REPORT ON FORM 10-Q
For the quarter ended January 2, 1999
----------------
SAFELITE GLASS CORP.
(Exact name as specified in charter)
DELAWARE 13-3386709
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1105 SCHROCK ROAD, COLUMBUS, OHIO 43229 (Address,
including zip code of principal executive offices)
(614) 842-3000
(Telephone number, including area code)
As of January 2, 1999 there were 3,414,345 shares outstanding of the
Company's Class A Common Stock ($.01 par value) and 10,412,638 shares
outstanding of the Company's Class B Common Stock ($.01 par value).
<PAGE>
SAFELITE GLASS CORP. AND SUBSIDIARIES
INDEX
Page No.
Part I. Financial Information
Item 1. Financial Statements
Consolidated Condensed Balance Sheets -
January 2, 1999 and April 4, 1998..................... 3
Consolidated Condensed Statements of Operations -
Three Months Ended January 2, 1999 and January 3, 1998 4
Consolidated Condensed Statements of Operations -
Nine Months Ended January 2, 1999 and January 3, 1998 5
Consolidated Condensed Statements of Cash Flows -
Nine Months Ended January 2, 1999 and January 3, 1998 6
Notes to Consolidated Condensed Financial Statements 7 - 8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.................... 9 - 13
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K....................... 14
<PAGE>
PART I.
ITEM 1. Financial Statements
SAFELITE GLASS CORP. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(In thousands, except per share amounts)
January 2, April 4,
1999 1998
--------- ---------
ASSETS (Unaudited)
CURRENT ASSETS:
Cash .......................................... $ 7,808 $ 10,254
Accounts receivable, net of allowance for
doubtful accounts of $6,119 and $12,622 ..... 62,128 62,000
Inventories ................................... 53,011 50,535
Other current assets .......................... 26,023 29,798
-------- --------
Total current assets ................... 148,970 152,587
PROPERTY, PLANT AND EQUIPMENT - net of accumulated
depreciation of $62,580 and $72,094 ........... 62,008 61,994
INTANGIBLE ASSETS - net of accumulated amortization
of $18,484 and $10,933 ........................ 290,983 292,325
RESTRICTED CASH - collateralizing bonds closed
into escrow ................................... 46,400 --
OTHER ASSETS ...................................... 19,725 24,873
DEFERRED INCOME TAXES ............................. 52,054 44,576
-------- --------
TOTAL ASSETS ...................................... $ 620,140 $ 576,355
======== ========
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES:
Accounts payable .............................. $ 43,127 $ 43,480
Current portion - long term debt .............. 15,542 5,941
Accrued expenses
Payroll and related items ................. 9,138 9,669
Self-insurance reserves ................... 7,482 7,018
Restructuring reserves .................... 7,548 22,390
Accrued interest .......................... 2,802 8,695
Other ..................................... 12,105 15,075
-------- --------
Total current liabilities .............. 97,744 112,268
BONDS CLOSED INTO ESCROW - collateralized by
restricted cash .............................. 50,447 --
LONG-TERM DEBT - LESS CURRENT PORTION ............. 521,618 497,645
OTHER LONG-TERM LIABILITIES ....................... 8,831 14,853
STOCKHOLDERS' EQUITY (DEFICIT):
Preferred stock issued, 8%, $0.01 par value ... 1 1
Class A common stock issued, $0.01 par value .. 38 38
Class B common stock issued, $0.01 par value .. 104 104
Additional paid-in capital .................... 324,878 324,878
Accumulated deficit ........................... (372,166)
Other ......................................... (11,355) (11,355)
-------- --------
Total stockholders' deficit ............ (58,500) (48,411)
-------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT ....... $ 620,140 $ 576,355
======== ========
See notes to consolidated condensed financial statements.
<PAGE>
SAFELITE GLASS CORP. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(In thousands)
Three Months Ended
January 2, April 4,
1999 1998
---------- ---------
(Unaudited) (Unaudited)
SALES:
Installation and related services ............ $ 175,179 $ 108,415
Wholesale .................................... 10,858 11,654
--------- ---------
Total sales .............................. 186,037 120,069
COST OF SALES .................................... 146,267 85,406
--------- ---------
GROSS PROFIT ..................................... 39,770 34,663
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES ..................................... 44,926 29,482
RESTRUCTURING EXPENSES ........................... -- 2,865
OTHER OPERATING EXPENSES ......................... -- 5,704
--------- ---------
OPERATING LOSS ................................... (5,156) (3,388)
INTEREST EXPENSE ................................. (11,832) (7,920)
INTEREST INCOME .................................. 172 385
--------- ---------
LOSS BEFORE INCOME TAX BENEFIT ................... (16,816) (10,923)
INCOME TAX BENEFIT ............................... 5,610 13,429
--------- ---------
INCOME (LOSS) BEFORE EXTRAORDINARY ITEM .......... (11,206) 2,506
EXTRAORDINARY ITEM - Early extinguishment of debt,
net of tax benefit ........................... -- (2,835)
--------- ---------
NET LOSS ......................................... $ (11,206) $ (329)
========= =========
See notes to consolidated condensed financial statements.
<PAGE>
SAFELITE GLASS CORP. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(In thousands)
Nine Months Ended
January 2, April 4,
1999 1998
---------- ---------
(Unaudited) (Unaudited)
SALES:
Installation and related services ............ $ 621,684 $ 335,041
Wholesale .................................... 37,372 40,470
--------- ---------
Total sales .............................. 659,056 375,511
COST OF SALES .................................... 488,529 255,900
--------- ---------
GROSS PROFIT ..................................... 170,527 119,611
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES ..................................... 140,725 85,822
LOSS ON SALE OF SUBSIDIARY ....................... -- 5,418
RESTRUCTURING EXPENSES ........................... 4,222 2,865
OTHER OPERATING EXPENSES ......................... 3,613 5,704
--------- ---------
OPERATING INCOME ................................. 21,967 19,802
INTEREST EXPENSE ................................. (34,292) (21,160)
INTEREST INCOME .................................. 384 975
--------- ---------
LOSS BEFORE INCOME TAX BENEFIT ................... (11,941) (383)
INCOME TAX BENEFIT ............................... 1,852 6,901
--------- ---------
INCOME (LOSS)BEFORE EXTRAORDINARY ITEM ........... (10,089) 6,518
EXTRAORDINARY ITEM - Early extinguishment of debt,
net of tax benefit ........................... -- (2,835)
--------- ---------
NET INCOME (LOSS) ................................ $ (10,089) $ 3,683
========= =========
See notes to consolidated condensed financial statements.
