As filed with the Securities and Exchange Commission on March 30, 2000
Registration No. 333-
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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DIAMOND TRIUMPH AUTO GLASS, INC.
(Exact Name of Registrant as Specified in Its Charter)
Delaware 7536 23-2758853
(State or Other (Primary Standard (I.R.S. Employer
Jurisdiction of Incorporation Industrial Classification Identification No.)
or Organization) Code Number)
220 Division Street
Kingston, Pennsylvania 18704
(570) 287-9915
(Address, Including Zip Code, and Telephone Number, Including Area Code, of
Registrant's Principal Executive Offices)
Michael A. Sumsky
220 Division Street
Kingston, Pennsylvania 18704
(570) 287-9915
(Name, Address, Including Zip Code, and Telephone Number,
Including Area Code, of Agent For Service)
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Copies to:
Howard A. Sobel, Esq.
Kramer Levin Naftalis & Frankel LLP
919 Third Avenue
New York, New York 10022
(212) 715-9100
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Approximate date of commencement of proposed sale to the public:
As soon as practicable after this Registration Statement becomes effective
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If any of 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. [ ]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ] ___________
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ] __________
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CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
====================================================================================================================
Proposed Proposed
Maximum Maximum
Title of Each Class of Amount to Offering Price Aggregate Amount of
Securities To Be Registered be Registered Per Security Offering Price Registration Fee
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
9 1/4% Senior Notes Due 2008............ $100,000,000 100% (1) $100,000,000(1) $26,400
====================================================================================================================
</TABLE>
(1) Estimated solely for purposes of calculating the registration fee pursuant
to Rule 457 under the Securities Act of 1933, as amended.
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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, as amended, or until this 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>
SUBJECT TO COMPLETION, DATED MARCH 30, 2000
Prospectus
DIAMOND TRIUMPH AUTO GLASS, INC.
Offer to Exchange
up to $100,000,000 9 1/4% Senior Notes due 2008
for any and all outstanding 9 1/4% Senior Notes due 2008
This Prospectus and the accompanying Letter of Transmittal relate to the
proposed offer by Diamond Triumph Auto Glass, Inc. ("Diamond") to exchange up to
$100,000,000 in aggregate principal amount of new 9 1/4% senior notes due 2008
for any and all of its outstanding 9 1/4% senior notes due 2008. The new notes,
which are referred to as the "New Notes," will be freely transferable. The
outstanding notes, which are referred to as the "Old Notes," have certain
transfer restrictions. The Old Notes and the New Notes are collectively referred
to as the "Notes."
The terms of the Exchange Offer are as follows:
o Diamond will exchange all Old Notes that are validly tendered and not
withdrawn prior to the expiration date of the Exchange Offer. The
Exchange Offer expires 5:00 p.m. New York City time on ________, 2000,
unless extended.
o You may withdraw tendered Old Notes at any time prior to the
expiration of the Exchange Offer.
o The terms of the New Notes are substantially identical to the terms of
the Old Notes, except for certain transfer restrictions and
registration rights relating to the Old Notes.
o Diamond believes that there will be no United States federal income
tax consequences to holders of Old Notes who exchange Old Notes for
New Notes pursuant to the Exchange Offer, but you should read the
section entitled "Certain U.S. Federal Income Tax Considerations" for
more information.
o Old Notes not exchanged in the Exchange Offer will remain outstanding
and be entitled to the benefits of the indenture under which they were
issued, but under certain circumstances will not have further exchange
or registration rights.
o Diamond does not intend to apply for listing of the New Notes on any
securities exchange or to arrange for the New Notes to be quoted on
any quotation system.
o Diamond will not receive any proceeds from the Exchange Offer.
If you wish to accept the Exchange Offer, you must deliver the Old Notes to
be exchanged, together with the Letter of Transmittal that accompanies this
Prospectus and any other required documentation, to the exchange agent
identified in this Prospectus. Alternatively, you may effect a tender of your
Old Notes by book-entry transfer into the exchange agent's account at the
Depository Trust Company. All deliveries are at your risk. You can find detailed
instructions concerning delivery in the "Exchange Offer" section of this
Prospectus and in the accompanying Letter of Transmittal.
Each broker-dealer that receives New Notes for its own account pursuant to
the Exchange Offer must acknowledge that it will deliver a prospectus in
connection with any resale of those New Notes. 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 of 1933, as amended. 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 New Notes received in exchange for Old Notes where the Old Notes
were acquired by that broker-dealer as a result of market-making activities or
other trading activities. Diamond has agreed that, starting on the Expiration
Date and ending on the close of business 180 days after the Expiration Date, it
will make this Prospectus available to any broker-dealer for use in connection
with any resale. See "Plan of Distribution."
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This investment involves risks. Please read this Prospectus carefully,
including the section entitled "Risk Factors" that begins on page 9 for a
discussion of the risks that you should consider prior to tendering your Old
Notes for exchange.
Neither the Securities and Exchange Commission (the "SEC") 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 defense.
The information in this Prospectus is not complete and may be changed.
Diamond may not sell the New Notes until the Registration Statement filed with
the SEC is effective. This Prospectus is not an offer to sell the New Notes and
is not soliciting an offer to buy the New Notes in any jurisdiction where the
offer to sell is not permitted.
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The date of this Prospectus is March 30, 2000
<PAGE>
WHERE YOU CAN FIND MORE INFORMATION
Diamond has filed a Registration Statement (which term includes any
amendments to the Registration Statement) with the SEC on Form S-4 under the
Securities Act of 1933, as amended (the "Securities Act"), covering the Exchange
Notes to be issued in the Exchange Offer. This Prospectus, which constitutes a
part of the Registration Statement, does not contain all of the information set
forth in the Registration Statement and the exhibits and schedules thereto, to
which reference is hereby made. Each statement made in this Prospectus referring
to a document filed as an exhibit or schedule to the Registration Statement is
not necessarily complete and is qualified in its entirety by reference to the
exhibit or schedule for a complete statement of its terms and conditions.
Upon the effectiveness of the Registration Statement filed with the SEC,
Diamond will be subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"). As a result, Diamond will
be required to file periodic reports and other information with the SEC relating
to its business, financial statements and other matters. These filings and the
Registration Statement are available to the public over the Internet at the
SEC's website at http://www.sec.gov. You may also read and copy any document
filed by Diamond with the SEC 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 these public reference rooms and their
copy charges.
Diamond's obligations under the Exchange Act to file periodic reports and
other information with the SEC may be suspended, under certain circumstances, if
the New Notes are held of record by fewer than 300 holders at the beginning of
any fiscal year and are not listed on a national securities exchange. Diamond
has agreed that, whether or not it is required to do so by the SEC's rules and
regulations, for so long as any Notes remain outstanding, it will furnish to the
holders of those Notes and file with the SEC (unless the SEC will not accept the
filing) all annual, quarterly and current reports that Diamond would be required
to file with the SEC pursuant to Sections 13(a) or 15(d) of the Exchange Act. In
addition, for so long as any Old Notes remain outstanding, Diamond has agreed to
make available to any prospective purchaser of the Old Notes or any beneficial
owner of the Old Notes, upon request, the information required by 144A(d)(4)
under the Securities Act.
This Prospectus incorporates documents by reference, which means that this
Prospectus discloses certain information to you by referring you to another
document. These incorporated documents contain important information about
Diamond that is not included in or delivered with this Prospectus. You may
request a copy of any documents incorporated by reference (including the
exhibits to those documents) at no cost, by writing or calling Diamond at the
following address or telephone number:
Investor Relations
Diamond Triumph Auto Glass, Inc.
220 Division Street
Kingston, Pennsylvania 18704
(570) 287-9915 ext. 3888
To obtain timely delivery of any copies of any requested documents, please
write or telephone no later than _________, 2000, ten days prior to the
scheduled expiration of the Exchange Offer.
You should rely only on the information provided or incorporated by
reference in this Prospectus. Diamond has not authorized anyone else to provide
you with different information. You should not assume that the information in
this Prospectus is accurate as of any date other than the date on the front of
this Prospectus. Neither the delivery of this Prospectus or the accompanying
Letter of Transmittal, nor any exchange made pursuant to this Prospectus shall
under any circumstances create an implication that the information contained in
this Prospectus is correct as of any subsequent date.
This Exchange Offer is not being made to, nor will tenders of Old Notes be
accepted from, holders of Old Notes in any jurisdiction in which the Exchange
Offer or its acceptance is unlawful.
-i-
<PAGE>
FORWARD LOOKING INFORMATION
You are cautioned that there are statements contained in this Prospectus
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 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 Diamond, economic and market factors and the industries in which Diamond
does business, among other things. These statements are not guaranties of future
performance and Diamond 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, among other things, overall economic and business conditions, the
demand for Diamond's services, competitive factors in the industries in which
Diamond competes and changes in government regulation. For a discussion of
important factors that could cause actual results to differ materially from the
forward-looking statements contained in this Prospectus, please read the Section
entitled "Risk Factors" beginning on page 9.
-ii-
<PAGE>
TABLE OF CONTENTS
Where You Can Find More Information............................................i
Forward Looking Information...................................................ii
Prospectus Summary.............................................................1
Summary Historical Financial Data..............................................7
Risk Factors...................................................................9
Use of Proceeds...............................................................15
Capitalization................................................................16
The Exchange Offer............................................................17
Selected Historical Financial Data............................................26
Management's Discussion and Analysis of Financial
Condition and Results of Operations.........................................28
Business......................................................................33
Management....................................................................39
Security Ownership of Certain Beneficial Owners and Management................43
Certain Relationships and Related Transactions................................44
Description of Credit Facility................................................45
Description of Capital Stock..................................................47
Description of the New Notes..................................................50
Certain U.S. Federal Income Tax Considerations................................83
Book-Entry, Delivery and Form.................................................86
Plan of Distribution..........................................................89
Legal Matters.................................................................89
Experts.......................................................................89
Index to Financial Statements................................................F-1
-iii-
<PAGE>
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PROSPECTUS SUMMARY
The following summary highlights selected information from this
Prospectus and may not contain all of the information that 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 New
Notes, you should read this entire Prospectus carefully, as well as the
additional documents that Diamond refers you to. See "Where You Can Find More
Information."
As you read this Prospectus, you should also note the following: This
Prospectus contains various references to industry market data and certain
industry forecasts. The industry market data and industry forecasts were
obtained from publicly available information and industry publications. Industry
publications generally state that the information contained therein has been
obtained from sources believed to be reliable, but that the accuracy and
completeness of that information is not guaranteed. Similarly, industry
forecasts, while believed to be accurate, have not been independently verified
and Diamond does not make any representation as to the accuracy of that
information.
Diamond
Diamond is a leading provider of automotive glass replacement and repair
services in the Northeast, Mid-Atlantic, Midwest, Southeast and Southwest
regions of the United States. At December 31, 1999, Diamond operated a network
of 226 automotive glass service centers, approximately 1,041 mobile installation
vehicles and four distribution centers in 39 states. Diamond serves all of its
customers' automotive glass replacement and repair needs, offering windshields,
tempered glass and other related products. Sales and EBITDA for the year ended
December 31, 1999 were $164.5 million and $13.8 million, respectively.
Diamond believes that, due to its sole focus on automotive glass
replacement and repair, it has one of the lowest cost structures in the
automotive glass replacement and repair industry. Diamond's low cost structure
enables it to serve all segments of the industry, which is comprised of: (1)
individual consumers; (2) commercial customers, including commercial fleet
leasing and rental car companies, car dealers, body shops and government
agencies; and (3) insurance customers, including referrals from local agents,
claims offices and centralized call centers. Diamond's 1999 sales to individual
consumers, commercial customers and insurance customers represented 28.6%, 41.5%
and 29.9% of total sales, respectively. While the two largest participants in
the industry primarily focus on servicing automotive glass insurance claims
(including providing related insurance claims processing services) and also
manufacture automotive glass, Diamond has strategically positioned itself solely
as a provider of automotive glass replacement and repair services to a balanced
mix of individual, commercial and insurance customers.
Diamond's headquarters are located at 220 Division Street, Kingston,
Pennsylvania 18704 and its telephone number is (570) 287-9915.
Recent Developments
On March 31, 1998, Diamond entered into a bank facility with a syndicate of
financial institutions, which provided for borrowings of up to $35 million. On
March 27, 2000, Diamond entered into a new revolving credit facility with The
CIT Group/Business Credit, Inc., as lender, which provides for revolving
advances ("Revolving Loans") of up to the lesser of:
o $25,000,000; or
o the sum of 85% of Diamond's Eligible Accounts Receivable (as defined
in the new credit facility) plus 85% of Diamond's Eligible Inventory
(as defined in the new credit facility), less certain reserves; or
o an amount equal to 1.5 times Diamond's EBITDA for the prior twelve
months. For purposes of the new credit facility, EBITDA is defined as
earnings before interest, taxes, depreciation and
1
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<PAGE>
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amortization, plus any accrued and unpaid management fees payable to
Leonard Green & Partners, L.P. ("LGP") during the period.
At the same time Diamond entered into the new credit facility, it repaid
outstanding borrowings under the old bank facility. For a more detailed
description of the new credit facility, please read the section entitled
"Description of Credit Facility."
About this Transaction
On March 31, 1998, Diamond sold $100.0 million of 9 1/4% Senior Notes Due
2008 in a private offering to First Union Capital Markets, BT Alex. Brown
Incorporated and Donaldson, Lufkin & Jenrette Securities Corporation,
collectively referred to as the "Initial Purchasers." These are the Old Notes to
which this Exchange Offer applies. Simultaneously with the private offering of
the Old Notes, Diamond entered into a Registration Rights Agreement with the
Initial Purchasers, in which Diamond agreed, among other things, to deliver this
Prospectus to you and to complete this Exchange Offer on or before October 27,
2000.
Set forth below is a summary of the material terms of the Exchange Offer:
The Exchange Offer
The Exchange Offer Diamond is offering to issue registered
New Notes in exchange for a like
principal amount of its outstanding Old
Notes. Diamond is offering to issue
these New Notes to satisfy its
obligations under the Registration
Rights Agreement it entered into with
the Initial Purchasers. You may tender
your outstanding Old Notes for exchange
by following the procedures described
under the heading "The Exchange Offer."
Expiration Date The Exchange Offer will expire at 5:00
p.m., New York City time, on _______,
2000, unless Diamond, in its sole
discretion, extends the Exchange Offer.
Procedures for Tendering Old Notes If you wish to accept the Exchange
Offer, you must complete, sign and date
the Letter of Transmittal, or a
facsimile thereof, in accordance with
the instructions contained in this
Prospectus and in the Letter of
Transmittal. You should then mail or
otherwise deliver the Letter of
Transmittal, or the facsimile thereof,
together with the Old Notes to be
exchanged and any other required
documentation, to the exchange agent at
the address set forth in this Prospectus
and in the Letter of Transmittal. Old
Notes may be physically delivered, but
physical delivery is not required if a
confirmation of a book-entry of such Old
Notes to the exchange agent's account at
The Depository Trust Company is
delivered in a timely fashion. By
executing the Letter of Transmittal, you
will represent to Diamond that, among
other things:
o you are acquiring the New Notes in
the ordinary course of business;
o you have no arrangement or
understanding with any person to
participate in the distribution of
the New Notes issued to you in the
Exchange Offer; and
o you are not an "affiliate," as
defined in Rule 405 under the
Securities Act, of Diamond, or, if
you are an affiliate, that you will
comply with the registration and
prospectus delivery requirements of
the Securities Act to the extent
applicable.
See "The Exchange Offer -How to Tender
Old Notes for Exchange" and "Plan of
Distribution."
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Guaranteed Delivery Procedures If you wish to tender your Old
Notes and:
o your Old Notes are not immediately
available;
o you cannot deliver your Old Notes,
the Letter of Transmittal or any
other required documents to the
exchange agent prior to the
expiration of the Exchange Offer;
or
o you cannot complete the procedure
for book-entry transfer on a timely
basis;
you may tender your Old Notes according
to the guaranteed delivery procedures
described in this Prospectus. See "The
Exchange Offer - Guaranteed Delivery
Procedures."
Acceptance of Old Notes and Upon satisfaction or waiver of all
Delivery of New Notes conditions of the Exchange Offer,
Diamond will accept any and all Old
Notes that are properly tendered in the
Exchange Offer prior to 5:00 p.m., New
York City time, on _______. The New
Notes issued pursuant to the Exchange
Offer will be delivered promptly after
acceptance of the Old Notes.
Withdrawal Rights You may withdraw any Old Notes you
tender for exchange at any time prior to
5:00 p.m., New York City time, on
________, 2000.
The Exchange Agent State Street Bank and Trust Company is
the exchange agent. The address and
telephone number of the exchange agent
are set forth in "The Exchange Offer -
The Exchange Agent."
United States Federal Income Tax Your exchange of Old Notes for New Notes
Considerations will not result in any gain or loss to
you for federal income tax purposes. See
"Certain U.S. Federal Income Tax
Considerations."
Fees and Expenses Diamond will pay all expenses incurred
in connection with the Exchange Offer.
Use of Proceeds Diamond will not receive any proceeds
from the issuance of the New Notes.
Resales of New Notes Based on certain no-action letters
issued by the staff of the SEC to third
parties in connection with transactions
similar to the Exchange Offer, Diamond
believes that you may offer for resale,
resell or otherwise transfer any New
Notes without compliance with the
registration and prospectus delivery
requirements of the Securities Act,
unless:
o you acquire the New Notes other
than in the ordinary course of
business;
o you are participating, intend to
participate or have an arrangement
or understanding with any person to
participate, in a distribution of
the New Notes; or
o you are an "affiliate" of Diamond,
as defined in Rule 405 under the
Securities Act.
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In any of the foregoing circumstances:
o you will not be able to rely on the
interpretations of the staff of the
SEC, in connection with any offer
for resale, resale or other
transfer of New Notes; and
o you must comply with the
registration and prospectus
delivery requirements of the
Securities Act, or have an
exemption available, in connection
with any offer for resale, resale
or other transfer of the New Notes.
Each broker-dealer that receives New
Notes for its own account in exchange
for Old Notes, where the Old Notes were
acquired by that 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 the New Notes. See "Plan of
Distribution."
4
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The New Notes
In this Exchange Offer, you may exchange your Old Notes for New Notes. The
form and terms of the New Notes are identical in all material respects to the
form and terms of the outstanding Old Notes, except that:
o the offering of the New Notes has been registered under the Securities
Act;
o the New Notes will not be subject to transfer restrictions; and
o the New Notes will not be entitled to exchange and registration
rights.
The New Notes will be issued under and entitled to the benefits of the
indenture that governs the Old Notes.
Set forth below is a summary of the material terms of the New Notes:
Terms of the New Notes
Securities Offered $100.0 million principal amount of 9 1/4%
Senior Notes due 2008, registered under
the Securities Act.
Maturity April 1, 2008.
Interest Payment Dates April 1 and October 1, beginning October
1, 2000.
Optional Redemption On or after April 1, 2003, Diamond may
redeem some or all of the New Notes at the
redemption prices set forth in
"Description of the New Notes
- Redemption."
In addition, at any time before April 1,
2001, Diamond may redeem up to 35% of the
aggregate principal amount of the New
Notes with the net cash proceeds from an
initial public offering at the redemption
price set forth in "Description of the New
Notes - Redemption."
Ranking The New Notes will be:
o senior, unsecured obligations of
Diamond and will rank senior in right
and priority of payment to any
indebtedness of Diamond that by its
terms is expressly subordinated to
the New Notes.
o subordinated to secured indebtedness
of Diamond (including indebtedness
under the new credit facility with
respect to the assets securing such
indebtedness. As of December 31,
1999, Diamond's aggregate
consolidated indebtedness was
approximately $107.5 million (of
which $7.5 million represented
aggregate outstanding indebtedness
under the old bank facility).
o subordinated to claims of creditors
of Diamond's subsidiaries, except to
the extent that holders of the New
Notes may be creditors of such
subsidiaries pursuant to the
Guarantees described in "Description
of the New Notes - The Guarantees").
Diamond currently has no
subsidiaries, and, accordingly, there
are currently no Guarantees.
5
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Subsidiary Guarantees If Diamond has a subsidiary in the future
with assets having a book value of more
than $50,000, this future subsidiary must
guarantee the New Notes on a senior,
unsecured basis. See "Description of the
New Notes - The Guarantees."
Change of Control If Diamond undergoes specific kinds of
changes of control, Diamond must make an
offer to purchase all outstanding New
Notes at a price equal to 101% of their
aggregate principal amount, plus accrued
and unpaid interest thereon to the date of
purchase. See "Description of the New
Notes - Change of Control."
Certain Covenants The indenture pursuant to which the New
Notes will be issued is the same as the
indenture under which the Old Notes were
issued. The indenture, among other things,
restricts Diamond's ability to:
o borrow money
o pay dividends or make
distributions
o incur liens to secure
indebtedness
o transfer or sell certain assets
o enter into certain transactions
with affiliates
o merge or consolidate with other
companies.
Absence of a Public Market The New Notes have no established market,
and Diamond does not expect that an active
trading market in the New Notes will
develop. As a result, Diamond cannot
assure you as to the development or
liquidity of any market for the New Notes.
Diamond does not currently intend to list
the New Notes on any securities exchange
or to arrange for the New Notes to be
quoted on any quotation system.
Risk Factors
You should carefully consider all of the information set forth in this
Prospectus. In particular, you should evaluate the specific factors set forth
under "Risk Factors" beginning on page 9 for risks involved with an investment
in the New Notes to be issued in this Exchange Offer.
6
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Summary Historical Financial Data
The summary historical and unaudited pro forma condensed financial data as
of December 31, 1995, 1996, 1997, 1998 and 1999 and for each of the years then
ended has been derived from Diamond's audited financial statements. The report
of KPMG LLP, independent auditors, on Diamond's Financial Statements as of
December 31, 1998 and 1999, and for each of the years in the three year period
ended December 31, 1999, is included elsewhere herein.
This summary historical and unaudited pro forma condensed financial data
should be read in conjunction with "Selected Historical Financial Data,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and Diamond's Financial Statements and the related notes thereto
appearing elsewhere in this Prospectus.
<TABLE>
<CAPTION>
Years Ended December 31,
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1995 1996 1997 1998 1999
--------- --------- --------- --------- ---------
(dollars in thousands)
<S> <C> <C> <C> <C> <C>
Statement of Operating Data:
Sales ............................................... $ 68,102 $ 101,355 $ 122,005 $ 149,609 $ 164,520
Cost of sales ....................................... 20,697 31,423 36,702 43,851 51,456
--------- --------- --------- --------- ---------
Gross profit ........................................ 47,405 69,932 85,303 105,758 113,064
Operating expenses .................................. 40,470 56,883 74,696 89,764 101,894
--------- --------- --------- --------- ---------
Income from operations .............................. 6,935 13,049 10,607 15,994 11,170
Interest income ..................................... (54) (109) (184) (120) (31)
Interest expense .................................... -- -- -- 8,162 11,054
Pre-tax income ...................................... 6,989 13,158 10,791 7,952 147
Provision for income taxes .......................... -- -- -- (37) 138
--------- --------- --------- --------- ---------
Net income .......................................... $ 6,989 $ 13,158 $ 10,791 $ 7,989 $ 9
========= ========= ========= ========= =========
Pro forma (1):
Historical income before provision for income taxes . $ 6,989 $ 13,158 $ 10,791 $ 7,952
Pro forma provision for income taxes ................ 2,796 5,263 4,316 3,181
--------- --------- --------- ---------
Pro forma net income ................................ $ 4,193 $ 7,895 $ 6,475 $ 4,771
========= ========= ========= =========
Other Data:
EBITDA(2) ........................................... $ 8,284 $ 14,948 $ 18,029 $ 18,524 $ 13,796
EBITDA margin ....................................... 12.2% 14.8% 14.8% 12.4% 8.4%
Non-vehicle capital expenditures .................... $ 356 $ 1,616 $ 1,514 $ 1,856 $ 1,892
Vehicle capital expenditures ........................ 1,425 3,730 859 673 479
--------- --------- --------- --------- ---------
Total capital expenditures .......................... 1,781 5,346 2,373 2,529 2,371
Ratio of earnings to fixed charges (excluding
preferred stock dividends)(3) ....................... 1.97x 1.01x
Service centers operated at period end .............. 105 142 174 206 226
Balance Sheet Data (at period end):
Cash and cash equivalents ........................... $ 4,100 $ 5,393 $ 6,255 $ 301 $ 94
Total assets ........................................ 21,069 31,494 36,687 90,692 87,519
Total debt .......................................... -- -- -- 108,500 107,500
Stockholders' equity (deficit) ...................... 15,728 24,294 23,285 (73,441) (78,232)
</TABLE>
(1) Prior to March 31, 1998, Diamond consisted of S corporations and,
accordingly, federal and state income taxes were generally paid at the
stockholder level only. Upon consummation of the Recapitalization (as
defined under "Business--Recapitalization"), Diamond eliminated its S
corporation status and, accordingly, is subject to federal and state income
taxes.
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(2) EBITDA represents income before income taxes, interest expense,
depreciation and amortization expense and non-recurring executive
compensation expense in 1997 of $5 million. While EBITDA is not intended to
represent cash flow from operations as defined by GAAP and should not be
considered as an indicator of operating performance or an alternative to
cash flow (as measured by GAAP) as a measure of liquidity, it is included
herein to provide additional information with respect to Diamond's ability
to meet its future debt service, capital expenditure and working capital
requirements.
(3) Ratio of earning to fixed charges equals pre-tax income plus interest
expense divided by interest expense.
8
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RISK FACTORS
In addition to the other information set forth in this Prospectus, you
should carefully consider the following risk factors prior to tendering your Old
Notes for exchange in this Exchange Offer.
Diamond is substantially leveraged and has significant debt service obligations
which could impair its ability to pay the amounts due under the New Notes.
Diamond is highly leveraged and has significant debt service obligations.
As of December 31, 1999, Diamond's aggregate consolidated indebtedness was
approximately $107.5 million (of which approximately $7.5 million represented
aggregate outstanding indebtedness under Diamond's old bank facility), and
Diamond had $43.0 million (liquidation preference) of outstanding Preferred
Stock and a stockholders' deficit of $78.2 million. See "Capitalization."
The degree to which Diamond is leveraged may impair Diamond's ability to
pay the amounts due under the New Notes. Possible adverse consequences of
Diamond's degree of leverage include the following:
o Diamond's ability to obtain additional financing for working capital,
capital expenditures or general corporate purposes may be impaired;
o a substantial portion of Diamond's cash flow from operations goes to
the payment of interest and principal on its outstanding debt, thereby
reducing the funds available to Diamond for other purposes;
o the new credit facility and the indenture contain certain restrictive
financial and operating covenants;
o Diamond's indebtedness under the new credit facility is at variable
rates of interest, which makes Diamond vulnerable to increases in
interest rates;
o Diamond's indebtedness outstanding under the new credit facility is
secured by a first priority lien on substantially all of its assets
and will become due prior to the time the principal on the New Notes
will become due;
o Diamond's substantial degree of leverage will limit its ability to
adjust rapidly to changing market conditions, reduce its ability to
withstand competitive pressures, and make it more vulnerable in the
event of a downturn in general economic conditions, repeated years of
mild weather conditions or other adverse events in its business.
If Diamond is unable to generate sufficient cash flows from operations in
the future to service its indebtedness, it may be required to refinance all or a
portion of its indebtedness, including the New Notes, or to obtain additional
financing or to dispose of material assets or discontinue certain of its
operations. The new credit facility and the indenture restrict Diamond's ability
to sell assets and/or use the proceeds therefrom. Diamond cannot assure you that
any refinancing or asset sales would be possible under its debt instruments
existing at that time, that the proceeds which Diamond could realize from such
refinancing or asset sales would be sufficient to meet its obligations then due
or that Diamond could obtain any additional financing.
The New Notes will be subordinated to Diamond's secured indebtedness.
The New Notes will be:
o senior, unsecured obligations of Diamond and will rank senior in right
and priority of payment to any indebtedness of Diamond that by its
terms is expressly subordinated to the New Notes.
o subordinated to secured indebtedness of Diamond (including
indebtedness under the new credit facility) with respect to the assets
securing such indebtedness. The new credit facility is secured by a
first priority lien on substantially all of Diamond's assets.
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o subordinated to claims of creditors of Diamond's subsidiaries, except
to the extent that holders of the New Notes may be creditors of such
subsidiaries pursuant to the Guarantees described under "Description
of the New Notes -- The Guarantees"). Diamond currently has no
subsidiaries, and, accordingly, there are currently no Guarantees.
Diamond's obligations with respect to the New Notes will be guaranteed,
jointly and severally, on a senior, unsecured basis by certain of its future
subsidiaries. Any obligations of Diamond's subsidiaries will be senior to the
claims of the holders of the New Notes with respect to the assets of any of
these subsidiaries, except to the extent that the holders of the New Notes may
be creditors of a subsidiary pursuant to a Guarantee. Any claim by the holders
of the New Notes with respect to the assets of any subsidiary will be
subordinated to secured indebtedness (including indebtedness under the new
credit facility) of that subsidiary with respect to the assets securing such
indebtedness. The rights of Diamond and its creditors, including holders of the
New Notes, to realize upon the assets of any subsidiary upon that subsidiary's
liquidation or reorganization (and the consequent rights of holders of the New
Notes to participate in those assets) will be subject to the prior claims of
that subsidiary's creditors, except to the extent that Diamond may itself be a
creditor with recognized claims against that subsidiary or to the extent that
the holders of the New Notes may be creditors with recognized claims against
that subsidiary pursuant to the terms of a Guarantee (subject, however, to the
prior claims of creditors holding secured indebtedness of any subsidiary with
respect to the assets securing that indebtedness). The new credit facility is
secured by a first priority lien on substantially all of Diamond's assets. See
"Description of Credit Facility." In addition, the indenture will restrict the
amount of indebtedness that subsidiaries are permitted to incur. See
"Description of the New Notes--Certain Covenants--Limitation on Incurrence of
Additional Indebtedness."
Diamond may not be able to comply with certain provisions in the agreements
governing its outstanding debt that restrict Diamond's actions and require
Diamond to maintain financial ratios.
The new credit facility and the indenture include certain covenants that,
among other things, restrict Diamond's ability to:
o make investments;
o incur additional indebtedness;
o grant liens;
o merge or consolidate with other companies;
o change the nature of its business;
o dispose of assets;
o make loans;
o pay dividends or redeem capital stock;
o guarantee the debts of other persons;
o make capital expenditures; and
o engage in transactions with affiliates.
The old bank facility required Diamond to maintain certain financial
ratios, including interest coverage and leverage ratios. In August 1999, the
lenders of the old bank facility amended the old bank facility to increase the
permitted maximum leverage ratio and decrease the minimum interest coverage
ratio. At December 31, 1999, Diamond did not comply with the revised ratios set
forth in the old bank facility, as amended. Diamond received a waiver from the
lenders under the old bank facility with respect to this non-compliance. The new
credit facility
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requires Diamond to maintain minimum EBITDA (as defined in the new credit
facility), calculated monthly, for each 12-month period, ending as of the end of
each month, of at least $10.5 million.
Diamond's ability to comply with the minimum EBITDA requirement and the
other provisions of its new credit facility may be affected by events beyond its
control. Diamond's breach of any of these covenants could result in a default
under the new credit facility, in which case the lender would, among other
things, be entitled to elect to declare all amounts owing under the new credit
facility, together with accrued interest, to be due and payable. If Diamond were
unable to repay these borrowings, the lender could proceed against its
collateral. If the indebtedness under the new credit facility were accelerated,
Diamond cannot assure you that its assets would be sufficient to repay in full
that indebtedness and Diamond's other indebtedness, including the New Notes. See
"Description of the New Notes."
The New Notes are subject to fraudulent conveyance laws.
Diamond's obligations under the Notes may be subject to review under
relevant federal and state fraudulent conveyance laws in the event that a
bankruptcy, reorganization or rehabilitation case by or on behalf of unpaid
creditors of Diamond were to occur. Under these laws, Diamond's obligation to
repay the Notes could be voided, or the New Notes could be subordinated to all
other creditors of Diamond, if, at the time Diamond issued the Notes, any of the
following were true:
Diamond intended to hinder, delay or defraud any existing or future
creditor or contemplated insolvency in order to prefer one or more creditors to
the exclusion in the whole or in part of others;
o Diamond was insolvent or was rendered insolvent by reason of issuing
the Notes;
o Diamond was engaged in a business or transaction with unreasonably
small capital; or
o Diamond intended to incur, or believed that it would incur, debts
beyond its ability to pay those debts as they matured.
In the event that in the future the Notes are guaranteed by subsidiary
guarantors, the Guarantees may also be subject to review under federal and state
fraudulent transfer laws. If a court were to determine that, at the time a
subsidiary guarantor became liable under its Guarantee, it satisfied certain of
the conditions stated above, the court could void the Guarantee and direct the
repayment of amounts paid thereunder.
The measure of insolvency under fraudulent conveyance statutes varies
depending upon the laws of the jurisdiction being applied. Generally, however,
Diamond would be considered insolvent if, at the time it issued the Notes,
either (1) the sum of its debts was greater than all of its property at a fair
valuation; or (2) if the present fair salable value of its assets is less than
the amount that it would be required to pay on its existing debts as they become
absolute and matured. The obligations of each Subsidiary Guarantor under its
Guarantee, however, will be limited in a manner intended to avoid it being
deemed a fraudulent conveyance under applicable law. See "Description of the New
Notes."
Additionally, under federal bankruptcy or applicable state insolvency law,
if a bankruptcy or insolvency proceeding were initiated by or against Diamond
within 90 days after it made any payment with respect to the Notes, or if
Diamond anticipated becoming insolvent at the time of that payment, all or a
portion of the payment could be avoided as a preferential transfer and the
recipient of that payment could be required to return that payment.
Diamond does not know what standard a court would use to determine whether
Diamond was insolvent at the time the Notes were issued, nor can Diamond assure
you that a court would not find Diamond to be insolvent on that date or that,
regardless of Diamond's solvency, that the issuances of the Notes constituted
fraudulent conveyances on another of the grounds summarized above.
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<PAGE>
Diamond may not be able to comply with its obligations under the indenture to
purchase all of the Notes upon a change of control.
Upon the occurrence of a change of control, the indenture requires Diamond
to make an offer to repurchase all outstanding Notes at a price equal to 101% of
the aggregate principal amount thereof, together with accrued and unpaid
interest thereon to the date of repurchase. However, the new credit facility
prohibits Diamond from repurchasing any Notes, unless and until Diamond has paid
the indebtedness under the new credit facility in full. Diamond's failure to
repurchase the Notes would result in a default under the indenture and the new
credit facility. Diamond's inability to pay the indebtedness under the new
credit facility, if accelerated, would also constitute a default under the
indenture, which could have adverse consequences to Diamond and to the holders
of the Notes. In the event of a change of control, Diamond cannot assure you
that it would have sufficient assets to satisfy all of its obligations under the
new credit facility and the Notes. See "Description of the New Notes--Change of
Control."
Diamond's future expansion may be hindered by its lack of sufficient capital or
other factors, which would adversely affect Diamond's continued growth.
Diamond's continued growth depends to a significant degree on its ability
to open new service centers in existing and new markets and to operate these
service centers on a profitable basis. In addition, Diamond will require
additional distribution centers as it implements its program to expand its
service centers to achieve a nationwide presence. Diamond's ability to expand
will depend, in part, on business conditions and the availability of qualified
managers and service representatives, and sufficient capital. Due to weak
industry conditions resulting from reduced demand for auto glass services and
lower average revenue per installation unit, Diamond opened 24 new service
centers in 1999, as compared to an average of 35 new service centers in the
three years prior to 1999. Diamond currently plans to open approximately 4 new
service centers in 2000 absent an improvement in industry conditions. A decline
in Diamond's overall financial performance may adversely impact its ability to
expand in the future. Diamond expects that the net cash generated from
operations, together with borrowings under the new credit facility, should
enable it to finance the expenditures related to its expansion. However, Diamond
cannot assure you that:
o it will possess sufficient funds to finance the expenditures related
to its expansion;
o new service centers can be opened on a timely basis;
o new service centers can be operated on a profitable basis; or that
o Diamond will be able to hire, train and integrate employees.
In the event net cash generated from operations together with working
capital reserves and borrowings under the new credit facility are insufficient
to finance the expenditures related to Diamond's expansion, Diamond may be
required to reduce its expansion in the future.
Diamond's operating results are affected by seasonality and weather.
Weather has historically affected Diamond's sales, net income and EBITDA,
with severe weather generating increased sales and income and mild weather
resulting in lower sales, net income and EBITDA. In addition, Diamond's business
is somewhat seasonal, with the fourth quarter traditionally its slowest period
of activity. Diamond believes these seasonal trends will continue for the
foreseeable future. Although Diamond's installation units increased 18.4% in
fiscal 1999, primarily reflecting the continued maturation of Diamond's service
centers and increased installation productivity, revenue per installation unit
decreased an average of 6% in 1999. The decrease in Diamond's average revenue
per installation unit is primarily attributable to weaker industry demand for
glass replacement services, due primarily to milder weather conditions, which
resulted in price compression throughout the industry.
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<PAGE>
Diamond competes against other large companies that may be better equipped to
provide customers with automotive glass replacement and repair services.
The automotive glass replacement and repair industry is highly competitive,
with customer decisions based on price, customer service, technical
capabilities, quality, advertising and geographic coverage. The competition in
the industry could result in additional pricing pressures, which could
negatively affect Diamond's results of operations. In addition, certain of
Diamond's competitors provide insurance companies with claims management
services, including computerized referral management, policyholder call
management, electronic auditing and billing services and management reporting.
While the market is generally highly fragmented, Diamond also competes against
several other large competitors in this market, the largest two of which are
Safelite Glass Corporation and Harmon AutoGlass, a division of Apogee
Enterprises, Inc. Many of Diamond's competitors have substantially less leverage
than Diamond, which may allow them greater flexibility in managing their
operations. Diamond cannot assure you that it will be able to continue to
compete effectively with these or other competitors. See
"Business--Competition."
Diamond is dependent on its key personnel and the loss of key personnel could
adversely affect its results of operations.
Diamond success is largely dependent upon the abilities and experience of
its senior management team, including Kenneth Levine, Richard Rutta, Norman
Harris and Michael A. Sumsky. The loss of services of one or more of these
senior executives could adversely affect Diamond's results of operations. See
"Management."
Ownership of Diamond is concentrated in Green Equity Investors II, L.P., whose
interests may conflict with those of the holders of Notes.
Green Equity Investors II, L.P., an investment partnership managed by LGP,
owns 77.0% of the outstanding shares of Diamond's Common Stock and 80.0% of the
outstanding shares of Diamond's Series A 12% Senior Redeemable Cumulative
Preferred Stock. As a result, Green Equity Investors II, L.P. has the power to
elect all of the members of Diamond's board of directors, to approve all
amendments to Diamond's certificate of incorporation and bylaws and to effect
fundamental corporate transactions such as mergers, asset sales and public
offerings. Diamond cannot assure you that the interests of Green Equity
Investors II, L.P. will not conflict with the interests of the holders of the
Notes. See "Security Ownership of Certain Beneficial Owners and Management."
Diamond's results of operations may be adversely affected by a downturn in
general economic conditions or an increase in fuel prices.
Diamond's revenues are dependent on the annual number of windshields
replaced, which in turn is influenced by the aggregate number of vehicles on the
road and the number of miles driven per vehicle per year. As a result, a general
economic downturn or higher fuel prices could have a material adverse effect on
Diamond's results of operations.
Diamond's EBITDA has declined due to industry conditions.
In 1999, Diamond's EBITDA declined 25.4%. The decrease in EBITDA was
primarily due to lower average revenue per installation unit that was partially
offset by a decrease in glass product costs, increases in installation
productivity and the leveraging of service center, corporate and administrative
expenses. If Diamond continues to experience further declines in revenue per
installation unit, Diamond would experience further declines in EBITDA which
could limit its ability to meet its ongoing debt service obligations. The new
credit facility requires Diamond to maintain minimum EBITDA (as defined in the
new credit facility), calculated monthly, for each 12-month period, ending as of
the end of each month, of at least $10.5 million.
Diamond's business involves the potential for product liability claims against
Diamond, which may adversely affect Diamond's business, financial condition and
results of operations if the cost of those claims exceeds Diamond's insurance
coverage.
The replacement of windshields entails risk of product liability claims,
particularly if the windshields Diamond uses in its business are defective. To
date, no material product liability claims have been made against
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Diamond relating to its replacement of windshields. However, Diamond cannot
assure you that these claims will not be made in the future. A successful
product liability claim (or series of claims) against Diamond in excess of its
insurance coverage could have a material adverse affect on Diamond's business,
financial condition and results of operations.
There is no established market for the New Notes and no assurance that a liquid
trading market will develop in the future.
There is no existing market for the New Notes, Diamond cannot assure you as
to the liquidity of any markets that may develop for the New Notes, the ability
of holders of the New Notes to sell their New Notes or the price at which
holders would be able to sell their New Notes. Future trading prices of the New
Notes will depend on many factors, including, among other things, prevailing
interest rates, Diamond's operating results and the market for similar
securities.
Old Notes that are not exchanged in the Exchange Offer will continue to be
subject to restrictions on transfer.
Holders of Old Notes who do not exchange their Old Notes for New Notes as
part of this Exchange Offer will continue to be subject to the restrictions on
transfer of the Old Notes. These restrictions are described in the legend to the
Old Notes. In general, the Old 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. Diamond does not currently anticipate that it will register
the outstanding Old Notes under the Securities Act.
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USE OF PROCEEDS
Diamond will not receive any proceeds from the Exchange Offer.
15
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CAPITALIZATION
The following table sets forth Diamond's capitalization on December 31, 1999.
This table should be read in conjunction with Diamond's Financial Statements and
the notes thereto included elsewhere in this Prospectus.
At December 31, 1999
--------------------
(in thousands)
Long-term debt (including current portion):
Bank Facility ....................................... $ 7,500
Notes ............................................... 100,000
---------
Total long-term debt ...................... 107,500
---------
Preferred Stock .......................................... 43,046
Stockholders' equity:
Common stock, par value $0.01 per share ............. 10
Additional paid-in capital .......................... 52,747
Retained earnings ................................... (130,989)
---------
Total stockholders' equity (deficit) ....... (78,232)
---------
Total capitalization ............. (72,314)
=========
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THE EXCHANGE OFFER
Reasons for the Exchange Offer
Diamond initially sold the Old Notes in a private offering on March 31,
1998 to First Union Capital Markets, BT Alex. Brown Incorporated and Donaldson,
Lufkin & Jenrette Securities Corporation, collectively referred to as the
"Initial Purchasers," pursuant to a Purchase Agreement dated March 26, 1998
among Diamond and the Initial Purchasers. The Initial Purchasers subsequently
resold or were permitted to resell the Old Notes:
o to qualified institutional buyers in accordance with the provisions of
Rule 144A under the Securities Act;
o to institutional accredited investors in accordance with the
provisions of Rule 501(a) under the Securities Act; and
o outside the United States in accordance with the provisions of
Regulation S under the Securities Act.
In connection with the private offering of the Old Notes, Diamond and the
Initial Purchasers entered into a Registration Rights Agreement dated March 31,
1998 in which Diamond agreed, among other things:
o to file with the SEC on or before March 30, 2000, a registration
statement relating to an Exchange Offer for the Old Notes;
o use its best efforts to cause the Exchange Offer registration
statement to be declared effective under the Securities Act on or
before August 28, 2000;
o upon the effectiveness of the Exchange Offer registration statement,
to offer the holders of the Old Notes the opportunity to exchange
their Old Notes in the Exchange Offer for a like principal amount of
New Notes;
o to keep the Exchange Offer open for not less than 30 days, or longer,
if required by applicable law, after notice of the Exchange Offer is
mailed to holders of the Old Notes; and
o to use its best efforts to consummate the Exchange Offer within 60
days from the effective date of the Exchange Offer registration
statement.
Diamond also agreed, under certain circumstances:
o to file a shelf registration statement relating to the offer and sale
of the Old Notes by the holders of the Old Notes;
o to use its best efforts to cause the shelf registration statement to
be declared effective; and
o to use its best efforts to keep the shelf registration statement
effective for 180 days after the shelf registration statement becomes
effective or until the Old Notes covered by the shelf registration
statement have been sold or cease to be outstanding.
The Exchange Offer being made by this Prospectus is intended to satisfy
Diamond's exchange and registration obligations under the Registration Rights
Agreement. If Diamond fails to fulfill these obligations, you are entitled to
receive additional interest at the rate of 0.25% per annum for each violation of
Diamond's obligations. The rate will increase by an additional 0.25% for each
90-day period during which the additional interest continues to accrue. The
maximum aggregate increase to the interest rate under all circumstances is 0.50%
per annum. After Diamond has cured all defaults of its registration and exchange
obligations, the accrual of additional interest on the Old Notes will cease, and
the interest rate for the Old Notes will revert to its original rate.
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<PAGE>
For a more complete understanding of your exchange and registration rights,
please refer to the Registration Rights Agreement, which is included as Exhibit
4.2 to the Exchange Offer registration statement.
Transferability of the New Notes
Based on certain no-action letters issued by the staff of the SEC to third
parties in connection with transactions similar to the Exchange Offer, Diamond
believes that you may offer for resale, resell or otherwise transfer any New
Notes without compliance with the registration and prospectus delivery
requirements of the Securities Act, unless:
o you acquire the New Notes other than in the ordinary course of
business;
o you are participating, intend to participate or have an arrangement or
understanding with any person to participate, in a distribution of the
New Notes; or
o you are an "affiliate" of Diamond, as defined in Rule 405 under the
Securities Act.
In any of the foregoing circumstances:
o you will not be able to rely on the interpretations of the staff of
the SEC, in connection with any offer for resale, resale or other
transfer of the New Notes; and
o you must comply with the registration and prospectus delivery
requirements of the Securities Act, or have an exemption available, in
connection with any offer for resale, resale or other transfer of the
New Notes.
Diamond is not making this Exchange Offer to, nor will it accept surrenders
of the Old Notes from, you if you live in any state in which this Exchange Offer
would not comply with the applicable securities laws or "blue sky" laws of that
state. However, Diamond will register or qualify the New Notes for offer and
sale under the securities or blue sky laws of those jurisdictions as any holder
of the Old Notes may reasonably request and do any and all other acts necessary
or advisable to enable the offer and sale of the New Notes in those
jurisdictions.
Each broker-dealer that receives New Notes for its own account in exchange
for Old Notes, where the Old Notes were acquired by that 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 the New
Notes. See "Plan of Distribution."
Terms of the Exchange Offer
The Old Notes were issued in a single series of 9 1/4% Senior Notes due
2008. As of the date of this Prospectus, $100.0 million aggregate principal
amount of the 9 1/4% Senior Notes due 2008 are outstanding. In the Exchange
Offer, the Old Notes will be exchanged for New Notes.
Upon the terms and subject to the conditions set forth in this Prospectus
and in the accompanying Letter of Transmittal, Diamond will accept all Old Notes
validly tendered and not withdrawn prior to 5:00 p.m. New York City time on
______, 2000, the date that the Exchange Offer expires. Diamond, in its sole
discretion, may extend the Exchange Offer to a later date and time. See
"Expiration Date; Extensions; Amendments" below. After authentication of the New
Notes by the trustee under the indenture governing the Notes, Diamond will issue
and deliver up to $100.0 million aggregate principal amount of the New Notes in
exchange for up to $100.0 million aggregate principal amount of the Old Notes
accepted in the Exchange Offer. Holders may tender some or all of their Old
Notes pursuant to the Exchange Offer in denominations of $1,000 and integral
multiples of $1,000.
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The form and terms of the New Notes are identical in all material respects
to the form and terms of the Old Notes, except that:
o the offering of the New Notes has been registered under the Securities
Act;
o the New Notes will not be subject to transfer restrictions; and
o the New Notes will not be entitled to exchange and registration
rights.
The New Notes will be issued under and entitled to the benefits of the
indenture that governs the Old Notes.
In connection with the issuance of the Old Notes, Diamond arranged for the
Old Notes to be issued and transferable in book-entry form through the
facilities of The Depository Trust Company, acting as a depositary. The New
Notes will also be issuable and transferable in book-entry form through DTC.
This Prospectus, together with the accompanying Letter of Transmittal, is
initially being sent to all registered holders of the Old Notes as of the close
of business on __________, 2000. The Exchange Offer of the Old Notes is not
conditioned upon any minimum aggregate principal amount being tendered. However,
the Exchange Offer is subject to certain customary conditions which may be
waived by Diamond, and to the terms and provisions of the Registration Rights
Agreement. See "Conditions to the Exchange Offer" below.
The exchange agent is State Street Bank and Trust Company, which also
serves as trustee under the indenture that governs the Notes.
Diamond will be deemed to have accepted validly tendered Old Notes when, as
and if Diamond has given oral or written notice thereof to the exchange agent.
The exchange agent will act as agent of the tendering holders for the purpose of
receiving the New Notes from Diamond and as agent of Diamond for the purpose of
delivering the New Notes to those holders. See "Exchange Agent" below.
If any tendered Old Notes are not accepted for exchange because of an
invalid tender or the occurrence of certain other events set forth herein,
certificates for the unaccepted Old Notes will be returned, at Diamond's cost
and expense, to the tendering holder as promptly as practicable after the
expiration of the Exchange Offer.
Holders who tender Old Notes in the Exchange Offer will not be required to
pay brokerage commissions or fees or, subject to the instructions in the Letter
of Transmittal, transfer taxes with respect to the exchange of the Old Notes
pursuant to the Exchange Offer. Diamond will pay all charges and expenses, other
than certain applicable taxes, in connection with the Exchange Offer. See
"Solicitation of Tenders, Fees and Expenses" below.
Expiration Date; Extensions; Amendments
The Exchange Offer will expire at 5:00 p.m., New York City time, on
_________, 2000, unless Diamond, in its sole discretion, extends the Exchange
Offer. Diamond may extend the Exchange Offer at any time and from time to time
by giving oral or written notice to the exchange agent and by timely public
announcement.
Diamond reserves the right, in its sole discretion, to amend the terms of
the Exchange Offer in any manner. If any of the conditions set forth below under
"Conditions to the Exchange Offer" has occurred and has not been waived by
Diamond, Diamond expressly reserves the right, in its sole discretion, by giving
oral or written notice to the exchange agent, to:
o delay acceptance of, or refuse to accept, any Old Notes not previously
accepted;
o extend the Exchange Offer; or
o terminate the Exchange Offer.
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<PAGE>
Any delay in acceptance, extension, termination or amendment will be
followed as promptly as practicable by oral or written notice by Diamond to the
registered holders of the Old Notes. If the Exchange Offer is amended in a
manner determined by Diamond to constitute a material change, Diamond will
promptly disclose that amendment in a manner reasonably calculated to inform the
holders of the Old Notes of the amendment, and Diamond will extend the Exchange
Offer to the extent required by law. If the Exchange Offer is terminated,
federal law requires that Diamond promptly either exchange or return all Old
Notes that have been tendered.
Diamond will have no obligation to publish, advise, or otherwise
communicate any delay in acceptance, extension, termination or amendment of the
Exchange Offer other than by making a timely press release. Diamond may also
publicly communicate these matters in any other appropriate manner of its
choosing.
How to Tender Old Notes for Exchange
Only a registered holder of the Old Notes or a DTC participant listed on a
DTC securities position listing with respect to the Old Notes may tender its Old
Notes in the Exchange Offer. To tender the Old Notes in the Exchange Offer:
o registered holders of certificated Old Notes must complete, sign and
date the Letter of Transmittal, or a facsimile thereof, in accordance
with the instructions contained in this Prospectus and in the Letter
of Transmittal. The holder should then mail or otherwise deliver the
Letter of Transmittal, or such facsimile, together with the Old Notes
to be exchanged and any other required documents, to the exchange
agent, at the address set forth in this Prospectus and in the Letter
of Transmittal.
o holders of the Old Notes that are DTC participants may follow the
procedures for book-entry transfer as provided for below under
"Book-Entry Transfer" and in the Letter of Transmittal.
To be effective, a tender must be made prior to the expiration of the
Exchange Offer.
If your Old Notes are registered in the name of a broker, dealer,
commercial bank, trust company or other nominee and you wish to tender the Old
Notes in the Exchange Offer, you should contact the registered holder promptly
and instruct the registered holder to tender on your behalf. If you tender on
your own behalf, you must, prior to completing and executing the Letter of
Transmittal and delivering your Old Notes, either make appropriate arrangements
to register ownership of the Old Notes in your own name or obtain a properly
completed bond power from the registered holder of the Old Notes. This transfer
of record ownership may take considerable time.
Delivery of documents to DTC in accordance with DTC's procedures will NOT
constitute delivery to the exchange agent.
Your tender of the Old Notes will constitute a binding agreement between
you, Diamond and the exchange agent in accordance with the terms and subject to
the conditions set forth in this Prospectus and in the Letter of Transmittal. If
you tender less than all of your Old Notes, you should fill in the amount of Old
Notes being tendered in the specified box on the Letter of Transmittal. You will
be deemed to have tendered the entire amount of the Old Notes which you deliver
to the exchange agent unless you indicate otherwise.
By tendering your Old Notes, you will represent to Diamond that, among
other things:
o you are acquiring the New Notes in the ordinary course of your
business;
o you are not participating, do not intend to participate and do not
have any arrangement or understanding with any person to participate,
in the distribution of the New Notes; and
o you are not an "affiliate," as defined in Rule 405 under the
Securities Act, of Diamond, or, if you are an affiliate of Diamond,
that you will comply with the registration and prospectus delivery
requirements of the Securities Act to the extent applicable.
20
<PAGE>
A Letter of Transmittal of a broker-dealer that receives New Notes for its
own account in exchange for Old Notes that were acquired by it as a result of
market-making or other trading activities must also include an acknowledgment
that the broker-dealer will deliver a copy of this Prospectus in connection with
any resale of the New Notes. By so acknowledging and by delivering a prospectus,
the broker-dealer will not be deemed to admit that it is an "underwriter" within
the meaning of the Securities Act. See "Plan of Distribution."
The method of delivery of Old Notes and Letters of Transmittal and all
other required documents is at your election and risk. Instead of delivery by
mail, Diamond recommends that you use an overnight or hand delivery service. In
all cases, you should allow sufficient time to ensure timely delivery to the
exchange agent prior to the expiration of the Exchange Offer. You should not
send the Letter of Transmittal or your Old Notes directly to Diamond.
Signatures on a Letter of Transmittal or a notice of withdrawal (described
in "Withdrawal of Tenders" below), as the case may be, must be guaranteed by a
member firm of a registered national securities exchange or of the National
Association of Securities Dealers, Inc., a commercial bank or trust company
having an office or correspondent in the United States or an "eligible guarantor
institution" within the meaning of Rule 17Ad-15 under the Exchange Act (each, an
"Eligible Institution"), unless the corresponding Old Notes are tendered:
o by a registered holder who has not completed the box entitled "Special
Registration Instructions" or the box entitled "Special Delivery
Instructions" in the Letter of Transmittal; or
o for the account of an Eligible Institution.
If a Letter of Transmittal is signed by a person other than the registered
holder, the corresponding Old Notes must be endorsed or accompanied by
appropriate bond powers which authorize that person to tender the Old Notes on
behalf of the registered holder, in either case signed exactly as the name of
the registered holder or holders appears on the Old Notes. If a Letter of
Transmittal or any Old Notes or bond powers are signed or endorsed by trustees,
executors, administrators, guardians, attorneys-in-fact, officers of
corporations or others acting in a fiduciary or representative capacity, those
persons should so indicate when signing the Letter of Transmittal and submit
evidence satisfactory to Diamond of their authority to so act, unless Diamond
waives this requirement.
Diamond, in its sole discretion, will determine all questions as to the
validity, form, eligibility, acceptance and withdrawal of the Old Notes.
Diamond's determination will be final and binding. Diamond reserves the absolute
right to:
o reject any and all Old Notes improperly tendered;
o refuse to accept any Old Note if, in Diamond's judgment or the
judgment of Diamond's counsel, acceptance of the Old Note may be
deemed unlawful; and
o waive any defects or irregularities or conditions of the Exchange
Offer as to particular Old Notes.
Diamond's interpretation of the terms and conditions of the Exchange Offer,
including the instructions in the Letter of Transmittal, will be final and
binding on all parties. You must cure any defects or irregularities in
connection with your tender of the Old Notes within the time that Diamond
determines, unless Diamond waives those defects or irregularities.
Although Diamond intends to notify you of defects or irregularities with
respect to your tender of Old Notes, neither Diamond, the exchange agent nor any
other person will be under any duty or obligation to do so, and no person will
incur any liability for failure to give you this notification. Your Old Notes
will not be validly tendered until you have cured any defects or irregularities
or Diamond has waived those defects or irregularities. If the exchange agent
receives Old Notes that Diamond determines are not properly tendered or the
tender of which Diamond otherwise rejects, the exchange agent will return those
Old Notes to the tendering holder or other person specified in the appropriate
Letter of Transmittal as soon as practicable following the expiration of the
Exchange Offer.
21
<PAGE>
Diamond reserves the right in its sole discretion:
o to purchase or make offers for any Old Notes that remain outstanding
after the expiration of the Exchange Offer;
o to terminate the Exchange Offer, as set forth in "Conditions to the
Exchange Offer" below; and
o to the extent permitted by applicable law, to purchase Old Notes
during the pendency of the Exchange Offer in the open market, in
privately negotiated transactions or otherwise.
The terms of any of these purchases or offers may differ from the terms of
the Exchange Offer.
Book-Entry Transfer
The exchange agent will make a request promptly after the date of this
Prospectus to establish accounts with respect to the Old Notes at DTC for the
purpose of facilitating the Exchange Offer. Any financial institution that is a
participant in DTC's system may make book-entry delivery of the Old Notes by
causing DTC to transfer those Old Notes into the exchange agent's DTC account in
accordance with DTC's procedures for transfer. The exchange for tendered Old
Notes will only be made after a timely confirmation of a book-entry transfer of
the Old Notes into the exchange agent's account, and timely receipt by the
exchange agent of an Agent's Message, as defined below.
The term "Agent's Message" means a message, transmitted by DTC and received
by the exchange agent and forming part of the confirmation of a book-entry
transfer, which states that DTC has received an express acknowledgment from a
participant in DTC tendering Old Notes and that the participant has received an
appropriate Letter of Transmittal and agrees to be bound by the terms of the
Letter of Transmittal, and Diamond may enforce that agreement against the
participant. Delivery of an Agent's Message will also constitute an
acknowledgement from the tendering DTC participant that the representations
contained in the appropriate Letter of Transmittal and described above are true
and correct.
Guaranteed Delivery Procedures
If you wish to tender your Old Notes and:
o your Old Notes are not immediately available;
o you cannot deliver your Old Notes, the Letter of Transmittal or any
other required documents to the exchange agent prior to the expiration
of the Exchange Offer; or
o you cannot complete the book-entry transfer procedures on a timely
basis;
You may effect a tender if:
o the tender is made through an Eligible Institution;
o prior to the expiration of the Exchange Offer, the exchange agent
receives from the Eligible Institution a properly completed and duly
executed Notice of Guaranteed Delivery by facsimile transmittal,
overnight courier, mail or hand delivery; and
o the exchange agent receives certificate(s) representing all tendered
Old Notes in proper form for transfer, together with a properly
completed and executed Letter of Transmittal, or a facsimile thereof,
and all other documents required by the Letter of Transmittal, or
confirmation of a book-entry transfer into the exchange agent's
account at DTC of the Old Notes delivered electronically, within three
business days after the expiration of the Exchange Offer.
22
<PAGE>
A Notice of Guaranteed Delivery must state:
o the name and address of the holder;
o if the Old Notes will be tendered by their registered holder, the
certificate number or numbers of the Old Notes;
o the principal amount of the Old Notes tendered;
o that the tender is being made thereby; and
o that the holder guarantees that, within three business days after the
expiration of the Exchange Offer, a properly completed and executed
Letter of Transmittal or facsimile thereof, together with the
certificate(s) representing the Old Notes to be tendered in proper
form for transfer and all other documents required by the Letter of
Transmittal, or confirmation of a book-entry transfer into the
exchange agent's account at DTC of the Old Notes delivered
electronically, will be deposited by the Eligible Institution with the
exchange agent.
Forms of the Notice of Guaranteed Delivery will be available from the
exchange agent upon request.
Withdrawal Rights
Except as otherwise provided herein, you may withdraw tenders of your Old
Notes at any time prior to the expiration of the Exchange Offer by delivery of a
written or facsimile transmission notice of withdrawal to the exchange agent at
its address set forth in this Prospectus.
Any notice of withdrawal must:
o specify the name of the person having deposited the Old Notes to be
withdrawn;
o identify the Old Notes to be withdrawn, including the certificate
numbers or number and principal amount of the Old Notes or, in the
case of Old Notes transferred by book-entry transfer, the name and
number of the account at DTC to be credited;
o be signed by the depositor of the Old Notes in the same manner as the
original signature on the Letter of Transmittal by which the Old Notes
were tendered, including any required signature guarantee, or be
accompanied by documents of transfer sufficient to permit the
registrar to register the transfer of the Old Notes into the name of
the person withdrawing the tender; and
o specify the name in which any the Old Notes are to be registered, if
different from that of the depositor of the Old Notes.
Diamond will determine all questions as to the validity, form and
eligibility (including time of receipt) of any withdrawal notices. Diamond's
determination will be final and binding on all parties. Any Old Notes which are
withdrawn will be deemed not to have been validly tendered for purposes of the
Exchange Offer, and no New Notes will be issued with respect to those Old Notes
unless they are validly retendered. Any Old Notes that have been tendered for
exchange but are not accepted for exchange will be returned to the holder
thereof without cost to the holder as soon as practicable after withdrawal,
rejection of tender or termination of the Exchange Offer. Properly withdrawn Old
Notes may be retendered by following one of the procedures described above under
"How to Tender Old Notes for Exchange" at any time prior to the expiration of
the Exchange Offer.
Conditions to the Exchange Offer
Diamond is not required to accept for exchange, or to issue New Notes for,
any Old Notes, and may terminate or amend the Exchange Offer before the
acceptance of the Old Notes if, in Diamond's judgment, any of the following
conditions has occurred:
23
<PAGE>
o the Exchange Offer, or the making of any exchange by a holder of Old
Notes, violates applicable law or the applicable interpretations of
the SEC staff;
o any action or proceeding shall have been instituted or threatened in
any court or by or before any governmental agency or body with respect
to the Exchange Offer; or
o there has been adopted or enacted any law, statute, rule or regulation
that can reasonably be expected to impair Diamond's ability to proceed
with the Exchange Offer.
See "Expiration Date; Extensions; Amendments" above for a discussion of
possible actions Diamond may take if any of the foregoing conditions occur.
The foregoing conditions are for Diamond's sole benefit. Diamond may assert
them regardless of the circumstances giving rise to any of the foregoing
conditions at any time and from time to time in its sole discretion. Diamond's
failure at any time to exercise any of the foregoing rights will not be deemed a
waiver of any of these rights, and each right will be considered an ongoing
right which Diamond may assert at any time and from time to time.
Exchange Agent
State Street Bank and Trust Company has been appointed as exchange agent
for the Exchange Offer. Requests for assistance and requests for additional
copies of this Prospectus or of the Letter of Transmittal should be directed to
the exchange agent addressed as follows:
By Mail, Overnight Delivery or Hand Delivery:
State Street Bank and Trust Company
Corporate Trust Department
Two Avenue de Layfayette
Fifth Floor
Boston, Massachusetts 02111-1724
Attention: Kellie Mullen
Facsimile Transmission: (617) 662-1452
Information or Confirmation by Telephone: (617) 662-1523
Solicitation of Tenders; Fees and Expenses
Diamond is making the principal solicitation pursuant to the Exchange Offer
by mail and through the facilities of DTC. Additional solicitations may be made
by officers and regular employees of Diamond and its affiliates in person or by
telegraph, telephone, facsimile transmission, electronic communication or
similar methods.
Diamond has not retained any dealer-manager in connection with the Exchange
Offer and will not make any payments to brokers, dealers or other persons
soliciting acceptances of the Exchange Offer. Diamond will, however, pay the
exchange agent reasonable and customary fees for its services and will reimburse
the exchange agent for its reasonable out-of-pocket costs and expenses incurred
in connection with the Exchange Offer and will indemnify the exchange agent for
all losses and claims incurred by it as a result of the Exchange Offer. Diamond
may also pay brokerage houses and other custodians, nominees and fiduciaries the
reasonable out-of-pocket expenses incurred by them in forwarding copies of this
Prospectus, the Letter of Transmittal and related documents to the beneficial
owners of the Old Notes and in handling or forwarding tenders for exchange.
Diamond will pay all expenses incurred in connection with the Exchange
Offer, including fees and expenses of the trustee, accounting and legal fees,
including the expense of one counsel designated by the holders of a majority of
the aggregate principal amount of the Old Notes, and printing costs.
24
<PAGE>
Diamond will pay any transfer taxes applicable to the exchange of the Old
Notes pursuant to the Exchange Offer. If, however, a transfer tax is imposed for
any reason other than the exchange of the Old Notes pursuant to the Exchange
Offer, then the amount of these transfer taxes, whether imposed on the
registered holder thereof or any other person, will be payable by the tendering
holder.
Accounting Treatment
Diamond will record the New Notes at the same carrying value as the Old
Notes, as reflected in Diamond's accounting records on the date of the exchange.
As a result, Diamond will not recognize any gain or loss for accounting purposes
as a result of the consummation of the Exchange Offer. Diamond will amortize the
expense of the Exchange Offer over the term of the New Notes.
Consequences of a Failure to Exchange Old Notes
Following consummation of the Exchange Offer, assuming Diamond has accepted
for exchange all validly tendered Old Notes, Diamond will have fulfilled its
exchange and registration obligations under the Registration Rights Agreement.
All untendered Old Notes outstanding after consummation of the Exchange Offer
will continue to be valid and enforceable debt obligations of Diamond, subject
to the restrictions on transfer set forth in the indenture governing the Notes.
Holders of these Old Notes will only be able to offer for sale, sell or
otherwise transfer their untendered Old Notes as follows:
o to Diamond, although Diamond has no obligation to purchase untendered
Old Notes unless they are called for redemption in accordance with the
provisions of the indenture governing the Notes;
o pursuant to a registration statement that has been declared effective
under the Securities Act, although Diamond will have no obligation,
and does not intend, to file any such registration statement;
o for so long as the Old Notes are eligible for resale pursuant to Rule
144A under the Securities Act, to a person reasonably believed to be a
qualified institutional buyer, or QIB, within the meaning of Rule
144A, that purchases for its own account or for the account of a QIB
to whom notice is given that the transfer is being made in reliance on
the exemption from the registration requirements of the Securities Act
provided by Rule 144A;
o pursuant to offers and sales that occur outside the United States to
foreign persons in transactions complying with the provisions of
Regulation S under the Securities Act; or
o pursuant to any other available exemption from the registration
requirements of the Securities Act.
To the extent that Old Notes are tendered and accepted in the Exchange
Offer, the liquidity of the trading market for untendered Old Notes could be
adversely affected.
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<PAGE>
SELECTED HISTORICAL FINANCIAL DATA
The selected historical and unaudited pro forma condensed financial data as
of December 31, 1995, 1996, 1997, 1998 and 1999 and for each of the years then
ended has been derived from Diamond's audited financial statements. The report
of KPMG LLP, independent auditors, on Diamond's Financial Statements as of
December 31, 1998 and 1999, and for each of the years in the three year period
ended December 31, 1999, is included elsewhere herein.
This summary historical and unaudited pro forma condensed financial data
should be read in conjunction with "Summary Historical Financial Data,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and Diamond's Financial Statements and the related notes thereto
appearing elsewhere in this Prospectus.
<TABLE>
<CAPTION>
Years Ended December 31,
-----------------------------------------------------------------
1995 1996 1997 1998 1999
--------- --------- --------- --------- ---------
(dollars in thousands)
<S> <C> <C> <C> <C> <C>
Statement of Operating Data:
Sales ............................................... $ 68,102 $ 101,355 $ 122,005 $ 149,609 $ 164,520
Cost of sales ....................................... 20,697 31,423 36,702 43,851 51,456
--------- --------- --------- --------- ---------
Gross profit ........................................ 47,405 69,932 85,303 105,758 113,064
Operating expenses .................................. 40,470 56,883 74,696 89,764 101,184
--------- --------- --------- --------- ---------
Income from operations .............................. 6,935 13,049 10,607 15,994 11,170
Interest income ..................................... (54) (109) (184) (120) (31)
Interest expense .................................... -- -- -- 8,162 11,054
Pre-tax income ...................................... 6,989 13,158 10,791 7,952 147
Provision for income taxes .......................... -- -- -- (37) 138
--------- --------- --------- --------- ---------
Net income .......................................... $ 6,989 $ 13,158 $ 10,791 $ 7,989 $ 9
========= ========= ========= ========= =========
Pro forma (1):
Historical income before provision for income taxes . $ 6,989 13,158 $ 10,791 $ 7,952
Pro forma provision for income taxes ................ 2,796 5,263 4,316 3,181
--------- --------- --------- ---------
Pro forma net income ................................ $ 4,193 $ 7,895 $ 6,475 $ 4,771
========= ========= ========= =========
Other Data:
EBITDA(2) ........................................... $ 8,284 $ 14,948 $ 18,029 $ 18,524 $ 13,796
EBITDA margin ....................................... 12.2% 14.8% 14.8% 12.4% 8.4%
Non-vehicle capital expenditures .................... $ 356 $ 1,616 $ 1,514 $ 1,856 $ 1,892
Vehicle capital expenditures ........................ 1,425 3,730 859 673 479
--------- --------- --------- --------- ---------
Total capital expenditures .......................... 1,781 5,346 2,373 2,529 2,371
Ratio of earning to fixed changes (excluding
preferred stock dividends)(3) ....................... 1.97x 1.01x
Service centers operated at period end .............. 105 142 174 206 226
Balance Sheet Data (at period end):
Cash and cash equivalents ........................... $ 4,100 $ 5,393 $ 6,255 $ 301 $ 94
Total assets ........................................ 21,069 31,494 36,687 91,692 87,519
Total debt .......................................... -- -- -- 108,500 107,500
Stockholders' equity (deficit) ...................... 15,728 24,294 23,285 (73,441) (78,232)
</TABLE>
(1) Prior to March 31, 1998, Diamond consisted of S corporations and,
accordingly, federal and state income taxes were generally paid at the
stockholder level only. Upon consummation of the Recapitalization (as
defined under "Business--Recapitalization"), Diamond eliminated its S
corporation status and, accordingly, is subject to federal and state income
taxes.
26
<PAGE>
(2) EBITDA represents income before income taxes, interest expense,
depreciation and amortization expense and non-recurring executive
compensation expense in 1997 of $5 million. While EBITDA is not intended to
represent cash flow from operations as defined by GAAP and should not be
considered as an indicator of operating performance or an alternative to
cash flow (as measured by GAAP) as a measure of liquidity, it is included
herein to provide additional information with respect to Diamond's ability
to meet its future debt service, capital expenditure and working capital
requirements.
(3) Ratio of earnings to fixed charges equals pre-tax income plus interest
expense divided by interest expense.
27
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Overview
Diamond is a leading provider of automotive glass replacement and repair
services in the Northeast, Mid-Atlantic, Midwest, Southeast and Southwest
regions of the United States. At December 31, 1999, Diamond operated a network
of 226 automotive glass service centers, approximately 1,041 mobile installation
vehicles and four distribution centers in 39 states. Diamond serves all of its
customers' automotive glass replacement and repair needs, offering windshields,
tempered glass and other related products. Sales and EBITDA for the year ended
December 31, 1999 were $164.5 million and $13.8 million, respectively.
Diamond believes that, due to its sole focus on automotive glass
replacement and repair, it has one of the lowest cost structures in the
automotive glass replacement and repair industry. Diamond's low cost structure
enables it to serve all segments of the industry, which is comprised of: (1)
individual consumers; (2) commercial customers, including commercial fleet
leasing and rental car companies, car dealers, body shops and government
agencies; and (3) insurance customers, including referrals from local agents,
claims offices and centralized call centers. Diamond's 1999 sales to individual
consumers, commercial customers and insurance customers represented 28.6%, 41.5%
and 29.9% of total sales, respectively. While the two largest participants in
the industry primarily focus on servicing automotive glass insurance claims
(including providing related insurance claims processing services) and also
manufacture automotive glass, Diamond has strategically positioned itself solely
as a provider of automotive glass replacement and repair services to a balanced
mix of individual, commercial and insurance customers.
Recapitalization
On January 15, 1998, Diamond, Kenneth Levine, Richard Rutta, Green Equity
Investors II, L.P. and certain affiliated entities of Diamond entered into a
Second Amended and Restated Stock Purchase Agreement, pursuant to which, among
other things: (1) Diamond declared and paid a dividend of 3,500 shares of Series
A 12% Senior Redeemable Cumulative Preferred Stock (equal to 10.0% of the Series
A 12% Senior Redeemable Cumulative Preferred Stock outstanding after the
Recapitalization, as defined below) to each of Kenneth Levine and Richard Rutta;
(2) Kenneth Levine and Richard Rutta transferred all of the issued and
outstanding shares of each of the affiliated entities to Diamond in
consideration for which Diamond issued 6,950,000 shares of Common Stock to
Kenneth Levine and Richard Rutta; (3) each of the affiliated entities merged
with and into Diamond; (4) Green Equity Investors II, L.P. purchased: (A)
770,000 shares of Common Stock, equal to 77.0% of the Common Stock outstanding
after the Recapitalization, for aggregate consideration equal to $15.4 million,
and (B) 28,000 shares of Series A 12% Senior Redeemable Cumulative Preferred
Stock, equal to 80.0% of the Preferred Stock outstanding following the
Recapitalization, for an aggregate consideration of $28.0 million; (5) Norman
Harris and Michael A. Sumsky purchased an aggregate of 30,000 shares of Common
Stock, equal to 3.0% of the Common Stock outstanding after the Recapitalization,
for aggregate consideration of $600,000; and (6) Diamond redeemed from Kenneth
Levine and Richard Rutta all of the Common Stock owned by them (other than
100,000 shares owned by each of them) for approximately $150.7 million in cash,
which resulted in each of Kenneth Levine and Richard Rutta owning 10.0% of the
Common Stock outstanding after the Recapitalization. These transactions were
consummated on March 31, 1998, and together constitute the "Recapitalization."
Concurrently with the Recapitalization, Diamond issued the Old Notes and entered
into the old bank facility, under which Diamond borrowed $12.5 million in
connection with the Recapitalization. See "Description of Credit Facility."
Results of Operations
The following discussion and analysis should be read in conjunction with
"Selected Financial Data" and the audited Financial Statements of Diamond and
the notes thereto included elsewhere in this Prospectus.
The following table summarizes Diamond's historical results of operations
and historical results of operations as a percentage of sales for the years
ended December 31, 1997, 1998 and 1999.
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<PAGE>
<TABLE>
<CAPTION>
Years Ended December 31,
-----------------------------------------------------------
1997 1998 1999
------------------ ------------------ -----------------
$ % $ % $ %
------- ------- ------- ------- ------- -------
(dollars in millions)
<S> <C> <C> <C> <C> <C> <C>
Sales .................................. 122.0 100.0 149.6 100.0 164.5 100.0
Cost of Sales .......................... 36.7 30.1 43.8 29.3 51.4 31.2
------- ------- ------- ------- ------- -------
Gross Profit ........................... 85.3 69.9 105.8 70.7 113.1 68.8
Operating Expenses ..................... 74.7 61.2 89.8 60.0 101.9 61.9
------- ------- ------- ------- ------- -------
Income from Operations ................. 10.6 8.7 16.0 10.7 11.2 6.8
Interest Income ........................ (0.2) 0.2 (0.1) 0.1 0.0 0.0
Interest Expense ....................... 0.0 0.0 8.1 5.4 11.0 6.7
------- ------- ------- ------- ------- -------
(0.2) 0.2 8.0 5.3 11.0 6.7
------- ------- ------- ------- ------- -------
Income before provision for income taxes 10.8 8.9 8.0 5.3 0.2 0.1
Provision for income taxes ............. 0.0 0.0 0.0 0.0 0.2 0.1
------- ------- ------- ------- ------- -------
Net income ............................. 10.8 8.9 8.0 5.3 0.0 0.0
======= ======= ======= ======= ======= =======
EBITDA (1) ............................. 18.0 14.8 18.5 12.4 13.8 8.4
</TABLE>
(1) EBITDA represents income before taxes, interest expense, depreciation and
amortization expense and non-recurring executive compensation expense in
1997 of $5 million. While EBITDA is not intended to represent cash flow
from operations as defined by GAAP and should not be considered as an
indicator of operating performance or an alternative to cash flow (as
measured by GAAP) as a measure of liquidity, it is included herein to
provide additional information with respect to Diamond's ability to meet
its future debt service, capital expenditure and working capital
requirements.
Year Ended December 31, 1999 Compared to Year Ended December 31, 1998
Sales. Sales for 1999 increased by $14.9 million, or 10.0%, to $164.5
million from $149.6 million for 1998. This increase was primarily due to an
increase in sales at service centers opened in 1998 and 1999. Although
installation units increased 18.4%, primarily reflecting the continued
maturation of Diamond's service centers and increased installation productivity,
revenue per installation unit decreased an average of 6%. The decrease in
Diamond's average revenue per installation unit is primarily attributable to
weaker industry demand for glass replacement services, due primarily to milder
weather conditions, which resulted in price compression throughout the industry.
Gross Profit. Gross profit for 1999 increased by $7.3 million, or 6.9%, to
$113.1 million from $105.8 million for 1998. Gross margin decreased as a
percentage of sales to 68.8% for 1999 from 70.7% for 1998. The decrease in gross
margin was primarily due to price compression throughout the industry, which
adversely affected average revenue per installation unit. The adverse impact of
price compression was partially offset by a decrease in glass product costs.
Operating Expenses. Operating expenses for 1999 increased by $12.1 million,
or 13.5%, to $101.9 million from $89.8 million for 1998. Operating expenses
increased as a percentage of sales to 61.9% for 1999 from 60.0% for 1998. The
increase in operating expenses during 1999 was primarily due to an increase in
expenses related to the continued expansion of Diamond's service and
distribution center network which resulted in an increase in service and
distribution center payroll and other operating expenses, such as vehicle
operating leases and rent. The increase in operating expenses as a percentage of
sales is attributable to a decrease in average revenue per installation unit
which was partially offset by an average decrease of 4% in operating expense per
installation unit due to the leveraging of service center, corporate and
administrative expenses. In addition, operating expenses in 1999 included a full
year of costs related to senior management salaries and the management fees paid
to LGP compared to the inclusion of nine months of these costs in 1998 following
the consummation of the Recapitalization.
29
<PAGE>
Depreciation and amortization expense for 1999 increased by $0.2 million,
or 8.3%, to $2.6 million from $2.4 million for 1998. This increase is
attributable to a $0.5 million increase in amortization expense related to the
implementation of certain sales, billing and financial systems software in
February 1999. The increase in amortization expense was offset by a $0.5 million
decrease in depreciation expense due to the inception of a master fleet leasing
program during 1997 for the lease of mobile installation and distribution
service vehicles.
Income from Operations. Income from operations for 1999 decreased by $4.8
million, or 30.0%, to $11.2 million from $16.0 million for 1998. This decrease
was primarily due to the decline in average revenue per installation unit
discussed above that was partially offset by a decrease in glass product costs,
an increase in installation productivity and the leveraging of service center,
corporate and administrative expenses.
Interest Expense. Interest expense for 1999 increased by $2.9 million, or
35.8%, to $11.0 million from $8.1 million for 1998. In 1999, Diamond incurred a
full year of interest expense compared to the inclusion of nine months of
interest expense in 1998 following the consummation of the Recapitalization.
Net Income. Diamond recorded a minimal amount of net income in 1999
compared to $8.0 million of net income in 1998. Net income as a percentage of
sales decreased to 0.0% for 1999 from 5.3% for 1998. The decrease in net income
and net income margin during 1999 was primarily due to the adverse impact of
lower average revenue per installation unit that was partially offset by a
decrease in glass product costs, an increase in installation productivity and
the leveraging of service center, corporate and administrative expenses.
EBITDA. EBITDA for 1999 decreased by $4.7 million, or 25.4%, to $13.8
million from $18.5 million for 1998. EBITDA as a percentage of sales decreased
to 8.4% for 1999 from 12.4% for 1998. The decrease in EBITDA and EBITDA margin
during 1999 was primarily due to the adverse impact of lower average revenue per
installation unit that was partially offset by a decrease in glass product
costs, an increase in installation productivity and the leveraging of service
center, corporate and administrative expenses.
Year Ended December 31, 1998 Compared to Year Ended December 31, 1997
Sales. Sales for 1998 increased by $27.6 million, or 22.6%, to $149.6
million from $122.0 million for 1997. This increase was primarily due to an
increase in sales at service centers opened in 1996, 1997 and 1998.
Gross Profit. Gross profit for 1998 increased by $20.5 million, or 24.0%,
to $105.8 million from $85.3 million for 1997. Gross profit increased as a
percentage of sales to 70.7% for 1998 from 69.9% for 1997. The increase in gross
profit and gross margin during 1998 was primarily due to an increase in
Diamond's sales and an increase in average revenue per installation unit.
Operating Expenses. Operating expenses for 1998 increased by $15.1 million,
or 20.2%, to $89.8 million from $74.7 million for 1997. Operating expenses
decreased as a percentage of sales to 60.0% for 1998 from 61.2% for 1997. The
decrease in operating expenses as a percentage of sales during 1998 was
primarily due to a non-recurring executive compensation expense of $5.0 million
accrued for in 1997. Excluding the non-recurring executive compensation expense
in 1997, operating expenses increased as a percentage of sales to 60.0% for 1998
from 57.1% for 1997. The increase in operating expenses during 1998 was
primarily due to an increase in expenses related to the continued expansion of
Diamond's service and distribution center network. During 1998, Diamond added 32
net new service centers; opened distribution centers in Rock Island, Illinois
and Atlanta, Georgia and consolidated its Raleigh, North Carolina and its
Orlando, Florida distribution centers into Diamond's Atlanta, Georgia
distribution center. The increase in operating expenses as a percentage of sales
is primarily attributable to an increase in service and distribution center
network payroll and other operating expenses combined with weaker demand for
auto glass installation services. In addition, since April 1998 Diamond has
incurred additional costs related to increases in senior management salaries, an
accrual for an incentive based bonus program for senior management and
management fees paid to LGP.
Depreciation and amortization expense for 1998 increased by $0.2 million,
or 9.1%, to $2.4 million from $2.2 million for 1997. In 1998, Diamond commenced
amortization of certain software related to the implementation of a new point of
sale system for the service center network. The increase in amortization expense
was offset by a $0.1 million decrease in depreciation expense due to the
inception of a master fleet leasing program during 1997 for the lease of mobile
installation and distribution service vehicles.
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Income from Operations. Income from operations for 1998 increased by $5.4
million, or 50.9%, to $16.0 million from $10.6 million for 1997. Excluding the
impact of the non-recurring executive compensation expense of $5.0 million in
1997, income from operations for 1998 increased by $0.4 million, or 2.6%, to
$16.0 million from $15.6 million for 1997.
Interest Expense. Interest expense for 1998 was $8.1 million due to the
consummation of the Recapitalization compared to no interest expense for 1997.
Net Income. Net income for 1998 decreased $2.8 million, or 25.9%, to $8.0
million from $10.8 million for 1997. The primary reason for this decrease was
attributable to interest expense of $8.1 million. This was offset with a $5.4
million increase in income from operations.
EBITDA. EBITDA for 1998 increased by $0.5 million, or 2.8%, to $18.5
million from $18.0 million for 1997. EBITDA as a percentage of sales decreased
to 12.4% for 1998 from 14.8% for 1997. The increase in EBITDA during 1998 was
primarily due to the increase in sales and gross profit, which was offset by an
increase in operating expenses. The decrease in EBITDA margin during 1998 is
primarily attributable to an increase in the service and distribution center
network payroll and other operating expenses combined with weaker demand for
auto glass installation services. During 1998, Diamond incurred additional costs
related to increases in senior management salaries, an accrual for an incentive
based bonus program for senior management and management fees paid to LGP. The
decrease in EBITDA margin for 1998 related primarily to an increase in operating
expenses which was partially offset by an increase in gross margin.
Liquidity and Capital Resources
Diamond's need for liquidity will arise primarily from interest payable on
the Notes, the new credit facility and the funding of Diamond's capital
expenditures and working capital requirements. There are no mandatory principal
payments on the Notes prior to their maturity on April 1, 2008 and, except to
the extent that the borrowing base under the new credit facility exceeds the
amount outstanding thereunder, no required payments of principal on the new
credit facility prior to its expiration on March 28, 2004.
Net Cash Provided by Operating Activities. Net cash provided by operating
activities for 1999 decreased $1.9 million to $3.3 million from $5.2 million for
1998. The decrease in cash provided by operating activities for 1999 was due to
a decrease in Diamond's net earnings, a $1.4 million increase in inventory and a
$1.6 million decrease in accounts payable which was offset by a $1.9 million
decrease in accounts receivable due to newly implemented accounts receivable and
billing systems which improved the accuracy and timeliness of customer billings
and improved post-billing collection efforts. Net cash provided by operating
activities for 1998 decreased $10.5 million to $5.2 million from $15.7 million
for 1997. The decrease in cash provided by operating activities for 1998 was
primarily due to a decrease in Diamond's net earnings and an increase in working
capital requirements.
Net Cash Provided by/Used in Investing Activities. Net cash used in
investing activities for 1999 decreased $2.8 million to $2.3 million used from
$0.5 million provided by investing activities for 1998. Net cash provided by
investing activities for 1998 increased $3.6 million to $0.5 million from $3.1
million used in investing activities for 1997. The primary reason for these
variances was the elimination in 1998 of a due from related company of $2.9
million in connection with the Recapitalization.
Net Cash Used in Financing Activities. Net cash used in financing
activities for 1999 decreased $10.4 million to $1.2 million from $11.6 million
for 1998, while net cash used in financing activities for 1998 decreased $0.2
million to $11.6 million from $11.8 million for 1997. The reason for these
variances was the Recapitalization, in which $97.0 million was received from the
issuance of the Notes, $12.5 million from the old bank facility, $28.0 million
from the sale of preferred stock to Green Equity Investors II, L.P. and $16.0
million from the sale of common stock to Green Equity Investors II, L.P., Norman
Harris and Michael A. Sumsky. This was offset by distributions to stockholders
of $4.6 million, the repurchase of common stock for $150.7 million and deferred
loan costs of $5.8 million principally resulting from the issuance of the Notes.
In addition, Diamond repaid $4.0 million of the $12.5 million received from the
old bank facility during 1998 in connection with the Recapitalization.
Capital Expenditures. Net capital expenditures were $2.4 million for 1999
as compared to $2.5 million for 1998 and $2.4 million for 1997. Excluding
vehicle capital expenditures, capital expenditures were $1.9 million for
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1999 as compared to $1.8 million for 1998 and $1.5 million for 1997. Capital
expenditures in 1999 were made primarily to fund the continued upgrade of
Diamond's management information systems. The most significant capital
expenditures contemplated over the next five years will be for the continued
enhancement and maintenance of Diamond's management information systems and
development of Diamond's nationwide expansion program. It is anticipated that
Diamond will annually incur approximately $2.5 to $3.0 million in capital
expenditures primarily to expand its management information systems with the
remaining portion used to expand its service and distribution center network.
Liquidity. Management believes that Diamond will have adequate capital
resources and liquidity to satisfy its debt service obligations, working capital
needs and capital expenditure requirements, including those related to the
opening of new service centers. Diamond's capital resources and liquidity are
expected to be provided by Diamond's net cash provided by operating activities
and borrowings under the new credit facility.
Inflation
Diamond believes that inflation has not had a material impact on its
results of operations for 1997, 1998 or 1999.
Effect of Weather Conditions and Seasonality
Weather has historically affected Diamond's sales, net income and EBITDA,
with severe weather generating increased sales, net income and EBITDA and mild
weather resulting in lower sales, net income and EBITDA. In addition, Diamond's
business is somewhat seasonal, with the fourth quarter traditionally its slowest
period of activity. Diamond believes such seasonal trends will continue for the
foreseeable future. See "--Sales."
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BUSINESS
Overview
Diamond is a leading provider of automotive glass replacement and repair
services in the Northeast, Mid-Atlantic, Midwest, Southeast and Southwest
regions of the United States. At December 31, 1999, Diamond operated a network
of 226 automotive glass service centers, approximately 1,041 mobile installation
vehicles and four distribution centers in 39 states. Diamond serves all of its
customers' automotive glass replacement and repair needs, offering windshields,
tempered glass and other related products. Sales and EBITDA for the year ended
December 31, 1999 were $164.5 million and $13.8 million, respectively.
Diamond believes that, due to its sole focus on automotive glass
replacement and repair, it has one of the lowest cost structures in the
automotive glass replacement and repair industry. Diamond's low cost structure
enables it to serve all segments of the industry, which is comprised of: (1)
individual consumers; (2) commercial customers, including commercial fleet
leasing and rental car companies, car dealers, body shops and government
agencies; and (3) insurance customers, including referrals from local agents,
claims offices and centralized call centers. Diamond's 1999 sales to individual
consumers, commercial customers and insurance customers represented 28.6%, 41.5%
and 29.9% of total sales, respectively. While the two largest participants in
the industry primarily focus on servicing automotive glass insurance claims
(including providing related insurance claims processing services) and also
manufacture automotive glass, Diamond has strategically positioned itself solely
as a provider of automotive glass replacement and repair services to a balanced
mix of individual, commercial and insurance customers.
Diamond's sole focus on automotive glass replacement and repair, combined
with its aggressive cost controls, strong purchasing power and efficient
internal distribution system, have positioned Diamond as one of the lowest cost
providers of automotive glass replacement and repair services. These competitive
attributes, together with localized marketing efforts, have enabled Diamond's
new service centers to quickly establish a base of local consumer and commercial
installation business from which Diamond plans to grow all three of its customer
segments.
Diamond's financial performance reflects attractive service center-level
economics. The cash required to open a new service center, including inventory
net of trade payables, averages $33,000. In 1999, over 75% of Diamond's
installations and repairs were performed by mobile technicians at a customer's
home or workplace. Due to the high percentage of mobile installations and
repairs which Diamond performs, service centers are typically located in
commercial or industrial areas, where rents are generally available at low cost.
In 1999, Diamond's 102 mature service centers (service centers open for four
years or longer) averaged approximately $956,000 in sales and approximately
$200,000 of branch operating profit per location. For the year ended December
31, 1999, approximately 82% of Diamond's service centers that had been open for
at least fifteen months achieved positive branch operating profitability.
Diamond believes that the high volume of its automotive glass purchases
positions Diamond as an important customer of the primary automotive glass
manufacturers, thereby reducing Diamond's exposure to product shortages and
maximizing its ability to purchase automotive glass at the lowest available
cost. Diamond's purchasing program utilizes the major domestic original
equipment manufacturers for truckload and spot purchases, and importation of
containers from the larger manufacturers throughout the world. Management
believes that the scope and flexibility of Diamond's purchasing program and its
efficient distribution system have enabled Diamond to achieve higher service
levels and a lower cost of goods than most of its competitors.
History
Diamond was founded in 1923 by the grandfather of Kenneth Levine and
Richard Rutta, Diamond's Co-Chairmen of the Board and Co-Chief Executive
Officers. Diamond continues to operate a service center at the location of its
original store in Scranton, Pennsylvania. Messrs. Levine and Rutta joined
Diamond in 1979, when Diamond operated only one service center, and acquired
Diamond in 1987, when Diamond operated ten service centers in Pennsylvania and
New York. Under the management of Messrs. Levine and Rutta, Diamond has expanded
its service center and distribution network to serve 226 locations at the end of
1999.
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Recapitalization
On January 15, 1998, Diamond, Kenneth Levine, Richard Rutta, Green Equity
Investors II, L.P. and certain affiliated entities of Diamond entered into a
Second Amended and Restated Stock Purchase Agreement, pursuant to which, among
other things:
o Diamond declared and paid a dividend of 3,500 shares of Series A 12%
Senior Redeemable Cumulative Preferred Stock (equal to 10.0% of the
Series A 12% Senior Redeemable Cumulative Preferred Stock outstanding
after the Recapitalization, as defined below) to each of Kenneth
Levine and Richard Rutta;
o Kenneth Levine and Richard Rutta transferred all of the issued and
outstanding shares of each of the affiliated entities to Diamond in
consideration for which Diamond issued 6,950,000 shares of Common
Stock to Kenneth Levine and Richard Rutta;
o each of the affiliated entities merged with and into Diamond;
o Green Equity Investors II, L.P. purchased:
(1) 770,000 shares of Common Stock, equal to 77.0% of the Common
Stock outstanding after the Recapitalization, for aggregate
consideration equal to $15.4 million, and
(2) 28,000 shares of Series A 12% Senior Redeemable Cumulative
Preferred Stock, equal to 80.0% of the Preferred Stock
outstanding following the Recapitalization, for an aggregate
consideration of $28.0 million;
o Norman Harris and Michael A. Sumsky purchased an aggregate of 30,000
shares of Common Stock, equal to 3.0% of the Common Stock outstanding
after the Recapitalization, for aggregate consideration of $600,000;
and
o Diamond redeemed from Kenneth Levine and Richard Rutta all of the
Common Stock owned by them (other than 100,000 shares owned by each of
them) for approximately $150.7 million in cash, which resulted in each
of Kenneth Levine and Richard Rutta owning 10.0% of the Common Stock
outstanding after the Recapitalization.
The above transactions were consummated on March 31, 1998, and together
constitute the "Recapitalization." Concurrently with the Recapitalization,
Diamond issued the Old Notes and entered into the old bank facility, under which
Diamond borrowed $12.5 million in connection with the Recapitalization. See
"Description of Credit Facility."
Industry Overview
The automotive glass replacement and repair industry is an approximately
$3.0 billion market. The market for the installation of automotive glass is
highly fragmented, with approximately 20,000 providers of automotive glass
replacement and repair services in the United States. Many participants in the
industry are small "mom and pop" installers who compete less effectively against
large, geographically diversified providers of automotive glass installation
services, such as Diamond. Consequently, the industry has been consolidating.
Over the past 10 years, management estimates that total industry sales have
grown at approximately 4.0% per year. Replacement volume is influenced by
several factors, including the total vehicle population and the number of miles
driven. Severe weather and road conditions can also increase demand for
automotive glass repair and replacement. Fixing minor damage to a windshield may
be deferred by consumers until a vehicle trade-in, sale or inspection for new
license tags. Therefore, new automobile sales, turnover of used vehicles and
state automobile inspection laws influence automotive glass demand.
Sales growth has been attributable primarily to an increase in the
aggregate number of vehicles on the road, from approximately 181 million
vehicles in 1988 to approximately 212 million vehicles in 1998, and to an
increase
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in the aggregate number of miles driven per vehicle per year, from approximately
11,188 miles in 1988 to approximately 12,183 miles in 1998. Growth in industry
sales has also been driven by the use of larger, more complex and more expensive
automotive glass in new vehicles. In 1999, management estimates that industry
replacement units decreased approximately 3%, primarily due to weak demand. This
weaker demand had a negative impact on pricing and resulted in a decrease in
average revenue per installation unit.
Pricing
The price of replacement automotive glass is based on list prices developed
by the National Auto Glass Specification ("NAGS"), an independent third party.
NAGS prices are generally changed following wholesale price increases announced
by original equipment manufacturers. Prices charged by participants in the
automotive glass replacement industry are independently determined using varying
percentage discounts from the NAGS price list. The impact of NAGS price
increases on Diamond's financial results depends on the level of discounts
Diamond grants to its customers and the level of discounts that Diamond can
obtain from its glass suppliers. Effective January 1, 1999, NAGS significantly
modified its published list prices in order to bring actual prices more in line
with published list prices.
Products
Diamond's primary installation products are automotive windshields which
are made of laminated safety glass. Safety glass consists of two layers of glass
bound together with a thin layer of vinyl which adds strength to the glass and
makes it very difficult for an object to penetrate a windshield upon impact. As
part of Diamond's commitment to serve all of its customers' automotive glass
replacement needs, Diamond also offers tempered automotive glass. Tempered glass
is generally used for side and rear automobile and truck windows and is
significantly stronger than regular glass due to specialized processing which
also causes tempered glass to shatter into dull-edged pebbles, reducing glass
related injuries. In addition, Diamond offers automotive glass repair services.
Customers and Marketing
Diamond provides automotive glass replacement services to each of the
industry's customer segments, which include individual consumers, commercial
customers and insurance customers. Management believes that in addition to
capturing additional consumer sales, broadening Diamond's service center network
and geographic coverage will facilitate Diamond's efforts to obtain an increased
share of the national insurance and fleet markets, whose participants generally
establish multiple providers for their automotive glass replacement
requirements. Diamond's 1999 sales to individual consumers, commercial customers
and insurance customers represented 28.6%, 41.5% and 29.9% of total sales,
respectively. In 1999, Diamond's top ten customer accounts comprised
approximately 18.9% of total sales and no single customer account exceeded 6.0%
of total sales.
Diamond's marketing is conducted through a combination of prominent Yellow
Pages advertising and by a direct sales force of 143 representatives. Yellow
Pages advertising is supported by customer service representatives and extended
hour call centers that answer telephone inquiries, schedule service appointments
and arrange emergency service. Sales representatives market Diamond's services
to insurance claim centers, local agents, fleet operators, automobile dealers
and body shops and have established relationships at all levels of the major
insurance, fleet and rental car company organizations.
Individual Consumers. The marketing focus to the individual consumer
segment is low price and speed of service. Diamond's consumer customers consist
of individuals who are not associated with a related automobile insurance claim.
Customers in this segment typically do not have automobile glass insurance
coverage, have a high insurance deductible or do not want to file a claim with
their insurance carrier. These customers are primarily concerned with price,
quality, convenience and speed of service. A substantial portion of the
industry's consumer sales are generated as a result of localized marketing
efforts, such as Yellow Pages advertising. In order to attract consumer
customers, Diamond's Yellow Pages advertisements are designed to appear in the
first group of display advertisements and promote Diamond's competitive pricing
and fast mobile service. When a customer calls, Diamond's service
representatives are trained to emphasize Diamond's low price guarantee and
prompt service capabilities. The majority of Diamond's services can be provided
by its mobile installation technicians at a customer's home or workplace.
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Commercial Customers. Diamond markets to commercial customers through its
direct sales force, which emphasizes high quality service at a low cost.
Diamond's commercial segment customers include commercial fleet leasing
companies, rental car companies, car dealerships, body shops, utilities and
government agencies. Diamond's customers in the commercial segment include Avis
Rent-A-Car, Inc., Enterprise Rent-A-Car and Bell Atlantic Corporation.
Management believes that Diamond's expanding geographic coverage will enable
Diamond to obtain an increased share of the national fleet automotive glass
replacement business.
Insurance Customers. Diamond markets its services to all levels of the
insurance industry, including local agents, claims offices and centralized call
centers. In addition to marketing directly to insurance companies through its
direct sales force, Diamond participates as an approved service provider within
glass replacement networks administered by third parties, including certain of
Diamond's competitors. These third party networks act as outsourced claims
administrators under contract to an insurance company. Historically, insurance
companies which participate in these networks have required that automotive
glass replacement and repair services be provided by more than one service
provider in order to ensure competitive pricing and high quality service.
Diamond is an approved service provider for many national insurance carriers,
including State Farm Insurance Company, Nationwide Insurance Company, Allstate
Insurance Company and Travelers Property Casualty Corporation.
Service Centers
Diamond's repair and installation service is performed either on-site at a
service center location or at a customer's home or workplace by a mobile
technician. Diamond operates approximately 1,041 mobile installation vehicles.
In 1999, over 75% of Diamond's installations and repairs were performed by
mobile technicians at a customer's home or workplace. Due to the high percentage
of mobile installations and repairs which Diamond performs, service centers are
typically located in commercial or industrial areas, where rents are generally
available at low cost.
At the end of 1999, Diamond's network comprised 226 service centers in 39
states in the Northeast, Mid-Atlantic, Midwest, Southeast and Southwest regions
of the United States. These service centers are operated under the following
service marks: Triumph Auto Glass and Diamond Auto Glass in the Northeast and
Mid-Atlantic; and Triumph Auto Glass in the Midwest, Southeast and Southwest.
Any expansion into new states will be under the Triumph Auto Glass registered
service mark. Generally, Diamond's service center locations are approximately
2,600 square feet in size. Due to weak industry conditions, Diamond opened 24
new service centers in 1999, as compared to an average of 35 new service
centers in the three years prior to 1999. Diamond currently plans to open
approximately 4 new service centers in 2000 absent an improvement in industry
conditions.
The following chart provides information concerning Diamond's service
center openings from 1990 to 1999:
Service
Centers % Increase
Year Openings Consolidations At Year End Over Prior Year
---- -------- -------------- ----------- ---------------
1990..... 6 -- 24 33.3%
1991..... 7 -- 31 29.2%
1992..... 12 -- 43 38.7%
1993..... 17 -- 60 39.5%
1994..... 31 -- 91 51.7%
1995..... 17 3 105 15.4%
1996..... 39 2 142 35.2%
1997..... 33 1 174 22.5%
1998..... 33 1 206 18.4%
1999..... 24 4 226 9.7%
Service centers are typically staffed with approximately four persons and
are open for business from 8:00 a.m. to 5:00 p.m. on Monday through Friday and
8:00 a.m. to 12:00 p.m. on Saturday. Service center employees perform
installation services and process customer inquiries during regular business
hours. After-hours customer inquiries are handled by Diamond's emergency and
extended hour call center. Operators at this call center answer
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customer inquiries, schedule mobile installation services and arrange emergency
service from service centers throughout Diamond's network.
Distribution System
Diamond currently operates four distribution centers which operate 7 days a
week and are located in Kingston, Pennsylvania; Columbus, Ohio; Atlanta,
Georgia; and Rock Island, Illinois. Diamond's efficient distribution system
enables Diamond to make nightly or weekly deliveries to all of its service
centers both to replenish stock and to provide automotive glass that is not
carried in service center inventories. Through its distribution centers, Diamond
supports over 75% of its sales with internally distributed product, with the
remainder being purchased from the spot market. Diamond's highly efficient
distribution center network, combined with a successful inventory management
program at its service centers, enables Diamond to meet immediate service
demands at a lower cost than if larger quantities of automotive glass were
required to be purchased in the spot market.
Suppliers
Diamond believes that the high volume of its automotive glass purchases
positions Diamond as an important customer of the primary automotive glass
manufacturers, thereby reducing Diamond's exposure to product shortages and
maximizing its ability to purchase automotive glass at the lowest available
cost. Diamond's purchasing program utilizes the major domestic original
equipment manufacturers for truckload and spot purchases, and importation of
containers from the larger manufacturers throughout the world. Management
believes that the scope and flexibility of Diamond's purchasing program and its
efficient distribution system have enabled Diamond to achieve higher service
levels and a lower cost of goods than those of most of its competitors.
Diamond has numerous domestic and international suppliers, and is
continuing to expand its supplier network by utilizing additional foreign
suppliers in order to hedge against product shortages and to reduce the overall
cost of automotive glass. In 1999, no single supplier represented more than 30%
of Diamond's automotive glass purchases. Due to the competitive nature of the
automotive glass manufacturing industry, Diamond does not anticipate any
difficulty in sourcing its automotive glass requirements in the foreseeable
future.
Competition
The automotive glass replacement and repair industry is highly competitive, with
customer decisions based on price, customer service, technical capabilities,
quality, advertising and geographic coverage. The competition in the industry
could result in additional pricing pressures, which would negatively affect
Diamond's results of operations. In addition, certain of Diamond's competitors
provide insurance companies with claims management services, including
computerized referral management, policyholder call management, electronic
auditing and billing services and management reporting. While the market is
generally highly fragmented, Diamond competes against several other large
competitors in this market, the largest two of which are Safelite Glass
Corporation and Harmon AutoGlass, a division of Apogee Enterprises, Inc.
Properties
The following chart provides information concerning Diamond's headquarters,
distribution facilities and emergency call centers, all of which are leased:
Area in Square
Facility Function Feet
-------- -------- ----
Kingston, PA............. Headquarters 121,000
Distribution Center
Call Center
Columbus, OH............. Distribution Center 26,000
Atlanta, GA.............. Distribution Center 20,000
Rock Island, IL.......... Distribution Center 16,000
Scranton, PA............. Call Center 2,500
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The following chart provides information concerning the number and location
of Diamond's service centers, all of which are leased:
Number of Number of
Service Service
State Centers State Centers
- ----- ------- ----- -------
Alabama........... 5 Nebraska.......... 1
Arkansas.......... 1 New Hampshire..... 5
Colorado.......... 4 New Jersey........ 10
Connecticut....... 6 New Mexico........ 1
Delaware.......... 2 New York.......... 27
Florida........... 10 North Carolina.... 8
Georgia........... 9 Ohio.............. 11
Illinois.......... 6 Oklahoma.......... 1
Indiana........... 7 Pennsylvania...... 26
Iowa.............. 3 Rhode Island...... 1
Kansas............ 2 South Carolina.... 4
Kentucky.......... 3 South Dakota...... 1
Louisiana......... 3 Tennessee......... 5
Maine............. 3 Texas............. 5
Maryland.......... 8 Utah.............. 1
Massachusetts..... 9 Vermont........... 3
Michigan.......... 8 Virginia.......... 11
Minnesota......... 4 West Virginia..... 3
Mississippi....... 1 Wisconsin......... 5
Missouri.......... 3
Diamond believes that its facilities are adequate for its current needs and
that suitable additional distribution centers and service locations will be
available to satisfy Diamond's expansion needs.
Employees
As of December 31, 1999, Diamond employed 1,610 persons. None of Diamond's
employees are covered by a collective bargaining agreement, and Diamond believes
that its relationships with its employees are good.
Legal Proceedings and Insurance
Diamond is involved in legal proceedings in the ordinary course of its
business. Management believes that the amounts which may be awarded or assessed
against Diamond in connection with these matters, if any, will not have a
material adverse effect on Diamond. In addition, management believes that
Diamond has appropriate insurance coverage to operate its business, including
insurance for its mobile installation units and technicians.
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MANAGEMENT
Directors and Executive Officers
The following table sets forth certain information concerning each of
Diamond's directors and executive officers:
Name Age Position
---- --- --------
Kenneth Levine ................ 46 Co-Chairman of the Board, Co-Chief
Executive Officer and Director
Richard Rutta ................. 43 Co-Chairman of the Board, Co-Chief
Executive Officer and Director
Norman Harris ................. 45 President
Michael A. Sumsky.............. 41 Executive Vice President, Chief
Financial Officer and
General Counsel
Gregory J. Annick.............. 36 Director
John G. Danhakl .............. 44 Director
Jonathan D. Sokoloff ......... 42 Director
Kenneth Levine has been Diamond's Co-Chairman of the Board and Co-Chief
Executive Officer since March 1998 and a Director of Diamond since March 1987.
Mr. Levine joined Diamond in 1979 and has served as Diamond's effective
Co-President since 1987. In 1987, Mr. Levine, together with Richard Rutta,
purchased all of Diamond's outstanding stock.
Richard Rutta has been Diamond's Co-Chairman of the Board and Co-Chief
Executive Officer since March 1998 and a Director of Diamond since March 1987.
Mr. Rutta joined Diamond in 1979 and has served as Diamond's effective
Co-President since 1987. In 1987, Mr. Rutta, together with Kenneth Levine,
purchased all of Diamond's outstanding stock.
Norman Harris has been Diamond's President since March 1998. Mr. Harris has
served as Diamond's Executive Vice President from 1995 until March 1998. Mr.
Harris joined Diamond in 1993. From 1991 through 1993, Mr. Harris served as
President of Inveauto C.A. of Maracay, Venezuela, a fabricator of automotive
glass and parts. From 1977 until 1991, Mr. Harris was employed by Safelite Glass
Corporation.
Michael A. Sumsky has been Diamond's Executive Vice President, Chief
Financial Officer and General Counsel since joining Diamond in 1995. Prior to
joining Diamond, Mr. Sumsky was the co-founder of a distributorship of seasonal
gift electronics and other consumer products since 1991. Mr. Sumsky was employed
by Emerson Radio Corporation in various financial and legal capacities from 1986
to 1989 and from 1990 to 1991. From 1989 to 1990, Mr. Sumsky was an associate at
Parker, Duryee, Rosoff & Haft, a New York City law firm.
Gregory J. Annick has been a Director of Diamond since March 1998. Mr.
Annick has been an executive officer of LGP, a merchant banking firm that
manages Green Equity Investors II, L.P., since the formation of LGP and Green
Equity Investors II, L.P. in 1994. Mr. Annick joined a merchant-banking firm
affiliated with LGP as an associate in 1989, became a principal in 1993, and
through a corporation became a partner in 1994. From 1988 to 1989, Mr. Annick
was an associate with the merchant banking firm of Gibbons, Green, van
Amerongen. Prior thereto, Mr. Annick was a financial analyst in mergers and
acquisitions with Goldman, Sachs & Co. Mr. Annick is also a director of several
private companies.
John G. Danhakl has been a Director of Diamond since March 1998. Mr.
Danhakl has been an executive officer of LGP since 1995. Mr. Danhakl had
previously been a Managing Director at Donaldson, Lufkin & Jenrette Securities
Corporation ( "DLJ ") and had been with DLJ since 1990. Prior to joining DLJ,
Mr. Danhakl was a Vice President at Drexel Burnham Lambert Incorporated (
"Drexel "). Mr. Danhakl is also a director of Twinlab Corporation, The Arden
Group, Inc. and several private companies.
Jonathan D. Sokoloff has been a Director of Diamond since March 1998. Mr.
Sokoloff has been an executive officer of LGP since its formation in 1994. Since
1990, Mr. Sokoloff had been a partner at a merchant-banking firm affiliated with
LGP. Mr. Sokoloff had previously been a Managing Director at Drexel. Mr.
Sokoloff is also a director of Twinlab Corporation, Gart Sports Company, Rite
Aid Corporation and several private companies.
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Except for Messrs. Levine and Rutta, who are first cousins, no family
relationship exists between any of Diamond's officers or directors.
Committees of the Board of Directors
There are no committees of the Board of Directors.
Compensation of Directors
Diamond's officers, as well as Messrs. Annick, Danhakl and Sokoloff, do not
receive any compensation directly for their service on Diamond's Board of
Directors. Diamond has agreed, however, to pay LGP certain fees for various
management, consulting and financial planning services, including assistance in
strategic planning, providing market and financial analyses, negotiating and
structuring financing and exploring expansion opportunities. See "Certain
Relationships and Related Transactions."
Stock Option Plan
In September 1998, Diamond's Board of Directors and stockholders approved
and adopted the Diamond Triumph Auto Glass, Inc. 1998 Management Stock Option
Plan (the "1998 Plan"). The purpose of the 1998 Plan is to provide key employees
of Diamond and its subsidiaries with an incentive to remain in the service of
Diamond or its subsidiaries, to enhance Diamond's long-term performance and to
afford key employees the opportunity to acquire a proprietary interest in
Diamond. Currently, the 1998 Plan is administered by Diamond's Board of
Directors. An aggregate of 30,000 shares of Common Stock are authorized for
issuance under the 1998 Plan. As of December 31, 1999, the Board of Directors
had granted options to purchase a total of 27,175 shares of Common Stock under
the 1998 Plan. These options vest in five equal annual installments, commencing
on the first anniversary of the date of grant. Vested options may not be
exercised until the earlier of: (1) 90 days after Diamond's Common Stock has
become publicly traded and (2) 91 days prior to the tenth anniversary of the
date of grant. The 1998 Plan expires in September 2008.
