fair market value of the property as
determined in good faith by Safelite's Board of Directors.
VOTING. Except as otherwise required by law, or under "Restrictions and
Limitations" below or in the Shareholders Agreement, the holders of Non-Voting
Preferred Stock have no right to vote on any matters to be voted on by the
Safelite's stockholders.
MANDATORY REDEMPTION. The Non-Voting Preferred Stock is not mandatorily
redeemable.
OPTIONAL REDEMPTION. Safelite may redeem Non-Voting Preferred Stock at its
option, in whole or in part, at $1,000 per share plus accrued but unpaid
dividends, at any time. If, at any time, Safelite redeems less than all of the
outstanding shares of Non-Voting Preferred Stock, the redemption will be made
from the holders of Non-Voting Preferred Stock on a pro rata basis, based on the
number of shares of Non-Voting Preferred Stock held by each stockholder. The
terms of the Bank Credit Agreement, the Existing Notes Indenture and the
Indenture restrict Safelite's ability to redeem shares of the Non-Voting
Preferred Stock.
RANKING. The Non-Voting Preferred Stock ranks senior to all other series
of preferred stock of Safelite and all classes of common stock of Safelite with
respect to dividend and redemption rights and rights upon liquidation,
dissolution and winding up of Safelite.
RESTRICTIONS AND LIMITATIONS. Safelite will not amend the Restated
Certificate of Incorporation without the approval, by vote or written consent,
of the holders of at least a majority of the then outstanding shares of
Non-Voting Preferred Stock, if the amendment would amend any of the rights,
preferences, privileges of or limitations provided for in the Restated
Certificate of Incorporation for the benefit of shares of Non-Voting Preferred
Stock. Safelite will not amend the Restated Certificate of Incorporation without
the approval by the holders of at least a majority of the then outstanding
shares of Non-Voting Preferred Stock if the amendment would:
(1) change the relative seniority rights of holders of Non-Voting
Preferred Stock as to the payment of dividends in relation to the holders
of any other capital stock of Safelite;
(2) reduce the amount payable to the holders of Non-Voting Preferred
Stock in the event of a Liquidity Event, or change the relative seniority
of the liquidation preferences of the holders of Non-Voting Preferred Stock
to the rights upon liquidation of the holders of other capital stock of
Safelite, or change the dividend rights of the holders of Non-Voting
Preferred Stock;
(3) cancel or modify the redemption rights of the holders of
Non-Voting Preferred Stock provided for in the Restated Certificate of
Incorporation; or
(4) cancel or modify the rights of the holders of Non-Voting Preferred
Stock provided for in the section of the Restated Certificate of
Incorporation entitled "Restrictions and Limitations."
NO REISSUANCE OF PREFERRED STOCK. No share or shares of Non-Voting
Preferred Stock acquired by Safelite by reason of redemption, purchase or
otherwise will be reissued, and all these shares will be canceled, retired and
eliminated from the shares which Safelite is authorized to issue. Safelite may
from time to time take the appropriate corporate action as may be necessary to
reduce the authorized number of shares of Non-Voting Preferred Stock
accordingly.
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SERIES A CONVERTIBLE PARTICIPATING PREFERRED STOCK
The Series A Preferred Stock is an accumulating perpetual preferred stock.
The Series A Preferred Stock was issued on January 29, 1999 as part of the $50.0
million equity investment made by Safelite shareholders.
CUMULATIVE DIVIDENDS. Safelite will pay cumulative semi-annual dividends
on the Series A Preferred Stock if, when and as declared by the Board of
Directors of Safelite, and to the extent permitted under the General Corporation
Law of the State of Delaware. The dividends will accrue on a daily basis
(computed on the basis of a 360-day year and actual days elapsed) at the rate
per annum of 8% per share of Series A Preferred Stock, calculated as a
percentage of $1,000 (plus accrued and unpaid dividends). The dividends will be
compounded quarterly, from and including January 29, 1999 until the redemption
of Series A Preferred Stock and payment in full of the Series A Preferred Stock
liquidation amount (as described below), with payment being calculated through
the date on which payment is tendered to the holders of Series A Preferred
Stock.
If Safelite elects not to redeem Series A Preferred Stock upon the
occurrence of a Series A Preferred Stock Optional Redemption Event (defined
below), this dividend rate will automatically increase to:
(1) 14% per annum upon the occurrence of a Series A Preferred Stock
Optional Redemption Event;
(2) 15% per annum on the first annual anniversary date of that Series
A Preferred Stock Optional Redemption Event; and
(3) 16% per annum on the second anniversary date of that Series A
Preferred Stock Redemption Event.
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
Safelite legally available for the payment of dividends.
A "Series A Preferred Stock Optional Redemption Event" means:
(1) an underwritten initial public offering of Safelite's capital
stock pursuant to a registration statement effected under the Securities
Act;
(2) the occurrence of a change in control under the terms of the
Existing Notes Indenture or the Indenture; or
(3) if (a) a majority of the members of Safelite's Board of Directors
change, except for changes resulting from changes in the designee of any
investor who had the contractual right to designate a member of the Board
of Directors on January 29, 1999 or (b) there is a sale of all or
substantially all of Safelite's assets. Each of the events described in
clauses (3)(a) and 3(b) is referred to in the Restated Certificate of
Incorporation as a "Series A Change of Control."
A change of control under the Indentures or a Series A Change of Control
described in clause (3)(a) of the immediately paragraph will be deemed to occur
fifteen (15) days after the event causing the change of control occurs.
PARTICIPATING DIVIDENDS. If and when Safelite declares and pays a cash
dividend on its outstanding common stock, then the holders of Series A Preferred
Stock will be entitled to receive from Safelite a preferential dividend in the
same amount as would have been received by the holders if they had converted
their Series A Preferred Stock into
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Class B Common Stock (assuming conversion at the option of the holders). See "--
Conversion of Series A Preferred Stock" for the conversion formula. The dividend
must be paid on the Series A Preferred Stock at the same time that the dividend
is paid on the common stock.
The date on which Safelite initially issues any shares of Series A
Preferred Stock is considered to be its "date of issuance" regardless of the
number of times transfer of the shares of Series A Preferred Stock is made on
Safelite's stock records, and regardless of the number of certificates issued to
evidence the shares of Series A Preferred Stock. If at any time Safelite
distributes less than the total amount of accrued dividends on the Series A
Preferred Stock, the payment will be distributed among the holders of Series A
Preferred Stock so that an equal amount will be paid (as nearly as possible) on
each outstanding share of Series A Preferred Stock.
As a result of restrictions contained in the Existing Notes Indenture and
the Indenture, dividends are not payable on the Series A Preferred Stock unless
the payment is in compliance with the Limitation on Restricted Payments covenant
contained in these indentures. The accrual of dividends, however, is not
restricted in the Existing Notes Indenture or the Indenture.
So long as any shares of Series A Preferred Stock remain outstanding,
neither Safelite nor any future subsidiaries of Safelite will redeem, purchase
or otherwise acquire any other equity security of Safelite which is junior to
the Series A Preferred Stock in right to payment. In addition, Safelite will not
declare or pay any cash dividend or make any distribution of assets to these
junior securities unless the distribution is in the form of shares of junior
securities. However, nothing in the Restated Certificate of Incorporation
prohibits Safelite from acquiring common stock of Safelite pursuant to
contractual rights approved by the Board of Directors.
LIQUIDATION, DISSOLUTION OR WINDING-UP. In the event of a Liquidity Event,
before any distribution or payment may be made to holders of junior securities,
holders of each share of Series A Preferred Stock will be entitled to be paid
out a liquidation amount in cash equal to the greater of the following:
(1) $1,000 per share of Series A Preferred Stock (this amount is
subject to equitable adjustment whenever there is a Series A Preferred
Stock split, combination, reclassification or other similar event), plus
accrued and unpaid dividends up to and including the date full payment is
be tendered to the holders of Series A Preferred Stock; and
(2) an amount per share of Series A Preferred Stock equal to the
amount which would have been distributable with respect to the number of
shares of Class B Common Stock into which the shares of Series A Preferred
Stock would be convertible as of the date immediately prior to the
Liquidity Event if Safelite had been liquidated as of that date. The per
share amount will be based on the value of Safelite on a liquidated basis
as agreed to by Safelite, THL and Belron or, if agreement cannot be reached
within fifteen (15) days following the Liquidity Event, as determined by an
independent appraiser selected by Safelite, with Safelite paying the fees
and expenses of the appraiser.
If, upon a Liquidity Event, the assets of Safelite available for
distribution to its stockholders are insufficient to permit payment to the
holders of Series A Preferred Stock of the full liquidation amount to which they
are entitled, the holders of shares of Series A Preferred Stock will share
ratably in any distribution of assets. After the payment of the
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liquidation amount has been made in full or funds necessary for this payment
have been set aside by Safelite in trust, the holders of Series A Preferred
Stock will be entitled to no further participation in the distribution of the
assets of Safelite. The remaining assets of Safelite legally available for
distribution to its stockholders will be distributed among the holders of other
classes of securities of Safelite in accordance with their respective terms.
The liquidation amount will be paid in cash to the extent Safelite has cash
available. Whenever a distribution provided for above is payable in property
other than cash, the value of the distribution will be the fair market value of
the property as determined in good faith by Safelite's Board of Directors.
VOTING. Except as otherwise required by law, or under "Restrictions and
Limitations" below or in the Shareholders Agreement, the holders of Series A
Preferred Stock have no right to vote on any matters to be voted on by
Safelite's stockholders.
MANDATORY REDEMPTION. The Series A Preferred Stock is not mandatorily
redeemable.
OPTIONAL REDEMPTION. Safelite may redeem Series A Preferred Stock at its
option, in whole or in part, at $1,000 per share plus accrued but unpaid
dividends at any time. If, at any time, Safelite redeems less than all of the
outstanding shares of Series A Preferred Stock, the redemption will be made from
the holders of Series A Preferred Stock on a pro rata basis, based on the number
of shares of Series A Preferred Stock held by each stockholder. The terms of the
Bank Credit Agreement, the Existing Notes Indenture and the Indenture restrict
Safelite's ability to redeem shares of the Series A Preferred Stock. A
redemption of the Series A Preferred Stock is referred to in the Restated
Certificate of Incorporation as an "SA Redemption Event."
RANKING. The Series A Preferred Stock ranks senior to all classes of
common stock of Safelite with respect to dividend and redemption rights and
rights upon liquidation, dissolution and winding up of Safelite.
CONVERSION OF THE SERIES A PREFERRED STOCK
CONVERSION RIGHTS. At any time, any holder of shares of Series A Preferred
Stock has the right to exchange its shares of Series A Preferred Stock as
follows: each share of Series A Preferred Stock held by any person is
exchangeable for a number of shares of Class B Common Stock equal to (a) $1,000
divided by (b) the Conversion Price. "Conversion Price" means $4.72, subject to
adjustment as provided below.
ADJUSTMENT OF CONVERSION PRICE.
If the outstanding shares of Class B Common Stock are subdivided into a
greater number of shares of Class B Common Stock or a stock dividend is declared
on the shares Class B Common Stock, the Conversion Price in effect will be
proportionately decreased. Conversely, if the outstanding shares of Class B
Common Stock are combined into a smaller number of shares of Class B Common
Stock, the Conversion Price in effect will be proportionately increased.
If Safelite issues shares of Class B Common Stock or securities exercisable
for or convertible into shares of Class B Common Stock (other than (a) pursuant
to the exercise of employee stock options, (b) as consideration in connection
with acquisitions approved by the Board of Directors, or (c) in a public
offering at a price which is less than $4.72
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per share, the Conversion Price will be adjusted to the result obtained by
multiplying the Conversion Price in effect immediately prior to the date of the
issuance by a fraction:
(1) the numerator of which is the per share issuance price; and
(2) the denominator of which is be $4.72.
No adjustment in the Conversion Price, however, will be required unless the
adjustment would require an increase or decrease of at least 1% in the price.
Any adjustments which are not made because they are less than 1% will be carried
forward and taken into account in any subsequent adjustment.
RESTRICTIONS AND LIMITATIONS. Safelite will not amend the Restated
Certificate of Incorporation without the approval, by vote or written consent,
of both THL and Belron, if the amendment would amend any of the rights,
preferences, privileges of or limitations provided for in the Restated
Certificate of Incorporation for the benefit of shares of Series A Preferred
Stock. Safelite will not amend the Restated Certificate of Incorporation without
the approval of both THL and Belron if the amendment would:
(1) change the relative seniority rights of holders of Series A
Preferred Stock as to the payment of dividends in relation to the holders
of any other capital stock of Safelite;
(2) reduce the amount payable to the holders of Series A Preferred
Stock in the event of a Liquidity Event or an SA Redemption Event, or
change the relative seniority of the liquidation preferences of the holders
of Series A Preferred Stock to the rights upon liquidation of the holders
of other capital stock of Safelite, or change the dividend rights of the
holders of Series A Preferred Stock;
(3) cancel or modify the redemption rights of the holders of Series A
Preferred Stock provided for in the Restated Certificate of Incorporation;
(4) authorize, create, designate or issue any class or series of
capital stock, or any security which can be converted into or exchanged for
any class or series of capital stock, having priority over, or ranking pari
passu with, the Series A Preferred Stock as to dividends, redemption rights
or rights upon a Liquidity Event or a Series A Preferred Stock Redemption
Event; or
(5) cancel or modify the rights of the holders of Series A Preferred
Stock provided for in the section of the Restated Certificate of
Incorporation entitled "Restrictions and Limitations."
NO REISSUANCE OF PREFERRED STOCK. No share or shares of Series A Preferred
Stock acquired by Safelite by reason of redemption, purchase or otherwise will
be reissued, and all these shares will be canceled, retired and eliminated from
the shares which Safelite is authorized to issue. Safelite may from time to time
take the appropriate corporate action as may be necessary to reduce the
authorized number of shares of Series A Preferred Stock accordingly.
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CHARTER AND BY-LAW PROVISIONS
The Restated Certificate of Incorporation of Safelite provides that no
director will be personally liable to Safelite or its stockholders for monetary
damages for breach of fiduciary duty as a director, except for:
(1) any breach of the director's duty of loyalty to Safelite or its
stockholders;
(2) acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law;
(3) acts or omissions in respect of unlawful dividends and payments or
stock redemptions or repurchases; or
(4) any transaction from which the 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 (1) through
(4) 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 Amended and Restated Bylaws provide that Safelite will, to the full
extent permitted by the Delaware General Corporation Law as currently in effect,
indemnify each of its currently acting and former directors, officers, employees
and agents against liabilities arising in connection with their acting in these
capacities and may advance expenses related to addressing any of these items.
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DESCRIPTION OF EXCHANGE NOTES
Safelite will issue the notes to be issued in the Exchange Offer under an
Indenture between Safelite and State Street Bank and Trust Company, as trustee
(the "Trustee"). The terms of the notes include those expressly set forth in the
Indenture and those made part of the Indenture by reference to the Trust
Indenture Act of 1939, as amended.
This description of notes is intended to be a useful overview of the
material provisions of the Notes and the Indenture. Since this description of
notes is only a summary, you should refer to the Indenture for a complete
description of the obligations of Safelite and your rights. Safelite has filed a
copy of the Indenture as an exhibit to the registration statement.
The terms of the notes to be issued in the Exchange Offer are identical in
all material respects to the terms of the outstanding notes, except for transfer
restrictions relating to the outstanding notes. Any outstanding notes that
remain outstanding after the Exchange Offer will be treated for voting purposes
as a single class of securities with the notes issued in the Exchange Offer.
References to the term "Note" or "Notes" in this "Description of Exchange Notes"
section mean both the outstanding notes and the notes to be issued in the
Exchange Offer.
The section entitled "Certain Definitions" includes the definitions of the
capitalized terms used in this description. References to the "Company" mean
only Safelite Glass Corp., and not any of its future subsidiaries.
GENERAL
THE NOTES. The Notes:
- are general unsecured, senior subordinated obligations of Safelite;
- are limited to an aggregate principal amount of $55 million;
- mature on December 15, 2006;
- are subordinated in right of payment to all existing and future
Senior Indebtedness of Safelite; and
- rank equally in right of payment to any future Senior Subordinated
Indebtedness of Safelite.
INTEREST. Interest on the Notes will compound semi-annually and:
- accrue at the rate of 9 7/8% per annum;
- accrue from the date of issuance or the most recent interest payment
date;
- be payable in cash semi-annually in arrears on each June 15 and
December 15, commencing on June 15, 1999;
- be payable to the holders of record on the June 1 and December 1
immediately preceding the related interest payment dates; and
- be computed on the basis of a 360-day year comprised of twelve 30-day
months.
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PAYMENTS ON THE NOTES
Interest payments on the Notes will be made at the corporate trust office
of the Trustee in New York, New York. Safelite has the option to pay interest by
check mailed to the holders as their address appears in the register maintained
by the Trustee. If the Notes are in "global form," which means registered in the
name of or held by DTC or its nominee, then payment of principal and interest
will be made in immediately available funds to DTC or its nominee as it is the
registered holder of the global Note.
PAYING AGENT AND REGISTRAR
The Trustee will initially act as paying agent and registrar. Safelite may
change the paying agent or registrar without prior notice to the holders of the
Notes. Safelite or any of its future Restricted Subsidiaries may act as paying
agent or registrar.
TRANSFER AND EXCHANGE
A holder may transfer or exchange Notes in accordance with the Indenture.
The registrar and the Trustee may require a holder to furnish appropriate
endorsements and transfer documents and Safelite may require a holder to pay any
taxes and fees required by law or permitted by the Indenture. Safelite is not
required to transfer or exchange any Note selected for redemption. Also,
Safelite is not required to transfer or exchange any Note for a period of 15
days before a selection of Notes to be redeemed. No service charge will be made
for any registration of transfer or exchange of Notes, but Safelite may require
payment of a sum sufficient to cover any transfer tax or other similar
governmental charge payable in connection therewith.
The registered holder of a Note will be treated as the owner of it for all
purposes.
OPTIONAL REDEMPTION
Except as described below, the Notes are not redeemable until December 15,
2001. On and after that date, Safelite may redeem all or a part of the Notes
with not less than 30 nor more than 60 days' notice at the redemption prices
listed below. Redemption prices are expressed as a percentage of principal
amount. In addition, at redemption any accrued and unpaid interest to the
applicable redemption date will be paid. Redemption prices during the
twelve-month periods beginning on December 15 of the years indicated are as
follows:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
---- ----------
<S> <C>
2001................................................. 104.9375%
2002................................................. 103.2917%
2003................................................. 101.6458%
2004 and thereafter.................................. 100.0000%
</TABLE>
On or prior to December 15, 1999, Safelite may redeem up to $19.25 million
of the original aggregate principal amount of the Notes with the proceeds of one
or more equity offerings at a redemption price of 109.875%, plus accrued and
unpaid interest; provided that
(1) at least $35.75 million of the original principal amount of the
Notes remains outstanding immediately after each redemption; and
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(2) the redemption occurs within 120 days after the closing of the
equity offering.
If Safelite makes a partial redemption, the Trustee will select the Notes
for redemption on a pro rata basis, by lot or by another method that the Trustee
in its sole discretion considers to be fair and appropriate. No Note, however,
of $1,000 in original principal amount or less will be redeemed in part. If any
Note is to be redeemed in part, the notice of redemption will state the portion
of the principal amount to be redeemed. When this happens, a new Note in
principal amount equal to the unredeemed portion will be issued in the name of
the holder upon cancellation of the original Note.
RANKING AND SUBORDINATION
The Notes are general unsecured senior subordinated obligations of Safelite
and rank equally with the Existing Notes and any future senior subordinated debt
of the Company. The Notes rank behind all of Safelite's existing and future
senior debt. As a result, if Safelite declares bankruptcy, liquidates or
reorganizes, Safelite must repay all senior debt before Safelite will be able to
make payments on the Notes. This means that holders of the Notes may recover
less than senior creditors of Safelite in the event of an insolvency,
bankruptcy, reorganization, receivership or similar proceedings relating to
Safelite. See "Risk Factors -- The notes are subordinated to Safelite's senior
debt."
As described in "Prohibition on Incurrence of Senior Subordinated Debt" on
page 100, Safelite may not incur any debt that is senior in right of payment to
the Notes, but junior in right of payment to Senior Indebtedness. Safelite does
have the ability to create a defeasance trust for the Notes under specific
circumstances. These circumstances are described under the heading "Defeasance"
below. Assets held in a defeasance trust would not be subordinate to existing
and future senior debt of Safelite.
Safelite may not pay principal or interest, or make other payments on the
Notes, make any deposit pursuant to the provisions described under "Defeasance"
on page 109, or otherwise purchase, redeem or retire any Notes if:
(1) any senior debt is not paid when due; or
(2) any other default on senior debt occurs and is not timely cured or
waived causing the maturity of that senior debt to be accelerated in
accordance with its terms.
Safelite may however make payments on the Notes if Safelite and the Trustee
receive written notice approving the payment from the applicable senior lenders.
If Safelite has senior debt which permits the holder of that senior debt to
accelerate its maturity immediately when a default occurs, those senior lenders
will have the right to block payments on the Notes when a default occurs for a
period of 180 days. This 180 days is called the "payment blockage period." The
senior lenders must give a written "blockage notice" to the Trustee of their
desire to start a payment blockage period when a default occurs. The payment
blockage period can be less than 180 days if:
(1) written notice is received by the Trustee and Safelite from the
persons who gave the blockage notice;
(2) the default giving rise to the blockage notice is no longer
continuing; or
(3) the senior debt has been repaid in full.
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Safelite may resume payments on the Notes after the end of the payment
blockage period, unless the holders of the senior debt have accelerated the
maturity of the senior debt. No more than one blockage notice may be given in
any consecutive 360-day period, irrespective of the number of defaults which
occur on the senior debt in that period.
If payment of the Notes is accelerated because of an Event of Default,
Safelite or the Trustee will promptly notify the senior lenders of the
acceleration. Safelite may not pay the Notes until five business days after the
senior lenders receive notice of the acceleration and, thereafter, may pay the
Notes only if the subordination provisions of the Indenture otherwise permit
payment at that time.
SUBSIDIARY GUARANTEES
Safelite currently has no subsidiaries. If Safelite has subsidiaries in the
future, Safelite will cause each of them that guarantees debt under the Bank
Credit Agreement to guarantee Safelite's obligations under the Notes on an
unsecured senior subordinated basis. Each Subsidiary Guarantee will rank equally
with all other Guarantor Senior Subordinated Indebtedness of that Subsidiary
Guarantor. The Subsidiary Guarantors will not be permitted to incur debt that is
junior in right of payment to Guarantor Senior Indebtedness but senior in right
of payment to the Subsidiary Guarantee.
CHANGE OF CONTROL
If a Change of Control Triggering Event occurs, each holder will have the
right to require Safelite to repurchase all or any part (equal to $1,000 or an
integral multiple thereof) of the holder's Notes at a purchase price in cash
equal to 101% of the principal amount of the Notes plus accrued and unpaid
interest, if any, to the date of purchase.
Within 30 days following any Change of Control Triggering Event, Safelite
will mail a notice (the "Change of Control Offer") to each holder with a copy to
the Trustee stating:
(1) that a Change of Control Triggering Event has occurred and that
the holder has the right to require Safelite to purchase the holder's Notes
at a purchase price in cash equal to 101% of the principal amount plus
accrued and unpaid interest, if any, to the date of purchase;
(2) the purchase date (which must be no earlier than 30 days nor later
than 45 days from the date the notice is mailed); and
(3) the procedures determined by Safelite, consistent with the
Indenture, that a holder must follow in order to have its Notes
repurchased.
On the date specified in the Change of Control Offer, Safelite will
purchase all the Notes that have been tendered in accordance with the procedures
set forth in the notice delivered to the holders. Safelite will pay each holder
that has tendered Notes the purchase price plus any accrued interest up to the
date of the repurchase.
The Change of Control provisions described above will be applicable whether
or not any other provisions of the Indenture are applicable. Except as described
above with respect to a Change of Control Triggering Event, the Indenture does
not require Safelite to repurchase or redeem the Notes in the event of a
takeover, recapitalization or similar transaction. A third party can make a
Change of Control Offer in place of Safelite if they purchase all of the Notes
and follow the same requirements as set forth in the Indenture applicable to a
Change of Control Offer made by Safelite.
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Safelite will comply with applicable requirements of Section 14(e) of the
Exchange Act and any other securities laws or regulations in connection with the
repurchase of Notes under this covenant. To the extent that the provisions of
any securities laws or regulations conflict with provisions of the Indenture,
Safelite will comply with the applicable securities laws and regulations and
will not be considered to have breached its obligations described in the
Indenture by that compliance.
Safelite's ability to repurchase Notes under a Change of Control Offer may
be limited by a number of factors. The occurrence of the events that would
constitute a Change of Control Triggering Event would also constitute a "Change
of Control Triggering Event" under the Existing Notes Indenture. Accordingly,
Safelite would be subject to the same obligations for the Existing Notes as have
been described above. If a Change of Control Offer is made, there can be no
assurance that Safelite will have available funds sufficient to pay the Change
of Control purchase price for all the Notes and Existing Notes delivered by
holders seeking to accept the Change of Control Offer. If Safelite is required
to purchase outstanding Notes and Existing Notes under a Change of Control
Offer, Safelite 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 Safelite would be able to obtain this financing.
The occurrence of some of the events that constitute a Change of Control
Triggering Event would constitute a default under the Bank Credit Agreement. In
addition, some events that constitute a change of control under the Bank Credit
Agreement and which could cause a default under that agreement may not
constitute a Change of Control Triggering Event under the Indenture. Future debt
of Safelite and any of its future subsidiaries may also contain prohibitions of
events that would constitute a Change of Control or which would require debt to
be repurchased upon a Change of Control. Moreover, the exercise by the holders
of their right to require Safelite to repurchase the Notes could cause a default
under that debt, even if the Change of Control Triggering Event itself does not,
due to the financial effect of the repurchase on Safelite. Finally, Safelite's
ability to pay cash to the holders upon a repurchase may be limited by
Safelite's then existing financial resources. There can be no assurance that
sufficient funds will be available when necessary to make any required
repurchases.
Even if sufficient funds were otherwise available, the terms of the Bank
Credit Agreement may (and other debt may) prohibit Safelite from prepaying the
Notes prior to their scheduled maturity. If Safelite is not able to prepay the
Bank Indebtedness and any other debt containing similar restrictions, or if
Safelite is unable to obtain consent to prepay the Notes, as described above,
Safelite will be unable to fulfill its repurchase obligations following a Change
of Control Triggering Event. This would result in a default under the Indenture.
A default under the Indenture may result in a cross-default under the Existing
Notes Indenture or the Bank Credit Agreement. In the event of a default under
the Bank Credit Agreement, the subordination provisions of the Indenture would
likely restrict payments to the holders of the Notes.
The Change of Control provisions described above may deter mergers, tender
offers and other takeover attempts involving Safelite by increasing the capital
required to complete those transactions. The definition of "Change of Control"
includes a disposition of all or substantially all of the property and assets of
Safelite to any Person other than the Principal or its Related Parties. Although
there is a limited body of case law interpreting the phrase "substantially all,"
there is no precise established definition of the phrase under applicable law.
Accordingly, there may be a degree of uncertainty as to whether a
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particular transaction would involve a disposition of "all or substantially all"
of the property or assets of a Person. As a result, it may be unclear as to
whether a Change of Control has occurred and whether a holder of Notes may
require Safelite to make an offer to repurchase the Notes as described above.
COVENANTS
Limitation on Incurrence of Additional Indebtedness
Safelite will not, and will not permit any of its future Restricted
Subsidiaries to, directly or indirectly, create, incur, issue, assume, guarantee
or otherwise become directly or indirectly liable, contingent or otherwise,
(collectively, "incur") any Indebtedness; provided, however, that Safelite or
any future Subsidiary Guarantor may incur Indebtedness if on that date after
giving effect to the incurrence:
(1) no Default or Event of Default has occurred or is continuing or
would occur as a result of incurring the Indebtedness; and
(2) the Consolidated Fixed Charge Coverage Ratio for Safelite is
greater than 2.0 to 1.0.
The first paragraph of this covenant will not prohibit the incurrence of
the following Indebtedness (referred to as "Permitted Indebtedness"):
(1) the Notes, the Guarantees, the Existing Notes and the guarantees
thereof,
(2) Indebtedness incurred under the Bank Credit Agreement in an
aggregate principal amount at any time outstanding not to exceed $388.6
million less:
(a) the aggregate amount of Indebtedness of a Receivables Entity in
a Qualified Receivables Transaction,
(b) the amount of all mandatory principal payments actually made
since the Issue Date by Safelite in respect of term loans thereunder
(excluding mandatory principal payments (1) to the extent refinanced at
the time of payment under a replaced Bank Credit Agreement and (2)
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, any required permanent
repayments since the Issue Date (which are accompanied by a
corresponding permanent commitment reduction) thereunder,
(3) other Indebtedness of Safelite and its Restricted Subsidiaries
outstanding on the 1996 Issue Date reduced by the amount of any scheduled
amortization payments or mandatory prepayments when actually paid or other
permanent reductions thereon since the 1996 Issue Date,
(4) Interest Swap Obligations of Safelite or any of its Restricted
Subsidiaries covering Indebtedness of Safelite or any of its Restricted
Subsidiaries; provided that any Indebtedness to which those Interest Swap
Obligations correspond is otherwise permitted to be incurred under the
Indenture; provided, further, that those Interest Swap Obligations are
entered into, in the judgment of Safelite, to protect Safelite and its
Restricted Subsidiaries from fluctuation in interest rates on their
respective outstanding Indebtedness,
(5) Indebtedness under Currency Agreements,
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(6) intercompany Indebtedness owed by Safelite to any Wholly Owned
Restricted Subsidiary of Safelite or by any Restricted Subsidiary of
Safelite to Safelite or any Wholly Owned Restricted Subsidiary of Safelite,
(7) Acquired Indebtedness of Safelite or any Restricted Subsidiary of
Safelite to the extent Safelite could have incurred that Indebtedness in
accordance with the "Limitation on Incurrence of Additional Indebtedness"
covenant on the date it was incurred; provided that, in the case of
Acquired Indebtedness of a Restricted Subsidiary of Safelite, that Acquired
Indebtedness was not incurred in connection with, or in anticipation of,
that Person becoming a Restricted Subsidiary of Safelite,
(8) guarantees by Safelite and its Wholly Owned Restricted
Subsidiaries of each other's Indebtedness; provided that the Indebtedness
is permitted to be incurred under the Indenture, including, with respect to
guarantees by Wholly Owned Restricted Subsidiaries of Safelite, the
covenant entitled "Future Guarantees,"
(9) 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,
(10) any refinancing, modification, or replacement of existing or
future Indebtedness, including any additional Indebtedness incurred to pay
interest or premiums on that existing or future Indebtedness ("Required
Premiums") and fees in connection therewith; provided that this event does
not
(A) result in an increase in the aggregate principal amount of
Permitted Indebtedness of Safelite and its Restricted Subsidiaries;
(except to the extent that the increase is a result of additional
Indebtedness incurred to pay Required Premiums and related fees or
otherwise permitted to be incurred under the Indenture) and
(B) create Indebtedness with a Weighted Average Life to Maturity at
the time that Indebtedness is incurred that is less than the Weighted
Average Life to Maturity at the time of the Indebtedness being
refinanced, modified or replaced (except that this subclause (B) will
not apply in the event the Indebtedness being refinanced, modified,
replaced, renewed or restated was originally incurred in reliance upon
clause (6) or (17) of this definition); provided that no Restricted
Subsidiary of Safelite that is not a Subsidiary Guarantor may refinance
any Indebtedness pursuant to this clause other than its own
Indebtedness,
(11) Indebtedness (including Capitalized Lease Obligations) incurred
by Safelite or any of its Restricted Subsidiaries since the 1996 Issue Date
to finance the purchase, lease or improvement of property or equipment
(whether through the direct purchase of assets or the Capital Stock of any
Person owning those 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),
(12) the incurrence by a Receivables Entity of Indebtedness in a
Qualified Receivables Transaction that is non- recourse to Safelite or any
Subsidiary of Safelite (except for Standard Securitization Undertakings),
(13) Indebtedness incurred by Safelite or any of its Restricted
Subsidiaries constituting reimbursement obligations with respect to letters
of credit issued in the
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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,
(14) Indebtedness arising from agreements of Safelite or a Restricted
Subsidiary of Safelite 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 Safelite, other than guarantees of
Indebtedness incurred by any Person acquiring all or any portion of the
business, assets or Restricted Subsidiary for the purpose of financing that
acquisition, provided that the maximum assumable liability in respect of
all the Indebtedness will at no time exceed the gross proceeds actually
received by Safelite and its Restricted Subsidiaries in connection with
that disposition,
(15) obligations related to performance and surety bonds and
completion guarantees provided by Safelite or any Restricted Subsidiary of
Safelite in the ordinary course of business,
(16) Capitalized Lease Obligations of Vistar in an aggregate principal
amount not to exceed $2 million and other unsecured Indebtedness of Vistar
in an aggregate principal amount not to exceed $8 million, in each case
which was assumed by Safelite upon consummation of the Vistar Merger; and
(17) additional Indebtedness of Safelite 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).
Safelite will not incur any Indebtedness under the preceding paragraph if
the proceeds thereof are used, directly or indirectly, to refinance any
Subordinated Obligations of Safelite unless that Indebtedness will be
subordinated to the Notes to at least the same extent as those Subordinated
Obligations. No Subsidiary Guarantor will incur any indebtedness if the proceeds
thereof are used, directly or indirectly, to refinance any Guarantor
Subordinated Obligations of that Subsidiary Guarantor unless that Indebtedness
will be subordinated to the obligations of that Subsidiary Guarantor under its
Subsidiary Guarantee to at least the same extent as those Guarantor Subordinated
Obligations. No Subsidiary Guarantor will incur any Indebtedness if the proceeds
thereof are used, directly or indirectly, to refinance any Guarantor Senior
Subordinated Indebtedness unless that refinancing Indebtedness is either
Guarantor Senior Subordinated Indebtedness or Guarantor Subordinated
Obligations. No Restricted Subsidiary may Incur any Indebtedness if the proceeds
are used to refinance Indebtedness of Safelite.
For purposes of determining compliance with this covenant:
(1) in the event that Indebtedness meets the criteria of more than one
of the types of Indebtedness described in the first and second paragraphs
of this covenant, Safelite, in its sole discretion, will classify the
Indebtedness on the date of Incurrence and only be required to include the
amount and type of that Indebtedness in one of those clauses; and
(2) the amount of Indebtedness issued at a price that is less than the
principal amount thereof will be equal to the amount of the liability as
determined in accordance with GAAP.
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PROHIBITION ON INCURRENCE OF SENIOR SUBORDINATED DEBT
The Indenture prohibits Safelite and any Subsidiary Guarantor from
incurring Indebtedness that is senior in right of payment to the Notes or the
guarantee of that Subsidiary Guarantor and subordinate in right of payment to
any other Indebtedness of Safelite or that Subsidiary Guarantor, as the case may
be.
LIMITATION ON RESTRICTED PAYMENTS
Safelite will not, and will not permit any of its future Restricted
Subsidiaries, directly or indirectly, to:
(1) declare or pay any dividend or make any distribution on its
Capital Stock except dividends or distributions payable in its Qualified
Capital Stock or in options, warrants or other rights to purchase this
Capital Stock;
(2) purchase, redeem or otherwise acquire or retire for value any
Capital Stock of Safelite or any warrants, rights or options to purchase or
acquire shares of any class of Capital Stock of Safelite other than in
exchange for its Qualified Capital Stock; or
(3) make any Investment other than Permitted Investments; each of
these items in clauses (1) through (3) are referred to as "Restricted
Payments",
if at the time of the Restricted Payment or immediately after giving effect
to the Restricted Payment:
(a) a Default or an Event of Default has occurred and is continuing,
(b) Safelite 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,
(c) the aggregate amount of Restricted Payments made subsequent to the
1996 Issue Date exceeds the sum of:
(i) 50% of the cumulative Consolidated Net Income (or if cumulative
Consolidated Net Income is a loss, minus 100% of such loss) of Safelite
earned subsequent to the 1996 Issue Date and on or prior to the date the
Restricted Payment occurs (the "Referenced Date") (treating such period
as a single accounting period); plus
(ii) 100% of the aggregate net cash proceeds received by Safelite
from any Person (other than a Subsidiary of Safelite) from the issuance
and sale subsequent to the 1996 Issue Date and prior to the Reference
Date of Qualified Capital Stock of Safelite (including Capital Stock
issued upon the conversion of convertible Indebtedness or in exchange
for outstanding Indebtedness); plus
(iii) without duplication of any amounts included in clause (c)(ii)
above, 100% of the aggregate net cash proceeds of any equity
contribution received by Safelite from a holder of Safelite'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
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(iv) to the extent that any Investment (other than a Permitted
Investment) that was made after the 1996 Issue Date is sold for cash or
otherwise liquidated or repaid for cash, the lesser of:
(A) the cash received with respect to that sale, liquidation
or repayment of that Investment (less the cost of that sale,
liquidation or repayment, if any) and
(B) the initial amount of that Investment.
The provisions of the preceding paragraph will not prohibit:
(1) the payment of any dividend or the consummation of any irrevocable
redemption within 60 days after the date of declaration or notice if the
dividend or payment of the redemption price would have been permitted on
the date of declaration or notice;
(2) if no Event of Default has occurred and is continuing as a result
thereof, the acquisition of any share of Capital Stock of Safelite, either
(a) solely in exchange for shares of Qualified Capital Stock of
Safelite, or
(b) through the application of net proceeds of a substantially
concurrent sale (other than to a Subsidiary of Safelite) of shares of
the Qualified Capital Stock of Safelite.
(3) payments for the purpose of and in an amount equal to the amount
required to permit Safelite to redeem or repurchase shares of its Capital
Stock or options in connection with the repurchase provisions under
employee stock option or stock purchase agreements or other agreements to
compensate management employees; provided that those redemptions or
repurchases pursuant to this clause since the 1996 Issue Date shall not
exceed $2 million (which amount will be increased by the amount of any cash
proceeds to Safelite from (x) sales of its Capital Stock to management
employees subsequent to the 1996 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 reasonable fees and compensation to, and indemnity
provided on behalf of, officers, directors, employees or consultants of
Safelite or any Subsidiary of Safelite as determined in good faith by
Safelite's Board of Directors or senior management;
(5) so long as no Default or Event of Default has occurred and is
continuing, payments not to exceed $100,000 in the aggregate since the 1996
Issue Date, to enable Safelite 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 this Capital Stock represents a portion of the exercise
price thereof;
(7) payments made on the 1996 Issue Date pursuant to the
Recapitalization Agreement; and
(8) payment of the Distribution. In determining the aggregate amount
of Restricted Payments made subsequent to the 1996 Issue Date in accordance
with clause (c) of the immediately preceding paragraph,
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(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), (b) and (3) of this paragraph will be included in
the calculation, provided that these expenditures pursuant to clause (3)
will not be included to the extent of cash proceeds received by Safelite
from any "key-man" life insurance policies and
(B) amounts expended pursuant to clauses (2) (a), (4), (5), (6),
(7) and (8) will be excluded from this calculation.
LIMITATION ON LIENS
Safelite will not, and will not permit any of its future Restricted
Subsidiaries to, directly or indirectly, create, incur, assume or suffer to
exist any Lien (other than Permitted Liens) upon any of its property or assets
or any proceeds therefrom unless:
(1) 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 the property assets or proceeds that is senior in
priority to such Liens and
(2) in all other cases, the Notes are equally and ratably secured,
except for
(a) Liens existing as of the 1996 Issue Date and any extensions,
renewals or replacements thereof;
(b) Liens securing Senior Indebtedness and Guarantor Senior
Indebtedness;
(c) Liens securing the Notes and Guarantees;
(d) Liens of Safelite or a Wholly Owned Restricted Subsidiary on
assets of any Subsidiary of Safelite;
(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 those Liens do not extend to
or cover any property or assets of Safelite or any of its Restricted
Subsidiaries not securing the Indebtedness so refinances; and
(f) Permitted Liens.
LIMITATION ON DIVIDENDS AND OTHER PAYMENT RESTRICTIONS AFFECTING SUBSIDIARIES.
Safelite will not, and will not permit any Restricted Subsidiary to, create
or otherwise cause or permit to exist or become effective any encumbrance or
restriction on the ability of any Restricted Subsidiary to:
(1) pay dividends or make any other distributions on or in respect of
its Capital Stock;
(2) make loans or advances or to pay any Indebtedness or other
obligation owed to Safelite or any other Restricted Subsidiary of Safelite;
or
(3) transfer any of its property or assets to Safelite or any other
Restricted Subsidiary of Safelite, except for encumbrances or restrictions
existing by reason of:
(a) applicable law;
(b) the Indenture or the Existing Notes Indenture;
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(c) non-assignment provisions of any contract or any lease entered
into in the ordinary course of business;
(d) any instrument governing Acquired Indebtedness, which
encumbrance or restriction is not applicable to Safelite or any
Restricted Subsidiary of Safelite or the properties or assets of any
such Person, other than the Person or properties or assets of the Person
so acquired;
(e) agreements existing on the 1996 Issue Date (including, without
limitation, the Bank Credit Agreement and the Recapitalization
Agreement);
(f) restrictions on the transfer of assets subject to any Lien
permitted under the Indenture imposed by the holder of that Lien;
(g) restrictions imposed by any agreement to sell assets permitted
under the Indenture to any Person pending the closing of that sale;
(h) any agreement or instrument governing Capital Stock of any
Person that is acquired after the 1996 Issue Date;
(i) Indebtedness or other contractual requirements of a Receivables
Entity in connection with a Qualified Receivables Transaction; provided
that those restrictions apply only to that Receivables Entity; or
(j) An agreement effecting a refinancing, replacement or
substitution of Indebtedness issued, assume or incurred pursuant to an
agreement referred to in clause (b), (d) or (e) above; provided,
however, that the provisions relating to the encumbrance or restriction
contained in any that refinancing, replacement or substitution agreement
are no less favorable to Safelite or the holders in any material respect
as determined by the Board of Directors of Safelite than the provisions
relating to the encumbrance or restriction contained in agreements
referred to in clause (b), (d) or (e).
LIMITATION ON ASSET SALES
Safelite will not, and will not permit any of its future Restricted
Subsidiaries to, consummate an Asset Sale unless:
(1) the consideration received at the time of the Asset Sale is at
least equal to the fair market value of the assets sold or otherwise
disposed of (as determined in good faith by Safelite's Board of Directors),
(2) at least 75% of the consideration received from the Asset Sale is
cash or Cash Equivalents and is received at the time of the disposition;
provided that for purposes of this clause, any liabilities of Safelite or
the Restricted Subsidiary (other than liabilities that are by their terms
subordinated to the Notes or the Restricted Subsidiary's Guarantee) that
are assumed by the transferee of the assets and any notes or other
obligations received from the transferee that are immediately converted
will be considered to be cash for purposes of this provision; and
(3) upon the consummation of an Asset Sale, Safelite will apply, or
cause the Restricted Subsidiary to apply, the Net Cash Proceeds relating to
the 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 the revolving credit facility;
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(b) to reinvest in Productive Assets; or
(c) a combination of prepayment and investment permitted by the
foregoing clauses (3)(a) and (b).
On the 366th day after an Asset Sale or the earlier date, if any, on which
the Board of Directors of Safelite or of the Restricted Subsidiary determines
not to apply the Net Cash Proceeds relating to the Asset Sale as set forth in
clauses (3)(a), (3)(b) and (3)(c) of the immediately preceding paragraph, the
aggregate amount of Net Cash Proceeds which has not been applied will be applied
by Safelite or the Restricted Subsidiary to make an offer to purchase from all
holders on a pro rata basis that amount of Notes equal to the Net Cash Proceeds
not applied. The offer to repurchase the Notes, or "Net Proceeds Offer," will be
made within 30 to 45 days following the Asset Sale 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. This provision also applies
to any non-cash consideration from an Asset Sale which is converted into cash.
Any offer with respect to Other Debt will be made and consummated concurrently
with any offer described in this paragraph. "Other Debt" means other
Indebtedness of Safelite that ranks pari passu with the Notes and requires that
an offer to purchase that Other Debt be made upon consummation of an Asset Sale.
The total Net Proceeds Offer will be divided between the Notes and the Other
Debt on a pro rata basis.
Notwithstanding the foregoing, if the amount of cumulative Net Cash
Proceeds not applied as described in clause 3(a), 3(b) and 3(c) above is less
than $5 million, the application of the Net Cash Proceeds to repayment of the
Notes may be deferred.
Notwithstanding the immediately preceding paragraphs of this covenant,
Safelite and its Restricted Subsidiaries will be permitted to consummate an
Asset Sale without complying with those paragraphs to the extent:
(1) at least 75% of the consideration for the Asset Sale constitutes
Productive Assets; and
(2) the Asset Sale is for at least fair market value (as determined in
good faith by Safelite's Board of Directors), provided that any
consideration not constituting Productive Assets received by Safelite or
any of Restricted Subsidiaries in connection with any Asset Sale permitted
to be consummated under this paragraph will constitute Net Cash Proceeds
and will be subject to the provisions of the two preceding paragraphs;
provided, that at the time of entering into the transaction or immediately
after giving effect thereto, no Default or Event of Default has occurred or
is 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 the holders with a copy to the Trustee, and will 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 note offer amount, Notes of tendering holders
will be purchased on a pro rata basis (based on amount tendered). A Net Proceeds
Offer will remain open for a period of 20 business days or a 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 note offer amount,
Safelite may use any remaining amounts for general corporate purposes. Upon
completion of any Net Proceeds Offer, the $5 million limit described above will
be reset at zero.
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Safelite will comply with the requirements of Rule 14e-1 under the Exchange
Act and any other securities laws and regulations thereunder to the extent those
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, Safelite will comply with the applicable securities law and
regulations and will not be deemed to have breached it obligations under the
"Asset Sale" provisions of the Indenture by virtue thereof.
LIMITATION ON TRANSACTIONS WITH AFFILIATES
Safelite will not, and will not permit any of its future Restricted
Subsidiaries to, directly or indirectly, enter into or permit to exist any
transactions, including the purchase, sale, lease or exchange of any property or
the rendering of any service, with any Affiliate of Safelite (an "Affiliate
Transaction") other than: (x) Affiliate Transactions permitted under
"Exceptions" 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 the same 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 Safelite's
option:
(1) the determination will be made in good faith by a majority of the
disinterested members of the Board of Directors of Safelite or
(2) the Board of Directors of Safelite or the Restricted Subsidiary
party to the Affiliate Transaction shall have received a favorable opinion
from a nationally recognized investment banking firm that the Affiliate
Transaction is on terms not materially less favorable than those that might
reasonably have been obtained in a comparable transaction at the same 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 Safelite
will have received a favorable opinion from a nationally recognized
investment banking firm that the Affiliate Transaction is on terms not
materially less favorable than those that might reasonably have been
obtained in a comparable transaction at the same time on an arm's-length
basis from a Person that is not an Affiliate.
EXCEPTIONS
The foregoing restrictions do not apply to:
(1) reasonable fees and compensation paid to, and indemnity provided
on behalf of, officers, directors, employees or consultants of Safelite or
any Subsidiary of Safelite as determined in good faith by Safelite's Board
of Directors or senior management;
(2) transactions exclusively between or among Safelite and any of its
Wholly Owned Restricted Subsidiaries or exclusively between or among Wholly
Owned Restricted Subsidiaries, provided that the transactions are not
otherwise prohibited by the Indenture;
(3) transactions effected as part of a Qualified Receivables
Transaction;
(4) any agreement as in effect as of the 1996 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 the amendment or replacement agreement is not more disadvantageous
to the holders in any material respect than the original agreement as in
effect on the 1996 Issue Date;
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(5) Restricted Payments permitted by the Indenture; and
(6) payments made by Safelite to, and agreements entered into by
Safelite with Affiliates in connection with, the Vistar Merger.
LIMITATION ON PREFERRED STOCK OF SUBSIDIARIES
Safelite will not permit any of its future Restricted Subsidiaries to issue
any Preferred Stock other than to Safelite or to a Wholly Owned Restricted
Subsidiary of Safelite, or permit any Person other than Safelite or a Wholly
Owned Restricted Subsidiary of Safelite to own any Preferred Stock of any
Restricted Subsidiary of Safelite.
ADDITIONAL INFORMATION
The Indenture provides that Safelite will deliver to the Trustee, within 15
days after the filing of the same with the Securities and Exchange Commission,
copies of the quarterly and annual reports and of the information, documents and
other reports, if any, which Safelite is required to file with the Securities
and Exchange Commission pursuant to Section 13 or 15(d) of the Exchange Act. The
Indenture further provides that, notwithstanding that Safelite may not be
subject to the reporting requirements of Section 13 or 15(d) of the Exchange
Act, Safelite will file with the Securities and Exchange Commission, to the
extent permitted, and provide the Trustee and holders with the annual reports
and information, documents and other reports specified in Section 13 and 15(d)
of the Exchange Act.
MERGER, CONSOLIDATION AND SALE OF ASSETS
Safelite 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 its assets to,
any Person, unless:
(1) either (a) Safelite will be the survivor of the 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 this surviving Person will expressly assume all the
obligations of Safelite under the Notes and the Indenture;
(2) immediately after giving effect to the transaction, on a pro forma
basis, including any Indebtedness incurred or anticipated to be incurred in
connection with the transaction and including adjustments that are directly
attributable to the transaction and factually supportable, Safelite 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;
(3) immediately before and immediately after giving effect to the
transaction, including any indebtedness incurred or anticipated to be
incurred in connection with the transaction, no Default or Event of Default
has occurred and is continuing;
(4) each Subsidiary Guarantor, unless it is the other party to the
transaction, will have by execution of a supplemental indenture confirmed
that after consummation of the transaction its Guarantee will apply, as the
Guarantee applied on the date it was granted under the Indenture to the
obligations of Safelite under the Indenture and the Notes, to the
obligations of Safelite or such Person, as the case may be, under the
Indenture and the Notes; and
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(5) Safelite has delivered to the Trustee an officers' certificate and
opinion of counsel, each stating that the 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 the
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 Safelite, the Capital Stock of
which constitutes all or substantially all of the properties and assets of
Safelite, shall be deemed to be the transfer of all or substantially all of
the properties and assets of Safelite.
Notwithstanding the foregoing clauses (2) and (3) of this provision.
(a) any Restricted Subsidiary of Safelite may consolidate with,
merge into or transfer all or part of its properties and assets to
Safelite; and
(b) Safelite may merge with an Affiliate incorporated solely for
the purpose of reincorporating Safelite in another jurisdiction.
EVENTS OF DEFAULT
Each of the following is an Event of Default:
(1) the failure to pay interest on any Notes when that interest
becomes due and payable and the default continues for a period of 30 days,
whether or not that payment is prohibited by the subordination provisions
of the Indenture,
(2) the failure to pay the principal on any Notes, when the 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 the
payment is prohibited by the subordination provisions of the Indenture;
(3) 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 Safelite receives written notice specifying the
default and demanding that the default be remedied from the Trustee or the
holders of at least 25% of the outstanding principal amount of the Notes;
(4) the failure to pay at final maturity, giving effect to any
applicable grace period and any extensions thereof, the principal amount of
any Indebtedness of Safelite or any Restricted Subsidiary (other than a
Receivables Entity) of Safelite, or the acceleration of the final stated
maturity of any this Indebtedness if the aggregate principal amount of the
Indebtedness, together with the principal amount of any other Indebtedness
in default for failure to pay principal at the final maturity or which has
been accelerated, aggregates $10 million or more at any time;
(5) the rendering of one or more judgments in an aggregate amount in
excess of $10 million against Safelite or any of its Significant
Subsidiaries that remain undischarged, unpaid or unstayed for a period of
60 days after the judgment or judgments become final and non-appealable,
and in the event that judgment is covered by insurance, an enforcement
proceeding has been commenced by any creditor upon that judgment which is
not promptly stayed;
(6) certain events of bankruptcy affecting Safelite or any of its
Significant Subsidiaries; and
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(7) if any of the Guarantees of the Subsidiary Guarantors that are
also Significant Subsidiaries of Safelite ceases to be in full force and
effect or any of those Guarantees is declared to be null and void and
unenforceable or any of those Guarantees is found to be invalid or any of
the Subsidiary Guarantors denies its liability under its Guarantee other
than by reason of release of that Subsidiary Guarantor in accordance with
the terms of the Indenture.
Upon the happening of any Event of Default specified in the Indenture, the
Trustee of 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
immediately due and payable. This declaration should be done by notice in
writing to Safelite and the Trustee specifying the respective Event of Default
and that it is a "notice of acceleration." If an Event of Default with respect
to bankruptcy proceedings of Safelite or any of its Significant Subsidiaries
occurs and is continuing, then that 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 provides 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 the declaration and its consequences:
(1) if the rescission would not conflict with any judgment or decree,
(2) 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,
(3) to the extent that payment is lawful, if interest on overdue
installments of interest and overdue principal, which has become due
otherwise than by the declaration of acceleration, has been paid,
(4) if Safelite has paid the Trustee its reasonable compensation and
reimbursed the Trustee for its expenses, disbursements and advances; and
(5) in the event of the cure or waiver of an Event of Default of the
type described in clause (6) or (7) of the description above of Events of
Default, the Trustee has received an officers' certificate and an opinion
of counsel that the 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 Safelite
will have any liability for any obligations of Safelite under the Notes or the
Indenture or for any claim based on, in respect of, or by reasons of, those
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. This waiver may not be effective to
waive liabilities under the federal securities laws and it is the view of the
Commission that this type of waiver is against public policy.
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DEFEASANCE
Safelite 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"). Legal Defeasance means that Safelite
will be deemed to have paid and discharged the entire indebtedness represented
by the outstanding Notes, except for
(1) 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,
(2) Safelite'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,
(3) the rights, powers, trust, duties and immunities of the Trustee
and Safelite's obligations in connection therewith and,
(4) the Legal Defeasance provisions of the Indenture.
In addition, Safelite may, at its option and at any time, elect to have the
obligations of Safelite released with respect to certain covenants that are
described in the Indenture ("Covenant Defeasance") and thereafter any omission
to comply with those obligations will 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,
(1) Safelite 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 amounts that 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 or on the
applicable redemption date, as the case may be;
(2) in the case of Legal Defeasance, Safelite must deliver 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 the opinion of
counsel must confirm that, the holders of the Notes will not recognize
income, gain or loss for federal income tax purposes as a result of 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
Legal Defeasance had not occurred;
(3) in the case of Covenant Defeasance, Safelite must deliver 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
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 Covenant Defeasance had not occurred;
(4) no Default or Event of Default has occurred and is continuing on
the date of the deposit (other than a Default or Event of Default with
respect to the Indenture
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resulting from the incurrence of indebtedness, all or a portion of which
will be used concurrently to defease the Notes);
(5) the Legal Defeasance or Covenant Defeasance must not result in a
breach or violation of, or constitute a default under the Indenture or any
other material agreement or instrument to which Safelite or any of its
Subsidiaries is a party or by which Safelite or any of its Subsidiaries is
bound;
(6) Safelite must deliver to the Trustee an officers' certificate
stating that the deposit was not made by Safelite with the intent of
preferring the holders of the Notes over any other creditors of Safelite or
with the intent of defeating, hindering, delaying or defrauding any other
creditors of Safelite or others;
(7) Safelite must deliver 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;
(8) Safelite must deliver to the Trustee an opinion of counsel to the
effect that (a) the trust funds will not be subject to any rights or
holders of indebtedness of Safelite other than the Notes and (b) assuming
no intervening bankruptcy of Safelite between the date of deposit and the
91st day following the deposit and that no holder of the Notes is an
insider of Safelite, 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) 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 either:
(1) all the Notes previously authenticated and delivered, have been
delivered to the Trustee for cancellation except lost, stolen or destroyed
Notes which have been replaced or paid and Notes for whose payment money
has previously been deposited in trust or segregated and held in trust by
Safelite and subsequently repaid to Safelite or discharged from the trust,
or,
(2) all Notes not previously delivered to the Trustee for cancellation
have become due and payable and Safelite 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 previously
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 Safelite directing the Trustee to apply the
deposited funds to the payment thereof at maturity or redemption, as the
case may be;
(3) Safelite has paid all other sums payable under the Indenture by
Safelite; and
(4) Safelite 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.
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MODIFICATION OF THE INDENTURE
From time to time, Safelite, the Subsidiary Guarantors, if any, 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 a 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
evidence that 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:
(1) reduce the amount of Notes whose holders must consent to an
amendment;
(2) reduce the rate or change or have the effect of changing the time
for payment of interest, including defaulted interest, on any Notes;
(3) 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 therefore;
(4) make any Notes payable in money other than that stated in the
Notes;
(5) 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 the Note on or after the due date thereof or to bring suit to
enforce 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 or interest on
the Notes);
(6) amend, change or modify in any material respect the obligation of
Safelite 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 the subordination provisions, including the related
definitions, of the Indenture to adversely affect the holders of Notes in
any material respect; or
(8) release any Subsidiary Guarantor that is a Significant Subsidiary
of Safelite from any of its obligations under its Guarantee or the
Indenture otherwise than in accordance with the terms of the Indenture.
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.
"1996 Issue Date" means December 20, 1996.
"Acquired Indebtedness" means Indebtedness (1) of a Person or any of its
Subsidiaries existing at the time the Person becomes a Restricted Subsidiary of
Safelite or (2) assumed in connection with the acquisition of assets from that
Person, in each case whether or not incurred by that Person in connection with,
or in anticipation or contemplation of, that Person becoming a Restricted
Subsidiary of Safelite or such
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acquisition. Acquired Indebtedness will be deemed to have been incurred, with
respect to clause (1) of the preceding sentence, on the date that Person becomes
a Restricted Subsidiary of Safelite and, with respect to clause (2) of the
preceding sentence, on the date of consummation of the acquisition of assets.
"Affiliate" means a Person who directly or indirectly is controlled by, or
is under common control with, Safelite. 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 Safelite or any Subsidiary of Safelite) in whom a Receivables Entity
makes an Investment in connection with a Qualified Receivables Transaction will
be deemed to be an Affiliate of Safelite or any of its Subsidiaries solely by
reason of that Investment.
"all or substantially all" will have the meaning given in the Revised Model
Business Corporation Act.