<PAGE>
SAFELITE GLASS CORP. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(In thousands)
Three Months Ended
January 2, April 4,
1999 1998
---------- ---------
(Unaudited) (Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) ................................. $ (10,089) $ 3,683
Adjustments to reconcile net income (loss) to net
cash provided by (used in) operating activities:
Extraordinary item-early extinguishment of debt -- 2,835
Depreciation and amortization .................. 17,152 6,697
Loss on sale of subsidiary ..................... -- 5,418
Change in equity from exercise of stock options -- 2,976
Deferred income taxes .......................... (3,055) (6,946)
(Gain) loss on disposition of assets ........... (92) 324
Changes in operating assets and liabilities:
Accounts receivable ........................... (128) 1,777
Inventories ................................... (2,476) 545
Accounts payable .............................. (196) 5,789
Restructuring reserves ........................ (13,625) 19,499
Accrued expenses .............................. (3,037) (9,072)
Accrued interest .............................. (5,893) (2,072)
Other ......................................... 313 (20,232)
Cash flows provided by discontinued operations . -- 7,915
--------- ---------
Net cash flows provided by (used in) operating
activities ................................... (21,126) 19,136
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures ........................... (17,142) (9,623)
Proceeds from sale of fixed assets ............. 323 82
Net cash transferred upon sale of subsidiary ... -- (3,407)
Cash paid in Vistar transaction (net of cash
acquired) .................................... -- (68,224)
--------- ---------
Net cash flows used in investing activities ... (16,819) (81,172)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Purchase of treasury stock ..................... -- (11)
Payments on long-term debt ..................... (4,176) (165,680)
Proceeds on long-term borrowings ............... -- 350,000
Proceeds from bond issuance .................... 50,447 --
Bonds closed into escrow collateralized by
restricted cash .............................. (46,400) --
Borrowings (payments) on revolver, net ......... 37,750 7,768
Capitalized debt issuance costs ................ (2,122) (11,206)
Exercise of stock options ...................... -- 2,292
Dividends paid ................................. -- (71,988)
Redemption of preferred stock .................. -- (58,250)
--------- ---------
Net cash flows provided by financing activities 35,499 52,925
--------- ---------
NET DECREASE IN CASH .............................. (2,446) (9,111)
CASH AT BEGINNING OF PERIOD ....................... 10,254 16,515
--------- ---------
CASH AT END OF PERIOD ............................. $ 7,808 $ 7,404
========= =========
SUPPLEMENTAL DISCLOSURES:
Cash paid for interest ......................... $ 38,362 $ 26,614
========= =========
Cash paid for income taxes ..................... $ 438 $ 289
========= =========
Common and preferred stock issued in merger .... $ 204,434
=========
See notes to consolidated condensed financial statements.
<PAGE>
SAFELITE GLASS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)
Note 1. General
The accompanying unaudited consolidated condensed financial
statements include the accounts of Safelite consolidated with the
accounts of all its subsidiaries. Financial information in this
Quarterly Report is unaudited but, in the opinion of management,
reflects any adjustments (consisting only of normal recurring
adjustments) that are necessary to fairly present results for the
interim periods in accordance with generally accepted accounting
principles. Reference is made to Safelite's Registration
Statement on Form S-4, file number 333-21949, as amended, that
includes information necessary or useful to understanding
Safelite's business and financial statement presentations. In
particular, Safelite's significant accounting policies and
practices are presented as Note 1 to the Consolidated Financial
Statements included in that Registration Statement.
Safelite's results for interim periods are not normally
indicative of results to be expected for the fiscal year.
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 combined
with the Company's operating leverage has historically resulted
in a disproportionate decline in operating income during the
first and fourth calendar quarters of each year. The severity of
weather also has an impact on Safelite's sales and operating
income, with severe winter weather generating increased sales and
income and mild winters generating lower sales and income.
Note 2. Comprehensive Income
The Company adopted SFAS No. 130 "Reporting of Comprehensive
Income", as of the beginning of its fiscal year 1999. SFAS No.
130 establishes standards for the reporting and display of
comprehensive income and its components. Other comprehensive
income of the Company consists of the change in minimum pension
liability net of income tax effect. SFAS No. 130 does not affect
the measurement of the items included in other comprehensive
income; it affects only where those items are displayed and how
they are described.
Comprehensive income (loss) was equal to net income (loss) for
the three months and nine months ended January 2, 1999 and
January 3, 1998.
<PAGE>
Note 3. Bond Issuance and Sale of Qualified Capital Stock
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 "Notes"). The 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 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 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 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 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 will
record an extraordinary charge of approximately $4.1 million, net
of tax benefit of $2.8 million in its quarter 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.
The above transactions significantly increase Safelite's ability
to make revolving credit borrowings and also reduce fiscal 2000
and 2001 mandatory term loan repayments. Detail of the amended
term loan amortization schedule can be found in the Company's
Current Report on Form 8-K dated December 21, 1998.
Note 4. Non-Voting 8% Preferred Stock
At January 2, 1999, cumulative undeclared, unpaid dividends on
the Company's Non-Voting 8% Preferred Stock were $3.4 million.
<PAGE>
ITEM 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
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 (the "Vistar Merger").
Accordingly, Safelite's results of operations for the three month and nine month
periods ended January 2, 1999 are not directly comparable to results recorded in
prior periods.
As part of the Vistar Merger, management went through a process to consolidate
redundant overhead in both field and corporate operations, eliminate overlapping
service center locations and eliminate redundant sales and marketing activities.
As of January 2, 1999 all actions required to achieve merger-related cost
savings have been completed. These consolidation activities, however, took
longer, and were more disruptive to the business, than was originally
anticipated. This disruption and delay, combined with lower overall automotive
glass replacement volumes, has had an adverse impact on the Company's sales and
operations, particularly in the six months ended January 2, 1999.
Management continues to devote substantial time and attention in an effort to
address these issues and to improve Safelite's sales growth and operating
efficiencies to expected levels. Many actions were taken in the third quarter
including continued training of former Vistar field operations and call center
associates on Safelite systems and market-based operating strategies,
re-energizing the field sales force around specific plans to grow sales in
targeted customer segments, and aligning service center and warehouse headcount
with current unit volumes. In addition, certain changes were made to key
leadership positions in field operations, field sales and call center
management. 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 the actions will ultimately be
successful.
Results of Operations
Sales. Sales for the quarter ended January 2, 1999, increased $66.0 million, or
55% to $186.0 million, from $120.0 million in the corresponding quarter of the
prior year. Installation and related services for the third quarter grew $66.8
million, or 62% to $175.2 million. Approximately 68% of this growth was
attributable to service center sales while the remainder was provided by
increased network sales. Service center sales consist of sales through
company-owned service centers, DCC/CTUs and mobile vans. Network sales consist
of sales derived from the Company's network of independent auto glass providers
which replace or repair auto glass for Safelite under subcontracting agreements.
<PAGE>
Most of the sales growth in installation and related services is attributable to
the Vistar Merger, with improved customer mix also contributing to the increase.
While sales have increased substantially over last year due to the Vistar
Merger, the Company's focus on the complexities of merger integration activities
has had an adverse impact on post-merger sales growth. Overall installation and
related services unit volumes for the three months ended January 3, 1999 are
down 9% from the combined pre-merger unit sales volumes of Safelite and Vistar
in the comparable prior year period.
Wholesale sales for the quarter ended January 2, 1999, fell 7% to $10.9 million
as a result of a 1% decline in unit sales further impacted by lower prices.
These results are reflective of the soft market conditions currently being
experienced in the auto glass replacement market, and excess capacity in
replacement autoglass production.
For the nine months ended January 2, 1999, sales increased $283.6 million, or
76% to $659.1 million from $375.5 million. Installation and related services
rose $286.6 million, or 86% to $621.7 million, primarily due to the Vistar
Merger, higher pricing and improved customer mix. Wholesale sales fell 8% to
$37.4 million for the reasons discussed above.
Gross Profit. Gross profit for the quarter ended January 2, 1999, increased
14.7% to $39.8 million, from $34.7 million in the comparable quarter of the
prior year, mainly as a result of increased sales volume from the Vistar Merger.
Gross profit margin decreased to 21% as compared to 29% in the same period of
the prior year as improved customer mix was more than offset by the higher rate
of growth of network business relative to total sales. 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 operations during the merger
integration period.
For the nine months ended January 2, 1999, gross profit was $170.5 million,
reflecting an increase of $50.9 million, or 43% over the comparable prior year
period. Gross profit margin decreased to 26% in the first nine months of fiscal
1999, from 32% in the comparable prior year period, primarily due to the higher
relative growth rate of network business and the decreased service center
productivity discussed above.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses rose 52% in the third quarter of fiscal 1999 to $44.9
million, as compared to $29.5 million in the corresponding quarter in the prior
year, mainly as a result of the Vistar Merger. As a percentage of sales for the
quarter ended January 2, 1999, selling, general and administrative expenses
remained flat at 24% as merger synergies achieved by the elimination of
overlapping general and administrative functions offset the effects of slower
post-merger sales growth.