Executive Compensation
Summary Compensation Table. The following table provides information about
the compensation paid by Diamond to its Co-Chief Executive Officers and its two
other executive officers during the fiscal years ended December 31, 1997, 1998
and 1999. The Co-Chief Executive Officers and the two other executive officers
of Diamond are collectively referred to as the "Named Executive Officers."
<TABLE>
<CAPTION>
Long-Term
Compensation
Annual Compensation Awards
------------------------------------------ -----------------
Other Securities
Annual Underlying All
Compensation Options/ Other
Name and Principal Position Year Salary ($) Bonus ($) ($) SARs (#) Compensation ($)
- -------------------------------- -------- ----------- ----------- ------------------ ----------------- ------------------
<S> <C> <C> <C> <C> <C> <C>
Kenneth Levine 1999 $300,000 -- -- -- $3,168 (3)
Co-Chairman of the Board 1998 $249,331 $85,386(1) -- -- $3,168 (3)
and Co-Chief Executive Officer 1997 $106,000 -- (2) -- $3,168 (3)
Richard Rutta 1999 $300,000 -- -- -- $3,168 (3)
Co-Chairman of the Board 1998 $249,331 $85,386(1) -- -- $3,168 (3)
and Co-Chief Executive Officer 1997 $106,000 -- (2) -- $3,168 (3)
Norman Harris 1999 $275,000 -- -- -- $3,168 (3)
President 1998 $256,962 $70,016(1) -- 450 $3,168 (3)
1997 $212,000 -- (2) -- $2,721 (3)
Michael A. Sumsky 1999 $250,000 -- -- -- $2,711 (3)
Executive Vice President, 1998 $221,893 $70,016(1) -- 450 $2,324 (3)
Chief Financial Officer and 1997 $148,400 -- (2) -- $2,182 (3)
General Counsel
</TABLE>
- ----------
(1) This bonus was earned in the year indicated, but paid in the immediately
subsequent year.
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<PAGE>
(2) During 1997, Diamond accrued an aggregate of $5.0 million in non-recurring
executive compensation for the Named Executive Officers, which was paid in
1998.
(3) Represents Diamond's net contribution on behalf of the Named Executive
Officer to Diamond's 401(k) Profit Sharing Plan.
Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-End Option
Values. The following table provides information regarding the exercise price of
stock options during the fiscal year ended December 31, 1999 for each of
Diamond's Named Executive Officers and the year-end value of unexercised options
held by the Named Executive Officers.
<TABLE>
<CAPTION>
Number of Securities
Underlying Value of Unexercised
Unexercised In-the-Money
Options/SARs at Options/SARs at
Fiscal Year-End (#) Fiscal Year-End ($)
Shares Acquired on Exercisable/ Exercisable/
Name Exercise (#) Value Realized ($) Unexercisable Unexercisable
---- ------------ ------------------ ------------- -------------
<S> <C> <C> <C> <C>
Kenneth Levine N/A N/A N/A N/A
Richard Rutta N/A N/A N/A N/A
Norman Harris -- -- 0/450 0/0
Michael A. Sumsky -- -- 0/450 0/0
</TABLE>
Employment Agreements
On March 31, 1998, Diamond entered into employment agreements with each of
Kenneth Levine and Richard Rutta pursuant to which they each agreed to serve as
the Co-Chairmen of the Board and Co-Chief Executive Officers of Diamond. Each of
the agreements with Messrs. Levine and Rutta provide for the following:
(1) An initial term of five years beginning on March 31, 1998 and ending
on March 31, 2003.
(2) An annual base salary of $300,000, subject to annual review based on
Diamond's and the executive's performance. In addition, for each
calendar year beginning on January 1, 1998, each executive is entitled
to receive an annual bonus equal to a percentage of Diamond's EBITDA
in excess of specified thresholds, not to exceed $450,000.
(3) In the event the executive is terminated by Diamond for cause (as
defined in the employment agreement) or in the event the executive
resigns, Diamond will pay the executive the executive's base salary
through the date of termination.
(4) In the event the executive is terminated due to death or disability
(as defined in the employment agreement), the executive will receive:
o his base salary for a period of 12 months (but in no event beyond
March 31, 2003); and
o the amount of any bonus payable through the date of termination.
(5) In the event the executive is terminated by Diamond for any other
reason than as provided in clauses (3) and (4) above, the executive
will receive:
o his base salary through the date of termination;
o the amount of any bonus payable through the date of termination;
and
o in lieu of any further compensation, severance pay equal to the
base salary that the executive would have otherwise received
during the period beginning on the date of termination and ending
on the earlier of (1) the scheduled termination date of
executive's employment period under the employment agreement and
(2) such time as the executive obtains other permanent
employment.
41
<PAGE>
(6) Customary non-competition and non-solicitation provisions, which
provisions survive for one year after the termination of the
executive's employment, and customary non-disclosure and assignment of
inventions provisions.
On March 31, 1998, Diamond entered into an employment agreement with Norman
Harris pursuant to which Mr. Harris agreed to serve as the President of Diamond
at an annual salary of $275,000, subject to annual review based on Diamond's and
the executive's performance. On March 31, 1998, Diamond also entered into an
employment agreement with Michael Sumsky pursuant to which Mr. Sumsky agreed to
serve as the Executive Vice President, Chief Financial Officer and General
Counsel of Diamond at an annual salary of $250,000, subject to annual review
based on Diamond's and the executive's performance. Each of the agreements with
Messrs. Harris and Sumsky also provide for the following:
(1) An initial term of three years beginning on March 31, 1998 and ending
on March 31, 2001.
(2) In addition to his base salary, for each calendar year beginning on
January 1, 1998, each executive is entitled to receive an annual bonus
equal to a percentage of Diamond's EBITDA in excess of specified
thresholds, not to exceed $375,000.
(3) In the event the executive is terminated by Diamond for cause (as
defined in the employment agreement) or in the event the executive
resigns, Diamond will pay the executive the executive's base salary
through the date of termination.
(4) In the event the executive is terminated due to death or disability
(as defined in the employment agreement), the executive will receive:
o his base salary for a period of 12 months (but in no event beyond
March 31, 2001); and
o the amount of any bonus payable through the date of termination.
(5) In the event the executive is terminated by Diamond for any other
reason than as provided in clauses (3) and (4) above, the executive
will receive:
o his base salary through the date of termination;
o the amount of any bonus payable through the date of termination;
and
o in lieu of any further compensation, severance pay equal to the
base salary that the executive would have otherwise received
during the period beginning on the date of termination and ending
on the earlier of (1) the scheduled termination date of
executive's employment period under the employment agreement and
(2) such time as the executive obtains other permanent employment
for compensation in an amount reasonably comparable to his base
salary with Diamond.
(6) Customary non-competition, non-solicitation provisions, non-disclosure
and assignment of inventions provisions.
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<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table provides information regarding the beneficial ownership
of Diamond's Common Stock and Series A 12% Senior Redeemable Cumulative
Preferred Stock (referred to in the table as the "Series A Preferred Stock"), as
of March 30, 2000, by (1) each person known by Diamond to be the beneficial
owner of more than 5% of the Common Stock, (2) each director, (3) Diamond's
Named Executive Officers, and (4) all of Diamond's executive officers and
directors as a group. Except as indicated in the footnotes to this table,
Diamond believes that the persons named in this table have sole voting and
investment power with respect to all of the shares of Common Stock and Series A
Preferred Stock indicated.
<TABLE>
<CAPTION>
Common Stock Series A Preferred Stock
Beneficially Owned Beneficially Owned
----------------------------- --------------------------------
Number of Percentage of Number of Percentage of
Name Shares Class Shares Class
---- --------- ------------- --------- -------------
<S> <C> <C> <C> <C>
Green Equity Investors II, L.P. (1) 770,000 77.0% 28,000 80.0%
Gregory J. Annick (1)(2) 770,000 77.0% 28,000 80.0%
John G. Danhakl (1)(2) 770,000 77.0% 28,000 80.0%
Jonathan D. Sokoloff (1)(2) 770,000 77.0% 28,000 80.0%
Kenneth Levine 100,000 10.0% 3,500 10.0%
Richard Rutta 100,000 10.0% 3,500 10.0%
Norman Harris 15,000 1.5% --
Michael Sumsky 15,000 1.5% --
All directors and executive officers 1,000,000 100.0% 35,000 100.00%
as a group
(7 persons)(3)
</TABLE>
(1) The address of Green Equity Investors II, L.P. and Messrs. Annick, Danhakl
and Sokoloff is 11111 Santa Monica Boulevard, Suite 2000, Los Angeles,
California 90025.
(2) The shares shown as beneficially owned by Messrs. Annick, Danhakl and
Sokoloff represent the 770,000 shares of Common Stock and the 28,000 shares
of Series A Preferred Stock owned of record by Green Equity Investors II,
L.P. Green Equity Investors II, L.P. is a Delaware limited partnership
managed by LGP, which is an affiliate of the general partner of Green
Equity Investors II, L.P. Each of Leonard I. Green, Jonathan D. Sokoloff,
John G. Danhakl, Peter J. Nolan and Gregory J. Annick, either directly
(whether through ownership interest or position) or through one or more
intermediaries, may be deemed to control LGP and such general partner. LGP
and such general partner may be deemed to control the voting and
disposition of the shares of Common Stock owned by Green Equity Investors
II, L.P. As such, Messrs. Annick, Danhakl and Sokoloff may be deemed to
have shared voting and investment power with respect to all shares held by
Green Equity Investors II, L.P. However, such individuals disclaim
beneficial ownership of the securities held by Green Equity Investors II,
L.P., except to the extent of their respective pecuniary interests therein.
(3) Includes the shares referred to in Note 2 above.
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<PAGE>
CERTAIN RELATIONSHIPS AND RELATED RECAPITALIZATION
Management Services Agreement
In connection with the Recapitalization, Diamond entered into a Management
Services Agreement with LGP pursuant to which LGP receives an annual management
fee of $685,000. This fee is subordinated in right of payment to the Notes. The
Management Services Agreement also provides that LGP may receive reasonable and
customary fees and reasonable expenses from time to time for providing
financing, advisory and investment banking services to Diamond in connection
with major financial transactions. See "Business - Recapitalization".
Lease
Kenneth Levine and Richard Rutta are the sole partners of a partnership
which leases to Diamond, on an arm's length basis, Diamond's headquarters and
distribution facility in Kingston, Pennsylvania and 18 service center locations.
Following the Recapitalization, at Diamond's request, Kenneth Levine and Richard
Rutta caused the partnership to renew or extend the leases on the facilities
through December 31, 2010, on terms substantially similar to those applicable to
those facilities on January 15, 1998, provided that the monthly rental amounts
increase 4.0% each calendar year beginning January 1, 1999. Rental payments to
the partnership for the facilities aggregated $513,000, $535,000 and $556,000 in
1997, 1998 and 1999, respectively.
Stockholders Agreement
On March 31, 1998, Green Equity Investors II, L.P., Kenneth Levine, Richard
Rutta and Diamond entered into a Stockholders Agreement. The Stockholders
Agreement generally restricts the transferability of shares of Common Stock held
by Kenneth Levine and Richard Rutta. The Stockholders Agreement also establishes
a right of first refusal in favor of Green Equity Investors II, L.P. or Diamond
in the event Kenneth Levine or Richard Rutta seek to transfer any of their
shares of Common Stock to a third party pursuant to a bona fide offer. In
addition, Green Equity Investors II, L.P. has certain "drag-along" rights and
certain sales of Common Stock by Green Equity Investors II, L.P. are subject to
"tag-along" rights of Kenneth Levine and Richard Rutta to participate in those
sales. The Stockholders Agreement also grants demand registration rights to
Green Equity Investors II, L.P. and piggyback registration rights to Green
Equity Investors II, L.P., Kenneth Levine and Richard Rutta
Pursuant to the Stockholders Agreement, Green Equity Investors II, L.P.,
Kenneth Levine and Richard Rutta have agreed to vote their shares of Common
Stock in favor of the election of each of Kenneth Levine and Richard Rutta as a
director of Diamond so long as they are executive officers of Diamond.
Subject to early termination of the provisions described above (other than
those relating to registration rights) at the time, if any, as the Common Stock
is publicly held, the Stockholders Agreement terminates on the tenth anniversary
of the date thereof.
Management Share Agreements
On March 31, 1998, Diamond and Green Equity Investors II, L.P., entered
into Management Subscription and Stockholders Agreements with each of Norman
Harris and Michael A. Sumsky, which are collectively referred to as the
"Management Share Agreements." Pursuant to the Management Share Agreements, the
shares of Common Stock purchased by Messrs. Harris and Sumsky in the
transactions related to the Recapitalization are subject to various transfer
restrictions and purchase rights. The Management Share Agreements also contain
certain "piggyback," registration rights, "tag-along" sale rights, "drag-along"
sale obligations and a right of first refusal in favor of Green Equity Investors
II, L.P. or Diamond in the event Messrs. Harris or Sumsky seek to transfer their
shares of Common Stock to a third party pursuant to a bona fide offer.
44
<PAGE>
DESCRIPTION OF CREDIT FACILITY
On March 31, 1998, Diamond entered into the old bank facility. The old bank
facility provided for borrowings of up to $35 million, a portion of which was
available for the issuance of letters of credit.
On March 27, 2000, Diamond entered into a new revolving credit facility
with The CIT Group/Business Credit, Inc., as lender. Simultaneously therewith,
the borrowings under the old bank facility were repaid. The description below
summarizes the principal terms of the new credit facility.
Revolving Line of Credit. The new credit facility provides for revolving
advances ("Revolving Loans") of up to the lesser of:
o $25,000,000; or
o the sum of 85% of Diamond's Eligible Accounts Receivable (as defined
in the new credit facility) plus 85% of Diamond's Eligible Inventory
(as defined in the new credit facility), less certain reserves; or
o an amount equal to 1.5 times Diamond's EBITDA for the prior twelve
months. EBITDA is defined as earnings before interest, taxes,
depreciation and amortization, plus any accrued and unpaid management
fees payable to LGP during the period.
Letters of Credit. A portion of the revolving line of credit, not to exceed
$3,000,000, is available for the issuance of letters of credit for the
importation of inventory or standby letters of credit for business purposes
unrelated to the purchase of inventory.
Term. The new credit facility has an initial term of four years with
automatic renewals thereafter, unless the lender gives at least 60 days prior
notice of non-renewal.
Diamond may terminate the new credit facility at any time upon 60 days
prior notice. However, if the new credit facility is terminated by Diamond,
Diamond must pay the lender an early termination fee equal to 1.00% of the line
of credit if termination occurs during the first year of the new credit
facility, or 0.50% of the line of credit if termination occurs during the second
or third years of the new credit facility. No early termination fee is payable
if termination occurs during the fourth year of the new credit facility or
thereafter.
Interest Rates. Interest on all outstanding Revolving Loans will be
computed and payable monthly at a spread above the Chase Manhattan Bank Rate
("CMBR") or LIBOR as follows:
EBITDA CMBR LIBOR
------ ---- -----
> $17,000,000 0.25% 2.00%
$13,000,000 to $17,000,000 0.50% 2.25%
<$13,000,000 0.75% 2.50%
The CMBR is the rate of interest per annum announced by The Chase Manhattan
Bank from time to time as its prime rate in effect at its principal office in
the City of New York. Diamond may elect to use the LIBOR rate; however, Diamond
cannot have more than five LIBOR loans outstanding at any one time.
Fees. Diamond must pay certain fees under the new credit facility as
follows:
o A line of credit fee, payable at the end of each month, of 0.25% per
annum computed on the difference between the revolving line of credit
and the sum of (A) the average daily balance of outstanding letters of
credit and (B) the average daily Revolving Loan balance due the
lender;
o A collateral management fee of $50,000 per year;
o A $220,000 loan facility fee, paid at the closing of the new credit
facility; and
45
<PAGE>
o A fee equal to 1.50% per annum, payable monthly, on the undrawn amount
of each letter of credit.
In connection with entering into the new credit facility, Diamond paid the
lender an initial loan facility fee of $220,000.
Collateral. The new credit facility is secured by a first priority lien on
substantially all of Diamond's assets, including accounts receivable, inventory
and equipment and the proceeds of each of the foregoing.
Covenants. The new credit facility contains a number of covenants that,
among other things, restrict Diamond's ability to:
o make investments,
o incur additional indebtedness;
o grant liens;
o merge or consolidate with other companies;
o change the nature of its business;
o dispose of assets;
o make loans;
o pay dividends or redeem capital stock;
o guarantee the debts of other persons; and
o engage in transactions with affiliates.
In addition, the new credit facility limits capital expenditures to a
maximum of $3,000,000 per year and requires Diamond to maintain minimum EBITDA,
calculated monthly, for each 12-month period ending as of the end of each month,
of at least $10,500,000.
Events of Default. The new credit facility contains customary events of
default, including events of default relating to:
o non-payment of principal, interest or fees;
o violation of covenants;
o inaccuracy of representations and warranties;
o defaults on other indebtedness; and
o certain events of bankruptcy or insolvency.
46
<PAGE>
DESCRIPTION OF CAPITAL STOCK
Overview
Diamond's authorized capital stock consists of 1,100,00 shares of Common
Stock, par value $0.01 per share, and 100,000 shares of Preferred Stock, par
value $0.01 per share, of which 35,000 shares have been designated Series A 12%
Senior Redeemable Cumulative Preferred Stock. The Series A 12% Senior Redeemable
Cumulative Preferred Stock is referred to as the "Series A Preferred Stock."
The following is only a summary of the provisions of the Common Stock and
the Series A Preferred Stock. For a full description of the Common Stock and the
Series A Preferred Stock, you should read Diamond's Certificate of
Incorporation, which is filed as an exhibit to the Exchange Offer registration
statement.
Common Stock
Subject to the rights of the holders of any Preferred Stock which may be
outstanding, all shares of Common Stock are subject to the following rights and
restrictions:
Dividends. All shares of Common Stock participate equally in dividends
payable to holders of Common Stock when, as and if dividends are declared by
Diamond's Board of Directors.
Liquidation or Dissolution. All shares of Common Stock participate equally
in net assets available for distribution to holders of Common Stock on
liquidation or dissolution of Diamond.
Voting. The holders of Common Stock are entitled to one vote per share on
all matters submitted to a vote of Diamond's stockholders. The holders of Common
Stock do not have cumulative voting rights in the election of directors.
Series A Preferred Stock
Rank. With respect to dividend distributions and distributions upon
liquidation, winding up or dissolution of Diamond, the Series A Preferred Stock
is senior to all classes of Common Stock and to each other class of capital
stock or series of preferred stock created by Diamond's Board of Directors after
March 27, 1998, unless that stock expressly provides otherwise.
Dividends. Diamond will pay cumulative quarterly dividends on the Series A
Preferred Stock if, when and as declared by its Board of Directors. All
dividends will be cumulative, whether or not earned or declared, and will accrue
on a daily basis from the date Diamond initially issued the Series A Preferred
Stock (computed on the basis of a 360-day year and the actual number of days
elapsed). At Diamond's option, dividends may be paid in cash or by adding to the
then liquidation value of the Series A Preferred Stock an amount equal to the
dividends then accrued and payable. So long as any shares of Series A Preferred
Stock remain outstanding and subject to certain exceptions, neither Diamond nor
any of its subsidiaries will redeem, purchase or otherwise acquire any other
equity security of Diamond which is junior to the Series A Preferred Stock in
right of payment. In addition, Diamond will not declare or pay dividends or make
any distribution of assets to any holders of junior securities other than
dividends or distributions of junior securities.
Liquidation or Dissolution. Upon a Liquidity Event (as defined below), the
Series A Preferred Stock has an initial liquidation preference over the Common
Stock equal to the liquidation value of the Series A Preferred Stock plus
accrued and unpaid dividends. The initial liquidation preference of the Series A
Preferred Stock was $1,000 per share, or $35.0 million in the aggregate. To the
extent dividends on the Series A Preferred Stock accrue but are not paid, the
liquidation preference per share will increase by the amount of such dividends.
At December 31, 1999, the liquidation preference of the Series A Preferred Stock
was approximately $1,230 per share, or approximately $43 million in the
aggregate. If, upon a Liquidation Event, Diamond has insufficient assets to pay
in full the liquidation payments payable to the holders of Series A Preferred
Stock and the holders of all other equity securities of Diamond which rank
equally with the Series A Preferred Stock, then all of these holders will share
equally and ratably in any distribution of Diamond's assets. A "Liquidity Event"
means the voluntary or
47
<PAGE>
involuntary liquidation, dissolution or winding up of Diamond. A Liquidity Event
does not include (1) a sale, conveyance, exchange or transfer of all or
substantially all of Diamond's assets, or (2) Diamond's merger with or into
another corporation or other entity.
Voting. The holders of Series A Preferred Stock have no voting rights with
respect to general corporate matters, except as required by law or as described
under "Restrictions and Limitations" below.
Restrictions and Limitations. Subject to certain exceptions, so long as any
shares of Series A Preferred Stock are outstanding, Diamond will not, without
the vote or written consent of a majority of the outstanding shares of Series A
Preferred Stock:
(1) authorize or issue any class or series of equity securities which rank
equally with the Series A Preferred Stock;
(2) authorize or issue any class or series of equity securities which rank
senior to the Series A Preferred Stock;
(3) amend, alter or repeal any provision of Diamond's Certificate of
Incorporation so as to adversely affect any of the preferences,
rights, powers or privileges of the Series A Preferred Stock; or
(4) issue any additional shares of Series A Preferred Stock after March
31, 1998.
Mandatory Redemption. The Series A Preferred Stock is subject to mandatory
redemption by Diamond on April 1, 2010 at 100% of the liquidation value plus
accrued and unpaid dividends. Diamond's mandatory redemption of the Series A
Preferred Stock is subject to certain contractual and other restrictions,
including restrictions imposed by the new credit facility and the indenture.
Optional Redemption. At Diamond's option, Diamond may redeem some or all of
the Series A Preferred Stock at 100% of the liquidation value plus accrued and
unpaid dividends. If Diamond 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, or by lot, as may be determined in
Diamond's sole discretion. Diamond's optional redemption of the Series A
Preferred Stock is subject to certain contractual and other restrictions,
including restrictions imposed by the new credit facility and the indenture.
Change of Control. Upon a Change of Control (as defined below), Diamond
must offer to repurchase the Series A Preferred Stock at 100% of its liquidation
value plus accrued and unpaid dividends. Diamond's obligation to repurchase the
Series A Preferred Stock upon a Change of Control is subject to certain
contractual and other restrictions,, including restrictions imposed by the new
credit facility and the indenture. A Change of Control means:
(1) Diamond's merger or consolidation with or into any other entity, or
the sale, transfer or conveyance of all or substantially all of
Diamond's assets on a consolidated basis in one transaction or a
series of transactions; if, immediately after giving effect to the
transaction(s), another person or group (other than Green Equity
Investors II, L.P., parties related to Green Equity Investors II,
L.P., Kenneth Levine or Richard Rutta) becomes the beneficial owner,
directly or indirectly, of more than 50% of the capital stock of
Diamond entitled to vote in the election of directors, managers or
trustees, as applicable, of the transferee(s) or the surviving entity
or entities; or
(2) Any person or group (other than Green Equity Investors II, L.P.,
parties related to Green Equity Investors II, L.P., Kenneth Levine or
Richard Rutta) becomes the beneficial owner, directly or indirectly,
of more than 50% of the capital stock of Diamond then outstanding
normally entitled to vote in the election of directors; or
48
<PAGE>
(3) during any period of 12 consecutive months after the date on which
Diamond initially issued the Series A Preferred Stock, individuals who
at the beginning of that 12-month period constituted Diamond's Board
of Directors cease to constitute a majority of Diamond's Board of
Directors for any reason.
49
<PAGE>
DESCRIPTION OF THE NEW NOTES
Diamond will issue the New Notes under the indenture, dated as of March 31,
1998, between Diamond and State Street Bank and Trust Company, as trustee. The
terms of the Old Notes and the New Notes are identical, except that the New
Notes are not subject to restrictions on transfer. As used in this "Description
of the New Notes," the term "Note" or "Notes" refers to both the Old Notes and
the New Notes. The indenture is subject to, and governed by, the Trust Indenture
Act of 1939, as amended.
This description of the Notes is intended to be a useful overview of the
material provisions of the Notes and the indenture. Since this description of
the Notes is only a summary, you should refer to the indenture for a complete
description of Diamond's obligations and your rights under the indenture.
Diamond has filed a copy of the indenture as Exhibit 4.1 to the registration
statement.
The section entitled "Certain Definitions" beginning on page 67 includes
the definitions of the capitalized terms used in this description. References to
the "Company" mean only Diamond Triumph Auto Glass, Inc., and not any of its
future subsidiaries. References to the Bank Facility, as used in the indenture,
include the new credit facility.
General
The Notes:
o represent senior, unsecured obligations of Diamond, ranking senior in
right of priority and payment to any indebtedness of Diamond that by
its terms is expressly subordinated to the Notes.
o are unconditionally guaranteed (the "Guarantees") on a senior,
unsecured basis by any Subsidiary Guarantor, of which there are
currently none.
o are effectively subordinated to secured indebtedness of Diamond and
the Subsidiary Guarantors (including indebtedness under the Bank
Facility) with respect to the assets securing that indebtedness.
o are effectively subordinated to claims of creditors of any of
Diamond's subsidiaries, except to the extent that holders of the Notes
may be creditors of Diamond's subsidiaries pursuant to a Guarantee.
Paying Agent and Registrar
Initially, the Trustee will act as paying agent and registrar for the
Notes. Diamond may change the paying agent or registrar without notice to
holders of the Notes. Holders must surrender their Notes to a paying agent to
collect principal payments and premium, if any. Principal, premium, if any, and
interest on the Notes will be paid by check mailed to the registered holders at
their registered addresses, except that any holders who have given wire transfer
instructions to Diamond will be paid by wire transfer of immediately available
funds to the accounts specified by those holders.
Principal, Maturity and Interest
The interest rate, aggregate principal amounts and maturity dates of the
Notes are as follows:
Interest Rate 9.25% per annum
Aggregate Principal Amount $100.0 million
Maturity Date April 1, 2008
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Interest on the Notes will:
o accrue at the rate of 9.25% per annum;
o be payable semi-annually in arrears on each April 1 and October 1,
commencing on October 1, 1998, to the persons who are registered
holders of the Notes at the close of business on the March 15 and
September 15, respectively, immediately preceding the applicable
interest payment date; and
o accrue from the most recent date to which interest has been paid or,
if no interest has been paid, from and including the date of issuance.
The Notes are not entitled to the benefit of any mandatory sinking fund.
Additional Notes
Subject to the limitations set forth under "--Certain Covenants--Limitation
on Incurrence of Additional Indebtedness," Diamond may incur additional
Indebtedness which, at Diamond's option, may consist of additional notes, in one
or more series, having identical terms as the Notes. Holders of such additional
notes will have the right to vote together with holders of the Notes as one
class.
The Guarantees
Diamond currently has no Subsidiaries, and, accordingly, there are no
Subsidiary Guarantors. Any future Wholly Owned Restricted Subsidiary with total
assets having a book value of more than $50,000 will be required to become a
Subsidiary Guarantor. No future non-Wholly Owned Restricted Subsidiary will be
required to become a Subsidiary Guarantor unless it guarantees any other
Indebtedness of Diamond or a Subsidiary Guarantor.
Any Subsidiary Guarantor will irrevocably and unconditionally guarantee on
a senior unsecured basis the performance and punctual payment when due, whether
at Stated Maturity, by acceleration or otherwise, of all of Diamond's
obligations under the indenture and the Notes, whether for principal of,
premium, if any, or interest on the Notes, expenses, indemnification or
otherwise (all such obligations guaranteed by a Subsidiary Guarantor being
herein called the "Guaranteed Obligations"). Any Subsidiary Guarantor will agree
to pay, on a senior unsecured basis and in addition to the amount stated above,
any and all expenses (including reasonable counsel fees and expenses) incurred
by the Trustee in enforcing any rights under a Guarantee with respect to a
Subsidiary Guarantor.
Each Guarantee:
o will represent a senior, unsecured obligation of the respective
Subsidiary Guarantor, ranking senior in right of priority and payment
to any Indebtedness of that Subsidiary Guarantor that by its terms is
expressly subordinate to such Subsidiary Guarantor's Guarantee. Any
claims by holders of the Notes with respect to the assets of any
Subsidiary Guarantor will be effectively subordinated to secured
Indebtedness of the Subsidiary Guarantor with respect to the assets
securing such Indebtedness.
o will be limited in amount to an amount not to exceed the maximum
amount that can be guaranteed by the relevant Subsidiary Guarantor
without rendering the Guarantee voidable under applicable law relating
to fraudulent conveyance or fraudulent transfer or similar laws
affecting the rights of creditors generally. See "Risk
Factors--Fraudulent Conveyance."
o will be a continuing guarantee and will (1) remain in full force and
effect until payment in full of all the Guaranteed Obligations or
until released as described in the following paragraph, (2) be binding
upon each Subsidiary Guarantor and (3) inure to the benefit of and be
enforceable by the Trustee, the holders of the Notes and their
successors, transferees and assigns. Each Guarantee shall be a
guarantee of payment and not of collection.
Each Subsidiary Guarantor may liquidate or dissolve or may consolidate
with, merge into, or sell or otherwise dispose of its assets to, Diamond or
another Subsidiary Guarantor without limitation. See "--Certain
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Covenants--Merger, Consolidation and Sale of Assets." In the event of a
disposition of all of the assets or all of the Capital Stock of any Subsidiary
Guarantor, by way of sale, merger, consolidation or otherwise, that Subsidiary
Guarantor in the event of a disposition of all of the Capital Stock or all of
the assets of that Subsidiary Guarantor or the surviving entity (whether or not
that Subsidiary Guarantor) in the event of a merger or consolidation will be
deemed released and relieved of its obligations under its Guarantee without any
further action required on the part of the Trustee or any holder of the Notes
and the Person acquiring or owning the assets or Capital Stock of that
Subsidiary Guarantor (if not otherwise required to be a Subsidiary Guarantor)
will not be required to enter into a Guarantee; provided, in each case, that the
transaction is carried out pursuant to and in accordance with "--Certain
Covenants--Limitation on Asset Sales" and, if applicable, "--Merger,
Consolidation and Sale of Assets." If a Subsidiary Guarantor becomes an
Unrestricted Subsidiary pursuant to and in accordance with the definition of
"Unrestricted Subsidiary" set forth below under "--Certain Definitions," it will
be deemed released and relieved of its obligations under its Guarantee without
any further action required on the part of the Trustee or any holder of the
Notes. A non-Wholly Owned Restricted Subsidiary that is a Subsidiary Guarantor
solely by reason of its guarantee of other Indebtedness of Diamond or a
Subsidiary Guarantor will be deemed released and relieved of its Guarantee
without any further action required on the part of the Trustee or any holder of
the Notes if it is released and relieved of its guarantee of such that
Indebtedness and that Subsidiary Guarantor gives written notice to the Trustee
of its election to be released from its Guarantee.
Redemption
Optional Redemption. Except as described below, the Notes are not
redeemable until April 1, 2003. On and after April 1, 2003, Diamond 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
percentages of the principal amount. In addition, at redemption, any accrued and
unpaid interest to the applicable redemption date will be paid. Redemption
prices during the 12-month period commencing on April 1 of the years indicated
are as follows:
Year Percentage
---- ----------
2003................... 104.625%
2004................... 103.083%
2005................... 101.542%
2006 and thereafter.... 100.000%
Optional Redemption upon Public Equity Offerings. On or prior to April 1,
2001, Diamond may, at its option, use the net cash proceeds of one or more
Public Equity Offerings (as defined below) to redeem up to 35% of the aggregate
principal amount of the Notes originally issued at a redemption price equal to
109.0% of the principal amount of the Notes, plus accrued and unpaid interest on
the Notes to the date of redemption (subject to the right of the record holders
of the Notes on a record date to receive interest due on an interest payment
date that is on or prior to the date of redemption); provided that:
o after giving effect to any redemption, at least 65% of the aggregate
principal amount of the Notes originally issued remains outstanding;
and
o the redemption occurs not more than 60 days after the consummation of
the Public Equity Offering.
As used above, "Public Equity Offering" means an underwritten public
offering of Qualified Capital Stock of Diamond pursuant to a registration
statement filed with the Commission in accordance with the Securities Act, or
any successor statute.
Selection and Notice of Redemption
In the event that less than all of the Notes are to be redeemed at any
time, the Trustee will select which Notes will be redeemed in compliance with
the requirements of:
o the principal national securities exchange, if any, on which the Notes
are listed; or
o if such Notes are not then listed on a national securities exchange,
on a pro rata basis, by lot or by any method as the Trustee deems fair
and appropriate.
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In addition, the Trustee's ability to select Notes for redemption is
subject to the following conditions:
o no Notes of a principal amount of $1,000 or less can be redeemed in
part;
o Notes of a principal amount in excess of $1,000 may be redeemed in
part in multiples of $1,000 only; and
o if a partial redemption is made with the proceeds of a Public Equity
Offering, selection of the Notes or portions of the Notes for
redemption will, subject to the preceding proviso, be made by the
Trustee only on a pro rata basis or on as nearly a pro rata basis as
is practicable (subject to DTC procedures), unless this method is
otherwise prohibited.
Diamond must deliver a notice of redemption by first-class mail at least 30
but not more than 60 days before the redemption date to each holder of the Notes
to be redeemed at its registered address. If any Note is to be redeemed in part
only, the notice of redemption that relates to the Note must state the portion
of the principal amount to be redeemed. A new Note in a principal amount equal
to the unredeemed portion of the Note will be issued in the name of the holder
upon cancellation of the original Note. On and after the redemption date,
interest will cease to accrue on the Notes or portions of the Notes called for
redemption as long as Diamond has deposited with the paying agent sufficient
funds to redeem on the redemption date all the Notes called for redemption.
Change of Control
If a Change of Control occurs, each holder of the Notes will have the right
to require Diamond to purchase all or a portion (in integral multiples of
$1,000) of the holder's Notes at a purchase price equal to 101% of the principal
amount of the Notes plus accrued and unpaid interest to the date of purchase
(subject to the right of holders of record on a record date to receive interest
due on an interest payment date that is on or prior to the date of purchase).
Within 30 days following the date upon which the Change of Control
occurred, Diamond must send, by first-class mail, a notice (the "Change of
Control Offer") to each holder of the Notes with a copy to the Trustee stating,
among other things, the purchase date, which must be no earlier than 30 days nor
later than 60 days from the date the notice is mailed, other than as may be
required by law (the "Change of Control Payment Date"). Holders electing to have
a Note purchased pursuant to a Change of Control Offer will be required to
surrender the Note, with the form entitled "Option of Holder to Elect Purchase"
on the reverse of the Note completed, to the paying agent at the address
specified in the notice prior to the close of business on the third business day
prior to the Change of Control Payment Date.
If a Change of Control Offer is made, Diamond may not have available funds
sufficient to pay the Change of Control purchase price for all the Notes that
might be delivered by holders of the Notes seeking to accept the Change of
Control Offer. In the event Diamond is required to purchase outstanding Notes
pursuant to a Change of Control Offer, Diamond 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 Diamond would be
able to obtain that financing. Neither Diamond's Board of Directors nor the
Trustee may waive the covenant relating to Diamond's obligation to make a Change
of Control Offer. Restrictions in the indenture on the ability of Diamond and
its Restricted Subsidiaries to incur additional Indebtedness, to grant Liens on
their property securing Indebtedness, to make Restricted Payments and to make
Asset Sales may also make more difficult or discourage a takeover of Diamond,
whether favored or opposed by Diamond's management. Consummation of any of these
types of transactions in certain circumstances may require redemption or
repurchase of the Notes, and there can be no assurance that Diamond or the
acquiring party will have sufficient financial resources to effect a redemption
or repurchase. These restrictions and the restrictions on transactions with
Affiliates may, in certain circumstances, make more difficult or discourage any
leveraged buyout of Diamond or any of its Subsidiaries. While these restrictions
cover a wide variety of arrangements which have traditionally been used to
effect highly leveraged transactions, the indenture may not afford holders of
the Notes protection in all circumstances from the adverse aspects of a highly
leveraged transaction, reorganization, restructuring, merger or similar
transaction.
Diamond will comply with the requirements of Rule 14e-1 under the Exchange
Act and any other securities laws and regulations thereunder to the extent these
laws and regulations are applicable in connection with the purchase of the Notes
pursuant to a Change of Control Offer. To the extent that the provisions of any
securities laws
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or regulations conflict with the "Change of Control" provisions of the
indenture, Diamond will comply with the applicable securities laws and
regulations and will not be considered to have breached its obligations under
the "Change of Control" provisions of the indenture by that compliance.
Certain Covenants
The indenture contains, among others, the following covenants:
Limitation on Incurrence of Additional Indebtedness. Diamond will not, and
will not permit any of its Restricted Subsidiaries to, directly or indirectly,
create, incur, assume, guarantee, become liable, contingently or otherwise, with
respect to, or otherwise become responsible for payment of (collectively,
"incur"), any Indebtedness (including Acquired Indebtedness but excluding
Permitted Indebtedness); provided, however, that Diamond 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 and is continuing at the
time of or as a consequence of the incurrence of that Indebtedness,
and
(2) the Consolidated Fixed Charge Coverage Ratio of Diamond is greater
than 2.0 to 1.0.
Indebtedness of a Person which is secured by a Lien on an asset acquired by
Diamond or a Restricted Subsidiary of Diamond (whether or not that Indebtedness
is assumed by the acquiring Person) will be deemed incurred at the time of the
Asset Acquisition.
Limitation on Restricted Payments. Diamond will not, and will not cause or
permit any of its Restricted Subsidiaries to, directly or indirectly,
(1) declare or pay any dividend or make any distribution other than:
(A) dividends or distributions payable on its Qualified Capital Stock
or on warrants, rights or options to purchase or acquire shares
of Qualified Capital Stock,
(B) dividends on shares of the Senior Preferred Stock paid by
increasing the then liquidation preference per share of the
Senior Preferred Stock or
(C) dividends or distributions payable to Diamond or a Restricted
Subsidiary and pro rata dividends or distributions to Diamond
and/or its Restricted Subsidiaries and to minority holders of
Capital Stock of Restricted Subsidiaries) on or in respect of
shares of Capital Stock of Diamond or any Restricted Subsidiary
to holders of that Capital Stock,
(2) purchase, redeem or otherwise acquire or retire for value any Capital
Stock of Diamond or any warrants, rights or options to purchase or
acquire shares of any class of Diamond's Capital Stock,
(3) make any principal payment on, purchase, defease, redeem, prepay,
decrease or otherwise acquire or retire for value, prior to any
scheduled final maturity, scheduled repayment or scheduled sinking
fund payment, as the case may be, any Indebtedness of Diamond or any
Subsidiary Guarantor that is subordinate or junior in right of payment
to the Notes or Guarantees, or
(4) make any Investment (other than Permitted Investments) (each of the
foregoing actions set forth above being referred to as a "Restricted
Payment"),
if at the time of the Restricted Payment or immediately after giving effect
to the Restricted Payment:
(1) a Default or an Event of Default has occurred and is continuing, or
(2) Diamond is not able to incur at least $1.00 of additional Indebtedness
(other than Permitted Indebtedness) in compliance with the covenant
described under "Limitation on Incurrence of Additional Indebtedness,"
or
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(3) the aggregate amount of Restricted Payments (including such proposed
Restricted Payment) made subsequent to the Issue Date (the amount
expended for these purposes, if other than in cash, being the fair
market value of that property) exceeds the sum of:
(A) 50% of Diamond's cumulative Consolidated Net Income (or if
cumulative Consolidated Net Income will be a loss, minus 100% of
that loss) accrued during the period (treated as one accounting
period) beginning on April 1, 1998 to the end of the most recent
fiscal quarter ending at least 45 days prior to the date of the
Restricted Payment; plus
(B) 100% of the aggregate net cash proceeds Diamond received from any
Person (other than a Subsidiary of Diamond) from the issuance and
sale subsequent to the Issue Date of Diamond's Qualified Capital
Stock or any warrants, rights or options to purchase or acquire
shares of Diamond's Capital Stock or from the issuance and sale
subsequent to the Issue Date of any debt or other security of
Diamond that has been converted into or exchanged for Diamond's
Qualified Capital Stock; plus
(C) the net cash proceeds of any capital contribution to Diamond
subsequent to the Issue Date; plus
(D) without duplication, the sum of:
(i) the aggregate amount returned in cash on or with respect to
Investments (other than Permitted Investments) made
subsequent to the Issue Date whether through interest
payments, principal payments, dividends or other
distributions or payments,
(ii) the net cash proceeds received by Diamond or any Restricted
Subsidiary from the disposition of all or any portion of
those Investments (other than to a Restricted Subsidiary of
Diamond),
(iii) to the extent that any Investment was in the form of a
guarantee, any reduction in the amount guaranteed, and
(iv) the portion (proportionate to Diamond's equity interest in
the Subsidiary) of the fair market value of the net assets
of an Unrestricted Subsidiary at the time the Unrestricted
Subsidiary is designated a Restricted Subsidiary;
provided, however, that the foregoing sum shall not exceed, in
the case of any Unrestricted Subsidiary, the amount of
Investments previously made (and treated as a Restricted Payment)
by Diamond or any Restricted Subsidiary in the Unrestricted
Subsidiary.
The immediately foregoing provisions do not prohibit:
(1) the payment of any dividend within 60 days after the date of
declaration if the dividend would have been permitted on the date of
declaration;
(2) if no Default or Event of Default has occurred and is continuing, the
acquisition of any shares of Diamond's Capital Stock or any warrants,
rights or options to purchase or acquire shares of Diamond's Capital
Stock, either:
(A) in exchange for shares of Diamond's Qualified Capital Stock or
any warrants, rights or options to purchase or acquire shares of
Diamond's Qualified Capital Stock, or
(B) through the application of net proceeds of a substantially
concurrent sale for cash (other than to a Subsidiary of Diamond)
of shares of Diamond's Qualified Capital Stock or any warrants,
rights or options to purchase or acquire shares of Diamond's
Qualified Capital Stock;
(3) if no Default or Event of Default has occurred and is continuing, the
voluntary prepayment, purchase, defeasance, redemption or other
acquisition or retirement for value of any Indebtedness of Diamond or
any Subsidiary Guarantor that is subordinate or junior in right of
payment to the Notes or Guarantees:
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(A) solely in exchange for shares of Diamond's Capital Stock or any
warrants, rights or options to purchase or acquire shares of
Diamond's Capital Stock; provided, however, that if that Capital
Stock is, or those warrants, rights or options to purchase that
Capital Stock are convertible into or exchangeable at the option
of the holder thereof for, Disqualified Capital Stock, then that
Disqualified Capital Stock will not:
(i) by its terms, or upon the happening of any event, mature or
be mandatorily redeemable pursuant to a sinking fund
obligation or otherwise, or be redeemable at the option of
the holder thereof, in any case, on or prior to the final
maturity of the Indebtedness permitted to be prepaid,
purchased, defeased, redeemed or acquired pursuant to this
clause (3) and
(ii) have a Weighted Average Life to Maturity less than the
Indebtedness permitted to be prepaid, purchased, defeased,
redeemed or acquired pursuant to this clause (3) or
(B) through the application of net proceeds of a substantially
concurrent sale for cash (other than to a Subsidiary of Diamond)
of
(i) shares of Diamond's Qualified Capital Stock or any warrants,
rights or options to purchase or acquire shares of Diamond's
Qualified Capital Stock, or
(ii) Refinancing Indebtedness;
(4) so long as no Default or Event of Default has occurred and is
continuing, repurchases by Diamond of Diamond's Common Stock or
options, warrants or other securities exercisable or convertible into
Diamond's Common Stock from employees and directors of Diamond or any
of its Subsidiaries or their authorized representatives upon the
death, disability or termination of employment or directorship of
these employees or directors, in an aggregate amount not to exceed
$750,000 in any calendar year and $3.0 million in the aggregate (in
each case plus the amount of net cash proceeds received by Diamond
from the sale of Qualified Capital Stock or any warrants, rights or
options to purchase or acquire shares of Qualified Capital Stock to
employees or directors of Diamond and its Subsidiaries, to the extent
that those amounts did not provide the basis for any previous
Restricted Payment); and
(5) so long as no Default or Event of Default has occurred and is
continuing, the payment of dividends on the shares of the Senior
Preferred Stock with:
(A) the net proceeds of a sale for cash (other than to a Subsidiary
of Diamond) of shares of Diamond's Qualified Capital Stock or any
warrants, rights or options to purchase or acquire shares of
Diamond's Qualified Capital Stock or
(B) the net cash proceeds of any capital contribution to Diamond to
the extent the amounts in clauses 5(A) and 5(B) did not provide
the basis for any previous Restricted Payment.
In determining the aggregate amount of Restricted Payments made subsequent
to the Issue Date, amounts expended pursuant to clauses (1), (2)(B), (3)(B)(i),
(4) and (5) should be included in the calculation and amounts expended pursuant
to clauses (2)(A), 3(A) and 3(B)(ii) should not be included in the calculation.
Not later than the date of making any Restricted Payment, Diamond will
deliver to the Trustee an officers' certificate stating that the Restricted
Payment complies with the indenture and setting forth in reasonable detail the
basis upon which the required calculations were computed, which calculations may
be based upon Diamond's latest available internal quarterly financial
statements.
Limitation on Asset Sales. Diamond will not, and will not permit any of its
Restricted Subsidiaries to, consummate an Asset Sale unless:
(1) Diamond or the applicable Restricted Subsidiary, as the case may be,
receives consideration at the time of the Asset Sale at least equal to
the fair market value of the assets sold or otherwise disposed of (as
determined in good faith by Diamond's Board of Directors),
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(2) at least 75% of the consideration received for the assets sold by
Diamond or the Restricted Subsidiary, as the case may be, from the
Asset Sale is in the form of cash or Cash Equivalents and is received
at the time of the disposition; provided, however, that for purposes
of this clause (2) only:
(A) notes received by Diamond or a Restricted Subsidiary as
consideration for an Asset Sale that are converted into cash or
Cash Equivalents within 30 days following the consummation of the
Asset Sale, or
(B) the assumption by the purchaser of assets pursuant to an Asset
Sale of Indebtedness of Diamond or a Restricted Subsidiary (other
than Indebtedness that is by its terms subordinate to the Notes
or any Guarantee) are, in each case of the immediately preceding
clauses (2)(A) and (2)(B), deemed to be cash or Cash Equivalents
at the time of the Asset Sale in an amount equal to, in the case
of clause (2)(A), the amount of cash or Cash Equivalents realized
on the conversion and, in the case of clause (2)(B), the amount
of the Indebtedness so assumed, as reflected on Diamond's balance
sheet, and
(3) following the consummation of an Asset Sale, Diamond will or will
cause the Restricted Subsidiary, within 365 days of receipt thereof
either
(A) to apply the Net Cash Proceeds related to the Asset Sale to
prepay any Indebtedness that by its terms is not subordinate to
the Notes or any Guarantee (and to permanently reduce the
commitments, if any, with respect thereto),
(B) to make a Permitted Investment or an investment in properties and
assets that replace the properties and assets that were the
subject of the Asset Sale or in properties and assets that will
be used in a Related Business (collectively, "Replacement
Assets"), or
(C) a combination of prepayment and investment permitted by the
foregoing clauses (3)(A) and (3)(B).
On the 365th day after an Asset Sale, or the earlier date, if any, as
Diamond's Board of Directors determines not to apply or cause to be applied 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 (each, a "Net Proceeds
Offer Trigger Date"), the aggregate amount of Net Cash Proceeds which have not
been applied on or before the applicable Net Proceeds Offer Trigger Date as
permitted in clauses (3)(A), (3)(B) and (3)(C) of the immediately preceding
paragraph (or, in the case of a Net Proceeds Offer Trigger Date occurring prior
to the 365th day, the aggregate amount of Net Cash Proceeds that the Board of
Directors of Diamond has determined not to so apply) (each a "Net Proceeds Offer
Amount") will be applied by Diamond or the 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 of the Notes on a pro rata
basis (and on a pro rata basis with the holders of any other Indebtedness of
Diamond that is not by its terms subordinate in right of payment to the Notes
with similar provisions requiring Diamond to offer to purchase that Indebtedness
with the proceeds of asset sales), that principal amount of the Notes and such
other Indebtedness equal to the Net Proceeds Offer Amount at a price, in the
case of the Notes, equal to 100% of the principal amount of the Notes to be
purchased, plus accrued and unpaid interest to the date of purchase (subject to
the right of holders of record on a record date to receive interest due on an
interest payment date that is on or prior to such date of purchase); provided,
however, that if at any time any non-cash consideration received by Diamond or
any Restricted Subsidiary of Diamond, 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 non-cash consideration), then the
conversion or disposition will be deemed to constitute an Asset Sale hereunder
and the Net Cash Proceeds will be applied in accordance with this covenant.
Diamond may defer the Net Proceeds Offer until there is an aggregate unutilized
Net Proceeds Offer Amount equal to or in excess of $5.0 million resulting from
one or more Asset Sales (at which time, the entire unutilized Net Proceeds Offer
Amount, and not just the amount in excess of $5.0 million, will be applied as
required pursuant to this paragraph).
In the event of the transfer of substantially all (but not all) of the
property and assets of Diamond and its Restricted Subsidiaries as an entirety to
a Person in a transaction permitted under "--Merger, Consolidation and Sale of
Assets," the Surviving Entity will be deemed to have sold the properties and
assets of Diamond and its Restricted Subsidiaries not so transferred for
purposes of this covenant, and will comply with the provisions of this covenant
with respect to the deemed sale as if it were an Asset Sale. In addition, the
fair market value of the
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properties and assets of Diamond or its Restricted Subsidiaries deemed to be
sold will be deemed to be Net Cash Proceeds for purposes of this covenant.
Notwithstanding the two immediately preceding paragraphs, Diamond 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
Replacement Assets and cash or Cash Equivalents; and
(2) the Asset Sale is for fair market value;
provided that any consideration not constituting Replacement Assets
received by Diamond or any of its Restricted Subsidiaries in connection
with any Asset Sale permitted to be consummated under this paragraph will
constitute Net Cash Proceeds subject to the provisions of the two preceding
paragraphs.
Each Net Proceeds Offer will be mailed to the record holders of the Notes
as shown on the register of holders within 25 days following the Net Proceeds
Offer Trigger Date, 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 of the Notes 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 of
the Notes and holders of other Indebtedness, if any, which are the subject of a
Net Proceeds Offer properly tender Notes or the other Indebtedness in an
aggregate amount exceeding the Net Proceeds Offer Amount, Notes of tendering
holders and other Indebtedness of tendering holders will be purchased on a pro
rata basis (based on amounts tendered). A Net Proceeds Offer will remain open
for a period of at least 20 business days or a longer period as may be required
by law.
Diamond 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 purchase of the 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, Diamond will comply with the applicable securities laws and
regulations and will not be deemed to have breached its obligations under the
"Asset Sale" provisions of the indenture by its compliance.
Upon completion of a Net Proceeds Offer, the amount of Net Cash Proceeds
will be reset at zero. Accordingly, to the extent that the aggregate amount of
the Notes and other Indebtedness tendered pursuant to a Net Proceeds Offer is
less than the Net Cash Proceeds Offer Amount, Diamond may use any remaining Net
Cash Proceeds for general corporate purposes.
Limitation on Dividend and Other Payment Restrictions Affecting Restricted
Subsidiaries. Diamond will not, and will not cause or permit any of its
Restricted Subsidiaries to, directly or indirectly, create or otherwise cause or
permit to exist or become effective any consensual encumbrance or restriction on
the ability of any Restricted Subsidiary of Diamond 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 Diamond or any other Restricted Subsidiary of Diamond; or
(3) transfer any of its property or assets to Diamond or any other
Restricted Subsidiary of Diamond.
These restrictions do not apply to any encumbrances or restrictions
existing under or by reason of:
(1) applicable law;
(2) the indenture;
(3) any new credit facility, provided that the provisions relating to the
encumbrance or restriction are not materially more restrictive than
those in the new credit facility as in existence on the Issue Date, as
any restriction may apply to any present or future Restricted
Subsidiary of Diamond;
(4) customary non-assignment provisions of any contract and customary
provisions restricting assignment or subletting in any lease governing
a leasehold interest of any Restricted Subsidiary
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of Diamond, or any customary restriction on the ability of a
Restricted Subsidiary of Diamond to dividend, distribute or otherwise
transfer any asset which secures Purchase Money Indebtedness of that
Subsidiary;
(5) any instrument governing Acquired Indebtedness, which encumbrance or
restriction is not applicable to any Person, or the properties or
assets of any Person, other than the Person or the properties or
assets of the Person so acquired;
(6) restrictions with respect to a Subsidiary of Diamond imposed pursuant
to a binding agreement which has been entered into for the sale or
disposition of Capital Stock or assets of that Subsidiary, provided
those restrictions apply solely to the Capital Stock or assets of that
Subsidiary which are being sold;
(7) customary restrictions imposed on the transfer of copyrighted or
patented materials; or
(8) an agreement governing Indebtedness incurred to Refinance the
Indebtedness issued, assumed or incurred pursuant to an agreement
referred to in clause (2), (3) or (5) above; provided, however, that
the provisions relating to any encumbrance or restriction contained in
any Indebtedness are not materially more restrictive than the
provisions relating to any encumbrance or restriction contained in
agreements referred to in such clause (2), (3) or (5). Notwithstanding
the foregoing, Liens not prohibited by the terms of the indenture will
not be considered a restriction on the ability of the applicable
Subsidiary to transfer any assets.
Limitation on Preferred Stock of Restricted Subsidiaries. Diamond will not
permit any of its Restricted Subsidiaries to issue any Preferred Stock (other
than to Diamond or to a Wholly Owned Restricted Subsidiary of Diamond) or permit
any Person (other than Diamond or a Wholly Owned Restricted Subsidiary of
Diamond) to own any Preferred Stock of any Restricted Subsidiary of Diamond;
provided, however, that any Restricted Subsidiary of Diamond that is not a
Wholly-Owned Restricted Subsidiary of Diamond may issue Preferred Stock to, and
that Preferred Stock may be owned by, the holders of the Common Stock of that
Subsidiary in the same proportions as their relative ownership of the Common
Stock of that Subsidiary.
Limitation on Liens. Diamond will not, and will not cause or permit any of
its Restricted Subsidiaries to, directly or indirectly, create, incur, assume or
permit or suffer to exist any Liens (other than Permitted Liens) securing any
Indebtedness of any kind against or upon any property or assets of Diamond or
any of its Restricted Subsidiaries whether owned on the Issue Date or acquired
after the Issue Date, 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 those Liens, and
(2) in all other cases, the Notes are equally and ratably secured.
Merger, Consolidation and Sale of Assets. Diamond will not, in a single
transaction or series of related transactions, consolidate or merge with or into
any Person, or sell, assign, transfer, lease, convey or otherwise dispose of (or
cause or permit any Subsidiary of Diamond to sell, assign, transfer, lease,
convey or otherwise dispose of) all or substantially all of Diamond's assets
(determined on a consolidated basis for Diamond and its Subsidiaries) whether as
an entirety or substantially as an entirety to any Person unless:
(1) either:
(A) Diamond will be the surviving or continuing corporation, or
(B) the Person (if other than Diamond) formed by the consolidation or
into which Diamond is merged or the Person which acquires by
sale, assignment, transfer, lease, conveyance or other
disposition the properties and assets of Diamond and of Diamond's
Subsidiaries substantially as an entirety (the "Surviving
Entity"):
(i) will be a corporation, limited liability company or similar
entity organized and validly existing under the laws of the
United States or any State thereof or the District of
Columbia, and
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(ii) will expressly assume, by supplemental indenture (in form
and substance satisfactory to the Trustee), executed and
delivered to the Trustee, the due and punctual payment of
the principal of, and premium, if any and interest on all of
the Notes and the performance of every covenant of the Notes
and the indenture to be performed or observed by Diamond;
(2) immediately after giving effect to the transaction and the assumption
contemplated by clause (1)(B)(ii) above (including giving effect to
any Indebtedness and Acquired Indebtedness incurred or anticipated to
be incurred in connection with or in respect of the transaction),
Diamond or the Surviving Entity, as the case may be,
(A) will have a Consolidated Net Worth equal to or greater than
Diamond's Consolidated Net Worth immediately prior to the
transaction, and
(B) will be able to incur at least $1.00 of additional Indebtedness
(other than Permitted Indebtedness) pursuant to the covenant
described under "-- Limitation on Incurrence of Additional
Indebtedness;"
(3) immediately before and immediately after giving effect to the
transaction and the assumption contemplated by clause (1)(B)(ii))
above (including, without limitation, giving effect to any
Indebtedness and Acquired Indebtedness incurred or anticipated to be
incurred and any Lien granted in connection with or in respect of the
transaction), no Default or Event of Default will have occurred or be
continuing, and
(4) Diamond or the Surviving Entity will have delivered to the Trustee an
officers' certificate and an opinion of counsel, each stating that the
consolidation, merger, sale, assignment, transfer, lease, conveyance
or other disposition and, if a supplemental indenture is required in
connection with the transaction, the supplemental indenture, comply
with the applicable provisions of the indenture 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 or assets of one or more Subsidiaries of
Diamond the Capital Stock of which constitutes all or substantially all of the
properties and assets of Diamond, will be deemed to be the transfer of all or
substantially all of the properties and assets of Diamond.
The foregoing provisions shall not apply to:
(1) any transfer of the properties or assets of a Subsidiary of Diamond to
Diamond or to a Wholly Owned Restricted Subsidiary of Diamond,
(2) any merger of a Restricted Subsidiary of Diamond into Diamond, or
(3) any merger of Diamond into a Restricted Subsidiary of Diamond.
In addition, the requirements of clause (2)(B) of the first paragraph under
this caption shall not apply to any merger into Diamond of a Person that:
(1) owns more than 50% of the outstanding Common Stock of Diamond, and
(2) has no Indebtedness (other than any guarantees of Indebtedness of
Diamond and the Subsidiary Guarantors).
The indenture provides that upon any consolidation, combination or merger
or any transfer of all or substantially all of Diamond's assets in accordance
with the foregoing, in which Diamond is not the continuing corporation, the
successor Person formed by the consolidation or into which Diamond is merged or
to which that conveyance, lease or transfer is made will succeed to, and be
substituted for, and may exercise every right and power of, Diamond under the
indenture and the Notes with the same effect as if the surviving entity had been
named as such.
Each Subsidiary Guarantor (other than any Subsidiary Guarantor whose
Guarantee is to be released in accordance with the terms of its Guarantee and
the indenture in connection with any transaction complying with the
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provisions of "--Limitation on Asset Sales" or as otherwise provided in the
indenture) will not, and Diamond will not cause or permit any Subsidiary
Guarantor to, consolidate with or merge into any Restricted Subsidiary of
Diamond that is not a Subsidiary Guarantor unless that Restricted Subsidiary (if
that Restricted Subsidiary is the surviving entity) assumes by supplemental
indenture all of the obligations of the Subsidiary Guarantor in respect of its
Guarantee.
Limitations on Recapitalization with Affiliates. Diamond will not, and will
not permit any of its Restricted Subsidiaries to, directly or indirectly, enter
into 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
(each an "Affiliate Transaction"), other than:
(1) Affiliate Recapitalization permitted below, and
(2) Affiliate Recapitalization on terms that are no less favorable than
those that could reasonably be expected to be obtained in a comparable
transaction at that time on an arm's-length basis from a Person that
is not an Affiliate of Diamond or a Restricted Subsidiary.
All Affiliate Recapitalization (and each series of related Affiliate
Recapitalization which are similar or part of a common plan), other than
Affiliate Recapitalization permitted below, involving consideration to either
party in excess of $1.0 million must be approved by the Board of Directors of
Diamond or the relevant Restricted Subsidiary, as the case may be, that approval
to be evidenced by a Board Resolution stating that the Board of Directors has
determined that the transaction complies with the foregoing provisions. If
Diamond or any Restricted Subsidiary of Diamond enters into an Affiliate
Transaction (or a series of related Affiliate Recapitalization related to a
common plan), other than Affiliate Recapitalization permitted below, that
involves aggregate consideration to either party of more than $5.0 million,
Diamond or the relevant Restricted Subsidiary, as the case may be, must, prior
to the consummation of that related transaction, obtain a favorable opinion as
to the fairness of that related transaction or series of related transactions to
Diamond or the relevant Restricted Subsidiary, as the case may be, from a
financial point of view, from an Independent Financial Advisor and file the
opinion with the Trustee.
The foregoing limitations on Affiliate Recapitalization do not apply to:
(1) compensation, indemnification and other benefits paid or made
available:
(A) pursuant to the Employment Agreements, or
(B) for or in connection with services actually rendered and
comparable to those generally paid or made available by entities
engaged in the same or similar businesses (including
reimbursement or advancement of reasonable out-of-pocket
expenses, loans to officers, directors and employees in the
ordinary course of business consistent with past practice and
directors' and officers' liability insurance) as determined in
good faith by Diamond's Board of Directors or senior management;
(2) transactions, expenses and payments pursuant to the terms of or
contemplated by the Stockholders Agreement, the Management
Subscription and Stockholders Agreements or the Stock Purchase
Agreement;
(3) any Restricted Payments or other payments or transactions expressly
permitted under the covenant discussed above under "Limitation on
Restricted Payments;"
(4) payments for services and reimbursement of reasonable expenses under
the Management Services Agreement;
(5) payments to be made in connection with the consummation of the
transactions contemplated by the Stock Purchase Agreement or the
financing of those transactions to be received by LGP, and its
Affiliates pursuant to the Stock Purchase Agreement as in effect on
the Issue Date;
(6) transactions and payments pursuant to leases between Diamond and
Richard Rutta and Kenneth Levine, General Partnership in effect on the
Issue Date as any of those leases may be extended or amended from time
to time;
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(7) transactions between or among Diamond and any of its Restricted
Subsidiaries or between or among any Restricted Subsidiaries; provided
that those transactions are not otherwise prohibited by the indenture;
(8) Permitted Investments; and
(9) loans or advances to Diamond's officers or employees in the ordinary
course of business not to exceed $500,000 in the aggregate at any one
time outstanding.
Future Guarantors. The indenture provides that Diamond will cause any
Person that becomes a Wholly Owned Restricted Subsidiary of Diamond and has
total assets having a book value of more than $50,000, and each future
non-Wholly Owned Restricted Subsidiary of Diamond that guarantees any other
Indebtedness of Diamond or a Subsidiary Guarantor, to become a Subsidiary
Guarantor by executing and delivering an appropriate supplemental indenture. See
"--The Guarantees." In addition, other Restricted Subsidiaries of Diamond may,
but are not required, to become Subsidiary Guarantors.
Conduct of Business. Diamond and its Restricted Subsidiaries will not
engage in any businesses other than a Related Business.
Reports to Holders. Notwithstanding that Diamond may not be subject to the
reporting requirements of Section 13 or 15(d) of the Exchange Act, so long as
any Notes remain outstanding, Diamond will provide the Trustee, the Noteholders
and the Initial Purchasers with the annual reports and the information,
documents and other reports (other than exhibits) as are specified in Sections
13 and 15(d) of the Exchange Act and applicable to a U.S. corporation subject to
those Sections, such information, documents and other reports to be so provided
within 15 days after the times specified for the filing of such information,
documents and reports under those Sections. Notwithstanding that Diamond may not
be subject to the reporting requirements of Section 13 or 15(d) of the Exchange
Act, Diamond will, beginning on the earlier of (x) the effective date of the
Exchange Offer Registration Statement and (y) 730 days following the Issue Date,
file with the Commission, to the extent permitted, the annual reports and the
information, documents and other reports as are specified in Sections 13 and
15(d) of the Exchange Act and applicable to a U.S. corporation subject to those
Sections, such information, documents and other reports to be so filed within 15
days after the times specified for the filing of such information, documents and
reports under those Sections. In addition, Diamond will make available, upon
request, to any holder of Notes and any prospective purchaser of Notes the
information required pursuant to Rule 144A(d)(4) under the Securities Act.
Events of Default
The following events are defined in the indenture as "Events 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;
(2) the failure to pay the principal on any Notes, when that principal
becomes due and payable, at maturity, upon redemption or otherwise
(including the failure to make a required payment to purchase Notes
tendered pursuant to a Change of Control Offer or a Net Proceeds
Offer);
(3) Diamond's failure to comply with the provisions described under
"--Certain Covenants--Merger, Consolidation and Sales of Assets";
(4) 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 Diamond 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;
(5) the failure to pay at final maturity (giving effect to any applicable
grace periods and any extensions of those grace periods) the principal
amount of any Indebtedness of Diamond or any Restricted Subsidiary of
Diamond, or the acceleration of the final stated maturity of any
Indebtedness by reason of a default or event of default in respect of
that Indebtedness, in any case if the aggregate principal amount of
that Indebtedness, together with the principal amount of any
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other that Indebtedness in default for failure to pay principal at
final maturity or which has been so accelerated, aggregates $5.0
million or more at any time;
(6) one or more judgments in an aggregate amount in excess of $5.0 million
will have been rendered against Diamond or any of its Restricted
Subsidiaries and those judgments remain undischarged, unpaid or
unstayed for a period of 60 days after those judgment or judgments
become final and non-appealable;
(7) certain events of bankruptcy affecting Diamond or any of its
Significant Subsidiaries; or
(8) the Guarantee of any Subsidiary Guarantor is held by a final
non-appealable order or judgment of a court of competent jurisdiction
to be unenforceable or invalid or ceases for any reason to be in full
force and effect (other than in accordance with the terms of the
indenture) or any Subsidiary Guarantor or any Person acting on behalf
of any Subsidiary Guarantor denies or disaffirms that Subsidiary
Guarantor's obligations under its Guarantee (other than by reason of a
release of that Subsidiary Guarantor from its Guarantee in accordance
with the terms of the indenture).
If an Event of Default (other than an Event of Default specified in clause
(7) above) occurs and is continuing, the Trustee or the holders of at least 25%
in principal amount of outstanding Notes may declare the principal of and
accrued and unpaid interest on all the Notes to be due and payable by notice in
writing to Diamond and the Trustee specifying the respective Event of Default
and that it is a "notice of acceleration" (the "Acceleration Notice"), and the
same shall become immediately due and payable. If an Event of Default specified
in clause (7) above occurs and is continuing, then all unpaid principal of, and
premium, if any, and accrued and unpaid interest on all of the outstanding Notes
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 that 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 the payment of that interest is lawful, 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 Diamond has paid the Trustee its reasonable compensation and
reimbursed the Trustee for its reasonable 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 (7) of the description above of Events of Default,
the Trustee will have received an officers' certificate and an opinion
of counsel that the relevant Event of Default has been cured or
waived.
No rescission will affect any subsequent Default or impair any right
consequent thereto.
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, premium, if any, or
interest on any Notes.
Subject to the provisions of the indenture relating to the duties of the
Trustee, the Trustee is under no obligation to exercise any of its rights or
powers under the indenture at the request, order or direction of any of the
holders of the Notes, unless the holders have offered to the Trustee reasonable
indemnity. Subject to all provisions of the indenture and applicable law, the
holders of a majority in aggregate principal amount of the then outstanding
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Notes have the right to direct the time, method and place of conducting any
proceeding for any remedy available to the Trustee or exercising any trust or
power conferred on the Trustee.
No holder of any Notes will have any right to institute any proceeding with
respect to the indenture or for any remedy under the indenture, unless:
(1) The Holder gives the Trustee written notice of a continuing Event of
Default;
(2) Holders of at least 25% in principal amount of the then outstanding
Notes make a written request to pursue the remedy;
(3) The holders of the Notes provide to the Trustee satisfactory
indemnity;
(4) the Trustee does not comply within 60 days; and
(5) during that 60 day period the holders of a majority in principal
amount of the outstanding Notes do not give the Trustee a written
direction which, in the opinion of the Trustee, is inconsistent with
the request. Otherwise, no holder of any Note will have any right to
institute any proceeding with respect to the indenture or for any
remedy under the indenture, except (i) a holder of a Note may
institute suit for enforcement of payment of the principal of and
premium, if any, or interest on the Note on or after the respective
due dates expressed in the Note or (ii) the institution of any
proceeding with respect to the indenture or any remedy under the
indenture, including, without limitation, acceleration, by the Holders
of a majority in principal amount of the outstanding Notes; provided
that upon institution of any proceeding or exercise of any remedy,
those holder or Holders provide the Trustee with prompt notice.
Under the indenture, Diamond is required to provide an officers'
certificate to the Trustee promptly upon any those officer obtaining knowledge
of any Default or Event of Default (provided that those officers will provide
the certification at least annually whether or not they know of any Default or
Event of Default) that has occurred and is continuing and, if applicable,
describe the relevant Default or Event of Default and the status that Default or
Event of Default.
Legal Defeasance and Covenant Defeasance
Diamond may, at its option and at any time, elect to have its obligations
discharged with respect to the outstanding Notes ("Legal Defeasance"). This
Legal Defeasance means that Diamond 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
those payments are due,
(2) Diamond'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
Diamond's obligations in connection therewith, and
(4) the Legal Defeasance provisions of the indenture.
In addition, Diamond may, at its option and at any time, elect to have its
obligations 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.
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In order to exercise either Legal Defeasance or Covenant Defeasance:
(1) Diamond 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 those
amounts as will be sufficient, in the opinion of a nationally
recognized firm of independent public accountants, to pay the
principal of, premium, if any, and interest on the Notes on the stated
date for payment thereof or on the applicable redemption date, as the
case may be;
(2) in the case of Legal Defeasance, Diamond will have delivered to the
Trustee an opinion of counsel in the United States reasonably
acceptable to the Trustee to the effect that:
(A) Diamond has received from, or there has been published by, the
Internal Revenue Service a ruling or;
(B) since the Issue Date, there has been a change in the applicable
federal income tax law, in either case to the effect that, and
based on that change the opinion of counsel will state that, the
holders of Notes will not recognize income, gain or loss for
federal income tax purposes as a result of the 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 that Legal Defeasance had not occurred;
(3) in the case of Covenant Defeasance, Diamond will have delivered to the
Trustee an opinion of counsel in the United States reasonably
acceptable to the Trustee to the effect that the holders of the Notes
will not recognize income, gain or loss for federal income tax
purposes as a result of that 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 that Covenant Defeasance
had not occurred;
(4) the Trustee will have received an officers' certificate stating that:
(A) no Default or Event of Default has occurred and is continuing on
the date of the deposit or insofar as Events of Default from
bankruptcy or insolvency events are concerned, at any time in the
period ending on the 91st day after the date of deposit;
(B) the Legal Defeasance or Covenant Defeasance will not result in a
breach or violation of, or constitute a default under the
indenture or any other material agreement or instrument to which
Diamond or any of its Subsidiaries is a party or by which Diamond
or any of its Subsidiaries is bound (and in that connection, the
Trustee will have received a certificate from the agent under the
Bank Facility to that effect with respect to the Bank Facility
then in effect);
(C) Diamond did not make the deposit with the intent of preferring
the holders of the Notes over any other creditors of Diamond or
any Subsidiary of Diamond or with the intent of defeating,
hindering, delaying or defrauding any other creditors of Diamond
or others;
(5) Diamond will have delivered to the Trustee an officers' certificate
and an opinion of counsel, each stating that all conditions precedent
provided for or relating to the Legal Defeasance or the Covenant
Defeasance have been complied with;
(6) Diamond will have delivered to the Trustee an opinion of counsel to
the effect that 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
(7) 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:
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(1) either:
(A) all the Notes theretofore authenticated and delivered (except
lost, stolen or destroyed Notes which have been replaced or paid
and Notes for whose payment money has theretofore been deposited
in trust or segregated and held in trust by Diamond and
thereafter repaid to Diamond or discharged from such trust) have
been delivered to the Trustee for cancellation, or
(B) all the Notes not theretofore delivered to the Trustee for
cancellation have become due and payable, or will be due and
payable within one year or are to be called for redemption within
one year under arrangements satisfactory to the Trustee for the
giving of notice of redemption, and Diamond has irrevocably
deposited or caused to be deposited with the Trustee funds or
certain direct, non-callable obligations of, or guaranteed by,
the United States sufficient to pay and discharge the entire
Indebtedness on the Notes not theretofore delivered to the
Trustee for cancellation, for principal of, premium, if any, and
interest on the Notes to the earlier of the stated maturity or
the redemption date together with irrevocable instructions from
Diamond directing the Trustee to apply those funds and/or the
proceeds of such direct, non-callable obligations to the payment
thereof at maturity or redemption, as the case may be;
(2) Diamond has paid all other sums payable under the indenture by
Diamond; and
(3) Diamond has delivered to the Trustee an officers' certificate stating
that all conditions precedent under the indenture relating to the
satisfaction and discharge of the indenture have been complied with.
Modification of the Indenture
From time to time, Diamond and the Trustee, without the consent of the
holders of the Notes, may amend the indenture or the Notes for certain specified
purposes, including curing ambiguities, defects or inconsistencies, so long as
the change does not, in the opinion of the Trustee, adversely affect the rights
of any of the holders of the Notes in any material respect. In formulating its
opinion on these matters, the Trustee will be entitled to rely on any evidence
it considers appropriate, including, without limitation, solely on an opinion of
counsel. Other modifications and amendments of the indenture or the Notes 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 affected thereby, no amendment may:
(1) reduce the amount of Notes whose holders must consent to an amendment
or waiver;
(2) reduce the rate of 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 reduce the redemption price therefor;
(4) make any Notes payable in money other than that stated in the Notes;
(5) make any change in provisions of the indenture entitling each holder
of the Notes to receive payment of principal of and interest on those
Note on or after the due date thereof or to bring suit to enforce that
payment, or permitting Holders of a majority in principal amount of
Notes to waive Defaults or Events of Default; or
(6) amend, change or modify in any material respect the obligation of
Diamond to make and consummate a Change of Control Offer in respect of
a Change of Control that has occurred or make and consummate a Net
Proceeds Offer with respect to any Asset Sale that has been
consummated.
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Governing Law
The indenture and the Notes are 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 law of
another jurisdiction would be required thereby.
The Trustee
The indenture provides that, except during the continuance of an Event of
Default, the Trustee will perform only those duties as are specifically set
forth in the indenture. During the existence of an Event of Default, the Trustee
will exercise those rights and powers vested in it by the indenture, and use the
same degree of care and skill in its exercise as a prudent man would exercise or
use under the circumstances in the conduct of his own affairs.
The indenture and the provisions of the TIA contain certain limitations on
the rights of the Trustee, should it become a creditor of Diamond, to obtain
payments of claims in certain cases or to realize on certain property received
in respect of any claim as security or otherwise. Subject to the TIA, the
Trustee will be permitted to engage in other transactions; provided that if the
Trustee acquires any conflicting interest as described in the TIA, it must
eliminate that conflict or resign.
Payments for Consent
Neither Diamond nor any of its Subsidiaries will, directly or indirectly,
pay or cause to be paid any consideration, whether by way of interest, fee or
otherwise, to any holder of any Notes for or as an inducement to any consent,
waiver or amendment of any terms or provisions of the Notes, unless that
consideration is offered to be paid or agreed to be paid to all holders of the
Notes which so consent, waive or agree to amend in the time frame set forth in
the solicitation documents relating to such consent, waiver or agreement.
Certain Definitions
Set forth below is a summary of certain of the defined terms used in the
indenture. You should refer to the indenture for the full definition of all of
these terms, as well as any other terms used herein for which no definition is
provided.
"Acquired Indebtedness" means Indebtedness:
(1) of a Person or any of its Subsidiaries existing at the time that
Person becomes a Restricted Subsidiary of Diamond or at the time it
merges or consolidates with Diamond or any of its Restricted
Subsidiaries; or,
(2) assumed in connection with the acquisition of assets from that Person,
and in each case not incurred in connection with, or in anticipation
or contemplation of, that acquisition, merger or consolidation.
Acquired Indebtedness will be deemed to have been incurred:
(1) at the time a Person becomes a Restricted Subsidiary of Diamond; or
(2) at the time a Person merges or consolidates with Diamond or a
Restricted Subsidiary of Diamond; or
(3) at the time that Indebtedness is assumed in connection with the
acquisition of assets from that Person.
"Affiliate" means, with respect to any specified Person, any other Person
who directly or indirectly through one or more intermediaries controls, or is
controlled by, or is under common control with, that specified Person. The term
"control" means the possession, directly or indirectly, of the power to direct
or cause the direction of the
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management and policies of a Person, whether through the ownership of voting
securities, by contract or otherwise; and the terms "controlling" and
"controlled" have meanings correlative of the foregoing.
"Asset Acquisition" means:
(1) an Investment by Diamond or any Restricted Subsidiary of Diamond
in any other Person pursuant to which that Person will become a
Restricted Subsidiary of Diamond, or is merged with or into
Diamond or any Restricted Subsidiary of Diamond; or
(2) the acquisition by Diamond or any Restricted Subsidiary of
Diamond of the assets of any Person (other than a Subsidiary of
Diamond) which constitute all or substantially all of the assets
of that Person or comprise 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 Diamond or any of its
Restricted Subsidiaries (including any Sale and Leaseback Transaction) to any
Person other than Diamond or a Restricted Subsidiary of Diamond (including a
Person that is or will become a Restricted Subsidiary of Diamond immediately
after that sale, issuance, conveyance, transfer, lease, assignment or other
transfer for value) of:
(1) any Capital Stock of any Restricted Subsidiary of Diamond; or
(2) any other property or assets (other than cash or Cash
Equivalents) of Diamond or any Restricted Subsidiary of Diamond
other than in the ordinary course of business.
This definition of Asset Sales does not include:
(1) a transaction or series of related transactions for which Diamond
or its Restricted Subsidiaries receive aggregate consideration of
less than $500,000; and
(2) the sale, lease, conveyance, disposition or other transfer of all
or substantially all of the assets of Diamond as permitted under
"--Certain Covenants--Merger, Consolidation and Sale of Assets."
"Bank Facility" means the credit agreement dated as of March 31, 1998 among
Diamond, the lenders named therein and Bankers Trust Company, as Administrative
Agent, and all amendments thereto, together with the related documents thereto
(including, without limitation, any guarantee agreements and security
documents), in each case as these agreements may be amended (including any
amendment and restatement thereof), supplemented or otherwise modified from time
to time by one or more credit agreements, including any agreement adding
Subsidiaries of Diamond as additional borrowers or guarantors thereunder or
extending the maturity of, refinancing, replacing or otherwise restructuring all
or any portion of the Indebtedness under these agreement(s) or any successor or
replacement agreement(s) and whether by the same or any other agent, lender or
group of lenders.
"Board of Directors" means, as to any Person, the board of directors of
that Person or any duly authorized committee thereof.
"Board Resolution" means, with respect to any Person, a copy of a
resolution certified by the Secretary or an Assistant Secretary of that Person
to have been duly adopted by the Board of Directors of that Person and to be in
full force and effect on the date of certification, and delivered to the
Trustee.
"Capitalized Lease Obligations" 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 these obligations at any date will be the capitalized amount of
such obligations at such date, determined in accordance with GAAP.
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"Capital Stock" means:
(1) with respect to any Person that is a corporation, any and all
shares, interests, participations or other equivalents (however
designated and whether or not voting) 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 or ownership 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;
(2) marketable direct obligations issued by any state of the United
States of America or any political subdivision of any state or
any public instrumentality maturing within one year from the date
of acquisition and, at the time of acquisition, having one of the
two highest ratings obtainable from either Standard & Poor's
Corporation ("S&P") or Moody's Investors Service, Inc.
("Moody's");
(3) commercial paper maturing no more than one year from the date of
creation 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 maturing within
one year from the date of acquisition issued by any bank
organized under the laws of the United States of America or any
state or the District of Columbia or any U.S. branch of a foreign
bank having at the date of acquisition combined capital and
surplus of not less than $250.0 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 Diamond's assets if, immediately after giving effect to those
transaction(s), any Person or group of related Persons (other
than Permitted Holders) for purposes of Section 13(d) of the
Exchange Act (a "Group"), is or becomes the beneficial owner,
directly or indirectly, of shares representing more than 50% of
the aggregate ordinary voting power represented by the issued and
outstanding Capital Stock of the transferee or surviving entity;
(2) any Person or Group (other than Permitted Holders) will become
the beneficial owner, directly or indirectly, of shares
representing more than 50% of the aggregate ordinary voting power
represented by Diamond's issued and outstanding Capital Stock;
(3) the replacement after the Issue Date of a majority of Diamond's
Board of Directors over a two-year period after the Issue Date
from the directors who constituted Diamond's Board of Directors
at the beginning of that period, and the replacement will not
have been approved by a vote of at least a majority of Diamond's
Board of Directors then still in
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office who either were members of that Board of Directors at the
beginning of that period or whose election as a member of such
Board of Directors was previously so approved; or
(4) Diamond consolidates with, or merges with or into, another
Person, or sells, assigns, conveys, transfers, leases or
otherwise disposes of all or substantially all of its assets to
any Person, or any Person consolidates with, or merges with or
into, Diamond, in any such event pursuant to a transaction in
which the shares representing the aggregate ordinary voting power
represented by Diamond's issued and outstanding Capital Stock is
converted into or exchanged for cash, securities or other
property, other than:
(A) any transaction where:
(i) the shares representing Diamond's issued and
outstanding ordinary voting Capital Stock are converted
into or exchanged for:
o ordinary voting Capital Stock (other than
Disqualified Capital Stock) of the surviving or
transferee corporation, and/or
o cash, securities and other property in an amount
which could be paid by Diamond as a Restricted
Payment under the indenture; and
(ii) the "beneficial owners" of the shares representing
Diamond's issued and outstanding ordinary voting
Capital Stock immediately prior to that transaction
own, directly or indirectly, shares of Capital Stock
representing not less than a majority of voting power
of all issued and outstanding shares of Capital Stock
of the surviving or transferee corporation immediately
after that transaction; or
(B) any transaction as a result of which the Permitted Holders
own shares of Capital Stock representing more than 50% of
the voting power of all issued and outstanding shares of
Capital Stock of the surviving or transferee corporation
immediately after that transaction.
"Change of Control Offer" has the meaning set forth under "--Change of
Control."
"Change of Control Payment Date" has the meaning set forth under "--Change
of Control."
"Commission" means the Securities and Exchange Commission, or any successor
agency thereto with respect to the regulation or registration of securities.
"Common Stock" of any Person means any and all shares, interests or other
participations in, and other equivalents (however designated and whether voting
or non-voting) of that Person's common stock, whether outstanding on the Issue
Date or issued after the Issue Date, and includes, without limitation, all
series and classes of that common stock.
"Consolidated EBITDA" means, 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 Diamond and its Restricted Subsidiaries
paid or accrued in accordance with GAAP for that period;
(B) Consolidated Interest Expense;
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(C) Consolidated Non-cash Charges less any non-cash items
increasing Consolidated Net Income for that period;
(D) executive compensation expense not to exceed $5.0 million
incurred in the fiscal year ended December 31, 1997; and
(E) write-offs in the fiscal year ending December 31, 1998 of
amounts, not to exceed $3.0 million, due from a company
owned by Kenneth Levine and Richard Rutta,] all as
determined on a consolidated basis for Diamond and its
Restricted Subsidiaries in accordance with GAAP.
"Consolidated Fixed Charge Coverage Ratio" means the ratio of Consolidated
EBITDA during the four full fiscal quarters (the "Four Quarter Period") ending
on or prior to the date of the transaction giving rise to the need to calculate
the Consolidated Fixed Charge Coverage Ratio (the "Transaction Date") to
Consolidated Fixed Charges 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 or repayment of any Indebtedness of Diamond 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), other than the
incurrence or repayment of Indebtedness in the ordinary course of
business for working capital purposes pursuant to working capital
facilities, 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; and
(2) 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 Diamond 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
including, without limitation, by giving pro forma effect to any
Consolidated EBITDA (provided that pro forma Consolidated EBITDA
will be calculated in a manner consistent with the exclusions in
the definition of "Consolidated Net Income") 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 Acquired
Indebtedness) occurred on the first day of the Four Quarter
Period. If Diamond or any of its Restricted Subsidiaries directly
or indirectly guarantees Indebtedness of a third Person, the
preceding sentence will give effect to the incurrence of that
guaranteed Indebtedness as if Diamond or any of its Restricted
Subsidiaries had directly incurred or otherwise assumed that
guaranteed Indebtedness.
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 will be deemed to have accrued at a fixed
rate per annum equal to the rate of interest on that 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
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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 that interest is
covered by agreements relating to Interest Swap Obligations, will
be deemed to accrue at the rate per annum resulting after giving
effect to the operation of those agreements.
"Consolidated Fixed Charges" means, for any period, the sum, without
duplication, of:
(1) Consolidated Interest Expense (excluding any amortization or
write off of deferred financing costs), plus
(2) the product of:
(A) the amount of all dividend payments on any series of
Diamond's Preferred Stock (other than dividends paid in
Qualified Capital Stock) paid, accrued or scheduled to be
paid or accrued during that period
- times -
(B) a fraction, the numerator of which is one and the
denominator of which is one minus Diamond's then current
effective consolidated federal, state and local tax rate,
expressed as a decimal.
"Consolidated Interest Expense" means, for any period, the sum of, without
duplication:
(1) the aggregate of the interest expense of Diamond and its
Restricted Subsidiaries for that period determined on a
consolidated basis in accordance with GAAP, including, without
limitation:
(A) any amortization of debt discount and any amortization or
write off of deferred financing costs;
(B) the net costs under Interest Swap Obligations;
(C) all capitalized interest; and
(D) the interest portion of any deferred payment obligation;
and
(2) the interest component of Capitalized Lease Obligations paid,
accrued and/or scheduled to be paid or accrued by Diamond and its
Restricted Subsidiaries during that period as determined on a
consolidated basis in accordance with GAAP.
"Consolidated Net Income" means, for any period, the aggregate net income
(or loss) of Diamond and its Restricted Subsidiaries for that period on a
consolidated basis, determined in accordance with GAAP; provided that there
shall be excluded therefrom:
(1) net after-tax gains from Asset Sales or abandonments or reserves
relating thereto,
(2) net after-tax items classified as extraordinary or nonrecurring
gains or losses,
(3) the net income of any Person acquired in a "pooling of interests"
transaction accrued prior to the date it becomes a Restricted
Subsidiary of Diamond or is merged or consolidated with Diamond
or any Restricted Subsidiary of Diamond,
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(4) the net income (but not loss) of any Restricted Subsidiary of
Diamond to the extent that the declaration of dividends or
similar distributions by that Subsidiary of that income is
restricted by contract, operation of law or otherwise,
(5) the net income of any Person, other than a Restricted Subsidiary
of Diamond, except to the extent of cash dividends or
distributions paid to Diamond or to a Restricted Subsidiary of
Diamond by that Person,
(6) any restoration to income of any contingency reserve, except to
the extent that provision for such reserve was made out of
Consolidated Net Income accrued at any time following the Issue
Date, and
(7) income or loss attributable to discontinued operations
(including, without limitation, operations disposed of during
such period whether or not those operations were classified as
discontinued).
"Consolidated Net Worth" of any Person means the consolidated stockholders'
equity of that Person, determined on a consolidated basis in accordance with
GAAP, less (without duplication) amounts attributable to Disqualified Capital
Stock of that Person.
"Consolidated Non-cash Charges" means, for any period, the aggregate
depreciation, amortization and other non-cash expenses of Diamond and its
Restricted Subsidiaries reducing Consolidated Net Income of Diamond and its
Restricted Subsidiaries for that period, determined on a consolidated basis in
accordance with GAAP (excluding any charges constituting an extraordinary item
or loss or any charge which requires an accrual of or a reserve for cash charges
for any future period).
"Covenant Defeasance" has the meaning set forth under "--Legal Defeasance
and Covenant Defeasance."
"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.
"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 at the option of the holder thereof), or upon the
happening of any event, matures or is mandatorily redeemable, pursuant to a
sinking fund obligation or otherwise, or is redeemable at the sole option of the
holder thereof, in any case, on or prior to the final maturity date of the
Notes. Notwithstanding the foregoing, in no event will the Senior Preferred
Stock be deemed to be Disqualified Capital Stock.
"Employment Agreements" means the employment agreements, dated as of the
Issue Date, between Diamond and each of Kenneth Levine, Richard Rutta, Norman
Harris and Michael Sumsky, as any of these agreements may be extended or amended
from time to time to the extent that any extension or amendment does not have
the effect of increasing in any material respect the payments permitted to be
made under agreements pursuant to "--Certain Covenants--Limitation on
Recapitalization with Affiliates."
"Exchange Act" means the Securities Exchange Act of 1934, as amended, or
any successor statute or statutes thereto.
"fair market value" means, 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 transaction. Fair market value will
be determined by Diamond's Board of Directors acting reasonably and in good
faith and will be evidenced by a Board Resolution of Diamond's Board of
Directors delivered to the Trustee.
"GAAP" means generally accepted accounting principles 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 any other statements by any other
entity as may
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be approved by a significant segment of the accounting profession of the United
States, which are in effect as of the Issue Date.
"Indebtedness" means with respect to any Person, without duplication:
(1) the principal amount (or, if less, the accreted value) of all
obligations of that Person for borrowed money,
(2) the principal amount (or, if less, the accreted value) of all
obligations of that Person evidenced by bonds, debentures, notes
or other similar instruments,
(3) all Capitalized Lease Obligations of that Person,
(4) all obligations of that 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 and other accrued liabilities
arising in the ordinary course of business that are not overdue
by 90 days or more or are being contested in good faith by
appropriate proceedings promptly instituted and diligently
conducted),
(5) all obligations of that Person for the reimbursement of any
obligor on any letter of credit, banker's acceptance or similar
credit transaction,
(6) guarantees and other contingent obligations of that Person in
respect of Indebtedness referred to in clauses (1) through (5)
above and clause (8) below,
(7) all Indebtedness 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 that Person, the amount of that Indebtedness
being deemed to be the lesser of the fair market value of that
property or asset or the amount of the Indebtedness so secured,
(8) all obligations under currency agreements and interest swap
agreements of such Person, and
(9) all Disqualified Capital Stock issued by that Person with the
amount of Indebtedness represented by that 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, the
"maximum fixed repurchase price" of any Disqualified Capital
Stock which does not have a fixed repurchase price will be
calculated in accordance with the terms of that Disqualified
Capital Stock as if that Disqualified Capital Stock were
purchased on any date on which Indebtedness will be required to
be determined pursuant to the indenture, and if that price is
based upon, or measured by, the fair market value of that
Disqualified Capital Stock, that fair market value that be
determined reasonably and in good faith by the Board of Directors
of the issuer of that Disqualified Capital Stock.
"Independent Financial Advisor" means an accounting firm, appraisal firm,
investment banking firm or consultant to Persons engaged in a Related Business,
in each case, of nationally recognized standing that is, in the judgment of
Diamond's Board of Directors, qualified to perform the task for which it has
been engaged.
"Interest Swap Obligations" means the obligations of any Person pursuant to
any arrangement with any other Person whereby, directly or indirectly, that
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 the other Person calculated by
applying a fixed or a floating rate of interest on the same notional amount and
shall include, without limitation, interest rate swaps, caps, floors, collars
and similar agreements.
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"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 that Person of any Capital Stock,
bonds, notes, debentures or other securities or evidences of Indebtedness issued
by, any Person. "Investment" will exclude accounts receivable or deposits
arising in the ordinary course of business. For purposes of the "Limitation on
Restricted Payments" covenant, "Investment" will include and be valued at the
fair market value of the net assets of any Restricted Subsidiary of Diamond at
the time that the Restricted Subsidiary is designated an Unrestricted
Subsidiary. If Diamond or any Restricted Subsidiary of Diamond sells or
otherwise disposes of any Common Stock of any direct or indirect Restricted
Subsidiary of Diamond so that, after giving effect to any the sale or
disposition, that Restricted Subsidiary would cease to be a Subsidiary of
Diamond, Diamond will be deemed to have made an Investment on the date of that
sale or disposition equal to the fair market value of the Common Stock of that
Restricted Subsidiary not sold or disposed of.
"Issue Date" means the date of original issuance of the Notes.
"Legal Defeasance" has the meaning set forth under "--Legal Defeasance and
Covenant Defeasance."
"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).
"Management Services Agreement" means the Management Services Agreement,
dated as of the Issue Date, between Diamond and LGP, substantially as in effect
on the Issue Date.
"Management Subscription and Stockholders Agreements" mean each of the
Management Subscription and Stockholders Agreements, dated as of the Issue Date,
among Diamond, Green Equity Investors II, L.P. and an employee or director of
Diamond and/or one or more of its Subsidiaries, as any of these agreement may be
amended from time to time.
"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
Diamond or any of its Restricted Subsidiaries from that Asset Sale net of:
(1) reasonable out-of-pocket expenses and fees relating to that 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 Indebtedness that is required to be repaid in
connection with that Asset Sale;
(4) appropriate amounts to be provided by Diamond or any Restricted
Subsidiary, as the case may be, as a reserve, in accordance with
GAAP, against any liabilities associated with that Asset Sale and
retained by Diamond or any Restricted Subsidiary, as the case may
be, after that Asset Sale, including, without limitation, pension
and other post-employment benefit liabilities, liabilities
related to environmental matters and liabilities under any
indemnification obligations associated with that Asset Sale; and
(5) that portion of the cash or Cash Equivalents attributable to the
Capital Stock of a Restricted Subsidiary which is not a Wholly
Owned Restricted Subsidiary of Diamond held, directly or
indirectly, by any Person which is not Diamond or a Wholly Owned
Restricted Subsidiary of Diamond.
"Net Proceeds Offer" has the meaning set forth under "--Certain
Covenants--Limitation on Asset Sales."
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"Net Proceeds Offer Amount" has the meaning set forth under "--Certain
Covenants--Limitation on Asset Sales."
"Net Proceeds Offer Payment Date" has the meaning set forth under
"--Certain Covenants--Limitation on Asset Sales."
"Net Proceeds Offer Trigger Date" has the meaning set forth under
"--Certain Covenants--Limitation on Asset Sales."
"Permitted Holders" means Green Equity Investors II, L.P., its Affiliates
and Related Parties and Diamond's senior management on the Issue Date.
"Permitted Indebtedness" means, without duplication, each of the following:
(1) Indebtedness in an aggregate principal amount not to exceed
$100.0 million under the Notes, the Guarantees and the indenture
and any replacement Notes therefor issued pursuant to the
indenture;
(2) Indebtedness of Diamond and the Subsidiary Guarantors incurred
under the Bank Facility in an aggregate principal amount at any
time outstanding not to exceed $35.0 million less the amount of
any permanent prepayments of Indebtedness made with the Net Cash
Proceeds of an Asset Sale pursuant to clause (3) (A) of the first
sentence under "--Certain Covenants--Limitation on Asset Sales;"
(3) other Indebtedness of Diamond and the Subsidiary Guarantors
outstanding on the Issue Date;
(4) Diamond's Interest Swap Obligations covering Indebtedness of
Diamond or any of its Restricted Subsidiaries and Interest Swap
Obligations of any Restricted Subsidiary of Diamond covering
Indebtedness of that Restricted Subsidiary; provided, however,
that those Interest Swap Obligations are entered into to protect
Diamond and its Restricted Subsidiaries from fluctuations in
interest rates on Indebtedness incurred in accordance with the
indenture to the extent the notional principal amount of that
Interest Swap Obligation does not exceed the principal amount of
the Indebtedness to which that Interest Swap Obligation relates;
(5) Indebtedness of a Restricted Subsidiary of Diamond to Diamond or
to a Wholly Owned Restricted Subsidiary of Diamond for so long as
that Indebtedness is held by Diamond or a Wholly Owned Restricted
Subsidiary of Diamond, in each case subject to no Lien securing
Indebtedness other than Permitted Liens; provided that if as of
any date any Person other than Diamond or a Wholly Owned
Restricted Subsidiary of Diamond owns or holds any that
Indebtedness or holds a Lien in respect of such Indebtedness
securing Indebtedness other than Permitted Liens, such date shall
be deemed the incurrence of Indebtedness not constituting
Permitted Indebtedness by the issuer of that Indebtedness;
(6) Indebtedness of Diamond to a Wholly Owned Restricted Subsidiary
of Diamond for so long as that Indebtedness is held by a Wholly
Owned Restricted Subsidiary of Diamond, in each case subject to
no Lien securing Indebtedness other than Permitted Liens;
provided that if as of any date any Person other than a Wholly
Owned Restricted Subsidiary of Diamond owns or holds any
Indebtedness or any Person other than a Wholly Owned Restricted
Subsidiary of Diamond holds a Lien in respect of that
Indebtedness securing Indebtedness other than Permitted Liens,
that date will be deemed the incurrence of Indebtedness not
constituting Permitted Indebtedness by Diamond;
(7) Indebtedness of Diamond or any of its Restricted Subsidiaries
arising from the honoring by a bank or other financial
institution of a check, draft or similar instrument inadvertently
(except in the case of daylight overdrafts) drawn against
insufficient funds
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in the ordinary course of business; provided, however, that such
Indebtedness is extinguished within two business days of
incurrence;
(8) Indebtedness of Diamond or any of its Restricted Subsidiaries
represented by letters of credit for the account of Diamond or
any Restricted Subsidiary, as the case may be, in order to
provide security for workers' compensation claims, payment
obligations in connection with self-insurance or similar
requirements in the ordinary course of business;
(9) Refinancing Indebtedness;
(10) Capitalized Lease Obligations and Purchase Money Indebtedness of
Diamond or any of the Subsidiary Guarantors in an aggregate
principal amount not to exceed $5.0 million at any one time
outstanding; and
(11) additional Indebtedness of Diamond or any of its Restricted
Subsidiaries in an aggregate principal amount not to exceed $10.0
million at any one time outstanding (which amount may, but need
not, be incurred in whole or in part under the Bank Facility);
provided, however, that the Indebtedness of Restricted
Subsidiaries that are not Subsidiary Guarantors permitted by this
clause (11) shall not exceed $2.0 million at any one time
outstanding.
"Permitted Investments" means:
(1) Investments by Diamond or any Restricted Subsidiary of Diamond in
any Person that is or will become, or Investments by Diamond or
any Restricted Subsidiary of Diamond which result in any Person
becoming, in any case, immediately after that Investment, a
Restricted Subsidiary of Diamond or that will merge or
consolidate into Diamond or a Restricted Subsidiary of Diamond;
(2) Investments by any Restricted Subsidiary of Diamond in Diamond;
(3) Investments in cash and Cash Equivalents;
(4) Investments existing as of the Issue Date and any extension,
modification or renewal of that Investment (but not increases
thereof, other than as a result of the accrual or accretion of
interest or original issue discount pursuant to the terms of such
Investment);
(5) transactions or arrangements with officers, directors or
employees of Diamond or any Subsidiary of Diamond entered into in
the ordinary course of business (including compensation or
employee benefit arrangements with any officer or director of
Diamond or any Subsidiary of Diamond permitted under the covenant
"Recapitalization with Affiliates");
(6) Investments received as a result of the bankruptcy or
reorganization of any Person or taken in settlement of or other
resolution of claims or disputes, and, in each case, extensions,
modifications and renewals thereof;
(7) Investments made by Diamond or its Restricted Subsidiaries as a
result of consideration received in connection with an Asset Sale
made in compliance with the covenant described under "--Certain
Covenants--Limitation on Asset Sales" or any exchange of any such
Investment with the issuer thereof, and extensions, modifications
and renewals thereof; and
(8) other Investments not to exceed $2.0 million at any one time
outstanding.
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"Permitted Liens" means the following types of Liens:
(1) Liens securing Indebtedness incurred under the Bank Facility or
pursuant to clause (11) of the definition of Permitted
Indebtedness;
(2) Liens securing letters of credit issued in the ordinary course of
business consistent with past practice in connection with
workers' compensation, unemployment insurance and other types of
social security;
(3) any interest or title of a lessor under any Capitalized Lease
Obligation; provided that those Liens do not extend to any
property or assets which is not leased property subject to that
Capitalized Lease Obligation;
(4) Liens securing Purchase Money Indebtedness of Diamond or any
Restricted Subsidiary of Diamond; provided, however, that (A) the
Purchase Money Indebtedness will not exceed the cost of that
property or assets and shall not be secured by any property or
assets of Diamond or any Restricted Subsidiary of Diamond other
than the property and assets so acquired and (B) the Lien
securing that Indebtedness will be created within 90 days of such
acquisition;
(5) Liens upon specific items of inventory or other goods and
proceeds of any Person securing that Person's obligations in
respect of bankers' acceptances issued or created for the account
of that Person to facilitate the purchase, shipment or storage of
that inventory or other goods;
(6) Liens securing reimbursement obligations with respect to
commercial letters of credit which encumber documents and other
property relating to those letters of credit and products and
proceeds thereof;
(7) Liens securing Interest Swap Obligations which Interest Swap
Obligations relate to Indebtedness that is otherwise permitted
under the indenture;
(8) Liens securing Acquired Indebtedness incurred in accordance with
the covenant described under "--Certain Covenants--Limitation on
Incurrence of Additional Indebtedness"; provided that (A) those
Liens secured that Acquired Indebtedness at the time of and prior
to the incurrence of such Acquired Indebtedness by Diamond or a
Restricted Subsidiary of Diamond and were not granted in
connection with, or in anticipation of, the incurrence of that
Acquired Indebtedness by Diamond or a Restricted Subsidiary of
Diamond and (B) those Liens do not extend to or cover any
property or assets of Diamond or of any of its Restricted
Subsidiaries other than the property or assets that secured the
Acquired Indebtedness prior to the time that Indebtedness became
Acquired Indebtedness of Diamond or a Restricted Subsidiary of
Diamond and are not materially more favorable to the lienholders
than those securing the Acquired Indebtedness prior to the
incurrence of that Acquired Indebtedness by Diamond or a
Restricted Subsidiary of Diamond;
(9) Liens created under the indenture;
(10) Liens of Diamond or a Wholly Owned Restricted Subsidiary of
Diamond on assets of any Restricted Subsidiary of Diamond; and
(11) Liens securing Refinancing Indebtedness which is incurred to
Refinance any 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 (A) are not materially less favorable
to the Holders and are not materially more favorable to the
lienholders with respect to those Liens than the Liens in respect
of
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the Indebtedness being Refinanced and (B) do not extend to or
cover any property or assets of Diamond or any of its
Subsidiaries not securing the Indebtedness so Refinanced.
"Person" means an individual, partnership, corporation, limited liability
company, unincorporated organization, trust or joint venture, or a governmental
agency or political subdivision thereof.
"Preferred Stock" of any Person means any Capital Stock of that Person that
has preferential rights over any other Capital Stock of that Person with respect
to dividends or redemptions or upon liquidation.
"Purchase Money Indebtedness" means Indebtedness of Diamond and its
Restricted Subsidiaries incurred in connection with the purchase of businesses
(including Capital Stock of businesses primarily engaged in a Related Business),
properties or assets for the business of Diamond and its Restricted Subsidiaries
and any Refinancing thereof.
"Qualified Capital Stock" means the Senior Preferred Stock and any other
Capital Stock that is not Disqualified Capital Stock.
"Refinance" means, in respect of any security or Indebtedness, to
refinance, extend, renew, refund, repay, prepay, redeem, defease or retire, or
to issue a security or Indebtedness in exchange or replacement for, such
security or Indebtedness in whole or in part. "Refinanced" and "Refinancing"
shall have correlative meanings.
"Refinancing Indebtedness" means any Refinancing by Diamond or any
Restricted Subsidiary of Diamond of Indebtedness incurred in accordance with the
covenant described under "--Certain Covenants--Limitation on Incurrence of
Additional Indebtedness" (other than pursuant to clause (2), (4), (5), (6), (7),
(8), (10) or (11) of the definition of Permitted Indebtedness), to the extent
that such Refinancing does not:
(1) result in an increase in the aggregate principal amount of the
Indebtedness of the Person as of the date of that proposed
Refinancing (plus the amount of any premium required to be paid
under the terms of the instrument governing that Indebtedness and
plus the amount of reasonable expenses incurred by Diamond in
connection with that Refinancing); or
(2) create Indebtedness with:
(A) a Weighted Average Life to Maturity that is less than the
Weighted Average Life to Maturity of the Indebtedness being
Refinanced; or
(B) a final maturity earlier than the final maturity of the
Indebtedness being Refinanced;
provided that:
(1) if the Indebtedness being Refinanced is Indebtedness solely of
Diamond, then that Refinancing Indebtedness will be Indebtedness
solely of Diamond; and
(2) if that Indebtedness being Refinanced is subordinate or junior to
the Notes, then that Refinancing Indebtedness will be subordinate
to the Notes at least to the same extent and in the same manner
as the Indebtedness being Refinanced.
"Related Business" means a business whose revenues are derived from the
general business conducted by Diamond on the Issue Date or any business or
activity that (in the good faith judgment of Board of Directors of Diamond) is
reasonably related thereto or a reasonable extension, development or expansion
thereof or ancillary thereto.
"Related Party" means, with respect to Green Equity Investors II, L.P., any
partnership, corporation or other Person which is managed or controlled by LGP
or any Affiliate thereof.
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"Restricted Payments" has the meaning set forth under "--Certain
Covenants--Limitation on Restricted Payments."
"Restricted Subsidiary" of Diamond means any Subsidiary of Diamond which at
the time of determination is not an Unrestricted Subsidiary.
"Sale and Leaseback Transaction" means any direct or indirect arrangement
with any Person or to which any Person is a party, providing for the leasing to
Diamond or a Restricted Subsidiary of any property, whether owned by Diamond or
any Restricted Subsidiary at the Issue Date or later acquired, which has been or
is to be sold or transferred by Diamond or that Restricted Subsidiary to such
Person or to any other Person by whom funds have been or are to be advanced on
the security of that Property.
"Senior Preferred Stock" means the Series A 12% Senior Redeemable
Cumulative Preferred Stock of Diamond issued pursuant to the Certificate of
Designations, Preferences and Relative, Participating, Optional and Other
Special Rights of Series A 12% Senior Redeemable Cumulative Preferred Stock, as
in effect on the Issue Date.
"Significant Subsidiary" has the meaning set forth in Rule 1.02(w) of
Regulation S-X under the Securities Act.
"Stock Purchase Agreement" means the Second Amended and Restated Stock
Purchase and Sale Agreement, dated as of January 15, 1998, as amended as of the
Issue Date, by and among VGMC Corp., Green Equity Investors II, L.P., Diamond
Auto Glass Works, Inc., Triumph Auto Glass, Inc., Diamond, A Above Average Glass
Company by Diamond, Inc., A-AA Triumph Auto Glass, Inc., Scranton Holdings,
Inc., Diamond/Triumph Auto Export Sales Co., Inc., A-Auto Glass by Triumph,
Inc., A-Auto Glass Company by Diamond, Inc., Kenneth Levine and Richard Rutta.
"Stockholders Agreement" means the Stockholders Agreement dated as of the
Issue Date among Green Equity Investors II, L.P., Kenneth Levine, Richard Rutta
and Diamond, as that agreement may be amended from time to time, provided that
no such amendment shall have the effect of increasing in any material respect
the cost to Diamond of the transactions, payments or expenses permitted under
such agreement pursuant to "--Certain Covenants--Limitation on Recapitalization
with Affiliates."
"Subordinated Management Fees" means the management fees payable under the
Management Services Agreement, which fees are subordinated in right of payment,
as provided in the Management Services Agreement, to the prior payment in full
in cash of all obligations of Diamond with respect to the Notes, whether for
principal of or interest on the Notes, expenses, indemnification or otherwise.
"Subsidiary," with respect to any Person, means:
(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 that 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 that Person.
"Subsidiary Guarantor" means each future Restricted Subsidiary of Diamond
that executes a supplemental indenture in which that Restricted Subsidiary
agrees to be bound by the terms and provisions of the indenture as a Subsidiary
Guarantor.
"Surviving Entity" has the meaning set forth under "--Certain
Covenants--Merger, Consolidation and Sale of Assets."
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"Unrestricted Subsidiary" means:
(1) any Subsidiary of Diamond that at the time of determination shall
be designated an Unrestricted Subsidiary by Diamond's Board of
Directors in the manner provided below; and
(2) any Subsidiary of an Unrestricted Subsidiary. Diamond's Board of
Directors may designate any Subsidiary of Diamond (including any
newly acquired or newly formed Subsidiary) to be an Unrestricted
Subsidiary unless that Subsidiary or any of its Subsidiaries owns
any Capital Stock or Indebtedness of, or holds any Lien on any
property of, Diamond or any Restricted Subsidiary of Diamond that
is not a Subsidiary of the Subsidiary to be so designated;
provided, however, that
(1) either:
(A) the Subsidiary to be so designated has total assets of
$1,000 or less; or
(B) if that Subsidiary has assets greater than $1,000, such
designation would be permitted under the covenant described
under "--Limitation on Restricted Payments;"
and
(2) the Subsidiary to be so designated and each of its Subsidiaries
has not at the time of that designation, and does not thereafter,
incur any Indebtedness pursuant to which the lender has recourse
to any of the assets or properties of Diamond or any of its
Restricted Subsidiaries (except to the extent such recourse
arises pursuant to an Investment permitted by the indenture).
The Board of Directors may designate any Unrestricted Subsidiary to
be a Restricted Subsidiary; provided, however, that
(1) any Indebtedness of that Subsidiary outstanding at the time of
that designation will be deemed to have been incurred at such
time; and
(2) immediately after giving effect to that designation and that
incurrence no Default will have occurred and be continuing. Any
designation by the Board of Directors will be evidenced by
Diamond to the Trustee by promptly filing with the Trustee a copy
of the Board Resolution giving effect to that designation and an
Officers' Certificate certifying that the designation complied
with the foregoing provisions.
"Weighted Average Life to Maturity" means, when applied to any Indebtedness
(including any Disqualified Capital Stock) at any date, the number of years
obtained by dividing:
(1) the sum of the products obtained by multiplying:
(A) 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
(B) the number of years (calculated to the nearest one-twelfth)
that will elapse between such date and the making of such
payment,
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by
(2) the then outstanding principal amount or liquidation preference,
as applicable, of such Indebtedness.
"Wholly Owned Restricted Subsidiary" of Diamond means any Restricted
Subsidiary of Diamond of which all the outstanding voting securities (other than
in the case of a foreign Restricted Subsidiary, directors' qualifying shares or
an immaterial amount of shares required to be owned by other Persons pursuant to
applicable law) are owned by Diamond or any Wholly Owned Restricted Subsidiary
of Diamond.
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CERTAIN U.S. FEDERAL INCOME TAX CONSIDERATIONS
The following is a general discussion of anticipated U.S. federal income
tax consequences of the ownership and disposition of the notes to holders
thereof and of the exchange of Old Notes for New Notes pursuant to the Exchange
Offer. This summary is based upon laws, regulations, rulings and decisions
currently in effect, all of which are subject to change at any time, possibly
with retroactive effect. Moreover, it deals only with purchasers who hold notes
as "capital assets" within the meaning of Section 1221 of the U.S. Internal
Revenue Code of 1986, as amended, and does not purport to deal with persons in
special tax situations, such as financial institutions, insurance companies,
regulated investment companies, tax exempt investors, dealers in securities or
currencies, U.S. expatriates, persons holding notes as a hedge against currency
risk or as a position in a "straddle," "hedge," "conversion" or another
integrated transaction for tax purposes or U.S. Holders, as defined below, whose
functional currency is not the U.S. dollar. Further, this discussion does not
address the consequences under U.S. federal estate or gift tax laws or the laws
of any U.S. state or locality.
Holders of Old Notes are urged to consult their own tax advisors concerning
the consequences, in their particular circumstances, of the ownership and
disposition of the notes and the exchange of Old Notes for New Notes pursuant to
the Exchange Offer under the U.S. federal tax laws and the laws of any relevant
state, local or non-U.S. taxing jurisdiction.