"Asset Acquisition" means (a) an Investment by Safelite or any Restricted
Subsidiary of Safelite in any other Person pursuant to which that Person will
becomes a Restricted Subsidiary of Safelite or any Restricted Subsidiary of
Safelite, or is merged with or into Safelite or any Restricted Subsidiary of
Safelite, or (b) the acquisition by Safelite or any Restricted Subsidiary of
Safelite of the assets of any Person which constitute all or substantially all
of the assets of that Person, any division or line of business of that Person or
any other properties or assets of that 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 Safelite or any of its
Restricted Subsidiaries (including any Sale and Leaseback Transaction) to any
Person other than Safelite or a Wholly Owned Restricted Subsidiary of Safelite
of (a) any Capital Stock of any Restricted Subsidiary of Safelite; or (b) any
other property or assets of Safelite or any Restricted Subsidiary of Safelite
other than in the ordinary course of business; provided, however, that Asset
Sales will not include:
(1) a transaction or series of related transactions for which Safelite
or its Restricted Subsidiaries receive aggregate consideration of less than
$1 million,
(2) the sale, lease, conveyance, disposition or other transfer of all
or substantially all of the assets of Safelite as permitted under "Merger,
Consolidation and Sale of Assets,"
(3) 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,
(4) the factoring of accounts receivable arising in the ordinary
course of business pursuant to arrangements customary in the industry,
(5) the licensing of intellectual property,
(6) disposals or replacements of obsolete equipment in the ordinary
course of business,
(7) the sale, lease, conveyance, disposition or other transfer by
Safelite or any Restricted Subsidiary of assets or property to one or more
Wholly Owned Restricted
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Subsidiaries in connection with Investments permitted under the
"Limitations on Restricted Payments" covenant,
(8) 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
(9) 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 (8), Purchase
Money Notes are considered to be cash.
"Bank Credit Agreement" means the Credit Agreement dated as of the 1996
Issue Date, among Safelite, 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 these agreements may be amended, supplemented or
otherwise modified from time to time, or refunded, refinanced, restructured,
replaced, renewed, repaid or extended (whether with the original agents and
lenders or other agents and lenders and whether provided under the original Bank
Credit Agreement or other credit agreements).
"Bank Indebtedness" means any and all amounts, whether outstanding on the
1996 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 Safelite or any Restricted Subsidiary of Safelite
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
that Person or any duly authorized committee thereof.
"Capitalized Lease Obligation" means, as to any Person, the obligations of
that 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 that obligations at any date will be the capitalized amount of
these obligations at that date, determined in accordance with GAAP.
"Capital Stock" means (1) 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 that Person and (2) with respect to any Person that is not a
corporation, any and all partnership or other equity interests of that Person.
"Cash Equivalents" means:
(1) 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;
(2) 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
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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;
(3) 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;
(4) 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;
(5) repurchase obligations with a term of not more than seven days for
underlying securities of the types described in clause (1) above entered
into with any bank meeting the qualifications specified in clause (4)
above; and (6) investments in money market funds which invest substantially
all their assets in securities of the types described in clauses (1)
through (5) above.
"Change of Control" means the occurrence of one or more of the following
events:
(1) 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 Safelite 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);
(2) the approval by the holders of Capital Stock of Safelite of any
plan or proposal for the liquidation or dissolution of Safelite (whether or
not otherwise in compliance with the provisions of the Indenture);
(3) 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
Safelite or
(4) the first day on which a majority of the members of the Board of
Directors of Safelite 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 (1) Consolidated Net Income and (2) to the
extent Consolidated Net Income has been reduced thereby, (A) all income taxes of
that 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 that 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
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Date") to Consolidated Fixed Charges of that 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" will be
calculated after giving effect on a pro forma basis for the period of the
calculation to:
(1) the incurrence of any Indebtedness of that Person or any of its
Restricted Subsidiaries (and the application of the proceeds thereof)
giving rise to the need to make this 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 the 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,
(2) any Asset Sales or Asset Acquisitions (including, without
limitation, any Asset Acquisition giving rise to the need to make this
calculation as a result of that 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 (x) directly
attributable to the transaction and (y) 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,
(3) 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 (x) directly attributable to
such transaction and (y) factually supportable) shall be deemed to have
taken place on the first day of such Four Quarter Period and
(4) any asset sales or asset acquisitions (including any Consolidated
EBITDA (including any pro forma expense and cost reductions that are (x)
directly attributable to such transaction and (y) 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 Safelite or has been
merged with or into Safelite or any Restricted Subsidiary of Safelite
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 Safelite or
subsequent to such Person's merger into Safelite, 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 (2) or (4) 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
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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 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 Consolidated Interest Expense
(excluding amortization or write-off of debt issuance costs in connection with
the Transactions) plus 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, (1) 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 (2) 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 Safelite means, for any period, the aggregate
net income (or loss) of Safelite and its Restricted Subsidiaries for such period
on a consolidated basis, determined in accordance with GAAP; provided that there
shall be excluded therefrom
(1) gains and losses from Asset Sales (without regard to the $1
million limitation set forth in the definition thereof) or abandonment 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,
(2) gains and losses due solely to fluctuations in currency values
and the related tax effects according to GAAP,
(3) items classified as extraordinary, unusual or nonrecurring gains
and losses, and the related tax effects according to GAAP,
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(4) 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 Safelite or is merged or consolidated with Safelite or any
Restricted Subsidiary of Safelite,
(5) the net income of any Restricted Subsidiary of Safelite 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,
(6) 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,
(7) the net loss of any Person other than a Restricted Subsidiary of
Safelite,
(8) the net income of any Person, other than a Restricted Subsidiary,
except to the extent of cash dividends or distributions paid to Safelite or
a Restricted Subsidiary of Safelite by such Person unless, in the case of a
Restricted Subsidiary of Safelite who receives such dividends or
distributions, such Restricted Subsidiary is subject to clause (e) above,
(9) one time non-cash compensation charges, including any arising
from existing stock options resulting from any merger or recapitalization
transaction,
(10) bonus payments that were paid to senior management of Safelite in
connection with the Transactions in an aggregate amount (together with the
bonus payments made under clause (k)) not to exceed $7 million and
(11) bonus payments that were paid to senior management prior to
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 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 Safelite who
(1) was a member of such Board of Directors on the 1996 Issue Date,
(2) 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
(3) 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 Safelite
or any Restricted Subsidiary of Safelite 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.
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"Designated Senior Indebtedness" means (1) the Bank Indebtedness and (2)
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 Safelite 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.
"Distribution" means a dividend of up to $67.2 million on Safelite's
outstanding Class A Common Stock, a dividend of approximately $4.7 million
representing accrued and unpaid dividends on Safelite's 8% Cumulative Preferred
Stock and a redemption of Safelite's 8% Cumulative Preferred Stock for an amount
equal to approximately $58.2 million, in each case to be paid no more than five
business days prior to the Vistar Merger.
"Existing Notes" means the $100 million aggregate principal amount of 9
7/8% Senior Subordinated Notes due 2006.
"Existing Note Indenture" means the Indenture dated as of December 20, 1996
between Safelite and Fleet National Bank, as trustee, as amended by the First
Supplemental Indenture dated as of December 12, 1997, and as the same may be
further amended, supplemented or otherwise modified from time to time.
"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
Safelite acting reasonably and in good faith and shall be evidenced by a
resolution of the Board of Directors of Safelite delivered to the Trustee.
"GAAP" means generally accepted accounting principles in the United States
of America as in effect on the 1996 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, (1) any Indebtedness of such Subsidiary Guarantor under the Bank
Credit Agreement or in respect of Bank Indebtedness and (2) all Indebtedness of
such Subsidiary Guarantor, including in the case of both (1) and (2) 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 1996 Issue Date or thereafter incurred, unless in the
instrument creating or evidencing the same or pursuant to which the same is
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outstanding it is expressly provided that such obligations are not superior in
right of payment to the Guarantee of such Subsidiary Guarantor or a guarantee in
respect of the Existing Notes; 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 Safelite,
(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,
(1) all obligations of such Person for borrowed money,
(2) all obligations of such Person evidenced by bonds, debentures,
notes or other similar instruments,
(3) all Capitalized Lease Obligations of such Person,
(4) 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),
(5) all obligations for the reimbursement of any obligor on any
letter of credit, banker's acceptance or similar credit transaction,
(6) guarantees and other contingent obligations in respect of
Indebtedness referred to in clauses (i) through (v) above and clause (8)
below,
(7) all obligations of any other Person of the type referred to in
clauses (1) through (6) 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,
(8) all obligations under currency swap agreements and interest swap
agreements of such Person and
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(9) 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,
(10) 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), 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
Safelite and its Restricted Subsidiaries on commercially reasonable terms in
accordance with normal trade practices of Safelite or such Restricted
Subsidiary, as the case may be. For the purposes of the "Limitation on
Restricted Payments" covenant,
(1) "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
(2) the amount of any Investment shall be the original cost of such
Investment plus the cost of all additional Investments by Safelite 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 Safelite or any Restricted Subsidiary of
Safelite sells or otherwise disposes of any common stock of any direct or
indirect Restricted Subsidiary of Safelite such that, after giving effect
to any such sale or disposition, Safelite no longer owns, directly or
indirectly, 100% (or 80% in the case of clause (9) of the definition of
"Permitted Investments") of the outstanding common stock of such Restricted
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Subsidiary, Safelite 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 (1) a rating of at least BBB- (or equivalent
successor rating) by S&P or (2) 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
Safelite or any of its Subsidiaries from such Asset Sale net of
(1) out-of-pocket expenses and fees relating to such Asset Sale
(including, without limitation, legal, accounting and investment banking
fees and sales commissions),
(2) 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,
(3) repayment of Senior Indebtedness that is required to be repaid in
connection with such Asset Sale,
(4) any portion of cash proceeds which Safelite 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
Safelite or any of its Subsidiaries shall constitute Net Cash Proceeds on
such date; provided that, in the case of the sale by Safelite 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 Safelite with respect to such Investment, whether
by dividend, sale, liquidation or repayment, in each case prior to the date
of such Asset Sale.
"Non-Voting Preferred Stock" means Safelite's 8% Non-Voting Preferred
Stock, $.01 par value per share, issued by Safelite as partial merger
consideration in the Vistar Merger.
"Permitted Indebtedness" means, without duplication,
(1) the Notes, the Guarantees, the Existing Notes and the guarantees
thereof,
(2) Indebtedness incurred pursuant to the Bank Credit Agreement in an
aggregate principal amount at any time outstanding not to exceed $388.6
million
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(3) less the aggregate amount of Indebtedness of a Receivables Entity
in a Qualified Receivables Transaction,
(4) less the amount of all mandatory principal payments actually made
since the Issue Date by Safelite in respect of term loans thereunder
(excluding mandatory principal payments (1) to the extent refinanced at the
time of payment under a replaced Bank Credit Agreement and (2) relating to
the Sale of Excluded Assets in an aggregate amount not to exceed $30
million) and
(5) in the case of a revolving facility, reduced by any required
permanent repayments since the Issue Date (which are accompanied by a
corresponding permanent commitment reduction) thereunder,
(6) other Indebtedness of Safelite and its Restricted Subsidiaries
outstanding on the 1996 Issue Date reduced by the amount of any scheduled
amortization payments or mandatory prepayments when actually paid or
permanent reductions thereon since the 1996 Issue Date,
(7) Interest Swap Obligations of Safelite or any of its Restricted
Subsidiaries covering Indebtedness of Safelite or any of its Restricted
Subsidiaries; provided that any Indebtedness to which any those Interest
Swap Obligations correspond is otherwise permitted to be incurred under the
Indenture; provided, further, that those Interest Swap Obligations are
entered into, in the judgment of Safelite, to protect Safelite and its
Restricted Subsidiaries from fluctuation in interest rates on their
respective outstanding Indebtedness,
(8) Indebtedness under Currency Agreements,
(9) intercompany Indebtedness owed by Safelite to any Wholly Owned
Restricted Subsidiary of Safelite or by any Restricted Subsidiary of
Safelite to Safelite or any Wholly Owned Restricted Subsidiary of Safelite,
(10) Acquired Indebtedness of Safelite or any Restricted Subsidiary of
Safelite to the extent Safelite could have incurred that Indebtedness in
accordance with the "Limitation on Incurrence of Additional Indebtedness"
covenant on the date that Indebtedness became Acquired Indebtedness;
provided that, in the case of Acquired Indebtedness of a Restricted
Subsidiary of Safelite, that Acquired Indebtedness was not incurred in
connection with, or in anticipation or contemplation of, that Person
becoming a Restricted Subsidiary of Safelite,
(11) guarantees by Safelite and its Wholly Owned Restricted
Subsidiaries of each other's Indebtedness; provided that the Indebtedness
is permitted to be incurred under the Indenture, including, with respect to
guarantees by Wholly Owned Restricted Subsidiaries of Safelite, the
covenant entitled "Future Guarantees,"
(12) 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
(13) Indebtedness is extinguished within five business days of its
incurrence,
(14) 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
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as in effect at the time of issuance thereof ("Required Premiums") and fees
in connection therewith; provided that any such event shall not
(a) 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 to pay Required
Premiums and related fees or otherwise permitted to be incurred under
the Indenture) of Safelite and its Restricted Subsidiaries and
(b) create Indebtedness with a Weighted Average Life to Maturity at
the time that Indebtedness is incurred that is less than the Weighted
Average Life to Maturity at the time of the Indebtedness being
refinanced, modified, replaced, renewed, restated, refunded, deferred,
extended, substituted, supplemented, reissued or resold (except that
this subclause (b) 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 (6) or (18) of this definition);
provided that no Restricted Subsidiary of Safelite that is not a
Subsidiary Guarantor may refinance any Indebtedness pursuant to this
clause
(15) other than its own Indebtedness,
(16) Indebtedness (including Capitalized Lease Obligations) incurred
by Safelite or any of its Restricted Subsidiaries since the 1996 Issue Date
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 those 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),
(17) the incurrence by a Receivables Entity of Indebtedness in a
Qualified Receivables Transaction that is not recourse to Safelite or any
Subsidiary of Safelite (except for Standard Securitization Undertakings),
(18) Indebtedness incurred by Safelite 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,
(19) Indebtedness arising from agreements of Safelite or a Restricted
Subsidiary of Safelite 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 Safelite, other than guarantees of
Indebtedness incurred by any Person acquiring all or any portion of the
business, assets or Restricted Subsidiary for the purpose of financing that
acquisition, provided that the maximum assumable liability in respect of
all the Indebtedness shall at no time exceed the gross proceeds actually
received by Safelite and its Restricted Subsidiaries in connection with
that disposition,
(20) obligations in respect of performance and surety bonds and
completion guarantees provided by Safelite or any Restricted Subsidiary of
Safelite in the ordinary course of business,
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(21) Indebtedness of Vistar constituting Capitalized Lease Obligations
in an aggregate principal amount not to exceed $2 million and other
indebtedness of Vistar constituting unsecured Indebtedness in an aggregate
principal amount not to exceed $8 million, in each case which was assumed
by Safelite upon consummation of the Vistar Merger, and
(22) additional Indebtedness of Safelite 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
(1) Investments by Safelite or any Restricted Subsidiary of Safelite
in any Wholly Owned Restricted Subsidiary of Safelite (whether existing on
the 1996 Issue Date or created thereafter) and Investments in Safelite by
any Restricted Subsidiary of Safelite; provided that, in the case of an
Investment by Safelite or any Restricted Subsidiary of Safelite in any
Wholly Owned Restricted Subsidiary of Safelite, such Wholly Owned
Restricted Subsidiary is not restricted from making dividends or similar
distributions by contract, operation of law or otherwise;
(2) cash and Cash Equivalents;
(3) Investments existing on the 1996 Issue Date and Investments made
on the 1996 Issue Date pursuant to the Recapitalization Agreement;
(4) loans and advances to employees and officers of Safelite and its
Restricted Subsidiaries since the 1996 Issue Date not in excess of $1
million at any one time outstanding;
(5) accounts receivable created or acquired in the ordinary course of
business;
(6) Currency Agreements and Interest Swap Obligations entered into in
the ordinary course of Safelite's or its Restricted Subsidiaries'
businesses and otherwise in compliance with the Indenture;
(7) 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;
(8) guarantees by Safelite or any of its Restricted Subsidiaries of
Indebtedness otherwise permitted to be incurred by Safelite or any of its
Restricted Subsidiaries under the Indenture;
(9) Investments by Safelite or any Restricted Subsidiary of Safelite
in a Person, if as a result of such Investment (A) such Person becomes a
Wholly Owned Restricted Subsidiary of Safelite 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, Safelite
or a Wholly Owned Restricted Subsidiary of Safelite;
(10) additional Investments having an aggregate fair market value,
taken together with all other Investments made (or as if made) since the
1996 Issue Date 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 Safelite
from any Person (other than a Subsidiary of Safelite) from the issuance and
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sale subsequent to the 1996 Issue Date of Qualified Capital Stock of
Safelite (including Qualified Capital Stock issued upon the conversion of
convertible Indebtedness or in exchange for outstanding Indebtedness or as
capital contributions to Safelite (other than from a Subsidiary)) and (B)
without duplication of any amounts included in clause (10) (A) above, 100%
of the aggregate net cash proceeds of any equity contribution received by
Safelite since the 1996 Issue Date from a holder of Safelite's Capital
Stock, that in the case of amounts described in clause (10) (A) or (10) (B)
are applied by Safelite within 180 days after receipt, to make additional
Permitted Investments under this clause (10) (such additional Permitted
Investments being referred to collectively as "Stock Permitted
Investments");
(11) any Investment by Safelite or a Wholly Owned Subsidiary of
Safelite 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;
(12) Investments received by Safelite 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 Safelite or any of its Restricted Subsidiaries to make Stock Permitted
Investments pursuant to clause (10) of this definition shall not be
included in subclauses (x) and (y) of clause (3) 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:
(1) 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 Safelite or its Restricted Subsidiaries shall
have set aside on its books such reserves as may be required pursuant to
GAAP;
(2) 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;
(3) 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);
(4) judgment Liens not giving rise to an Event of Default;
(5) 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 Safelite or
any of its Restricted Subsidiaries;
(6) any interest or title of a lessor under any Capitalized Lease
Obligation;
(7) purchase money Liens to finance property or assets of Safelite or
any Restricted Subsidiary of Safelite acquired in the ordinary course of
business; provided,
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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 Safelite or any Restricted Subsidiary of Safelite
other than the property and assets so acquired and (B) the Lien securing
such Indebtedness shall be created within 90 days of such acquisition;
(8) 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;
(9) 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;
(10) Liens encumbering deposits made to secure obligations arising
from statutory, regulatory, contractual, or warranty requirements of
Safelite or any of its Restricted Subsidiaries, including rights of offset
and set-off;
(11) Liens securing Interest Swap Obligations which Interest Swap
Obligations relate to Indebtedness that is otherwise permitted under the
Indenture;
(12) Liens securing Indebtedness under Currency Agreements;
(13) Liens securing Acquired Indebtedness incurred in reliance on
clause (7) of the definition of Permitted Indebtedness; provided that such
Liens do not extend to or cover any property or assets of Safelite 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 Safelite or a Restricted Subsidiary of
Safelite;
(14) 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;
(15) leases or subleases granted to others that do not materially
interfere with the ordinary course of business of Safelite and its
Restricted Subsidiaries;
(16) Liens arising from filing Uniform Commercial Code financing
statements regarding leases;
(17) 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, Safelite or any Restricted Subsidiary of Safelite; 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, Safelite or any Restricted Subsidiary of Safelite;
(18) 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
(19) Liens existing on the 1996 Issue Date, together with any Liens
securing Indebtedness incurred in reliance on clause (10) of the definition
of Permitted Indebtedness in order to refinance the Indebtedness secured by
Liens existing on the 1996 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.
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"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 Safelite 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 Safelite or any
Subsidiary of Safelite 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 Safelite or any of its Subsidiaries
pursuant to which Safelite or any or its Subsidiaries may sell, convey or
otherwise transfer to (a) a Receivables Entity (in the case of a transfer by
Safelite 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 Safelite
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" means the transactions which occurred on the 1996 Issue
Date as contemplated by the Recapitalization Agreement.
"Recapitalization Agreement" means the Recapitalization Agreement and Plan
of Merger and Stock Purchase Agreement, dated as of November 8, 1996, among
Safelite, 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 Safelite (or
another Person in which Safelite or any Subsidiary of Safelite makes an
Investment and to which Safelite or any Subsidiary of Safelite 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 Safelite (as provided below) as a
Receivables Entity (a) no portion of the Indebtedness or any other Obligations
(contingent or otherwise) of which
(1) is guaranteed by Safelite or any Subsidiary of Safelite (excluding
guarantees of Obligations (other than the principal of, and interest on,
Indebtedness) pursuant to Standard Securitization Undertakings),
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<PAGE> 129
(2) is recourse to or obligates Safelite or any Subsidiary of Safelite
in any way other than pursuant to Standard Securitization Undertakings or
(3) subjects any property or asset of Safelite or any Subsidiary of
Safelite, directly or indirectly, contingently or otherwise, to the
satisfaction thereof, other than pursuant to Standard Securitization
Undertakings, (b) with which neither Safelite nor any Subsidiary of
Safelite has any material contract, agreement, arrangement or understanding
other than on terms no less favorable to Safelite or such Subsidiary than
those that might be obtained at the time from Persons that are not
Affiliates of Safelite, other than fees payable in the ordinary course of
business in connection with servicing accounts receivable, and (c) to which
neither Safelite nor any Subsidiary of Safelite 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 Safelite shall be evidenced to the Trustee by filing
with the Trustee a certified copy of the resolution of the Board of
Directors of Safelite giving effect to such designation and an Officers'
Certificate certifying that such designation complied with the foregoing
conditions.
"Redemption Event" shall mean (1) an underwritten initial public offering
of the common stock of Safelite or (2) 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 1996 Issue Date, together with improvements,
repairs, modifications and additions thereon in the ordinary course of business.
"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 Safelite or a Restricted Subsidiary of any property, whether owned by
Safelite or any Restricted Subsidiary at the 1996 Issue Date or later acquired,
which has been or is to be sold or transferred by Safelite 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.
"S&P" means Standard & Poor's Ratings Service, a division of The
McGraw-Hill Companies, Inc. and its successors.
"Secured Indebtedness" means any Indebtedness of Safelite secured by a
Lien.
"Senior Indebtedness" means (1) the Bank Indebtedness and (2) all
Indebtedness of Safelite, including interest thereon (including interest
accruing on or after the filing of any petition in bankruptcy or for
reorganization relating to Safelite or any Restricted Subsidiary of Safelite
whether or not a claim for post-filing interest is allowed in such proceedings),
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whether outstanding on the 1996 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 or the Existing Notes; provided, however, that
Senior Indebtedness shall not include
(1) any obligation of Safelite to any Subsidiary of Safelite,
(2) any liability for Federal, state, local or other taxes owed or
owing by Safelite,
(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 Safelite which is expressly subordinate in
right of payment to any other Indebtedness of Safelite, including any
Senior Subordinated Indebtedness (including, without limitation, the
Existing Notes) 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 Safelite 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, the Existing Notes and
any other Indebtedness of Safelite that specifically provides that such
Indebtedness is to rank pari passu with the Notes or the Existing Notes and is
not by its express terms subordinate in right of payment to any indebtedness of
Safelite which is not Senior Indebtedness.
"Significant Subsidiary" means, as of any date of determination, for any
Person, each Restricted Subsidiary of such Person which (1) 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 (2) 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 Safelite or any Subsidiary of Safelite
which are reasonably customary in an accounts receivable transaction.
"Subordinated Obligation" means any Indebtedness of Safelite (whether
outstanding on the 1996 Issue Date or thereafter incurred) which is expressly
subordinate in right of payment to the Notes or the Existing Notes pursuant to a
written agreement.
"Subsidiary" means, with respect to any Person, (1) 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 (2) 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.
"Transactions" means the recapitalization, merger, stock purchase and other
transactions contemplated by the Recapitalization Agreement and the related
financings.
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"Unrestricted Subsidiary" of any Person means (1) 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 (2) 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,
Safelite or any other Subsidiary of Safelite that is not a Subsidiary of the
Subsidiary to be so designated; provided that (x) Safelite 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 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 Safelite 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, Safelite 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.
"Vistar" means Vistar, Inc.
"Vistar Merger" means the merger contemplated by the Vistar Merger
Agreement.
"Vistar Merger Agreement" means that certain Merger Agreement, dated as of
10, 1997, by and between Vistar and Safelite.
"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 (1) 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 (2) 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.
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DESCRIPTION OF OTHER DEBT
SENIOR CREDIT FACILITIES
The description below summarizes keys terms and conditions of the Bank
Credit Agreement, as amended on December 18, 1998. The Bank Credit Agreement and
the Amendment to the Bank Credit Agreement dated December 18, 1998 are filed as
exhibits to the registration statement. The description below gives effect to
the pay down of the term loans which occurred on January 29, 1999.
STRUCTURE. The senior credit facilities consist of a term loan facility in
an aggregate principal amount of $288.6 million, and a revolving credit facility
providing for revolving loans to Safelite and the issuance of letters of credit
for the account of Safelite in an aggregate principal amount at any time not to
exceed $100 million. The term loan facility consists of three tranches in
principal amounts of $123.6 million (the "Tranche A Term Loan"), $82.5 million
(the "Tranche B Term Loan"), and $82.5 million (the "Tranche C Term Loan").
REPAYMENT. The Tranche A Term Loan and the revolving credit facility
mature on the sixth anniversary of the closing of the initial borrowing under
the Bank Credit Agreement. The Tranche B Term Loan matures on the seventh
anniversary of the closing. The Tranche C Term Loan matures on the eighth
anniversary of the closing. In addition, the term loan facility is subject to
the following amortization schedule:
<TABLE>
<CAPTION>
REPAYMENT AMOUNTS
-------------------------------------
TRANCHE A TRANCHE B TRANCHE C
DATE TERM LOAN TERM LOAN TERM LOAN
- ---- ----------- ---------- ----------
<S> <C> <C> <C>
Last business day in September and
December 1999..................... $ 0 $ 206,143 $ 206,143
Last business day in March, June and
September 2000.................... 0 206,143 206,143
Last business day in December
2000.............................. 3,685,714 206,143 206,143
Last business day in March 2001..... 7,500,000 206,143 206,143
Last business day in June, September
and December 2001................. 7,500,000 206,143 206,143
Last business day in March, June,
September and December 2002....... 10,000,000 206,143 206,143
Last business day in March, June and
September 2003.................... 12,500,000 9,946,393 206,143
December 17, 2003................... 12,500,000 -- --
Last business day in December
2003.............................. -- 9,946,393 206,143
Last business day in March, June and
September 2004.................... -- 9,946,393 9,843,321
December 17, 2004................... -- 9,946,393 --
Last business day in December
2004.............................. -- -- 9,843,321
Last business day in March, June and
September 2005.................... -- 9,843,321
December 17, 2005................... -- -- 9,843,321
</TABLE>
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The Bank Credit Agreement is also subject to mandatory principal prepayment
and commitment reductions to be applied to the term loan facility in an amount
equal to (1) 100% of the net cash proceeds of certain debt and equity offerings
by Safelite and certain asset sales or other dispositions and (2) 50% of
Safelite's annual excess operating cash flow (as defined in the Bank Credit
Agreement).
SECURITY. The Bank Credit Agreement is secured by security interests in
and pledges of or liens on substantially all the assets of Safelite.
INTEREST. At Safelite's election, the interest rates applicable to the
loans under the Bank Credit Agreement are fluctuating rates 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"), which is equal to
the higher of Chase Manhattan Bank's published prime rate and the Federal Funds
effective rate plus 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 1.75% per annum for ABR loans and 2.75% per annum for LIBOR
loans. The 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. The borrowing margins
applicable to the Tranche C Term Loan are 2.25% per annum for ABR loans and
3.25% per annum for LIBOR loans. Each of these margins is subject to reduction
based upon the achievement by Safelite of specified financial performance
thresholds. 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.
COVENANTS. The Bank Credit Agreement contains a number of covenants that,
among other things, restrict the ability of Safelite to dispose of assets,
borrow money, make guarantees, prepay other debt 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 Safelite, make capital
expenditures, or engage in transactions with affiliates and otherwise restricts
some types of corporate activities. In addition, under the Bank Credit
Agreement, Safelite is required to comply with specified financial ratios and
minimum tests, including minimum interest coverage ratios and maximum leverage
ratios. The Bank Credit Agreement, as amended, requires Safelite to maintain a
leverage ratio (total debt to EBITDA, each as adjusted) of 9.75 to 1.00
commencing on March 31, 1999 and declining thereafter in predetermined
increments, and an interest coverage ratio (EBITDA to interest expense, each as
adjusted) of 1.15 to 1.00 commencing on March 31, 1999 and increasing thereafter
in predetermined increments.
The Bank Credit Agreement also contains provisions that limit Safelite's
ability to amend or modify the Existing Indentures and the Indenture and
Safelite's ability to prepay or refinance the Existing Notes and the notes
issued in the exchange offer without the consent of the lenders under the Bank
Credit Agreement.
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, the occurrence of certain ERISA events,
failure or invalidity of security or guarantees and change of control.
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EXISTING 9 7/8% SERIES B SENIOR SUBORDINATED NOTES DUE 2006
As of date of this prospectus, Safelite had outstanding $100,000,000
principal amount of Existing Notes. The Existing Notes mature on December 15,
2006. Cash interest on the Existing Notes is payable semiannually in arrears on
June 15 and December 15 of each year. The Existing Notes are unsecured senior
subordinated obligations of Safelite, subordinated in right of payment to all
existing and future senior indebtedness, and rank equally in right of payment
with all other existing and future senior subordinated indebtedness of Safelite,
including the outstanding notes and the notes to be issued in the exchange
offer.
The Existing Notes are redeemable at the option of Safelite at any time on
or after December 15, 2001 at an initial redemption price of 104.9375%,
declining ratably to par on or after December 15, 2004. In addition, on or prior
to December 15, 1999, Safelite may redeem up to $35 million of the original
principal amount of the Existing Notes at a redemption price of 109.875%, with
the net cash proceeds of one or more equity offerings; provided that at least
$65 million of the aggregate principal amount of the Existing Notes remains
outstanding immediately after the redemption. If Safelite experiences specific
kinds of changes in control, Safelite will be required to make an offer to
purchase all outstanding Existing Notes at 101% of the principal amount thereof.
In all cases the redemption amount paid would also include any accrued and
unpaid interest.
The Existing Notes Indenture contains covenants that are essentially
identical to those contained in the Indenture and restricts, among other things,
Safelite's ability to borrow money, pay dividends, merge with or into other
companies, enter into transactions with affiliates or sell substantially all of
the assets of Safelite. The Existing Notes Indenture also provides for customary
events of default which are identical to those relating to the notes to be
issued in the exchange offer.
A copy of the Existing Notes Indenture, as amended, is filed as an exhibit
to the registration statement.
OTHER DEBT
During 1996, Safelite 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. This premium financing is 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 Safelite cancels
its insurance policies for any reason, corresponding unearned premium refunds
would be applied directly against the outstanding principal balance. At January
2, 1999, the outstanding principal balance of this premium financing was
approximately $4.4 million.
INCOME TAX CONSIDERATIONS
Holders of the outstanding 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. In this "Income
Tax Considerations" section, the notes to be issued in the Exchange Offer are
referred to as the "Exchange Notes." The term "Notes" includes outstanding notes
and Exchange Notes.
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Safelite believes, based on the opinion of Hutchins, Wheeler & Dittmar, A
Professional Corporation, that the following summary fairly describes the
material United States federal income tax consequences expected to apply to the
exchange of outstanding 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 here 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 outstanding notes and the
Exchange Notes may vary depending on the holder's particular situation. Some
holders (including insurance companies, tax-exempt organizations, financial
institutions, broker-dealers, taxpayers subject to the alternative minimum tax,
foreign persons, persons holding Notes as a part of a hedging, conversion or
constructive sale transaction or a straddle or holders of notes whose
"functional currency" is not the U.S. dollar) may be subject to special rules
not discussed below. This description assumes that holders of the outstanding
notes and the Exchange Notes will hold the outstanding notes and the Exchange
Notes as "capital assets" (generally, property held for investment purposes)
within the meaning of Section 1221 of the Internal Revenue Code of 1986, as
amended (the "Code"). The discussion below is based upon the provisions of the
Code, and regulations, rulings and judicial decisions thereunder, as of the date
of this prospectus. These authorities may be repealed, revoked or modified so as
to result in United States federal income tax consequences different from those
discussed below.
THE EXCHANGE
An exchange of outstanding 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 outstanding notes.
As a result, no federal income tax consequences will result to holders
exchanging outstanding notes for Exchange Notes.
THE EXCHANGE NOTES
INTEREST PAYMENTS ON THE EXCHANGE NOTES. The Notes will be treated as debt
for federal income tax purposes. Stated interest on the Notes should be
considered to be "qualified stated interest," and therefore, will generally be
includible in income of a United States Holder as ordinary income from domestic
sources at the time it is paid or accrued in accordance with the United States
Holder's method of accounting for tax purposes. As used herein, a "United States
Holder" of a Note means a holder that is (1) a citizen or resident of the United
States, (2) a corporation or partnership created or organized in or under the
laws of the United States or any political subdivision thereof (unless, in the
case of a partnership, the Secretary of the Treasury otherwise provides by
regulation), (3) an estate the income of which is subject to United States
federal income taxation regardless of its source, or (4) a trust which is
subject to the supervision of a court within the United States and the control
of a United States person as described in Section 7701(a)(30) of the Code. A
"Non-United States Holder" is a holder that is not a United States Holder.
ORIGINAL ISSUE DISCOUNT. The Notes were issued with original issue discount
("OID") in an amount equal to the difference between their stated redemption
price at maturity (the sum of all payments to be made on the Note other than
"qualified stated interest") and their "issue price." United States Holders
should be aware that they generally must include OID in gross income in advance
of the receipt of cash attributable to that income. However, United States
Holders of such Notes generally will not be required to include
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separately in income cash payments received on the Notes, even if denominated as
interest, to the extent those payments do not constitute qualified stated
interest (as defined below).
This summary is based upon final Treasury regulations addressing debt
instruments issued with OID (the "OID Regulations").
The "issue price" of each Note will be the first price at which a
substantial amount of that particular offering is sold (other than to an
underwriter, placement agent or wholesaler). The term "qualified stated
interest" means stated interest that is unconditionally payable in cash or in
property (other than debt instruments of the issuer) at least annually at a
single fixed rate or, subject to certain conditions, based on one or more
interest indices. Interest is payable at a single fixed rate only if the rate
appropriately takes into account the length of the interval between payments.
The stated interest payments on the Notes are qualified stated interest.
The amount of OID includible in income by the initial United States Holder
of an original issue discount Note is the sum of the "daily portions" of OID
with respect to the Note for each day during the taxable year or portion of the
taxable year in which such United States Holder held such Note ("accrued OID").
The daily portion is determined by allocating to each day in any "accrual
period" a pro rata portion of the OID allocable to that accrual period. The
"accrual period" for an original issue discount Note may be of any length and
may vary in length over the term of the Note, provided that each accrual period
is no longer than one year and each scheduled payment of principal or interest
occurs on the first day or the final day of an accrual period. The amount of OID
allocable to any accrual period is an amount equal to the excess, if any, of (a)
the product of the Note's adjusted issue price at the beginning of such accrual
period and its yield to maturity (determined on the basis of compounding at the
close of each accrual period and properly adjusted for the length of the accrual
period), over (b) the sum of any qualified stated interest allocable to the
accrual period. OID allocable to a final accrual period is the difference
between the amount payable at maturity (other than a payment of qualified stated
interest) and the adjusted issue price at the beginning of the final accrual
period. Special rules will apply for calculating OID for an initial short
accrual period. The "adjusted issue price" of a Note at the beginning of any
accrual period is equal to its issue price increased by the accrued OID for each
prior accrual period and reduced by any payments made on the note (other than
qualified stated interest) on or before the first day of the accrual period.
Under these rules, a United States Holder will have to include in income
increasingly greater amounts of OID in successive accrual periods. Safelite is
required to provide information returns stating the amount of OID accrued on
Notes held of record by persons other than corporations and other exempt
holders.
United States Holders may elect to treat all interest on any Note as OID
and calculate the amount includible in gross income under the constant yield
method described above. For the purposes of this election, interest includes
stated interest, acquisition discount, OID, de minimis OID and unstated
interest. The election is to be made for the taxable year in which the United
States Holder acquired the Note, and may not be revoked without the consent of
the IRS. United States Holders should consult with their own tax advisors about
this election.
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 outstanding note will equal the cost of the outstanding note
to the holder, plus the amount of market discount and OID previously included in
income by the holder and minus any principal payments received by the holder
with respect to the Notes and amortized bond
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premium. A holder's adjusted tax basis in an Exchange Note will be equal to the
price paid for the Exchange Note (determined by taking into account accrued
interest at the time of purchase), plus market discount and OID previously
included in income by the holder and minus any principal payments received by
the holder with respect to an Exchange Note and 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 the holder's adjusted tax basis in the Exchange Note. This 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 the sale, exchange or retirement. There
are limitations on the use of capital losses.
MARKET DISCOUNT AND BOND PREMIUM. Holders should be aware that the market
discount provisions of the Code may affect the Notes. These rules generally
provide that a holder who purchases Notes for an amount which is less than their
"revised issue price" will be considered to have purchased the Notes at a
"market discount" equal to the amount of this difference. The revised issue
price is the issue price increased by the aggregate amount of OID includible in
the gross income of all holders for periods before the taxpayer's acquisition of
the Notes. The holder will be required to treat any gain realized upon the
disposition of the Notes as ordinary income to the extent of the market discount
that is treated as having accrued during the period that the holder held the
Notes, unless an election is made to include this market discount in income on a
current basis. A holder of a Note who acquires the 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 debt
incurred or continued to purchase or carry the Note until the holder disposes of
the Note in a taxable transaction.
A holder of a Note that acquired such Note on the secondary market at a
cost that is more than its adjusted issue price but less than or equal to its
stated redemption price at maturity may reduce the amount of OID includible in
its gross income to reflect such acquisition premium. See "Original Issue
Discount" discussed above.
If a holder's tax basis in a Note immediately after acquisition exceeds the
stated redemption price at maturity of the Note, the holder may be eligible to
elect to deduct the 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 the purchasers of the market discount and bond premium
rules.
NON-UNITED STATES HOLDERS
Under present United States federal income and estate tax law, and subject
to the discussion below concerning back-up withholding:
(1) no withholding of United States federal income tax will be required
with respect to the payment by Safelite or any paying agent of
principal or interest (which for purposes of this discussion includes
OID) on a Note owned by a Non-United States Holder, provided that:
(a) the beneficial owner does not directly or indirectly, actually or
constructively, own 10% or more of the total combined voting power of all
classes of stock of Safelite entitled to vote within the meaning of Section
871(h)(3) of the Code and the regulations thereunder,
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(b) the beneficial owner is not a controlled foreign corporation
(within the meaning of Section 957(a) of the Code) that is related (within
the meaning of Section 864(d)(4) of the Code) to Safelite through stock
ownership,
(c) the beneficial owner is not a bank whose receipt of interest on a
Note is described in Section 881(c)(3)(A) of the Code, and
(d) the beneficial owner satisfies the statement requirement
(described generally below) set forth in Section 871(h) and Section 881(c)
of the Code and the regulations thereunder;
(2) no withholding of United States federal income tax will be required
with respect to any gain or income realized by a Non-United States
Holder upon the sale, exchange, retirement or other disposition of a
Note; provided that, in the case of proceeds representing interest, the
conditions described in the preceding paragraph are met; and
(3) a Note beneficially owned by an individual who at the time of death is
a Non-United States Holder will not be subject to United States federal
estate tax as a result of such individual's death, provided that such
individual does not directly or indirectly, actually or constructively,
own 10% or more of the total combined voting power of all classes of
stock of Safelite entitled to vote within the meaning of Section
871(h)(3) of the Code and provided that the interest payments with
respect to such Notes would not have been, if received at the time of
such individual's death, effectively connected with the conduct of a
United States trade or business by such individual.
To satisfy the requirement referred to in (1)(d) above, the beneficial
owner of the Note, or a financial institution holding the Note on behalf of the
owner, must provide, in accordance with specified procedures, a paying agent of
Safelite with a statement to the effect that the beneficial owner is not a
United States person. Currently, these requirements will be met if (1) the
beneficial owner provides his name and address, and certifies, under penalties
of perjury, that he is not a United States person (which certification may be
made on an Internal Revenue Form ("IRS") W-8 (or successor form)), or (2) a
financial institution holding the Note on behalf of the beneficial owner
certifies, under penalties of perjury, that such statement has been received by
it and furnishes a paying agent with a copy thereof. Under recently finalized
Treasury regulations (the "Final Regulations"), the statement requirement
referred to in (1)(d) above may also be satisfied with other documentary
evidence for interests paid after December 31, 1999 with respect to an offshore
account or through certain foreign intermediaries.
If a Non-United States Holder cannot satisfy the requirements described in
(1) above, payments of interest (including OID) made to such Non-United States
Holder will be subject to a 30% withholding tax unless the beneficial owner of
the Note provides Safelite or its paying agent, as the case may be, with a
properly executed (1) IRS Form 1001 (or successor form) claiming an exemption
from withholding under the benefit of a tax treaty, or (2) IRS Form 4224 (or
successor form) stating that interest paid on the Note is not subject to
withholding tax because it is effectively connected with the beneficial owner's
conduct of a trade or business in the United States. Under the Final
Regulations, Non-United States Holders will generally be required to provide IRS
Form W-8 in lieu of IRS Form 1001 and IRS Form 4224, although alternative
documentation may be applicable in some situations.
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If a Non-United States Holder is engaged in a trade or business in the
United States and interest (including OID) on the Note is effectively connected
with the conduct of such trade or business, the Non-United States Holder,
although exempt from the withholding tax discussed above, will be subject to
United States federal income tax on such interest and OID on a net income basis
in the same manner as if it were a United States Holder. In addition, if the
Holder is a foreign corporation, it may be subject to a branch profits tax equal
to 30% (or lower applicable treaty rate) of its effectively connected earnings
and profits for the taxable year, subject to adjustments. For this purpose,
interest (including OID) on a Note will be included in the foreign corporation's
earnings and profits.
Any gain or income realized upon the sale, exchange, retirement or other
disposition of a Note (other than proceeds, if any, representing interest)
generally will not be subject to United States federal income tax unless:
(1) the gain or income is effectively connected with a trade or business in
the United States of the Non-United States Holder, or
(2) in the case of a Non-United States Holder who is an individual, the
individual is present in the United States for 183 days or more in the
taxable year of the sale, exchange, retirement or other disposition,
and certain other conditions are met, or
(3) the Non-United States Holder is subject to tax, pursuant to provisions
of the United States tax law applicable to certain United States
expatriates whose loss of United States citizenship had as one of its
principal purposes the avoidance of United States taxes.
INFORMATION REPORTING AND BACK-UP WITHHOLDING
In general, information reporting requirements will apply to certain
payments of principal, interest and OID paid on Notes and to the proceeds of
sale of a Note made to United States Holders other than exempt recipients (such
as corporations). A 31% back-up withholding tax will apply to such payments if
the United States Holder fails to provide a taxpayer identification number or
certification of foreign or other exempt status or fails to report in full
dividend and interest income.
In general, no information reporting or back-up withholding will be
required with respect to payments made by the Company or any paying agent to
Non-United States Holders if a statement described in (1)(d) under "Non-United
States Holders" has been received (and the payer does not have actual knowledge
that the beneficial owner is a United States person).
In addition, back-up withholding and information reporting may apply to the
proceeds of the sale of a Note within the United States or conducted through
certain U.S. related financial intermediaries unless the statement described in
1(d) under "Non-United States Holders" has been received (and the payor does not
have actual knowledge that the beneficial owner is a United States person) or
the holder otherwise establishes an exemption.
Any amount withheld under the back-up withholding rules will be allowed as
a refund or a credit against such holder's United States federal income tax
liability provided the required information is furnished to the IRS.
HOLDERS OF THE OUTSTANDING NOTES ARE URGED TO CONSULT THEIR TAX ADVISORS
REGARDING THE PARTICULAR TAX CONSEQUENCES TO THEM OF ACQUIRING, OWNING OR
DISPOSING OF THE OUTSTANDING NOTES AND THE EXCHANGE NOTES, INCLUDING THE
APPLICATION OF FEDERAL, STATE, LOCAL AND FOREIGN TAX LAWS, AND POSSIBLE FUTURE
CHANGES IN THE FEDERAL TAX LAWS.
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BOOK-ENTRY; DELIVERY AND FORM
Except as set forth below, the notes issued in the Exchange Offer will
initially be issued in the form of one or more registered notes in global form,
called "Global Notes," without coupons. Each Global Note will be deposited with,
or on behalf of, DTC and registered in the name of Cede & Co., as nominee of
DTC, or will remain in the custody of the Trustee pursuant to the FAST Balance
Certificate Agreement between DTC and the Trustee.
DTC has advised Safelite that it is:
(1) a limited purpose trust company organized under the laws of the
State of New York,
(2) a member of the Federal Reserve System,
(3) a "clearing corporation" within the meaning of the Uniform
Commercial Code, as amended, and
(4) a "Clearing Agency" registered pursuant to Section 17A of the
Exchange Act.
DTC was created to hold securities for its participating organizations
(collectively, the "Participants") and facilitates the clearance and settlement
of securities transactions between Participants through electronic book-entry
changes to the accounts of its Participants, thereby eliminating the need for
physical transfer and delivery of certificates. DTC's Participants include
securities brokers and dealers (including the initial purchaser of the
outstanding notes), banks and trust companies, clearing corporations, and
certain other organizations. Access to DTC's system is also available to other
entities such as banks, brokers, dealers and trust companies (collectively, the
"Indirect Participants") that clear through or maintain a custodial relationship
with a Participant, either directly or indirectly. Holders who are not
Participants may beneficially own securities held by or on behalf of DTC only
through Participants or Indirect Participants.
Safelite expects, pursuant to procedures established by DTC, that (1) upon
deposit of the Global Notes, DTC will credit the accounts of Participants
designated by the Initial Purchasers with an interest in the Global Note and (2)
ownership of the notes will be shown on, and the transfer of ownership thereof
will be effected only through, records maintained by DTC (with respect to the
interest of Participants), the Participants and the Indirect Participants. The
laws of some states require that some persons take physical delivery in
definitive form of securities that they own and that security interest in
negotiable instruments can only be perfected by delivery of certificates
representing the instruments. Consequently, the ability to transfer notes or to
pledge the notes as collateral will be limited to this extent.
So long as DTC or its nominee is the registered owner of a Global Note, DTC
or the nominee, as the case may be, will be considered the sole owner or holder
of the notes represented by the Global Note for all purposes under the
Indenture. Except as provided below, owners of beneficial interests in a Global
Note will not be entitled to have notes represented by the Global Note
registered in their names, will not receive or be entitled to receive physical
delivery of certificated notes (the "Certificated Notes"). In addition, owners
of beneficial interest in a Global Note will not be considered the owners or
holders thereof under the Indenture for any purpose, including with respect to
giving of any directions, instruction or approval to the Trustee thereunder. As
a result, the ability of a person having a beneficial interest in a Global Note
to pledge or transfer its interest to
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persons or entities that do not participate in DTC's system or to otherwise take
action with respect to its interest, may be affected the lack of a physical
certificate evidencing this interest.
Accordingly, each holder owning a beneficial interest in a Global Note must
rely on the procedures of DTC and, if the holder is not a Participant or an
Indirect Participant, on the procedures of the Participant through which the
holder owns its interest, to exercise any rights of a holder of notes under the
Indenture or such Global Note. Safelite understands that under existing industry
practice, in the event Safelite requests any action of holders of notes or if a
holder that is an owner of a beneficial interest in a Global Note desires to
take any action that DTC, as the holder of the Global Note, is entitled to take,
DTC would authorize the Participants to take this action and the Participant
would authorize holders owning through these Participants to take this action or
would otherwise act upon the instruction of the holders. Neither Safelite nor
the Trustee will have any responsibility or liability for any aspect of the
records relating to or payments made on account of notes by DTC, or for
maintaining, supervising or reviewing any records of DTC relating to these
notes.
Payments with respect to the principal of, premium, if any, and interest on
any notes represented by a Global Note registered in the name of DTC or its
nominee on the applicable record date will be payable by the Trustee to or at
the direction of DTC or its nominee in its capacity as the registered holder of
the Global Note. Under the terms of the Indenture, Safelite and the Trustee may
treat the persons in whose names the notes, including the Global Notes, are
registered as the owners thereof for the purpose of receiving this payment and
for any and all other purposes whatsoever. Consequently, neither Safelite nor
the Trustee has or will have any responsibility or liability for the payment of
these amounts to beneficial owners of interest in the Global Note (including
principal, premium, if any, and interest). Payments by the Participants and the
Indirect Participants to the beneficial owners of interests in the Global Note
will be governed by standing instructions and customary practice and will be the
responsibility of the Participants or the Indirect Participants and DTC.
CERTIFICATED NOTES
If:
(1) Safelite notifies the Trustee in writing that DTC is no longer
willing or able to act as a depositary, or DTC ceases to be registered as a
clearing agency under the Exchange Act and a successor depositary is not
appointed within 90 days of this notice or cessation;
(2) Safelite, at its option, notifies the Trustee in writing that it
elects to cause the issuance of notes in definitive form under the
Indenture; or
(3) upon the occurrence of other events described in the Indenture,
then, upon surrender by DTC of the Global Notes, certificated notes will be
issued to each person that DTC identifies as the beneficial owner of the
notes represented by the Global Notes. Upon any issuance of certificated
notes, the Trustee will be required to register the certificated notes in
the name of the beneficial owner indicated by the DTC, or the nominee of
such person, and cause the certificates to be delivered to that person.
Neither Safelite nor the Trustee will be liable for any delay by DTC or any
Participant or Indirect Participant in identifying the beneficial owners of the
related notes.
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Each of Safelite and the Trustee may conclusively rely on, and will be protected
in relying on, instructions from DTC for all purposes, including with respect to
the registration and delivery, and the respective principal amounts, of the
notes to be issued.
PLAN OF DISTRIBUTION
Each broker-dealer that receives notes for its own account in the Exchange
Offer must acknowledge that it will deliver a prospectus in connection with any
resale of those notes. 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
notes received in the Exchange Offer where the outstanding notes were acquired
as a result of market-making activities or other trading activities. Safelite
has agreed that, for a period of 180 days after the consummation of the Exchange
Offer, it will make this prospectus, as amended and supplemented, available to
any broker-dealer for use in connection with any resale. In addition, until
, 1999, all dealers effecting transactions in the notes issued in
the Exchange Offer may be required to deliver a prospectus.
Safelite will not receive any proceeds from any sale of notes by
broker-dealers. Notes received by broker-dealers for their own account in 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 notes or a combination of these methods of resale, at market
prices prevailing at the time of resale, at prices related to these prevailing
market prices or at negotiated prices. Any resale may be made directly to
purchasers or to or though brokers or dealers who may receive compensation in
the form of commissions or concessions from any broker-dealer or the purchasers
of any notes. Any broker-dealer that resells notes that were received by it for
its own account in the Exchange Offer and any broker or dealer that participates
in a distribution of the notes may be deemed to be an "underwriter" within the
meaning of the Securities Act, and profit on any resale of notes issued in the
exchange and any commission or concessions received by any these persons may be
considered 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 180 days after the consummation of the Exchange Offer,
Safelite will promptly send additional copies of this prospectus and any
amendment or supplement to this prospectus to any broker-dealer that requests
these documents in the letter of transmittal. Safelite has agreed to pay all
expenses incident to the Exchange Offer, including the expenses of one counsel
for the holders of the notes, other than the commissions or concessions of any
broker-dealers. Safelite will also indemnify the holders of the notes, including
any broker-dealers, against specific liabilities, including liabilities under
the Securities Act.
LEGAL MATTERS
The validity of the Exchange Notes will be passed upon for Safelite by
Hutchins, Wheeler & Dittmar, A Professional Corporation, Boston, Massachusetts.
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EXPERTS
The consolidated balance sheets of Safelite Glass Corp. and its
subsidiaries as of December 28, 1996, January 3, 1998, and April 4, 1998, and
the consolidated statements of operations, stockholders' equity (deficit) and
cash flows for each of the three years in the period ended January 3, 1998, and
the three months ended April 4, 1998, included in this prospectus have been
audited by Deloitte & Touche LLP, independent auditors, as stated in their
report appearing herein, and are included in reliance upon the report of such
firm given upon their authority as experts in accounting and auditing.
The consolidated balance sheets of Vistar, Inc. and its subsidiaries as of
March 31, 1996 and 1997, and the consolidated statements of earnings (loss),
stockholders' equity and cash flows for each of the three years in the period
ended March 31, 1997 included in this prospectus have been audited by Arthur
Andersen LLP, independent public accountants, as indicated in their report
thereto and are included herein in reliance upon the authority of said firm as
experts in giving said report.
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INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
FINANCIAL STATEMENTS OF SAFELITE GLASS CORP. AND
SUBSIDIARIES:
Independent Auditors' Report................................ F-2
Consolidated Balance Sheets -- December 28, 1996, January 3,
1998, April 4, 1998 and January 2, 1999................... F-3
Consolidated Statements of Operations -- Years Ended
December 30, 1995, December 28, 1996 and January 3, 1998,
Three Months Ended March 29, 1997 and April 4, 1998 and
Nine Months Ended January 3, 1998 and January 2, 1999..... F-4
Consolidated Statements of Stockholders' Equity
(Deficit) -- Years Ended December 30, 1995, December 28,
1996 and January 3, 1998, Three Months Ended April 4, 1998
and Nine Months Ended January 2, 1999..................... F-5
Consolidated Statements of Cash Flows -- Years Ended
December 30, 1995, December 28, 1996 and January 3, 1998,
Three Months Ended March 29, 1997 and April 4, 1998 and
Nine Months Ended January 3, 1998 and January 2, 1999..... F-6
Notes to Consolidated Financial Statements.................. F-7
FINANCIAL STATEMENTS OF VISTAR, INC. AND SUBSIDIARIES:
Report of Independent Public Accountants.................... F-29
Consolidated Balance Sheets -- March 31, 1996 and 1997...... F-30
Consolidated Statements of Earnings (Loss) -- Years Ended
March 31, 1995, 1996 and 1997 and Nine Months Ended
December 21, 1996 and December 19, 1997................... F-32
Consolidated Statements of Stockholders' Equity -- Years
Ended March 31, 1995, 1996 and 1997 and Nine Months Ended
December 19, 1997......................................... F-33
Consolidated Statements of Cash Flows -- Years Ended March
31, 1995, 1996 and 1997 and Nine Months Ended December 21,
1996 and December 19, 1997................................ F-34
Notes to Consolidated Financial Statements.................. F-35
</TABLE>
F-1
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INDEPENDENT AUDITORS' REPORT
Safelite Glass Corp.:
We have audited the accompanying consolidated balance sheets of Safelite
Glass Corp. and subsidiaries ("Company") as of December 28, 1996, January 3,
1998, and April 4, 1998 and the related consolidated statements of operations,
stockholders' equity (deficit), and cash flows for the years ended December 30,
1995, December 28, 1996 and January 3, 1998, and the three months ended April 4,
1998. 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 auditing standards generally
accepted in the United States of America. 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 Safelite Glass Corp. and
subsidiaries at December 28, 1996, January 3, 1998, and April 4, 1998, and the
results of their operations and their cash flows for the years ended December
30, 1995, December 28, 1996 and January 3, 1998, and the three months ended
April 4, 1998 in conformity with accounting principles generally accepted in the
United States of America.
DELOITTE & TOUCHE LLP
Dayton, Ohio
November 6, 1998
F-2
<PAGE> 146
SAFELITE GLASS CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
DECEMBER 28, JANUARY 3, APRIL 4, JANUARY 2,
1996 1998 1998 1999
------------ ---------- --------- ------------
(UNAUDITED)
<S> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents....................... $ 31,188 $ 7,404 $ 10,254 $ 7,808
Accounts receivable, net........................ 29,647 54,927 62,000 62,128
Refundable taxes................................ 7,600
Inventories..................................... 42,454 48,133 50,535 53,011
Prepaid expenses................................ 6,684 6,505 11,382 12,030
Deferred income taxes........................... 7,862 24,613 18,416 13,993
--------- --------- --------- ---------
Total current assets..................... 125,435 141,582 152,587 148,970
PROPERTY, PLANT AND EQUIPMENT -- net.............. 40,119 63,820 61,994 62,008
INTANGIBLE ASSETS -- net.......................... 17,832 286,221 286,542 283,360
RESTRICTED CASH -- collateralizing notes closed
into escrow..................................... 46,400
OTHER ASSETS...................................... 18,970 23,821 24,873 19,725
DEFERRED INCOME TAXES............................. 13,890 42,610 50,359 59,677
--------- --------- --------- ---------
TOTAL ASSETS............................. $ 216,246 $ 558,054 $ 576,355 $ 620,140
========= ========= ========= =========
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES:
Accounts payable................................ $ 23,703 $ 45,313 $ 43,480 $ 43,127
Current portion -- long-term debt............... 5,418 6,425 5,941 15,542
Accrued expenses:
Payroll and related items..................... 17,359 14,768 9,669 9,138
Self-insurance reserves....................... 9,086 7,987 7,018 7,482
Taxes......................................... 6,376 4,537 546 1,754
Accrued interest.............................. 685 1,949 8,695 2,802
Restructuring................................. 561 20,007 22,390 7,548
Other......................................... 5,664 10,787 14,529 10,351
--------- --------- --------- ---------
Total current liabilities................ 68,852 111,773 112,268 97,744
NOTES CLOSED INTO ESCROW -- collateralized by
restricted cash................................. 50,447
LONG-TERM DEBT -- less current portion............ 258,322 473,499 497,645 521,618
OTHER LONG-TERM LIABILITIES:
Self-insurance reserves......................... 6,512 5,758 4,895 2,935
Pension......................................... 7,733 4,098 671 791
Restructuring................................... 1,128 6,846 8,983 4,486
Other........................................... 2,231 2,954 304 619
--------- --------- --------- ---------
Total other long-term liabilities........ 17,604 19,656 14,853 8,831
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY (DEFICIT):
Preferred stock issued, 8%, $100 par value at
December 28, 1996 and $0.01 thereafter........ 58,250 1 1 1
Class A Common Stock issued, $0.01 par value.... 53 38 38 38
Class B Common Stock issued, $0.01 par value.... 1 104 104 104
Additional paid-in capital...................... 182,368 324,794 324,878 324,878
Accumulated deficit............................. (356,555) (357,761) (362,077) (372,166)
Other........................................... (12,649) (14,050) (11,355) (11,355)
--------- --------- --------- ---------
Total stockholders' deficit.............. (128,532) (46,874) (48,411) (58,500)
--------- --------- --------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS'
DEFICIT................................ $ 216,246 $ 558,054 $ 576,355 $ 620,140
========= ========= ========= =========
</TABLE>
See notes to consolidated financial statements.