For the nine months ended January 2, 1999, selling, general and administrative
expenses rose 64% to $140.7 million from $85.8 million in the corresponding nine
months of the prior year. As a percentage of sales for the nine months ended
January 2, 1999, selling, general and administrative expenses decreased to 21%
from the corresponding prior year percentage of 23% due to the achievement of
merger synergies.
<PAGE>
Loss Before Income Taxes. Loss before income taxes increased to a loss of $16.8
million in the third quarter of fiscal 1999 from a loss of $10.9 million in the
comparable quarter of the prior year. For the nine months ended January 2, 1999,
loss before taxes increased to a loss of $11.9 million from a loss of $0.4
million in the comparable prior year period. In addition to the impact of merger
integration on sales and gross profit described above, loss before income taxes
in the first nine months of fiscal 1999 was adversely affected by $13.1 million
in increased interest costs and $7.8 million in restructuring and one-time
integration costs associated with the Vistar Merger. Loss before income taxes
for the nine months ended January 3, 1998 included a $5.4 million loss on sale
of the Company's former subsidiary, Lear Siegler and $8.6 million in
restructuring and one-time integration costs associated with the Vistar Merger.
Income Taxes. In the three months and nine months ended January 2, 1999, the
Company's credit provisions for income taxes were significantly lower than
income taxes computed using statutory rates due to permanent differences, of
which the principal item is non-deductible amortization of goodwill.
Net Income (Loss). Net loss for the quarter ended January 2, 1999, was $11.2
million, compared with a loss of $0.3 million in the comparable quarter of the
prior year. For the nine months ended January 2, 1999, net loss was $10.1
million, down from net income of $3.7 million in the corresponding prior year
period. The decreases in net income from the prior year were primarily due to
the changes in loss before income taxes described above, offset by an
extraordinary charge of $2.8 million in the quarter ended January 3, 1998 for
early extinguishment of debt.
Liquidity and Capital Resources
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 million was primarily due to
restructuring cash payments and higher interest costs associated with the Vistar
Merger.
The Company's investing activities consist mainly of capital expenditures for
new and existing service center and warehouse locations, capacity and efficiency
upgrades to manufacturing facilities, and information technology equipment.
Capital expenditures totaled $17.1 million and $9.6 million for the nine months
ended January 2, 1999 and January 3, 1998, respectively.
Management expects post-integration capital spending levels to approximate $22.0
million annually after the Vistar Merger, which includes maintenance spending of
approximately $10.0 million to $12.0 million annually. Additional
integration-related capital expenditures of $3.0 million to $5.0 million in both
fiscal years 1999 and 2000 are expected as a result of (i) converting Vistar
service centers and mobile vans to the Safelite logo and format and (ii)
expansion of certain centralized telephone/dispatch center locations.
<PAGE>
As a result of the Vistar Merger, Safelite has significantly increased cash
requirements for debt service related to the Company's credit facilities. The
Company will rely on internally generated funds and, to the extent necessary, on
borrowings under its revolving credit facility to meet its liquidity needs. As
of January 2, 1999, the Company had long-term borrowings of $537.2 million and
$21.0 million of availability under its revolving credit facility (less $16.4
million in letters of credit outstanding ).
As discussed in Item 1, Note 3 of this Quarterly Report, on January 29, 1999,
Safelite completed the sale of $50 million in Series A Convertible Preferred
Stock and the net proceeds from the sale of the Notes were released from escrow.
These funds were used to repay approximately $61.4 million in term loans and
$35.0 million in revolving credit borrowings, with no reduction to the revolving
credit facility. These transactions significantly increased the Company's
ability to make borrowings under its revolving credit facility and also reduced
fiscal year 2000 and 2001 mandatory term loan principal repayments. Safelite
does not currently have plans that would anticipate the need to increase its
current credit facilities.
The ability of the Company 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
affected by changes in prevailing interest rates.
Impact of Year 2000
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 the Company's systems, products, electronic linkages with insurance
companies and other 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 compliance
with the Year 2000 issue.
The assessment phase of the Year 2000 project is approximately 90% complete with
final completion of the assessment phase scheduled for March 1999. Remediation
and implementation for Year 2000 compliance is currently estimated to be
approximately 35% complete with final completion expected by August 1999.
Completion of remediation testing is scheduled for September 1999, while
contingency planning is anticipated to be finished by March 1999.
Remediation of systems and applications software is being performed by outside
consultants, "factory support", in-house staff and in some cases by the
replacement of packages. Safelite is building an isolated test environment where
systems will be tested by resetting dates to various points beyond the year
2000.
<PAGE>
Based on the Company's latest assessments, the total cost of addressing the Year
2000 issue is estimated to be in the range of approximately $2.0 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. The Company does not separately
track the internal costs for the Year 2000 project, with such costs being
principally the related payroll costs for the Management Information Systems
staff.
Surveys of critical suppliers and vendors 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 the Company relies will
be timely converted or that any such failure to convert by another company would
not have an adverse effect on the Company's systems. Furthermore, no assurance
can be given that any or all of the Company's systems are or will be Year 2000
compliant, or that the ultimate costs required to address the Year 2000 project
or the impact of any failure to achieve Year 2000 compliance will not have a
material adverse effect on the Company's financial condition.
Forward-Looking Statements
Investors are cautioned that certain statements contained in this document,
including but not limited to those under the caption Year 2000 Issues as well as
some statements by the Company in periodic press releases and some oral
statements of Company officials during presentations about the Company, 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 the
Company does business, among other things. These statements are not guaranties
of future performance and the Company 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. Such 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 the Company, including updating software and hardware and potential system
interruptions. The foregoing list should not be construed as exhaustive.
<PAGE>
PART II.
ITEM 6. Exhibits and Reports on Form 8-K
a. Exhibits
Exhibit 3(i) -- Restated Certificate of Incorporation
Exhibit 27 -- Financial Data Schedule
b. Reports on Form 8-K
The Company filed a Current Report on Form 8-K, dated
December 2, 1998 which reported an extension of the
exchange offer for the Company's senior subordinated notes
and that the Company had initiated discussions with its
lenders to obtain a Bank Credit Agreement Amendment.
The Company filed a Current Report on Form 8-K dated
December 21, 1998 which reported an extension of the
exchange offer for the Company's senior subordinated
notes, the completion of the offering of $55,000,000 in
new senior subordinated notes and the obtaining of a Bank
Credit Agreement Amendment.
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</LEGEND>
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<NAME> SAFELITE GLASS CORP.
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</TABLE>
RESTATED CERTIFICATE OF INCORPORATION
OF
SAFELITE GLASS CORP.
Safelite Glass Corp. (the "Corporation"), a corporation organized and
existing under the laws of the State of Delaware, hereby certifies as follows:
1. The present name of the Corporation is Safelite Glass Corp. The name under
which the Corporation was originally incorporated is LS Acquisition Corp.
No. 23. The date of filing of its original Certificate of Incorporation
with the Secretary of State was January 13, 1987.
2. This Restated Certificate of Incorporation restates, integrates and further
amends the Restated Certificate of Incorporation, as amended, of the
Corporation to read as herein set forth in full:
FIRST: The name of the Corporation is Safelite Glass Corp.
SECOND: The address of the Corporation's registered office in the
State of Delaware is Corporation Trust Center, 1209 Orange Street in
the City of Wilmington, County of New Castle, Delaware 19801. The name
of its registered agent at such address is The Corporation Trust
Company.