As used in this section, the term "U.S. Holder" means a beneficial owner of
notes that is, for U.S. federal income tax purposes:
o a citizen or resident of the United States,
o a corporation, partnership or other entity, other than a trust,
created or organized in or under the laws of the United States or of
any political subdivision thereof, other than a partnership that is
not treated as a U.S. person under any applicable U.S. Treasury
regulations,
o an estate whose income is subject to U.S. federal income tax
regardless of its source, or
o a trust if, in general, a court within the U.S. is able to exercise
primary jurisdiction over its administration and one or more U.S.
persons have authority to control all of its substantial decisions.
As used in this section, the term "non-U.S. Holder" means a beneficial
owner of notes that is not a U.S. Holder for U.S. federal income tax purposes.
The Exchange Offer
An exchange of Old Notes for New Notes pursuant to the Exchange Offer
should not be treated as an exchange or other taxable event for United States
federal income tax purposes. Accordingly, there should be no United States
federal income tax consequences to holders of Old Notes who exchange Old Notes
for New Notes pursuant to the Exchange Offer, and any holder should have the
same adjusted tax basis and holding period in the New Notes as it had in the Old
Notes immediately before the exchange.
U.S. Holders
Interest and Disposition Generally
The gross amount of interest paid on the notes will be taxable as ordinary
income for U.S. federal income tax purposes when received or accrued by a U.S.
holder in accordance with such U.S. Holder's method of tax accounting.
Upon the sale, redemption or other taxable disposition of a note, a U.S.
Holder will recognize capital gain or loss equal to the difference between the
amount realized (excluding any amount attributable to accrued interest, which
will be taxable as ordinary interest income as described above, or accrued
market discount which is described
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below) and the U.S. Holder's tax basis in the notes. Such gain or loss will be
long term capital gain or loss if the notes are held for more than one year. The
deductibility of capital losses is subject to certain limitations.
Special rules apply to notes acquired at a market discount or premium,
which are discussed below.
Bond Premium
If a U.S. Holder purchased notes for an amount in excess of the amount
payable at the maturity date of the notes, the U.S. Holder may deduct such
excess as amortizable bond premium over the term of the notes under a
yield-to-maturity formula. The deduction is available only if an election is
made by the purchaser or if such an election is in effect. This election is
revocable only with the consent of the U.S. Internal Revenue Service. The
election applies to all obligations owned or subsequently acquired by the U.S.
Holder. The U.S. Holder's adjusted tax basis in the notes will be reduced to the
extent of the deduction of amortizable bond premium. The amortizable bond
premium is treated as an offset to interest income on the notes rather than as a
separate deduction item.
Market Discount
A U.S. Holder that acquires notes, other than in an original issue, at a
market discount (other than market discount that is less than 1/4 of 1% of the
stated redemption price of the notes at maturity multiplied by the number of
remaining complete years to maturity) must include as ordinary income upon a
subsequent disposition, redemption or gift of the notes, the lesser of:
o the gain realized upon the disposition or redemption or, in the case
of a gift, the appreciation in the notes, and
o the portion of the market discount which accrued on a straight line
basis, or, if the U.S. Holder so elects, on a constant interest rate
basis, while the notes were held by such U.S. Holder.
For these purposes, market discount means the excess, if any, of the stated
redemption price at maturity of the Notes (i.e., their principal amount) over
the U.S. Holder's tax basis in such notes immediately after their acquisition by
the U.S. Holder. A U.S. Holder may elect to include accrued market discount in
income currently, which would increase the U.S. Holder's basis in the notes,
rather than upon disposition of the notes. This election once made applies to
all market discount obligations acquired on or after the first taxable year to
which the election applies, and may not be revoked without the consent of the
Internal Revenue Service.
A U.S. Holder of notes acquired at a market discount generally will be
required to defer the deduction of a portion of the interest on any indebtedness
incurred or maintained to purchase or carry such notes until the market discount
is recognized upon a subsequent disposition of such notes. Such a deferral is
not required, however, if the U.S. Holder elects to include accrued market
discount in income currently.
A proposal recently set forth in the Clinton Administration's Fiscal Year
2001 Revenue Proposals would require U.S. Holders that use an accrual method of
accounting to include market discount in income on a constant-yield basis as it
accrues. The U.S. Holder's yield for purposes of determining and accruing market
discount would be limited to the greater of (1) the original yield-to-maturity
of the debt instrument plus 5 percentage points, or (2) the applicable Federal
rate at the time the holder acquired the debt instrument plus 5 percentage
points. The proposal would be effective for debt instruments acquired on or
after the date of enactment.
Information Reporting and Backup Withholding
Non-exempt U.S. Holders may be subject to information reporting with
respect to payments of interest on, and the proceeds of the disposition of,
notes. Non-exempt U.S. Holders who are subject to information reporting and who
do not provide appropriate information when requested may be subject to backup
withholding at a 31% rate. U.S. Holders should consult their tax advisors.
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Non-U.S. Holders
Interest and Disposition
In general, payments of interest received by a non-U.S. Holder will not be
subject to U.S. federal withholding tax, provided that the non-U.S. Holder (a)
does not actually or constructively own 10% or more of the total combined voting
power of all classes of stock of the Company entitled to vote, (b) is not a
controlled foreign corporation that is related to the Company actually or
constructively through stock ownership, and (c) provides, under penalties of
perjury (either directly or through a financial institution that holds the note
on behalf of the non-U.S. Holder and that holds customers' securities in the
ordinary course of its trade or business), the Company or its agent with the
non-U.S. Holder's (or, if different, the beneficial owner's) name and address
and certifies, under penalties of perjury, that it is not a U.S. Holder.
Payments of interest not exempt from U.S. federal withholding tax as described
above will be subject to withholding tax at the rate of 30% unless, (i) the
interest received on the note is effectively connected with the conduct by the
non-U.S. Holder of a trade or business within the U.S. and the non-U.S. Holder
complies with certain reporting requirements (see "Effectively Connected Income"
below); or (ii) the non-U.S. Holder is entitled to the benefits of an income tax
treaty under which the interest is exempt from U.S. withholding tax or the rate
is reduced and the non-U.S. Holder complies with certain reporting requirements.
A non-U.S. Holder generally will not be subject to U.S. federal income tax
(and generally no tax will be withheld) with respect to gain realized on the
disposition of a note, unless (i) the gain is effectively connected with a U.S.
trade or business conducted by the non-U.S. Holder or (ii) the non-U.S. Holder
is an individual who is present in the United States for 183 or more days during
the taxable year of the disposition and certain other requirements are
satisfied.
Effectively Connected Income
If interest or other payments received by a non-U.S. Holder with respect to
the notes (including proceeds from the disposition of the notes) are effectively
connected with the conduct by the non-U.S. Holder of a trade or business within
the United States (or the non-U.S. Holder is otherwise subject to U.S. federal
income taxation on a net basis with respect to such holder's ownership of
notes), such non-U.S. Holder will generally be subject to the rules described
above under "U.S. Holders" (subject to any modification provided under an
applicable income tax treaty). Non-U.S. corporate holders may also be subject to
the U.S. "branch profits tax" at a rate of 30%, or a lower rate provided by an
applicable income tax treaty.
Information Reporting and Backup Withholding
If the notes are held by a non-U.S. Holder through a non-U.S., and non-U.S.
related broker or financial institution, information reporting and backup
withholding generally would not be required. Information reporting, and possibly
backup withholding, may apply if the notes are held by a non-U.S. Holder through
a U.S., or U.S. related, broker or financial institution and the non-U.S. Holder
fails to provide appropriate information. Holders should consult their tax
advisors.
Recently Issued Treasury Regulations
The U.S. Treasury Department issued final Treasury regulations governing
information reporting and the certification procedures regarding withholding and
backup withholding on certain amounts paid to non-U.S. Holders after December
31, 2000. The new Treasury regulations would alter the procedures for claiming
the benefits of an income tax treaty and may change the certification procedures
relating to the receipt by intermediaries of payments on behalf of a beneficial
owner of a note.
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BOOK-ENTRY, DELIVERY AND FORM
The Global Notes
The certificates representing the Old Notes were issued, and the
certificates representing the New Notes will be issued, in fully registered
form, without coupons. The Old Notes are represented by one or more permanent
global certificates in definitive, fully registered form without interest
coupons. Except as described under "Certificated New Notes," the New Notes
initially will be represented by one or more permanent global certificates in
definitive, fully registered form and
o will be deposited with, or on behalf of, DTC, and registered in the
name of Cede & Co., as DTC's nominee, or
o will remain in the custody of the trustee pursuant to a FAST Balance
Certificate Agreement between DTC and the trustee.
Depositary Procedures
The following description of the operations and procedures of DTC,
Euroclear and Cedelbank are provided only as a matter of convenience. These
operations and procedures are solely within the control of the respective
settlement systems and are subject to changes by them from time to time. Diamond
takes no responsibility for these operations and procedures and urges you to
contact the system or their participants directly to discuss these matters.
DTC has advised Diamond that DTC is a limited purpose trust company created
to hold securities for its participating organizations (collectively, the
"Participants") and to facilitate the clearance and settlement of transactions
in those securities between Participants through electronic book-entry changes
in accounts of its Participants. DTC's Participants include securities brokers
and dealers (including the Initial Purchasers), banks, 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
that clear through or maintain a custodial relationship with a Participant,
either directly or indirectly (collectively, the "Indirect Participants").
Persons who are not Participants may beneficially own securities held by or on
behalf of DTC only through the Participants or the Indirect Participants. The
ownership interests in, and transfers of ownership interests in, each security
held by or on behalf of DTC are recorded on the records of the Participants and
Indirect Participants.
DTC has also advised Diamond that, pursuant to DTC's procedures:
o upon deposit of the global notes representing the New Notes, DTC will
credit the accounts of Participants with an interest in the global
notes; and
o ownership of the New Notes will be shown on, and the transfer of
ownership thereof will be effected only through, records maintained by
DTC, with respect to the interests of its Participants, and the
records of DTC's Participants and the Indirect Participants, with
respect to the interests of persons other than Participants in such
series of the global notes.
The laws of some jurisdictions may require that certain purchasers of
securities take physical delivery of those securities in definitive form. As a
result, the ability to transfer interests in the New Notes represented by global
notes to those persons may be limited. In addition, because DTC can act only on
behalf of its Participants, who in turn act on behalf of persons who hold
interests through a Participant, the ability of a person having an interest in
New Notes represented by a global note to pledge or transfer that interest to
persons or entities that do not participate in DTC's system, or to otherwise
take actions in respect of that interest, may be affected by the lack of a
physical definitive security evidencing that interest.
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 New 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 New
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Notes represented by the global note registered in their names, will not receive
or be entitled to receive physical delivery of certificated New Notes, and will
not be considered the owners or holders thereof under the indenture for any
purpose, including with respect to the giving of any direction, instruction or
approval to the trustee under the indenture. As a result, each holder owning a
beneficial interest in a global note must rely on the procedures of DTC and, if
the holder is not a DTC 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 the New Notes under the indenture or the
global note. Diamond understands that under existing industry practice, in the
event that Diamond requests any action of holders of the New Notes, or 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 that action and the participants would
authorize holders owning through these Participants to take that action or would
otherwise act upon the instruction of those holders. Neither Diamond nor the
trustee will have any responsibility or liability for any aspect of the records
relating to or payments made on account of New Notes by DTC, or for maintaining,
supervising or reviewing any records of DTC relating to these New Notes.
Except as described below, owners of interests in global notes will not
have notes registered in their names, will not receive physical delivery of
notes in certificated form and will not be considered the registered owners or
holders thereof under the indenture for any purpose.
Payments in respect of the principal of, and premium, if any, and interest
on the New Notes represented by the global note registered in the name of DTC or
its nominee on the applicable record date will be payable by the trustee to DTC
or its nominee in its capacity as the registered holder of the global note
representing the New Notes under the indenture. Under the terms of the
indenture, Diamond and the trustee may treat the persons in whose names the New
Notes, including the global notes, are registered as the owners thereof for the
purpose of receiving payments thereon and for any and all other purposes
whatsoever. Consequently, neither Diamond, the trustee or any agent of Diamond
or the trustee has or will have any responsibility or liability for the payment
of these amounts to owners of beneficial interests in a global note, including
principal, premium, if any, and interest. Payments by the DTC Participants and
Indirect Participants to the beneficial owner of a global note will be governed
by standing instructions and customary industry practice and will be the
responsibility of the Participants or Indirect Participants and DTC.
DTC has advised Diamond that its current practice, upon receipt of any
payment in respect of securities such as the New Notes (including principal and
interest), is to credit the accounts of the relevant Participants with the
payment on the payment date, in amounts proportionate to their respective
holdings in the principal amount of beneficial interest in the relevant security
as shown on the records of DTC, unless DTC has reason to believe it will not
receive payment on the payment date. Payments by the Participants and the
Indirect Participants to the beneficial owners of the New Notes will be governed
by standing instructions and customary practices and will be the responsibility
of the Participants or the Indirect Participants and will not be the
responsibility of DTC, the trustee or Diamond. Neither Diamond nor the trustee
will be liable for any delay by DTC or any of its Participants in identifying
the beneficial owners of the New Notes, and Diamond and the trustee may
conclusively rely on and will be protected in relying on instructions from DTC
or its nominee for all purposes.
Cross-market transfers between the Participants in DTC, on the one hand,
and Euroclear or Cedelbank participants, on the other hand, will be effected
through DTC in accordance with DTC's rules on behalf of Euroclear or Cedelbank,
as the case may be, by its respective depositary; however, these cross-market
transactions will require delivery of instructions to Euroclear or Cedelbank, as
the case may be, by the counterparty in that system in accordance with the rules
and procedures and within the established deadlines (Brussels time) of that
system. Euroclear or Cedelbank, as the case may be, will, if the transaction
meets its settlement requirements, deliver instructions to its respective
depositary to take action to effect final settlement on its behalf by delivering
or receiving interests in the global note in DTC, and making or receiving
payment in accordance with normal procedures for same-day funds settlement
applicable to DTC. Euroclear participants and Cedelbank participants may not
deliver instructions directly to the depositories for Euroclear or Cedelbank.
DTC has advised Diamond that it will take any action permitted to be taken
by a holder of notes of any series only at the direction of one or more
Participants to whose account DTC has credited the interests in the global notes
of such series and only in respect of such portion of the aggregate principal
amount of the notes as to which such Participant or Participants has or have
given such direction. However, if there is an event of default under the notes,
DTC reserves the right to exchange the global notes for legended notes in
certificated form, and to distribute such notes to its Participants.
87
<PAGE>
Although DTC, Euroclear and Cedelbank have agreed to the foregoing
procedures to facilitate transfers of interests in the global notes among
Participants in DTC, Euroclear and Cedelbank, they are under no obligation to
perform or to continue to perform these procedures, and these procedures may be
discontinued at any time. Neither Diamond nor the trustee will have any
responsibility for the performance by DTC, Euroclear or Cedelbank or their
respective Participants or Indirect Participants of their respective obligations
under the rules and procedures governing their operations.
Certificated New Notes
If:
o Diamond notifies the trustee in writing that DTC is no longer willing
or able to act as a depositary or DTC ceases to registered as a
clearing agency under the Exchange Act, and a successor depositary is
not appointed within 90 days of such notice or cessation;
o Diamond, at its option, notifies the trustee in writing that it elects
to cause the issuance of New Notes in definitive form under the
indenture; or
o upon the occurrence of other events described in the indenture.
upon surrender by DTC of the global notes representing New Notes,
certificated New Notes will be issued in the names and denominations requested
by DTC in accordance with its customary procedures. Upon any issuance of
certificated New Notes, the trustee is required to register the certificated New
Notes in the name of the beneficial owner indicated by DTC, and cause the same
to be delivered to that person.
Neither Diamond 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 and Diamond and the trustee may conclusively rely on, and will be
protected in relying on, instructions from DTC for all purposes.
88
<PAGE>
PLAN OF DISTRIBUTION
Each broker-dealer that receives New Notes for its own account pursuant to
the Exchange Offer must acknowledge that it will deliver a prospectus in
connection with any resale of the New 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 New Notes received in exchange for Old Notes where
the Old Notes were acquired as a result of market-making activities or other
trading activities. Diamond has agreed that, starting on the Expiration Date and
ending on the close of business 180 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 resale. In addition, until ______, 2000, all dealers
effecting transactions in New Notes may be required to deliver a prospectus.
Diamond will not receive any proceeds from any sale of New Notes by
broker-dealers. New Notes received by broker-dealers for their own account
pursuant to the Exchange Offer may be sold from time to time in one or more
transactions in the over-the-counter market, in negotiated transactions, through
the writing of options on the New 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 negotiated prices. Any 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 broker-dealer
and/or the purchasers of any New Notes. Any broker-dealer that resells New Notes
that were received by it for its own account pursuant to the Exchange Offer and
any broker or dealer that participates in a distribution of the New Notes may be
deemed to be an "underwriter" within the meaning of the Securities Act and any
profit from any resale of New Notes and any commissions or concessions received
by any of these 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 an "underwriter" within the meaning of the Securities Act.
For a period of 180 days after the Expiration Date, Diamond will promptly
send additional copies of this Prospectus and any amendment or supplement to
this Prospectus to any broker-dealer that requests those documents in the Letter
of Transmittal. Diamond has agreed to pay all expenses incident to the Exchange
Offer (including the expenses of one counsel for the holders of the Old Notes)
other than dealers' and brokers' discounts, commissions and counsel fees) and
will indemnify the holders of the Old Notes (including any broker-dealers)
against certain liabilities, including liabilities under the Securities Act.
LEGAL MATTERS
The validity of the New Notes will be passed upon for Diamond by Kramer
Levin Naftalis & Frankel LLP, New York New York.
EXPERTS
The Balance Sheets as of December 31, 1998 and 1999 and the related
Statements of Operations, Stockholders' Equity, and Cash Flows for each of the
years in the three year period ended December 31, 1997, 1998 and 1999, included
in this Prospectus, have been audited by KPMG LLP, independent certified public
accountants, as stated in their report included herein, and are included in this
Prospectus in reliance upon the authority of said firm as experts in accounting
and auditing.
89
<PAGE>
INDEX TO FINANCIAL STATEMENTS
Page
----
Independent Auditors' Report........................................... F-2
Balance Sheets, December 31, 1999 and 1998............................. F-3
Statements of Operations for the Years Ended
December 31, 1999, 1998 and 1997.................................. F-5
Statements of Stockholders' Equity (Deficit) for the
Years Ended December 31, 1999, 1998 and 1997...................... F-6
Statements of Cash Flows for the Years Ended
December 31, 1999, 1998 and 1997.................................. F-7
Notes to Financial Statements.......................................... F-8
F-1
<PAGE>
Independent Auditors' Report
The Board of Directors
Diamond Triumph Auto Glass, Inc.:
We have audited the accompanying balance sheets of Diamond Triumph Auto Glass,
Inc. as of December 31, 1999 and 1998, and the related statements of operations,
stockholders' equity (deficit) and cash flows for each of the years in the three
year period ended December 31, 1999. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Diamond Triumph Auto Glass,
Inc. as of December 31, 1999 and 1998, and the results of its operations and its
cash flows for each of the years in the three year period ended December 31,
1999, in conformity with generally accepted accounting principles.
/s/ KPMG LLP
Allentown, Pennsylvania
February 22, 2000, except for Note 12 which is as of March 27, 2000
F-2
<PAGE>
DIAMOND TRIUMPH AUTO GLASS, INC.
Balance Sheets
December 31, 1999 and 1998
(Dollars in Thousands)
<TABLE>
<CAPTION>
Assets 1999 1998
-------- --------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 94 301
Accounts receivable, less allowance for doubtful accounts
of $956 and $800 for 1999 and 1998 respectively 10,895 12,727
Other receivables 189 1,610
Inventories 12,620 11,264
Prepaid expenses 962 841
Deferred income taxes 3,081 2,826
-------- --------
Total current assets 27,841 29,569
-------- --------
Equipment and leasehold improvements:
Vehicles 10,289 11,040
Computers and office equipment 3,173 2,667
Computer software 3,901 2,566
Other equipment 524 488
Leasehold improvements 140 123
-------- --------
18,027 16,884
Accumulated depreciation and amortization (10,334) (8,906)
-------- --------
Net equipment and leasehold improvements 7,693 7,978
Deferred loan costs and senior notes discount, net 7,502 8,152
Deferred income taxes 44,082 44,619
Other assets 401 374
-------- --------
Total assets $ 87,519 90,692
======== ========
</TABLE>
F-3
<PAGE>
DIAMOND TRIUMPH AUTO GLASS, INC.
Balance Sheets
December 31, 1999 and 1998
(Dollars in Thousands)
<TABLE>
<CAPTION>
Liabilities and Stockholders' Equity (Deficit) 1999 1998
--------- ---------
<S> <C> <C>
Current liabilities:
Accounts payable $ 7,950 9,586
Accrued expenses
Payroll and related items 3,314 3,166
Accrued interest 2,363 2,326
Accrued income taxes 1,216 1,955
Other 362 354
--------- ---------
Total accrued expenses 7,255 7,801
--------- ---------
Total current liabilities 15,205 17,387
--------- ---------
Long-term debt:
Bank facility 7,500 8,500
Senior notes 100,000 100,000
--------- ---------
Total long-term debt 107,500 108,500
--------- ---------
Total liabilities 122,705 125,887
--------- ---------
Series A 12% senior redeemable cumulative preferred stock - par
value $0.01 per share; authorized 100,000 shares; issued and
outstanding 35,000 in 1999 and 1998, at liquidation preference value 43,046 38,246
--------- ---------
Stockholders' equity (deficit):
Common stock, 1999 and 1998- par value $0.01 per share; authorized
1,100,000 shares; issued and outstanding 1,000,000 shares 10 10
Additional paid-in capital 52,747 57,547
Retained earnings (accumulated deficit) (130,989) (130,998)
--------- ---------
Total stockholders' equity (deficit) (78,232) (73,441)
--------- ---------
Total liabilities and stockholders' equity (deficit) $ 87,519 90,692
========= =========
</TABLE>
See accompanying notes to financial statements.
F-4
<PAGE>
DIAMOND TRIUMPH AUTO GLASS, INC.
Statements of Operations
Years Ended December 31, 1999, 1998 and 1997
(Dollars in Thousands)
<TABLE>
<CAPTION>
1999 1998 1997
--------- --------- ---------
<S> <C> <C> <C>
Net sales $ 164,520 149,609 122,005
Cost of sales 51,456 43,851 36,702
--------- --------- ---------
Gross profit 113,064 105,758 85,303
--------- --------- ---------
Operating expenses:
Payroll 61,434 54,377 47,653
Advertising and promotional 10,349 9,499 7,360
Other operating expenses 27,516 23,478 17,445
Depreciation and amortization 2,595 2,410 2,238
--------- --------- ---------
101,894 89,764 74,696
--------- --------- ---------
Income from operations 11,170 15,994 10,607
Other (income) expense:
Interest income (31) (120) (184)
Interest expense 11,054 8,162 --
--------- --------- ---------
11,023 8,042 (184)
--------- --------- ---------
Income before provision for income taxes 147 7,952 10,791
Provision for income taxes 138 (37) --
--------- --------- ---------
Net income 9 7,989 10,791
Preferred stock dividends 4,800 3,246 --
--------- --------- ---------
Net (loss) income applicable to common stockholders $ (4,791) 4,743 10,791
========= ========= =========
Historical income before provision for income taxes $ 7,952 10,791
Pro forma provision for taxes 3,181 4,316
--------- ---------
Pro forma net income 4,771 6,475
Preferred stock dividends 3,246 --
--------- ---------
Pro forma net income applicable to common stockholders $ 1,525 6,475
========= =========
</TABLE>
See accompanying notes to financial statements.
F-5
<PAGE>
DIAMOND TRIUMPH AUTO GLASS, INC.
Statements of Stockholders' Equity (Deficit)
Years Ended December 31, 1999, 1998 and 1997
(Dollars in Thousands)
<TABLE>
<CAPTION> Retained
Common stock Additional earnings
------------------------ paid-in (accumulated
Shares Amount capital deficit) Total
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1996 2,300 4 -- 24,290 24,294
Issuance of common stock -- -- -- -- --
Net income -- -- -- 10,791 10,791
Distributions to stockholders -- -- -- (11,800) (11,800)
---------- ---------- ---------- ---------- ----------
Balance, December 31, 1997 2,300 4 -- 23,281 23,285
Net income -- -- -- 7,989 7,989
Distributions to stockholders -- -- -- (11,597) (11,597)
Reclassification of common stock 698,500 6 -- (6) --
Common stock issued as stock
purchase shares 6,950,000 69 -- (69) --
Sale of common stock 800,000 8 15,992 -- 16,000
Redemption of stockholders'
common stock and
recapitalization followed by
cancellation of treasury stock
including income tax effects (7,450,800) (77) 44,801 (150,596) (105,872)
Preferred stock dividends -- -- (3,246) -- (3,246)
---------- ---------- ---------- ---------- ----------
Balance, December 31, 1998 1,000,000 10 57,547 (130,998) (73,441)
Net income -- -- -- 9 9
Preferred stock dividends -- -- (4,800) -- (4,800)
---------- ---------- ---------- ---------- ----------
Balance, December 31, 1999 1,000,000 $ 10 52,747 (130,989) (78,232)
========== ========== ========== ========== ==========
</TABLE>
See accompanying notes to financial statements.
F-6
<PAGE>
DIAMOND TRIUMPH AUTO GLASS, INC.
Statements of Cash Flows
Years ended December 31, 1999, 1998 and 1997
(Dollars in Thousands)
<TABLE>
<CAPTION>
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 9 7,989 10,791
-------- -------- --------
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and other amortization 2,595 2,410 2,238
Amortization of deferred loan costs and senior notes discount 882 661 --
Provision for doubtful accounts 1,341 1,063 662
(Gain) on sale of fixed assets (32) (40) (2)
Changes in assets and liabilities:
Decrease (increase) in accounts and other receivables 1,912 (5,586) (4,824)
(Increase) decrease in inventories (1,356) (3,027) 886
(Increase) decrease in prepaid expenses (121) 363 (207)
(Decrease) increase in accounts payable (1,635) 3,655 911
(Decrease) increase in accrued expenses (546) (2,339) 5,290
Increase in deferred income taxes 282 25 --
-------- -------- --------
Total adjustments 3,322 (2,815) 4,954
-------- -------- --------
Net cash provided by operating activities 3,331 5,174 15,745
-------- -------- --------
Cash flows from investing activities:
Capital expenditures (2,371) (2,529) (2,373)
Proceeds from sale of equipment 92 186 105
(Increase) decrease in other assets (27) (69) 83
Due from (to) related company -- 2,866 (898)
-------- -------- --------
Net cash (used in) provided by investing activities (2,306) 454 (3,083)
-------- -------- --------
Cash flows from financing activities:
Net proceeds from issuance of senior notes -- 97,000 --
Net proceeds from bank facility 26,000 18,500 --
Proceeds from issuance of preferred stock -- 28,000 --
Distributions to stockholders, net -- (4,597) (11,800)
Payments on bank facility (27,000) (10,000) --
Issuance of common stock -- 16,000 --
Deferred loan costs (232) (5,813) --
Repurchase of common stock -- (150,672) --
-------- -------- --------
Net cash used in financing activities (1,232) (11,582) (11,800)
-------- -------- --------
Net (decrease) increase in cash and cash equivalents (207) (5,954) 862
Cash and cash equivalents, beginning of year 301 6,255 5,393
-------- -------- --------
Cash and cash equivalents, end of year $ 94 301 6,255
======== ======== ========
</TABLE>
See accompanying notes to financial statements.
F-7
<PAGE>
DIAMOND TRIUMPH AUTO GLASS, INC.
Notes to Financial Statements
Years Ended December 31, 1999, 1998 and 1997
(Dollars in Thousands)
(1) Description of Entity, Basis of Presentation and Recapitalization
Prior to March 31, 1998, Diamond Triumph Auto Glass, Inc. (formerly Diamond
Auto Glass Works, Inc. and affiliates) included Diamond Auto Glass Works,
Inc., Triumph Auto Glass, Inc., Triumph Auto Glass of Ohio, Inc., A Above
Average Auto Glass Company by Diamond, Inc., A-AA Triumph Auto Glass, Inc.,
and Scranton Holding Co., all of which were owned equally by two
stockholders. All significant intercompany balances and transactions were
eliminated in combination prior to March 31, 1998.
The Company, Kenneth Levine and Richard Rutta (together, the "Company
Principals"), Green Equity Investors II, L.P. ("GEI"), and certain
affiliated entities of the Company (the "Affiliated Companies") entered
into a Second Amended and Restated Stock Purchase and Sale Agreement, dated
as of January 15, 1998 and which was consummated on March 31, 1998,
pursuant to which, among other things, (a) the Company declared and paid a
dividend of 3,500 shares ($3,500) of Preferred Stock, to each of the
Company Principals, equal to 10.0% of the Preferred Stock to be outstanding
following the Recapitalization (as hereinafter defined); (b) the Company
Principals transferred all of the issued and outstanding shares of each of
the Affiliated Companies to Diamond and as consideration for such transfers
Diamond issued 6,950,000 shares of Common Stock (the "Stock Purchase
Shares") to the Company Principals; (c) certain Affiliated Companies merged
with and into the Company (the "Merger"); (d) GEI purchased (i)
approximately 770,000 shares of Common Stock, equal to 77.0% of the Common
Stock outstanding following the Recapitalization, for aggregate
consideration of $15,400, and (ii) 28,000 shares of Preferred Stock, equal
to 80.0% of the Preferred Stock outstanding following the Recapitalization,
for aggregate consideration of $28,000; (e) certain members of the
Company's management purchased 30,000 shares of Common Stock, equal to 3.0%
of the Common Stock outstanding following the Recapitalization, for
aggregate consideration of $600; and (f) the Company redeemed from the
Company Principals all of the Stock Purchase Shares and other shares of
Common Stock owned by them (other than 100,000 shares owned by each of
them) for cash, resulting in each of the Company Principals owning 10.0% of
the Common Stock to be outstanding following the Recapitalization.
Concurrently, with the consummation of the transactions set forth in
clauses (a) through (f) above (the "Recapitalization"), the Company issued
$100,000 in aggregate principal amount of senior notes in a private
placement (the "Note Offering") and entered into a five year $35,000
revolving credit facility (the "Old Bank Facility") with a syndicate of
financial institutions, of which $12,500 was borrowed in connection with
the Recapitalization.
On March 27, 2000, the Company replaced the Old Bank Facility with a new
revolving credit facility (the "Credit Facility") (See Note 12 - Subsequent
Event).
The Company, headquartered in Kingston, Pennsylvania, is a provider of
automotive glass replacement and repair services in the Northeast,
Mid-Atlantic, Midwest, Southwest and Southeast regions of the United
States. At December 31, 1999, the Company operated a network of 226 service
centers and four distribution centers in 39 states.
F-8
<PAGE>
DIAMOND TRIUMPH AUTO GLASS, INC.
Notes to Financial Statements
Years Ended December 31, 1999, 1998 and 1997
(Dollars in Thousands)
(2) Summary of Significant Accounting Policies
(a) Cash and Cash Equivalents
Investments with original maturities of three months or less are
considered cash equivalents.
(b) Inventories
Inventories are stated at the lower of cost or market. Cost is
determined using the rolling average method with costs incurred on a
first-in, first-out basis.
(c) Equipment and Leasehold Improvements
Equipment and leasehold improvements are recorded at cost.
Depreciation and amortization is calculated using the straight-line
method over the following useful lives:
Vehicles 5 years
Computers and office equipment 5-7 years
Computer software 3-5 years
Other equipment 5 years
Leasehold improvements 39 years
Costs in 1999 and 1998 related to the development of software for a
new back office sales audit and financial accounting system and point
of sale system were capitalized. Upon completion of each of the
projects in 1999 and 1998, the Company commenced amortizing the
software costs over the estimated useful life of five years.
Unamortized computer software costs were $3,218 and $2,503 at December
31, 1999 and 1998, respectively. Amortization expense in 1999 and 1998
for capitalized computer software costs was $620 and $61,
respectively.
(d) Income Taxes
Effective March 31, 1998, the date of conversion from S Corporation
status to C Corporation status, the Company adopted Statement of
Financial Accounting Standards (SFAS) No. 109, Accounting for Income
Taxes, and has reported the effect of recognizing deferred tax assets
and liabilities in income tax expense in the 1998 statement of
operations.
Under the asset and liability method of SFAS No. 109, 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.
Under SFAS No. 109, 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 of any change.
F-9
<PAGE>
DIAMOND TRIUMPH AUTO GLASS, INC.
Notes to Financial Statements
Years Ended December 31, 1999, 1998 and 1997
(Dollars in Thousands)
(e) Deferred Loan Costs and Senior Notes Discount
Deferred loan costs and senior notes discount are amortized over
the life of the related debt and included in interest expense. Costs
and accumulated amortization are summarized as follows:
Accumulated
December 31, 1999 Amount Amortization Balance
----------------- ------ ------------ -------
Deferred loan costs $ 6,013 1,017 4,996
Discount on senior notes 3,000 525 2,475
-------- -------- --------
$ 9,013 1,542 7,471
======== ======== ========
December 31, 1998
-----------------
Deferred loan costs $ 5,813 436 5,377
Discount on senior notes 3,000 225 2,775
-------- -------- --------
$ 8,813 661 8,152
======== ======== ========
(f) Revenue Recognition
Revenue from auto glass installation and related services is
recognized when the installation is complete or the service is
performed.
(g) Advertising
The Company expenses all advertising costs as incurred. The costs of
yellow pages advertising are expensed at the time the yellow pages
phone book is published. Total advertising expense was $8,150, $7,444
and $5,902 in 1999, 1998 and 1997, respectively.
(h) Impairment of Long-Lived Assets
The Company accounts for long-lived assets in accordance with the
provisions of SFAS No. 121, "Accounting For the Impairment of
Long-lived Assets and For Long-lived Assets to Be Disposed Of". Under
the provisions of this statement, the Company has evaluated its
long-lived assets for financial impairment, and will continue to
evaluate them as events or changes in circumstances indicate that the
carrying amount of such assets may not be fully recoverable.
(i) Use of Estimates
Management of the Company has made a number of estimates and
assumptions relating to the reporting of assets and liabilities and
the 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.
F-10
<PAGE>
DIAMOND TRIUMPH AUTO GLASS, INC.
Notes to Financial Statements
Years Ended December 31, 1999, 1998 and 1997
(Dollars in Thousands)
(3) Fair Value of Financial Instruments
For purposes of estimating the fair value of financial instruments, the
Company has determined that the carrying amounts recorded on the balance
sheet approximate the fair value for cash and cash equivalents, accounts
and other receivables and current liabilities. In making this
determination, the Company considered the short-term maturity of those
assets and liabilities. The carrying amount of the Company's Old Bank
Facility approximates fair value based on borrowing rates available to the
Company for loans with similar terms. On March 27, 2000, the Company
replaced the Old Bank Facility with the new Credit Facility (See Note 12 -
Subsequent Event). The fair value of the Company's Senior Notes is
estimated based on quoted market prices for those or similar investments.
The estimated fair value of the Corporation's Senior Notes is $70,000 and
$100,000 at December 31, 1999 and 1998, respectively. The fair value of the
Company's Series A 12% Senior Redeemable Cumulative Preferred Stock
approximates the liquidation preference.
(4) Long -Term Debt
Long-term debt consists of the following:
1999 1998
-------- --------
Bank facility $ 7,500 8,500
Senior notes 100,000 100,000
-------- --------
Total $107,500 108,500
======== ========
The Old Bank Facility was scheduled to expire on April 1, 2003 and provided
for borrowings of up to $35,000. Borrowings under the Old Bank Facility
bore interest, at the Company's discretion, at either the Base Rate, as
defined, or at the Eurodollar Rate, plus a margin of 1.50% for the Base
Rate and 2.50% for the Eurodollar Rate from August 13, 1999. Prior to
August 13, 1999, borrowings under the Old Bank Facility bore interest, at
the Company's discretion, at either the Base Rate, as defined, or at the
Eurodollar Rate, plus a margin of 1.00% for the Base Rate and 2.00% for the
Eurodollar Rate. In addition, a commitment fee of 0.375% was charged
against any unused balance of the Old Bank Facility. The effective interest
rate on borrowings under the Old Bank Facility ranged from 9.00% to 10.00%
as of December 31, 1999. Interest rates were subject to increases or
reductions based upon the Company meeting certain financial tests. The
proceeds of the Old Bank Facility were available for working capital
requirements and for general corporate purposes, including permitted
acquisitions. A portion of the Old Bank Facility not to exceed $5,000 was
available for the issuance of letters of credit, which generally have an
initial term of one year or less. The Company had $852 and $673 in
outstanding letters of credit at December 31, 1999 and 1998, respectively.
The Old Bank Facility was secured by first priority security interests in
all of the tangible and intangible assets of the Company. In addition, the
Old Bank Facility contained certain restrictive covenants including, among
other things, the maintenance of certain debt coverage ratios, as well as
restrictions on additional indebtedness, dividends and certain other
significant transactions. At December 31, 1999, the Company was not in
compliance with certain financial covenants of its Old Bank Facility and
received a waiver from its lenders. As previously described, the Company
replaced the Old Bank Facility with the new Credit Facility, which is the
basis for the classification of the debt as long-term debt.
F-11
<PAGE>
DIAMOND TRIUMPH AUTO GLASS, INC.
Notes to Financial Statements
Years Ended December 31, 1999, 1998 and 1997
(Dollars in Thousands)
The Senior Notes mature on April 1, 2008 and bear interest at a rate of
9.25% per annum. The Senior Notes and the obligations of the Company under
the indenture governing the Senior Notes (the "Note Indenture") are
unconditionally guaranteed on a senior, unsecured basis by any Subsidiary
Guarantor, of which there are currently none. The Senior Notes are callable
after five years at a premium to par which declines to par after eight
years. Upon a change of control, as defined, the Company is required to
offer to redeem the Senior Notes at 101% of the principal amount plus
accrued and unpaid interest. Restrictive covenants contained in the Note
Indenture include, among other things, limitations on additional
indebtedness, investments, dividends and certain other significant
transactions. The Company was in compliance with all such covenants as of
December 31, 1999.
Maturities of long-term debt are as follows:
2000 $ --
2001 --
2002 --
2003 --
2004 7,500
Thereafter 100,000
-----------
$ 107,500
===========
(5) Preferred Stock
On March 27, 1998, the Company's Board of Directors adopted a Certificate
of Designation creating $35,000 in Series A 12% Senior Redeemable
Cumulative Preferred Stock (the "Preferred Stock"). The Preferred Stock has
a liquidation preference over the Common Stock equal to the initial
liquidation value of the Preferred Stock plus accrued and unpaid dividends
thereon. The Preferred Stock will be subject to mandatory redemption on
April 1, 2010 at 100% of the liquidation value plus accrued and unpaid
dividends. The Company may, at its option, redeem at any time the Preferred
Stock, in whole or in part, at 100% of the liquidation value plus accrued
and unpaid dividends. Upon a Change of Control (as defined), the Company
must offer to repurchase the Preferred Stock at 100% of its liquidation
value plus accrued and unpaid dividends, provided, however, that the
Company shall not be obligated to (and shall not) offer to repurchase the
Preferred Stock if such repurchase would violate the terms of the new
Credit Facility or the terms of the Note Indenture.
F-12
<PAGE>
DIAMOND TRIUMPH AUTO GLASS, INC.
Notes to Financial Statements
Years Ended December 31, 1999, 1998 and 1997
(Dollars in Thousands)
The Preferred Stock bears cumulative quarterly dividends at a rate per
annum equal to 12.0% of the liquidation value. Dividends may, at the option
of the Company, be paid in cash or by adding to the then liquidation value
of the Preferred Stock an amount equal to the dividends then accrued and
payable. The terms of the Preferred Stock contain restrictions on
distributions and on purchases of junior securities. The Preferred Stock
has no voting rights with respect to general corporate matters except as
provided by law or for certain class voting rights in connection with the
issuance of senior or parity equity securities of the Company and any
amendments to the Company's Certificate of Incorporation that adversely
affect the rights of the Preferred Stock.
At December 31, 1999 and 1998 the liquidation value of the Preferred Stock
recorded on the Company's Balance Sheet was $43,046 and $38,246,
respectively, which includes dividends of $8,046 and $3,246, respectively,
added to the liquidation value.
(6) Commitments and Related Party Transactions
The Company leases service center and warehouse space and is responsible
for all related occupancy costs. Rental expense in 1999, 1998 and 1997
aggregated $4,419, $3,931 and $3,135, respectively, of which $556, $535 and
$513, respectively, were for realty owned by two stockholders and executive
officers. Certain of the leases with unrelated parties contain various
renewal options, and right of refusal purchase options.
In addition, the Company leases certain vehicles under operating leases
having lease terms of 367 days. The leases have renewal options for up to
eight years. Total rent expense for such leases amounted to $2,587, $1,808
and $539 for the years ended December 31, 1999, 1998 and 1997,
respectively.
Total lease commitments, including vehicles, are as follows:
Third Related
parties parties Total
------------- --------------- --------------
2000 $ 5,764 562 6,326
2001 3,930 539 4,469
2002 2,368 561 2,929
2003 1,102 583 1,685
2004 333 606 939
The Company entered into a Management Services Agreement on March 31, 1998
with a related party pursuant to which the Company pays an annual fee of
$685. Expense under this agreement was $685 and $514 in 1999 and 1998,
respectively.
The Company has employment agreements with certain of its executive
officers (some of whom are also stockholders) which expire on March 31,
2001 and 2003.
F-13
<PAGE>
DIAMOND TRIUMPH AUTO GLASS, INC.
Notes to Financial Statements
Years Ended December 31, 1999, 1998 and 1997
(Dollars in Thousands)
(7) Stock Option Plan
In September 1998, the Board of Directors and stockholders of the Company
approved and adopted the Diamond Triumph Auto Glass 1998 Stock Option Plan
(the "1998 Plan"). The 1998 Plan provides for the issuance of a total of
30,000 authorized and unissued shares of common stock. In 1998, the Board
of Directors granted 27,175 options to key employees of the Company with an
exercise price of $20.00 per share, which approximates fair value at the
date of grant. No options were granted in 1999. The options vest evenly
over five years and may not be exercised until the earlier of (a) 90 days
after the Company's Common Stock has become publicly traded or (b) 91 days
prior to the tenth anniversary of the date of the grant. The 1998 Plan
expires in September 2008.
The Company applies APB Opinion No. 25 in accounting for the 1998 Plan and,
accordingly, no compensation cost has been recognized for its stock options
in the financial statements. Had the Company determined its stock options
under SFAS No. 123, the Company's net income would have been changed to the
pro forma amounts indicated below.
Years Ended December 31,
1999 1998
--------- ---------
Net income:
As reported $ 9 7,987
Pro forma (6) 7,985
The per share fair value of stock options granted during fiscal 1998 was
$2.84 on the date of grant and was determined using the Black-Scholes
option-pricing model based upon the following assumptions:
1998
-------
Expected dividend yield 0.00%
Expected volatility 0.00%
Risk-free rate 4.65%
Expected life (in years) 9.75
F-14
<PAGE>
DIAMOND TRIUMPH AUTO GLASS, INC.
Notes to Financial Statements
Years Ended December 31, 1999, 1998 and 1997
(Dollars in Thousands)
Summarized stock option data is as follows:
Exercise Shares
Price Under Option
---------- ------------
Outstanding at December 31, 1997 $ -- --
Granted 20.00 27,125
Exercised -- --
Cancelled -- --
--------
Outstanding at December 31, 1998 -- 27,125
Granted -- --
Exercised -- --
Cancelled -- (3,000)
--------
Outstanding at December 31, 1999 20.00 24,125
========
Exercisable $ -- --
(8) Income Taxes
Prior to the consummation of the Merger, all of the Affiliated Companies
were S Corporations and as such federal and state taxes were generally paid
at the stockholder level only. There was no provision for income taxes
through the consummation of the Merger on March 31, 1998.
As discussed in Note 2, the Company adopted SFAS No. 109 as of March 31,
1998. The effect of recognizing deferred tax assets and liabilities from
other than the Merger transaction as of March 31, 1998 was the recording of
net deferred tax assets of $1,643, reflected as a reduction in 1998 income
tax expense.
Upon consummation of the Merger, the Affiliated Companies terminated their
S Corporation status. The Merger of Diamond Auto Glass Works, Inc., Triumph
Auto Glass, Inc., A Above Average Auto Glass Company by Diamond, Inc., A-AA
Triumph Auto Glass, Inc., and Scranton Holding Co. into Diamond Triumph
Auto Glass, Inc. (formerly Triumph Auto Glass of Ohio, Inc.) was treated as
a taxable asset acquisition of the merged Affiliated Companies for Federal
and state income tax purposes and as a recapitalization for financial
accounting purposes. For Federal and state income tax purposes, the
purchase price was allocated among the various merged Affiliated Companies
and their respective assets and liabilities based on the respective fair
values as of the closing of the Merger. This resulted in different book and
tax asset bases for the assets of these companies, which resulted in
deferred tax assets of approximately $44,801 credited to additional paid-in
capital.
F-15
<PAGE>
DIAMOND TRIUMPH AUTO GLASS, INC.
Notes to Financial Statements
Years Ended December 31, 1999, 1998 and 1997
(Dollars in Thousands)
Income tax expense consists of:
Current Deferred Total
-------- -------- --------
Year ended December 31, 1999:
Federal $ -- 107 107
State (144) 175 31
-------- -------- --------
$ (144) 282 138
======== ======== ========
Current Deferred Total
-------- -------- --------
Year ended December 31, 1998:
Federal $ 161 (302) (141)
State 446 (342) 104
-------- -------- --------
$ 607 (644) (37)
======== ======== ========
Income tax expense differed from the amounts computed by applying the U.S.
federal income tax rate of 34 percent to pretax income as a result of the
following:
<TABLE>
<CAPTION>
1999 1998
------ ------
<S> <C> <C>
Computed "expected" tax expense $ 50 2,704
Increase (reduction) in income taxes resulting from:
State income taxes, net of federal income tax benefit 21 68
Recognition of deferred tax due to change in tax status -- (1,643)
Pretax income applicable to portion of year as S Corporation
for which income taxes have not been provided -- (1,572)
Permanent items 67 173
Other, net -- 233
------ ------
$ 138 (37)
====== ======
</TABLE>
F-16
<PAGE>
DIAMOND TRIUMPH AUTO GLASS, INC.
Notes to Financial Statements
Years Ended December 31, 1999, 1998 and 1997
(Dollars in Thousands)
The tax effects of temporary differences that give rise to significant
portions of the deferred assets and deferred tax liabilities at December
31, 1999 and 1998 are presented below.
<TABLE>
<CAPTION>
1999 1998
------- -------
<S> <C> <C>
Deferred tax assets:
Accounts receivable, principally due to
allowance for doubtful accounts $ 382 320
Inventories, principally due to additional
costs inventoried for tax 651 741
Intangibles 41,885 45,046
Prepaid Advertising expenses not yet
deducted for tax purposes 1,650 1,501
Net operating loss and alternative minimum
tax credit carryforward 3,130 83
Liabilities and accruals for financial reporting purposes 420 269
------- -------
Total gross deferred tax assets 48,118 47,960
------- -------
Deferred tax liabilities:
Plant and equipment, principally due to differences
in depreciation and capitalized interest 955 515
------- -------
Total gross deferred tax liabilities 955 515
------- -------
Net deferred tax assets $47,163 47,445
======= =======
</TABLE>
There was no valuation allowance for deferred tax assets as of December 31,
1999 or 1998, or March 31, 1999. 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 periods in which those temporary
differences become deductible. Management considers the reversal of
deferred tax liabilities, projected future taxable income, and tax planning
strategies in making this assessment. In order to realize the deferred tax
assets, the Company will need to generate future taxable income of
approximately $115,000 prior to expiration of the 15-year amortization
period for the intangible assets in 2012 and the subsequent net operating
loss carryforward period of 20 years. Taxable income (loss) for the years
ended December 31, 1999, 1998 and 1997 was $(8,000), $4,500 and $9,000,
respectively. Based upon the level of historical taxable income and
projections of future taxable income over the period the deferred tax
assets are deductible, management believes it is more likely than not the
Company will realize the benefits of these deductible differences. The
amount of the deferred tax assets considered realizable, however, could be
reduced in the near term if estimates of future taxable income during the
amortization period are reduced.
F-17
<PAGE>
DIAMOND TRIUMPH AUTO GLASS, INC.
Notes to Financial Statements
Years Ended December 31, 1999, 1998 and 1997
(Dollars in Thousands)
(9) Employee Benefit Plans
The Company has a defined contribution plan covering all employees who meet
the age and service requirements. Contributions to the plan are determined
by the Company and are based upon a percentage of the annual compensation
of all participants. The expense related to the plan amounted to $292,
$250 and $206 for 1999, 1998 and 1997, respectively.
(10) Supplemental Cash Flow Information
<TABLE>
<CAPTION>
1999 1998 1997
------- ------- -------
<S> <C> <C> <C>
Interest paid $10,090 5,175 --
Income taxes paid -- 202 --
======= ======= =======
Noncash investing and financing activities:
Preferred stock dividends $ 4,800 3,246 --
Deferred tax assets -- 44,801 --
Distribution of preferred stock -- 7,000 --
======= ======= =======
</TABLE>
(11) Legal Proceedings
The Company is involved in various claims and legal actions arising in the
ordinary course of business. In the opinion of management, the ultimate
disposition of these matters will not have a material adverse effect on the
Company's financial position, results of operations or liquidity.
(12) Subsequent Event
On March 27, 2000, the Company entered into the new Credit Facility. The
new Credit Facility has an initial term of four years and provides for
revolving advances of up to the lesser of: (1) $25,000; (2) the sum of 85%
of the Company's Eligible Accounts Receivable (as defined in the new Credit
Facility) plus 85% of the Company's Eligible Inventory (as defined in the
new Credit Facility), less certain reserves; or (3) an amount equal to 1.5
times the Company's EBITDA (as defined in the new Credit Facility) for the
prior twelve months. A portion of the new Credit Facility, not to exceed
$3,000, is available for the issuance of letters of credit. Borrowings
under the new Credit Facility bear interest, at the Company's discretion,
at either the Chase Manhattan Bank Rate (as defined in the new Credit
Facility) or LIBOR, plus a margin of 0.50% for the Chase Manhattan Rate and
2.25% for the LIBOR Rate. In addition, a commitment fee of 0.25% is charged
against any unused balance of the new Credit Facility. Interest rates are
subjected to increases or reductions based upon the Company meeting certain
EBITDA levels. The proceeds of the new Credit Facility are available for
working capital requirements and for general corporate purposes. The new
Credit Facility is secured by first priority security interests in all of
the tangible and intangible assets of the Company. In addition, the new
Credit Facility contains certain restrictive covenants including, among
other things, the
F-18
<PAGE>
DIAMOND TRIUMPH AUTO GLASS, INC.
Notes to Financial Statements
Years Ended December 31, 1999, 1998 and 1997
(Dollars in Thousands)
maintenance of a minimum EBITDA level for the prior twelve months, as well
as restrictions on additional indebtedness, dividends and certain other
significant transactions.
F-19
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 20. Indemnification of Directors and Officers
Section 102(b)(7) of the Delaware General Corporation Law (the "DGCL")
permits a corporation in its certificate of incorporation or an amendment
thereto to eliminate or limit the personal liability of a director for
violations of the director's fiduciary duty, except (i) for any breach of the
director's fiduciary 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) pursuant to Section 174 of the
DGCL (providing for liability of directors for unlawful payment of dividends or
unlawful stock purchases or redemptions), or (iv) for any transaction from which
the director derived an improper personal benefit. The Registrant's Amended and
Restated Certificate of Incorporation contains the provisions permitted by
Section 102(b)(7) of the DGCL.
Section 145(a) of the DGCL provides that a corporation shall have power to
indemnify any person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative (other than an action by or in
the right of the corporation) by reason of the fact that the person is or was a
director, officer, employee or agent of the corporation, or is or was serving at
the request of the corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
against expenses (including attorneys' fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred by the person in connection with
such action, suit or proceeding if the person acted in good faith and in a
manner the person reasonably believed to be in or not opposed to the best
interests of the corporation, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe the person's conduct was
unlawful. The termination of any action, suit or proceeding by judgment, order,
settlement, conviction, or upon a plea of nolo contendere or its equivalent,
shall not, of itself, create a presumption that the person did not act in good
faith and in a manner which the person reasonably believed to be in or not
opposed to the best interests of the corporation, and, with respect to any
criminal action or proceeding, had reasonable cause to believe that the person's
conduct was unlawful.
Section 145(b) of the DGCL provides that a corporation shall have power to
indemnify any person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action or suit by or in the right of the
corporation to procure a judgment in its favor by reason of the fact that the
person is or was a director, officer, employee or agent of the corporation, or
is or was serving at the request of the corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise against expenses (including attorneys' fees) actually and
reasonably incurred by the person in connection with the defense or settlement
of such action or suit if the person acted in good faith and in a manner the
person reasonably believed to be in or not opposed to the best interests of the
corporation and except that no indemnification shall be made in respect of any
claim, issue or matter as to which such person shall have been adjudged to be
liable to the corporation unless and only to the extent that the Court of
Chancery or the court in which such action or suit was brought shall determine
upon application that, despite the adjudication of liability but in view of all
the circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses which the Court of Chancery or such other court
shall deem proper.
Section 145(c) of the DGCL provides that, to the extent that a present or
former director or officer of a corporation has been successful on the merits or
otherwise in defense of any action, suit or proceeding referred to in the
Section 145(a) and 145(b) of the DGCL, or in defense of any claim, issue or
matter therein, such person shall be indemnified against expenses (including
attorneys' fees) actually and reasonably incurred by such person in connection
therewith.
The Registrant's Amended and Restated Certificate of Incorporation provides
indemnification of directors and officers of the Registrant to the fullest
extent permitted by the DGCL. Diamond's Amended and Restated Certificate of
Incorporation also provides that neither Kenneth Levine nor Richard Rutta shall
be entitled to indemnification against any Liability (as defined in the
Agreement) to the extent that such Liability arises out of a breach of (i) the
Second Amended and Restated Stock Purchase and Sale Agreement, dated as of
January 15, 1998, by and among, VGMC Corp., Green Equity Investors II, L.P.,
Diamond Triumph Auto Glass, Inc., Triumph Auto Glass, Inc., Diamond Auto Glass
Works, Inc., A Above Average Glass Company by Diamond, Inc., A-AA Triumph
II-1
<PAGE>
Auto Glass, Inc., Scranton Holdings, Inc., Diamond/Triumph Auto Export Sales Co.
Inc., A-Auto Glass by Triumph, Inc., A-Auto Glass Company by Diamond, Inc. and
Kenneth Levine and Richard Rutta (the "Agreement").; or (ii) any of the
Transaction Documents (as defined in the Agreement). In addition, pursuant to
their Registration Rights Agreement with the Registrant, dated as of March 31,
1998, First Union Capital Markets, a division of Wheat First Securities, Inc.,
BT Alex. Brown Incorporated and Donaldson, Lufkin & Jenrette Securities
Corporation have agreed to indemnify directors and officers of the Registrant
against certain liabilities, including liabilities under the Securities Act.
The Registrant maintains liability insurance for each director and officer
for certain losses arising from claims or charges made against them while acting
in their capacities as directors or officers of the Registrant.
Item 21. Exhibits
Exhibit
Number Description
------ -----------
2.1* Second Amended and Restated Stock Purchase and Sale Agreement, dated
as of January 15, 1998, by and among, VGMC Corp., Green Equity
Investors II, L.P., Diamond Triumph Auto Glass, Inc., Triumph Auto
Glass, Inc., Diamond Auto Glass Works, Inc., A Above Average Glass
Company by Diamond, inc., A-AA Triumph Auto Glass, Inc., Scranton
Holdings, Inc., Diamond/Triumph Auto Export Sales Co. Inc., A-Auto
Glass by Triumph, Inc., A-Auto Glass Company by Diamond, Inc. and
Kenneth Levine and Richard Rutta.
3.1* Amended and Restated Certification of Incorporation of Diamond Triumph
Auto Glass, Inc.
3.2* Certificate of Designations of Series A 12% Senior Redeemable
Cumulative Preferred Stock of Diamond Triumph Auto Glass, Inc.
3.3* Certificate of Amendment of Certificate of Incorporation of Diamond
Triumph Auto Glass, Inc., dated April 28, 1998.
3.4* Certificate of Amendment of Certificate of Incorporation of Diamond
Triumph Auto Glass, Inc., dated September 15, 1998.
3.5* By-laws of Diamond Triumph Auto Glass, Inc.
4.1* Indenture, dated as of March 31, 1998, between Diamond Triumph Auto
Glass, Inc., as Issuer, and State Street Bank and Trust Company, as
Trustee, regarding the 9 1/4 Senior Notes Due 2008.
4.2* Registration Rights Agreement, dated as of March 31, 1998, among
Diamond Triumph Auto Glass, Inc., First Union Capital Markets, a
division of Wheat First Securities, Inc., BT Alex. Brown Incorporated
and Donaldson, Lufkin & Jenrette Securities Corporation.
4.3* Note Purchase Agreement, dated March 26, 1998, among Diamond Triumph
Auto Glass, Inc., First Union Capital Markets, a division of Wheat
First Securities, Inc., BT Alex. Brown Incorporated and Donaldson,
Lufkin & Jenrette Securities Corporation.
5.1** Opinion of Kramer Levin Naftalis & Frankel LLP.
10.1* Management Subscription and Stockholders Agreement, dated as of March
31, 1998, among Diamond Triumph Auto Glass, Inc., Green Equity
Investors II, L.P. and Norman Harris.
10.2* Management Subscription and Stockholders Agreement, dated as of March
31, 1998, among Diamond Triumph Auto Glass, Inc., Green Equity
Investors II, L.P. and Michael Sumsky.
II-2
<PAGE>
Exhibit
Number Description
------ -----------
10.3* Stockholders Agreement, dated as of March 31, 1998, among Green Equity
Investors II, L.P.,
Kenneth Levine, Richard Rutta and Diamond Triumph Auto Glass, Inc.
10.4* Employment Agreement, dated as of March 31, 1998, between Diamond
Triumph Auto Glass, Inc. and Kenneth Levine.
10.5* Employment Agreement, dated as of March 31, 1998, between Diamond
Triumph Auto Glass, Inc. and Richard Rutta.
10.6* Employment Agreement, dated as of March 31, 1998, between Diamond
Triumph Auto Glass, Inc. and Norman Harris.
10.7* Employment Agreement, dated as of March 31, 1998, between Diamond
Triumph Auto Glass, Inc. and Michael Sumsky.
10.8* Non-Competition Agreement, dated March 31, 1998, between Kenneth
Levine and Diamond Triumph Auto Glass, Inc.
10.9* Non-Competition Agreement, dated March 31, 1998, between Richard Rutta
and Diamond Triumph Auto Glass, Inc.
10.10* Management Services Agreement, dated as of March 31, 1998, between
Diamond Triumph Auto Glass, Inc. and Leonard Green & Partners, L.P.
10.11** Finance Agreement, dated March 27, 2000, between The CIT Business
Group/Business Credit, Inc. and Diamond Triumph Auto Glass, Inc.
10.12* Diamond Triumph Auto Glass, Inc. 1998 Management Stock Option Plan.
23.1* Consent of KPMG LLP.
23.2** Consent of Kramer Levin Naftalis & Frankel (contained in the opinion
filed as Exhibit 5.1.)
25* Form T-1 Statement of Eligibility and Qualification of State Street
Bank and Trust.
27* Financial Data Schedule.
99.1** Form of Letter of Transmittal.
99.2** Form of Notice of Guaranteed Delivery.
- ----------
* Filed herewith
**To be filed by amendment.
Item 22. Undertakings
(a) 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
II-3
<PAGE>
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 Securities 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 to a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the Registration Statement when it became effective.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-4 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of New York, State of New York on this 30th day of
March, 2000.
DIAMOND TRIUMPH AUTO GLASS, INC.
By: /s/ Kenneth Levine
--------------------------------------
Name: Kenneth Levine
Title: Co-Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints each of Kenneth Levine and Richard Rutta, and
each of them, his true and lawful attorney-in-fact and agent, with full power of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities, to sign any or all 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 and necessary
to be done in and about the premises, as fully for all intents and purposes as
he might or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or any of them or his substitute or substitutes,
may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons on March
30, 2000 in the capacities indicated.
Signature Title(s)
/s/ Kenneth Levine
- --------------------------------- Co-Chairman of the Board, Co-Chief
Kenneth Levine Executive Officer and Director
/s/ Richard Rutta
- --------------------------------- Co-Chairman of the Board, Co-Chief
Richard Rutta Executive Officer and Director
/s/ Michael A. Sumsky
- --------------------------------- Executive Vice President, Chief
Michael A. Sumsky Financial Officer and General Counsel
/s/ Norman Harris
- --------------------------------- President
Norman Harris
/s/ Gregory J. Annick
- --------------------------------- Director
Gregory J. Annick
/s/ John G. Danhakl
- --------------------------------- Director
John G. Danhakl
/s/ Jonathan D. Sokoloff
- --------------------------------- Director
Jonathan D. Sokoloff
II-5
<PAGE>
EXHIBIT INDEX
Exhibit
Number Description
------ -----------
2.1* Second Amended and Restated Stock Purchase and Sale Agreement, dated
as of January 15, 1998, by and among, VGMC Corp., Green Equity
Investors II, L.P., Diamond Triumph Auto Glass, Inc., Triumph Auto
Glass, Inc., Diamond Auto Glass Works, Inc., A Above Average Glass
Company by Diamond, inc., A-AA Triumph Auto Glass, Inc., Scranton
Holdings, Inc., Diamond/Triumph Auto Export Sales Co. Inc., A-Auto
Glass by Triumph, Inc., A-Auto Glass Company by Diamond, Inc. and
Kenneth Levine and Richard Rutta.
3.1* Amended and Restated Certification of Incorporation of Diamond Triumph
Auto Glass, Inc.
3.2* Certificate of Designations of Series A 12% Senior Redeemable
Cumulative Preferred Stock of Diamond Triumph Auto Glass, Inc.
3.3* Certificate of Amendment of Certificate of Incorporation of Diamond
Triumph Auto Glass, Inc., dated April 28, 1998.
3.4* Certificate of Amendment of Certificate of Incorporation of Diamond
Triumph Auto Glass, Inc., dated September 15, 1998.
3.5* By-laws of Diamond Triumph Auto Glass, Inc.
4.1* Indenture, dated as of March 31, 1998, between Diamond Triumph Auto
Glass, Inc., as Issuer, and State Street Bank and Trust Company, as
Trustee, regarding the 9 1/4 Senior Notes Due 2008.
4.2* Registration Rights Agreement, dated as of March 31, 1998, among
Diamond Triumph Auto Glass, Inc., First Union Capital Markets, a
division of Wheat First Securities, Inc., BT Alex. Brown Incorporated
and Donaldson, Lufkin & Jenrette Securities Corporation.
4.3* Note Purchase Agreement, dated March 26, 1998, among Diamond Triumph
Auto Glass, Inc., First Union Capital Markets, a division of Wheat
First Securities, Inc., BT Alex. Brown Incorporated and Donaldson,
Lufkin & Jenrette Securities Corporation.
5.1** Opinion of Kramer Levin Naftalis & Frankel LLP.
10.1* Management Subscription and Stockholders Agreement, dated as of March
31, 1998, among Diamond Triumph Auto Glass, Inc., Green Equity
Investors II, L.P. and Norman Harris.
10.2* Management Subscription and Stockholders Agreement, dated as of March
31, 1998, among Diamond Triumph Auto Glass, Inc., Green Equity
Investors II, L.P. and Michael Sumsky.
10.3* Stockholders Agreement, dated as of March 31, 1998, among Green Equity
Investors II, L.P., Kenneth Levine, Richard Rutta and Diamond Triumph
Auto Glass, Inc.
10.4* Employment Agreement, dated as of March 31, 1998, between Diamond
Triumph Auto Glass, Inc. and Kenneth Levine.
10.5* Employment Agreement, dated as of March 31, 1998, between Diamond
Triumph Auto Glass, Inc. and Richard Rutta.
10.6* Employment Agreement, dated as of March 31, 1998, between Diamond
Triumph Auto Glass, Inc. and Norman Harris.
<PAGE>
10.7* Employment Agreement, dated as of March 31, 1998, between Diamond
Triumph Auto Glass, Inc. and Michael Sumsky.
10.8* Non-Competition Agreement, dated March 31, 1998, between Kenneth
Levine and Diamond Triumph Auto Glass, Inc.
10.9* Non-Competition Agreement, dated March 31, 1998, between Richard Rutta
and Diamond Triumph Auto Glass, Inc.
10.10* Management Services Agreement, dated as of March 31, 1998, between
Diamond Triumph Auto Glass, Inc. and Leonard Green & Partners, L.P.
10.11** Finance Agreement, dated March 27, 2000, between The CIT Business
Group/Business Credit, Inc. and Diamond Triumph Auto Glass, Inc.
10.12* Diamond Triumph Auto Glass, Inc. 1998 Management Stock Option Plan.
23.1* Consent of KPMG LLP
23.2** Consent of Kramer Levin Naftalis & Frankel (contained in the opinion
filed as Exhibit 5.1.)
25* Form T-1 Statement of Eligibility and Qualification of State Street
Bank and Trust.
27* Financial Data Schedule.
99.1** Form of Letter of Transmittal.
99.2** Form of Notice of Guaranteed Delivery.
- ----------
* Filed herewith
**To be filed by amendment.
Exhibit 2.1
SECOND AMENDED AND RESTATED
STOCK PURCHASE AND SALE AGREEMENT
by and among
VGMC CORP.,
GREEN EQUITY INVESTORS II, L.P.,
DIAMOND TRIUMPH AUTO GLASS, INC.,
TRIUMPH AUTO GLASS, INC.,
DIAMOND AUTO GLASS WORKS, INC.,
A ABOVE AVERAGE GLASS COMPANY BY DIAMOND, INC.,
A-AA TRIUMPH AUTO GLASS, INC.,
SCRANTON HOLDINGS, INC.,
DIAMOND/TRIUMPH AUTO EXPORT SALES CO. INC.,
A-AUTO GLASS BY TRIUMPH, INC.
A-AUTO GLASS COMPANY BY DIAMOND, INC.
and
KENNETH LEVINE
and
RICHARD RUTTA
<PAGE>
SECOND AMENDED AND RESTATED STOCK PURCHASE AND SALE AGREEMENT,
dated as of January 15, 1998 (the "Agreement"), by and among VGMC CORP., a
Delaware Corporation ("VGMC"), GREEN EQUITY INVESTORS II, L.P., a Delaware
limited partnership (the "Purchaser"), DIAMOND TRIUMPH AUTO GLASS, INC. (named
Triumph Auto Glass of Ohio, Inc., prior to March 9, 1998), a Delaware
corporation ("Triumph-Delaware"), TRIUMPH AUTO GLASS, INC. ("Triumph-NY"),
DIAMOND AUTO GLASS WORKS, INC. ("Diamond"), A ABOVE AVERAGE GLASS COMPANY BY
DIAMOND, INC. ("Above Average"), A-AA TRIUMPH AUTO GLASS, INC. ("A-AA"),
SCRANTON HOLDINGS, INC. ("Scranton"), DIAMOND/TRIUMPH AUTO EXPORT SALES CO. INC.
("Export"), A-AUTO GLASS BY TRIUMPH, INC. ("A-Triumph") and A-AUTO GLASS COMPANY
BY DIAMOND, INC. ("A-Diamond" and together with Triumph-NY, Diamond, Above
Average, A-AA, Scranton, Export and A-Triumph, the "Affiliated Companies") (each
of Triumph-Delaware and the Affiliated Companies (other than Export, A-Triumph
and A-Diamond (collectively, the "Excluded Companies")) being sometimes referred
to herein individually as a "Company" and collectively as the "Companies"),
KENNETH LEVINE ("Levine") and RICHARD RUTTA ("Rutta" and together with Levine,
the "Company Principals").
-----------------
WHEREAS, the parties hereto entered into an Amended and
Restated Stock Purchase and Sale Agreement dated as of January 15, 1998 (the
"Original Agreement"); and
WHEREAS, the parties desire to amend and restate the Original
Agreement to read in its entirety as set forth herein.
NOW, THEREFORE, in consideration of the respective agreements
herein contained and for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the Original Agreement is hereby
amended and restated to read in its entirety as follows:
ARTICLE I
ACTIONS PRIOR TO CLOSING
SECTION 1.1 Amendment of Charter and Bylaws. Subject to the
terms and conditions set forth herein, prior to the Closing (as hereinafter
defined), the Company Principals shall cause the Certificate of Incorporation
and Bylaws of Triumph-Delaware to be amended to be in the forms of Exhibits A-1
and A-2 annexed hereto, respectively, with such changes therein, if any, as
shall be mutually acceptable to the Purchaser and the Company Principals. The
revised Certificate of Incorporation will, among other things, reclassify each
of the 1,500 issued and outstanding shares of capital stock, par value $1.00 per
share, of Triumph-Delaware into 466K shares of Common Stock, par value $.01
per share (the "Common Stock"), of Triumph-Delaware and authorize the issuance
by Triumph-Delaware of preferred stock.
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SECTION 1.2 Issuance of Preferred Stock to Company Principals.
Subject to the terms and conditions set forth herein, prior to the Closing, the
Company Principals shall cause Triumph-Delaware to declare and pay a dividend
(the "Preferred Stock Dividend") to each of the Company Principals, as the sole
stockholders of Triumph-Delaware, of 3,500 shares of Senior Preferred Stock (the
"Preferred Stock") of Triumph-Delaware having the rights, restrictions,
privileges and preferences set forth in Exhibit A-3 annexed hereto with such
changes therein, if any, as shall be mutually acceptable to the Company
Principals and the Purchaser.
SECTION 1.3 Purchase of the Companies. Subject to the terms
and conditions set forth herein, subsequent to the actions referred to in
Sections 1.1 and 1.2 and prior to the Closing, the Company Principals shall
transfer all of the issued and outstanding shares of each Company to
Triumph-Delaware (the "Stock Purchases"). The Company Principals shall cause
Triumph-Delaware to issue, as consideration for such transfers, an aggregate of
6,950,000 shares (the "Stock Purchase Shares") of its Common Stock to the
Company Principals, as the sole stockholders of each of the Companies. The
number of Stock Purchase Shares to be issued to each Company Principal in
exchange for the stock of each of the Companies is as set forth in Exhibit A-4
hereto. At the Closing, the Stock Purchase Shares will be redeemed by
Triumph-Delaware pursuant to Section 2.2(e) below.
SECTION 1.4 Merger of the Companies. Subject to the terms and
conditions set forth herein, subsequent to the actions referred to in Sections
1.1, 1.2 and 1.3 and prior to the Closing, the Company Principals shall cause
each Company to merge with and into Triumph-Delaware, with Triumph-Delaware
surviving (the "Mergers").
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ARTICLE II
CLOSING
SECTION 2.1 Time of Closing. Subject to the terms and
conditions of this Agreement, the consummation of the Transactions (as defined
below) contemplated to be consummated on the Closing Date (the "Closing") shall
take place at the offices of Cooperman Levitt Winikoff Lester & Newman, P.C.,
800 Third Avenue, New York, New York 10022, on March 31, 1998, at 10:00 a.m.,
local time, or at such other time and place as may be acceptable to the Company
Principals and Purchaser (the "Closing Date").
SECTION 2.2 Actions at Closing. Subject to the terms and
conditions set forth herein, at the Closing, the Company Principals shall, or
shall cause Triumph-Delaware to, take the following actions:
(a) Triumph-Delaware shall issue, sell and deliver to
Purchaser, and Purchaser shall purchase and accept from Triumph-Delaware (the
"Acquisition"), 770,000 shares of Common Stock (the "Common Shares") (which will
represent seventy-seven percent (77%) of the issued and outstanding shares of
Common Stock after giving effect to all of the Transactions). In consideration
for the Common Shares, Purchaser shall pay Triumph-Delaware in cash the purchase
price of Fifteen Million Four Hundred Thousand U.S. Dollars ($15,400,000) (the
"Purchaser Common Shares Purchase Price");
(b) Triumph-Delaware shall issue, sell and deliver to
Purchaser, and Purchaser shall purchase and accept from Triumph-Delaware (the
"Purchaser Preferred Stock Purchase"), 28,000 shares of Preferred Stock (the
"Preferred Shares") (which will represent eighty percent (80%) of the issued and
outstanding shares of Preferred Stock after giving effect to all of the
Transactions). In consideration for the Preferred Shares, Purchaser shall pay
Triumph-Delaware in cash the purchase price of Twenty-Eight Million U.S. Dollars
($28,000,000) (the "Purchaser Preferred Shares Purchase Price");
(c) Triumph-Delaware shall issue, sell and deliver to members
of management of the Companies ("Management") designated by Purchaser, and such
members of Management shall purchase and accept from Triumph-Delaware (the
"Management Purchase"), an aggregate of up to 30,000 shares of Common Stock at a
purchase price of $20.00 per share. In consideration for the shares of Common
Stock purchased by members of Management, such members of Management shall pay
Triumph-Delaware in cash the purchase price of $20.00 per share;
(d) Triumph-Delaware shall borrow approximately One Hundred
Fifteen Million U.S. Dollars ($115,000,000) in aggregate principal amount
consisting of a combination of borrowings (the "Borrowings") from certain
providers of financing (the "Lenders") and the issuance (the "Note Financing")
to certain purchasers of Senior Notes (the "Notes") and have available to it a
credit facility in the amount of approximately an additional Twenty Million U.S.
Dollars ($20,000,000), as contemplated by the Funds Availability Letter (as
hereinafter defined);
(e) Triumph-Delaware shall redeem from each of the Company
Principals fifty percent (50%) of the Stock Purchase Shares as well as 250,000
additional shares of
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Common Stock held by each Company Principal prior to the Stock Purchases (the
"Redemption") such that each Company Principal will hold 100,000 shares of
Common Stock (which will represent ten percent (10%) of the issued and
outstanding shares of Common Stock after giving effect to all of the
Transactions), and shall distribute to each Company Principal in cash an amount
equal to fifty percent (50%) of the aggregate redemption price (the "Redemption
Price") of One Hundred and Forty-Nine Million U.S. Dollars ($149,000,000). The
Company Principals shall deliver stock certificates representing the shares of
Common Stock to be redeemed, endorsed for transfer to Triumph-Delaware;
(f) Triumph-Delaware shall, along with the Purchaser and the
Company Principals, enter into a Stockholders Agreement in substantially the
form annexed hereto as Exhibit B (the "Stockholders Agreement");
(g) Triumph-Delaware shall enter into employment agreements
with each of Levine, Rutta, Norman Harris and Michael Sumsky, substantially in
the forms of Exhibits C-1, C-2, C-3 and C-4 annexed hereto, respectively (the
"Employment Agreements");
(h) Triumph-Delaware shall enter into non-competition
agreements with each of the Company Principals, substantially in the form of
Exhibit D annexed hereto (the "Non-competition Agreements"); and
(i) Triumph-Delaware shall enter into a Management Services
Agreement with Leonard Green & Partners, L.P. ("LGP"), substantially in the form
annexed hereto as Exhibit E (the "Management Services Agreement") and shall pay
a closing and structuring fee to LGP in the amount of Two Million Eight Hundred
and Fifty Thousand U.S. Dollars ($2,850,000) (the "Fee").
The Preferred Stock Dividend, the Stock Purchases, the Mergers, the Acquisition,
the Purchaser Preferred Stock Purchase, the Management Purchase, the Borrowings,
the Note Financing, the Redemption and the other transactions contemplated
herein to be consummated pursuant to Articles I and II hereof are collectively
referred to herein as the "Transactions."
SECTION 2.3 Post-Closing Adjustment.
(a) Reduction in Redemption Price. The Redemption Price shall
be reduced in the event that the tangible net worth of Triumph-Delaware,
determined in accordance with generally accepted accounting principles ("GAAP")
consistent with those followed in the preparation of the Company Financial
Statements (as defined herein) but with such adjustments as may be specifically
provided by this Agreement, immediately prior to the Closing after giving effect
to the Mergers but before giving effect to the Preferred Stock Dividend and the
other Transactions (the "Closing Net Worth") is less than $24,086,234 (including
at least $2,000,000 in cash) (the "Guaranteed Net Worth"), it being understood
and agreed that the Fee shall not reduce the Closing Net Worth. The amount of
the aggregate adjustment shall be a dollar for dollar reduction based on the
dollar amount of the deficiency.
(b) Increase in Redemption Price. The Redemption Price shall
be increased in the event that the Closing Net Worth is more than the Guaranteed
Net Worth. The amount of the
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<PAGE>
aggregate adjustment shall be a dollar for dollar increase based on the dollar
amount of the excess.
(c) Method of Adjusting Redemption Price. Within ninety (90)
days of the Closing, the Company Principals shall deliver to the Purchaser a
balance sheet, prepared by KPMG Peat Marwick, LLP (the "Auditors"), reflecting
the Closing Net Worth of Triumph-Delaware as of immediately prior to the Closing
(the "Closing Balance Sheet"), audited by and containing an unqualified report
of the Auditors. The Closing Balance Sheet shall be prepared in good faith in
accordance with the provisions of this Agreement. Unless the Purchaser or the
Company Principals shall dispute the calculation of the Closing Net Worth as
reflected on the Closing Balance Sheet, then, in the event that the Closing Net
Worth as reflected thereon varies from the Guaranteed Net Worth, the Redemption
Price shall be subject to automatic adjustment as provided in Section 2.3(a) or
(b) hereof, as applicable.
(d) Adjustment. (i) In the event of a reduction in the
Redemption Price under Section 2.3(a), each Company Principal shall, within
fifteen (15) days after delivery of the Closing Balance Sheet (unless a Balance
Sheet Dispute (as hereinafter defined) is pending), pay 50% of the amount
thereof to Triumph-Delaware. The Company Principals agree that representatives
of Purchaser may be present during any physical inventory conducted as part of
the audit of the Closing Balance Sheet.
(ii) In the event of an increase in the Redemption Price
under Section 2.3(b), Triumph-Delaware shall (unless a Balance Sheet Dispute is
pending) pay the amount thereof to the Company Principals, one half to each, no
later than fifteen (15) days after the delivery of the Closing Balance Sheet.
(e) Disputes Regarding Closing Balance Sheet. The Company
Principals and the Auditors, as the case may be, shall furnish the Purchaser and
its accountants (the "Purchaser's Auditors") and agents with full access, upon
reasonable prior notice, to all working papers, books, records, financial data
and other documentation used in the calculation of the Closing Net Worth.
Disputes with respect to the Closing Balance Sheet shall be dealt with as
follows:
(i) Triumph-Delaware and the Company Principals shall
have fifteen (15) days after receipt of the Closing Balance Sheet (the "Dispute
Period") to dispute any of the elements of or amounts reflected in the Closing
Balance Sheet (a "Balance Sheet Dispute"). If Triumph-Delaware or the Company
Principals has a Balance Sheet Dispute, Triumph-Delaware or the Company
Principals, as the case may be, shall deliver to the other parties to this
Agreement written notice (a "Dispute Notice") within the Dispute Period, setting
forth in reasonable detail a description of the Balance Sheet Dispute. Within
ten (10) business days after the delivery of any such Dispute Notice, the
Company Principals and Triumph-Delaware shall meet at a mutually acceptable time
and place and thereafter as often as such parties reasonably deem necessary and
shall, in good faith, cooperate in an attempt to resolve such Balance Sheet
Dispute and agree in writing upon an appropriate adjustment to the Closing Net
Worth as reflected in the Closing Balance Sheet.
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(ii) If any Balance Sheet Dispute is not finally resolved
within twenty (20) business days after the delivery of a Dispute Notice, as
aforesaid, or if the parties shall fail to meet within ten (10) business days
after the delivery of any such Dispute Notice, then the Balance Sheet Dispute
shall be referred to an independent nationally recognized certified public
accounting firm selected by the Purchaser and the Company Principals (the
"Balance Sheet Arbitrator") for resolution in accordance with the terms hereof
(the "Balance Sheet Arbitration"), and in any event as soon as practicable.
(iii) In the event that the accounting firm selected by
the Purchaser and the Company Principals is then unwilling or unable to serve as
the Balance Sheet Arbitrator, the parties hereto shall select by mutual written
agreement another independent nationally recognized certified public accounting
firm to serve as the Balance Sheet Arbitrator.
(iv) The Balance Sheet Arbitrator shall hold a hearing
within thirty (30) days of the submission of the Balance Sheet Dispute for
arbitration (the "Balance Sheet Hearing") and shall render a decision within
thirty (30) days of the conclusion of such hearing. In preparation for its
presentation at such Balance Sheet Hearing, Triumph-Delaware, the Purchaser and
the Company Principals may depose such directors, officers, employees or agents
of the Companies, and such other persons as they may deem reasonably necessary
for such preparation. Triumph-Delaware and the Company Principals may file with
the Balance Sheet Arbitrator such briefs, affidavits and supporting documents as
they deem appropriate. The Balance Sheet Arbitrator shall have the same access
as the Purchaser to any documentation used in the calculation of the Closing Net
Worth. Any decision made by the Balance Sheet Arbitrator within the scope of its
authority shall be final, binding and non-appealable.
(v) The Balance Sheet Arbitrator shall only be authorized
on any one issue to decide in favor of and choose the position of either of the
parties to the Balance Sheet Arbitration or to decide upon a compromise position
between the ranges presented by the parties to such arbitration. The Balance
Sheet Arbitrator shall base its decision solely upon the presentations of the
parties to the Balance Sheet Arbitration at the Balance Sheet Hearing and any
materials made available under clauses (iv) or (vi) hereof and not upon
independent review.
(vi) The Balance Sheet Arbitrator's decision regarding
its final resolution of any Balance Sheet Dispute (the "Arbitrator's Decision")
shall be in writing, shall set forth the calculations made in reaching its
decision, shall describe the manner in which such calculations were made and
shall include a representation that the manner so used was in accordance with
GAAP and the specific terms of this Agreement relative to the calculation of the
Closing Net Worth. The Arbitrator's Decision shall specifically set forth the
amount of any adjustment required to be made to the Redemption Price pursuant to
Section 2.3(a) or (b), as the case may be.
(vii) Any such Balance Sheet Hearing shall take place in
New York, New York unless the parties shall mutually agree on another location.
The Balance Sheet Hearing shall be governed by the United States Arbitration
Act, 9 U.S.C. ss.ss. 1 though 16, and judgment upon the award of the Balance
Sheet Arbitrator may be entered by any court having jurisdiction thereof.
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(viii) The fees and expenses of the Balance Sheet
Arbitrator shall be borne (A) by Triumph-Delaware in the event that the Company
Principals' calculation of the Closing Net Worth was closer in dollar amounts to
the Balance Sheet Arbitrator's determination than was the Purchaser's
calculation thereof, and (B) by the Company Principals in the event that the
Purchaser's calculation of the Closing Net Worth was closer in dollar amounts to
the Balance Sheet Arbitrator's determination than was the Company Principals'
calculation thereof. Notwithstanding the foregoing, each of the parties hereto
shall bear their own costs and expenses related to any such Balance Sheet
Arbitration. Upon the request of the Balance Sheet Arbitrator, the Company
Principals, Triumph-Delaware and Purchaser agree to enter into an arbitration
agreement providing reasonable protection to the Balance Sheet Arbitrator, in
such form as may be mutually acceptable to the Balance Sheet Arbitrator and the
Company Principals, Triumph-Delaware and Purchaser.
(ix) If the Balance Sheet Arbitrator determines that the
amount of the Closing Net Worth requires an adjustment to the Redemption Price
in accordance with Section 2.3(a) or (b) hereof, then the Redemption Price shall
be adjusted in accordance with such determination. In the event of a reduction
in the Redemption Price pursuant to Section 2.3(a), then each Company Principal
shall pay 50% of the amount thereof to Triumph-Delaware, within ten (10) days of
receipt of a copy of the Balance Sheet Arbitrator's determination. In the event
of an increase in the Redemption Price pursuant to Section 2.3(b), then
Triumph-Delaware shall pay the amount thereof to the Company Principals, one
half to each, within ten (10) days of receipt of a copy of the Balance Sheet
Arbitrator's determination.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANIES
AND, AS TO SECTIONS 3.2, 3.4 AND 3.7, THE COMPANY PRINCIPALS
Each Company and, as to Section 3.2, 3.4 and 3.7, each of the
Company Principals represents and warrants to Purchaser as follows, with the
knowledge and understanding that Purchaser is relying upon such representations
and warranties:
SECTION 3.1 Organization and Qualification. Each Company is a
corporation duly organized, validly existing and in good standing under the laws
of its respective jurisdiction of incorporation, as set forth in Section 3.1 of
the Schedule annexed hereto relating to such Company setting forth matters
required to be set forth as described in this Agreement (the "Disclosure
Schedule"). Each Company has all requisite corporate power to carry on its
business as it is now being conducted and is duly qualified to do business as a
foreign corporation and is in good standing in the respective jurisdictions set
forth opposite its name in Section 3.1 of the Disclosure Schedule, and to the
knowledge of such Company, such jurisdictions are the only ones in which the
properties owned, leased or operated by such Company or the nature of the
business conducted by such Company makes such qualification necessary, except
where the failure to qualify (individually or in the aggregate) will not have
any Material Adverse Effect. "Material Adverse Effect" means a material adverse
effect on the business, operations, properties, assets, condition (financial or
otherwise) or results of operations of the Companies on a combined or
consolidated basis, as applicable. The Disclosure Schedule
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shall be deemed a part of this Agreement. The copies of the Certificate of
Incorporation and By-laws of each Company, as amended to date and delivered to
Purchaser, are true and complete copies of these documents as now in effect.
SECTION 3.2 Capitalization. The authorized capital stock of
each Company, the classes of capital stock, the number of shares of capital
stock of each class or series which are issued and outstanding as of the date
hereof, the par value thereof, and the record and beneficial holders thereof are
as set forth in Section 3.2 of the Disclosure Schedule. All of such shares of
capital stock are duly authorized, validly issued and outstanding, fully paid
and nonassessable, and were not issued in violation of the preemptive rights of
any person. Except as set forth in Section 3.2 of the Disclosure Schedule, there
are no subscriptions, options, warrants, rights or calls or other commitments or
agreements to which any Company or any of the Company Principals is a party or
by which any of them is bound, calling for any issuance, transfer, sale or other
disposition of any class of securities of any Company. Other than as set forth
in Section 3.2 of the Disclosure Schedule, there are no outstanding securities
convertible or exchangeable, currently or contingently, into capital stock or
any other securities of any Company. None of the Companies nor either of the
Company Principals is a party to any voting trust or other voting agreement with
respect to any shares of capital stock or to any agreement relating to the
issuance, sale, redemption, transfer or other disposition of capital stock or
other securities of any Company. Each of the Company Principals represents and
warrants to, and covenants and agrees with, the Purchaser that (i) immediately
prior to the Stock Purchases, the Company Principals will own all of the issued
and outstanding shares of capital stock of each Company, free and clear of all
Liens of any kind or nature, (ii) immediately prior to the Mergers,
Triumph-Delaware will own all of the issued and outstanding capital stock of
each Company, free and clear of all Liens of any kind or nature, (iii)
immediately prior the Closing, the Company Principals will own all of the issued
and outstanding shares of capital stock of Triumph-Delaware, free and clear of
all liens of any kind or nature, (iv) the transfer by the Company Principals of
the shares of Common Stock to Triumph-Delaware pursuant to Section 2.2(e) above
will transfer good and valid title thereto to Triumph-Delaware free and clear of
all Liens of any kind or nature whatsoever and (v) the shares of Common Shares
and Preferred Shares sold by Triumph-Delaware to the Purchaser pursuant to
Sections 2.2(a) and 2.2(b), respectively, will be transferred free and clear of
all Liens of any kind or nature whatsoever and the Purchaser shall possess good
and marketable title to such shares free and clear as aforesaid.
SECTION 3.3 Subsidiaries. Except as disclosed in Section 3.3
of the Disclosure Schedule, there are no Company Subsidiaries. As used herein,
the term "Company Subsidiary" shall mean any corporation or other entity of
which any Company directly or indirectly, controls or which any Company owns,
directly or indirectly, 50% or more of the stock or other voting interests, the
holders of which are, ordinarily or generally, in the absence of contingencies
(which contingencies have not occurred) or understandings (which understandings
have not yet been required to be performed) entitled to vote for the election of
a majority of the board of directors or any similar governing body. Except as
set forth in Section 3.3 of the Disclosure Schedule, none of the Companies owns,
directly or indirectly, any capital stock, equity or other interest in any other
corporation or business entity nor is any Company a partner in any partnership
or joint venture. There are no obligations, contingent or otherwise, of any
Company to provide funds to or make an investment (in the form of a loan,
capital contribution or otherwise) in any corporation, partnership, joint
venture or other entity.
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SECTION 3.4 Authority. (a) Each Company has full corporate
power and authority to, and each Company Principal can, enter into this
Agreement and the other Transaction Documents, as applicable, and, subject to
the Required Approvals (as defined in Section 3.4(b) below), consummate the
transactions contemplated hereby and thereby. Each Company's execution and
delivery of this Agreement and the other Transaction Documents, as applicable,
and its consummation of the transactions contemplated hereby and thereby, have
been duly authorized by its Board of Directors and no other corporate
proceedings on its part are necessary to authorize its execution and delivery of
this Agreement and the other Transaction Documents, as applicable, and its
consummation of the transactions contemplated hereby and thereby, except for the
obtaining of the Required Approvals. This Agreement has been, and the other
Transaction Documents will be, duly and validly executed and delivered by each
Company and the Company Principals, as the case may be, and constitutes the
legal, valid and binding obligation of each Company and the Company Principals,
as the case may be, enforceable against each Company and the Company Principals,
as the case may be, in accordance with its terms, except that such enforcement
may be limited by (i) bankruptcy, insolvency, reorganization, moratorium or
other similar laws affecting or relating to enforcement of creditors' rights
generally and (ii) general equitable principles, whether asserted at law or in
equity (collectively, the "Bankruptcy Exception").
(b) Except for (i) filings in connection with the applicable
requirements of the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended (the "HSR Act"), and (ii) the consents set forth in Section 3.4(b) of
the Disclosure Schedule (the filings and approvals referred to in clauses (i)
and (ii) are collectively referred to as the "Required Approvals"), no
declaration, filing or registration with, or notice to, or authorization,
consent or approval of, any governmental or regulatory body or authority or
other person is necessary for the execution and delivery of this Agreement or
any of the other Transaction Documents by the Companies and the Company
Principals or the consummation by the Companies and the Company Principals of
the transactions contemplated hereby or thereby, other than such declarations,
filings, registrations, notices, authorizations, consents or approvals which, if
not made or obtained, as the case may be, would not, individually or in the
aggregate, have a Material Adverse Effect.
SECTION 3.5 Contracts; No Default.
(a) Section 3.5(a) of the Disclosure Schedule consists of a
true and complete list of all contracts, agreements, commitments and other
instruments (whether oral or written) to which any Company is a party that (i)
involve a receipt or an expenditure by any Company or require the performance of
services or delivery of goods to, by, through, on behalf of or for the benefit
of any Company, which in each case, relates to a contract, agreement, commitment
or instrument that (A) requires payments in excess of $200,000 per year and
receipts in excess of $250,000 per year, (B) is not terminable by any Company on
notice of thirty (30) days or less without penalty or any Company being liable
for damages of $200,000 or more, or (C) involves the lease of real property or
any contract or arrangement with either of the Company Principals or any of
their Affiliates, or (ii) involve an obligation for the performance of services
or delivery of goods by any Company that cannot, or in reasonable probability
will not, be performed within one year from the date hereof.
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(b) All of the contracts, agreements, commitments and other
instruments described in Section 3.5(a) of the Disclosure Schedule
(individually, a "Contract" and collectively, the "Contracts") are valid and
binding upon a Company or the Companies, as applicable, and to the knowledge of
the Companies, the other parties thereto, and are in full force and effect and
enforceable in accordance with their terms, subject to the Bankruptcy Exception
and no Company nor, to the knowledge of each Company, any other party to any
Contract, has materially breached any provision of, nor has any event occurred
which, with the lapse of time or action by a third party, could result in a
material default under, the terms thereof. To the knowledge of each Company, no
Company Principal has received any payment in violation of law from any
contracting party in connection with or as an inducement for causing any Company
to enter into any Contract.
SECTION 3.6 Litigation. Except as set forth in Schedule 3.6 of
the Disclosure Schedule, there is no (i) claim (other than claims fully insured
against or adequately reserved against in the Latest Financial Statements),
action, suit, investigation or proceeding pending or, to the knowledge of any
Company, threatened against or relating to any Company before any court or
governmental or regulatory authority or body or arbitration tribunal, or (ii)
outstanding judgment, order, writ, injunction or decree, or application, request
or motion therefor, of any court or governmental or regulatory authority or body
or arbitration tribunal in a proceeding to which any Company, or any of their
assets was or is a party except, in the case of clauses (i) and (ii) above, such
as would not, individually or in the aggregate, either materially impair or
preclude the Company Principals' or any Company's ability to consummate the Sale
or the other Transactions contemplated hereby or, if adversely determined, have
a Material Adverse Effect.
SECTION 3.7 Taxes. Except as disclosed in Section 3.7 of the
Disclosure Schedule: (i) the Companies have completely and accurately prepared
and timely filed or will timely file prior to the Closing with the appropriate
governmental agencies all material franchise, income and all other material Tax
(as hereinafter defined) returns and reports (Tax returns and reports are
hereinafter collectively referred to as "Tax Returns") required to be filed for
any period ending on or before the Closing Date, taking into account any
extension of time to file granted to or obtained on behalf of the Companies
disclosed in Section 3.7 of the Disclosure Schedule; (ii) all material Taxes of
the Companies (whether or not reported) in respect of all periods ending on or
prior to the Closing Date have been paid in full to the proper authorities or
fully accrued for in the latest balance sheet included in the Latest Financials
Statements, other than such Taxes as are being contested in good faith by
appropriate proceedings and are adequately reserved for in accordance with GAAP;
(iii) (a) no deficiency has been asserted or assessed against any Company and is
pending, and (b) no examination of any Company is pending or, to any Company's
knowledge, threatened for any amount of Tax by any taxing authority. Each
Company has validly and effectively elected to be treated as a "S" corporation
under the Internal Revenue Code of 1986, as amended (the "Code") and except as
disclosed in Section 3.7 of the Disclosure Schedule such election and treatment
has not been terminated within the meaning of Section 1362(d) of the Code and
has been in effect throughout the entire existence of each Company.
"Tax" or "Taxes" shall mean all federal, state, local and
foreign taxes, duties, levies, charges and assessments of any nature, including
social security payments and
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deductibles relating to wages, salaries and benefits and payments to
subcontractors (to the extent required under applicable Tax law), and also
including all interest, penalties and additions imposed with respect to such
amounts.
SECTION 3.8 Employee Benefit Plans; ERISA. Except as set
forth in Section 3.8 of the Disclosure Schedule:
(a) there are no "employee pension benefit plans" as defined
in Section 3(2) of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), covering employees (or former employees) employed in the
United States, maintained or contributed to by any Company or any ERISA
Affiliate (as hereinafter defined), or to which any Company or any ERISA
Affiliate contributes or is obligated to make payments thereunder or otherwise
may have any liability ("Pension Benefit Plans"). For purposes of this
Agreement, "ERISA Affiliate" shall mean any person (as defined in Section 3(9)
of ERISA) that is a member of any group of persons described in Section 414(b),
(c), (m) or (o) of the Code of which any Company is a member.
(b) Each Company has delivered to Purchaser true and complete
copies of all Pension Benefit Plans and all "welfare benefit plans" (as defined
in Section 3(1) of ERISA) covering employees (or former employees) employed in
the United States, maintained or contributed to by any Company and, to the
extent covering employees (or former employees) employed in the United States,
any other plans, policies, programs, agreements, understanding or arrangements
providing compensation or other benefits to employees and former employees,
including, without limitation, all stock bonus, stock option, restricted stock,
stock appreciation right, stock purchase, bonus, incentive, deferred
compensation, severance and vacation plans maintained or contributed to by any
Company ("Welfare Plans").
(c) Each of the Companies, and each of the Pension Benefit
Plans and Welfare Plans, have been operated in and are in compliance with its
terms and the applicable provisions of ERISA and other applicable laws except
where the failure to comply would not, individually or in the aggregate, have a
Material Adverse Effect.
(d) All contributions to, and payments from, the Pension
Benefit Plans which are required to have been made in accordance with the
Pension Benefit Plans and, when applicable, Section 302 of ERISA or Section 412
of the Code have been timely made except where the failure to make such
contributions or payments on a timely basis would not, individually or in the
aggregate, have a Material Adverse Effect.
(e) The Pension Benefit Plans intended to qualify under
Section 401 of the Code have been determined by the Internal Revenue Service
("IRS") to be so qualified and, to each Company's knowledge, nothing has
occurred with respect to the operation of such Pension Benefit Plans which would
cause the loss of such qualification or exemption or the imposition of any
material liability, penalty or tax under ERISA or the Code. Such plans have been
or will be amended on a timely basis to comply with changes to the Code made by
the Tax Reform Act of 1986 and other applicable legislative, regulatory or
administrative requirements.
(f) There are (i) no investigations pending, to the knowledge
of the Companies, by any governmental entity involving the Pension Benefit Plans
or Welfare Plans,
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(ii) no termination proceedings involving the Pension Benefit Plans and (iii) no
pending or, to any Company's knowledge, threatened claims (other than routine
claims for benefits), suits or proceedings against any Pension Benefit Plan or
Welfare Plan, against the assets of any of the trusts under any Pension Benefit
Plan or Welfare Plan or against any fiduciary of any Pension Benefit Plan or
Welfare Plan with respect to the operation of such plan or asserting any rights
or claims to benefits under any Pension Benefit Plan or against the assets of
any trust under such plan, except for those which would not, individually or in
the aggregate, give rise to any liability which would have a Material Adverse
Effect, nor, to any Company's knowledge, are there any facts which would give
rise to any liability except for those which would not, individually or in the
aggregate, have a Material Adverse Effect in the event of any such
investigation, claim, suit or proceeding.
(g) To each Company's knowledge, no Company or any employee of
the foregoing, nor any trustee, administrator, other fiduciary or any other
"party in interest" or "disqualified person" with respect to the Pension Benefit
Plans or Welfare Plans, has engaged in a "prohibited transaction" (as such term
is defined in Section 4975 of the Code or Section 406 of ERISA) which would be
reasonably likely to result in a tax or penalty on any Company under Section
4975 of the Code or Section 502(i) of ERISA, except any such transaction which
would not, individually or in the aggregate, have a Material Adverse Effect. No
fiduciary (as defined in Section 3(21) of ERISA) has breached any of the
responsibilities or obligations imposed upon such fiduciary under Title I of
ERISA.
(h) None of the Companies or any ERISA Affiliate has ever
terminated any Pension Benefit Plan subject to Title IV of ERISA, nor has any
trust created thereunder been terminated nor have there been any "reportable
events" (as defined in Section 4043 of ERISA and the regulations thereunder)
with respect to any Pension Benefit Plan or any trust created thereunder, except
any such event which would not, individually or in the aggregate, have a
Material Adverse Effect nor has there been any event with respect to any Pension
Benefit Plan requiring disclosure under Section 4063(a) of ERISA or any event
with respect to any Pension Benefit Plan requiring disclosure under Section
4041(c)(3)(C) of ERISA, except any such event which would not, individually or
in the aggregate, have a Material Adverse Effect.
(i) None of the Companies or any ERISA Affiliate has incurred
any currently outstanding liability to the Pension Benefit Guaranty Corporation
(the "PBGC") or to a trustee appointed under Section 4042(b) or (c) of ERISA
other than for the payment of premiums, all of which have been paid when due. No
Pension Benefit Plan has applied for, or received, a waiver of the minimum
funding standards imposed by Section 412 of the Code. The information supplied
to an actuary by each Company for use in preparing the most recent actuarial
report for a Pension Benefit Plan, if any, is complete and accurate in all
material respects.
(j) None of the Companies or any ERISA Affiliate has ever
withdrawn (in a partial or complete withdrawal) from or incurred any liability
(including any contingent liability under Section 4204 of ERISA) with respect to
any multi-employer plan, within the meaning of Section 3(37) of ERISA, covering
employees (or former employees) employed in the United States.
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(k) With respect to each of the Pension Benefit Plans and
Welfare Plans, true, correct and complete copies of the following documents have
been delivered to Purchaser: (i) the current plans and related trust documents,
including amendments thereto, (ii) any current summary plan descriptions, (iii)
the most recent Forms 5500, financial statements and actuarial reports, if
applicable, and (iv) the most recent IRS determination letter, if applicable.
(l) None of the Companies or any organization to which any
Company is a successor or parent corporation, within the meaning of Section
4069(b) of ERISA, nor any ERISA Affiliate has engaged in any transaction, within
the meaning of Section 4069(a) of ERISA, except where the liability for which
would not, individually or in the aggregate, have a Material Adverse Effect.
(m) None of the Welfare Plans maintained by any Company are
plans which provide for continuing benefits or coverage for any participant or
any beneficiary of a participant following retirement or other termination of
employment, except as may be required under the Consolidated Omnibus Budget
Reconciliation Act of 1985, as amended ("COBRA"), or except at the expense of
the participant or the participant's beneficiary. Welfare Plans providing
benefits or coverage to terminated or retired participants or their
beneficiaries at the expense of such individuals are listed in Schedule 3.8(m).
Each Company which maintains a "group health plan" within the meaning of Section
5000(b)(1) of the Code has complied with the notice and continuation
requirements of Section 4980B of the Code, COBRA, Part 6 of Subtitle B of Title
I of ERISA and the regulations thereunder except where the failure to comply
would not, individually or in the aggregate, have a Material Adverse Effect.
(n) No liability under any Pension Benefit or Welfare Plan has
been funded nor has any such obligation been satisfied with the purchase of a
contract from an insurance company as to which any Company has received notice
that such insurance company is in rehabilitation.
(o) The Continental Insurance Company stop-loss insurance
policy with respect to the Diamond Auto Glass Works, Inc. Employee Welfare
Benefit Plan is currently in force, has never lapsed and all required premiums
have been paid. Claims under the Diamond Auto Glass Works, Inc. Employee Welfare
Benefit Plan have not exceeded the coverage limits of the Continental Insurance
Company stop-loss insurance policy.
SECTION 3.9 No Violation of Law. Except as set forth in
Section 3.9 of the Disclosure Schedule, none of the Companies is in violation of
or has been given notice or been charged with any violation of, any law,
statute, order, rule, regulation, ordinance or judgment (including, without
limitation, any applicable environmental law, ordinance or regulation) of any
Governmental Body, except for violations which, in the aggregate, do not have,
and would not reasonably be expected to have, a Material Adverse Effect. No
Company has received any notice that any investigation or review with respect to
it by any Governmental Body is pending or threatened, other than, in each case,
those the outcome of which would not reasonably be expected to have a Material
Adverse Effect. Each Company has all permits, licenses, franchises,
registrations, variances, exemptions, orders and other governmental and other
authorizations, consents and approvals necessary to conduct its business as
presently conducted, except for those, the absence of which, alone or in the
aggregate, would not have a
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Material Adverse Effect (collectively, "Permits"). Each Company (a) has duly and
timely filed all reports and other information required to be filed with any
Governmental Body in connection with its Permits, and (b) is not in violation of
the terms of any of its Permits, except for such omissions or delays in filings,
reports or violations which, alone or in the aggregate, would not have a
Material Adverse Effect. Section 3.9 of the Disclosure Schedule contains a list
of Permits.
SECTION 3.10 Environmental Matters. (a) To the knowledge of
each Company, the Companies and the properties and assets owned or operated by
any Company (including the Real Properties (as hereinafter defined)) are in
material compliance with all applicable Environmental Laws (as hereinafter
defined), which compliance includes, without limitation, the possession of all
material licenses, permits, registrations and other governmental authorizations
(collectively, "Environmental Authorizations") required under applicable
Environmental Laws and material compliance with the terms and conditions
thereof. To each Company's knowledge, since December 31, 1994, none of the
Companies have received any communication, whether from a Governmental Authority
(as hereinafter defined), citizen group, employee or otherwise, that alleges
that any of the Companies or any of the properties or assets owned or operated
by any of the Companies (including the Real Properties) is not in full
compliance with Environmental Laws. To each Company's knowledge, the Companies
have all material Environmental Authorizations necessary for the conduct of the
businesses of the Companies at the Closing Date except for those that are
disclosed in Schedule 3.10. None of the Companies have been notified by a
Governmental Authority since December 31, 1994, nor do any of the Companies have
reason to believe, that any such Environmental Authorizations will be modified,
suspended or revoked or cannot be renewed or otherwise maintained in the
ordinary course of business.
(b) There is no Environmental Notice (as hereinafter defined)
that (i) is pending or, to the knowledge of any Company, threatened against any
Company or (ii) is pending or, to the knowledge of any Company, threatened
against any person or entity whose liability for such Environmental Notice may
have been retained or assumed contractually or otherwise by any Company in each
case which is reasonably likely to have a Material Adverse Effect.
(c) Except as set forth in Section 3.10 of the Disclosure
Schedule, and to each Company's knowledge, there are no past or present actions,
activities, circumstances, conditions, events or incidents arising out of, based
upon, resulting from or relating to any properties or assets (including the Real
Properties) currently or formerly owned, operated, leased or used by any of the
Companies, including, without limitation, the emission, discharge, disposal or
other release of any Hazardous Material (as hereinafter defined) in or into the
Environment (as hereinafter defined), that (i) could reasonably be expected to
result in the incurrence by any Company of material liabilities under
Environmental Laws, (ii) could reasonably be expected to form the basis of any
Environmental Notice relating to a material risk of loss or damage against or
with respect to any of the Companies, or against any Person or entity whose
liability for any Environmental Notice may have been retained or assumed
(contractually or otherwise) by or could be imputed or attributed by law to any
of the Companies or (iii) could subject Purchaser or any Company to any material
risk of loss or damages.
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(d) Without in any way limiting the generality of the
foregoing, to each Company's knowledge, and except as set forth in Section 3.10
of the Disclosure Schedule, (i) there are and have been no underground or above
ground storage tanks or other storage receptacles, or related piping used for
storage or transport of Hazardous Materials, located on, at or under property
(including the Real Properties) currently or formerly owned, operated, leased or
used by any Company, (ii) there are and have been no polychlorinated biphenyls
located on, at or under property (including the Real Properties) currently or
formerly owned, operated, leased or used by any Company, (iii) there are and
have been no properties (including the Real Properties) currently or formerly
owned, operated, managed, leased or used by any Company (or any of their
respective predecessors in interest) at which Hazardous Materials generated,
used, owned, managed, stored or controlled by any Company may have been disposed
of or otherwise released into the Environment in violation of the law and (iv)
there is no friable asbestos contained in or forming part of any building,
building component, structure or office space owned, operated, leased or used by
any Company, in each case which is reasonably likely to require abatement or
removal.
(e) To each Company's knowledge, no lien has been recorded in
the public records under Environmental Laws with respect to any properties,
assets or facilities (including the Real Properties) owned, operated, managed,
leased or used by any Company.
(f) To each Company's knowledge, each Company has given
Purchaser and its authorized representatives access to all records and files in
its possession relating to actual or potential compliance or liability issues of
any Company under Environmental Laws, including, without limitation, all
reports, studies, analyses, tests or monitoring results pertaining to the
existence of Hazardous Materials or any other environmental concern relating to
properties, assets or facilities (including the Real Properties) currently or
formerly owned, operated, managed, leased, used or controlled by any Company, or
otherwise concerning compliance with or liability under Environmental Laws.
(g) To each Company's knowledge, there has been no disposal,
release, discharge, spillage, uncontrolled loss, seepage or filtration of
Hazardous Material on-site at any properties, assets or facilities (including
the Real Properties) formerly or currently owned or operated by any Company (the
"Properties") and, except as set forth in Section 3.10 of the Disclosure
Schedule, any Hazardous Material which remains on the Properties is being
managed in all material respects in accordance with applicable state and Federal
law and the regulations adopted thereunder.
(h) For purposes of this Agreement:
(i) "Environment" shall mean any surface water,
ground water, or drinking water supply, land surface or
subsurface strata, or ambient air and includes, without
limitation, any indoor location.
(ii) "Environmental Laws" shall mean any federal,
state or local law (including common law), statute, code,
ordinary rule or regulation relating to the environment,
natural resources, or public or employee health or safety,
including (i) the Comprehensive Environmental Response,
Compensation and Liability Act
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of 1980, as amended, 42 U.S.C. ss. 9601 et seq.; (ii) the
Resource Conservation and Recovery Act, as amended, 42 U.S.C.
ss. 9601 et seq.; (iii) the Toxic Substances Control Act, as
amended, 15 U.S.C. ss. 9601 et seq.; the Clean Water Act, 33
U.S.C. Section 1251 et seq.; the Clean Air Act, 33 U.S.C.
Section 2601 et seq.; the Occupational Safety and Health Act,
29 U.S.C. Section 651 et seq. ("OSHA"); as such laws have been
amended or supplemented, and the regulations promulgated
thereunder, and any applicable state transfer laws or
statutes; and (iv) any other federal or state law or
regulation relating to the protection of the Environment.
(iii) "Environmental Notice" shall mean any written
notice or claim by any Governmental Authority or other third
party alleging liability (including, without limitation,
potential liability for investigatory costs, clean-up costs,
governmental costs, compliance costs or harm, injuries or
damages to any person, property, natural resources, or any
fines or penalties) arising out of, based upon, resulting from
or relating to any Environmental Law.
(iv) "Governmental Authority" shall mean any
government or political subdivision or any agency, authority,
bureau, central bank, commission, department or
instrumentality, or any court, tribunal, grand jury or
arbitrator, in each case whether foreign or domestic.
(v) "Hazardous Material" shall mean any substance
included within the definition of "hazardous substance,"
"hazardous waste," "toxic substance," "toxic pollutant,"
"hazardous pollutant," or any similar term under any
Environmental Law and specifically includes polychlorinated
biphenyls and petroleum, oil, or petroleum or oil products,
derivatives or constituents, including, without limitation,
crude oil or any fraction thereof, excluding, however, a
substance present only in de minimis quantities that (i) does
not present a material risk of harm to public health or the
Environment and that (ii) would not be the subject of an
enforcement action if brought to the attention of appropriate
governmental agencies.
(vi) "Real Property" shall mean all right, title and
interest of any of the Companies (including any leasehold
estate) in and to a parcel of real property owned or operated
by any Company together with, in each case, all improvements
and appurtenant fixtures, equipment, personal property,
easements and other property and rights incidental to the
ownership, lease or operation thereof.
SECTION 3.11 Insurance. Each Company is covered by insurance
policies, or renewals thereof, as identified and described in Section 3.11 of
the Disclosure Schedule. No Company has received notice from any insurer or
agent of such insurer that material improvements or expenditures will have to be
made in order to continue such insurance and, so far as known to each Company,
no such improvements or expenditures are required (other than premium payments).
To each Company's knowledge, there is no material liability under any insurance
policy in the nature of a retroactive rate adjustment or loss sharing or similar
arrangement except as set forth in Section 3.11 of the Disclosure Schedule. To
each Company's
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knowledge, such insurance is adequate to cover risks of such types and in such
amounts as is customary for entities engaged in similar lines of business.
SECTION 3.12 Properties. Except as set forth in Section 3.12
of the Disclosure Schedule, each Company has good and marketable title to all of
the assets and properties which it purports to own as reflected on the most
recent balance sheet included in the Latest Financial Statements, or thereafter
acquired (except assets and properties sold or otherwise disposed of since the
date of such balance sheet in the ordinary course of business consistent with
past practice). Each Company has a valid leasehold interest in all properties of
which it is the lessee and each such lease is valid, binding and enforceable
against such Company and, to the knowledge of each Company, the other parties
thereto in accordance with its terms, subject to the Bankruptcy Exception. No
Company nor, to the knowledge of any Company, the other parties thereto are in
default in the performance of any material provision thereunder. No portion of
the assets of any Company is subject to any governmental decree or order to be
sold or is being condemned, expropriated or otherwise taken by any public
authority with or without payment of compensation therefor, nor, to the
knowledge of any Company, has any such condemnation, expropriation or taking
been proposed. Except as set forth in Section 3.12 of the Disclosure Schedule,
none of the material assets of the Companies are subject to any restriction
which would prevent continuation of the use currently made thereof or materially
adversely affect the value thereof.