F-3
<PAGE> 147
SAFELITE GLASS CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED THREE MONTHS ENDED NINE MONTHS ENDED
---------------------------------------- ---------------------- -------------------------
DECEMBER 30, DECEMBER 28, JANUARY 3, MARCH 29, APRIL 4, JANUARY 3, JANUARY 2,
1995 1996 1998 1997 1998 1998 1999
------------ ------------ ---------- ----------- -------- ----------- -----------
(UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
SALES:
Installation and related
services.................. $315,642 $380,142 $430,290 $95,249 $201,684 $335,041 $621,684
Wholesale................... 56,500 58,183 53,014 12,544 12,108 40,470 37,372
-------- -------- -------- ------- -------- -------- --------
Total sales........... 372,142 438,325 483,304 107,793 213,792 375,511 659,056
COST OF SALES................. 261,693 299,623 331,658 75,758 155,545 255,900 488,529
-------- -------- -------- ------- -------- -------- --------
GROSS PROFIT.................. 110,449 138,702 151,646 32,035 58,247 119,611 170,527
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES..... 93,486 107,350 111,815 25,993 46,467 85,822 140,725
RESTRUCTURING EXPENSES........ 6,311 2,865 3,791 2,865 4,222
LOSS ON SALE OF LEAR
SIEGLER..................... 5,418 5,418
OTHER OPERATING EXPENSES...... 7,558 5,704 3,079 5,704 3,613
-------- -------- -------- ------- -------- -------- --------
OPERATING INCOME.............. 10,652 23,794 25,844 6,042 4,910 19,802 21,967
INTEREST EXPENSE.............. (6,000) (6,726) (27,517) (6,357) (10,987) (21,160) (34,292)
INTEREST INCOME............... 2,890 2,094 1,254 279 138 975 384
-------- -------- -------- ------- -------- -------- --------
INCOME (LOSS) FROM CONTINUING
OPERATIONS BEFORE INCOME TAX
(PROVISION) BENEFIT AND
MINORITY INTEREST........... 7,542 19,162 (419) (36) (5,939) (383) (11,941)
INCOME TAX (PROVISION)
BENEFIT..................... (157) 17,605 6,842 (59) 1,623 6,901 1,852
MINORITY INTEREST............. (1,059) (10,199)
-------- -------- -------- ------- -------- -------- --------
INCOME (LOSS) FROM CONTINUING
OPERATIONS.................. 6,326 26,568 6,423 (95) (4,316) 6,518 (10,089)
DISCONTINUED OPERATIONS....... 1,706
EXTRAORDINARY ITEM -- Early
extinguishment of debt, net
of tax benefit.............. (500) (2,835) (2,835)
-------- -------- -------- ------- -------- -------- --------
NET INCOME (LOSS)............. $ 6,326 $ 27,774 $ 3,588 $ (95) $ (4,316) $ 3,683 $(10,089)
======== ======== ======== ======= ======== ======== ========
</TABLE>
See notes to consolidated financial statements.
F-4
<PAGE> 148
SAFELITE GLASS CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
OTHER
PREFERENTIAL -----------------------
AND CLASS A CLASS B ADDITIONAL STOCK
PREFERRED PREFERRED COMMON COMMON PAID-IN ACCUMULATED TREASURY SUBSCRIPTION
STOCK STOCK STOCK STOCK CAPITAL DEFICIT STOCK RECEIVABLE
--------- ------------ ------- ------- ---------- ----------- -------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1994...... $ 32 $ 11 $ 1 $ 393,562 $(390,655) $ (732) $(372)
Purchase of 5,256 shares of
Class A Treasury Stock......... 5 (5)
Net income...................... 6,326
Minimum pension liability
adjustment, net of tax.........
-------- ---- ---- --------- --------- ------- -----
BALANCE, DECEMBER 30, 1995...... 32 11 1 393,567 (384,329) (737) (372)
Issuance of 4,209,689 shares of
Class A Common Stock net of
issuance costs of $6,502....... 42 49,866
Issuance of 582,498 shares of
preferred stock................ 58,250
Redemption of preferential
common stock................... (32) (293,107)
Contributed capital............. 21,314
Purchase of 353,557 shares of
Class A Treasury Stock......... (4,720)
Exercise of 6,080 stock
options........................ 63 (4)
Net income...................... 27,774
Purchase of minority interest... 10,665
Minimum pension liability
adjustment, net of tax.........
-------- ---- ---- --------- --------- ------- -----
BALANCE, DECEMBER 28, 1996...... 58,250 53 1 182,368 (356,555) (5,457) (376)
Purchase of 1,000 shares of
Class A Common Stock........... (11)
Stock options exercised......... 2 5,273
Dividend ($12.99 per share)..... (67,194)
Preferred stock redemption,
including payment of
accumulated dividends of
$4,794......................... (58,250) (4,794)
Elimination of stock
subscription receivable........ 376
Reverse stock split (1 for 3)... (34) 34
Stock dividend (2 shares of
Class B Common Stock for each
share of Class A Common
Stock)......................... 34 (34)
Issuance of 1,690,101 shares of
Class A Common Stock and
6,959,771 shares of Class B
Common Stock................... 17 69 164,348
Issuance of 40,000 shares of
preferred stock................ $1 39,999
Net income...................... 3,588
Minimum pension liability
adjustment, net of tax.........
-- -------- ---- ---- --------- --------- ------- -----
BALANCE, January 3, 1998........ 1 38 104 324,794 (357,761) (5,468)
Issuance of 4,378 shares of
Class B Common Stock........... 84
Net loss........................ (4,316)
Minimum pension liability
adjustment, net of tax.........
-- -------- ---- ---- --------- --------- ------- -----
BALANCE, APRIL 4, 1998.......... 1 38 104 324,878 (362,077) (5,468)
Net loss (unaudited)............ (10,089)
-- -------- ---- ---- --------- --------- ------- -----
BALANCE, JANUARY 2, 1999
(unaudited).................... $1 $ $ 38 $104 $ 324,878 $(372,166) $(5,468) $
== ======== ==== ==== ========= ========= ======= =====
<CAPTION>
OTHER
---------
COMP.
MINIMUM INCOME
LIABILITY TOTAL (LOSS)
--------- --------- --------
<S> <C> <C> <C>
BALANCE, DECEMBER 31, 1994...... $(1,631) $ 216
Purchase of 5,256 shares of
Class A Treasury Stock.........
Net income...................... 6,326 $ 6,326
Minimum pension liability
adjustment, net of tax......... (7,156) (7,156) (7,156)
------- --------- --------
BALANCE, DECEMBER 30, 1995...... (8,787) (614) $ (830)
========
Issuance of 4,209,689 shares of
Class A Common Stock net of
issuance costs of $6,502....... 49,908
Issuance of 582,498 shares of
preferred stock................ 58,250
Redemption of preferential
common stock................... (293,139)
Contributed capital............. 21,314
Purchase of 353,557 shares of
Class A Treasury Stock......... (4,720)
Exercise of 6,080 stock
options........................ 59
Net income...................... 27,774 $ 27,774
Purchase of minority interest... 10,665
Minimum pension liability
adjustment, net of tax......... 1,971 1,971 1,971
------- --------- --------
BALANCE, DECEMBER 28, 1996...... (6,816) (128,532) $ 29,745
========
Purchase of 1,000 shares of
Class A Common Stock........... (11)
Stock options exercised......... 5,275
Dividend ($12.99 per share)..... (67,194)
Preferred stock redemption,
including payment of
accumulated dividends of
$4,794......................... (63,044)
Elimination of stock
subscription receivable........ 376
Reverse stock split (1 for 3)...
Stock dividend (2 shares of
Class B Common Stock for each
share of Class A Common
Stock).........................
Issuance of 1,690,101 shares of
Class A Common Stock and
6,959,771 shares of Class B
Common Stock................... 164,434
Issuance of 40,000 shares of
preferred stock................ 40,000
Net income...................... 3,588 $ 3,588
Minimum pension liability
adjustment, net of tax......... (1,766) (1,766) (1,766)
------- --------- --------
BALANCE, January 3, 1998........ (8,582) (46,874) $ 1,822
========
Issuance of 4,378 shares of
Class B Common Stock........... 84
Net loss........................ (4,316) $ (4,316)
Minimum pension liability
adjustment, net of tax......... 2,695 2,695 2,695
------- --------- --------
BALANCE, APRIL 4, 1998.......... (5,887) (48,411) $ (1,621)
========
Net loss (unaudited)............ (10,089) $(10,089)
------- --------- --------
BALANCE, JANUARY 2, 1999
(unaudited).................... $(5,887) $ (58,500) $(10,089)
======= ========= ========
</TABLE>
See notes to consolidated financial statements.
F-5
<PAGE> 149
SAFELITE GLASS CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED THREE MONTHS ENDED NINE MONTHS ENDED
---------------------------------------- ---------------------- -------------------------
DECEMBER 30, DECEMBER 28, JANUARY 3, MARCH 29, APRIL 4, JANUARY 3, JANUARY 2,
1995 1996 1998 1997 1998 1998 1999
------------ ------------ ---------- ----------- -------- ----------- -----------
(UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net income (loss)................ $ 6,326 $ 27,774 $ 3,588 $ (95) $ (4,316) $ 3,683 $(10,089)
Adjustments to reconcile net
income (loss) to net cash
provided by (used in) operating
activities:
Extraordinary item-early
extinguishment of debt....... 500 2,835 2,835
Depreciation and
amortization................. 7,621 8,031 8,700 2,003 6,377 6,697 17,152
Loss on sale of subsidiary..... 5,418 5,418
Change in equity from exercise
of stock options............. 2,976 2,976
Minority interest.............. 862 10,199
Deferred income taxes.......... (19,715) (6,887) 59 (1,552) (6,946) (3,055)
(Gain) loss on disposition of
assets....................... 654 258 324 346 324 (92)
Gain from discontinued
operations................... (1,706)
Changes in operating assets and
liabilities:
Accounts receivable.......... (5,011) 2,379 560 (1,217) (7,073) 1,777 (128)
Inventories.................. (5,159) (704) (145) (690) (2,402) 545 (2,476)
Accounts payable............. (2,120) 4,277 1,852 (3,937) (1,833) 5,789 (196)
Accrued expenses............. (25,939) 1,615 (2,288) (10,643) (5,099) 8,355 (22,555)
Other........................ 12,696 (11,179) (18,478) 1,754 (42) (20,232) 313
Cash flows provided by (used
in) discontinued
operations................... (21,604) 3,975 (3,940) 7,915
-------- --------- --------- -------- -------- --------- --------
Net cash flows provided by
(used in) operating
activities................. (10,070) 125 2,430 (16,706) (15,594) 19,136 (21,126)
-------- --------- --------- -------- -------- --------- --------
CASH FLOWS FROM INVESTING
ACTIVITIES:
Capital expenditures............. (11,986) (12,843) (13,856) (4,233) (2,425) (9,623) (17,142)
Proceeds from sale of fixed
assets......................... 1,243 87 87 5 28 82 323
Acquisition of intangibles....... (392) (30) (30) (2,821)
Sale of subsidiary............... (3,407) (3,407)
Purchases of short-term
investments.................... (47,479) (29,570)
Maturities of short-term
investments.................... 23,500 64,224
Cash paid in Vistar transaction
(net of cash acquired)......... (68,224) (68,224)
-------- --------- --------- -------- -------- --------- --------
Net cash flows provided by
(used in) investing
activities................. (34,722) 21,506 (85,430) (4,258) (5,218) (81,172) (16,819)
-------- --------- --------- -------- -------- --------- --------
CASH FLOWS FROM FINANCING
ACTIVITIES
Issuance of common and preferred
stock.......................... 108,217 7 7
Redemption of preferential common
stock.......................... (293,139)
Purchase of treasury stock....... (5) (4,720) (11) (11)
Payments on long-term
borrowings..................... (7,500) (47,500) (166,996) (1,316) (2,219) (165,680) (4,176)
Proceeds from long-term
borrowings..................... 263,740 350,000 350,000 50,447
Notes closed into escrow
collateralized by restricted
cash........................... (46,400)
Borrowings (payments) on
revolver, net.................. 12,700 (21,500) 15,368 7,600 25,881 7,768 37,750
Capitalized debt issuance
costs.......................... (9,323) (11,206) (11,206) (2,122)
Exercise of stock options........ 2,292 2,292
Dividends paid................... (71,988) (71,988)
Redemption of preferred stock.... (58,250) (58,250)
-------- --------- --------- -------- -------- --------- --------
Net cash flows provided by
(used in) financing
activities................. 5,195 (4,225) 59,216 6,291 23,662 52,925 35,499
-------- --------- --------- -------- -------- --------- --------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS............. (39,597) 17,406 (23,784) (14,673) 2,850 (9,111) (2,446)
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD.............. 53,379 13,782 31,188 31,188 7,404 16,515 10,254
-------- --------- --------- -------- -------- --------- --------
CASH AND CASH EQUIVALENTS AT END
OF PERIOD........................ $ 13,782 $ 31,188 $ 7,404 $ 16,515 $ 10,254 $ 7,404 $ 7,808
======== ========= ========= ======== ======== ========= ========
SUPPLEMENTAL DISCLOSURES:
Cash paid for interest........... $ 6,051 $ 5,127 $ 29,550 $ 2,936 $ 3,857 $ 26,614 $ 38,362
======== ========= ========= ======== ======== ========= ========
Cash paid for income taxes....... $ 109 $ 350 $ 492 $ 203 $ 123 $ 289 $ 438
======== ========= ========= ======== ======== ========= ========
Contributed capital.............. $ 21,314
=========
Common and preferred stock issued
in merger...................... $ 204,434 $ 204,434
========= =========
Common stock issued as
compensation................... $ 84
========
</TABLE>
See notes to consolidated financial statements.
F-6
<PAGE> 150
SAFELITE GLASS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS
ENDED DECEMBER 30, 1995, DECEMBER 28, 1996 AND JANUARY 3, 1998,
THREE MONTHS ENDED MARCH 29, 1997 (UNAUDITED) AND APRIL 4, 1998, AND NINE MONTHS
ENDED JANUARY 3, 1998 (UNAUDITED) AND
JANUARY 2, 1999 (UNAUDITED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
DESCRIPTION OF BUSINESS -- Safelite Glass Corp. and subsidiaries (the
"Company" or "Safelite") are engaged principally in the manufacture,
distribution and installation of replacement automotive glass and related
insurance claims processing. Safelite is the largest automotive glass
replacement and repair company in the United States. Currently, approximately
94% of Safelite's sales represent installation and related services with the
balance representing sales to wholesale customers. On December 19, 1997,
Safelite acquired Vistar, Inc. ("Vistar"), the second largest automotive glass
replacement and repair company in the United States (see Note 4). At January 2,
1999, Safelite had two manufacturing facilities, 76 warehouses, 51 dispatch
command centers/central telephone units and 674 service center locations across
the United States.
BASIS OF ACCOUNTING -- The consolidated financial statements have been
prepared on the basis of accounting principles generally accepted in the United
States of America and all amounts are expressed in U.S. dollars. 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 herein, include the accounts of Lear Siegler Holdings Corp.
("Lear Siegler") through September 12, 1997 (see Notes 2 and 3). As of January
2, 1999, Safelite had no subsidiaries.
FISCAL YEAR -- Prior to 1998, Safelite used a 52 or 53 week fiscal year
that ended on the Saturday nearest December 31. In May 1998, Safelite changed
its fiscal year to a 52 or 53 week fiscal year that ends on the Saturday closest
to March 31. The footnote references to year ends are as follows: December 30,
1995 ("1995"), December 28, 1996 ("1996") and January 3, 1998 ("1997").
INTERIM FINANCIAL STATEMENTS -- In the opinion of management, the unaudited
consolidated financial statements presented herein reflect all adjustments,
consisting of normal recurring accruals, which are necessary to present fairly
the financial position and results of operations for the period then ended.
CASH AND CASH EQUIVALENTS -- Safelite considers all short-term investments
which have a purchased term of three months or less to be cash equivalents. The
carrying amount approximates fair value because of the short maturity of those
instruments.
CONCENTRATION OF CREDIT RISK -- Approximately 38% at December 28, 1996, 58%
at January 3, 1998, 57% at April 4, 1998 and 72% at January 2, 1999, of trade
accounts receivable are due from insurance companies in connection with sales to
individual
F-7
<PAGE> 151
SAFELITE GLASS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS -- (CONTINUED)
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 Safelite's exposure to credit risk for
insurance related receivables. During the three months ended April 4, 1998 and
the nine months ended January 2, 1999, $25,779 (12%) and $89,506 (14%),
respectively, of total sales for the period were to a single insurance customer.
The diversity and wide geographic dispersion limits the credit risk of
receivables from wholesale and other commercial customers. Safelite also
performs ongoing credit evaluations of the financial condition of its wholesale
and other commercial customers which reduces its exposure to loss. Safelite
maintains reserves for potential uncollectible accounts.
INVENTORIES -- Safelite accounts for inventories, which are primarily
finished goods, at the lower of standard cost, which approximates actual cost
determined utilizing the first in, first out method, or market. Valuation
allowances for obsolete and slow moving inventories were $1,621, $1,704, $1,723
and $892 at December 28, 1996, January 3, 1998, April 4, 1998 and January 2,
1999, respectively.
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:
<TABLE>
<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.
DEBT ISSUANCE COSTS -- Debt issuance costs are amortized over the life of
the related debt.
LONG-LIVED ASSETS -- Long-lived assets, certain identifiable intangibles
and goodwill related to those assets to be held and used, are reviewed for
impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable from undiscounted future cash
flows.
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 -- Safelite expenses all advertising costs. The costs of
yellow pages advertising are expensed at the time the yellow pages phone book is
published. Total advertising expense was $5,910, $7,123 and $7,367 in 1995, 1996
and 1997, respectively. Total advertising expense for the three months ended
March 29, 1997 and April 4, 1998 was $1,807 and $2,298, respectively. Total
advertising expense for the nine months ended January 3, 1998 and January 2,
1999 was $5,560 and $8,947, respectively.
F-8
<PAGE> 152
SAFELITE GLASS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS -- (CONTINUED)
OTHER OPERATING EXPENSES -- Other operating expenses in 1996 consist of
$6,858 in management transaction bonuses related to the THL Transaction and
estimated costs (primarily severance) of $700 to exit the activities of Lear
Siegler (see Note 2). Other operating expenses in 1997 include $1,000 of
management transaction bonuses, $2,976 related to the acceleration of vesting of
management stock options, and $470 related to forgiveness of officer loans made
in connection with the Vistar Merger (see Note 4). Also included in other
operating expenses in 1997 are costs related to obtaining bondholder consent to
the Vistar Merger of $1,258 (see Note 10). Other operating expenses of $3,079 in
the three months ended April 4, 1998 and $3,613 in the nine months ended January
2, 1999, consist of costs associated with the integration of corporate systems,
moving, relocation and other expenses associated with the Vistar Merger.
INTEREST RATE SWAPS -- Safelite uses settlement accounting to account for
its interest rate swap agreements.
OTHER -- The following Statements of Financial Accounting Standards (SFAS)
were issued by the Financial Accounting Standards Board. The impact of adopting
these statements has not been determined.
SFAS No. 131, "Disclosure about Segments of an Enterprise and Related
Information," was issued in June 1997. This statement establishes standards for
the way that business enterprises report information about operating segments.
This SFAS is effective for Safelite's fiscal year ended April 3, 1999.
SFAS No. 132, "Employers' Disclosures about Pensions and Other
Post-Retirement Benefits," was issued in February 1998 and revises the current
disclosure requirements for employers' pensions and other retiree benefits. This
SFAS is effective for Safelite's fiscal year ended April 3, 1999.
SFAS No. 133, "Accounting for Derivative Instruments and Hedging
Activities," was issued in June 1998. The statement requires derivatives to be
recorded on the balance sheet as assets or liabilities, measured at fair value.
Gains or losses resulting from changes in fair value of the derivatives are
recorded depending upon whether the instruments meet the criterion for hedge
accounting. This statement is effective for fiscal years beginning after June
15, 1999. The impact of adopting this statement has not been determined.
RECLASSIFICATIONS -- Some reclassifications have been made to prior year
balances to conform them with the fiscal 1999 presentation.
2. THE THL TRANSACTIONS
Prior to December 20, 1996, Safelite was an indirect subsidiary of Lear
Siegler. The transactions described below, or the "THL Transactions," occurred
on December 20, 1996 pursuant to a Recapitalization Agreement and Plan of Merger
and Stock Purchase Agreement dated November 8, 1996. As a result of the THL
Transactions, Safelite's preferential common shares were converted into the
right to receive cash, and Thomas H. Lee Equity Fund III, L.P., together with
some of its affiliates and certain other investors (collectively "THL"),
obtained 88% of Safelite's common stock. Some existing shareholders, primarily
Safelite management, retained the remaining interest. The Agreement also
provided for Safelite's acquisition (through a newly formed subsidiary) of
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SAFELITE GLASS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS -- (CONTINUED)
substantially all of the outstanding common stock of Lear Siegler, its former
parent. Significant components of the transactions were 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. After this transaction, all remaining common stock, except for
626,910 shares of Class A Common Stock and 17,991 shares of Class B Common
Stock owned by existing shareholders (primarily management), was 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, to remain outstanding and unaffected by the
Merger (LSNWY and some 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, Safelite 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 10).
(4) In the final step of the transactions, Safelite, through a new
wholly-owned subsidiary, L.S. Acquisition Corp., acquired substantially all
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 Safelite. 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.
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SAFELITE GLASS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS -- (CONTINUED)
The THL 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 THL Transactions, Lear Siegler operated as a holding company
whose principal activity was to oversee its discontinued operations. The Lear
Siegler activities did 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 were accrued in
accordance with Emerging Issues Task Force Statement No. 94-3. This amount was
included in other operating expenses for 1996.
In connection with the THL Transactions, certain selling shareholders
agreed to reimburse Safelite should Safelite be required to pay tax liabilities
of Lear Siegler arising from disputes with various taxing authorities.
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. SALE OF LEAR SIEGLER
On September 12, 1997, Safelite sold all of the issued and outstanding
shares of the capital stock of Lear Siegler to BPLSI Investment Company, a
Delaware corporation ("BPLSI"), pursuant to a Stock Purchase Agreement by and
among Lear Siegler, Safelite, BPLSI, and James F. Matthews (the President of
Lear Siegler and the sole stockholder of the Purchaser). The net book value of
Lear Siegler on the sale date was $5,500, which was comprised of $3,500 in cash,
$13,400 in other assets and $11,400 in liabilities.
The sale price of the Lear Siegler was $100 in cash and a promissory note
delivered by BPLSI to Safelite. The promissory note provides that BPLSI must pay
to Safelite an amount equal to 50% of the net proceeds realized, directly or
indirectly, by Lear Siegler from the liquidation or other disposition, if any,
of the assets belonging to Lear Siegler or its direct or indirect subsidiaries
which were seized by the Cuban government when Fidel Castro came to power, or
from settlement of any claims relating thereto (the "Cuban Assets") if BPLSI
receives dividends or other distributions from Lear Siegler. Due to restrictions
in the documents governing the December 20, 1996 recapitalization of Safelite,
no payments are anticipated under the promissory note for six years. The
promissory note will remain in full force and effect until the earlier of (a)
June 21, 2017, or (b) after six years, such time as all of the Cuban Assets have
been liquidated or otherwise disposed of, and Lear Siegler is permitted to
distribute the net proceeds thereof, and Safelite receives 50% of such net
proceeds plus interest from the date of disposition to the date of payment. Due
to the wholly-contingent nature of the ability of Lear Siegler or any of its
subsidiaries to realize any proceeds from the liquidation or other disposition
of any of the Cuban Assets, there can be no assurance that BPLSI will make any
payments to Safelite under the promissory note. Accordingly, Safelite has
recorded this promissory note at a net book value of zero, and a loss of $5,418
related to the sale.
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SAFELITE GLASS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS -- (CONTINUED)
4. THE VISTAR TRANSACTIONS
On December 19, 1997, Safelite merged with Vistar, with Safelite as the
corporation surviving the merger (the "Vistar Merger"). Safelite's merger with
Vistar has been accounted for as a purchase transaction, with results of Vistar
included in Safelite's financial statements from the acquisition date. Prior to
the Vistar Merger, Safelite paid a dividend on its outstanding shares of Class A
Common Stock in the aggregate amount of $67,194 and paid a dividend on its
outstanding shares of 8% Cumulative Preferred Stock equal to the accrued and
unpaid dividends thereon in the aggregate amount of $4,794 (collectively, the
"Dividend"). In addition, Safelite redeemed all outstanding shares of its 8%
Cumulative Preferred Stock at an aggregate redemption price of $58,250 (the
"Redemption" and, together with the Dividend, the "Distribution").
After the Distribution and immediately prior to the consummation of the
Vistar Merger, Safelite effected a 1 for 3 reverse stock split (the "Stock
Split") of its Class A Common Stock, which was reclassified as Class A Voting
Common Stock. At the same time, Safelite reclassified its Class B Common Stock
as Class B Non-Voting Stock. The Company then declared and paid a dividend on
each share of Class A Voting Stock outstanding after the Stock Split in the form
of two shares of Class B Non-Voting Stock.
At the time of the Vistar Merger, Safelite also authorized the creation of
a new series of preferred stock, designated as Non-Voting 8% Preferred Stock
(the "Non-Voting Preferred Stock"). The Non-Voting Preferred Stock is an
accumulating perpetual preferred stock. As a result of restrictions contained in
the indenture governing its 9 7/8% Senior Subordinated Notes due 2006 and its
9 7/8% Series C Senior Subordinated Notes due 2006 (the "Indentures"), dividends
are not payable in respect of the Non-Voting Preferred Stock unless such payment
is in compliance with the "Limitation on Restricted Payments" covenant contained
in the Indentures. Cumulative undeclared preference dividends were $131, $798
and $3,396 as of January 3, 1998, April 4, 1998 and January 2, 1999,
respectively. The Non-Voting Preferred Stock is not mandatorily redeemable.
Unlike the 8% Cumulative Preferred Stock, however, the Non-Voting Preferred
Stock is redeemable by Safelite, at its option, at any time (provided that
Safelite is in compliance with the "Limitation on Restricted Payments"
covenant).
The purchase price paid by Safelite for all of the outstanding capital
stock of Vistar consisted of 1,690,101 shares of Class A Voting stock (valued at
$19.01 a share), 6,959,771 shares of Class B Non-Voting Stock (valued at $19.01
a share), 40,000 shares of Non-Voting Preferred Stock ($40,000 aggregate
liquidation preference) and $65,000 cash (collectively, the "Merger
Consideration"). The aggregate purchase price was $269,434. As a result of the
Vistar Merger, Safelite shareholders retained ownership of 50.5% of the
outstanding Class A Voting Stock and became the owners of approximately 33% of
the outstanding Class B Non-Voting stock (including shares subject to
exercisable options to acquire Class B Non-Voting Stock). Vistar shareholders
became the owners of 49.5% of the outstanding Class A Voting Stock,
approximately 67% of the outstanding Class B Non-Voting Stock and 100% of the
outstanding Non-Voting Preferred Stock.
In connection with the Vistar Merger, substantially all of the Safelite
shareholders and all of the Vistar shareholders entered into a Shareholders
Agreement, which established certain rights and restrictions with respect to the
management of Safelite and transfers of the Class A Voting Stock and the Class B
Non-Voting Stock. They also entered into a
F-12
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SAFELITE GLASS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS -- (CONTINUED)
Registration Agreement providing for certain rights to cause Safelite to
register the Class A Voting Stock and the Class B Non-Voting Stock under the
Securities Act of 1933, as amended.
Fees and expenses paid in connection with the Vistar Merger totaled
approximately $14,550. Of these total fees and expenses, approximately $3,000,
$3,010 and $2,737 were paid to THL, Belron International (a former Vistar
shareholder) and The Windsor Park Management Group, respectively. The Windsor
Park Management Group is affiliated with an individual who became a director of
Safelite subsequent to the Vistar Merger. Also in connection with the Vistar
Merger, THL amended its existing management agreement with Safelite to remove
any future obligations of Safelite to pay transaction fees and to set the annual
management fee payable thereunder at $1,000. Belron International entered into
an Amended and Restated Management Agreement with Safelite to replace its
existing management agreement with Vistar, pursuant to which Belron will
continue to receive a management fee of $1,000 per year. Each of these
agreements terminates upon consummation of an initial public offering of
Safelite's common stock. Safelite also paid THL $1,000 in connection with the
debt refinancing.
Payment of the Distribution, the cash portion of the Merger Consideration,
the refinancing of Vistar's senior credit financing and the fees and expenses of
the transaction were financed through borrowings made pursuant to a refinancing
of Safelite's existing senior credit facility (see Note 10).
The excess purchase price over the fair value of identifiable net assets
acquired has been allocated to goodwill. Goodwill of $272,518 recorded in the
transaction is being amortized over 30 years using the straight-line method.
The following summary was prepared to illustrate the pro forma results of
operations as if the Vistar acquisition had occurred at the beginning of the
fiscal years presented without the benefit of any synergies. Included in the pro
forma presentation is the impact of those purchase adjustments directly
attributable to the acquisition which are expected to have a continuing impact.
<TABLE>
<CAPTION>
1996 1997
-------- --------
(UNAUDITED)
<S> <C> <C>
Net sales........................................ $818,339 $879,803
Income (loss) from continuing operations before
extraordinary charge........................... (1,595) (24,716)
Net income (loss)................................ (389) (27,551)
</TABLE>
The pro forma financial information is presented for informational purposes
only and is not necessarily indicative of the operating results that would have
occurred had the Vistar acquisition been consummated as of the beginning of the
fiscal years presented, nor is it necessarily indicative of future operating
results. The pro forma financial information does not reflect any synergies that
may be achieved from the combined operations. Included in pro forma net income
are adjustments to conform the accounting practices of the companies which
decreased net income by $287 in 1996 and increased net income by $46 in 1997.
F-13
<PAGE> 157
SAFELITE GLASS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS -- (CONTINUED)
As a result of the Merger, Safelite went through a process to consolidate
redundant overhead in both field and corporate operations, eliminate redundant
service center locations and eliminate redundant sales and marketing force
activities. This process was substantially complete as of January 2, 1999. At
January 3, 1998, April 4, 1998 and January 2, 1999, Safelite went through a
process and recorded the following accrual as part of its purchase accounting
for Vistar:
<TABLE>
<CAPTION>
THREE
MONTHS
ENDED NINE MONTHS
APRIL 4, ENDED
1997 1998 JANUARY 2, 1999
------- ------------- ---------------
(UNAUDITED)
<S> <C> <C> <C>
Closing of Vistar service center
locations....................... $ 1,734 $1,472 $2,338
Vistar field and corporate
severance....................... 13,556 1,873 578
Elimination of redundant Vistar
corporate functions............. 5,559
------- ------ ------
$20,849 $3,345 $2,916
======= ====== ======
</TABLE>
5. RESTRUCTURING EXPENSES
Prior to 1990, Safelite grew through acquisitions and internal service
center openings. In 1991, a new management team developed a strategic plan to
focus Safelite on its primary insurance customers. The plan called for growth to
be achieved by increasing Safelite'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 Safelite's strategic plan was a market-by-market review of its
distribution and service center configuration, and the Safelite'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 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.
As described in Note 4, subsequent to the Vistar Merger, the Company
undertook a process to review redundant corporate and field operations which
resulted from its acquisition of Vistar. Accordingly, restructuring provisions
for $2,865, $3,791 and $4,222, were recorded in the 1997, the three months ended
April 4, 1998 and the nine months ended January 2, 1999, respectively. The
January 3, 1998, provision consisted of $415
F-14
<PAGE> 158
SAFELITE GLASS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS -- (CONTINUED)
related to Safelite service center closings and $2,450 related to Safelite
employee severance. The April 4, 1998, provision consisted of $2,491 related to
Safelite service center closings and $1,300 related to Safelite employee
severance. The January 2, 1999 provision consisted of $3,580 related to Safelite
Service Center closings and $642 related to Safelite employee severance.
Safelite has completed its merger related restructuring review and anticipates
that no further restructuring provisions will be taken in its fiscal year ending
March 1999.
The following summarizes the reserve activity:
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
YEARS ENDED ---------------------- -------------------------
--------------------------- MARCH 29, APRIL 4, JANUARY 3, JANUARY 2,
1995 1996 1997 1997 1998 1998 1999
------- ------- ------- ----------- -------- ----------- -----------
(UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
Beginning balance.... $ $ 5,098 $ 1,689 $1,689 $26,853 $ 1,425 $ 31,373
Restructuring
liabilities
acquired -- Vistar... 2,438 2,438
Restructuring Merger
accrual............ 20,849 3,345 20,849 2,916
Restructuring
provision.......... 6,311 2,865 3,791 2,865 4,222
Used for intended
purpose............ (1,213) (3,409) (988) (264) (2,616) (724) (26,477)
------- ------- ------- ------ ------- ------- --------
Ending balance....... $ 5,098 $ 1,689 $26,853 $1,425 $31,373 $26,853 $ 12,034
======= ======= ======= ====== ======= ======= ========
</TABLE>
6. ACCOUNTS RECEIVABLE
<TABLE>
<CAPTION>
DECEMBER 28, JANUARY 3, APRIL 4, JANUARY 2,
1996 1998 1998 1999
------------ ---------- -------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C>
Trade receivables..................... $31,748 $70,755 $ 74,622 $68,247
Less allowance for uncollectible
accounts............................ (2,101) (15,828) (12,622) (6,119)
------- ------- -------- -------
Net................................... $29,647 $54,927 $ 62,000 $62,128
======= ======= ======== =======
</TABLE>
F-15
<PAGE> 159
SAFELITE GLASS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS -- (CONTINUED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
YEARS ENDED ---------------------- -------------------------
--------------------------- MARCH 29, APRIL 4, JANUARY 3, JANUARY 2,
1995 1996 1997 1997 1998 1998 1999
------- ------- ------- ----------- -------- ----------- -----------
(UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
Allowance for
uncollectible
accounts:
Balance, beginning of
period............. $ 2,301 $ 2,413 $ 2,101 $2,101 $ 15,828 $ 2,132 $12,622
Provision............ 1,354 1,015 1,469 618 1,319 851 1,805
Vistar Merger........ 14,002 14,002
Charge-offs.......... (1,242) (1,327) (1,744) (587) (4,525) (1,157) (8,308)
------- ------- ------- ------ -------- ------- -------
Balance, end of
period............. $ 2,413 $ 2,101 $15,828 $2,132 $ 12,622 $15,828 $ 6,119
======= ======= ======= ====== ======== ======= =======
</TABLE>
7. PROPERTY, PLANT & EQUIPMENT
<TABLE>
<CAPTION>
DECEMBER 28, JANUARY 3, APRIL 4, JANUARY 2,
1996 1998 1998 1999
------------ ---------- -------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C>
Land........................... $ 4,672 $ 5,569 $ 5,569 $ 5,459
Buildings and leaseholds....... 33,336 43,148 47,333 43,118
Equipment and furniture........ 52,764 71,950 81,186 76,011
-------- -------- -------- --------
Total................ 90,772 120,667 134,088 124,588
Less accumulated
depreciation................. (50,653) (56,847) (72,094) (62,580)
-------- -------- -------- --------
Net............................ $ 40,119 $ 63,820 $ 61,994 $ 62,008
======== ======== ======== ========
</TABLE>
Depreciation expense was $6,851, $7,239 and $7,622 for the years ended
1995, 1996 and 1997, respectively. Depreciation expense for the three months
ended 1997 and 1998 was $1,822 and $3,876, respectively. Depreciation expense
for the nine months ended January 3, 1998 and January 2, 1999 was $5,800 and
$9,541, respectively.
F-16
<PAGE> 160
SAFELITE GLASS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS -- (CONTINUED)
8. INTANGIBLE AND OTHER ASSETS
<TABLE>
<CAPTION>
DECEMBER 28, JANUARY 3, APRIL 4, JANUARY 2,
1996 1998 1998 1999
------------ ---------- -------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C>
Trademarks..................... $24,168 $ 24,264 $ 24,264 $ 24,264
Goodwill....................... 853 270,313 273,135 277,563
Non-compete agreements......... 46 76 76 76
------- -------- -------- --------
Total................ 25,067 294,653 297,475 301,903
Less accumulated
amortization................. (7,235) (8,432) (10,933) (18,543)
------- -------- -------- --------
Net............................ $17,832 $286,221 $286,542 $283,360
======= ======== ======== ========
</TABLE>
Amortization expense in 1995, 1996 and 1997 was $770, $792 and $1,078,
respectively. Amortization expense for the three months ended 1997 and 1998 was
$181 and $2,501, respectively. Amortization expense for the nine months ended
January 3, 1998 and January 2, 1999 was $897 and $7,611, respectively.
9. LEASES
Safelite leases many of its vehicles and service center locations under
operating leases. Most of the service center location leases provide renewal
options. Future minimum rental commitments under non-cancelable operating leases
for facilities (including closed service centers), vehicles and equipment at
January 2, 1999 (unaudited), are as follows:
<TABLE>
<S> <C>
Fiscal Year:
1999 (three months)................................ $ 11,874
2000............................................... 43,201
2001............................................... 31,423
2002............................................... 19,349
2003............................................... 11,202
Thereafter......................................... 13,525
--------
Total.................................... $130,574
========
</TABLE>
For 1995, 1996 and 1997, rent expense under all operating leases was
$24,028, $25,180 and $28,585, respectively. Rent expense for the three months
ended 1997 and 1998 was $6,674 and $14,164, respectively. Rent expense for the
nine months ended January 3, 1998 and January 2, 1999 was $21,911 and $39,473,
respectively.
10. LONG-TERM DEBT
At December 28, 1996, Safelite had a credit facility consisting 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 letters of
credit, which provided up to a maximum of $30,000. The rate of interest on these
borrowings was based on the prime rate or Eurodollar rate, at Safelite's option.
A commitment fee of 1/2% per annum was required on the unused portion of the
credit facility.
In connection with the Vistar Merger, a new credit facility was entered
into consisting of (a) a term loan facility in an aggregate principal amount of
$350,000 (the "Term Loan
F-17
<PAGE> 161
SAFELITE GLASS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS -- (CONTINUED)
Facility"), consisting of three tranches in principal amounts of $150,000 (the
"Tranche A Term Loan"), $100,000 (the "Tranche B Term Loan"), and $100,000 (the
"Tranche C Term Loan"), respectively, and (b) a revolving credit facility,
including letters of credit, which provides up to $100,000 (the "Revolving
Credit Facility"). The Tranche A Term Loan and the Revolving Credit Facility
mature on September 30, 2003, the Tranche B Term Loan and the Tranche C Term
Loan mature on September 30, 2004 and September 30, 2005, respectively.
The credit facility is subject to mandatory principal prepayment and
commitment reductions (to be applied to the Term Loan Facility) in an amount
equal to, subject to certain exceptions, (a) 100% of the net cash proceeds of
(i) certain debt and equity offerings by Safelite, and (ii) certain asset sales
or other dispositions, and (iii) 50% of Safelite's excess cash flow (as
defined). Borrowings under the facility are collateralized by substantially all
assets of Safelite. The rate of interest on these borrowings is based on the
prime rate, or LIBOR, at Safelite's option. At January 2, 1999, the interest
rates in effect were 7.756%, 7.740%, 7.990% and 8.240% on the Revolver, Tranche
A, Tranche B and Tranche C Term Loans, respectively.
The Bank Credit Agreement for this credit facility contains a number of
covenants that, among other things, restrict the ability of Safelite to dispose
of assets, borrow money, make guarantees, prepay other debt 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 Safelite, make capital
expenditures, or engage in certain transactions with affiliates and otherwise
restricts certain corporate activities. In addition, Safelite must comply with
specified financial ratios and minimum tests, including minimum interest
coverage ratios and maximum leverage ratios.
In connection with the THL Transactions described in Note 2, on December
20, 1996, Safelite issued $100,000 in 9 7/8% Senior Subordinated Notes (the
"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, Safelite is required to make an offer to
repurchase the Notes at 101%. The Notes are redeemable at the option of Safelite
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,
Safelite, at its option, may redeem (at 109 7/8%) up to $35,000 of principal
with the proceeds of one or more equity offerings. During 1997, the noteholders
were paid $5,000 in exchange for their consent for Safelite to modify the terms
of the Notes and to allow Safelite to enter into the Vistar Merger. This payment
is being amortized over the remaining life of the Notes. Costs of the consent
solicitation of $1,258 were expensed in 1997.
On December 18, 1998, Safelite completed an offering of $55 million
aggregate principal amount of 9 7/8% Series C Senior Subordinated Notes due 2006
(the "Series C Notes"). The Series C Notes were issued at an offering price of
91.649% plus accrued interest from the date of original issuance. One of the
terms of the Series C Notes was that the net proceeds from the Notes would be
held in escrow until the Company received $50 million in net cash proceeds from
the sale of Qualified Capital Stock (as defined in the Note Indenture), which
was to be completed by January 29, 1999. Accordingly, the net Note proceeds were
deposited into escrow on December 18, 1998, pending completion
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<PAGE> 162
SAFELITE GLASS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS -- (CONTINUED)
of the sale of the Qualified Capital Stock. These funds are reflected in
restricted cash on the accompanying balance sheet as of January 2, 1999.
On December 18, 1998, Safelite also completed an amendment to its Bank
Credit Agreement. The amendment changed certain of the covenants within the Bank
Credit Agreement to make them less restrictive and provided for the use of
proceeds from the sale of the Qualified Capital Stock and the Series C Notes to
pay down approximately $61.4 million in term loans and $35.0 million in
revolving credit borrowings with no reduction to the revolving credit facility.
One of the terms of the amendment was that it would cease to be effective after
February 3, 1999, if the sale of $50 million of Qualified Capital Stock was not
completed by January 29, 1999.
On January 29, 1999, Safelite completed the sale of $50 million in Series A
Convertible Participating Preferred Stock (the "Series A Convertible Preferred
Stock"). The Series A Convertible Preferred Stock met the definition of
Qualified Capital Stock under the Note Indenture. Accordingly, on January 29,
1999, the proceeds of the Series C Notes were released from escrow and these
proceeds along with the proceeds from the sale of the Series A Convertible
Preferred Stock were used to repay the revolving credit borrowing and term loans
as described above. Safelite recorded an extraordinary charge of approximately
$4.0 million, net of tax benefit of $2.8 million in the year ended April 3, 1999
from the write off of unamortized debt issue costs related to this amendment to
its Bank Credit Agreement and related debt repayments.
Safelite uses interest rate exchange agreements to manage the exposure
associated with interest rate fluctuations. At January 2, 1999, Safelite had
outstanding interest rate swaps in the notional amount of $149,625 to hedge the
impact of changing interest rates on its variable rate debt. Swap agreements
totalling $99,625 mature March 31, 2000; the counterparty, however, has the
option to extend maturity until March 28, 2002. Swap agreements totaling $50,000
mature December 29, 2000; the counterparty, however, has the option to extend
maturity until June 30, 2003. The swap agreements provide for interest to be
received on notional amounts at variable rates and provides for interest to be
paid on the same notional amounts at fixed rates. The fixed interest rates do
not change over the life of the swap agreements. The variable interest rates are
reset every three months and are based on LIBOR. The credit risk associated with
the interest rate swap agreements revolve around the ability of the counterparty
to perform its obligation under the agreement. Safelite does not anticipate
nonperformance by the counterparty. Terms of the swap agreements are as follows:
<TABLE>
<CAPTION>
JANUARY 3, APRIL 4, JANUARY 2,
1998 1998 1999
---------- -------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Notional amount...................... $100,000 $150,000 $149,625
Fair value (unrealized losses)....... (1,568) (2,250) (4,688)
Average received rate (variable)..... 5.91% 5.69% 5.28%
Average pay rate (fixed)............. 6.19% 6.19% 5.96%
Average life (years)................. 2.25 2.00 1.33
</TABLE>
Net interest received or paid on these contracts is reflected in interest
expense. The difference between the interest paid and received on the interest
rate swap contracts resulted in $328 and $70 of additional interest expense in
1997 and the three months
F-19
<PAGE> 163
SAFELITE GLASS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS -- (CONTINUED)
ended April 4, 1998, respectively, and $477 of additional interest expense in
the nine months ended January 2, 1999.
Safelite has various unsecured notes payable with interest rates ranging
from 6.4% to 8.5% and prime plus 1%.
Maturities of Safelite's long-term debt are as follows:
<TABLE>
<CAPTION>
JANUARY 2, 1999 (UNAUDITED)
---------------------------------------------------------
DUE DATE SENIOR
FOR FISCAL REVOLVING TERM SUBORDINATED NOTES OTHER
YEAR ENDING NOTES LOANS NOTES PAYABLE (NOTE 12) TOTAL
- ----------- --------- -------- ------------ ------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
1999 (three
months)............ $ 575 $1,190 $ 1,765
2000................. $ 16,500 210 2,585 19,295
2001................. 24,500 1,200 25,700
2002................. 34,500 1,200 35,700
2003................. 56,313 1,200 57,513
Thereafter........... $79,000 218,187 $155,000 452,187
------- -------- -------- ------ ------ --------
Subotal....... 79,000 350,000 155,000 4,385 3,775 592,160
Less: unamortized
debt discount...... (4,553) (4,553)
------- -------- -------- ------ ------ --------
Total...... $79,000 $350,000 $150,447 $4,385 $3,775 $587,607
======= ======== ======== ====== ====== ========
</TABLE>
The carrying amount of debt approximates its fair value.
Safelite had letters of credit outstanding totaling $16,395 at January 2,
1999.
11. CAPITAL STOCK
In conjunction with the Vistar Merger described in Note 4, Safelite also
effected a 1 for 3 reverse stock split of its Class A Common Stock and
reclassified these shares as Class A Voting Common Stock. The Class B Common
Stock was reclassified as Class B Non-Voting Common Stock, and a stock dividend
was paid, in which two shares of Class B Non-Voting Common Stock were issued for
each share of Class A Voting Common Stock. Safelite also paid $4,794 in accrued
dividends on the 8% Cumulative Preferred Stock and redeemed the preferred stock
for $58,250. A new series of preferred stock was issued and designated as
Non-Voting 8% Preferred Stock. Treasury shares were converted into Class A
Voting Common Stock and Class B Non-Voting Common Stock via the 1 for 3 reverse
stock split and the Class B Common Stock reclassification, respectively. The 2
for 1 stock dividend was not paid for shares held in treasury.
F-20
<PAGE> 164
SAFELITE GLASS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS -- (CONTINUED)
The following represents the number of shares outstanding and held in
treasury for each class of stock at respective dates. Share amounts for December
28, 1996, have not been restated for the reverse stock split or stock dividend.
<TABLE>
<CAPTION>
DECEMBER 28, JANUARY 3, APRIL 4, JANUARY 2,
1996 1998 1998 1999
------------ ---------- ---------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C>
8% Cumulative Preferred
Stock.................... 582,498
8% Non-Voting Preferred
Stock.................... 40,000 40,000 40,000
Class A Common Stock
Issued................... 5,326,935
Class A Common Stock Held
in Treasury.............. 358,813
Class A Voting Common
Stock.................... 3,534,283 3,534,283 3,534,283
Class A Voting Common Stock
Held in Treasury......... 119,938 119,938 119,938
Class B Common Stock
Issued................... 50,000
Class B Common Stock Held
in Treasury.............. 50,000
Class B Non-Voting Common
Stock.................... 10,458,260 10,462,638 10,462,638
Class B Non-Voting Common
Stock Held in Treasury... 50,000 50,000 50,000
</TABLE>
Safelite 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.
In conjunction with the Vistar Merger, all options for Class A shares were
converted to options to purchase the same number of Class B shares. At January
2, 1999, all options outstanding are to key associates and are for Class B
Non-Voting shares.
F-21
<PAGE> 165
SAFELITE GLASS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS -- (CONTINUED)
The following table summarizes the stock options outstanding:
<TABLE>
<CAPTION>
JANUARY 2, 1999
DECEMBER 30, 1995 DECEMBER 28, 1996 JANUARY 3, 1998 APRIL 4, 1998 ------------------
------------------ ------------------ -------------------- ------------------- (UNAUDITED)
WEIGHTED WEIGHTED WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE AVERAGE AVERAGE
EXERCISE EXERCISE EXERCISE EXERCISE EXERCISE
SHARES PRICE SHARES PRICE SHARES PRICE SHARES PRICE SHARES PRICE
------- -------- ------- -------- --------- -------- -------- -------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Outstanding at
beginning of
period............. 5,025 $241.78 45,532 $ 29.35 54,780 $ 24.90 17,190 $12.08 424,690 $ 18.72
Granted.............. 42,133 3.00 15,328 3.00 175,000 13.40 407,500 19.00
Exercised............ (6,080) 3.00 (203,611) 11.17
Forfeited............ (1,626) 3.00 (8,979) 136.63 (42,500) (19.00)
------- ------- ------- ------- --------- ------- -------- ------ ------- -------
Outstanding at end of
period............. 45,532 $ 29.35 54,780 $ 24.90 17,190 $ 12.08 424,690 $18.72 382,190 $ 18.69
======= ======= ======= ======= ========= ======= ======== ====== ======= =======
Exercisable at period
end................ 4,149 $292.00 11,209 $110.05 876 $ 3.00 1,314 $ 3.00 7,214 $ 11.51
======= ======= ======= ======= ========= ======= ======== ====== ======= =======
Weighted-average fair
value of options
granted during the
period using the
Black-Scholes
pricing model...... $ 1.56 $ 1.43 $ 3.64 $ 4.64
Assumptions used:
Expected dividend
yield............ 0% 0% 0% 0%
Expected
volatility....... 0% 0% 0% 0%
Risk-free interest
rate............. 7.5% 6.6% 6.2% 5.7%
Expected life of
option (in
years)........... 10.0 10.0 5.2 5.0
</TABLE>
The following table shows various information about stock options
outstanding at January 2, 1999 (unaudited):
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
------------------------------------- -------------------------
NUMBER WEIGHTED WEIGHTED NUMBER WEIGHTED
OUTSTANDING AT AVERAGE AVERAGE EXERCISABLE AT AVERAGE
EXERCISE JANUARY 2, REMAINING EXERCISE JANUARY 2, EXERCISE
PRICES 1999 LIFE PRICE 1999 PRICE
-------- -------------- --------- -------- -------------- --------
<S> <C> <C> <C> <C> <C>
$ 3.00 2,190 6.4 $ 3.00 1,314 $ 3.00
13.40 15,000 8.8 13.40 5,900 13.40
19.00 365,000 9.2 19.00
------- --- ------ ----- ------
$3.00-$19.00 382,190 9.1 $18.72 7,214 $11.51
======= === ====== ===== ======
</TABLE>
F-22
<PAGE> 166
SAFELITE GLASS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS -- (CONTINUED)
During 1997, Safelite recorded $2,976 of expenses associated with the
acceleration of the vesting of 160,000 management stock options. Safelite
accounts for employee stock options using the intrinsic value method allowed by
Accounting Principles Board Opinion No. 25. Had compensation costs been
determined based on the fair value method of Statement of Financial Accounting
Standard No. 123 for all plans, Safelite's net earnings would have been reduced
to the pro forma amounts as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
YEAR ENDED ----------------------- -------------------------
------------------------- MARCH 29, APRIL 4, JANUARY 3, JANUARY 2,
1995 1996 1997 1997 1998 1998 1999
------ ------- ------ ------------ -------- ----------- -----------
(UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
Net earnings
(in thousands):
As reported.......... $6,326 $27,774 $3,588 $(95) $(4,316) $3,683 $(10,089)
Pro forma............ $6,317 $27,764 $3,577 $(95) $(4,319) $3,678 $(10,122)
</TABLE>
At January 2, 1999 there were 45,000 options available for grant.
12. COMMITMENTS AND CONTINGENCIES
For certain of its workers' compensation, automobile, product and associate
health care liabilities, Safelite 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 Safelite will ultimately incur for
these liabilities could differ from these estimates.
During 1996, Safelite purchased insurance to cover Safelite's remaining
workers' compensation, automobile and product liabilities for the period July 1,
1989 through December 31, 1994. Safelite no longer has any liability for these
contingencies; therefore, the self-insured accrual for this period has been
removed from the financial statements. This transaction had no significant
impact on results of operations for 1996. During 1996, Safelite 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 financing, if Safelite cancels its
insurance policies for any reason, corresponding unearned premium refunds would
be applied directly against the outstanding principal balance. At January 2,
1999, the outstanding principal balance of this premium financing was $4,385.
On June 25, 1998, a customer advised Safelite, following a review of
contract terms, that the customer was disputing certain billings made to it by
Vistar prior to the Vistar Merger. On September 22, 1998, this preacquisition
contingency was resolved without a material adverse impact on Safelite's
financial statements.
Safelite 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. Safelite is also involved in certain environmental
actions brought by the U.S. Environmental Protection Agency and certain state
agencies. The ultimate resolution of these matters is
F-23
<PAGE> 167
SAFELITE GLASS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS -- (CONTINUED)
not presently determinable but, in the opinion of management, such resolution is
not expected to have a significant impact on Safelite's financial statements.
13. SAVINGS AND RETIREMENT 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 to its 401(k) savings plans
were $636, $762 and $998 for the years 1995, 1996 and 1997, respectively.
Contributions for the three months ended 1997 and 1998 were $386 and $491,
respectively. Contributions for the nine months ended January 3, 1998 and
January 2, 1999 were $612 and $1,246, respectively.
Safelite also has a defined benefit plan whose benefits were frozen and
fully vested to participants effective June 30, 1993. The funded status of the
Safelite defined benefit plan is as follows:
<TABLE>
<CAPTION>
DECEMBER 28, JANUARY 3, APRIL 4,
1996 1998 1998
------------ ---------- --------
<S> <C> <C> <C>
Accumulated and projected benefit
obligation (all vested) for
services provided to date........ $(14,964) $(17,192) $(18,548)
Less market value of plan assets... 14,319 16,932 18,738
-------- -------- --------
Plan assets in excess of (less
than) projected benefit
obligation....................... (645) (260) 190
Unrecognized net loss resulting
from past experience different
from that assumed................ 1,227 1,284 895
Adjustment to recognize minimum
pension liability................ (1,227) (1,284)
-------- -------- --------
Prepaid (accrued) pension cost..... $ (645) $ (260) $ 1,085
======== ======== ========
Discount rate...................... 7.5% 7.0% 7.0%
</TABLE>
Plan assets are invested in common and preferred stocks, corporate and U.S.
government bonds and money market funds. The expected long-term rate of return
on plan assets was 8.5% for all periods.
As part of the sale of Lear Siegler (Note 3), Safelite retained the
liability for pension obligations of former Lear Siegler employees and related
pension assets. Plan benefits are based on various formulae, the principal
factors of which are years of service and compensation during the years
immediately preceding retirement. Safelite's funding policy for these plans is
to make the minimum annual contributions required by applicable regulations. No
further accruals for service costs will be made.
F-24
<PAGE> 168
SAFELITE GLASS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS -- (CONTINUED)
The funded status of the Lear Siegler defined benefit plan is as follows:
<TABLE>
<CAPTION>
DECEMBER 28, JANUARY 3, APRIL 4,
1996 1998 1998
------------ ---------- --------
<S> <C> <C> <C>
Accumulated and projected benefit
obligation (all vested) for services
provided to date......................... $(33,805) $(35,475) $(35,576)
Less market value of plan assets........... 26,717 31,637 34,905
-------- -------- --------
Plan assets in excess of (less than)
projected benefit obligation............. (7,088) (3,838) (671)
Unrecognized net loss...................... 10,133 13,020 9,814
Adjustment to recognize minimum pension
liability................................ (10,133) (13,020) (9,814)
-------- -------- --------
Accrued pension cost....................... $ (7,088) $ (3,838) $ (671)
======== ======== ========
Discount rate.............................. 7.5% 7.0% 7.0%
</TABLE>
Plan assets consist primarily of a bond mutual fund, U.S. government
obligations and cash equivalents. The expected long-term rate of return on plan
assets was 8.75% in 1995 and 8.5% in 1996, 1997 and the three months ended 1998.
Net periodic pension expense (income) for all of the Company's defined
benefit plans for the respective periods includes the following components:
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED ENDED APRIL 4,
----------------------------- --------------
1995 1996 1997 1998
------- ------- ------- --------------
<S> <C> <C> <C> <C>
Service cost-benefit
earned during the
period.................. $ 15
Interest cost on the
projected benefit
obligation.............. 3,219 $ 3,225 $ 3,560 $ 911
Actual return on plan
assets.................. (4,273) (2,736) (3,861) (5,771)
Net amortization and
deferral................ 939 (494) 558 4,840
------- ------- ------- -------
Net periodic pension
expense (income)........ $ (100) $ (5) $ 257 $ (20)
======= ======= ======= =======
</TABLE>
Net periodic pension expense for the three months ended March 29, 1997 was
$64. Net periodic pension expense (income) for the nine months ended January 3,
1998 and January 2, 1999 was $193 and $(62), respectively.
At December 28, 1996, January 3, 1998 and April 4, 1998, Safelite recorded,
as required by SFAS No. 87, an additional minimum pension liability of $11,360,
$14,304, and $9,814, respectively, related to certain unfunded pension
obligations. The corresponding cumulative charge to stockholders' equity
(deficit) for these amounts at
F-25
<PAGE> 169
SAFELITE GLASS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS -- (CONTINUED)
December 28, 1996, January 3, 1998, April 4, 1998 and January 2, 1999, net of
applicable taxes, was $6,816, $8,582, $5,887 and $5,887, respectively.