THIRD: The purpose of the Corporation is to engage in any lawful
act or activity for which corporations may be organized under the
General Corporation Law of Delaware.
FOURTH: The aggregate number of shares of all classes of capital
stock which the Corporation shall have the authority to issue is
35,050,000 shares of capital stock, of which 40,000 shares shall be
designated as Non-Voting 8% Preferred Stock, par value $.01 per share
(the "Non-Voting 8% Preferred Stock"), 50,000 shares shall be
designated as Series A Convertible Participating Preferred Stock, par
value $.01 per share (the "Series A Preferred Stock"), 4,960,000
shares shall be designated as Class A Voting Common Stock, par value
$.01 per share (the "Class A Common"), and 30,000,000 shares shall be
designated as Class B Non- Voting Common Stock, par value $.01 per
share (the "Class B Common" and, together with the Class A Common, the
"Common Stock").
A. Non-Voting 8% Preferred Stock. The powers, preferences and rights of
the shares of Non-Voting 8% Preferred Stock, and the qualifications,
limitations or restrictions thereof, are as follows:
1
<PAGE>
1. Designation and Amount. The Corporation shall be authorized to
issue 40,000 shares of preferred stock designated as Non-Voting
8% Preferred Stock, par value $.01 per share.
The date on which the Corporation initially issues any shares of
Non-Voting 8% Preferred Stock will be deemed to be its "date of
issuance" regardless of the number of times transfer of such
shares of Non-Voting 8% Preferred Stock is made on the stock
records of the Corporation, and regardless of the number of
certificates which may be issued to evidence such shares of
Non-Voting 8% Preferred Stock.
2. Dividends.
(a) General Obligation. In preference to the holders of shares of
Common Stock and of any other capital stock of the Corporation ranking
junior to the NonVoting 8% Preferred Stock as to payment of dividends,
the Corporation will pay cumulative semi-annual dividends on
Non-Voting 8% Preferred Stock if, when and as declared by the Board of
Directors of the Corporation, and to the extent permitted under the
General Corporation Law of the State of Delaware, which shall accrue
on a daily basis (computed on the basis of a 360-day year and actual
days elapsed) at the rate per annum of eight percent (8%) per share of
NonVoting 8% Preferred Stock calculated as a percentage of $1,000
(plus accrued and unpaid dividends), compounded semi-annually, from
and including December 18, 1997 until the redemption of Non-Voting 8%
Preferred Stock (with payment being calculated up to and including the
date on which full payment shall be tendered to the holders of
Non-Voting 8% Preferred Stock). Such dividends will accrue and be
cumulative whether or not they have been declared and whether or not
there are profits, surplus or other funds of the Corporation legally
available for the payment of dividends.
If the Corporation elects not to redeem Non-Voting 8% Preferred
Stock upon the occurrence of a Non-Voting 8% Preferred Stock Optional
Redemption Event (defined below), the eight percent (8%) dividend rate
will automatically increase to (i) fourteen percent (14%) per annum
upon the occurrence of a Non-Voting 8% Preferred Stock Optional
Redemption Event, (ii) fifteen percent (15%) per annum on the first
annual anniversary date of such Non-Voting 8% Preferred Stock Optional
Redemption Event and (iii) sixteen percent (16%) per annum on the
second anniversary date of such Non-Voting 8% Preferred Stock Optional
Redemption Event.
A "Non-Voting 8% Preferred Stock Optional Redemption Event" shall
mean (i) an underwritten initial public offering (a "Public Offering")
of the Corporation's capital stock pursuant to a registration
statement effected under the Securities Act of 1933, as amended or
(ii) the occurrence of a Change in Control under the terms of the
Indenture, dated as of December 20, 1996, as amended from time to
time, by and between the Corporation and State Street Bank and Trust
Company, as Trustee (the "Trustee"), or the Indenture, dated as of
December 18, 1998, as amended from time to time, by and between the
Corporation and the Trustee (collectively, the "Indentures").
2
<PAGE>
(b) Distributing Partial Dividend Payments. If at any time the
Corporation distributes less than the total amount of dividends then
accrued with respect to NonVoting 8% Preferred Stock, such payment
will be distributed among the holders of Non-Voting 8% Preferred Stock
so that an equal amount will be paid (as nearly as possible) with
respect to each outstanding share of Non-Voting 8% Preferred Stock.
(c) Priority. So long as any shares of Non-Voting 8% Preferred
Stock remain outstanding, neither the Corporation nor any Subsidiary
(which shall mean any corporation, association or other business
entity of which the Corporation directly or indirectly owns at the
time more than fifty percent (50%) of the outstanding voting
securities or equity interests) will redeem, purchase or otherwise
acquire any other equity security of the Corporation ranking junior to
Non-Voting 8% Preferred Stock in right to payment now or hereafter
outstanding, including, without limitation, the Common Stock and the
Series A Preferred Stock (for purposes only of this Section A of
Article Fourth, all such securities collectively, the "Junior
Securities"), nor will the Corporation declare or pay any cash
dividend (including accrued dividends) or make any distribution of
assets other than shares of Junior Securities upon any Junior
Securities; provided that nothing herein shall prohibit the
Corporation from acquiring Common Stock of the Corporation pursuant to
contractual rights approved by the Board of Directors of the
Corporation.
3. Liquidation, Dissolution or Winding Up.
(a) Treatment at Liquidation, Dissolution and Winding Up. In the
event of a Liquidity Event (defined below), after payment or provision
for payment of the amounts to which the holders of any outstanding
shares of any capital stock ranking senior in preference to the
Non-Voting 8% Preferred Stock, and before any distribution or payment
may be made with respect to the Junior Securities, holders of each
share of Non-Voting 8% Preferred Stock shall be entitled to be paid,
out of the assets of the Corporation available for distribution to
holders of the Corporation's capital stock of all classes, whether
such assets are capital, surplus or capital earnings, an amount in
cash equal to $1,000 per share of Non-Voting 8% Preferred Stock (which
amount, together with the other share and per share numbers used in
this Section A of Article Fourth, shall be subject to equitable
adjustment whenever there shall occur a stock split, combination,
reclassification or other similar event involving the class or series
of stock in question), plus accrued and unpaid dividends from the date
of issuance thereof up to and including the date full payment shall be
tendered to the holders of Non-Voting 8% Preferred Stock with respect
to such Liquidity Event (the "Non-Voting 8% Preferred Stock
Liquidation Amount"). The term "Liquidity Event" shall mean a
liquidation, dissolution or winding-up of the Corporation, whether
voluntary or involuntary.
If, upon any such Liquidity Event, the assets of the Corporation
available for distribution to its stockholders shall be insufficient
to permit payment to the holders of NonVoting 8% Preferred Stock of
the full amount of the Non-Voting 8% Preferred Stock Liquidation
Amount to which they are entitled to be paid, the holders of shares of
Non-Voting 8% Preferred
3
<PAGE>
Stock shall share ratably in any distribution of assets according
to the amounts which would be payable with respect to the shares of
Non-Voting 8% Preferred Stock held by them upon such distribution if
all amounts payable on or with respect to said shares were paid in
full.
After the payment of the Non-Voting 8% Preferred Stock
Liquidation Amount shall have been made in full to the holders of
Non-Voting 8% Preferred Stock or funds necessary for such payment
shall have been set aside by the Corporation in trust for the accounts
of holders of Non-Voting 8% Preferred Stock so as to be available for
such payment, the holders of NonVoting 8% Preferred Stock shall be
entitled to no further participation in the distribution of the assets
of the Corporation, and the remaining assets of the Corporation
legally available for distribution to its stockholders shall be
distributed among the holders of other classes of securities of the
Corporation in accordance with their respective terms.