SECTION 3.13 Condition of Assets. The material equipment,
fixtures and other personal property of each Company are in good operating
condition and repair (ordinary wear and tear excepted) for the conduct of its
respective business as presently being conducted.
SECTION 3.14 No Contravention. Subject to receipt of the
Required Approvals and as specified in Section 3.4(b) of the Disclosure
Schedule, the execution, delivery and performance of this Agreement and the
other Transaction Documents by each Company and the Company Principals does not
and will not (i) conflict with or violate the Certificate of Incorporation or
the by-laws of any Company, (ii) violate any laws, ordinances, rules, or
regulations, or any order, writ, injunction or decree to which any Company or
any Company Principal is a party or by which any Company or any Company
Principal, or any of their respective material assets, businesses, or operations
may be bound or affected or (iii) result in any breach or termination of, or
constitute a default under, or constitute an event which, with notice or lapse
of time, or both, would become a default under, or result in the creation of any
encumbrance upon any material asset of any Company under, or create any rights
of termination, cancellation or acceleration in any person under, any Contract.
SECTION 3.15 Labor Matters. No Company is a party to any union
contract or other collective bargaining agreement, other than those set forth in
Section 3.15 of the Disclosure Schedule, true and complete copies of which
contracts have been delivered to Purchaser. Each Company is in compliance in all
material respects with all applicable laws respecting employment and employment
practices, terms and conditions of employment and wages and hours, and no
Company is engaged in any unfair labor practice. There is no labor strike,
slowdown or stoppage pending (or, to the knowledge of any Company, any labor
strike or stoppage threatened) against or affecting any Company. No petition for
certification has been
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filed and is pending before the National Labor Relations Board with respect to
any employees of any Company who are not currently organized.
SECTION 3.16 Employees. To the knowledge of each Company, no
key employee or group of employees has any plans to terminate employment with
any Company. Except for Triumph-Delaware's current executive officers who are
listed in Section 3.16 of the Disclosure Schedule, no Company is a party to any
employment, management services, consultation or other contract or agreement
with any past or present officer, director or employee or, to any Company's
knowledge, any entity affiliated with any past or present officer, director or
employee with obligations exceeding $100,000 other than those set forth in
Section 3.16 of the Disclosure Schedule, in each case true and complete copies
of which contracts have been delivered to Purchaser, and other than the
agreements executed by employees generally, the forms of which have been
provided to Purchaser.
SECTION 3.17 Financial Statements. Section 3.17 of the
Disclosure Schedule contains (i) an unaudited interim combined balance sheet of
the Companies as of September 30, 1997 and related unaudited combined statement
of income and retained earnings and statement of cash flows (the "Latest
Financial Statements") and (ii) year-end combined balance sheets, statements of
income and retained earnings and cash flows of the Companies for each of the
years ended December 31, 1996, 1995 and 1994 (the Latest Financial Statements
and the financial statements referred to in this clause (ii) are collectively
referred to as the "Company Financial Statements"). The Company Financial
Statements present fairly, in all material respects, the combined financial
position of the Companies as of the respective dates and the results of their
operations and cash flows for the respective years and periods covered in
accordance with GAAP consistently applied (subject, in the case of the Latest
Financial Statements, to normal and recurring year-end adjustments which,
individually or collectively, are not material). Without limiting the generality
of the foregoing, (i) except as set forth in Section 3.17 of the Disclosure
Schedule, as of the date of the most recent balance sheet included in the Latest
Financial Statements, there was no debt, liability or obligation of any nature
not reflected or reserved against in the Latest Financial Statements or in the
notes thereto required to be so reflected or reserved in accordance with GAAP;
and (ii) there are no assets of any Company, the value of which (in the
reasonable judgment of any Company) is materially overstated in the Company
Financial Statements. Except as disclosed therein or in Section 3.17 of the
Disclosure Schedule, the Companies have no material contingent liabilities
(including liabilities for Taxes). Except as disclosed in Section 3.17 of the
Disclosure Schedule, no Company is a party to any contract or agreement for the
forward purchase or sale of any foreign currency or has invested in any
"derivatives."
SECTION 3.18 Absence of Certain Changes or Events. Except as
set forth in Section 3.18 of the Disclosure Schedule, since September 30, 1997
there has not been:
(a) any Material Adverse Change (as hereinafter defined);
(b) any material damage, destruction or loss of any material
properties of any Company, whether or not covered by insurance;
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(c) any material change in the manner in which the business of
the Companies considered as one enterprise has been conducted;
(d) any material change in the treatment and protection of
trade secrets or other confidential information of any Company;
(e) (i) any declaration, setting aside or authorization of the
payment of, any dividend or other distribution in respect of any shares of
capital stock of any Company or any repurchase, redemption or other acquisition
by any Company of any of the outstanding shares of capital stock or other
securities of, or other ownership interest in, any Company or (ii) any amount or
asset paid or otherwise distributed to the Company Principals, whether as
compensation or otherwise (other than normal salary compensation, the amount of
which has previously been disclosed to Purchaser);
(f) any change by any Company in accounting principles,
methods or policies; or
(g) any occurrence not included in paragraphs (a) through (f)
of this Section which has resulted, or which any Company has reason to believe,
could reasonably be expected to result, in a Material Adverse Effect.
SECTION 3.19 Customers and Suppliers. Except as set forth in
Section 3.19 of the Disclosure Schedule, no Company has any knowledge that, as a
result of the transactions contemplated hereby, any material customer of, or
material supplier to any Company will not continue to conduct business with any
Company after the Closing Date in substantially the same manner as it has
conducted business with the Companies within the twelve (12) month period
immediately preceding the Closing Date.
SECTION 3.20 Intellectual Property; Software. (a) Section
3.20(a) of the Disclosure Schedule sets forth a complete and correct list in all
material respects of all patents, trademarks, tradenames, service marks, service
names, brand names and copyright registrations, and applications therefor,
applicable to or used in the business of the Companies, together with a complete
list of all licenses granted by or to any Company with respect to any of the
above. All such patents, trademarks, tradenames, service marks, service names,
brand names and copyrights are owned by a Company, free and clear of all liens,
claims, security interests and encumbrances of any nature whatsoever, except
with respect to the credit agreements listed in Section 3.5(a) of the Disclosure
Schedule, or are used by a Company pursuant to valid licenses. Except as set
forth in Section 3.20(a) of the Disclosure Schedule, no Company is currently in
receipt of any notice of any violation or infringement of, and no Company is
knowingly violating or infringing in any material respect, the rights of others
in any patent, unpatented invention, trademark, tradename, service mark,
copyright, trade secret, know-how, design or process.
(b) (i) Except with respect to the credit agreements listed in
Section 3.5(a) of the Disclosure Schedule, and except as set forth on Schedule
3.20(b)(i) of the Disclosure Schedule, each Company has title to all material
computer software owned by such Company (other than "off-the-shelf" software not
customized for its use) ("Owned Software") free and clear of all liens, claims,
security interests and encumbrances whatsoever, including
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claims or rights of employees, agents, consultants, customers, licensees or
other parties involved in the development, creation, documentation, marketing,
maintenance, enhancement or licensing of such computer software. Except as set
forth in Section 3.20(b)(i) or (ii) of the Disclosure Schedule, the Owned
Software is not dependent on any Licensed Software (as defined in subsection
(ii) below) in order to operate fully in the manner in which it is intended. The
source code of any Owned Software has not been published or knowingly disclosed
to any other parties, except as set forth on Section 3.20(b)(i) of the
Disclosure Schedule, and except pursuant to contracts requiring such other
parties to keep the source code of any Owned Software confidential. As of the
date hereof, to the knowledge of each Company, no such other party has breached
any such obligation of confidentiality.
(ii) Section 3.20(b)(ii) of the Disclosure Schedule also
sets forth a list of the agreements which require the payment of license fees,
rents, royalties or other charges by any Company with respect to all material
software (other than "off-the-shelf" software that has not been customized for
its use) under which any Company is a licensee, lessee or otherwise has obtained
the right to use software and any Company pays a royalty for the use of such
software (the "Licensed Software"). Each Company has the right and license to
use, sublicense, modify and copy Licensed Software, free and clear of any
limitations or encumbrances, except as may be set forth in Section 3.20(b)(ii)
of the Disclosure Schedule or in the agreements referenced therein. Each Company
is in material compliance with all provisions of each license, lease or other
similar agreement pursuant to which it has rights to use the Licensed Software.
No Company has published or knowingly disclosed any Licensed Software to any
other party except, in the case of Licensed Software which a Company leases or
markets to others, in accordance with and as permitted by any license, lease or
similar agreement relating to the Licensed Software and except pursuant to
contracts requiring such other parties to keep the Licensed Software
confidential. As of the date hereof, to the knowledge of each Company, no party
to whom any Company has disclosed Licensed Software has breached such obligation
of confidentiality.
(iii) The Owned Software and Licensed Software constitute
all material software used in the respective businesses of the Companies
(collectively, the "Company Software"). Subject to obtaining the Required
Approvals, the transactions contemplated herein will not cause a breach or
default under any license, leases or similar agreements relating to the Company
Software or impair the ability of Triumph-Delaware to use the Company Software
subsequent to the Closing Date in the same manner as the Company Software is
currently used by the Companies. Except as set forth in Section 3.20(a), no
Company is knowingly infringing in any material respect any intellectual
property rights of any other person or entity with respect to the Company
Software, and, to the knowledge of each Company, no other person or entity is
infringing any intellectual property rights of any Company with respect to the
Company Software.
SECTION 3.21 Business Locations. No Company owns or leases any
real property in any state or country except as set forth in Section 3.21 of the
Disclosure Schedule. No Company has executive offices or places of business
except as otherwise set forth in Section 3.21 of the Disclosure Schedule.
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SECTION 3.22 Directors, Officers and Compensation of
Employees. There is set forth in Section 3.22 of the Disclosure Schedule a true
and complete list showing the names of all directors and officers of each
Company. The Companies previously provided to Purchaser (a) the names of all
salaried persons (other than salespersons) whose aggregate compensation for
purposes of tax reporting from any Company in the fiscal year ended December 31,
1996 was, or in the fiscal year ending December 31, 1997 is expected to be
$100,000 or more per year, together with a statement of the full amount expected
to be paid to each such person for services in all capacities to be rendered in
the fiscal year ending December 31, 1997, separately including the amounts paid
or payable, or expected to be paid or payable, under bonus or incentive
arrangements, if any; and (b) the names and titles of all salespersons whose
aggregate compensation for purposes of tax reporting from any Company in the
fiscal year ended December 31, 1996 was, or in the fiscal year ending December
31, 1997 is expected to be, $100,000 or more per year, together with a statement
of the base salary, the commission and any amount or amounts under bonus or
other incentive arrangements, expected to be paid to each such person in the
fiscal year ending December 31, 1997.
SECTION 3.23 Books, Records and Accounts. Each Company's
books, records and accounts fairly and accurately reflect in all material
respects transactions and dispositions of assets by such Company, and the system
of internal accounting controls of each Company is sufficient to assure that:
(a) transactions are executed in accordance with management's authorization; (b)
transactions are recorded as necessary to permit preparation of financial
statements in conformity with GAAP, and to maintain accountability for assets;
(c) access to assets is permitted only in accordance with management's
authorization; and (d) the recorded accountability for assets is compared with
the existing assets at reasonable intervals and appropriate action is taken with
respect to any differences.
SECTION 3.24 Brokers and Finders. Except for the fees and
expenses payable to First Union Capital Markets Corp., which fees and expenses
will be paid by the Company on the Closing Date, no Company and none of the
Company Principals employed any investment banker, broker, finder, consultant,
intermediary or other person in connection with the transactions contemplated by
this Agreement which would be entitled to any investment banking, brokerage,
finder's or other fee or commission in connection with this Agreement or the
transactions contemplated hereby. No fees or expenses of any nature incurred in
connection with this Agreement or the transactions contemplated hereby,
including those referred to in the preceding sentence, that are paid by any
Company on or prior to the Closing Date shall be capitalized by any Company, and
the Closing Net Worth shall be determined as if all such fees and expenses were
incurred as an expense prior to the Closing Date. Any fees or expenses incurred
by any Company or any Company Principal in connection with this Agreement or the
transactions contemplated hereby that are not paid by a Company on or prior to
the Closing Date shall become the obligation of the Company Principals, who
shall enter into appropriate documentation reflecting their assumption of such
obligations, as of the Closing Date.
SECTION 3.25 No Omissions or Untrue Statements. No
representation or warranty made by any Company or any Company Principal to
Purchaser in this Agreement, the Disclosure Schedule or in any certificate of a
Company officer required to be delivered to Purchaser pursuant to the terms of
this Agreement contains or will contain any untrue statement of a material fact,
or omits or will omit to state a material fact necessary to make the statements
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contained herein or therein in light of the circumstances in which made not
misleading as of the date hereof and as of the Closing Date. The representations
and warranties contained in this Section 3.25 or elsewhere in this Agreement or
in any other Transaction Document shall not be affected or deemed waived by
reason of the fact that the Purchaser and/or its representatives know or should
have known that any such representation or warranty is or might be inaccurate in
any respect.
SECTION 3.26 Related Party Transactions. Except as set forth
on Schedule 3.26(a) of the Disclosure Schedule, (i) since December 31, 1996 no
officer or director (or any relative or Affiliate of any of them) of any Company
has entered into any transaction with or is a party to any contract with any
Company and (ii) no officer or director (or any relative or Affiliate of any of
them) of any Company is a party to any contract with any Company. Except as set
forth on Schedule 3.26(b) of the Disclosure Schedule, no officer or director (or
any relative or Affiliate of any of them) of any Company owns any direct or
indirect interest of any kind in, or controls or is a director, officer,
employee or partner of, or consultant to, or lender to or borrower from or has
the right to participate in the profits of, any Person which is a competitor,
supplier, customer, landlord, tenant, creditor or debtor of any Company except
for the passive ownership of not more than 1% of the outstanding capital stock
of any company which is traded on a national securities exchange or The Nasdaq
Stock Market's National Market.
SECTION 3.27 Entire Business. The assets, properties and
rights which will be owned or leased by the Companies as of the Closing will
constitute all of the tangible and intangible property used by the Companies in
connection with the conduct of their business.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser represents and warrants to the Companies as follows,
with the knowledge and understanding that the Companies are relying on such
representations and warranties:
SECTION 4.1 Organization and Qualification of Purchaser.
Purchaser is a limited partnership duly organized, validly existing and in good
standing under the laws of the State of Delaware.
SECTION 4.2 Purchaser's Authority. (a) Purchaser has full
power and authority to enter into this Agreement and, subject to filings in
connection with the applicable requirements of the HSR Act (the "Required
Statutory Approvals"), to consummate the transactions contemplated hereby.
Purchaser's general partner has approved and adopted this Agreement. No other
partnership proceedings on Purchaser's part are necessary to authorize its
execution and delivery of this Agreement and its consummation of the
transactions contemplated hereby. This Agreement has been duly and validly
executed and delivered by Purchaser, and constitutes the legal, valid and
binding obligation of Purchaser, enforceable against Purchaser in accordance
with its terms, except that such enforcement may be limited by the Bankruptcy
Exception.
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(b) Except for the Required Statutory Approvals, no
declaration, filing or registration with, or notice to, or authorization,
consent or approval of, any governmental or regulatory body or authority or
other person is necessary for the execution and delivery of this Agreement by
Purchaser or the consummation by Purchaser of the transactions contemplated
hereby, other than such declarations, filings, registrations, notices,
authorizations, consents or approval which, if not made or obtained, as the case
may be, would not, in the aggregate, have a Material Adverse Effect on
Purchaser.
SECTION 4.3 Securities Act.
(a) The Purchaser will not offer to sell or otherwise dispose
of the Preferred Shares and the Common Shares acquired by it hereunder in
violation of any of the registration requirements of the Securities Act of 1933,
as amended (the "Act"), and subject, nevertheless, to the disposition of the
Purchaser's property being at all times within its control; provided, however,
that it is understood and acknowledged that the Purchaser may assign (i) to an
Affiliate the Purchaser's rights hereunder with respect to the purchase of the
Preferred Shares and the Common Shares and (ii) to investors in the Purchaser
the Purchaser's rights hereunder with respect to the purchase of a portion of
the Preferred Shares and a portion of the Common Shares, provided that any such
assignments do not violate any of the registration requirements of the Act.
(b) The Purchaser has substantial experience in business and
financial matters and in making investments of the type contemplated by this
Agreement and is capable of evaluating the merits and risks of its purchase of
the Common Shares and Preferred Shares pursuant to this Agreement and is able to
bear the economic risks of its investment.
SECTION 4.4 Availability of Financing. Subject to the receipt
of the financing (as outlined in the attachments to the letter dated January 14,
1998, from Leonard Green & Partners, L.P. to Diamond (the "Funds Availability
Letter")) on terms and conditions reasonably acceptable to the Purchaser, the
Purchaser has sufficient unencumbered cash and cash equivalents and/or financing
commitment letters from or funding arrangements with commercial banks and other
lending institutions, such that Triumph-Delaware should be able to make payment
in full in cash of the Redemption Price upon satisfaction of the conditions to
Closing set forth in this Agreement ("Funds Availability").
ARTICLE V
CONDUCT OF BUSINESS PRIOR TO THE CLOSING DATE
SECTION 5.1 Conduct of Business Prior to Closing Date. Each
Company hereby covenants and agrees to do the following, from and after the date
of this Agreement and until the Closing Date, except as otherwise specifically
consented to in writing by the Purchaser:
(a) not amend or propose to amend any Company's Certificate of
Incorporation or By-Laws, except as set forth in Section 1.1 above;
(b) conduct each Company's business in the ordinary and usual
course of business and consistent with past practice;
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(c) except as set forth in Article I above, not (i) split,
combine or reclassify its outstanding capital stock or declare, set aside or pay
or authorize the payments of any dividend or distribution payable in cash,
stock, property or otherwise, or repurchase, redeem or acquire any of the
outstanding shares of any class of capital stock, (ii) pay or otherwise
distribute any other amounts or assets to any Company Principal, whether as
compensation or otherwise, other than as disclosed in Section 5.1 of the
Disclosure Schedule, except for normal salary compensation, (iii) spin-off any
assets or businesses, (iv) engage in any transaction for the purpose of
effecting a recapitalization, or (v) engage in any transaction or series of
related transactions which has a similar effect to any of the foregoing, except
that, immediately prior to the Closing, Triumph-Delaware may distribute to the
Company Principals all cash and cash equivalents of Triumph-Delaware in excess
of the sum of (A) $2.0 million and (B) the amount of any fees or expenses of any
nature incurred in connection with this Agreement or the transactions
contemplated hereby, including those referred to in Section 3.24, that are paid
by any Company on the Closing Date; provided, however, that the amount of such
distributions shall be reduced to the extent that, in the good faith judgment of
Triumph-Delaware, such reduction is necessary to ensure that the Closing Net
Worth will not be less than the Guaranteed Net Worth;
(d) use all reasonable efforts to preserve intact each
Company's business organization and goodwill, keep available the services of its
present officers and key employees, and preserve the goodwill and business
relationships with suppliers, distributors, customers and others having business
relationships with any Company, and not engage in any action, directly or
indirectly, that could impact adversely the transactions contemplated by this
Agreement or the Transaction Documents.
(e) not incur or become contingently liable with respect to
any Indebtedness, except in the ordinary course of business and only pursuant to
the revolving credit arrangements referred to in Section 3.5(a) of the
Disclosure Schedule and provided that all Indebtedness of each Company shall be
fully repaid prior to the Closing and the Closing Balance Sheet shall reflect no
outstanding Indebtedness of any Company;
(f) not enter into or amend in any respect any employment,
severance, or special pay arrangement with respect to termination of employment
or other similar material arrangements or agreements with any directors,
officers or key employees;
(g) not change accounting principles, methods or policies,
except for the elimination of the Due From Related Company account (in the
amount of $2,771,296), and Purchaser has agreed to such elimination;
(h) not (i) make any loans, advances or capital contributions
to any other Person or (ii) assume, guarantee, endorse or otherwise become
liable for the obligations of any other Person;
(i) not increase the rate of remuneration payable to any of
its directors or officers, or, except in the ordinary course of business and
consistent with past practices or as required by existing contractual
arrangements, to any other employees or other representatives, or agree to do
so;
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(j) not adopt, enter into or amend any bonus, profit sharing,
compensation, stock option, pension, retirement, deferred compensation, health
care, employment or other employee benefit plan, agreement, trust, fund or
arrangement for the benefit or welfare of any employee or retiree, except as
required to comply with changes in applicable law;
(k) use its best efforts to maintain in force the insurance
coverage described in Section 3.11 of the Disclosure Schedule;
(l) except as set forth in Article I above, not issue, sell,
pledge or dispose of, or agree to issue, sell pledge or dispose of any shares of
its capital stock of any class or any of its securities, or any options,
warrants or rights of any kind to acquire any shares of its capital stock of any
class or any debt or equity securities convertible into or exchangeable for such
capital stock or amend or modify the terms and conditions of any of the
foregoing;
(m) not (i) make any acquisition of any assets (except in the
ordinary course of business and consistent with past practices, excluding in any
case material assets), (ii) sell any assets (except in the ordinary course of
business and consistent with past practices, excluding in any case material
assets), or (iii) enter into any contract, agreement, commitment or arrangement
to do any of the foregoing;
(n) not mortgage, pledge or subject to any Lien any of its
assets other than under any Contract described in Section 3.5(a) of the
Disclosure Schedule;
(o) merge, consolidate or reorganize with, or acquire, any
Person other than as contemplated by this Agreement;
(p) enter into any transaction with, or become party to any
Contract with, any officer or director (or any relative of any of them) of any
Company; or
(q) agree to do, or enter into negotiations with respect to,
any of the things described in the preceding clauses in this Section 5.1.
SECTION 5.2 No Solicitation. Each Company and each of the
Company Principals agrees that, prior to the Closing Date or the termination of
this Agreement in accordance with its terms, none of the Companies or the
Company Principals shall directly or indirectly, solicit, initiate, facilitate
or encourage or take any other action intended or designed to facilitate the
efforts of any Person other than the Purchaser, with respect to (including by
way of furnishing or disclosing information or engaging in discussions or
negotiations, whether such negotiations are initiated by any Company, the
Company Principals, or otherwise) any merger, consolidation, acquisition, other
business combination involving any Company, acquisition of a material portion of
the assets or capital stock of any Company, or inquiries or proposals concerning
or which could be expected to lead to, any of the foregoing (an "Acquisition
Transaction") or negotiate, explore or otherwise communicate in any way with any
third party (other than Purchaser or its Affiliates) with respect to any
Acquisition Transaction or enter into any agreement, arrangement or
understanding requiring it to abandon, terminate or fail to consummate the
transactions expressly contemplated by this Agreement, or contemplated to be a
material part hereof. Each Company and the Company Principals shall advise
Purchaser in writing of any inquiries or proposals relating to an Acquisition
Transaction received on or after
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the fifth business day following the date of this Agreement, within one business
day following the receipt of any such inquiry or proposal. Each Company and the
Company Principals shall promptly advise any person seeking an Acquisition
Transaction that they are bound by the provisions of this Section, but without
identifying Purchaser. During the five business days following the date of this
Agreement, each Company, each Company Principal and their respective
representatives and advisors will (i) inform each Person (including such
Person's representatives and advisors; an "Inquiring Person") who expressed an
interest in engaging in or considering an Acquisition Proposal that the Company
Principals and the Companies have entered into a definitive agreement with
another party to consummate an Acquisition Proposal which provides, among other
things, that the Companies, the Company Principals and their respective
representatives are precluded from engaging in any further negotiations or
discussions concerning an Acquisition Proposal with any Person (other than the
Purchaser, but without identifying Purchaser), (ii) request that each Inquiring
Person return to Diamond all information and material concerning any of the
Companies in the possession of any such Inquiring Person; and (iii) discontinue
communications with all Inquiring Persons.
ARTICLE VI
ADDITIONAL AGREEMENTS
SECTION 6.1 Furnishing of Information. Each Company throughout
the period prior to the Closing Date shall afford to the Purchaser and the
Purchaser's accountants, counsel, financial advisors and other representatives
full access during normal business hours to all properties, books, contracts,
commitments and records of each Company and, during such period, shall furnish
to the Purchaser promptly such information concerning its business, properties
and personnel as the Purchaser shall reasonably request; provided, however,
that, no furnishing of information pursuant to this Section 6.1 shall affect any
representation or warranty made herein or the conditions to the obligations of
the parties to consummate the Transactions. All non-public documents and
information furnished to Purchaser in connection with the transactions
contemplated by this Agreement shall be deemed to have been received pursuant to
and shall be subject to the provisions of the confidentiality and non-disclosure
agreement heretofore entered into between Purchaser and the Companies (the
"Confidentiality Agreement"), except that Purchaser may disclose such
information as may be necessary in connection with seeking the Required
Statutory Approvals and the Required Approvals. Each Company shall promptly
advise Purchaser, in writing, of any change or the occurrence of any event after
the date of this Agreement having, or which may have, a Material Adverse Effect.
SECTION 6.2 Agreement to Cooperate. Subject to the terms and
conditions herein provided, each of the parties hereto shall cooperate and use
its respective reasonable best efforts to take, or cause to be taken, all action
and to do, or cause to be done, all things necessary, proper or advisable under
applicable laws and regulations to consummate and make effective the
Transactions contemplated by this Agreement, including using its reasonable best
efforts to obtain all necessary or appropriate waivers, consents and approvals
(including, without limitation, any required under the HSR Act including request
for early termination of waiting periods under the HSR Act), to effect all
necessary registrations, filings and submissions and to lift any injunction or
other legal bar to the Transactions (and, in such case, to proceed with the
Transactions as expeditiously as possible), subject, however, to obtaining the
Required
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Approvals and the Required Statutory Approvals; and provided, that nothing in
this Section 6.2 shall affect any responsibility or obligation specifically
allocated to any party in this Agreement.
SECTION 6.3 Public Statements. The parties shall consult with
each other prior to issuing any press release or making any written public
statement with respect to this Agreement or the transactions contemplated hereby
and shall not issue any such press release or written public statement prior to
such consultation, except that prior review and approval shall not be required
if, in the reasonable judgment of the party seeking to issue such release or
make such public statement, prior review and approval would prevent the timely
dissemination of such release or statement in violation of applicable law.
SECTION 6.4 Disclosure Supplements. From time to time prior to
the Closing Date, and in any event immediately prior to the Closing Date, the
Companies shall promptly supplement or amend the Disclosure Schedule with
respect to any matter hereafter arising that, if existing, occurring, or known
at the date of this Agreement, would have been required to be set forth or
described in the Disclosure Schedule or that is necessary to correct any
information in the Disclosure Schedule that is or has become inaccurate in any
material respect, it being understood that neither the delivery of such
information nor any amendment or supplement to the Disclosure Schedule shall,
directly or indirectly, in any manner constitute a waiver by the Purchaser of
the conditions precedent to the Closing hereunder or a modification to such
conditions to Closing.
SECTION 6.5 Funds Availability Notification. If the Purchaser
becomes aware or learns of any actual or threatened event or circumstance which
causes, or can reasonably be expected to cause, the Purchaser's representation
contained in Section 4.4 hereof as to Funds Availability to be incorrect at any
time in any material respect, the Purchaser agrees to notify each Company
Principal of such event or circumstance and the steps Purchaser proposes to take
to remedy such event or circumstance or otherwise seek to obtain sufficient
funds to satisfy such representation. Any such notification shall be given
promptly but in no event later than two (2) business days following Purchaser's
learning of such event or circumstance. In addition, the Purchaser agrees to
promptly furnish to each Company Principal copies of any material amendment of,
or modification to, any commitment letter or funding arrangement relied upon by
the Purchaser in making the Funds Availability representation.
SECTION 6.6 Satisfaction of Conditions Precedent. Each of the
parties shall use its reasonable best efforts to cause the satisfaction on or
before the Final Date (as defined herein) of the conditions precedent contained
in Article VII of this Agreement that impose obligations on it or require action
on its part.
SECTION 6.7 Continuing Director and Officer Indemnification.
Triumph-Delaware will indemnify, hold harmless and reimburse expenses (including
in advance), for a period of six years following the Closing Date (the
"Indemnification Period"), the directors and officers of the Companies from and
against any and all liabilities, fines, penalties, losses, costs and expenses
(collectively "Liability") that any such director or officer may incur by reason
of his service as a director or officer of a Company prior to the Closing Date
to the same extent as the Companies shall have agreed to indemnify and reimburse
expenses of such directors and officers as of the date of this Agreement
pursuant to the By-laws of such Company,
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except to the extent that such Liability arises out of a breach of this
Agreement or any of the Transaction Documents by such director or officer. In
the event Purchaser shall sell, liquidate, combine or reorganize
Triumph-Delaware at any time during the Indemnification Period, adequate
provision shall be made as a condition thereto to ensure that the rights of such
directors and officers pursuant to this Section 6.7 are preserved for the then
remaining duration of the Indemnification Period. During the Indemnification
Period, each Company, to the extent it maintains directors' and officers'
liability insurance, shall use its reasonable best efforts to include the
aforesaid officers and directors of such Company as additional covered persons
(assuming that such coverage is available at commercially reasonable rates).
SECTION 6.8 Certain Leases. After the Closing, at the request
of Triumph-Delaware, the Company Principals shall cause the Real Estate
Partnership which owns the Facilities (as hereinafter defined) to renew or
extend the leases through December 31, 2010, with respect to the facilities
listed in Section 3.5(a) of the Disclosure Schedule (the "Facilities") on terms
substantially similar to those applicable to such Facilities on the date of this
Agreement, provided that the monthly rental amounts will remain at current rates
through December 31, 1998 and then will be increased 4% each calendar year
thereafter.
SECTION 6.9 Name Change. Concurrently with or prior to the
Closing, the Company Principals shall dissolve or change the name of the
Excluded Companies such that the words "Diamond" or "Triumph" do not appear.
From and after the Closing, the Company Principals shall cease and desist from
using in the conduct of any business, such words or any resemblance to, or
likely to be confused with, "Diamond" or "Triumph."
SECTION 6.10 Section 338(h)(10) Election. The Company
Principals agree, upon GEI's request, to join Triumph-Delaware in making an
election pursuant to Section 338(h)(10) of the Code (and similar provisions of
state and local law) with respect to the Stock Purchases.
ARTICLE VII
CONDITIONS
SECTION 7.1 Conditions to Each Party's Obligations to Effect
the Transactions. The respective obligation of each party to effect the
Transactions set forth in Section 2.2 shall be subject to the fulfillment at or
prior to the Closing Date of the following conditions:
(a) No preliminary or permanent injunction or other order or
decree by any federal or state court which prevents the consummation of the
Transactions shall have been issued and remain in effect;
(b) No legal action shall have been taken, and no statute,
rule or regulation shall have been enacted, by any state or federal government
or governmental agency in the United States which would prevent the consummation
of the Transactions;
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(c) All governmental and third party consents, orders and
approvals legally required for the consummation of the Transactions and the
transactions contemplated hereby (including without limitation all Required
Statutory Approvals and Required Approvals) shall have been obtained and be in
effect at the Closing Date without any material limitations or conditions; and
(d) All waiting periods and conditions applicable to the
Transactions under the HSR Act shall have expired or been terminated and/or been
satisfied.
SECTION 7.2 Conditions to Obligations of the Company
Principals to Effect the Transactions. Unless waived in writing by the Company
Principals, the obligation of the Company Principals to effect the Transactions
set forth in Section 2.2 shall be subject to the fulfillment at or prior to the
Closing Date of the following additional conditions:
(a) Each Company Principal shall have received, by wire
transfer to an account designated by such Company Principal, payment of an
amount equal to 50% of the Redemption Price; and
(b) Each Company Principal shall have received from Kramer,
Levin, Naftalis & Frankel, counsel to the Purchaser, an opinion reasonably
satisfactory to each Company Principal.
SECTION 7.3 Conditions to Obligations of Purchaser to Effect
the Transactions. Unless waived in writing by Purchaser, the obligations of
Purchaser to effect the Transactions set forth in Section 2.2 shall be subject
to the fulfillment at or prior to the Closing Date of the following additional
conditions:
(a) Each Company and the Company Principals shall have
performed in all material respects all of their respective covenants and
agreements contained in this Agreement required to be performed on or prior to
the Closing Date, and the representations and warranties of the Companies and
the Company Principals contained in this Agreement shall be true and correct in
all material respects on and as of (i) the date made and (ii) the Closing Date;
and Purchaser shall have received a Certificate of the President of
Triumph-Delaware to that effect;
(b) The Employment Agreements shall have been executed and
delivered;
(c) Purchaser shall have received good standing certificates
dated within one month of the Closing Date for each Company from the
jurisdictions listed in Section 3.1 of the Disclosure Schedule;
(d) There shall not have been any Material Adverse Change, and
the Purchaser shall have received a Certificate of the President of
Triumph-Delaware to such effect;
(e) The Purchaser shall have received from Cooperman Levitt
Winikoff Lester & Newman, P.C., counsel to the Companies and the Company
Principals, an opinion reasonably satisfactory to the Purchaser;
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(f) The Purchaser shall have received all written consents,
assignments, waivers, authorizations or other certificates reasonably deemed
necessary by the Purchaser's legal counsel to provide for the continuation in
full force and effect of any and all material Contracts of each Company and for
the Company Principals to consummate the transactions contemplated hereby and by
the other Transaction Documents;
(g) Each of the Company Principals shall have executed and
delivered a Non-competition Agreement, the Stockholders Agreement and a General
Release substantially in the form of Exhibit F annexed hereto;
(h) Triumph-Delaware shall have obtained at least One Hundred
Fifteen Million U.S. Dollars ($115,000,000.00) in aggregate principal amount of
borrowings to be applied to the payment of the Redemption Price, and
Triumph-Delaware shall have available a credit facility in the amount of an
additional Twenty Million U.S. Dollars ($20,000,000.00), as contemplated by the
Funds Availability Letter, on terms and conditions acceptable to the Purchaser
in its sole discretion; and
(i) The Purchaser shall have been given an opportunity to
review the Company Financial Statements with the Company's independent auditors
and certain tax matters relating to Scranton and the other Companies with the
Company's tax advisors and, in each case, shall be reasonably satisfied with the
results of such review.
ARTICLE VIII
TERMINATION AND ABANDONMENT
SECTION 8.1 Termination. This Agreement may be terminated at
any time prior to the Closing Date:
(a) by mutual written consent of the Purchaser and the
Company Principals; or
(b) by either the Purchaser or the Company Principals, if
all the conditions for Closing shall not have been satisfied
or waived on or before May 31, 1998 (the "Final Date");
provided, however, that the right to terminate this Agreement
under this Section 8.1(b) shall not be available to any party
whose breach of this Agreement or failure to fulfill any
obligation under this Agreement has been the cause of or
resulted in the failure of any condition for Closing (for the
purposes of this clause (b), the Companies and the Company
Principals shall be considered a single party); or
(c) by either the Purchaser or the Company Principals, if
a Governmental Body shall have issued a nonappealable final
Order or taken any other action having the effect of
permanently restraining, enjoining or otherwise prohibiting
the consummation of the transactions contemplated hereby or in
the other Transaction Documents; provided however, that the
right to terminate this
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<PAGE>
Agreement under this Section 8.1(c) shall not be available to
any party which has not complied with its respective
obligations under Section 6.2 and such noncompliance
materially contributed to the issuance of any such Order or
the taking of such action; provided further that the party
seeking to terminate this Agreement pursuant to this clause
8.1(c) shall have used all reasonable efforts to remove such
Order or action (for the purposes of this clause (c), the
Companies and the Company Principals shall be considered a
single party); or
(d) by the Purchaser if any representation or warranty of
any Company or the Company Principals set forth in this
Agreement shall be untrue in any material respect such that
the condition set forth in Section 7.3(a), would not be
satisfied; provided, however, that if such breach of such
representation or warranty is curable prior to the Final Date
by a Company or the Company Principals, through the exercise
of reasonable best efforts and for so long as such Company or
the Company Principals continues to exercise such reasonable
best efforts, the Purchaser may not terminate this Agreement
under this Section 8.1(d); provided, however, that no
modification of the Disclosure Schedule (whether pursuant to
Section 6.4 or otherwise) without the written consent of the
Purchaser shall be deemed to cure a breach of any such
representation or warranty; or
(e) by the Purchaser, upon a breach of any covenant or
agreement on the part of any Company or the Company Principals
set forth in this Agreement such that the condition set forth
in Section 7.3(a), would not be satisfied; provided, however,
that if such breach is curable prior to the Final Date by a
Company or the Company Principals, through the exercise of
reasonable best efforts and for so long as such Company or the
Company Principals continues to exercise such reasonable best
efforts, the Purchaser may not terminate this Agreement under
this Section 8.1(e); or
(f) by any Company Principal if any representation or
warranty of the Purchaser set forth in this Agreement shall be
untrue in any material respect on and as of (i) the date made
and (ii) the Closing Date; provided, however, that if such
breach of such representation or warranty is curable prior to
the Final Date by the Purchaser through the exercise of
reasonable best efforts and for so long as the Purchaser
continues to exercise such reasonable best efforts, the
Company Principals may not terminate this Agreement under this
Section 8.1(f); or
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<PAGE>
(g) by the Company Principals, upon a material breach of
any material covenant or agreement on the part of the
Purchaser set forth in this Agreement; provided, however, that
if such breach is curable prior to the Final Date by the
Purchaser, through the exercise of reasonable best efforts and
for so long as the Purchaser continues to exercise such
reasonable best efforts, the Company Principals may not
terminate this Agreement under this Section 8.1(g).
SECTION 8.2 Effect of Termination. Any termination of this
Agreement under Section 8.1 above will be effective by the delivery of written
notice (in accordance with the provisions of Section 9.3 hereof) of the
terminating party to the other parties hereto. In the event of termination of
this Agreement by either Purchaser or any Company Principal as provided in
Section 8.1, this Agreement shall forthwith become void and there shall be no
further obligation on the part of any of the Companies, the Company Principals
or Purchaser except as set forth in this Section 8.2, the penultimate sentence
of Section 6.1 (with respect to confidential and non-public information), and
Sections 8.1, 8.5, 9.4 and 9.9, which shall survive such termination; provided,
however, that a termination of this Agreement shall not relieve any party from
liability for any breach of this Agreement or defeat or impair the right of any
party to pursue such relief as may otherwise be available to it as a result of
any breach of this Agreement or any of the representations, warranties,
covenants or agreements contained herein.
SECTION 8.3 Amendment. This Agreement may not be amended
except by an instrument in writing signed on behalf of each of the parties
hereto and in compliance with applicable law.
SECTION 8.4 Waiver. At any time prior to the Closing Date, any
party hereto may (i) extend the time for the performance of any of the
obligations or other acts of the other parties hereto, (ii) waive any
inaccuracies in the representations and warranties made to such party contained
herein or in any document delivered pursuant hereto and (iii) waive compliance
with any of the agreements or conditions for the benefit of such party contained
herein. Any agreement on the part of a party hereto to any such extension or
waiver shall be valid only if set forth in an instrument in writing signed on
behalf of such party.
SECTION 8.5 Expenses. Subject to the last sentence of Section
3.24, whether or not the Transactions are consummated, all costs and expenses
incurred in connection with this Agreement and the Transactions contemplated
hereby shall be paid by the party incurring such costs and expenses.
33
<PAGE>
ARTICLE IX
MISCELLANEOUS
SECTION 9.1 Survival of Representations and Warranties. The
representations and warranties of the Companies, and the Company Principals, as
the case may be, contained in this Agreement or in any Transaction Document
shall survive the Closing for the benefit of the Purchaser as follows: (i) as to
the representations and warranties contained in Section 3.2, forever; (ii) as to
the representations and warranties contained in Section 3.7, until 60 days
following the expiration of all periods allowed for objecting and appealing the
determination of any proceedings relating to any assessment or reassessment by
any tax authority with respect to the matters to which such representations and
warranties pertain; and (iii) as to all other representations and warranties, no
survival following the Closing Date.
SECTION 9.2 Succession and Assignments; Third Party
Beneficiaries. Except as contemplated by Section 4.3 hereof, this Agreement may
not be assigned (either voluntarily or involuntarily) by any party hereto
without the express written consent of the other parties. Any attempted
assignment in violation of this Section shall be void and ineffective for all
purposes. In the event of an assignment permitted by this Section, this
Agreement shall be binding upon the heirs, successors and assigns of the parties
hereto. There shall be no third party beneficiaries of this Agreement.
SECTION 9.3 Notices. All notices, requests, demands, or other
communications with respect to this Agreement shall be in writing and shall be
(i) sent by facsimile transmission (with confirmation of receipt), (ii) sent by
the United States Postal Service, registered or certified mail, return receipt
requested, or (iii) personally delivered by a nationally recognized express
overnight courier service, charges prepaid, to the following addresses (or such
other addresses as the parties may specify from time to time in accordance with
this Section):
(a) To Purchaser:
Green Equity Investors II, L.P.
c/o Leonard Green & Partners, L.P.
11111 Santa Monica Boulevard, Suite 2000
Los Angeles, California 90025
Attention: Gregory J. Annick
Fax No.: (310) 954-0404
With a copy to:
Kramer, Levin, Naftalis & Frankel
919 Third Avenue
New York, New York 10022-3903
Attention: Howard A. Sobel, Esq.
Fax No.: (212) 715-8000
34
<PAGE>
(b) To any Company and to the Company Principals:
Diamond Triumph Auto Glass, Inc.
220 Division Street
Kingston, Pennsylvania 18704
Attention: Co-Chairmen of the Board
Fax No.: (717) 287-9775
With a copy to:
Cooperman Levitt Winikoff Lester & Newman, P.C.
800 Third Avenue
New York, New York 10022
Attention: Ira I. Roxland, Esq.
Fax No.: (212) 755-2839
Any such notice shall, when sent in accordance with the preceding sentence, be
deemed to have been given and received on the earliest of (i) the day delivered
to such address or sent by facsimile transmission, (ii) the fifth business day
following the date deposited with the United States Postal Service, or (iii) 24
hours after shipment by such courier service.
SECTION 9.4 Construction. This Agreement shall be construed
and enforced in accordance with the internal laws of the State of New York
without giving effect to the principles of conflicts of law thereof.
SECTION 9.5 Counterparts. This Agreement may be executed in
two or more counterparts, each of which shall be deemed an original, but all of
which shall together constitute one and the same Agreement.
SECTION 9.6 No Implied Waiver; Remedies. No failure or delay
on the part of the parties hereto to exercise any right, power, or privilege
hereunder or under any instrument executed pursuant hereto shall operate as a
waiver nor shall any single or partial exercise of any right, power, or
privilege preclude any other or further exercise thereof or the exercise of any
other right, power, or privilege. All rights, powers, and privileges granted
herein shall be in addition to other rights and remedies to which the parties
may be entitled at law or in equity.
SECTION 9.7 Entire Agreement. This Agreement, including the
Exhibits and Disclosure Schedule attached hereto and the documents and
instruments referred to herein or delivered pursuant hereto (including the
Transaction Documents), and the Confidentiality Agreement, sets forth the entire
understandings of the parties with respect to the subject matter hereof, and it
incorporates and merges any and all previous communications, understandings,
oral or written, as to the subject matter hereof, and cannot be amended or
changed except in writing, signed by the parties.
SECTION 9.8. Environmental Indemnity. From and after the
Closing, the Company Principals shall indemnify and hold harmless the Purchaser
and each of the
35
<PAGE>
Companies from all Environmental Costs and Liabilities relating to any
properties or facilities formerly or currently owned by any of the Company
Principals or any Affiliates thereof if such Environmental Costs and Liabilities
(i) arise from or are related to the business and operations of the Companies
prior to the Closing, or (ii) are caused by or relate to any act or omission of
the Company Principals, their Affiliates, or any other person acting on their
behalf after the Closing.
"Environmental Costs and Liabilities" means any and all
losses, liabilities, obligations, damages, fines, penalties, judgments, actions,
claims, costs and expenses (including, without limitation, reasonable attorneys'
fees, consultants' fees, and investigation and cleanup costs) in connection with
any Environmental Law (as to OSHA, only the environmental law provisions
thereof), Environmental Notice, or other environmental matter.
SECTION 9.9 Headings. The headings of the Sections of this
Agreement, where employed, are for the convenience of reference only and do not
form a part hereof and in no way modify, interpret or construe the meanings of
the parties.
SECTION 9.10 Severability. To the extent that any provision of
this Agreement shall be invalid or unenforceable, it shall be considered deleted
hereof and the remainder of such provision and of this Agreement shall be
unaffected and shall continue in full force and effect.
SECTION 9.11 Certain Definitions.
"Affiliate" shall have the meaning specified by Rule 12b-2
under the Securities Exchange Act of 1934, as amended.
"Governmental Body" means any governmental or regulatory body,
or political subdivision thereof, whether federal, state, local or foreign, or
any agency, instrumentality or authority thereof, or any court or arbitrator
(public or private).
"Indebtedness" means at a particular time, without
duplication, (i) any indebtedness for borrowed money or issued in substitution
for or exchange of indebtedness for borrowed money, including any bank overdraft
or other similar extension of credit, (ii) any indebtedness evidenced by any
note, bond, debenture or other debt security, (iii) any indebtedness for the
deferred purchase price of property or services with respect to which a Person
is liable, contingently or otherwise, as obligor or otherwise (other than trade
payables and other current liabilities incurred in the ordinary course of
business which are not more than 30 days past due unless disputed or contested
by a Company and which do not in the aggregate amount to more than $100,000),
(iv) any commitment by which a Person assures a creditor against loss
(including, without limitation, contingent reimbursement obligations with
respect to letters of credit), (v) any indebtedness guaranteed in any manner by
a Person (including, without limitation, guarantees in the form of an agreement
to repurchase or reimburse), (vi) any obligations under capitalized leases with
respect to which a Person is liable, contingently or otherwise, as obligor,
guarantor or otherwise, or with respect to which obligations a Person assures a
creditor against loss, (vii) any indebtedness secured by a Lien on a Person's
assets and (viii) any unsatisfied obligation for "withdrawal liability" to a
"multiemployer plan" as such terms are defined under ERISA.
36
<PAGE>
"Lien" means any lien, pledge, hypothecation, levy, mortgage,
deed of trust, security interest, claim, lease, charge, option, right of first
refusal, easement, or other real estate declaration, covenant, condition,
restriction or servitude, transfer restriction under any shareholder or similar
agreement, encumbrance or any other restriction or limitation affecting title.
"Material Adverse Change" means any material adverse change in
the business, properties, results of operations or condition (financial or
otherwise) of the Companies on a combined or consolidated basis, as applicable.
"Order" means any order, consent, consent order, injunction,
judgement, decree, consent decree, ruling, writ, assessment or arbitration
award.
"Person" means any individual, corporation, partnership, firm,
joint venture, association, joint-stock company, trust, unincorporated
organization, Governmental Body or other entity.
"Transaction Documents" means this Agreement, the Employment
Agreements, the Stockholders Agreement, the Non-competition Agreements, the
Management Services Agreement and the General Releases.
Terms defined in the preamble to this Agreement shall have the
respective meanings ascribed to such terms in such preamble.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement the day and year first above written.
VGMC CORP.
By: /s/ Gregory Annick
------------------------------------
Name:
Title:
GREEN EQUITY INVESTORS II, L.P.
By: Grand Avenue Capital Partners, L.P.
By: Grand Avenue Capital Corporation,
its general partner
By: /s/ Gregory Annick
------------------------------------
Name:
Title:
DIAMOND TRIUMPH AUTO GLASS, INC.
By /s/ Kenneth Levine
-------------------------------------
Name:
Title:
TRIUMPH AUTO GLASS, INC.
By: /s/ Kenneth Levine
-----------------------------------
Name:
Title:
DIAMOND AUTO GLASS WORKS, INC.
By: /s/ Kenneth Levine
-----------------------------------
Name:
Title:
38
<PAGE>
A ABOVE AVERAGE GLASS COMPANY
BY DIAMOND, INC.
By: /s/ Kenneth Levine
-----------------------------------
Name:
Title:
A-AA TRIUMPH AUTO GLASS, INC.
By: /s/ Kenneth Levine
-----------------------------------
Name:
Title:
SCRANTON HOLDINGS, INC.
By: /s/ Kenneth Levine
-----------------------------------
Name:
Title:
DIAMOND/TRIUMPH AUTO EXPORT
SALES CO. INC.
By: /s/ Kenneth Levine
-----------------------------------
Name:
Title:
A-AUTO GLASS BY TRIUMPH, INC.
By: /s/ Kenneth Levine
-----------------------------------
Name:
Title:
A-AUTO GLASS COMPANY BY
DIAMOND, INC.
By: /s/ Kenneth Levine
-----------------------------------
Name:
Title:
39
<PAGE>
/s/ Kenneth Levine
--------------------------------------
Kenneth Levine
/s/ Richard Rutta
--------------------------------------
Richard Rutta
40
<PAGE>
Exhibit 3.1
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
DIAMOND TRIUMPH AUTO GLASS, INC.
Pursuant to Section 245 of the
General Corporation Law
of the State of Delaware
Diamond Triumph Auto Glass, Inc., a corporation organized and
existing under the laws of the State of Delaware (the "Company"), hereby
certifies as follows:
1. That the name of the Company is Diamond Triumph Auto Glass, Inc.
2. That the name under which the Company was originally incorporated
is Triumph Auto Glass of Ohio, Inc.
3. That the Certificate of Incorporation of the Company was filed in
the office of the Secretary of State of the State of Delaware on the 8th day of
April, 1994.
4. That this Amended and Restated Certificate of Incorporation
amends and restates in its entirety the Certificate of Incorporation of the
Company.
5. That the text of the Certificate of Incorporation is hereby
amended and restated to read in its entirety as follows:
FIRST: The name of the corporation is Diamond Triumph Auto
Glass, Inc. (the "Company").
SECOND: The address of the registered office of the Company in
Delaware is 9 East Loockerman Street, Dover, Delaware 19901, County of Kent, and
the name of the registered agent of the Company at such address is National
Registered Agents, Inc.
THIRD: The purpose of the Company is to engage in any lawful
act or activity for which corporations may be organized under the General
Corporation Law of Delaware (the "Delaware General Corporation Law").
FOURTH: The total number of shares of all classes of stock
which the Company shall have authority to issue is nine million one hundred
thousand (9,100,000), of which one hundred thousand (100,000) shall be
designated Preferred Stock, par value $.01 per share (hereinafter the "Preferred
Stock"), and nine million (9,000,000) shall be designated Common Stock, par
value $.01 per share (hereinafter the "Common Stock").
<PAGE>
A. AUTHORITY OF BOARD OF DIRECTORS TO FIX DESIGNATIONS,
POWERS, PREFERENCES, RIGHTS, QUALIFICATIONS, LIMITATIONS
AND RESTRICTIONS OF SHARES OF PREFERRED STOCK NOT
FIXED HEREBY.
Shares of Preferred Stock may be issued from time to time, in one or
more series, as may from time to time be determined by the Board of Directors,
each of said series to be distinctly designated. All shares of any one series of
Preferred Stock shall be alike in every particular, except that there may be
different dates from which dividends, if any, thereon shall be cumulative, if
made cumulative. The voting powers, designations and preferences and the
relative, participating, optional or other special rights of each such series,
and the qualifications, limitations or restrictions thereof, if any, may differ
from those of any and all other series at any time outstanding; and, subject to
the provisions of subparagraph 1 of Paragraph C of this Article FOURTH, the
Board of Directors hereby is expressly granted authority to fix, by resolution
or resolutions adopted prior to the issuance of any shares of a particular
series of Preferred Stock, the voting powers, designations and preferences, the
relative, participating, optional or other special rights and the
qualifications, limitations and restrictions of such series, including, but
without limiting the generality of the foregoing, the following:
(a) the distinctive designation of, and the number of shares
of Preferred Stock which shall constitute, such series, which number may be
increased (except where otherwise provided by the Board of Directors) or
decreased (but not below the number of shares thereof then outstanding) from
time to time by like action of the Board of Directors;
(b) the rate and times at which, and the terms and conditions
on which, dividends, if any, on Preferred Stock of such series shall be paid,
the extent of the preference or relation, if any, of such dividends to the
dividends payable on any other class or classes or series of the same or any
other class or classes of stock of the Company and whether such dividends shall
be cumulative or non-cumulative;
(c) the right, if any, of the holders of Preferred Stock of
such series to convert the same into, or exchange the same for, shares of any
other class or classes or of any series of the same or any other class or
classes of stock of the Company and the terms and conditions of such conversion
or exchange;
(d) whether or not Preferred Stock of such series shall be
subject to redemption, and the redemption price or prices and the time or times
at which, and the terms and conditions on which, Preferred Stock of such series
may be redeemed;
(e) the terms of the sinking fund or redemption or purchase
account, if any, to be provided for the Preferred Stock of such series;
(f) the restrictions, if any, on the issuance of shares of the
same or any other class or classes or of any series of the same or any other
class or classes of stock of the Company;
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<PAGE>
(g) the rights, if any, of the holders of Preferred Stock of
such series upon the voluntary or involuntary liquidation, merger,
consolidation, distribution or sale of assets, dissolution or winding-up of the
Company; and
(h) the voting powers, if any, of the holders of such series
of Preferred Stock which, without limiting the generality of the foregoing, may
be equal to, more than or less than one vote per share and may include the
right, voting as a series by itself or together with other series of Preferred
Stock or all series of Preferred Stock as a class, or, together with any other
class or classes or series of any other class or classes of stock of the
Company, to elect one or more directors of the Company if there shall have been
a default in the payment of dividends on any one or more series of Preferred
Stock or under such other circumstances and on such conditions as the Board of
Directors may determine.
B. STATEMENT OF LIMITATIONS, RELATIVE RIGHTS AND POWERS IN RESPECT OF
COMMON STOCK.
1. After the requirements with respect to preferential
dividends on the Preferred Stock (fixed in accordance with the provisions of
Paragraph A of this Article Fourth), if any, shall have been met and after the
Company shall have complied with all the requirements, if any, with respect to
the setting aside of sums as sinking funds or redemption or purchase accounts
for the Preferred Stock (fixed in accordance with the provisions of Paragraph A
of this Article Fourth), and subject further to any other conditions which may
be fixed in accordance with the provisions of Paragraph A of this Article
FOURTH, then and not otherwise the holders of Common Stock shall be entitled to
receive such dividends as may be declared from time to time by the Board of
Directors; provided, however, that the declaration and payment of cash dividends
on the Common Stock shall be subject to contractual and other restrictions with
respect thereto and the legal availability of funds therefor.
2. After distribution in full of the preferential amount, if
any, to be distributed to the holders of Preferred Stock in the event of
voluntary or involuntary liquidation, dissolution or winding-up of the Company,
the holders of the Common Stock, subject to the rights, if any, of the holders
of Preferred Stock to participate therein (fixed in accordance with the
provisions of Paragraph A of this Article Fourth), shall be entitled to receive
all the remaining assets of the Company, tangible and intangible, of whatever
kind available for distribution to stockholders ratably in proportion to the
number of shares of Common Stock held by them, respectively.
3. Except as may otherwise be required by law, or by the
provisions of such resolution or resolutions as may be adopted by the Board of
Directors pursuant to the provisions of Paragraph A of this Article Fourth, each
holder of Common Stock shall have one vote in respect of each share of Common
Stock held by him on all matters voted upon by the stockholders.
C. OTHER PROVISIONS.
1. The relative powers, preferences and rights of each series
of Preferred Stock in relation to the powers, preferences and rights of each
other series of Preferred Stock
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<PAGE>
shall, in each case, be as may be fixed from time to time by the Board of
Directors in such resolution or resolutions as may be adopted pursuant to
authority granted in Paragraph A of this Article FOURTH and the consent, by
class or series vote or otherwise, of the holders of any of the series of
Preferred Stock as are from time to time outstanding shall not be required for
the issuance by the Board of Directors of any other series of Preferred Stock
whether or not the powers, preferences and rights of such other series shall be
fixed by the Board of Directors as senior to, or on a parity with, the powers,
preferences and rights of such outstanding series, or any of them; provided,
however, that the Board of Directors may provide in the resolution or
resolutions as to any series of Preferred Stock adopted pursuant to the
provisions of Paragraph A of this Article FOURTH that the consent of the holders
of a majority (or such greater proportion as shall be therein fixed) of the
outstanding shares of such series voting thereon shall be required for the
issuance of any or all other series of Preferred Stock.
2. Subject to the provisions of this Paragraph C and to the
provisions of any resolution or resolutions as to any series of Preferred Stock
adopted pursuant to the provisions of Paragraph A of this Article FOURTH, shares
of any series of Preferred Stock may be issued from time to time as the Board of
Directors shall determine, for such consideration and upon such terms as the
Board of Directors may determine.
3. Shares of Common Stock may be issued from time to time as
the Board of Directors shall determine, for such consideration and upon such
terms as the Board of Directors may determine.
4. The authorized amount of shares of Common Stock and of
Preferred Stock may, without a class or series vote, be increased or decreased
from time to time by the affirmative vote of the holders of a majority of the
stock of the Company entitled to vote thereon.
D. RECLASSIFICATION
Each of the 1,500 shares of capital stock of the Company, par value
$1.00 per share, issued and outstanding immediately prior to the effectiveness
of this Amended and Restated Certificate of Incorporation is hereby reclassified
and converted into 466 2/3 shares of Common Stock.
FIFTH: No election of directors need be by written
ballot.
SIXTH: The Board of Directors shall have the power to
make, alter, or repeal By-Laws subject to the power of the stockholders to alter
or repeal the By-Laws made or altered by the Board of Directors.
SEVENTH: The Company expressly elects not be governed
by Section 203 of the Delaware General Corporation Law.
EIGHTH: The Company shall, to the fullest extent
permitted by the provisions of ss. 145 of the Delaware General Corporation Law,
as the same may be amended and supplemented, indemnify each person who is or was
an officer or Director of the Company and may indemnify any and all other
persons whom it shall have power to indemnify under said
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<PAGE>
section from and against any and all of the expenses, liabilities, or other
matters referred to in or covered by said section, and the indemnification
provided for herein shall not be deemed exclusive of any other rights to which
those indemnified may be entitled under any by-law, agreement, vote of
stockholders or disinterested Directors or otherwise, both as to acting in such
person's official capacity and as to acting in another capacity while holding
such office, and shall continue as to a person who has ceased to be a Director
or officer and shall inure to the benefit of the heirs, executors, and
administrators of such a person. No repeal or modification of this Article
EIGHTH shall adversely affect any right or protection afforded to an officer of
Director prior to such repeal or modification. Notwithstanding the foregoing
provisions of this Article EIGHTH, no Company Principal (as such term is defined
in the Second Amended and Restated Stock Purchase and Sale Agreement dated as of
January 15, 1998 by and among VGMC Corp., Green Equity Investors II, L.P.,
Diamond Auto Glass Works, Inc., Triumph Auto Glass, Inc., A Above Average Glass
Company by Diamond, Inc., A-AA Triumph Auto Glass, Inc., the Company, Scranton
Holdings, Inc., Diamond/Triumph Auto Export Sales Co. Inc., A-Auto Glass by
Triumph, Inc., A-Auto Glass Company by Diamond, Inc., Kenneth Levine and Richard
Rutta (the "Agreement')) shall be entitled to indemnification against any
Liability (as such term is defined in the Agreement) to the extent that such
Liability arises out of a breach of the Agreement or any of the Transaction
Documents (as such term is defined in the Agreement).
NINTH: A Director of the Company shall not be
personally liable to the Company or the stockholders for monetary damages for
breach of fiduciary duty as a Director of the Company, except (i) for any breach
of the duty of loyalty of such Director to the Company or such 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
Delaware General Corporation Law and (iv) for any transaction from which such
Director derives an improper personal benefit. If the Delaware General
Corporation Law is hereafter amended to authorize corporate action further
eliminating or limiting the personal liability of Directors, then the liability
of a Director shall be eliminated or limited to the fullest extent permitted by
the Delaware General Corporation Law, as so amended. No repeal or modification
of this Article NINTH shall adversely affect any right of or protection afforded
to a Director prior to such repeal or modification.
5. This Amended and Restated Certificate of Incorporation was
duly adopted in accordance with the provisions of Sections 228, 242 and 245 of
the General Corporation Law of Delaware.
IN WITNESS WHEREOF, the Company has caused this Amended and
Restated Certificate of Incorporation to be signed by its Co-Chief Executive
Officer on this 26th day of March, 1998.
DIAMOND TRIUMPH AUTO GLASS, INC.
/s/ Kenneth Levine
------------------------------------
Kenneth Levine
Co-Chief Executive Officer
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Exhibit 3.2
DIAMOND TRIUMPH AUTO GLASS, INC.
CERTIFICATE OF DESIGNATIONS, PREFERENCES
AND RELATIVE, PARTICIPATING, OPTIONAL AND
OTHER SPECIAL RIGHTS OF SERIES A 12% SENIOR
REDEEMABLE CUMULATIVE PREFERRED STOCK AND
QUALIFICATIONS, LIMITATIONS AND RESTRICTIONS THEREOF
-----------------------------------
Pursuant to Section 151 of the
General Corporation Law of the State of Delaware
-----------------------------------
Diamond Triumph Auto Glass, Inc. (the "Company"), a corporation
organized and existing under the General Corporation Law of the State of
Delaware, does hereby certify that, pursuant to authority conferred upon the
board of directors of the Company (the "Board of Directors") or any committee of
the Board of Directors (the "Board Committee") by its Certificate of
Incorporation (the "Certificate of Incorporation"), and pursuant to the
provisions of Section 151 of the General Corporation Law of the State of
Delaware, the Board of Directors, by unanimous written consent dated as of March
27, 1998, duly approved and adopted the following resolution (the "Resolution"):
RESOLVED, that, pursuant to the authority vested in the Board of
Directors by its Certificate of Incorporation, the Board of Directors
does hereby create, authorize and provide for the issue of the Series A
12% Senior Redeemable Cumulative Preferred Stock (the "Senior Preferred
Stock"), par value $0.01 per share, with a liquidation preference of
$1,000 per share as of the date of issue, consisting of 35,000 shares,
to have the powers, designations and preferences, the relative,
participating, optional and other special rights and the
qualifications, limitations and restrictions thereof that are set forth
in the Certificate of Incorporation and in this Resolution as follows:
(a) Designations.
There is hereby created out of the authorized and unissued shares of
Preferred Stock of the Company a series of Preferred Stock designated
as the "Series A 12% Senior Redeemable Cumulative Preferred Stock". The
number of shares constituting such series shall be 35,000 shares of
Senior Preferred Stock. The liquidation preference of the Senior
Preferred Stock shall be $1,000 per share as of the date of issuance.
(b) Rank.
The Senior Preferred Stock shall, with respect to dividend
distributions and distributions upon the liquidation, winding up or
dissolution of the Company, rank senior to all classes of common stock
of the Company and to each other class of capital stock or series of
preferred stock hereafter created by the Board of Directors the terms
of which do not
<PAGE>
expressly provide that it ranks senior to or on a parity with the
Senior Preferred Stock as to dividend distributions and distributions
upon the liquidation, winding up or dissolution of the Company
(collectively referred to with the common stock of the Company as
"Junior Securities"). The Senior Preferred Stock shall, with respect to
dividend distributions and distributions upon the liquidation, winding
up or dissolution of the Company, rank on a parity with any class of
capital stock or series of preferred stock hereafter created which
expressly provides that it ranks on a parity with the Senior Preferred
Stock as to dividend distributions and distributions upon the
liquidation, winding up or dissolution of the Company ("Parity
Securities"), provided that any such Parity Securities that were not
(but were required to be) approved by the Holders of Senior Preferred
Stock in accordance with paragraph (f)(ii)(A) hereof shall be deemed to
be Junior Securities and not Parity Securities. The Senior Preferred
Stock shall, with respect to dividend distributions and distributions
upon the liquidation, winding up or dissolution of the Company, rank
junior to each class of capital stock or series of preferred stock
hereafter created which has been approved by the Holders of Senior
Preferred Stock in accordance with paragraph (f)(ii)(B) hereof and
which expressly provides that it ranks senior to the Senior Preferred
Stock as to dividend distributions or distributions upon the
liquidation, winding up or dissolution of the Company ("Senior
Securities").
(c) Dividends.
(i) Beginning on the Preferred Stock Issue Date, the Holders
of the outstanding shares of Senior Preferred Stock shall be entitled
to receive, when, as and if declared by the Board of Directors, out of
funds legally available therefor, distributions in the form of cash
dividends on each share of Senior Preferred Stock, at a rate per annum
equal to 12% of the liquidation preference (as adjusted from time to
time as hereinafter provided) per share of the Senior Preferred Stock,
payable quarterly. All dividends shall be cumulative, whether or not
earned or declared, on a daily basis from the Preferred Stock Issue
Date and shall be payable quarterly in arrears on each Dividend Payment
Date, commencing on July 1, 1998, provided that the amount payable as
dividends on any Dividend Payment Date may, at the option of the
Company, be paid in cash or by increasing the then liquidation
preference per share of the Senior Preferred Stock by the amount of
such dividends (rounded to the nearest whole cent). Such increase in
the liquidation preference shall constitute full payment of such
dividend. In the event the Board of Directors does not declare and the
Company does not pay a cash dividend on the shares of Senior Preferred
Stock on any Dividend Payment Date, the Company shall be deemed to have
satisfied such dividends on the Senior Preferred Stock by an increase
in the liquidation preference. Each distribution in the form of a
dividend in cash shall be payable to the Holders of Senior Preferred
Stock of record as they appear on the stock books of the Company on
such record dates, not less than 10 nor more than 45 days preceding the
related Dividend Payment Date, as shall be fixed by the Board of
Directors. Any increase in the then liquidation preference of the
Senior Preferred Stock as set forth in this paragraph (c) shall occur
automatically, without the need for any action on the part of the
Company, on the applicable Dividend Payment Date. Dividends shall cease
to accumulate in respect of shares of the Senior Preferred Stock on the
date of their redemption unless the Company shall have failed to pay
the relevant redemption price on
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<PAGE>
the date fixed for redemption. Not more than 30 days after a Dividend
Payment Date, written notice of the amount of the dividend per share
paid or, in the event of a failure of the Board of Directors to declare
and the Company to pay a cash dividend, the resulting increase in the
liquidation preference of each share and the resulting liquidation
preference of each share of Senior Preferred Stock (the "Liquidation
Preference Notice") shall be given by first-class mail, postage
prepaid, to each Holder of Senior Preferred Stock of record, on the
record date fixed by the Board of Directors for payment of such
dividend or, if no record date was fixed, the Dividend Payment Date, at
such Holder's address as the same appears on the stock books of the
Company, provided that no failure to give such notice nor any
deficiency therein shall affect any increase in the liquidation
preference of each share of Senior Preferred Stock.
(ii) All dividends paid with respect to shares of the Senior
Preferred Stock pursuant to paragraph (c)(i) hereof shall be paid pro
rata to the Holders thereof entitled thereto.
(iii) Dividends in connection with any optional redemption
pursuant to paragraph (e)(i) hereof may be declared and paid at any
time, without reference to any regular Dividend Payment Date, to
Holders of Senior Preferred Stock of record on such date, not more than
45 days prior to the payment thereof, as may be fixed by the Board of
Directors.
(iv) No full dividends shall be declared by the Board of
Directors or paid or funds set apart for payment of dividends by the
Company on any Parity Securities for any period unless full cumulative
dividends shall have been or contemporaneously are declared and paid in
full, or declared and (in the case of dividends payable in cash) a sum
in cash set apart sufficient for such payment, on the Senior Preferred
Stock for all Dividend Periods terminating on or prior to the date of
payment of such full dividends on such Parity Securities. If any
dividends are not paid in full, as aforesaid, upon the shares of the
Senior Preferred Stock and any other Parity Securities, all dividends
declared upon shares of the Senior Preferred Stock and any other Parity
Securities shall be declared pro rata based on the then relative
liquidation preference of the Senior Preferred Stock and such Parity
Securities. So long as any shares of the Senior Preferred Stock are
outstanding, the Company shall not make any payment on account of, or
set apart for payment money for a sinking or other similar fund for,
the purchase, redemption or other retirement of, any of the Parity
Securities or any warrants, rights, calls or options exercisable for or
convertible into any of the Parity Securities, and shall not permit any
corporation or other entity directly or indirectly controlled by the
Company to purchase or redeem any of the Parity Securities or any such
warrants, rights, calls or options unless full dividends determined in
accordance herewith on the Senior Preferred Stock shall have been paid
or contemporaneously are declared and paid in full.
(v) (A) Holders of shares of the Senior Preferred Stock shall
be entitled to receive the dividends provided for in paragraph
(c)(i) hereof in preference to and in priority over any
dividends upon any of the Junior Securities.
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<PAGE>
(B) So long as any shares of Senior Preferred Stock
are outstanding, except pursuant to a Management Subscription
and Stockholders Agreement or, on the Closing Date, pursuant
to the Purchase Agreement, the Company shall not (1) declare,
pay or set apart for payment any dividend on any of the Junior
Securities or make any payment on account of, or set apart for
payment money for a sinking or other similar fund for, the
purchase, redemption or other retirement of, any of the Junior
Securities or any warrants, rights, calls or options
exercisable for or convertible into any of the Junior
Securities (other than the repurchase, redemption or other
acquisition or retirement for value of Junior Securities
solely in exchange for Junior Securities and other than the
repurchase, redemption or other acquisition or retirement for
value of Junior Securities (and any warrants, rights, calls or
options exercisable for or convertible into such Junior
Securities) held by employees of or consultants or advisors to
the Company or any of its Subsidiaries, which repurchase,
redemption or other acquisition or retirement shall have been
approved by a majority of the Board of Directors, provided
that such Junior Securities may only be repurchased, redeemed
or otherwise acquired or retired either in exchange for Junior
Securities or, if such Junior Securities are not held on the
Closing Date by Kenneth Levine or Richard Rutta, upon the
termination, retirement, death or disability of such employee,
consultant or advisor), or (2) make any distribution in
respect thereof, either directly or indirectly, and whether in
cash, obligations or shares of the Company or other property
(other than distributions or dividends in Junior Securities to
the holders of Junior Securities), or (3) permit any
corporation or other entity directly or indirectly controlled
by the Company to purchase or redeem any of the Junior
Securities or any such warrants, rights, calls or options,
unless in any such case full cumulative dividends determined
in accordance herewith have been paid in full in cash on the
Senior Preferred Stock (such payment to be deemed to have been
made in cash for purposes of this provision even if dividends
had theretofore been paid by increasing the then liquidation
preference of the Senior Preferred Stock if (x) there are no
arrears in the payment of dividends on the Senior Preferred
Stock for any past Dividend Period and (y) the aggregate
liquidation preference then in effect of all outstanding
shares of Senior Preferred Stock does not exceed $35,000,000)
and all other redemption or repayment obligations in respect
of the Senior Preferred Stock have been paid in full in cash.
(vi) Dividends payable on shares of the Senior Preferred Stock
for any period less than a year shall be computed on the basis of a
360-day year of twelve 30-day months and the actual number of days
elapsed in the period for which payable. If any Dividend Payment Date
occurs on a day that is not a Business Day, any accrued dividends
otherwise payable on such Dividend Payment Date shall be paid on the
next succeeding Business Day.
(d) Liquidation Preference.
(i) Upon any voluntary or involuntary liquidation, dissolution
or winding up of the affairs of the Company, the Holders of shares of
Senior Preferred Stock then outstanding shall be entitled to be paid,
out of the assets of the Company available for
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<PAGE>
distribution to its stockholders, $1,000 per share of Senior Preferred
Stock plus an amount in cash equal to the sum of the amounts, if any,
theretofore added to the liquidation preference per share of Senior
Preferred Stock pursuant to paragraph (c)(i) hereof (the "liquidation
preference") plus an amount in cash equal to accumulated and unpaid
dividends thereon to the date fixed for liquidation, dissolution or
winding up (including an amount equal to a prorated dividend for the
period from the last Dividend Payment Date to the date fixed for
liquidation, dissolution or winding up) before any payment shall be
made or any assets distributed to the holders of any of the Junior
Securities, including, without limitation, common stock of the Company.
Except as provided in the preceding sentence, Holders of shares of
Senior Preferred Stock shall not be entitled to any distribution in the
event of liquidation, dissolution or winding up of the affairs of the
Company. If the assets of the Company are not sufficient to pay in full
the liquidation payments payable to the Holders of outstanding shares
of the Senior Preferred Stock and the holders of all outstanding Parity
Securities, then the holders of all such shares shall share equally and
ratably in such distribution of assets of the Company in accordance
with the amounts which would be payable on such distribution if the
amount to which the Holders of outstanding shares of Senior Preferred
Stock and the holders of outstanding shares of all Parity Securities
are entitled were paid in full.
(ii) For the purposes of this paragraph (d), neither the sale,
conveyance, exchange or transfer (for cash, shares of stock, securities
or other consideration) of all or substantially all of the property or
assets of the Company nor the consolidation or merger of the Company
with or into one or more corporations or other entities shall be deemed
to be a liquidation, dissolution or winding up of the affairs of the
Company (unless such sale, conveyance, exchange or transfer is in
connection with a liquidation, dissolution or winding up of the
business of the Company).
(e) Redemption.
(i) Optional Redemption.
(A) The Company may (subject to contractual and other
restrictions with respect thereto, including without
limitation, restrictions imposed by the Bank Facility and the
Senior Indenture, and the legal availability of funds
therefor), at the option of the Company, redeem at any time or
from time to time from any source of funds legally available
therefor, in whole or in part, in the manner provided in
paragraph (e)(iii) hereof, any or all of the shares of the
Senior Preferred Stock, at a redemption price equal to 100% of
the then liquidation preference per share plus, without
duplication, an amount in cash equal to all accumulated and
unpaid dividends per share (including an amount in cash equal
to a prorated dividend for the period from the Dividend
Payment Date immediately prior to the Redemption Date to the
Redemption Date).
(B) In the event of a redemption pursuant to
paragraph (e)(i)(A) hereof of only a portion of the then
outstanding shares of the Senior Preferred Stock, the Company
shall effect such redemption as it determines, pro rata
according to the
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<PAGE>
number of shares held by each Holder of Senior Preferred Stock
or by lot, as may be determined by the Company in its sole
discretion.
(ii) Mandatory Redemption. On April 1, 2010, the Company shall
redeem, subject to contractual and other restrictions with respect
thereto, including without limitation, restrictions imposed by the Bank
Facility and the Senior Indenture, from any source of funds legally
available therefor, in the manner provided in paragraph (e)(iii)
hereof, all of the shares of the Senior Preferred Stock then
outstanding at a redemption price equal to 100% of the then liquidation
preference per share, plus, without duplication, an amount in cash
equal to all accumulated and unpaid dividends per share (including an
amount equal to a prorated dividend for the period from the Dividend
Payment Date immediately prior to the Redemption Date to the Redemption
Date).
(iii) Procedures for Redemption.
(A) At least 15 days and not more than 60 days prior
to the date fixed for any redemption of the Senior Preferred
Stock, written notice (the "Redemption Notice") shall be given
by first-class mail, postage prepaid, to each Holder of Senior
Preferred Stock to be redeemed, at such Holder's address as
the same appears on the stock register of the Company,
provided that no failure to give such notice nor any
deficiency therein shall affect the validity of the procedure
for the redemption of any shares of Senior Preferred Stock to
be redeemed except as to the Holder or Holders to whom the
Company has failed to give said notice or except as to the
Holder or Holders whose notice was defective. The Redemption
Notice shall state: (1) whether the redemption is pursuant to
paragraph (e)(i) or (e)(ii) hereof; (2) the redemption price;
(3) whether all or less than all the outstanding shares of the
Senior Preferred Stock are to be redeemed and the total number
of shares of the Senior Preferred Stock being redeemed; (4)
the number of shares of Senior Preferred Stock held by the
Holder that the Company intends to redeem; (5) the date fixed
for redemption; (6) that the Holder is to surrender to the
Company, at the place or places where certificates for shares
of Senior Preferred Stock are to be surrendered for
redemption, in the manner and at the place designated, his
certificate or certificates representing the shares of Senior
Preferred Stock to be redeemed; and (7) that dividends on the
shares of the Senior Preferred Stock to be redeemed shall
cease to accrue on such Redemption Date unless the Company
defaults in the payment of the redemption price.
(B) Each Holder of Senior Preferred Stock shall
surrender to the Company the certificate or certificates
representing its shares of Senior Preferred Stock to be
redeemed, duly endorsed, in the manner and at the place
designated in the Redemption Notice, and on the Redemption
Date the full redemption price for such shares shall be
payable in cash to the Person whose name appears on such
certificate or certificates as the owner thereof, and each
surrendered certificate shall be canceled and retired. In the
event that less than all of the shares represented by any such
certificate are redeemed, a new certificate shall be issued
representing the unredeemed shares.
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<PAGE>
(C) Unless the Company defaults in the payment in
full of the redemption price, dividends on the shares of
Senior Preferred Stock called for redemption shall cease to
accumulate on the Redemption Date, and the Holders of such
shares shall cease to have any further rights with respect
thereto on the Redemption Date, other than the right to
receive the redemption price, without interest.
(f) Voting Rights.
(i) The Holders of shares of the Senior Preferred Stock,
except as otherwise required under Delaware law or as set forth in
paragraph (f)(ii) below, shall not be entitled or permitted to vote on
any matter required or permitted to be voted upon by the stockholders
of the Company.
(ii) (A) So long as any shares of the Senior Preferred Stock
are outstanding, the Company shall not authorize or issue any
class or series of Parity Securities without the affirmative
vote or consent of Holders of at least a majority of the
outstanding shares of Senior Preferred Stock, voting or
consenting, as the case may be, separately as one class, given
in person or by proxy, either in writing or by resolution
adopted at an annual or special meeting, except that without
the approval of Holders of Senior Preferred Stock, the Company
may authorize and issue shares of Parity Securities in
exchange for, or the proceeds of which are used to redeem or
repurchase, all shares of Senior Preferred Stock then
outstanding.
(B) So long as any shares of the Senior Preferred
Stock are outstanding, the Company shall not authorize or
issue any class or series of Senior Securities without the
affirmative vote or consent of Holders of at least a majority
of the outstanding shares of Senior Preferred Stock, voting or
consenting, as the case may be, separately as one class, given
in person or by proxy, either in writing or by resolution
adopted at an annual or special meeting.
(C) So long as any shares of the Senior Preferred
Stock are outstanding, the Company shall not, without the
affirmative vote or consent of Holders of at least a majority
of the outstanding shares of Senior Preferred Stock, voting or
consenting, as the case may be, separately as one class, given
in person or by proxy, either in writing or by resolution
adopted at an annual or special meeting, (1) amend, alter or
repeal any of the provisions of the Certificate of
Incorporation of the Company or of any certificate amendatory
thereof or supplemental thereto so as to affect adversely any
of the preferences, rights, powers or privileges of the Senior
Preferred Stock or of the holders thereof as such or (2) issue
after the Closing Date any additional shares of Senior
Preferred Stock. The affirmative vote or consent of Holders of
at least a majority of the outstanding shares of Senior
Preferred Stock, voting or consenting, as the case may be,
separately as one class, whether voting in person or by proxy,
either in writing or by resolution adopted at an annual or
special meeting, may waive compliance with any provision of
this Resolution.
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<PAGE>
(D) Except as set forth in paragraphs (f)(ii)(A) and
(f)(ii)(B) above or in clause (2) of paragraph (f)(ii)(C)
above, (1) the creation, authorization or issuance of any
shares of any Junior Securities, Parity Securities or Senior
Securities, or (2) the increase or decrease in the amount of
authorized capital stock of any class or series, including
Senior Preferred Stock or any other series of preferred stock,
shall not require the consent of Holders of Senior Preferred
Stock and shall not, unless not complying with paragraphs
(f)(ii)(A) or (f)(ii)(B) or clause (2) of paragraph (f)(ii)(C)
above, be deemed to affect adversely the rights, preferences,
privileges or voting rights of Holders of shares of Senior
Preferred Stock.
(iii) In any case in which the Holders of shares of the Senior
Preferred Stock shall be entitled to vote pursuant to this paragraph
(f) or pursuant to Delaware law, each Holder of shares of the Senior
Preferred Stock shall be entitled to one vote for each share of Senior
Preferred Stock held.
(g) Change of Control Offer. Subject to contractual and other
restrictions with respect thereto, including without limitation,
restrictions imposed by the Bank Facility and the Senior Indenture,
upon the occurrence of a Change of Control, the Company shall make an
offer (a "Change of Control Offer") to each Holder of Senior Preferred
Stock to repurchase any or all of such Holder's shares of Senior
Preferred Stock at a purchase price in cash equal to 100.0% of the
aggregate liquidation preference (as then in effect) thereof plus,
without duplication, all accumulated and unpaid dividends thereon
(including an amount equal to the prorated dividend from the Dividend
Payment Date immediately prior to the date of repurchase to the date of
repurchase), if any, to the date of repurchase (the "Change of Control
Payment").
(A) Within 30 days following any Change of Control,
the Company shall mail a notice to each Holder of Senior
Preferred Stock stating: (1) that the Change of Control Offer
is being made pursuant to this paragraph (g) and that all
shares of Senior Preferred Stock duly tendered will be
accepted for payment; (2) the purchase price and the purchase
date, which shall be no sooner than 30 nor later than 60 days
from the date such notice is mailed (the "Change of Control
Payment Date"); (3) that any shares not tendered will continue
to accumulate dividends; (4) that, unless the Company defaults
in the payment of the Change of Control Payment, all shares of
Senior Preferred Stock accepted for payment pursuant to the
Change of Control Offer shall cease to accumulate dividends on
the Change of Control Payment Date; (5) that Holders electing
to have any shares of Senior Preferred Stock repurchased
pursuant to a Change of Control Offer will be required to
surrender such shares, with the form entitled "Option of
Holder to Elect Purchase" on the reverse of the shares of
Senior Preferred Stock, completed, or transfer by book-entry
transfer, to the Company or its transfer agent at the address
specified in the notice prior to the close of business on the
third Business Day preceding the Change of Control Payment
Date; (6) that Holders will be entitled to withdraw their
election if the Company or the transfer agent, as the case may
be, receives, not later than the close of business on the
third Business Day preceding the Change of Control Payment
Date, a telegram, telex, facsimile
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<PAGE>
transmission or letter setting forth the name of the Holder,
the number of shares of Senior Preferred Stock delivered for
repurchase, and a statement that such Holder is withdrawing
his election to have such shares repurchased; and (7) that
Holders whose shares of Senior Preferred Stock are being
repurchased only in part will be issued new shares of Senior
Preferred Stock equal in liquidation preference (as then in
effect) to the unpurchased portion of the shares of Senior
Preferred Stock surrendered (or transferred by book-entry
transfer), which unpurchased portion must be a number of whole
shares of Senior Preferred Stock.
(B) On the Change of Control Payment Date, the
Company shall, to the extent lawful, (1) accept for payment
all shares of Senior Preferred Stock or portions thereof
properly tendered pursuant to the Change of Control Offer and
(2) deposit with the Company or its transfer agent an amount
equal to the Change of Control Payment in respect of all
shares of Senior Preferred Stock or portions thereof so
tendered. The Company or its transfer agent, as the case may
be, shall promptly mail to each Holder of shares of Senior
Preferred Stock so tendered the Change of Control Payment for
such shares or portions thereof. The Company shall promptly
issue a certificate representing shares of Senior Preferred
Stock and mail (or cause to be transferred by book entry) to
each Holder a new certificate representing shares of Senior
Preferred Stock equal in liquidation preference (as then in
effect) to any unpurchased portion of such shares surrendered
by such Holder, if any; provided, that each such certificate
shall be for a number of whole shares of Senior Preferred
Stock. The Company shall announce to its stockholders the
results of the Change of Control Offer on or as soon as
practicable after the Change of Control Payment Date.
(C) The Company shall 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 shares of Senior Preferred Stock in connection with a
Change of Control.
(D) The Company's obligations with respect to a
Change of Control Offer shall be satisfied to the extent
actually performed by a third party in accordance with the
terms of this paragraph (g). Any shares of Senior Preferred
Stock purchased by such third party as contemplated by the
preceding sentence shall, notwithstanding the foregoing
provisions of this paragraph (g), remain outstanding and
continue to accumulate dividends on and after the Change of
Control Payment Date.
(E) Notwithstanding the foregoing, prior to complying
with the foregoing provisions of this paragraph (g), the
Company will (1) if the repurchase pursuant to a Change of
Control Offer is not permitted under the Bank Facility, either
repay all Indebtedness under the Bank Facility and terminate
all commitments outstanding under the Bank Facility or obtain
the requisite consents under the Bank Facility to permit the
repurchase of Senior Preferred Stock required by this
paragraph (g); and (2) if the repurchase pursuant to a Change
of
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<PAGE>
Control Offer is not permitted under the Senior Indenture,
either repay all Indebtedness under the Notes or obtain the
requisite consents under the Senior Indenture to permit such
repurchase of Senior Preferred Stock. Until the requirements
of the immediately preceding sentence are satisfied, the
Company will not make, and will not be obligated to make, any
Change of Control Offer.
(h) Conversion or Exchange.
The Holders of shares of Senior Preferred Stock shall not have
any rights to convert such shares into or exchange such shares for
shares of any other class or classes or of any other series of any
class or classes of Capital Stock of the Company.
(i) Preemptive Rights.
No shares of Senior Preferred Stock shall have any rights of
preemption whatsoever as to any securities of the Company, or any
warrants, rights or options issued or granted with respect thereto,
regardless of how such securities or such warrants, rights or options
may be designated, issued or granted.
(j) Reissuance of Senior Preferred Stock.
Shares of Senior Preferred Stock that have been issued and
reacquired by the Company in any manner, including shares purchased or
redeemed, shall (upon compliance with any applicable provisions of the
laws of Delaware) have the status of authorized but unissued shares of
Preferred Stock of the Company undesignated as to series and, subject
to the provisions of paragraphs (f)(ii)(A) and (f)(ii)(B) hereof, may
be designated or redesignated and issued or reissued, as the case may
be, as part of any series of Preferred Stock of the Company, provided
that such shares may not in any event be reissued as Senior Preferred
Stock.
(k) Business Day.
If any payment or redemption shall be required by the terms
hereof to be made on a day that is not a Business Day, such payment or
redemption shall be made on the immediately succeeding Business Day.
(l) Certain Additional Provisions.
(i) Restricted Payments.
The Company shall not, and shall not cause or permit any of
its 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 of the Company or in
warrants, rights or options to purchase or acquire shares of Qualified
Capital Stock of the Company or dividends on shares of the Senior
Preferred Stock paid by increasing the then liquidation preference per
share of the Senior Preferred Stock) on or in respect of shares of the
Company's Capital Stock to holders of such Capital Stock or (b)
purchase, redeem or otherwise acquire or retire for value any Capital
Stock of the Company or any
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<PAGE>
warrants, rights or options to purchase or acquire shares of any class
of such Capital Stock (each of the foregoing actions set forth in
clauses (a) and (b) being referred to as a "Restricted Payment"), if at
the time of such Restricted Payment or immediately after giving effect
thereto, (i) a Default Event shall have occurred and be continuing or
(ii) the aggregate amount of Restricted Payments (including such
proposed Restricted Payment) made subsequent to the Issue Date (the
amount expended for such purposes, if other than in cash, being the
fair market value of such property) 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
accrued during the period (treated as one accounting period) beginning
on April 1, 1998 to the end of the most recent fiscal quarter ending at
least 45 days prior to the date of such Restricted Payment; plus (x)
100% of the aggregate net cash proceeds received by the Company from
any Person (other than a Subsidiary of the Company) from the issuance
and sale subsequent to the Issue Date of Qualified Capital Stock of the
Company or any warrants, rights or options to purchase or acquire
shares of Capital Stock of the Company or from the issuance and sale
subsequent to the Issue Date of any debt or other security of the
Company that has been converted into or exchanged for Qualified Capital
Stock of the Company; plus (y) the net cash proceeds of any capital
contribution to the Company subsequent to the Issue Date.
Notwithstanding the foregoing, the provisions set forth in the
immediately preceding paragraph do not prohibit: (1) the payment of any
dividend within 60 days after the date of declaration of such dividend
if the dividend would have been permitted on the date of declaration;
(2) if no Default Event shall have occurred and be continuing, the
acquisition of any shares of Capital Stock of the Company or any
warrants, rights or options to purchase or acquire shares of Capital
Stock of the Company (i) in exchange for shares of Qualified Capital
Stock of the Company or any warrants, rights or options to purchase or
acquire shares of Qualified Capital Stock of the Company or (ii)
through the application of net proceeds of a substantially concurrent
sale for cash (other than to a Subsidiary of the Company) of shares of
Qualified Capital Stock of the Company or any warrants, rights or
options to purchase or acquire shares of Qualified Capital Stock of the
Company; (3) so long as no Default Event shall have occurred and be
continuing, repurchases by the Company of Common Stock of the Company
or options, warrants or other securities exercisable or convertible
into Common Stock of the Company from employees and directors of the
Company or any of its Subsidiaries or their authorized representatives
upon the death, disability or termination of employment or directorship
of such employees or directors, in an aggregate amount not to exceed
$750,000 in any calendar year and $3,000,000 in the aggregate (in each
case plus the amount of net cash proceeds received by the Company from
the sale of Qualified Capital Stock or any warrants, rights or options
to purchase or acquire shares of Qualified Capital Stock of the Company
to employees or directors of the Company and its Subsidiaries, to the
extent that such amounts did not provide the basis for any previous
Restricted Payment); (4) the payment of dividends in cash on (or the
purchase, redemption or other acquisition or retirement of) shares of
the Senior Preferred Stock. In determining the aggregate amount of
Restricted Payments made subsequent to the Issue Date in accordance
with clause (ii) of the immediately preceding paragraph, amounts
expended pursuant to clauses (1),
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<PAGE>
(2)(ii), (3) and (4) shall be included in such calculation and amounts
expended pursuant to clause 2(i) shall not be included in such
calculation.
(ii) Reports.
So long as any shares of Senior Preferred Stock are
outstanding, the Company shall furnish to each Holder of Senior
Preferred Stock (at such Holder's address as the same appears on the
stock register of the Company); (i) beginning at the end of the
Company's first fiscal year ending after the Preferred Stock Issue
Date, all quarterly and annual financial information that would be
required to be contained in a filing with the SEC on Forms 10-Q and
10-K if the Company were required to file such forms, including a
"Management's Discussion and Analysis of Financial Condition and
Results of Operations" and, with respect to the annual information
only, a report thereon by the Company's certified independent
accountants, and (ii) all current reports that would be required to be
filed with the SEC on Form 8-K if the Company were required to file
such reports.
(m) Definitions and Interpretation.
(i) Definitions. As used in this Resolution, the following
terms shall have the following meanings, unless the context otherwise
requires:
"Affiliate" of any specified Person means any other Person
directly or indirectly controlling or controlled by or under direct or
indirect common control with such specified Person. For purposes of
this definition, the term "control" (including, with correlative
meanings, the terms "controlling," "controlled by" and "under common
control with"), as used with respect to any Person, shall mean the
possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of such Person, directly or
through one or more intermediaries, whether through the ownership of
voting securities, by contract, or otherwise, provided, that, with
respect to the Company and its Subsidiaries, a Beneficial Owner of 10%
or more of the total voting power normally entitled to vote in the
election of directors of the Company shall for such purposes be deemed
to constitute control.
"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 Subsidiaries (including any Sale and
Leaseback Transaction) to any Person other than the Company or a
Subsidiary of the Company (including a Person that is or will become a
Subsidiary of the Company immediately after such sale, issuance,
conveyance, transfer, lease, assignment or other transfer for value) of
(a) any Capital Stock of any Subsidiary of the Company; or (b) any
other property or assets (other than cash or Cash Equivalents) of the
Company or any 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 Subsidiaries receive aggregate consideration of less
than $500,000 and (ii) the sale, lease, conveyance, disposition or
other transfer of all or substantially all of the assets of the
Company.
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"Bank Facility" shall have the meaning ascribed to such term
in the Senior Indenture.
"Beneficial Owner" or "beneficial owner" for purposes of the
definition of Change of Control and Affiliate has the meaning attributed to it
in Rules 13d-3 and 13d-5 under the Exchange Act (as in effect on the Preferred
Stock Issue Date), whether or not applicable.
"Board of Directors" means the Board of Directors of the
Company.
"Business Day" means any day other than a Legal Holiday.
"Capital Stock" means (i) with respect to any Person that is a
corporation, any and all shares, interests, participations or other equivalents
(however designated and whether or not voting) 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 or ownership interests of such Person.
"Cash Equivalents" shall have the meaning ascribed to such
term in the Senior Indenture.
"Certificate of Incorporation" means the Company's Certificate
of Incorporation.
"Change of Control" (i) any merger or consolidation of the
Company with or into any Person or any sale, transfer or other conveyance,
whether direct or indirect, of all or substantially all of the assets of the
Company on a consolidated basis, in one transaction or a series of related
transactions, if, immediately after giving effect to such transaction(s), any
"person" or "group" (as such terms are used for purposes of Sections 13(d) and
14(d) of the Exchange Act, whether or not applicable), other than any Excluded
Person or Excluded Persons, is or becomes the Beneficial Owner, directly or
indirectly, of more than 50% of the total voting power in the aggregate normally
entitled to vote in the election of directors, managers or trustees, as
applicable, of the transferee(s) or surviving entity or entities, (ii) any
"person" or "group," other than any Excluded Person or Excluded Persons, becomes
the Beneficial Owner, directly or indirectly, of more than 50% of the total
voting power in the aggregate of all classes of Capital Stock of the Company
then outstanding normally entitled to vote in elections of directors or (iii)
during any period of 12 consecutive months after the Issue Date, individuals who
at the beginning of any such 12-month period constituted the Board of Directors
of the Company (together, in each case, with any new directors whose election by
such Board of Directors or whose nomination for election by the shareholders of
the Company was approved by LGP or a Related Party of LGP or by the Excluded
Persons or by a vote of a majority of the directors then still in office who
were either directors at the beginning of such period or whose election or
nomination for election was previously so approved) cease for any reason to
constitute a majority of the Board of Directors of the Company then in office,
as applicable.
"Closing Date" has the meaning attributed to such term in the
Purchase Agreement.
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"Common Stock" of any Person means any and all shares,
interests or other participations in, and other equivalents (however designated
and whether voting or non-voting) of such Person's common stock, whether
outstanding on the Issue Date or issued after the Issue Date, and includes,
without limitation, all series and classes of such common stock.
"Company" means this corporation.
"Consolidated Net Income" means, with respect to any Person,
for any period, the aggregate net income (or loss) of such Person and its
Subsidiaries for such period on a consolidated basis, determined in accordance
with GAAP; provided that there shall be excluded therefrom (a) net after-tax
gains from Asset Sales or abandonments or reserves relating thereto, (b)
after-tax items classified as extraordinary or nonrecurring gains or losses, (c)
the net income of any Person acquired in a "pooling of interests" transaction
accrued prior to the date it becomes a Subsidiary of the referent Person or is
merged or consolidated with the referent Person or any Subsidiary of the
referent Person, (d) the net income (but not loss) of any Subsidiary of the
referent Person to the extent that the declaration of dividends or similar
distributions by that Subsidiary of that income is restricted by contract,
operation of law or otherwise, (e) the net income of any Person, other than a
Subsidiary of the referent Person, except to the extent of cash dividends or
distributions paid to the referent Person or to a Subsidiary of the referent
Person by such Person, (f) any restoration to income of any contingency reserve,
except to the extent that provision for such reserve was made out of
Consolidated Net Income accrued at any time following the Issue Date and (g)
income or loss attributable to discontinued operations (including, without
limitation, operations disposed of during such period whether or not such
operations were classified as discontinued).
"Default Event" means any of the following events: (1) any
time when the Company fails to make a mandatory redemption of the Senior
Preferred Stock when required (whether or not any contractual or other
restrictions apply to such redemption) pursuant to paragraph (e)(ii) hereof; or
(2) any time when the Company fails to make an offer to repurchase all of the
outstanding shares of Senior Preferred Stock (or fails to consummate any such
offer to repurchase) following a Change of Control, if such offer to repurchase
is required to be made pursuant to paragraph (g)(i) hereof (whether or not any
contractual or other restrictions apply to such repurchase).
"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, matures or is mandatorily redeemable, pursuant to a sinking fund
obligation or otherwise, or is redeemable at the sole option of the holder
thereof, in any case, on or prior to April 1, 2008. Notwithstanding the
foregoing, in no event shall the Senior Preferred Stock be deemed to be
Disqualified Capital Stock.
"Dividend Payment Date" means January 1, April 1, July 1, and
October 1 of each year.
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"Dividend Period" means the Initial Dividend Period and,
thereafter, each Quarterly Dividend Period.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations thereunder.
"Excluded Person" means GEI and its Related Parties, Kenneth
Levine and his Related Parties and Richard Rutta and his Related Parties.
"fair market value" means, 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
transaction. Fair market value shall be determined by the Board of Directors of
the Company acting reasonably and in good faith.
"GAAP" means United States generally accepted accounting
principles 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 in the United States as in effect on the Issue
Date.
"GEI" means Green Equity Investors II, L.P.
"Holder" means a Person in whose name a share of Senior
Preferred Stock is registered.
"Initial Dividend Period" means the dividend period commencing
on the Preferred Stock Issue Date and ending on the day before the first
Dividend Payment Date to occur thereafter.
"Issue Date" means the date of original issuance of the Senior
Notes.
"Legal Holiday" means a Saturday, a Sunday or a day on which
banking institutions in the Company's principal place of business or in the City
of New York are authorized by law, regulation or executive order to remain
closed.
"LGP" means Leonard Green & Partners, L.P.
"Management Subscription and Stockholders Agreement" means any
Management Subscription and Stockholders Agreement, dated as of the Issue Date,
among the Company, GEI and an employee of the Company and/or one or more of its
subsidiaries, as any such agreement may be amended from time to time.
"Person" means an individual, partnership, corporation,
limited liability company, unincorporated organization, trust or joint venture,
or a governmental agency or political subdivision thereof.
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<PAGE>
"Preferred Stock" of any Person means any Capital Stock of
such Person that has preferential rights over any other Capital Stock of such
Person with respect to dividends or redemptions or upon liquidation.
"Preferred Stock Issue Date" means the first date on which
shares of Senior Preferred Stock are originally issued by the Company under this
Resolution.
"Purchase Agreement" means the Second Amended and Restated
Stock Purchase and Sale Agreement, dated as of January 15, 1998, as amended as
of the Issue Date, by and among VGMC Corp., GEI, Diamond Auto Glass Works, Inc.,
Triumph Auto Glass, Inc., the Company, A Above Average Glass Company by Diamond,
Inc., A-AA Triumph Auto Glass, Inc., Scranton Holdings, Inc., Diamond/Triumph
Auto Export Sales Co., Inc., A-Auto Glass by Triumph, Inc., A-Auto Glass Company
by Diamond, Inc., Kenneth Levine and Richard Rutta.
"Qualified Capital Stock" the Senior Preferred Stock and any
other Capital Stock that is not Disqualified Capital Stock.
"Quarterly Dividend Period" shall mean the quarterly period
commencing on each January 1, April 1, July 1 and October 1 and ending on the
day before the following Dividend Payment Date.
"Redemption Date" with respect to any shares of Senior
Preferred Stock, means the date on which such shares of Senior Preferred Stock
are redeemed by the Company.
"Related Party" means, with respect to GEI, any partnership,
limited liability company, corporation or other entity which is managed by or
controlled by LGP or any Affiliate thereof and, with respect to Kenneth Levine
or Richard Rutta, (i) such Person's spouse and immediate family members and (ii)
any trust, corporation, partnership, limited liability company or other entity,
the beneficiaries, stockholders, partners, owners or persons holding an 80% or
more controlling interest of which consist of such Person and/or such Person's
spouse or immediate family members.
"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 Subsidiary of any property, whether owned by
the Company or any Subsidiary at the Issue Date or later acquired, which has
been or is to be sold or transferred by the Company or such Subsidiary to such
Person or to any other Person by whom funds have been or are to be advanced on
the security of such Property.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended,
and the rules and regulations thereunder.
"Senior Indenture" means the Indenture pursuant to which the
Senior Notes will be issued.
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"Senior Notes" means the 9.25% Senior Notes due 2008 of the
Company to be issued pursuant to the Senior Indenture.
"Senior Preferred Stock" means the Company's Series A 12%
Senior Redeemable Cumulative Preferred Stock.
"Subsidiary", with respect to any Person, means (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.
(ii) Interpretation. For the purposes of this Certificate of
Designations: (x) words in the singular shall be held to include the
plural and vice versa and words of one gender shall be held to include
the other gender as the context requires and (y) the word "including"
and words of similar import shall mean "including, without limitation,"
unless the context otherwise requires or unless otherwise specified.
IN WITNESS WHEREOF, Diamond Triumph Auto Glass, Inc. has
caused this Certificate to be executed by its Co-Chief Executive Officer this
26th day of March, 1998.
DIAMOND TRIUMPH AUTO GLASS, INC.
By: /s/ Kenneth Levine
--------------------------
Kenneth Levine
Co-Chief Executive Officer
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Exhibit 3.3
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
DIAMOND TRIUMPH AUTO GLASS, INC.
(Pursuant to Section 242 of the
General Corporation Law
of the State of Delaware)
Diamond Triumph Auto glass, inc., a corporation organized and
existing under the laws of the State of Delaware (the "Company"), hereby
certifies as follows:
1. That the name of the company is Diamond Triumph Auto Glass,
Inc.
2. That the name under which the Company was originally
incorporated i Triumph Auto Glass of Ohio, Inc.
3. That the Certificate of Incorporation of the Company was
filed in the office of the Secretary of State of the State of Delaware on the
8th day of April, 1994.
4. The first paragraph of Article FOURTH of the Certificate of
Incorporation of, the Company, as amended, is hereby further amended to read in
its entirety as follows:
"The total number of share of all classes of stock
which the Company shall have authority to issue is one million
one hundred thousand (1,100,000) of which one hundred thousand
(100,000) shall be designated Preferred Stock par value $.01
per share (hereinafter the "Preferred Stock"), and one million
(1,000,000) shall be designated Common Stock, par value $.01
per share (hereinafter the "Common Stock").
5. The foregoing amendment was declared advisable by the Board
of Directors of the Corporation pursuant to a resolution duly adopting the
amendment on the date hereof, and was duly adopted in accordance with the
provisions of Section 242(b) of the Delaware General Corporation Law by the
unanimous written consent of stockholders of the Company.
IN WITNESS WHEREOF, the Company has caused this Certificate of
Amendment to be signed by its Co-Chief Executive Officer on this 28th day of
April, 1998.
DIAMOND TRIUMPH AUTO GLASS, INC.
/s/ Kenneth Levine
----------------------------------
Kenneth Levine
Co-Chief Executive Officer
Exhibit 3.4
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
DIAMOND TRIUMPH AUTO GLASS, INC.
(Pursuant to Section 242 of the
General Corporation Law
of the State of Delaware)
Diamond Triumph Auto Glass, Inc., a corporation organized and
existing under the laws of the State of Delaware (the "Company"), hereby
certifies as follows:
1. That the name of the Company is Diamond Triumph Auto Glass,
Inc.
2. That the name under which the Company was originally
incorporated is Triumph Auto Glass of Ohio, Inc.
3. That the Certificate of Incorporation of the Company was
filed in the office of the Secretary of State of the State of Delaware on the
8th day of April, 1994.
4. The first paragraph of Article FOURTH of the Certificate of
Incorporation of the Company, as amended, is hereby further amended to read in
its entirety as follows:
"The total number of shares of all classes of stock
which the Company shall have authority to issue is one million
two hundred thousand (1,200,000) of which one hundred thousand
(100,000) shall be designated Preferred Stock, par value $.01
per share (hereinafter the "Preferred Stock"), and one million
one hundred thousand (1,100,000) shall be designated Common
Stock, par value $.01 per share (hereinafter the "Common
Stock")."
<PAGE>
5. The foregoing amendment was declared advisable by the Board
of Directors of the Corporation pursuant to a resolution duly adopting the
amendment on the date hereof, and was duly adopted in accordance with the
provisions of Section 242(b) of the Delaware General Corporation Law by the
unanimous written consent of stockholders of the Company.
IN WITNESS WHEREOF, the Company has caused this Certificate of
Amendment to be signed by its Co-Chief Executive Officer on this 15th day of
September 1998.
DIAMOND TRIUMPH AUTO GLASS, INC.
/s/ Kenneth Levine
-------------------------------
Kenneth Levine
Co-Chief Executive Officer
Exhibit 3.5
BY-LAWS
OF
DIAMOND TRIUMPH AUTO GLASS, INC.
(A Delaware Corporation)
ARTICLE I
Stockholders
Section 1. Place of Meetings. Meetings of stockholders shall
be held at such place, either within or without the State of Delaware, as shall
be designated in the notice of meeting.
Section 2. Annual Meetings. Annual meetings of stockholders
shall be held on such date during the month of April or at such other time and
at such place as shall be designated from time to time by the Board of
Directors. At each annual meeting the stockholders shall elect a Board of
Directors by plurality vote and transact such other business as may be properly
brought before the meeting.
Section 3. Special Meetings. Special meetings of the
stockholders may be called by the Board of Directors, by any two directors or by
the holders of a majority of the outstanding Common Stock of the Corporation.
Section 4. Notice of Meetings. Written notice of each meeting
of the stockholders stating the place, date and hour of the meeting shall be
given by or at the direction of the Board of Directors or other persons calling
the meeting to each stockholder entitled to vote at the meeting at least ten
(10), but not more than sixty (60), days prior to the meeting. Notice of any
special meeting shall state in general terms the purpose or purposes for which
the meeting is called.
<PAGE>
Section 5. Quorum; Adjournments of Meetings. The holders of a
majority of the issued and outstanding shares of the capital stock of the
Corporation entitled to vote at a meeting, present in person or represented by
proxy, shall constitute a quorum for the transaction of business at such
meeting; but, if there be less than a quorum, the holders of a majority of the
stock so present or represented may adjourn the meeting to another time or
place, from time to time, until a quorum shall be present, whereupon the meeting
may be held, as adjourned, without further notice, except as required by law,
and any business may be transacted thereat which might have been transacted at
the meeting as originally called.
Section 6. Voting. At any meeting of the stockholders every
registered owner of shares entitled to vote may vote in person or by proxy and,
except as otherwise provided by statute, in the Certificate of Incorporation or
these By-Laws, shall have one vote for each such share standing in his name on
the books of the Corporation. Except as otherwise required or provided by
statute, the Certificate of Incorporation or these By-Laws, all elections of
directors shall be decided by a plurality of votes cast, and all other matters
shall be decided by a vote of the majority of shares present in person or
represented by proxy at the meeting and entitled to vote thereon, a quorum being
present.
Section 7. Inspectors of Election. The Board of Directors, or,
if the Board shall not have made the appointment, the chairman presiding at any
meeting of stockholders, shall have power to appoint one or more persons to act
as inspectors of election at the meeting or any adjournment thereof, but no
candidate for the office of director shall be appointed as an inspector at any
meeting for the election of directors.
Section 8. Chairman of Meetings. The Chairman or a Co-Chairman
of the Board shall preside as chairman of a meeting of the stockholders. In the
absence of the Chairman or a
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Co-Chairman of the Board, a majority of the members of the Board of Directors
present in person at such meeting may appoint any other person to act as
chairman of the meeting.
Section 9. Secretary of Meetings. The Secretary of the
Corporation shall act as secretary of all meetings of the stockholders. In the
absence of the Secretary, the chairman of the meeting shall appoint any other
person to act as secretary of the meeting.
Section 10. Stockholders' Action Without Meetings. Any actions
that are required or permitted to be taken at any meeting of the stockholders
may be taken without a meeting, without prior notice and without a vote, if a
consent or consents in writing shall be signed by the holders of outstanding
stock having not less than the minimum number of votes that would be necessary
to authorize or take such action at a meeting at which all shares entitled to
vote thereon were present and voted and shall be delivered to the Corporation in
accordance with the provisions of Section 228 of the General Corporation Law of
the State of Delaware.
ARTICLE II
Board of Directors
Section 1. Number of Directors. The Board of Directors shall
consist of two (2) members; provided, however, such number may from time to time
be increased or decreased by the Board of Directors or by the stockholders.
Section 2. Vacancies. Whenever any vacancy shall occur in the
Board of Directors by reason of death, resignation, removal, increase in the
number of directors or otherwise, it may be filled only by the stockholders and
not by the directors.
Section 3. First Meeting. The first meeting of each newly
elected Board of Directors, of which no notice shall be necessary, shall be held
immediately following the annual meeting of stockholders or any adjournment
thereof at the place the annual meeting of
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stockholders was held at which such directors were elected, or at such other
place as the Board of Directors shall determine, for the election or appointment
of officers for the ensuing year and the transaction of such other business as
may be brought before such meeting.
Section 4. Regular Meetings. Regular meetings of the Board of
Directors, other than the first meeting, may be held without notice at such
times and places as the Board of Directors may from time to time determine.
Section 5. Special Meetings. Special meetings of the Board of
Directors may be called by order of the Chairman or a Co-Chairman of the Board
or any two directors. Notice of the time and place of each special meeting shall
be given by or at the direction of the person or persons calling the meeting by
mailing the same at least three (3) days before the meeting or by telephoning,
telegraphing or personally delivering the same at least twenty-four (24) hours
before the meeting. Except as otherwise specified in the notice thereof, or as
required by statute, the Certificate of Incorporation or these By-Laws, any and
all business may be transacted at any special meeting.
Section 6. Place of Conference Call Meeting. Any meeting at
which one or more of the members of the Board of Directors or of a committee
designated by the Board of Directors shall participate by means of conference
telephone or similar communications equipment shall be deemed to have been held
at the place designated for such meeting, provided that at least one member is
at such place while participating in the meeting.
Section 7. Organization. Every meeting of the Board of
Directors shall be presided over by the Chairman or a Co-Chairman of the Board.
In the absence of the Chairman or a Co-Chairman of the Board, a presiding
officer shall be chosen by a majority of the directors
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<PAGE>
present. The Secretary of the Corporation shall act as secretary of the meeting,
but, in his absence, the presiding officer may appoint any person to act as
secretary of the meeting.
Section 8. Quorum; Vote. A majority of the directors then in
office (but in no event less than one-third of the total number of directors)
shall constitute a quorum for the transaction of business, but less than a
quorum may adjourn any meeting to another time or place from time to time until
a quorum shall be present, whereupon the meeting may be held, as adjourned,
without further notice. Except as otherwise required by statute, the Certificate
of Incorporation or these By-Laws, all matters coming before any meeting of the
Board of Directors shall be decided by the vote of a majority of the directors
present at the meeting, a quorum being present.
Section 9. Removal of Directors. Any one or more of the
directors shall be subject to removal with or without cause at any time by the
stockholders.
Section 10. Directors' Action Without Meetings. Any action
required or permitted to be taken at any meeting of the Board of Directors may
be taken without a meeting, if a written consent thereto is signed by all
members of the Board of Directors and such written consent is filed with the
minutes of proceedings of the Board of Directors.
ARTICLE III
Officers
Section 1. General. The Board of Directors shall elect the
officers of the Corporation, which shall include a Chairman or Co-Chairmen of
the Board, a President, a Chief Executive Officer or Co-Chief Executive
Officers, a Chief Financial Officer, a
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<PAGE>
Secretary, a Treasurer and such other or additional officers (including, without
limitation, one or more Executive Vice Presidents, Vice-Presidents, Assistant
Vice-Presidents, Assistant Secretaries and Assistant Treasurers) as the Board of
Directors may designate.