14. 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 extraordinary
items are as follows:
<TABLE>
<CAPTION>
YEAR ENDED THREE MONTHS ENDED NINE MONTHS ENDED
------------------------- ---------------------- -------------------------
MARCH 29, APRIL 4, JANUARY 3, JANUARY 2,
1995 1996 1997 1997 1998 1998 1999
---- -------- ------- ----------- -------- ----------- -----------
(UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
Current.............. $157 $ 2,110 $ 45 $ (71) $ 45 $
Deferred............. (19,715) (6,887) $59 (1,552) (6,946) (1,852)
---- -------- ------- --- ------- ------- -------
Total................ $157 $(17,605) $(6,842) $59 $(1,623) $(6,901) $(1,852)
==== ======== ======= === ======= ======= =======
</TABLE>
The income tax provision (benefit) differs from the amounts determined by
applying the statutory income tax rate as a result of the following:
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
YEAR ENDED ---------------------- -------------------------
--------------------------- MARCH 29, APRIL 4, JANUARY 3, JANUARY 2,
1995 1996 1997 1997 1998 1998 1999
------ -------- ------- ----------- -------- ----------- -----------
(UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
Income taxes at
statutory rate..... $2,640 $ 6,706 $ (147) $(13) $(2,079) $ (134) $(4,179)
Reduction in
valuation
allowance.......... (2,000) (25,894) (2,996) (2,996)
State income taxes... 312 958 (21) (1) (197) (20) (597)
Lear Siegler net
operating losses... (5,674) (5,674)
Other, principally
permanent
differences........ (795) 625 1,996 73 653 1,923 2,924
------ -------- ------- ---- ------- ------- -------
Provision (benefit)
for income taxes... $ 157 $(17,605) $(6,842) $ 59 $(1,623) $(6,901) $(1,852)
====== ======== ======= ==== ======= ======= =======
</TABLE>
F-26
<PAGE> 170
SAFELITE GLASS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS -- (CONTINUED)
Items comprising Safelite's net deferred tax assets and liabilities are as
follows:
<TABLE>
<CAPTION>
DECEMBER 28, JANUARY 3, APRIL 4, JANUARY 2,
1996 1998 1998 1999
------------ ---------- -------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C>
Deferred tax assets:
Net operating loss carryforwards.... $ 32,035 $ 52,471 $ 51,608 $ 68,095
Differences between book and tax
basis of inventories............. 2,530 3,993 3,770 3,919
Reserves not currently deductible... 17,406 10,533 14,321 9,826
Restructuring reserves.............. 9,862 12,549 4,835
Deductible intangibles.............. 4,502 29 29
Pension............................. 4,547 5,722 3,925 3,973
Other............................... 2,738 2,340
Difference between book and tax
basis of property, plant and
equipment........................ 4,373 4,793
Valuation allowance................. (36,182) (21,800) (21,800) (21,800)
-------- -------- -------- --------
Total....................... 23,074 67,623 68,775 73,670
-------- -------- -------- --------
Deferred tax liabilities:
Difference between book and tax
basis of property, plant and
equipment........................ (1,322) (400)
-------- -------- -------- --------
Net deferred tax asset................ $ 21,752 $ 67,223 $ 68,775 $ 73,670
======== ======== ======== ========
</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, net operating loss limitations and other factors which may
impact Safelite's ability to realize the tax benefits.
As part of the sale of Lear Siegler, Safelite obtained the right to use
approximately $16,210 of previously unrecognized federal net operating loss
carryforwards. In addition, deferred tax assets totaling $11,386 related to Lear
Siegler, which had been fully reserved, were assigned to Lear Siegler in the
sale transaction.
At April 4, 1998, Safelite has net operating loss carryforwards for federal
income tax purposes totaling approximately $112,000 which expire through 2017.
15. EXTRAORDINARY ITEM
During 1997 Safelite recorded an extraordinary loss of $2,835, net of
income tax benefit of $1,890, as a result of expensing unamortized loan
origination costs related to its 1996 credit facility and fees paid to the
lenders of its new credit facility. In 1996, Safelite recorded an extraordinary
loss of $500, net of income tax benefit of $344, for the unamortized loan
origination fees related to the early repayment of another debt obligation.
F-27
<PAGE> 171
SAFELITE GLASS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS -- (CONTINUED)
16. DISCONTINUED OPERATIONS
In 1996, Safelite 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-28
<PAGE> 172
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Stockholders of Vistar, Inc.:
We have audited the accompanying consolidated balance sheets of VISTAR,
INC. (formerly Globe Glass & Mirror Co. and successor of Windshields America,
Inc.) (an Illinois corporation) AND SUBSIDIARIES as of March 31, 1996 and 1997,
and the related consolidated statements of earnings (loss), stockholders' equity
and cash flows for each of the three years in the period ended March 31, 1997.
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 audits 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, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Vistar, Inc.
and Subsidiaries as of March 31, 1996 and 1997, and the results of their
operations and their cash flows for each of the three years in the period ended
March 31, 1997, in conformity with generally accepted accounting principles.
The financial statements of Vistar, Inc. and Subsidiaries as of December
19, 1997, and for the nine-month periods ended December 21, 1996, and December
19, 1997, were not audited by us and, accordingly, we do not express an opinion
on them.
ARTHUR ANDERSEN LLP
Chicago, Illinois
April 7, 1997 (except with respect to
the matter described in Note 15, as to
which the date is September 22, 1998)
F-29
<PAGE> 173
VISTAR, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
MARCH 31,
------------------- DEC. 19,
1996 1997 1997
-------- -------- -----------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents................................. $ 13,438 $ 3,016 $ 4,942
Marketable securities..................................... 700 750 --
Trade accounts receivable, less allowance for doubtful
accounts of $2,656, $3,733 and $14,002, respectively.... 30,065 36,035 30,452
Inventories............................................... 21,347 13,804 7,010
Income tax refunds receivable and prepayments............. 11,682 3,958 3,808
Prepaid expenses and other current assets................. 6,388 8,511 5,675
Current maturities of notes receivable.................... 972 677 452
Deferred income taxes..................................... 14,802 10,969 4,684
-------- -------- --------
Total current assets............................... 99,394 77,720 57,023
-------- -------- --------
PROPERTY, PLANT AND EQUIPMENT, at cost:
Land...................................................... 962 962 962
Buildings and building improvements....................... 1,023 1,023 1,481
Machinery and equipment................................... 13,657 20,077 20,143
Leasehold improvements.................................... 10,082 11,175 11,328
Furniture and fixtures.................................... 2,993 3,356 3,540
-------- -------- --------
28,717 36,593 37,454
Less-Accumulated depreciation and amortization............ 8,653 15,801 19,576
-------- -------- --------
Property, plant and equipment, net........................ 20,064 20,792 17,878
-------- -------- --------
OTHER ASSETS:
Notes receivable, excluding current maturities............ 800 800 125
Deferred income taxes..................................... 11,739 11,722 16,787
Intangible assets......................................... 157,791 148,417 144,119
Other noncurrent assets................................... 6,645 2,374 6,605
-------- -------- --------
Total other assets................................. 176,975 163,313 167,636
-------- -------- --------
$296,433 $261,825 $242,537
======== ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt...................... $ 4,772 $ 2,906 $ 1,721
Trade accounts payable.................................... 23,584 18,639 19,581
Other current liabilities................................. 34,436 35,125 26,108
-------- -------- --------
Total current liabilities.......................... 62,792 56,670 47,410
-------- -------- --------
LONG-TERM DEBT, excluding current maturities................ 45,088 17,624 16,695
-------- -------- --------
PREFERENCE STOCK ($10 par value, 44,167 shares issued and
outstanding).............................................. 176,250 176,250 132,023
-------- -------- --------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock, $10 par value, 100,000 shares authorized;
45,970 shares issued and outstanding (excluding
preference shares)...................................... 460 460 460
Additional paid-in capital................................ 78,857 78,857 78,857
Accumulated deficit....................................... (67,014) (68,036) (32,908)
-------- -------- --------
Total stockholders' equity......................... 12,303 11,281 46,409
-------- -------- --------
$296,433 $261,825 $242,537
======== ======== ========
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these balance sheets.
F-30
<PAGE> 174
VISTAR, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS (LOSS)
(IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE YEARS ENDED MARCH 31 FOR THE NINE MONTHS ENDED
------------------------------ -----------------------------
1995 1996 1997 DEC. 21, 1996 DEC. 19, 1997
-------- -------- -------- ------------- -------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
NET SALES.......................... $114,319 $172,821 $413,504 $318,762 $339,502
-------- -------- -------- -------- --------
COST OF SALES:
Materials........................ 41,896 67,219 186,263 140,076 164,289
Labor............................ 17,604 27,104 75,242 56,970 71,151
Vehicle.......................... 5,074 6,058 12,209 9,861 11,740
Occupancy........................ 6,371 9,229 16,165 10,759 13,439
Other............................ 16,711 21,075 22,402 17,873 26,185
-------- -------- -------- -------- --------
87,656 130,685 312,281 235,539 286,804
-------- -------- -------- -------- --------
Gross profit.................. 26,663 42,136 101,223 83,223 52,698
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES......................... 21,543 38,001 72,090 55,458 49,968
AMORTIZATION OF INTANGIBLE
ASSETS........................... 3,285 5,001 13,371 9,558 10,162
NONRECURRING CHARGES............... -- -- 6,939 5,323 793
RESTRUCTURING CHARGES.............. -- 9,532 -- -- --
-------- -------- -------- -------- --------
Operating income (loss).......... 1,835 (10,398) 8,823 12,884 (8,225)
-------- -------- -------- -------- --------
INTEREST EXPENSE................... (49) (731) (2,046) (1,698) (1,206)
INTEREST INCOME.................... -- 98 437 327 600
-------- -------- -------- -------- --------
Income (loss) before income
taxes......................... 1,786 (11,031) 7,214 11,513 (8,831)
(PROVISION) BENEFIT FOR INCOME
TAXES............................ (175) 1,807 (8,236) (8,416) (268)
-------- -------- -------- -------- --------
NET INCOME (LOSS).................. $ 1,611 $ (9,224) $ (1,022) $ 3,097 $ (9,099)
======== ======== ======== ======== ========
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these statements.
F-31
<PAGE> 175
VISTAR, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS)
<TABLE>
<CAPTION>
ADDITIONAL
COMMON PAID-IN ACCUMULATED
STOCK CAPITAL DEFICIT TOTAL
------ ---------- ----------- --------
<S> <C> <C> <C> <C>
BALANCE, March 31, 1994.......... $ -- $42,229 $(59,401) $(17,172)
Conversion of amounts due to
Belron into capital......... -- 20,000 -- 20,000
Net income..................... -- -- 1,611 1,611
---- ------- -------- --------
BALANCE, March 31, 1995.......... -- 62,229 (57,790) 4,439
Conversion of amounts due to
Belron into capital......... -- 17,088 -- 17,088
Merger with Globe.............. 460 (460) -- --
Net loss....................... -- -- (9,224) (9,224)
---- ------- -------- --------
BALANCE, March 31, 1996.......... 460 78,857 (67,014) 12,303
Net loss....................... -- -- (1,022) (1,022)
---- ------- -------- --------
BALANCE, March 31, 1997.......... 460 78,857 (68,036) 11,281
Preference stock dilution
(unaudited)................. -- -- 44,227 44,227
Net loss (unaudited)........... -- -- (9,099) (9,099)
---- ------- -------- --------
BALANCE, December 19, 1997
(unaudited).................... $460 $78,857 $(32,908) $ 46,409
==== ======= ======== ========
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these statements.
F-32
<PAGE> 176
VISTAR, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE YEARS ENDED MARCH 31 FOR THE NINE MONTHS ENDED
----------------------------- -----------------------------
1995 1996 1997 DEC. 21, 1996 DEC. 19, 1997
------- -------- -------- ------------- -------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)................................ $ 1,611 $ (9,224) $ (1,022) $ 3,097 $(9,099)
Adjustments to reconcile net income (loss) to net
cash provided by (used in) operating
activities --
Depreciation................................... 2,160 3,183 6,198 4,009 5,260
Amortization................................... 3,285 5,001 13,371 9,558 10,162
Deferred income tax (benefit) provision........ -- (1,992) 5,543 1,741 1,220
(Gain) loss on disposal of property, plant and
equipment................................... (97) 508 74 (27) 6
Restructuring and other charges................ -- 9,532 -- -- --
Change in assets and liabilities, net of
effects of business acquisitions --
Trade accounts receivable................... (105) (4,676) (5,468) (1,983) 5,603
Inventories................................. (2,669) (2,400) 7,910 3,886 6,851
Prepaid expenses and other current assets... (832) (471) 6,931 13,168 3,215
Trade accounts payable...................... (1,355) 3,802 (4,945) 14,776 851
Other current liabilities................... (2,268) (5,039) 3,938 10,625 (6,747)
Other....................................... (40) (4,387) 4,571 2,544 (3,557)
------- -------- -------- -------- -------
Net cash provided by (used in) operating
activities.............................. (310) (6,163) 37,101 61,394 13,765
------- -------- -------- -------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Sale (purchase) of marketable securities......... -- (700) (50) -- 750
Cash paid for businesses, net of cash acquired... (3,181) (10,728) (7,156) (7,153) (1,622)
Cash obtained in Merger.......................... -- 15,014 -- -- --
Purchases of property, plant and equipment....... (3,248) (4,583) (8,042) (6,061) (3,553)
Proceeds from sale of property, plant and
equipment...................................... 150 447 -- 24 --
Collections on notes receivable.................. -- 28 381 123 219
------- -------- -------- -------- -------
Net cash used in investing activities..... (6,279) (522) (14,867) (13,067) (4,206)
------- -------- -------- -------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net change in revolving line of credit........... -- 19,869 (25,869) (28,269) (7,633)
Payments on long-term debt....................... (114) (1,409) (4,462) -- --
Net increase (decrease) in payable to Belron..... 6,907 (381) (2,325) -- --
------- -------- -------- -------- -------
Net cash provided by (used in) financing
activities.............................. 6,793 18,079 (32,656) (28,269) (7,633)
------- -------- -------- -------- -------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS...................................... 204 11,394 (10,422) 20,058 1,926
CASH AND CASH EQUIVALENTS, beginning of period..... 1,840 2,044 13,438 13,438 3,016
------- -------- -------- -------- -------
CASH AND CASH EQUIVALENTS, end of period........... $ 2,044 $ 13,438 $ 3,016 $ 33,496 $ 4,942
======= ======== ======== ======== =======
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for --
Interest....................................... $ 11 $ 613 $ 2,092 $ 237 $ 1,129
Income taxes................................... 122 895 10,319 3,498 475
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these statements.
F-33
<PAGE> 177
VISTAR, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN THOUSANDS)
1. ORGANIZATION AND PRESENTATION
Windshields America, Inc., together with its subsidiaries ("Windshields"),
was a wholly owned subsidiary of Belron (USA) BV ("Belron") through February 29,
1996. On that date, Windshields merged with and into Globe Glass & Mirror Co.
("Globe") with Belron retaining a 51% ownership interest in the merged entity
(the "Merger"). The previous stockholders of Globe obtained a 49% ownership
interest in the merged entity. The common stock of Globe survived the Merger;
Windshields' common stock was canceled and retired. The Merger was accounted for
as a reverse acquisition in accordance with the purchase method of accounting
with Windshields as the deemed acquirer. Pursuant to such accounting, each of
the 50,000 shares of Windshields common stock ($.001 par value) outstanding as
of the Merger date were exchanged for approximately .9194 shares of newly issued
Globe common stock ($10 par value) resulting in Belron owning 51% of the merged
entity. The merged entity originally retained the name of Globe Glass & Mirror
Co. but later changed its name to Vistar, Inc. The accompanying consolidated
financial statements include the accounts of Windshields through the Merger date
and of the merged entity thereafter. All significant intercompany accounts and
transactions have been eliminated in consolidation. As used herein, the
"Company" refers to Windshields through February 29, 1996, and the merged entity
and its subsidiaries thereafter.
The Company's business consists primarily of the replacement and repair of
automotive glass throughout the United States. A significant portion of the
Company's sales are to customers in the insurance industry.
In the opinion of management, the financial statements as of December 19,
1997, and for the nine months ended December 21, 1996, and December 19, 1997,
include all adjustments, consisting only of normal recurring adjustments, which
are necessary to present fairly the financial position and results of operations
for the periods then ended. Operating results for any interim period are not
necessarily indicative of results that may be expected for the full year. All
interim numbers presented herein are unaudited.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CASH AND CASH EQUIVALENTS
Cash equivalents consist of short-term liquid investments. Outstanding
balances of the Company's controlled disbursement accounts are included in trade
accounts payable ($9,324, $7,155 and $8,051 at March 31, 1996, March 31, 1997,
and December 19, 1997, respectively). Restricted cash, held in escrow accounts
for insurance purposes and in support of certain indebtedness, amounted to
$5,717, $1,655 and $1,393 as of March 31, 1996, March 31, 1997, and December 19,
1997, respectively, and is classified as other noncurrent assets.
MARKETABLE SECURITIES
Marketable securities consisted of fixed income securities with original
maturities of less than one year and were carried at amortized cost, which
approximated fair market value, as the Company had the ability and intent to
hold them to maturity.
F-34
<PAGE> 178
VISTAR, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLAR AMOUNTS IN THOUSANDS)
INVENTORIES
All inventories are stated at the lower of cost (first-in, first-out) or
market (net realizable value) and consist primarily of replacement glass. In
1997, the Company entered into an agreement to purchase a substantial portion of
its glass inventory from one supplier. The provisions of this agreement allow
the Company to maintain lower inventory levels.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment is recorded at cost which, for such assets
acquired in a business combination, represents the estimated fair value of such
assets at their acquisition date. Major renewals and betterments which extend
the useful life of an asset are capitalized; routine maintenance and repairs are
expensed as incurred. Upon the sale or retirement of these assets, the related
gross cost and accumulated depreciation are removed from the accounts and any
related gain or loss is reflected in earnings.
Depreciation and amortization of property, plant and equipment are computed
using the straight-line method for financial reporting purposes based on the
following estimated useful lives:
<TABLE>
<CAPTION>
CLASSIFICATION PERIOD
- -------------- --------------
<S> <C>
Building and building improvements............ 10 to 40 years
Machinery and equipment....................... 2 to 10 years
Leasehold improvements........................ Over the life
of the lease
Furniture and fixtures........................ 5 to 10 years
</TABLE>
INTANGIBLE ASSETS
The excess cost over the fair value of net assets acquired in the Merger is
being amortized on a straight-line basis over 20 years. Other such excess costs,
resulting from various acquisitions of smaller glass replacement and repair
businesses, are being amortized on a straight-line basis over five or ten years.
After an acquisition, the Company continually reviews whether subsequent events
and circumstances have occurred that indicate the remaining estimated useful
life of such excess costs may warrant revision or that the remaining balance may
not be recoverable. If events and circumstances indicate that excess costs
related to a particular business should be reviewed for possible impairment, the
Company uses projections to assess whether future operating income of the
business on a nondiscounted basis is likely to exceed the amortization of such
excess costs over its remaining life, to determine whether a write-down to
recoverable value is appropriate. Should an impairment be identified, a loss
would be reported to the extent that the carrying value exceeds the fair value
of that goodwill as determined by valuation techniques available in the
circumstances.
Other intangible assets (with a net recorded value of $3,917, $3,763 and
$4,957 as of March 31, 1996, March 31, 1997, and December 19, 1997,
respectively) include the costs of noncompete agreements with certain previous
owners of businesses acquired by Globe
F-35
<PAGE> 179
VISTAR, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLAR AMOUNTS IN THOUSANDS)
prior to the Merger, costs associated with the acquisition of customer lists and
costs incurred in obtaining trade names. Such costs are being amortized on a
straight-line basis over five years, except for costs of noncompete agreements
which are amortized over the term, not to exceed seven years, of the agreements.
Accumulated amortization of all intangible assets as of March 31, 1996, March
31, 1997, and December 19, 1997, amounted to $18,480, $31,851 and $42,013,
respectively.
ADVERTISING COSTS
The Company's yellow pages advertising qualifies as direct response
advertising and therefore the Company capitalizes such advertising costs and
amortizes the expense over the period in which the benefits are expected (the
life of the publication), which is generally one year or less. Advertising costs
of $2,399, $2,287 and $2,572 were reported as prepaid expenses as of March 31,
1996, March 31, 1997, and December 19, 1997, respectively. Total advertising
expense was $2,007, $2,894, $5,156, $3,548 and $4,873 in fiscal 1995, fiscal
1996, fiscal 1997 and the nine months ended December 21, 1996, and December 19,
1997, respectively.
INCOME TAXES
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. The effect on deferred tax
assets and liabilities of a change in tax rates is recognized in income in the
period that includes the enactment date.
REVENUE RECOGNITION
Revenue is recognized when the replacement or repair service is performed.
NEW ACCOUNTING PRONOUNCEMENTS
In July, 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 130, "Reporting Comprehensive Income" ("SFAS
No. 130"), and Statement of Financial Accounting Standards No. 131, "Disclosures
About Segments of an Enterprise and Related Information" ("SFAS No. 131"). SFAS
No. 130 establishes standards for reporting and display of comprehensive income
and its components in a full set of general purpose financial statements. SFAS
No. 131 introduces a new model for segment reporting, called the "management
approach." The management approach is based on the way that the chief operating
decision maker organizes segments within a company for making operating
decisions and assessing performance. Management is currently evaluating the
provisions of this statement to determine its impact upon current reporting.
Both SFAS No. 130 and SFAS No. 131 will be adopted by the Company by fiscal year
1999.
F-36
<PAGE> 180
VISTAR, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLAR AMOUNTS IN THOUSANDS)
In April, 1998, the American Institute of Certified Public Accountants
issued Statement of Position No. 98-5, "Reporting on the Cost of Start-up
Activity" ("SOP 98-5"). SOP 98-5 establishes the standard on the financial
reporting of start-costs and organization cost. SOP 98-5 requires costs of
start-up activities and organization cost to be expensed as incurred. Management
is currently evaluating the provisions of this statement to determine its impact
upon current reporting. SOP 98-5 will be adopted by the Company by fiscal year
1999.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates. In addition,
certain prior-year amounts have been reclassified to conform with current-year
presentation.
3. ACQUISITIONS
Based on independent appraisals of Globe, the purchase price paid in the
Merger by Windshields was determined to be $176,250. In connection with the
Merger, the Company and its stockholders entered into various agreements which
stipulate a dividend policy and certain stockholder rights, including put and
call provisions on the shares retained by the Globe shareholders. Such put
options provide that the Globe shareholders, solely at their option, could put
their entire common stock holdings to the Company, or in certain circumstances,
to Belron for the greater of the Company's Market Value, as defined, and a
preestablished minimum after the one year anniversary of the Merger.
Accordingly, such shares have been classified as Preference Stock outside of
stockholders' equity. Any changes in the minimum value of the putable shares are
reflected as an adjustment to Preference Stock on the Company's balance sheet
with an offsetting adjustment in Accumulated Deficit. Market value, as of March
31, 1997, based on a determination by the shareholders, had not changed since
the Merger. However, based on the Market Value of the Company implied in the
December 19, 1997, merger of the Company with and into Safelite Glass Corp.
("Safelite"), as described in Note 14, the value of the putable shares was
reduced by $44,227 as of December 19, 1997.
F-37
<PAGE> 181
VISTAR, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLAR AMOUNTS IN THOUSANDS)
The Merger purchase price was allocated to Globe's net assets as follows:
<TABLE>
<S> <C>
Cash............................................... $ 15,014
Trade accounts receivable.......................... 14,865
Inventories........................................ 8,627
Income tax refunds receivable...................... 11,682
Other current assets............................... 7,955
Property, plant and equipment...................... 10,982
Intangible assets.................................. 137,217
Other assets....................................... 23,931
Trade accounts payable............................. (12,865)
Other current liabilities.......................... (22,158)
Long-term debt..................................... (19,000)
========
</TABLE>
Included in the above allocation are $22,403 of deferred tax assets related
to Windshields which had been fully reserved before the Merger and are further
described in Note 8. Additionally, as a condition of the Merger, Belron
converted $17,088 of advances loaned to the Company into permanent capital
during fiscal 1996. Advances due to Belron are non-interest bearing.
Also, during fiscal 1995, fiscal 1996 and fiscal 1997, the Company acquired
the net assets and businesses of several companies in purchase transactions for
aggregate purchase prices of approximately $5,056, $20,461 and $8,492,
respectively. During the nine months ended December 21, 1996, and December 19,
1997, the Company acquired the net assets and businesses of several companies in
purchase transactions for aggregate purchase prices of approximately $8,492 and
$2,298, respectively. These acquisitions were not material to the Company.
All of the above acquisitions were accounted for as purchases and,
accordingly, the purchase price was allocated to the related assets acquired and
liabilities assumed based upon their estimated fair values at the date of
acquisition. Certain allocations have been, or may be, adjusted based on more
current available information. Future adjustments, if any, will be made prior to
the one year anniversary of the related acquisition and are not expected to be
material. Operating results of acquired businesses have been included in the
consolidated financial statements from the date of acquisition.
F-38
<PAGE> 182
VISTAR, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLAR AMOUNTS IN THOUSANDS)
The following table summarizes the composition of the acquisitions
described above and consideration paid therefore:
<TABLE>
<CAPTION>
YEARS ENDED MARCH 31 NINE MONTHS ENDED
-------------------------- -----------------------------
1995 1996 1997 DEC. 19, 1997 DEC. 21, 1996
------ -------- ------ ------------- -------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Merger value............ $ -- $176,250 $ -- $ -- $ --
Cash paid or withheld
pending collection of
acquired accounts
receivable............ 2,886 11,292 7,491 7,491 1,823
Notes issued to
sellers............... 2,170 9,169 1,001 1,001 475
------ -------- ------ ------ ------
Total
consideration.... 5,056 196,711 8,492 8,492 2,298
Assets acquired......... 4,182 252,361 9,204 9,204 2,389
------ -------- ------ ------ ------
Liabilities assumed..... $ 874 $ 55,650 $ 712 $ 712 $ 91
====== ======== ====== ====== ======
</TABLE>
4. RESTRUCTURING AND NONRECURRING CHARGES
In conjunction with the Merger, the Company recorded a restructuring charge
of $9,532 and an additional $3,966 reserve in purchase accounting primarily for
the closure of duplicative Windshields and Globe stores, warehouses and offices
and for the estimated costs related to the concurrent decisions to change the
Company's name (ultimately to Vistar, Inc.) and to change from a procurement
practice of warehousing inventory to a vendor-managed inventory program.
Estimated closure costs included (a) $2,371 for the severance of approximately
220 store, warehouse and corporate office employees, (b) $3,010 for future
noncancelable rental payments for facilities subsequent to the date of their
respective closure, (c) $1,199 for the write-off of abandoned assets and (d)
$3,570 for various other related costs necessary for or resulting from the
closure of the facilities, such as legal and brokerage fees to terminate and/or
sublet leases and building restoration costs.
Costs to tear down facility signs with the Windshields and Globe names
($500) and the estimated undepreciated carrying value of such signs ($645) were
also reserved. Based on the larger size of the merged company, management
elected to discontinue the warehousing of inventory prior to its shipment to
Company-owned stores. A program was established whereby certain vendors were
awarded a substantial portion of the Company's procurement requirements in
exchange for delivery directly to the stores. These vendors would acquire the
inventory at the Company's warehouses as the first step in implementing this
program. A $1,135 reserve was established for the estimated difference between
the aggregate carrying value and the bulk (versus retail) price that these
vendors would pay for this inventory. Additionally, the carrying value ($1,068)
of certain computer software systems under development by Windshields at the
time of the Merger was reserved as management elected to convert the Windshields
operations onto the Globe systems.
F-39
<PAGE> 183
VISTAR, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLAR AMOUNTS IN THOUSANDS)
Total noncash charges, representing asset write-offs, were $4,047. By
December 19, 1997, all affected facilities were closed and all affected
employees were terminated. Actual severance, rental payments and other costs
were not materially different than those estimated when the reserves were
established.
In addition to the costs described above, the Company incurred $6,939,
$5,323 and $793 of nonrecurring costs in fiscal 1997 and the nine-month periods
ended December 21, 1996, and December 19, 1997, respectively, related to the
integration of the Windshields and Globe businesses, the identification of the
new name and the implementation of the vendor-managed inventory program. Such
costs included various consulting fees, temporary services fees, moving,
relocation and other costs. No such future nonrecurring costs are anticipated.
5. NOTES RECEIVABLE
A summary of notes receivable is as follows:
<TABLE>
<CAPTION>
MARCH 31
----------------
1996 1997 DEC. 19, 1997
------ ------ -------------
(UNAUDITED)
<S> <C> <C> <C>
Note receivable related to sale of a
Globe subsidiary, due on demand, plus
interest at 10% to 14.4%............. $ 833 $ 563 $455
Notes receivable from officers and
employees with interest at various
amounts.............................. 14 33 --
Other notes receivable, primarily with
interest at 5% to 10%................ 925 881 122
------ ------ ----
Total notes receivable................. 1,772 1,477 577
Less -- Current maturities............. 972 677 452
------ ------ ----
Due by 1999.......................... $ 800 $ 800 $125
====== ====== ====
</TABLE>
The carrying value of these notes receivable approximate their estimated
fair market value based on their interest rates and near-term maturities.
F-40
<PAGE> 184
VISTAR, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLAR AMOUNTS IN THOUSANDS)
6. OTHER CURRENT LIABILITIES
A summary of other current liabilities is as follows:
<TABLE>
<CAPTION>
MARCH 31
-------------------
1996 1997 DEC. 19, 1997
-------- ------- -------------
(UNAUDITED)
<S> <C> <C> <C>
Salaries and wages................... $ 8,483 $ 4,711 $ 4,266
Vacation............................. 3,501 964 50
Restructuring........................ 13,100 5,695 1,075
Customer rebates..................... 3,350 9,796 5,275
Other................................ 6,002 13,959 15,442
------- ------- -------
Total other current
liabilities............. $34,436 $35,125 $26,108
======= ======= =======
</TABLE>
7. FINANCING ARRANGEMENTS
On March 31, 1996, the Company had two lines of credit, a temporary
unsecured demand loan providing for borrowings of $50,000 and a $10,000 credit
line secured by receivables and inventory that had been superseded and limited
to zero borrowings by the demand loan but not canceled. Outstanding borrowings
on the demand loan bore interest of LIBOR plus 0.5% or, at the Company's
discretion, the bank's prime rate (averaging 8.25% at March 31, 1996). The
demand loan had no significant covenants. Aggregate borrowings on the demand
loan as of March 31, 1996, were $38,869.
Subsequent to March 31, 1996, the $10,000 credit line was canceled. On May
9, 1996, the demand loan was replaced by a credit facility allowing aggregate
borrowings of $50,000 until March 31, 1998, after which maximum borrowings were
required to be reduced by $5,000 each April 1 down to $35,000 and paid in full
by May 9, 2001. Pursuant to this refinancing, the outstanding borrowings on the
demand note as of March 31, 1996, were classified as long term. Borrowings on
the credit facility bore interest at LIBOR plus applicable margin or, at the
Company's discretion, the bank's prime rate (averaging 6.4% at December 18,
1997). The covenants under the agreement required the Company to maintain, among
other things, minimum profitability, liquidity and net worth levels. Aggregate
borrowings under this credit line were $13,000 as of March 31, 1997. In
connection with the December 19, 1997, merger of the Company with and into
Safelite, as described in Note 14, the Company's borrowings under this line of
credit were paid off by Safelite on December 18, 1997. The amount paid on behalf
of the Company, including accrued interest, was $11,597.
The Company also has various unsecured notes payable related to
acquisitions, with interest rates ranging from 6.4% to 8.33%, and prime plus
1.0% which totaled $10,991 (current maturity $4,772), $7,530 (current maturity
$2,906) and $6,216 (current maturity $1,371) as of March 31, 1996, March 31,
1997, and December 19, 1997, respectively. Principal payments on this debt are
due in various increments through September, 2003. As of December 19, 1997, the
Company was in compliance with all the covenants governing its indebtedness.
F-41
<PAGE> 185
VISTAR, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLAR AMOUNTS IN THOUSANDS)
Based upon borrowing rates currently available to the Company for
borrowings with similar terms and maturities, the fair value of the Company's
debt was approximately equal to its carrying value as of March 31, 1996, March
31, 1997, and December 19, 1997.
The aggregate maturities of long-term debt as of March 31, 1997, are as
follows:
<TABLE>
<S> <C>
Year ending March 31 --
1998................................ $ 2,906
1999................................ 1,010
2000................................ --
2001................................ 1,200
2002................................ 14,200
Thereafter.......................... 1,214
-------
$20,530
=======
</TABLE>
The Company had letters of credit outstanding totaling $10,312, $8,621 and
$0 as of March 31, 1996, March 31, 1997, and December 19, 1997, respectively.
These letters of credit were issued primarily to guarantee various promissory
notes and insurance activities.
8. INCOME TAXES
Components of the (provision) benefit for income taxes are as follows:
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31 NINE MONTHS ENDED
------------------------ -----------------------------
1995 1996 1997 DEC. 21, 1996 DEC. 19, 1997
----- ------ ------- ------------- -------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Currently payable --
Federal.................. $(132) $ (168) $(1,870) $(5,465) $ --
State.................... (43) (17) (823) (1,210) 952
Deferred................. -- 1,992 (5,543) (1,741) (1,220)
----- ------ ------- ------- -------
$(175) $1,807 $(8,236) $(8,416) $ (268)
===== ====== ======= ======= =======
</TABLE>
F-42
<PAGE> 186
VISTAR, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLAR AMOUNTS IN THOUSANDS)
The principal items comprising the difference between income taxes on the
income (loss) before income taxes computed at the federal statutory rate and the
actual (provision) benefit for income taxes are as follows:
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31 NINE MONTHS ENDED
------------------------- -----------------------------
1995 1996 1997 DEC. 21, 1996 DEC. 19, 1997
----- ------- ------- ------------- -------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Tax benefit (expense)
computed at the
statutory rate.......... $(607) $ 3,751 $(2,453) $(3,914) $ 3,003
Nondeductible amortization
of excess costs......... (779) (530) (2,503) (1,890) (1,858)
State income taxes, net of
federal benefit......... (45) 416 (964) (875) (37)
Change in valuation
allowance............... 1,316 (1,298) -- -- --
Other..................... (60) (532) (2,316) (1,737) (1,376)
----- ------- ------- ------- -------
$(175) $ 1,807 $(8,236) $(8,416) $ (268)
===== ======= ======= ======= =======
</TABLE>
The tax effects of temporary differences that give rise to significant
portions of deferred income tax benefits (obligations) are as follows:
<TABLE>
<CAPTION>
MARCH 31,
------------------
1996 1997 DEC. 19, 1997
------- ------- -------------
(UNAUDITED)
<S> <C> <C> <C>
Allowance for doubtful accounts...... $ 1,154 $ 1,027 $ 5,500
Inventory bases differences.......... 1,863 848 540
Property, plant and equipment bases
differences........................ 552 948 (191)
Intangible assets bases
differences........................ 2,034 3,548 4,502
Accrued vacation..................... 1,322 64 20
Accrued rent......................... 742 944 572
Accrued insurance.................... 1,064 940 2,460
Restructuring reserve................ 5,568 2,278 430
Alternative minimum tax credit
carryforwards...................... 247 274 483
Net operating loss carryforwards..... 14,417 10,353 10,244
Valuation allowances................. (1,693) -- --
Other, net........................... (729) 1,467 (3,089)
------- ------- -------
Total net deferred income
tax benefits............ $26,541 $22,691 $21,471
======= ======= =======
</TABLE>
F-43
<PAGE> 187
VISTAR, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLAR AMOUNTS IN THOUSANDS)
In the accompanying consolidated balance sheet, these net deferred income
tax benefits are classified as current or noncurrent based on the classification
of the related asset or liability for financial reporting. A deferred income tax
obligation or benefit that is not related to an asset or liability for financial
reporting, including deferred income tax assets related to carryforwards, are
classified according to the expected reversal date of the temporary difference.
As of the date of the Merger, Windshields had net deferred income tax
assets of $22,403, primarily due to net operating loss carryforwards. All such
assets were fully offset by a valuation allowance. Based on Windshields'
historical operating results, management concluded that realization of any
benefit from these income tax assets was not reasonably assured. However, due to
the merger with Globe and based on its historical operating results and the
Company's forecast of future operating results, management has concluded that
the Company will likely realize the benefit of these deferred income tax assets.
Accordingly, the valuation allowance of $22,403 was eliminated and, pursuant to
purchase accounting, the resulting net deferred income tax assets were
considered as additional assets acquired in the Merger.
In addition to these carryforwards, the Company has recorded net operating
loss carryforwards attributable to Globe which relate to taxable losses in the
period just prior to the Merger. These taxable losses also created $11,682 of
federal and state income tax refunds from net operating loss carrybacks which
were recorded as receivables by the Company as of March 31, 1996, and
substantially collected in fiscal 1997. The net operating losses which could not
be carried back are subject to various state limitations and accordingly, the
Company had established a valuation allowance against such carryforwards.
However, during fiscal 1997, it was determined that such limitations would not
impair the realizability of these carryforwards and accordingly, the related
valuation allowance was reversed.
The remaining net federal operating losses of the Company as of December
19, 1997, aggregate to $25,780 and expire, if unutilized, in various increments
from 2004 to 2007. Utilization of such carryforwards in any particular year may
be limited under current income tax regulations regarding changes in ownership.
In assessing the realizability of deferred tax assets, management considers
whether it is more likely than not that some portion or all of the deferred tax
assets will not be realized. The ultimate realization of deferred tax assets is
dependent upon the generation of future taxable income during the periods in
which those temporary differences become deductible subject to the limitations
noted above. Management considers the scheduled reversal of deferred tax
liabilities, projected future taxable income and tax planning strategies in
making this assessment. In order to fully realize the benefit of its deferred
tax assets, the Company will need to generate substantial future taxable income.
Taxable income for the fiscal years ended March 31, 1996 and 1997, was $7,873
and $11,461, respectively (before the effect of net operating loss
carryforwards). Based upon the level of historical taxable income and
projections for future taxable income over the periods in which the deferred tax
assets are deductible, management believes it is more likely than not that the
Company will realize the benefits of these unreserved deductible differences.
F-44
<PAGE> 188
VISTAR, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLAR AMOUNTS IN THOUSANDS)
9. PROFIT-SHARING/401(k) PLAN
Through December 31, 1996, the Company had two defined contribution 401(k)
profit-sharing plans covering substantially all Windshield employees who had
completed 90 days of service and all Globe nonunion employees. Employees were
allowed to make contributions to the 401(k) plans up to certain specified
limits. The Company matched the employee contributions at specified rates up to
certain percentages of the employee's compensation. These plans were merged into
a single plan, with similar provisions, effective January 1, 1997. The Company
contributed approximately $254, $255, $596, $418 and $468 to these 401(k) plans
during fiscal 1995, fiscal 1996, fiscal 1997 and the nine months ended December
21, 1996, and December 19, 1997, respectively.
10. OTHER RELATED-PARTY TRANSACTIONS
Prior to the Merger, Belron's parent charged the Company a fee equal to
0.5% of net sales for management services. Such charges amounted to $574 and
$744 during the years ended March 31, 1995 and 1996. Concurrent with the Merger,
the management fee for such services was changed to $1,000 annually, plus
expenses incurred by Belron's parent in providing such services. Under this
arrangement, $80 was charged to the Company during the month ended March 31,
1996, $1,000 was charged during the year ended March 31, 1997 ($750 through
December 21, 1996), and $780 for the nine months ended December 19, 1997. The
arrangement was scheduled to be terminated on the fifth anniversary of the
Merger unless otherwise extended by agreement of the stockholders.
The amount due to Belron at March 31, 1996, was $2,574 (included in other
current liabilities). Such amounts were not material at March 31, 1997, or
December 19, 1997. In addition, since the Merger, the Company had a receivable
in the amount of $3,050 from a significant shareholder of the Company. This
receivable is due in accordance with the terms of the original Merger agreement.
Interest accrued and unpaid on this receivable amounted to $400 as of December
19, 1997.
11. LEASE COMMITMENTS
The Company leases certain of its operating facilities, offices and
equipment under long-term operating leases. Certain leases require the payment
of property taxes, insurance and maintenance and contain certain escalation
provisions and renewal options. The Company also leases vehicles under master
leases which typically contain three-year lease terms and expects to renew or
replace vehicle leases as they mature. At March 31, 1997,
F-45
<PAGE> 189
VISTAR, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLAR AMOUNTS IN THOUSANDS)
the Company's commitments under leases with noncancelable terms of more than one
year are as follows:
<TABLE>
<S> <C>
Year ending March 31 --
1998.............................. $13,405
1999.............................. 10,583
2000.............................. 7,925
2001.............................. 5,187
2002.............................. 2,967
Thereafter........................ 4,134
-------
$44,201
=======
</TABLE>
Total rent expense was approximately $8,436, $9,519 and $15,864 for the
years ended March 31, 1995, 1996 and 1997, respectively, and $10,084 and $10,783
for the nine months ended December 21, 1996, and December 19, 1997,
respectively.
12. SIGNIFICANT CUSTOMER
Revenues from a significant customer of the Company were approximately
$9,000 and $124,000 for the years ended March 31, 1996 and 1997, respectively,
and $111,000 and $117,000 for the nine months ended December 21, 1996, and
December 19, 1997, respectively. Trade accounts receivable related to this
significant customer were $6,580, $7,788 and $6,615 as of March 31, 1996, March
31, 1997, and December 19, 1997, respectively. As this customer was a
significant customer of Globe, the revenue amount listed above for fiscal 1996
primarily reflects one month's activity. Approximately 47% in fiscal 1995, 69%
in fiscal 1996, 70% in fiscal 1997 (61% through December 21, 1996) and 67% for
the nine months ended December 19, 1997, of total sales were derived from
customers in the insurance industry. The Company's exposure to credit risk is
mitigated by the financial strength of its insurance company customers and the
number of such customers.
13. CONTINGENCIES
The Company is involved in various legal actions arising in the ordinary
course of business. The liabilities, if any, associated with these matters are
not determinable as of December 19, 1997. In the opinion of management, the
ultimate disposition of these matters will not have a material adverse effect on
the Company's financial position or results of operations.
14. SUBSEQUENT EVENT (UNAUDITED)
Effective December 19, 1997, the Company consummated a merger with Safelite
in a transaction which was accounted for under the purchase method of accounting
as an acquisition of the Company by Safelite. Stockholders of the Company
received cash, common and preferred shares of Safelite (aggregating to
approximately $269,434) in exchange for 100% of the outstanding common and
preference shares of the Company.
F-46
<PAGE> 190
VISTAR, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLAR AMOUNTS IN THOUSANDS)
Certain provisions related to the preference shares were amended to facilitate
the merger, and such shares are no longer putable to or callable by the combined
company. The Company had incurred $1,899 of transaction costs as of December 19,
1997. As Safelite will reimburse the Company for such costs, the Company
recorded this amount as an intangible asset.
15. SUBSEQUENT EVENT
On September 22, 1998, Safelite resolved a dispute with a customer
regarding certain billings made to the customer by the Company prior to the
Vistar Merger. On June 25, 1998, following a review of contract terms, the
customer had advised Safelite of its dispute and had provided Safelite with a
preliminary estimate of the disputed amount. The ultimate resolution included a
refund from Safelite to the customer of $4.6 million. This refund is not
reflected in the accompanying financial statements.
F-47
<PAGE> 191
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE
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
THESE SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS
UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY OFFER OR SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION THAT THERE HAS
BEEN NO CHANGE IN THE AFFAIRS OF SAFELITE SINCE THE DATE HEREOF OR THAT THE
INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
$55,000,000
SAFELITE GLASS CORP.
9 7/8% SERIES D SENIOR SUBORDINATED
NOTES DUE 2006
------------------------
PROSPECTUS
------------------------
, 1999
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 192
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
As authorized by Section 145 of the General Corporation Law of the State of
Delaware, each director and officer of the registrant may be indemnified by the
registrant against expenses (including attorney's fees, judgments, fines and
amounts paid in settlement) actually and reasonably incurred in connection with
the defense or settlement of any threatened, pending or completed legal
proceedings in which he is involved by reason of the fact that he is or was a
director or officer of the registrant if he acted in good faith and in a manner
that he reasonably believed to be in or not opposed to the best interests of the
registrant and, with respect to any criminal action or proceeding, if he had no
reasonable cause to believe that his conduct was unlawful. If the legal
proceeding, however, is by or in the right of the registrant, the director or
officer may not be indemnified in respect of any claim, issue or matter to which
he has been adjudged to be liable for negligence or misconduct in the
performance of his duty to the registrant unless a court determines otherwise.
Safelite's certificate of incorporation, which is filed as an exhibit to this
registration statement, contains provisions authorizing this indemnity.
Safelite's Amended and Restated By-Laws, which are filed as an exhibit to
this registration statement, authorize Safelite to indemnify its present and
former directors and to pay or reimburse these individuals for fees and expenses
in advance of a final disposition of a proceeding upon receipt of an undertaking
by or on behalf of these individuals to repay such amounts if so required.
Safelite maintains insurance with respect to the liabilities that may arise
under the statutory provisions referred to above. The directors and officers of
Safelite also are insured against certain liabilities, including certain
liabilities arising under the Securities Act of 1933, which might be incurred by
them in their capacities and against which they are not indemnified by Safelite.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) EXHIBITS. UNLESS OTHERWISE INDICATED, ALL EXHIBITS HAVE BEEN PREVIOUSLY
FILED.
<TABLE>
<S> <C>
3.1 Restated Certificate of Incorporation of the Company, as
amended. Incorporated by reference to Exhibit 3(i) of the
Company's Form 10-Q for the quarter ended January 2, 1999.
3.2 Amended and Restated By-Laws of the Company. Incorporated by
reference to Exhibit 3.2 of the Company's Registration
Statement on Form S-4 (File No. 333-21949).
4.1 Indenture dated as of December 20, 1996 between the Company
and Fleet National Bank, as Trustee. Incorporated by
reference to Exhibit 4.1 of the Company's Registration
Statement on Form S-4 (File No. 333-21949).
4.2 First Supplemental Indenture dated as of December 12, 1997
between the Company and State Street Bank and Trust Company,
as Trustee. Incorporated by reference to Exhibit 4.2 of the
Company's Registration Statement on Form S-4 (File No.
333-21949).
4.3 Second Supplemental Indenture dated as of December 18, 1997
between the Company and State Street Bank and Trust Company.
Incorporated by reference to Exhibit 4.3 of the Company's
Registration Statement on Form S-4 (File No. 333-21949).
</TABLE>
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<PAGE> 193
<TABLE>
<S> <C>
4.4* Indenture, dated as of December 18, 1998, by and between the
Company and State Street Bank and Trust Company.
4.5* Form of Exchange Note. Included in Exhibit 4.4.
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. Incorporated
by reference to Exhibit 10.1 of the Company's Registration
Statement on Form S-4 (File No. 333-21949).
10.2 Credit Agreement, amended and restated through December 17,
1997, by and among the Company, various lending
institutions, The Chase Manhattan Bank, Bankers Trust
Company and Goldman Sachs Credit Partners L.P. Incorporated
by reference to Exhibit 10.2 of the Company's Registration
Statement on Form S-4 (File No. 333-21949).
10.3 Employment Agreement, dated as of December 20, 1996, by and
between the Company and Garen K. Staglin. Incorporated by
reference to Exhibit 10.3 of the Company's Registration
Statement on Form S-4 (File No. 333-21949).
10.4 Employment Agreement, dated as of December 20, 1996, by and
between the Company and John F. Barlow. Incorporated by
reference to Exhibit 10.4 of the Company's Registration
Statement on Form S-4 (File No. 333-21949).
10.5 Employment Agreement, dated as of December 20, 1996, by and
between the Company and Douglas A. Herron. Incorporated by
reference to Exhibit 10.5 of the Company's Registration
Statement on Form S-4 (File No. 333-21949).
10.6 Safelite Glass Corp. 1996 Stock Option Plan. Incorporated by
reference to Exhibit 10.6 of the Company's Registration
Statement on Form S-4 (File No. 333-21949).
10.7 Safelite Glass Corp. 1998 Stock Option Plan. Incorporated by
reference to Exhibit 10.7 of the Company's Registration
Statement on Form S-4 (File No. 333-21949).
10.8 Amended and Restated Management Agreement, dated as of
December 18, 1997, by and between the Company and Thomas H.
Lee Company. Incorporated by reference to Exhibit 10.8 of
the Company's Registration Statement on Form S-4 (File No.
333-21949).
10.9 Amended and Restated Management Agreement, dated as of
December 18, 1997, by and between the Company and Belron
International BV. Incorporated by reference to Exhibit 10.9
of the Company's Registration Statement on Form S-4 (File
No. 333-21949).
10.10 Amended and Restated Shareholders Agreement, dated as of
December 18, 1997, among the Company and the stockholders
named therein. Incorporated by reference to Exhibit 10.10 of
the Company's Registration Statement on Form S-4 (File No.
333-21949).
10.11 Pledge Agreement, dated as of December 17, 1997, made by the
Company in favor of The Chase Manhattan Bank, as Collateral
Agent. Incorporated by reference to Exhibit 10.11 of the
Company's Registration Statement on Form S-4 (File No.
333-21949).
</TABLE>
II-2
<PAGE> 194
<TABLE>
<S> <C>
10.12 Amendment No. 1 to the Amended and Restated Shareholders'
Agreement, dated as of March 26, 1998. Incorporated by
reference to Exhibit 10.12 of the Company's Registration
Statement on Form S-4 (File No. 333-21949).
10.13 Amendment to the Safelite Glass Corp. 1998 Stock Option
Plan. Incorporated by reference to Exhibit 10.13 of the
Company's Registration Statement on Form S-4 (File No.
333-21949).
10.14 Registration Agreement, dated as of December 18, 1997, among
the Company and the stockholders named therein. Incorporated
by reference to Exhibit 10.14 of the Company's Registration
Statement on Form S-4 (File No. 333-21949).
10.15 Security Agreement, as amended and restated through December
17, 1997, among the Company and The Chase Manhattan Bank, as
Collateral Agent. Incorporated by reference to Exhibit 10.15
of the Company's Registration Statement on Form S-4 (File
No. 333-21949).
10.16* Amendment No. 1 to Credit Agreement, dated as of December
18, 1998, by and among the Company, various lending
institutions, The Chase Manhattan Bank, Bankers Trust
Company and Goldman Sachs Credit Partners L.P.
10.17* Safelite Glass Corp. 1999 Stock Option Plan.
10.18* Exchange and Registration Rights Agreement, dated December
18, 1998, among the Company, Chase Securities Inc., BT Alex.
Brown Incorporated and Salomon Brothers Inc.
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 Arthur Andersen LLP.
23.3* 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
State Street Bank and Trust Company.
</TABLE>
- -------------------------
* Filed herewith.
** To be filed by amendment.
(b) FINANCIAL STATEMENT SCHEDULES.
Schedules have been omitted since the information is not applicable, not
required or is included in the financial statements or notes thereto.
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
II-3
<PAGE> 195
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.
(d) The undersigned registrant hereby undertakes:
(d)(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement.
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
II-4
<PAGE> 196
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering range
may be reflected in the form of prospectus filed with the Commission
pursuant to Rule 424(b) (sec.230,424(b) of this chapter) if, in the
aggregate, the changes in volume and price represent no more than a 20%
change in the maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective registration
statement.
(iii) To include any material information with respect to the plan of
distribution information in the registration statement;
(d)(2) That, for the purpose 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.
(d)(3) To remove from registration by means of post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.
II-5
<PAGE> 197
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 15TH DAY OF APRIL, 1999.
SAFELITE GLASS CORP.
By: /s/ JOHN F. BARLOW
-----------------------------------
John F. Barlow
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that each person whose signature appears
below constitutes and appoints John F. Barlow 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 agents, 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/ JOHN F. BARLOW Director, President and Chief Executive April 15, 1999
- --------------------------------- Officer (principal executive officer)
John F. Barlow
/s/ GAREN K. STAGLIN Director and Chairman of the Board April 15, 1999
- ---------------------------------
Garen K. Staglin
/s/ DOUGLAS A. HERRON Senior Vice President, Treasurer and April 15, 1999
- --------------------------------- Chief Financial Officer (principal financial
Douglas A. Herron and accounting officer)
/s/ ANTHONY J. DINOVI Director April 15, 1999
- ---------------------------------
Anthony J. DiNovi
/s/ SELWYN HERSON Director April 15, 1999
- ---------------------------------
Selwyn Herson
</TABLE>
II-6
<PAGE> 198
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ ADRIAN F. JONES Director April 15, 1999
- ---------------------------------
Adrian F. Jones
/s/ SETH W. LAWRY Director April 15, 1999
- ---------------------------------
Seth W. Lawry
/s/ THOMAS H. LEE Director April 15, 1999
- ---------------------------------
Thomas H. Lee
/s/ RONNIE LUBNER Director April 15, 1999
- ---------------------------------
Ronnie Lubner
/s/ JOHN E. MASON Director April 15, 1999
- ---------------------------------
John E. Mason
/s/ M. LOUIS SHAKINOVKSY Director April 15, 1999
- ---------------------------------
M. Louis Shakinovksy
/s/ SCOTT M. SPERLING Director April 15, 1999
- ---------------------------------
Scott M. Sperling
/s/ RODNEY STANSFIELD Director April 15, 1999
- ---------------------------------
Rodney Stansfield
</TABLE>
II-7
<PAGE> 199
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C>
3.1 Restated Certificate of Incorporation of the Company, as
amended. Incorporated by reference to Exhibit 3(i) of the
Company's Form 10-Q for the quarter ended January 2, 1999.
3.2 Amended and Restated By-Laws of the Company. Incorporated by
reference to Exhibit 3.2 of the Company's Registration
Statement on Form S-4 (File No. 333-21949).
4.1 Indenture dated as of December 20, 1996 between the Company
and Fleet National Bank, as Trustee. Incorporated by
reference to Exhibit 4.1 of the Company's Registration
Statement on Form S-4 (File No. 333-21949).
4.2 First Supplemental Indenture dated as of December 12, 1997
between the Company and State Street Bank and Trust Company,
as Trustee. Incorporated by reference to Exhibit 4.2 of the
Company's Registration Statement on Form S-4 (File No.
333-21949).
4.3 Second Supplemental Indenture dated as of December 18, 1997
between the Company and State Street Bank and Trust Company.
Incorporated by reference to Exhibit 4.3 of the Company's
Registration Statement on Form S-4 (File No. 333-21949).
4.4* Indenture, dated as of December 18, 1998, by and between the
Company and State Street Bank and Trust Company.
4.5* Form of Exchange Note. Included in Exhibit 4.4.
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. Incorporated
by reference to Exhibit 10.1 of the Company's Registration
Statement on Form S-4 (File No. 333-21949).
10.2 Credit Agreement, amended and restated through December 17,
1997, by and among the Company, various lending
institutions, The Chase Manhattan Bank, Bankers Trust
Company and Goldman Sachs Credit Partners L.P. Incorporated
by reference to Exhibit 10.2 of the Company's Registration
Statement on Form S-4 (File No. 333-21949).
10.3 Employment Agreement, dated as of December 20, 1996, by and
between the Company and Garen K. Staglin. Incorporated by
reference to Exhibit 10.3 of the Company's Registration
Statement on Form S-4 (File No. 333-21949).
10.4 Employment Agreement, dated as of December 20, 1996, by and
between the Company and John F. Barlow. Incorporated by
reference to Exhibit 10.4 of the Company's Registration
Statement on Form S-4 (File No. 333-21949).
10.5 Employment Agreement, dated as of December 20, 1996, by and
between the Company and Douglas A. Herron. Incorporated by
reference to Exhibit 10.5 of the Company's Registration
Statement on Form S-4 (File No. 333-21949).
10.6 Safelite Glass Corp. 1996 Stock Option Plan. Incorporated by
reference to Exhibit 10.6 of the Company's Registration
Statement on Form S-4 (File No. 333-21949).
10.7 Safelite Glass Corp. 1998 Stock Option Plan. Incorporated by
reference to Exhibit 10.7 of the Company's Registration
Statement on Form S-4 (File No. 333-21949).
10.8 Amended and Restated Management Agreement, dated as of
December 18, 1997, by and between the Company and Thomas H.
Lee Company. Incorporated by reference to Exhibit 10.8 of
the Company's Registration Statement on Form S-4 (File No.
333-21949).
10.9 Amended and Restated Management Agreement, dated as of
December 18, 1997, by and between the Company and Belron
International BV. Incorporated by reference to Exhibit 10.9
of the Company's Registration Statement on Form S-4 (File
No. 333-21949).
</TABLE>
<PAGE> 200
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C>
10.10 Amended and Restated Shareholders Agreement, dated as of
December 18, 1997, among the Company and the stockholders
named therein. Incorporated by reference to Exhibit 10.10 of
the Company's Registration Statement on Form S-4 (File No.
333-21949).
10.11 Pledge Agreement, dated as of December 17, 1997, made by the
Company in favor of The Chase Manhattan Bank, as Collateral
Agent. Incorporated by reference to Exhibit 10.11 of the
Company's Registration Statement on Form S-4 (File No.
333-21949).
10.12 Amendment No. 1 to the Amended and Restated Shareholders'
Agreement, dated as of March 26, 1998. Incorporated by
reference to Exhibit 10.12 of the Company's Registration
Statement on Form S-4 (File No. 333-21949).
10.13 Amendment to the Safelite Glass Corp. 1998 Stock Option
Plan. Incorporated by reference to Exhibit 10.13 of the
Company's Registration Statement on Form S-4 (File No.
333-21949).
10.14 Registration Agreement, dated as of December 18, 1997, among
the Company and the stockholders named therein. Incorporated
by reference to Exhibit 10.14 of the Company's Registration
Statement on Form S-4 (File No. 333-21949).
10.15 Security Agreement, as amended and restated through December
17, 1997, among the Company and The Chase Manhattan Bank, as
Collateral Agent. Incorporated by reference to Exhibit 10.15
of the Company's Registration Statement on Form S-4 (File
No. 333-21949).
10.16* Amendment No. 1 to Credit Agreement, dated as of December
18, 1998, by and among the Company, various lending
institutions, The Chase Manhattan Bank, Bankers Trust
Company and Goldman Sachs Credit Partners L.P.
10.17* Safelite Glass Corp. 1999 Stock Option Plan.
10.18* Exchange and Registration Rights Agreement, dated December
18, 1998, among the Company, Chase Securities Inc., BT Alex.
Brown Incorporated and Salomon Brothers Inc.
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 Arthur Andersen LLP.