(b) Distributions in Cash. The Non-Voting 8% Preferred Stock
Liquidation Amount shall be paid in cash to the extent the Corporation
has cash available. Whenever a distribution provided for in this
Section A.3 of Article Fourth is payable in property other than cash,
the value of such distribution shall be the fair market value of such
property as determined in good faith by the Board of Directors of the
Corporation.
4. Voting Power. Except as otherwise required by law or as provided
in Section A.6 of Article Fourth or in that certain Amended and
Restated Shareholders' Agreement among the Corporation and its
stockholders dated December 18, 1997, as amended (the
"Shareholders' Agreement"), the holders of Non-Voting 8%
Preferred Stock shall not be entitled to vote on, and their
consent shall not be required with respect to, any corporate
matters.
5. Redemption.
(a) Optional Redemption Rights. At any time, including upon the
occurrence of a Non-Voting 8% Preferred Stock Optional Redemption
Event (the "Non-Voting 8% Preferred Stock Redemption Date"), the
Corporation may redeem Non-Voting 8% Preferred Stock at its option, in
whole or in part, at $1,000 per share plus accrued and unpaid
dividends from the date of issuance thereof up to and including the
date on which full payment shall be tendered to holders of Non-Voting
8% Preferred Stock with respect to such redemption (the "Non-Voting 8%
Preferred Stock Redemption Price").
(b) Surrender of Certificates. Each holder of shares of
Non-Voting 8% Preferred Stock to be redeemed under this Section A.5 of
Article Fourth shall surrender the certificate or certificates
representing such shares to the Corporation at the principal office of
the Corporation, and thereupon the Non-Voting 8% Preferred Stock
Redemption Price for such shares as set forth in this Section A.5 of
Article Fourth shall be paid to the order of the person whose name
appears on such certificate or certificates. Irrespective of whether
the certificates therefor shall have been surrendered, all shares of
Non-Voting 8% Preferred Stock which are the subject of a redemption
shall be deemed to have been redeemed and shall be canceled effective
4
<PAGE>
as of the closing of a Public Offering or the Non-Voting 8% Preferred
Stock Redemption Date, as the case may be, unless the Corporation
shall default in the payment of the Non-Voting 8% Preferred Stock
Redemption Price.
(c) Partial Redemptions. If at any time the Corporation redeems
less than all of the outstanding shares of Non-Voting 8% Preferred
Stock, such redemption will be made from the holders of Non-Voting 8%
Preferred Stock on a pro rata basis based upon the number of shares of
Non-Voting 8% Preferred Stock held by each stockholder.
6. Restrictions and Limitations. The Corporation shall not amend
this Restated Certificate of Incorporation without the approval,
by vote or written consent, of the holders of at least a majority
of the then outstanding shares of Non-Voting 8% Preferred Stock,
voting together as a separate class, if such amendment would
amend any of the rights, preferences, privileges or limitations
provided for herein for the benefit of any shares of Non-Voting
8% Preferred Stock. Without limiting the generality of the
preceding sentence, the Corporation will not amend this Restated
Certificate of Incorporation without the approval by the holders
of at least a majority of the then outstanding shares of
Non-Voting 8% Preferred Stock, voting separately as a separate
class, if such amendment would:
(i) change the relative seniority rights of holders of
Non-Voting 8% Preferred Stock as to the payment of dividends in
relation to the holders of any other capital stock of the
Corporation;
(ii) reduce the amount payable to the holders of Non-Voting
8% Preferred Stock in the event of a Liquidity Event, or change
the relative seniority of the liquidation preferences of the
holders of Non-Voting 8% Preferred Stock to the rights upon
liquidation of the holders of other capital stock of the
Corporation, or change the dividend rights of the holders of
Non-Voting 8% Preferred Stock;
(iii) cancel or modify the redemption rights of the holders
of Non- Voting 8% Preferred Stock provided for in Section A.5 of
Article Fourth; or
(iv) cancel or modify the rights of the holders of
Non-Voting 8% Preferred Stock provided for in this Section A.6 of
Article Fourth.
7. Notices of Record Date. In the event of:
(a) any taking by the Corporation of a record of the holders of
any class of securities for the purpose of determining the holders
thereof who are entitled to receive any dividend or other
distribution, or any right to subscribe for, purchase or otherwise
acquire any shares of stock of any class or any other securities or
property, or to receive any other right, or
5
<PAGE>
(b) any capital reorganization of the Corporation, any
reclassification or recapitalization of the capital stock of the
Corporation, any merger of the Corporation, or any transfer of all or
substantially all of the assets of the Corporation to any other
corporation or to any other entity or person, or
(c) any Liquidity Event, then and in each such event the Corporation
shall mail or cause to be mailed to each holder of Non-Voting 8% Preferred
Stock a notice specifying (i) the date on which any such record is to be
taken for the purpose of such dividend, distribution or right and a
description of such dividend, distribution or right, (ii) the date on which
any such reorganization, reclassification, recapitalization, merger,
transfer of assets or Liquidity Event is expected to become effective and
(iii) the time, if any, that is to be fixed, as to when the holders of
record of Common Stock (or other securities, including Non-Voting 8%
Preferred Stock and Series A Preferred Stock) shall be entitled to exchange
their shares of Common Stock (or other securities, including Non-Voting 8%
Preferred Stock and Series A Preferred Stock) for securities or other
property deliverable upon such reorganization, reclassification,
recapitalization, merger, transfer of assets or Liquidity Event. Such
notice shall be mailed at least ten (10) business days prior to the date
specified in such notice on which such action is to be taken.
8. No Reissuance of Non-Voting 8% Preferred Stock. No share or shares of
NonVoting 8% Preferred Stock acquired by the Corporation by reason of
redemption, purchase or otherwise shall be reissued, and all such
shares shall be canceled, retired and eliminated from the shares which
the Corporation shall be authorized to issue. The Corporation may from
time to time take such appropriate corporate action as may be
necessary to reduce the authorized number of shares of Non-Voting 8%
Preferred Stock accordingly.
B. Series A Preferred Stock. The powers, preferences and rights of the
shares of Series A Preferred Stock, and the qualifications,
limitations or restrictions thereof, are as follows:
1. Designation and Amount. The Corporation shall be authorized to
issue 50,000 shares of preferred stock designated as Series A
Convertible Participating Preferred Stock, par value $.01 per
share.
The date on which the Corporation initially issues any shares of
Series A Preferred Stock will be deemed to be its "date of
issuance" regardless of the number of times transfer of such
shares of Series A Preferred Stock is made on the stock records
of the Corporation, and regardless of the number of certificates
which may be issued to evidence such shares of Series A Preferred
Stock.
6
<PAGE>
2. Dividends.
(a) Cumulative Dividends. In preference to the holders of shares
of Common Stock and of any other capital stock of the Corporation
ranking junior to the Series A Preferred Stock as to the payment of
dividends, the Corporation will pay cumulative quarterly dividends on
the Series A Preferred Stock if, when and as declared by the Board of
Directors of the Corporation, and to the extent permitted under the
General Corporation Law of the State of Delaware, which shall accrue
on a daily basis (computed on the basis of a 360-day year and actual
days elapsed) at the rate per annum of eight percent (8%) per share of
Series A Preferred Stock calculated as a percentage of $1,000 (plus
accrued and unpaid dividends), compounded quarterly from and including
January 29, 1999 until the redemption of the Series A Preferred Stock
and payment in full of the Series A Preferred Stock Liquidation Amount
(as defined below), with payment being calculated up to and including
the date on which full payment shall be tendered to the holders of
Series A Preferred Stock.
Such dividends will accrue and be cumulative whether or not they
have been declared and whether or not there are profits, surplus or
other funds of the Corporation legally available for the payment of
dividends.