Section 2. Term of Office; Removal and Vacancy. Each officer
shall hold his office until his successor is elected and qualified or until his
earlier resignation or removal. Any officer shall be subject to removal with or
without cause at any time by the Board of Directors. Vacancies in any office,
whether occurring by death, resignation, removal or otherwise, may be filled by
the Board of Directors.
Section 3. Powers and Duties. Each of the officers of the
Corporation shall, unless otherwise ordered by the Board of Directors, have such
powers and duties as generally pertain to his respective office as well as such
powers and duties as from time to time may be conferred upon him by the Board of
Directors.
Section 4. Power to Vote Stock. No person shall have the power
or authority on behalf of the Corporation to attend and to vote at any meeting
of stockholders of any corporation in which this Corporation may hold stock, or
to exercise on behalf of this Corporation any and all of the rights and powers
incident to the ownership of such stock at any such meeting, except to the
extent such powers are conferred upon any person by the Board of Directors.
ARTICLE IV
Capital Stock
Section 1. Certificates of Stock. Certificates for stock of
the Corporation shall be in such form as the Board of Directors may from time to
time prescribe and shall be signed by the Chairman or a Co-Chairman of the Board
or a Vice Chairman of the Board or a President or
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<PAGE>
Vice-President, and by the Treasurer or an Assistant Treasurer or the Secretary
or an Assistant Secretary.
Section 2. Transfer of Stock. Shares of capital stock of the
Corporation shall be transferable on the books of the Corporation only by the
holder of record thereof, in person or by duly authorized attorney, upon
surrender and cancellation of certificates for a like number of shares, with an
assignment or power of transfer endorsed thereon or delivered therewith, duly
executed, and with such proof of the authenticity of the signature and of
authority to transfer, and of payment of transfer taxes, as the Corporation or
its agents may require. Notwithstanding the foregoing, the Board of Directors
may, in accordance with the provisions of Section 158 of the General Corporation
Law of the State of Delaware, provide by resolution or resolutions that some or
all of any or all classes or series of stock of the Corporation shall be
uncertificated shares.
Section 3. Ownership of Stock. The Corporation shall be
entitled to treat the holder of record of any share or shares of stock as the
owner thereof in fact and shall not be bound to recognize any equitable or other
claim to or interest in such shares on the part of any other person, whether or
not it shall have express or other notice thereof, except as otherwise expressly
provided by law.
ARTICLE V
Miscellaneous
Section 1. Corporate Seal. The seal of the Corporation shall
be circular in form and shall contain the name of the Corporation and the year
and State of incorporation.
Section 2. Fiscal Year. The Board of Directors shall have
power to fix, and from time to time to change, the fiscal year of the
Corporation.
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<PAGE>
ARTICLE VI
Amendment
The Board of Directors shall have the power to make, alter or
repeal the By-Laws of the Corporation subject to the power of the stockholders
to alter or repeal the By-Laws made or altered by the Board of Directors.
ARTICLE VII
Indemnification
Except to the extent expressly prohibited by the Delaware
General Corporation Law, the Corporation shall indemnify each person made or
threatened to be made a party to any action or proceeding, whether civil or
criminal, and whether by or in the right of the Corporation or otherwise, by
reason of the fact that such person or such person's testator or intestate is or
was a director or officer of the Corporation, or serves or served at the request
of the Corporation any other corporation, partnership, joint venture, trust,
employee benefit plan or other enterprise in any capacity while he or she was
such a director or officer (hereinafter referred to as "Indemnified Person"),
against judgments, fines, penalties, amounts paid in settlement and reasonable
expenses, including attorneys' fees, incurred in connection with such action or
proceeding, or any appeal therein, provided that no such indemnification shall
be made if a judgment or other final adjudication adverse to such Indemnified
Person establishes that either (a) his or her acts were committed in bad faith,
or were the result of active and deliberate dishonesty, and were material to the
cause of action so adjudicated, or (b) that he or she personally gained in fact
a financial profit or other advantage to which he or she was not legally
entitled.
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<PAGE>
The Corporation shall advance or promptly reimburse upon
request any Indemnified Person for all expenses, including attorneys' fees,
reasonably incurred in defending any action or proceeding in advance of the
final disposition thereof upon receipt of an undertaking by or on behalf of such
Indemnified Person to repay such amount if such Indemnified Person is ultimately
found not to be entitled to indemnification or, where indemnification is
granted, to the extent the expenses so advanced or reimbursed exceed the amount
to which such Indemnified Person is entitled.
Nothing herein shall limit or affect any right of any
Indemnified Person otherwise than hereunder to indemnification or expenses,
including attorneys' fees, under any statute, rule, regulation, certificate of
incorporation, by-law, insurance policy, contract or otherwise.
Anything in these by-laws to the contrary notwithstanding, no
elimination of this by-law, and no amendment of this by-law adversely affecting
the right of any Indemnified Person to indemnification or advancement of
expenses hereunder shall be effective until the sixtieth (60th) day following
notice to such Indemnified Person of such action, and no elimination of or
amendment to this by-law shall thereafter deprive any Indemnified Person of his
or her rights hereunder arising out of alleged or actual occurrences, acts or
failures to act prior to such sixtieth (60th) day.
The Corporation shall not, except by elimination or amendment
of this by-law in a manner consistent with the preceding paragraph, take any
corporate action or enter into any agreement which prohibits, or otherwise
limits the rights of any Indemnified Person to, indemnification in accordance
with the provisions of this by-law. The indemnification of any Indemnified
Person provided by this by-law shall be deemed to be a contract between the
Corporation and each Indemnified Person and shall continue after such
Indemnified Person has
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<PAGE>
ceased to be a director or officer of the Corporation and shall inure to the
benefit of such Indemnified Person's heirs, executors, administrators and legal
representatives. If the Corporation fails timely to make any payment pursuant to
the indemnification and advancement or reimbursement of expenses provisions of
this Article VII and an Indemnified Person commences an action or proceeding to
recover such payment, the Corporation in addition shall advance or reimburse
such Indemnified Person for the legal fees and other expenses of such action or
proceeding.
The Corporation is authorized to enter into agreements with
any of its directors or officers extending rights to indemnification and
advancement of expenses to such Indemnified Person to the fullest extent
permitted by applicable law, but the failure to enter into any such agreement
shall not affect or limit the rights of such Indemnified Person pursuant to this
by-law, it being expressly recognized hereby that all directors or officers of
the Corporation, by serving as such after the adoption hereof, are acting in
reliance hereon and that the Corporation is estopped to contend otherwise.
Persons who are not directors or officers of the Corporation shall be similarly
indemnified and entitled to advancement or reimbursement of expenses to the
extent authorized at any time by the Board of Directors.
In case any provision in this Article VII, shall be determined
at any time to be unenforceable in any respect, the other provisions shall not
in any way be affected or impaired thereby, and the affected provision shall be
given the fullest possible enforcement in the circumstances, it being the
intention of the Corporation to afford indemnification and advancement of
expenses to its directors or officers, acting in such capacities or in the other
capacities mentioned herein, to the fullest extent permitted by law whether
arising from alleged
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<PAGE>
or actual occurrences, acts or failures to act occurring before or after the
adoption of this Article VII.
For purposes of this Article VII, the Corporation shall be
deemed to have requested an Indemnified Person to serve an employee benefit plan
where the performance by such Indemnified Person of his or her duties to the
Corporation also imposes duties on, or otherwise involves services by, such
Indemnified Person to the plan or participants or beneficiaries of the plan, and
excise taxes assessed on an Indemnified Person with respect to an employee
benefit plan pursuant to applicable law shall be considered indemnifiable fines.
For purposes of this Article VII, the term "Corporation" shall include any legal
successor to the Corporation, including any corporation which acquires all or
substantially all of the assets of the Corporation in one or more transactions.
Notwithstanding the foregoing provisions of this Article VII,
no Company Principal (as such term is defined in the Second Amended and Restated
Stock Purchase and Sale Agreement dated as of January 15, 1998 by and among VGMC
Corp., Green Equity Investors II, L.P., Diamond Auto Glass Works, Inc., Triumph
Auto Glass, Inc., the Corporation, A Above Average Glass Company by Diamond,
Inc., A-AA Triumph Auto Glass, Inc., Scranton Holdings, Inc., Diamond/Triumph
Auto Export Sales Co. Inc., A-Auto Glass by Triumph, Inc., A-Auto Glass Company
by Diamond, Inc., Kenneth Levine and Richard Rutta (the "Agreement")) shall be
entitled to indemnification against any Liability (as such term is defined in
the Agreement) to the extent that such Liability arises out of a breach of the
Agreement or any of the Transaction Documents (as such term is defined in the
Agreement).
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Exhibit 4.1
EXECUTION COPY
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DIAMOND TRIUMPH AUTO GLASS, INC.,
as Issuer,
AND
STATE STREET BANK AND TRUST COMPANY,
as Trustee
INDENTURE
Dated as of March 31, 1998
9-1/4% Senior Notes Due 2008
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<PAGE>
INDENTURE dated as of March 31, 1998 between DIAMOND TRIUMPH
AUTO GLASS, INC., a Delaware corporation (the "Company"), as Issuer and STATE
STREET BANK AND TRUST COMPANY, as Trustee (the "Trustee").
The Company has duly authorized the creation of an issue of
9-1/4% Senior Notes Due 2008 (the "Initial Notes") and an issue of 9-1/4% Senior
Notes Due 2008, to be issued in exchange for the Initial Notes (the "Exchange
Notes") pursuant to the Registration Rights Agreement and, to provide therefor,
the Company has duly authorized the execution and delivery of this Indenture.
All things necessary to make the Notes (as defined below), when duly issued and
executed by the Company and authenticated and delivered hereunder, the valid and
binding obligations of the Company and to make this Indenture a valid and
binding agreement of the Company have been done.
Each party hereto agrees as follows for the benefit of each
other party and for the equal and ratable benefit of the Holders of the Notes:
ARTICLE One
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01. Definitions.
"Accredited Investor" means Indebtedness of a Person or any of
its Subsidiaries existing at the time such Person become a Restricted Subsidiary
of the Company or at the time it merges or consolidates wit the Company or any
of its Restricted Subsidiaries or is assumed in connection with the acquisition
of assets from such Person and in each case not incurred in connection with, or
in anticipation or contemplation of, such acquisition, merger or consolidation.
Such Indebtedness shall be deemed to have been incurred at the time such Person
becomes a Restricted Subsidiary of the Company or at the time it mergers or
consolidates with the Company or a Restricted Subsidiary of the Company or at
the time such Indebtedness is assumed in connection with the acquisition of
assets from such Person.
"Additional Interest" has the meaning set forth in the
Registration Rights Agreement.
"Affiliate" means, with respect to any specified Person, any
other Person who directly or indirectly through one or more intermediaries
controls, or is controlled by, or is under common control with, such specified
person. 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; and the terms "controlling" and "controlled" have meanings
correlative of the foregoing.
"Affiliate Transaction" has the meaning set forth in Section
4.10.
"Agent" means any Registrar, Paying Agent or Co-Registrar.
<PAGE>
"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 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 (other than a Subsidiary of the Company) which
constitute all or substantially all of the assets of such Person or comprises
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 Restricted Subsidiary of
the Company (including a Person that is or will become a Restricted Subsidiary
of the Company immediately after such sale, issuance, conveyance, transfer,
lease, assignment or other transfer for value) of (a) any Capital Stock of any
Restricted Subsidiary of the Company; or (b) any other property or assets (other
than cash or Cash Equivalents) 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 $500,000 and (ii) the sale, lease,
conveyance, disposition or other transfer of all or substantially all of the
assets of the Company as permitted under Article Five.
"Authentication Order" has the meaning set forth in Section
2.03.
"Bank Facility" means the credit agreement dated as of March
31, 1998 among the Company, the lenders named therein and Bankers Trust Company,
as Administrative Agent, and all amendments thereto, together with the related
documents thereto (including, without limitation, any guarantee agreements and
security documents), in each case as such agreements may be amended (including
any amendment and restatement thereof), supplemented or otherwise modified from
time to time by one or more credit agreements, including any agreement adding
Subsidiaries of the Company as additional borrowers or guarantors thereunder or
extending the `maturity of, refinancing, replacing or otherwise restructuring
all or any portion of the Indebtedness under such agreement(s) or any successor
or replacement agreement(s) and whether by the same or any other agent, lender
or group of lenders.
"Bankruptcy Law" means Title 11, U.S. Code or any similar
Federal, state or foreign law for the relief of debtors.
"Board of Directors" means, as to any Person, the board of
directors of such Person or any duly authorized committee thereof.
"Board Resolution" means, with respect to any Person, a copy
of a resolution certified by the Secretary or an Assistant Secretary of such
Person to have been duly adopted by the Board of Directors of such Person and to
be in full force and effect on the date of such certification, and delivered to
the Trustee.
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<PAGE>
"Business Day" means any day other than a Saturday, Sunday or
any other day on which banking institutions in the City of New York or the city
in which the principal corporate trust office of the Trustee is located are
required or authorized by law or other governmental action to be closed.
"Capitalized Lease Obligations" 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 and whether or not voting) 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 or ownership interests of such Person.
"Cash Equivalents" means (i) marketable direct obligations
issued by, or unconditionally guaranteed by, the United States Government or
issued by any agency thereof and backed by the full faith and credit of the
United States, in each case maturing within one year from the date of
acquisition thereof; (ii) marketable direct obligations issued by any state of
the United States of America or any political subdivision of any such state or
any public instrumentality thereof maturing within one year from the date of
acquisition thereof and, at the time of acquisition, having one of the two
highest ratings obtainable from either S&P or Moody's; (iii) commercial paper
maturing no more than one year from the date of creation thereof and, at the
time of acquisition, having a rating of at least A-1 from S&P or at least P-1
from Moody's; (iv) certificates of deposit or bankers' acceptances 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 $250.0
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 if, immediately after giving effect to such
transaction(s), any Person or group of related Persons (other than Permitted
Holders) for purposes of Section 13(d) of the Exchange Act (a "Group"), is or
becomes the beneficial owner, directly or indirectly, of shares representing
more than 50% of the aggregate ordinary voting power represented by the issued
and outstanding Capital Stock of the transferee or surviving entity; (ii) any
Person or Group (other than Permitted Holders) shall become the beneficial
owner, directly or indirectly, of shares representing more than 50% of the
aggregate ordinary voting power represented by the issued and outstanding
Capital Stock of the Company; (iii) the replacement after the Issue Date of a
majority of the Board of Directors of the Company
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<PAGE>
over a two-year period after the Issue Date from the directors who constituted
the Board of Directors of the Company at the beginning of such period, and such
replacement shall not have been approved by a vote of at least a majority of the
Board of Directors of the Company then still in office who either were members
of such Board of Directors at the beginning of such period or whose election as
a member of such Board of Directors was previously so approved; or (iv) the
Company consolidates with, or merges with or into, another Person, or sells,
assigns, conveys, transfers, leases or otherwise disposes of all or
substantially all of its assets to any Person, or any Person consolidates with,
or merges with or into, the Company, in any such event pursuant to a transaction
in which the shares representing the aggregate ordinary voting power represented
by the issued and outstanding Capital Stock of the Company is converted into or
exchanged for cash, securities or other property, other than (A) any such
transaction where (1) the shares representing the issued and outstanding
ordinary voting Capital Stock of the Company are converted into or exchanged for
(I) ordinary voting Capital Stock (other than Disqualified Capital Stock) of the
surviving or transferee corporation and/or (II) cash, securities and other
property in an amount which could be paid by the Company as a Restricted Payment
under this Indenture and (2) the "beneficial owners" of the shares representing
the issued and outstanding ordinary voting Capital Stock of the Company
immediately prior to such transaction own, directly or indirectly, shares of
Capital Stock representing not less than a majority of voting power of all
issued and outstanding shares of Capital Stock of the surviving or transferee
corporation immediately after such transaction or (B) any such transaction as a
result of which the Permitted Holders own shares of Capital Stock representing
more than 50% of the voting power of all issued and outstanding shares of
Capital Stock of the surviving or transferee corporation immediately after such
transaction.
"Change of Control Offer" has the meaning set forth in Section
4.14.
"Change of Control Payment Date" has the meaning set forth in
Section 4.14.
"Commission" means the Securities and Exchange Commission, or
any successor agency thereto with respect to the regulation or registration of
securities.
"Common Stock" of any Person means any and all shares,
interests or other participations in, and other equivalents (however designated
and whether voting or non-voting) of such Person's common stock, whether
outstanding on the Issue Date or issued after the Issue Date, and includes,
without limitation, all series and classes of such common stock.
"Company" means the party named as such in the recitals hereto
until a successor replaces it pursuant to this Indenture.
"Consolidated EBITDA" means, 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 the Company and its
Restricted Subsidiaries paid or accrued in accordance with GAAP for such period,
(B) Consolidated Interest Expense, (C) Consolidated Non-cash Charges less any
non-cash items increasing Consolidated Net Income for such period, (D) executive
compensation expense not to exceed $5.0 million incurred in the fiscal year
ended December 31, 1997 and (E) write-offs in the fiscal year ending December
31, 1998 of amounts, not to exceed $3.0 million, due from a company owned by
Kenneth Levine and Richard Rutta,
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<PAGE>
all as determined on a consolidated basis for the Company and its Restricted
Subsidiaries in accordance with GAAP.
"Consolidated Fixed Charge Coverage Ratio" means the ratio of
Consolidated EBITDA during the four full fiscal quarters (the "Four Quarter
Period") ending on or prior to the date of the transaction giving rise to the
need to calculate the Consolidated Fixed Charge Coverage Ratio (the "Transaction
Date") to Consolidated Fixed Charges 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 or repayment of any Indebtedness of the Company 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), other than the
incurrence or repayment of Indebtedness in the ordinary course of business for
working capital purposes pursuant to working capital facilities, 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 and (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 the
Company 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 including,
without limitation, by giving pro forma effect to any Consolidated EBITDA
(provided that such pro forma Consolidated EBITDA shall be calculated in a
manner consistent with the exclusions in the definition of "Consolidated Net
Income") 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 Acquired Indebtedness) occurred on the first day of the Four Quarter
Period. If the Company 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 the
Company or any of its Restricted Subsidiaries 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.
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<PAGE>
"Consolidated Fixed Charges" means, for any period, the sum,
without duplication, of (i) Consolidated Interest Expense (excluding any
amortization or write off of deferred financing costs), plus (ii) the product of
(x) the amount of all dividend payments on any series of Preferred Stock of the
Company (other than dividends paid in Qualified Capital Stock) paid, accrued or
scheduled to be paid or accrued during such period 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 the Company,
expressed as a decimal.
"Consolidated Interest Expense" means, for any period, the sum
of, without duplication: (i) the aggregate of the interest expense of the
Company and its Restricted Subsidiaries for such period determined on a
consolidated basis in accordance with GAAP, including, without limitation, (a)
any amortization of debt discount and any amortization or write off of deferred
financing costs, (b) the net costs under Interest Swap Obligations, (c) all
capitalized interest and (d) the interest portion of any deferred payment
obligation; and (ii) the interest component of Capitalized Lease Obligations
paid, accrued and/or scheduled to be paid or accrued by the Company and its
Restricted Subsidiaries during such period as determined on a consolidated basis
in accordance with GAAP.
"Consolidated Net Income" 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) net after-tax gains from Asset Sales
or abandonments or reserves relating thereto, (b) net after-tax items classified
as extraordinary or nonrecurring gains or losses, (c) the net income 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, (d)
the net income (but not loss) of any Restricted Subsidiary of the Company to the
extent that the declaration of dividends or similar distributions by that
Subsidiary of that income is restricted by contract, operation of law or
otherwise, (e) the net income of any Person, other than a Restricted Subsidiary
of the Company, except to the extent of cash dividends or distributions paid to
the Company or to a Restricted Subsidiary of the Company by such Person, (f) any
restoration to income of any contingency reserve, except to the extent that
provision for such reserve was made out of Consolidated Net Income accrued at
any time following the Issue Date and (g) income or loss attributable to
discontinued operations (including, without limitation, operations disposed of
during such period whether or not such operations were classified as
discontinued).
"Consolidated Net Worth" of any Person means the consolidated
stockholders' equity of such Person, determined on a consolidated basis in
accordance with GAAP, less (without duplication) amounts attributable to
Disqualified Capital Stock of such Person.
"Consolidated Non-cash Charges" means, for any period, the
aggregate depreciation, amortization and other non-cash expenses of the Company
and its Restricted Subsidiaries reducing Consolidated Net Income of the Company
and its Restricted Subsidiaries for such period, determined on a consolidated
basis in accordance with GAAP (excluding any such charges constituting an
extraordinary item or loss or any such charge which requires an accrual of or a
reserve for cash charges for any future period).
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<PAGE>
"Corporate Trust Office" means the principal office of the
Trustee where it conducts its corporate trust administrative functions, which
office is currently located at Goodwin Square, 225 Asylum Street, 23rd Floor,
Hartford, CT 06103.
"Covenant Defeasance" has the meaning set forth in Section
8.01.
"Custodian" means any receiver, trustee, assignee, liquidator,
sequestrator or similar official under any Bankruptcy Law.
"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.
"Defaulted Interest" has the meaning set forth in Section
2.13.
"Depository" means, with respect to the Notes issued in the
form of one or more Global Notes, The Depository Trust Company or another Person
designated as Depository by the Company, which must be a clearing agency
registered under the Exchange Act.
"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 at the option of the holder
thereof), or upon the happening of any event, matures or is mandatorily
redeemable, pursuant to a sinking fund obligation or otherwise, or is redeemable
at the sole option of the holder thereof, in any case, on or prior to the final
maturity date of the Notes. Notwithstanding the foregoing, in no event shall the
Senior Preferred Stock be deemed to be Disqualified Capital Stock.
"Employment Agreements" means the employment agreements, dated
as of the Issue Date, between the Company and each of Kenneth Levine, Richard
Rutta, Norman Harris and Michael Sumsky, as any such agreement may be extended
or amended from time to time to the extent that any such extension or amendment
does not have the effect of increasing in any material respect the payments
permitted to be made under such agreements pursuant to clause (i) of Section
4.12(b).
"Event of Default" has the meaning set forth in Section 6.01.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, or any successor statute or statutes thereto.
"Exchange Notes" has the meaning assigned in the recital
hereto.
"Exchange Offer Registration Statement" has the meaning set
forth in the Registration Rights Agreement.
"fair market value" means, 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
transaction. Fair market value shall be determined by the Board of Directors of
the
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<PAGE>
Company acting reasonably and in good faith and shall be evidenced by a Board
Resolution of the Board of Directors of the Company delivered to the Trustee.
"Final Maturity Date" means April 1, 2008.
"GAAP" means generally accepted accounting principles 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 may be approved by a significant segment of
the accounting profession of the United States, which are in effect as of the
Issue Date.
"GEI" means Green Equity Investors II, L.P.
"Global Note" means a note evidencing all or a portion of the
Notes issued to the Depository or its nominee in accordance with Section 2.01
and bearing the legend set forth in Section 2.02(b).
"Guarantees" means the future guarantees of the Notes and the
Obligations of the Company under the Indenture provided by any Subsidiary
Guarantors pursuant to Section 4.17 and Article Ten.
"incur" has the meaning set forth in Section 4.04.
"Indebtedness" means with respect to any Person, without
duplication, (i) the principal amount (or, if less, the accreted value) of all
obligations of such Person for borrowed money, (ii) the principal amount (or, if
less, the accreted value) of 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 and other accrued liabilities arising in the
ordinary course of business that are not overdue by 90 days or more or are being
contested in good faith by appropriate proceedings promptly instituted and
diligently conducted), (v) all obligations of such Person for the reimbursement
of any obligor on any letter of credit, banker's acceptance or similar credit
transaction, (vi) guarantees and other contingent obligations of such Person in
respect of Indebtedness referred to in clauses (i) through (v) above and clause
(viii) below, (vii) all Indebtedness 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, the amount of such Indebtedness being deemed to be the
lesser of the fair market value of such property or asset or the amount of the
Indebtedness so secured, (viii) all obligations under currency 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, 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
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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.
"Indenture" means this Indenture, as amended or supplemented
from time to time in accordance with the terms hereof.
"Independent Financial Advisor" means an accounting firm,
appraisal firm, investment banking firm or consultant to Persons engaged in a
Related Business, in each case, of nationally recognized standing that is, in
the judgment of the Company's Board of Directors, qualified to perform the task
for which it has been engaged.
"Initial Notes" has the meaning set forth in the recitals
hereto.
"Initial Purchasers" means First Union Capital Markets, a
division of Wheat First Securities, Inc., BT Alex. Brown Incorporated and
Donaldson, Lufkin & Jenrette Securities Corporation.
"Interest Payment Date" means the stated due date of an
installment of interest on the Notes.
"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 and shall include, without limitation, interest rate swaps,
caps, floors, collars and similar agreements.
"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 accounts receivable or
deposits arising in the ordinary course of business. For purposes of Section
4.03, "Investment" shall include and be valued at the fair market value of the
net assets of any Restricted Subsidiary of the Company at the time that such
Restricted Subsidiary is designated an Unrestricted Subsidiary. 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, such Restricted
Subsidiary would cease to be a Subsidiary of the Company, 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
Initial Notes.
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"Legal Defeasance" has the meaning set forth in Section 8.01.
"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).
"Management Services Agreement" means the Management Services
Agreement, dated as of the Issue Date, between the Company and Leonard Green &
Partners, L.P., substantially as in effect on the Issue Date.
"Management Subscription and Stockholders Agreements" mean
each of the Management Subscription and Stockholders Agreements, dated as of the
Issue Date, among the Company, Green Equity Investors II, L.P. and an employee
or director of the Company and/or one or more of its Subsidiaries, as any such
agreement may be amended from time to time.
"Moody's" means Moody's Investors Service, Inc. and its
successors.
"Net Cash Proceeds" means, with respect to any Asset Sale, the
proceeds in the form of cash or Cash Equivalents including payments in respect
of deferred payment obligations when received in the form of cash or Cash
Equivalents (other than the portion of any such deferred payment constituting
interest) received by the Company or any of its Restricted Subsidiaries from
such Asset Sale net of (a) reasonable 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
Indebtedness that is required to be repaid in connection with such Asset Sale,
(d) appropriate amounts to be provided by the Company or any Restricted
Subsidiary, as the case may be, as a reserve, in accordance with GAAP, against
any liabilities associated with such Asset Sale and retained by the Company or
any Restricted Subsidiary, as the case may be, after such Asset Sale, including,
without limitation, pension and other post-employment benefit liabilities,
liabilities related to environmental matters and liabilities under any
indemnification obligations associated with such Asset Sale, and (e) that
portion of the cash or Cash Equivalents attributable to the Capital Stock of a
Restricted Subsidiary which is not a Wholly Owned Restricted Subsidiary of the
Company held, directly or indirectly, by any Person which is not the Company or
a Wholly Owned Restricted Subsidiary of the Company.
"Net Proceeds Offer" has the meaning set forth in Section
4.15.
"Net Proceeds Offer Amount" has the meaning set forth in
Section 4.15.
"Net Proceeds Offer Payment Date" has the meaning set forth in
Section 4.15.
"Net Proceeds Offer Trigger Date" has the meaning set forth in
Section 4.15.
"Notes" means the Initial Notes, the Exchange Notes and any
notes issued pursuant to Section 2.03, treated as a single class of notes, as
amended or supplemented from time to time in accordance with the terms of this
Indenture.
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"Noteholder" or "Holder" means the Person in whose name a Note
is registered on the Registrar's books.
"Obligations" has the meaning set forth in Section 10.01.
"Offering Memorandum" means the Confidential Offering
Memorandum of the Company dated March 26, 1998.
"Officer" means, with respect to any Person, the Chairman of
the Board, any Co-Chairman of the Board, the Vice Chairman of the board, the
Chief Executive Officer, any Co-Chief Executive Officer, the President, any Vice
President, the Chief Financial Officer, the Controller, the Treasurer or the
Secretary of such Person.
"Officers' Certificate" means a certificate signed by two
Officers of the Company.
"Offshore Global Notes" has the meaning set forth in Section
2.01.
"Offshore Physical Notes" has the meaning set forth in Section
2.01.
"Offshore Notes Exchange Date" has the meaning set forth in
Section 2.01.
"Opinion of Counsel" means a written opinion from legal
counsel which opinion is reasonably acceptable to the Trustee and which counsel
may be counsel to or an employee of the Company or counsel to the Trustee.
"Participants" has the meaning set forth in Section 2.16.
"Permanent Offshore Global Note" has the meaning set forth in
Section 2.01.
"Paving Agent" has the meaning set forth in Section 2.04.
"Permitted Holders" means Green Equity Investors II, L.P., its
Affiliates and Related Parties and senior management of the Company on the Issue
Date.
"Permitted Indebtedness" means, without duplication, each of
the following:
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(i) Indebtedness in an aggregate principal amount not to
exceed $100.0 million under the Notes, the Guarantees and this
Indenture and any replacement Notes therefor issued pursuant to
Section 2.08;
(ii) Indebtedness of the Company and the Subsidiary Guarantors
incurred under the Bank Facility in an aggregate principal amount at
any time outstanding not to exceed $35.0 million less the amount of
any permanent prepayments of Indebtedness made with the Net Cash
Proceeds of an Asset Sale pursuant to clause (iii) (A) of the first
sentence of Section 4.15.
(iii) other Indebtedness of the Company and the Subsidiary
Guarantors outstanding on the Issue Date;
(iv) Interest Swap Obligations of the Company covering
Indebtedness of the Company or any of its Restricted .Subsidiaries
and Interest Swap Obligations of any Restricted Subsidiary of the
Company covering Indebtedness of such Restricted Subsidiary;
provided, however, that such Interest Swap Obligations are entered
into to protect the Company and its Restricted Subsidiaries from
fluctuations in interest rates on Indebtedness incurred in accordance
with this Indenture to the extent the notional principal amount of
such Interest Swap Obligation does not exceed the principal amount of
the Indebtedness to which such Interest Swap Obligation relates;
(v) Indebtedness of a Restricted Subsidiary of the Company to
the Company or to a Wholly Owned Restricted Subsidiary of the Company
for so long as such Indebtedness is held by the Company or a Wholly
Owned Restricted Subsidiary of the Company, in each case subject to
no Lien securing Indebtedness other than Permitted Liens; provided
that if as of any date any Person other than the Company or a Wholly
Owned Restricted Subsidiary of the Company owns or holds any such
Indebtedness or holds a Lien in respect of such Indebtedness securing
Indebtedness other than Permitted Liens, such date shall be deemed
the incurrence of Indebtedness not constituting Permitted
Indebtedness by the issuer of such Indebtedness;
(vi) Indebtedness of the Company to a Wholly Owned Restricted
Subsidiary of the Company for so long as such Indebtedness is held by
a Wholly Owned Restricted Subsidiary of the Company, in each case
subject to no Lien securing Indebtedness other than Permitted Liens;
provided that if as of any date any Person other than a Wholly Owned
Restricted Subsidiary of the Company owns or holds any such
Indebtedness or any Person other than a Wholly Owned Restricted
Subsidiary of the Company holds a Lien in respect of such
Indebtedness securing Indebtedness other than Permitted Liens, such
date shall be deemed the incurrence of Indebtedness not constituting
Permitted Indebtedness by the Company;
(vii) Indebtedness of the Company or any of its Restricted
Subsidiaries arising from the honoring by a bank or other financial
institution of a check, draft or similar instrument inadvertently
(except in the case of daylight overdrafts) drawn against
insufficient funds in the ordinary course of business; provided,
however, that such Indebtedness is extinguished within two Business
Days of incurrence;
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(viii) Indebtedness of the Company or any of its Restricted
Subsidiaries represented by letters of credit for the account of the
Company or any Restricted Subsidiary, as the case may be, in order to
provide security for workers' compensation claims, payment
obligations in connection with self-insurance or similar requirements
in the ordinary course of business;
(ix) Refinancing Indebtedness;
(x) Capitalized Lease Obligations and Purchase Money
Indebtedness of the Company or any of the Subsidiary Guarantors in an
aggregate principal amount not to exceed $5.0 million at any one time
outstanding; and
(xi) additional Indebtedness of the Company or any of its
Restricted Subsidiaries in an aggregate principal amount not to
exceed $10.0 million at any one time outstanding (which amount may,
but need not, be incurred in whole or in part under the Bank
Facility); provided, however, that the Indebtedness of Restricted
Subsidiaries that are not Subsidiary Guarantors permitted by this
clause (xi) shall not exceed $2.0 million at any one time
outstanding.
"Permitted Investments" means (i) Investments by the Company
or any Restricted Subsidiary of the Company in any Person that is or will
become, or Investments by the Company or any Restricted Subsidiary of the
Company which result in any Person becoming, in any case, immediately after such
Investment, a Restricted Subsidiary of the Company or that will merge or
consolidate into the Company or a Restricted Subsidiary of the Company; (ii)
Investments by any Restricted Subsidiary of the Company in the Company; (iii)
Investments in cash and Cash Equivalents; (iv) Investments existing as of the
Issue Date and any extension, modification or renewal of such Investment (but
not increases thereof, other than as a result of the accrual or accretion of
interest or original issue discount pursuant to the terms of such Investment);
(v) transactions or arrangements with officers, directors or employees of the
Company or any Subsidiary of the Company entered into in the ordinary course of
business (including compensation or employee benefit arrangements with any
officer or director of the Company or any Subsidiary of the Company permitted
under Section 4.10); (vi) Investments received as a result of the bankruptcy or
reorganization of any Person or taken in settlement of or other resolution of
claims or disputes, and, in each case, extensions, modifications and renewals
thereof; (vii) Investments made by the Company or its Restricted Subsidiaries as
a result of consideration received in connection with an Asset Sale made in
compliance with Section 4.15 or any exchange of any such Investment with the
issuer thereof, and extensions, modifications and renewals thereof; and (viii)
other Investments not to exceed $2.0 million at any one time outstanding.
"Permitted Liens" means the following types of Liens:
(i) Liens securing Indebtedness incurred under the Bank
Facility or pursuant to clause (xi) of the definition of Permitted
Indebtedness;
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(ii) Liens securing letters of credit issued in the ordinary
course of business consistent with past practice in connection with
workers' compensation, unemployment insurance and other types of
social security;
(iii) any interest or title of a lessor under any Capitalized
Lease Obligation; provided that such Liens do not extend to any
property or assets which is not leased property subject to such
Capitalized Lease Obligation;
(iv) Liens securing Purchase Money Indebtedness of the Company
or any Restricted Subsidiary of the Company; provided, however, that
(A) the 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;
(v) 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;
(vi) 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;
(vii) Liens securing Interest Swap Obligations which Interest
Swap Obligations relate to Indebtedness that is otherwise permitted
under this Indenture;
(viii) Liens securing Acquired Indebtedness incurred in
accordance with Section 4.04; provided that (A) such Liens secured
such Acquired Indebtedness at the time of and prior to the incurrence
of such Acquired Indebtedness by the Company or a Restricted
Subsidiary of the Company and were not granted in connection with, or
in anticipation of, the incurrence of such Acquired Indebtedness by
the Company or a Restricted Subsidiary of the Company and (B) 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 and are not materially more
favorable to the lienholders than those securing the Acquired
Indebtedness prior to the incurrence of such Acquired Indebtedness by
the Company or a Restricted Subsidiary of the Company;
(ix) Liens created under this Indenture;
(x) Liens of the Company or a Wholly Owned Restricted
Subsidiary of the Company on assets of any Restricted Subsidiary of
the Company; and
(xi) Liens securing Refinancing Indebtedness which is incurred
to Refinance any 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,
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however, that such Liens (X) are not materially less favorable to the
Holders and are not materially more favorable to the lienholders with
respect to such Liens than the Liens in respect of the Indebtedness
being Refinanced and (Y) do not extend to or cover any property or
assets of the Company or any of its Subsidiaries not securing the
indebtedness so Refinanced.
"Person" means an individual, partnership, corporation,
limited liability company, unincorporated organization, trust or joint venture,
or a governmental agency or political subdivision thereof.
"Physical Notes" has the meaning set forth in Section 2.01.
"Preferred Stock" of any Person means any Capital Stock of
such Person that has preferential rights over any other Capital Stock of such
Person with respect to dividends or redemptions or upon liquidation.
"Private Placement Legend" has the meaning set forth in
Section 2.02.
"pro forma" means, with respect to any calculation made or
required to be made pursuant to the terms of this Indenture, a calculation in
accordance with Article 11 of Regulation S-X under the Securities Act as
interpreted by the Company's Board of Directors in consultation with its
independent certified public accountants.
"Public Equity Offering" means an underwritten public offering
of Qualified Capital Stock of the Company pursuant to a registration statement
filed with the Commission in accordance with the Securities Act or any successor
statute.
"Purchase Agreement" means the Note Purchase Agreement dated
as of March 26, 1998 by and among the Company and the Initial Purchasers.
"Purchase Money Indebtedness" means Indebtedness of the
Company and its Restricted Subsidiaries incurred in connection with the purchase
of businesses (including Capital Stock of businesses primarily engaged in a
Related Business), properties or assets for the business of the Company and its
Restricted Subsidiaries and any Refinancing thereof.
"Qualified Capital Stock" means the Senior Preferred Stock and
any other Capital Stock that is not Disqualified Capital Stock.
"Qualified Institutional Buyer" or "QIB" means a "qualified
institutional buyer" as that term is defined in Rule 144A under the Securities
Act.
"Record Date" means the applicable Record Date specified in
the Notes; provided that if any such date is not a Business Day, the Record Date
shall be the first day immediately preceding such specified day that is a
Business Day.
"Redemption Date," when used with respect to any Notes to be
redeemed, means the date fixed for such redemption pursuant to this Indenture
and the Notes.
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"Redemption Price," when used with respect to any Notes to be
redeemed, means the price fixed for such redemption pursuant to this Indenture
and the Notes.
"Refinance" means, in respect of any security or Indebtedness,
to refinance, extend, renew, refund, repay, prepay, redeem, defease or retire,
or to issue a security or Indebtedness in exchange or replacement for, such
security or Indebtedness in whole or in part. "Refinanced" and "Refinancing"
shall have correlative meanings.
"Refinancing Indebtedness" means any Refinancing by the
Company or any Restricted Subsidiary of the Company of Indebtedness incurred in
accordance with Section 4.04 (other than pursuant to clause (ii), (iv), (v),
(vi), (vii), (viii), (x) or (xi) of the definition of Permitted Indebtedness),
to the extent that such Refinancing does not (1) result in an increase in the
aggregate principal amount of the Indebtedness of such Person as of the date of
such proposed Refinancing (plus the amount of any premium required to be paid
under the terms of the instrument governing such Indebtedness and plus the
amount of reasonable expenses incurred by the Company in connection with such
Refinancing) or (2) create Indebtedness with (A) at Weighted Average Life to
Maturity that is less than the Weighted Average Life to Maturity of the
Indebtedness being Refinanced or (B) a final maturity earlier than the final
maturity of the Indebtedness being Refinanced; provided that (x) if such
Indebtedness being Refinanced is Indebtedness solely of the Company, then such
Refinancing Indebtedness shall be Indebtedness solely of the Company and (y) if
such Indebtedness being Refinanced is subordinate or junior to the Notes, then
such Refinancing Indebtedness shall be subordinate to the Notes at least to the
same extent and in the same manner as the Indebtedness being Refinanced.
"Registered Exchange Offer" means the offer to exchange the
Exchange Notes for all of the outstanding Initial Notes in accordance with the
Registration Rights Agreement.
"Registrar" has the meaning set forth in Section 2.04.
"Registration Rights Agreement" means the Registration Rights
Agreement dated as of the Issue Date between the Company and the Initial
Purchasers.
"Regulation S" means Regulation S under the Securities Act.
"Related Business" means a business whose revenues are derived
from the general business conducted by the Company on the Issue Date or any
business or activity that (in the good faith judgment of Board of Directors of
the Company) is reasonably related thereto or a reasonable extension,
development or expansion thereof or ancillary thereto.
"Related Party" means, with respect to Green Equity Investors
II, L.P., any partnership, corporation or other Person which is managed or
controlled by Leonard Green & Partners, L.P. or any Affiliate thereof.
"Replacement Assets" has the meaning set forth in Section
4.15.
"Responsible Officer" means, when used with respect to the
Trustee, any officer in the Corporate Trust Office of the Trustee including any
vice president, assistant vice president, assistant secretary, treasurer,
assistant treasurer, or any other officer of the Trustee who customarily
performs functions similar to those performed by the Persons who at
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the time shall be such officers, respectively, or to whom any corporate trust
matter is referred because of such officer's knowledge of and familiarity with
the particular subject.
"Restricted Payments" has the meaning set forth in Section
4.03.
"Restricted Security" has the meaning set forth in Rule 144
(a) (3) under the Securities Act; provided that the Trustee shall be entitled to
request and conclusively rely upon an opinion of Counsel with respect to whether
any Note is a Restricted Security.
"Restricted Subsidiary" of the Company means any Subsidiary of
the Company which at the time of determination is not an Unrestricted
Subsidiary.
"Rule 144A" means Rule 144A under the Securities Act.
"Sale and Leaseback Transaction" means any direct or indirect
arrangement with any Person or to which any such Person is a party, providing
for the leasing to the Company or a Restricted Subsidiary of any property,
whether owned by the Company or any Restricted Subsidiary at the Issue Date or
later acquired, which has been or is to be sold or transferred by the Company or
such Restricted Subsidiary to such Person or to any other Person by whom funds
have been or are to be advanced on the security of such Property.
"S&P" means Standard & Poor's Corporation and its successors.
"Securities Act" means the Securities Act of 1933, as amended,
or any successor statute or statutes thereto.
"Senior Preferred Stock" means the Series A 12% Senior
Redeemable Cumulative Preferred Stock of the Company issued pursuant to the
Certificate of Designations, Preferences and Relative, Participating, Optional
and Other Special Rights of Series A 12% Senior Redeemable Cumulative Preferred
Stock, as in effect on the Issue Date.
"Significant Subsidiary" shall have the meaning set forth in
Rule 1.02(w) of Regulation S-X under the Securities Act.
"Special Record Date" means a date fixed by the Trustee
pursuant to Section 2.13 for the payment of Defaulted Interest.
"Stock Purchase Agreement" means the Second Amended and
Restated Stock Purchase and Sale Agreement, dated as of January 15, 1998, as
amended as of the Issue Date, by and among VGMC Corp., GEI, Diamond Auto Glass
Works, Inc., Triumph Auto Glass, Inc., the Company, A Above Average Glass
Company by Diamond, Inc., A-AA Triumph Auto Glass, Inc., (Scranton Holdings,
Inc., Diamond/Triumph Auto Export Sales Co., Inc., A-Auto Glass by Triumph,
Inc,, A-Auto Glass Company by Diamond, Inc,, Kenneth Levine and Richard Rutta.
"Stockholders Agreement" means the Stockholders Agreement
dated as of the Issue Date among GEI, Kenneth Levine, Richard Rutta and the
Company, as such agreement may be amended from time to time, provided that no
such amendment shall have the effect of
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increasing in any material respect the cost to the Company of the transactions,
payments or expenses permitted under such agreement pursuant to clause (ii) of
Section 4.10(b).
"Subordinated Management Fees" means the management fees
payable under the Management Services Agreement, which fees are subordinated in
right of payment, as provided in the Management Services Agreement, to the prior
payment in full in cash of all obligations of the Company with respect to the
Notes, whether for principal of, premium, if any or interest, or Additional
Interest, if any, on the Notes, expenses, indemnification or otherwise.
"Subsidiary," with respect to any Person, means (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 each future Restricted Subsidiary
of the Company that executes a supplemental indenture in which such Restricted
Subsidiary agrees to be bound by the terms and provisions of this Indenture as a
Subsidiary Guarantor including, without limitation, the terms and provisions of
Article Ten.
"Surviving Entity" has the meaning set forth in Section 5.01.
"Temporary Offshore Global Note" has the meaning set forth in
Section 2.01.
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C. ss.ss.
77aaa-77bbbb), as amended, as in effect on the date of the execution of this
Indenture until such time as this Indenture is qualified under the TIA, and
thereafter as in effect on the date on which this Indenture is qualified under
the TIA, except as otherwise provided in Section 9.03.
"Trustee" means the party named as such in this Indenture
until a successor replaces it in accordance with the provisions of this
Indenture and thereafter means such successor.
"U.S. Global Note" has the meaning set forth in Section 2.01.
"U.S. Government Obligations" shall have the meaning set forth
in Section 8.01.
"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.
"U.S. Physical Notes" has the meaning set forth in Section
2.01.
"Unrestricted Subsidiary" means (i) any Subsidiary of the
Company that at the time of determination shall be designated an Unrestricted
Subsidiary by the Board of Directors of the Company in the manner provided below
and (ii) any Subsidiary of an Unrestricted Subsidiary. The Board of Directors of
the Company may designate any Subsidiary of the Company (including any newly
acquired or newly formed Subsidiary) to be an Unrestricted Subsidiary unless
such Subsidiary or any of its Subsidiaries owns any Capital Stock or
Indebtedness of, or
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holds any Lien on any property of, the Company or any Restricted Subsidiary of
the Company that is not a Subsidiary of the Subsidiary to be so designated;
provided, however, that (A) either (1) the Subsidiary to be so designated has
total assets of $1,000 or less or (2) if such Subsidiary has assets greater than
$1,000, such designation would be permitted under Section 4.03 and (B) such
Subsidiary to be so designated and each of its Subsidiaries has not at the time
of such designation, and does not thereafter, incur any Indebtedness pursuant to
which the lender has recourse to any of the assets or properties of the Company
or any of its Restricted Subsidiaries (except to the extent such recourse arises
pursuant to an Investment permitted by this Indenture). The Board of Directors
may designate any Unrestricted Subsidiary to be a Restricted Subsidiary;
provided, however, that (x) any Indebtedness of such Subsidiary outstanding at
the time of such designation shall be deemed to have been incurred at such time
and (y) immediately after giving effect to such designation and such incurrence
no Default shall have occurred and be continuing. Any such designation by the
Board of Directors shall be evidenced by the Company to the Trustee by promptly
filing with the Trustee a copy of the Board Resolution giving effect to such
designation and an Officers' Certificate certifying that such designation
complied with the foregoing provisions.
"Weighted Average Life to Maturity" means, when applied to any
Indebtedness (including any Disqualified Capital Stock) at any date, the number
of years obtained by dividing (a) the sum of the products obtained by
multiplying (x) 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 (y) the number of years (calculated to
the nearest one-twelfth) that will elapse between such date and the making of
such payment, by (b) the then outstanding principal amount or liquidation
preference, as applicable, of such Indebtedness.
"Wholly Owned Restricted Subsidiary" of the Company means any
Restricted Subsidiary of the Company of which all the outstanding voting
securities (other than in the case of a foreign Restricted Subsidiary,
directors' qualifying shares or an immaterial amount of shares required to be
owned by other Persons pursuant to applicable law) are owned by the Company or
any Wholly Owned Restricted Subsidiary of the Company.
SECTION 1.02. Incorporation by Reference of TIA.
Whenever this Indenture refers to a provision of the TIA, such
provision is incorporated by reference in, and made a part of, this Indenture.
The following TIA terms used in this Indenture have the following meanings:
"indenture securities" means the Notes.
"indenture security holder" means a Holder or a Noteholder.
"indenture to be qualified" means this Indenture.
"indenture trustee" or "institutional trustee" means the
Trustee.
"obligor" on the "indenture securities" means the Company, any
Subsidiary Guarantor or any other obligor on the Notes.
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All other TIA terms used in this Indenture that are defined by
the TIA, defined by TIA reference to another statute or defined by Commission
rule and, in each case, not otherwise defined herein have the meanings assigned
to them therein.
SECTION 1.03. Rules of Construction.
Unless the context otherwise requires:
(1) an accounting term not otherwise defined has the meaning
assigned to it in accordance with GAAP;
(2) "or" is not exclusive;
(3) words in the singular include the plural, and words in the
plural include the singular;
(4) provisions apply to successive events and transactions;
and
(5) "herein," "hereof' and other words of similar import refer
to this Indenture as a whole and not to any particular Article,
Section or other subdivision.
ARTICLE Two
THE NOTES
SECTION 2.01. Form and Dating.
The Initial Notes and the Trustee's certificate of
authentication thereof shall be substantially in the form of Exhibit A hereto,
which is hereby incorporated in and expressly made a part of this Indenture. The
Exchange Notes and the Trustee's certificate of authentication thereof shall be
substantially in the form of Exhibit B hereto, which is hereby incorporated in
and expressly made a part of this Indenture. The Notes may have notations,
legends or endorsements required by law, stock exchange rule or usage. The
Company and the Trustee shall approve the form of the Notes and any notation,
legend or endorsement on them. Each Note shall be dated the date of its issuance
and shall show the date of its authentication.
The terms and provisions contained in the Notes, annexed
hereto as Exhibits A and B, shall constitute, and are hereby expressly made, a
part of this Indenture and, to the extent applicable, the Company and the
Trustee, by their execution and delivery of this Indenture, expressly agree to
such terms and provisions and to be bound thereby.
Notes offered and sold in reliance on Rule 144A shall be
issued in the form of one or more permanent Global Notes in registered form,
substantially in the form set forth in Exhibit A (each a "U.S. Global Note")
deposited with the Trustee, as custodian for the Depository, duly executed by
the Company and authenticated by the Trustee as hereinafter provided. The
aggregate principal amount of a U.S. Global Note may from time to time be
increased or decreased by
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adjustments made on the records of the Trustee, as custodian for the Depository
or its nominee, as hereinafter provided.
Notes offered and sold in offshore transactions in reliance on
Regulation S shall be issued initially in the form of one or more temporary
Global Notes in registered form, substantially in the form set forth in Exhibit
A (each a "Temporary Offshore Global Note"), deposited with the Trustee, as
custodian for the Depository, duly executed by the Company and authenticated by
the Trustee as hereinafter provided. At any time after the 41st day following
the original issuance of a Temporary Offshore Global Note (an "Offshore Notes
Exchange Date"), upon receipt by the Trustee and the Company of a certificate
substantially in the form of Exhibit C hereto, one or more permanent Global
Notes in registered form substantially in the form set forth in Exhibit A (each
a "Permanent Offshore Global Note" and, together with the Temporary Offshore
Global Note, the "Offshore Global Notes"), shall be deposited with the Trustee,
as custodian for the Depository, duly executed by the Company and authenticated
by the Trustee as hereinafter provided, and the Trustee, as custodian for the
depository or its nominee, shall reflect on its books and records the date and a
decrease in the principal amount of such Temporary Offshore Global Note
transferred in exchange for such Permanent Offshore Global Note.
Notes which are offered and sold to Accredited Investors which
are not QIBs (excluding Non-U.S. Persons), and Notes offered and sold in
reliance on any other exemption from the registration requirements under the
Securities Act, other than as described above, shall be issued in the form of
permanent certificated Notes in registered form, substantially in the form set
forth in Exhibit A (the "U.S. Physical Notes"), duly executed by the Company and
authenticated by the Trustee as hereinafter provided. Notes issued pursuant to
Section 2.16(b) or 2.17(d) in exchange for interests in the Offshore Global
Notes shall be in the form of permanent certificated Notes in registered form
substantially in the form set forth in Exhibit A (the "Offshore Physical Notes"
and, together with the U.S. Physical Notes, the "Physical Notes").
The definitive Notes shall .be typed, printed, lithographed or
engraved or produced by any combination of these methods or may be produced in
any other manner permitted by the rules of any securities exchange on which the
Notes may be listed, all as determined by the Officers executing such Notes, as
evidenced by their execution of such Notes.
SECTION 2.02. Restrictive Legends.
(a) (i) Each U.S. Global Note and U.S. Physical Note shall
bear the legend set forth below (the "Private Placement Legend") unless and
until (1) such Note is exchanged for an Exchange Note in connection with the
Registered Exchange Offer, (2) such Note is offered and sold pursuant to an
effective registration statement under the Securities Act or (3) receipt by the
Trustee of an Opinion of Counsel reasonably satisfactory to the Trustee and the
Company to the effect that neither the Private Placement Legend nor the related
restrictions on transfer are required in order to maintain compliance with the
provisions of the Securities Act and (ii) each Offshore Global Note shall bear
the Private Placement Legend until at least 41 days after the date of its
original issuance and receipt by the Company and the Trustee of a certificate
substantially in the form of Exhibit C attached hereto: .
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THIS NOTE 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 (A) IT IS A
"QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER
THE SECURITIES ACT) OR (B) IT IS AN "ACCREDITED INVESTOR" (AS
DEFINED IN RULE 501(a)(1), (2), (3) OR (7) UNDER THE
SECURITIES ACT) (AN "ACCREDITED INVESTOR") OR (C) IT IS NOT A
U.S. PERSON AND IS ACQUIRING THIS NOTE IN AN OFFSHORE
TRANSACTION IN COMPLIANCE WITH REGULATION S UNDER THE
SECURITIES ACT; (2) AGREES THAT IT WILL NOT WITHIN TWO YEARS
AFTER THE ORIGINAL ISSUANCE OF THIS NOTE RESELL OR OTHERWISE
TRANSFER THIS NOTE EXCEPT (A) TO THE ISSUER OR ANY SUBSIDIARY
THEREOF, (B) INSIDE THE UNITED STATES TO A QUALIFIED
INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A UNDER THE
SECURITIES ACT, (C) INSIDE THE UNITED STATES TO AN ACCREDITED
INVESTOR THAT IS ACQUIRING THE NOTE FOR ITS OWN ACCOUNT, OR
FOR THE ACCOUNT OF SUCH AN ACCREDITED INVESTOR, IN EACH CASE
IN A MINIMUM PRINCIPAL AMOUNT OF THE NOTES OF U. S. $250,000,
FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO OR FOR OFFER OR
SALE IN CONNECTION WITH ANY DISTRIBUTION IN VIOLATION OF THE
SECURITIES ACT, AND THAT, PRIOR TO SUCH TRANSFER, FURNISHES
(OR HAS FURNISHED ON ITS BEHALF BY A U.S. BROKER-DEALER) TO
THE TRUSTEE A SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS
AND AGREEMENTS RELATING TO THE RESTRICTIONS ON TRANSFER OF
THIS NOTE (THE FORM OF WHICH LETTER CAN BE OBTAINED FROM THE
TRUSTEE), (D) OUTSIDE THE UNITED STATES IN COMPLIANCE WITH
REGULATION S UNDER THE SECURITIES ACT, (E) PURSUANT TO THE
EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE
SECURITIES ACT (IF AVAILABLE), OR (F) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT; AND (3)
AGREES THAT IT WILL GIVE TO EACH PERSON TO WHOM THIS NOTE IS
TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS
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LEGEND. IN CONNECTION WITH ANY TRANSFER OF THIS NOTE WITHIN
TWO YEARS AFTER THE ORIGINAL ISSUANCE OF THIS NOTE, IF THE
PROPOSED TRANSFEREE IS AN ACCREDITED INVESTOR, THE HOLDER
MUST, PRIOR TO SUCH TRANSFER, FURNISH TO THE TRUSTEE AND THE
ISSUER SUCH CERTIFICATIONS, LEGAL OPINIONS OR OTHER
INFORMATION AS EITHER OF THEM MAY REASONABLY REQUIRE 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. 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.
(b) Each Global Note, whether or not an Exchange Note, shall
also bear the following legend on the face thereof:
UNLESS THIS NOTE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE
OF THE DEPOSITORY TRUST COMPANY TO THE COMPANY OR ITS AGENT
FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY
NOTE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH
OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF
THE DEPOSITORY TRUST COMPANY (AND ANY PAYMENT HEREON IS MADE
TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY),
ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL SINCE THE REGISTERED
OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
TRANSFERS OF THIS GLOBAL NOTE SHALL BE LIMITED TO TRANSFERS IN
WHOLE, BUT NOT IN PART, TO THE DEPOSITORY TRUST COMPANY OR
NOMINEES OF THE DEPOSITORY TRUST COMPANY OR TO A SUCCESSOR
THEREOF OR SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS
OF THIS GLOBAL NOTE SHALL BE LIMITED TO TRANSFERS MADE IN
ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN SECTION 2.17 OF
THE INDENTURE.
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SECTION 2.03. Execution and Authentication.
Two Officers, or an Officer and an Assistant Secretary, shall
sign, or one Officer shall sign and one Officer or an Assistant Secretary (each
of whom shall, in each case, have been duly authorized by all requisite
corporate actions) shall attest to, the Notes for the Company by manual or
facsimile signature. The Company's seal may also be reproduced on the Notes.
If an Officer whose signature is on a Note was an Officer at
the time of such execution but no longer holds that office at the time the
Trustee authenticates the Note, the Note shall be valid nevertheless.
A Note shall not be valid until an authorized signatory of the
Trustee manually signs the certificate of authentication on the Note. Such
signature shall be conclusive evidence that the Note has been authenticated by
the Trustee under this Indenture.
The Trustee shall authenticate (i) the Initial Notes for
original issue on the Issue Date in the aggregate principal amount not to exceed
$100,000,000, (ii) the Exchange Notes from time to time only in exchange for a
like principal amount of Initial Notes, and (iii) Notes issued in one or more
series (such Notes to be substantially in the form of Exhibit A or Exhibit B
(and if in the form of Exhibit A, a like principal amount of Notes in the form
of Exhibit B in exchange therefor)) in each case upon receipt by the Trustee of
a written order of the Company (an "Authentication Order") and an Officers'
Certificate. The Authentication Order shall specify the amount of Notes to be
authenticated, the series of Notes and the date on which the Notes are to be
authenticated. Upon receipt of an Authentication Order and an Officers'
Certificate, the Trustee shall authenticate Notes in substitution for Notes
originally issued to reflect any name change of the Company.
The Trustee may appoint an authenticating agent reasonably
acceptable to the Company to authenticate Notes. Unless otherwise provided in
the appointment, an authenticating agent may authenticate Notes whenever the
Trustee may do so. Each reference in this Indenture to authentication by the
Trustee includes authentication by such agent. An authenticating agent has the
same rights as an Agent to deal with the Company and Affiliates of the Company.
The Notes shall be issuable only in registered form without
coupons in denominations of $1,000 and any integral multiple thereof.
SECTION 2.04. Registrar and Paying Agent.
The Company shall maintain an office or agency in the Borough
of Manhattan, The City of New York, where (a) Notes may be presented or
surrendered for registration of transfer or for exchange ("Registrar"), (b)
Notes may be presented or surrendered for payment ("Paying Agent") and (c)
notices and demands in respect of the Notes and this Indenture may be served.
The Registrar shall keep a register of the Notes and of their transfer and
exchange. The Company, upon notice to the Trustee, may have one or more
Co-Registrars and one or more additional Paying Agents reasonably acceptable to
the Trustee. The term "Paying Agent" includes any additional Paying Agent.
Neither the Company nor any Affiliate of the Company may act as Paying Agent.
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The Company shall enter into an appropriate agency agreement
with any Agent not a party to this Indenture, which agreement shall incorporate
the provisions of the TIA and implement the provisions of this Indenture that
relate to such Agent. The Company shall notify the Trustee, in advance, of the
name and address of any such Agent. If the Company fails to maintain a Registrar
or Paying Agent, or fails to give the foregoing notice, the Trustee shall act as
such.
The Company initially appoints the Trustee as Registrar,
Paying Agent and agent for service of demands and notices in connection with the
Notes, until such time as the Trustee has resigned or a successor has been
appointed. The Paying Agent or Registrar may resign upon 30 days notice to the
Company.
SECTION 2.05. Paving Agent To Hold Assets in Trust.
The Company shall require each Paying Agent other than the
Trustee to agree in writing that each Paying Agent shall hold in trust for the
benefit of Holders or the Trustee all assets held by the Paying Agent for the
payment of principal of, premium, if any, and interest and Additional Interest,
if any, on the Notes, and shall notify the Trustee of any Default by the Company
in making any such payment. The Company at any time may require a Paying Agent
to distribute all assets held by it to the Trustee and account for any assets
distributed and the Trustee may at any time during the continuance of any
payment Default, upon written request to a Paying Agent, require such Paying
Agent to distribute all assets held by it to the Trustee and to account for any
assets distributed. Upon distribution to the Trustee of all assets that shall
have been delivered by the Company to the Paying Agent, the Paying Agent shall
have no further liability for such assets.
SECTION 2.06. Noteholder 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 Holders. If the Trustee is not the Registrar, the Company shall
furnish to the Trustee before each Record Date and at such other times as the
Trustee may request in writing a list as of such date and in such form as the
Trustee may reasonably require of the names and addresses of Holders, which list
may be conclusively relied upon by the Trustee.
SECTION 2.07. Transfer and Exchange.
Subject to the provisions of Sections 2.16 and 2.17, when
Notes are presented to the Registrar or a Co-Registrar with a request to
register the transfer of such Notes or to exchange such Notes for an equal
principal amount of Notes of other authorized denominations of the same series,
the Registrar or Co-Registrar shall register the transfer or make the exchange
as requested if its requirements for such transaction are met; provided,
however, that the Notes surrendered for transfer or exchange shall be duly
endorsed or accompanied by a written instrument of transfer in form satisfactory
to the Company and the Registrar or Co-Registrar, duly executed by the Holder
thereof or his attorney duly authorized in writing. To permit registrations of
transfers and exchanges, the Company shall execute and the Trustee shall
authenticate Notes. No service charge shall be made for any registration of
transfer or exchange,
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but the Company may require payment of a sum sufficient to cover any transfer
tax or similar governmental charge payable in connection therewith (other than
any such transfer taxes or other governmental charge payable upon exchanges or
transfers pursuant to Section 2.03, 2.11, 3.06, 4.14, 4.15 or 9.05 in which
event the Company shall be responsible for the payment of such taxes or
governmental charges). The Registrar or Co-Registrar shall not be required to
register the transfer of or exchange of any Note (i) during a period beginning
at the opening of business 15 days before the mailing of a notice of redemption
of Notes and ending at the close of business on the day of such mailing and (ii)
selected for redemption in whole or in part pursuant to Article Three, except
the unredeemed portion of any Note being redeemed in part.
Any Holder of a Global Note shall, by acceptance of such
Global Note, agree that transfers of beneficial interests in such Global Note
may be effected only through a book-entry system maintained by the Depository
(or its agent), and that ownership of a beneficial interest in a Global Note
shall be required to be reflected in a book entry.
SECTION 2.08. Replacement Notes.
If a mutilated Note is surrendered to the Trustee or if the
Holder of a Note claims that the Note has been lost, destroyed or wrongfully
taken, the Company shall issue and the Trustee shall authenticate a replacement
Note if the Trustee's requirements are met. If required by the Trustee or the
Company, such Holder must provide an indemnity bond or other indemnity,
sufficient in the judgment of both the Company and the Trustee, to protect the
Company, the Trustee and any Agent from any loss which any of them may suffer if
a Note is replaced. The Company may charge such Holder for its reasonable
out-of-pocket expenses in replacing a Note, including reasonable fees and
expenses of counsel.
Every replacement Note is an additional obligation of the
Company.
SECTION 2.09. Outstanding Notes.
Notes outstanding at any time are all the Notes that have been
authenticated by the Trustee except those canceled by it, those delivered to it
for cancellation and those described in this Section as not outstanding. Subject
to Section 2.10, a Note does not cease to be outstanding because the Company or
any of its Affiliates holds the Note.
If a Note is replaced pursuant to Section 2.08 (other than a
mutilated Note surrendered for replacement), it ceases to be outstanding unless
the Trustee receives proof satisfactory to it that the replaced Note is held by
a bona fide purchaser. A mutilated Note ceases to be outstanding upon surrender
of such Note and replacement thereof pursuant to Section 2.08.
If on a Redemption Date or the Final Maturity Date the Paying
Agent holds U.S. Legal Tender sufficient to pay all of the principal and
interest due on that date with respect to the Notes (or portions thereof) to be
redeemed or maturing, as the case may be, then on and after that date such Notes
(or portions thereof) cease to be outstanding and interest on them shall cease
to accrue.
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SECTION 2.10. Treasury Notes.
In determining whether the Holders of the required principal
amount of Notes have concurred in any direction, waiver or consent, Notes owned
by the Company or any of its Affiliates shall be disregarded, except that, for
the purposes of determining whether the Trustee shall be protected in relying on
any such direction, waiver or consent, only Notes that the Trustee actually
knows are so owned shall be disregarded.
The Trustee may require an Officers' Certificate listing Notes
owned by the Company or its Affiliates.
SECTION 2.11. Temporary Notes.
Until definitive Notes are ready for delivery, the Company may
prepare, and the Trustee shall authenticate, temporary Notes upon receipt of a
written order of the Company in the form of an Officers' Certificate. The
Officers' Certificate shall specify the amount of temporary Notes to be
authenticated and the date on which the temporary Notes are to be authenticated.
Temporary Notes shall be substantially in the form of definitive Notes but may
have variations that the Company considers appropriate for temporary Notes.
Without unreasonable delay, the Company shall prepare and the Trustee shall
authenticate definitive Notes in exchange for temporary Notes.
SECTION 2.12. Cancellation.
The Company at any time may deliver Notes to the Trustee for
cancellation. The Registrar and the Paying Agent shall forward to the Trustee
any Notes surrendered to them for transfer, exchange or payment. The Trustee, or
at the direction of the Trustee, the Registrar or the Paying Agent, and no one
else, shall cancel and, at the written direction of the Company, shall dispose
of all Notes surrendered for transfer, exchange, payment or cancellation,
provided that the Trustee shall not be required to destroy Notes. Subject to
Section 2.08, the Company may not issue new Notes to replace Notes that it has
paid or delivered to the Trustee for cancellation. If the Company shall acquire
any of the Notes, such acquisition shall not operate as a redemption or
satisfaction of the Indebtedness represented by such Notes unless and until the
same are surrendered to the Trustee for cancellation pursuant to this Section
2.12.
SECTION 2.13. Defaulted Interest.
If the Company defaults in a payment of principal or interest
on the Notes, it shall pay, to the extent such payments are lawful, interest on
overdue principal and on overdue installments of interest (without regard to any
applicable grace periods) (herein called "Defaulted Interest") at the rate of
2.0% per annum in excess of the rate shown on the Notes. When any installment of
interest becomes Defaulted Interest, such installment shall forthwith cease to
be payable to the Holders in whose names the Notes were registered on the Record
Date applicable to such installment of interest. Defaulted Interest, and any
interest payable on such Defaulted Interest, may be paid by the Company, at its
election, as provided in clause (a) or (b) below.
(a) The Company may elect to make payment of any Defaulted
Interest, and any interest payable on such Defaulted Interest, to the Holders in
whose names the Notes are
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registered at the close of business on a Special Record Date for the payment of
such Defaulted Interest, which shall be fixed in the following manner. The
Company shall notify the Trustee in writing of the amount of Defaulted Interest
proposed to be paid on the Notes 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 deposited to be held
in trust for the benefit of the Holders entitled to such Defaulted Interest as
provided in this Section 2.13(a). Thereupon the Trustee shall fix a Special
Record Date for the payment of such Defaulted Interest which shall be not more
than 15 calendar days and not less than 10 calendar days prior to the date of
the proposed payment and not less than 10 calendar days after the receipt by the
Trustee of the notice of the proposed payment. The Trustee shall promptly notify
the Company of such Special Record Date and, in the name and at the expense of
the Company, shall cause notice of the proposed payment of such Defaulted
Interest and the Special Record Date therefor to be sent, first-class mail,
postage prepaid, to each Holder at such Holder's address as it appears in the
registration books of the Registrar, not less than 10 calendar days prior to
such Special Record Date. Notice of the proposed payment of such Defaulted
Interest and the Special Record Date therefor having been mailed as aforesaid,
such Defaulted Interest shall be paid to the Holders in whose names the Notes
are registered at the close of business on such Special Record Date and shall no
longer be payable pursuant to the following clause (b); or
(b) The Company may make payment of any Defaulted Interest,
and any interest payable on such Defaulted Interest, on the Notes in any other
lawful manner not inconsistent with the requirements of any securities exchange
on which the Notes may be listed, and upon such notice as may be required by
such exchange, if, after notice given by the Company to the Trustee of the
proposed payment pursuant to this clause (b), such manner of payment shall be
deemed practicable by the Trustee.
Subject to the foregoing provisions of this Section 2.13, each
Note delivered under this Indenture upon registration of transfer of, or in
exchange for, or in lieu of, any other Note, shall carry the rights to interest
accrued and unpaid, and to accrue, which were carried by such other Note.
SECTION 2.14. CUSIP Number.
The Company in issuing the Notes will use one or more CUSIP
numbers and the Trustee shall use the CUSIP numbers in notices of redemption or
exchange as a convenience to Holders. The Trustee and the Company shall not be
liable for any defect or inaccuracy in the CUSIP numbers that appear on any Note
or in any redemption notice. The Trustee, in its discretion, may include in any
notice a statement to the effect that the CUSIP numbers on the Notes have been
assigned by an independent service and are included in such notice solely for
the convenience of the Holders and that neither the Trustee nor the Company make
any representation as to the correctness or accuracy of the CUSIP numbers
printed in the notice or on the Notes, and that reliance may be placed only on
the other identification numbers printed on the Notes. The Company shall
promptly notify the Trustee of any change in the CUSIP numbers.
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In the event that the Company shall issue and the Trustee
shall authenticate any Notes issued under this Indenture subsequent to the Issue
Date pursuant to clause (iii) of the first sentence of the fourth paragraph of
Section 2.03, the Company shall use its best efforts to obtain the same CUSIP
number for such Notes as is printed on the Notes outstanding at such time;
provided, however, that if any series of Notes issued under this Indenture
subsequent to the Issue Date is determined, pursuant to an Opinion of Counsel of
the Company in a form reasonably satisfactory to the Trustee to be a different
class of security than the Notes outstanding at such time for federal income tax
purposes, the Company may obtain a CUSIP number for such Notes that is different
than the CUSIP number printed on the Notes then outstanding.
Notwithstanding the foregoing, all Notes issued under this
Indenture shall vote and consent together on all matters as one class and no
series of Notes will have the right to vote or consent as a separate class on
any matter.
SECTION 2.15. Deposit of Moneys.
Prior to 10:00 a.m. New York City time on each Interest
Payment Date and the Final Maturity Date, the Company shall have deposited with
the Paying Agent in immediately available funds U.S. Legal Tender sufficient to
make cash payments due on such Interest Payment Date or Final Maturity Date, as
the case may be, in a timely manner which permits the Paying Agent to remit
payment to the Holders on such Interest Payment Date or Final Maturity Date, as
the case may be.
SECTION 2.16. Book-Entry Provisions for Global Notes.
(a) The Global Notes initially shall (i) be registered in the
name of the Depository or the nominee of such Depository, (ii) be delivered to
the Trustee as custodian for such Depository and (iii) bear legends as set forth
in Section 2.02.
Members of, or participants in, the Depository
("Participants") shall have no rights under this Indenture with respect to any
Global Note held on their behalf by the Depository, or the Trustee as its
custodian, or under the Global Note, and the Depository may be treated by the
Company, any Subsidiary, the Trustee and any agent of the Company, any
Subsidiary, or the Trustee as the absolute owner of the Global Note for all
purposes whatsoever. Notwithstanding the foregoing, nothing herein shall prevent
the Company, any Subsidiary, the Trustee or any agent of the Company, any
Subsidiary, or the Trustee from giving effect to any written certification,
proxy or other authorization furnished by the Depository or impair, as between
the Depository and Participants, the operation of customary practices governing
the exercise of the rights of a Holder of any Note.
(b) Transfers of Global Notes shall be limited to transfers in
whole, but not in part, to the Depository, its successors or their respective
nominees. Interests of beneficial owners in the Global Notes may be transferred
or exchanged for Physical Notes in accordance with the rules and procedures of
the Depository and the provisions of Section 2.17. In addition, Physical Notes
shall be transferred to all beneficial owners in exchange for their beneficial
interests in Global Notes if (i) the Depository notifies the Company that it is
unwilling or unable to continue as Depository for any Global Note and a
successor Depository is not appointed by the Company
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within 90 days of such notice or (ii) an Event of Default has occurred and is
continuing and the Registrar has received a request from the Depository to issue
Physical Notes.
(c) In connection with any transfer or exchange of a portion
of the beneficial interest in a Global Note to beneficial owners pursuant to
paragraph (b) of this Section 2.16, the Registrar shall (if one or more Physical
Notes are to be issued) reflect on its books and records the date and a decrease
in the principal amount of the beneficial interest in the Global Note to be
transferred, and the Company shall execute and the Trustee shall authenticate
and make available for delivery, one or more Physical Notes of like tenor and
amount.
(d) In connection with the transfer of Global Notes as an
entirety to beneficial owners pursuant to paragraph (b) of this Section 2.16,
the Global Notes shall be deemed to be surrendered to the Trustee for
cancellation, and the Company shall execute, and the Trustee shall upon written
instructions from the Company authenticate and make available for delivery, to
each beneficial owner identified by the Depository in exchange for its
beneficial interest in the Global Notes, an equal aggregate principal amount of
Physical Notes of authorized denominations.
(e) Any Physical Note constituting a Restricted Security
delivered in exchange for an interest in a Global Note pursuant to paragraph (b)
of this Section 2.16 shall, except as otherwise provided by Section 2.17, bear
the Private Placement Legend.
(f) The Holder of any Global Note may grant proxies and
otherwise authorize any Person, including Participants and Persons that may hold
interests through Participants, to take any action which a Holder is entitled to
take under this Indenture or the Notes.
SECTION 2.17. Registration of Transfers and Exchanges.
(a) Transfer and Exchange of Physical Notes. When Physical
Notes are presented to the Registrar or Co-Registrar with a request:
(i) to register the transfer of the Physical Notes; or
(ii) to exchange such Physical Notes for an equal number of
Physical Notes of other authorized denominations, the Registrar or
Co-Registrar shall register the transfer or make the exchange as
requested if the requirements under this Indenture as set forth in
this Section 2.17 for such transactions are met; provided, however,
that the Physical Notes presented or surrendered for registration of
transfer or exchange:
(I) shall be duly endorsed or accompanied by a written
instrument of transfer in form satisfactory to the Registrar or Co-Registrar,
duly executed by the Holder thereof or his attorney duly authorized in writing;
and
(II) in the case of Physical Notes the offer and sale of
which have not been registered under the Securities Act and which bear the
Private Placement Legend, such Physical Notes shall be accompanied, in the sole
discretion of the Company, by the following additional information and
documents, as applicable:
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(A) if such Physical Note is being delivered to the
Registrar or Co-Registrar by a Holder for
registration in the name of such Holder, without
transfer, a certification from such Holder to that
effect (substantially in the form of Exhibit D
hereto); or
(B) if such Physical Note is being transferred to a
Qualified Institutional Buyer in accordance with
Rule 144A, a certification to that effect
(substantially in the form of Exhibit D hereto); or
(C) if such Physical Note is being transferred to an
Accredited Investor, delivery of a certification to
that effect (substantially in the form of Exhibit D
hereto) and a Transferee Certificate for Accredited
Investors substantially in the form of Exhibit E
hereto; or
(D) if such Physical Note is being transferred in
reliance on Regulation S, delivery of a
certification to that effect (substantially in the
form of Exhibit D hereto) and a Transferee
Certificate for Regulation S Transfers substantially
in the form of Exhibit F hereto; or
(E) if such Physical Note is being transferred in
reliance on Rule 144 under the Securities Act,
delivery of a certification to that effect
(substantially in the form of Exhibit D hereto); or
(F) if such Physical Note is being transferred in
reliance on another exemption from the registration
requirements of the Securities Act, a certification
to that effect (substantially in the form of Exhibit
D hereto) and an Opinion of Counsel reasonably
acceptable to the Company to the effect that such
transfer is in compliance with the rules and
regulations under the Securities Act applicable to
such exemption.
(b) Restrictions on Transfer of a Physical Note for a
Beneficial Interest in a Global Note. A Physical Note may not be exchanged for a
beneficial interest in a Global Note except upon satisfaction of the
requirements set forth below. Upon receipt by the Registrar or Co-Registrar of a
Physical Note, duly endorsed or accompanied by appropriate instruments of
transfer, in form satisfactory to the Registrar or Co-Registrar, together with:
(A) in the case of Physical Notes the offer and sale of
which have not been registered under the Securities
Act and which bear the Private Placement Legend,
certification, substantially in the form of Exhibit
D hereto, that such Physical Note is being
transferred (I) to a Qualified Institutional Buyer
or (II) in an offshore transaction in reliance on
Regulation S; and
(B) written instructions directing the Registrar or
Co-Registrar to make, or to direct the Depository to
make, an endorsement on the
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applicable Global Note to reflect an increase in the
aggregate amount of the Notes represented by the
Global Note,
then the Registrar or Co-Registrar shall cancel such Physical Note and cause, or
direct the Depository to cause, in accordance with the standing instructions and
procedures existing between the Depository and the Registrar or Co-Registrar,
the principal amount of Notes represented by the applicable Global Note to be
increased accordingly. If no Global Note representing Notes held by Qualified
Institutional Buyers or Persons acquiring Notes in offshore transactions in
reliance on Regulation S, as the case may be, is then outstanding, the Company
shall issue and the Trustee shall, upon written instructions from the Company in
accordance with Section 2.03, authenticate such a Global Note in the appropriate
principal amount.
(c) Transfer and Exchange of Global Notes. (i) Subject to
clause (ii) of this paragraph (c), the transfer and exchange of Global Notes or
beneficial interests therein shall be effected through the Depository in
accordance with this Indenture (including the restrictions on transfer set forth
herein) and the procedures of the Depository therefor. Upon receipt by the
Registrar or Co-Registrar of written instructions, or such other instruction as
is customary for the Depository, from the Depository or its nominee, requesting
the registration of transfer of an interest in a Global Note to another type of
Global Note, together with the applicable Global Notes (or, if the applicable
type of Global Note required to represent the interest as requested to be
transferred is not then outstanding, only the Global Note representing the
interest being transferred), the Registrar or Co-Registrar shall cancel such
Global Notes (or Global Note) and the Company shall issue and the Trustee shall,
upon written instructions from the Company in accordance with Section 2.02,
authenticate new Global Notes of the types so canceled (or the type so canceled
and applicable type required to represent the interest as requested to be
transferred) reflecting the applicable increase and decrease of the principal
amount of Notes represented by such types of Global Notes, giving effect to such
transfer. If the applicable type of Global Note required to represent the
interest as requested to be transferred is not outstanding at the time of such
request, the Company shall issue and the Trustee shall, upon written
instructions from the Company in accordance with Section 2.02, authenticate a
new Global Note of such type in principal amount equal to the principal amount
of the interest requested to be transferred.
(ii) Notwithstanding clause (i) above, beneficial interests in
a Temporary Offshore Global Note may not be transferred to a Person that takes
delivery thereof in the form of an interest in a U.S. Global Note and beneficial
interests in a U.S. Global Note may not be transferred to a Person that takes
delivery thereof in the form of an interest in a Temporary Offshore Global Note.
(d) Transfer of a Beneficial Interest in a Global Note for a
Physical Note.
(i) Any Person having a beneficial interest in a Global Note
(other than a Temporary Offshore Global Note) may exchange upon
request such beneficial interest for a Physical Note. Upon receipt by
the Registrar or Co-Registrar of written instructions, or such other
form of instructions as is customary for the Depository, from the
Depository or its nominee on behalf of any Person having a beneficial
interest in a Global Note and upon receipt by the Trustee of a
written order or such other form of instructions as is customary for
the Depository or the Person designated by the
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Depository as having such a beneficial interest containing
registration instructions and, in the case of any such transfer or
exchange of a beneficial interest in a Note the offer and sale of
which has not been registered under the Securities Act and which
bears the Private Placement Legend, the following additional
information and documents:
(A) if such beneficial interest is being transferred to
the Person designated by the Depository as being the
beneficial owner, a certification from such Person
to that effect (substantially in the form of Exhibit
D hereto); or
(B) if such beneficial interest is being transferred to
a Qualified Institutional Buyer in accordance with
Rule 144A, a certification to that effect
(substantially in the form of Exhibit D hereto); or
(C) if such beneficial interest is being transferred to
an Accredited Investor, delivery of a certification
to that effect (substantially in the form of Exhibit
D hereto) and a Transferee Certificate for
Accredited Investors substantially in the form of
Exhibit E hereto; or
(D) if such beneficial interest is being transferred in
reliance on Regulation S, delivery of a
certification to that effect (substantially in the
form of Exhibit D hereto) and a Transferee
Certificate for Regulation S Transfers substantially
in the form of Exhibit F hereto; or
(E) if such beneficial interest is being transferred in
reliance on Rule 144 under the Securities Act,
delivery of a certification to that effect
(substantially in the form of Exhibit D hereto); or
(F) if such beneficial interest is being transferred in
reliance on another exemption from the registration
requirements of the Securities Act, a certification
to that effect (substantially in the form of Exhibit
D hereto) and an Opinion of Counsel reasonably
satisfactory to the Company to the effect that such
transfer is in compliance with the rules and
regulations under the Securities Act applicable to
such exemption,
then the Registrar or Co-Registrar will cause, in accordance with the standing
instructions and procedures existing between the Depository and the Registrar or
Co-Registrar, the aggregate principal amount of the applicable Global Note to be
reduced and, following such reduction, the Company will execute and, upon
receipt of an authentication order in the form of an Officers' Certificate in
accordance with Section 2.03, the Trustee will authenticate and make available
for delivery to the transferee a Physical Note.
(ii) Notes issued in exchange for a beneficial interest in a
Global Note pursuant to clause (d) of this Section 2.17 shall be
registered in such names and in such authorized denominations as the
Depository, pursuant to instructions from its direct or
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indirect participants or otherwise, shall instruct the Registrar or
Co-Registrar in writing. The Registrar or Co-Registrar shall make
available for delivery such Physical Notes to the Persons in whose
names such Physical Notes are so registered.
(e) Restrictions on Transfer and Exchange of Global Notes.
Notwithstanding any other provisions of this Indenture, a Global Note may not be
transferred as a whole except by the Depository to a nominee of the Depository
or by a nominee of the Depository to the Depository or another nominee of the
Depository or by the Depository or any such nominee to a successor Depository or
a nominee of such successor Depository.
(f) Private Placement Legend. Upon the transfer, exchange or
replacement of Notes not bearing the Private Placement Legend, the Registrar or
Co-Registrar shall deliver Notes that do not bear the Private Placement Legend.
Upon the transfer, exchange or replacement of Notes bearing the Private
Placement Legend, the Registrar or Co-Registrar shall deliver only Notes that
bear the Private Placement Legend unless, and the Trustee is hereby authorized
and directed to deliver Notes without the Private Placement Legend if, (i) there
is delivered to the Trustee an Opinion of Counsel reasonably satisfactory to the
Company and the Trustee 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, (ii) such Note has been sold pursuant to an
effective registration statement under the Securities Act or (iii) such Note has
been exchanged for an Exchange Note pursuant to the Registered Exchange Offer.
(g) General. By its acceptance of any Notes bearing the
Private Placement Legend, each Holder of such a Note acknowledges the
restrictions on transfer of such Notes set forth in this Indenture and in the
Private Placement Legend and agrees that it will transfer such Notes only as
provided in this Indenture.
The Registrar shall retain copies of all letters, notices and
other written communications received pursuant to Section 2.16 or this Section
2.17. 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.
SECTION 2.18. Additional Interest Under Registration Rights Agreement.
Under certain circumstances, the Company shall be obligated to
pay Additional Interest to the Holders, all as set forth in Section 4 of the
Registration Rights Agreement. The terms thereof are hereby incorporated herein
by reference.
ARTICLE Three
REDEMPTION
SECTION 3.01. Notices to Trustee.
If the Company elects to redeem Notes pursuant to Paragraph 5
or Paragraph 6 of the Notes, it shall notify the Trustee in writing of the
Redemption Date, the Redemption Price and the principal amount of Notes to be
redeemed. The Company shall give notice of redemption
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to the Paying Agent and Trustee at least 30 days but not more than 60 days
before the Redemption Date (unless a shorter notice shall be agreed to by the
Trustee in writing), together with an Officers' Certificate stating that such
redemption will comply with the conditions contained herein.
SECTION 3.02. Selection of Notes To Be Redeemed.
In the event that less than all of the Notes are to be
redeemed at any time, selection of such Notes for redemption will be made by the
Trustee in compliance with the requirements of the principal national securities
exchange, if any, on which such Notes are listed or, if such Notes are not then
listed on a national securities exchange, on a pro rata basis, by lot or by such
method as the Trustee shall deem fair and appropriate; provided, however, that
no Notes of a principal amount of $1,000 or less shall be redeemed in part and
Notes of a principal amount in excess of $1,000 may be redeemed in part in
multiples of $1,000 only; and provided, further, that if a partial redemption is
made with the proceeds of a Public Equity Offering, selection of the Notes or
portions thereof for redemption shall, subject to the preceding proviso, be made
by the Trustee only on a pro rata basis or on as nearly a pro rata basis as is
practicable (subject to the procedures of the Depository), unless such method is
otherwise prohibited.
The Trustee shall make the selection from the Notes
outstanding and not previously called for redemption and shall promptly notify
the Company in writing of the Notes selected for redemption and, in the case of
any Note selected for partial redemption, the principal amount thereof to be
redeemed. Notes in denominations of $1,000 or less may be redeemed only in
whole. The Trustee may select for redemption portions (equal to $1,000 or any
integral multiple thereof) of the principal of Notes that have denominations
larger than $1,000. Provisions of this Indenture that apply to Notes called for
redemption also apply to portions of Notes called for redemption.
SECTION 3.03. Notice of Redemption.
At least 30 days but not more than 60 days before a Redemption
Date, the Company shall mail a notice of redemption by first class mail, postage
prepaid, to each Holder whose Notes are to be redeemed at its registered
address. At the Company's request made at least 45 days (unless a shorter period
shall be acceptable to the Trustee) before the Redemption Date, the Trustee
shall give the notice of redemption in the Company's name and at the Company's
expense. Each notice for redemption shall identify the Notes to be redeemed
(including the CUSIP number(s), if any) and shall state:
(1) the Redemption Date;
(2) the Redemption Price and the amount of accrued interest,
if any, to be paid;
(3) the name and address of the Paying Agent;
(4) that Notes called for redemption must be surrendered to
the Paying Agent to collect the Redemption Price, including accrued
interest, if any;
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(5) that, unless the Company defaults in making the redemption
payment, interest on Notes called for redemption shall cease to
accrue on and after the Redemption Date, and the only remaining right
of the Holders of such Notes is to receive payment of the Redemption
Price upon surrender to the Paying Agent of the Notes redeemed; i
(6) if any Note is being redeemed in part, the notice of
redemption that relates to such Notes shall state the portion of the
principal amount of such Note to be redeemed and that, after the
Redemption Date, and upon surrender of such Note, a new Note or Notes
in aggregate principal amount equal to the unredeemed portion thereof
will be issued;
(7) if fewer than all the Notes are to be redeemed, the
aggregate principal amount of Notes to be redeemed and the aggregate
principal amount of Notes to be outstanding after such partial
redemption;
(8) the paragraph of the Notes pursuant to which the Notes are
to be redeemed; and
(9) if the Redemption Date is after a Record Date and prior to
the Interest Payment Date to which such Record Date relates, that the
accrued interest on the Notes called for redemption shall be payable
to the Holders of such Notes on the relevant Record Date and no
accrued interest will be included in the Redemption Price of the
Notes redeemed on the Redemption Date.
SECTION 3.04. Effect of Notice of Redemption.
Once notice of redemption is mailed in accordance with Section
3.03, Notes called for redemption become due and payable on the Redemption Date
and at the Redemption Price including accrued interest, if any, thereon. Upon
surrender to the Trustee or Paying Agent, such Notes called for redemption shall
be paid at the Redemption Price (which shall include accrued interest thereon to
the Redemption Date) stated in such notice; provided that, if the Redemption
Date is after a Record Date and prior to the Interest Payment Date to which such
Record Date relates, the accrued interest shall be payable to the Holders of the
redeemed Notes on the relevant Record Date and no accrued interest will be
included in the Redemption Price of the Notes redeemed on the Redemption 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 3.05. Deposit of Redemption Price.
On or before 10:00 a.m. New York City Time on the Redemption
Date, the Company shall deposit with the Paying Agent U.S. Legal Tender
sufficient to pay the Redemption Price including accrued interest, if any, of
all Notes to be redeemed on that date.
If the Company complies with the preceding paragraph, then,
unless the Company defaults in the payment of such Redemption Price including
accrued interest, if any, interest on the Notes to be redeemed will cease to
accrue on and after the applicable Redemption Date, whether or not such Notes
are presented for payment.
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SECTION 3.06. Notes Redeemed in Part.
Upon surrender of a Note that is to be redeemed in part only,
the Trustee shall, upon written instruction from the Company, authenticate for
the Holder thereof a new Note or Notes in a principal amount equal to the
unredeemed portion of the Note surrendered.
ARTICLE Four
COVENANTS
SECTION 4.01. Payment of Notes.
The Company will pay the principal of, premium, if any, and
interest and Additional Interest, if any, on the Notes in the manner provided in
the Notes and in this Indenture. An installment of principal of or interest or
Additional Interest, if any, on the Notes shall be considered paid on the date
it is due if the Trustee or Paying Agent (other than the Company or an Affiliate
of the Company) holds on that date U. S. Legal Tender designated for and
sufficient to pay the installment in full and is not prohibited from paying such
money to the Holders pursuant to the terms of this Indenture.
The Company will pay, to the extent such payments are lawful,
Defaulted Interest and interest on Defaulted Interest, compounded semi-annually
on each Interest Payment Date, at the rate of 2% per annum in excess of the rate
shown on the Notes. Interest will be computed on the basis of a 360-day year
comprised of twelve 30-day months.
SECTION 4.02. Maintenance of Office or Agency.
The Company will maintain in the Borough of Manhattan, The
City of New York, the office or agency required under Section 2.04. The Company
shall give prompt written notice (in any event no later than forty-eight hours
after any change in location) 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 11.02.
The Company hereby initially designates the office of the Trustee at 61
Broadway, Concourse Level, Corporate Trust Window, New York, New York 10006 as
its office or agency in the Borough of Manhattan, The City of New York.
SECTION 4.03. Limitation on Restricted Payments.
The Company will not, and will not cause or permit any of its
Restricted Subsidiaries to, directly or indirectly, (a) declare or pay any
dividend or make any distribution (other than (q) dividends or distributions
payable in Qualified Capital Stock of the Company or in warrants, rights or
options to purchase or acquire shares of Qualified Capital Stock of the Company,
(r) dividends on shares of the Senior Preferred Stock paid by increasing the
then liquidation preference per share of the Senior Preferred Stock or (s)
dividends or distributions payable to the Company or a Restricted Subsidiary and
pro rata dividends or distributions to the Company and/or its Restricted
Subsidiaries and to minority holders of Capital Stock of
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Restricted Subsidiaries) on or in respect of shares of Capital Stock of the
Company or any Restricted Subsidiary 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, (c) make any principal payment on, purchase,
defease, redeem, prepay, decrease or otherwise acquire or retire for value,
prior to any scheduled final maturity, scheduled repayment or scheduled sinking
fund payment, as the case may be, any Indebtedness of the Company or any
Subsidiary Guarantor that is subordinate or junior in right of payment to the
Notes or Guarantees or (d) make any Investment (other than Permitted
Investments) (each of the foregoing actions set forth in clauses (a), (b), (c)
and (d) 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 or (ii) the Company is
not able to incur at least $1.00 of additional Indebtedness (other than
Permitted Indebtedness) in compliance with Section 4.04 or (iii) the aggregate
amount of Restricted Payments (including such proposed Restricted Payment) made
subsequent to the Issue Date (the amount expended for such purposes, if other
than in cash, being the fair market value of such property) 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
accrued during the period (treated as one accounting period) beginning on April
1, 1998 to the end of the most recent fiscal quarter ending at least 45 days
prior to the date of such Restricted Payment; plus (x) 100% of the aggregate net
cash proceeds received by the Company from any Person (other than a Subsidiary
of the Company) from the issuance and sale subsequent to the Issue Date of
Qualified Capital Stock of the Company or any warrants, rights or options to
purchase or acquire shares of Capital Stock of the Company or from the issuance
and sale subsequent to the Issue Date of any debt or other security of the
Company that has been converted into or exchanged for Qualified Capital Stock of
the Company; plus (y) the net cash proceeds of any capital contribution to the
Company subsequent to the Issue Date; plus (z) without duplication, the sum of
(1) the aggregate amount returned in cash on or with respect to Investments
(other than Permitted Investments) made subsequent to the Issue Date whether
through interest payments, principal payments, dividends or other distributions
or payments, (2) the net cash proceeds received by the Company or any Restricted
Subsidiary from the disposition of all or any portion of such Investments (other
than to a Restricted Subsidiary of the Company), (3) to the extent that any such
Investment was in the form of a guarantee, any reduction in the amount
guaranteed, and (4) the portion (proportionate to the Company's equity interest
in such Subsidiary) of the fair market value of the net assets of an
Unrestricted Subsidiary at the time such Unrestricted Subsidiary is designated a
Restricted Subsidiary; provided, however, that the foregoing sum shall not
exceed, in the case of any Unrestricted Subsidiary, the amount of Investments
previously made (and treated as a Restricted Payment) by the Company or any
Restricted Subsidiary in such Unrestricted Subsidiary.
Notwithstanding the foregoing, the provisions set forth in the
immediately preceding paragraph do not prohibit: (1) the payment of any dividend
within 60 days after the date of declaration of such dividend if the dividend
would have been permitted on the date of declarations; (2) if no Default or
Event of Default shall have occurred and be continuing, the acquisition of any
shares of Capital Stock of the Company or any warrants, rights or options to
purchase or acquire shares of Capital Stock of the Company, (i) in exchange for
shares of Qualified Capital Stock of the Company or any warrants, rights or
options to purchase or acquire shares of Qualified Capital Stock of the Company
or (ii) through the application of net proceeds
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of a substantially concurrent sale for cash (other than to a Subsidiary of the
Company) of shares of Qualified Capital Stock of the Company or any warrants,
rights or options to purchase or acquire shares of Qualified Capital Stock of
the Company; (3) if no Default or Event of Default shall have occurred and be
continuing, the voluntary prepayment, purchase, defeasance, redemption or other
acquisition or retirement for value of any Indebtedness of the Company or any
Subsidiary Guarantor that is subordinate or junior in right of payment to the
Notes or Guarantees (i) solely in exchange for shares of Capital Stock of the
Company or any warrants, rights or options to purchase or acquire shares of
Capital Stock of the Company; provided, however, that if such Capital Stock is,
or such warrants, rights or options to purchase such Capital Stock are
convertible into or exchangeable at the option of the holder thereof for,
Disqualified Capital Stock, then such Disqualified Capital Stock shall not (i)
by its terms, or upon the happening of any event, mature or be mandatorily
redeemable pursuant to a sinking fund obligation or otherwise, or be redeemable
at the option of the holder thereof, in any case, on or prior to the final
maturity of the Indebtedness permitted to be prepaid, purchased, defeased,
redeemed or acquired pursuant to this clause (3) and (ii) have a Weighted
Average Life to Maturity less than the Indebtedness permitted to be prepaid,
purchased, defeased, redeemed or acquired pursuant to this clause (3) or (iii)
through the application of net proceeds of a substantially concurrent sale for
cash (other than to a Subsidiary of the Company) of (A) shares of Qualified
Capital Stock of the Company or any warrants, rights or options to purchase or
acquire shares of Qualified Capital Stock of the Company or (B) Refinancing
Indebtedness; (4) so long as no Default or Event of Default shall have occurred
and be continuing, repurchases by the Company of Common Stock of the Company or
options, warrants or other securities exercisable or convertible into Common
Stock of the Company from employees and directors of the Company or any of its
Subsidiaries or their authorized representatives upon the death, disability or
termination of employment or directorship of such employees or directors, in an
aggregate amount not to exceed $750,000 in any calendar year and $3.0 million in
the aggregate (in each case plus the amount of net cash proceeds received by the
Company from the sale of Qualified Capital Stock or any warrants, rights or
options to purchase or acquire shares of Qualified Capital Stock to employees or
directors of the Company and its Subsidiaries, to the extent that such amounts
did not provide the basis for any previous Restricted Payment); and (5) so long
as no Default or Event of Default shall have occurred and be continuing, the
payment of dividends on the shares of the Senior Preferred Stock with (x) the
net proceeds of a sale for cash (other than to a Subsidiary of the Company) of
shares of Qualified Capital Stock of the Company or any warrants, rights or
options to purchase or acquire shares of Qualified Capital Stock of the Company
or (y) the net cash proceeds of any capital contribution to the Company to the
extent such amounts in clauses (x) and (y) did not provide the basis for any
previous Restricted Payment. In determining the aggregate amount of Restricted
Payments made subsequent to the Issue Date in accordance with clause (iii) of
the immediately preceding paragraph, amounts expended pursuant to clauses (1),
(2)(ii), (3)(ii)(A), (4) and (5) shall be included in such calculation and
amounts expended pursuant to clauses (2)(i), 3(i) and 3(ii)(B) shall not be
included in such calculation.
Not later than the date of making any Restricted Payment, the
Company shall deliver to the Trustee an officers' certificate stating that such
Restricted Payment complies with this Indenture and setting forth in reasonable
detail the basis upon which the required calculations were computed, which
calculations may be based upon the Company's latest available internal quarterly
financial statements.
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SECTION 4.04. 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, become liable, contingently or otherwise, with respect to, or
otherwise become responsible for payment of (collectively, "incur"), any
Indebtedness (including Acquired Indebtedness but excluding Permitted
Indebtedness); provided, however, that if no Default or Event of Default shall
have occurred and be continuing at the time of or as a consequence of the
incurrence of such Indebtedness, the Company and the Subsidiary Guarantors may
incur Indebtedness (including, without limitation, Acquired 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.
Indebtedness of a Person which is secured by a Lien on an
asset acquired by the Company or a Restricted Subsidiary of the Company (whether
or not such Indebtedness is assumed by the acquiring Person) shall be deemed
incurred at the time of the Asset Acquisition.
SECTION 4.05. Corporate Existence.
Except as otherwise permitted by Article Five or elsewhere in
this Indenture, 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
existence.
SECTION 4.06. Payment of Taxes.
The Company will pay or discharge or cause to be paid or
discharged, before the same shall become delinquent, all material taxes,
assessments and governmental charges levied or imposed upon it or any of its
Restricted Subsidiaries or upon the income, profits or property of it or any of
its Restricted Subsidiaries, except (a) to the extent that (i) such taxes,
assessments and charges are being contested in good faith by appropriate
proceedings and (ii) appropriate reserves have been taken with respect to such
taxes, assessments and charges to the extent required by GAAP or (b) where the
failure to effect such payment or discharge is not adverse in any material
respect to the Holders.
SECTION 4.07. Compliance Certificate; Notice of Default.
(a) The annual reports delivered pursuant to Section 4.08 to
the Trustee shall be accompanied by an Officers' Certificate stating that a
review of the activities of the Company has been made under the supervision of
the signing Officers and further stating, as to each such Officer signing such
certificate, that to the best of his knowledge at the date of such Officers'
Certificate there is no Default or Event of Default that has occurred and is
continuing or, if such signers do know of such Default or Event of Default, the
certificate shall describe its status with particularity. The Officers'
Certificate shall also notify the Trustee should the Company elect to change the
manner in which it fixes its fiscal year end.
(b) So long as not contrary to the then current
recommendations of the American Institute of Certified Public Accountants or to
the policies of the Company's independent accountants, the annual reports
delivered pursuant to Section 4.08 to the Trustee shall be accompanied by a
written report of the Company's independent accountants (who shall
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be a firm of established national reputation) that in conducting their audit of
the financial statements of the Company for the most recent fiscal year nothing
has come to their attention that would lead them to believe that a Default or
Event of Default under this Indenture has occurred insofar as they relate to
accounting matters or, if any such violation has occurred, specifying the nature
and period of existence thereof, it being understood that such accountants shall
not be liable directly or indirectly to any Person for any failure to obtain
knowledge of any such violation that would not be disclosed in the course of an
audit examination conducted in accordance with GAAP.
(c) (i) If any Default or Event of Default has occurred and is
continuing or (ii) if any Holder seeks to exercise any remedy hereunder with
respect to a claimed Default under this Indenture or the Notes, the Company
shall deliver to the Trustee, at its address set forth in Section 11.02 hereof,
by registered or certified mail or by facsimile transmission followed by hard
copy by registered or certified mail an Officers' Certificate specifying such
event, notice or other action and the status thereof within five Business Days
of its becoming aware of such occurrence.
SECTION 4.08. Commission Reports.
Notwithstanding that the Company may not be subject to the
reporting requirements of Section 13 or 15(d) of the Exchange Act, so long as
any Notes remain outstanding, the Company shall provide the Trustee, the
Noteholders and the Initial Purchasers with such annual reports and such
information, documents and other reports (other than exhibits) as are specified
in Sections 13 and 15(d) of the Exchange Act and applicable to a U. S.
corporation subject to such Sections, such information, documents and other
reports to be so provided within 15 days after the times specified for the
filing of such information, documents and reports under such Sections.
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,
beginning on the earlier of (x) the effective date of the Exchange Offer
Registration Statement and (y) 730 days following the Issue Date, file with the
Commission, to the extent permitted, such annual reports and such information,
documents and other reports as are specified in Sections 13 and 15(d) of the
Exchange Act and applicable to a U.S. corporation subject to such Sections, such
information, documents and other reports to be so filed within 15 days after the
times specified for the filing of such information, documents and reports under
such Sections. In addition, the Company will make available, upon request, to
any holder and any prospective purchaser of Notes the information required
pursuant to Rule 144A(d)(4) under the Securities Act. Following qualification of
this Indenture under the TIA, the Company shall also comply with the other
provisions of TIA ss. 314(a).
Delivery of such reports, information and documents to the
Trustee is for informational purposes only and the Trustee's receipt of such
shall not constitute constructive notice of any information contained therein or
determinable from information contained therein, including the Company's
compliance with any of its covenants hereunder (as to which the Trustee is
entitled to rely exclusively on Officers' Certificates).
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SECTION 4.09. Waiver of Stay, Extension or Usury Laws.
The Company (and each Subsidiary Guarantor, if any,) 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 the Company or such Subsidiary Guarantor from paying all or any
portion of the principal of, premium, if any, and interest and Additional
Interest, if any, on the Notes as contemplated herein, wherever enacted, now or
at any time hereafter in force, and (to the extent that they may lawfully do so)
the Company hereby expressly waives, and each future Subsidiary Guarantor, if
any, will waive, 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.
SECTION 4.10. Limitation on Transactions with Affiliates.
(a) The Company will not, and will not permit any of its
Restricted Subsidiaries to, directly or indirectly, enter into 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 (each 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
could reasonably be expected to be obtained in a comparable transaction at such
time on an arm's-length basis from a Person that is not an Affiliate of the
Company or such Restricted Subsidiary. All Affiliate Transactions (and each
series of related Affiliate Transactions which are similar or part of a common
plan), other than Affiliate Transactions permitted under paragraph (b) below,
involving consideration to either party in excess of $1.0 million shall be
approved by the Board of Directors of the Company or such Restricted Subsidiary,
as the case may be, such approval to be evidenced by a Board Resolution stating
that such Board of Directors has determined that such transaction complies with
the foregoing provisions. If the Company or any Restricted Subsidiary of the
Company enters into an Affiliate Transaction (or a series of related Affiliate
Transactions related to a common plan), other than Affiliate Transactions
permitted under paragraph (b) below, that involves aggregate consideration to
either patty of more than $5.0 million, the Company or such Restricted
Subsidiary, as the case may be, shall, prior to the consummation thereof, obtain
a favorable opinion as to the fairness of such transaction or series of related
transactions to the Company or the relevant Restricted Subsidiary, as the case
may be, from a financial point of view, from an Independent Financial Advisor
and file the same with the Trustee.
(b) The restrictions set forth in paragraph (a) shall not
apply to (i) compensation, indemnification and other benefits paid or made
available (x) pursuant to the Employment Agreements, or (y) for or in connection
with services actually rendered and comparable to those generally paid or made
available by entities engaged in the same or similar businesses (including
reimbursement or advancement of reasonable out-of-pocket expenses, loans to
officers, directors and employees in the ordinary course of business consistent
with past practice and directors' and officers' liability insurance) as
determined in good faith by the Company's Board of Directors or senior
management; (ii) transactions, expenses and payments pursuant to the terms of or
contemplated by the Stockholders Agreement, the Management Subscription and
Stockholders
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Agreements or the Stock Purchase Agreement; (iii) any Restricted Payments or
other payments or transactions expressly permitted under Section 4.03; (iv)
payments for services and reimbursement of reasonable expenses under the
Management Services Agreement; (v) payments to be made in connection with the
consummation of the transactions contemplated by the Stock Purchase Agreement or
the financing thereof to be received by Leonard Green & Partners, L.P., and its
Affiliates pursuant to the Stock Purchase Agreement as in effect on the Issue
Date; (vi) transactions and payments pursuant to leases between the Company and
Richard Rutta and Kenneth Levine, General Partnership in effect on the Issue
Date as any such leases may be extended or amended from time to time; (vii)
transactions between or among the Company and any of its Restricted Subsidiaries
or between or among such Restricted Subsidiaries; provided such transactions are
not otherwise prohibited by this Indenture; (viii) Permitted Investments; and
(ix) loans or advances to officers or employees of the Company in the ordinary
course of business not to exceed $500,000 in the aggregate at any one time
outstanding.
SECTION 4.11. Conduct of Business.
The Company and its Restricted Subsidiaries shall not engage
in any businesses other than a Related Business.
SECTION 4.12. Limitation on Dividend and Other Payment Restrictions
Affecting Restricted Subsidiaries.
The Company will not, and will not cause or permit any of its
Restricted Subsidiaries to, directly or indirectly, create or otherwise cause or
permit to exist or become effective any consensual encumbrance or restriction on
the ability of any Restricted Subsidiary of the Company to (a) pay dividends or
make any other distributions on or in respect of its Capital Stock; (b) make
loans or advances or to pay any Indebtedness or other obligation owed to the
Company or any other Restricted Subsidiary of the Company; or (c) transfer any
of its property or assets to the Company or any other Restricted Subsidiary of
the Company, except for such encumbrances or restrictions existing under or by
reason of: (1) applicable law; (2) this Indenture; (3) any Bank Facility,
provided that the provisions relating to such encumbrance or restriction are not
materially more restrictive than those in the Bank Facility as in existence on
the Issue Date, as any such restriction may apply to any present or future
Restricted Subsidiary of the Company; (4) customary non-assignment provisions of
any contract and customary provisions restricting assignment or subletting in
any lease governing a leasehold interest of any Restricted Subsidiary of the
Company, or any customary restriction on the ability of a Restricted Subsidiary
of the Company to dividend, distribute or otherwise transfer any asset which
secures Purchase Money Indebtedness of such Subsidiary; (5) any instrument
governing Acquired Indebtedness, which encumbrance or restriction is not
applicable to any Person, or the properties or assets of any Person, other than
the Person or the properties or assets of the Person so acquired; (6)
restrictions with respect to a Subsidiary of the Company imposed pursuant to a
binding agreement which has been entered into for the sale or disposition of
Capital Stock or assets of such Subsidiary, provided such restrictions apply
solely to the Capital Stock or assets of such Subsidiary which are being sold;
(7) customary restrictions imposed on the transfer of copyrighted or patented
materials; or (8) an agreement governing Indebtedness incurred to Refinance the
Indebtedness issued, assumed or incurred pursuant to an agreement referred to in
clause (2), (3) or (5) above; provided, however, that the provisions relating to
such encumbrance
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or restriction contained in any such Indebtedness are not materially more
restrictive than the provisions relating to such encumbrance or restriction
contained in agreements referred to in such clause (2), (3) or (5).
Notwithstanding the foregoing, Liens not prohibited by the terms of this
Indenture shall not be considered a restriction on the ability of the applicable
Subsidiary to transfer any assets.
SECTION 4.13. Limitation on Liens.
The Company will not, and will not cause or permit any of its
Restricted Subsidiaries to, directly or indirectly, create, incur, assume or
permit or suffer to exist any Liens (other than Permitted Liens) securing any
Indebtedness of any kind against or upon any property or assets of the Company
or any of its Restricted Subsidiaries whether owned on the Issue Date or
acquired after the Issue Date, or any proceeds therefrom, unless (i) in the case
of Liens securing Indebtedness that is expressly subordinate or junior in right
of payment to the Notes, the Notes are secured by a Lien on such property,
assets or proceeds that is senior in priority to such Liens and (ii) in all
other cases, the Notes are equally and ratably secured.
SECTION 4.14. Change of Control.
(a) Upon the occurrence of a Change of Control, the Company
shall make an offer to purchase (the "Change of Control Offer") all of the then
outstanding Notes pursuant to the offer described in paragraph (b) below at a
purchase price equal to 101 % of the principal amount thereof, plus accrued and
unpaid interest, if any, thereon to the date of purchase (subject to the right
of Holders of record on a Record Date to receive interest due on an Interest
Payment Date that is on or prior to such date of purchase and subject to clause
(b)(9) below).
(b) Within 30 days following the date upon which a Change of
Control occurred, the Company shall 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. The notice to the Holders shall contain all
instructions and materials reasonably necessary to enable such Holders to tender
Notes pursuant to the Change of Control Offer. Such notice shall state:
(1) that the Change of Control Offer is being made pursuant to
this Section 4.14 and that all Notes properly tendered and not
withdrawn will be accepted for payment;
(2) the purchase price (including the amount of accrued
interest, if any) and the purchase date, which shall be no earlier
than 30 days nor later than 60 days from the date such notice is
mailed, other than as may be required by law (the "Change of Control
Payment Date");
(3) that any Note not tendered will continue to accrue
interest;
(4) that, unless the Company defaults in making payment
therefor, any Note accepted for payment pursuant to the Change of
Control Offer shall cease to accrue interest on and after the Change
of Control Payment Date;
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(5) that Holders electing to have a Note purchased pursuant to
a Change of Control Offer will be required to surrender such Note,
with the form entitled "Option of Holder to Elect Purchase" on the
reverse of the Note completed, to the Paying Agent at the address
specified in the notice prior to the close of business on the third
Business Day prior to the Change of Control Payment Date;
(6) that Holders will be entitled to withdraw their election
if the Paying Agent receives, not later than the close of business on
the third Business Day prior to the Change of Control Payment Date, a
telegram, telex, facsimile transmission or letter setting forth the
name of the Holder, the principal amount of the Notes the Holder
delivered for purchase and a statement that such Holder is
withdrawing his election to have such Notes purchased or portions
thereof;
(7) that Notes will be purchased in part only in integral
multiples of $1,000 and that Holders whose Notes are purchased only
in part will be issued new Notes in a principal amount equal to the
unpurchased portion of the Notes surrendered;
(8) a brief description of the event resulting in such Change
of Control; and
(9) if the Change of Control Payment Date is after a Record
Date and prior to the Interest Payment Date to which such Record Date
relates, that the accrued interest on the Notes purchased pursuant to
the Change of Control Offer shall be payable to the Holders of such
Notes on the relevant Record Date and no accrued interest will be
included in the purchase price of the Notes purchased on the Change
of Control Payment Date.
On or before the Change of Control Payment Date, the Company
shall (i) accept for payment Notes or portions thereof properly tendered
pursuant to the Change of Control Offer, (ii) deposit with the Paying Agent U.S.