23.3* 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
State Street Bank and Trust Company.
</TABLE>
- -------------------------
* Filed herewith.
** To be filed by amendment.
<PAGE> 1
Exhibit 4.4
================================================================================
SAFELITE GLASS CORP.
9 7/8% Series C Senior Subordinated Notes due 2006
=======================
INDENTURE
Dated as of December 18, 1998
=======================
STATE STREET BANK AND TRUST COMPANY,
Trustee
================================================================================
<PAGE> 2
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.
- ----------
<PAGE> 3
3
Note: This Cross-Reference Table shall not, for any purpose, be deemed to be
part of the Indenture.
<PAGE> 4
4
INDEX
-----
Affiliate Transaction ................................................. 59
Agent Members ......................................................... 35
Authenticating Agent .................................................. 37
Blockage Notice ....................................................... 87
Change of Control Offer ............................................... 60
Change of Control Payment Date ........................................ 60
Company ............................................................... 1
Covenant Defeasance ................................................... 79
Exchange Global Note .................................................. 31
Exchange Notes ........................................................ 1
Four Quarter Period ................................................... 5
Global Securities ..................................................... 31
Group ................................................................. 4
IAIs .................................................................. 30
incur ................................................................. 53
Initial Notes ......................................................... 1
Institutional Accredited Investor Note ................................ 30
Legal Defeasance ...................................................... 78
Legal Holiday ......................................................... 103
Net Proceeds Offer Amount ............................................. 57
Net Proceeds Offer Payment Date ....................................... 57
Net Proceeds Offer Trigger Date ....................................... 56, 58
Note Register ......................................................... 38
pay the Securities .................................................... 87, 97
Paying Agent .......................................................... 38
Payment Blockage Period ............................................... 87
Permitted Investments ................................................. 13
Private Placement Legend .............................................. 32
QIBs .................................................................. 29
Reference Date ........................................................ 54
Registrar ............................................................. 38
Regulation S .......................................................... 29
Regulation S Legend ................................................... 33
Regulation S Note ..................................................... 30
Regulation S Temporary Global Note .................................... 30
Required Premiums ..................................................... 16
Resale Restriction Termination Date ................................... 39
Restricted Payment .................................................... 53
Rule 144A ............................................................. 29
Rule 144A Global Note ................................................. 30
Rule 144A Note ........................................................ 30
Securities ............................................................ 1
Stock Permitted Investments ........................................... 18
Transactions Date ..................................................... 5
Trustee ............................................................... 1
<PAGE> 5
TABLE OF CONTENTS
PAGE
ARTICLE I
DEFINITIONS AND INCORPORATION BY REFERENCE ............................ 1
SECTION 1.1. DEFINITIONS ............................................. 1
SECTION 1.2. OTHER DEFINITIONS ....................................... 28
SECTION 1.3. INCORPORATION BY REFERENCE OF TRUST INDENTURE ACT ....... 28
SECTION 1.4. RULES OF CONSTRUCTION ................................... 29
ARTICLE II
THE SECURITIES ........................................................ 29
SECTION 2.1. FORM, DATING AND TERMS ................................. 29
SECTION 2.2. EXECUTION AND AUTHENTICATION ........................... 37
SECTION 2.3. REGISTRAR AND PAYING AGENT ............................. 38
SECTION 2.4. PAYING AGENT TO HOLD MONEY IN TRUST .................... 38
SECTION 2.5. SECURITYHOLDER LISTS ................................... 39
SECTION 2.6. TRANSFER AND EXCHANGE .................................. 39
SECTION 2.7. FORM OF CERTIFICATE TO BE DELIVERED IN
CONNECTION WITH TRANSFERS TO INSTITUTIONAL ACCREDITED
INVESTORS ........................................................... 43
SECTION 2.8. FORM OF CERTIFICATE TO BE DELIVERED IN
CONNECTION WITH TRANSFERS PURSUANT TO REGULATION S .................. 45
SECTION 2.9. REPLACEMENT SECURITIES ................................. 46
SECTION 2.10. OUTSTANDING SECURITIES ................................. 46
SECTION 2.11. TEMPORARY SECURITIES ................................... 47
SECTION 2.12. CANCELLATION ........................................... 47
SECTION 2.13. DEFAULTED INTEREST ..................................... 47
SECTION 2.14. CUSIP NUMBERS .......................................... 48
ARTICLE III
REDEMPTION ............................................................ 48
SECTION 3.1. NOTICES TO TRUSTEE ..................................... 48
SECTION 3.2. SELECTION OF SECURITIES TO BE REDEEMED ................. 48
SECTION 3.3. NOTICE OF REDEMPTION ................................... 49
SECTION 3.4. EFFECT OF NOTICE OF REDEMPTION ......................... 50
SECTION 3.5. DEPOSIT OF REDEMPTION PRICE ............................ 50
SECTION 3.6. SECURITIES REDEEMED IN PART ............................ 50
SECTION 3.7. SPECIAL REDEMPTION. .................................... 50
SECTION 3.8. ENTIRETY OF COLLATERAL ARRANGEMENT ..................... 52
ARTICLE IV
COVENANTS ............................................................. 52
SECTION 4.1. PAYMENT OF SECURITIES .................................. 52
SECTION 4.2. LIMITATION ON LIENS .................................... 52
SECTION 4.3. LIMITATION ON INCURRENCE OF ADDITIONAL
INDEBTEDNESS ........................................................ 53
- i -
<PAGE> 6
PAGE
SECTION 4.4. LIMITATION ON RESTRICTED PAYMENTS .................... 53
SECTION 4.5. LIMITATION ON DIVIDEND AND OTHER PAYMENT RESTRICTIONS
AFFECTING SUBSIDIARIES ............................................ 55
SECTION 4.6. LIMITATION ON ASSET SALES ............................ 56
SECTION 4.7. LIMITATION ON TRANSACTIONS WITH AFFILIATES............ 58
SECTION 4.8. CHANGE OF CONTROL .................................... 60
SECTION 4.9. PROHIBITION ON INCURRENCE OF SENIOR SUBORDINATED DEBT 60
SECTION 4.10. LIMITATION ON PREFERRED STOCK OF SUBSIDIARIES ........ 61
SECTION 4.11. LIMITATION ON FUTURE GUARANTEES ...................... 61
SECTION 4.12. CONDUCT OF BUSINESS .................................. 61
SECTION 4.13. MAINTENANCE OF OFFICE OR AGENCY ...................... 61
SECTION 4.14. CORPORATE EXISTENCE .................................. 61
SECTION 4.15. PAYMENT OF TAXES AND OTHER CLAIMS .................... 62
SECTION 4.16. MAINTENANCE OF PROPERTIES AND INSURANCE .............. 62
SECTION 4.17. COMPLIANCE WITH LAWS ................................. 63
SECTION 4.18. ADDITIONAL INFORMATION ............................... 63
SECTION 4.19. FURTHER INSTRUMENTS AND ACTS ......................... 63
ARTICLE V
SUCCESSOR COMPANY ................................................... 63
SECTION 5.1. WHEN COMPANY MAY MERGE OR TRANSFER ASSETS ............ 63
ARTICLE VI
DEFAULTS AND REMEDIES ............................................... 65
SECTION 6.1. EVENTS OF DEFAULT .................................... 65
SECTION 6.2. ACCELERATION ......................................... 67
SECTION 6.3. OTHER REMEDIES ....................................... 68
SECTION 6.4. WAIVER OF PAST DEFAULTS .............................. 68
SECTION 6.5. CONTROL BY MAJORITY .................................. 69
SECTION 6.6. LIMITATION ON SUITS .................................. 69
SECTION 6.7. RIGHTS OF HOLDERS TO RECEIVE PAYMENT ................. 69
SECTION 6.8. COLLECTION SUIT BY TRUSTEE ........................... 70
SECTION 6.9. TRUSTEE MAY FILE PROOFS OF CLAIM ..................... 70
SECTION 6.10. PRIORITIES ........................................... 70
SECTION 6.11. UNDERTAKING FOR COSTS ................................ 71
ARTICLE VII
TRUSTEE ............................................................. 71
SECTION 7.1. DUTIES OF TRUSTEE .................................... 71
SECTION 7.2. RIGHTS OF TRUSTEE .................................... 72
SECTION 7.3. INDIVIDUAL RIGHTS OF TRUSTEE ......................... 73
SECTION 7.4. TRUSTEE'S DISCLAIMER ................................. 73
SECTION 7.5. NOTICE OF DEFAULTS ................................... 73
SECTION 7.6. REPORTS BY TRUSTEE TO HOLDERS ........................ 73
SECTION 7.7. COMPENSATION AND INDEMNITY ........................... 74
SECTION 7.8. REPLACEMENT OF TRUSTEE ............................... 75
SECTION 7.9. SUCCESSOR TRUSTEE BY MERGER .......................... 75
- ii -
<PAGE> 7
PAGE
SECTION 7.10. ELIGIBILITY; DISQUALIFICATION ....................... 76
SECTION 7.11. PREFERENTIAL COLLECTION OF CLAIMS AGAINST COMPANY ... 76
ARTICLE VIII
DISCHARGE OF INDENTURE; DEFEASANCE ................................ 76
SECTION 8.1. DISCHARGE OF LIABILITY ON SECURITIES ................ 76
SECTION 8.2. LEGAL DEFEASANCE AND COVENANT DEFEASANCE ............ 78
SECTION 8.3. CONDITIONS TO DEFEASANCE ............................ 79
SECTION 8.4. APPLICATION OF TRUST MONEY .......................... 81
SECTION 8.5. REPAYMENT TO COMPANY OR THE SUBSIDIARY GUARANTORS ... 81
SECTION 8.6. REINSTATEMENT ....................................... 82
ARTICLE IX
AMENDMENTS .......................................................... 82
SECTION 9.1. WITHOUT CONSENT OF HOLDERS .......................... 82
SECTION 9.2. WITH CONSENT OF HOLDERS ............................. 83
SECTION 9.3. COMPLIANCE WITH TRUST INDENTURE ACT ................. 85
SECTION 9.4. REVOCATION AND EFFECT OF CONSENTS AND WAIVERS ....... 85
SECTION 9.5. NOTATION ON OR EXCHANGE OF SECURITIES ............... 86
SECTION 9.6. TRUSTEE TO SIGN AMENDMENTS .......................... 86
ARTICLE X
SUBORDINATION ....................................................... 86
SECTION 10.1. AGREEMENT TO SUBORDINATE ............................ 86
SECTION 10.2. LIQUIDATION, DISSOLUTION, BANKRUPTCY ................ 86
SECTION 10.3. DEFAULT ON SENIOR INDEBTEDNESS ...................... 87
SECTION 10.4. ACCELERATION OF PAYMENT OF SECURITIES ............... 88
SECTION 10.5. WHEN DISTRIBUTION MUST BE PAID OVER ................. 88
SECTION 10.6. SUBROGATION ......................................... 88
SECTION 10.7. RELATIVE RIGHTS ..................................... 88
SECTION 10.8. SUBORDINATION MAY NOT BE IMPAIRED BY COMPANY ........ 89
SECTION 10.9. RIGHTS OF TRUSTEE AND PAYING AGENT .................. 89
SECTION 10.10. DISTRIBUTION OR NOTICE TO REPRESENTATIVE ............ 89
SECTION 10.11. ARTICLE X NOT TO PREVENT EVENTS OF DEFAULT OR LIMIT
RIGHT TO ACCELERATE ............................................... 89
SECTION 10.12. TRUST MONEYS NOT SUBORDINATED ....................... 89
SECTION 10.13. TRUSTEE ENTITLED TO RELY ............................ 90
SECTION 10.14. TRUSTEE TO EFFECTUATE SUBORDINATION ................. 90
SECTION 10.15. TRUSTEE NOT FIDUCIARY FOR HOLDERS OF SENIOR
INDEBTEDNESS ...................................................... 90
SECTION 10.16. RELIANCE BY HOLDERS OF SENIOR INDEBTEDNESS ON
SUBORDINATION PROVISIONS .......................................... 91
ARTICLE XI
SUBSIDIARY GUARANTEE ................................................ 91
- iii -
<PAGE> 8
PAGE
SECTION 11.1. SUBSIDIARY GUARANTEE ................................ 91
SECTION 11.2. UNCONDITIONAL GUARANTEE ............................. 91
SECTION 11.3. SUBORDINATION OF GUARANTEE .......................... 92
SECTION 11.4. SEVERABILITY ........................................ 92
SECTION 11.5. RELEASE OF A SUBSIDIARY GUARANTOR ................... 92
SECTION 11.6. LIMITATION OF SUBSIDIARY GUARANTOR'S LIABILITY ...... 93
SECTION 11.7. SUBSIDIARY GUARANTORS MAY CONSOLIDATE, ETC., ON
CERTAIN TERMS ..................................................... 93
SECTION 11.8. CONTRIBUTION ........................................ 94
SECTION 11.9. WAIVER OF SUBROGATION ............................... 95
SECTION 11.10. WAIVER OF STAY, EXTENSION OR USURY LAWS ............. 96
ARTICLE XII
SUBORDINATION OF GUARANTEES ......................................... 96
SECTION 12.1. AGREEMENT TO SUBORDINATE ............................ 96
SECTION 12.2. LIQUIDATION, DISSOLUTION, BANKRUPTCY ................ 96
SECTION 12.3. DEFAULT ON GUARANTOR SENIOR INDEBTEDNESS ............ 97
SECTION 12.4. ACCELERATION OF PAYMENT OF SECURITIES ............... 98
SECTION 12.5. WHEN PAYMENT OR DISTRIBUTION MUST BE PAID OVER ...... 98
SECTION 12.6. SUBROGATION ......................................... 98
SECTION 12.7. RELATIVE RIGHTS ..................................... 99
SECTION 12.8. SUBORDINATION MAY NOT BE IMPAIRED BY SUBSIDIARY
GUARANTOR ......................................................... 99
SECTION 12.9. RIGHTS OF TRUSTEE AND PAYING AGENT .................. 99
SECTION 12.10. DISTRIBUTION OR NOTICE TO REPRESENTATIVE ............ 99
SECTION 12.11. ARTICLE XII NOT TO PREVENT EVENTS OF DEFAULT OR LIMIT
RIGHT TO ACCELERATE ............................................... 100
SECTION 12.12. TRUST MONEYS NOT SUBORDINATED ....................... 100
SECTION 12.13. TRUSTEE ENTITLED TO RELY ............................ 100
SECTION 12.14. TRUSTEE TO EFFECTUATE SUBORDINATION ................. 101
SECTION 12.15. TRUSTEE NOT FIDUCIARY FOR HOLDERS OF GUARANTOR SENIOR
INDEBTEDNESS ...................................................... 101
SECTION 12.16. RELIANCE BY HOLDERS OF GUARANTOR SENIOR INDEBTEDNESS
ON SUBORDINATION PROVISIONS ....................................... 101
ARTICLE XIII
MISCELLANEOUS ....................................................... 101
SECTION 13.1. TRUST INDENTURE ACT CONTROLS ........................ 101
SECTION 13.2. NOTICES ............................................. 101
SECTION 13.3. COMMUNICATION BY HOLDERS WITH OTHER HOLDERS ......... 102
SECTION 13.4. CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT .. 102
SECTION 13.5. STATEMENTS REQUIRED IN CERTIFICATE OR OPINION ....... 102
SECTION 13.6. WHEN SECURITIES DISREGARDED ......................... 103
SECTION 13.7. RULES BY TRUSTEE, PAYING AGENT AND REGISTRAR ........ 103
- iv -
<PAGE> 9
PAGE
SECTION 13.8. LEGAL HOLIDAYS ...................................... 103
SECTION 13.9. GOVERNING LAW ....................................... 103
SECTION 13.10. NO RECOURSE AGAINST OTHERS .......................... 104
SECTION 13.11. SUCCESSORS .......................................... 104
SECTION 13.12. MULTIPLE ORIGINALS .................................. 104
SECTION 13.13. VARIABLE PROVISIONS ................................. 104
SECTION 13.14. QUALIFICATION OF INDENTURE .......................... 104
SECTION 13.15. TABLE OF CONTENTS; HEADINGS ......................... 104
EXHIBITS
EXHIBIT A FORM OF NOTE
EXHIBIT B FORM OF EXCHANGE NOTE
EXHIBIT C FORM OF SUPPLEMENTAL INDENTURE
EXHIBIT D FORM OF PLEDGE AND SECURITY AGREEMENT
- v -
<PAGE> 10
INDENTURE dated as of December 18, 1998, among SAFELITE GLASS CORP., a Delaware
corporation (as further defined below, the "COMPANY") and STATE STREET BANK AND
TRUST COMPANY, a Massachusetts trust company, 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 (i) the Company's 9 7/8%
Series C Senior Subordinated Notes due 2006 (the "INITIAL NOTES"), (ii) 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% Series D Senior
Subordinated Notes due 2006 (the "EXCHANGE NOTES") and (iii) if and when issued
as provided in the Registration Rights Agreement, the Private Exchange
Securities (as defined in the Registration Rights Agreement; together with the
Initial Notes and Exchange Notes, the "SECURITIES"):
ARTICLE I
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.1. DEFINITIONS.
"1996 Issue Date" means December 20, 1996.
"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.
<PAGE> 11
2
"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 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
<PAGE> 12
3
Receivables Transaction. For the purposes of clause (viii), Purchase Money Notes
shall be deemed to be cash.
"Bank Credit Agreement" means the Credit Agreement dated as of the
1996 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 1996 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.
<PAGE> 13
4
"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 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.
<PAGE> 14
5
"Closing" means the date of the closing of the Transactions.
"Code" means the Internal Revenue Code of 1986, as amended.
"Collateral Agreement" has the meaning set forth in Section 3.7.
"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.
"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 "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 (x) directly attributable to
such transaction and (y) factually supportable) attributable to the assets which
are the subject of the Asset Acquisition or Asset Sale during the Four Quarter
<PAGE> 15
6
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
(x) directly attributable to such transaction and (y) 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
(x) directly attributable to such transaction and (y) 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 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
<PAGE> 16
7
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
<PAGE> 17
8
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 that were 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 that were paid to senior management
prior to 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 1996 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.
"Definitive Securities" means certificated Securities, including
Institutional Accredited Investor Notes.
<PAGE> 18
9
"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
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.
"Distribution" means a dividend of up to $67.2 million on the
Company's outstanding Class A Common Stock, a dividend of approximately
$4.7 million representing accrued and unpaid dividends on the Company's 8%
Cumulative Preferred Stock and a redemption of the Company's 8% Cumulative
Preferred Stock for an amount equal to approximately $58.2 million, in each case
paid no more than five Business Days prior to the Vistar Merger.
"Equity Offering" means an offering of Qualified Capital Stock of the
Company (other than the Equity Investment).
"Equity Investment" has the meaning set forth in the Offering
Memorandum.
"Existing Notes" means the $100 million aggregate principal amount of
9 7/8% Senior Subordinated Notes due 2006.
"Existing Note Indenture" means the Indenture dated as of December 20,
1996 between the Company and Fleet National Bank, as trustee, as amended by the
First Supplemental Indenture dated as of December 12, 1997, and as the same may
be further amended, supplemented or otherwise modified from time to time.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
<PAGE> 19
10
"Exchange Global Note" has the meaning set forth in Section 2.1.
"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 1996 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.
"Global Security" has the meaning set forth in Section 2.1.
"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 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 C.
"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
<PAGE> 20
11
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 1996 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 or a guarantee in
respect of the Existing Notes; 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 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
<PAGE> 21
12
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.
"Institutional Accredited Investor Note" has the meaning set forth in
Section 2.1.
"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> 22
13
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.
"Letter of Credit" has the meaning set forth in Section 3.7.
"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 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> 23
14
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.
"Non-Voting Preferred Stock" means the Company's 8% Non-Voting
Preferred Stock, $.01 par value per share, issued by the Company as partial
merger consideration in the Vistar Merger.
"Note Register" means the register of Securities maintained by the
Trustee, pursuant to Section 2.3.
"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 15,
1998 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.
<PAGE> 24
15
"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, the Guarantees, the Existing Notes and the guarantees thereof,
(ii) Indebtedness incurred pursuant to the Bank Credit Agreement in an aggregate
principal amount (x) prior to completion of the Equity Investment, not to exceed
$450 million and (y) thereafter, at any time outstanding not to exceed $388.6
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 since the Issue Date 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,
(2) any such payments relating to the Sale of Excluded Assets in an aggregate
amount not to exceed $30 million and (3) any such payments made with the
proceeds of the Securities and the Equity Investment) and (C) in the case of a
revolving facility, reduced by any required permanent repayments since the Issue
Date (which are accompanied by a corresponding permanent commitment reduction)
thereunder, (iii) other Indebtedness of the Company and its Restricted
Subsidiaries outstanding on the 1996 Issue Date reduced by the amount of any
scheduled amortization payments or mandatory prepayments when actually paid or
permanent reductions thereon since the 1996 Issue Date, (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
<PAGE> 25
16
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 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 (xvii) 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 since the 1996
Issue Date 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
<PAGE> 26
17
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, (xvi) Indebtedness
of Vistar constituting Capitalized Lease Obligations in an aggregate principal
amount not to exceed $2 million and other indebtedness of Vistar constituting
unsecured Indebtedness in an aggregate principal amount not to exceed
$8 million, in each case which was assumed by the Company upon consummation of
the Vistar Merger, and (xvii) 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 1996 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 1996 Issue
Date and Investments made on the 1996 Issue Date pursuant to the
Recapitalization Agreement; (iv) loans and advances to employees and officers of
the Company and its Restricted Subsidiaries since the 1996 Issue Date 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
<PAGE> 27
18
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 (or as if made) since the 1996 Issue Date 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 1996 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 since the 1996 Issue Date 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 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
<PAGE> 28
19
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;
<PAGE> 29
20
(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 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 1996 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 1996 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.
<PAGE> 30
21
"Pledge Agreement" has the meaning set forth in Section 3.7.
"Pledged Funds" has the meaning set forth in Section 3.7.
"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.
"Private Exchange Securities" shall have the meaning set forth in the
Registration Rights Agreement.
"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" has the meaning set forth in Section 2.1.
"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,
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
<PAGE> 31
22
customarily granted in connection with asset securitization transactions
involving accounts receivable.
"Recapitalization" means the transactions which occurred on the 1996
Issue Date as contemplated by the Recapitalization Agreement.
"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 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.
<PAGE> 32
23
"Registered Exchange Offer" shall have the meaning set forth in the
Registration Rights Agreement.
"Registrar" shall have the meaning set forth in Section 2.3.
"Registration Rights Agreement" means the Exchange and Registration
Rights Agreement, dated December 18, 1998, among the Company, Chase Securities
Inc., BT Alex. Brown Incorporated and Salomon Brothers Inc.
"Regulation S Note" has the meaning set forth in Section 2.1.
"Regulation S Global Note" has the meaning set forth in Section 2.1.
"Regulation S Legend" has the meaning set forth in Section 2.1.
"Related Party" means Thomas H. Lee Company and any Affiliate of
Thomas H. Lee Company.
"Release Date" has the meaning set forth in Section 2.1.
"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 Period" means the 40 consecutive days beginning on and
including the later of (A) the day on which the Initial Notes are offered to
persons other than distributors (as defined in Regulation S under the Securities
Act) and (B) the Issue Date.
"Restricted Subsidiary" of any Person means any Subsidiary of such
Person which at the time of determination is not an Unrestricted Subsidiary.
"Restricted Securities Legend" means the Private Placement Legend set
forth in clause (A) of Section 2.1(c) or the Regulation S Legend set forth in
clause (B) of Section 2.1(c), as applicable.
"Rule 144A" has the meaning set forth in Section 2.1.
<PAGE> 33
24
"Rule 144A Note" has the meaning set forth in Section 2.1.
"Rule 144A Global Note" has the meaning set forth in Section 2.1.
"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 1996 Issue Date, together with improvements,
repairs, modifications and additions thereon in the ordinary course of business.
"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 1996 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.
"S&P" means Standard & Poor's Ratings Service, a division of The
McGraw-Hill Companies, Inc. and its successors.
"Secured Indebtedness" means any Indebtedness of the Company secured
by a Lien.
"Securities Custodian" means the custodian with respect to the Global
Security (as appointed by the Depositary), or any successor Person thereto and
shall initially be the Trustee.
"Securities Intermediary" has the meaning set forth in Section 3.7.
"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 1996 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 or the Existing Notes; PROVIDED,
HOWEVER, that Senior Indebtedness shall not include (1) any obligation of the
Company to any Subsidiary of the Company,
<PAGE> 34
25
(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 (including, without
limitation, the Existing Notes) 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, the Existing
Notes and any other Indebtedness of the Company that specifically provides that
such Indebtedness is to rank pari passu with the Securities or the Existing
Notes 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 such
fiscal year, was the owner of more than 10% of the consolidated assets of such
Person.
"Special Redemption" has the meaning set forth in Section 3.7.
"Special Redemption Date" has the meaning set forth in Section 3.7.
"Special Redemption Price" has the meaning set forth in Section 3.7.
"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.
<PAGE> 35
26
"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 1996 Issue Date or thereafter incurred) which is
expressly subordinate in right of payment to the Securities or the Existing
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.
"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. ss.ss.
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.
"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.
"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
<PAGE> 36
27
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.
"Vistar" means Vistar, Inc.
"Vistar Merger" means the merger contemplated by the Vistar Merger
Agreement.
"Vistar Merger Agreement" means that certain Merger Agreement, dated
as of October 10, 1997, by and between Vistar and the Company.
"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
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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.
All other TIA terms used in this Indenture that are defined by the
TIA, defined by the TIA reference to another
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29
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 non-interest 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, DATING AND TERMS. (a) The Initial Notes are being
offered and sold by the Company pursuant to a Purchase Agreement, dated December
15, 1998, among the Company, Chase Securities Inc., BT Alex. Brown Incorporated
and Salomon Brothers Inc. The Initial Notes will be resold initially only to
(A) qualified institutional buyers (as defined in Rule 144A under the Securities
Act ("RULE 144A")) in reliance on Rule 144A ("QIBS") and (B) Persons other than
U.S. Persons (as defined in Regulation S under the Securities Act ("REGULATION
S")) in reliance on Regulation S. Such Initial Notes may thereafter be
transferred to among others, QIBs, purchasers in reliance on Regulation S and
IAIs (as defined herein) in accordance with Rule 501 of the Securities Act in
accordance with the procedures described herein.
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Initial Notes offered and sold to qualified institutional buyers in
the United States of America in reliance on Rule 144A (the "RULE 144A NOTE")
will be issued on the Issue Date in the form of a permanent global Security,
without interest coupons, substantially in the form of Exhibit A, which is
hereby incorporated by reference and made a part of this Indenture, including
appropriate legends as set forth in Section 2.1(c) (the "RULE 144A GLOBAL
NOTE"), deposited with the Trustee, as custodian for the Depositary, duly
executed by the Company and authenticated by the Trustee as hereinafter
provided. The Rule 144A Global Note may be represented by more than one
certificate, if so required by the Depositary's rules regarding the maximum
principal amount to be represented by a single certificate. The aggregate
principal amount of the Rule 144A Global Note may from time to time be increased
or decreased by adjustments made on the records of the Trustee, as custodian for
the Depositary or its nominee, as hereinafter provided.
Initial Notes offered and sold outside the United States of America in
reliance on Regulation S (the "REGULATION S NOTE") will be issued on the Issue
Date in the form of a permanent global Security, without interest coupons,
substantially in the form set forth in Exhibit A, which is hereby incorporated
by reference and made a part of this Indenture, including appropriate legends as
set forth in Section 2.1(c) (a "REGULATION S GLOBAL NOTE"). The Regulation S
Global Note will be deposited with the Trustee, as custodian for the Depositary,
duly executed by the Company and authenticated by the Trustee as hereinafter
provided. The Regulation S Global Note may be represented by more than one
certificate, if so required by the Depositary's rules regarding the maximum
principal amount to be represented by a single certificate. The aggregate
principal amount of the Regulation S Global Note may from time to time be
increased or decreased by adjustments made on the records of the Trustee, as
custodian for the Depositary or its nominee, as hereinafter provided.
Securities resold to institutional "accredited investors" (as defined
in Rules 501(a)(1), (2), (3) and (7) under the Securities Act) who are not QIBs
("IAIS") in the United States of America will be issued in non-global, fully
registered form, without interest coupons, substantially in the form set forth
in Exhibit A, which is hereby incorporated by reference and made a part of this
Indenture, including appropriate legends as set forth in Section 2.1(c), duly
executed by the Company and authenticated by the Trustee as hereinafter provided
(each, an "INSTITUTIONAL ACCREDITED INVESTOR NOTE"). Upon such issuance, the
Trustee shall register such Institutional Accredited Investor Note in the name
of the beneficial owner or owners of such note (or the nominee of such
beneficial owner or owners) and deliver the certificates for such Institutional
Accredited Investor Notes to the respective beneficial owner or owners. Upon
transfer of such Institutional Accredited Investor Notes to a QIB or to a
<PAGE> 40
31
Non-U.S. Person, such Institutional Accredited Investor Notes will, unless the
Rule 144A Global Note, in the case of a transfer to a QIB, or the Regulation S
Global Note, in the case of a transfer to a Non-U.S. Person, has previously been
exchanged for Definitive Securities pursuant to Section 2.1(e), be exchanged for
an interest in a Global Security pursuant to the provisions of Section 2.6.
Exchange Notes exchanged for interests in the Rule 144A Note, the
Regulation S Note and the Institutional Accredited Investor Notes will be issued
in the form of a permanent global Security substantially in the form of Exhibit
B, which is hereby incorporated by reference and made a part of this Indenture,
deposited with the Trustee as hereinafter provided, including the appropriate
legend set forth in Section 2.1(c) (the "EXCHANGE GLOBAL NOTE"). The Exchange
Global Note may be represented by more than one certificate, if so required by
the Depositary's rules regarding the maximum principal amount to be represented
by a single certificate.
The Rule 144A Global Note, the Regulation S Global Note and the
Exchange Global Note are sometimes collectively herein referred to as the
"GLOBAL SECURITIES."
The principal of (and premium, if any) and interest on the Securities
shall be payable at the office or agency of the Company maintained for such
purpose in The City of New York, or at such other office or agency of the
Company as may be maintained for such purpose pursuant to Section 2.3; provided,
however, that, at the option of the Company, each installment of interest may be
paid by (i) check mailed to addresses of the Persons entitled thereto as such
addresses shall appear on the Note Register or (ii) wire transfer to an account
located in the United States maintained by the payee. Payments in respect of
Securities represented by a Global Security (including principal, premium and
interest) will be made by wire transfer of immediately available funds to the
accounts specified by the Depositary.
The Private Exchange Securities shall be in the form of Exhibit A. The
Securities may have notations, legends or endorsements required by law, stock
exchange rule or usage, in addition to those set forth in Exhibits A and B and
in Section 2.1(c). 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 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.
<PAGE> 41
32
(b) DENOMINATIONS. The Securities shall be issuable only in fully
registered form, without coupons, and only in denominations of $1,000 and any
integral multiple thereof.
(c) RESTRICTIVE LEGENDS. Unless and until (i) an Initial Note or
Private Exchange Security is sold under an effective registration statement or
(ii) an Initial Note is exchanged for an Exchange Note in connection with an
effective registration statement, in each case pursuant to the Registration
Rights Agreement or a similar agreement,
(A) the Rule 144A Global Note and the Institutional Accredited
Investor Notes shall bear the following legend (the "PRIVATE PLACEMENT LEGEND")
on the face thereof:
"THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), OR THE SECURITIES LAWS OF ANY STATE OR
OTHER JURISDICTION. 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, SUCH REGISTRATION.
THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES, ON ITS OWN
BEHALF AND ON BEHALF OF ANY INVESTOR ACCOUNT FOR WHICH IT HAS PURCHASED
SECURITIES, TO OFFER, SELL OR OTHERWISE TRANSFER SUCH SECURITY, PRIOR TO
THE DATE (THE "RESALE RESTRICTION TERMINATION DATE") WHICH IS TWO YEARS
AFTER THE LATER 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 UNDER THE SECURITIES ACT, 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 TRANSACTION
INVOLVING A MINIMUM PRINCIPAL AMOUNT OF $250,000 OF SECURITIES, FOR
INVESTMENT PURPOSES AND NOT WITH A VIEW TO OR FOR OFFER OR SALE IN
CONNECTION
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33
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."; and
(B) the Regulation S Global Note shall bear the following legend (the
"REGULATION S LEGEND") on the face thereof:
"THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE
OFFERED OR SOLD WITHIN THE UNITED STATES OR TO OR FOR THE ACCOUNT OR
BENEFIT OF, U.S. PERSONS EXCEPT AS SET FORTH IN THE FOLLOWING SENTENCE. BY
ITS ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS THAT IT IS NOT A U.S.
PERSON NOR IS IT PURCHASING FOR THE ACCOUNT OF A U.S. PERSON AND IS
ACQUIRING THIS SECURITY IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH
REGULATION S UNDER THE SECURITIES ACT ("REGULATION S"), (2) BY ITS
ACCEPTANCE HEREOF AGREES TO OFFER, SELL OR OTHERWISE TRANSFER SUCH
SECURITY, PRIOR TO THE DATE (THE "RESALE RESTRICTION TERMINATION DATE")
WHICH IS TWO YEARS AFTER THE LATER 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 UNDER THE SECURITIES ACT, 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, (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 TRANSACTION INVOLVING A MINIMUM
PRINCIPAL AMOUNT OF $250,000 OF SECURITIES, 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
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(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) OR (F) TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL,
CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO EACH OF THEM AND IN
THE CASE OF THE FOREGOING CLAUSE (E), 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
AFTER 40 CONSECUTIVE DAYS BEGINNING ON AND INCLUDING THE LATER OF (A) THE
DAY ON WHICH THE SECURITIES ARE OFFERED TO PERSONS OTHER THAN DISTRIBUTORS
(AS DEFINED IN REGULATION S) AND (B) THE DATE OF THE CLOSING OF THE
ORIGINAL OFFERING. AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION,"
"UNITED STATES" AND "U.S. PERSON" HAVE THE MEANINGS GIVEN TO THEM BY
REGULATION S UNDER THE SECURITIES ACT."
(C) The Global Securities, whether or not an Initial Note, shall bear
the following legend on the face thereof:
"UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF
THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), NEW YORK, NEW
YORK, TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR
PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO.
OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF
DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR
OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL
INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST
HEREIN.
TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN WHOLE,
BUT NOT IN PART, TO NOMINEES OF DTC OR TO A SUCCESSOR THEREOF OR SUCH
SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY SHALL
BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH
IN THE INDENTURE REFERRED TO ON THE REVERSE HEREOF."
(D) Each Institutional Accredited Investor Note shall also bear the
following additional legend on the face thereof:
IN CONNECTION WITH ANY TRANSFER, THE HOLDER WILL DELIVER TO THE REGISTRAR
AND TRANSFER AGENT SUCH CERTIFICATES AND OTHER INFORMATION AS SUCH TRANSFER
AGENT MAY REASONABLY REQUIRE TO CONFIRM THAT THE TRANSFER COMPLIED WITH THE
FOREGOING RESTRICTIONS.
<PAGE> 44
35
(d) BOOK-ENTRY PROVISIONS. (i) This SECTION 2.1(d) shall apply only to
Global Securities deposited with the Trustee, as custodian for the Depositary.
(ii) Each Global Security initially shall (x) be registered in the
name of the Depositary for such Global Security or the nominee of the
Depositary, (y) be delivered to the Trustee as custodian for the Depositary and
(z) bear legends as set forth in SECTION 2.1(C).
(iii) Members of, or participants in, the Depositary ("AGENT MEMBERS")
shall have no rights under this Indenture with respect to any Global Security
held on their behalf by the Depositary or by the Trustee as the custodian of the
Depositary or under such Global Security, and the Depositary 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 Depositary
or impair, as between the Depositary and its Agent Members, the operation of
customary practices of the Depositary governing the exercise of the rights of a
holder of a beneficial interest in any Global Security.
(iv) In connection with any transfer of a portion of the beneficial
interest in a Global Security pursuant to subsection (e) of this Section to
beneficial owners who are required to hold Definitive Securities or to IAIs who
shall hold certificated Institutional Accredited Investor Notes pursuant to
Section 2.1(a), the Securities Custodian shall reflect on its books and records
the date and a decrease in the principal amount of such Global Security in an
amount equal to the principal amount of the beneficial interest in the Global
Security to be transferred, and the Company shall execute, and the Trustee shall
authenticate and deliver, one or more Definitive Securities of like tenor and
amount.
(v) In connection with the transfer of an entire Global Security to
beneficial owners pursuant to subsection (e) of this Section, such Global
Security shall be deemed to be surrendered to the Trustee for cancellation, and
the Company shall execute, and the Trustee shall authenticate and deliver, to
each beneficial owner identified by the Depositary in exchange for its
beneficial interest in such Global Security, an equal aggregate principal amount
of Definitive Securities of authorized denominations.
(vi) 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
<PAGE> 45
36
Members, to take any action which a Holder is entitled to take under this
Indenture or the Securities.
(e) DEFINITIVE SECURITIES. (i) Except as provided below, owners of
beneficial interests in Global Securities will not be entitled to receive
Definitive Securities. If required to do so pursuant to any applicable law or
regulation, beneficial owners may obtain Definitive Securities in exchange for
their beneficial interests in a Global Security upon written request in
accordance with the Depositary's and the Registrar's procedures. In addition,
Definitive Securities shall be transferred to all beneficial owners in exchange
for their beneficial interests in a Global Security if (a) the Depositary
notifies the Company that it is unwilling or unable to continue as depositary
for such Global Security or the Depositary ceases to be a clearing agency
registered under the Exchange Act, at a time when the Depositary is required to
be so registered in order to act as depositary, and in each case a successor
depositary is not appointed by the Company within 90 days of such notice or,
(b) the Company executes and delivers to the Trustee and Registrar an Officers'
Certificate stating that such Global Security shall be so exchangeable or (c) an
Event of Default has occurred and is continuing and the Registrar has received a
request from the Depositary.
(ii) Any Definitive Security delivered in exchange for an interest in
a Global Security pursuant to Section 2.1(d)(iv) or (v) shall, except as
otherwise provided by Section 2.6(c), bear the applicable legend regarding
transfer restrictions applicable to the Definitive Security set forth in Section
2.1(c).
(iii) In connection with the exchange of a Definitive Security for a
beneficial interest in a Global Security pursuant to a transfer of an
Institutional Accredited Investor Note to a QIB or a Non-U.S. Person, upon
receipt by the Trustee of such Institutional Accredited Investor Note, duly
endorsed or accompanied by appropriate instruments of transfer in accordance
with Section 2.6(a), the Trustee shall cancel such Institutional Accredited
Investor Note and cause, or direct the Securities Custodian to cause, in
accordance with the standing instructions and procedures existing between the
Depositary 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 to the Depositary and, upon receipt thereof, the Securities
Custodian shall reflect on its books and records the date and an increase in the
principal amount of such Global Security in an amount equal to the principal
amount of the Institutional
<PAGE> 46
37
Accredited Investor Note so transferred to reflect the exchange of such
Institutional Accredited Investor Note for an interest in the Global Security.
(iv) In connection with the exchange of a portion of a Definitive
Security for a beneficial interest in a Global Security, the Trustee shall
cancel such Definitive Security, and the Company shall execute, and the Trustee
shall authenticate and deliver, to the transferring Holder a new Definitive
Security representing the principal amount not so transferred.
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 $55 million and (2) Exchange
Notes for issue only in a Registered Exchange Offer and Private Exchange
Securities 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 (a "COMPANY
ORDER"). 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, Exchange Notes
or Private Exchange Securities. The aggregate principal amount of Securities
outstanding at any time may not exceed $55 million except as provided in Section
2.9.
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.
In case the Company, pursuant to Article V, shall be consolidated or
merged with or into any other Person or shall
<PAGE> 47
38
convey, transfer, lease or otherwise dispose of its properties and assets
substantially as an entirety to any Person, and the successor Person resulting
from such consolidation, or surviving such merger, or into which the Company
shall have been merged, or the Person which shall have received a conveyance,
transfer, lease or other disposition as aforesaid, shall have executed an
indenture supplemental hereto with the Trustee pursuant to Article V, any of the
Securities authenticated or delivered prior to such consolidation, merger,
conveyance, transfer, lease or other disposition may, from time to time, at the
request of the successor Person, be exchanged for other Securities executed in
the name of the successor Person with such changes in phraseology and form as
may be appropriate, but otherwise in substance of like tenor as the Securities
surrendered for such exchange and of like principal amount; and the Trustee,
upon Company Order of the successor Person, shall authenticate and deliver
Securities as specified in such order for the purpose of such exchange. If
Securities shall at any time be authenticated and delivered in any new name of a
successor Person pursuant to this Section 2.2 in exchange or substitution for or
upon registration of transfer of any Securities, such successor Person, at the
option of the Holders but without expense to them, shall provide for the
exchange of all Securities at the time outstanding for Securities authenticated
and delivered in such new name.
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 "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 "NOTE
REGISTER"). 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
<PAGE> 48
39
principal of, premium if any, 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, premium if any, 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.
SECTION 2.6. TRANSFER AND EXCHANGE.
(a) The following provisions shall apply with respect to any proposed
transfer of a Rule 144A Note or an Institutional Accredited Investor Note prior
to the date which is two years after the later of the date of its original issue
and the last date on which the Company or any affiliate of the Company was the
owner of such Securities (or any predecessor thereto) (the "RESALE RESTRICTION
TERMINATION DATE"):
(i) a transfer of a Rule 144A Note or an Institutional Accredited
Investor Note or a beneficial interest therein to a QIB shall be made upon the
representation of the transferee in the form of an assignment on the reverse of
the certificate that it is purchasing the Security for its own account or an
account with respect to which it exercises sole investment discretion and that
it and any such account is a "qualified institutional buyer" within the meaning
of Rule 144A, and is aware that the sale to it is being made in reliance on Rule
144A and acknowledges that it has received such information regarding the
Company as the undersigned has requested pursuant to Rule 144A or has determined
not to request such information and that it is aware that the
<PAGE> 49
40
transferor is relying upon its foregoing representations in order to claim the
exemption from registration provided by Rule 144A;
(ii) a transfer of a Rule 144A Note or an Institutional Accredited
Investor Note or a beneficial interest therein to an IAI shall be made upon
receipt by the Trustee or its agent of a certificate substantially in the form
set forth in Section 2.7 from the proposed transferee and, if requested by the
Company or the Trustee, the delivery of an opinion of counsel, certification
and/or other information satisfactory to each of them; and
(iii) a transfer of a Rule 144A Note or an Institutional Accredited
Investor Note or a beneficial interest therein to a Non-U.S. Person shall be
made upon receipt by the Trustee or its agent of a certificate substantially in
the form set forth in Section 2.8 from the proposed transferee and, if requested
by the Company or the Trustee, the delivery of an opinion of counsel,
certification and/or other information satisfactory to each of them.
(b) The following provisions shall apply with respect to any proposed
transfer of a Regulation S Note prior to the expiration of the Restricted
Period:
(i) a transfer of a Regulation S Note or a beneficial interest therein
to a QIB shall be made upon the representation of the transferee, in the form of
assignment on the reverse of the certificate, that it is purchasing the Security
for its own account or an account with respect to which it exercises sole
investment discretion and that it and any such account is a "qualified
institutional buyer" within the meaning of Rule 144A, and is aware that the sale
to it is being made in reliance on Rule 144A and acknowledges that it has
received such information regarding the Company as the undersigned has requested
pursuant to Rule 144A or has determined not to request such information and that
it is aware that the transferor is relying upon its foregoing representations in
order to claim the exemption from registration provided by Rule 144A;
(ii) a transfer of a Regulation S Note or a beneficial interest
therein to an IAI shall be made upon receipt by the Trustee or its agent of a
certificate substantially in the form set forth in Section 2.7 from the proposed
transferee and, if requested by the Company or the Trustee, the delivery of an
opinion of counsel, certification and/or other information satisfactory to each
of them; and
(iii) a transfer of a Regulation S Note or a beneficial interest
therein to a Non-U.S. Person shall be made upon receipt by the Trustee or its
agent of a certificate substantially in the form set forth in Section 2.8 hereof
from the proposed transferee and, if requested by the Company or the Trustee,
receipt by the
<PAGE> 50
41
Trustee or its agent of an opinion of counsel, certification and/or other
information satisfactory to each of them.
After the expiration of the Restricted Period, interests in the Regulation
S Note may be transferred without requiring the certifications set forth in
Section 2.7, Section 2.8 or any additional certification.
(c) RESTRICTED SECURITIES LEGEND. Upon the transfer, exchange or
replacement of Securities not bearing a Restricted Securities Legend, the
Registrar shall deliver Securities that do not bear a Restricted Securities
Legend. Upon the transfer, exchange or replacement of Securities bearing a
Restricted Securities Legend, the Registrar shall deliver only Securities that
bear a Restricted Securities Legend unless there is delivered to the Registrar
an Opinion of Counsel to the effect that neither such legend nor the related
restrictions on transfer are required in order to maintain compliance with the
provisions of the Securities Act.
(d) The Company shall deliver to the Trustee an Officer's Certificate
setting forth the Resale Restriction Termination Date and the Restricted Period.
The Registrar shall retain copies of all letters, notices and other written
communications received pursuant to Section 2.1 and this Section 2.6. The
Company shall have the right to inspect and make copies of all such letters,
notices or other written communications at any reasonable time upon the giving
of reasonable written notice to the Registrar.
(e) 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 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, assessments 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 any Security for a period beginning (1) 15 days
before the mailing of a notice of an offer to repurchase or redeem Securities
and ending at the
<PAGE> 51
42
close of business on the day of such mailing or (2) 15 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) Any Definitive Security (including any Institutional Accredited
Investor Note) delivered in exchange for an interest in a Global Security
pursuant to Section 2.1(d) shall, except as otherwise provided by Section
2.6(c), bear the applicable legend regarding transfer restrictions applicable to
the Definitive Security set forth in Section 2.1(c).
(vi) 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.
(f) 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 Depositary or other Person with respect to
the accuracy of the records of the Depositary 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 Depositary) 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
Depositary 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
Depositary subject to the applicable rules and procedures of the Depositary. The
Trustee may rely and shall be fully protected in relying upon information
furnished by the Depositary 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
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43
any Security (including any transfers between or among Depositary 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 Indenture, and to examine the same to determine substantial compliance
as to form with the express requirements hereof.
(iii) Each beneficial owner of an interest in any Security agrees to
indemnify the Company and the Trustee against any liability that may result from
the transfer, exchange or assignment by such beneficial owner of such interest
in violation of any provision of this Indenture and/or applicable United States
federal or state securities law.
SECTION 2.7. FORM OF CERTIFICATE TO BE DELIVERED IN CONNECTION WITH
TRANSFERS TO INSTITUTIONAL ACCREDITED INVESTORS.
[Date]
State Street Bank and Trust Company
Two International Place
Boston, Massachusetts 02110
Attention: Corporate Trust Services Department
Dear Sirs:
This certificate is delivered to request a transfer of $
principal amount of the 9 7/8% Series C Senior Subordinated Notes due 2006 (the
"Securities") of Safelite Glass Corp. (the "Company").
Upon transfer, the Securities would be registered in the name of the
new beneficial owner as follows:
Name: ___________________________________
Address: ________________________________
Taxpayer ID Number: _____________________
The undersigned represents and warrants to you that:
1. We are an institutional "accredited investor" (as defined in Rule
501(a)(1), (2), (3) or (7) under the Securities Act of 1933, as amended (the
"Securities Act")) purchasing for our own account or for the account of such an
institutional "accredited investor" at least $250,000 principal amount of the
Securities, and we are acquiring the Securities not with a view to, or for offer
or sale in connection with, any distribution in violation of the Securities Act.
We have such knowledge and experience in financial and business matters as to be
capable of evaluating the merits and risk of our investment in the
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44
Securities and we invest in or purchase securities similar to the Securities in
the normal course of our business. We and any accounts for which we are acting
are each able to bear the economic risk of our or its investment.
2. We understand that the Securities have not been registered under
the Securities Act and, unless so registered, may not be sold except as
permitted in the following sentence. We agree on our own behalf and on behalf of
any investor account for which we are purchasing Securities to offer, sell or
otherwise transfer such Securities prior to the date which is two years after
the later of the date of original issue and the last date on which the Company
or any affiliate of the Company was the owner of such Securities (or any
predecessor thereto) (the "Resale Restriction Termination Date") only (a) to the
Company, (b) pursuant to a registration statement which has been declared
effective under the Securities Act, (c) in a transaction complying with the
requirements of Rule 144A under the Securities Act, to a person we reasonably
believe is a qualified institutional buyer under Rule 144A (a "QIB") that
purchases for its own account or for the account of a QIB and 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 purchasing for its own account or for the account of such
an institutional "accredited investor," in each case in a minimum principal
amount of Securities of $250,000 or (f) pursuant to any other available
exemption from the registration requirements of the Securities Act, subject in
each of the foregoing cases to any requirement of law that the disposition of
our property or the property of such investor account or accounts be at all
times within our or their control and in compliance with any applicable state
securities laws. The foregoing restrictions on resale will not apply subsequent
to the Resale Restriction Termination Date. If any resale or other transfer of
the Securities is proposed to be made pursuant to clause (e) above prior to the
Resale Restriction Termination Date, the transferor shall deliver a letter from
the transferee substantially in the form of this letter to the Company and the
Trustee, which shall provide, among other things, that the transferee is an
institutional "accredited investor" (within the meaning of Rule 501(a)(1), (2),
(3) or (7) under the Securities Act) and that it is acquiring such Securities
for investment purposes and not for distribution in violation of the Securities
Act. Each purchaser acknowledges that the Company and the Trustee reserve the
right prior to any offer, sale or other transfer prior to the Resale Restriction
Termination Date of the Securities pursuant to clauses (d), (e) or (f) above to
require
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the delivery of an opinion of counsel, certifications and/or other information
satisfactory to the Company and the Trustee.
TRANSFEREE:_____________________
BY______________________________
Signature Medallion Guaranteed
SECTION 2.8. FORM OF CERTIFICATE TO BE DELIVERED IN CONNECTION WITH
TRANSFERS PURSUANT TO REGULATION S.
[Date]
State Street Bank and Trust Company
Two International Place
Boston, Massachusetts 02110
Attention: Corporate Trust Services Department
Re: Safelite Glass Corp.
9 7/8% SERIES C SENIOR SUBORDINATED NOTES DUE 2006 (THE
"SECURITIES")
Ladies and Gentlemen:
In connection with our proposed sale of $________ aggregate principal
amount of the Securities, we confirm that such sale has been effected pursuant
to and in accordance with Regulation S under the United States Securities Act of
1933, as amended (the "Securities Act"), and, accordingly, we represent that:
(a) the offer of the Securities was not made to a person in the United
States;
(b) either (i) at the time the buy order was originated, the transferee was
outside the United States or we and any person acting on our behalf reasonably
believed that the transferee was outside the United States or (ii) the
transaction was executed in, on or through the facilities of a designated
off-shore securities market and neither we nor any person acting on our behalf
knows that the transaction has been pre-arranged with a buyer in the United
States;
(c) no directed selling efforts have been made in the United States in
contravention of the requirements of Rule 903(b) or Rule 904(b) of Regulation S,
as applicable; and
(d) the transaction is not part of a plan or scheme to evade the
registration requirements of the Securities Act.
In addition, if the sale is made during a restricted period and the
provisions of Rule 903(c)(3) or Rule 904(c)(1) of
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46
Regulation S are applicable thereto, we confirm that such sale has been made in
accordance with the applicable provisions of Rule 903(c)(3) or Rule 904(c)(1),
as the case may be.
You and the Company are entitled to rely upon this letter and are
irrevocably authorized to produce this letter or a copy hereof to any interested
party in any administrative or legal proceedings or official inquiry with
respect to the matters covered hereby. Terms used in this certificate have the
meanings set forth in Regulation S.
Very truly yours,
[Name of Transferor]
By:____________________________
----------------------------
Authorized Signature Signature Medallion Guaranteed
SECTION 2.9. 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 2.10. 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 2.9, 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
<PAGE> 56
47
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 2.11. 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 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 2.12. 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 2.13. 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
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48
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 2.14. 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 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
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49
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.
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
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50
(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.
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.
SECTION 3.7. SPECIAL REDEMPTION. Unless the Company shall have
received net cash proceeds of at least $50 million from the issuance of
Qualified Capital Stock in the Equity Investment on or prior to January 29,
1999, the Company shall redeem the Securities (the "SPECIAL REDEMPTION") on
February 3, 1999 (or such earlier date selected by the Company, the "SPECIAL
<PAGE> 60
51
REDEMPTION DATE") at a redemption price (the "SPECIAL REDEMPTION PRICE") equal
to 92.649% of the original principal amount of the Securities, plus accrued and
unpaid interest thereon from December 18, 1998 to the Special Redemption Date.
Pursuant to the Pledge and Security Agreement dated as of December 18,
1998 (as the same may be amended, modified or otherwise supplemented from time
to time, the "PLEDGE AGREEMENT") between the Company and State Street Bank and
Trust Company, in its capacities as Trustee and collateral agent (the
"COLLATERAL AGENT")and The Chase Manhattan Bank, as securities intermediary (the
"SECURITIES INTERMEDIARY"), in the form annexed hereto as Exhibit D, the Company
shall deposit $46.4 million of the proceeds of the Offering (as defined in the
Offering Memorandum)into a securities account (the "PLEDGED FUNDS") for the
benefit of the Holders. The Collateral Agent will exercise control over the
Pledged Funds as collateral for the Securities pursuant to the Pledge Agreement
until such funds are applied to complete the Special Redemption, or such earlier
time that the Equity Investment is completed. The Company shall deliver to the
Collateral Agent an irrevocable letter of credit issued under the Bank Credit
Agreement in favor of the Collateral Agent for the benefit of the holders of the
Notes in the amount of $5,266,030 (the "Letter of Credit") so that the Pledged
Funds originally deposited in the Account (as defined in the Pledge Agreement)
on the Issue Date, together with such Letter of Credit, will be sufficient to
complete the redemption of the Securities at the Special Redemption Price on the
Special Redemption Date.
If the Special Redemption occurs, the funds owing in respect of such
Special Redemption shall be paid to Holders on the Special Redemption Date. The
Pledge Agreement provides that if, on or prior to January 29, 1999, the Company
delivers to the Trustee a certificate substantially in the form set forth in the
Pledge Agreement stating that the Equity Investment has been completed, then
simultaneously with the completion of the Equity Investment, the Collateral
Agent will release to the Company (through instructions to the Securities
Intermediary) the Pledged Funds, and the Pledge Agreement will terminate. In
addition, the Letter of Credit issued in favor of the Collateral Agent for the
benefit of the holders of the Notes on the Issue Date as described above will be
canceled.
The Company shall apply $50 million of the proceeds of the Equity
Investment to repay $35 million of revolving credit loans under the Bank Credit
Agreement and $15 million to the repayment of term loans under the Bank Credit
Agreement.
Pending such release of funds to the Company or the occurrence of the
Special Redemption, such funds shall be controlled by the Collateral Agent
through instructions to the Securities Intermediary and may be invested, as
directed by the Company, in cash and/or Cash Equivalents (subject to the
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52
restrictions set forth in the Pledge Agreement). In connection with the Special
Redemption, notice of such Special Redemption will be mailed by overnight
delivery to each Holder at the address last drawn on the Registrar's books not
less than three Business Days prior to the Special Redemption Date. The notice
shall identify such notice of redemption as pursuant to the Special Redemption
and the CUSIP number, if any, on the Securities being redeemed. 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 3.8. ENTIRETY OF COLLATERAL ARRANGEMENT. The Pledge Agreement
is being executed and accepted by the Trustee subject to all terms and
conditions of its acceptance of the trust under this Indenture, as fully as if
the terms hereof were set forth at length in the Pledge Agreement.
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.
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
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Liens and (ii) in all other cases, the Securities are equally and ratably
secured, except for (A) Liens existing as of the 1996 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 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 Section 4.3 or (iii) the
aggregate amount of Restricted Payments made subsequent to the 1996 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
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54
1996 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 1996 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 1996 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) since the 1996 Issue Date 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 1996 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
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
since the 1996 Issue
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55
Date, 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; (7) payments made on
the 1996 Issue Date pursuant to the Recapitalization Agreement; and (8) payment
of the Distribution. In determining the aggregate amount of Restricted Payments
made subsequent to the 1996 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)(ii) 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 clauses (2)(i), (4), (5), (6), (7) and (8) shall be excluded from
such calculation.
(c) The Company shall not permit the payment of dividends in respect
of the Non-Voting Preferred Stock unless the Company exercises its optional
right to redeem the Non-Voting Preferred Stock (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 or the Existing Notes 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 1996 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
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
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56
agreement or instrument governing Capital Stock of any Person that is acquired
after the 1996 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 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
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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 Note 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). Any offer with
respect to Other Debt shall be made and consummated concurrently with any Net
Proceeds Offer.
"Other Debt" shall mean other Indebtedness of the Company that ranks
pari passu with the Securities and requires that an offer to purchase such Other
Debt be made upon consummation of an Asset Sale.
"Note Offer Amount" means (i) if an offer to purchase Other Debt is
not being made, the amount of the Net Proceeds Offer Amount and (ii) if an offer
to purchase Other Debt is being made, an amount equal to the product of (x) the
Net Proceeds Offer Amount and (y) a fraction the numerator of which is the
aggregate amount of Securities tendered pursuant to such offer to purchase and
the denominator of which is the aggregate amount of Securities and Other Debt
tendered pursuant to such offer to purchase.
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
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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
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 receiving 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 Note 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 Note 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
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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 this Indenture; (iii) transactions effected as part
of a Qualified Receivables Transaction; (iv) any agreement as in effect as of
the 1996 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 1996 Issue Date; (v) Restricted Payments permitted
by this Indenture; and (vi) payments made by the Company to, and agreements
entered into by the Company with, Affiliates in connection with the Vistar
Merger.
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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 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 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 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. 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 Securities or such
Subsidiary
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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 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 1996 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
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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 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.
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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 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 ss. 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;
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(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 (x) directly attributable to such transaction and
(y) 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
under this Indenture to the obligations of the Company under this
Indenture and the 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
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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
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 or failure to make the Special Redemption
required by Section 3.7, 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;
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(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 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;
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(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).
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
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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.