If the Corporation elects not to redeem Series A Preferred Stock
upon the occurrence of a Series A Preferred Stock Optional Redemption
Event (defined below), the eight percent (8%) dividend rate will
automatically increase to (i) ten percent (10%) per annum upon the
occurrence of a Series A Preferred Stock Optional Redemption Event,
(ii) eleven percent (11%) per annum on the first annual anniversary
date of such Series A Preferred Stock Optional Redemption Event and
(iii) twelve percent (12%) per annum on the second anniversary date of
such Series A Preferred Stock Optional Redemption Event.
A "Series A Preferred Stock Optional Redemption Event" shall mean
(i) the closing of a Public Offering (as defined in Section A.2(a) of
Article Fourth) of the Corporation's capital stock pursuant to a
registration statement effected under the Securities Act of 1933, as
amended, (ii) the occurrence of a Change of Control under the terms of
the Indentures, or (iii) the occurrence of a "Series A Change of
Control" (defined below). A "Series A Change of Control" shall mean:
(a) a majority of the members of the Board of Directors of the
Corporation 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) a sale of
all or substantially all of the assets of the Corporation. A Change of
Control under the Indentures or a Series A Change of Control described
in clause (a) of the immediately preceding sentence of this paragraph
shall be deemed to occur fifteen (15) days after the event causing
such Change of Control occurs. As used herein, the terms "TH Lee
Shareholders," "Management Shareholders," and "Permitted Transferees"
shall have the meanings ascribed to them in the Shareholders'
Agreement.
7
<PAGE>
(b) Participating Dividends. If and whenever the Corporation
shall at any time or from time to time declare and pay a cash dividend
on its outstanding Common Stock, then the holders of Series A
Preferred Stock shall be entitled to receive from the Corporation,
with respect to each share of Series A Preferred Stock held, a
preferential dividend equal in amount to the same dividend to be
received by a holder of the number of shares of Class B Common Stock
into which such share of Series A Preferred Stock is convertible on
the record date for such dividend (assuming conversion at the option
of the holder). Any such dividend shall be paid on the Series A
Preferred Stock at the same time such dividend shall be paid on the
Common Stock.
(c) Distributing Partial Dividend Payments. If at any time the
Corporation distributes less than the total amount of dividends then
accrued with respect to Series A Preferred Stock, such payment will be
distributed among the holders of Series A Preferred Stock so that an
equal amount will be paid (as nearly as possible) with respect to each
outstanding share of Series A Preferred Stock.
(d) Priority. So long as any shares of Series A Preferred Stock
remain outstanding, neither the Corporation nor any Subsidiary (as
defined in Section A.2(c) of Article Fourth) will redeem, purchase or
otherwise acquire any other equity security of the Corporation ranking
junior to Series A Preferred Stock in right to payment now or
hereafter outstanding, including, without limitation, the Common Stock
(for purposes only of this Section B of Article Fourth, all such
securities collectively, the "Junior Equity"), nor will the
Corporation declare or pay any cash dividend (including accrued
dividends) or make any distribution of assets other than shares of
Junior Equity upon any Junior Equity; provided that nothing herein
shall prohibit the Corporation from acquiring Common Stock of the
Corporation pursuant to contractual rights approved by the Board of
Directors of the Corporation.
3. Liquidation, Dissolution or Winding Up.
(a) Treatment at Liquidation, Dissolution and Winding Up. In the
event of a Liquidity Event (as defined Section A.3(a) of Article
Fourth), before any distribution or payment may be made with respect
to the Junior Equity, holders of each share of Series A Preferred
Stock shall be entitled to be paid, out of the assets of the
Corporation available for distribution to holders of the Corporation's
capital stock of all classes, whether such assets are capital, surplus
or capital earnings, an amount in cash equal to the Series A Preferred
Stock Liquidation Amount (defined below).
The "Series A Preferred Stock Liquidation Amount" is that amount equal
to the greater of (i) $1,000 per share of Series A Preferred Stock
(which amount, together with the other share and per share numbers
used in this Section B of Article Fourth, shall be subject to
equitable adjustment whenever there shall occur a stock split,
combination, reclassification or other similar event involving the
class or series of stock in question), plus accrued and unpaid
dividends from the date of issuance thereof up to and including the
date full payment shall be tendered to the
8
<PAGE>
holders of Series A Preferred Stock with respect to a Liquidity Event
(or, if applicable, an SA Redemption Event as defined below), and (ii)
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 into which such shares of Series A Preferred
Stock would be convertible as of the date immediately prior to the
Liquidity Event (or, if applicable, an SA Redemption Event) had the
Corporation been liquidated as of such date, such per share amount to
be based on the value of the Corporation on a liquidated basis and to
be agreed upon by the Corporation and both TH Lee and Belron or,
absent such agreement within fifteen (15) days following the Liquidity
Event (or, if applicable, an SA Redemption Event, if applicable), as
determined by an independent appraiser selected by the Corporation,
the fees and expenses of which appraiser shall be borne by the
Corporation.
If, upon any such Liquidity Event, the assets of the Corporation
available for distribution to its stockholders shall be insufficient
to permit payment to the holders of Series A Preferred Stock of the
full amount of the Series A Preferred Stock Liquidation Amount to
which they are entitled to be paid, the holders of shares of Series A
Preferred Stock shall share ratably in any distribution of assets
according to the amounts which would be payable with respect to the
shares of Series A Preferred Stock held by them upon such distribution
if all amounts payable on or with respect to said shares were paid in
full.
After the payment of the Series A Preferred Stock Liquidation
Amount shall have been made in full to the holders of Series A
Preferred Stock or funds necessary for such payment shall have been
set aside by the Corporation in trust for the accounts of holders of
Series A Preferred Stock so as to be available for such payment, the
holders of Series A Preferred Stock shall be entitled to no further
participation in the distribution of the assets of the Corporation,
and the remaining assets of the Corporation legally available for
distribution to its stockholders shall be distributed among the
holders of other classes of securities of the Corporation in
accordance with their respective terms.
(b) Distributions in Cash. The Series A Preferred Stock
Liquidation Amount shall be paid in cash to the extent the Corporation
has cash available. Whenever a distribution provided for in this
Section B.3 of Article Fourth is payable in property other than cash,
the value of such distribution shall be the fair market value of such
property as determined in good faith by the Board of Directors of the
Corporation.
4. Voting Power. Except as otherwise required by law or as provided in Section
B.7 of Article Fourth or in the Shareholders' Agreement, the holders of
Series A Preferred Stock shall not be entitled to vote on, and their
consent shall not be required with respect to, any corporate matters.
5. Redemption.
9
<PAGE>
(a) Optional Redemption Rights. At any time, including upon the
occurrence of a Series A Preferred Stock Optional Redemption Event, the
Corporation may redeem Series A Preferred Stock at its option, in whole or
in part, in exchange for an amount per share equal to the Series A
Preferred Stock Liquidation Amount (any such redemption referred to herein
as an "SA Redemption Event"). The Corporation shall provide each holder of
Series A Preferred Stock not less than fifteen (15) days' prior written
notice of the pending occurrence of an SA Redemption Event.
(b) Surrender of Certificates. Each holder of shares of Series A
Preferred Stock to be redeemed under this Section B.5 of Article Fourth
shall surrender the certificate or certificates representing such shares to
the Corporation at the principal office of the Corporation, and thereupon
the Series A Preferred Stock Liquidation Amount for such shares shall be
paid to the order of the person whose name appears on such certificate or
certificates. Irrespective of whether the certificates therefor shall have
been surrendered, all shares of Series A Preferred Stock which are the
subject of the redemption shall be deemed to have been redeemed and shall
be canceled effective as of an SA Redemption Event unless the Corporation
shall default in the payment of the Series A Preferred Stock Liquidation
Amount.