Legal Tender sufficient to pay the purchase price, including accrued interest,
if any, of all Notes so tendered and (iii) deliver to the Trustee Notes so
accepted together with an Officers' Certificate stating the Notes or portions
thereof being purchased by the Company. The Paying Agent shall promptly mail to
the Holders of Notes so accepted payment in an amount equal to the purchase
price, including accrued interest, if any, thereon and the Trustee shall
promptly authenticate and mail to such Holders new Notes equal in principal
amount to any unpurchased portion of the Notes surrendered. Any Notes not so
accepted shall be promptly mailed by the Company to the Holder thereof. For
purposes of this Section 4.14, the Trustee shall act as the Paying Agent.
Any amounts remaining after the purchase of Notes pursuant to
a Change of Control Offer shall be returned by the Trustee to the Company.
The Company shall 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
purchase of Notes pursuant to a Change of Control Offer. To the extent the
provisions of any securities laws or regulations conflict with the provisions
under this Section 4.14, the Company shall comply with the applicable securities
laws
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and regulations and shall not be deemed to have breached its obligations under
this Section 4.14 by virtue thereof.
SECTION 4.15. Limitation on Asset Sales.
The Company will not, and will not permit any of its
Restricted Subsidiaries to, consummate an Asset Sale unless (i) the Company or
the applicable Restricted Subsidiary, as the case may be, receives consideration
at the time of such Asset Sale at least equal to the fair market value of the
assets sold or otherwise disposed of (as determined in good faith by the
Company's Board of Directors), (ii) at least 75% of the consideration received
for the assets sold by the Company or the Restricted Subsidiary, as the case may
be, from such Asset Sale shall be in the form of cash or Cash Equivalents and is
received at the time of such disposition; provided, however, that for purposes
of this clause (ii) only, (A) notes received by the Company or such Restricted
Subsidiary as consideration for an Asset Sale that are converted into cash or
Cash Equivalents within 30 days following the consummation of such Asset Sale or
(B) the assumption by the purchaser of assets pursuant to an Asset Sale of
Indebtedness of the Company or such Restricted Subsidiary (other than
Indebtedness that is by its terms subordinate to the Notes or any Guarantee)
shall, in each case of the immediately preceding clauses (A) and (B), be deemed
to be cash or Cash Equivalents at the time of such Asset Sale in an amount equal
to, in the case of clause (A), the amount of cash or Cash Equivalents realized
on such conversion and, in the case of clause (B), the amount of the
Indebtedness so assumed, as reflected on the balance sheet of the Company, and
(iii) following the consummation of an Asset Sale, the Company shall or cause
such Restricted Subsidiary, within 365 days of receipt thereof either (A) to
apply the Net Cash Proceeds related to such Asset Sale to prepay any
Indebtedness that by its terms is not subordinate to the Notes or any Guarantee
(and to permanently reduce the commitments, if any, with respect thereto), (B)
to make a Permitted Investment or an investment in properties and assets that
replace the properties and assets that were the subject of such Asset Sale or in
properties and assets that will be used in a Related Business (collectively,
"Replacement Assets") or (C) a combination of prepayment and investment
permitted by the foregoing clauses (iii)(A) and (iii)(B). On the 365th day after
an Asset Sale, or such earlier date, if any, as the Board of Directors of the
Company determines not to apply or cause to be applied the Net Cash Proceeds
relating to such Asset Sale as set forth in clauses (iii)(A), (iii)(B) and
(iii)(C) of the next preceding sentence (each, a "Net Proceeds Offer Trigger
Date"), such aggregate amount of Net Cash Proceeds which have not been applied
on or before the applicable Net Proceeds Offer Trigger Date as permitted in
clauses (iii)(A), (iii)(B) and (iii)(C) of the next preceding sentence (or, in
the case of a Net Proceeds Offer Trigger Date occurring prior to such 365th day,
the aggregate amount of Net Cash Proceeds that the Board of Directors of the
Company has determined not to so apply) (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 (and on a
pro rata basis with the holders of any other Indebtedness of the Company that is
not by its terms subordinate in right of payment to the Notes with similar
provisions requiring the Company to offer to purchase such Indebtedness with the
proceeds of asset sales), that principal amount of Notes and such other
Indebtedness equal to the Net Proceeds Offer Amount at a price, in the case of
the Notes, equal to 100% of the principal amount of the Notes to be purchased,
plus accrued and unpaid interest thereon, to the date of purchase (subject to
the right of Holders
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of record on a Record Date to receive interest due on an Interest Payment Date
that is on or prior to such date of purchase and subject to clause (8) below);
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 4.15. The Company may defer the Net
Proceeds Offer until there is an aggregate unutilized Net Proceeds Offer Amount
equal to or in excess of $5.0 million resulting from one or more Asset Sales (at
which time, the entire Net Proceeds Offer Amount, and not just the amount in
excess of $5.0 million, shall be applied as required pursuant to this
paragraph).
In the event of the transfer of substantially all (but not
all) of the property and assets of the Company and its Restricted Subsidiaries
as an entirety to a Person in a transaction permitted under Section 5.01, the
Surviving Entity shall be deemed to have sold the properties and assets of the
Company and its Restricted Subsidiaries not so transferred for purposes of this
Section 4.15, and shall comply with the provisions of this Section 4.15 with
respect to such deemed sale as if it were an Asset Sale. In addition, the fair
market value of such properties and assets of the Company or its Restricted
Subsidiaries deemed to be sold shall be deemed to be Net Cash Proceeds for
purposes of this Section 4.15.
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 Replacement Assets and cash or
Cash Equivalents and (ii) such Asset Sale is for fair market value; provided
that any consideration not constituting Replacement 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 subject to the provisions of the two preceding paragraphs.
Notice of each Net Proceeds Offer pursuant to this Section
4.15 shall be mailed or caused to be mailed, by first class mail, by the Company
within 25 days following the applicable Net Proceeds Offer Trigger Date to all
Holders, with a copy to the Trustee. The notice shall contain all instructions
and materials reasonably necessary to enable such Holders to tender Notes
pursuant to the Net Proceeds Offer and shall state:
(1) that the Net Proceeds Offer is being made pursuant to this
Section 4.15 and that all Notes properly tendered and not withdrawn
will be accepted for payment; provided, however, that if the
principal amount of Notes properly tendered and not withdrawn,
together with the principal amount of any other Indebtedness properly
tendered and not withdrawn, in the Net Proceeds Offer exceeds the Net
Proceeds Offer Amount, the Company shall select the Notes and such
other Indebtedness, if any, to be purchased on a pro rata basis based
on their respective principal amounts (provided that no Notes or
other Indebtedness with a principal amount of less than $1,000 shall
be purchased in part and Notes and other Indebtedness with a
principal amount in excess of $1,000 shall be purchased in integral
multiples of $1,000 only);
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(2) the Net Proceeds Offer price for the Notes (including the
amount of accrued interest, if any) and the Net Proceeds Offer
Payment Date;
(3) that any Note not tendered will continue to accrue
interest;
(4) that, unless the Company defaults in making payment
therefor, any Note accepted for payment pursuant to the Net Proceeds
Offer shall cease to accrue interest on and after the Net Proceeds
Offer Payment Date;
(5) that Holders electing to have a Note purchased pursuant to
the Net Proceeds Offer will be required to surrender such Note, with
the form entitled "Option of Holder to Elect Purchase" on the reverse
of the Note completed, to the Paying Agent at the address specified
in the notice prior to the close of business on the third Business
Day prior to the Net Proceeds Offer Payment Date;
(6) that Holders will be entitled to withdraw their election
if the Paying Agent receives, not later than the close of business on
the third Business Day prior to the Net Proceeds Offer Payment Date,
a facsimile transmission or letter setting forth the name of the
Holder, the principal amount of the Notes the Holder delivered for
purchase and a statement that such Holder is withdrawing his election
to have such Notes (or portions thereof) purchased;
(7) that Notes will be purchased in part only in integral
multiples of $1,000 and that Holders whose Notes are purchased only
in part will be issued new Notes in a principal amount equal to the
unpurchased portion of the Notes surrendered; and
(8) if the Net Proceeds Offer Payment Date is after a Record
Date and prior to the Interest Payment Date to which such Record Date
relates, that the accrued interest on the Notes purchased pursuant to
the Net Proceeds Offer shall be payable to the Holders of such Notes
on the relevant Record Date and no accrued interest will be included
in the purchase price of the Notes purchased on the Net Proceeds
Offer Date.
On or before the Net Proceeds Offer Payment Date, the Company
shall, subject to the proration provisions referred to above, (i) accept for
payment Notes or portions thereof properly tendered pursuant to the Net Proceeds
Offer, (ii) deposit with the Paying Agent U.S. Legal Tender sufficient to pay
the purchase price, including accrued interest, if any, of all Notes to be
purchased and (iii) deliver to the Trustee Notes so accepted together with an
Officers' Certificate stating the Notes or portions thereof being purchased by
the Company. The Paying Agent shall promptly mail to the Holders of Notes so
accepted payment in an amount equal to the purchase price, including accrued
interest, if any, thereon and the Trustee shall promptly authenticate and mail
to such Holders new Notes equal in principal amount to any unpurchased portion
of the Notes surrendered. Any Notes not so accepted shall be promptly mailed by
the Company to the Holder thereof. For purposes of this Section 4.17, the
Trustee shall act as the Paying Agent.
Any Net Proceeds Offer shall remain open for a period of at
least 20 Business Days (or such longer period as may be required by law).
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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
purchase of Notes pursuant to a Net Proceeds Offer. To the extent that the
provisions of any securities laws or regulations conflict with the provisions of
this Section 4.15, the Company shall comply with the applicable securities laws
and regulations and shall not be deemed to have breached its obligations under
this Section 4.15 by virtue thereof.
Upon completion of a Net Proceeds Offer, the amount of Net
Cash Proceeds will be reset at zero. Accordingly, to the extent that the
aggregate amount of Notes and other Indebtedness tendered pursuant to a Net
Proceeds Offer is less than the Net Cash Proceeds Offer Amount, the Company may
use any remaining Net Cash Proceeds for general corporate purposes.
SECTION 4.16. Limitation on Preferred Stock of Restricted 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; provided, however,
that any Restricted Subsidiary of the Company that is not a Wholly-Owned
Restricted Subsidiary of the Company may issue Preferred Stock to, and such
Preferred Stock may be owned by, the holders of the Common Stock of such
Subsidiary in the same proportions as their relative ownership of the Common
Stock of such Subsidiary.
SECTION 4.17. Future Guarantees.
The Company will cause any Person that shall become a Wholly
Owned Restricted Subsidiary of the Company and has total assets having a book
value of more than $50,000, and each future non-Wholly Owned Restricted
Subsidiary of the Company that guarantees any other Indebtedness of the Company
or a Subsidiary Guarantor, to become a Subsidiary Guarantor by executing and
delivering an appropriate supplemental indenture. In addition, other Restricted
Subsidiaries of the Company may, but are not required, to become Subsidiary
Guarantors.
ARTICLE Five
SUCCESSOR CORPORATION
SECTION 5.01. Merger, Consolidation and Sale of Assets.
The Company will not, in a single transaction or series of
related transactions, consolidate or merge with or into any Person, or sell,
assign, transfer, lease, convey or otherwise dispose of (or cause or permit any
Subsidiary of the Company to sell, assign, transfer, lease, convey or otherwise
dispose of) all or substantially all of the Company's assets (determined on a
consolidated basis for the Company and its Subsidiaries) whether as an entirety
or substantially as an entirety to any Person unless: (i) either (1) the Company
shall be the surviving or con-
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tinuing corporation or (2) the Person (if other than the Company) formed by such
consolidation or into which the Company is merged or the Person which acquires
by sale, assignment, transfer, lease, conveyance or other disposition the
properties and assets of the Company and of the Company's Subsidiaries
substantially as an entirety (the "Surviving Entity") (x) shall be a
corporation, limited liability company or similar entity organized and validly
existing under the laws of the United States or any State thereof or the
District of Columbia and (y) shall expressly assume, by supplemental indenture
(in form and substance satisfactory to the Trustee), executed and delivered to
the Trustee, the due and punctual payment of the principal of, and premium, if
any, and interest and Additional Interest, if any, on all of the Notes and the
performance of every covenant of the Notes and this Indenture on the part of the
Company to be performed or observed; (ii) immediately after giving effect to
such transaction and the assumption contemplated by clause (i)(2)(y) above
(including giving effect to any Indebtedness and Acquired Indebtedness incurred
or anticipated to be incurred in connection with or in respect of such
transaction), the Company or such Surviving Entity, as the case may be, (1)
shall have a Consolidated Net Worth equal to or greater than the Consolidated
Net Worth of the Company immediately prior to such transaction and (2) shall be
able to incur at least $1.00 of additional Indebtedness (other than Permitted
Indebtedness) pursuant to Section 4.04; (iii) immediately before and immediately
after giving effect to such transaction and the assumption contemplated by
clause (i)(2)(y) above (including, without limitation, giving effect to any
Indebtedness and Acquired Indebtedness incurred or anticipated to be incurred
and any Lien granted in connection with or in respect of the transaction), no
Default or Event of Default shall have occurred or be continuing and (iv) the
Company or the Surviving Entity shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that such consolidation,
merger, sale, assignment, transfer, lease, conveyance or other disposition and,
if a supplemental indenture is required in connection with such transaction,
such supplemental indenture, comply with the applicable provisions of this
Indenture 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 or 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.
The foregoing provisions shall not apply to (w) any transfer
of the properties or assets of a Subsidiary of the Company to the Company or to
a Wholly Owned Restricted Subsidiary of the Company, (x) any merger of a
Restricted Subsidiary of the Company into the Company or (y) any merger of the
Company into a Restricted Subsidiary of the Company. In addition, the
requirements of clause (ii)(2) of the first paragraph of this Section 5.01 shall
not apply to any merger into the Company of a Person that (i) owns more than 50%
of the outstanding Common Stock of the Company and (ii) has no Indebtedness
(other than any guarantees of Indebtedness of the Company and the Subsidiary
Guarantors).
SECTION 5.02. Successor Person Substituted.
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, in which the
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Company is not the continuing corporation, the successor Person formed by such
consolidation or into which the Company is merged or to which such conveyance,
lease or transfer is made shall succeed to, and be substituted for, and may
exercise every right and power of, the Company under this Indenture and the
Notes with the same effect as if such Surviving Entity had been named as such.
SECTION 5.03. Merger, Consolidation and Sale of Assets of Subsidiary
Guarantors.
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 4.15 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 into any Restricted Subsidiary of the Company that is
not a Subsidiary Guarantor unless such Restricted Subsidiary (if such Restricted
Subsidiary is the surviving entity in such transaction) assumes by supplemental
indenture all of the obligations of such Subsidiary Guarantor in respect of its
Guarantee.
ARTICLE Six
DEFAULT AND REMEDIES
SECTION 6.01. Events of Default.
An "Event of Default" occurs in the following circumstances:
(i) the failure to pay interest on any Notes when the same
becomes due and payable and the default continues for a period of 30
days;
(ii) the failure to pay the principal on any Notes, when such
principal becomes due and payable, at maturity, upon redemption or
otherwise (including the failure to make a required payment to
purchase Notes tendered pursuant to a Change of Control Offer or a
Net Proceeds Offer);
(iii) the failure of the Company to comply with Article Five;
(iv) a default 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 Notes;
(v) the failure to pay at final maturity (giving effect to any
applicable grace periods and any extensions thereof) the principal
amount of any Indebtedness of the Company or any Restricted
Subsidiary of the Company, or the acceleration of the final stated
maturity of any such Indebtedness by reason of a default or event of
default in respect of such Indebtedness, in any case if the aggregate
principal amount of such Indebtedness, together with the principal
amount of any other such Indebtedness in
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default for failure to pay principal at final maturity or which has
been so accelerated, aggregates $5.0 million or more at any time;
(vi) one or more judgments in an aggregate amount in excess of
$5.0 million shall have been rendered against the Company or any of
its Restricted 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;
(vii) the Company or any of its Significant Subsidiaries (i)
admits in writing its inability to pay its debts generally as they
become due, (ii) commences a voluntary case or proceeding under any
Bankruptcy Law with respect to itself, (iii) consents to the entry of
a judgment, decree or order for relief against it in an involuntary
case or proceeding under any Bankruptcy Law, (iv) consents to the
appointment of a Custodian of it or for substantially all of its
property, (v) consents to or acquiesces in the institution of a
bankruptcy or an insolvency proceeding against it under any
Bankruptcy Law, (vi) makes a general assignment for the benefit of
its creditors or (vii) takes any partnership or corporate action, as
the case may be, to authorize or effect any of the foregoing;
(viii) a court of competent jurisdiction enters a judgment,
decree or order for relief in respect of the Company or any of its
Significant Subsidiaries in an involuntary case or proceeding under
any Bankruptcy Law, which shall (i) approve as properly filed a
petition seeking reorganization, arrangement, adjustment or
composition in respect of the Company or any of its Significant
Subsidiaries, (ii) appoint a Custodian of the Company or any of its
Significant Subsidiaries or for substantially all of the property of
any of them or (iii) order the winding-up or liquidation of the
affairs of the Company or any of its Significant Subsidiaries; and
such judgment, decree or order shall remain unstayed and in effect
for a period of 60 consecutive days; or
(ix) the Guarantee of any Subsidiary Guarantor is held by a
final non-appealable order or judgment of a court of competent
jurisdiction to be unenforceable or invalid or ceases for any reason
to be in full force and effect (other than in accordance with the
terms of this Indenture) or any Subsidiary Guarantor or any Person
acting on behalf of any Subsidiary Guarantor denies or disaffirms
such Subsidiary Guarantor's obligations under its Guarantee (other
than by reason of a release of such Subsidiary Guarantor from its
Guarantee in accordance with the terms of this Indenture).
SECTION 6.02. Acceleration.
If an Event of Default (other than an Event of Default
specified in clause (vii) or (viii) of Section 6.01) shall occur and be
continuing, the Trustee or the Holders of at least 25% in principal amount of
outstanding Notes may declare the principal of, premium, if any, and accrued and
unpaid interest and Additional Interest, if any, on all the outstanding Notes to
be due and payable by notice in writing to the Company and the Trustee
specifying the respective Event of Default and that it is a "notice of
acceleration" (the "Acceleration Notice"), and the same shall become immediately
due and payable. If an Event of Default specified in clause (vii) or (viii) of
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Section 6.01 occurs and is continuing, then all unpaid principal of, and
premium, if any, and accrued and unpaid interest and Additional Interest, if
any, on all of the outstanding Notes 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.
At any time after a declaration of acceleration with respect
to the Notes as described in the preceding paragraph, the Holders of a majority
in principal amount of the Notes may rescind and cancel such declaration and its
consequences (i) if the rescission would not conflict with any judgment or
decree, (ii) if all existing Events of Default have been cured or waived except
nonpayment of principal or interest that has become due solely because of the
acceleration, (iii) to the extent the payment of such interest is lawful,
interest on overdue installments of interest and overdue principal, which has
become due otherwise than by such declaration of acceleration, has been paid,
(iv) if the Company has paid the Trustee its reasonable compensation and
reimbursed the Trustee for its reasonable expenses, disbursements and advances
and (v) in the event of the cure or waiver of an Event of Default of the type
described in clause (vii) or (viii) of Section 6.01, the Trustee shall have
received an Officers' Certificate and an Opinion of Counsel that such Event of
Default has been cured or waived. No such rescission shall affect any subsequent
Default or impair any right consequent thereto.
SECTION 6.03. Other Remedies.
If an Event of Default occurs and is continuing, the Trustee
may pursue any available remedy by proceeding at law or in equity to collect the
payment of principal of, premium, if any, and interest and Additional Interest,
if any, on the Notes or to enforce the performance of any provision of the Notes
or this Indenture.
The Trustee may maintain a proceeding even if it does not
possess any of the Notes or does not produce any of them in the proceeding. A
delay or omission by the Trustee or any Noteholder 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 to the
extent permitted by law.
SECTION 6.04. Waiver of Past Defaults.
Subject to Sections 2.10 and 9.02, the Holders of not less
than a majority in principal amount of the outstanding Notes by written notice
to the Trustee or by written consent may waive any existing Default or Event of
Default and its consequences, except a Default in the payment of principal of,
premium, if any, and interest and Additional Interest, if any, on any Note. The
Company shall deliver to the Trustee an Officers' Certificate stating that the
requisite percentage of Holders have consented to such waiver and attaching
copies of such consents. When a Default or Event of Default is waived, it is
cured and ceases.
SECTION 6.05. Control by Majority.
The Holders of not less than a majority in principal amount of
the outstanding Notes may direct the time, method and place of conducting any
proceeding for any remedy available to the Trustee or exercising any trust or
power conferred on it. Subject to Section 7.01,
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however, the Trustee may refuse to follow any direction that conflicts with any
law or this Indenture, that the Trustee determines may be unduly prejudicial to
the rights of another Noteholder, or that may, in the sole judgment of the
Trustee, give rise to or subject the Trustee to personal liability; provided
that the Trustee may take any other action deemed proper by the Trustee.
In the event the Trustee takes any action or follows any
direction pursuant to this Indenture, the Trustee shall be entitled to
indemnification satisfactory to it in its sole discretion against any loss or
expense caused by taking such action or following such direction.
SECTION 6.06. Limitation on Suits.
A Noteholder may not pursue any remedy with respect to this
Indenture or the Notes unless:
(1) such Holder gives to the Trustee written notice of a
continuing Event of Default;
(2) the Holders of at least 25% in principal amount of the
outstanding Notes make a written request to the Trustee to pursue the
remedy;
(3) such Holders offer and, if requested, provide to the
Trustee indemnity satisfactory to the Trustee in its sole judgment
against any loss, liability or expense;
(4) the Trustee does not comply with the request described in
clause (2) above within 60 days after receipt thereof and the offer
described in clause (3) above and, if requested, the provision of
indemnity; and
(5) during such 60-day period the Holder or Holders of a
majority in principal amount of the outstanding Notes do not give the
Trustee a written direction which, in the opinion of the Trustee, is
inconsistent with the request.
A Noteholder may not use this Indenture to prejudice the
rights of another Noteholder or to obtain a preference or priority over such
other Noteholder.
SECTION 6.07. Rights of Holders To Receive Payment; Right of Majority
Holders to Enforce Indenture.
Notwithstanding any other provision of this Indenture, (i) the
right of any Holder of a Note to institute suit for enforcement of payment of
the principal of, premium, if any, and interest and Additional Interest, if any,
on such Note on or after the respective due dates expressed in such Note or (ii)
the right of Holders of a majority in principal amount of the outstanding Notes
to institute any proceeding with respect to this Indenture or any remedy
thereunder, including, without limitation, acceleration, shall not be impaired
or affected without the written consent of such Holder in the case of (i) or the
Holders of a majority in principal amount of the outstanding Notes in the case
of (ii); provided that upon institution of any proceeding or exercise of any
remedy, such Holder or Holders provide the Trustee with prompt notice hereof.
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SECTION 6.08. Collection Suit by Trustee.
If an Event of Default in payment of principal or interest
specified in clause (i) or (ii) of Section 6.01 occurs and is continuing, the
Trustee may recover judgment in its own name and as trustee of an express trust
against the Company or any other obligor on the Notes for the whole amount of
principal and accrued interest and fees remaining unpaid, together with interest
on overdue principal and, to the extent that payment of such interest is lawful,
interest on overdue installments of interest, in each case at the rate per annum
borne by the Notes and such further amount as shall be sufficient to cover the
costs and expenses of collection, including the actual, documented compensation,
expenses, disbursements and advances of the Trustee, its agents and counsel.
SECTION 6.09. 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 (including any claim for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel) and the
Noteholders allowed in any judicial proceedings relating to the Company, any
Subsidiaries of the Company, their creditors or their property and shall be
entitled and empowered to collect and receive any moneys or other property
payable or deliverable on any such claims and to distribute the same, and any
Custodian in any such judicial proceedings is hereby authorized by each
Noteholder to make such payments to the Trustee and, in the event that the
Trustee shall consent to the making of such payments directly to the
Noteholders, to pay to the Trustee any amount due to it for the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agent and
counsel, and any other amounts due the Trustee under Section 7.07. Nothing
herein contained shall be deemed to authorize the Trustee to authorize or
consent to or accept or adopt on behalf of any Noteholder any plan of
reorganization, arrangement, adjustment or composition affecting the Notes or
the rights of any Holder thereof, or to authorize the Trustee to vote in respect
of the claim of any Noteholder in any such proceeding.
SECTION 6.10. Priorities.
If the Trustee collects any money or property pursuant to this
Article Six, it shall pay out the money or property in the following order:
First: to the Trustee for amounts due under Section 7.07;
Second: to Holders for amounts due and unpaid on the Notes for
principal and interest, ratably, without preference or priority of any kind,
according to the amounts due and payable on the Notes for principal and
interest, respectively; and
Third: to the Company.
The Trustee, upon prior notice to the Company, may fix a
record date and payment date for any payment to Noteholders pursuant to this
Section 6.10.
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SECTION 6.11. Undertaking for Costs.
Each party to this Indenture agrees and each Holder of any
Note by its acceptance thereof shall be deemed to have agreed that, 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 and expenses,
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 6.11
does not apply to a suit instituted by the Company, any suit instituted by the
Trustee, any suit instituted by a Holder pursuant to Section 6.07, or any suit
instituted by a Holder or Holders of more than 10% in principal amount of the
outstanding Notes.
ARTICLE Seven
TRUSTEE
SECTION 7.01. Duties of Trustee.
(a) If an Event of Default has occurred and is continuing, the
Trustee shall exercise such of 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
his or her own affairs.
(b) Except during the continuance of an Event of Default
actually known to a Responsible Officer of the Trustee:
(1) The Trustee need perform only those duties as are
expressly and specifically set forth herein and no others and no
implied covenants, duties or obligations whatsoever shall be read
into this Indenture against the Trustee.
(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 and such other documents delivered to it pursuant to Section
11.04 hereof 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) Notwithstanding anything to the contrary herein contained,
the Trustee may not be relieved from liability for its own negligent action, its
own negligent failure to act, or its own willful misconduct, except that:
(1) This paragraph does not limit the effect of paragraph (b)
of this Section 7.01.
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(2) The Trustee shall not be liable for any error of judgment
made in good faith by a Responsible Officer, unless it is proved that
the Trustee was negligent in ascertaining the pertinent facts
necessary to make such judgment.
(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 6.05.
(d) No provision of this Indenture shall require the Trustee
to expend or risk its own funds or otherwise incur any financial liability in
the performance of any of its duties hereunder or to take or omit to take any
action under this Indenture or take any action at the request or direction of
Holders if it shall reasonably believe that repayment of such funds is not
assured to it or if it receives no indemnity that is, in its sole discretion,
adequate against such risk, liability, loss, fee or expense which might be
incurred by it in compliance with such request or direction.
(e) Every provision of this Indenture that in any way relates
to the Trustee is subject to this Section 7.01 and Section 7.02.
(f) The Trustee shall not be liable for interest on any money
or assets received by it except as the Trustee may agree in writing with the
Company. Assets held in trust by the Trustee need not be segregated from other
assets of the Trustee except to the extent required by law.
(g) The Trustee shall not be accountable for the use of any of
the Notes delivered hereunder or the proceeds thereof.
(h) The permissive right of the Trustee to do things
enumerated in this Indenture shall not be construed as a duty or obligation on
its part and the Trustee shall not be liable for not taking such permissive
action unless it has been negligent or engaged in willful misconduct in not
taking such action.
(i) Except for Events of Default relating to the payment of
the principal or the interest with respect to the Notes, the Trustee shall not
be required to take notice, and shall not be deemed to have notice, of any
Default unless the Trustee shall be notified specifically and expressly in
writing of the Default; such notice being deemed "actual notice." In the absence
of delivery of a written notice satisfying these requirements, the Trustee may
assume conclusively that there is no Default, except as noted above.
SECTION 7.02. Rights of Trustee.
Subject to Section 7.01:
(a) The Trustee may rely conclusively 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.
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(b) Before the Trustee acts or refrains from acting, it may
require an Officers' Certificate and an Opinion of Counsel, which shall conform
to the provisions of Sections 11.04 and 11.05. The Trustee shall not be liable
for any action it takes or omits to take in good faith in reliance on such
certificate or opinion.
(c) The Trustee may act through its attorneys and agents and
shall not be responsible for the misconduct or negligence of any agent (other
than an agent who is an employee of the Trustee) appointed in good faith.
(d) The Trustee shall not be liable for any action it takes or
omits to take in good faith which it reasonably believes to be authorized or
within its rights or powers.
(e) The Trustee may consult with counsel of its selection and
the advice or opinion of such counsel as to matters of law shall be full and
complete authorization and protection from liability in respect of any action
taken, omitted or suffered by it hereunder in good faith and in accordance with
the advice or opinion of such counsel.
(f) The Trustee shall be under no obligation to exercise any
of the rights or powers vested in it by this Indenture at the request, order or
direction of any of the Holders pursuant to the provisions of this Indenture,
unless such Holders shall have offered to the Trustee reasonable security or
indemnity satisfactory to the Trustee in its sole judgment against the costs,
expenses and liabilities which may be incurred therein or thereby.
(g) The Trustee shall not be deemed to have notice of any
Event of Default unless a Responsible Officer of the Trustee has actual
knowledge thereof or unless written notice of any event which is in fact such a
default is received by the Trustee at the Corporate Trust Office of the Trustee,
and such notice references the Notes and this Indenture.
SECTION 7.03. Individual Rights of Trustee.
The Trustee in its individual or any other capacity may become
the owner or pledgee of Notes and may otherwise deal with the Company, its
Subsidiaries, if any, or their respective Affiliates with the same rights it
would have if it were not Trustee. Any Agent may do the same with like rights.
However, the Trustee must comply with Sections 7.10 and 7.11.
SECTION 7.04. 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 Notes, it
shall not be accountable for the Company's use of the proceeds from the Notes,
and it shall not be responsible for any statement of the Company in this
Indenture or any document issued in connection with the sale of Notes or any
statement in the Notes other than the Trustee's certificate of authentication.
SECTION 7.05. Notice of Default.
If a Default or an Event of Default occurs and is continuing
and the Trustee receives actual notice of such event, the Trustee shall mail to
each Noteholder, as their names and addresses appear on the Noteholder list
described in Section 2.06, notice of the uncured
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Default or Event of Default within 90 days after the Trustee receives such
notice. Except in the case of a Default or an Event of Default in payment of
principal of, premium, if any, and interest and Additional Interest, if any, on
any Note, including the failure to make payment on (i) the Change of Control
Payment Date pursuant to a Change of Control Offer or (ii) the Net Proceeds
Offer Payment Date pursuant to a Net Proceeds Offer, the Trustee shall not be
deemed to have actual knowledge or actual notice of a Default or an Event of
Default unless a Responsible Officer of the Trustee received written notice of
such Default or Event of Default and the Trustee may withhold the notice if and
so long as the Board of Directors, the executive committee, or a trust committee
of directors and/or Responsible Officers, of the Trustee in good faith
determines that withholding the notice is in the interest of the Noteholders.
SECTION 7.06. Reports by Trustee to Holders.
Within 60 days after each May 15, the Trustee shall, to the
extent that any of the events described in TIA ss. 313(a) occurred within the
previous twelve months, but not otherwise, mail to each Noteholder 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), 313(c) and 313(d).
A copy of each report at the time of its mailing to
Noteholders shall be mailed to the Company and filed with the Commission and
each securities exchange, if any, on which the Notes are listed.
The Company shall notify the Trustee if the Notes become
listed on any securities exchange or of any delisting thereof.
SECTION 7.07. Compensation and Indemnity.
The Company shall pay to the Trustee from time to time such
compensation for its services hereunder (which shall be agreed to from time to
time by the Company and the Trustee). 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 disbursements, expenses and
advances (including reasonable fees and expenses of counsel) incurred or made by
it in addition to the compensation for its services, except any such
disbursements, expenses and advances as may be attributable to the Trustee's
negligence or willful misconduct. Such expenses shall include the compensation,
disbursements and expenses of the Trustee's agents, accountants, experts and
counsel and any taxes or other expenses incurred by a trust created pursuant to
Section 8.01.
The Company shall indemnify the Trustee and each predecessor
trustee for, and hold it harmless against, any loss, liability, claim, damage or
expense, including taxes (other than taxes based upon, measured by or determined
by the income of the Trustee) incurred by the Trustee without negligence or
willful misconduct on its part arising out of or in connection with the
administration of this trust and its duties under this Indenture, including the
reasonable expenses and attorneys' fees of defending itself against any claim of
liability arising hereunder. The Trustee shall notify the Company promptly of
any claim asserted against the Trustee for which it may seek indemnity. However,
the failure by the Trustee to so notify the Company shall not relieve the
Company of its obligations hereunder unless and to the extent such failure
results
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in the forfeiture by the Company of material rights and defenses. The Company
shall defend the claim and the Trustee shall cooperate in the defense (and may
employ its own counsel) at the Company's expense. The Company need not reimburse
any expense or indemnify against any loss or liability incurred by the Trustee
as a result of the violation of this Indenture by the Trustee if such violation
arose from the Trustee's negligence or willful misconduct.
To secure the Company's payment obligations in this Section
7.07, the Trustee shall have a senior claim prior to the Notes against all money
or property held or collected by the Trustee, in its capacity as Trustee, except
money or property held in trust to pay principal of, premium, if any, or
interest on particular Notes.
When the Trustee incurs expenses or renders services after an
Event of Default specified in clauses (vii) or (viii) of Section 6.01 occurs,
the expenses (including the reasonable fees and expenses of its agents and
counsel) and the compensation for the services shall be preferred over the
status of the Holders in a proceeding under any Bankruptcy Law and are intended
to constitute expenses of administration under any Bankruptcy Law. The Company's
obligations under this Section 7.07 and any claim arising hereunder shall
survive the resignation or removal of any Trustee, the discharge of the
Company's obligations pursuant to Article Eight and any rejection or termination
under any Bankruptcy Law.
SECTION 7.08. Replacement of Trustee.
The Trustee may resign at any time by so notifying the Company
in writing. The Holders of a majority in principal amount of the outstanding
Notes may remove the Trustee by so notifying the Company and the Trustee in
writing and may appoint a successor trustee with the Company's consent. The
Company may 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 becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in
the office of Trustee for any reason, the Company shall notify each Holder in
writing of such event and shall appoint a successor Trustee within 60 days after
the effective date of such resignation, removal or vacancy. Within one year
after the successor Trustee takes office, the Holders of a majority in principal
amount of the Notes may appoint a successor Trustee to replace the successor
Trustee appointed by the Company.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company and immediately
thereafter, (i) the retiring Trustee shall transfer, after payment of all sums
then owing to the Trustee pursuant to Section 7.07, all property held by it as
Trustee to the successor Trustee, subject to the Lien provided in Section 7.07,
(ii) the resignation or removal of the retiring Trustee shall become effective
and (iii) the
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successor Trustee shall have all the rights, powers and duties of the Trustee
under this Indenture. A successor Trustee shall mail notice of its succession to
each Noteholder.
If a successor Trustee does not take office within 30 days
after the retiring Trustee resigns or is removed, the retiring Trustee, the
Company or the Holders of at least 10% in principal amount of the outstanding
Notes 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
Noteholder may petition any court of competent jurisdiction for the removal of
the Trustee and the appointment of a successor Trustee.
Notwithstanding replacement of the Trustee pursuant to this
Section 7.08, the Company's obligations under Section 7.07 shall continue for
the benefit of the retiring Trustee.
SECTION 7.09. Successor Trustee by Merger, Etc.
If the Trustee consolidates with, merges or converts into, or
transfers all or substantially all of its corporate trust business to, another
corporation, the resulting, surviving or transferee corporation without any
further act shall, if such resulting, surviving or transferee corporation is
otherwise eligible hereunder, be the successor Trustee; provided, however, that
such corporation shall be otherwise qualified and eligible under this Article
Seven.
SECTION 7.10. Eligibility; Disqualification.
This Indenture shall always have a Trustee who satisfies the
requirement of TIA ss.ss. 310(a)(1) and 310(a)(5). The Trustee shall be a
commercial bank with trust powers or a trust company, which shall have (or, in
the case of a financial institution, commercial bank with trust powers or a
trust company included in a bank holding company system, the related bank
holding company shall have) a combined capital and surplus of at least
$100,000,000 as set forth in its most recent published annual report of
condition, and subject to supervision or examination by federal or state
authorities, so long as any of the Notes are outstanding. 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. The provisions of TIA ss. 310
shall apply to the Company, as obligors of the Notes.
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. The
provisions of TIA ss. 311 shall apply to the Company, as obligor of the Notes.
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ARTICLE Eight
SATISFACTION AND DISCHARGE OF INDENTURE
SECTION 8.01. Legal Defeasance and Covenant Defeasance.
(a) The Company may, at its option by Board Resolution, at any
time, with respect to the Notes, elect to have either paragraph (b) or paragraph
(c) below be applied to the outstanding Notes upon compliance with the
conditions set forth in paragraph (d).
(b) Upon the Company's exercise under paragraph (a) of the
option applicable to this paragraph (b), the Company and each Subsidiary
Guarantor, if any, shall be deemed to have been released and discharged from its
obligations with respect to the outstanding Notes on the date the conditions set
forth below are satisfied (hereinafter, "Legal Defeasance"). For this purpose,
such Legal Defeasance means that the Company shall be deemed to have paid and
discharged the entire indebtedness represented by the outstanding Notes, which
shall thereafter be deemed to be "outstanding" only for the purposes of the
Sections and matters under this Indenture referred to in (i) and (ii) below, and
to have satisfied all of its other obligations under such Notes and this
Indenture insofar as such Notes are concerned, except for the following which
shall survive until otherwise terminated or discharged hereunder: (i) the rights
of Holders of outstanding Notes to receive solely from the trust fund described
m paragraph (d) below and as more fully set forth in such paragraph, payments in
respect of the principal of, premium, if any, and interest and Additional
Interest, if any, on such Notes when such payments are due, and (ii) obligations
listed in Section 8.03, subject to compliance with this Section 8.01. The
Company may exercise its option under this paragraph (b) notwithstanding the
prior exercise of its option under paragraph (c) below with respect to the
Notes.
(c) Upon the Company's exercise under paragraph (a) of the
option applicable to this paragraph (c), the Company and each Subsidiary
Guarantor, if any, shall be released and discharged from its obligations under
any covenant contained in Article Five and in Sections 4.03 through 4.17 with
respect to the outstanding Notes on and after the date the conditions set forth
below are satisfied (hereinafter, "Covenant Defeasance"), and the Notes shall
thereafter be deemed to be not "outstanding" for the purpose 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. For this purpose, such Covenant
Defeasance means that, with respect to the outstanding Notes, the Company and
its Restricted Subsidiaries, if any, 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 clause (iii)
or clause (iv) of Section 6.01, nor shall any event referred to in clauses (v)
or (vi) of Section 6.01 thereafter constitute a Default or an Event of Default
thereunder but, except as specified above, the remainder of this Indenture and
such Notes shall be unaffected thereby.
(d) The following shall be the conditions to application of
either paragraph (b) or paragraph (c) above to the outstanding Notes:
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(1) The Company shall have irrevocably deposited in trust with
the Trustee, pursuant to an irrevocable trust and security agreement
in form and substance satisfactory to the Trustee, U.S. Legal Tender
or direct non-callable obligations of, or non-callable obligations
guaranteed by, the United States of America for the payment of which
obligation or guarantee the full faith and credit of the United
States of America is pledged ("U.S. Government Obligations") maturing
as to principal and interest in such amounts and at such times as are
sufficient, without consideration of the reinvestment of such
interest and after payment of all Federal, state and local taxes or
other charges or assessments in respect thereof payable by the
Trustee, in the opinion of a nationally recognized investment bank or
firm of independent public accountants expressed in a written
certification thereof (in form and substance reasonably satisfactory
to the Trustee) delivered to the Trustee, to pay the principal of,
premium, if any, and interest and Additional Interest, if any, on all
the outstanding Notes on the dates on which any such payments are due
and payable in accordance with the terms of this Indenture and of the
Notes;
(2) Such deposit shall not cause the Trustee to have a
conflicting interest as defined in and for purposes of the TIA;
(3) The Trustee shall have received an Officers' Certificate
stating that no Default or Event of Default shall have occurred and
be continuing on the date of such deposit or, insofar as clauses
(vii) or (viii) of Section 6.01 are concerned, at any time during the
period ending on the 91st day after the date of such deposit (it
being understood that this condition shall not be deemed satisfied
until the expiration of such period);
(4) The Trustee shall have received an Officers' Certificate
stating that such deposit will not result in a Default under this
Indenture or a breach or violation of, or constitute a default under,
any other material instrument or agreement to which the Company or
any of its Subsidiaries, if any, is a party or by which any of them
or their property is bound (and in that connection, the Trustee shall
have received a certificate from the agent under the Bank Facility to
that effect with respect to the Bank Facility then in effect),
(5) (i) In the event the Company elects paragraph (b) hereof,
the Company shall deliver to the Trustee an Opinion of Counsel in the
United States, in form and substance reasonably satisfactory to the
Trustee to the effect that (A) the Company has received from, or
there has been published by, the Internal Revenue Service a ruling or
(B) since the Issue Date, there has been a change in the applicable
Federal income tax law, in either case to the effect that, and based
thereon such Opinion of Counsel shall state that, Holders of the
Notes will not recognize income gain or loss for Federal income tax
purposes as a result of such deposit and the defeasance contemplated
hereby and will be subject to Federal income taxes in the same manner
and at the same times as would have been the case if such deposit and
defeasance had not occurred or (ii) in the event the Company elects
paragraph (c) hereof, the Company shall deliver to the Trustee an
Opinion of Counsel in the United States, in form and substance
reasonably satisfactory to the Trustee, to the effect that Holders of
the Notes will not recognize income, gain or loss
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for Federal income tax purposes as a result of such deposit and the
defeasance contemplated hereby and will be subject to Federal income
tax in the same amounts and in the same manner and at the same times
as would have been the case if such deposit and defeasance had not
occurred;
(6) The Trustee shall have received an Opinion of Counsel
stating that the deposit shall not result in the Company, the Trustee
or the trust becoming or being deemed to be an "investment company"
under the Investment Company Act of 1940;
(7) The Company shall have delivered to the Trustee an
Officer's Certificate, in form and substance reasonably satisfactory
to the Trustee, stating that the deposit under clause (1) was not
made by the Company with the intent of preferring the Holders over
any other creditors of the Company or any Subsidiary of the Company
or with the intent of defeating, hindering, delaying or defrauding
any other creditors of the Company, any Subsidiary of the Company or
others;
(8) The Company shall have delivered to the Trustee an Opinion
of Counsel, in form and substance reasonably satisfactory to the
Trustee, to the effect that assuming no intervening bankruptcy of the
Company between the date of deposit and the 91st day following the
deposit and that no Holder of Notes is an insider of the Company, (A)
the trust funds will not be subject to the rights of holders of
Indebtedness of the Company other than the Notes and (B) after the
passage of the 91st day following the deposit, the trust funds will
not be subject to any applicable bankruptcy, insolvency,
reorganization or similar law affecting creditors' rights generally;
and
(9) The Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all
conditions precedent specified herein relating to the defeasance
contemplated by this Section 8.01 have been complied with; provided,
however, that no deposit under clause (1) above shall be effective to
terminate the obligations of the Company under the Notes or this
Indenture prior to 90 days following any such deposit.
In the event all or any portion of the Notes are to be
redeemed through such irrevocable trust, the Company must make arrangements
satisfactory to the Trustee, at the time of such deposit, for the giving of the
notice of such redemption or redemptions by the Trustee in the name and at the
expense of the Company.
SECTION 8.02. Satisfaction and Discharge.
This Indenture will be discharged and will cease to be of
further effect (except as to surviving rights listed in Section 8.03 as to all
outstanding Notes when:
(1) either (a) all the Notes, theretofore authenticated and
delivered (except lost, stolen or destroyed Notes which have been
replaced or paid and Notes for whose payment money has theretofore
been deposited in trust or segregated and held in trust by the
Company and thereafter repaid to the Company or discharged from such
trust) have been delivered to the Trustee for cancellation or (b) all
Notes not theretofore delivered to the Trustee for cancellation have
become due and payable, or will become due and
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payable within one year or are to be called for redemption within one
year under arrangements satisfactory to the Trustee for the giving of
notice of redemption, and the Company has irrevocably deposited or
caused to be deposited with the Trustee funds or U.S. Government
Obligations in an amount sufficient to pay and discharge the entire
Indebtedness on the Notes not theretofore delivered to the Trustee
for cancellation, for principal of, premium, if any, and interest and
Additional Interest, if any, on the Notes to the earlier of the
stated maturity or the redemption date together with irrevocable
instructions from the Company directing the Trustee to apply such
funds and/or the proceeds of such U.S. Government Obligations to the
payment thereof at maturity or redemption, as the case may be;
(2) the Company has paid all other sums payable under this
Indenture by the Company; and
(3) the Company has delivered to the Trustee an Officers'
Certificate stating that all conditions precedent under this
Indenture relating to the satisfaction and discharge of this
Indenture have been complied with.
SECTION 8.03. Survival of Certain Obligations.
Notwithstanding the satisfaction and discharge of this
Indenture and of the Notes referred to in Section 8.01 or 8.02, the respective
obligations of the Company and the Trustee under Sections 2.03, 2.04, 2.05,
2.06, 2.07, 2.08, 2.11, 2.13, 2.14, 4.01, 4.02, 6.07, Article Seven, Sections
8.05, 8.06 and 8.07 shall survive until the Notes are no longer outstanding, and
thereafter the obligations of the Company and the Trustee under Sections 7.07,
8.05, 8.06 and 8.07 shall survive. Nothing contained in this Article Eight shall
abrogate any of the obligations or duties of the Trustee under this Indenture.
SECTION 8.04. Acknowledgment of Discharge by Trustee.
Subject to Section 8.07, after (i) the conditions of Section
8.01 or 8.02 have been satisfied, (ii) the Company has paid or caused to be paid
all other sums payable hereunder by the Company and (iii) the Company has
delivered to the Trustee an Officers' Certificate and an Opinion of Counsel,
each stating that all conditions precedent referred to in clause (i) above
relating to the satisfaction and discharge of this Indenture have been complied
with, the Trustee upon written request shall acknowledge in writing the
discharge of the Company's obligations under this Indenture except for those
surviving obligations specified in Section 8.03.
SECTION 8.05. Application of Trust Assets.
The Trustee shall hold any U. S. Legal Tender or U. S.
Government Obligations deposited with it pursuant to this Article Eight in the
irrevocable trust established pursuant to Section 8.01 or Section 8.02, as the
case may be. The Trustee shall apply the deposited U.S. Legal Tender or the U.
S. Government Obligations, together with earnings thereon, through the Paying
Agent, in accordance with this Indenture and the terms of the irrevocable trust
established pursuant to Section 8.01 or Section 8.02, as the case may be, to the
payment of principal of, premium, if any, and interest and Additional Interest,
if any, on the Notes. The U. S. Legal Tender or U. S. Government Obligations so
held in trust and deposited with the Trustee in
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compliance with Section 8.01 or Section 8.02 shall not be part of the trust
estate under this Indenture, but shall constitute a separate trust fund for the
benefit of all Holders entitled thereto.
SECTION 8.06. Repayment to the Company; Unclaimed Money.
Subject to Section 7.07, the Trustee shall promptly pay to the
Company, upon receipt by the Trustee of an Officers' Certificate, any excess
money, determined in accordance with Section 8.01 or Section 8.02, held by it at
any time. The Trustee and the Paying Agent shall pay to the Company upon receipt
by the Trustee or the Paying Agent, as the case may be, of an officers'
Certificate, any money held by it for the payment of principal of, premium, if
any, and interest and Additional Interest, if any, that remains unclaimed for
two years after payment to the Holders is required; provided, however, that the
Trustee and the Paying Agent before being required to make any payment may, but
are not required to, at the expense of the Company and within 10 days of receipt
of the Officers' Certificate described above, 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. After payment to the Company, Noteholders entitled to
money must look solely to the Company for payment as general creditors unless an
applicable abandoned property law designates another Person, and all liability
of the Trustee or Paying Agent with respect to such money shall thereupon cease.
SECTION 8.07. Reinstatement.
If the Trustee or Paying Agent is unable to apply any U.S.
Legal Tender or U.S. Government Obligations in accordance with this Indenture by
reason of any legal proceeding pending before or any order or judgment of any
court or governmental authority enjoining, restraining or otherwise prohibiting
such application, then and only then the Company's obligations under this
Indenture and the Notes shall be revived and reinstated as though no deposit had
been made pursuant to this Indenture until such time as the Trustee is permitted
to apply all such U.S. Legal Tender or U.S. Government Obligations in accordance
with this Indenture; provided, however, that if the Company has made any payment
of principal of, premium, if any, and interest and Additional Interest, if any,
on any Notes because of the reinstatement of its obligations, the Company shall
be subrogated to the rights of the Holders of such Notes to receive such payment
from the U.S. Legal Tender or U.S. Government Obligations held by the Trustee or
Paying Agent.
ARTICLE Nine
AMENDMENTS, SUPPLEMENTS AND WAIVERS
SECTION 9.01. Without Consent of Holders.
The Company and the Trustee, together, may amend or supplement
this Indenture or the Notes without notice to or consent of any Noteholder:
(1) to cure any ambiguity, defect or inconsistency;
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(2) to evidence the succession in accordance with Article Five
hereof of another Person to the Company and the assumption by any
such successor of the covenants of the Company herein and in the
Notes;
(3) to evidence the succession in accordance with Article Five
hereof of another Person to any Subsidiary Guarantor and the
assumption by such successor of the obligations of such Subsidiary
Guarantor herein;
(4) to provide for Subsidiary Guarantors;
(5) to evidence the release of any Subsidiary Guarantor in
accordance with Section 10.06;
(6) to evidence the appointment hereunder of a successor
Trustee hereunder;
(7) to secure the Notes in accordance with Section 4.13;
(8) to provide for uncertificated Notes in addition to or in
place of certificated Notes;
(9) to make any other change that does not, in the opinion of
the Trustee, adversely affect in any material respect the rights of
any Noteholders hereunder;
(10) to comply with any requirements of the Commission in
connection with the qualification of this Indenture under the TIA; or
(11) to make any change that would provide any additional
benefit or rights to the Noteholders or that does not adversely
affect the rights of any Noteholder;
provided, that (i) in the opinion of the Trustee, no such change or amendment
adversely affects the rights of any Holders in any material respect (and in
formulating its opinion, the Trustee is entitled to rely on such evidence as it
deems appropriate, including, without limitation, solely on an Opinion of
Counsel) and (ii) the Company has delivered to the Trustee an Opinion of Counsel
and an Officers' Certificate, each stating that such amendment or supplement
complies with the provisions of this Section 9.01.
SECTION 9.02. With Consent of Holders.
Subject to Section 6.07, the Company and the Trustee,
together, with the written consent of the Holder or Holders of at least a
majority in aggregate principal amount of the outstanding Notes, may amend or
supplement this Indenture or the Notes, without notice to any other Noteholders.
Subject to Section 6.07, the Holder or Holders of a majority in aggregate
principal amount of the outstanding Notes may waive compliance by the Company
with any provision of this Indenture or the Notes without notice to any other
Noteholder. Without the consent of each Noteholder affected, however, no
amendment, supplement or waiver, including a waiver pursuant to Section 6.04,
may:
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(1) reduce the amount of Notes whose Holders must consent to
an amendment, supplement or waiver;
(2) reduce the rate of 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 reduce the redemption
price therefor;
(4) make any Notes payable in money other than that stated in
the Notes;
(5) make any change in provisions of this Indenture entitling
each Holder to receive payment of principal of, premium, if any, and
interest and Additional Interest, if any, on such Note on or after
the due date thereof or to bring suit to enforce such payment, or
permitting Holders of a majority in principal amount of the Notes to
waive Defaults or Events of Default;
(6) make any changes in Section 6.04, 6.07 or this sentence of
this Section 9.02;
(7) amend, modify or change in any material respect the
obligation of the Company to make and consummate a Change of Control
Offer in respect of a Change of Control that has occurred or make and
consummate a Net Proceeds Offer with respect to any Asset Sale that
has been consummated.
It shall not be necessary for the consent of the Holders under
this Section to approve the particular form of any proposed amendment,
supplement or waiver, but it shall be sufficient if such consent approves the
substance thereof.
After an amendment, supplement or waiver under this Section
9.02 becomes effective, the Company shall mail to the Holders affected thereby a
notice briefly describing the amendment, supplement or waiver. Any failure of
the Company to mail such notice, or any defect therein, shall not, however, in
any way impair or affect the validity of any such amendment, supplement, waiver
or supplemental indenture.
SECTION 9.03. Compliance with TIA.
From the date on which this Indenture is qualified under the
TIA, every amendment, waiver or supplement of this Indenture or the Notes shall
comply with the TIA as then in effect, such compliance to be evidenced by an
Opinion of Counsel.
SECTION 9.04. Revocation and Effect of Consents.
Until an amendment, waiver or supplement becomes effective, a
consent to it by a Holder is a continuing consent by the Holder and every
subsequent Holder of a Note or portion of a Note that evidences the same debt as
the consenting Holder's Note, even if notation of the consent is not made on any
Note. However, any such Holder or subsequent Holder may revoke
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the consent as to his Note or portion of his Note by notice to the Trustee or
the Company received before the date on which the Trustee receives an Officers'
Certificate certifying that the Holders of the requisite principal amount of
Notes have consented (and not theretofore revoked such consent) to the
amendment, supplement or waiver.
The Company may, but shall not be obligated to, fix a record
date for the purpose of determining the Holders entitled to consent to any
amendment, supplement or waiver. If a record date is fixed, then notwithstanding
the last sentence of the immediately preceding paragraph, those Persons who were
Holders at such record date (or their duly designated proxies), and only those
Persons, shall be entitled to revoke any consent previously given, whether or
not such Persons continue to be Holders after such record date. No such consent
shall be valid or effective for more than 90 days after such record date.
After an amendment, supplement or waiver becomes effective, it
shall bind every Noteholder, unless it makes a change described in any of
clauses (1) through (7) of Section 9.02, in which case, the amendment,
supplement or waiver shall bind only each Holder of a Note who has consented to
it and every subsequent Holder of a Note or portion of a Note that evidences the
same debt as the consenting Holder's Note; 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 and Additional Interest, if any, on a Note, on or
after the respective due dates expressed in such Note, or to bring suit for the
enforcement of any such payment on or after such respective dates without the
consent of such Holder.
SECTION 9.05. Notation on or Exchange of Notes.
If an amendment, supplement or waiver changes the terms of a
Note, the Company may require the Holder of the Note to deliver it to the
Trustee. The Company may place an appropriate notation on the Note about the
changed terms and return it to the Holder. Alternatively, if the Company or the
Trustee so determines, the Company in exchange for the Note shall issue and the
Trustee shall authenticate a new Note that reflects the changed terms.
SECTION 9.06. Trustee To Sign Amendments, Etc.
The Trustee shall execute any amendment, supplement or waiver
authorized pursuant to this Article Nine; provided that the Trustee may, but
shall not be obligated to, execute any such amendment, supplement or waiver
which affects the Trustee's own rights, duties or immunities under this
Indenture. The Trustee shall be entitled to receive, and shall be fully
protected in relying upon, an Opinion of Counsel and an Officers' Certificate
each stating that the execution of any amendment, supplement or waiver
authorized pursuant to this Article Nine is authorized or permitted by this
Indenture. Such Opinion of Counsel shall be at the expense of the Company.
SECTION 9.07. Payment for Consent.
Neither the Company nor any of its Subsidiaries, if any,
shall, directly or indirectly, pay or cause to be paid any consideration,
whether by way of interest, fee or otherwise, to any Holder of any Notes for or
as an inducement to any consent, waiver or amendment of any terms or provisions
of the Notes, unless' such consideration is offered to be
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paid or agreed to be paid to all Holders of the Notes which so consent, waive or
agree to amend in the time frame set forth in the solicitation documents
relating to such consent, waiver or agreement.
ARTICLE Ten
GUARANTEES; RELEASE OF GUARANTEES
SECTION 10.01. Guarantees.
(a) Each Subsidiary Guarantor hereby unconditionally and
irrevocably, jointly and severally with any other Subsidiary Guarantors,
guarantees on a senior, unsecured basis to each Holder and to the Trustee and
its successors and assigns (a) the full and punctual payment of principal of,
premium, if any, interest and Additional Interest, if any, on the Notes when
due, whether at maturity, by acceleration, by redemption or otherwise, and all
expenses and indemnification and other monetary obligations of the Company under
this Indenture and the Notes and (b) the full and punctual performance within
applicable grace periods of all other obligations of the Company under this
Indenture and the Notes (all the foregoing being hereinafter collectively called
the "Obligations"). Each Subsidiary Guarantor hereby further agrees that the
Obligations may be extended or renewed, in whole or in part, without notice or
further assent from such Subsidiary Guarantor and that such Subsidiary Guarantor
will remain bound under this Article Ten notwithstanding any extension or
renewal of any Obligation.
(b) Each Subsidiary Guarantor hereby waives presentation to,
demand of, payment from and protest to the Company of any of the Obligations and
also waives notice of protest for nonpayment. Each Subsidiary Guarantor waives
notice of any default under the Notes or the Obligations. The obligations of
each Subsidiary Guarantor hereunder shall not be affected by (a) the failure of
any Holder or the Trustee to assert any claim or demand or to enforce any right
or remedy against the Company or any other Person under this Indenture, the
Notes or any other agreement or otherwise; (b) any extension or renewal of any
thereof, (c) any rescission, waiver, amendment or modification of any of the
terms or provisions of this Indenture, the Notes or any other agreement; (d) the
release of any security held by any Holder or the Trustee for the Obligations or
any of them; (e) the failure of any Holder or Trustee to exercise any right or
the Obligations; or (f) subject to Section 10.06, any change in the ownership of
any Subsidiary Guarantor.
(c) Each Subsidiary Guarantor hereby further agrees that its
Guarantee herein constitutes a guarantee of payment, performance and compliance
when due (and not a guarantee of collection) and waives any right to require
that any resort be had by any Holder or the Trustee to any security held for
payment of the Obligations.
(d) The obligations of each Subsidiary Guarantor hereunder
shall not be subject to any reduction, limitation, impairment or termination for
any reason, including any claim of waiver, release, surrender, alteration or
compromise, and shall not be subject to any defense of setoff, counterclaim,
recoupment or termination whatsoever or by reason of the invalidity, illegality
or unenforceability of the Obligations or otherwise. Without limiting the
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generality of the foregoing, the obligations of each Subsidiary Guarantor herein
shall not be discharged or impaired or otherwise affected by the failure of any
Holder or the Trustee to assert any claim or demand or to enforce any remedy
under this Indenture, the Notes or any other agreement, by any waiver or
modification of any thereof, by any default, failure or delay, willful or
otherwise, in the performance of the Obligations, or by any other act or thing
or omission or delay to do any other act or thing which may or might in any
manner or to any extent vary the risk of each Subsidiary Guarantor or would
otherwise operate as a discharge of such Subsidiary Guarantor as a matter of law
or equity.
(e) Each Subsidiary Guarantor hereby further agrees that its
Guarantee herein shall continue to be effective or be reinstated, as the case
may be, if at any time payment, or any part thereof, of principal, premium, if
any, or interest or Additional Interest, if any, on any Obligation is rescinded
or must otherwise be restored by any Holder or the Trustee upon the bankruptcy
or reorganization of the Company or otherwise.
(f) In furtherance of the foregoing and not in limitation of
any other right which any Holder or the Trustee has at law or in equity against
any Subsidiary Guarantor by virtue hereof, upon the failure of the Company to
pay the principal of, premium, if any or interest or Additional Interest, if
any, on any Obligation when and as the same shall become due, whether at
maturity, by acceleration, by redemption or otherwise, or to perform or comply
with any other Obligation, each Subsidiary Guarantor promises to and will, upon
receipt of written demand by the Trustee, forthwith pay, or cause to be paid, in
cash, to the Holders or the Trustee an amount equal to the sum of (i) the unpaid
amount of such Obligations, (ii) accrued and unpaid interest on such Obligations
(but only to the extent not prohibited by law) and (iii) all other monetary
Obligations of the Company to the Holders and the Trustee.
(g) Each Subsidiary Guarantor hereby further agrees that, as
between it, 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 Six for the purposes of such Subsidiary Guarantor's
Guarantee herein, notwithstanding any stay, injunction or other prohibition
preventing such acceleration in respect of the Obligations guaranteed hereby,
and (y) in the event of any declaration of acceleration of such Obligations as
provided in Article Six, such Obligations (whether or not due and payable) shall
forthwith become due and payable by such Subsidiary Guarantor for the purposes
of this Section 10.01.
(h) Each Subsidiary Guarantor also agrees to pay on a senior
unsecured basis and in addition to the amounts stated in clause (a) of Section
10.01 any and all expenses (including reasonable counsel's fees and expenses)
incurred by the Trustee in enforcing against such Subsidiary Guarantor any
rights under this Section 10.01.
SECTION 10.02. Successors and Assigns.
This Article Ten shall be binding upon each Subsidiary
Guarantor and its successors and assigns and shall remain in full effect and
force until payment in full of all the Obligations or until released under
Section 10.06.
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SECTION 10.03. No Waiver.
Neither a failure nor a delay on the part of either the
Trustee or the Holders in exercising any right, power or privilege under this
Article Ten shall operate as a waiver thereof, nor shall a single or partial
exercise thereof preclude any other or further exercise of any right, power or
privilege. The rights, remedies and benefits of the Trustee and the Holders
herein expressly specified are cumulative and not exclusive of any other rights,
remedies or benefits which either may have under this Article Ten at law, in
equity, by statute or otherwise.
SECTION 10.04. Modification.
No modification, amendment or waiver of any provision of this
Article Ten, nor the consent to any departure by any Subsidiary Guarantor
therefrom, shall in any event be effective unless the same shall be in writing
and signed by the Trustee, and then such waiver or consent shall be effective
only in the specific instance and for the purpose for which it is given. No
notice to or demand on any Subsidiary Guarantor in any case shall entitle such
Subsidiary Guarantor to any other or further notice or demand in the same,
similar or other circumstances.
SECTION 10.05. Limitation of Subsidiary Guarantor's Liability.
It is the intention of all parties that the Guarantee of each
Subsidiary Guarantor not constitute a fraudulent transfer or conveyance for
purposes of the Bankruptcy Law, federal and state fraudulent conveyance laws or
any similar federal, state or foreign law. To effectuate the foregoing
intention, it is agreed that the obligations of each Subsidiary Guarantor under
this Article Ten shall be limited to the maximum amount as will, after giving
effect to all other contingent and fixed liabilities of such Subsidiary
Guarantor and after giving effect to any collections from or payments made by or
on behalf of any other Subsidiary Guarantor in respect of the obligations of
such other Subsidiary Guarantor under this Article Ten, result in the
obligations of such Subsidiary Guarantor under its Guarantee not constituting a
fraudulent transfer or conveyance under applicable federal, state or foreign
law.
SECTION 10.06. Release of Guarantees.
(a) In the event of a disposition of all of the assets or all
of the Capital Stock of any Subsidiary Guarantor, by way of sale, merger,
consolidation or otherwise, such Subsidiary Guarantor in the event of a
disposition of all of the Capital Stock or all of the assets of such Subsidiary
Guarantor or the surviving entity (whether or not such Subsidiary Guarantor) in
the event of a merger or consolidation will be deemed released and relieved of
its obligations under its Guarantee and this Indenture without any further
action required on the part of the Trustee or any Holder and the Person
acquiring or owning the assets or Capital Stock of such Subsidiary Guarantor (if
not otherwise required to be a Subsidiary Guarantor pursuant to the provisions
of Section 4.17) will not be required to enter into a Guarantee; provide in each
case, that such transaction is carried out pursuant to and in accordance with
Section 4.15 and, if applicable, Section 5.01.
(b) If a Subsidiary Guarantor becomes an Unrestricted
Subsidiary, it will be deemed released and relieved of its obligations under its
Guarantee and this Indenture without any further action required on the part of
the Trustee or any Holder.
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(c) A non-Wholly Owned Restricted Subsidiary that is a
Subsidiary Guarantor solely by reason of its guarantee of other Indebtedness of
the Company or a Subsidiary Guarantor will be deemed released and relieved of
its obligations under its Guarantee and this Indenture without any further
action required on the part of the Trustee or any Holder if it is released and
relieved of its guarantee of such other Indebtedness and such Subsidiary
Guarantor gives written notice to the Trustee of its election to be so released.
Upon delivery by the Company to the Trustee of an Officers'
Certificate and Opinion of Counsel, to the effect that a Subsidiary Guarantor
has been deemed released from its obligations under its Guarantee and this
Indenture pursuant to this Section 10.06, the Trustee shall execute any
documents reasonably requested by the Company or such Subsidiary Guarantor in
order to evidence the release of such Subsidiary Guarantor from its obligations
under its Guarantee and this Indenture.
ARTICLE Eleven
MISCELLANEOUS
SECTION 11.01. TIA Controls.
If any provision of this Indenture limits, qualifies, or
conflicts with the duties imposed by operation of Section 318(c) of the TIA, the
imposed duties shall control.
SECTION 11.02. Notices.
Any notices or other communications required or permitted
hereunder shall be in writing, and shall be sufficiently given if made by hand
delivery, by telecopier or registered or certified mail, postage prepaid, return
receipt requested, addressed as follows:
if to the Company or any Subsidiary Guarantor:
Diamond Triumph Auto Glass, Inc.
220 Division Street
Kingston, PA 18704
Attention: General Counsel
Facsimile: (717) 287-2149
with copies to:
Green Equity Investors II, L.P.
11111 Santa Monica Boulevard
Suite 2000
Los Angeles, California 90025
Attention: Gregory J. Annick
Facsimile: (310) 954-0404
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Kramer, Levin, Naftalis & Frankel
919 Third Avenue
New York, NY 10022
Attention: Howard A. Sobel, Esq.
Facsimile: (212) 715-8326
if to the Trustee:
State Street Bank and Trust Company
Goodwin Square
225 Asylum Street, 23rd Floor
Hartford, CT 06103
Attention: Corporate Trust Department
Facsimile: (860) 244-1889
Each of the Company and the Trustee by written notice to each
other such Person may designate additional or different addresses for notices to
such Person. Any notice or communication to the Company and the Trustee shall be
deemed to have been given or made as of the date so delivered if personally
delivered; when answered back, if telexed; when receipt is acknowledged, if
telecopied; and five (5) calendar days after mailing if sent by registered or
certified mail, postage prepaid (except that, notwithstanding the foregoing, a
notice of change of address shall not be deemed to have been given until
actually received by the addressee).
Any notice or communication mailed to a Noteholder shall be
mailed to him by first class mail or other equivalent means at his address as it
appears on the registration books of the Registrar and shall be sufficiently
given to him if so mailed within the time prescribed.
Failure to mail a notice or communication to a Noteholder or
any defect in it shall not affect its sufficiency with respect to other
Noteholders. If a notice or communication is mailed in the manner provided
above, it is duly given, whether or not the addressee receives it.
SECTION 11.03. Communications by Holders with Other Holders.
Noteholders may communicate pursuant to TIA ss. 312(b) with
other Noteholders with respect to their rights under this Indenture or the
Notes. The Company, the Trustee, the Registrar and any other Person shall have
the protection of TIA ss. 312(c).
SECTION 11.04. Certificate and Opinion as to Conditions Precedent.
Upon any request or application by the Company to the Trustee
to take any action the Company shall furnish to the Trustee at the request of
the Trustee:
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(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 stating that, in the opinion of such
counsel, all such conditions precedent have been complied with.
SECTION 11.05. Statements Required in Certificate or Opinion.
Each certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture, other than the Officers'
Certificate required by Section 4.08, shall include:
(1) a statement that the Person making such certificate or
opinion has read such covenant or condition and the definitions
relating thereto;
(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 Person, 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 each
such Person, such condition or covenant has been complied with;
provided, however, that with respect to matters of fact an Opinion of
Counsel may rely on an Officers' Certificate or certificates of
public officials.
SECTION 11.06. Rules by Trustee, Paying Agent, Registrar.
The Trustee, Paying Agent or Registrar may make reasonable
rules for its functions.
SECTION 11.07. Legal Holidays.
If a payment date is not a Business Day, payment may be made
on the next succeeding day that is a Business Day, and no interest shall accrue
for the intervening period.
SECTION 11.08. Governing Law.
(a) THIS INDENTURE AND THE NOTES 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 LAW OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY.
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(b) Each of the Company and the future Subsidiary Guarantors,
if any, hereby (i) agrees or will agree, as the case may be, that any suit,
action or proceeding against it arising out of or relating to this Indenture or
the Notes, as the case may be, may be instituted in any Federal or state court
sitting in The City of New York, (ii) waives or will waive, as the case may be,
to the extent permitted by applicable law, any objection which it may now or
hereafter have to the laying of venue of any such suit, action or proceeding,
and any claim that any suit, action or proceeding in such a court has been
brought in an inconvenient forum, (iii) irrevocably submits or will submit, as
the case may be, to the non-exclusive jurisdiction of such courts in any suit,
action or proceeding, (iv) agrees or will agree, as the case may be, that final
judgment in any such suit, action or proceeding brought in such a court shall be
conclusive and binding upon each and may be enforced in the courts of the
jurisdiction of which each is subject, respectively, by a suit upon judgment,
(v) agrees or will agree, as the case may be, that service of process by mail to
the addressed specified in Section 11.02 hereof shall constitute personal
service of such process on it in any such suit, action or proceeding.
SECTION 11.09. No Adverse Interpretation of Other Agreements.
This Indenture may not be used to interpret another indenture,
loan or debt agreement of the Company or any of its Subsidiaries. Any such
indenture, loan or debt agreement may not be used to interpret this Indenture.
SECTION 11.10. No Recourse Against Others.
A director, officer, employee, stockholder or incorporator, as
such, of the Company or of any Subsidiary Guarantor shall not have any liability
for any obligations of the Company or of such Subsidiary Guarantor under the
Notes, the Guarantees, or this Indenture or for any claim based on, in respect
of or by reason of such obligations or their creation. Each Noteholder by
accepting a Note waives and releases all such liability. Such waiver and release
are part of the consideration for the issuance of the Notes.
SECTION 11.11. Successors.
All agreements of the Company in this Indenture and the Notes
shall bind its successors. All agreements of the Trustee in this Indenture shall
bind its successor.
SECTION 11.12. Duplicate Originals.
All parties may sign any number of copies of this Indenture.
Each signed copy or counterpart shall be an original, but all of them together
shall represent the same agreement.
SECTION 11.13. Severability.
In case any one or more of the provisions in this Indenture or
in the Notes shall be held invalid, illegal or unenforceable, in any respect for
any reason, the validity, legality and enforceability of any such provision in
every other respect and of the remaining provisions shall not in any way be
affected or impaired thereby, it being intended that all of the provisions
hereof shall be enforceable to the full extent permitted by law.
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SECTION 11.14. Effect of Headings and Table of Contents.
The Article and Section headings herein and the Table of
Contents are for convenience only and shall not affect the construction hereof.
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SIGNATURES
IN WITNESS WHEREOF, the parties hereto have caused this
Indenture to be duly executed as of the date first written above.
THE COMPANY:
DIAMOND TRIUMPH
AUTO GLASS, INC.
By: /s/ Kenneth Levine
---------------------------------------
Name: Kenneth Levine
Title: Co-Chief Executive Officer
THE TRUSTEE:
STATE STREET BANK AND TRUST COMPANY
By: /s/ Phillip Kane, Jr.
--------------------------------------
Name: Phillip Kane, Jr.
Title: Vice President
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Exhibit 4.2
DIAMOND TRIUMPH AUTO GLASS, INC.
9 1/4% Senior Notes Due 2008
REGISTRATION RIGHTS AGREEMENT
New York, New York
March 31, 1998
First Union Capital Markets
BT Alex. Brown Incorporated
Donaldson, Lufkin & Jenrette Securities Corporation
As Initial Purchasers under the Purchase Agreement
c/o First Union Capital Markets
301 South College Street, TW-10
Charlotte, NC 28288-0606
Ladies and Gentlemen:
This Registration Rights Agreement (the "Agreement") is dated
as of March 31, 1998, by and among Diamond Triumph Auto Glass, Inc., a Delaware
corporation (the "Issuer"), First Union Capital Markets, a division of Wheat
First Securities, Inc., BT Alex. Brown Incorporated and Donaldson, Lufkin &
Jenrette Securities Corporation (the "Initial Purchasers").
This Agreement is being entered into in connection with a
certain note purchase agreement, dated March 26, 1998, between the Issuer and
the Initial Purchasers (the "Purchase Agreement"), which provides for the
issuance and sale by the Issuer to the Initial Purchasers of $100,000,000
aggregate principal amount of the Issuer's 9 1/4% Senior Notes Due 2008 (the
"Notes"). In order to induce the Initial Purchasers to enter into the Purchase
Agreement, the Issuer has agreed to provide the registration rights set forth in
this Agreement for the benefit of the Initial Purchasers and their direct and
indirect transferees. The execution and delivery of this Agreement is a
condition to the obligation of the Initial Purchasers to purchase the Notes
under the Purchase Agreement. The parties hereby agree as follows:
1. Definitions. Capitalized terms used herein without
definition shall have their respective meanings set forth in the Purchase
Agreement. As used in this Agreement, the following capitalized defined terms
shall have the following meanings:
"Act" means the Securities Act of 1933. as amended, and the
rules and regulations of the Commission promulgated thereunder.
"Additional Interest" has the meaning set forth in Section 4
hereto.
"Affiliate" means, with respect to any specified person, any
other person that, directly or indirectly, is in control of, is controlled by,
or is under common control with, such
<PAGE>
specified person. For purposes of this definition, control of a person means the
power, direct or indirect, to direct or cause the direction of the management
and policies of such person whether by contract or otherwise; and the terms
"controlling" and "controlled" have meanings correlative to the foregoing.
"Agreement" has the meaning set forth in the preamble hereto.
"Business Day" means any day excluding Saturday, Sunday or any
other day which is a legal holiday under the laws of Charlotte, North Carolina
or New York, New York or is a day on which banking institutions therein located
are authorized or required by law or other governmental action to close.
"Closing Date" has the meaning set forth in the Purchase
Agreement.
"Commission" mean the Securities and Exchange Commission.
"Consummate" means, with respect to a Registered Exchange
Offer, the occurrence of (a) the filing and effectiveness under the Act of the
Exchange Offer Registration statement relating to the Exchange Notes to be
issued in the Registered Exchange Offer, (b) the maintenance of such
Registration Statement continuously effective and the keeping of the Registered
Exchange Offer open for a period not less than the minimum period required
pursuant t to Section 2(c)(ii) hereof, (c) the Issuer's acceptance for exchange
of all Transfer Restricted Notes duly tendered and not validly withdrawn
pursuant to the Registered Exchange Offer and (d) the delivery of Exchange Notes
by the Issuer to the registrar under the Indenture in the same aggregate
principal amount as the aggregate principal amount of Transfer Restricted Notes
validly tendered by Holders thereof pursuant to the Registered Exchange Offer.
The term "Consummation" has a meaning correlative to the foregoing.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations of the Commission promulgated thereunder.
"Exchange Notes" means debt securities of the Issuer
substantially identical in all material respects to the Notes (except that the
Additional Interest provisions and the transfer restrictions pertaining to the
Notes will be modified or eliminated, as appropriate), to be issued under the
Indenture.
"Exchange Offer Registration Period" means the 180-day period
following the Consummation of the Registered Exchange Offer, exclusive of any
period during which any stop order shall be in effect suspending the
effectiveness of the Exchange Offer Registration Statement; provided, however,
that in the event that all resales of Exchange Notes (including, subject to the
time periods set forth herein, any resales by Exchanging Dealers) covered by
such Exchange Offer Registration Statement have been made, the Exchange Offer
Registration Statement need not thereafter remain continuously effective for
such period.
"Exchange Offer Registration Statement" means a registration
statement of the issuer on an appropriate form under the Act with respect to the
Registered Exchange Offer, all amendments and supplements to such registration
statement, including post-effective amendments, in each case including the
Prospectus contained therein, all exhibits thereto and all material incorporated
by reference therein.
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"Exchanging Dealer" means any Holder (which may include any of
the Initial Purchasers) that is a broker-dealer, electing to exchange Notes
acquired for its own account as a result of market-making activities or other
trading activities for Exchange Notes.
"Filing Date" has the meaning set forth in Section 2 hereto.
"Final Memorandum" has the meaning set forth in the Purchase
Agreement.
"Holder" means any holder from time to time of Transfer
Restricted Notes or Exchange Notes (including any of the Initial Purchasers).
"Indenture" means the indenture relating to the Notes and the
Exchange Notes, to be dated as of the Closing Date, among the Issuer and State
Street Bank and Trust Company, as trustee, as the same may be amended,
supplemented, waived or otherwise modified from time to time in accordance with
the terms thereof. It shall include the provisions of the Trust Indenture Act
that are deemed to be part of the Indenture.
"Initial Purchasers" has the meaning set forth in the preamble
hereto.
"Issuer" has the meaning set forth in the preamble hereto.
"Losses" has the meaning set forth in Section 7(d) hereto.
"Majority Holders" means the Holders of a majority of the
aggregate principal amount of Transfer Restricted Notes registered under a
Registration Statement.
"Managing Underwriters" means the investment banker or
investment bankers and manager or managers that shall administer an underwritten
offering under a Shelf Registration Statement.
"Notes" has the meaning set forth in the preamble hereto.
"Prospectus" means the prospectus included in any Registration
Statement (including, without limitation, a prospectus that discloses
information previously omitted from a prospectus filed as part of an effective
registration statement in reliance upon Rule 430A under the Act), as amended or
supplemented by any prospectus supplement, with respect to the terms of the
offering of any portion of the Transfer Restricted Notes covered by such
Registration Statement, and all amendments and supplements to the Prospectus,
including post-effective amendments.
"Purchase Agreement" has the meaning set forth in the preamble
hereto.
"Registered Exchange Offer" means the proposed offer to the
Holders to issue and deliver to such Holders, in exchange for the Notes, a like
principal amount of Exchange Notes.
"Registration Statement" means any Exchange Offer Registration
Statement or Shelf Registration Statement that covers any of the Transfer
Restricted Notes (including any guarantees of each thereof) pursuant to the
provisions of this Agreement, amendments and supplements to such registration
statement, including post-effective amendments, in each case including the
Prospectus contained therein, all exhibits thereto, and all material
incorporated by reference therein.
"Shelf Registration" means a registration effected pursuant to
Section 3 hereof.
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<PAGE>
"Shelf Registration Period" has the meaning set forth in
Section 3(c) hereof.
"Shelf Registration Statement" means a "shelf' registration
statement of the Issuer pursuant to the provisions of Section 3 hereof, which
covers some or all of the Transfer Restricted Notes, as applicable, on an
appropriate form under Rule 415 under the Act, or any similar rule that may be
adopted by the Commission, all amendments and supplements to such registration
statement, including post-effective amendments, in each case including the
Prospectus contained therein, all exhibits thereto and all material incorporated
by reference therein.
"Shelf Registration Trigger Date" means the date on which the
filing of a Shelf Registration is requested or required under Section 3 hereof.
"Transfer Restricted Notes" means each Note upon original
issuance thereof and at all times subsequent thereto, each Exchange Note as to
which Section 3 (a) (ii) and Section 3 (a) (iv) apply upon original issuance and
at all times subsequent thereto, until in the case of any such Note or Exchange
Note, as the case may be, the earliest to occur of (i) the date on which such
Note has been exchanged by a person other than an Exchanging Dealer for an
Exchange Note (other than with respect to an Exchange Note as to which Section 3
(a) (ii) and Section 3 (a) (iv) apply), (ii) with respect to Exchange Notes
received by Exchanging Dealers in the Exchange Offer, the earlier to occur of
(x) the date on which such Exchange Note has been sold by such Exchanging Dealer
by means of the Prospectus contained in the Exchange Offer Registration
Statement and (y) the date on which the Exchange Offer Registration Statement
has been effective under the Act for a continuous period of 180 days following
Consummation, (iii) a Shelf Registration Statement covering such Note or
Exchange Note, as the case may be, has been declared effective by the Commission
and such Note or Exchange Note, as the case may be, has been disposed of in
accordance with such effective Shelf Registration Statement, (iv) the date on
which such Note or Exchange Note, as the case may be, is disposed of pursuant to
Rule 144 under the Act or (v) such Note or Exchange Note, as the case may be,
ceases to be outstanding for purposes of the Indenture.
"Trust Indenture Act" means the Trust Indenture Act of 1939,
as amended.
"Trustee" means the trustee with respect to the Notes or
Exchange Notes, as applicable, under the Indenture.
2. Registered Exchange Offer: Resales of Exchange Notes by
Exchanging Dealers: Private Exchange. (a) The Issuer shall prepare and, not
later than the earlier to occur of (i) the date of any filing of a registration
statement by the Issuer under the Securities Act and (ii) 730 days from the date
of original issuance of the Notes (or, if such 730th day is not a Business Day,
by the first Business Day thereafter), shall file with the Commission the
Exchange Offer Registration Statement with respect to the Registered Exchange
Offer (the date of such filing hereinafter referred to as the "Filing Date").
The Issuer shall use its best efforts (i) to cause the Exchange Offer
Registration Statement to be declared effective under the Act within 150 days
from the Filing Date (or, if such 150th day is not a Business Day, by the first
Business Day thereafter), and (ii) to Consummate the Registered Exchange Offer
within 60 Business Days from the date the Exchange Offer Registration Statement
becomes effective (or, if such 60th day is not a Business Day, by the first
Business Day thereafter).
(b) Upon the effectiveness of the Exchange Offer Registration
Statement, the Issuer shall promptly commence and Consummate the Registered
Exchange Offer. The objective of such Registered Exchange Offer is to enable
each Holder electing to exchange Transfer Restricted
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Notes for Exchange Notes (assuming that such Holder (x) is not an "affiliate" of
the Issuer within the meaning of the Act, (y) is not a broker-dealer that
acquired the Transfer Restricted Notes in a transaction other than as a part of
its market-making or other trading activities and (z) if such Holder is not a
broker-dealer, acquires the Exchange Notes in the ordinary course of such
Holder's business, is not participating in the distribution of the Exchange
Notes and has no arrangements or understandings with any person to participate
in the distribution of the Exchange Notes) to resell such Exchange Notes from
and after their receipt without any limitations or restrictions under the Act
and without material restrictions under the securities laws of a substantial
proportion of the several states of the United States.
(c) In connection with the Registered Exchange Offer, the
Issuer shall:
(i) 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;
(ii) keep the Registered Exchange Offer open for acceptance
for not less than 30 Business Days after the date notice thereof is
mailed to the Holders;
(iii) utilize the services of a depositary for the Registered
Exchange Offer with an address in the Borough of Manhattan, The City of
New York; and
(iv) comply in all material respects with all applicable laws
relating to the Registered Exchange Offer.
(d) The Issuer may suspend the use of the Prospectus for a
period not to exceed 30 days in any three-month period or for three periods not
to exceed an aggregate of 90 days in any twelve-month period for valid business
reasons, to be determined by the Issuer in its sole reasonable judgment (not
including avoidance of its obligations hereunder), including, without
limitation, the acquisition or divestiture of assets, public filings with the
Commission, pending corporate developments and similar events; provided that the
Issuer promptly thereafter complies with the requirements of Section 5(k)
hereof, if applicable.
(e) As soon as practicable after the Consummation of the
Registered Exchange Offer, the Issuer shall cause the Trustee promptly to
authenticate and deliver to each Holder Exchange Notes equal in principal amount
to the Transfer Restricted Notes of such Holder so accepted for exchange.
(f) The Initial Purchasers and the Issuer acknowledge that,
pursuant to interpretations by the staff of the Commission of Section 5 of the
Act, and in the absence of an applicable exemption therefrom, each Exchanging
Dealer is required to deliver a Prospectus in connection with a sale of any
Exchange Notes received by such Exchanging Dealer pursuant to the Registered
Exchange Offer in exchange for Transfer Restricted Notes acquired for its own
account as a result of market-making activities or other trading activities.
Accordingly, the Issuer shall:
(i) include the information set forth in Annex A hereto on the
cover of the Prospectus forming a part of the Exchange Offer
Registration Statement, in Annex B hereto in the forepart of the
Exchange Offer Registration Statement in a section setting forth
details of the Registered Exchange Offer, in Annex C hereto in the
underwriting or plan of distribution section of the Prospectus forming
a part of the Exchange Offer Registration
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<PAGE>
Statement, and in Annex D hereto in the letter of transmittal delivered
pursuant to the Registered Exchange Offer; and
(ii) use its best efforts to keep the Exchange Offer
Registration Statement continuously effective under the Act during the
Exchange Offer Registration Period for delivery of the Prospectus
included therein by Exchanging Dealers in connection with sales of
Exchange Notes received pursuant to the Registered Exchange Offer, as
contemplated by Section 5(h) below.
(g) In the event that any Initial Purchaser determines that it
is not eligible to participate in the Registered Exchange Offer with respect to
the exchange of Transfer Restricted Notes constituting any portion of an unsold
allotment, upon the effectiveness of the Shelf Registration Statement as
contemplated by Section 3 hereof and at the request of such Initial Purchaser,
the Issuer shall issue and deliver to such Initial Purchaser, or to the party
purchasing Transfer Restricted Notes registered under the Shelf Registration
Statement from such Initial Purchaser, in exchange for such Transfer Restricted
Notes, a like principal amount of Exchange Notes to the extent permitted by
applicable law. The Issuer shall use its reasonable best efforts to cause the
CUSIP Service Bureau to issue the same CUSIP number for such Exchange Notes as
for Exchange Notes issued pursuant to the Registered Exchange Offer.
3. Shelf Registration. (a) If (i) the Company is not permitted
to file the Exchange Offer Registration Statement or to Consummate the
Registered Exchange Offer because the Registered Exchange Offer is not permitted
by applicable law or Commission policy, (ii) prior to the 60th day preceding the
Filing Date (1) any Holder notifies the Issuer that due to a change in
applicable law or Commission policy it is not entitled to participate in the
Registered Exchange offer or that it may not resell Exchange Notes acquired by
it in the Registered Exchange Offer to the public without complying with the
registration and prospectus delivery requirements of the Act and the delivery of
the Prospectus contained in the Exchange Offer Registration Statement, as
appropriately amended, is not a legally available alternative or (2) any Holder
notifies the Issuer that it owns Notes (including, without limitation, Notes
held by any of the Initial Purchasers that constitute any portion of an unsold
allotment) acquired directly from the Issuer or an Affiliate of the Issuer,
(iii) the Registered Exchange Offer is not Consummated within 180 days of the
Filing Date, or (iv) in the case where the Initial Purchaser participates in the
Registered Exchange Offer or acquires Exchange Notes pursuant to Section 2(g)
hereof, the Initial Purchaser does not receive freely tradable Exchange Notes in
exchange for Notes constituting any portion of an unsold allotment (it being
understood that, for purposes of this Section 3, (x) the requirement that the
Initial Purchaser deliver a Prospectus containing the information required by
Items 507 and/or 508 of Regulation S-K under the Act in connection with sales of
Exchange Notes acquired in exchange for such Transfer Restricted Notes shall
result in such Exchange Notes being not "freely tradable" and (y) the
requirement that an Exchanging Dealer deliver a Prospectus in connection with
sales of Exchange Notes acquired in the Registered Exchange Offer in exchange
for Transfer Restricted Notes acquired as a result of market-making activities
or other trading activities shall not result in such Exchange Notes being not
"freely tradable"), the following provisions shall apply:
(b) The Issuer shall prepare and file with the Commission a
Shelf Registration Statement prior to the later of (i) the Filing Date, (ii) if
such Shelf Registration Statement is required pursuant to Section 3 (a) (i),
(ii), or (iv), the 60th day following the Shelf Registration Trigger Date (or if
such 60th day is not a Business Day, by the first Business Day thereafter) and
(iii) if such Shelf Registration Statement is required pursuant to Section 3 (a)
(iii), the 215th day following the Filing Date (or, if such 215th day is not a
Business Day, by the first Business Day thereafter). The Issuer
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shall use its best efforts to cause the Shelf Registration Statement to be
declared effective by the Commission as promptly as possible following the
filing thereof. With respect to Exchange Notes received by any Initial Purchaser
in exchange for Notes constituting any portion of an unsold allotment, the
Issuer may, if permitted by current interpretations by the Commission's staff,
file a post-effective amendment to the Exchange Offer Registration Statement
containing the information required by Regulation S-K Items 507 and/or 508, as
applicable, in satisfaction of their obligations under this paragraph (b) with
respect thereto, and any such Exchange Offer Registration Statement, as so
amended, shall be referred to herein as and governed by the provisions herein
applicable to, a Shelf Registration Statement.
(c) The Issuer shall use its best efforts to keep such Shelf
Registration Statement continuously effective in order to permit the Prospectus
forming a part thereof to be usable by Holders until the earliest of (i) the
180th day following the date on which the Shelf Registration Statement was
declared effective and (ii) such date as of which all the Transfer Restricted
Notes have been sold pursuant to the Shelf Registration Statement (in any such
case, such period being called the "Shelf Registration Period"). The Issuer
shall be deemed not to have used its 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 Transfer Restricted Notes covered thereby
not being able to offer and sell such notes during that period, unless such
action is (x) required by applicable law or (y) pursuant to Section 3(d) hereof,
and, in either case, so long as the Issuer promptly thereafter complies with the
requirements of Section 5(k) hereof, if applicable.
(d) The Issuer may suspend the use of the Prospectus for a
period not to exceed 30 days in any three-month period or for three periods not
to exceed an aggregate of 90 days in any twelve-month period for valid business
reasons, to be determined by the Issuer in its sole reasonable judgment (not
including avoidance of its obligations hereunder), including, without
limitation, the acquisition or divestiture of assets, public filings with the
Commission, pending corporate developments and similar events; provided that the
Issuer promptly thereafter complies with the requirements of Section 5(k)
hereof, if applicable.
(e) No Holder of Transfer Restricted Notes may include any of
its Transfer Restricted Notes in any Shelf Registration Statement pursuant to
this Agreement unless and until such Holder furnishes to the Issuer in writing,
within 20 Business Days after receipt of a request therefor, such information as
the Issuer may reasonably request for use in connection with any Shelf
Registration Statement or Prospectus or preliminary Prospectus included therein.
No Holder of Transfer Restricted Notes shall be entitled to Additional Interest
pursuant to Section 4 hereof unless and until such Holder shall have used its
best efforts to provide all such reasonably requested information. Each Holder
as to which any Shelf Registration Statement is being effected agrees to furnish
promptly to the Issuer all information required to be disclosed in order to make
the information previously furnished to the Issuer by such Holder not
misleading.
4. Additional Interest.
(a) The parties hereto agree that the Holders of the Exchange
Notes or the Transfer Restricted Notes, as the case may be, will suffer damages
if the Issuer fails to perform its obligations under Section 2 or Section 3
hereof and that it would not be feasible to ascertain the extent of such
damages. Accordingly, in the event that (i) the applicable Registration
Statement is not filed with the Commission on or prior to the date specified
herein for such filing, (ii) the applicable Registration Statement has not been
declared effective by the Commission on or prior to the date specified herein
for such effectiveness after such obligation arises, (iii) if the Exchange Offer
is
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required to be Consummated hereunder, the Exchange Offer has not been
Consummated by the Issuer within the time period set forth in Section 2(a) or
(iv) the applicable Registration Statement is filed and declared effective but
shall thereafter cease to be effective or usable in connection with the Exchange
Offer or resales of Transfer Restricted Notes during a period in which it is
required to be effective hereunder without being succeeded immediately by any
additional Registration Statement covering the Transfer Restricted Notes or the
Exchange Notes, as the case may be, which has been filed and declared effective
(each such event referred to in clauses (i) through (iv), a "Registration
Default"), then the interest rate on the Transfer Restricted Notes will increase
("Additional Interest"), with respect to the first 90-day period immediately
following the occurrence of such Registration Default, by 0.25% per annum and
will increase by an additional 0.25% per annum with respect to each subsequent
90-day period until such Registration Default has been cured, up to a maximum
amount of 0.50% per annum with respect to all Registration Defaults. Following
the cure of a Registration Default, the accrual of Additional Interest with
respect to such Registration Default will cease and upon the cure of all
Registration Defaults the interest rate on the Transfer Restricted Notes will
revert to the original rate.
(b) The Issuer shall notify the Trustee and paying agent under
the Indenture (or the trustee and paying agent under such other indenture under
which any Transfer Restricted Notes are issued) immediately upon the happening
of each and every Registration Default. The Issuer shall pay the Additional
Interest due on the Transfer Restricted Notes by depositing with the paying
agent (which shall not be the Issuer for these purposes) for the Transfer
Restricted Notes, in trust, for the benefit of the Holders thereof, prior to
11:00 A.M. on the next interest payment date specified in the Indenture (or such
other indenture), sums sufficient to pay the Additional Interest then due. The
Additional Interest due shall be payable on each interest payment date specified
by the Indenture (or such other indenture) to the record holders entitled to
receive the interest payment to be made on such date. Each obligation to pay
Additional Interest shall be deemed to accrue from and including the applicable
Registration Default.
(c) The parties hereto agree that the Additional Interest
provided for in this Section 4 constitutes a reasonable estimate of the damages
that will be suffered by holders of Transfer Restricted Notes by reason of the
happening of any Registration Default.
(d) All of the Issuer's obligations set forth in this Section
4 which are outstanding with respect to any Exchange Note or Transfer Restricted
Note at the time such note ceases to be covered by an effective Registration
Statement shall survive until such time as all such obligations with respect to
such security have been satisfied in full (notwithstanding termination of the
Agreement).
5. Registration Procedures. In connection with any Shelf
Registration Statement and, to the extent applicable, any Exchange Offer
Registration Statement, the following provisions shall apply:
(a) The Issuer shall furnish to each of the Initial
Purchasers, prior to the filing thereof with the Commission, a copy of any
Registration Statement, and each amendment thereof and each amendment or
supplement, if any, to the Prospectus included therein and shall use its best
efforts to reflect in each such document, when so filed with the Commission,
such comments as each of the Initial Purchasers reasonably may propose.
(b) The Issuer shall ensure that:
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(i) any Registration Statement and any amendment thereto and
any Prospectus contained therein and any amendment or supplement
thereto complies in all material respects with the Act;
(ii) any 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 pan of any Registration
Statement, including any amendment or supplement to such Prospectus,
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 light of the circumstances under which they were made, not
misleading;
provided, that no representation or agreement is made hereby with respect to
information with respect to any of the Initial Purchasers, any Underwriter or
any Holder required to be included in any Registration Statement or Prospectus
pursuant to the Act or provided by any of the Initial Purchasers, any Holder or
any Underwriter specifically for inclusion in any Registration Statement or
Prospectus.
(c) (1) The Issuer shall advise the Initial Purchasers and, in
the case of a Shelf Registration Statement, the Holders of Transfer Restricted
Notes covered thereby, and, if requested by any of the Initial Purchasers or any
such Holder, confirm such advice in writing:
(i) when a Registration Statement and any amendment thereto
has been filed with the Commission and when the Registration Statement
or any post-effective amendment thereto has become effective; and
(ii) of any request by the Commission for amendments or
supplements to the Registration Statement or the Prospectus included
therein or for additional information.
(2) The Issuer shall advise the Initial Purchasers and, in the
case of a Shelf Registration Statement, the Holders of Transfer Restricted Notes
covered thereby, and, in the case of an Exchange Offer Registration Statement,
any Exchanging Dealer that has provided in writing to the Issuer a telephone or
facsimile number and address for notices, and, if requested by any of the
Initial Purchasers or any such Holder or Exchanging Dealer, confirm such advice
in writing:
(i) of the issuance by the Commission of any stop order
suspending the effectiveness of the Registration Statement or the
initiation of any proceedings for that purpose;
(ii) of the receipt by the Issuer of any notification with
respect to the suspension of the qualification of the Transfer
Restricted Notes included in any Registration Statement for sale in any
jurisdiction or the initiation or threatening of any proceeding for
such purpose; and
(iii) of the suspension of the use of the Prospectus pursuant
to Section 5(c) hereof or of the happening of any event that requires
the making of any changes in the 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
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statements therein (in the case of the Prospectus, in light of the
circumstances under which they were made) not misleading (which advice
shall be accompanied by an instruction to suspend the use of the
Prospectus until the requisite changes have been made).
(d) The Issuer shall use its best efforts to obtain the
withdrawal of any order suspending the effectiveness of any Registration
Statement at the earliest possible time and in any event shall within 30 days of
any such order (or, if such 30th day is not a Business Day, by the first
Business Day thereafter) amend the Registration Statement covering all of the
Transfer Restricted Notes (whereupon references herein to the Registration
Statement shall be deemed to include reference to such additional filing).
(e) The Issuer shall furnish to each Holder of Transfer
Restricted Notes 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
schedules, and, if the Holder so requests in writing, all exhibits thereto
(including statements and those incorporated by reference).
(f) The Issuer shall, during the Shelf Registration Period,
deliver to each Holder of Transfer Restricted Notes 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 Issuer consents to the use of the Prospectus or
any amendment or supplement thereto by each of the selling Holders of Transfer
Restricted Notes in connection with the offering and sale of the Transfer
Restricted Notes covered by the Prospectus or any amendment or supplement
thereto.
(g) The Issuer shall furnish to each Exchanging Dealer that 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, any documents incorporated by reference therein and,
if the Exchanging Dealer so requests in writing, all exhibits thereto (including
those incorporated by reference).
(h) The Issuer shall, during the Exchange Offer Registration
Period, deliver to each Exchanging Dealer, without charge, as many copies of the
Prospectus (including each preliminary Prospectus) included in such Exchange
Offer Registration Statement and any amendment or supplement thereto as such
Exchanging Dealer may reasonably request; and the Issuer consents to the use of
the Prospectus or any amendment or supplement thereto by any such Exchanging
Dealer in connection with the offering and sale of the Exchange Notes, as
provided in Section 2(f) above.
(i) Prior to the Registered Exchange offer or any other
offering of Transfer Restricted Notes pursuant to any Registration Statement,
the Issuer shall register, qualify or cooperate with the Holders of Transfer
Restricted Notes included therein and their respective counsel in connection
with the registration or qualification of such Transfer Restricted Notes for
offer and sale under the securities or blue sky laws of such states as any such
Holders reasonably request 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
Transfer Restricted Notes covered by such Registration Statement; provided,
however, that the Issuer will not be required to qualify generally to do
business in any jurisdiction in which it is not then so qualified, to file any
general consent to seance of process 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.
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(j) The Issuer shall cooperate with the Holders to facilitate
the timely preparation and delivery of certificates representing Transfer
Restricted Notes to be sold pursuant to any Registration Statement free of any
restrictive legends and in denominations and registered in such names as Holders
may request prior to sales of Transfer Restricted Notes pursuant to such
Registration Statement.
(k) Upon the occurrence of any event contemplated by paragraph
(c)(2)(iii) of this Section 5, the Issuer shall promptly prepare and file a
post-effective amendment to any Registration Statement or an amendment or
supplement to the related Prospectus or any other required document so that, as
thereafter delivered to purchasers of the Transfer Restricted Notes included
therein, 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
light of the circumstances under which they were made, not misleading.
(l) The Issuer shall use its reasonable best efforts to cause
The Depository Trust Company ("DTC") on the first Business Day following the
effective date of any Registration Statement hereunder or as soon as possible
thereafter to remove (i) from any existing CUSIP number assigned to the Transfer
Restricted Notes or Exchange Notes, as the case may be, any designation
indicating that such notes are "restricted securities," which efforts shall
include delivery to DTC of a letter executed by the Issuer substantially in the
form of Annex E hereto and (ii) any other stop or restriction on DTC's system
with respect to the Transfer Restricted Notes or Exchange Notes, as the case may
be. In the event the Issuer is unable to cause DTC to take actions described in
the immediately preceding sentence, the Issuer shall take such actions as the
Initial Purchasers may reasonably request to provide, as soon as practicable, a
CUSIP number for the Transfer Restricted Notes or Exchange Notes registered
under such Registration Statement and to cause such CUSIP number to be assigned
to the Transfer Restricted Notes or Exchange Notes (or to the maximum aggregate
principal amount of the securities to which such number may be assigned).
(m) The Issuer shall use its best efforts to comply with all
applicable rules and regulations of the Commission and shall 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 Act and Rule 158 promulgated thereunder.
(n) The Issuer shall cause the Indenture to be qualified under
the Trust Indenture Act in a timely manner.
(o) The Issuer may require each Holder of Transfer Restricted
Notes to be sold pursuant to any Shelf Registration Statement to furnish to the
Issuer such information regarding the Holder and the distribution of such
Transfer Restricted Notes as may, from time to time, be reasonably required by
the Act and the rules and regulations promulgated thereunder, and the
obligations of the Issuer to any Holder hereunder shall be expressly conditioned
on the compliance of such Holder with such request.
(p) The Issuer shall, if requested, promptly incorporate in a
Prospectus supplement or post-effective amendment to a Shelf Registration
Statement (i) such information as the Majority Holders provide or, if the
Transfer Restricted Notes are being sold in an under written offering, as the
Managing Underwriters and the Majority Holders reasonably agree should be
included therein and provide to the Issuer in writing for inclusion in the Shelf
Registration Statement or Prospectus, and (ii) such information as a Holder may
provide from time to time to the Issuer in writing for inclusion in a Prospectus
or any Shelf Registration Statement concerning such Holder and
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the distribution of such Holder's Transfer Restricted Notes and, in either case,
shall make all required filings of such Prospectus supplement or post-effective
amendment as soon as practicable after being notified in writing of the matters
to be incorporated in such Prospectus supplement or post-effective amendment.
(q) In the case of any Shelf Registration Statement, the
Issuer shall enter into such agreements (including underwriting agreements) and
take all other customary and appropriate actions as may be reasonably requested
in order to expedite or facilitate the registration or the disposition of any
Transfer Restricted Notes, and in connection therewith, if an underwriting
agreement is entered into, cause the same to contain indemnification provisions
and procedures no less favorable than those set forth in Section 7 (or such
other provisions and procedures acceptable to the Majority Holders and the
Managing Underwriters, if any, with respect to all parties to be indemnified
pursuant to Section 7).
(r) In the case of any Shelf Registration Statement, the
Issuer shall:
(i) make reasonably available for inspection by the Holders of
Transfer Restricted Notes to be registered thereunder, any Underwriter
participating in any disposition pursuant to such Shelf Registration
Statement, and any attorney, accountant or other agent retained by the
Holders or any such Underwriter, all relevant financial and other
records, pertinent corporate documents and properties of the Issuer and
any of its subsidiaries;
(ii) cause the Issuer's officers, directors and employees to
supply all relevant information reasonably requested by the Holders or
any such Underwriter, attorney, accountant or agent in connection with
any such Registration Statement as is customary for similar due
diligence examinations; provided, however, that any information that is
designated in writing by the Issuer, in its sole discretion, as
confidential at the time of delivery of such information shall be kept
confidential by the Holders or any such Underwriter, attorney,
accountant or agent, unless (x) disclosure thereof is made in
connection with a court proceeding or required by law; provided that,
each Holder and any such Managing Underwriter, attorney, accountant or
agent will, upon learning that disclosure of such information is sought
in a court proceeding or required by law, give reasonable notice to the
Issuer with enough time to allow the Issuer to undertake appropriate
action to prevent disclosure at the Issuer's sole expense, or (y) such
information becomes available to the public generally through the
Issuer or through a third party without an accompanying obligation of
confidentiality;
(iii) make such representations and warranties to the Holders
of Transfer Restricted Notes registered thereunder and the Managing
Underwriters, if any, in form, substance and scope as are customarily
made by issuers to Managing Underwriters and covering matters
including, but not limited to, those set forth in the Purchase
Agreement;
(iv) obtain opinions of counsel to the Issuer and updates
thereof (which counsel and opinions, in form, scope and substance,
shall be reasonably satisfactory to the Managing Underwriters, if any)
addressed to each selling Holder and the Managing Underwriters, if any,
covering such matters as are customarily covered in opinions requested
in underwritten offerings and such other matters as may be reasonably
requested by such Holders and Managing Underwriters;
(v) obtain "cold comfort" letters and updates thereof from the
independent certified public accountants of the Issuer (and, if
necessary, any other independent certified
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public accountants of any subsidiary of the Issuer or of any business
acquired by the Issuer for which financial statements and financial
data are, or are required to be, included in the Registration
Statement), addressed to each selling Holder of the Transfer Restricted
Notes covered by such Shelf Registration Statement (provided such
Holder furnishes the accountants with such representations as the
accountants customarily require in similar situations) and the Managing
Underwriters, if any, in customary form and covering matters of the
type customarily covered in "cold comfort" letters in connection with
primary underwritten offerings;
(vi) deliver such documents and certificates as may be
reasonably requested by the Majority Holders and the Managing
Underwriters, if any, including those to evidence compliance with
Section 5(i) and with any customary conditions contained in the
underwriting agreement or other agreement entered into by the Issuer;
and
(vii) The foregoing actions set forth in clauses (iii), (iv),
(v) and (vi) of this Section 5(r) shall be performed at (A) the
effectiveness of such Shelf Registration Statement and each
post-effective amendment thereto and (B) each closing under any
underwriting or similar agreement as and to the extent required
thereunder.
(s) The Issuer shall, if and to the extent required under the
Act and/or the Trust Indenture Act and the rules and regulations thereunder in
order to register the Transfer Restricted Notes (including any guarantees
thereof) under the Act and qualify the Indenture under the Trust Indenture Act,
cause each guarantor, if any, to sign any Registration Statement and take all
other action necessary to register any such guarantees under the applicable
Registration Statement.
6. Registration Expenses. The Issuer shall bear all expenses
incurred in connection with the performance of its obligations under Sections 2,
3, 4 and 5 hereof (other than brokers', dealers' and underwriters' discounts and
commissions and brokers', dealers' and underwriters' counsel fees) and shall
reimburse the Holders for the reasonable fees and disbursements of one firm or
counsel designated by the Majority Holders to act as counsel for the Holders in
connection therewith.
7. Indemnification and Contribution.
(a) (i) In connection with any Registration Statement, the
Issuer agrees to indemnify and hold harmless each Holder of Transfer
Restricted Notes covered thereby, the directors, officers, employees
and agents of each such Holder and each person who controls any such
Holder within the meaning of either the Act or the Exchange Act against
any and all losses, claims, damages or liabilities, joint or several,
to which they or any of them may become subject under the Act, the
Exchange Act or other Federal or state statutory law or regulation. at
common law or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based
upon any untrue statement or alleged untrue statement of a material
fact contained in the Registration Statement as originally filed or in
any amendment thereof, in any preliminary Prospectus or Prospectus or
in any amendment thereof or supplement thereto, or arise out of or are
based upon the omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements
therein not misleading, and agree to reimburse each such indemnified
party, as incurred, for any legal or other expenses reasonably incurred
by them in connection with investigating or defending any such loss,
claim, damage, liability or action: provided, however, that the Issuer
will not be liable in any case to the extent that
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any such loss, claim, damage or liability arises out of or is based
upon (A) any such untrue statement or alleged untrue statement or
omission or alleged omission made therein in reliance upon and in
conformity with written information relating to the Holder furnished to
the Issuer by or on behalf of any such Holder specifically for
inclusion therein, (B) use of a Registration Statement or the related
Prospectus during a period when a stop order has been issued in respect
of such Registration Statement or any proceedings for that purpose have
been initiated or use of a Prospectus when use of such Prospectus has
been suspended pursuant to Section 5(c); provided, further, in each
case, that Holders received prior notice of such stop order, initiation
of proceedings or suspension or (C) if the Holder is required to but
does not deliver a Prospectus or the then current Prospectus. This
indemnity agreement will be in addition to any liability which the
Issuer may otherwise have.
(ii) The Issuer also agrees to indemnify or contribute to
Losses, as provided in Section 7(d), of any Managing Underwriters of
Transfer Restricted Notes registered under a Registration Statement,
their officers and directors and each person who controls such Managing
Underwriters on substantially the same basis as that of the
indemnification of the selling Holders provided in this Section 7(a)
and shall, if requested by any Holder, enter into an underwriting
agreement reflecting such agreement, as provided in Section 5(q)
hereof.
(b) Each Holder of Transfer Restricted Notes covered by a
Registration Statement severally agrees to indemnify and hold harmless the
Issuer, its directors, officers, employees and agents and each person who
controls the Issuer within the meaning of either the Act or the Exchange Act to
the same extent as the foregoing indemnity from the Issuer to each such Holder,
but only with reference to written information relating to such Holder furnished
to the Issuer by or on behalf of such Holder specifically for inclusion in the
documents referred to in the foregoing indemnity. This indemnity agreement will
be in addition to any liability which any such Holder may otherwise have.
(c) Promptly after receipt by an indemnified party under this
Section 7 of notice of the commencement of any action, such indemnified party
will, if a claim in respect thereof is to be made against the indemnifying party
under this Section 7, notify the indemnifying party in writing of the
commencement thereof; but the failure so to notify the indemnifying patty (i)
will not relieve it from liability under paragraph (a) or (b) above unless and
to the extent it did not otherwise learn of such action and such failure results
in the forfeiture by the indemnifying patty of substantial rights and defenses
and (ii) will not, in any event, relieve the indemnifying party from any
obligations to any indemnified party other than the indemnification obligation
provided in paragraph (a) or (b) above. The indemnifying party shall be entitled
to appoint counsel of the indemnifying party's choice at the indemnifying
party's expense to represent the indemnified party in any action for which
indemnification is sought (in which case the indemnifying party shall not
thereafter be responsible for the fees and expenses of any separate counsel
retained by the indemnified party or parties except as set forth below);
provided, however, that such counsel shall be satisfactory to the indemnified
party. Notwithstanding the indemnifying party's election to appoint counsel to
represent the indemnified party in an action, the indemnified party shall have
the right to employ separate counsel (including, local counsel), and the
indemnifying party shall bear the reasonable fees, costs and expenses of such
separate counsel (and local counsel) if (i) the use of counsel chosen by the
indemnifying party to represent the indemnified party would present such counsel
with a conflict of interest, (ii) the actual or potential defendants in, or
targets of, any such action include both the indemnified party and the
indemnifying party and the indemnified party shall have reasonably concluded
that there may be legal defenses available to it and/or other indemnified
parties which are different from or additional to those available to the
indemnifying party, (iii) the indemnifying party
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shall not have employed counsel satisfactory to the indemnified party to
represent the indemnified party within a reasonable time after notice of the
institution of such action or (iv) the indemnifying party shall have authorized
the indemnified party to employ separate counsel at the expense of the
indemnifying party, provided further, that the indemnifying party shall not be
responsible for the fees and expenses of more than one separate counsel
(together with appropriate local counsel) representing all the indemnified
parties under paragraph (a) or paragraph (b) above. An indemnifying party will
not, without the prior written consent of the indemnified parties, settle or
compromise or consent to the entry of any judgment with respect to any pending
or threatened claim, action, suit or proceeding in respect of which
indemnification or contribution may be sought hereunder (whether or not the
indemnified parties are actual or potential parties to such claim or action)
unless such settlement, compromise or consent includes an unconditional release
of each indemnified party from all liability arising out of such claim, action,
suit or proceeding.