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
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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;
(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
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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:
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, ratably, 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
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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 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;
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(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.
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,
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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 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 ss. 313(a). The Trustee also shall comply with TIA ss. 313(b). The
Trustee shall also transmit by mail all reports required by TIA ss. 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
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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.
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.
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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 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,
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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 ss. 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
ss. 310(b); PROVIDED, HOWEVER, that there shall be excluded from the operation
of TIA ss. 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 ss.
310(b)(1) are met.
SECTION 7.11. PREFERENTIAL COLLECTION OF CLAIMS AGAINST COMPANY. The
Trustee shall comply with TIA ss. 311(a), excluding any creditor relationship
listed in TIA ss. 311(b). A Trustee who has resigned or been removed shall be
subject to TIA ss. 311(a) to the extent indicated.
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:
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(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 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, 2.9, 2.10, 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 2.10. After the Securities are no
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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
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
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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; 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
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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 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
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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 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.
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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.
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;
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(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 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
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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
(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.
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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 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.
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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 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 marshaling 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
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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
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
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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 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
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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 Securityholders or the
Trustee to accelerate the maturity of the Securities or to make a claim for
payment under a Guarantee.
SECTION 10.12. TRUST MONEYS NOT SUBORDINATED. Notwithstanding anything
contained herein to the contrary, payments from money or the proceeds either
(i) 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
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on the Securities or (ii) of cash and/or Cash Equivalents held pursuant to the
Pledge Agreement prior to completion of the Equity Investment and amounts that
may be drawn under the Letter of Credit referred to in such Pledge Agreement
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 Person, money or assets to which any holders of Senior
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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
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Indenture, such Subsidiary Guarantor shall be deemed released 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
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Subsidiary Guarantor shall be entitled to a contribution from all 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
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Subsidiary Guarantor acknowledges that it will receive direct and indirect
benefits from the financing arrangements contemplated by 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 marshaling 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
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terminated (i) by written notice to the Trustee and the Company 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
<PAGE> 108
99
Guarantor and Holders, a payment by each Subsidiary Guarantor on Guarantor
Senior Indebtedness.
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,
<PAGE> 109
100
the payment or distribution may be made and the notice given to their
Representative (if any).
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.
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101
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 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
<PAGE> 111
102
if to the Trustee:
State Street Bank and Trust Company
Two International Place
Boston, Massachusetts 02110
Attention of Corporate Trust Department
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 ss. 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 ss. 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> 112
103
(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.
<PAGE> 113
104
SECTION 13.10. NO RECOURSE AGAINST OTHERS. A director, officer,
employee or stockholder, as such, of the 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> 114
105
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: Sr. VP & CFO
STATE STREET BANK AND TRUST
COMPANY, as Trustee
By: /s/ Robert J. Dunn
------------------------------
Name: Robert J. Dunn
Title: Vice President
<PAGE> 115
EXHIBIT A
SAFELITE GLASS CORP.
No. __ Principal Amount $_____________
CUSIP NO. _________
9 7/8% Series C Senior Subordinated Note due 2006
Safelite Glass Corp., a Delaware corporation, promises to pay
to __________, or registered assigns, the principal sum of _____________
Dollars on December 15, 2006.
Interest Payment Dates: June 15 and December 15.
Record Dates: June 1 and December 1.
Additional provisions of this Security are set forth on the
other side of this Security.
IN WITNESS WHEREOF, the Company has caused this Security to be
signed manually or by facsimile by its duly authorized officers and a facsimile
of its corporate seal to be affixed hereto and imprinted hereon.
Dated: December __, 1998 SAFELITE GLASS CORP.
By:
----------------------------------
Name:
Title:
By:
----------------------------------
Name:
Title:
TRUSTEE'S CERTIFICATE OF
AUTHENTICATION
STATE STREET BANK AND TRUST COMPANY
as Trustee, certifies
that this is one of
the Securities referred
to in the Indenture.
by
-----------------------------
Authorized Signatory
<PAGE> 116
2
(Reverse of Security)
9 7/8% Series C Senior Subordinated Note due 2006
1. INTEREST
Safelite Glass Corp., a Delaware corporation (such corporation, and
its successors and assigns under the Indenture hereinafter referred to, being
herein called the "Company"), promises to pay interest on the principal amount
of this Security at the rate per annum shown above.
The Company will pay interest semiannually on June 15 and December 15
of each year, commencing June 15, 1998. Interest on the Securities will accrue
from the most recent date to which interest has been paid on the Securities or,
if no interest has been paid, from December 18, 1998. The Company shall pay
interest on overdue principal or premium, if any, and interest at the rate borne
by the Securities to the extent lawful. Interest will be computed on the basis
of a 360-day year of twelve 30-day months.
2. METHOD OF PAYMENT
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
irrevocably deposit with the Trustee or the Paying Agent money sufficient to pay
such principal, premium, if any, and/or interest. The Company will pay interest
(except defaulted interest) to the Persons who are registered Holders of
Securities at the close of business on the June 1 or December 1 immediately
preceding the interest payment date even if Securities are canceled, repurchased
or redeemed after the record date and on or before the interest payment date.
Holders must surrender Securities to a Paying Agent to collect principal
payments. The Company will pay principal and interest in money of the United
States that at the time of payment is legal tender for payment of public and
private debts. However, the Company may pay principal and interest by check
payable in such money. It may mail an interest check to a Holder's registered
address.
3. PAYING AGENT AND REGISTRAR
Initially, State Street Bank and Trust Company, a Massachusetts trust
company (the "Trustee"), will act as Paying Agent and Registrar. The Company may
appoint and change any Paying Agent, Registrar or co-registrar without notice to
any Securityholder. The Company or any of its domestically
<PAGE> 117
3
incorporated Wholly Owned Subsidiaries may act as Paying Agent, Registrar or
co-registrar.
4. INDENTURE
The Company issued the Securities under an Indenture dated as of
December 18, 1998 (as it may be amended or supplemented from time to time in
accordance with the terms thereof, the "Indenture"), among the Company and the
Trustee. The terms of the Securities include those stated in the Indenture and
those made part of the Indenture by reference to the Trust Indenture Act of 1939
(15 U.S.C. ss.ss. 77aaa-77bbbb) as in effect on the date of the Indenture (the
"Act"). Capitalized terms used herein and not defined herein have the meanings
ascribed thereto in the Indenture. The Securities are subject to all such terms,
and Securityholders are referred to the Indenture and the Act for a statement of
those terms.
The Securities are general unsecured senior subordinated obligations
of the Company limited to $55 million aggregate principal amount (subject to
Section 2.9 of the Indenture). This Security is one of the Initial Notes
referred to in the Indenture. The Securities include the Initial Notes and any
Exchange Notes or Private Exchange Notes issued in exchange for the Initial
Notes pursuant to the Indenture and the Registration Rights Agreement. The
Initial Notes, the Exchange Notes and the Private Exchange Notes are treated as
a single class of securities under the Indenture. The Indenture imposes certain
limitations on the incurrence of Indebtedness by the Company and its Restricted
Subsidiaries, the payment of dividends and other distributions on the Capital
Stock of the Company and its Restricted Subsidiaries, the purchase or redemption
of Capital Stock of the Company and Capital Stock of such Restricted
Subsidiaries, the sale or transfer of assets and Capital Stock of Restricted
Subsidiaries, the investments of the Company, its Subsidiaries and transactions
with Affiliates, Liens, dividends and other payment restrictions affecting
Subsidiaries, incurrence of Indebtedness senior to the Securities but junior to
Senior Indebtedness, preferred stock of Subsidiaries, future guarantees and
conduct of business. In addition, the Indenture limits the ability of the
Company and its Restricted Subsidiaries to restrict distributions and dividends
from Restricted Subsidiaries.
To guarantee the due and punctual payment of the principal, premium,
if any, and interest on the Securities and all other amounts payable by the
Company under the Indenture and the Securities when and as the same shall be due
and payable, whether at maturity, by acceleration or otherwise, according to the
terms of the Securities and the Indenture, the Subsidiary Guarantors will have,
jointly and severally, unconditionally
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4
guaranteed such obligations on a senior subordinated basis pursuant to the terms
of the Indenture.
5. OPTIONAL REDEMPTION
Except as set forth in this paragraph 5, the Securities will not be
redeemable at the option of the Company prior to December 15, 2001. On and after
such date, the Securities will be redeemable, at the Company's option, in whole
or in part, upon not less than 30 nor more than 60 days' prior notice mailed by
first class mail to each Holder's registered address, at the following
redemption prices (expressed as percentages of principal amount) if redeemed
during the twelve month period commencing on December 15 of the year set forth
below plus, in each case, accrued and unpaid interest to the redemption date
(subject to the right of Holders of record on the relevant record date to
receive interest due on the relevant interest payment date):
Year Redemption Price
---- ----------------
2001..................................... 104.9375%
2002..................................... 103.2917%
2003..................................... 101.6458%
2004 and thereafter...................... 100.0000%
Notwithstanding the foregoing, 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 Offerings to redeem up to $19.25 million of the
aggregate principal amount of Securities 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 $35.75 million of the original
principal amount of Securities remains outstanding immediately after any such
redemption. In order to effect the foregoing redemption with the proceeds of any
such Equity Offering, the Company shall make such redemption not more than 120
days after the consummation of any such Equity Offering.
6. NOTICE OF REDEMPTION
Notice of redemption will be mailed at least 30 days but not more than
60 days before the redemption date to each Holder of Securities to be redeemed
at his registered address. 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
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5
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. Securities in denominations of principal
amount larger than $1,000 may be redeemed in part but only in whole multiples of
$1,000. If money sufficient to pay the redemption price of and accrued and
unpaid interest on all Securities (or portions thereof) to be redeemed on the
redemption date is deposited with the Paying Agent on or before the redemption
date and certain other conditions are satisfied, on and after such date interest
ceases to accrue on such Securities (or such portions thereof) called for
redemption.
7. OPTION OF HOLDER TO ELECT PURCHASE
Upon a Change of Control Triggering Event, any Holder of Securities
will have the right to require that the Company purchase all or a portion of
such Holder's Securities pursuant to the Indenture at a purchase price equal to
101% of the principal amount thereof plus accrued interest to the date of
repurchase as provided in, and subject to the terms of, the Indenture.
Under certain circumstances, in the event the Net Cash Proceeds
received by the Company or a Restricted Subsidiary from an Asset Sale are not
used (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 (a) and (b), then
such aggregate amount of Net Cash Proceeds which have not been applied on or
before such Net Proceeds Offer Trigger Date shall be applied by the Company or
such Restricted Subsidiary to make an offer to purchase on a 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
Note Offer Amount at a price equal to 100% of the principal amount of the
Securities to be purchased, plus accrued and unpaid interest thereon.
8. SUBORDINATION
The Securities are subordinated to Senior Indebtedness, as defined in
the Indenture. To the extent provided in the Indenture, Senior Indebtedness must
be paid before the Securities may be paid. The Company agrees, and each
Securityholder by accepting a Security agrees, to the subordination provisions
contained in the Indenture and authorizes the Trustee to give them effect and
appoints the Trustee as attorney-in-fact for such purpose.
<PAGE> 120
6
9. DENOMINATIONS; TRANSFER; EXCHANGE
The Securities are in registered form without coupons in denominations
of principal amount of $1,000 and whole multiples of $1,000. A Holder may
transfer or exchange Securities in accordance with the Indenture. The Registrar
may require a Holder, among other things, to furnish appropriate endorsements or
transfer documents and to pay any taxes and fees required by law or permitted by
the Indenture. The Registrar need not register the transfer of or exchange of
any Security for a period beginning (i) 15 Business Days before the mailing of a
notice of an offer to repurchase or redeem Securities and ending at the close of
business on the day of such mailing or (b) 15 Business Days before an interest
payment date and ending on such interest payment date.
10. PERSONS DEEMED OWNERS
The registered holder of this Security may be treated as the owner of
it for all purposes.
11. UNCLAIMED MONEY
If money for the payment of principal or interest remains unclaimed
for two years, the Trustee or Paying Agent shall pay the money back to the
Company at its request unless an abandoned property law designates another
Person. After any such payment, Holders entitled to the money must look only to
the Company and not to the Trustee for payment.
12. DEFEASANCE
Subject to certain conditions set forth in the Indenture, the Company
at any time may terminate some or all of its obligations under the Securities
and the Indenture if the Company deposits with the Trustee money or U.S.
Government Obligations for the payment of principal of, premium, if any, and
interest on the Securities to redemption or maturity, as the case may be.
13. AMENDMENT, WAIVER
Subject to certain exceptions set forth in the Indenture, (i) the
Indenture or the Securities may be amended with the written consent of the
Holders of at least a majority in principal amount of the outstanding Securities
and (ii) any default or noncompliance with any provision may be waived with the
written consent of the Holders of a majority in principal
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7
amount of the outstanding Securities. Subject to certain exceptions set forth in
the Indenture, without the consent of any Securityholder, the Company, and the
Trustee may amend the Indenture or the Securities to cure any ambiguity,
omission, defect or inconsistency, or to comply with Article V of the Indenture,
or to make certain changes in Article X of the Indenture or to provide for
uncertificated Securities in addition to or in place of certificated Securities,
or to add guarantees with respect to the Securities or to secure the Securities,
or to add additional covenants or surrender rights and powers conferred on the
Company, or to comply with any request of the SEC in connection with qualifying
the Indenture under the Act, or to make any change that does not adversely
affect the rights of any Securityholder, or to provide for the issuance of
Exchange Notes.
14. DEFAULTS AND REMEDIES
Under the Indenture, Events of Default include (i) default for 30 days
in payment of interest on the Securities; (ii) default in payment of principal
on the Securities at maturity, upon redemption pursuant to paragraph 5 of the
Securities, upon required repurchase, upon declaration or otherwise;
(iii) failure by the Company to comply with other agreements in the Indenture or
the Securities, in certain cases subject to notice and lapse of time; (iv)
failure to pay at final maturity (giving effect to any applicable grace period
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 maturity of any such Indebtedness, if
the aggregate principal amount of any such Indebtedness, together with the
principal amount of any such other Indebtedness in default for failure to pay
principal at final maturity or which has been accelerated, aggregates $10.0
million or more at any time; (v) certain events of bankruptcy or insolvency with
respect to the Company or any Significant Subsidiary; (vi) certain final,
non-appealable judgments or decrees for the payment of money in excess of $10.0
million against the Company or any Significant Subsidiary; and (vii) any
Guarantee by a Significant Subsidiary ceases to be in full force and effect
(except as contemplated by the terms of the Indenture) or any Subsidiary
Guarantor that is a Significant Subsidiary denies or disaffirms its obligations
under the Indenture or its Guarantee. If an Event of Default occurs and is
continuing, the Trustee or the Holders of at least 25% in principal amount of
the Securities may declare all the Securities to be due and payable immediately.
Certain events of bankruptcy or insolvency are Events of Default which will
result in the Securities being due and payable immediately upon the occurrence
of such Events of Default.
Securityholders may not enforce the Indenture or the Securities except
as provided in the Indenture. The Trustee may
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8
refuse to enforce the Indenture or the Securities unless it receives reasonable
indemnity or security. Subject to certain limitations, Holders of a majority in
principal amount of the Securities may direct the Trustee in its exercise of any
trust or power. The Trustee may withhold from Securityholders notice of any
continuing Default or Event of Default (except a Default or Event of Default in
payment of principal or interest) if it determines that withholding notice is in
their interest.
15. TRUSTEE DEALINGS WITH THE COMPANY
Subject to certain limitations set forth in the Indenture, the Trustee
under the Indenture, in its individual or any other capacity, may become the
owner or pledgee of Securities and may otherwise deal with and collect
obligations owed to it by the Company or its affiliates and may otherwise deal
with the Company or its affiliates with the same rights it would have if it were
not Trustee.
16. NO RECOURSE AGAINST OTHERS
A director, officer, employee or stockholder, as such, of the Company
shall not have any liability for any obligations of the Company under the
Securities or the 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 waives and releases all such liability. The waiver and release
are part of the consideration for the issue of the Securities.
17. AUTHENTICATION
This Security shall not be valid until an authorized signatory of the
Trustee (or an authenticating agent acting on its behalf) manually signs the
certificate of authentication on the other side of this Security.
18. ABBREVIATIONS
Customary abbreviations may be used in the name of a Securityholder or
an assignee, such as TEN COM (=tenants in common), TEN ENT (=tenants by the
entirety), JT TEN (=joint tenants with rights of survivorship and not as tenants
in common), CUST (=custodian) and U/G/M/A (=Uniform Gift to Minors Act).
<PAGE> 123
9
19. CUSIP NUMBERS
Pursuant to a recommendation promulgated by the Committee on Uniform
Security Identification Procedures the Company has caused CUSIP numbers to be
printed on the Securities and has directed the Trustee to use CUSIP numbers in
notices of redemption as a convenience to Securityholders. No representation is
made as to the accuracy of such numbers either as printed on the Securities or
as contained in any notice of redemption and reliance may be placed only on the
other identification numbers placed thereon.
20. GOVERNING LAW
This Security 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.
The Company will furnish to any Securityholder upon written request
and without charge to the Securityholder a copy of the Indenture which has in it
the text of this Security in larger type. Requests may be made to: Safelite
Glass Corp., 1105 Schrock Road, Columbus, Ohio 43216, Attention: General
Counsel.
<PAGE> 124
ASSIGNMENT FORM
To assign this Security, fill in the form below:
I or we assign and transfer this Security to
---------------------------------------------------
---------------------------------------------------
---------------------------------------------------
(Print or type assignee's name, address and zip code)
---------------------------------------------------
(Insert assignee's soc. sec. or tax I.D. No.)
and irrevocably appoint agent to transfer
this Security on the books of the Company. The agent may
substitute another to act for him.
- --------------------------------------------------------------------------------
Date: ____________________ Your Signature: ___________________
Signature Guarantee: ______________________________
(Signature must be guaranteed)
- --------------------------------------------------------------------------------
Sign exactly as your name appears on the other side of this Security.
In connection with any transfer or exchange of any of the Securities evidenced
by this certificate occurring prior to the date that is three years after the
later of the date of original issuance of such Securities and the last date, if
any, on which such Securities were owned by the Company or any Affiliate of the
Company, the undersigned confirms that such Securities are being:
CHECK ONE BOX BELOW:
1[ ] acquired for the undersigned's own account,
without transfer (in satisfaction of Section
2.6(a)(ii)(A) or Section 2.6(d)(i)(A) of the
Indenture); or
2[ ] transferred to the Company; or
3[ ] transferred pursuant to and in compliance with
Rule 144A under the Securities Act of 1933; or
4[ ] transferred pursuant to an effective registration
statement under the Securities Act; or
5[ ] transferred pursuant to and in compliance with
Regulation S under the Securities Act of 1933; or
<PAGE> 125
2
6[ ] transferred to an institutional "accredited investor"
(as defined in Rule 501(a)(1), (2), (3) or (7) under
the Securities Act of 1933), that has furnished to
the Trustee a signed letter containing certain
representations and agreements (the form of which
letter appears as Section 2.7 of the Indenture); or
7[ ] transferred pursuant to another available
exemption from the registration requirements
of the Securities Act of 1933.
Unless one of the boxes is checked, the Trustee will refuse to register any of
the Securities evidenced by this certificate in the name of any person other
than the registered holder thereof; PROVIDED, HOWEVER, that if box (5), (6) or
(7) is checked, the Trustee or the Company may require, prior to registering any
such transfer of the Securities, in their sole discretion, such legal opinions,
certifications and other information as the Trustee or the Company may
reasonably request to confirm that such transfer is being made pursuant to an
exemption from, or in a transaction not subject to, the registration
requirements of the Securities Act of 1933, such as the exemption provided by
Rule 144 under such Act.
------------------------------
Signature
Signature Guarantee:
- ------------------------- ------------------------------
Signature
(Signature must be guaranteed)
- ------------------------------------------------------------
<PAGE> 126
SCHEDULE OF INCREASES OR DECREASES IN GLOBAL SECURITY
The following increases or decreases in this Global Security have been
made:
<TABLE>
<S> <C> <C> <C> <C>
Amount of decrease Amount of increase Principal Amount of Signature of
in Principal Amount in Principal Amount this Global Security authorized officer
Date of of this Global of this Global following such of Trustee or
Exchange Security Security decrease or increase Securities Custodian
</TABLE>
<PAGE> 127
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Security purchased by the Company
pursuant to Section 4.6 or 4.8 of the Indenture, check the box:
[ ]
If you want to elect to have only part of this Security purchased by
the Company pursuant to Section 4.6 or 4.8 of the Indenture, state the amount in
principal amount (must be integral multiple of $1,000): $
Date: __________ Your Signature ____________________________
(Sign exactly as your name appears on the
other side of the Security)
Signature Guarantee: _______________________________________
(Signature must be guaranteed)
<PAGE> 128
EXHIBIT B
SAFELITE GLASS CORP.
No. __ Principal Amount $_____________
CUSIP NO. ___________
9 7/8% Series D Senior Subordinated Note due 2006
Safelite Glass Corp., a Delaware corporation, promises to pay
to __________, or registered assigns, the principal sum of
___________________________ Dollars on December 15, 2006.
Interest Payment Dates: June 15 and December 15.
Record Dates: June 1 and December 1.
Additional provisions of this Security are set forth on the
other side of this Security.
IN WITNESS WHEREOF, the Company has caused this Security to be
signed manually or by facsimile by its duly authorized officers and a facsimile
of its corporate seal to be affixed hereto and imprinted hereon.
Dated: _________ __, 1998 SAFELITE GLASS CORP.
By:
------------------------------------
Name:
Title:
By:
------------------------------------
Name:
Title:
TRUSTEE'S CERTIFICATE OF
AUTHENTICATION
STATE STREET BANK AND TRUST COMPANY
as Trustee, certifies
that this is one of
the Securities referred
to in the Indenture.
by
------------------------
Authorized Signatory
<PAGE> 129
2
(Reverse of Security)
9 7/8% Series D Senior Subordinated Note due 2006
1. INTEREST
Safelite Glass Corp., a Delaware corporation (such corporation, and
its successors and assigns under the Indenture hereinafter referred to, being
herein called the "Company"), promises to pay interest on the principal amount
of this Security at the rate per annum shown above.
The Company will pay interest semiannually on June 15 and December 15
of each year, commencing June 15, 1999. Interest on the Securities will accrue
from the most recent date to which interest has been paid on the Securities or,
if no interest has been paid, from December 18, 1998. The Company shall pay
interest on overdue principal or premium, if any, and interest at the rate borne
by the Securities to the extent lawful. Interest will be computed on the basis
of a 360-day year of twelve 30-day months.
2. METHOD OF PAYMENT
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
irrevocably deposit with the Trustee or the Paying Agent money sufficient to pay
such principal, premium, if any, and/or interest. The Company will pay interest
(except defaulted interest) to the Persons who are registered Holders of
Securities at the close of business on the June 1 or December 1 immediately
preceding the interest payment date even if Securities are canceled, repurchased
or redeemed after the record date and on or before the interest payment date.
Holders must surrender Securities to a Paying Agent to collect principal
payments. The Company will pay principal and interest in money of the United
States that at the time of payment is legal tender for payment of public and
private debts. However, the Company may pay principal and interest by check
payable in such money. It may mail an interest check to a Holder's registered
address.
<PAGE> 130
3
3. PAYING AGENT AND REGISTRAR
Initially, State Street Bank and Trust Company, a Massachusetts trust
company (the "Trustee"), will act as Paying Agent and Registrar. The Company may
appoint and change any Paying Agent, Registrar or co-registrar without notice to
any Securityholder. The Company or any of its domestically incorporated Wholly
Owned Restricted Subsidiaries may act as Paying Agent, Registrar or
co-registrar.
4. INDENTURE
The Company issued the Securities under an Indenture dated as of
December 18, 1998 (as it may be amended or supplemented from time to time in
accordance with the terms thereof, the "Indenture"), among the Company and the
Trustee. The terms of the Securities include those stated in the Indenture and
those made part of the Indenture by reference to the Trust Indenture Act of 1939
(15 U.S.C. ss.ss. 77aaa-77bbbb) as in effect on the date of the Indenture (the
"Act"). Capitalized terms used herein and not defined herein have the meanings
ascribed thereto in the Indenture. The Securities are subject to all such terms,
and Securityholders are referred to the Indenture and the Act for a statement of
those terms.
The Securities are general unsecured senior subordinated obligations
of the Company limited to $55 million aggregate principal amount (subject to
Section 2.9 of the Indenture). This Security is one of the Initial Notes
referred to in the Indenture. The Securities include the Initial Notes and any
Exchange Notes or Private Exchange Notes issued in exchange for the Initial
Notes pursuant to the Indenture and the Registration Rights Agreement. The
Initial Notes, the Exchange Notes and the Private Exchange Notes are treated as
a single class of securities under the Indenture. The Indenture imposes certain
limitations on the incurrence of Indebtedness by the Company and its Restricted
Subsidiaries, the payment of dividends and other distributions on the Capital
Stock of the Company and its Restricted Subsidiaries, the purchase or redemption
of Capital Stock of the Company and Capital Stock of such Restricted
Subsidiaries, the sale or transfer of assets and Capital Stock of Restricted
Subsidiaries, the investments of the Company, its Subsidiaries and transactions
with Affiliates, Liens, dividends and other payment restrictions affecting
Subsidiaries, incurrence of Indebtedness senior to the Securities but junior to
Senior Indebtedness, preferred stock of Subsidiaries, future guarantees and
conduct of business. In addition, the Indenture limits the ability of the
Company and its Restricted Subsidiaries to restrict distributions and dividends
from Restricted Subsidiaries.
<PAGE> 131
4
To guarantee the due and punctual payment of the principal, premium,
if any, and interest on the Securities and all other amounts payable by the
Company under the Indenture and the Securities when and as the same shall be due
and payable, whether at maturity, by acceleration or otherwise, according to the
terms of the Securities and the Indenture, the Subsidiary Guarantors will have,
jointly and severally, unconditionally guaranteed such obligations on a senior
subordinated basis pursuant to the terms of the Indenture.
5. OPTIONAL REDEMPTION
Except as set forth in this paragraph 5, the Securities will not be
redeemable at the option of the Company prior to December 15, 2001. On and after
such date, the Securities will be redeemable, at the Company's option, in whole
or in part, upon not less than 30 nor more than 60 days' prior notice mailed by
first class mail to each Holder's registered address, at the following
redemption prices (expressed as percentages of principal amount) if redeemed
during the twelve month period commencing on December 15 of the year set forth
below plus, in each case, accrued and unpaid interest to the redemption date
(subject to the right of Holders of record on the relevant record date to
receive interest due on the relevant interest payment date):
Year Redemption Price
---- ----------------
2001............................... 104.9375%
2002............................... 103.2917%
2003............................... 101.6458%
2004 and thereafter................ 100.0000%
Notwithstanding the foregoing, 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 Offerings to redeem up to $19.25 million of the
aggregate principal amount of Securities 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 $35.75 million of the original
principal amount of Securities remains outstanding immediately after any such
redemption. In order to effect the foregoing redemption with the proceeds of any
such Equity Offering, the Company shall make such redemption not more than 120
days after the consummation of any such Equity Offering.
6. NOTICE OF REDEMPTION
Notice of redemption will be mailed at least 30 days but not more than
60 days before the redemption date to each
<PAGE> 132
5
Holder of Securities to be redeemed at his registered address. 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. Securities
in denominations of principal amount larger than $1,000 may be redeemed in part
but only in whole multiples of $1,000. If money sufficient to pay the redemption
price of and accrued and unpaid interest on all Securities (or portions thereof)
to be redeemed on the redemption date is deposited with the Paying Agent on or
before the redemption date and certain other conditions are satisfied, on and
after such date interest ceases to accrue on such Securities (or such portions
thereof) called for redemption.
7. OPTION OF HOLDER TO ELECT PURCHASE
Upon a Change of Control Triggering Event, any Holder of Securities
will have the right to require that the Company purchase all or a portion of
such Holder's Securities pursuant to the Indenture at a purchase price equal to
101% of the principal amount thereof plus accrued interest to the date of
repurchase as provided in, and subject to the terms of, the Indenture.
Under certain circumstances, in the event the Net Cash Proceeds
received by the Company or a Restricted Subsidiary from an Asset Sale are not
used (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 (a) and (b), then
such aggregate amount of Net Cash Proceeds which have not been applied on or
before such Net Proceeds Offer Trigger Date shall be applied by the Company or
such Restricted Subsidiary to make an offer to purchase on a 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
Note Offer Amount at a price equal to 100% of the principal amount of the
Securities to be purchased, plus accrued and unpaid interest thereon.
<PAGE> 133
6
8. SUBORDINATION
The Securities are subordinated to Senior Indebtedness, as defined in
the Indenture. To the extent provided in the Indenture, Senior Indebtedness must
be paid before the Securities may be paid. The Company agrees, and each
Securityholder by accepting a Security agrees, to the subordination provisions
contained in the Indenture and authorizes the Trustee to give them effect and
appoints the Trustee as attorney-in-fact for such purpose.
9. DENOMINATIONS; TRANSFER; EXCHANGE
The Securities are in registered form without coupons in denominations
of principal amount of $1,000 and whole multiples of $1,000. A Holder may
transfer or exchange Securities in accordance with the Indenture. The Registrar
may require a Holder, among other things, to furnish appropriate endorsements or
transfer documents and to pay any taxes and fees required by law or permitted by
the Indenture. The Registrar need not register the transfer of or exchange of
any Security for a period beginning (i) 15 Business Days before the mailing of a
notice of an offer to repurchase or redeem Securities and ending at the close of
business on the day of such mailing or (b) 15 Business Days before an interest
payment date and ending on such interest payment date.
10. PERSONS DEEMED OWNERS
The registered holder of this Security may be treated as the owner of
it for all purposes.
11. UNCLAIMED MONEY
If money for the payment of principal or interest remains unclaimed
for two years, the Trustee or Paying Agent shall pay the money back to the
Company at its request unless an abandoned property law designates another
Person. After any such payment, Holders entitled to the money must look only to
the Company and not to the Trustee for payment.
12. DEFEASANCE
Subject to certain conditions set forth in the Indenture, the Company
at any time may terminate some or all of its obligations under the Securities
and the Indenture if the Company deposits with the Trustee money or U.S.
Government Obligations for the payment of principal of, premium, if any, and
<PAGE> 134
7
interest on the Securities to redemption or maturity, as the case
may be.
13. AMENDMENT, WAIVER
Subject to certain exceptions set forth in the Indenture, (i) the
Indenture or the Securities may be amended with the written consent of the
Holders of at least a majority in principal amount of the outstanding Securities
and (ii) any default or noncompliance with any provision may be waived with the
written consent of the Holders of a majority in principal amount of the
outstanding Securities. Subject to certain exceptions set forth in the
Indenture, without the consent of any Securityholder, the Company, and the
Trustee may amend the Indenture or the Securities to cure any ambiguity,
omission, defect or inconsistency, or to comply with Article V of the Indenture,
or to make certain changes in Article X of the Indenture or to provide for
uncertificated Securities in addition to or in place of certificated Securities,
or to add guarantees with respect to the Securities or to secure the Securities,
or to add additional covenants or surrender rights and powers conferred on the
Company, or to comply with any request of the SEC in connection with qualifying
the Indenture under the Act, or to make any change that does not adversely
affect the rights of any Securityholder, or to provide for the issuance of
Exchange Notes.
14. DEFAULTS AND REMEDIES
Under the Indenture, Events of Default include (i) default for 30 days
in payment of interest on the Securities; (ii) default in payment of principal
on the Securities at maturity, upon redemption pursuant to paragraph 5 of the
Securities, upon required repurchase, upon declaration or otherwise; (iii)
failure by the Company to comply with other agreements in the Indenture or the
Securities, in certain cases subject to notice and lapse of time; (iv) failure
to pay at final maturity (giving effect to any applicable grace period 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 maturity of any such Indebtedness, if the
aggregate principal amount of any such Indebtedness, together with the principal
amount of any such other Indebtedness in default for failure to pay principal at
final maturity or which has been accelerated, aggregates $10.0 million or more
at any time; (v) certain events of bankruptcy or insolvency with respect to the
Company or any Significant Subsidiary; (vi) certain final, non-appealable
judgments or decrees for the payment of money in excess of $10.0 million against
the Company or any Significant Subsidiary; and (vii) any Guarantee by a
Significant Subsidiary ceases to be in full force and effect (except as
contemplated by
<PAGE> 135
8
the terms of the Indenture) or any Subsidiary Guarantor that is a Significant
Subsidiary denies or disaffirms its obligations under the Indenture or its
Guarantee. If an Event of Default occurs and is continuing, the Trustee or the
Holders of at least 25% in principal amount of the Securities may declare all
the Securities to be due and payable immediately. Certain events of bankruptcy
or insolvency are Events of Default which will result in the Securities being
due and payable immediately upon the occurrence of such Events of Default.
Securityholders may not enforce the Indenture or the Securities except
as provided in the Indenture. The Trustee may refuse to enforce the Indenture or
the Securities unless it receives reasonable indemnity or security. Subject to
certain limitations, Holders of a majority in principal amount of the Securities
may direct the Trustee in its exercise of any trust or power. The Trustee may
withhold from Securityholders notice of any continuing Default or Event of
Default (except a Default or Event of Default in payment of principal or
interest) if it determines that withholding notice is in their interest.
15. TRUSTEE DEALINGS WITH THE COMPANY
Subject to certain limitations set forth in the Indenture, the Trustee
under the Indenture, in its individual or any other capacity, may become the
owner or pledgee of Securities and may otherwise deal with and collect
obligations owed to it by the Company or its affiliates and may otherwise deal
with the Company or its affiliates with the same rights it would have if it were
not Trustee.
16. NO RECOURSE AGAINST OTHERS
A director, officer, employee or stockholder, as such, of the Company
shall not have any liability for any obligations of the Company under the
Securities or the 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 waives and releases all such liability. The waiver and release
are part of the consideration for the issue of the Securities.
17. AUTHENTICATION
This Security shall not be valid until an authorized signatory of the
Trustee (or an authenticating agent acting on its behalf) manually signs the
certificate of authentication on the other side of this Security.
<PAGE> 136
9
18. ABBREVIATIONS
Customary abbreviations may be used in the name of a Securityholder or
an assignee, such as TEN COM (=tenants in common), TEN ENT (=tenants by the
entirety), JT TEN (=joint tenants with rights of survivorship and not as tenants
in common), CUST (=custodian) and U/G/M/A (=Uniform Gift to Minors Act).
19. CUSIP NUMBERS
Pursuant to a recommendation promulgated by the Committee on Uniform
Security Identification Procedures the Company has caused CUSIP numbers to be
printed on the Securities and has directed the Trustee to use CUSIP numbers in
notices of redemption as a convenience to Securityholders. No representation is
made as to the accuracy of such numbers either as printed on the Securities or
as contained in any notice of redemption and reliance may be placed only on the
other identification numbers placed thereon.
20. GOVERNING LAW
This Security 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.
The Company will furnish to any Securityholder upon written request
and without charge to the Securityholder a copy of the Indenture which has in it
the text of this Security in larger type. Requests may be made to: Safelite
Glass Corp., 1105 Schrock Road, Columbus, Ohio 43216, Attention: General
Counsel.
<PAGE> 137
ASSIGNMENT FORM
To assign this Security, fill in the form below:
I or we assign and transfer this Security to
---------------------------------------------------
---------------------------------------------------
---------------------------------------------------
(Print or type assignee's name, address and zip code)
---------------------------------------------------
(Insert assignee's soc. sec. or tax I.D. No.)
and irrevocably appoint agent to transfer
this Security on the books of the Company. The agent may
substitute another to act for him.
- --------------------------------------------------------------------------------
Date: ____________________ Your Signature: ___________________
Signature Guarantee: ______________________________
(Signature must be guaranteed)
Sign exactly as your name appears on the other side of this Security.
<PAGE> 138
SCHEDULE OF INCREASES OR DECREASES IN GLOBAL SECURITY
The following increases or decreases in this Global Security have been
made:
<TABLE>
<S> <C> <C> <C> <C>
Amount of decrease Amount of increase Principal Amount of Signature of
in Principal Amount in Principal Amount this Global Security authorized officer
Date of of this Global of this Global following such of Trustee or
Exchange Security Security decrease or increase Securities Custodian
</TABLE>
<PAGE> 139
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Security purchased by the Company
pursuant to Section 4.6 or 4.8 of the Indenture, check the box:
[ ]
If you want to elect to have only part of this Security purchased by
the Company pursuant to Section 4.6 or 4.8 of the Indenture, state the amount in
principal amount (must be integral multiple of $1,000): $
Date: __________ Your Signature ____________________________
(Sign exactly as your name appears on the
other side of the Security)
Signature Guarantee: _______________________________________
(Signature must be guaranteed)
<PAGE> 140
EXHIBIT C
[FORM OF SUPPLEMENTAL INDENTURE]
SUPPLEMENTAL INDENTURE, dated as of __________ __, 199_, among
SAFELITE GLASS CORP., a Delaware corporation (the "Company"),[list additional
Subsidiary Guarantors], [NEW SUBSIDIARY GUARANTOR], a __________ corporation
(the "New Subsidiary Guarantor") and STATE STREET BANK AND TRUST COMPANY, a
Massachusetts trust company, as trustee (the "Trustee") to the Indenture dated
as of December 18, 1998 (the "Indenture") among the Company and the Trustee.
WITNESSETH:
WHEREAS, Section 9.1 of the Indenture provides that the Company and
the Trustee may, among other things, amend this Indenture or the Securities
without notice to or consent of any Securityholder to add Guarantees with
respect to the Securities or to secure the Securities;
WHEREAS, Section 11.1 of the Indenture provides that any Restricted
Subsidiary of the Company that guarantees payment of the Bank Indebtedness must
execute and deliver to the Trustee this Supplemental Indenture pursuant to which
such Restricted Subsidiary shall agree to be bound by the provisions of Article
XI of the Indenture; and
WHEREAS, the New Subsidiary Guarantor has guaranteed payment of the
Bank Indebtedness and shall execute and deliver to the Trustee this Supplemental
Indenture.
NOW, THEREFORE, the parties hereto hereby agree as follows:
1. DEFINED TERMS. Capitalized terms used and not defined herein shall
have the meaning specified in or pursuant to the Indenture.
2. GUARANTEE. The New Subsidiary Guarantor hereby agrees to
unconditionally assume all the obligations of a Subsidiary Guarantor under the
Indenture as described therein.
3. TRUSTEE. The Trustee accepts the modification of the Indenture
effected by this Supplemental Indenture, but only upon the terms and conditions
set forth in the Indenture. Without limiting the generality of the foregoing,
the Trustee assumes no responsibility for the correctness of the recitals herein
contained, which shall be taken as the statements of the Company. The Trustee
makes no representation and shall have no responsibility as to the validity and
sufficiency of this Supplemental Indenture.
<PAGE> 141
1
4. EFFECT ON INDENTURE. As supplemented by this Supplemental
Indenture, the Indenture is hereby ratified and confirmed in all aspects.
5. COUNTERPARTS. This Supplemental Indenture may be executed in
counterparts, each of which when so executed shall be deemed to be an original,
but all such counterparts shall together constitute but one and the same
instrument.
6. GOVERNING LAW. This Supplemental Indenture shall be governed by
and construed in accordance with the laws of the State of New York.
IN WITNESS WHEREOF, the parties hereto have caused this Supplemental
Indenture to be duly executed, and their respective corporate seals to be
hereunto affixed and attested, all as of the day and year first above written.
[NEW SUBSIDIARY GUARANTORS]
By:
----------------------------------
Name:
Title:
STATE STREET BANK AND TRUST
COMPANY, as Trustee
By:
----------------------------------
Name:
Title: Corporate Trust Officer
SAFELITE GLASS CORP.
By:
----------------------------------
Name:
Title:
[SUBSIDIARY GUARANTORS]
By:
----------------------------------
Name:
Title:
<PAGE> 1
Exhibit 5.1
Hutchins, Wheeler & Dittmar
A Professional Corporation
101 Federal Street
Boston, Massachusetts 02110
April 15, 1999
Safelite Glass Corp.
1105 Schrock Road
Columbus, OH 43229
Ladies and Gentlemen:
We have acted as counsel to Safelite Glass Corp., a Delaware corporation
(the "Company"), in connection with the offer to exchange under the Securities
Act of 1933, as amended, $1,000 in principal amount of 9 7/8% Series D Senior
Subordinated Notes due 2006 (the "Exchange Notes") for each $1,000 in principal
amount of outstanding 9 7/8% Series C Senior Subordinated Notes due 2006, up to
an aggregate of $55,000,000, pursuant to a Registration Statement on Form S-4
filed with the Securities and Exchange Commission (the "Registration
Statement"). The Exchange Notes are being issued pursuant to an Indenture, dated
as of December 18, 1998, in the form filed as an Exhibit to the Registration
Statement (the "Indenture").
As such counsel, we have examined (i) certain corporate records of the
Company, including its Certificate of Incorporation, as amended, its Bylaws,
stock records and minutes of meetings of its stockholders and Board of
Directors; (ii) a Certificate of the Secretary of the State of Delaware as to
the legal existence of the Company; and (iii) such other documents as we have
deemed necessary as a basis for the opinions hereinafter expressed.
Based upon the foregoing, and having regard for such legal considerations
as we deem relevant, we are of the opinion that:
1. The Company is a corporation duly incorporated and validly existing
under the laws of the State of Delaware.
2. The Exchange Notes, when issued under the circumstances contemplated
in the Indenture, (a) will have been duly and validly issued by the
Company, with all requisite authority and action; and (b) will be the
legal, valid and binding obligations of the Company.
We hereby consent to the filing of this opinion as an Exhibit to the
Registration Statement and to the reference to us under the caption "Legal
Matters" in the Prospectus forming a part of the Registration Statement.
Very truly yours,
HUTCHINS, WHEELER & DITTMAR
A Professional Corporation
<PAGE> 1
Exhibit 8
HUTCHINS, WHEELER & DITTMAR
A PROFESSIONAL CORPORATION
101 FEDERAL STREET
BOSTON, MASSACHUSETTS 02110
April 15, 1999
Safelite Glass Corp.
1105 Schrock Road
Columbus, OH 43229
Re: Safelite Glass Corp. Exchange of Initial Notes for Exchange Notes
-----------------------------------------------------------------
Ladies and Gentlemen:
We have acted as counsel to Safelite Glass Corp., a Delaware
corporation (the "Company"), in connection with the offer to exchange under the
Securities Act of 1933, as amended, $1,000 in principal amount of 9 7/8% Series
D Senior Subordinated Notes due 2006 (the "Exchange Notes") for each $1,000 in
principal amount of outstanding 9 7/8% Series C Senior Subordinated Notes due
2006 (the "Initial Notes" or the "outstanding Notes"), up to an aggregate of
$55,000,000, pursuant to a Registration Statement on Form S-4 filed with the
Securities and Exchange Commission (the "Registration Statement"). The Exchange
Notes are being issued pursuant to an Indenture, dated as of December 18, 1998,
in the form filed as an Exhibit to the Registration Statement. Unless the
context otherwise requires, the term "Notes" includes outstanding notes and
Exchange Notes. All capitalized terms used but not defined herein shall have the
meanings ascribed to such terms in the Registration Statement.
As such counsel, we have examined such documents as we have deemed
necessary as a basis for the opinions hereinafter expressed. Based upon the
foregoing, and having regard for such legal considerations as we deem relevant,
and subject to the assumptions and qualifications set forth in the Registration
Statement under the heading "Income Tax Considerations," we are of the opinion
that:
1. Holders of the outstanding 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.
2. An exchange of outstanding 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
outstanding Notes. As a result, no federal income tax consequences will result
to holders exchanging outstanding Notes for Exchange Notes.
<PAGE> 2
Safelite Glass Corp.
April 15, 1999
Page 2
3. (a) The Notes will be treated as debt for federal income tax
purposes. Stated interest on the Notes should be considered to be "qualified
stated interest", and therefore, will generally be includible in income of a
United States Holder as ordinary income from domestic sources at the time it is
paid or accrued in accordance with the United States Holder's method of
accounting for tax purposes. As used herein, a "United States Holder" of a Note
means a holder that is (i) a citizen or resident of the United States, (ii) a
corporation or partnership created or organized in or under the laws of the
United States or any political subdivision thereof (unless, in the case of a
partnership, the Secretary of the Treasury otherwise provides by regulation),
(iii) an estate the income of which is subject to United States federal income
taxation regardless of its source, or (iv) a trust which is subject to the
supervision of a court within the United States and the control of a United
States person as described in Section 7701(a)(30) of the Code. A "Non-United
States Holder" is a holder that is not a United States Holder.
(b) The Notes were issued with original issue discount ("OID")
in an amount equal to the difference between their stated redemption price at
maturity (the sum of all payments to be made on the Note other than "qualified
stated interest") and their "issue price." United States Holders should be aware
that they generally must include OID in gross income in advance of the receipt
of cash attributable to that income. However, United States Holders of such
Notes generally will not be required to include separately in income cash
payments received on the Notes, even if denominated as interest, to the extent
such payments do not constitute qualified stated interest (as defined below).
This summary is based upon final Treasury regulations addressing debt
instruments issued with OID (the "OID Regulations").
The "issue price" of each Note will be the first price at which a
substantial amount of that particular offering is sold (other than to an
underwriter, placement agent or wholesaler). The term "qualified stated
interest" means stated interest that is unconditionally payable in cash or in
property (other than debt instruments of the issuer) at least annually at a
single fixed rate or, subject to certain conditions, based on one or more
interest indices. Interest is payable at a single fixed rate only if the rate
appropriately takes into account the length of the interval between payments.
The stated interest payments on the Notes are qualified stated interest.
The amount of OID includible in income by the initial United States
Holder of an original issue discount Note is the sum of the "daily portions" of
OID with respect to the Note for each day during the taxable year or portion of
the taxable year in which such United States Holder held such Note ("accrued
OID"). The daily portion is determined by allocating to each day in any "accrual
period" a pro rata portion of the OID allocable to that accrual period. The
"accrual period" for an original issue discount Note may be of any length and
may vary in length over the term of the Note, provided that each accrual period
is no longer than one year and each scheduled payment of principal or interest
occurs on the first day or the final day of an accrual period. The amount of OID
allocable to any accrual period is an amount equal to the excess, if any, of (a)
the product of the Note's adjusted issue price at the beginning of such accrual
period and its yield to maturity (determined on the basis of compounding at the
close of each accrual period and properly adjusted
<PAGE> 3
Safelite Glass Corp.
April 15, 1999
Page 3
for the length of the accrual period), over (b) the sum of any qualified stated
interest allocable to the accrual period. OID allocable to a final accrual
period is the difference between the amount payable at maturity (other than a
payment of qualified stated interest) and the adjusted issue price at the
beginning of the final accrual period. Special rules will apply for calculating
OID for an initial short accrual period. The "adjusted issue price" of a Note at
the beginning of any accrual period is equal to its issue price increased by the
accrued OID for each prior accrual period and reduced by any payments made on
such Note (other than qualified stated interest) on or before the first day of
the accrual period. Under these rules, a United States Holder will have to
include in income increasingly greater amounts of OID in successive accrual
periods. The Company is required to provide information returns stating the
amount of OID accrued on Notes held of record by persons other than corporations
and other exempt holders.
United States Holders may elect to treat all interest on any Note as
OID and calculate the amount includible in gross income under the constant yield
method described above. For the purposes of this election, interest includes
stated interest, acquisition discount, OID, de minimis OID and unstated
interest. The election is to be made for the taxable year in which the United
States Holder acquired the Note, and may not be revoked without the consent of
the IRS. United States Holders should consult with their own tax advisors about
this election.
(c) 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 outstanding Note will equal the cost of the outstanding Note
to the holder, plus the amounts of market discount and OID previously included
in income by the holder and minus any principal payments received by the holder
with respect to the Notes and amortized bond premium. A holder's adjusted tax
basis in an Exchange Note will be equal to the price paid for the Exchange Note
(determined by taking into account accrued interest at the time of purchase),
plus market discount and OID previously included in income by the holder and
minus any principal payments received by the holder with respect to an Exchange
Note and amortized bond premium.
(d) 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 the holder's
adjusted tax basis in the Exchange Note. This 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 the sale, exchange or retirement. There are
limitations on the use of capital losses.
(e) Holders should be aware that the market discount provisions
of the Code may affect the Notes. These rules generally provide that a holder
who purchases Notes for an amount which is less than their "revised issue price"
will be considered to have purchased the Notes at a "market discount" equal to
the amount of this difference. The revised issue price is the issue price
increased by the aggregate amount of OID includible in the gross income of all
holders for periods before the taxpayer's acquisition of the Notes. The holder
will be required to treat any gain realized upon the disposition of the Notes as
ordinary income to the extent of the market discount that is treated as having
accrued during the period that the holder held the Notes, unless an
<PAGE> 4
Safelite Glass Corp.
April 15, 1999
Page 4
election is made to include this market discount in income on a current basis. A
holder of a Note who acquires the 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 debt
incurred or continued to purchase or carry the Note until the holder disposes of
the Note in a taxable transaction.
A holder of a Note that acquired such Note on the secondary market at a
cost that is more than its adjusted issue price but less than or equal to its
stated redemption price at maturity may reduce the amount of OID includible in
its gross income to reflect such acquisition premium.
If a holder's tax basis in a Note immediately after acquisition exceeds
the stated redemption price at maturity of the Note, the holder may be eligible
to elect to deduct the 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 the purchasers of the market discount and bond premium
rules.
4. Under present United States federal income and estate tax law,
and subject to the discussion below concerning back-up withholding:
(a) no withholding of United States federal income tax will be
required with respect to the payment by the Company or any paying agent of
principal or interest (which for purposes of this discussion includes OID) on a
Note owned by a Non-United States Holder, provided that: (i) the beneficial
owner does not directly or indirectly, actually or constructively, own 10% or
more of the total combined voting power of all classes of stock of the Company
entitled to vote within the meaning of Section 871(h)(3) of the Code and the
regulations thereunder, (ii) the beneficial owner is not a controlled foreign
corporation (within the meaning of Section 957(a) of the Code) that is related
(within the meaning of Section 864(d)(4) of the Code) to the Company through
stock ownership, (iii) the beneficial owner is not a bank whose receipt of
interest on a Note is described in Section 881(c)(3)(A) of the Code, and (iv)
the beneficial owner satisfies the statement requirement (described generally
below) set forth in Section 871(h) and Section 881(c) of the Code and the
regulations thereunder;
(b) no withholding of United States federal income tax will be
required with respect to any gain or income realized by a Non-United States
Holder upon the sale, exchange, retirement or other disposition of a Note;
provided that, in the case of proceeds representing interest, the conditions
described in the preceding paragraph are met; and
(c) a Note beneficially owned by an individual who at the time
of death is a Non-United States Holder will not be subject to United States
federal estate tax as a result of such individual's death, provided that such
individual does not directly or indirectly, actually or constructively, own 10%
or more of the total combined voting power of all classes of stock of the
Company entitled to vote within the meaning of Section 871(h)(3) of the Code and
provided that the interest payments with respect to such Notes would not have
been, if received at the time of
<PAGE> 5
Safelite Glass Corp.
April 15, 1999
Page 5
such individual's death, effectively connected with the conduct of a United
States trade or business by such individual.
To satisfy the requirement referred to in 4(a)(iv) above, the
beneficial owner of such Note, or a financial institution holding the Note on
behalf of such owner, must provide, in accordance with specified procedures, a
paying agent of the Company with a statement to the effect that the beneficial
owner is not a United States person. Currently, these requirements will be met
if (1) the beneficial owner provides his name and address, and certifies, under
penalties of perjury, that he is not a United States person (which certification
may be made on an Internal Revenue Form ("IRS") W-8 (or successor form)), or (2)
a financial institution holding the Note on behalf of the beneficial owner
certifies, under penalties of perjury, that such statement has been received by
it and furnishes a paying agent with a copy thereof. Under recently finalized
Treasury regulations (the "Final Regulations"), the statement requirement
referred to in 4(a)(iv) above may also be satisfied with other documentary
evidence for interests paid after December 31, 1999 with respect to an offshore
account or through certain foreign intermediaries.
If a Non-United States Holder cannot satisfy the requirements described
in 4(a) above, payments of interest (including OID) made to such Non-United
States Holder will be subject to a 30% withholding tax unless the beneficial
owner of the Note provides the Company or its paying agent, as the case may be,
with a properly executed (1) IRS Form 1001 (or successor form) claiming an
exemption from withholding under the benefit of a tax treaty, or (2) IRS Form
4224 (or successor form) stating that interest paid on the Note is not subject
to withholding tax because it is effectively connected with the beneficial
owner's conduct of a trade or business in the United States. Under the Final
Regulations, Non-United States Holders will generally be required to provide IRS
Form W-8 in lieu of IRS Form 1001 and IRS Form 4224, although alternative
documentation may be applicable in certain situations.
If a Non-United States Holder is engaged in a trade or business in the
United States and interest (including OID) on the Note is effectively connected
with the conduct of such trade or business, the Non-United States Holder,
although exempt from the withholding tax discussed above, will be subject to
United States federal income tax on such interest and OID on a net income basis
in the same manner as if it were a United States Holder. In addition, if such
Holder is a foreign corporation, it may be subject to a branch profits tax equal
to 30% (or lower applicable treaty rate) of its effectively connected earnings
and profits for the taxable year, subject to adjustments. For this purpose,
interest (including OID) on a Note will be included in such foreign
corporation's earnings and profits.
Any gain or income realized upon the sale, exchange, retirement or
other disposition of a Note (other than proceeds, if any, representing interest)
generally will not be subject to United States federal income tax unless (i)
such gain or income is effectively connected with a trade or business in the
United States of the Non-United States Holder, or (ii) in the case of a
Non-United States Holder who is an individual, such individual is present in the
United States for 183 days or more in the taxable year of such sale, exchange,
retirement or other disposition, and certain other conditions are met, or (iii)
the Non-United States Holder is subject to tax, pursuant to provisions of
<PAGE> 6
Safelite Glass Corp.
April 15, 1999
Page 6
the United States tax law applicable to certain United States expatriates whose
loss of United States citizenship had as one of its principal purposes the
avoidance of United States taxes.
5. In general, information reporting requirements will apply to
certain payments of principal, interest and OID paid on Notes and to the
proceeds of sale of a Note made to United States Holders other than certain
exempt recipients (such as corporations). A 31% back-up withholding tax will
apply to such payments if the United States Holder fails to provide a taxpayer
identification number or certification of foreign or other exempt status or
fails to report in full dividend and interest income.
In general, no information reporting or back-up withholding will be
required with respect to payments made by the Company or any paying agent to
Non-United States Holders if a statement described in 4(a)(iv) has been received
(and the payer does not have actual knowledge that the beneficial owner is a
United States person).
In addition, back-up withholding and information reporting may apply to
the proceeds of the sale of a Note within the United States or conducted through
certain U.S. related financial intermediaries unless the statement described in
4(a)(iv) has been received (and the payor does not have actual knowledge that
the beneficial owner is a United States person) or the holder otherwise
establishes an exemption.
Any amount withheld under the back-up withholding rules will be allowed
as a refund or a credit against such holder's United States federal income tax
liability provided the required information is furnished to the IRS.
The summary under the heading "Income Tax Considerations" in the
Registration Statement fairly describes, subject to the assumptions and
qualifications set forth therein, the material United States federal income tax
consequences to holders of the Initial Notes and the Exchange Notes resulting
from the exchange of the Initial Notes for the Exchange Notes and the ownership
and disposition of the Exchange Notes under currently applicable law.
We hereby consent to the filing of this opinion as an Exhibit to the
Registration Statement, and to the reference to us under the heading "Income Tax
Considerations" therein.
Very truly yours,
/s/ HUTCHINS, WHEELER & DITTMAR
A Professional Corporation
<PAGE> 1
EXHIBIT 10.16
WAIVER AND FIRST AMENDMENT, dated as of December 16, 1998 (this "FIRST
AMENDMENT"), to the CREDIT AGREEMENT, dated as of December 20, 1996, as amended
and restated through December 17, 1997 (the "CREDIT AGREEMENT"), among SAFELITE
GLASS CORP., a Delaware corporation (the "BORROWER"), the lenders from time to
time party thereto (the "BANKS"), THE CHASE MANHATTAN BANK, as Administrative
Agent, BANKERS TRUST COMPANY, as Syndication Agent, and GOLDMAN SACHS CREDIT
PARTNERS L.P., as Documentation Agent.
WITNESSETH:
WHEREAS, the Borrower is considering issuing new senior subordinated notes
in the aggregate stated principal amount of at least $50,000,000 (the "1998
SENIOR SUBORDINATED NOTES"); and
WHEREAS, the Borrower is considering raising at least $50,000,000 in gross
cash proceeds from an offering of its common stock or preferred stock (the "NEW
EQUITY OFFERING");
WHEREAS, the parties hereto wish to waive and amend certain provisions of
the Credit Agreement on the terms set forth herein:
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements herein contained, the parties hereto agree as follows:
1. DEFINITIONS. Unless otherwise defined herein, terms defined in the
Credit Agreement shall be used as so defined.
2. WAIVER OF SECTION 4.02. (a) Up to $35,000,000 of the net cash proceeds
of the New Equity Offering will be used to repay Revolving Loans (with no
reduction of the Revolving Credit Commitments). The balance of such net cash
proceeds of the New Equity Offering, together with the net cash proceeds of the
1998 Senior Subordinated Notes, will be used to prepay principal of the A Term
Loans, the B Term Loans and the C Term Loans ratably, based on the respective
outstanding principal amounts thereof.
(b) The prepayment of the A Term Loans described in the preceding paragraph
(a) will be applied to reduce the then remaining Scheduled Repayments thereof in
the direct order of maturity.
(c) Sections 4.02(A)(d) and 4.02(B)(b) of the Credit Agreement are hereby
waived to the extent necessary to give effect to the preceding paragraphs (a)
and (b).
3. AMENDMENTS TO CREDIT AGREEMENT.
(a) Section 6.10(c) of the Credit Agreement is amended by deleting all
references to the September 30, 1997 financial statements described therein.
<PAGE> 2
2
(b) Section 6.25 of the Credit Agreement is amended by deleting such
Section 6.25 and substituting therefor the following:
6.25 SUBORDINATED NOTES. The subordination provisions contained in the
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. This Agreement is the Bank Credit Agreement under the
Subordinated Note Indentures.