(c) Partial Redemptions. If at any time the Corporation redeems less
than all of the outstanding shares of Series A Preferred Stock, such
redemption will be made from the holders of Series A Preferred Stock on a
pro rata basis based upon the number of shares of Series A Preferred Stock
held by each stockholder.
6. Conversion of the Series A Preferred Stock.
(a) Conversion Rights. At any time and from time to time (including,
without limitation, up to immediately prior to an SA Redemption Event), any
holder of shares of Series A Preferred Stock shall have the right to
exchange such holder's shares of Series A Preferred Stock as follows: (i)
each share of Series A Preferred Stock held by any person shall be
exchangeable for such number of shares of Class B Common equal to (i)
$1,000 divided by (ii) the Conversion Price. "Conversion Price" means
$4.72, subject to adjustment as provided in Section B.6(b) of Article
Fourth.
(b) Adjustment of Conversion Price.
(i) If and whenever the outstanding shares of Class B Common
shall be subdivided into a greater number of shares of Class B Common
or a stock dividend is declared in respect of shares Class B Common,
the Conversion Price in effect at the opening of business on the day
following the day upon which such subdivision or stock dividend
becomes effective shall be proportionately decreased, and conversely,
in case the outstanding shares of Class B Common shall be combined
into a smaller number of shares of Class B Common, the Conversion
Price in effect at the opening of business on the day following the
day upon which such combination becomes effective shall be
proportionately increased, with such decrease or
10
<PAGE>
increase, as the case may be, to become effective immediately after
the opening of business on the day following the day upon which such
subdivision, stock dividend or combination becomes effective.
(ii) If and whenever the Corporation issues shares of Class B
Common or securities exercisable for or convertible into shares of
Class B Common (other than (A) pursuant to the exercise of employee
stock options, (B) as consideration in connection with acquisitions
approved by the Board of Directors of the Corporation, or (C) in a
Public Offering (as defined in Section A.2(a) of Article Fourth) at a
price which is less than $4.72 per share, the Conversion Price shall
be adjusted to the result obtained by multiplying the Conversion Price
in effect immediately prior to the date of such issuance by a
fraction:
(A) the numerator of which shall be the per share issuance
price; and
(B) the denominator of which shall be $4.72.
(iii) Notwithstanding the foregoing, no adjustment in the
Conversion Price shall be required unless such adjustment would
require an increase or decrease of at least one percent (1%) in such
price; provided, however, that any adjustments which by reason of this
clause (iii) are not required to be made shall be carried forward and
taken into account in any subsequent adjustment. All calculations
under this paragraph (b) shall be made by the Corporation and shall be
made to the nearest cent or to the nearest one one-hundredth of a
share, as the case may be.
No adjustment need be made for rights to purchase shares of Class
B Common pursuant to a Corporation plan for reinvestment of dividends
or interest.
(iv) In the event of any reclassification or change of
outstanding shares of Class B Common, including in connection with a
merger, consolidation or similar transaction (other than a change as a
result of a subdivision or combination) (a "Reclassification"), each
share of Series A Preferred Stock then outstanding shall thereafter be
convertible into the kind and amount of shares and other securities or
properties receivable upon such Reclassification by a holder of that
number of shares of Class B Common issuable upon conversion of such
share of Series A Preferred Stock.
The above provisions of this clause (iv) shall similarly apply to
successive Reclassifications. If this clause (iv) applies to any event
or occurrence, the adjustments provided for in clauses (i) and (ii)
shall not apply to such event or occurrence.
(v) In any case where the application of the foregoing provisions
results in an decrease in the Conversion Price taking effect
immediately after the record date for a specific event, if any share
of Series A Preferred Stock is converted after that record date and
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prior to completion of the event, the Corporation may postpone the
issuance to the holder of the additional shares of Class B Common to
which it is entitled by reason of the decrease in the Conversion Price
but such additional shares of Class B Common shall be so issued and
delivered to that holder upon completion of the event and the
Corporation shall, in the interim, deliver to the holder an
appropriate instrument evidencing his right to receive such additional
shares of Class B Common.
(c) Surrender of Certificates. From and after such time as the
shares of Series A Preferred Stock are exchangeable pursuant to
Section B.6(a) of Article Fourth, each such share of Series A
Preferred Stock may be exchanged as set forth above and in the
following manner: each holder of shares of Series A Preferred Stock
wishing to exchange shares of Series A Preferred Stock for shares of
Class B Common shall surrender the certificate or certificates
representing such shares to the Corporation at the principal office of
the Corporation, and thereupon the Corporation shall cause such shares
to be exchanged and shall, within three (3) business days after
receipt of a duly endorsed certificate or duly endorsed certificates
representing such shares, cause to be issued to such holder thereof a
certificate for shares of Class B Common for the number of shares of
Class B Common issuable in exchange therefor pursuant to Section
B.6(a) of Article Fourth.
7. Restrictions and Limitations.
The Corporation shall not amend this Restated Certificate of
Incorporation without the approval, by vote or prior written consent,
of both TH Lee and Belron, if such amendment would amend any of the
rights, preferences, privileges or limitations provided for herein for
the benefit of any shares of Series A Preferred Stock. Without
limiting the generality of the preceding sentence, the Corporation
will not amend this Restated Certificate of Incorporation without the
approval of both TH Lee and Belron, if such amendment would:
(i) 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 the Corporation;
(ii) reduce the amount payable to the holders of Series A
Preferred Stock upon a Liquidity Event or a Series A Preferred Stock
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 the
Corporation, or change the dividend rights of the holders of Series A
Preferred Stock;
(iii) cancel or modify the redemption rights or the conversion
rights of the holders of Series A Preferred Stock provided for in
Sections B.5 and B.6 of Article Fourth;
(iv) 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
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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
(v) cancel or modify the rights of the holders of Series A
Preferred Stock provided for in this Section B.7 of Article Fourth.
As used herein, the terms "TH Lee" and "Belron" have the meanings
ascribed to them in the Shareholders' Agreement.
8. Notices of Record Date. In the event of:
(a) any taking by the Corporation of a record of the holders of any class
of securities for the purpose of determining the holders thereof who are
entitled to receive any dividend or other distribution, or any right to
subscribe for, purchase or otherwise acquire any shares of stock of any class or
any other securities or property, or to receive any other right, or
(b) any capital reorganization of the Corporation, any reclassification or
recapitalization of the capital stock of the Corporation, any merger of the
Corporation, or any transfer of all or substantially all of the assets of the
Corporation to any other corporation or to any other entity or person, or
(c) any Liquidity Event,
then and in each such event the Corporation shall mail or cause to be
mailed to each holder of Series A Preferred Stock a notice specifying
(i) the date on which any such record is to be taken for the purpose
of such dividend, distribution or right and a description of such
dividend, distribution or right, (ii) the date on which any such
reorganization, reclassification, recapitalization, merger, transfer
of assets or Liquidity Event is expected to become effective and (iii)
the time, if any, that is to be fixed, as to when the holders of
record of Common Stock (or other securities, including Series A
Preferred Stock) shall be entitled to exchange their shares of Common
Stock (or other securities, including Series A Preferred Stock) for
securities or other property deliverable upon such reorganization,
reclassification, recapitalization, merger, transfer of assets or
Liquidity Event. Such notice shall be mailed at least ten (10)
business days prior to the date specified in such notice on which such
action is to be taken.
9. No Reissuance of Series A Preferred Stock. No share or shares of Series A
Preferred Stock acquired by the Corporation by reason of redemption,
purchase or otherwise shall be reissued, and all such shares shall be
canceled, retired and eliminated from the shares which the Corporation
shall be authorized to issue. The Corporation may from time to time take
such appropriate corporate action as may be necessary to reduce the
authorized number of shares of Series A Preferred Stock accordingly.