(d) In the event that the indemnity provided in paragraph (a)
or (b) of this Section 7 is unavailable to or insufficient to hold harmless an
indemnified party for any reason, then each applicable indemnifying party, in
lieu of indemnifying such indemnified party, shall have a joint and several
obligation to contribute to the aggregate losses, claims, damages and
liabilities (including legal or other expenses reasonably incurred in connection
with investigating or defending same) (collectively "Losses") to which such
indemnified party may be subject in such proportion as is appropriate to reflect
the relative benefits received by such indemnifying party, on the one hand, and
such indemnified party, on the other hand, from the Registration Statement which
resulted in such Losses; provided, however, that in no case shall any
Underwriter be responsible for any amount in excess of the underwriting discount
or commission applicable to the Transfer Restricted Notes purchased by such
Underwriter under the Registration Statement which resulted in such Losses. If
the allocation provided by the immediately preceding sentence is unavailable for
any reason, the indemnifying party and the indemnified party shall contribute in
such proportion as is appropriate to reflect not only such relative benefits but
also the relative fault of such indemnifying party, on the one hand, and such
indemnified party, on the other hand, in connection with the statements or
omissions which resulted in such Losses as well as any other relevant equitable
considerations. Benefits received by the Issuer shall be deemed to be equal to
the sum of (x) the aggregate principal amount of the Notes and (y) the total
amount of Additional Interest which the Issuer was not required to pay as a
result of registering the Transfer Restricted Notes covered by the Registration
Statement which resulted in such Losses. Benefits received by any Holder shall
be deemed to be equal to the value of receiving Transfer Restricted Notes
registered under the Act. Benefits received by any Underwriter shall be deemed
to be equal to the total underwriting discounts and commissions, as set forth on
the cover page of the Prospectus forming a part of the Registration Statement
which resulted in such Losses. Relative fault shall be determined by reference
to, among other things, whether any alleged untrue statement or omission relates
to information provided by the indemnifying party, on the one hand, or by the
indemnified party, on the other hand. The parties agree that it would not be
just and equitable if contribution were determined by pro rata allocation or any
other method of allocation which does not take account of the equitable
considerations referred to above. Notwithstanding the provisions of this
paragraph (d), no person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Act) shall be entitled to contribution from any
person who was not guilty of such fraudulent misrepresentation. For purposes of
this Section 7, each person who controls a Holder within the meaning of either
the Act or the Exchange Act and each director, officer, employee and agent of
such Holder shall have the same rights to contribution as such Holder, and each
person who controls the Issuer within the meaning of either the Act or the
Exchange Act and each director, officer, employee and agent of the Issuer shall
have the same rights to contribution as the Issuer, subject in each case to the
applicable terms and conditions of this paragraph (d).
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(e) The provisions of this Section 7 will remain in full force
and effect, regardless of any investigation made by or on behalf of any Holder,
the Issuer or any of the officers, directors or controlling persons referred to
in Section 7 hereof, and will survive the sale by a Holder of Transfer
Restricted Notes covered by a Registration Statement.
8. Miscellaneous.
(a) No Inconsistent Agreements. The Issuer has not, as of the
date hereof, entered into nor shall it, on or after the date hereof, enter into
any agreement that is inconsistent with the rights granted to the Holders herein
or otherwise conflicts with the provisions hereof.
(b) Amendments and Waivers. The provisions of this Agreement,
including the provisions of this sentence, may not be amended, qualified,
modified or supplemented, and waivers or consents to departures from the
provisions hereof may not be given, unless the Issuer has obtained the written
consent of the Majority Holders. Notwithstanding the foregoing, a waiver or
consent to departure from the provisions hereof with respect to a matter that
relates exclusively to the rights of Holders whose Transfer Restricted Notes are
being sold pursuant to a Shelf Registration Statement or whose Notes are being
exchanged pursuant to an Exchange Offer Registration Statement, as the case may
be, and which does not directly or indirectly affect the rights of other Holders
may be given by such Holders, determined on the basis of Notes being sold rather
than registered. Notwithstanding any of the foregoing, no amendment,
modification, supplement, waiver or consents to any departure from the
provisions of Section 7 hereof shall be effective as against any Holder of
Transfer Restricted Notes unless consented to in writing by such Holder.
(c) Notices. All notices and other communications provided for
or permitted hereunder shall be made in writing by hand-delivery, first-class
mail, telex, telecopier, or air courier guaranteeing overnight delivery:
(i) if to the Initial Purchasers, as follows:
First Union Capital Markets
301 South College Street, TW-10
Charlotte, NC 28288-0606
Attention: Corporate Finance Department
BT Alex. Brown Incorporated
300 South Grand Avenue, 41st Floor
Los Angeles, CA 90071
Attention: Financial Sponsors Group
Donaldson, Lufkin & Jenrette Securities Corporation
277 Park Avenue
New York, NY 10172
Attention: Syndicate Department
(ii) if to any other Holder, at the most current address given
by such Holder to the Issuer in accordance with the provisions of this
Section 8(c), 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 the Initial Purchaser; and
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(iii) if to the Issuer, as follows:
Diamond Triumph Auto Glass, Inc.
220 Division Street
Kingston, Pennsylvania 18704
Attention: General Counsel
All such notices and communications shall be deemed to have
been duly given when received, if delivered by hand or air courier, and when
sent, if sent by first-class mail, telex or telecopier.
The Issuer by notice to the others may designate additional or
different addresses for subsequent notices or communications.
(d) Successors and Assigns. This Agreement shall inure to the
benefit of and be binding upon the successors and assigns of each of the
parties, including, without the need for an express assignment or any consent by
the Issuer thereto, subsequent Holders. The Issuer hereby agrees to extend the
benefits of this Agreement to any Holder and any such Holder may specifically
enforce the provisions of this Agreement as if an original party hereto.
(e) Counterparts. This agreement may be executed in any number
of counterparts 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.
(f) Headings. The headings in this agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.
(g) Governing Law. This agreement shall be governed by and
construed in accordance with the laws of the State of New York applicable to
agreements made and to be performed in said State, without regard to the
conflicts of law rules thereof.
(h) Severability. In the event that any one or more of the
provisions contained herein, or the application thereof in any circumstances, is
held invalid, illegal or unenforceable in any respect for any reason, the
validity, legality and enforceability of any such provision in every other
respect and of the remaining provisions hereof shall not be in any way impaired
or affected thereby, it being intended that all of the rights and privileges of
the parties shall be enforceable to the fullest extent permitted by law.
(i) Notes Held by the Issuer, etc. Whenever the consent or
approval of Holders of a specified percentage of principal amount of Transfer
Restricted Notes or Exchange Notes is required hereunder, Transfer Restricted
Notes or Exchange Notes held by the Issuer or its Affiliates (other than
subsequent Holders of Transfer Restricted Notes or Exchange Notes if such
subsequent Holders are deemed to be Affiliates solely by reason of their
holdings of such notes) shall not be counted in determining whether such consent
or approval was given by the Holders of such required percentage.
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Please confirm that the foregoing correctly sets forth the
agreement among the Issuer and the Initial Purchasers.
Very truly yours,
DIAMOND TRIUMPH AUTO GLASS, INC.
By: /s/ Kenneth Levine
------------------------------------
Name: Kenneth Levine
Title: Co-Chief Executive Officer
The foregoing Agreement is hereby
accepted as of the date first written above on
behalf of itself and the other Initial Purchasers.
FIRST UNION CAPITAL MARKETS,
A DIVISION OF WHEAT FIRST SECURITIES, INC.
By: /s/ Eric Lloyd
----------------------------
Name: Eric Lloyd
Title: Director
<PAGE>
Exhibit 4.3
EXECUTION COPY
DIAMOND TRIUMPH AUTO GLASS, INC.
$100,000,000
9 1/4% SENIOR NOTES DUE 2008
NOTE PURCHASE AGREEMENT
MARCH 26, 1998
First Union Capital Markets
BT Alex. Brown Incorporated
Donaldson, Lufkin & Jenrette Securities Corporation
c/o First Union Capital Markets
301 South College Street, TW-10
Charlotte, NC 28288-0606
Ladies and Gentlemen:
Diamond Triumph Auto Glass, Inc., a Delaware corporation (the
"Company"), proposes to issue and sell (the "Initial Placement") to First Union
Capital Markets, a division of Wheat First Securities, Inc., BT Alex. Brown
Incorporated and Donaldson, Lufkin & Jenrette Securities Corporation
(collectively, the "Initial Purchasers"), $100,000,000 principal amount of its 9
1/4% Senior Notes Due 2008 (the "Notes"). The Notes are to be issued under an
indenture (the "Indenture") to be dated as of the Closing Date (as defined
below) between the Company and State Street Bank and Trust Company, as trustee
(the "Trustee"). The Initial Placement is to occur concurrently with, and is
conditioned upon, (i) the consummation of a recapitalization of the Company
pursuant to a Second Amended and Restated Stock Purchase and Sale Agreement,
dated as of January 15, 1998 (the "Stock Purchase Agreement") among the Company,
Kenneth Levine and Richard Rutta (together, the "Company Principals"), Green
Equity Investors II, L.P. ("GEI") and certain affiliated entities of the Company
(the "Affiliated Companies"), whereby (a) the Company will declare and pay a
dividend of 3,500 shares of its preferred stock to each of the Company
Principals, (b) the Company Principals shall transfer all of the issued and
outstanding shares of certain of the Affiliated Companies to the Company and in
connection therewith the Company will issue shares of its common stock (the
"Stock Purchase Shares") to the Company Principals, (c) certain of the
Affiliated Companies will be merged with and into the Company, (d) GEI will
purchase (I) 770,000 shares of the Company's common stock, for aggregate
consideration of $15.4 million, and (II) 28,000 shares of the Company's
preferred stock for aggregate consideration of $28.0 million, (e) certain
members of the Company's management will purchase an aggregate of 30,000 shares
of the Company's common stock for aggregate consideration of $600,000, and (f)
the Company will redeem from the Company principals all of the Stock Purchase
Shares and certain other shares of common stock owned by them for cash; each of
the transactions described in clauses (a) through (f) above are collectively
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referred to herein as the "Recapitalization," and (ii) the initial borrowing of
approximately $14.4 million under a credit facility, to be executed on or prior
to the date on which the Notes are issued (the "Bank Facility") among the
Company, the lenders named therein and Bankers Trust Company as Administrative
Agent. This Agreement, the registration rights agreement, to be dated the
Closing Date, between the Initial Purchasers and the Company (the "Registration
Rights Agreement"), the Stock Purchase Agreement, the Notes and the Indenture
are hereinafter collectively referred to as the "Transaction Documents." The
Initial Placement, the offer and resale of the Notes by the Initial Purchasers
in accordance with this Agreement, the Recapitalization and the entering into by
the Company of the Bank Facility and the initial borrowing thereunder are
hereinafter referred to as the "Transactions."
The sale of the Notes to the Initial Purchasers will be made
without registration of the Notes under the Securities Act of 1933, as amended
(the "Securities Act"), in reliance upon certain exemptions from the
registration requirements of the Securities Act. You have advised the Company
that you will offer and sell the Notes purchased by you hereunder in accordance
with Section 4 hereof as soon as you deem advisable.
In connection with the sale of the Notes, the Company has
prepared a preliminary offering memorandum, dated March 10, 1998 (the
"Preliminary Memorandum"), and a final offering memorandum, dated March 26, 1998
(the "Final Memorandum"). Each of the Preliminary Memorandum and the Final
Memorandum sets forth certain information concerning the Company, the
Transaction Documents and the Transactions. The Company hereby confirms that it
has authorized the use of the Preliminary Memorandum and the Final Memorandum,
and any amendment or supplement thereto, in connection with the offer and sale
of the Notes by the Initial Purchasers. Unless stated to the contrary, all
references herein to the Final Memorandum are to the Final Memorandum at the
Execution Time (as defined below) and are not meant to include any amendment or
supplement, or any information incorporated by reference therein, subsequent to
the Execution Time.
As used herein, "Material Adverse Effect" means (i) a material
adverse effect upon the business, operations, properties, assets, condition
(financial or otherwise) or prospects of the Company whether before or after
giving effect to the Transactions or (ii) a material impairment of the ability
of the Company to execute, deliver or perform any of its obligations under, or
the material impairment of the ability of the Trustee and the holders of the
Notes (the "Holders") to enforce any obligations under, any of the Transaction
Documents. Capitalized terms used herein but not defined have the meaning
ascribed to them in the Final Memorandum.
1. The Company's Representations and Warranties. The Company
represents and warrants to the Initial Purchasers the following:
(a) The Preliminary Memorandum, at the date thereof, did not
contain any untrue statement of a material fact or omit to state any
material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. The Final
Memorandum, at the date hereof, does not and at the Closing Date will
not (and any amendment or supplement thereto, at the date thereof and
at the Closing Date, will not), contain any untrue statement of a
material fact or omit to state any material fact necessary to make the
statements therein, in light of the circumstances under
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<PAGE>
which they were made, not misleading; provided, however, that the
Company makes no representation or warranty as to any statements made
in or omissions from the Preliminary Memorandum or the Final Memorandum
(or any amendment or supplement thereto) in reliance upon and in
conformity with information relating to any of the Initial Purchasers
furnished to the Company in writing by or on behalf of any of the
Initial Purchasers, expressly for use therein.
(b) Except as disclosed in the Preliminary Memorandum or the
Final Memorandum, no holder of securities of the Company will be
entitled to have such securities registered under any registration
statement required to be filed by the Company.
(c) None of the Company or any of its Affiliates (as defined
in Rule 501(b) of Regulation D under the Securities Act ("Regulation
D")), nor any person acting on its or their behalf (other than the
Initial Purchasers or any of their Affiliates, as to whom the Company
makes no representation or warranty) has, directly or indirectly:
(i) made offers or sales of any security, or
solicited offers to buy any security, which is or will be
integrated with the sale of the Notes in a manner that would
require the registration of the Notes under the Securities
Act;
(ii) engaged in any form of general solicitation or
general advertising (within the meaning of Regulation D) in
connection with any offer or sale of the Notes;
(iii) taken any action designed to cause or result
in, or that has constituted or that might reasonably be
expected to constitute, stabilization or manipulation of the
price of the Notes;
(iv) except as disclosed in the Preliminary
Memorandum or the Final Memorandum, paid or agreed to pay to
any person any compensation for soliciting another to purchase
any of the Notes;
(v) engaged in any directed selling efforts (as that
term is defined in Regulation S under the Securities Act
("Regulation S")) with respect to the Notes, and each of the
Company and its Affiliates and any person acting on its or
their behalf (other than the Initial Purchasers or any of
their Affiliates, as to whom the Company makes no
representation) has complied with the offering restrictions
requirement of Regulation S.
(d) The Notes satisfy the eligibility requirements of Rule
144A(d)(3) under the Securities Act.
(e) Assuming the accuracy of your representations contained in
Section 4 hereof and your compliance with your agreements therein set
forth, it is not necessary in connection with the offer, sale and
delivery of the Notes in the manner contemplated by this Agreement and
the Final Memorandum to register the Notes under the Securities Act
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<PAGE>
or to qualify the Indenture under the Trust Indenture Act of 1939, as
amended (the "Trust Indenture Act").
(f) The Company is a corporation duly organized, validly
existing and in good standing under the laws of its jurisdiction of
incorporation. The Company has the corporate power and authority to own
its properties and to carry on its business as now conducted and as
proposed to be conducted and is duly qualified to do business as a
foreign corporation and is in good standing under the laws of each
jurisdiction wherein it owns or leases material properties or conducts
material business, except where the failure to be so qualified or in
good standing, individually or in the aggregate, has not had or would
not have a Material Adverse Effect.
(g) All of the outstanding shares of capital stock of the
Company have been duly authorized and validly issued and are fully paid
and nonassessable.
(h) The Company has the corporate power and requisite
authority to execute, deliver and carry out the terms and provisions of
the Transaction Documents.
(i) Each of the Transaction Documents and each other document
or instrument to be delivered by the Company in connection therewith
has been, or as of the Closing Date will have been, duly authorized by
all necessary corporate action of the Company; this Agreement has been
duly executed and delivered by the Company; and each of the other
Transaction Documents and each other document or instrument to be
delivered in connection herewith or therewith to be executed and
delivered by the Company after the date hereof will be duly executed
and delivered; and this Agreement is, and such other Transaction
Documents and other documents and instruments to which the Company is a
party will be, upon their execution and delivery by the Company (and
assuming due execution by you and the other parties thereto), the
legal, valid and binding obligation of the Company, enforceable against
the Company in accordance with their respective terms, except to the
extent that the enforceability thereof may be limited by applicable
bankruptcy, insolvency, reorganization, fraudulent conveyance or
similar laws affecting the enforcement of creditors' rights and
remedies generally ("Bankruptcy Law") or by general principles of
equity (regardless of whether such enforceability is considered in a
proceeding in equity or at law) ("Equity").
(j) The execution, delivery and performance by the Company of
the Transaction Documents and each other document and instrument to be
executed, delivered or performed by the Company in connection
therewith; and the consummation of each of the Transactions, do not and
on the Closing Date will not (i) violate any statute, law, ordinance,
regulation, rule, order, judgment, writ, injunction or decree of any
state, commonwealth, nation, territory, possession, province, county,
parish, township, village, municipality or other jurisdiction (singly,
"Law," and collectively, the "Laws") applicable to the Company or any
judgment, order, writ, injunction or decree of any government, any
arbitration panel, any court or any governmental department,
commission, board, bureau, agency, authority or instrumentality of any
state, commonwealth, nation, territory, possession, province, county,
parish, town, township, village, municipality or other jurisdiction,
whether now or hereafter constituted and/or
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<PAGE>
existing ("Tribunal") binding on the Company, except, other than with
respect to the Initial Placement and the offer and resale of the Notes
by the Initial Purchasers pursuant to this Agreement, for such
violations that individually or in the aggregate would not have a
Material Adverse Effect (ii) conflict with, result in a breach or
violation of or constitute a default under the certificate of
incorporation or bylaws of the Company or any indenture, mortgage, deed
of trust, loan agreement, lease or other agreement or instrument to
which the Company is a party or by which the Company or any of its
properties are bound ("Contracts"), except, other than with respect to
the Initial Placement and the offer and resale of the Notes by the
Initial Purchasers pursuant to this Agreement, for such violations that
individually or in the aggregate would not have a Material Adverse
Effect (iii) result in or require the creation or imposition of any
lien upon any of the properties or assets of the Company (other than
any liens created under the Bank Facility) or (iv) require any approval
of stockholders or any approval or consent of any person under any
Contracts except for such approvals or consents which have been
obtained and disclosed in writing to the Initial Purchasers.
(k) No consent, approval, authorization or order of any
Tribunal or other person is required in connection with the execution
and delivery by the Company of the Transaction Documents or any other
document or instrument to be delivered in connection therewith by the
Company or is required in connection with the consummation of the other
Transactions, other than any such consent, approval, authorization or
order which has been obtained and remains in full force and effect or
which has been waived in writing by the Initial Purchasers or such as
may be required under applicable state securities or Blue Sky laws.
(l) The audited financial statements (including the notes
thereto) of the Company included in the Final Memorandum comply as to
form in all material respects with the requirements applicable to
registration statements on Form S-1 under the Securities Act and fairly
present in all material respects the combined financial position of the
Company and the results of operations and cash flow thereof as of the
dates and periods therein specified. Such financial statements have
been prepared in accordance with generally accepted accounting
principles ("GAAP") consistently applied throughout the periods
involved. Since the date of the most recent financial statements
included in the Final Memorandum, except as described therein and in
the notes thereto or in the Final Memorandum, (i) the Company has not
incurred any liabilities or obligations, direct or contingent, or
entered into or agreed to enter into any transactions or Contracts
(written or oral) not in the ordinary course of business which
liabilities, obligations, transactions or Contracts would, individually
or in the aggregate, have a Material Adverse Effect, (ii) except as
contemplated by the Stock Purchase Agreement, the Company has not
purchased any of its outstanding Capital Stock, nor declared, paid or
otherwise made any dividend or distribution of any kind on its Capital
Stock, (iii) there has not been any material change in the long-term
indebtedness of the Company and (iv) none of the assets of the Company
have materially diminished in value. The unaudited pro forma financial
statements of the Company included in the Final Memorandum comply as to
form in all material respects with the requirements of the Securities
Act; the pro forma adjustments have been properly applied to the
historical amounts in the compilation of such pro forma statements; the
assumptions described in the notes to such
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pro forma statements provide a reasonable basis for presenting the
significant direct effects of the transactions contemplated therein;
and such pro forma adjustments comply as to form in all material
respects with the applicable accounting requirements of Regulation S-X
under the Securities Act ("Regulation S-X").
(m) The Company maintains a system of internal accounting
controls sufficient to provide reasonable assurance that (i)
transactions are executed in accordance with management's general or
specific authorizations; (ii) transactions are recorded as necessary to
permit preparation of financial statements in conformity with GAAP and
to maintain asset accountability; (iii) access to assets is permitted
only in accordance with management's general or specific authorization;
and (iv) the recorded accountability for inventory assets is compared
with the existing inventory assets at reasonable intervals and
appropriate action is taken with respect to any differences.
(n) The Company is not now, and immediately after giving
effect to the consummation of the Transactions, will not be (i)
insolvent, (ii) left with unreasonably small capital with which to
engage in its anticipated businesses or (iii) incurring debts beyond
its ability to pay such debts as they become due. The Company is not in
liquidation, administration or receivership nor has any petition been
presented for the winding-up of the Company.
(o) The Company has, and after consummation of the
Transactions will have, good and marketable title to all of its
properties and assets, and a valid leasehold interest in all properties
held under lease by the Company, and none of the Company and, to the
knowledge of the Company, any other party thereto, is in default under
any lease, except in each case for such defects or defaults that,
singly or in the aggregate, would not have a Material Adverse Effect.
All such properties and assets owned or leased are so owned or leased
free and clear of liens other than liens permitted under of the
definition "Permitted Liens" set forth in the Final Memorandum. None of
the material assets of the Company is subject to any restriction which
would prevent continuation of the use currently made thereof or which
would materially adversely affect the value thereof.
(p) The Company is not (i) in violation of its certificate of
incorporation or bylaws, (ii) in breach or violation of any Laws or
(iii) in breach of or default under (nor has any event occurred which,
with notice or the passage of time or both, would constitute a default
under) or in violation of any of the terms or provisions of any
Contract, except for any such breach, default, violation or event in
each case of (i), (ii) or (iii) which would, individually or in the
aggregate, not have a Material Adverse Effect.
(q) There is no litigation pending or, to the knowledge of the
Company after due investigation, threatened, by, against, or which may
relate to or affect (a) any benefit plan or any fiduciary or
administrator thereof, (b) the Transactions or (c) the Company which,
individually or in the aggregate, would have a Material Adverse Effect.
There are no outstanding injunctions or restraining orders prohibiting
consummation of any of the Transactions or any other transactions
contemplated in connection therewith. The Company is not in default
with respect to any judgment, order, writ, injunction or decree of any
Tribunal, and there are no unsatisfied judgments against the Company or
its businesses
-6-
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or properties, except for defaults and unsatisfied judgments that
individually or in the aggregate would not have a Material Adverse
Effect. The Company has not been advised that there is a reasonable
likelihood of an adverse determination of any litigation which adverse
determination, should it occur, would have a Material Adverse Effect.
(r) The proceeds from the issuance and sale of the Notes will
be used solely for the purposes specified in the Final Memorandum. None
of such proceeds will be used for the purpose of purchasing or carrying
any Margin Stock within the meaning of the applicable provisions of
Regulation G, T, U or X of the Board of Governors of the Federal
Reserve System, or for the purpose of reducing or retiring any
indebtedness which was originally incurred to purchase or carry Margin
Stock or for any other purpose which might cause any of the Notes to be
considered a "purpose credit" within the meaning of the applicable
provisions of Regulation G, T, U or X.
(s) All material Tax Returns, foreign and domestic, required
to be filed by the Company in any jurisdiction have been timely filed,
and all material Taxes (whether or not actually shown on such Tax
Returns) for which it is directly or indirectly liable or to which any
of its respective properties or assets is subject have been paid other
than taxes being contested in good faith and for which adequate
reserves have been established in accordance with GAAP; all such Tax
Returns are true, correct and complete in all material respects and
accurately set forth all items to the extent required to be reflected
or included in such Tax Returns by applicable federal, state, local or
foreign Tax laws, regulations or rules. There is no material proposed
tax assessment against the Company and, to the best knowledge of the
Company, there is no basis for such assessment, except for contested
claims.
As used herein, the following terms shall have the respective
meaning ascribed to each below:
"Tax Return" means a report, return or other information
(including any amendments) required to be supplied to a governmental entity with
respect to Taxes including, where permitted or required, combined or
consolidated returns for any group of entities that includes the Company.
"Taxes" shall mean all taxes, however denominated, including
any interest or penalties that may become payable in respect thereof, imposed by
any federal, state, local or foreign government or any agency or political
subdivision of any such government, which taxes shall include, without limiting
the generality of the foregoing, all income taxes (including, but not limited
to, United States federal income taxes and state income Taxes), payroll and
employee withholding taxes, unemployment insurance, social security, sales and
use taxes, excise taxes, environmental, franchise taxes, gross receipts taxes,
occupation taxes, real and personal property taxes, stamp taxes, transfer taxes,
withholding taxes, workers' compensation, and other obligations of the same or
of a similar nature, whether arising before, on or after the Closing Date.
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(t) (A) After giving effect to the Transactions, no ERISA
Events have occurred or are reasonably expected to occur which
individually or in the aggregate resulted in or might reasonably be
expected to result in a liability of the Company or any of its ERISA
Affiliates which would have a Material Adverse Effect.
(B) In accordance with the most recent actuarial valuations,
the Amount of Unfunded Benefit Liabilities individually or in the
aggregate for all Pension Plans (excluding for purposes of such
computation any Pension Plans which have a negative Amount of Unfunded
Benefit Liabilities), is not an amount which would have a Material
Adverse Effect.
As used herein, the following terms shall have the respective
meaning ascribed to each below:
"Amount of Unfunded Benefit Liability" means, with respect to
any Pension Plan, (i) if set forth on the most recent actuarial valuation report
with respect to such Pension Plan, the amount of unfunded benefit liabilities
(as defined in Section 4001(a)(18) of ERISA) and (ii) otherwise, the excess of
(a) the greater of the current liability (as defined in Section 412(1)(7) of the
Internal Revenue Code) or the actuarial present value of the accrued benefits
with respect to such Pension Plan over (b) the market value of the assets of
such Pension Plan.
"Employee Pension Benefit Plan" means any "employee pension
benefit plan" as defined in Section 3(2) of ERISA (i) which is, or, at any time
within the five calendar years immediately preceding the date hereof, was at any
time, sponsored, maintained or contributed to by the Company or any of its ERISA
Affiliates or (ii) with respect to which the Company retains any liability,
including any potential joint and several liability as a result of an
affiliation with an ERISA Affiliate or a party that would be an ERISA Affiliate
except for the fact the affiliation ceased more than five calendar years prior
to the date hereof.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended from time to time, and the regulations promulgated and rulings
issued thereunder and any successor statute, regulations and rulings.
"ERISA Affiliate," as applied to any person, means (i) any
corporation which is, or was at any time within the five calendar years
immediately preceding the date hereof, a member of a controlled group of
corporations within the meaning of Section 414(b) of the Internal Revenue. Code
of which that person is, or was at any time within the five calendar years
immediately preceding the date hereof, a member; (ii) any trade or business
(whether or not incorporated) which is, or was at any time within the five
calendar years immediately preceding the date hereof, a member of a group of
trades or businesses under common control within the meaning of Section 414(c)
of the Internal Revenue Code of which that person is, or was at any time within
the five calendar years immediately preceding the date hereof, a member; and
(iii) any member of an affiliated service group within the meaning of Section
414(m) or (o) of the Internal Revenue Code of which that person, any corporation
described in clause (i) above or any trade or business described in clause (ii)
above is, or was at any time within the five calendar years immediately
preceding the date hereof, a member.
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"ERISA Event" means (i) a "reportable event" within the
meaning of Section 4043 of ERISA and the regulations issued thereunder with
respect to any Pension Plan (excluding those for which the provision for 30-day
notice to the PBGC has been waived by regulation); (ii) the failure to meet the
minimum funding standard of Section 412 of the Internal Revenue Code with
respect to any Pension Plan (whether or not waived) or the failure to make any
required contribution with respect to any Multiemployer Plan; (iii) the
provision by the administrator of any Pension Plan pursuant to Section
4041(a)(2) of ERISA of a notice of intent to terminate such plan in a distress
termination described in Section 4041(c) of ERISA; (iv) the withdrawal by the
Company or any of its ERISA Affiliates from any Multiple Employer Plan or the
termination of any such Multiple Employer Plan resulting in liability pursuant
to Sections 4063 or 4064 of ERISA; (v) the institution by the PBGC of
proceedings to terminate any Pension Plan, or the occurrence of any event or
condition which might reasonably be expected to constitute grounds under ERISA
for the termination of, or the appointment of a trustee to administer, any
Pension Plan; (vi) the imposition of liability on the Company or any of its
ERISA Affiliates pursuant to Section 4062(e) or 4069 of ERISA or by reason of
the application of Section 4212(c) of ERISA; (vii) the withdrawal by the Company
or any of its ERISA Affiliates in a complete or partial withdrawal (within the
meaning of Sections 4203 and 4205 of ERISA) from any Multiemployer Plan if there
is any potential liability therefor, or the receipt by the Company or any of its
ERISA Affiliates of notice from any Multiemployer Plan that it is in
reorganization or insolvency pursuant to Section 4241 or 4245 of ERISA, or that
it intends to terminate or has terminated under Section 4041 A or 4042 of ERISA;
(viii) the occurrence of an act or omission which could reasonably be expected
to give rise to the imposition on the Company or any of its ERISA Affiliates of
fines, penalties, taxes or related charges under Chapter 43 of the Internal
Revenue Code or under Sections 406, 409 or 502(i) or (1) of ERISA in respect of
any Employee Benefit Pension Plan; (ix) receipt from the Internal Revenue
Service of notice of the failure of any Pension Plan (or any other Employee
Pension Benefit Plan intended to be qualified under Section 401 (a) of the
Internal Revenue Code) to qualify under Section 401 (a) of the Internal Revenue
Code, or the failure of any trust forming part of any Pension Plan or Employee
Pension Benefit Plan to qualify for exemption from taxation under Section 501
(a) of the Internal Revenue Code; or (x) the imposition of alien pursuant to
Section 401(a)(29) or 412(n) of the Internal Revenue Code or pursuant to ERISA
with respect to any Pension Plan.
"Internal Revenue Code" means the Internal Revenue Code of
1986, as amended from time to time, and any successor code or statute.
"Multiemployer Plan" means a "multiemployer plan" as defined
in Section 4001(a)(3) of ERISA to which any of the Company or any of its ERISA
Affiliates is making or accruing an obligation to make contributions, or has
within any of the preceding five years made or accrued an obligation to make
contributions.
"Multiple Employer Plan" means a single employer plan, as
defined in Section 4001(a)(15) of ERISA, that (i) is maintained for employees of
the Company or any of its ERISA Affiliates and at least one person other than
the Company and its ERISA Affiliates or (ii) was so maintained and in respect of
which such Company or ERISA Affiliates could have liability under Section 4064
or Section 4069 of ERISA in the event such plan has been or were to be
terminated.
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<PAGE>
"Pension Plan" means a Single Employer Plan or Multiple
Employer Plan.
"PBGC" means the Pension Benefit Guaranty Corporation, and any
successor to all or any of the Pension Benefit Guaranty Corporation's functions
under ERISA.
"Single Employer Plan" means a "single-employer plan," as
defined in Section 4001(a)(15) of ERISA, that (i) is maintained for employees of
the Company or any of its ERISA Affiliates and no person other than the Company
or any of its ERISA Affiliates or (ii) was so maintained and in respect of which
such Company or ERISA Affiliates could have liability under Section 4069 of
ERISA in the event such plan has been or were to be terminated.
(u) The Company is not subject to regulation under the Public
Utility Holding Company Act of 1935, the Federal Power Act of 1935, the
Investment Company Act of 1940 (as any of the preceding acts have been
amended) or other Law which regulates the incurrence by the Company of
indebtedness, including, but not limited to, Laws relating to common
contract carriers or the sale of electricity, gas, steam, water or
other public utility services.
(v) (A) The Company owns or is licensed to use, and
immediately after consummation of the Transactions, will own or be
licensed to use, all patents, trademarks, tradenames, copyrights,
technology, know-how and processes used in or necessary for the conduct
of the business of the Company as currently conducted ("Intellectual
Property") except where the failure to own or license the use of such
Intellectual Property does not, singly or in the aggregate, have a
Material Adverse Effect.
(B) To the Company's knowledge, no material claim has
been asserted by any person with respect to the use of any
such Intellectual Property, or challenging or questioning the
validity or effectiveness of any such Intellectual Property.
To the Company's knowledge, the use of such Intellectual
Property by the Company does not infringe on the rights of any
person, subject to such claims and infringements as do not,
singly or in the aggregate, have a Material Adverse Effect.
The consummation of the Transactions will not in any material
manner or to any material extent impair the ownership of (or
the license to use, as the case may be) such Intellectual
Property by the Company.
(w) After giving effect to the Transactions:
(A) the operations of the Company (including, without
limitation, as the term is used throughout this Section 1(w),
all operations and conditions at or in the Facilities) comply
in all material respects with all Environmental Laws except
for any such noncompliance which would not reasonably be
expected to have a Material Adverse Effect;
(B) The Company has obtained all Permits under
Environmental Laws necessary to its operations, and all such
Permits are being maintained in good standing, including the
timely submission of any renewal applications, and the Company
is in compliance with all material terms and conditions of
such Permits
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<PAGE>
except for any such failure to obtain, maintain or comply
which would not reasonably be expected to have a Material
Adverse Effect;
(C) the Company is not aware of nor has it received
(a) any written notice or claim to the effect that it is or
may be liable to any person under any Environmental Law,
including without limitation, any notice or claim relating to
any Hazardous Materials except as would not reasonably be
expected to have a Material Adverse Effect or (b) any letter
or request for information under Section 104 of the
Comprehensive Environmental Response, Compensation, and
Liability Act (42 U.S.C.ss. 9604) or comparable foreign or
state laws regarding any matter which could reasonably be
expected to result in a Material Adverse Effect, and, to the
best of the Company's knowledge, the Company is not nor will
it be involved in any investigation, response or corrective
action relating to or in connection with any Hazardous
Materials at any Facility or at any other location except for
such of the foregoing which would not reasonably be expected
to have a Material Adverse Effect;
(D) the Company is not subject to any judicial or
administrative proceeding alleging the violation of or
liability under any Environmental Laws which if adversely
determined could reasonably be expected to have a Material
Adverse Effect;
(E) none of the Company or any of its respective
Facilities or operations is subject to any outstanding written
order or agreement with any governmental authority or private
party relating to (a) any actual or potential violation by the
Company of or liability of the Company under Environmental
Laws or (b) any Environmental Claims except for such of the
foregoing which would not reasonably be expected to have a
Material Adverse Effect;
(F) to the best of the Company's knowledge, the
Company does not have any contingent liability in connection
with any Release or threatened Release of any Hazardous
Materials by the Company except for such of the foregoing
which would not reasonably be expected to have a Material
Adverse Effect;
(G) to the best of the Company's knowledge, the
Company and all predecessors of the Company have filed any
notice required under any Environmental Law indicating past or
present treatment, storage or disposal of hazardous waste, as
defined under 40 C.F.R. Parts 260-270 or any comparable
foreign or state laws;
(H) to the best of the Company's knowledge, no
Hazardous Materials exist on, under or about any Facility in a
manner that would reasonably be expected to give rise to an
Environmental Claim having a Material Adverse Effect. The
Company has not filed any notice or report of a Release of any
Hazardous Materials that would reasonably be expected to give
rise to an Environmental Claim having a Material Adverse
Effect;
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<PAGE>
(I) neither the Company nor, to the best of the
Company's knowledge, any of the predecessors of the Company,
has disposed of any Hazardous Materials in a manner that would
reasonably be expected to give rise to an Environmental Claim
having a Material Adverse Effect;
(J) to the best of the Company's knowledge, no
underground storage tanks or surface impoundments are on or at
any Facility; and
(K) no lien in favor of any person relating to or in
connection with any Environmental Claim has been filed or has
been attached to any Facility or other assets of the Company
except for any such lien which would not reasonably be
expected to have a Material Adverse Effect.
Notwithstanding anything in this Section 1(w) to the contrary,
no event or condition has occurred which may interfere with present compliance
by the Company with any Environmental Law or which could reasonably be expected
to result in any liability under any Environmental Law which, individually or in
the aggregate, has had a Material Adverse Effect.
As used herein, the following terms shall have the respective
meaning ascribed to each below:
"Environmental Claims" means any allegation, notice of
violation, claim, demand, abatement order or other order by any governmental
authority or any person for any response or corrective action, any damage,
including, without limitation, personal injury (including sickness, disease or
death), property damage, contribution, indemnity, indirect or consequential
damages, damage to the environment, nuisance, pollution, contamination or other
adverse effects on the environment, or for fines, penalties or restrictions, in
each case arising under or relating to any Environmental Law, including without
limitation, relating to, resulting from or in connection with Hazardous
Materials and relating to the Company or any of its Facilities or predecessors
of the Company.
"Environmental Laws" means the common law and all statutes,
ordinances, orders, rules, regulations, requirements, judgments, policies or
decrees relating to (i) pollution, protection, preservation, cleanup or
reclamation of the environment, natural resources, human, plant or animal health
or welfare, (ii) the Release or threatened Release of Hazardous Materials, (iii)
manufacture, processing, treatment, handling, recycling, generation, use,
storage, transportation or disposal of Hazardous Materials including, without
limitation, investigation, study, assessment, testing, monitoring, containment,
removal, remediation, or clean-up of any such Release or (iv) occupational
safety and health and industrial hygiene.
"Facilities" means any and all real property (including,
without limitation, all buildings, fixtures or other improvements located
thereon) now, hereafter or heretofore owned, leased, operated or used by the
Company or any of its predecessors of the Company.
"Hazardous Materials" means (i) any chemical, material or
substance at any time defined as or included in the definition of "hazardous
substances," "hazardous wastes," "hazardous materials," "extremely hazardous
substance," "restricted hazardous waste," "infectious waste," "toxic substances"
or any other formulations intended to define, list or
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<PAGE>
classify substances by reason of deleterious properties such as ignitability,
corrosivity, reactivity, carcinogenicity, toxicity, reproductive toxicity, "TCLP
toxicity" or "EP toxicity" or words of similar import under any applicable
Environmental Laws or publications issued pursuant thereto; (ii) any oil,
petroleum, petroleum fraction or petroleum derived substance; (iii) any
flammable substances or explosives; (iv) any radioactive materials or gases; (v)
asbestos; (vi) urea formaldehyde foam insulation; (vii) electrical equipment
which contains any oil or dielectric fluid containing levels of polychlorinated
biphenyls in excess of fifty parts per million; (viii) pesticides; (ix)
lead-based paint; and (x) any other chemical, material or substance, exposure to
which is prohibited, limited or regulated by any governmental authority.
"Permits" has the meaning ascribed to it in Section 1(x)
below.
"Release" means any release, spill, emission, leaking,
pumping, pouring, injection, escaping, deposit, disposal, discharge, dispersal,
dumping, leaching or migration of Hazardous Materials into the environment
(including, without limitation, the abandonment or disposal of any barrels,
containers or other closed receptacles containing any Hazardous Materials), or
onto or out of any Facility, including the movement of any Hazardous Material
through the air, soil, surface water, groundwater or property.
(x) The Company has, and immediately after the consummation of
the Transactions will have, such certificates, permits, licenses,
franchises, consents, approvals, authorizations and clearances
("Permits"), and is, and immediately after the consummation of the
Transactions will be, in compliance in all material respects with all
Laws as are necessary to own, lease or operate its properties and to
conduct its businesses in the manner as presently conducted and to be
conducted immediately after the consummation of the Transactions except
where the failure to have such Permits or to comply with such Laws
would not, singly or in the aggregate, have a Material Adverse Effect,
and all such Permits are valid and in full force and effect and will be
valid and in full force and effect immediately upon consummation of the
Transactions. The Company is, and immediately after the consummation of
the Transactions will be, in compliance in all material respects with
its obligations under such Permits and no event has occurred or will
occur as a result of the consummation of the Transactions that allows,
or after notice or lapse of time or both would allow, revocation or
termination of such Permits except for any such revocation or
termination as would not, singly or in the aggregate, have a Material
Adverse Effect.
(y) The Company carries or is entitled to the benefits of
insurance (including self insurance) in such amounts and covering such
risks as is generally maintained by companies of established repute
engaged in the same or similar businesses, and all such insurance is
(and will be immediately after the consummation of the Transactions) in
full force and effect, except where the failure to carry such insurance
or be entitled to the benefits of such insurance does not, singly or in
the aggregate, have a Material Adverse Effect.
(z) No labor disturbance by the employees of the Company
exists or, to the best knowledge of the Company, is threatened and the
Company is not aware of any existing or imminent labor disturbance by
the employees of the Company's principal
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<PAGE>
suppliers, manufacturers or customers that could, singly or in the
aggregate, have a Material Adverse Effect.
(aa) Except for the fees and expenses payable to the Initial
Purchasers and to Leonard Green & Partners, L.P., which fees and expenses will
be paid by the Company on the Closing Date, the Company did not employ any
investment banker, broker, finder, consultant, intermediary or other person in
connection with the transactions contemplated by this Agreement which would be
entitled to any investment banking, brokerage, finder's or other fee or
commission in connection with this Agreement or the transactions contemplated
hereby.
Any certificate signed by any officer of the Company and
delivered to the Initial Purchasers or their counsel shall be deemed to be a
representation and warranty by the Company to the Initial Purchasers as to the
matters covered thereby to the extent expressly set forth therein.
2. Purchase and Sale. Subject to the terms and conditions and
in reliance upon the representations and warranties herein set forth, the
Company agrees to sell to each of the Initial Purchasers, and each of the
Initial Purchasers agrees to purchase from the Company, severally and not
jointly, at a purchase price equal to 97% of the principal amount thereof, Notes
in the respective principal amount set forth opposite its name on Schedule I
hereto.
3. Delivery and Payment. Delivery of and payment for the Notes
shall be made at 10:00 AM, New York City time, on March 31, 1998, which date and
time may be postponed by agreement between the Initial Purchasers and the
Company (such date and time of delivery and payment for the Notes being herein
called the "Closing Date"). Delivery of the Notes shall be made to the Initial
Purchasers against payment by the Initial Purchasers of the purchase price
thereof to or upon the order of the Company by intrabank transfer payable in
same day funds or such other manner of payment as may be agreed by the Company
and the Initial Purchasers. Delivery of the Notes and payment for the Notes
shall be made at the office of Kramer, Levin, Naftalis & Frankel, 919 Third
Avenue, New York, NY 10022. Certificates for the Notes shall be registered in
such names and in such denominations as the Initial Purchasers may request not
less than two full Business Days in advance of the Closing Date.
The Company agrees to have the Notes available for inspection,
checking and packaging by the Initial Purchasers in New York, New York, not
later than 1:00 PM on the Business Day prior to the Closing Date.
4. Offering of Notes and the Initial Purchasers'
Representations and Warranties. (a) Each of the Initial Purchasers has advised
the Company that it is its intention, as promptly as it deems appropriate after
the Company shall have furnished it with copies of the Final Memorandum, to
resell the Notes pursuant to the procedures and upon the terms and subject to
the conditions set forth in the Final Memorandum.
(b) Each of the Initial Purchasers represents and warrants to
and agrees with the Company that:
(i) It is not acquiring the Notes with a view to any
distribution thereof within the meaning of the Securities Act
or with any present intention of offering or selling any of
the Notes in a transaction that would violate the Securities
Act or the securities laws of any State of the United States
or any other applicable jurisdiction.
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<PAGE>
(ii) It has not offered or sold, and it will not
offer or sell, any Notes except (x) within the United States
to those it reasonably believes to be qualified institutional
buyers (as defined in Rule 144A under the Securities Act)
("QIBs") in transactions meeting the requirements of Rule
144A, (y) to other institutional "accredited investors" (as
defined in Rule 501(a)(1), (2), (3) or (7) under the
Securities Act) who provide to it and to the Company a letter
in the form of Exhibit A hereto or (z) outside the United
States to persons other than U.S. persons (or the account or
benefit of U.S. persons) within the meaning of and in reliance
upon Regulation S under the Securities Act. In connection with
each sale pursuant to clause (x) above, each Initial Purchaser
has taken or will take reasonable steps to ensure that the
purchaser of such Notes is aware that such sale is being made
in reliance upon Rule 144A.
(iii) It is an institutional accredited investor with
such knowledge and experience in financial and business
matters as are necessary in order to evaluate the merits and
risks of an investment in the Notes.
(iv) Neither it nor any person acting on its behalf
has made or will make offers or sales of the Notes by means of
any form of general solicitation or general advertising
(within the meaning of Regulation D under the Securities Act).
(v) It has not offered or sold, and prior to the date
six months after the issue of the Notes, will not offer or
sell any Notes to persons in the United Kingdom except to
persons whose ordinary activities involve them in acquiring,
holding, managing or disposing of investments (as principal or
agent) for the purposes of their businesses, or otherwise in
circumstances which have not resulted and will not result in
an offer to the public in the United Kingdom within the
meaning of the Public Offers of Securities Regulations 1995.
(vi) It has complied and will comply with all
applicable provisions of the Financial Services Act 1986 with
respect to anything done by it in relation to the Notes in,
from or otherwise involving the United Kingdom.
(vii) It has only issued or passed on and will only
issue or pass on in the United Kingdom any document received
by it in connection with the issue of the Notes to a person
who is of a kind described in Article 11(3) of the Financial
Services Act 1986 (Investment Advertisements) (Exemptions)
Order 1996 (as amended) or is a person to whom the document
may otherwise lawfully be issued or passed on.
5. Agreements. The Company agrees with the Initial
Purchasers that:
(a) The Company will furnish to the Initial Purchasers and to
Cleary, Gottlieb, Steen & Hamilton ("Counsel for the Initial
Purchasers"), without charge, during the
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<PAGE>
period referred to in paragraph (c) below, as many copies of the Final
Memorandum and any amendments and supplements thereto as they may
reasonably request. The Company will pay the expenses of printing or
other production of all documents relating to the offering of the Notes
and will reimburse the Initial Purchasers for payment of the required
PORTAL filing fee.
(b) The Company will not amend or supplement the Final
Memorandum prior to the completion of the distribution of the Notes by
the Initial Purchasers, without the prior written consent of each of
the Initial Purchasers.
(c) If at any time prior to the completion of the distribution
of the Notes acquired by the Initial Purchasers pursuant to this
Agreement, during which time you are required to deliver a Final
Memorandum in connection with sales of the Notes by you (as reasonably
determined by the Initial Purchasers, upon the advice of counsel), any
event occurs as a result of which the Final Memorandum, as then amended
or supplemented, would include any untrue statement of a material fact
or omit to state any material fact necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading, or if it should be necessary to amend or supplement the
Final Memorandum to comply with applicable law, the Company will
promptly notify the Initial Purchasers of the same and, subject to the
requirements of paragraph (b) of this Section 5, will prepare and
provide to the Initial Purchasers pursuant to paragraph (a) of this
Section 5 an amendment or supplement that will correct such statement
or omission or effect such compliance.
(d) The Company will arrange for the qualification of the
Notes for sale by the Initial Purchasers under the laws of such
jurisdictions as the Initial Purchasers may reasonably designate and
will maintain such qualifications in effect so long as required by law
for the sale of the Notes by the Initial Purchasers; provided, however,
that the Company will not be required to qualify generally to do
business in any jurisdiction in which it is not then so qualified, to
file any general consent to service of process or to take any other
action which would subject it to general service of process or to
taxation in any such jurisdiction where it is not then so subject. The
Company will promptly advise the Initial Purchasers of the receipt by
the Company of any notification with respect to the suspension of the
qualification of the Notes for sale in any jurisdiction or the
initiation or threatening of any proceeding for such purpose.
(e) The Company, whenever it publishes or makes available to
the public (by filing with any regulatory authority or securities
exchange or by publishing a press release or otherwise) any information
that could reasonably be expected to be material in the context of the
issue of Notes under this Agreement, shall promptly notify the Initial
Purchasers as to the nature of such information or event. The Company
will likewise notify the Initial Purchasers of (i) any decrease in the
rating of the Notes or any other debt securities of the Company by any
nationally recognized statistical rating organization (as defined in
Rule 436(g)(2) under the Securities Act) or (ii) any notice given of
any intended or potential decrease in any such rating or of a possible
change in any such rating that does not indicate the direction of the
possible change, as soon as the Company becomes aware of any such
decrease or notice. The Company will also deliver
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<PAGE>
to the Initial Purchasers, as soon as available and without request,
copies of its latest yearly and quarterly financial statements and any
report of its auditors thereon.
(f) The Company will not, and will not permit any of its
Affiliates to, resell any Notes that have been acquired by any of them,
other than pursuant to an effective registration statement under the
Securities Act.
(g) Except as contemplated in the Registration Rights
Agreement and except as disclosed in the Final Memorandum, none of the
Company or any of its Affiliates, nor any person acting on its or their
behalf (other than the Initial Purchasers or any of their Affiliates,
as to whom the Company expresses no opinion) will, directly or
indirectly, make offers or sales of any security, or solicit offers to
buy any security, under circumstances that would require the
registration of the Notes under the Securities Act.
(h) None of the Company or any of its Affiliates, nor any
person acting on its or their behalf (other than the Initial Purchasers
or any of their Affiliates, as to whom the Company expresses no
opinion) will engage in any form of general solicitation or general
advertising (within the meaning of Regulation D) in connection with any
offer or sale of the Notes.
(i) So long as any Notes remain outstanding, the Company shall
provide the Trustee, the holders of the Notes and the Initial
Purchasers with such annual reports and such information, documents and
other reports (other than exhibits) as are specified in Sections 13 and
15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act") and applicable to a U.S. corporation subject to such Sections,
such information, documents and other reports to be so provided within
15 days after the times specified for the filing of such information,
documents and reports under such Sections. 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, beginning on the
earlier of (x) the date on which, pursuant to the Registration Rights
Agreement, the Exchange Offer Registration Statement (as defined
therein) becomes effective and (y) 730 days following the Issue Date,
file with the Commission, to the extent permitted, such annual reports
and such information, documents and other reports as are specified in
Sections 13 and 15(d) of the Exchange Act and applicable to a U.S.
corporation subject to such Sections, such information, documents and
other reports to be so filed within 15 days after the times specified
for the filing of such information, documents and reports under such
Sections. In addition, the Company will make available, upon request,
to any holder and any prospective purchaser of Notes the information
required pursuant to Rule 144A(d)(4) under the Securities Act.
(j) The Company will cooperate with the Initial Purchasers and
use its best efforts to (i) permit the Notes to be designated PORTAL
securities in accordance with the Rules and regulations of the NASD
relating to trading in the Private Offerings, Resale and Trading
through Automated Linkages market ("PORTAL") and (ii) permit the Notes
to be eligible for clearance and settlement as described under
"Book-Entry; Delivery and Form" in the Final Memorandum.
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<PAGE>
(k) The Company will apply the net proceeds from the sale of
the Notes as set forth under "Use of Proceeds" in the Final Memorandum.
(l) The Company will conduct its operations in a manner that
will not subject the Company to registration as an investment company
under the Investment Company Act of 1940, as amended.
(m) Each Note will bear a legend substantially to the
following effect until such legend shall no longer be necessary or
advisable because the Notes are no longer subject to the restrictions
on transfer described therein:
THIS NOTE 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 (A) IT IS A "QUALIFIED INSTITUTIONAL
BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) OR
(B) IT IS AN "ACCREDITED INVESTOR" (AS DEFINED IN RULE
501(a)(1), (2), (3) OR (7) UNDER THE SECURITIES ACT) (AN
"ACCREDITED INVESTOR") OR (C) IT IS NOT A U.S. PERSON AND IS
ACQUIRING THIS NOTE IN AN OFFSHORE TRANSACTION IN COMPLIANCE
WITH REGULATION S UNDER THE SECURITIES ACT; (2) AGREES THAT IT
WILL NOT WITHIN TWO YEARS AFTER THE ORIGINAL ISSUANCE OF THIS
NOTE RESELL OR OTHERWISE TRANSFER THIS NOTE EXCEPT (A) TO THE
ISSUER OR ANY SUBSIDIARY THEREOF, (B) INSIDE THE UNITED STATES
TO A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE
144A UNDER THE SECURITIES ACT, (C) INSIDE THE UNITED STATES TO
AN ACCREDITED INVESTOR THAT IS ACQUIRING THE NOTE FOR ITS OWN
ACCOUNT, OR FOR THE ACCOUNT OF SUCH AN ACCREDITED INVESTOR, IN
EACH CASE IN A MINIMUM PRINCIPAL AMOUNT OF THE NOTES OF U.S.
$250,000, FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO OR
FOR OFFER OR SALE IN CONNECTION WITH ANY DISTRIBUTION IN
VIOLATION OF THE SECURITIES ACT THAT, PRIOR TO SUCH TRANSFER,
FURNISHES (OR HAS FURNISHED ON ITS BEHALF BY A U.S.
BROKER-DEALER) TO THE TRUSTEE A SIGNED LETTER CONTAINING
CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE
RESTRICTIONS ON TRANSFER OF THIS NOTE (THE FORM OF WHICH
LETTER CAN BE OBTAINED FROM THE TRUSTEE), (D) OUTSIDE THE
UNITED STATES IN COMPLIANCE WITH REGULATION S UNDER THE
SECURITIES ACT, (E) PURSUANT TO THE EXEMPTION FROM
REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF
AVAILABLE), OR (F) PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT; AND (3) AGREES THAT IT
WILL GIVE TO EACH PERSON TO WHOM THIS NOTE IS TRANSFERRED
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<PAGE>
A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. IN
CONNECTION WITH ANY TRANSFER OF THIS NOTE WITHIN TWO YEARS
AFTER THE ORIGINAL ISSUANCE OF THIS NOTE, IF THE PROPOSED
TRANSFEREE IS AN ACCREDITED INVESTOR, THE HOLDER MUST, PRIOR
TO SUCH TRANSFER, FURNISH TO THE TRUSTEE AND THE ISSUER SUCH
CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION AS EITHER
OF THEM MAY REASONABLY REQUIRE 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. 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.
6. Conditions to the Obligations of the Initial Purchasers.
The obligations of the Initial Purchasers to purchase the Notes shall be subject
to the accuracy of the representations and warranties on the part of the Company
contained herein at the date and time that this Agreement is executed and
delivered by the parties hereto (the "Execution Time") and the Closing Date, to
the accuracy of the statements of the Company made in any certificates pursuant
to the provisions hereof, to the performance by the Company of its obligations
hereunder in all material respects and to the following additional conditions:
(a) The Company shall have furnished to the Initial Purchasers
the opinions of Kramer, Levin, Naftalis & Frankel and Cooperman, Levitt
Winikoff, Lester & Newman, P.C. ("Counsel for the Company"), each dated
the Closing Date, in form and substance satisfactory to the initial
Purchasers to the effect set forth in Exhibit B-1 and B-2 hereto.
(b) The Initial Purchasers shall have received from Counsel
for the Initial Purchasers such opinion or opinions, dated the Closing
Date, with respect to the issuance and sale of the Notes and other
related matters as the Initial Purchasers may reasonably require, and
the Company shall have furnished to such counsel such documents as it
reasonably requests for the purpose of enabling it to pass upon such
matters.
(c) The Company shall have furnished to the Initial Purchasers
a certificate dated the Closing Date, signed on behalf of the Company
by any two of its Co-Chairmen of the Board and Co-Chief Executive
Officers, President, Chief Financial Officer and any Vice President to
the effect that the signer of such certificate has carefully examined
the Final Memorandum, any amendment or supplement to the Final
Memorandum and this Agreement and that:
(i) the representations and warranties of the Company
contained in this Agreement are true and correct in all
material respects on and as of the Closing Date with the same
effect as if made on the Closing Date, and the Company has
complied in all material respects with all the agreements and
satisfied in all material respects all the conditions on its
part to be performed or satisfied hereunder at or prior to the
Closing Date; and
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(ii) since the date of the most recent financial
statements included in the Final Memorandum, there has been no
change or development or event involving a prospective change
constituting a Material Adverse Effect, except as set forth in
or contemplated by the Final Memorandum (exclusive of any
amendment or supplement thereto).
(d) At the Execution Time and at the Closing Date, KPMG Peat
Marwick LLP shall have furnished to the Initial Purchasers a letter or
letters, dated respectively as of the Execution Time and as of the
Closing Date, in form and substance reasonably satisfactory to the
Initial Purchasers, confirming that they are independent public
accountants within the meaning of Rule 101 of the Code of Professional
Conduct of the American Institute of Certified Public Accountants (the
"AICPA") and stating in effect that:
(i) they have (a) read the incomplete unaudited
monthly financial statements for January 31, 1998 prepared by
the Company, (b) read the minutes of the meetings of the
stockholders, directors and committees of the board of
directors of the Company made available to them by the Company
and (c) made inquiries of certain officials of the Company who
have responsibility for financial and accounting matters of
the Company whether the financial statements referred to in
clause (a) above are stated on a basis substantially
consistent with that of the audited combined financial
statements included in the Final Memorandum.
(ii) Nothing came to their attention as a result of
the procedures performed in (a), (b) and (c) above that caused
them to believe that, (1) at January 31, 1998, there was any
change in capital stock, increase in long-term debt or
decrease in combined net current assets or stockholders'
equity of the Company as compared with amounts shown in the
December 31, 1997 audited combined balance sheet included in
the Final Memorandum, or (2) for the period from January 1,
1998 to January 31, 1998, there were any decreases, as
compared to the corresponding period in the preceding year, in
combined net sales or in the total amount of net income,
except in all instances for (I) changes, increases or
decreases that the Final Memorandum disclosed have occurred or
may occur or (II) as set forth in such letter, in which case
the letter shall be accompanied by an explanation by the
Company as to the significance thereof unless said explanation
is not deemed necessary by the Initial Purchasers;
(iii) they have inquired of certain officials of the
Company who have responsibility for financial and accounting
matters whether (a) at any specified date not more than three
Business Days prior to the date of the letter, there was any
change in the capital stock, increase in long-term debt or any
decrease in combined net current assets or stockholders'
equity of the Company as compared with amounts shown on the
January 31, 1998, unaudited combined balance sheet or (b) for
the period from January 31, 1998 to any specified date not
more than three Business Days prior to the date of the letter,
there were any decreases as compared with the corresponding
period in the preceding year, in combined net sales or in the
total amount of net income. On the basis of these inquiries,
nothing
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came to their attention that caused them to believe that there
was any such change, increases or decrease, except in all
instances for (I) changes, increases, or decreases, that the
Final Memorandum discloses have occurred or may occur or (II)
as set forth in such letter, in which case the letter shall be
accompanied by an explanation by the Company as to the
significance thereof unless said explanation is not deemed
necessary by the Initial Purchaser;
(iv) they have performed certain other specified
procedures as a result of which they determined that certain
information of an accounting, financial or statistical nature
(which is limited to accounting, financial or statistical
information derived from the general accounting records of the
Company) set forth in the Final Memorandum, including without
limitation the information set forth under the captions
"Summary," "Risk Factors," "Use of Proceeds,"
"Capitalization," "Unaudited Pro Forma Combined Financial
Data," "Selected Historical Combined Financial Data,"
"Management's Discussion and Analysis of Financial Condition
and Results of Operations," "Business" and "Certain
Relationships and Related Transactions," in the Final
Memorandum agrees with the accounting records of the Company,
excluding any questions of legal interpretation; and
(v) as to pro forma financial information,
(A) they have read the unaudited pro forma combined
financial data included in the Final Memorandum;
(B) they have inquired of certain officials of the
Company who have responsibility for financial and accounting
matters as to the basis for their determination of the pro
forma adjustments;
(C) they have proved the arithmetic accuracy of the
application of the pro forma adjustments to the historical
financial amounts in the unaudited pro forma combined
consolidated financial data, and as a result of the procedures
specified in (A), (B) and (C), nothing came to their attention
that caused them to believe that the pro forma adjustments
have not been properly applied to the historical amounts in
the compilation of the unaudited pro forma combined
consolidated financial data included in the Final Memorandum;
and
(D) they have performed certain other specified
procedures as a result of which they determined that certain
pro forma information of an accounting, financial, or
statistical nature set forth in the Final Memorandum,
including without limitation the information set forth under
the captions "Summary," "Risk Factors," "Capitalization" and
"Unaudited Pro Forma Combined Financial Data" in the Final
Memorandum, agrees to or can be derived from the pro forma
financial data of the Company or the analysis completed in the
preparation of such pro forma financial data, excluding any
questions of legal interpretation.
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All references in this Section 6(d) to the Final Memorandum
shall be deemed to include any amendment or supplement thereto at the date of
the letter or letters.
(e) At the Execution Time, Kronick Kalada Berdy & Co.
shall have furnished to the Initial Purchasers a letter, dated
as of the Execution Time, in form and substance reasonably
satisfactory to the Initial Purchasers, confirming that they
are independent public accountants within the meaning of Rule
101 of the Code of Professional Conduct of the American
Institute of Certified Public Accountants (the "AICPA") and
stating in effect that
(i) they have (a) read the incomplete
unaudited monthly financial statements for January
31, 1998 and January 31, 1997 prepared by the
Company, (b) read the minutes of the meetings of the
stockholders, directors and committees of the board
of directors of the Company made available to them by
the Company and (c) made inquiries of certain
officials of the Company who have responsibility for
financial and accounting matters of the Company
whether the financial statements referred to in
clause (a) above are stated on a basis substantially
consistent with that of the audited combined
financial statements included in the Final
Memorandum; and
(ii) they have performed certain specified
procedures as a result of which they determined that
certain information of an accounting, financial or
statistical nature (which is limited to accounting,
financial or statistical information derived from the
general accounting records of the Company) set forth
in the Final Memorandum, including without limitation
the information set forth under the captions
"Summary," "Selected Historical Combined Financial
Data," "Management's Discussion and Analysis of
Financial Condition and Results of Operations,"
"Business" and "Certain Relationships and Related
Transactions," in the Final Memorandum, agrees with
the accounting records of the Company, excluding any
questions of legal interpretation.
All references in this Section 6(e) to the Final Memorandum
shall be deemed to include any amendment or supplement thereto at the date of
the letter.
(f) Subsequent to the Execution Time or, if earlier, the dates
as of which information is given in the Final Memorandum and prior to
the Closing Date, there shall not have been (i) any change or decrease
specified in the letter or letters referred to in paragraph (d) of this
Section 6, or (ii) any change, or any development involving a
prospective change, in or affecting the business or properties of the
Company, the effect of which, in any case referred to in clause (i) or
(ii) above, is, in the judgment of the Initial Purchasers, so material
and adverse as to make it impractical or inadvisable to market the
Notes as contemplated by the Final Memorandum.
(g) Subsequent to the respective dates as of which information
is given in the Final Memorandum and after giving effect to the
Transactions, (i) the Company shall not have incurred any material
liability or obligation, direct or contingent, or entered into any
material transaction not in the ordinary course of business; (ii) the
Company shall not have purchased any of its outstanding Capital Stock,
nor declared, paid or otherwise made any dividend or distribution of
any kind on its Capital Stock; (iii) there shall not
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<PAGE>
have been any material change in the Capital Stock of the Company or in
the short-term debt or long-term debt of the Company; and (iv) none of
the assets of the Company shall have materially diminished in value,
except in each case as described in or contemplated by the Final
Memorandum.
(h) Subsequent to the Execution Time and prior to the Closing
Date, there shall not have been any decrease in the rating of the Notes
by any "nationally recognized statistical rating organization" (as
defined for purposes of Rule 436(g)(2) under the Securities Act) or any
notice given of any intended or potential decrease in any such rating
or of a possible change in any such rating that does not indicate the
direction of the possible change.
(i) On or prior to the Closing Date, each of the Transaction
Documents (including any amendments thereto) shall have been duly
authorized, executed and delivered by each of the parties thereto, and
the Initial Purchasers shall have received copies of each such
Transaction Document (including any amendments thereto) as so executed
and delivered in the form provided to the Initial Purchasers on or
before the date hereof except for changes approved by the Initial
Purchasers or changes which do not materially affect the rights or
obligations of the Company.
(j) The Company shall have been advised by the National
Association of Securities Dealers, Inc. (the "NASD") that the Notes
have been designated PORTAL eligible securities in accordance with the
Rules and regulations of the NASD relating to trading in the Private
Offerings, Resales and Trading through Automated Linkages Market (the
"PORTAL Market").
(k) On or before the Closing Date, all conditions to
borrowings under the Bank Facility shall have been satisfied or waived,
the initial borrowings thereunder shall have occurred concurrently with
the closing of the sale of the Notes hereunder as contemplated in the
Final Memorandum and all representations and warranties of the Company
contained in the Bank Facility shall be true and correct in all
material respects on the Closing Date as if made on the Closing Date.
(l) On or before the Closing Date, all conditions to
consummation of the Recapitalization pursuant to the Stock Purchase
Agreement shall have been satisfied or waived, the consummation of the
Recapitalization shall have occurred concurrently with the closing of
the sale of the Notes hereunder as contemplated in the Final Memorandum
and all representations and warranties of the Company contained in the
Stock Purchase Agreement shall be true and correct in all material
respects on the Closing Date as if made on the Closing Date.
(m) Prior to the Closing Date, the Company shall have
furnished to the Initial Purchasers such further information,
certificates and documents as the Initial Purchasers may reasonably
request.
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<PAGE>
If any of the conditions specified in this Section 6 shall not
have been fulfilled in all material respects when and as provided in this
Agreement, or if any of the opinions and certificates mentioned above or
elsewhere in this Agreement shall not be in all material respects reasonably
satisfactory in form and substance to the Initial Purchasers and Counsel for the
Initial Purchasers, this Agreement and all obligations of the Initial Purchasers
hereunder may be canceled at the Closing Date by the Initial Purchasers. Notice
of such cancellation shall be given to the Company in writing or by telephone or
by telegraph confirmed in writing.
The documents required to be delivered by this Section 6 will
be delivered at the office of Counsel for the Initial Purchasers on the Closing
Date.
7. Reimbursement of Expenses; Fees. The Company will, whether
or not the sale of the Notes provided for herein is consummated, pay all
expenses incident to the performance of its obligations under this Agreement and
the offering documents, including the fees and disbursements of its accountants
and counsel, the costs of printing or other production and delivery of the
Preliminary Memorandum, the Final Memorandum, all amendments thereof and
supplements thereto, each Transaction Document and all other documents relating
to the offering of the Notes, the costs of preparing, printing, packaging and
delivering the Notes, the fees and disbursements, including reasonable fees of
counsel incurred in compliance with Section 5(d), the fees and disbursements of
the Trustee and the fees of any agency that rates the Notes, and the fees and
expenses, if any, incurred in connection with the admission of the Notes for
trading in the PORTAL Market.
8. Indemnification and Contribution. (a) The Company agrees to
indemnify and hold harmless the Initial Purchasers, the directors, officers,
employees and agents of the Initial purchasers and each person who controls any
of the Initial Purchasers within the meaning of either the Securities Act or the
Exchange Act against any and all losses, claims, damages or liabilities, joint
or several, to which they or any of them may become subject under the Securities
Act, the Exchange Act or other federal or state statutory law or regulation, at
common law or otherwise, insofar as such losses, claims, damages or liabilities
(or actions in respect thereof) arise out of or are based upon any untrue
statement or alleged untrue statement of a material fact contained in the
Preliminary Memorandum, the Final Memorandum or any information provided by the
Company to any Holder or prospective purchaser of Notes pursuant to Section
5(i), or in any amendment thereof or supplement thereto, or arise out of or are
based upon the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading, and
agrees to reimburse each such indemnified party, as incurred, for any legal or
other expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage, liability or action; provided, however,
that the Company will not be liable in any case to the extent that any such
loss, claim, damage or liability arises out of or is based upon any such untrue
statement or alleged untrue statement or omission or alleged omission made in
the Preliminary Memorandum or the Final Memorandum, or in any amendment thereof
or supplement thereto, in reliance upon and in conformity with written
information relating to the Initial Purchasers furnished to the Company by or on
behalf of the Initial Purchasers specifically for inclusion therein; and,
provided, further, that with respect to any untrue statement or omission of
material fact made in the Preliminary Memorandum, the indemnity agreement
contained in this Section 8(a) shall not inure to the benefit of the Initial
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<PAGE>
Purchasers to the extent that any such losses, claims, damages or liabilities
asserted against the Initial Purchasers occurs under circumstances where it
shall have been determined by a court of competent jurisdiction by final and
nonappealable judgment that (x) the Company had previously furnished copies of
the Final Memorandum to the Initial Purchasers as required by this Agreement,
(y) the untrue statement or omission of a material fact contained in the
Preliminary Memorandum was corrected in the Final Memorandum and (z) there was
not sent or given to such person asserting any such losses, claims, damages or
liabilities, at or prior to the written confirmation of the sale of Notes to
such person, a copy of the Final Memorandum. Notwithstanding the foregoing, in
the event that it is finally determined by a court of competent jurisdiction
that indemnification under this Section 8(a) is not available to an indemnified
party, expenses paid in advance of the final disposition of such claim shall be
repaid to the Company by such indemnified party. This indemnity agreement will
be in addition to any liability which the company may otherwise have.
(b) The Initial Purchasers agree to indemnify and hold
harmless the Company, its directors, officers, employees and agents and
each person who controls the Company within the meaning of either the
Securities Act or the Exchange Act to the same extent as the foregoing
indemnity from the Company to the Initial Purchasers, but only with
reference to written information relating to the Initial Purchasers
furnished to the Company by or on behalf of the Initial Purchasers
specifically for inclusion in the documents referred to in the
foregoing indemnity. This indemnity agreement will be in addition to
any liability which the Initial Purchasers may otherwise have. The
Company acknowledges that the statements set forth in the last
paragraph of the cover page and under the headings "Transfer
Restrictions" and "Plan of Distribution" in the Preliminary Memorandum
and the Final Memorandum constitute the only information furnished in
writing by or on behalf of the Initial Purchasers for inclusion in the
Preliminary Memorandum or Final Memorandum (or in any amendment or
supplement thereto).
(c) Promptly after receipt by an indemnified party under this
Section 8 of notice of the commencement of any action, such indemnified
party will, if a claim in respect thereof is to be made against the
indemnifying party under this Section 8, notify the indemnifying party
in writing of the commencement thereof; but the failure so to notify
the indemnifying party (i) will not relieve it from liability under
paragraph (a) or (b) above unless and to the extent it did not
otherwise learn of such action and such failure results in the
forfeiture by the indemnifying party of substantial rights and defenses
and (ii) will not, in any event, relieve the indemnifying party from
any obligations to any indemnified party other than the indemnification
obligation provided in paragraph (a) or (b) above. The indemnifying
party shall be entitled to appoint counsel of the indemnifying party's
choice at the indemnifying party's expense to represent the indemnified
party in any action for which indemnification is sought (in which case
the indemnifying party shall not thereafter be responsible for the fees
and expenses of any separate counsel retained by the indemnified party
or parties except as set forth below); provided, however, that such
counsel shall be satisfactory to the indemnified party. Notwithstanding
the indemnifying party's election to appoint counsel to represent the
indemnified party in an action, the indemnified party shall have the
right to employ separate counsel (including local counsel), and the
indemnifying party shall bear the reasonable fees, costs and expenses
of such separate counsel (and local counsel) if (i) the
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<PAGE>
use of counsel chosen by the indemnifying party to represent the
indemnified party would present such counsel with a conflict of
interest, (ii) the actual or potential defendants in, or targets of,
any such action include both the indemnified party and the indemnifying
party and the indemnified party shall have reasonably concluded that
there may be legal defenses available to it and/or other indemnified
parties which are different from or additional to those available to
the indemnifying party, (iii) the indemnifying party shall not have
employed counsel satisfactory to the indemnified party to represent the
indemnified party within a reasonable time after notice of the
institution of such action or (iv) the indemnifying party shall have
authorized the indemnified party to employ separate counsel at the
expense of the indemnifying party; provided further, that the
indemnifying party shall not be responsible for the fees and expenses
of more than one separate counsel (together with appropriate local
counsel) representing all the indemnified parties under paragraph (a)
or paragraph (b) above. An indemnifying party will not, without the
prior written consent of the indemnified party, settle or compromise or
consent to the entry of any judgement with respect to any pending or
threatened claim, action, suit or proceeding in respect of which
indemnification or contribution may be sought hereunder (whether or not
an indemnified party is an actual or potential party to such claim or
action) unless such settlement, compromise or consent includes an
unconditional release of each indemnified party from all liability
arising out of such claim, action, suit or proceeding.
(d) In the event that the indemnity provided in paragraph (a)
or (b) of this Section 8 is unavailable or insufficient to hold
harmless an indemnified party for any reason, the Company, on the one
hand, and the Initial Purchasers, on the other, agree to contribute to
the aggregate losses, claims, damages and liabilities (including legal
or other expenses reasonably incurred in connection with investigating
or defending same) (collectively "Losses") to which the Company, on the
one hand, and any Initial Purchaser, on the other, may be subject in
such proportion as is appropriate to reflect the relative benefits
received by the Company, on the one hand, and by the Initial
Purchasers, on the other, from the offering of the Notes; provided,
however, that in no case shall any Initial Purchaser be responsible for
any amount in excess of the purchase discount or commission applicable
to the Notes purchased by such Initial Purchaser hereunder. If the
allocation provided by the immediately preceding sentence is
unavailable for any reason, the Company, on the one hand, and any
Initial Purchasers, on the other, shall contribute in such proportion
as is appropriate to reflect not only such relative benefits but also
the relative fault of the Company, on the one hand, and of any Initial
Purchaser, on the other, in connection with the statements or omissions
that resulted in such Losses as well as any other relevant equitable
considerations. Benefits received by the Company shall be deemed to be
equal to the total net proceeds from the offering (before deducting
expenses), and benefits received by any Initial Purchaser shall be
deemed to be equal to the total purchase discounts and commissions
received by such Initial Purchaser from the Company in connection with
the purchase of the Notes hereunder. Relative fault shall be determined
by reference to, among other things, whether any alleged untrue
statement or omission relates to information provided by the Company or
any Initial Purchaser and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such
statement or omission. The Company and the Initial Purchasers agree
that it would not be just and equitable if contribution were determined
by pro rata allocation or
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<PAGE>
any other method of allocation that does not take account of the
equitable considerations referred to above. The amount paid or payable
by an indemnified party as a result of the losses, claims, damages,
liabilities, expenses or judgments referred to in this paragraph (d)
shall be deemed to include, subject to the limitations set forth above,
any legal or other expenses reasonably incurred by such indemnified
person in connection with investigating or defending any such action or
claim. Notwithstanding the provisions of this paragraph (d), no person
guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any
person who was not guilty of such fraudulent misrepresentation. For
purposes of this Section 8, each person who controls any of the Initial
Purchasers within the meaning of either the Securities Act or the
Exchange Act and each director, officer, employee and agent of the
Initial Purchasers shall have the same rights to contribution as the
Initial Purchasers, and each person who controls the Company within the
meaning of either the Securities Act or the Exchange Act and each
officer, director, employee and agent of the Company shall have the
same rights to contribution as the Company, subject in each case to the
applicable terms and conditions of this paragraph (d).
9. Termination. This Agreement shall be subject to termination
by notice given by the Initial Purchasers to the Company prior to delivery of
and payment for the Notes if, after the date hereof and prior to such time,
there shall have occurred a material adverse change in the condition of the
financial, banking or capital markets the effect of which, in the judgment of
the initial Purchasers, makes it impractical to market the Notes or to enforce
sale contracts with respect to the Notes.
10. Representations and Indemnities to Survive. The respective
agreements, representations, warranties, indemnities and other statements of the
Company or its officers and of the Initial Purchasers set forth in or made
pursuant to this Agreement will remain in full force and effect, regardless of
any investigation made by or on behalf of the Initial Purchasers or the Company
or any of its officers, directors or controlling persons referred to in Section
8 hereof, and will survive delivery of and payment for the Notes. The provisions
of Sections 7 and 8 hereof shall survive the termination or cancellation of this
Agreement.
11. Notices. All communications hereunder will be in writing
and effective only on receipt, and, if sent to the Initial Purchasers, will be
mailed, delivered or telecopied and confirmed to it at 301 South College Street,
TW-10, Charlotte, NC 28288-0606, Telecopy No.: (704) 383-9527, Attention: Eric
Lloyd; or, if sent to the Company, will be mailed, delivered or telecopied and
confirmed to them at 220 Division Street, Kingston, PA 18704, Telecopy No.:
(717) 287-2149, Attention: General Counsel.
12. Successors. This Agreement will inure to the benefit of
and be binding upon the parties hereto and their respective successors and
assigns and the officers and directors and controlling persons referred to in
Section 8 hereof, and, except as expressly set forth in Section 5(i) hereof,
nothing expressed or mentioned in this Agreement is intended or shall be
construed to give any other person, firm, corporation or other entity any legal
or equitable right, remedy or claim under or in respect to this Agreement or any
provisions herein contained. No purchaser of Notes from the Initial Purchasers
shall be deemed to be a successor merely by reason of such purchase.
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<PAGE>
13. Applicable Law. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO
AGREEMENTS MADE AND TO BE PERFORMED IN SAID STATE.
14. Business Day. For purposes of this Agreement, "Business
Day" means any day excluding Saturday, Sunday and any day which is a legal
holiday under the laws of Charlotte, North Carolina or of New York, New York, or
is a day on which banking institutions therein located are authorized or
required by law or other governmental action to close.
15. Counterparts. This Agreement may be executed in one or
more counterparts, each of which will be deemed to be an original, but all such
counterparts will together constitute one and the same instrument.
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If the foregoing is in accordance with your understanding of
our agreement, please sign and return to us the enclosed duplicate hereof,
whereupon this Agreement and your acceptance shall represent a binding agreement
among the Company and the Initial Purchasers.
Very truly yours,
DIAMOND TRIUMPH AUTO GLASS, INC.
By: /s/ Kenneth Levine
------------------------------
Name: Kenneth Levine
Title: CEO
The foregoing Agreement is hereby
confirmed and accepted as of the
date first written above on behalf of itself
and the other Initial Purchasers
FIRST UNION CAPITAL MARKETS,
A DIVISION OF WHEAT FIRST SECURITIES, INC.
By: /s/ Eric Lloyd
---------------------------
Name: Eric Lloyd
Title: Director
<PAGE>
Exhibit 10.1
MANAGEMENT SUBSCRIPTION
AND STOCKHOLDERS AGREEMENT
This Management Subscription and Stockholders Agreement (the
"Agreement") is entered into as of March 31, 1998 by and among Diamond Triumph
Auto Glass, Inc., a Delaware corporation (the "Company"), Green Equity Investors
II, L.P., a Delaware limited partnership ("GEI"), and the person identified on
Annex A attached hereto (hereinafter referred to as the "Management Investor"),
with reference to the following facts:
WHEREAS, GEI is the principal shareholder of the Company;
WHEREAS, Management Investor is a key executive of the Company or one
of its subsidiaries and, accordingly, as an incentive to the Management
Investor, the Company desires to issue uncertificated shares of the Company's
common stock (the "Common Stock") to the Management Investor as set forth
herein; and
NOW, THEREFORE, in consideration of the premises and for other good and
valuable consideration, the receipt and adequacy of which is hereby
acknowledged, the parties hereto agree as follows:
1. Management Investor Representations.
(a) Investment Risk. The Management Investor represents and
acknowledges that (i) as a result of the Management Investor's (A) existing
relationship with the Company and by virtue of being a key executive of the
Company or one of its subsidiaries, and (B) experience in financial matters, the
Management Investor is properly able to evaluate the capital structure of the
Company, the business of the Company and its subsidiaries and the risks inherent
therein; (ii) the Management Investor has been given the opportunity to obtain
any additional information or documents from and to ask questions, and receive
answers of, the officers and representatives of the Company and its subsidiaries
to the extent necessary to evaluate the merits and risks related to an
investment in the Company; (iii) the Management Investor has been and will be,
to the extent the Management Investor deems necessary, advised by legal counsel
of the Management Investor's choice at Management Investor's expense in
connection with this Agreement and the issuance and sale of Common Stock
hereunder and (iv) the purchase of Common Stock hereunder will be consistent, in
both nature and amount, with the Management Investor's overall investment
program and financial condition, and the Management Investor's financial
condition will be such that the Management Investor will be able to bear the
economic risk of holding unregistered Common Stock for which there is no market
and to suffer a complete loss of the Management Investor's investment therein.
The Management Investor further acknowledges that investment in the Common Stock
hereunder involves significant risks and that these risks include, without
limitation, the fact that the Company will have a leveraged financial structure.
<PAGE>
(b) Purchase for Investment.
(i) The Management Investor represents and warrants
that: (A) the Common Stock acquired by the Management Investor hereunder will be
acquired for the Management Investor's own account for investment, without any
present intention of selling or further distributing the same and the Management
Investor does not have any reason to anticipate any change in the Management
Investor's circumstances or any other particular occasion or event which would
cause the Management Investor to desire to sell any of such Common Stock and (B)
the Management Investor is fully aware that in agreeing to sell or issue such
Common Stock to the Management Investor the Company will be relying upon the
truth and accuracy of these representations and warranties. The Management
Investor agrees that the Management Investor will not sell or otherwise dispose
of any Common Stock except in compliance with the Securities Act of 1933, as
amended (the "Act"), the rules and regulations of the Securities and Exchange
Commission thereunder, the relevant state securities laws applicable to the
Management Investor's action and the terms of this Agreement.
(ii) Subject to Section 6 below, in addition to the
other restrictions provided in this Agreement, the Management Investor agrees
that prior to making any disposition of any Common Stock acquired hereunder
(other than a disposition to the Company), the Management Investor will give not
less than 10 days' advance written notice to the Company describing the manner
of such proposed disposition. The Management Investor further agrees that the
Management Investor will not effect such proposed disposition until either (A)
the Management Investor has provided to the Company, if so requested by the
Company, an opinion of counsel reasonably satisfactory in form and substance to
the Company that such proposed disposition is exempt from registration under the
Act and any applicable state securities laws or (B) a registration statement
under the Act covering such proposed disposition has been filed by the Company
under the Act and has become effective and compliance with applicable state
securities laws has been effected.
(iii) The Management Investor acknowledges that no
trading market for the Common Stock exists currently or is expected to exist at
any time in the foreseeable future and that, as a result, the Management
Investor may be unable to sell any of the Common Stock acquired hereunder for an
indefinite period. Further, the Company has no obligation to register any of the
Common Stock, except as expressly provided in Section 7 of this Agreement.
(iv) The Management Investor acknowledges and agrees
that nothing herein, including the opportunity to make any equity investment in
the Company, shall be deemed to create any implication concerning the adequacy
of the Management Investor's services to the Company or any of its subsidiaries
or shall be construed as an agreement by the Company or any of its subsidiaries,
express or implied, to employ the Management Investor or contract for the
Management Investor's services, to restrict the right of the Company or any of
its subsidiaries to discharge the Management Investor or cease contracting for
the Management Investor's services or to modify, extend or otherwise affect in
any manner whatsoever the terms of any employment agreement or contract for
services which may exist between the Management Investor and the Company or any
of its subsidiaries.
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2. Grant of Management Shares and Legend on Certificates.
(a) Grant of Management Shares. The Company hereby grants to
the Management Investor the right to purchase, on the terms and conditions set
forth in this Agreement, all or any part of the number of shares indicated on
Annex A hereto at the purchase price of $20.00 (the "Purchase Price") per share.
All shares of Common Stock issued hereunder shall be subject to all of the terms
and restrictions contained in this Agreement, including, without limitation,
those in Sections 1(b), 3, 4, 8 and 9, and shall be uncertificated shares.
Subject to the limitations set forth in Section 2(b), the Management Investor
shall be entitled, upon written request to the Company, to have a certificate
issued to him or her representing Common Stock issued hereunder.
(b) Legend on Certificates. Each stock certificate issued to
the Management Investor upon written request to the Company representing Common
Stock issued hereunder shall bear the following (or substantially equivalent)
legends on the face or reverse side thereof:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"), AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED OR
HYPOTHECATED UNLESS THERE IS AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE ACT COVERING SUCH SECURITIES, THE SALE IS
MADE IN ACCORDANCE WITH RULE 144 OR ANY SUCCESSOR RULE UNDER
THE ACT OR DIAMOND TRIUMPH AUTO GLASS, INC. (THE "COMPANY")
RECEIVES AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY
THAT AN EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE. THE
SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A
MANAGEMENT SUBSCRIPTION AND STOCKHOLDERS AGREEMENT DATED AS OF
MARCH 31, 1998, AMONG THE PURCHASER PARTY THERETO, GREEN
EQUITY INVESTORS II, L.P., AND THE COMPANY, A COPY OF WHICH IS
ON FILE WITH THE SECRETARY OF THE COMPANY, AND THE SECURITIES
REPRESENTED BY THIS CERTIFICATE MAY NOT BE TRANSFERRED, SOLD,
ASSIGNED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF
UNLESS SUCH TRANSFER, SALE, ASSIGNMENT, PLEDGE, HYPOTHECATION
OR OTHER DISPOSITION COMPLIES WITH THE PROVISIONS OF SUCH
AGREEMENT.
Any stock certificate issued at any time in exchange or substitution for any
certificates bearing such legends (except a new certificate issued upon the
completion of a public distribution of Common Stock represented thereby) shall
also bear such (or substantially equivalent) legends, unless the Common Stock
represented by such certificate is no longer subject to the provisions of
Sections 1(b)(ii), 3(a), 3(b), 4, 8 and 9 of this Agreement and, in the opinion
of counsel for the
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Company, the Common Stock represented thereby need no longer be subject to
restrictions pursuant to the Act or applicable state securities law. The Company
shall not be required to transfer on its books any certificate for Common Stock
in violation of the provisions of this Agreement.
3. Transfer of Stock.
(a) Prohibition on Transfer. Subject to the provisions of
Section 6, neither the Management Investor nor any other Holder (as defined in
Section 7(a)) shall, on or prior to the fifth anniversary of this Agreement,
directly or indirectly, sell, pledge, give, bequeath, transfer, assign or in any
other way whatsoever encumber or dispose of (a "transfer") any Covered Shares
(as defined in Section 7(a)) (or any interest therein), except for transfers (i)
pursuant to this Section 3 or Sections 4, 7, 8, or 9 of this Agreement or (ii)
as may be specifically authorized by the Board of Directors of the Company in
its sole discretion (either of (i) or (ii), a "Permitted Transfer").
(b) Transfer Procedure; Right of First Refusal. Neither the
Management Investor nor any other Holder shall, prior to the lapse of the
restriction in clause (a) of this Section 3, transfer any Covered Shares (or any
interest therein), except for Permitted Transfers or transfers in accordance
with the following:
(i) If any Holder shall have received a bona fide
arms' length written offer (a "Bona Fide Offer") which such Holder
desires to accept from an independent party unrelated to such Holder
(the "Outside Party") for the purchase of Covered Shares for
consideration consisting entirely of cash, then such Holder shall give
a notice in writing (the "Option Notice") to GEI setting forth such
desire, which notice shall set forth at least the name and address of
the Outside Party and the price and terms of the Bona Fide Offer and be
accompanied by a copy of the Bona Fide Offer.
(ii) Upon the giving of such Option Notice, GEI shall
have an option (transferable, in the sole discretion of GEI, to an
Affiliate (as defined in Section 7(b)) of GEI or to the Company or a
subsidiary of the Company) to purchase all of the Covered Shares
specified in the Option Notice, said option to be exercised within
thirty (30) days after the giving of such Option Notice, by giving a
counter-notice (the "Election Notice") to the Holder.
(iii) If GEI (or an Affiliate of GEI, the Company or
a subsidiary of the Company, if applicable) elects to purchase all of
such Covered Shares, it shall be obligated to purchase, and the Holder
shall be obligated to sell, such Covered Shares at the cash price and
terms indicated in the Bona Fide Offer, except that the closing of the
purchase by GEI (or an Affiliate of GEI, the Company or a subsidiary of
the Company, if applicable) shall be held on a business day within
sixty (60) days after the giving of the Election Notice at 10:30 a.m.,
Eastern Standard Time, at the principal executive office of the
Company, or at such other time and place as may be mutually agreed to
by GEI (or an Affiliate of GEI, the Company or a subsidiary of the
Company, if applicable) and the Holder.
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(iv) If an Election Notice is not delivered by GEI
(or an Affiliate of GEI, the Company or a subsidiary of the Company, if
applicable) within the period specified above, the Holder thereafter,
at any time within a period of sixty (60) days from the giving of said
Option Notice, may transfer all (but not less than all) of such Covered
Shares to the Outside Party at the cash price and terms contained in
the Bona Fide Offer, and the Outside Party shall thereafter be subject
to and bound by all of the provisions of this Agreement and, as a
condition precedent to the completion of such transfer of Covered
Shares to such Outside Party, such Outside Party shall execute and
deliver to the Company and GEI a written consent to such effect in form
and substance satisfactory to the Company and GEI; provided, however,
that in the event the Holder has not so transferred said Covered Shares
to the Outside Party within said sixty (60) day period, then said
Covered Shares thereafter shall continue to be subject to all of the
restrictions contained in this Agreement.
(c) No Waiver by GEI. Any election in any instance by
GEI (or an Affiliate of GEI, the Company or a subsidiary of the Company, if
applicable) not to exercise its rights of first refusal under this Section 3
shall not constitute a waiver of such rights with respect to any other proposed
transfer of Covered Shares.
(d) Transfer to Related Transferees. Notwithstanding
anything to the contrary contained in clauses (a) through (c) of this Section 3,
the Management Investor or any other Holder may transfer Covered Shares without
restriction to the Management Investor's Related Transferees (as defined below)
provided that each such Related Transferee shall first (i) execute a written
consent in form and substance satisfactory to the Company and GEI to be bound by
all of the provisions of this Agreement and (ii) give a duplicate original of
such consent to the Company and GEI. The "Related Transferees" of the Management
Investor shall consist of the Management Investor's spouse, the Management
Investor's adult lineal descendants, the adult spouses of such lineal
descendants, trusts solely for the benefit of the Management Investor's spouse
or the Management Investor's minor or adult lineal descendants and, in the event
of death, the Management Investor's personal representatives (in their
capacities as such), estate and named beneficiaries. In the event of any
transfer by the Management Investor to his Related Transferees of all or any
part of the Covered Shares (or in the event of any subsequent transfer by any
such Related Transferee to another Related Transferee of the Management
Investor), such Related Transferees shall receive and hold said Covered Shares
subject to and be bound by the terms of this Agreement. There shall be no
further transfer of such Covered Shares by a Related Transferee except as
permitted by this Agreement.
4. "Call" Option.
(a) Upon the termination of the Management Investor's
employment with, or cessation of services as a director of, the Company or any
of its subsidiaries for any reason (including without limitation Voluntary
Termination, a Just Cause Dismissal, Involuntary Termination Without Cause or
the Retirement, death or Permanent Disability of the Management Investor (as
such terms are defined in Section 5 below)) (a "Call Purchase Event"), subject
to the provisions of Section 6 and this Section 4, the Company shall give prompt
written notice of such termination or cessation to GEI and GEI (or an Affiliate
of GEI designated by GEI) may, at its
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option exercisable by written notice (a "Purchase Notice") delivered to the
Management Investor and each other Holder within ninety (90) days after the
applicable Call Purchase Event (or, in the event the applicable Call Purchase
Event is the death of the Management Investor, within thirty (30) days after the
appointment and qualification of the deceased Management Investor's personal
representative, if later), elect to purchase and, upon the giving of such
notice, GEI (or an Affiliate of GEI designated by GEI) shall be obligated to
purchase and the Management Investor and each other Holder (each a "Seller")
shall be obligated to sell, all, or any lesser portion indicated in the Purchase
Notice, of the Covered Shares held by such Holder at a per share price equal to:
(i) in the case of Voluntary Termination or a Just
Cause Dismissal, the lower of the Adjusted Purchase Price or the Fair
Market Value (as each such term is defined in Section 5 below); or
(ii) in the case of any other termination (including
without limitation Involuntary Termination Without Cause, death,
Retirement or Permanent Disability), the Fair Market Value.
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Notwithstanding the foregoing provisions of this Section 4(a), in the event that
the applicable Call Purchase Event occurs more than one year after the date
hereof, in the case of Voluntary Termination or a Just Cause Dismissal, the
price per share for the Applicable Percentage of the Covered Shares held by each
Holder shall be the Fair Market Value and the price per share for the remaining
Covered Shares held by such Holder shall be the lower of the Adjusted Purchase
Price or the Fair Market Value. The "Applicable Percentage" shall be determined
from the following table, based upon the period during which the applicable Call
Purchase Event occurs.
Period during which Call
Purchase Event Occurs Applicable Percentage
12 months commencing on the
first anniversary of the
date of this Agreement 33-1/3%
12 months commencing on the
second anniversary of the
date of this Agreement 66-2/3%
On or after the third anniversary
of the date of this Agreement 100%
If, as a result of the provisions of the two preceding sentences, there are two
different prices per share applicable to the Covered Shares held by each Holder
and less than all Covered Shares held by each Holder are to be purchased
pursuant to this Section 4, the Covered Shares not purchased from such Holder
shall be those having the higher price per share.
(b) If GEI (or an Affiliate of GEI designated by GEI) does not
elect to exercise its option set forth in paragraph (a) of this Section 4, GEI
shall give written notice that it is not so electing to the Company within the
time periods specified in paragraph (a) of this Section 4 for the giving of the
Purchase Notice. Upon receipt of such notice from GEI, the Company shall have
the option, exercisable by written notice (a "Company Purchase Notice")
delivered to the Management Investor and each other Holder within fifteen (15)
days after receipt of such notice from GEI, to purchase from each Seller (and,
upon the giving of the Company Purchase Notice, the Company shall be obligated
to purchase and each Seller shall be obligated to sell) all, or any lesser
portion indicated in the Company Purchase Notice, of the Covered Shares held by
such Seller at the per share price set forth in paragraph (a) of this Section 4.
(c) In the event a purchase of Covered Shares pursuant to this
Section 4 by the Company shall be prohibited by law or would cause a default
under the terms of any indenture or loan agreement or other instrument to which
the Company or any of its subsidiaries may be a party, the obligations of each
Seller and the Company pursuant to this Section 4 shall be suspended until such
time as such prohibition first lapses or is waived and no such default would be
caused; provided, however, that (x) the purchase price to be paid by the Company
for the Covered Shares shall accrue interest at the lowest rate necessary to
prevent the imputation of interest or original issue discount under the Internal
Revenue Code of 1986, as amended, reduced
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by any dividends or distributions on such Covered Shares during the period of
such suspension, which interest shall likewise be paid when such prohibition
first lapses or is waived and no such default would be caused and (y) in the
event of any such suspension, if GEI so elects and no violation of law would be
caused and no default under the terms of any indenture or loan agreement or
other instrument to which the Company or any of its subsidiaries may be a party
would result, the Company shall transfer its obligations under this Section 4 to
GEI or to an Affiliate of GEI, in which case GEI or the Affiliate (as the case
may be) and the Seller(s) shall be obligated to complete the purchase of such
Covered Shares pursuant to this Section 4.
5. Purchase Price, Closing and Terms of Payment for "Call" Sales.
(a) (i) For purposes of this Agreement, the "Fair Market
Value" of each share of Common Stock shall be determined as of the time of the
Call Purchase Event by the Board of Directors of the Company in the exercise of
its reasonable discretion; provided, however, that such determination shall be
based upon the Company as a going concern and shall not discount the value of
such shares either because they are subject to the restrictions set forth in
this Agreement or because they constitute only a minority interest in the
Company. Upon delivery of notice of such Fair Market Value to GEI and to the
Seller(s) of Common Stock pursuant to Section 4 (which shall indicate, in a
general fashion, the factors considered by the Board of Directors in determining
such amount), the Management Investor shall have ten (10) business days in which
to notify the Company in writing of any disagreement. If no written notice of
disagreement is given by the Management Investor, the Fair Market Value as
determined by the Board of Directors of the Company shall be conclusive and
binding on each Seller and on GEI or any Affiliate of GEI. If written notice is
given by the Management Investor of a disagreement, GEI and the Management
Investor shall mutually agree upon an independent appraiser experienced in
making valuations of such sort which shall make a determination of the Fair
Market Value. Such determination shall be final, binding and nonappealable upon
GEI (or an Affiliate of GEI or the Company, as applicable) and each Seller. The
costs and expenses incurred in connection with the determination made by the
independent appraiser shall be borne equally by GEI (or an Affiliate of GEI or
the Company, as applicable) and by the Management Investor.
(ii) For purposes of this Agreement, the "Adjusted
Purchase Price" of each share of Common Stock shall be determined as of the time
of the Call Purchase Event and shall equal (A) $20.00, plus (or minus in the
case of a loss) (B) an amount equal to the quotient of (1) the aggregate net
income (loss) of the Company applicable to the Common Stock, determined in
accordance with generally accepted accounting principles consistently applied,
for the period (treated as one accounting period) beginning on April 1, 1998 to
the end of the most recent fiscal quarter ending prior to the date of the Call
Purchase Event, divided by (2) the number of outstanding shares of Common Stock
(determined on a fully diluted basis) as of the end of such most recent fiscal
quarter, less (C) an amount equal to the aggregate dividends per share of Common
Stock paid during the period from April 1, 1998 to the date of the Call Purchase
Event.
(b) For purposes of this Agreement, the Management Investor
shall be deemed to be "Permanently Disabled" if the Management Investor becomes
unable to engage in any substantial gainful activity by reason of any medically
determinable physical or mental
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impairment which can be expected to result in death or which has lasted or can
be expected to last for a continuous period of not less than twelve (12) months.
The Company, at its option and expense, shall be entitled to retain a physician
to confirm the existence of such incapacity or disability and the determination
of such physician shall be binding upon the Company (or GEI or an Affiliate of
GEI, as applicable) and each Seller; provided, however, that if the Management
Investor disagrees with such determination of Permanent Disability within
fifteen (15) days of being notified of it, the Management Investor and the
Company shall jointly agree upon an independent physician (or, if they are
unable to agree upon such physician, they shall each select a physician and
those two physicians shall select the independent physician) who shall make the
determination, whose decision shall be binding upon the Company (or GEI or an
Affiliate of GEI, as applicable) and each Seller.
(c) For the purposes of this Agreement, the Management
Investor shall be deemed to be "Involuntarily Terminated Without Cause" upon the
later of the termination of the Management Investor's employment by, or removal
or failure to be reelected as a director of, the Company or any of its
subsidiaries, unless such termination, removal or failure to be reelected is due
to Retirement, death, Permanent Disability or a Just Cause Dismissal.
"Retirement" shall mean retirement in accordance with the retirement policies or
practices of the Company or its subsidiaries applicable to executives or
directors, as the case may be, but in no event at an age of less than seventy
(70). "Voluntary Termination" shall mean the termination by the Management
Investor of his employment with, or his resignation or refusal to stand for
reelection as a director of, the Company or any of its subsidiaries, for any
reason other than death, Permanent Disability, or Retirement. A "Just Cause
Dismissal" shall mean termination of the Management Investor's employment with,
or service as a director of, the Company or any of its subsidiaries as a result
of any of the following (each, a "Cause"):
(i) the Management Investor commits any act of fraud,
intentional misrepresentation or serious misconduct in connection with
the business of the Company or its subsidiaries, including but not
limited to, falsifying any documents or agreements (regardless of
form); or
(ii) the Management Investor materially violates any
rule or policy of the Company or its subsidiaries (A) for which
violation an employee may be terminated pursuant to the written
policies of the Company or its subsidiaries reasonably applicable to a
key employee, or (B) which violation results in material damage to the
Company or its subsidiaries, or (C) which, after written notice to do
so, the Management Investor fails to correct within a reasonable time;
or
(iii) the Management Investor wilfully breaches or
habitually neglects any material aspect of the Management Investor's
duties (A) as described in the Management Investor's employment
contract, or (B) in the ordinary course of the Management Investor's
employment or service as a director, or (C) assigned to the Management
Investor by the Company or its subsidiaries, which assignment was
reasonable in light of the Management Investor's position with the
Company or its subsidiaries (all of the foregoing duties, "Duties"); or
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(iv) the Management Investor fails, after written
notice, adequately to perform any Duties and such failure is reasonably
likely to have an adverse impact upon the Company, its subsidiaries or
the operations of any of them; or
(v) the Management Investor materially fails to
comply with a direction from the Board of Directors of the Company or
its subsidiaries with respect to a material matter, which direction was
reasonable in light of the Management Investor's position with the
Company or its subsidiaries; or
(vi) while employed by the Company or its
subsidiaries, and without the written approval of the Chief Executive
Officer of the Company (or, in case the Management Investor is such
Chief Executive Officer, approval of the Company's Board of Directors),
the Management Investor performs services for any other corporation or
person which competes with the Company or its subsidiaries; or
(vii) the Management Investor is convicted by a court
of competent jurisdiction of a felony (other than a traffic or moving
violation) or any crime involving dishonesty; or
(viii) the Management Investor engages in any conduct
which is materially injurious or damaging to the Company or any of its
subsidiaries or the reputation of the Company or any of its
subsidiaries; or
(ix) any willful breach by the Management Investor of
his or her fiduciary duties as a director of the Company or any of its
subsidiaries.
In the event that there is a dispute between the Seller(s) and the Company (or
GEI or an Affiliate of GEI, as applicable) as to whether "Cause" for termination
exists: (x) such termination shall nonetheless be effective, (y) such dispute
shall be subject to arbitration pursuant to Section 12 (f) hereof and (z) the
payments or deliveries, if any, to be made by the Company (or GEI or an
Affiliate of GEI, as applicable) in connection with a purchase of Covered Shares
held by the Seller(s) pursuant to Section 4 shall be delayed until the final
resolution of such dispute in such arbitration.
(d) The closing for all purchases and sales of
Covered Shares provided for in Section 4 hereof (the "Call Closing") shall be at
the principal executive offices of the Company at 10:30 a.m., Eastern Standard
Time, on the later of (A) the sixtieth day after the giving of the applicable
Purchase Notice or Company Purchase Notice and (B), if the per share price is
the Fair Market Value, the thirtieth day after the final determination of the
Fair Market Value of the Common Stock as set forth above; provided, however,
that if any Seller is deceased on the closing date and such deceased person's
personal representative shall not have been appointed and qualified by such
date, then the closing in respect of such Seller shall be postponed until the
tenth day after the appointment and qualification of such personal
representative. If the aforesaid closing date falls on a day which is not a
business day, then the closing shall be held on the next succeeding business
day.
(e) The purchase price for the purchase and sale of
Covered Shares pursuant to the provisions hereof shall be paid in cash, by
certified or by official bank check.
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(f) On the date of the Call Closing, each Seller
authorizes the Company (or the Company's transfer agent, if any) to record in
the Company's books and records the transfer of all of such Seller's Covered
Shares to be sold at the Call Closing, which are not represented by one or more
certificates issued by the Company, from such Seller to the purchaser at the
Call Closing. On the date of the Call Closing, each Seller shall also deliver
all certificates, if any, issued by the Company which represent Covered Shares
to be sold at the Call Closing by such Seller, duly endorsed for transfer with
signatures guaranteed, to the purchaser at the Call Closing. In addition, each
Seller shall take all actions as the Company or any other purchaser at the Call
Closing shall request as necessary to vest in the purchaser at the Call Closing
all shares sold by such Seller pursuant to Section 4 hereof, whether in
certificated or uncertificated form, free and clear of all liens, charges and
encumbrances of any kind.
6. Termination and Lapse of Rights and Restrictions; Application
to Other Stock.
(a) The provisions of Sections 1(b)(ii), 3(a), 3(b), 4, 8 and
9 of this Agreement shall lapse and be of no further effect with respect to
Covered Shares upon the commencement of the public trading of the Company's
Common Stock (or any capital stock exchanged for or distributed upon such Common
Stock as described in paragraph (b) of this Section 6) on any national
securities exchange, on the NASDAQ National Market System or on the NASDAQ
"Small Cap" Issues System; provided, however, that nothing in this Section 6(a)
shall affect any options to purchase, or any obligations to purchase and sell,
Covered Shares which arose prior to the commencement of such public trading.
(b) In the event any capital stock of the Company or any other
corporation shall be distributed on, with respect to, or in exchange for shares
of Common Stock of the Company as a stock dividend, stock split, spin-off,
reclassification or recapitalization in connection with any merger or
reorganization, the restrictions, rights and options set forth in Sections 3, 4,
7, 8 and 9 shall apply with respect to such other capital stock to the same
extent as they are, or would have been applicable, to the Covered Shares on, or
with respect to, which such other capital stock was distributed.
7. Piggyback Registration Rights.
(a) As used in this Agreement:
(i) the term "Holder" means the Management Investor,
any Related Transferee of the Management Investor and/or any Outside
Party that, at the time, owns Covered Shares; provided, however, that,
unless the Company is otherwise notified, the record owner of Covered
Shares shall be deemed to be the Holder of such Covered Shares;
(ii) the term Covered Shares means the shares of
Common Stock acquired by the Management Investor pursuant to this
Agreement.
(b) Subject to the provisions herein, if the Company at any
time proposes to include all or any part of GEI's Common Stock in a public
offering of Common Stock registered under the Act (other than registration (x)
on Forms S-4 or S-8 or any successor forms thereto or (y) filed in connection
with an exchange offer), the Company shall give written notice of the
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proposed registration to each Holder at least thirty (30) days prior to the
filing thereof, and each Holder shall have the right to request that all or any
part of its Covered Shares be included in such registration by giving written
notice to the Company within fifteen (15) days after the giving of such notice
by the Company (any Holder giving the Company a notice requesting that Covered
Shares owned by it be included in such proposed registration being hereinafter
referred to in this Section 7 as a "Registering Holder"); provided, however,
that (i) if the registration is in whole or in part an underwritten primary
registration on behalf of the Company and the managing underwriters of such
offering determine that the aggregate amount of securities of the Company which
all Registering Holders and all other security holders of the Company, pursuant
to contractual rights to participate in such registration ("Other Holders"),
propose to include in such registration statement exceeds the maximum amount of
securities that should be included therein, the Company will include in such
registration, first, the shares which the Company proposes to sell and, second,
the shares of such Registering Holders and other securities to be sold for the
account of Other Holders, pro rata among all such Registering Holders and Other
Holders, taken together, on the basis of the relative equity interests in the
Company of all Registering Holders and Other Holders who have requested that
securities owned by them be so included (it being agreed and understood,
however, that such underwriters shall have the right to eliminate entirely the
participation in such registration of all Registering Holders and Other
Holders), (ii) if the registration is an underwritten secondary registration on
behalf of any of the Other Holders pursuant to demand registration rights (other
than such right of GEI or its Affiliates) and the managing underwriters
determine that the aggregate amount of securities which all Registering Holders
and all Other Holders propose to include in such registration exceeds the
maximum amount of securities that should be included therein, the Company will
include in such registration, first, the securities to be sold for the account
of the Other Holders demanding registration (but only to the extent such Other
Holders are entitled to demand inclusion thereof) second, any securities to be
sold for the account of the Company, and, third, the shares of such Registering
Holders and other securities to be sold for the account of the Other Holders
electing to include (but not being entitled to demand inclusion of) securities
in such registration, pro rata among all such Registering Holders and Other
Holders, taken together, on the basis of relative equity interests in the
Company of all Registering Holders and such Other Holders who have requested
that securities owned by them be included (it being agreed and understood,
however, that such underwriters shall have the right to eliminate entirely the
participation therein of all such Registering Holders and Other Holders not
entitled to demand inclusion of securities in such registration). Shares of
Common Stock proposed to be registered and sold for the account of any
Registering Holder shall be sold to prospective underwriters selected or
approved by the Company on the terms and subject to the conditions of one or
more underwriting agreements negotiated between the Company and/or Other Holders
demanding registration and the prospective underwriters, and (iii) if the
registration is an underwritten secondary registration on behalf of GEI or any
of its Affiliates pursuant to demand registration rights and the managing
underwriters determine that the aggregate amount of securities which all
Registering Holders and GEI and its Affiliates propose to include in such
registration exceeds the maximum amount of securities that should be included
therein, the Company will include in such registration the shares of such
Registering Holders and other securities to be sold for the account of GEI and
its Affiliates pro rata among all such Registering Holders and GEI and its
Affiliates, taken together, on the basis of the relative equity interests in the
Company of all Registering Holders and GEI and its Affiliates who have requested
that securities owned by them be
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included. For the purposes hereof, an "Affiliate" of any person or entity means
any other person or entity controlling, controlled by or under common control
with such person or entity; provided, however, that none of the Management
Stockholders (defined below) or any of their Affiliates shall be deemed to be an
Affiliate of GEI. "Management Stockholders" means, collectively, all holders of
capital stock or other securities issued by the Company who are also employees
of the Company or its subsidiaries.
In the event the Company proposes to register any of its Common Stock
under the Act on Form S-8 (or any successor thereto), if the Company determines
that it is permissible to do so and will not result in material added costs to
the Company from such registration, the Company shall, at a Registering Holder's
request, include in such registration a percentage of such Registering Holder's
Covered Shares equal to the percentage, if any, of GEI's shares of Common Stock
held as of the date of this Agreement sold by GEI in private transactions from
the date hereof to the date of such request.
The Registering Holders shall be permitted to withdraw all or a part of
the Covered Shares held by such Registering Holders which were to be included in
such registration at any time prior to the effective date of such registration.
The Company shall not be required to maintain the effectiveness of the
registration statement for such registration beyond the earlier to occur of 120
days after the effective date thereof or consummation of the distribution by the
Registering Holders included in such registration statement. The Company may
withdraw any registration statement at any time before it becomes effective, or
postpone the offering of securities, without obligation or liability to any
Holder.
(c) The registration rights set forth in this Section 7 shall
terminate and be of no further effect with respect to the Covered Shares held by
a Holder: (i) at such time as the Company has filed, and there has become
effective, one registration statement in which all Holders have been afforded
the opportunity to include all Covered Shares held by them or (ii) if earlier,
after an initial public offering, at such time as all Covered Shares owned by
such Holder are eligible for sale pursuant to the provisions of Rule 144 under
the Act.
(d) In connection with any registration of shares under the
Act pursuant to this Section 7, the Company will furnish each Holder whose
Covered Shares are registered thereunder with a copy of the registration
statement and all amendments thereto and will supply each such Holder with
copies of any prospectus included therein (including a preliminary prospectus
and all amendments and supplements thereto), in such quantities as may be
reasonably necessary for the purpose of the proposed sale or distribution
covered by such registration. The Company shall not, however, be required to
maintain the registration statement and to supply copies of a prospectus for a
period beyond 120 days after the effective date of such registration statement
and, at the end of such period, the Company may deregister any shares of Common
Stock covered by such registration statement and not then sold or distributed.
In connection with any such registration of shares of Common Stock, the Company
will, at the request of the managing underwriter with respect thereto, use its
best efforts to qualify such registered shares for sale under the securities
laws of such states as is reasonably required to permit the distribution of such
registered shares; provided, however, that the Company shall not be required in
connection therewith or as condition thereof to qualify as a foreign corporation
or
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to execute a general consent to service of process in any jurisdiction or become
subject to taxation in any jurisdiction.
(e) Notwithstanding any other provision of this Section 7, in
the event of an underwritten public offering of Common Stock for the account of
the Company, no Holder shall offer for public sale (other than as part of such
underwritten public offering) any shares of Common Stock during the ten (10)
days prior to, and such number of days (not in excess of 180) after, the
effective date of the registration statement in connection with such pubic
offering as the underwriters and the Company may request in writing, without the
consent of the underwriters; provided, however, that, in the case of death of a
Holder, if consented to by the underwriters, a Holder shall be permitted to
offer for public sale prior to the expiration of such period shares of Common
Stock reasonably necessary to generate funds for the payment of estate taxes.
(f) Except as otherwise required by state securities laws or
the rules and regulations promulgated thereunder, all expenses, disbursements
and fees incurred by the Company in connection with carrying out its obligations
under this Section 7 shall be borne by the Company; provided, however, that each
Holder shall pay (i) all costs and expenses of counsel for such Holder, if such
counsel is not also counsel for the Company, (ii) all underwriting discounts,
commissions and expenses and all transfer taxes with respect to the shares of
Common Stock sold by such Holder and (iii) all other expenses incurred by such
Holder and incidental to the sale and delivery of the shares of Common Stock to
be sold by such Holder.