(c) Section 8.03 of the Credit Agreement is amended by (i) deleting the
word "and" which appears at the end of clause (n) thereof, (ii) deleting the
period at the end of paragraph (o) thereof and substituting therefor the phrase
"; and" and (iii) adding the following new paragraph (p) at the end thereof:
(p) Liens in favor of the holders of the 1998 Subordinated Notes and
the trustee and collateral agent therefor resulting from the deposit of the
proceeds of the 1998 Subordinated Notes in an escrow or similar account.
(d) Section 8.04 of the Credit Agreement is hereby amended by (i) deleting
the word "and" which appears at the end of clause (n), (ii) deleting the period
at the end of clause (o) and substituting therefor the phrase "; and" and (iii)
adding the following new clause (p):
(p) Indebtedness of the Borrower and the Subsidiary Guarantors
incurred under one or more 1998 Subordinated Note Indentures and 1998
Subordinated Notes and the other 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,
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 set forth in the
1998 Subordinated Note Indenture as originally entered into and (B) the
aggregate principal amount of outstanding 1998 Senior Subordinated Notes
under the 1998 Senior Subordinated Note Indenture shall not exceed
$150,000,000 at any time plus the amount of additional 1998 Senior
Subordinated Notes issued to pay interest in lieu of payment of interest in
cash.
(e) Section 8.05 of the Credit Agreement is amended by deleting such
Section 8.05 and substituting therefor the following:
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
<PAGE> 3
3
"Designated Senior Indebtedness" for purposes of, and as defined in, the
Subordinated Note Documents.
(f) Section 8.08 of the Credit Agreement is amended by deleting from the
last sentence thereof the phrase "Senior Subordinated Note Indenture" and
substituting therefor the phrase "Subordinated Note Indentures".
(g) Section 8.11 of the Credit Agreement is amended by deleting the columns
captioned "DATE" and "RATIO" and substituting therefor the following:
Last Day of Fiscal Quarter Ending on or about Ratio
- --------------------------------------------- -----
March 31, 1999 1.15:1.00
June 30, 1999 1.15:1.00
September 30, 1999 1.15:1.00
December 31, 1999 1.25:1.00
March 31, 2000 1.25:1.00
June 30, 2000 1.50:1.00
September 30, 2000 1.50:1.00
December 31, 2000 1.75:1.00
March 31, 2001 1.75:1.00
June 30, 2001 1.75:1.00
September 30, 2001 2.00:1.00
December 31, 2001 2.00:1.00
March 31, 2002 2.00:1.00
June 20, 2002 2.00:1.00
September 30, 2002 2.25:1.00
December 31, 2002 2.25:1.00
March 31, 2003 2.25:1.00
June 30, 2003 2.25:1.00
September 30, 2003 2.50:1.00
December 31, 2003 2.50:1.00
March 31, 2004 2.50:1.00
June 30, 2004 2.50:1.00
September 30, 2004 and 2.75:1.00
each Fiscal Quarter Thereafter
<PAGE> 4
4
(h) Section 8.12 of the Credit Agreement is amended by deleting the columns
captioned "PERIOD" and "RATIO" and substituting therefor the following:
Last Day of Fiscal Quarter Ending on or about Ratio
- --------------------------------------------- -----
March 31, 1999 9.75:1.00
June 30, 1999 9.75:1.00
September 30, 1999 9.00:1.00
December 31, 1999 8.25:1.00
March 31, 2000 7.75:1.00
June 30, 2000 7.00:1.00
September 30, 2000 6.25:1.00
December 31, 2000 6.00:1.00
March 31, 2001 6.00:1.00
June 30, 2001 5.75:1.00
September 30, 2001 5.25:1.00
December 31, 2001 5.00:1.00
March 31, 2002 5.00:1.00
June 20, 2002 4.75:1.00
September 30, 2002 4.50:1.00
December 31, 2002 4.50:1.00
March 31, 2003 4.50:1.00
June 30, 2003 4.50:1.00
September 30, 2003 4.25:1.00
December 31, 2003 4.25:1.00
March 31, 2004 4.25:1.00
June 30, 2004 4.00:1.00
September 30, 2004 3.75:1.00
December 31, 2004 3.75:1.00
March 31, 2005 3.75:1.00
June 30, 2005 3.50:1.00
September 30, 2005 and 3.25:1.00
each Fiscal Quarter Thereafter
(i) Section 8.13 of the Credit Agreement is amended by (i) deleting from
clauses (i) - (iv) thereof the word "Senior" each time it appears therein (other
than in the phrase
<PAGE> 5
5
"Senior Subordinated Notes Consent Solicitation" which appears in clause (iv)
thereof) and (ii) deleting the paragraph beginning "Notwithstanding" and
substituting therefor the following:
Notwithstanding the foregoing (a) the Senior Subordinated Notes may
be refinanced in accordance with the provisions of Section 8.04(c)
and the 1998 Senior Subordinated Notes may be refinanced in
accordance with the provisions of Section 8.04(p) without limitation
by this Section 8.13, (b) so long as no Default or Event of Default
exists or would result after giving effect thereto, (i) the
Subordinated Notes and accrued interest thereon may be repaid with
the proceeds of the issuance of common stock by the Borrower and (ii)
the Subordinated Notes issued under a 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 such 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
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 and (c) the 1998 Senior Subordinated Notes may be redeemed on
or prior to February 3, 1999 if the proceeds thereof are not released
to the Borrower on or prior to such date.
(j) Section 8.14 of the Credit Agreement is amended by deleting from clause
(v) thereof the word "Senior".
(k) Section 10 of the Credit Agreement is hereby amended by adding the
following definitions in proper alphabetical order:
"1998 Senior Subordinated Note Documents" shall mean and include each
of the 1998 Senior Subordinated Note Indenture and the 1998 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.
"1998 Senior Subordinated Note Indenture" shall mean the Indenture to
be entered into among the Borrower and the trustee for the holders of the
1998 Senior Subordinated Notes, which Indenture shall be substantially
similar to the Senior Subordinated Note Indenture, and any other Indentures
that may be entered into by and between the Borrower, the Subsidiary
Guarantors and the trustee for the holders of the 1998 Senior Subordinated
Notes or the purchaser of the 1998 Senior Subordinated Notes, as
applicable, in the form referred to in, or having the terms permitted by,
Section 8.04(p), as the same may be entered into, modified, amended or
supplemented from time to time in accordance with the terms hereof and
thereof.
"1998 Senior Subordinated Notes" shall mean the subordinated notes of
the Borrower that may be issued pursuant to a 1998 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.
<PAGE> 6
6
"Subordinated Note Documents" shall mean the collective reference to
the 1998 Senior Subordinated Note Documents and the Senior Subordinated
Note Documents.
"Subordinated Note Indentures" shall mean the collective reference to
the 1998 Senior Subordinated Note Indenture and the Senior Subordinated
Note Indenture.
"Subordinated Notes" shall mean the collective reference to the 1998
Senior Subordinated Notes and the Senior Subordinated Notes.
(l) Section 10 of the Credit Agreement is amended by deleting from the
definitions of "FQE1", "FQE2" and "FQE3" the phrase "calendar year" and
substituting therefor the phrase "fiscal year".
(m) Section 10 of the Credit Agreement is amended by deleting the phrase
"(or, for the Test Period ending FQE3 1998, Consolidated EBITDA for such Test
Period multiplied by 4/3)" from the definition of "Leverage Ratio".
(n) Section 10 of the Credit Agreement is amended by deleting the phrase ";
provided that the Test Period for FQE3 1998 shall mean the period beginning on
January 1, 1998 and ending on the last day of FQE3 1998" from the definition of
"Test Period".
(o) Section 10 of the Credit Agreement is amended by deleting from the
definition of "Documents" the word "Senior".
4. AMENDMENT TO ANNEX III. Annex III to the Credit Agreement (the Pricing
Grid) is hereby deleted and replaced with Annex III hereto.
5. EFFECTIVE DATE. (a) This First Amendment will become effective on the
date (the "AMENDMENT EFFECTIVE DATE") on which both (i) this First Amendment
shall have been executed by the Borrower and the Banks in accordance with the
terms of the Credit Agreement and (ii) the 1998 Subordinated Notes have been
issued and the net proceeds thereof have been deposited into an escrow account
for the benefit of the holders thereof.
(b) The amendments and waivers set forth herein shall cease to be effective
on February 3, 1999 unless on or prior to February 3, 1999 (i) the proceeds of
the 1998 Senior Subordinated Notes shall have been released from escrow to the
Borrower and (ii) the Borrower shall have received at least $50,000,000 of gross
cash proceeds from the New Equity Offering.
6. AMENDMENT FEE. The Borrower shall pay to the Administrative Agent, for
the account of each Bank which executes this First Amendment, (i) on the
Amendment Effective Date, an amendment fee equal to .10% and (ii) on the date of
the consummation of the New Equity Offering, an amendment fee equal to .275%, in
each case of the sum of such Bank's Revolving Credit Commitment and Term Loans
after giving effect to the application of the net
<PAGE> 7
7
cash proceeds of the 1998 Senior Subordinated Notes and the New Equity Offering
described in Section 2 of this First Amendment.
7. REPRESENTATIONS AND WARRANTIES. The Borrower represents and warrants to
each Bank that as of the effective date of this First Amendment (a) this First
Amendment constitutes the legal, valid and binding obligation of the Borrower,
enforceable against it in accordance with its terms, except as such enforcement
may be limited by bankruptcy, insolvency, fraudulent conveyances,
reorganization, moratorium or similar laws affecting creditors' rights
generally, by general equitable principles (whether enforcement is sought by
proceedings in equity or at law) and by an implied covenant of good faith and
fair dealing, (b) the representations and warranties made by the Borrower in the
Credit Documents are true and correct in all material respects on and as of the
date hereof (except to the extent that such representations and warranties are
expressly stated to relate to an earlier date, in which case such
representations and warranties shall have been true and correct in all material
respects on and as of such earlier date) and (c) no Default or Event of Default
shall have occurred and be continuing as of the date hereof.
8. CONTINUING EFFECT. Except as expressly waived or amended hereby, the
Credit Agreement shall continue to be and shall remain in full force and effect
in accordance with its terms.
9. GOVERNING LAW. THIS FIRST AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED
AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
10. COUNTERPARTS. This First Amendment may be executed by the parties
hereto in any number of separate counterparts and all of said counterparts taken
together shall be deemed to constitute one and the same instrument.
11. PAYMENT OF EXPENSES. The Borrower agrees to pay and reimburse the
Administrative Agent for all of its out-of-pocket costs and reasonable expenses
incurred in connection with this First Amendment, including, without limitation,
the reasonable fees and disbursements of counsel to the Administrative Agent.
<PAGE> 8
8
IN WITNESS WHEREOF, the parties hereto have caused this First Amendment to
be duly executed and delivered by their properly and duly authorized officers as
of the day and year first above written.
SAFELITE GLASS CORP.
By:__________________________________________
Title:
THE CHASE MANHATTAN BANK, as
Administrative Agent and as a Bank
By:__________________________________________
Title:
BANKERS TRUST COMPANY, as Syndication
Agent and as a Bank
By:__________________________________________
Title:
GOLDMAN SACHS CREDIT PARTNERS L.P.,
as Documentation Agent and as a Bank
By:_________________________________________
Title:
THE BANK OF NOVA SCOTIA
By:_________________________________________
Title:
<PAGE> 9
9
BANK ONE, NA
By:_________________________________________
Title:
BANK OF TOKYO-MITSUBISHI TRUST COMPANY
By:_________________________________________
Title:
BANK AUSTRIA CREDITANSTALT
CORPORATE FINANCE, INC.
By:_________________________________________
Title:
By:_________________________________________
Title:
CREDIT LYONNAIS
By:_________________________________________
Title:
FLEET NATIONAL BANK
By:_________________________________________
Title:
THE LONG-TERM CREDIT BANK OF
JAPAN, LIMITED, NEW YORK BRANCH
By:_________________________________________
Title:
<PAGE> 10
10
ABN AMRO BANK, N.V.
By:_________________________________________
Title:
By:_________________________________________
Title:
ALLSTATE INSURANCE COMPANY
By:_________________________________________
Title:
By:_________________________________________
Title:
THE BANK OF NEW YORK
By:_________________________________________
Title:
BANQUE NATIONALE DE PARIS
By:_________________________________________
Title:
PARIBAS
By:_________________________________________
Title:
By:_________________________________________
Title:
<PAGE> 11
11
THE FUJI BANK, LIMITED
By:_________________________________________
Title:
ING HIGH INCOME PRINCIPAL PRESERVATION
FUND HOLDINGS, LDC
By: ING Capital Advisors, Inc., as Investment
Advisor
By:_________________________________________
Title:
METROPOLITAN LIFE INSURANCE COMPANY
By:_________________________________________
Title:
NEW YORK LIFE INSURANCE COMPANY
By:_________________________________________
Title:
NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION
By: NEW YORK LIFE INSURANCE COMPANY
By:_________________________________________
Title:
PILGRIM PRIME RATE TRUST
BY PILGRIM INVESTMENTS, INC. AS ITS
INVESTMENT MANAGER
By:_________________________________________
Title:
<PAGE> 12
12
PNC BANK, N.A.
By:_________________________________________
Title:
THE TRAVELERS INSURANCE COMPANY
By:_________________________________________
Title:
KZH SOLEIL LLC
By:_________________________________________
Title:
THE SUMITOMO BANK, LIMITED, CHICAGO BRANCH
By:_________________________________________
Title:
VAN KAMPEN PRIME RATE INCOME TRUST
By:_________________________________________
Title:
MERRILL LYNCH SENIOR FLOATING RATE FUND, INC.
By:_________________________________________
Title:
<PAGE> 13
13
MERRILL LYNCH GLOBAL INVESTMENT
SERIES: INCOME STRATEGIES PORTFOLIO
By: MERRILL LYNCH ASSET MANAGEMENT,
L.P., as Investment Adviser
By:_________________________________________
Title:
MERRILL LYNCH DEBT STRATEGIES, FUND II, INC.
By:_________________________________________
Title:
MERRILL LYNCH DEBT STRATEGIES PORTFOLIO
By: Merrill Lynch Asset Management, L.P. as
Investment Advisor
By:_________________________________________
Title:
KZH CYPRESSTREE 1 LLC
By:_________________________________________
Title:
IMPERIAL BANK
By:_________________________________________
Title:
IBJ SCHRODER BANK & TRUST COMPANY
By:_________________________________________
Title:
<PAGE> 14
14
CREDIT AGRICOLE INDOSUEZ
By:_________________________________________
Title:
MORGAN STANLEY DEAN WITTER PRIME INCOME TRUST
By:_________________________________________
Title:
PACIFICA PARTNERS I. LP
By:_________________________________________
Title:
DEEPROCK & CO.
By: Eaton Vance Management as Investment Advisor
By:_________________________________________
Title:
GENERAL MOTORS CASH MANAGEMENT MASTER TRUST
By:_________________________________________
Title:
SENIOR DEBT PORTFOLIO
By: Eaton Vance Management as Investment Advisor
By:_________________________________________
Title:
<PAGE> 1
Exhibit 10.17
SAFELITE GLASS CORP.
1999 STOCK OPTION PLAN
1. PURPOSE OF THE PLAN.
This stock option plan (the "Plan") is intended to encourage ownership
of the stock of Safelite Glass Corp. (the "Company") by employees of the Company
and its subsidiaries, to induce qualified personnel to enter and remain in the
employ of the Company or its subsidiaries and otherwise to provide additional
incentive for optionees to promote the success of its business.
2. STOCK SUBJECT TO THE PLAN.
(a) The total number of shares of the authorized but unissued or
Treasury shares of the Class B Non-Voting Common Stock, $0.01 par value, of the
Company ("Common Stock") for which options may be granted under the Plan shall
not exceed five hundred twenty-five thousand (525,000) shares, subject to
adjustment as provided in Section 12 hereof.
(b) If an option granted hereunder shall expire or terminate for
any reason without having vested fully or having been exercised in full, the
unvested and/or unpurchased shares subject thereto shall again be available for
subsequent option grants under the Plan.
(c) Stock issuable upon exercise of an option granted under the
Plan may be subject to such restrictions on transfer, repurchase rights or other
restrictions as shall be determined by the Board of Directors.
<PAGE> 2
3. ADMINISTRATION OF THE PLAN.
At the discretion of the Company=s Board of Directors, the Plan shall
be administered either (i) by the full Board of Directors of the Company or (ii)
by a committee (the "Committee") consisting of two or more members of the
Company's Board of Directors. In the event the full Board of Directors is the
administrator of the Plan, references herein to the Committee shall be deemed to
include the full Board of Directors. The Board of Directors may from time to
time appoint a member or members of the Committee in substitution for or in
addition to the member or members then in office and may fill vacancies on the
Committee however caused. The Committee shall choose one of its members as
Chairman and shall hold meetings at such times and places as it shall deem
advisable. A majority of the members of the Committee shall constitute a quorum
and any action may be taken by a majority of those present and voting at any
meeting.
Any action may also be taken without the necessity of a meeting by a
written instrument signed by a majority of the Committee. The decision of the
Committee as to all questions of interpretation and application of the Plan
shall be final, binding and conclusive on all persons. The Committee shall have
the authority to adopt, amend and rescind such rules and regulations as, in its
opinion, may be advisable in the administration of the Plan. The Committee may
correct any defect or supply any omission or reconcile any inconsistency in the
Plan or in any option agreement or Award agreement granted hereunder in the
manner and to the extent it shall deem expedient to carry the Plan into effect
and shall be the sole and final judge of such
-2-
<PAGE> 3
expediency. No Committee member shall be liable for any action or determination
made in good faith.
4. TYPE OF OPTIONS.
Options granted pursuant to the Plan shall be authorized by action of
the Board of Directors and may be designated as either incentive stock options
meeting the requirements of Section 422 of the Internal Revenue Code of 1986, as
amended (the "Code"), or non-qualified options which are not intended to meet
the requirements of such Section 422 of the Code, the designation to be in the
sole discretion of the Board of Directors. The Plan shall be administered by the
Board of Directors in such manner as to permit options to qualify as incentive
stock options under the Code.
5. ELIGIBILITY.
Options designated as incentive stock options shall be granted only to
key employees (including officers and directors who are also employees) of the
Company or any of its subsidiaries, including subsidiaries who become such after
adoption of the Plan. Options designated as non-qualified options may be granted
to officers, key employees and non-employee directors of the Company or of any
of its subsidiaries. "Subsidiary" or "subsidiaries" shall be as defined in
Section 424 of the Code and the Treasury Regulations promulgated thereunder (the
"Regulations").
The Committee shall, from time to time, at its sole discretion, select
from such eligible individuals those to whom options shall be granted and shall
determine the number of shares to be subject to each option. In determining the
eligibility of an individual to be granted an option, as well as in determining
the number of shares to be
-3-
<PAGE> 4
granted to any individual, the Board of Directors in its sole discretion shall
take into account the position and responsibilities of the individual being
considered, the nature and value to the Company or its subsidiaries of his or
her service and accomplishments, his or her present and potential contribution
to the success of the Company or its subsidiaries, and such other factors as the
Board of Directors may deem relevant.
No option designated as an incentive stock option shall be granted to
any employee of the Company or any subsidiary if such employee owns, immediately
prior to the grant of an option, stock representing more than 10% of the voting
power or more than 10% of the value of all classes of stock of the Company or a
parent or a subsidiary, unless the purchase price for the stock under such
option shall be at least 110% of its fair market value at the time such option
is granted and the option, by its terms, shall not be exercisable more than five
years from the date it is granted. In determining the stock ownership under this
paragraph, the provisions of Section 424(d) of the Code shall be controlling. In
determining the fair market value under this paragraph, the provisions of
Section 7 hereof shall apply.
The maximum number of shares of the Company's Common Stock with respect
to which an option or options may be granted to any employee in any calendar
year shall not exceed five hundred and twenty-five thousand (525,000) shares,
taking into account shares subject to options granted and terminated, or
repriced, during such calendar year.
-4-
<PAGE> 5
6. OPTION AGREEMENT.
Each option shall be evidenced by an option agreement (the "Agreement")
duly executed on behalf of the Company and by the optionee to whom such option
is granted, which Agreement shall comply with and be subject to the terms and
conditions of the Plan. The Agreement may contain such other terms, provisions
and conditions which are not inconsistent with the Plan as may be determined by
the Board of Directors, provided that options designated as incentive stock
options shall meet all of the conditions for incentive stock options as defined
in Section 422 of the Code. The date of grant of an option shall be as
determined by the Board of Directors. More than one option may be granted to an
individual.
7. OPTION PRICE.
The option price or prices of shares of the Company's Common Stock for
options designated as non-qualified stock options shall be as determined by the
Board of Directors, but in no event shall the option price of a non-qualified
stock option be less than 50% of the fair market value of such Common Stock at
the time the option is granted, as determined by the Board of Directors. The
option price or prices of shares of the Company's Common Stock for incentive
stock options shall be the fair market value of such Common Stock at the time
the option is granted as determined by the Board of Directors in accordance with
the Regulations promulgated under Section 422 of the Code. If such shares are
then listed on any national securities exchange, the fair market value shall be
the mean between the high and low sales prices, if any, on the largest such
exchange on the business day immediately preceding the date of the grant
-5-
<PAGE> 6
of the option or, if none, shall be determined by taking a weighted average of
the means between the highest and lowest sales prices on the nearest date before
and the nearest date after the date of grant in accordance with Treasury
Regulations Section 25.2512-2. If the shares are not then listed on any such
exchange, the fair market value of such shares shall be the mean between the
high and low sales prices, if any, as reported in the National Association of
Securities Dealers Automated Quotation National Market ("NASDAQ/NM") for the
business day immediately preceding the date of the grant of the option, or, if
none, shall be determined by taking a weighted average of the means between the
highest and lowest sales on the nearest date before and the nearest date after
the date of grant in accordance with Treasury Regulations Section 25.2512-2. If
the shares are not then either listed on any such exchange or quoted in
NASDAQ/NM, the fair market value shall be the mean between the average of the
"Bid" and the average of the "Ask" prices, if any, as reported in the National
Daily Quotation Service for the business day immediately preceding the date of
the grant of the option, or, if none, shall be determined by taking a weighted
average of the means between the highest and lowest sales prices on the nearest
date before and the nearest date after the date of grant in accordance with
Treasury Regulations Section 25.2512-2. If the fair market value cannot be
determined under the preceding three sentences, it shall be determined in good
faith by the Board of Directors.
8. MANNER OF PAYMENT; MANNER OF EXERCISE.
(a) Options granted under the Plan may provide for the payment of
the exercise price, as determined by the Board of Directors, by delivery of (i)
cash or a
-6-
<PAGE> 7
check payable to the order of the Company in an amount equal to the exercise
price of such options, (ii) shares of Common Stock of the Company owned by the
optionee having a fair market value equal in amount to the exercise price of the
options being exercised, (iii) any combination of (i) and (ii), provided,
however, that payment of the exercise price by delivery of shares of Common
Stock of the Company owned by such optionee may be made only if such payment
does not result in a charge to earnings for financial accounting purposes as
determined by the Board of Directors or (iv) payment may also be made by
delivery of a properly executed exercise notice to the Company, together with a
copy of irrevocable instruments to a broker to deliver promptly to the Company
the amount of sale or loan proceeds to pay the exercise price. The fair market
value of any shares of the Company's Common Stock which may be delivered upon
exercise of an option shall be determined by the Board of Directors in
accordance with Section 7 hereof.
(b) To the extent that the right to purchase shares under an
option has accrued and is in effect, options may be exercised in full at one
time or in part from time to time, by giving written notice, signed by the
person or persons exercising the option, to the Company, stating the number of
shares with respect to which the option is being exercised, accompanied by
payment in full for such shares as provided in subparagraph (a) above. Upon such
exercise, delivery of a certificate for paid-up non-assessable shares shall be
made at the principal office of the Company to the person or persons exercising
the option at such time, during ordinary business hours, after five (5) but not
more than ten (10) business days from the date of receipt of the
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<PAGE> 8
notice by the Company, as shall be designated in such notice, or at such time,
place and manner as may be agreed upon by the Company and the person or persons
exercising the option. Upon exercise of the option and payment as provided
above, the optionee shall become a shareholder of the Company as to the Shares
acquired upon such exercise.
9. EXERCISE OF OPTIONS.
Except as otherwise determined from time to time by the Board of
Directors, options granted under the Plan shall, subject to Section 10(b) and
Section 12 hereof, not be exercisable during the first twelve (12) months after
the date of grant. Thereafter, options shall become exercisable as to
twenty-five percent (25%) of the shares covered thereby upon the expiration of
twelve (12) months after the date of grant and as to an additional 2.08333%
upon the expiration of each month during the next three (3) succeeding twelve
(12) month periods.
To the extent that an option to purchase shares is not exercised by an
optionee when it becomes initially exercisable, it shall not expire but shall be
carried forward and shall be exercisable, on a cumulative basis, until the
expiration of the exercise period. No partial exercise may be made for less than
one hundred (100) full shares of Common Stock.
Notwithstanding the foregoing, the Board of Directors may in its
discretion (i) specifically provide for another time or times of exercise or
(ii) accelerate the exercisability of any option subject to such terms and
conditions as the Board of Directors deems necessary and appropriate.
-8-
<PAGE> 9
10. TERM OF OPTIONS; EXERCISABILITY.
(a) TERM.
(1) Each option shall expire not more than ten (10) years
from the date of the granting thereof, but shall be subject to earlier
termination as herein provided.
(2) Except as otherwise provided in this Section 10, an
option granted to any employee optionee who ceases to be an employee of the
Company or one of its subsidiaries shall terminate immediately on the date such
optionee ceases to be an employee of the Company or one of its subsidiaries, or
on the date on which the option expires by its terms, whichever occurs first.
(3) If such termination of employment is because the
optionee has become permanently disabled (within the meaning of Section 22(e)(3)
of the Code), such option shall terminate on the last day of the third month
from the date such optionee ceases to be an employee, or on the date on which
the option expires by its terms, whichever occurs first.
(4) In the event of the death of any optionee, any option
granted to such optionee shall terminate on the last day of the sixth month from
the date of death, or on the date on which the option expires by its terms,
whichever occurs first.
(5) If an optionee ceases to be an employee of the
Company or one of its subsidiaries due to a termination of such employment by
the Company without "Cause", as such term is defined in the particular
employment agreement with such optionee, any option granted to such optionee
shall terminate on the last day of the
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<PAGE> 10
second month from the date of such termination, or on the date on which the
option expires by its terms, whichever occurs first.
(6) Notwithstanding subparagraphs (2), (3), (4) and (5)
above, the Board of Directors shall have the authority to extend the expiration
date of any outstanding option in circumstances in which it deems such action to
be appropriate, provided that no such extension shall extend the term of an
option beyond the date on which the option would have expired if no termination
of the optionee's employment had occurred.
(b) Exercisability; Vesting. An option granted to an employee
optionee who ceases to be an employee of the Company or one of its subsidiaries
shall be exercisable only to the extent that the right to purchase shares under
such option has accrued, is vested and is in effect on the date such optionee
ceases to be an employee of the Company or one of its subsidiaries.
11. OPTIONS NOT TRANSFERABLE.
The right of any optionee to exercise any option granted to him or her
shall not be assignable or transferable by such optionee otherwise than by will
or the laws of descent and distribution, and any such option shall be
exercisable during the lifetime of such optionee only by him. Any option granted
under the Plan shall be null and void and without effect upon the bankruptcy of
the optionee to whom the option is granted, or upon any attempted assignment or
transfer, except as herein provided, including without limitation any purported
assignment, whether voluntary or by operation of law,
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<PAGE> 11
pledge, hypothecation or other disposition, attachment, divorce, trustee process
or similar process, whether legal or equitable, upon such option.
12. RECAPITALIZATIONS, REORGANIZATIONS AND THE LIKE.
(a) In the event that the outstanding shares of the Common Stock
of the Company are changed into or exchanged for a different number or kind of
shares or other securities of the Company or of another corporation by reason of
any reorganization, merger, consolidation, recapitalization, reclassification,
stock split-up, combination of shares, or dividends payable in capital stock,
appropriate adjustment shall be made in the number and kind of shares as to
which options may be granted under the Plan and as to which outstanding options
or portions thereof then unexercised shall be exercisable, to the end that the
proportionate interest of the optionee shall be maintained as before the
occurrence of such event; such adjustment in outstanding options shall be made
without change in the total price applicable to the unexercised portion of such
options and with a corresponding adjustment in the option price per share.
(b) In addition, unless otherwise determined by the Board of
Directors in its sole discretion, in the case of any (i) sale or conveyance to
another entity of all or substantially all of the property and assets of the
Company, including, without limitation, by way of merger or consolidation, or
(ii) Change in Control (as hereinafter defined) of the Company, the purchaser(s)
of the Company's assets or stock may, in his, her or its discretion, deliver to
the optionee the same kind of consideration that is delivered to the
shareholders of the Company as a result of such sale, conveyance or
-11-
<PAGE> 12
Change in Control, or the Board of Directors may cancel all outstanding options
in exchange for consideration in cash or in kind which consideration in both
cases shall be equal in value to the value of those shares of stock or other
securities the optionee would have received had the option been exercised (to
the extent then exercisable) and no disposition of the shares acquired upon such
exercise been made prior to such sale, conveyance or Change in Control, less the
option price therefor. Upon receipt of such consideration by the optionee, his
or her option shall immediately terminate and be of no further force and effect.
The value of the stock or other securities the optionee would have received if
the option had been exercised shall be determined in good faith by the Board of
Directors of the Company, and in the case of shares of the Common Stock of the
Company, in accordance with the provisions of Section 7 hereof. The Board of
Directors shall also have the power and right to accelerate the exercisability
of any options, notwithstanding any limitations in this Plan or in the Agreement
upon such a sale, conveyance or Change in Control. Upon such acceleration, any
options or portion thereof originally designated as incentive stock options that
no longer qualify as incentive stock options under Section 422 of the Code as a
result of such acceleration shall be redesignated as non-qualified stock
options. A "Change in Control" shall be deemed to have occurred if any person,
or any two or more persons acting as a group, and all affiliates of such person
or persons, who prior to such time owned less than ten percent (10%) of the
then outstanding Common Stock of the Company, shall acquire, whether by
purchase, exchange, tender offer, merger, consolidation or otherwise, such
additional shares of the Company's Common Stock in one or more transactions, or
-12-
<PAGE> 13
series of transactions, such that following such transaction or transactions,
such person or group and affiliates beneficially own fifty percent (50%) or more
of the Company's Common Stock outstanding.
(c) Upon dissolution or liquidation of the Company, all options
granted under this Plan shall terminate, but each optionee (if at such time in
the employ of or otherwise associated with the Company or any of its
subsidiaries) shall have the right, immediately prior to such dissolution or
liquidation, to exercise his or her option to the extent then exercisable.
(d) No fraction of a share shall be purchasable or deliverable
upon the exercise of any option, but in the event any adjustment hereunder of
the number of shares covered by the option shall cause such number to include a
fraction of a share, such fraction shall be adjusted to the nearest smaller
whole number of shares.
13. NO SPECIAL EMPLOYMENT RIGHTS.
Nothing contained in the Plan or in any option granted under the Plan
shall confer upon any option holder any right with respect to the continuation
of his or her employment by the Company (or any subsidiary) or interfere in any
way with the right of the Company (or any subsidiary), subject to the terms of
any separate employment agreement to the contrary, at any time to terminate such
employment or to increase or decrease the compensation of the option holder from
the rate in existence at the time of the grant of an option. Whether an
authorized leave of absence, or absence in military or government service, shall
constitute termination of employment shall be determined by the Board of
Directors at the time.
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<PAGE> 14
14. WITHHOLDING.
The Company's obligation to deliver shares upon the exercise of any
option granted under the Plan shall be subject to the option holder's
satisfaction of all applicable Federal, state and local income, excise,
employment and any other tax withholding requirements. On or after the date of
the first registration of an equity security of the Company under Section 12 of
the Securities Exchange Act of 1934 (the "1934 Act"), if an optionee is an
officer of the Company within the meaning of Section 16 of the 1934 Act, such
optionee may elect to pay such withholding tax obligations in accordance with
rules prescribed by the Board of Directors by having the Company withhold shares
of Common Stock having a value equal to the amount required to be withheld. The
value of the shares to be withheld shall equal the fair market value of the
shares on the day the option is exercised as determined by the Board of
Directors. The following provisions shall apply to such elections by persons who
are directors or officers of the Company within the meaning of Section 16(b) of
the 1934 Act: (i) if an optionee has received multiple options, a separate
election must be made for each option; (ii) the election may be a "standing
election," i.e., upon making an election, a fixed date need not be set for the
exercise of the option to which the election relates; (iii) the election will be
subject to the approval or disapproval of the Board of Directors, which approval
or disapproval may be given at any time after the election to which it relates;
(iv) the election may not be made within six months following the date of grant
of the option to which it relates; (v) the election must be made six months
prior to the date the option is exercised, or both the election and exercise
must be made
-14-
<PAGE> 15
in the ten-day "window period" beginning on the third day following the release
of the Company's quarterly or annual summary statement of sales and earnings;
and (vi) an election may be revoked, or may be reinstituted after a revocation,
only upon six months' prior notice.
15. RESTRICTIONS ON ISSUE OF SHARES.
(a) Notwithstanding the provisions of Section 8, the Company may
delay the issuance of shares covered by the exercise of an option and the
delivery of a certificate for such shares until one of the following conditions
shall be satisfied:
(i) The shares with respect to which such option has been
exercised are at the time of the issue of such shares effectively registered or
qualified under applicable Federal and state securities acts now in force or as
hereafter amended; or
(ii) Counsel for the Company shall have given an opinion,
which opinion shall not be unreasonably conditioned or withheld, that such
shares are exempt from registration and qualification under applicable Federal
and state securities acts now in force or as hereafter amended.
(b) It is intended that all exercises of options shall be
effective, and the Company shall use its best efforts to bring about compliance
with the above conditions within a reasonable time, except that the Company
shall be under no obligation to qualify shares or to cause a registration
statement or a post-effective amendment to any registration statement to be
prepared for the purpose of covering the issue of shares in respect of which any
option may be exercised, except as otherwise agreed to by the Company in
writing.
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<PAGE> 16
16. PURCHASE FOR INVESTMENT; RIGHTS OF HOLDER ON SUBSEQUENT
REGISTRATION.
Unless the shares to be issued upon exercise of an option granted under
the Plan have been effectively registered under the Securities Act of 1933, as
now in force or hereafter amended, the Company shall be under no obligation to
issue any shares covered by any option unless the person who exercises such
option, in whole or in part, shall give a written representation and undertaking
to the Company which is satisfactory in form and scope to counsel for the
Company and upon which, in the opinion of such counsel, the Company may
reasonably rely, that he or she is acquiring the shares issued pursuant to such
exercise of the option for his or her own account as an investment and not with
a view to, or for sale in connection with, the distribution of any such shares,
and that he or she will make no transfer of the same except in compliance with
any rules and regulations in force at the time of such transfer under the
Securities Act of 1933, or any other applicable law, and that if shares are
issued without such registration, a legend to this effect may be endorsed upon
the securities so issued. In the event that the Company shall, nevertheless,
deem it necessary or desirable to register under the Securities Act of 1933 or
other applicable statutes any shares with respect to which an option shall have
been exercised, or to qualify any such shares for exemption from the Securities
Act of 1933 or other applicable statutes, then the Company may take such action
and may require from each optionee such information in writing for use in any
registration statement, supplementary registration statement, prospectus,
preliminary prospectus or offering circular as is reasonably necessary for such
purpose and may require reasonable indemnity to the Company and
-16-
<PAGE> 17
its officers and directors and controlling persons from such holder against all
losses, claims, damages and liabilities arising from such use of the information
so furnished and caused by any untrue statement of any material fact therein or
caused by the omission 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.
17. LOANS.
The Company may make loans to optionees to permit them to exercise
options. If loans are made, the requirements of all applicable Federal and state
laws and regulations regarding such loans must be met.
18. MODIFICATION OF OUTSTANDING OPTIONS.
The Board of Directors may authorize the amendment of any outstanding
option with the consent of the optionee when and subject to such conditions as
are deemed to be in the best interests of the Company and in accordance with the
purposes of this Plan.
19. APPROVAL OF STOCKHOLDERS.
The Plan shall be subject to approval by the vote of stockholders
holding at least a majority of the voting stock of the Company present, or
represented, and entitled to vote at a duly held stockholders' meeting, or by
written consent of the stockholders as provided for under applicable state law,
within twelve (12) months after the adoption of the Plan by the Board of
Directors and shall take effect as of the date of adoption by the Board of
Directors upon such approval. The Board of Directors may grant options
-17-
<PAGE> 18
under the Plan prior to such approval, but any such option shall become
effective as of the date of grant only upon such approval and, accordingly, no
such option may be exercisable prior to such approval.
20. TERMINATION AND AMENDMENT.
Unless sooner terminated as herein provided, the Plan shall terminate
ten (10) years from the date upon which the Plan was duly adopted by the Board
of Directors of the Company. The Board of Directors may at any time terminate
the Plan or make such modification or amendment thereof as it deems advisable;
provided, however, that except as provided in this Section 20, the Board of
Directors may not, without the approval of the stockholders of the Company
obtained in the manner stated in Section 19, increase the maximum number of
shares for which options may be granted or change the designation of the class
of persons eligible to receive options under the Plan, or make any other change
in the Plan which requires stockholder approval under applicable law or
regulations, including any approval requirement which is a prerequisite for
exemptive relief under Section 16 of the 1934 Act. The Board of Directors may
terminate, amend or modify any outstanding option without the consent of the
option holder, provided, however, that, except as provided in Section 12,
without the consent of the optionee, the Board of Directors shall not change the
number of shares subject to an option, nor the exercise price thereof, nor
extend the term of such option.
-18-
<PAGE> 19
21. COMPLIANCE WITH RULE 16b-3.
It is intended that the provisions of the Plan and any option granted
thereunder to a person subject to the reporting requirements of Section 16(a) of
the 1934 Act shall comply in all respects with the terms and conditions of Rule
16b-3 under the 1934 Act, or any successor provisions. Any agreement granting
options shall contain such provisions as are necessary or appropriate to assure
such compliance. To the extent that any provision hereof is found not to be in
compliance with such Rule, such provision shall be deemed to be modified so as
to be in compliance with such Rule, or if such modification is not possible,
shall be deemed to be null and void, as it relates to a recipient subject to
Section 16(a) of the 1934 Act.
22. RESERVATION OF STOCK.
The Company shall at all times during the term of the Plan reserve and
keep available such number of shares of stock as will be sufficient to satisfy
the requirements of the Plan and shall pay all fees and expenses necessarily
incurred by the Company in connection therewith.
23. LIMITATION OF RIGHTS IN THE OPTION SHARES.
An optionee shall not be deemed for any purpose to be a stockholder of
the Company with respect to any of the options except to the extent that the
option shall have been exercised with respect thereto and, in addition, a
certificate shall have been issued theretofore and delivered to the optionee.
-19-
<PAGE> 20
24. NOTICES.
Any communication or notice required or permitted to be given under the
Plan shall be in writing, and mailed by registered or certified mail or
delivered by hand, if to the Company, to its principal place of business,
attention: President, and, if to an optionee, to the address as appearing on the
records of the Company.
APPROVED BY BOARD OF DIRECTORS:
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APPROVED BY SHAREHOLDERS:
- -------------------------------
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<PAGE> 1
Exhibit 10.18
SAFELITE GLASS CORP.
$55,000,000
9 7/8% SERIES C SENIOR SUBORDINATED NOTES DUE 2006
EXCHANGE AND REGISTRATION RIGHTS AGREEMENT
------------------------------------------
December 18, 1998
CHASE SECURITIES INC.
BT ALEX. BROWN INCORPORATED
SALOMON BROTHERS INC
c/o Chase Securities Inc.
270 Park Avenue
New York, New York 10017
Dear Sirs:
Safelite Glass Corp., a Delaware corporation (the "Company"), proposes to
issue and sell to you (the "Initial Purchasers"), upon the terms set forth in a
purchase agreement dated December 15, 1998 (the "Purchase Agreement"),
$55,000,000 principal amount of its 9 7/8% Series C Senior Subordinated Notes
due 2006 (the "Securities"). Capitalized terms used but not specifically defined
herein are defined in the Purchase Agreement. As an inducement to the Initial
Purchasers to enter into the Purchase Agreement and in satisfaction of a
condition to your obligations thereunder, the Company agrees with you, for the
benefit of the holders of the Securities (including the Initial Purchasers) (the
"Holders"), as follows:
1. REGISTERED EXCHANGE OFFER. The Company shall prepare and, not later than
120 days following the date of original issuance of the Securities (the "Issue
Date"), shall file with the Commission a registration statement (the "Exchange
Offer Registration Statement") on an appropriate form under the Securities Act
with respect to a proposed offer (the "Registered Exchange Offer") to the
Holders to issue and deliver to such Holders, in exchange for the Securities, a
like aggregate principal amount of debt securities of the Company (the "Exchange
Securities") identical in all material respects to the Securities, except for
the transfer restrictions relating to the Securities, shall use its reasonable
best efforts to cause the Exchange Offer Registration Statement to become
effective under the Securities Act no later than 240 days after the Issue Date
and to cause the Registered Exchange Offer to be consummated no later than 270
days after the Issue Date, and shall keep the Exchange Offer Registration
Statement effective for
<PAGE> 2
2
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 (such period being called
the "Exchange Offer Registration Period"). The Exchange Securities and the
Private Exchange Securities (as defined below, if any) will be issued under the
Indenture or an indenture (the "Exchange Securities Indenture") between the
Company and the Trustee or such other bank or trust company reasonably
satisfactory to you, as trustee (the "Exchange Securities Trustee"), such
indenture to be identical in all material respects to the Indenture except for
the transfer restrictions relating to the Securities (as described above).
Upon the effectiveness of the Exchange Offer Registration Statement, the
Company shall promptly commence the Registered Exchange Offer, it being the
objective of such Registered Exchange Offer to enable each Holder electing to
exchange Securities for Exchange Securities (assuming that such Holder (a) is
not (i) an affiliate of the Company within the meaning of the Securities Act or
(ii) an Exchanging Dealer (as defined below) not complying with the requirements
of the next sentence, (b) is not an Initial Purchaser with Securities that have
the status of an unsold allotment in an initial distribution, (c) acquires the
Exchange Securities in the ordinary course of such Holder's business and (d) has
no arrangements or understandings with any person to participate in the
distribution of the Exchange Securities) and to trade such Exchange Securities
from and after their receipt without any limitations or restrictions under the
Securities Act and without material restrictions under the securities laws of
the several states of the United States. The Company, the Initial Purchasers and
each Exchanging Dealer (as defined below) acknowledge that, pursuant to current
interpretations by the Commission's staff of Section 5 of the Securities Act,
(i) each Holder which is a broker-dealer electing to exchange Securities,
acquired for its own account as a result of market making activities or other
trading activities, for Exchange Securities (an "Exchanging Dealer"), is
required to deliver a prospectus containing the information set forth in Annex A
hereto on the cover, in Annex B hereto in the "Exchange Offer Procedures"
section and the "Purpose of the Exchange Offer" section, and in Annex C hereto
in the "Plan of Distribution" section of such prospectus in connection with a
sale of any such Exchange Securities received by such Exchanging Dealer pursuant
to the Registered Exchange Offer and (ii) if any Initial Purchaser elects to
sell Private Exchange Securities acquired in exchange for Securities
constituting any portion of an unsold allotment it is required to deliver a
prospectus containing the information required by Items 507 or 508 of Regulation
S-K under the Securities Act, as applicable, in connection with such a sale.
If, prior to the consummation of the Registered Exchange Offer, any Holder
holds any Securities acquired by it that have, or that are reasonably likely to
be determined to have, the status of an unsold allotment in the initial
distribution of the Securities, or any Holder is not entitled to participate in
the Registered Exchange Offer, the Company shall, upon the request of any such
Holder, simultaneously with the delivery of the Exchange Securities in the
Registered Exchange Offer, issue and deliver to any such Holder, in exchange for
the Securities held by such Holder (the "Private Exchange"), a like principal
amount of debt securities of the Company (the "Private Exchange Securities")
that are identical in all material respects to the Exchange Securities, except
for the transfer restrictions relating to such Private Exchange Securities. The
Private Exchange Securities will be issued under the same indenture as the
Exchange Securities,
<PAGE> 3
3
and the Company shall use its reasonable best efforts to cause the Private
Exchange Securities to bear the same CUSIP number as the Exchange Securities.
In connection with the Registered Exchange Offer, the Company shall:
(a) mail to each Holder a copy of the prospectus forming part of the
Exchange Offer Registration Statement, together with an appropriate letter
of transmittal and related documents;
(b) keep the Registered Exchange offer open for not less than 30 days
after the date notice of the Exchange Offer is mailed to the Holders (or
longer if required by applicable law);
(c) utilize the services of a Depositary for the Registered Exchange
Offer with an address in the Borough of Manhattan, The City of New York;
(d) permit Holders to withdraw tendered Securities at any time prior
to the close of business, New York time, on the last business day on which
the Registered Exchange Offer shall remain open; and
(e) otherwise comply in all respects with all laws applicable to the
Registered Exchange Offer.
As soon as practicable after the close of the Registered Exchange
Offer and any Private Exchange, the Company shall:
(a) accept for exchange all Securities tendered and not validly
withdrawn pursuant to the Registered Exchange Offer and the Private
Exchange;
(b) deliver to the Trustee for cancellation all Securities so accepted
for exchange; and
(c) cause the Trustee or the Exchange Securities Trustee, as the case
may be, promptly to authenticate and deliver to each Holder of Securities,
Exchange Securities or Private Exchange Securities, as the case may be,
equal in principal amount to the Securities of such Holder so accepted for
exchange.
The Company shall make available for a period of 90 days after the
consummation of the Registered Exchange Offer, a copy of the prospectus forming
part of the Exchange Offer Registration Statement to any broker-dealer for use
in connection with any resale of any Exchange Securities.
Interest on each Exchange Security and Private Exchange Security
issued pursuant to the Registered Exchange Offer and in the Private Exchange
will accrue from the last interest payment date on which interest was paid on
the Securities surrendered in exchange
<PAGE> 4
4
therefor or, if no interest has been paid on the Securities, from the date of
original issue of the Securities.
Each Holder participating in the Registered Exchange Offer shall be
required to represent to the Company that at the time of the consummation of the
Registered Exchange Offer (i) any Exchange Securities received by such Holder
will be acquired in the ordinary course of business, (ii) such Holder will have
no arrangements or understanding with any person to participate in the
distribution of the Securities or the Exchange Securities within the meaning of
the Securities Act and (iii) such Holder is not an affiliate of the Company
within the meaning of the Securities Act, or if it is an affiliate, it will
comply with the registration and prospectus delivery requirements of the
Securities Act to the extent applicable.
Notwithstanding any other provisions hereof, the Company will ensure
that (i) any Exchange Offer Registration Statement and any amendment thereto and
any prospectus forming part thereof and any supplement thereto complies in all
material respects with the Securities Act and the rules and regulations
thereunder, (ii) any Exchange Offer Registration Statement and any amendment
thereto does not, when it becomes effective, contain 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 and (iii) any prospectus
forming part of any Exchange Offer Registration Statement, and any supplement to
such prospectus, does not include, as of the consummation of the Registered
Exchange Offer, an untrue statement of a material fact or omit to state a
material fact necessary in order to make the statements therein, in the light of
the circumstances under which they were made, not misleading.
2. SHELF REGISTRATION. If (i) applicable interpretations of the staff
of the Commission do not permit the Company to effect the Registered Exchange
Offer as contemplated by Section 1 hereof or (ii) any Holder either (A) is not
eligible to participate in the Registered Exchange Offer or (B) participates in
the Registered Exchange Offer and does not receive freely transferrable Exchange
Securities in exchange for tendered Securities (which shall include Initial
Purchasers with an unsold allotment), the following provisions shall apply:
(a) The Company shall use all reasonable efforts to as promptly as
practicable file with the Commission and thereafter shall use its reasonable
best efforts to cause to be declared effective a shelf registration statement on
an appropriate form under the Securities Act relating to the offer and sale of
the Transfer Restricted Securities (as defined below) by the Holders from time
to time in accordance with the methods of distribution set forth in such
registration statement (hereafter, a "Shelf Registration Statement" and,
together with any Exchange Offer Registration Statement, a "Registration
Statement"); PROVIDED, HOWEVER, that no Holder of Securities or Exchange
Securities (other than any Initial Purchaser) shall be entitled to have
Securities or Exchange Securities held by it covered by such Shelf Registration
Statement unless such Holder agrees in writing to be bound by all the provisions
of this Agreement applicable to such Holder.
(b) The Company shall use its reasonable best efforts to keep the
Shelf Registration Statement continuously effective in order to permit the
prospectus forming part thereof to be used by Holders for a period of two years
from the Issue Date or such shorter period
<PAGE> 5
5
that will terminate when either (i) all the Securities and Exchange Securities
covered by the Shelf Registration Statement have been sold pursuant to the Shelf
Registration Statement (in any such case, such period being called the "Shelf
Registration Period") or (ii) all the Securities and Exchange Securities are
eligible for sale pursuant to Rule 144(k) promulgated under the Securities Act.
The Company shall be deemed not to have used its reasonable best efforts to keep
the Shelf Registration Statement effective during the requisite period if it
voluntarily takes any action that would result in Holders of Securities or
Exchange Securities covered thereby not being able to offer and sell such
Securities or Exchange Securities during that period, unless such action is
required by applicable law; PROVIDED, HOWEVER, that the foregoing shall not
apply to actions taken by the Company in good faith and for valid business
reasons (not including avoidance of its obligations hereunder), including,
without limitation, the acquisition or divestiture of assets, so long as the
Company within 120 days thereafter complies with the requirements of Section
4(j) hereof. Any such period during which the Company fails to keep the
registration statement effective and usable for offers and sales of Securities
and Exchange Securities is referred to as a "Suspension Period." A Suspension
Period shall commence on and include the date that the Company gives notice that
the Shelf Registration Statement is no longer effective or the prospectus
included therein is no longer usable for offers and sales of Securities and
Exchange Securities and shall end on the date when each Holder of Securities and
Exchange Securities covered by such registration statement either receives the
copies of the supplemented or amended prospectus contemplated by Section 4(j)
hereof or is advised in writing by the Company that use of the prospectus may be
resumed. If one or more Suspension Periods occur, the two-year time period
referenced above shall be extended by the number of days included in each such
Suspension Period.
(c) Notwithstanding any other provisions hereof, the Company will
ensure that (i) any Shelf Registration Statement and any amendment thereto and
any prospectus forming part thereof and any supplement thereto complies in all
material respects with the Securities Act and the rules and regulations
thereunder, (ii) any Shelf Registration Statement and any amendment thereto (in
either case, other than with respect to information included therein in reliance
upon or in conformity with written information furnished to the Company by or on
behalf of any Holder specifically for use therein (the "HOLDERS' INFORMATION"))
does not, when it becomes effective, contain 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 and (iii) any prospectus forming
part of any Shelf Registration Statement, and any supplement to such prospectus
(in either case, other than with respect to Holders' Information), does not
include an untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
3. LIQUIDATED DAMAGES. (a) The parties hereto agree that the Holders
of Securities will suffer damages if the Company fails to fulfill its
obligations under Section 1 or Section 2, as applicable, and that it would not
be feasible to ascertain the extent of such damages. Accordingly, if (i) the
applicable Registration Statement is not filed with the Commission on or prior
to 120 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 240 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
<PAGE> 6
6
after publication of the change in law or interpretation), (iii) the Registered
Exchange Offer is not consummated on or prior to 270 days after the Issue Date,
or (iv) the Shelf Registration Statement is filed and declared effective within
240 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 (as defined below), during the period of one or more such
Registration Defaults, in an amount equal to $ 0.192 per week per $1,000
principal amount of the Securities constituting Transfer Restricted Securities
held by such holder until the applicable Registration Statement is filed or
declared effective, the Registered Exchange Offer is consummated or the Shelf
Registration Statement again becomes effective, as the case may be. Following
the cure of all Registration Defaults, the accrual of liquidated damages will
cease. "Transfer Restricted Securities" means each Security or Exchange Security
until (i) the date on which such Security or Exchange Security has been
exchanged for a freely transferrable Exchange Security in the Registered
Exchange Offer, (ii) the date on which such Security or Private Exchange
Security 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 Security or Private Exchange Security is distributed to the public
pursuant to Rule 144 under the Securities Act or is salable pursuant to Rule
144(k) under the Securities Act. Notwithstanding anything to the contrary in
this Section 3(a), the Company shall not be required to pay liquidated damages
to the holder of Transfer Restricted Securities if such holder failed to comply
with its obligations to make the representations in the second to last paragraph
of Section 1 or to provide the information required to be provided by it, if
any, pursuant to Section 4(n).
(b) The Company shall notify the Trustee and the Paying Agent under
the Indenture immediately upon the happening of each and every Registration
Default. The Company shall pay the liquidated damages due on the Transfer
Restricted Securities by depositing with the Paying Agent (which may not be the
Company for these purposes), in trust, for the benefit of the Holders thereof,
prior to 10:00 a.m., New York City time on the next interest payment date
specified by the Indenture and the Securities, sums sufficient to pay the
liquidated damages then due. The liquidated damages due shall be payable on each
interest payment date specified by the Indenture to the record holder entitled
to receive the interest payment to be made on such date. Each obligation to pay
liquidated damages shall be deemed to accrue from and including the applicable
Registration Default.
(c) The parties hereto agree that the liquidated damages provided for
in this Section 3 constitute a reasonable estimate of and are intended to
constitute the sole damages that will be suffered by holders of Transfer
Restricted Securities by reason of the failure of the Shelf Registration
Statement or the Exchange Offer Registration Statement, as the case may be, to
be filed, to be declared effective or to remain effective, or the Exchange Offer
to be consummated, as the case may be, to the extent required by this Agreement.
<PAGE> 7
7
4. REGISTRATION PROCEDURES. In connection with any Registration
Statement, the following provisions shall apply:
(a) The Company shall (i) furnish to you, prior to the filing thereof
with the Commission, a copy of the Registration Statement and each amendment
thereof and each supplement, if any, to the prospectus included therein and, in
the event that any of the Initial Purchasers (with respect to any portion of an
unsold allotment from the original offering) are participating in the Registered
Exchange Offer or the Shelf Registration, shall use reasonable efforts to
reflect in each such document, when so filed with the Commission, such comments
as you reasonably may propose; (ii) if applicable, include the information set
forth in Annex A hereto on the cover, in Annex B hereto in the "Exchange Offer
Procedures" section and the "Purpose of the Exchange Offer" section and in Annex
C hereto in the "Plan of Distribution" section of the prospectus forming a part
of the Exchange Offer Registration Statement, and include the information set
forth in Annex D hereto in the Letter of Transmittal delivered pursuant to the
Registered Exchange Offer; and (iii) if requested by any Initial Purchaser,
include the information required by Items 507 or 508 of Regulation S-K under the
Securities Act, as applicable, in the prospectus forming a part of the Exchange
Offer Registration Statement.
(b) The Company shall advise the Initial Purchasers, each Exchanging
Dealer and the Holders (if applicable), and, if requested by you or any such
Holder, confirm such advice in writing (which advice pursuant to clauses
(ii)-(v) hereof shall be accompanied by an instruction to suspend the use of the
prospectus until the requisite changes have been made):
(i) when any Registration Statement and any amendment thereto has
been filed with the Commission and when such Registration Statement or
any post-effective amendment thereto has become effective;
(ii) of any request by the Commission for amendments or
supplements to any Registration Statement or the prospectus included
therein or for additional information;
(iii) of the issuance by the Commission of any stop order
suspending the effectiveness of any Registration Statement or the
initiation of any proceedings for that purpose;
(iv) of the receipt by the Company of any notification with
respect to the suspension of the qualification of the Securities or the
Exchange Securities for sale in any jurisdiction or the initiation or
threatening of any proceeding for such purpose; and
(v) of the happening of any event that requires the making of any
changes in any Registration Statement or the prospectus so that, as of
such date, the statements therein are not misleading and do not omit to
state a material fact required to be stated therein or necessary to
make the statements therein not misleading.
(c) The Company will make every reasonable effort to obtain the
withdrawal of any order suspending the effectiveness of any Registration
Statement at the earliest possible time.
<PAGE> 8
8
(d) The Company will furnish to each Holder of Transfer Restricted
Securities included within the coverage of any Shelf Registration Statement,
without charge, at least one copy of such Shelf Registration Statement and any
post-effective amendment thereto, including financial statements and schedules,
and, if the Holder so requests in writing, all exhibits (including those
incorporated by reference).
(e) The Company will, during the Shelf Registration Period, promptly
deliver to each Holder of Transfer Restricted Securities included within the
coverage of any Shelf Registration Statement, without charge, as many copies of
the prospectus (including each preliminary prospectus) included in such Shelf
Registration Statement and any amendment or supplement thereto as such Holder
may reasonably request; and the Company consents to the use of the prospectus or
any amendment or supplement thereto by each of the selling Holders of Transfer
Restricted Securities in connection with the offering and sale of the Transfer
Restricted Securities covered by the prospectus or any amendment or supplement
thereto.
(f) The Company will furnish to each Exchanging Dealer or Initial
Purchaser, as applicable, and to any Holder which so requests, without charge,
at least one copy of the Exchange Offer Registration Statement and any
post-effective amendment thereto, including financial statements and schedules,
and, if the Exchanging Dealer, Initial Purchaser or Holder, as applicable, so
requests in writing, all exhibits (including those incorporated by reference).
(g) The Company will, during the Exchange Offer Registration Period,
promptly deliver to each Exchanging Dealer or Initial Purchaser and such other
persons that are required to deliver a prospectus, as applicable, without
charge, as many copies of the prospectus included within the coverage of the
Exchange Offer Registration Statement and any amendment or supplement thereto as
such Exchanging Dealer or Initial Purchaser, as applicable, may reasonably
request for delivery by (i) such Exchanging Dealer in connection with a sale of
Exchange Securities received by it pursuant to the Registered Exchange Offer or
(ii) such Initial Purchaser in connection with a sale of Exchange Securities
received by it in exchange for Securities constituting any portion of an unsold
allotment; and the Company consents to the use of the prospectus or any
amendment or supplement thereto by any such Exchanging Dealer or Initial
Purchaser, as applicable, as aforesaid.