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10. Conflict. In the event of any conflict or inconsistency between any of the
provisions herein related to the Series A Preferred Stock and any of the
provisions herein related to the Non-Voting 8% Preferred Stock, such
conflict or inconsistency shall be resolved in favor of the Series A
Preferred Stock.
C. Common Stock. Except as otherwise provided in this Section C of Article
Fourth or as otherwise required by applicable law, all shares of Class A
Common and Class B Common shall be identical in all respects and shall
entitle the holders thereof to the same rights, preferences and privileges,
subject to the same qualifications, limitations and restrictions, as set
forth herein. The powers, preferences and rights of the shares of Class A
Common and Class B Common, and the qualifications, limitations or
restrictions thereof, are as follows:
1. Dividends. If, when and as dividends are declared or paid with respect
to shares of Common Stock, whether in cash, property or securities of
the Corporation, the holders of Class A Common and the holders of
Class B Common shall be entitled to receive such dividends pro rata at
the same rate per share, in the same kind, and at the same time for
each class of Common Stock; provided that (i) if dividends are
declared or paid in shares of Common Stock, the dividends payable to
the holders of Class A Common shall be payable in shares of Class A
Common and the dividends payable to holders of Class B Common shall be
payable in shares of Class B Common, and (ii) if the dividends consist
of other voting securities of the Corporation, the Corporation shall
pay to each holder of Class B Common dividends consisting of
non-voting securities (except as otherwise required by law) of the
Corporation which are otherwise identical to the voting securities and
which are convertible into such voting securities on the same terms as
the Class B Common is convertible into the Class A Common.
2. Dissolution, Liquidation or Winding-Up. In the event of any Liquidity
Event (as defined in Section A.3(a) of Article Fourth, after payment
or provision for payment of the debts and other liabilities of the
Corporation and of the amounts to which the holders of any outstanding
shares of any capital stock ranking senior in preference to the Common
Stock including, without limitation, Series A Preferred Stock and
Non-Voting 8% Preferred Stock, the holders of the Class A Common and
the holders of the Class B Common shall be entitled to participate pro
rata at the same rate per share of each class of Common Stock in all
distributions to the holders of the Common Stock in any liquidation,
dissolution or winding up of the Corporation. The Board of Directors
of the Corporation, in good faith, shall determine the fair market
value, as of the date of distribution, of any property (other than
cash) distributed in the event of any dissolution, liquidation or
winding-up of the affairs of the Corporation (and such fair market
value shall be the amount received in such dissolution, liquidation or
winding-up by the stockholders by reason of the distribution of the
property). Any determination made by the Board of Directors of the
Corporation pursuant to this Section C.2 of Article Fourth shall be
final and binding on the Corporation and all holders of Common Stock.
3. Voting Power. Except as otherwise provided in this Section C.2 of
Article Fourth or as otherwise required by applicable law, the holders
of Class A Common shall be entitled to
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one vote per share on all matters to be voted on by the Corporation's
stockholders, and the holders of Class B Common shall have no right to
vote on any matters to be voted on by the Corporation's stockholders.
4. Conversion of the Class B Common.
(a) Conversion Rights. Any holder of shares of Class B Common
shall have the right to exchange such holder's shares of Class B
Common as follows: (i) any time on or after the Triggering Day, all
shares of Class B Common held by any person shall be exchangeable, on
a one-for-one basis, for shares of Class A Common and (ii) upon or any
time after the sale, which is not a Permitted Transfer, to any person,
such shares of Class B Common which have been so sold shall be
exchangeable for shares of Class A Common. The terms "Triggering Day"
and "Permitted Transfer" shall have the meanings set forth in the
Shareholders' Agreement.
(b) Surrender of Certificates. From and after such time as the
shares of Class B Common are exchangeable pursuant to Section C.4(a)
of Article Fourth, each such share of Class B Common may be exchanged
for one share of Class A Common in the following manner: each holder
of shares of Class B Common wishing to exchange shares of Class B
Common for shares of Class A Common shall surrender the certificate or
certificates representing such shares to the Corporation at the
principal office of the Corporation, and thereupon the Corporation
shall cause such shares to be exchanged for the same number of shares
of Class A Common. The Corporation shall, within three (3) business
days of receipt of a duly endorsed certificate or duly endorsed
certificates representing shares of Class B Common, cause to be issued
to such holder thereof a certificate for shares of Class A Common
equal in number to the shares of Class B Common represented by the
certificate(s) which had been surrendered for exchange by such
beneficial holder.
FIFTH: The Board of Directors is expressly authorized to adopt,
amend or repeal the by-laws of the Corporation.
SIXTH: Elections of directors need not be by written ballot
unless the by-laws of the Corporation shall otherwise provide.
SEVENTH: A director of the Corporation shall not be personally
liable to the Corporation or its stockholders for monetary damages for
breach of fiduciary duty as a director; provided, however, that the
foregoing shall -------- ------- not eliminate or limit the liability
of a director (i) for any breach of the director's duty of loyalty to
the Corporation or its stockholders, (ii) for acts or omissions not in
good faith or which involve intentional misconduct or a knowing
violation of law, (iii) under Section 174 of the General Corporation
Law of Delaware, or (iv) for any transaction from which the director
derived an improper personal benefit. If the General
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Corporation Law of Delaware is hereafter amended to permit further
elimination or limitation of the personal liability of directors, then
the liability of a director of the Corporation shall be eliminated or
limited to the fullest extent permitted by the General Corporation Law
of Delaware as so amended. Any repeal or modification of Article
Seventh by the stockholders of the Corporation or otherwise shall not
adversely affect any right or protection of a director of the
Corporation existing at the time of such repeal or modification.
EIGHTH: Whenever a compromise or arrangement is proposed between
this Corporation and its creditors or any class of them and/or between
this Corporation and its stockholders or any class of them, any court
of equitable jurisdiction within the State of Delaware may, on the
application in a summary way of this Corporation or of any creditor or
stockholder thereof or on the application of any receiver or receivers
appointed for this Corporation under the provisions of Section 291 of
Title 8 of the Delaware Code or on the application of trustees in
dissolution or of any receiver or receivers appointed for this
Corporation under the provisions of Section 279 of Title 8 of the
Delaware Code, order a meeting of the creditors or class of creditors,
and/or of the stockholders or class of stockholders of this
Corporation, as the case may be, to be summoned in such manner as the
said court directs. If a majority in number representing three-fourths
in value of the creditors or class of creditors, and/or of the
stockholders or class of stockholders of this Corporation, as the case
may be, agree to any compromise or arrangement and to any
reorganization of this Corporation as a consequence of such compromise
or arrangement, the said compromise or arrangement and the said
reorganization shall, if sanctioned by the court to which said
application has been made, be binding on all the creditors or class of
creditors, and/or on all of the stockholders or class of stockholders,
of this Corporation, as the case may be, and also on this Corporation.
NINTH: The Corporation reserves the right to amend, alter, change
or repeal any provision contained in this Restated Certificate of
Incorporation, in the manner now or hereafter prescribed by statute,
and all rights conferred upon stockholders herein are granted subject
to this reservation.
5. This Restated Certificate of Incorporation was duly adopted in
accordance with the provisions of Sections 242 and 245 of the General
Corporation Law of the State of Delaware.
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IN WITNESS WHEREOF, said Safelite Glass Corp. has caused this Restated
Certificate of Incorporation to be signed by David W. Wood, its Secretary, this
___ day of January, 1999.
SAFELITE GLASS CORP.
By: /s/ David W. Wood
David W. Wood, Secretary
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