(h) Prior to any public offering of Securities, Exchange Securities or
Private Exchange Securities pursuant to any Registration Statement, the Company
will use its best efforts to register or qualify or cooperate with the Holders
of Securities included therein and their respective counsel in connection with
the registration or qualification of such securities for offer and sale under
the securities or blue sky laws of such jurisdictions as any such Holder
reasonably requests in writing and do any and all other acts or things necessary
or advisable to enable the offer and sale in such jurisdictions of the
Securities, Exchange Securities or Private Exchange Securities covered by such
Registration Statement; PROVIDED, HOWEVER, that the Company will not be required
to qualify generally to do business in any jurisdiction where it is not then so
qualified or to take any action which would subject it to general service of
process or to taxation in any such jurisdiction where it is not then so subject.
<PAGE> 9
9
(i) The Company will cooperate with the Holders of Securities,
Exchange Securities or Private Exchange Securities to facilitate the timely
preparation and delivery of certificates representing Securities, Exchange
Securities or Private Exchange Securities to be sold pursuant to any
Registration Statement free of any restrictive legends and in such denominations
and registered in such names as Holders may request in writing prior to sales of
Securities, Exchange Securities or Private Exchange Securities pursuant to such
Registration Statement.
(j) If (i) any event contemplated by paragraphs (b)(ii) through (v)
above occurs during the period for which the Company is required to maintain an
effective Registration Statement or (ii) any Suspension Period remains in effect
more than 120 days after the occurrence thereof, the Company will promptly
prepare a post-effective amendment to the Registration Statement or a supplement
to the related prospectus or file any other required document so that, as
thereafter delivered to purchasers of the Securities, Exchange Securities or
Private Exchange Securities from a Holder, the prospectus will not include an
untrue statement of a material fact or omit to state any material fact necessary
to make the statements therein, in the light of the circumstances under which
they were made, not misleading.
(k) Not later than the effective date of the applicable Registration
Statement, the Company will provide a CUSIP number for the Securities, Exchange
Securities or Private Exchange Securities, as the case may be, and provide the
applicable trustee with printed certificates for the Securities, Exchange
Securities or Private Exchange Securities, as the case may be, in a form
eligible for deposit with The Depository Trust Company.
(l) The Company will comply with all applicable rules and regulations
of the Commission and will make generally available to its security holders as
soon as practicable after the effective date of the applicable Registration
Statement an earnings statement satisfying the provisions of Section 11(a) of
the Securities Act; PROVIDED that in no event shall such earnings statement be
delivered later than 45 days after the end of a 12-month period (or 90 days, if
such period is a fiscal year) beginning with the first month of the Company's
first fiscal quarter commencing after the effective date of the applicable
Registration Statement, which statements shall cover such 12-month period.
(m) The Company will cause the Indenture or the Exchange Securities
Indenture, as the case may be, to be qualified under the Trust Indenture Act as
required by applicable law in a timely manner.
(n) The Company may require each Holder of Transfer Restricted
Securities to be sold pursuant to any Shelf Registration Statement to furnish to
the Company such information regarding the Holder and the distribution of such
Transfer Restricted Securities as the Company may from time to time reasonably
require for inclusion in such Registration Statement, and the Company may
exclude from such registration the Transfer Restricted Securities of any Holder
that fails to furnish such information within a reasonable time after receiving
such request.
<PAGE> 10
10
(o) In the case of a Shelf Registration Statement, each Holder of
Transfer Restricted Securities to be registered pursuant thereto agrees by
acquisition of such Transfer Restricted Securities that, upon receipt of any
notice of the Company (i) of a Suspension Period under Section 2(b) hereof or
(ii) pursuant to Section 4(b)(ii) through (v) hereof, such Holder will
discontinue disposition of such Transfer Restricted Securities until such
Holder's receipt of copies of the supplemental or amended prospectus
contemplated by Section 4(j) hereof or until advised in writing (the "Advice")
by the Company that the use of the applicable prospectus may be resumed. If the
Company shall give any notice under Section 4(b)(ii) through (v) during the
period that the Company is required to maintain an effective Registration
Statement (the "Effectiveness Period"), such Effectiveness Period shall be
extended by the number of days during such period from and including the date of
the giving of such notice to and including the date when each seller of Transfer
Restricted Securities covered by such Registration Statement shall have received
(x) the copies of the supplemental or amended prospectus contemplated by Section
4(j) (if an amended or supplemental prospectus is required) or (y) the Advice
(if no amended or supplemental prospectus is required).
5. REGISTRATION EXPENSES. The Company will bear all expenses incurred
in connection with the performance of its obligations under Sections 1, 2, 3 and
4 hereof and the Company will reimburse the Initial Purchasers and the Holders
for the reasonable fees and disbursements of one firm of attorneys chosen by the
Holders of a majority in aggregate principal amount of the Securities and the
Exchange Securities to be sold pursuant to each Registration Statement (the
"Special Counsel") acting for the Initial Purchasers or Holders in connection
therewith.
6. INDEMNIFICATION. (a) In the event of a Shelf Registration Statement
or in connection with any prospectus delivery pursuant to an Exchange Offer
Registration Statement by an Exchanging Dealer or Initial Purchaser, as
applicable, the Company shall indemnify and hold harmless each Holder, its
directors, officers, agents and employees and each person, if any, who controls
such Holder within the meaning of Section 15 of the Securities Act or Section 20
of the Exchange Act and the directors, officers, agents and employees of such
controlling persons as follows:
(i) against any and all loss, liability, claim and damage whatsoever,
as incurred, arising out of any untrue statement or alleged untrue
statement of a material fact contained in any such Registration Statement
or any prospectus forming part thereof or the omission or alleged omission
therefrom of a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading; and
(ii) against any and all expense (including, subject to Section 6(c)
hereof, the fees and disbursements of counsel chosen by the indemnified
party), reasonably incurred in investigating, preparing or defending
against any litigation, or any investigation or proceeding by any
governmental or regulatory agency or body, commenced or threatened, or any
claim whatsoever based upon any such untrue statement or omission, or any
such alleged untrue statement or omission;
<PAGE> 11
11
PROVIDED, HOWEVER, that (i) this indemnity shall not apply to any loss,
liability, claim, damage or expense to the extent arising out of any untrue
statement or omission or alleged untrue statement or omission made in reliance
upon and in conformity with Holders' Information and (ii) this indemnity with
respect to any untrue statement or alleged untrue statement or omission or
alleged omission in any related preliminary prospectus shall not inure to the
benefit of any indemnified party from whom the person asserting any such loss,
claim, damage or liability received Securities, Exchange Securities or Private
Exchange Securities if such persons did not receive a copy of the final
prospectus at or prior to the confirmation of the sale of such Securities,
Exchange Securities or Private Exchange Securities to such person in any case
where such delivery is required by the Securities Act and the untrue statement
or omission of material fact contained in the related preliminary prospectus was
corrected in the final prospectus unless such failure to deliver the final
prospectus was a result of noncompliance by the Company with Section 4(d), 4(e),
4(f) or 4(g).
(b) In the event of a Shelf Registration Statement, each Holder agrees
to indemnify and hold harmless the Company, its directors, officers, agents and
employees and each person, if any, who controls the Company within the meaning
of Section 15 of the Securities Act or Section 20 of the Exchange Act and the
directors, officers, agents and employees of such controlling persons against
any and all loss, liability, claim, damage and expense described in the
indemnity contained in Section 6(a) hereof, as incurred, arising out of or based
upon any untrue statements or omissions, or alleged untrue statements or
omissions, made in the Registration Statement (or any amendment or supplement
thereto) in reliance on and in conformity with Holders' Information furnished to
the Company by such Holder; PROVIDED, HOWEVER, that no such Holder shall be
liable for any indemnity claims hereunder in excess of the amount of net
proceeds received by such Holder from the sale of Securities, Exchange
Securities or Private Exchange Securities pursuant to the Registration
Statement.
(c) Each indemnified party shall give notice as promptly as reasonably
practicable to each indemnifying party of any claim or action commenced against
it in respect of which indemnity may be sought hereunder; PROVIDED, HOWEVER,
that failure to so notify an indemnifying party shall not relieve such
indemnifying party from any obligation that it may have pursuant to this Section
except to the extent that it has been materially prejudiced by such failure;
PROVIDED FURTHER, HOWEVER, that the failure to notify an indemnifying party
shall not relieve it from any liability that it may have to an indemnified party
otherwise than on account of this indemnity agreement. If any such claim or
action shall be brought against an indemnified party, the indemnified party
shall notify the indemnifying party thereof, and the indemnifying party shall be
entitled to participate therein and, to the extent that it wishes, jointly with
any other similarly notified indemnifying party, to assume the defense thereof
with counsel reasonably satisfactory to the indemnified party. After notice from
the indemnifying party to the indemnified party of its election to assume the
defense of such claim or action, the indemnifying party shall not be liable to
the indemnified party under this Section 6 for any legal or other expenses
subsequently incurred by the indemnified party in connection with the defense
thereof; PROVIDED, HOWEVER, that an indemnified party will have the right to
employ its own counsel in any such action, but the fees, expenses and other
charges of such counsel will be at the expense of such indemnified party unless
(1) the employment of counsel by the indemnified party has been authorized in
writing by the indemnifying party, (2) the indemnified party has reasonably
<PAGE> 12
12
concluded (based on the written advice of counsel) that there may be legal
defenses available to it or other indemnified parties that are different from or
in addition to those available to the indemnifying party, (3) a conflict or
potential conflict exists (based on the written advice of counsel to the
indemnified party) between the indemnified party and indemnifying party (in
which case the indemnifying party will not have the right to direct the defense
of such action on behalf of the indemnified party) or (4) the indemnifying party
has not in fact employed counsel to assume the defense of such action within a
reasonable time after receiving notice of the commencement of the action, in
each of which cases the reasonable fees, disbursements and other charges of
counsel for the indemnified party will be at the expense of the indemnifying
party or parties. It is understood that the indemnifying party or parties shall
not, in connection with any proceeding or related proceedings in the same
jurisdiction, be liable for the reasonable fees, disbursements and other charges
of more than one separate firm of attorneys (in addition to any local counsel)
at any one time for all such indemnified party or parties. Each indemnified
party, as a condition of the indemnity agreements contained in Sections 6(a) and
6(b), shall use all reasonable efforts to cooperate with the indemnifying party
in the defense of any such action or claim. No indemnifying party shall be
liable for any settlement of any such action effected without its written
consent, but if settled with its written consent or if there be a final judgment
of the plaintiff in any such action, the indemnifying party agrees to indemnify
and hold harmless any indemnified party from and against any loss or liability
by reason of such settlement or judgment. No indemnifying party shall, without
the prior written consent of the indemnified party, effect any settlement of any
pending or threatened proceeding in respect of which any indemnified party is or
could have been a party and indemnity could have been sought hereunder by such
indemnified party, unless such settlement includes an unconditional release of
such indemnified party from all liability on claims that are the subject matter
of such proceeding.
(d) If a claim by an indemnified party for indemnification under this
Section 6 is unenforceable even though the express provisions hereof provide for
indemnification in such case, then each applicable indemnifying party, in lieu
of indemnifying such indemnified party, shall contribute to the amount paid or
payable by such indemnified party as a result of such losses in such proportion
as is appropriate to reflect the relative fault of the indemnifying party and
indemnified party in connection with the actions, statements or omissions that
resulted in such losses as well as any other relevant equitable considerations.
The relative fault of such indemnifying party and indemnified party shall be
determined by reference to, among other things, whether any action in question,
including any untrue or alleged untrue statement of a material fact or omission
or alleged omission of a material fact, has been taken or made by, or relates to
information supplied by, such indemnifying party or indemnified party, and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such action, statement or omission. The amount paid or
payable by a party as a result of any losses shall be deemed to include, subject
to the limitations set forth in Section 6(c) herein, any legal or other fees or
expenses reasonably incurred by such party in connection with any investigation
or proceeding.
The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 6(d) were determined by pro rata
allocation or by any other method of allocation that does not take into account
the equitable considerations referred to in the immediately preceding paragraph.
Notwithstanding the provisions of this Section, an
<PAGE> 13
13
indemnifying party that is a holder of Transfer Restricted Securities or
Exchange Securities shall not be required to contribute any amount in excess of
the amount by which the total price at which the Transfer Restricted Securities
or Exchange Securities sold by such indemnifying party and distributed to the
public were offered to the public exceeds the amount of any damages that such
indemnifying party would have otherwise been required to pay by reason of such
untrue or alleged untrue statement or omission or alleged omission. No person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Securities Act) shall be entitled to any contribution from any person who
was not guilty of such fraudulent misrepresentation.
7. MISCELLANEOUS. (a) AMENDMENTS AND WAIVERS. The provisions of this
Agreement may not be amended, modified or supplemented, and waivers or consents
to departures from the provisions hereof may not be given, unless the Company
has obtained the written consent of Holders of a majority in aggregate principal
amount of the Securities, Exchange Securities and the Private Exchange
Securities, taken as a single class. Notwithstanding the foregoing, a waiver or
consent to depart from the provisions hereof with respect to a matter that
relates exclusively to the rights of the Holders of Securities, Exchange
Securities or Private Exchange Securities whose Securities, Exchange Securities
or Private Exchange Securities are being sold pursuant to a Registration
Statement and that does not directly or indirectly affect the rights of other
Holders may be given by Holders of a majority in aggregate principal amount of
the Securities, Exchange Securities or Private Exchange Securities being sold by
such Holders pursuant to such Registration Statement.
(b) NOTICES. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand-delivery, first-class mail,
telecopier, or air courier guaranteeing overnight delivery:
(1) if to a Holder, at the most current address given by such Holder
to the Company in accordance with the provisions of this Section 7(b),
which address initially is, with respect to each Holder, the address of
such Holder maintained by the Registrar under the Indenture, with a copy in
like manner to Chase Securities Inc., BT Alex. Brown Incorporated and
Salomon Brothers Inc;
(2) if to you, initially at your respective addresses set forth in the
Purchase Agreement; and
(3) if to the Company, initially at the address of the Company set
forth in the Purchase Agreement.
All such notices and communications shall be deemed to have been duly
given: when delivered by hand, if personally delivered; one business day after
being delivered to a next-day air courier; five business days after being
deposited in the mail; and when receipt is acknowledged by the recipient's
telecopier machine, if telecopied.
(c) SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon the
Company and its successors and assigns.
<PAGE> 14
14
(d) COUNTERPARTS. This Agreement may be executed in any number of
counterparts (which may be delivered in original form or by telecopies) and by
the parties hereto in separate counterparts, each of which when so executed
shall be deemed to be an original and all of which taken together shall
constitute one and the same agreement.
(e) HEADINGS. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(f) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
(g) NO INCONSISTENT AGREEMENTS. The Company has not and shall not, on
or after the date of this Agreement, enter into any agreement that is
inconsistent with the rights granted to the holders of Transfer Restricted
Securities in this Agreement or otherwise conflicts with the provisions hereof.
The Company has not previously entered into any agreement which remains in
effect granting any registration rights with respect to any of its debt
securities to any person. Without limiting the generality of the foregoing,
without the written consent of the holders of a majority in aggregate principal
amount of the then outstanding Transfer Restricted Securities, the Company shall
not grant to any person the right to request the Company to register any debt
securities of the Company under the Securities Act unless the rights so granted
are not in conflict or inconsistent with the provisions of this Agreement.
(h) NO PIGGYBACK ON REGISTRATIONS. Neither the Company nor any of its
security holders (other than the holders of Transfer Restricted Securities in
such capacity) shall have the right to include any securities of the Company in
any Shelf Registration or Registered Exchange Offer other than Transfer
Restricted Securities.
(i) SEVERABILITY. The remedies provided herein are cumulative and not
exclusive of any remedies provided by law. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction to be
invalid, illegal, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions set forth herein shall remain in full force and
effect and shall in no way be affected, impaired or invalidated, and the parties
hereto shall use their reasonable efforts to find and employ an alternative
means to achieve the same or substantially the same result as that contemplated
by such term, provision, covenant or restriction. It is hereby stipulated and
declared to be the intention of the parties that they would have executed the
remaining terms, provisions, covenants and restrictions without including any of
such that may be hereafter declared invalid, illegal, void or unenforceable.
<PAGE> 15
15
Please confirm that the foregoing correctly sets forth the agreement
among the Company and you.
Very truly yours,
SAFELITE GLASS CORP.
By: /s/ D.A. Herron
--------------------------
Title: Sr. VP & CFO
Accepted in New York, New York
CHASE SECURITIES INC.
By: /s/ Peter A. DiLullo
--------------------------
Title: Vice President
BT ALEX. BROWN INCORPORATED
By: /s/ Brian Foley
--------------------------
Title:
SALOMON BROTHERS INC
By: /s/ [illegible]
--------------------------
Title: Managing Director
<PAGE> 16
ANNEX A
Each broker-dealer that receives Exchange Securities for its own
account pursuant to the Registered Exchange Offer must acknowledge that it will
deliver a prospectus in connection with any resale of such Exchange Securities.
The Letter of Transmittal 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 Securities received in exchange for
Securities where such Securities 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 90 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."
<PAGE> 17
ANNEX B
Each broker-dealer that receives Exchange Securities for its own
account in exchange for Securities, where such Securities 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 Securities. See "Plan of Distribution."
<PAGE> 18
ANNEX C
PLAN OF DISTRIBUTION
Each broker-dealer that receives Exchange Securities for its own
account pursuant to the Registered Exchange Offer must acknowledge that it will
deliver a prospectus in connection with any resale of such Exchange Securities.
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 Securities
received in exchange for Securities where such Securities 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 _______________,
199_, all dealers effecting transactions in the Exchange Securities may be
required to deliver a prospectus.(1)
The Company will not receive any proceeds from any sale of Exchange
Securities by broker-dealers. Exchange Securities received by broker-dealers for
their own account pursuant to the Registered 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
Securities or a combination of such methods of resale, at market prices
prevailing at the time of resale, at prices related to such prevailing market
prices or at 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 broker-dealer or the
purchasers of any such Exchange Securities. Any broker-dealer that resells
Exchange Securities that were received by it for its own account pursuant to the
Registered Exchange Offer and any broker or dealer that participates in a
distribution of such Exchange Securities may be deemed to be an "underwriter"
within the meaning of the Securities Act and any profit on any such resale of
Exchange Securities and any commission 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 Registered Exchange Offer (including the expenses of one counsel
for the Holders of the Securities) other than commissions or concessions of any
broker-dealers and will indemnify the Holders of the Securities (including any
broker-dealers) against certain liabilities, including liabilities under the
Securities Act.
- ----------
(1) In addition, the legend required by Item 502(e) of Regulation S-K will
appear on the back cover page of the Exchange Offer prospectus.
<PAGE> 19
ANNEX D
[ ] CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10
ADDITIONAL COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY
AMENDMENTS OR SUPPLEMENTS THERETO.
Name:__________________________________________
Address:_______________________________________
__________________________________________
If the undersigned is not a broker-dealer, the undersigned represents that it is
not engaged in, and does not intend to engage in, a distribution of Exchange
Securities. If the undersigned is a broker-dealer that will receive Exchange
Securities for its own account in exchange for Securities that were acquired as
a result of market-making activities or other trading activities, it
acknowledges that it will deliver a prospectus in connection with any resale of
such Exchange Securities; however, by so acknowledging and by delivering a
prospectus, the undersigned will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
<PAGE> 1
Exhibit 12.1
SAFELITE GLASS CORP.
RATIO OF EARNINGS
TO FIXED CHARGES
(Dollars in Millions)
<TABLE>
<CAPTION>
FISCAL YEAR (1) Three Months Nine Months
Pro Forma Ended Ended
1993 1994 1995 1996 1997 1997 April 4, 1998 January 2, 1999
------ ------ ----- ----- ------ --------- ------------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
EARNINGS & LOSSES:
PRE-TAX INCOME (LOSS) FROM
CONTINUING OPERATIONS ($21.6) ($2.9) $ 7.5 $19.2 $(0.4) $(46.1) $(5.9) $(11.9)
INTEREST EXPENSE 15.5 4.5 6.0 6.7 27.5 44.5 10.9 34.3
PORTION OF RENTAL EXPENSE
REPRESENTATIVE OF AN INTEREST
FACTOR 11.0 11.5 12.0 12.5 14.3 25.2 7.1 19.7
------ ----- ----- ----- ----- ------ ----- ------
TOTAL EARNINGS (LOSSES) $ 4.9 $13.1 $25.5 $38.4 $41.4 $ 23.6 $12.1 $ 42.1
FIXED CHARGES:
INTEREST EXPENSE $ 15.5 $ 4.5 $ 6.0 $6.7 $27.5 $ 44.5 $10.9 $ 34.3
PORTION OF RENTAL EXPENSE
REPRESENTATIVE OF AN INTEREST
FACTOR 11.0 11.5 12.0 12.5 14.3 25.2 7.1 19.7
------ ----- ----- ----- ----- ------ ----- ------
TOTAL FIXED CHARGES $ 26.5 $16.0 $18.0 $19.2 $41.8 $ 69.7 $18.0 $ 54.0
RATIO OF EARNINGS TO FIXED CHARGES -- -- 1.4x 2.0x -- -- -- --
</TABLE>
(1) Prior to 1998, the Company's fiscal year ended on the Saturday closest
to December 31 of each year. On May 18, 1998, the Company changed its
fiscal year to the Saturday closest to March 31.
<PAGE> 1
Exhibit 21.1
List of Subsidiaries of the Company
None.
<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 November 6, 1998, appearing in the
Prospectus, which is part of this Registration Statement.
We also consent to the reference to us under the heading "Experts" in such
Prospectus.
DELOITTE & TOUCHE LLP
Dayton, Ohio
April 12, 1999
<PAGE> 1
Exhibit 23.2
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use in this
registration statement of our report dated April 7, 1997 (except with respect
to the matter described in Note 15, as to which the date is September 22, 1998),
regarding Vistar, Inc. and to all references to our Firm included in this
registration statement.
ARTHUR ANDERSEN LLP
Chicago, Illinois
April 14, 1999
<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 JANUARY 3, 1998, THREE MONTHS ENDED APRIL 4, 1998 AND THE NINE MONTHS
ENDED JANUARY 2, 1999 INCLUDED IN FORM S-4 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0001033671
<NAME> SAFELITE GLASS CORP.
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> APR-03-1999
<PERIOD-START> APR-04-1998
<PERIOD-END> JAN-02-1999
<EXCHANGE-RATE> 1
<CASH> 7,808
<SECURITIES> 0
<RECEIVABLES> 68,247
<ALLOWANCES> 6,119
<INVENTORY> 53,011
<CURRENT-ASSETS> 148,970
<PP&E> 124,588
<DEPRECIATION> 62,580
<TOTAL-ASSETS> 620,140
<CURRENT-LIABILITIES> 97,744
<BONDS> 572,065
0
1
<COMMON> 142
<OTHER-SE> (58,643)
<TOTAL-LIABILITY-AND-EQUITY> 620,140
<SALES> 0
<TOTAL-REVENUES> 659,056
<CGS> 0
<TOTAL-COSTS> 488,529
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 1,805
<INTEREST-EXPENSE> 34,292
<INCOME-PRETAX> (11,941)
<INCOME-TAX> (1,852)
<INCOME-CONTINUING> (10,089)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (10,089)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
<PAGE> 1
EXHIBIT 99.1
LETTER OF TRANSMITTAL
FOR OFFER FOR ALL OUTSTANDING
9 7/8% SERIES C SENIOR SUBORDINATED NOTES DUE 2006
IN EXCHANGE FOR
9 7/8% SERIES D SENIOR SUBORDINATED NOTES DUE 2006
SAFELITE GLASS CORP.
- --------------------------------------------------------------------------------
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME,
ON , 1999 (THE "EXPIRATION DATE")
UNLESS EXTENDED BY SAFELITE GLASS CORP.
- --------------------------------------------------------------------------------
The Exchange Agent
for the Exchange Offer is:
STATE STREET BANK AND TRUST COMPANY
<TABLE>
<S> <C>
By Registered or Certified Mail: By Overnight Courier:
State Street Bank and Trust Company State Street Bank and Trust Company
P.O. Box 778 Two International Place, 4th Floor
Boston, MA 02102-0078 Corporate Trust Department
Attn.: Kellie Mullen Boston, MA 02110
Attn.: Kellie Mullen
By Hand:
State Street Bank and Trust Company By Facsimile:
Two International Place, 4th Floor State Street Bank and Trust Company
Corporate Trust Division (617) 664-5290
Boston, MA 02110 Attn.: Kellie Mullen
Attn.: Kellie Mullen
</TABLE>
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS
OTHER THAN AS SET FORTH ABOVE OR TRANSMISSION OF INSTRUCTIONS
VIA A FACSIMILE TRANSMISSION TO A NUMBER OTHER THAN SET FORTH ABOVE
WILL NOT CONSTITUTE A VALID DELIVERY.
The undersigned acknowledges receipt of the Prospectus dated , 1999
(the "Prospectus") of Safelite Glass Corp. (the "Company"), and this Letter of
Transmittal (the "Letter of Transmittal"), which together describe the Company's
offer (the "Exchange Offer") to exchange $1,000 in principal amount of 9 7/8%
Series D Senior Subordinated Notes Due 2006 (the "Exchange Notes") for each
$1,000 in principal amount of outstanding 9 7/8% Series C Senior Subordinated
Notes Due 2006 (the "Initial 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 the Exchange Offer, except that the Exchange Notes are
freely transferable by holders thereof (except as provided herein or in the
Prospectus) and are issued without any covenant upon the Company regarding
registration.
The undersigned has checked the appropriate boxes below and signed this
Letter of Transmittal to indicate the action the undersigned desires to take
with respect to the Exchange Offer.
1
<PAGE> 2
PLEASE READ THE ENTIRE LETTER OF TRANSMITTAL AND THE PROSPECTUS CAREFULLY
BEFORE CHECKING ANY BOX BELOW.
YOUR BANK OR BROKER CAN ASSIST YOU IN COMPLETING THIS FORM. THE
INSTRUCTIONS INCLUDED WITH THIS LETTER OF TRANSMITTAL MUST BE FOLLOWED.
QUESTIONS AND REQUESTS FOR ASSISTANCE OR FOR ADDITIONAL COPIES OF THE PROSPECTUS
AND THIS LETTER OF TRANSMITTAL MAY BE DIRECTED TO THE EXCHANGE AGENT.
A holder that is a participant in the Depository Trust Company's system may
utilize the Depository Trust Company's Automated Tender Offer Program to tender
Initial Notes.
List below the Initial Notes to which this Letter of Transmittal relates.
If the space provided below is inadequate, the Certificate Numbers and Principal
Amounts should be listed on a separate signed schedule affixed hereto.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
DESCRIPTION OF INITIAL NOTES TENDERED HEREWITH
- ---------------------------------------------------------------------------------------------------------------------------------
AGGREGATE PRINCIPAL
NAME(S) AND ADDRESS(ES) OF REGISTERED CERTIFICATE AMOUNT REPRESENTED BY PRINCIPAL AMOUNT
HOLDER(S) (PLEASE FILL IN) NUMBER(S)* INITIAL NOTES TENDERED*
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
------------------------------------------------------------------
------------------------------------------------------------------
------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
* Need not be completed by book-entry holders.
** Unless otherwise indicated, the holder will be deemed to have tendered the
full aggregate amount represented by such Initial Notes. See Instruction 2.
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
This Letter of Transmittal is to be used either if certificates of Initial
Notes are to be forwarded herewith or if delivery of Initial Notes is to be made
by book-entry transfer to an account maintained by the Exchange Agent at The
Depository Trust Company, pursuant to the procedures set forth in "The Exchange
Offer -- How To Tender" in the Prospectus. Delivery of documents to a book-entry
transfer facility does not constitute delivery to the Exchange Agent.
Holders whose Initial Notes are not immediately available or who cannot
deliver their Initial Notes and all other documents required hereby to the
Exchange Agent on or prior to the Expiration Date may tender their Initial Notes
according to the guaranteed procedure set forth in the Prospectus under the
caption "The Exchange Offer How To Tender."
- --------------------------------------------------------------------------------
[ ] CHECK HERE IF TENDERED INITIAL NOTES ARE BEING DELIVERED BY BOOK-ENTRY
TRANSFER MADE TO AN ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH A
BOOK-ENTRY TRANSFER FACILITY AND COMPLETE THE FOLLOWING:
Name of Tendering Institution
--------------------------------------------------
[ ] The Depository Trust Company
Account Number
------------------------------------------------------------
Transaction Code Number
---------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
[ ] CHECK HERE IF TENDERED INITIAL NOTES ARE BEING DELIVERED PURSUANT TO
A NOTICE OF GUARANTEED DELIVERY AND COMPLETE THE FOLLOWING:
Name of Registered Holder(s)
----------------------------------------------
Name of Institution that Guaranteed Delivery
------------------------------
If Delivered by Book-Entry Transfer:
Account Number
------------------------------------------------------------
- --------------------------------------------------------------------------------
2
<PAGE> 3
- --------------------------------------------------------------------------------
[ ] CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL
COPIES OF THE REGISTRATION STATEMENT AND 10 COPIES OF ANY AMENDMENTS OR
SUPPLEMENTS THERETO.
Name
----------------------------------------------------------------------
Address:
------------------------------------------------------------------
----------------------------------------------------------------------
- --------------------------------------------------------------------------------
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
Upon the terms and subject to the conditions of the Exchange Offer, the
undersigned hereby tenders to the Company the above-described principal amount
of the Initial Notes. Subject to, and effective upon, the acceptance for
exchange of the Initial Notes tendered herewith, the undersigned hereby
exchanges, assigns and transfers to, or upon the order of, the Company all
right, title and interest in and to such Initial Notes. The undersigned hereby
irrevocably constitutes (with full knowledge that said Exchange Agent acts as
the Agent of the Company in connection with the Exchange Offer) to cause the
Initial Notes to be assigned, transferred and exchanged. The undersigned
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 undersigned
also warrants that it will, upon request, execute and deliver any additional
documents deemed by the Exchange Agent or the Company to be necessary or
desirable to complete the exchange, assignment and transfer of tendered Initial
Notes or transfer ownership of such Notes on the account books maintained by a
book-entry transfer facility. The undersigned further agrees that acceptance of
any and all validly tendered Initial Notes by the Company and the issuance of
Exchange Notes in exchange therefor shall constitute performance in full by the
Company of its obligations under the Exchange and Registration Rights Agreement
(as defined in the Prospectus) and that the Company shall have no further
obligations or liabilities thereunder.
The Exchange Offer is subject to certain conditions as set forth in the
Prospectus under the caption "The Exchange Offer -- Conditions to the Exchange
Offer." The undersigned recognizes that as a result of these conditions (which
may be waived, in whole or in part, by the Company), as more particularly set
forth in the Prospectus, the Company may not be required to exchange any of the
Initial Notes tendered hereby and, in such event, the Initial Notes not
exchanged will be returned to the undersigned at the address above.
By tendering, each holder of Initial Notes represents that Exchange Notes
acquired in the exchange will be obtained in the ordinary course of such
holder's business, that such holder has no arrangement or understanding with any
person to participate in the distribution of such Exchange Notes and that such
holder is not an "affiliate" of the Company within the meaning of Rule 405 under
the Securities Act of 1933, as amended (the "Act"). If the undersigned is not a
broker-dealer, the undersigned represents that it is not engaged in, and does
not intend to engage in, a distribution of Exchange Notes. If the undersigned is
a broker-dealer that will receive Exchange Notes for its own account in exchange
for Initial Notes, it represents that the Initial Notes to be exchanged for
Exchange Notes were acquired as a result of market-making activities or other
trading activities and it acknowledges that it will deliver a Prospectus in
connection with any resale of such Exchange Notes; however, by so acknowledging
and by delivering a Prospectus, the undersigned will not be deemed to admit that
it is an "underwriter" within the meaning of the Act. Any holder of Initial
Notes using the Exchange Offer to participate in a distribution of the Exchange
Notes (i) cannot rely on the position of the staff of the Securities and
Exchange Commission enunciated in its interpretive letter with respect to Exxon
Capital Holdings Corporation (available May 13, 1988) or similar letters issued
to third parties and (ii) must comply with the registration and prospectus
requirements of the Act in connection with a secondary resale transaction.
All authority herein conferred or agreed to be conferred shall survive the
death or incapacity of the undersigned and every obligation of the undersigned
shall be binding upon the heirs, personal representatives, successors and
assigns of the undersigned. Tendered Initial Notes may be withdrawn at any time
prior to the Expiration Date.
3
<PAGE> 4
Certificates for all Exchange Notes delivered in exchange for tendered
Initial Notes and any Initial Notes delivered herewith but not exchanged, and
registered in the name of the undersigned, shall be delivered to the undersigned
at the address shown below the signature of the undersigned.
- --------------------------------------------------------------------------------
TENDERING HOLDER(S) SIGN HERE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SIGNATURE OF HOLDER(S)
Dated: , 1999
---------------
(Must be signed by registered holder(s) exactly as name(s) appear(s) on
certificate(s) of Initial Notes. If signature is by a trustee, executor,
administrator, guardian, attorney-in-fact, officer of a corporation or other
person acting in a fiduciary or representative capacity, please set forth the
full title of such person.) See Instruction 3.
Name(s):
-----------------------------------------------------------------------
- --------------------------------------------------------------------------------
(PLEASE PRINT)
Capacity (full title):
---------------------------------------------------------
Address:
-----------------------------------------------------------------------
- --------------------------------------------------------------------------------
(INCLUDING ZIP CODE)
Area Code and Telephone No.:
---------------------------------------------------
Taxpayer Identification No.:
---------------------------------------------------
GUARANTEE OF SIGNATURE(S)
(IF REQUIRED -- SEE INSTRUCTION 3)
Authorized Signature:
----------------------------------------------------------
Name:
--------------------------------------------------------------------------
Title:
-------------------------------------------------------------------------
Address:
-----------------------------------------------------------------------
Name of Firm:
------------------------------------------------------------------
Area Code and Telephone No.:
---------------------------------------------------
Dated: , 1999
---------------
- --------------------------------------------------------------------------------
4
<PAGE> 5
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITION OF THE EXCHANGE OFFER
1. DELIVERY OF THIS LETTER OF TRANSMITTAL AND CERTIFICATES.
Certificates for all physically delivered Initial Notes or confirmation of
any book-entry transfer to the Exchange Agent's account at a book-entry transfer
facility of Initial Notes tendered by book-entry transfer, as well as a properly
completed and duly executed copy of this Letter of Transmittal or facsimile
thereof, and any other documents required by this Letter of Transmittal, must be
received by the Exchange Agent at any of its addresses set forth herein on or
prior to the Expiration Date (as defined in the Prospectus).
THE METHOD OF DELIVERY OF THIS LETTER OF TRANSMITTAL, THE INITIAL NOTES AND
ANY OTHER REQUIRED DOCUMENTS IS AT THE ELECTION AND RISK OF THE HOLDER, AND
EXCEPT AS OTHERWISE PROVIDED BELOW, THE DELIVERY WILL BE DEEMED MADE ONLY WHEN
ACTUALLY RECEIVED BY THE EXCHANGE AGENT. IF SUCH DELIVERY IS BY MAIL, IT IS
SUGGESTED THAT REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED,
BE USED.
Holders whose Initial Notes are not immediately available or who cannot
deliver their Initial Notes and all other required documents to the Exchange
Agent on or prior to the Expiration Date or comply with book-entry transfer
procedures on a timely basis may tender their Initial Notes pursuant to the
guaranteed delivery procedure set forth in the Prospectus under "The Exchange
Offer -- How to Tender." Pursuant to such procedures: (i) such tender must be
made by or through an Eligible Institution (as defined in the Prospectus); (ii)
on or prior to the Expiration Date the Exchange Agent must have received from
such Eligible Institution a letter, telegram or facsimile transmission setting
forth the name and address of the tendering holder, the names in which such
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 all other required documents, as all provided in the
Prospectus under the caption "The Exchange Offer -- How to Tender."
No alternative, conditional, irregular or contingent tenders will be
accepted. All tendering holders, by execution of this Letter of Transmittal (or
facsimile thereof), shall waive any right to receive notice of the acceptance of
the Initial Notes for exchange.
2. PARTIAL TENDERS: WITHDRAWALS.
If less than the entire principal amount of Initial Notes evidenced by a
submitted certificate is tendered, the tendering holder should fill in the
principal amount tendered in the box entitled "Principal Amount Tendered." A
newly issued certificate for the principal amount of Initial Notes submitted but
not tendered will be sent to such holder as soon as practicable after the
Expiration Date. All Initial Notes to the Exchange Agent will be deemed to have
been tendered unless otherwise indicated.
Initial Notes tendered pursuant to the Exchange Offer may be withdrawn at
anytime 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. 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 the Initial Notes to be
withdrawn, the principal amount of Initial Notes delivered for exchange, a
statement that such holder is withdrawing his or her 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 accepted by evidence satisfactory to the Company 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 procedure for book-entry
transfer, any notice of withdrawal must specify the name and number
5
<PAGE> 6
of the account at the book-entry transfer facility to be credited with the
withdrawn Initial Notes or otherwise comply with the book-entry transfer
facility's procedures.
3. SIGNATURE ON THIS LETTER OF TRANSMITTAL; WRITTEN INSTRUMENTS AND
ENDORSEMENTS; GUARANTEE OF SIGNATURES.
If this Letter of Transmittal is signed by the registered holder(s) of the
Initial Notes tendered hereby, the signature must correspond with the name(s) as
written on the face of the certificates without alteration or any change
whatsoever.
If any of the Initial Notes tendered hereby are owned of record by two or
more joint owners, all such owners must sign this Letter of Transmittal.
If a number of Initial Notes tendered hereby are owned of record by two or
more joint owners, all such owners must sign this Letter of Transmittal.
If a number of Initial Notes registered in different names are tendered, it
will be necessary to complete, sign and submit as many separate copies of this
Letter of Transmittal as there are different registrations of Initial Notes.
When this Letter of Transmittal is signed by the registered holder or
holders (which term, for the purposes described herein, shall include a
book-entry transfer facility whose name appears on a security listing as the
owner of the Initial Notes) of Initial Notes listed and tendered hereby, no
endorsements of certificates or separate written instruments of transfer or
exchange are required.
If this Letter of Transmittal is signed by a person other than the
registered holder or holders of the Initial Notes listed, such Initial Notes
must be endorsed or accompanied by separate written instruments of transfer or
exchange in form satisfactory to the Company and duly executed by the registered
holder, in either case signed exactly as the name or names of the registered
holder or holders appear(s) on the Initial Notes.
If this Letter of Transmittal, any certificates or separate written
instruments of transfer or exchange are signed by trustees, executors,
administrators, guardians, attorneys-in-fact, officers of corporations or others
acting in a fiduciary or representative capacity, such persons should so
indicate when signing, and, unless waived by the Company, proper evidence
satisfactory to the Company of their authority so to act must be submitted.
Endorsements on certificates or signatures on separate written instruments
of transfer or exchange required by this Instruction 3 must be guaranteed by an
Eligible Institution.
Signatures on this Letter of Transmittal need not be guaranteed by an
Eligible Institution, provided the Initial Notes are tendered: (i) by a
registered holder of such Initial Notes; or (ii) for the account of an Eligible
Institution.
4. TRANSFER TAXES.
The Company shall pay all transfer taxes, if any, applicable to the
transfers and exchange of Initial Notes to it or its order pursuant to the
Exchange Offer. If a transfer tax is imposed for any reason other than the
transfer and exchange of Initial Notes to the Company or its order pursuant to
the Exchange Offer, the amount of any such transfer taxes (whether imposed on
the registered holder or any other person) will be payable by the tendering
holder. If satisfactory evidence of payment of such taxes or exception therefrom
is not submitted herewith the amount of such transfer taxes will be billed
directly to such tendering holder.
Except as provided in this Instruction 4, it will not be necessary for
transfer tax stamps to be affixed to the Initial Notes listed in this Letter of
Transmittal.
5. WAIVER OF CONDITIONS.
The Company reserves the absolute right to waive, in whole or in part, any
of the conditions to the Exchange Offer set forth in the Prospectus.
6. MUTILATED, LOST, STOLEN OR DESTROYED INITIAL NOTES.
Any holder whose Initial Notes have been mutilated, lost, stolen or
destroyed, should contact the Exchange Agent at the address indicated below for
further instructions.
6
<PAGE> 7
7. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES.
Questions relating to the procedure for tendering, as well as requests for
additional copies of the Prospectus and this Letter of Transmittal, may be
directed to the Exchange Agent at the address and telephone number set forth on
the first page of this Letter of Transmittal. In addition, all questions
relating to the Exchange Offer, as well as requests for assistance or additional
copies of the Prospectus and this Letter of Transmittal, may be directed to the
Company at 1105 Schrock Road, 7th Floor, P.O. Box 2000, Columbus, OH 43216.
Attention: Poe A. Timmons (telephone: (614) 842-3325).
IMPORTANT: THIS LETTER OF TRANSMITTAL OR A FACSIMILE THEREOF (TOGETHER WITH
CERTIFICATES OF INITIAL NOTES OR CONFIRMATION OF BOOK-ENTRY TRANSFER AND ALL
OTHER REQUIRED DOCUMENTS) OR A NOTICE OF GUARANTEED DELIVERY MUST BE RECEIVED BY
THE EXCHANGE AGENT ON OR PRIOR TO THE EXPIRATION DATE.
7
<PAGE> 1
EXHIBIT 99.2
NOTICE OF GUARANTEED DELIVERY
FOR
OFFER FOR ALL OUTSTANDING
9 7/8% SERIES C SENIOR SUBORDINATED NOTES DUE 2006
IN EXCHANGE FOR
9 7/8% SERIES D SENIOR SUBORDINATED NOTES DUE 2006
OF
SAFELITE GLASS CORP.
Registered holders of outstanding 9 7/8% Series C Senior Subordinated Notes
due 2006 (the "Initial Notes") who wish to tender their Initial Notes in
exchange for a like principal amount of 9 7/8% Series D Senior Subordinated
Notes due 2006 (the "Exchange Notes") and whose Initial Notes are not
immediately available or who cannot deliver their Initial Notes and Letter of
Transmittal (and any other documents required by the Letter of Transmittal) to
State Street Bank and Trust Company (the "Exchange Agent") prior to the
Expiration Date, may use this Notice of Guaranteed Delivery or one substantially
equivalent hereto. This Notice of Guaranteed Delivery may be delivered by hand
or sent by facsimile transmission or mail to the Exchange Agent, See "The
Exchange Offer -- How to Tender" in the Prospectus.
The Exchange Agent
for the Exchange Offer
is:
STATE STREET BANK AND TRUST COMPANY
<TABLE>
<S> <C>
By Registered or Certified Mail: By Overnight Courier:
State Street Bank and Trust Company State Street Bank and Trust Company
P.O. Box 778 Two International Place, 4th Floor
Boston, MA 02102-0078 Corporate Trust Division
Attn.: Kellie Mullen Boston, MA 02110
Attn.: Kellie Mullen
By Hand: By Facsimile:
State Street Bank and Trust Company State Street Bank and Trust Company
Two International Place, 4th Floor (617) 664-5290
Corporate Trust Division Attn.: Kellie Mullen
Boston, MA 02110
Attn.: Kellie Mullen
</TABLE>
Delivery of this Notice of Guaranteed Delivery to an address other than as
set forth above or transmission of instructions via a facsimile transmission to
a number other than set forth above will not constitute a valid delivery.
This Notice of Guaranteed Delivery is not to be used to guarantee
signatures. If a signature on a Letter of Transmittal is required to be
guaranteed by an Eligible Institution under the instructions thereto, such
signature guarantee must appear in the applicable space provided on the Letter
of Transmittal for Guarantee of Signatures.
1
<PAGE> 2
Ladies and Gentlemen:
The undersigned hereby tenders the principal amounts of Initial Notes
indicated below, upon the terms and subject to the conditions contained in the
Prospectus dated , 1999 of Safelite Glass Corp. (the "Prospectus"),
receipt of which is hereby acknowledged.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------
DESCRIPTION OF SECURITIES TENDERED
- -----------------------------------------------------------------------------------
NAME AND ADDRESS OF REGISTERED HOLDER
AS IT APPEARS ON THE PRIVATELY PLACED 9 7/8% SERIES C SENIOR SUBORDINATED NOTES DUE
2006, ("INITIAL NOTES")
- -----------------------------------------------------------------------------------
- ---------------------------------------------------------
CERTIFICATE NUMBER(S) OF PRINCIPAL AMOUNT OF INITIAL
INITIAL NOTES TRANSMITTED NOTES TRANSMITTED
- ---------------------------------------------------------
<C> <C>
- ---------------------------------------------------------
- ---------------------------------------------------------
- ---------------------------------------------------------
Total Securities
Tendered
</TABLE>
THE FOLLOWING MUST BE COMPLETED
- --------------------------------------------------------------------------------
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a firm that is a member of a registered national
securities exchange or a member of the National Association of Securities
Dealers, Inc. or a commercial bank or trust company having an office, branch,
agency or correspondent in the United States, hereby guarantees to deliver to
the Exchange Agent at one of its addresses set forth above, the Initial Notes,
together with a properly completed and duly executed Letter of Transmittal
within five New York Stock Exchange, Inc. trading days after the date of
execution of this Notice of Guaranteed Delivery.
<TABLE>
<S> <C>
Name of Firm:
------------------------------------------ ----------------------------------------------
(AUTHORIZED SIGNATURE)
Address: Title:
----------------------------------------------- ---------------------------------------
- -------------------------------------------------------- Name:
(Zip Code) ----------------------------------------
Area Code and
Telephone Number: Date:
----------------------------------- ----------------------------------------
</TABLE>
NOTE: DO NOT SEND INITIAL NOTES WITH THIS NOTICE OF GUARANTEED DELIVERY,
INITIAL NOTES SHOULD BE SENT WITH YOUR LETTER OF TRANSMITTAL.
- --------------------------------------------------------------------------------
2
<PAGE> 1
Exhibit 99.3
EXCHANGE AGENT AGREEMENT
DATED AS OF [__________], 1999
STATE STREET BANK AND TRUST COMPANY
TWO INTERNATIONAL PLACE, 4TH FLOOR
CORPORATE TRUST DIVISION
BOSTON, MA 02110
ATTN: MICHAEL QUAILE
LADIES AND GENTLEMEN:
Pursuant to the provisions of the Offer (the "Exchange Offer") for all
of the outstanding 9 7/8% Series C Senior Subordinated Notes Due 2006 (the
"Initial Notes") of Safelite Glass Corp., a Delaware corporation (the
"Company"), in exchange for 9 7/8% Series D Senior Subordinated Notes Due 2006
(the "Exchange Notes"), all of the Company's issued and outstanding Initial
Notes accepted for tender of exchange (the "Exchange") prior to 5:00 p.m. New
York time on [_________], 1999, unless extended, for the Company's Exchange
Notes will be exchanged pursuant to the terms and conditions of the Exchange
Offer. The Exchange Offer is being made pursuant to a prospectus (the
"Prospectus") included in the Company's registration statement on Form S-4 (the
"Registration Statement") filed with the Securities and Exchange Commission (the
"SEC"). The term "Expiration Date" shall mean the date on which the Exchange
Offer, as it may be extended, shall expire. Upon receipt and execution of this
letter and confirmation of the arrangements herein set forth, State Street Bank
and Trust Company will act as the Exchange Agent for the Exchange (the "Exchange
Agent"). A copy of the Prospectus is attached hereto as EXHIBIT A.
A copy of the form of the letter of transmittal, including the related
notice of guaranteed delivery (the "Letters of Transmittal"), to be used by the
holders of record of the Initial Notes (the "Holders") to surrender their
Initial Notes in order to receive the Exchange Notes pursuant to the Exchange is
attached hereto as EXHIBIT B.
The Company hereby appoints you to act as Exchange Agent in connection
with the Exchange. In carrying out your duties as Exchange Agent, you are to act
in accordance with the following:
1. You are to mail the Prospectus and the Letters of Transmittal
to all of the Holders on the day that you are notified in writing by the Company
that the Registration Statement has become effective under the Securities Act of
1933, as amended, and to make subsequent mailings thereof to persons who become
Holders prior to the Expiration Date as may from time to time be requested by
the Company.
2. You are to examine the Letters of Transmittal and the Initial
Notes and other documents delivered or mailed to you, by or for the Holders,
prior to the Exchange Date, to ascertain whether (i) the Letters of Transmittal
are properly executed and completed in accordance with the instructions set
forth therein, (ii) the Initial Notes are in proper form for transfer and (iii)
all other
<PAGE> 2
documents submitted to you are in proper form. In each case where a Letter of
Transmittal or other document has been improperly executed or completed or, for
any other reason, is not in proper form, or some other irregularity exists, you
are authorized to endeavor to take such action as you consider appropriate to
notify the tenderer of such irregularity and as to the appropriate means of
resolving the same. Determination of questions as to the proper completion or
execution of the Letters of Transmittal, or as to the proper form for transfer
of the Initial Notes or as to any other irregularity in connection with the
submission of Letters of Transmittal and/or Initial Notes and other documents in
connection with the Exchange, shall be made by officers of the Company evidenced
by their written instructions or oral direction confirmed by facsimile. Any
determination made by the Company on such questions shall be final and binding.
As Exchange Agent, you are entitled to rely on any determination by the Company
as described above and shall be fully protected and indemnified in such
reliance.
3. Tender of the Initial Notes may be made only as set forth in
the Letter of Transmittal. Notwithstanding the foregoing, tenders which the
Company shall approve in writing as having been properly tendered shall be
considered to be properly tendered. Letters of Transmittal shall be recorded by
you as to the date and time of receipt and shall be preserved and retained by
you. Exchange Notes are to be issued in exchange for the Initial Notes pursuant
to the Exchange only (i) against deposit with you of the Initial Notes, together
with executed Letters of Transmittal and any other documents required by the
Exchange Offer on each business day from the execution hereof up to the
Expiration Date or (ii) in the event the holder is a participant in The
Depository Trust Company ("DTC") system, by the utilization of DTC's Automated
Tender Offer Program ("ATOP") and any evidence required by the Exchange Offer on
each business day from the execution hereof up to the Expiration Date.
4. Upon the oral or written request of the Company (with written
confirmation of such oral request thereafter), you will transmit by telephone,
and promptly thereafter confirm in writing to (i) Poe A. Timmons, Corporate
Controller (telephone (614) 842-3325) and (ii) Susan Jane Chester, Esq.,
Hutchins, Wheeler & Dittmar, A Professional Corporation, counsel to the Company
(telephone (617) 951-6837) or such other persons as the Company may reasonably
request, the aggregate number of the Initial Notes tendered to you and the
number of the Initial Notes properly tendered that day. Furthermore, you shall
transmit copies of all Agents Messages (as defined in the Letter of Transmittal)
received in connection with ATOP to the aforementioned persons as they are
received. In addition, you will also inform the aforementioned persons, upon
oral request made from time to time (with written confirmation of such request
thereafter) prior to the Expiration Date, of such information as they or any of
them may reasonably request.
5. 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 you promptly after acceptance of the tendered Initial
Notes.
6. If any Holder shall report to you that his/her failure to
surrender Initial Notes registered in his/her name is due to the loss,
misplacement or destruction of a certificate or
2
<PAGE> 3
certificates, you shall request such Holder (i) to furnish to the Exchange Agent
an affidavit of loss and, if required by the Company, a corporate bond of
indemnity in an amount and evidenced by such certificate or certificates of a
surety, as may be satisfactory to you and the Company, and (ii) to execute and
deliver an agreement to indemnify the Company and you in such form as is
acceptable to you and the Company. The obligees to be named in each such
indemnity bond shall include the Company and you. You shall report to the
Company the names of all Holders who claim that their Initial Notes have been
lost, misplaced or destroyed and the principal amount of such Initial Notes.
7. As soon as practicable after you mail or deliver to an Initial
Holder the Exchange Notes that such Holder may be entitled to receive, you shall
arrange for cancellation of the Initial Notes submitted to you or returned by
DTC in connection with ATOP. Such Notes shall be forwarded to State Street Bank
and Trust Company, as trustee (the "Trustee") under the Indenture dated as of
December 18, 1998 governing the Initial Notes for cancellation and retirement as
you are instructed by the Company (or a representative designated by the
Company).
8. For your services as the Exchange Agent hereunder, the Company
shall pay you in accordance with the schedule of fees attached hereto as EXHIBIT
C. The Company also will reimburse you for your reasonable out-of-pocket
expenses (including but not limited to counsel fees not previously paid to you
as set forth in Exhibit C) in connection with your services promptly after
submission to the Company of itemized statements.
9. As the Exchange Agent hereunder you:
(a) shall have no duties or obligations other than those
specifically set forth herein or in the Exhibits attached hereto or as
may be subsequently requested in writing of you by the Company and
agreed to by you in writing with respect to the Exchange;
(b) will be regarded as making no representations and having
no responsibilities as to the validity, accuracy, sufficiency, value or
genuineness of any of the Company's Holder record information, any
Initial Notes deposited with you hereunder or any Exchange Notes, any
Letters of Transmittal or other documents prepared by the Company in
connection with the Exchange Offer or any signatures or endorsements
other than your own, and will not be required to and will make no
representations as to the validity, value or genuineness of the
Exchange Offer;
(c) shall not be obligated to take any legal action hereunder
which might in your judgment involve any expenses or liability unless
you shall have been furnished with an indemnity reasonably satisfactory
to you;
(d) may rely on and shall be fully protected and indemnified
as provided in paragraph l0 hereof in acting in reliance upon any
certificate, instrument, opinion, notice, letter, telegram, facsimile
or other document or security delivered to you and reasonably
believed by you to be genuine and to have been signed by the proper
party or parties;
3
<PAGE> 4
(e) may rely on and shall be fully protected and indemnified
as provided in paragraph 10 hereof in acting upon the written or oral
instructions with respect to any matter relating to your acting as
Exchange Agent specifically covered by this Agreement or supplementing
or qualifying any such action of any officer or agent of the Company or
such other person or persons as may be designated or whom you
reasonably believe has been designated by the Company;
(f) may consult with counsel satisfactory to you, including
counsel for the Company, and the opinion or advice of such counsel
shall be full and complete authorization and protection in respect of
any action taken, suffered or omitted by you hereunder in good faith
and in accordance with the opinion or advice of such counsel;
(g) shall not at any time advise any person as to the wisdom
of the Exchange or as to the market value or decline or appreciation in
market value of any Initial Notes or Exchange Notes; and
(h) shall not be liable for anything which you may do or
refrain from doing in connection with this letter except for your gross
negligence, willful misconduct or bad faith.
10. The Company covenants and agrees to indemnify and hold
harmless State Street Bank and Trust Company and its officers, directors,
employees, agents and affiliates (collectively, the "Indemnified Parties" and
each an "Indemnified Party") and hold each Indemnified Party harmless against
any loss, liability or reasonable expense of any nature (including reasonable
legal and other fees and expenses) incurred in connection with the
administration of the duties of the Indemnified Parties hereunder; provided,
however, that no Indemnified Party shall be indemnified against any such loss,
liability or expense arising out of such party's gross negligence or bad faith.
In no event shall you be liable for special, indirect or consequential loss or
damage of any kind whatsoever (including but not limited to lost profits), even
if you have been advised of the likelihood of such loss or damage and regardless
of the form of action. To the extent stated below, the Company shall not be
liable under this indemnity with respect to any claim against any Indemnified
Party unless the Company shall be notified by such Indemnified Party by letter,
or by cable, telex or telecopier confirmed by letter, of the written assertion
of a claim against such Indemnified Party, or of any action commenced against
such Indemnified Party, promptly after but in any event within 10 days of the
date such Indemnified Party shall have received any such written assertion of a
claim or shall have been served with a summons, or other legal process, giving
information as to the nature and basis of the claim, but failure so to notify
the Company shall not relieve the Company of any liability which it may have
otherwise than on account of this Agreement or hereunder except such liability
which is a direct result of such Indemnified Party's failure to notify promptly.
The Company shall be entitled to participate at its own expense in the defense
against any such claim or legal action. If such Indemnified Party in such notice
so directs, the Company shall assume the defense of any suit brought to enforce
any such claim. If such Indemnified Party does not so direct the Company but
elects not to defend any such claim or legal action or if such Indemnified Party
has elected to
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defend any such claim or legal action but is not, in the reasonable judgment of
the Company, diligently pursuing such defense, then the Company may elect to
assume the defense of any suit brought to enforce any such claim. In the event
the Company assumes the defense, the Company shall not be liable for any fees
and expenses thereafter incurred by such Indemnified Party's counsel, except for
any reasonable fees and expenses of such Indemnified Party's counsel incurred in
representing such Indemnified Party that are necessary and appropriate as a
result of the need to have separate representation because of a conflict of
interest between such Indemnified Party and the Company. You shall not enter
into a settlement or other compromise with respect to any indemnified loss,
liability or expense without the prior written consent of the Company, which
shall not be unreasonably withheld or delayed.
11. This Agreement and your appointment as the Exchange Agent
shall be construed and enforced in accordance with the laws of The Commonwealth
of Massachusetts and shall inure to the benefit of, and the obligations created
hereby shall be binding upon, the successors and assigns of the parties hereto.
This Agreement may not be modified orally. Any inconsistency between this
Agreement and the Letter of Transmittal, as they may from time to time be
supplemented or amended, shall be resolved in favor of the Letter of
Transmittal, except with respect to the duties, liabilities and indemnification
of you as Exchange Agent, which shall be governed exclusively by this Agreement.
12. If any provision of this Agreement shall be held illegal,
invalid, or unenforceable by any court, this Agreement shall be construed and
enforced as if such provision had not been contained herein and shall be deemed
an agreement among us to the full extent permitted by applicable law.
13. This Agreement may be executed in any number of counterparts,
each of which so executed shall be deemed to be an original but all such
counterparts shall together constitute but one and the same instrument.
* * * *
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Please acknowledge receipt of this letter and confirm the arrangements
herein provided by signing and returning the enclosed copy.
Very truly yours,
SAFELITE GLASS CORP.
By:
-------------------------------
Name: Douglas A. Herron
Title: Senior Vice President and
Chief Financial Officer
Accepted and Agreed to:
STATE STREET BANK AND TRUST COMPANY
Exchange Agent
By:
-------------------------------
Name:
Title:
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EXHIBIT A
PROSPECTUS
[Attached]
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EXHIBIT B
FORM OF LETTER OF TRANSMITTAL
[Attached]
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EXHIBIT C
FEE SCHEDULE
9