(g) It shall be a condition of each Holder's rights hereunder
to have Covered Shares owned by such Holder registered that:
(i) such Holder shall cooperate with the Company by
supplying information and executing documents relating to such Holder
or the securities of the Company owned by such Holder in connection
with such registration;
(ii) such Holder shall enter into any undertakings
and take such other action relating to the conduct of the proposed
offering which the Company or the underwriters may reasonably request
as being necessary to insure compliance with federal and state
securities laws and the rules or other requirements of the National
Association of Securities Dealers, Inc. or which the Company or the
underwriters may reasonably request to otherwise effectuate the
offering; and
(iii) such Holder shall execute and deliver an
agreement to indemnify and hold harmless the Company, each of its
directors, each of its officers who has signed the registration
statement, any underwriter (as defined in the Act) and each person, if
any who controls the Company or such underwriter within the meaning of
the Act, against such losses, claims, damages or liabilities (including
reimbursement for legal and other expenses) to which the Company or any
such director, officer, underwriter or controlling person may become
subject under the Act or otherwise, in such manner as is customary for
registration of the type then proposed and, in any event, equivalent in
scope to indemnities given by the Company in connection with such
registration, but only with respect to written information furnished by
such Holder in his or her capacity as a selling shareholder in
connection with such registration.
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(h) In the event of any registration under the Act of any
Covered Shares pursuant to this Section 7, the Company hereby agrees to
indemnify and hold harmless each Holder disposing of such shares against such
losses, claims, damages or liabilities (including reimbursement for legal and
other expenses) to which such Holder may become subject under the Act or
otherwise, in such manner as is customary for registrations of the type then
proposed, but not with respect to written information furnished by such Holder
in his capacity as a selling shareholder in connection with such registration.
8. Tag-Along Rights.
(a) Right to Participate in Sale. If GEI enters into an
agreement to transfer, sell or otherwise dispose of for value (such transfer,
sale or other disposition being referred to as a "Tag-Along Sale") a majority of
its shares of Common Stock of the Company held on the date hereof, then GEI
shall afford each Holder the opportunity to participate proportionately in such
Tag-Along Sale in accordance with this Section 8. Each Holder shall have the
right, but not the obligation (except as provided in Section 9), to participate
in such Tag-Along Sale. The number of shares of Common Stock that each Holder
will be entitled to include in such Tag-Along Sale (such Holder's "Allotment")
shall be determined by multiplying (i) the number of Covered Shares owned by
such Holder as of the close of business on the day immediately preceding the
Tag-Along Notice Date (as defined below), by (ii) a fraction, the numerator or
which shall equal the number of shares of Common Stock proposed by GEI to be
sold or otherwise disposed of pursuant to the Tag-Along Sale and the denominator
of which shall equal the total number of shares of Common Stock that are
beneficially owned as of the close of business on the day immediately preceding
the Tag-Along Notice Date by (a) GEI and (b) all holders of shares of Common
Stock (including the Holders) to the extent that such holders have the right to
"tag-along" in the Tag-Along Sale. The "Tag Along Notice Date" shall be the date
that the Tag-Along Sale Notice (as defined below) is first delivered, mailed or
sent by courier, Telex or telecopy to the Holders.
(b) Terms of Tag-Along Sale. Any sales of Covered Shares by a
Holder as a result of the "Tag-Along Rights" granted to the Holder pursuant to
this agreement shall be on the same terms and conditions as the proposed
Tag-Along Sale by GEI.
(c) Sale Notice. GEI shall provide each Holder with written
notice (the "Tag-Along Sale Notice") not more than sixty (60) nor less than
twenty (20) days prior to the proposed date of the Tag-Along Sale (the
"Tag-Along Sale Date"). Each Tag-Along Sale Notice shall set forth: (i) the
number of shares proposed to be transferred or sold by GEI; (ii) the proposed
amount and form of consideration to be paid for such shares and the terms and
conditions of payment offered by each proposed transferee or purchaser; (iii)
the aggregate number of shares of Common Stock held of record as of the close of
business on the day immediately preceding the Tag-Along Notice Date by GEI; (iv)
such Holder's Allotment assuming such Holder elected to sell the maximum number
of Covered Shares possible; (v) confirmation that the proposed purchaser or
transferee has been informed of the "Tag-Along Rights" provided for herein and
has agreed to purchase Covered Shares in accordance with the terms hereof; and
(vi) the Tag-Along Sale Date.
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(d) Tag-Along Notice. If a Holder wishes to participate in the
Tag-Along Sale, such Holder shall provide written notice (the "Tag-Along
Notice") to GEI no less than ten (10) days prior to the Tag-Along Sale Date. The
Tag-Along Notice shall set forth the number of Covered Shares that such Holder
elects to include in the Tag-Along Sale, which shall not exceed such Holder's
Allotment. The Tag-Along Notice shall also specify the aggregate number of
additional Covered Shares owned of record as of the close of business on the day
immediately preceding the Tag-Along Notice Date by such Holder, if any, which
such Holder desires also to include in the Tag-Along Sale ("Additional Shares")
in the event there is any under-subscription for the entire amount of all
Holders' Allotments and of all shares that may be included by persons having,
pursuant to agreements of even date herewith in form substantially similar to
this Agreement (the "Other Agreements"), tag-along rights relative to GEI
(collectively, the "Management Investors' Allotments"). In the event there is an
under-subscription by all holders of Management Investors' Allotments for the
entire amount of the Management Investors' Allotments, GEI shall apportion the
unsubscribed Management Investors' Allotments to such holders on a pro rata
basis in accordance with the number of Additional Shares (as such term is
defined in this Agreement and the Other Agreements) specified by all such
holders in their Tag-Along Notices (as such term is defined in this Agreement
and the Other Agreements). The Tag-Along Notice given by each Holder shall
constitute such Holder's binding agreement to sell the Covered Shares specified
in such Tag-Along Notice (including any Additional Shares to the extent such
Additional Shares are to be included in the Tag-Along Sale pursuant to the
apportionment described in the preceding sentence) on the terms and conditions
applicable to the Tag-Along Sale, subject to the provisions of Section 8 (b)
above; provided, however, that in the event that there is any material change in
the terms and conditions of such Tag-Along Sale applicable to any Holder after
such Holder gives its Tag-Along Notice, then, notwithstanding anything herein to
the contrary, such Holder shall have the right to withdraw from participation in
the Tag-Along Sale with respect to all of its Covered Shares affected thereby.
If the purchaser does not consummate the purchase of all of such shares on the
same terms and conditions applicable to GEI (except as otherwise provided
herein) then GEI shall not consummate the Tag-Along Sale of any of its shares to
such transferee or purchaser, unless the shares of each Holder and GEI are
reduced or limited pro rata in proportion to the respective number of shares
actually sold in such Tag-Along Sale.
If a Tag-Along Notice is not received by GEI from any Holder prior to
the ten-day period specified above, GEI shall have the right to sell or
otherwise transfer the number of shares specified in the Tag-Along Notice to the
proposed purchaser or transferee without any participation by such Holder, but
only on terms and conditions which are no more favorable in any material respect
to GEI than as stated in the Tag-Along Notice to such Holder and only if such
Tag-Along Sale occurs on a date within sixty (60) business days of the Tag-Along
Sale Date.
(e) Authority to Record Transfer/Delivery of Certificates. On
the Tag-Along Sale Date, each Holder, if a participant in the applicable
Tag-Along Sale, authorizes the Company (or the Company's transfer agent, if any)
to record in the Company's books and records the transfer of all of such
Holder's Covered Shares included in such Tag-Along Sale which are not
represented by one or more certificates issued by the Company, from the Holder
to the purchaser in the Tag-Along Sale. On the Tag-Along Sale Date, each Holder,
if a participant in the applicable Tag-Along Sale, shall also deliver all
certificates, if any, issued by the
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Company which represent Covered Shares owned by such Holder included in such
Tag-Along Sale, duly endorsed for transfer with signatures guaranteed, to the
purchaser in the Tag-Along Sale, in the manner and at the address indicated in
the Tag-Along Notice against delivery of the purchase price for such shares. In
addition, each Holder, if a participant in the applicable Tag-Along Sale, shall
take all action as GEI or the purchaser in the Tag-Along Sale shall request as
necessary to vest in the purchaser in the Tag-Along Sale all Covered Shares
owned by such Holder included in such Tag-Along Sale, whether in certificated or
uncertificated form, free and clear of all liens, charges and encumbrances of
any kind.
(f) Exempt Transfers. The provisions of this Section 8 shall
not apply to (i) any sale of Common Stock by GEI in a bona fide underwritten
offering of Common Stock pursuant to an effective registration statement under
the Act or any bona fide public distribution of Common Stock by GEI pursuant to
Rule 144 thereunder; (ii) any bona fide pledge by GEI of Common Stock to a
commercial bank, savings and loan institution or any other similar lending
institution as security for any indebtedness to such lender or any sale upon
foreclosure of any such pledge; (iii) any transfer, sale or other disposition of
Common Stock by GEI to one of its Affiliates (except that (A) prior to any such
disposition, the party receiving such shares of Common Stock shall agree in
writing to be bound by the terms of this Agreement applicable to GEI as if such
transferee were an original party hereto and (B) any such shares of Common Stock
shall continue to be subject to this Agreement); (iv) any redemption by the
Company of its Common Stock; or (v) any GEI Distribution (as defined in Section
13). In the event of any transfer, sale or other disposition of Common Stock by
GEI to one of its Affiliates, to the extent provided in any agreement between
GEI and such Affiliate, such Affiliate shall have any or all of the rights of
GEI under this Agreement and references in this Agreement to GEI shall be deemed
to be references to such Affiliate.
9. Drag-Along Sales.
(a) Right to Require Sale. Notwithstanding any other provision
hereof, if GEI agrees to sell 100% of the shares of Common Stock held by it to a
third person who is not an Affiliate of GEI (a "Third Party") or if GEI agrees
to sell a portion of its shares pursuant to a transaction in which more than 50%
of the total Common Stock of the Company will be sold to a Third Party (either
of such sales, a "Drag-Along Sale"), then, upon the demand of GEI, each Holder
hereby agrees to sell to such Third Party the same percentage of the total
number of Covered Shares held by such Holder on the date of the Drag-Along
Notice (as defined below), as the number of shares GEI is selling in the
Drag-Along Sale bears to the total number of shares held by GEI as of the date
of the Drag-Along Notice (the "Sale Percentage"), at the same price and on the
same terms and conditions as GEI has agreed to with such Third Party.
(b) Drag-Along Notice. Prior to making any Drag-Along Sale, if
GEI elects to exercise the option described in this Section 9, GEI shall provide
each Holder with written notice (the "Drag-Along Notice") not more than sixty
(60) nor less than twenty (20) days prior to the proposed date of the Drag-Along
Sale (the "Drag-Along Sale Date"). The Drag-Along Notice shall set forth: (i)
the proposed amount and form of consideration to be paid per share of Common
Stock and the terms and conditions of payment offered by the Third Party; (ii)
the aggregate number of shares of Common Stock held by GEI as of the date that
the Drag-Along Notice is first delivered, mailed or sent by courier, telex or
telecopy to the Holder(s); (iii) the
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Sale Percentage; (iv) the Drag-Along Sale Date and (v) confirmation that the
proposed Third Party has agreed to purchase the Holder's Covered Shares in
accordance with the terms hereof.
(c) Authority to Record Transfer/Delivery of Certificates. On
the Drag-Along Sale Date, each Holder, if a participant in the applicable
Drag-Along Sale, authorizes the Company (or the Company's transfer agent, if
any) to record in the Company's books and records the transfer of all of such
Holder's Covered Shares included in such Drag-Along Sale which are not
represented by one or more certificates issued by the Company, from such Holder
to the purchaser in the Drag-Along Sale. On the Drag-Along Sale Date, each
Holder, if a participant in the applicable Drag-Along Sale, shall also deliver
all certificates, if any, issued by the Company which represent Covered Shares
owned by such Holder included in such Drag-Along Sale, duly endorsed for
transfer with signatures guaranteed, to the purchaser in the Drag-Along Sale, in
the manner and at the address indicated in the Drag-Along Notice against
delivery of the purchase price for such shares. In addition, each Holder, if a
participant in the applicable Drag-Along Sale, shall take all action as GEI or
the purchaser in the Drag-Along Sale shall request as necessary to vest in the
purchaser in the Drag-Along Sale all Covered Shares owned by such Holder
included in such Drag-Along Sale, whether in certificated or uncertificated
form, free and clear of all liens, charges and encumbrances of any kind.
(d) Consideration. The provisions of this Section 9 shall
apply regardless of the form of consideration received in the Drag-Along Sale.
10. Notices. All notices or other communications under this Agreement
shall be given in writing and shall be deemed duly given and received on the
third full business day following the day of the mailing thereof by registered
or certified mail or when delivered personally or sent by facsimile transmission
as follows:
(a) if to the Company, at its principal executive offices at
the time of the giving of such notice, or at such other place as the Company
shall have designated by notice as herein provided to GEI and to the Management
Investor and any other Holders, Attention: Chief Executive Officer;
(b) if to the Management Investor, at the address of the
Management Investor as it appears in Annex A or at such other place as the
Management Investor shall have designated by notice as herein provided to the
Company and GEI;
(c) if to any Holder other than the Management Investor, at
the address of such Holder as set forth in the stock records of the Company or
at such other place as such Holder shall have designated by notice as herein
provided to the Company and GEI; and
(d) if to GEI, at its principal executive offices at the time
of the giving of such notice, or at such other place as GEI shall have
designated by notice as herein provided to the Company and to the Management
Investor and any other Holders, Attention: Gregory J. Annick.
11. Specific Performance. Due to the fact that the securities of the
Company cannot be readily purchased or sold in the open market and for other
reasons, the parties will be irreparably damaged in the event that this
Agreement is not specifically enforced. In the event of a breach or threatened
breach of the terms, covenants and/or conditions of this Agreement by any
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of the parties hereto, the other parties shall, in addition to all other
remedies, be entitled (without any bond or other security being required) to a
temporary and/or permanent injunction, without showing any actual damage or that
monetary damages would not provide an adequate remedy, and/or a decree for
specific performance, in accordance with the provisions hereof.
12. Miscellaneous.
(a) This writing constitutes the entire agreement of the
parties with respect to the subject matter hereof and may not be modified or
amended except by a written agreement signed by the Company, GEI and the
Holders; provided, however, that any of the provisions of this Agreement (except
as hereinafter provided) may be modified, amended or eliminated by agreement of
the Company, GEI and a majority in interest (on the basis of the number of
"covered shares" of Common Stock then owned of all of the Holders and all
holders of securities pursuant to agreements in forms substantially similar to
this Agreement, which agreement shall bind each Holder whether or not such
Holder has agreed thereto; provided further, that no modification or amendment
which would materially adversely affect the rights of any Holder under Sections
3, 4, 5, 6, 7, 8, 9 or 12(a) of this Agreement shall be effective as to such
Holder if such Holder shall not have consented in writing thereto. Anything in
this Agreement to the contrary notwithstanding, any modification or amendment of
this Agreement by a written agreement signed by, or binding upon, any Holder
shall be valid and binding upon any and all persons or entities who may, at any
time, have or claim any rights under or pursuant to this Agreement in respect of
Covered Shares acquired from such Holder.
(b) No waiver of any breach or default hereunder shall be
considered valid unless in writing, and no such waiver shall be deemed a waiver
of any subsequent breach or default of the same or similar nature. Anything in
this Agreement to the contrary notwithstanding, any waiver, consent or other
instrument under or pursuant to this Agreement signed by, or binding upon, the
Management Investor or any other Holder shall be valid and binding upon any and
all persons or entities (other than the Company, GEI or any Affiliate of GEI)
who may, at any time, have or claim any rights under or pursuant to this
Agreement in respect of Covered Shares acquired from such Holder.
(c) Except as otherwise expressly provided herein, this
Agreement shall be binding upon and inure to the benefit of the Company and GEI,
their respective successors and assigns and the Management Investor and the
other Holders and their respective heirs, personal representatives, successors
and assigns; provided, however, that nothing contained herein shall be construed
as granting to any Holder the right to transfer any Covered Shares except in
accordance with this Agreement and any transferee shall hold such Covered Shares
having only those rights and being subject to the restrictions provided for in
this Agreement.
(d) If any provision of this Agreement shall be invalid or
unenforceable, such invalidity or unenforceability shall attach only to such
provision and shall not in any manner affect or render invalid or unenforceable
any other severable provision of this Agreement, and this Agreement shall be
carried out as if any such invalid or unenforceable provision were not contained
herein.
(e) The provisions of this Agreement shall apply to all
Covered Shares.
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(f) Except as set forth in Section 11, arbitration shall be
the exclusive remedy for resolving any dispute or controversy between the
Company, any of its subsidiaries or GEI and any Management Investor or other
Holder. Such arbitration shall be conducted in accordance with the then most
applicable rules of the American Arbitration Association. The arbitrator shall
be empowered to grant only such relief as would be available in a court of law.
In the event of any conflict between this Agreement and the rules of the
American Arbitration Association, the provisions of this Agreement shall be
determinative. If the parties are unable to agree upon an arbitrator, they shall
select a single arbitrator from a list of seven arbitrators designated by the
office of the American Arbitration Association having responsibility for the
city in which the Management Investor last resided while employed by the Company
or its subsidiaries, all of whom shall be retired judges who are actively
involved in hearing private cases or members of the National Academy of
Arbitrators. If the parties are unable to agree upon an arbitrator from such
list, they shall each strike names alternatively from the list, with the first
to strike being determined by lot. After each party has used three strikes, the
remaining name on the list shall be the arbitrator. The fees and expenses of the
arbitrator shall initially be borne equally by the parties; provided, however,
that each party shall initially be responsible for the fees and expenses of its
own representatives and witnesses. If the parties cannot agree upon a location
for the arbitration, the arbitrator shall determine the location. Judgment may
be entered on the award of the arbitrator in any court having jurisdiction. The
prevailing party in the arbitration proceeding, as determined by the arbitrator,
and in any enforcement or other court proceedings, shall be entitled to the
extent provided by law to reimbursement from the other party for all of the
prevailing party's costs (including but not limited to the arbitrator's
compensation), expenses and reasonable attorneys' fees.
(g) Should any party to this Agreement be required to commence
any litigation concerning any provision of this Agreement or the rights and
duties of the parties hereunder, the prevailing party in such proceeding shall
be entitled, in addition to such other relief as may be granted, to the
reasonable attorneys' fees and court costs incurred by reason of such
litigation.
(h) The section headings contained herein are for the purposes
of convenience only and are not intended to define or limit the contents of said
sections.
(i) Each party hereto shall cooperate and shall take such
further action and shall execute and deliver such further documents as may be
reasonably requested by any other party in order to carry out the provisions and
purposes of this Agreement.
(j) The Management Investor represents that, if the Management
Investor is married and resides in a community property state, the Management
Investor's spouse has signed the Acknowledgment and Agreement of Spouse relating
to the Management Investor at the end of this Agreement.
(k) Words in the singular shall be read and construed as
though in the plural and words in the plural shall be read and construed as
though in the singular in all cases where they would so apply.
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(l) This Agreement may be executed in one or more
counterparts, all of which taken together shall be deemed one original.
(m) The Management Investor and each other Holder hereby
irrevocably and unconditionally consents to the jurisdiction of any New York
State court or federal court of the United States sitting in the State of New
York in any action or proceeding relating to this Agreement and consents to
service of process in connection therewith by the delivery of notice to such
Management Investor's or Holder's address at the address for notices to such
Holder pursuant to this Agreement.
(n) This Agreement shall be deemed to be a contract under the
laws of the State of New York and for all purposes shall be construed and
enforced in accordance with the internal laws of said state without regard to
the principles of conflicts of law.
13. GEI Distributions Exempt.
It is expressly understood and agreed that GEI may distribute
to its partners or other equity participants, in accordance with the terms of
its limited partnership agreement, all or any part of the shares of the
Company's capital stock or other Company securities held by it (any such
distribution, a "GEI Distribution"). Notwithstanding anything to the contrary
contained in this Agreement, any GEI Distribution shall not constitute a "sale,"
"transfer" or "disposition" for any purpose under this Agreement and shall be
exempt in all respects from the terms and conditions of this Agreement. As an
example, and without limiting the generality of the foregoing, it is expressly
understood and agreed that a GEI Distribution shall not constitute a Tag-Along
Sale for the purposes of Section 8 hereof. Further, it is also expressly
understood and agreed that, following a GEI Distribution, (i) the shares of the
Company's capital stock or other Company securities distributed to the partners
or equity participants of GEI shall in no way be subject to this Agreement and
(ii) any partner or equity participant of GEI which receives shares of the
Company's capital stock or other Company securities pursuant to a GEI
Distribution shall not be required or deemed to become a party to this Agreement
or otherwise be subject to this Agreement.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the
first date written above.
DIAMOND TRIUMPH AUTO GLASS, INC.
By: /s/ Kenneth Levine
------------------------
Name: Kenneth Levine
Its: Co-Chairman & Co-Chief
Executive Officer
GREEN EQUITY INVESTORS II, L.P.
By: Grand Avenue Capital Partners, L.P.
By: Grand Avenue Capital Corporation, its
general partner
By: /s/ Gregory Annick
-----------------------
Name: Gregory Annick
Management Investor
By: /s/ Norman Harris
---------------------
Name: Norman Harris
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Exhibit 10.2
MANAGEMENT SUBSCRIPTION
AND STOCKHOLDERS AGREEMENT
This Management Subscription and Stockholders Agreement (the
"Agreement") is entered into as of March 31, 1998 by and among Diamond Triumph
Auto Glass, Inc., a Delaware corporation (the "Company"), Green Equity Investors
II, L.P., a Delaware limited partnership ("GEI"), and the person identified on
Annex A attached hereto (hereinafter referred to as the "Management Investor"),
with reference to the following facts:
WHEREAS, GEI is the principal shareholder of the Company;
WHEREAS, Management Investor is a key executive of the Company or one
of its subsidiaries and, accordingly, as an incentive to the Management
Investor, the Company desires to issue uncertificated shares of the Company's
common stock (the "Common Stock") to the Management Investor as set forth
herein; and
NOW, THEREFORE, in consideration of the premises and for other good and
valuable consideration, the receipt and adequacy of which is hereby
acknowledged, the parties hereto agree as follows:
1. Management Investor Representations.
(a) Investment Risk. The Management Investor represents and
acknowledges that (i) as a result of the Management Investor's (A) existing
relationship with the Company and by virtue of being a key executive of the
Company or one of its subsidiaries, and (B) experience in financial matters, the
Management Investor is properly able to evaluate the capital structure of the
Company, the business of the Company and its subsidiaries and the risks inherent
therein; (ii) the Management Investor has been given the opportunity to obtain
any additional information or documents from and to ask questions, and receive
answers of, the officers and representatives of the Company and its subsidiaries
to the extent necessary to evaluate the merits and risks related to an
investment in the Company; (iii) the Management Investor has been and will be,
to the extent the Management Investor deems necessary, advised by legal counsel
of the Management Investor's choice at Management Investor's expense in
connection with this Agreement and the issuance and sale of Common Stock
hereunder and (iv) the purchase of Common Stock hereunder will be consistent, in
both nature and amount, with the Management Investor's overall investment
program and financial condition, and the Management Investor's financial
condition will be such that the Management Investor will be able to bear the
economic risk of holding unregistered Common Stock for which there is no market
and to suffer a complete loss of the Management Investor's investment therein.
The Management Investor further acknowledges that investment in the Common Stock
hereunder involves significant risks and that these risks include, without
limitation, the fact that the Company will have a leveraged financial structure.
<PAGE>
(b) Purchase for Investment.
(i) The Management Investor represents and warrants
that: (A) the Common Stock acquired by the Management Investor hereunder will be
acquired for the Management Investor's own account for investment, without any
present intention of selling or further distributing the same and the Management
Investor does not have any reason to anticipate any change in the Management
Investor's circumstances or any other particular occasion or event which would
cause the Management Investor to desire to sell any of such Common Stock and (B)
the Management Investor is fully aware that in agreeing to sell or issue such
Common Stock to the Management Investor the Company will be relying upon the
truth and accuracy of these representations and warranties. The Management
Investor agrees that the Management Investor will not sell or otherwise dispose
of any Common Stock except in compliance with the Securities Act of 1933, as
amended (the "Act"), the rules and regulations of the Securities and Exchange
Commission thereunder, the relevant state securities laws applicable to the
Management Investor's action and the terms of this Agreement.
(ii) Subject to Section 6 below, in addition to the
other restrictions provided in
this Agreement, the Management Investor agrees that prior to making any
disposition of any Common Stock acquired hereunder (other than a disposition to
the Company), the Management Investor will give not less than 10 days' advance
written notice to the Company describing the manner of such proposed
disposition. The Management Investor further agrees that the Management Investor
will not effect such proposed disposition until either (A) the Management
Investor has provided to the Company, if so requested by the Company, an opinion
of counsel reasonably satisfactory in form and substance to the Company that
such proposed disposition is exempt from registration under the Act and any
applicable state securities laws or (B) a registration statement under the Act
covering such proposed disposition has been filed by the Company under the Act
and has become effective and compliance with applicable state securities laws
has been effected.
(iii) The Management Investor acknowledges that no
trading market for the Common Stock exists currently or is expected to exist at
any time in the foreseeable future and that, as a result, the Management
Investor may be unable to sell any of the Common Stock acquired hereunder for an
indefinite period. Further, the Company has no obligation to register any of the
Common Stock, except as expressly provided in Section 7 of this Agreement.
(iv) The Management Investor acknowledges and agrees
that nothing herein, including the opportunity to make any equity investment in
the Company, shall be deemed to create any implication concerning the adequacy
of the Management Investor's services to the Company or any of its subsidiaries
or shall be construed as an agreement by the Company or any of its subsidiaries,
express or implied, to employ the Management Investor or contract for the
Management Investor's services, to restrict the right of the Company or any of
its subsidiaries to discharge the Management Investor or cease contracting for
the Management Investor's services or to modify, extend or otherwise affect in
any manner whatsoever the terms of any employment agreement or contract for
services which may exist between the Management Investor and the Company or any
of its subsidiaries.
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2. Grant of Management Shares and Legend on Certificates.
(a) Grant of Management Shares. The Company hereby grants to
the Management Investor the right to purchase, on the terms and conditions set
forth in this Agreement, all or any part of the number of shares indicated on
Annex A hereto at the purchase price of $20.00 (the "Purchase Price") per share.
All shares of Common Stock issued hereunder shall be subject to all of the terms
and restrictions contained in this Agreement, including, without limitation,
those in Sections 1(b), 3, 4, 8 and 9, and shall be uncertificated shares.
Subject to the limitations set forth in Section 2(b), the Management Investor
shall be entitled, upon written request to the Company, to have a certificate
issued to him or her representing Common Stock issued hereunder.
(b) Legend on Certificates. Each stock certificate issued to
the Management Investor upon written request to the Company representing Common
Stock issued hereunder shall bear the following (or substantially equivalent)
legends on the face or reverse side thereof:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"), AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED OR
HYPOTHECATED UNLESS THERE IS AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE ACT COVERING SUCH SECURITIES, THE SALE IS
MADE IN ACCORDANCE WITH RULE 144 OR ANY SUCCESSOR RULE UNDER
THE ACT OR DIAMOND TRIUMPH AUTO GLASS, INC. (THE "COMPANY")
RECEIVES AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY
THAT AN EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE. THE
SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A
MANAGEMENT SUBSCRIPTION AND STOCKHOLDERS AGREEMENT DATED AS OF
MARCH 31, 1998, AMONG THE PURCHASER PARTY THERETO, GREEN
EQUITY INVESTORS II, L.P., AND THE COMPANY, A COPY OF WHICH IS
ON FILE WITH THE SECRETARY OF THE COMPANY, AND THE SECURITIES
REPRESENTED BY THIS CERTIFICATE MAY NOT BE TRANSFERRED, SOLD,
ASSIGNED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF
UNLESS SUCH TRANSFER, SALE, ASSIGNMENT, PLEDGE, HYPOTHECATION
OR OTHER DISPOSITION COMPLIES WITH THE PROVISIONS OF SUCH
AGREEMENT.
Any stock certificate issued at any time in exchange or substitution for any
certificates bearing such legends (except a new certificate issued upon the
completion of a public distribution of Common Stock represented thereby) shall
also bear such (or substantially equivalent) legends, unless the Common Stock
represented by such certificate is no longer subject to the provisions of
Sections 1(b)(ii), 3(a), 3(b), 4, 8 and 9 of this Agreement and, in the opinion
of counsel for the
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<PAGE>
Company, the Common Stock represented thereby need no longer be subject to
restrictions pursuant to the Act or applicable state securities law. The Company
shall not be required to transfer on its books any certificate for Common Stock
in violation of the provisions of this Agreement.
3. Transfer of Stock.
(a) Prohibition on Transfer. Subject to the provisions of
Section 6, neither the Management Investor nor any other Holder (as defined in
Section 7(a)) shall, on or prior to the fifth anniversary of this Agreement,
directly or indirectly, sell, pledge, give, bequeath, transfer, assign or in any
other way whatsoever encumber or dispose of (a "transfer") any Covered Shares
(as defined in Section 7(a)) (or any interest therein), except for transfers (i)
pursuant to this Section 3 or Sections 4, 7, 8, or 9 of this Agreement or (ii)
as may be specifically authorized by the Board of Directors of the Company in
its sole discretion (either of (i) or (ii), a "Permitted Transfer").
(b) Transfer Procedure; Right of First Refusal. Neither the
Management Investor nor any other Holder shall, prior to the lapse of the
restriction in clause (a) of this Section 3, transfer any Covered Shares (or any
interest therein), except for Permitted Transfers or transfers in accordance
with the following:
(i) If any Holder shall have received a bona fide
arms' length written offer (a "Bona Fide Offer") which such Holder
desires to accept from an independent party unrelated to such Holder
(the "Outside Party") for the purchase of Covered Shares for
consideration consisting entirely of cash, then such Holder shall give
a notice in writing (the "Option Notice") to GEI setting forth such
desire, which notice shall set forth at least the name and address of
the Outside Party and the price and terms of the Bona Fide Offer and be
accompanied by a copy of the Bona Fide Offer.
(ii) Upon the giving of such Option Notice, GEI shall
have an option (transferable, in the sole discretion of GEI, to an
Affiliate (as defined in Section 7(b)) of GEI or to the Company or a
subsidiary of the Company) to purchase all of the Covered Shares
specified in the Option Notice, said option to be exercised within
thirty (30) days after the giving of such Option Notice, by giving a
counter-notice (the "Election Notice") to the Holder.
(iii) If GEI (or an Affiliate of GEI, the Company or
a subsidiary of the Company, if applicable) elects to purchase all of
such Covered Shares, it shall be obligated to purchase, and the Holder
shall be obligated to sell, such Covered Shares at the cash price and
terms indicated in the Bona Fide Offer, except that the closing of the
purchase by GEI (or an Affiliate of GEI, the Company or a subsidiary of
the Company, if applicable) shall be held on a business day within
sixty (60) days after the giving of the Election Notice at 10:30 a.m.,
Eastern Standard Time, at the principal executive office of the
Company, or at such other time and place as may be mutually agreed to
by GEI (or an Affiliate of GEI, the Company or a subsidiary of the
Company, if applicable) and the Holder.
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<PAGE>
(iv) If an Election Notice is not delivered by GEI
(or an Affiliate of GEI, the Company or a subsidiary of the Company, if
applicable) within the period specified above, the Holder thereafter,
at any time within a period of sixty (60) days from the giving of said
Option Notice, may transfer all (but not less than all) of such Covered
Shares to the Outside Party at the cash price and terms contained in
the Bona Fide Offer, and the Outside Party shall thereafter be subject
to and bound by all of the provisions of this Agreement and, as a
condition precedent to the completion of such transfer of Covered
Shares to such Outside Party, such Outside Party shall execute and
deliver to the Company and GEI a written consent to such effect in form
and substance satisfactory to the Company and GEI; provided, however,
that in the event the Holder has not so transferred said Covered Shares
to the Outside Party within said sixty (60) day period, then said
Covered Shares thereafter shall continue to be subject to all of the
restrictions contained in this Agreement.
(c) No Waiver by GEI. Any election in any instance by
GEI (or an Affiliate of GEI, the Company or a subsidiary of the Company, if
applicable) not to exercise its rights of first refusal under this Section 3
shall not constitute a waiver of such rights with respect to any other proposed
transfer of Covered Shares.
(d) Transfer to Related Transferees. Notwithstanding
anything to the contrary contained in clauses (a) through (c) of this Section 3,
the Management Investor or any other Holder may transfer Covered Shares without
restriction to the Management Investor's Related Transferees (as defined below)
provided that each such Related Transferee shall first (i) execute a written
consent in form and substance satisfactory to the Company and GEI to be bound by
all of the provisions of this Agreement and (ii) give a duplicate original of
such consent to the Company and GEI. The "Related Transferees" of the Management
Investor shall consist of the Management Investor's spouse, the Management
Investor's adult lineal descendants, the adult spouses of such lineal
descendants, trusts solely for the benefit of the Management Investor's spouse
or the Management Investor's minor or adult lineal descendants and, in the event
of death, the Management Investor's personal representatives (in their
capacities as such), estate and named beneficiaries. In the event of any
transfer by the Management Investor to his Related Transferees of all or any
part of the Covered Shares (or in the event of any subsequent transfer by any
such Related Transferee to another Related Transferee of the Management
Investor), such Related Transferees shall receive and hold said Covered Shares
subject to and be bound by the terms of this Agreement. There shall be no
further transfer of such Covered Shares by a Related Transferee except as
permitted by this Agreement.
4. "Call" Option.
(a) Upon the termination of the Management Investor's
employment with, or cessation of services as a director of, the Company or any
of its subsidiaries for any reason (including without limitation Voluntary
Termination, a Just Cause Dismissal, Involuntary Termination Without Cause or
the Retirement, death or Permanent Disability of the Management Investor (as
such terms are defined in Section 5 below)) (a "Call Purchase Event"), subject
to the provisions of Section 6 and this Section 4, the Company shall give prompt
written notice of such termination or cessation to GEI and GEI (or an Affiliate
of GEI designated by GEI) may, at its
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<PAGE>
option exercisable by written notice (a "Purchase Notice") delivered to the
Management Investor and each other Holder within ninety (90) days after the
applicable Call Purchase Event (or, in the event the applicable Call Purchase
Event is the death of the Management Investor, within thirty (30) days after the
appointment and qualification of the deceased Management Investor's personal
representative, if later), elect to purchase and, upon the giving of such
notice, GEI (or an Affiliate of GEI designated by GEI) shall be obligated to
purchase and the Management Investor and each other Holder (each a "Seller")
shall be obligated to sell, all, or any lesser portion indicated in the Purchase
Notice, of the Covered Shares held by such Holder at a per share price equal to:
(i) in the case of Voluntary Termination or a Just
Cause Dismissal, the lower of the Adjusted Purchase Price or the Fair Market
Value (as each such term is defined in Section 5 below); or
(ii) in the case of any other termination (including
without limitation Involuntary Termination Without Cause, death, Retirement or
Permanent Disability), the Fair Market Value.
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<PAGE>
Notwithstanding the foregoing provisions of this Section 4(a), in the event that
the applicable Call Purchase Event occurs more than one year after the date
hereof, in the case of Voluntary Termination or a Just Cause Dismissal, the
price per share for the Applicable Percentage of the Covered Shares held by each
Holder shall be the Fair Market Value and the price per share for the remaining
Covered Shares held by such Holder shall be the lower of the Adjusted Purchase
Price or the Fair Market Value. The "Applicable Percentage" shall be determined
from the following table, based upon the period during which the applicable Call
Purchase Event occurs.
Period during which Call
Purchase Event Occurs Applicable Percentage
--------------------- ---------------------
12 months commencing on the
first anniversary of the
date of this Agreement 33-1/3%
12 months commencing on the
second anniversary of the
date of this Agreement 66-2/3%
On or after the third anniversary
of the date of this Agreement 100%
If, as a result of the provisions of the two preceding sentences, there are two
different prices per share applicable to the Covered Shares held by each Holder
and less than all Covered Shares held by each Holder are to be purchased
pursuant to this Section 4, the Covered Shares not purchased from such Holder
shall be those having the higher price per share.
(b) If GEI (or an Affiliate of GEI designated by GEI) does not
elect to exercise its option set forth in paragraph (a) of this Section 4, GEI
shall give written notice that it is not so electing to the Company within the
time periods specified in paragraph (a) of this Section 4 for the giving of the
Purchase Notice. Upon receipt of such notice from GEI, the Company shall have
the option, exercisable by written notice (a "Company Purchase Notice")
delivered to the Management Investor and each other Holder within fifteen (15)
days after receipt of such notice from GEI, to purchase from each Seller (and,
upon the giving of the Company Purchase Notice, the Company shall be obligated
to purchase and each Seller shall be obligated to sell) all, or any lesser
portion indicated in the Company Purchase Notice, of the Covered Shares held by
such Seller at the per share price set forth in paragraph (a) of this Section 4.
(c) In the event a purchase of Covered Shares pursuant to this
Section 4 by the Company shall be prohibited by law or would cause a default
under the terms of any indenture or loan agreement or other instrument to which
the Company or any of its subsidiaries may be a party, the obligations of each
Seller and the Company pursuant to this Section 4 shall be suspended until such
time as such prohibition first lapses or is waived and no such default would be
caused; provided, however, that (x) the purchase price to be paid by the Company
for the Covered Shares shall accrue interest at the lowest rate necessary to
prevent the imputation of interest or original issue discount under the Internal
Revenue Code of 1986, as amended, reduced
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<PAGE>
by any dividends or distributions on such Covered Shares during the period of
such suspension, which interest shall likewise be paid when such prohibition
first lapses or is waived and no such default would be caused and (y) in the
event of any such suspension, if GEI so elects and no violation of law would be
caused and no default under the terms of any indenture or loan agreement or
other instrument to which the Company or any of its subsidiaries may be a party
would result, the Company shall transfer its obligations under this Section 4 to
GEI or to an Affiliate of GEI, in which case GEI or the Affiliate (as the case
may be) and the Seller(s) shall be obligated to complete the purchase of such
Covered Shares pursuant to this Section 4.
5. Purchase Price, Closing and Terms of Payment for "Call" Sales.
(a) (i) For purposes of this Agreement, the "Fair Market
Value" of each share of Common Stock shall be determined as of the time of the
Call Purchase Event by the Board of Directors of the Company in the exercise of
its reasonable discretion; provided, however, that such determination shall be
based upon the Company as a going concern and shall not discount the value of
such shares either because they are subject to the restrictions set forth in
this Agreement or because they constitute only a minority interest in the
Company. Upon delivery of notice of such Fair Market Value to GEI and to the
Seller(s) of Common Stock pursuant to Section 4 (which shall indicate, in a
general fashion, the factors considered by the Board of Directors in determining
such amount), the Management Investor shall have ten (10) business days in which
to notify the Company in writing of any disagreement. If no written notice of
disagreement is given by the Management Investor, the Fair Market Value as
determined by the Board of Directors of the Company shall be conclusive and
binding on each Seller and on GEI or any Affiliate of GEI. If written notice is
given by the Management Investor of a disagreement, GEI and the Management
Investor shall mutually agree upon an independent appraiser experienced in
making valuations of such sort which shall make a determination of the Fair
Market Value. Such determination shall be final, binding and nonappealable upon
GEI (or an Affiliate of GEI or the Company, as applicable) and each Seller. The
costs and expenses incurred in connection with the determination made by the
independent appraiser shall be borne equally by GEI (or an Affiliate of GEI or
the Company, as applicable) and by the Management Investor.
(ii) For purposes of this Agreement, the "Adjusted
Purchase Price" of each share of Common Stock shall be determined as of the time
of the Call Purchase Event and shall equal (A) $20.00, plus (or minus in the
case of a loss) (B) an amount equal to the quotient of (1) the aggregate net
income (loss) of the Company applicable to the Common Stock, determined in
accordance with generally accepted accounting principles consistently applied,
for the period (treated as one accounting period) beginning on April 1, 1998 to
the end of the most recent fiscal quarter ending prior to the date of the Call
Purchase Event, divided by (2) the number of outstanding shares of Common Stock
(determined on a fully diluted basis) as of the end of such most recent fiscal
quarter, less (C) an amount equal to the aggregate dividends per share of Common
Stock paid during the period from April 1, 1998 to the date of the Call Purchase
Event.
(b) For purposes of this Agreement, the Management Investor
shall be deemed to be "Permanently Disabled" if the Management Investor becomes
unable to engage in any substantial gainful activity by reason of any medically
determinable physical or mental
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<PAGE>
impairment which can be expected to result in death or which has lasted or can
be expected to last for a continuous period of not less than twelve (12) months.
The Company, at its option and expense, shall be entitled to retain a physician
to confirm the existence of such incapacity or disability and the determination
of such physician shall be binding upon the Company (or GEI or an Affiliate of
GEI, as applicable) and each Seller; provided, however, that if the Management
Investor disagrees with such determination of Permanent Disability within
fifteen (15) days of being notified of it, the Management Investor and the
Company shall jointly agree upon an independent physician (or, if they are
unable to agree upon such physician, they shall each select a physician and
those two physicians shall select the independent physician) who shall make the
determination, whose decision shall be binding upon the Company (or GEI or an
Affiliate of GEI, as applicable) and each Seller.
(c) For the purposes of this Agreement, the Management
Investor shall be deemed to be "Involuntarily Terminated Without Cause" upon the
later of the termination of the Management Investor's employment by, or removal
or failure to be reelected as a director of, the Company or any of its
subsidiaries, unless such termination, removal or failure to be reelected is due
to Retirement, death, Permanent Disability or a Just Cause Dismissal.
"Retirement" shall mean retirement in accordance with the retirement policies or
practices of the Company or its subsidiaries applicable to executives or
directors, as the case may be, but in no event at an age of less than seventy
(70). "Voluntary Termination" shall mean the termination by the Management
Investor of his employment with, or his resignation or refusal to stand for
reelection as a director of, the Company or any of its subsidiaries, for any
reason other than death, Permanent Disability, or Retirement. A "Just Cause
Dismissal" shall mean termination of the Management Investor's employment with,
or service as a director of, the Company or any of its subsidiaries as a result
of any of the following (each, a "Cause"):
(i) the Management Investor commits any act of fraud,
intentional misrepresentation or serious misconduct in connection with
the business of the Company or its subsidiaries, including but not
limited to, falsifying any documents or agreements (regardless of
form); or
(ii) the Management Investor materially violates any
rule or policy of the Company or its subsidiaries (A) for which
violation an employee may be terminated pursuant to the written
policies of the Company or its subsidiaries reasonably applicable to a
key employee, or (B) which violation results in material damage to the
Company or its subsidiaries, or (C) which, after written notice to do
so, the Management Investor fails to correct within a reasonable time;
or
(iii) the Management Investor wilfully breaches or
habitually neglects any material aspect of the Management Investor's
duties (A) as described in the Management Investor's employment
contract, or (B) in the ordinary course of the Management Investor's
employment or service as a director, or (C) assigned to the Management
Investor by the Company or its subsidiaries, which assignment was
reasonable in light of the Management Investor's position with the
Company or its subsidiaries (all of the foregoing duties, "Duties"); or
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<PAGE>
(iv) the Management Investor fails, after written
notice, adequately to perform any Duties and such failure is reasonably
likely to have an adverse impact upon the Company, its subsidiaries or
the operations of any of them; or
(v) the Management Investor materially fails to
comply with a direction from the Board of Directors of the Company or
its subsidiaries with respect to a material matter, which direction was
reasonable in light of the Management Investor's position with the
Company or its subsidiaries; or
(vi) while employed by the Company or its
subsidiaries, and without the written approval of the Chief Executive
Officer of the Company (or, in case the Management Investor is such
Chief Executive Officer, approval of the Company's Board of Directors),
the Management Investor performs services for any other corporation or
person which competes with the Company or its subsidiaries; or
(vii) the Management Investor is convicted by a court
of competent jurisdiction of a felony (other than a traffic or moving
violation) or any crime involving dishonesty; or
(viii) the Management Investor engages in any conduct
which is materially injurious or damaging to the Company or any of its
subsidiaries or the reputation of the Company or any of its
subsidiaries; or
(ix) any willful breach by the Management Investor of
his or her fiduciary duties as a director of the Company or any of its
subsidiaries.
In the event that there is a dispute between the Seller(s) and the Company (or
GEI or an Affiliate of GEI, as applicable) as to whether "Cause" for termination
exists: (x) such termination shall nonetheless be effective, (y) such dispute
shall be subject to arbitration pursuant to Section 12 (f) hereof and (z) the
payments or deliveries, if any, to be made by the Company (or GEI or an
Affiliate of GEI, as applicable) in connection with a purchase of Covered Shares
held by the Seller(s) pursuant to Section 4 shall be delayed until the final
resolution of such dispute in such arbitration.
(d) The closing for all purchases and sales of
Covered Shares provided for in Section 4 hereof (the "Call Closing") shall be at
the principal executive offices of the Company at 10:30 a.m., Eastern Standard
Time, on the later of (A) the sixtieth day after the giving of the applicable
Purchase Notice or Company Purchase Notice and (B), if the per share price is
the Fair Market Value, the thirtieth day after the final determination of the
Fair Market Value of the Common Stock as set forth above; provided, however,
that if any Seller is deceased on the closing date and such deceased person's
personal representative shall not have been appointed and qualified by such
date, then the closing in respect of such Seller shall be postponed until the
tenth day after the appointment and qualification of such personal
representative. If the aforesaid closing date falls on a day which is not a
business day, then the closing shall be held on the next succeeding business
day.
(e) The purchase price for the purchase and sale of
Covered Shares pursuant to the provisions hereof shall be paid in cash, by
certified or by official bank check.
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(f) On the date of the Call Closing, each Seller
authorizes the Company (or the Company's transfer agent, if any) to record in
the Company's books and records the transfer of all of such Seller's Covered
Shares to be sold at the Call Closing, which are not represented by one or more
certificates issued by the Company, from such Seller to the purchaser at the
Call Closing. On the date of the Call Closing, each Seller shall also deliver
all certificates, if any, issued by the Company which represent Covered Shares
to be sold at the Call Closing by such Seller, duly endorsed for transfer with
signatures guaranteed, to the purchaser at the Call Closing. In addition, each
Seller shall take all actions as the Company or any other purchaser at the Call
Closing shall request as necessary to vest in the purchaser at the Call Closing
all shares sold by such Seller pursuant to Section 4 hereof, whether in
certificated or uncertificated form, free and clear of all liens, charges and
encumbrances of any kind.
6. Termination and Lapse of Rights and Restrictions; Application to
Other Stock.
(a) The provisions of Sections 1(b)(ii), 3(a), 3(b), 4, 8 and
9 of this Agreement shall lapse and be of no further effect with respect to
Covered Shares upon the commencement of the public trading of the Company's
Common Stock (or any capital stock exchanged for or distributed upon such Common
Stock as described in paragraph (b) of this Section 6) on any national
securities exchange, on the NASDAQ National Market System or on the NASDAQ
"Small Cap" Issues System; provided, however, that nothing in this Section 6(a)
shall affect any options to purchase, or any obligations to purchase and sell,
Covered Shares which arose prior to the commencement of such public trading.
(b) In the event any capital stock of the Company or any other
corporation shall be distributed on, with respect to, or in exchange for shares
of Common Stock of the Company as a stock dividend, stock split, spin-off,
reclassification or recapitalization in connection with any merger or
reorganization, the restrictions, rights and options set forth in Sections 3, 4,
7, 8 and 9 shall apply with respect to such other capital stock to the same
extent as they are, or would have been applicable, to the Covered Shares on, or
with respect to, which such other capital stock was distributed.
7. Piggyback Registration Rights.
(a) As used in this Agreement:
(i) the term "Holder" means the Management Investor,
any Related Transferee of the Management Investor and/or any Outside
Party that, at the time, owns Covered Shares; provided, however, that,
unless the Company is otherwise notified, the record owner of Covered
Shares shall be deemed to be the Holder of such Covered Shares;
(ii) the term Covered Shares means the shares of
Common Stock acquired by the Management Investor pursuant to this
Agreement.
(b) Subject to the provisions herein, if the Company at any
time proposes to include all or any part of GEI's Common Stock in a public
offering of Common Stock registered under the Act (other than registration (x)
on Forms S-4 or S-8 or any successor forms thereto or (y) filed in connection
with an exchange offer), the Company shall give written notice of the
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proposed registration to each Holder at least thirty (30) days prior to the
filing thereof, and each Holder shall have the right to request that all or any
part of its Covered Shares be included in such registration by giving written
notice to the Company within fifteen (15) days after the giving of such notice
by the Company (any Holder giving the Company a notice requesting that Covered
Shares owned by it be included in such proposed registration being hereinafter
referred to in this Section 7 as a "Registering Holder"); provided, however,
that (i) if the registration is in whole or in part an underwritten primary
registration on behalf of the Company and the managing underwriters of such
offering determine that the aggregate amount of securities of the Company which
all Registering Holders and all other security holders of the Company, pursuant
to contractual rights to participate in such registration ("Other Holders"),
propose to include in such registration statement exceeds the maximum amount of
securities that should be included therein, the Company will include in such
registration, first, the shares which the Company proposes to sell and, second,
the shares of such Registering Holders and other securities to be sold for the
account of Other Holders, pro rata among all such Registering Holders and Other
Holders, taken together, on the basis of the relative equity interests in the
Company of all Registering Holders and Other Holders who have requested that
securities owned by them be so included (it being agreed and understood,
however, that such underwriters shall have the right to eliminate entirely the
participation in such registration of all Registering Holders and Other
Holders), (ii) if the registration is an underwritten secondary registration on
behalf of any of the Other Holders pursuant to demand registration rights (other
than such right of GEI or its Affiliates) and the managing underwriters
determine that the aggregate amount of securities which all Registering Holders
and all Other Holders propose to include in such registration exceeds the
maximum amount of securities that should be included therein, the Company will
include in such registration, first, the securities to be sold for the account
of the Other Holders demanding registration (but only to the extent such Other
Holders are entitled to demand inclusion thereof) second, any securities to be
sold for the account of the Company, and, third, the shares of such Registering
Holders and other securities to be sold for the account of the Other Holders
electing to include (but not being entitled to demand inclusion of) securities
in such registration, pro rata among all such Registering Holders and Other
Holders, taken together, on the basis of relative equity interests in the
Company of all Registering Holders and such Other Holders who have requested
that securities owned by them be included (it being agreed and understood,
however, that such underwriters shall have the right to eliminate entirely the
participation therein of all such Registering Holders and Other Holders not
entitled to demand inclusion of securities in such registration). Shares of
Common Stock proposed to be registered and sold for the account of any
Registering Holder shall be sold to prospective underwriters selected or
approved by the Company on the terms and subject to the conditions of one or
more underwriting agreements negotiated between the Company and/or Other Holders
demanding registration and the prospective underwriters, and (iii) if the
registration is an underwritten secondary registration on behalf of GEI or any
of its Affiliates pursuant to demand registration rights and the managing
underwriters determine that the aggregate amount of securities which all
Registering Holders and GEI and its Affiliates propose to include in such
registration exceeds the maximum amount of securities that should be included
therein, the Company will include in such registration the shares of such
Registering Holders and other securities to be sold for the account of GEI and
its Affiliates pro rata among all such Registering Holders and GEI and its
Affiliates, taken together, on the basis of the relative equity interests in the
Company of all Registering Holders and GEI and its Affiliates who have requested
that securities owned by them be
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included. For the purposes hereof, an "Affiliate" of any person or entity means
any other person or entity controlling, controlled by or under common control
with such person or entity; provided, however, that none of the Management
Stockholders (defined below) or any of their Affiliates shall be deemed to be an
Affiliate of GEI. "Management Stockholders" means, collectively, all holders of
capital stock or other securities issued by the Company who are also employees
of the Company or its subsidiaries.
In the event the Company proposes to register any of its Common Stock
under the Act on Form S-8 (or any successor thereto), if the Company determines
that it is permissible to do so and will not result in material added costs to
the Company from such registration, the Company shall, at a Registering Holder's
request, include in such registration a percentage of such Registering Holder's
Covered Shares equal to the percentage, if any, of GEI's shares of Common Stock
held as of the date of this Agreement sold by GEI in private transactions from
the date hereof to the date of such request.
The Registering Holders shall be permitted to withdraw all or a part of
the Covered Shares held by such Registering Holders which were to be included in
such registration at any time prior to the effective date of such registration.
The Company shall not be required to maintain the effectiveness of the
registration statement for such registration beyond the earlier to occur of 120
days after the effective date thereof or consummation of the distribution by the
Registering Holders included in such registration statement. The Company may
withdraw any registration statement at any time before it becomes effective, or
postpone the offering of securities, without obligation or liability to any
Holder.
(c) The registration rights set forth in this Section 7 shall
terminate and be of no further effect with respect to the Covered Shares held by
a Holder: (i) at such time as the Company has filed, and there has become
effective, one registration statement in which all Holders have been afforded
the opportunity to include all Covered Shares held by them or (ii) if earlier,
after an initial public offering, at such time as all Covered Shares owned by
such Holder are eligible for sale pursuant to the provisions of Rule 144 under
the Act.
(d) In connection with any registration of shares under the
Act pursuant to this Section 7, the Company will furnish each Holder whose
Covered Shares are registered thereunder with a copy of the registration
statement and all amendments thereto and will supply each such Holder with
copies of any prospectus included therein (including a preliminary prospectus
and all amendments and supplements thereto), in such quantities as may be
reasonably necessary for the purpose of the proposed sale or distribution
covered by such registration. The Company shall not, however, be required to
maintain the registration statement and to supply copies of a prospectus for a
period beyond 120 days after the effective date of such registration statement
and, at the end of such period, the Company may deregister any shares of Common
Stock covered by such registration statement and not then sold or distributed.
In connection with any such registration of shares of Common Stock, the Company
will, at the request of the managing underwriter with respect thereto, use its
best efforts to qualify such registered shares for sale under the securities
laws of such states as is reasonably required to permit the distribution of such
registered shares; provided, however, that the Company shall not be required in
connection therewith or as condition thereof to qualify as a foreign corporation
or
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to execute a general consent to service of process in any jurisdiction or become
subject to taxation in any jurisdiction.
(e) Notwithstanding any other provision of this Section 7, in
the event of an underwritten public offering of Common Stock for the account of
the Company, no Holder shall offer for public sale (other than as part of such
underwritten public offering) any shares of Common Stock during the ten (10)
days prior to, and such number of days (not in excess of 180) after, the
effective date of the registration statement in connection with such pubic
offering as the underwriters and the Company may request in writing, without the
consent of the underwriters; provided, however, that, in the case of death of a
Holder, if consented to by the underwriters, a Holder shall be permitted to
offer for public sale prior to the expiration of such period shares of Common
Stock reasonably necessary to generate funds for the payment of estate taxes.
(f) Except as otherwise required by state securities laws or
the rules and regulations promulgated thereunder, all expenses, disbursements
and fees incurred by the Company in connection with carrying out its obligations
under this Section 7 shall be borne by the Company; provided, however, that each
Holder shall pay (i) all costs and expenses of counsel for such Holder, if such
counsel is not also counsel for the Company, (ii) all underwriting discounts,
commissions and expenses and all transfer taxes with respect to the shares of
Common Stock sold by such Holder and (iii) all other expenses incurred by such
Holder and incidental to the sale and delivery of the shares of Common Stock to
be sold by such Holder.
(g) It shall be a condition of each Holder's rights hereunder
to have Covered Shares owned by such Holder registered that:
(i) such Holder shall cooperate with the Company by
supplying information and executing documents relating to such Holder
or the securities of the Company owned by such Holder in connection
with such registration;
(ii) such Holder shall enter into any undertakings
and take such other action relating to the conduct of the proposed
offering which the Company or the underwriters may reasonably request
as being necessary to insure compliance with federal and state
securities laws and the rules or other requirements of the National
Association of Securities Dealers, Inc. or which the Company or the
underwriters may reasonably request to otherwise effectuate the
offering; and
(iii) such Holder shall execute and deliver an
agreement to indemnify and hold harmless the Company, each of its
directors, each of its officers who has signed the registration
statement, any underwriter (as defined in the Act) and each person, if
any who controls the Company or such underwriter within the meaning of
the Act, against such losses, claims, damages or liabilities (including
reimbursement for legal and other expenses) to which the Company or any
such director, officer, underwriter or controlling person may become
subject under the Act or otherwise, in such manner as is customary for
registration of the type then proposed and, in any event, equivalent in
scope to indemnities given by the Company in connection with such
registration, but only with respect to written information furnished by
such Holder in his or her capacity as a selling shareholder in
connection with such registration.
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(h) In the event of any registration under the Act of any
Covered Shares pursuant to this Section 7, the Company hereby agrees to
indemnify and hold harmless each Holder disposing of such shares against such
losses, claims, damages or liabilities (including reimbursement for legal and
other expenses) to which such Holder may become subject under the Act or
otherwise, in such manner as is customary for registrations of the type then
proposed, but not with respect to written information furnished by such Holder
in his capacity as a selling shareholder in connection with such registration.
8. Tag-Along Rights.
(a) Right to Participate in Sale. If GEI enters into an
agreement to transfer, sell or otherwise dispose of for value (such transfer,
sale or other disposition being referred to as a "Tag-Along Sale") a majority of
its shares of Common Stock of the Company held on the date hereof, then GEI
shall afford each Holder the opportunity to participate proportionately in such
Tag-Along Sale in accordance with this Section 8. Each Holder shall have the
right, but not the obligation (except as provided in Section 9), to participate
in such Tag-Along Sale. The number of shares of Common Stock that each Holder
will be entitled to include in such Tag-Along Sale (such Holder's "Allotment")
shall be determined by multiplying (i) the number of Covered Shares owned by
such Holder as of the close of business on the day immediately preceding the
Tag-Along Notice Date (as defined below), by (ii) a fraction, the numerator or
which shall equal the number of shares of Common Stock proposed by GEI to be
sold or otherwise disposed of pursuant to the Tag-Along Sale and the denominator
of which shall equal the total number of shares of Common Stock that are
beneficially owned as of the close of business on the day immediately preceding
the Tag-Along Notice Date by (a) GEI and (b) all holders of shares of Common
Stock (including the Holders) to the extent that such holders have the right to
"tag-along" in the Tag-Along Sale. The "Tag Along Notice Date" shall be the date
that the Tag-Along Sale Notice (as defined below) is first delivered, mailed or
sent by courier, Telex or telecopy to the Holders.
(b) Terms of Tag-Along Sale. Any sales of Covered Shares by a
Holder as a result of the "Tag-Along Rights" granted to the Holder pursuant to
this agreement shall be on the same terms and conditions as the proposed
Tag-Along Sale by GEI.
(c) Sale Notice. GEI shall provide each Holder with written
notice (the "Tag-Along Sale Notice") not more than sixty (60) nor less than
twenty (20) days prior to the proposed date of the Tag-Along Sale (the
"Tag-Along Sale Date"). Each Tag-Along Sale Notice shall set forth: (i) the
number of shares proposed to be transferred or sold by GEI; (ii) the proposed
amount and form of consideration to be paid for such shares and the terms and
conditions of payment offered by each proposed transferee or purchaser; (iii)
the aggregate number of shares of Common Stock held of record as of the close of
business on the day immediately preceding the Tag-Along Notice Date by GEI; (iv)
such Holder's Allotment assuming such Holder elected to sell the maximum number
of Covered Shares possible; (v) confirmation that the proposed purchaser or
transferee has been informed of the "Tag-Along Rights" provided for herein and
has agreed to purchase Covered Shares in accordance with the terms hereof; and
(vi) the Tag-Along Sale Date.
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(d) Tag-Along Notice. If a Holder wishes to participate in the
Tag-Along Sale, such Holder shall provide written notice (the "Tag-Along
Notice") to GEI no less than ten (10) days prior to the Tag-Along Sale Date. The
Tag-Along Notice shall set forth the number of Covered Shares that such Holder
elects to include in the Tag-Along Sale, which shall not exceed such Holder's
Allotment. The Tag-Along Notice shall also specify the aggregate number of
additional Covered Shares owned of record as of the close of business on the day
immediately preceding the Tag-Along Notice Date by such Holder, if any, which
such Holder desires also to include in the Tag-Along Sale ("Additional Shares")
in the event there is any under-subscription for the entire amount of all
Holders' Allotments and of all shares that may be included by persons having,
pursuant to agreements of even date herewith in form substantially similar to
this Agreement (the "Other Agreements"), tag-along rights relative to GEI
(collectively, the "Management Investors' Allotments"). In the event there is an
under-subscription by all holders of Management Investors' Allotments for the
entire amount of the Management Investors' Allotments, GEI shall apportion the
unsubscribed Management Investors' Allotments to such holders on a pro rata
basis in accordance with the number of Additional Shares (as such term is
defined in this Agreement and the Other Agreements) specified by all such
holders in their Tag-Along Notices (as such term is defined in this Agreement
and the Other Agreements). The Tag-Along Notice given by each Holder shall
constitute such Holder's binding agreement to sell the Covered Shares specified
in such Tag-Along Notice (including any Additional Shares to the extent such
Additional Shares are to be included in the Tag-Along Sale pursuant to the
apportionment described in the preceding sentence) on the terms and conditions
applicable to the Tag-Along Sale, subject to the provisions of Section 8 (b)
above; provided, however, that in the event that there is any material change in
the terms and conditions of such Tag-Along Sale applicable to any Holder after
such Holder gives its Tag-Along Notice, then, notwithstanding anything herein to
the contrary, such Holder shall have the right to withdraw from participation in
the Tag-Along Sale with respect to all of its Covered Shares affected thereby.
If the purchaser does not consummate the purchase of all of such shares on the
same terms and conditions applicable to GEI (except as otherwise provided
herein) then GEI shall not consummate the Tag-Along Sale of any of its shares to
such transferee or purchaser, unless the shares of each Holder and GEI are
reduced or limited pro rata in proportion to the respective number of shares
actually sold in such Tag-Along Sale.
If a Tag-Along Notice is not received by GEI from any Holder prior to
the ten-day period specified above, GEI shall have the right to sell or
otherwise transfer the number of shares specified in the Tag-Along Notice to the
proposed purchaser or transferee without any participation by such Holder, but
only on terms and conditions which are no more favorable in any material respect
to GEI than as stated in the Tag-Along Notice to such Holder and only if such
Tag-Along Sale occurs on a date within sixty (60) business days of the Tag-Along
Sale Date.
(e) Authority to Record Transfer/Delivery of Certificates. On
the Tag-Along Sale Date, each Holder, if a participant in the applicable
Tag-Along Sale, authorizes the Company (or the Company's transfer agent, if any)
to record in the Company's books and records the transfer of all of such
Holder's Covered Shares included in such Tag-Along Sale which are not
represented by one or more certificates issued by the Company, from the Holder
to the purchaser in the Tag-Along Sale. On the Tag-Along Sale Date, each Holder,
if a participant in the applicable Tag-Along Sale, shall also deliver all
certificates, if any, issued by the
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Company which represent Covered Shares owned by such Holder included in such
Tag-Along Sale, duly endorsed for transfer with signatures guaranteed, to the
purchaser in the Tag-Along Sale, in the manner and at the address indicated in
the Tag-Along Notice against delivery of the purchase price for such shares. In
addition, each Holder, if a participant in the applicable Tag-Along Sale, shall
take all action as GEI or the purchaser in the Tag-Along Sale shall request as
necessary to vest in the purchaser in the Tag-Along Sale all Covered Shares
owned by such Holder included in such Tag-Along Sale, whether in certificated or
uncertificated form, free and clear of all liens, charges and encumbrances of
any kind.
(f) Exempt Transfers. The provisions of this Section 8 shall
not apply to (i) any sale of Common Stock by GEI in a bona fide underwritten
offering of Common Stock pursuant to an effective registration statement under
the Act or any bona fide public distribution of Common Stock by GEI pursuant to
Rule 144 thereunder; (ii) any bona fide pledge by GEI of Common Stock to a
commercial bank, savings and loan institution or any other similar lending
institution as security for any indebtedness to such lender or any sale upon
foreclosure of any such pledge; (iii) any transfer, sale or other disposition of
Common Stock by GEI to one of its Affiliates (except that (A) prior to any such
disposition, the party receiving such shares of Common Stock shall agree in
writing to be bound by the terms of this Agreement applicable to GEI as if such
transferee were an original party hereto and (B) any such shares of Common Stock
shall continue to be subject to this Agreement); (iv) any redemption by the
Company of its Common Stock; or (v) any GEI Distribution (as defined in Section
13). In the event of any transfer, sale or other disposition of Common Stock by
GEI to one of its Affiliates, to the extent provided in any agreement between
GEI and such Affiliate, such Affiliate shall have any or all of the rights of
GEI under this Agreement and references in this Agreement to GEI shall be deemed
to be references to such Affiliate.
9. Drag-Along Sales.
(a) Right to Require Sale. Notwithstanding any other provision
hereof, if GEI agrees to sell 100% of the shares of Common Stock held by it to a
third person who is not an Affiliate of GEI (a "Third Party") or if GEI agrees
to sell a portion of its shares pursuant to a transaction in which more than 50%
of the total Common Stock of the Company will be sold to a Third Party (either
of such sales, a "Drag-Along Sale"), then, upon the demand of GEI, each Holder
hereby agrees to sell to such Third Party the same percentage of the total
number of Covered Shares held by such Holder on the date of the Drag-Along
Notice (as defined below), as the number of shares GEI is selling in the
Drag-Along Sale bears to the total number of shares held by GEI as of the date
of the Drag-Along Notice (the "Sale Percentage"), at the same price and on the
same terms and conditions as GEI has agreed to with such Third Party.
(b) Drag-Along Notice. Prior to making any Drag-Along Sale, if
GEI elects to exercise the option described in this Section 9, GEI shall provide
each Holder with written notice (the "Drag-Along Notice") not more than sixty
(60) nor less than twenty (20) days prior to the proposed date of the Drag-Along
Sale (the "Drag-Along Sale Date"). The Drag-Along Notice shall set forth: (i)
the proposed amount and form of consideration to be paid per share of Common
Stock and the terms and conditions of payment offered by the Third Party; (ii)
the aggregate number of shares of Common Stock held by GEI as of the date that
the Drag-Along Notice is first delivered, mailed or sent by courier, telex or
telecopy to the Holder(s); (iii) the
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Sale Percentage; (iv) the Drag-Along Sale Date and (v) confirmation that the
proposed Third Party has agreed to purchase the Holder's Covered Shares in
accordance with the terms hereof.
(c) Authority to Record Transfer/Delivery of Certificates. On
the Drag-Along Sale Date, each Holder, if a participant in the applicable
Drag-Along Sale, authorizes the Company (or the Company's transfer agent, if
any) to record in the Company's books and records the transfer of all of such
Holder's Covered Shares included in such Drag-Along Sale which are not
represented by one or more certificates issued by the Company, from such Holder
to the purchaser in the Drag-Along Sale. On the Drag-Along Sale Date, each
Holder, if a participant in the applicable Drag-Along Sale, shall also deliver
all certificates, if any, issued by the Company which represent Covered Shares
owned by such Holder included in such Drag-Along Sale, duly endorsed for
transfer with signatures guaranteed, to the purchaser in the Drag-Along Sale, in
the manner and at the address indicated in the Drag-Along Notice against
delivery of the purchase price for such shares. In addition, each Holder, if a
participant in the applicable Drag-Along Sale, shall take all action as GEI or
the purchaser in the Drag-Along Sale shall request as necessary to vest in the
purchaser in the Drag-Along Sale all Covered Shares owned by such Holder
included in such Drag-Along Sale, whether in certificated or uncertificated
form, free and clear of all liens, charges and encumbrances of any kind.
(d) Consideration. The provisions of this Section 9 shall
apply regardless of the form of consideration received in the Drag-Along Sale.
10. Notices. All notices or other communications under this Agreement
shall be given in writing and shall be deemed duly given and received on the
third full business day following the day of the mailing thereof by registered
or certified mail or when delivered personally or sent by facsimile transmission
as follows:
(a) if to the Company, at its principal executive offices at
the time of the giving of such notice, or at such other place as the Company
shall have designated by notice as herein provided to GEI and to the Management
Investor and any other Holders, Attention: Chief Executive Officer;
(b) if to the Management Investor, at the address of the
Management Investor as it appears in Annex A or at such other place as the
Management Investor shall have designated by notice as herein provided to the
Company and GEI;
(c) if to any Holder other than the Management Investor, at
the address of such Holder as set forth in the stock records of the Company or
at such other place as such Holder shall have designated by notice as herein
provided to the Company and GEI; and
(d) if to GEI, at its principal executive offices at the time
of the giving of such notice, or at such other place as GEI shall have
designated by notice as herein provided to the Company and to the Management
Investor and any other Holders, Attention: Gregory J. Annick.
11. Specific Performance. Due to the fact that the securities of the
Company cannot be readily purchased or sold in the open market and for other
reasons, the parties will be irreparably damaged in the event that this
Agreement is not specifically enforced. In the event of a breach or threatened
breach of the terms, covenants and/or conditions of this Agreement by any
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of the parties hereto, the other parties shall, in addition to all other
remedies, be entitled (without any bond or other security being required) to a
temporary and/or permanent injunction, without showing any actual damage or that
monetary damages would not provide an adequate remedy, and/or a decree for
specific performance, in accordance with the provisions hereof.
12. Miscellaneous.
(a) This writing constitutes the entire agreement of the
parties with respect to the subject matter hereof and may not be modified or
amended except by a written agreement signed by the Company, GEI and the
Holders; provided, however, that any of the provisions of this Agreement (except
as hereinafter provided) may be modified, amended or eliminated by agreement of
the Company, GEI and a majority in interest (on the basis of the number of
"covered shares" of Common Stock then owned of all of the Holders and all
holders of securities pursuant to agreements in forms substantially similar to
this Agreement, which agreement shall bind each Holder whether or not such
Holder has agreed thereto; provided further, that no modification or amendment
which would materially adversely affect the rights of any Holder under Sections
3, 4, 5, 6, 7, 8, 9 or 12(a) of this Agreement shall be effective as to such
Holder if such Holder shall not have consented in writing thereto. Anything in
this Agreement to the contrary notwithstanding, any modification or amendment of
this Agreement by a written agreement signed by, or binding upon, any Holder
shall be valid and binding upon any and all persons or entities who may, at any
time, have or claim any rights under or pursuant to this Agreement in respect of
Covered Shares acquired from such Holder.
(b) No waiver of any breach or default hereunder shall be
considered valid unless in writing, and no such waiver shall be deemed a waiver
of any subsequent breach or default of the same or similar nature. Anything in
this Agreement to the contrary notwithstanding, any waiver, consent or other
instrument under or pursuant to this Agreement signed by, or binding upon, the
Management Investor or any other Holder shall be valid and binding upon any and
all persons or entities (other than the Company, GEI or any Affiliate of GEI)
who may, at any time, have or claim any rights under or pursuant to this
Agreement in respect of Covered Shares acquired from such Holder.
(c) Except as otherwise expressly provided herein, this
Agreement shall be binding upon and inure to the benefit of the Company and GEI,
their respective successors and assigns and the Management Investor and the
other Holders and their respective heirs, personal representatives, successors
and assigns; provided, however, that nothing contained herein shall be construed
as granting to any Holder the right to transfer any Covered Shares except in
accordance with this Agreement and any transferee shall hold such Covered Shares
having only those rights and being subject to the restrictions provided for in
this Agreement.
(d) If any provision of this Agreement shall be invalid or
unenforceable, such invalidity or unenforceability shall attach only to such
provision and shall not in any manner affect or render invalid or unenforceable
any other severable provision of this Agreement, and this Agreement shall be
carried out as if any such invalid or unenforceable provision were not contained
herein.
(e) The provisions of this Agreement shall apply to all
Covered Shares.
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(f) Except as set forth in Section 11, arbitration shall be
the exclusive remedy for resolving any dispute or controversy between the
Company, any of its subsidiaries or GEI and any Management Investor or other
Holder. Such arbitration shall be conducted in accordance with the then most
applicable rules of the American Arbitration Association. The arbitrator shall
be empowered to grant only such relief as would be available in a court of law.
In the event of any conflict between this Agreement and the rules of the
American Arbitration Association, the provisions of this Agreement shall be
determinative. If the parties are unable to agree upon an arbitrator, they shall
select a single arbitrator from a list of seven arbitrators designated by the
office of the American Arbitration Association having responsibility for the
city in which the Management Investor last resided while employed by the Company
or its subsidiaries, all of whom shall be retired judges who are actively
involved in hearing private cases or members of the National Academy of
Arbitrators. If the parties are unable to agree upon an arbitrator from such
list, they shall each strike names alternatively from the list, with the first
to strike being determined by lot. After each party has used three strikes, the
remaining name on the list shall be the arbitrator. The fees and expenses of the
arbitrator shall initially be borne equally by the parties; provided, however,
that each party shall initially be responsible for the fees and expenses of its
own representatives and witnesses. If the parties cannot agree upon a location
for the arbitration, the arbitrator shall determine the location. Judgment may
be entered on the award of the arbitrator in any court having jurisdiction. The
prevailing party in the arbitration proceeding, as determined by the arbitrator,
and in any enforcement or other court proceedings, shall be entitled to the
extent provided by law to reimbursement from the other party for all of the
prevailing party's costs (including but not limited to the arbitrator's
compensation), expenses and reasonable attorneys' fees.
(g) Should any party to this Agreement be required to commence
any litigation concerning any provision of this Agreement or the rights and
duties of the parties hereunder, the prevailing party in such proceeding shall
be entitled, in addition to such other relief as may be granted, to the
reasonable attorneys' fees and court costs incurred by reason of such
litigation.
(h) The section headings contained herein are for the purposes
of convenience only and are not intended to define or limit the contents of said
sections.
(i) Each party hereto shall cooperate and shall take such
further action and shall execute and deliver such further documents as may be
reasonably requested by any other party in order to carry out the provisions and
purposes of this Agreement.
(j) The Management Investor represents that, if the Management
Investor is married and resides in a community property state, the Management
Investor's spouse has signed the Acknowledgment and Agreement of Spouse relating
to the Management Investor at the end of this Agreement.
(k) Words in the singular shall be read and construed as
though in the plural and words in the plural shall be read and construed as
though in the singular in all cases where they would so apply.
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(l) This Agreement may be executed in one or more
counterparts, all of which taken together shall be deemed one original.
(m) The Management Investor and each other Holder hereby
irrevocably and unconditionally consents to the jurisdiction of any New York
State court or federal court of the United States sitting in the State of New
York in any action or proceeding relating to this Agreement and consents to
service of process in connection therewith by the delivery of notice to such
Management Investor's or Holder's address at the address for notices to such
Holder pursuant to this Agreement.
(n) This Agreement shall be deemed to be a contract under the
laws of the State of New York and for all purposes shall be construed and
enforced in accordance with the internal laws of said state without regard to
the principles of conflicts of law.
13. GEI Distributions Exempt.
It is expressly understood and agreed that GEI may distribute
to its partners or other equity participants, in accordance with the terms of
its limited partnership agreement, all or any part of the shares of the
Company's capital stock or other Company securities held by it (any such
distribution, a "GEI Distribution"). Notwithstanding anything to the contrary
contained in this Agreement, any GEI Distribution shall not constitute a "sale,"
"transfer" or "disposition" for any purpose under this Agreement and shall be
exempt in all respects from the terms and conditions of this Agreement. As an
example, and without limiting the generality of the foregoing, it is expressly
understood and agreed that a GEI Distribution shall not constitute a Tag-Along
Sale for the purposes of Section 8 hereof. Further, it is also expressly
understood and agreed that, following a GEI Distribution, (i) the shares of the
Company's capital stock or other Company securities distributed to the partners
or equity participants of GEI shall in no way be subject to this Agreement and
(ii) any partner or equity participant of GEI which receives shares of the
Company's capital stock or other Company securities pursuant to a GEI
Distribution shall not be required or deemed to become a party to this Agreement
or otherwise be subject to this Agreement.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the
first date written above.
DIAMOND TRIUMPH AUTO GLASS, INC.
By: /s/ Kenneth Levine
--------------------------
Name: Kenneth Levine
Its: Co-Chairman & Co-Chief
Executive Officer
GREEN EQUITY INVESTORS II, L.P.
By: Grand Avenue Capital Partners, L.P.
By: Grand Avenue Capital Corporation, its
general partner
By: /s/ Gregory Annick
--------------------------
Name: Gregory Annick
Management Investor
By: /s/ Michael Sumsky
--------------------------
Name: Michael Sumsky
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Exhibit 10.3
STOCKHOLDERS AGREEMENT
DATED AS OF MARCH 31, 1998
among
GREEN EQUITY INVESTORS II, L.P.
KENNETH LEVINE,
RICHARD RUTTA
and
DIAMOND TRIUMPH AUTO GLASS, INC.
<PAGE>
STOCKHOLDERS AGREEMENT
THIS STOCKHOLDERS AGREEMENT (the "Agreement") is entered into as of
March 31, 1998, by and among Green Equity Investors II, L.P., a Delaware limited
partnership (the "Purchaser"), Kenneth Levine ("Levine"), Richard Rutta
("Rutta")(the foregoing individuals being sometimes hereinafter referred to,
individually, as an Executive and, collectively, as the "Executives") and
Diamond Triumph Auto Glass, Inc., a Delaware corporation (the "Company"). Each
of the parties to this Agreement (other than the Company) and any other Person
(as defined in Section 4.1) who shall become a party to or agree to be bound by
the terms of this Agreement after the date hereof is sometimes hereinafter
referred to as a "Stockholder".
RECITALS
Concurrently with the execution of this Agreement, the
Company, the Purchaser and the Executives will consummate the transactions
contemplated by that certain Second Amended and Restated Stock Purchase and Sale
Agreement dated as of January 15, 1998, (the "Purchase Agreement"). The
execution and delivery of this Agreement is a condition to the parties'
obligations under the Purchase Agreement.
Following the consummation of the transactions contemplated by
the Purchase Agreement, Purchaser will own 770,000 shares of Common Stock, par
value $.01 per share, of the Company (the "Common Stock") and 28,000 shares of
12% Senior Cumulative Preferred Stock, with a liquidation preference of $1,000
per share, of the Company (the "Preferred Stock"), Levine will own 100,000
shares of Common Stock and 3,500 Shares of Preferred Stock and Rutta will own
100,000 shares of Common Stock and 3,500 shares of Preferred Stock. Shares of
Common Stock are collectively referred to as the "Common Shares", shares of
Preferred Stock are collectively referred to as the "Preferred Shares and Common
Shares and Preferred Shares are collectively referred to as the "Shares".
The Company and each of the Stockholders desire, for their
mutual benefit and protection, to enter into this Agreement to set forth their
respective rights and obligations with respect to their Shares (whether issued
or acquired hereafter, including all shares of Common Stock issuable upon the
exercise of warrants, options or other rights to acquire shares of Common Stock,
or upon the conversion or exchange of any security ("Rights")).
NOW, THEREFORE, in consideration of the foregoing and for other good
and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto agree as follows:
ARTICLE 1. Election of Directors.
So long as an Executive is an executive officer of the
Company, each Stockholder shall vote his or its Common Shares in favor of the
election of such Executive as a director of the Company.
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ARTICLE 2. Restrictions on Transfer
2.1 General Restrictions on Transfer. Each Stockholder agrees that such
Stockholder will not, directly or indirectly, sell, hypothecate, give, bequeath,
transfer, assign, pledge or in any other way whatsoever encumber or dispose of
(any such event, a "Transfer") any Shares now or hereafter at any time owned by
such Stockholder (or any interest therein) to another Person ("Transferee"), to
the extent such Transfer is prohibited by this Agreement. The Company shall not
transfer upon its books any Shares to any Person to the extent prohibited by
this Agreement and any purported transfer in violation hereof shall be null and
void and of no effect. Each Executive represents and warrants to the Purchaser
and the Company that, except as permitted by Section 2.4 and Article 3, there is
not any plan or intention on the part of such Executive to sell, exchange or
otherwise dispose of the Shares owned by such Executive on the date hereof
following the consummation of the transactions contemplated by the Purchase
Agreement.
2.2 Compliance with Securities Laws. No Stockholder shall Transfer any
Shares, and the Company shall not transfer on its books any Shares, unless (a)
the Transfer is pursuant to an effective registration statement under the
Securities Act of 1933, as amended, or any similar federal statute, and the
rules and regulations of the Commission (as defined in Section 4.1) thereunder,
all as the same shall be in effect at the time (the "Securities Act") and is in
compliance with any applicable state securities or blue sky laws or (b) such
Stockholder shall have furnished the Company with an opinion of counsel, to the
extent reasonably required by the Company, which opinion and counsel shall be
reasonably satisfactory to the Company, to the effect that no such registration
is required because of the availability of an exemption from registration under
the Securities Act; provided that any Transfer by a Stockholder which is a
state-sponsored employee benefit plan to a successor trust or fiduciary or
pursuant to a statutory reconstitution shall be expressly permitted and no
opinions of counsel shall be required in connection therewith. As used in this
Agreement, the term "affiliate" means, with respect to any Person, any other
Person directly or indirectly controlling, controlled by, or under common
control with such Person. For purposes of this Agreement, the term "control",
(including, with correlative meanings, the terms "controlling", "controlled by",
and "under common control with"), as used with respect to any Person, shall mean
the possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of such Person, whether through the
ownership of voting securities or by contract or otherwise.
2.3 Agreement to be Bound. No Transfer of Shares by a Stockholder shall
be effective (and the Company shall not transfer on its books any Shares) unless
(i) the certificates representing such Shares issued to the Transferee shall
bear the legend provided in Section 7.4, if required by such Section 7.4, and
(ii) the Transferee shall have executed and delivered to the Company, as a
condition precedent to such Transfer, an instrument or instruments in form and
substance satisfactory to the Company confirming that the Transferee agrees to
be bound by the terms of this Agreement and accepts the rights and obligations
set forth hereunder, provided, however, that the conditions set forth in this
Section 2.3 shall not apply to any sale of Shares pursuant to an effective
registration statement under the Securities Act or, provided such sale is (x)
not to an affiliate of the Company and (y) not made prior to a Public Offering
Event (as defined in Section 2.4.5), pursuant to Rule 144 under the Securities
Act, as such Rule may be
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amended from time to time, or any other similar regulation hereafter adopted by
the SEC ("Rule 144").
2.4 Tag-Along Rights for the Executive Parties.
2.4.1 Right to Participate in Sale. (a) Purchaser and its
affiliates are sometimes referred to in this Agreement, collectively, as the
"Purchaser Parties" and, individually, as a "Purchaser Party." The Executives
and their respective spouses, descendants and ancestors and any trusts solely
for the benefit of any or all of the foregoing are sometimes referred to in this
Agreement, collectively, as the "Executive Parties" and, individually, as an
"Executive Party." If at any time any Purchaser Parties propose to enter into an
agreement (or substantially contemporaneous agreements, whether or not with the
same or affiliated parties) to sell or otherwise dispose of for value any Common
Shares in one or more related transactions which will result in the transfer of
at least ten percent (10%) of the outstanding Common Shares (such sale or other
disposition for value being referred to as a "Tag-Along Sale"), then such
Purchaser Parties shall afford the Executive Parties (each individually a
"Tag-Along Stockholder" and, collectively, the "Tag-Along Stockholders") the
opportunity to participate proportionately in such Tag-Along Sale in accordance
with this Section 2.4. The number of Common Shares that each Tag-Along
Stockholder will be entitled to include in such Tag-Along Sale (the "Tag-Along
Allotment") shall be determined by multiplying (i) the number of Common Shares
held by such Tag-Along Stockholder as of the close of business on the day
immediately prior to the Tag-Along Notice Date (as hereinafter defined) by (ii)
a fraction, the numerator of which shall equal the number Common Shares proposed
by the Purchaser Parties to be sold or otherwise disposed of pursuant to the
Tag-Along Sale and the denominator of which shall equal the total number of
Common Shares that are beneficially owned by the Purchaser Parties as of the
close of business on the day immediately prior to the Tag-Along Notice Date (the
"Purchaser Fraction"); provided, however, that if any of the Executive Parties
fails to elect to participate in a Tag-Along Sale, Purchaser shall give notice
of such failure to the other Tag-Along Stockholders. Such notice shall be made
by telephone and confirmed in writing within two (2) days. The other Tag-Along
Stockholders shall have three (3) days from the date such notice was given to
agree to sell their pro rata share of any unsold portion. For purposes of this
Section 2.4.1, a Tag-Along Stockholder's pro rata share of any unsold portion
shall be equal to the number of shares obtained by dividing (A) the Purchaser
Fraction times the total number of Common Shares that are held by the Executive
Parties that are not participating in the Tag-Along Sale by (B) the number of
Tag-Along Stockholders that are participating in the Tag-Along Sale.
2.4.2 Sale Notice. The relevant Purchaser Parties shall
provide each Tag-Along Stockholder and the Company with written notice (the
"Tag-Along Sale Notice") not more than sixty (60) days nor less than thirty (30)
days prior to the proposed date of the Tag-Along Sale (the "Tag-Along Sale
Date"). Each Tag-Along Sale Notice shall be accompanied by a copy of any written
agreement relating to the Tag-Along Sale and shall set forth: (i) the name and
address of each proposed Transferee of Common Shares in the Tag-Along Sale; (ii)
the number of Common Shares proposed to be Transferred by such Purchaser
Parties; (iii) the proposed amount and form of consideration to be paid for such
Common Shares and the terms and conditions of payment offered by each proposed
Transferee; (iv) the aggregate number of Common Shares held of record by the
Purchaser Parties as of the close of business on the day
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immediately prior to the date of the Tag-Along Notice (the "Tag-Along Notice
Date"); (v) the Tag-Along Stockholder's Tag-Along Allotment assuming the
Tag-Along Stockholder elected to sell the maximum number of Common Shares
possible; (vi) confirmation that the proposed Transferee has been informed of
the "Tag-Along Rights" provided for herein and has agreed to purchase Common
Shares from any Tag-Along Stockholder in accordance with the terms hereof; and
(vii) the Tag-Along Sale Date.
2.4.3 Tag-Along Notice. Any Tag-Along Stockholder wishing to
participate in the Tag-Along Sale shall provide written notice (the "Tag-Along
Notice") to the relevant Purchaser Parties no less than fifteen (15) days prior
to the Tag-Along Sale Date. The Tag-Along Notice shall set forth the number of
Common Shares that such Tag-Along Stockholder elects to include in the Tag-Along
Sale, which shall not exceed such Tag-Along Stockholder's Tag-Along Allotment.
The Tag-Along Notice given by any Tag-Along Stockholder shall constitute such
Tag-Along Stockholder's binding agreement to sell the Common Shares specified in
the Tag-Along Notice on the terms and conditions applicable to the Tag-Along
Sale; provided, however, that in the event that there is any material change in
the terms and conditions of such Tag-Along Sale applicable to the Tag-Along
Stockholder (including, but not limited to, any decrease in the purchase price
that occurs other than pursuant to an adjustment mechanism set forth in the
agreement relating to the Tag-Along Sale) after such Tag-Along Stockholder gives
its Tag-Along Notice, then, notwithstanding anything herein to the contrary, the
Tag-Along Stockholder shall have the right to withdraw from participation in the
Tag-Along Sale with respect to all of its Common Shares affected thereby. If the
proposed Transferee does not consummate the purchase of all of the Common Shares
requested to be included in the Tag-Along Sale by any Tag-Along Stockholder on
the same terms and conditions applicable to the Purchaser Parties, then such
Purchaser Parties shall not consummate the Tag-Along Sale of any of its Common
Shares to such Transferee, unless the Common Shares of such Purchaser Parties
and the Tag-Along Stockholders to be sold are reduced or limited pro rata in
proportion to the respective number of Common Shares actually sold in any such
Tag-Along Sale and all other terms and conditions of the Tag-Along Sale are the
same for such Purchaser Parties and the Tag-Along Stockholders.
If a Tag-Along Notice from any Tag-Along Stockholder is not received by
such Purchaser Parties prior to the ten (10) day period specified above, such
Purchaser Parties shall have the right to consummate the Tag-Along Sale without
the participation of such Tag-Along Stockholder, but only on terms and
conditions which are no more favorable in any material respect to such Purchaser
Parties (and, in any event, at no greater a purchase price, except as the
purchase price may be adjusted pursuant to the agreement relating to the
relevant Tag-Along Sale) than as stated in the Tag-Along Sale Notice and only if
such Tag-Along Sale occurs on a date within sixty (60) days of the Tag-Along
Sale Date. If such Tag-Along Sale does not occur within such sixty (60) day
period, the Common Shares that were to be subject to such Tag-Along Sale
thereafter shall continue to be subject to all of the restrictions contained in
this Section 2.4.
2.4.4 Delivery of Certificates. On the Tag-Along Sale Date,
each Tag-Along Stockholder shall deliver a certificate or certificates for the
Common Shares to be sold by such Tag-Along Stockholder in connection with the
Tag-Along Sale, duly endorsed for transfer with
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signatures guaranteed, to the Transferee in the manner and at the address
indicated in the Tag-Along Notice against delivery of the purchase price for
such Common Shares.
2.4.5 Exempt Transfers. The provisions of this Section 2.4
shall not apply:
(i) to any sale or other disposition of Common Shares by and
among Purchaser Parties;
(ii) to any sale of Common Shares to the public pursuant to
an effective registration statement under the Securities Act or
pursuant to Rule 144;
(iii) from and after a Public Offering Event. For the purposes
of this Agreement, a "Public Offering Event" shall mean the first date
after which at least twenty percent (20%) of the Company's outstanding
shares of Common Stock is publicly held and such Common Stock is listed
or admitted to trading on a national securities exchange or quoted on
the National Association of Securities Dealers, Inc.'s National Market
System or Small Capitalization System.
(iv) any bona fide pledge of Common Shares to a commercial
bank, savings and loan institution or any other similar lending
institution as security for any indebtedness to such lender, provided
that, prior to any such pledge, the Executives are informed in writing
of such pledge and the pledgee shall deliver to the Company its written
agreement, in form and substance satisfactory to the Company, that upon
any foreclosure such pledgee shall comply with the terms of Section 2.3
of this Agreement; or
(v) to any sale or other disposition of Preferred Shares.
2.5 Cooperation by the Company. The Company will provide reasonable
assistance to any Executive Party or any Purchaser Party seeking to sell its
Shares, provided that the Company shall not be required to provide any
confidential information to any prospective purchaser who has not executed a
confidentiality agreement in form reasonably satisfactory to the Company. Any
reasonable out-of-pocket costs to the Company of providing such assistance shall
be paid pro rata by each Stockholder seeking to sell its Shares. The Company
will also cooperate with any Executive Party or any Purchaser Party in having
all stop transfer instructions or notations and restrictive legends lifted in
connection with the sale (other than to an affiliate of the Company) of Shares
pursuant to Rule 144 promulgated under the Securities Act; provided that in such
a case the selling Stockholder shall be required to provide the Company with the
opinion provided for in Section 2.2(b).
2.6 Improper Transfer. Any attempt to Transfer or otherwise encumber
any Shares in violation of this Agreement shall be null and void and neither the
Company nor any transfer agent of such Shares shall give any effect to such
attempted Transfer or encumbrance in its stock records.
2.7 Involuntary Transfer. In the case of any Transfer of title or
beneficial ownership of Shares upon default, foreclosure, forfeit, court order,
or otherwise than by a voluntary decision on the part of a Stockholder (an
"Involuntary Transfer"), such Stockholder (or his legal
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representatives) shall promptly (but in no event later than two (2) Business
Days after such Involuntary Transfer) furnish written notice to the Company
indicating that the Involuntary Transfer has occurred, specifying the name of
the Person to whom such Shares have been transferred, giving a detailed
description of the circumstances giving rise to, and stating the legal basis
for, the Involuntary Transfer.
2.8 First Option Rights.
2.8.1 First Option. (a) No Executive Party shall Transfer any
Shares except as specifically permitted by this Section 2.8. If at any time any
Executive Party (a "Selling Executive Party") desires to sell or otherwise
dispose of for value all or any part of the Shares held by such Selling
Executive Party, and such Selling Executive Party shall have received an
irrevocable and unconditional bona fide arm's length written offer (the "Bona
Fide Offer") for the purchase of such Shares for consideration consisting solely
of cash from any third party unaffiliated with such Selling Executive Party (an
"Outside Party"), the Selling Executive Party shall provide written notice (the
"Sale Notice") to each of (i) Purchaser (together with its assigns, the
"Purchaser Buyer") and (ii) the Company (each of Purchaser Buyer and the Company
a "Potential Buyer") setting forth such desire to sell or otherwise dispose of
for value such Shares, which Sale Notice shall be accompanied by a photocopy of
the original Bona Fide Offer and shall set forth at least the name and address
of the Outside Party and the price and terms of such Bona Fide Offer. Upon the
giving of such Sale Notice, each Potential Buyer shall, subject to the
priorities set forth below, have the option (which option (the "Purchase
Option"), in the case of Purchaser only, shall be assignable at Purchaser's sole
discretion) to purchase all, but not less than all, of such Shares specified in
the Sale Notice, on the same terms and conditions, including but not limited to
the offer price for the Shares, of the Bona Fide Offer. Each Potential Buyer
shall have thirty (30) days from receipt of the Sale Notice to provide written
notice (the "Acceptance Notice") to such Selling Executive Party of its desire
to exercise such Purchase Option. If more than one Potential Buyer shall deliver
an Acceptance Notice within such thirty (30) day period, the priority as among
the Potential Buyers to match the Bona Fide Offer and purchase such Shares shall
be, to the extent such Potential Buyers have delivered Acceptance Notices,
first, the Purchaser Buyer and, second, the Company.
If a Potential Buyer or Potential Buyers, as applicable,
elects to purchase, in the aggregate, all of the Shares covered by the Bona Fide
Offer on the terms and conditions set forth in the Sale Notice, the Potential
Buyer(s) entitled to purchase such Shares (the "Chosen Buyer(s)") shall be
determined in accordance with the priorities set forth above and such Chosen
Buyer(s) shall be obligated to purchase, and such Selling Executive Party shall
be obligated to sell, such Shares at the price and terms specified in the Sale
Notice. The closing of the purchase by the Chosen Buyer(s) shall be held on a
Business Day within sixty days (60) days after the giving of the relevant
Acceptance Notice, at the principal offices of the Chosen Buyer(s), or at such
other time and place as may be mutually agreed to by the Chosen Buyer(s) and the
Selling Executive Party.
If no Acceptance Notice(s) is (are) delivered within the
periods specified above by one or more Potential Buyers, as applicable, with
respect to all (but not less than all) of the Shares included in the Sale
Notice, the Selling Executive Party shall, upon compliance with the
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provisions of Section 2.3, have the right to consummate the sale of all (but not
less than all) of the Shares covered by the Sale Notice to the Outside Party but
only at the price and upon terms and conditions no less favorable to the Selling
Executive Party than those contained in the Sale Notice (provided that the
purchase price must be payable solely in cash) and only if such sale occurs on a
date within sixty (60) days of the date of the Sale Notice; provided, however,
that in the event the Selling Executive Party has not so transferred all (but
not less than all) of such Shares to the Outside Party within such ninety-day
period, then such Shares thereafter shall continue to be subject to all of the
restrictions contained in this Agreement.
2.8.2 No Waiver. Any election in any instance by any Potential
Buyer not to exercise its option rights under this Section 2.8 shall not
constitute a waiver of such rights with respect to any other proposed Transfer
of Shares.
2.8.3 Exempt Transfers. The provisions of this Section 2.8
shall not apply:
(i) to any Transfer of Shares to Levine, Rutta, the spouse of
either of them, any direct lineal descendant or ancestor of either of
them or any trust solely for the benefit of any or all of the
foregoing, provided that each of the following conditions shall be
satisfied:
(A) after giving effect to such Transfer,
each of Levine and Rutta shall be the sole beneficial
and record owner of a number of Common Shares
representing not less than five percent (5%) of the
then issued and outstanding Common Shares;
(B) after giving effect to such Transfer,
sole voting power with respect to such Transferred
Shares shall be held by Levine and/or Rutta; and
(C) the Transferee of such Transferred
Shares shall have executed and delivered to the
Company, as a condition precedent to such Transfer,
an instrument or instruments in form and substance
satisfactory to the Company confirming that the
Transferee agrees to be bound by the terms of this
Agreement and accepts the rights and obligations set
forth in this Agreement; or
(ii) to any sale of Shares by an Executive Party to
the public pursuant to an effective registration statement under the
Securities Act.
ARTICLE 3. Drag-Along Sales.
3.1 Right of Purchaser to Require Sale. Notwithstanding any other
provision of this Agreement, if some or all Purchaser Parties (the "Drag-Along
Sellers") agree to sell or otherwise dispose of (or cause to be sold or
otherwise disposed of) for value all or substantially all of the Common Shares
and/or Preferred Shares then owned by the Purchaser Parties, in one in one or
more related transactions (a "Drag-Along Sale"), to a third Person or third
Persons who are not affiliates of any of the Drag-Along Sellers (a "Third
Party"), then, upon the demand of
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a majority of the Drag-Along Sellers, the Executive Parties (the "Required
Sellers") shall be required to sell to such Third Party all, but not less than
all of the shares of Common Stock and/or Preferred Stock, as applicable, if any,
then held by them, at the same price and on the same terms and conditions as the
Drag-Along Sellers have agreed to with such Third Party.
3.2 Drag-Along Notice. Prior to making any Drag-Along Sale, the
Drag-Along Sellers shall promptly provide each Required Seller with written
notice (the "Drag-Along Notice") not more than thirty (30) or less than fifteen
(15) days prior to the proposed date of the Drag-Along Sale (the "Drag-Along
Sale Date"). The Drag-Along Notice shall set forth: (i) the name and address of
the Third Party; (ii) the name and address of each member of the Drag-Along
Sellers; (iii) the proposed amount and form of consideration to be paid per
Common Share and/or Preferred Share and the terms and conditions of payment
offered by the Third Party; (iv) the number of Common Shares and Preferred
Shares held of record as of the close of business on the date of the Drag-Along
Sale Notice (the "Drag-Along Notice Date") by the Required Seller to whom the
notice is sent; (v) the aggregate number of Common Shares and Preferred Shares
held of record as of the Drag-Along Notice Date by the Drag-Along Sellers; (vi)
confirmation that the Drag-Along Sellers are selling all or substantially all of
the aggregate number of Common Shares and/or Preferred Shares then held by them
to the Third Party; (vii) the Drag-Along Sale Date; and (viii) confirmation that
the proposed Third Party has agreed to purchase the Required Sellers' shares of
Common Stock and/or Preferred Stock, as applicable, in accordance with the terms
hereof.
3.3 Delivery of Certificates. On the Drag-Along Sale Date, each
Required Seller shall deliver a certificate or certificates for all of its
shares of Common Stock, and/or Preferred Stock, as applicable, duly endorsed for
transfer with signatures guaranteed, to such Third Party in the manner and at
the address indicated in the Drag-Along Notice against delivery of the purchase
price for such Required Seller's shares of Common Stock.
3.4 Consideration. The provisions of this Section 3 shall apply
regardless of the form of consideration received in the Drag-Along Sale.
3.5 Cooperation. The Executive Parties shall cooperate in good faith
with the Drag-Along Sellers in connection with the consummation of the
Drag-Along Sale.
ARTICLE 4. Registration Rights.
4.1 Definitions.
"Commission" means the Securities and Exchange Commission or
any other federal agency at the time administering the Securities Act.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, or any similar federal statute, and the rules and regulations of the
Commission (as defined in Section 4.1) thereunder.
"Executive Holder" means a Holder of Registrable Executive
Shares, including a Transferee of Registrable Executive Shares if (i) the
Transfer to such Transferee is not prohibited
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by this Agreement, and (ii) the Shares Transferred to such Transferee continue
to be Registrable Shares.
"Holder" means a Holder of Registrable Shares. A Person is
deemed to be a Holder of Registrable Shares whenever such Person owns
Registrable Shares; provided, however, that unless the Company is otherwise
notified by the Holder of Registrable Shares, the Holder of Registrable Shares
shall be deemed to be that Person set forth on the books and records of the
Company or the registrar for such Registrable Shares.
"Person" means any individual, corporation, partnership, joint
venture, association, joint-stock company, trust, unincorporated organization or
government or other agency or political subdivision thereof.
"Purchaser Holder" means a Holder of Registrable Purchaser
Shares, including a Transferee of Registrable Purchaser Shares if (i) the
Transfer to such Transferee is not prohibited by this Agreement, and (ii) the
Shares Transferred to such Transferee continue to be Registrable Shares.
"Registrable Purchaser Shares" means the shares of Common
Stock issued pursuant to the Purchase Agreement to Purchaser or subsequently
acquired by any Purchaser Party (and any securities issued or issuable with
respect to such Common Stock by way of stock dividends or stock splits or in
connection with a combination of shares, recapitalization, merger,
consolidation, or other reorganization or otherwise); and "Registrable Executive
Shares" means the shares of Common Stock owned by either Executive on the date
hereof immediately following the Closing under the Purchase Agreement or
subsequently acquired by any Executive Party (and any securities issued or
issuable with respect to such Common Stock by way of stock dividends or stock
splits or in connection with a combination of shares, recapitalization, merger,
consolidation, or other reorganization or otherwise) (collectively, together
with the Registrable Purchaser Shares, the "Registrable Shares"); provided,
however, that any such shares will cease to be Registrable Shares when (i) a
registration statement covering such Registrable Shares has been declared
effective and such Registrable Shares have been disposed of pursuant to such
effective registration statement, or (ii) such Registrable Shares are
distributed to the public pursuant to Rule 144.
"Selling Holder" means, with respect to any registration
statement, any Holder whose Registrable Shares are included therein.
4.2 Demand Registrations.
4.2.1 Number of Registrations.
(a) Purchaser Holders' Demand Rights. Commencing on the
earlier of (i) the date that is three (3) months after a Public Offering Event,
and (ii) the second anniversary of the date of this Agreement, Purchaser Holders
holding an aggregate number of Registrable Purchaser Shares at least equal to
twenty percent (20%) of the number of Registrable Purchaser Shares on the date
hereof shall be entitled to make written request (a "Demand") of the Company to
register all or part of their Registrable Purchaser Shares under the Securities
Act
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(including, but not limited to, a shelf registration under Rule 415 promulgated
under the Securities Act) (a "Demand Registration"); provided, however, that not
more than an aggregate of two (2) Demand Registrations with respect to the
Registrable Purchaser Shares may be made pursuant to the rights granted by this
Section 4.2.1(a); and provided, further that if one or more of the Purchaser
Parties have not registered all or part of their Registrable Shares through the
first Demand Registration, then one or more Purchaser Holders holding an
aggregate number of Registrable Purchaser Shares at least equal to fifteen
percent (15%) of the Registrable Purchaser Shares on the date hereof shall be
entitled to make the second Demand; and provided, further that the first Demand
Registration must cover an aggregate number of Registrable Purchaser Shares at
least equal to twenty-five percent (25%) of the number of Registrable Purchaser
Shares on the date hereof and the second Demand Registration must cover an
aggregate number of Registrable Purchaser Shares at least equal to twenty
percent (20%) of the number of Registrable Purchaser Shares on the date hereof.
(b) Selection of Underwriter. Any Demand Registration
hereunder shall be on any appropriate form under the Securities Act permitting
registration of such Registrable Shares for resale by the Purchaser Holders in
the manner or manners designated by them (including, without limitation,
pursuant to one or more underwritten offerings). The determination of whether
the offering will involve an underwritten offering, and the selection of
investment bankers and managers, if any, and counsel, shall be made by Holders
of a majority of the Registrable Purchaser Shares to be included in such
registration, provided, however, that the selection of investment bankers and
managers, if any, and counsel so selected shall be reasonably satisfactory to
the Company. If requested, the Company shall enter into an underwriting or
purchase agreement with an investment banking firm in connection with a Demand
Registration, containing representations, warranties, indemnities and agreements
then customarily included in underwriting or purchase agreements by such
underwriter with respect to secondary distributions of securities.
4.2.2 Registration. The Company shall file a registration
statement with respect to each Demand Registration and use its best efforts to
cause the same to be declared effective as promptly as practicable following
such Demand, but not later than one hundred twenty (120) days thereafter. Unless
all of the Purchaser Registrable Shares covered by the registration statement
have earlier been sold or withdrawn from sale, the Company shall keep any such
Registration Statement effective for a period of at least one hundred eighty
(180) days after such registration statement is first declared effective plus a
period equal to (x) any period during which the Selling Holders are prohibited
from making sales because of any stop order, injunction or other order or
requirement of the Commission or any other governmental agency or court plus (y)
any Demand Suspension Period (as defined below) plus (z) any holdback period
pursuant to Section 4.6 that occurs while the registration statement is
effective (the "Demand Period") and a registration will not count as a Demand
Registration unless it is declared effective by the Commission and remains
effective until the earlier of such time as all of the Purchaser Registrable
Shares included in such registration have been sold or disposed of or withdrawn
from sale by the Selling Holders or the expiration of the Demand Period or, if
the registration remains effective for a shorter period, the Selling Holders
have sold at least eighty percent (80%) of their Purchaser Registrable Shares
included in such Demand Registration. In addition, a request for registration
shall not be deemed to constitute a Demand Registration if: (i) the conditions
to
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closing specified in the purchase agreement or underwriting agreement entered
into in connection with such Demand Registration are not satisfied other than by
reason of some act or omission by the Purchaser Holders that are Selling
Holders; (ii) the Company voluntarily takes any action that would result in the
Selling Holders not being able to sell such Registrable Shares covered thereby
during the Demand Period; (iii) after it has become effective, such Demand
Registration becomes subject to any stop order, injunction or other order or
requirement of the Commission or other governmental agency or court and such
order, injunction or requirement is not promptly withdrawn or lifted, and such
Demand Registration has not otherwise remained effective for the Demand Period
(including effective periods both before and after the order, injunction or
requirement is made or imposed); or (iv) such Demand Registration does not
involve an underwritten offering and the Purchaser Holders that are Selling
Holders determine not to proceed following any delay imposed hereunder by the
Company; provided, however, that prior to such a delay under this clause (iv),
the Purchaser Holders that are Selling Holders have not sold more than eighty
percent (80%) of the Purchaser Registrable Shares included in such Demand
Registration. Notwithstanding the foregoing, the Company may, at any time, delay
the filing or delay or suspend the effectiveness of the Demand Registration or,
without suspending such effectiveness, instruct the Selling Holders not to sell
any securities included in the Demand Registration, if the Company shall have
determined in good faith (as evidenced by a Board resolution delivered to the
Selling Holders) that proceeding with the Demand Registration at such time may
have a material adverse effect on the Company or the Company shall have
determined upon the advice of counsel that it would be required to disclose any
actions taken by the Company in good faith and for valid business reasons,
including without limitation, the acquisition or divestiture of assets, which
disclosure may have a material adverse effect on the Company or on such actions
(a "Demand Suspension Period"), by providing the Selling Holders with written
notice of such Demand Suspension Period and the reasons therefor. The Company
shall use its best efforts to provide such notice at least ten (10) days prior
to the commencement of such a Demand Suspension Period; provided, however, that
in any event the Company shall provide such notice no later than the
commencement of such Demand Suspension Period; and provided, further, that in no
event shall the Demand Suspension Periods exceed one hundred twenty (120) days
in any three hundred sixty (360) day period.
The Company further agrees to supplement or amend such
registration statement with respect to such Demand Registration, as required by
the registration form utilized by the Company or by the instructions applicable
to such registration form or by the Securities Act for the registration of
securities or as reasonably requested (which request shall result in the filing
of a supplement or amendment subject to approval thereof by the Company, which
approval shall not be unreasonably withheld) by any Selling Holder or any
managing underwriter of Registrable Shares to which such Demand Registration
relates, and the Company agrees to furnish to the Selling Holders (and any
managing underwriter) copies, in substantially the form proposed to be used
and/or filed, of any such supplement or amendment prior to its being used and/or
filed with the Commission. The Company shall amend or supplement the
registration statement with respect to such Demand Registration no less
frequently than every forty five (45) days to update the list of Selling Holders
pursuant to written requests by such Holders.
4.2.3 Inclusion of Registrable Shares. Any written request for
a Demand shall specify the number of Purchaser Registrable Shares to be
registered and the intended methods of
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disposition thereof. Within ten (10) days after receipt of such Demand, the
Company shall give written notice of such registration request to all Holders of
Purchaser Registrable Shares which have not made the Demand, and the Company
shall include in such registration all Purchaser Registrable Shares with respect
to which the Company has received written requests for inclusion therein within
fifteen (15) days after the date on which such notice is given. Each such
request shall also specify the aggregate number of Purchaser Registrable Shares
to be registered. The Company may also include in such Demand Registration
shares of Common Stock for the account of the Company and any other Persons who
hold shares of Common Stock.
4.2.4 Priority on Demand Registrations. If a Demand
Registration is an underwritten registration and the managing underwriters of
such offering determine that the aggregate number of (i) Purchaser Registrable
Shares of the Selling Holders exercising their rights to participate in the
Demand Registration on a demand basis, pursuant to this Section 4.2; (ii) Shares
of the Company; and (iii) Common Shares of any other Persons entitled to
participate in such Demand Registration, in each case proposed to be included in
such registration statement, exceeds the maximum number of Common Shares that
can reasonably be expected to be sold within a price range acceptable to the
Company and the Purchaser Holders that are the Selling Holders, then the number
of shares to be offered for the account of the Company and for the account of
all such other Persons, other than holders of Purchaser Registrable Shares
participating on a demand basis, participating in such registration shall be
reduced or limited pro rata (and to zero, if necessary) in proportion to the
respective number of Common Shares requested to be registered to the extent
necessary to reduce the total number of Common Shares requested to be included
in such registration statement to the maximum number of Common Shares that can
reasonably be expected to be included therein and still satisfy such price
requirement. If the foregoing market "cutback" does not reduce the aggregate
number of Common Shares proposed to be included in the registration statement to
the maximum number of Common Shares that can reasonably be expected to be sold
within the price range acceptable to the Company and the Purchaser Holders that
are Selling Holders, the Company shall include in such registration, Purchaser
Registrable Shares of such Selling Holders pro rata among all such Selling
Holders on the basis of the number of Purchaser Registrable Shares of the
Company requested to be included by all such Selling Holders. Any request for
registration with respect to which such a market "cutback" with respect to such
Selling Holders occurs shall be deemed to constitute a Demand Registration for
all purposes of this Article 4; provided, however, that if any such market
"cutback" occurs with respect to a Demand Registration and all such Selling
Holders are not able to sell at least eighty percent (80%) of the Registrable
Shares which such Holders proposed to sell pursuant to such Demand Registration,
then such request for registration will not count against the number of Demands
to which the Purchaser Holders are entitled pursuant to Section 4.2 hereof.
4.2.5 Compliance. Notwithstanding any other provisions hereof,
the Company shall use its best efforts to ensure that (i) any registration
statement filed in connection with a Demand Registration, and any amendment
thereto, and any prospectus forming a part thereof, and any supplement thereto,
complies in all material respects with the Securities Act and the rules and
regulations thereunder, (ii) any registration statement filed in connection with
a Demand Registration, 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
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<PAGE>
or necessary to make the statements therein not misleading and (iii) any
prospectus forming part of any registration statement filed in connection with a
Demand Registration, and any supplement to such prospectus, does not include an
untrue statement of a material fact or omit to state a material fact necessary
in order to make the statements, in the light of the circumstances under which
they are made, not misleading.
4.3 Piggyback Registration.
4.3.1 Right to Include Registrable Shares. If the Company at
any time proposes to register any of its equity securities under the Securities
Act, whether or not for sale for its own account, on a form and in a manner
which would permit registration of Registrable Shares for a public offering
under the Act (other than on a registration statement (i) on Form S-4 or Form
S-8 or any successor form thereto or (ii) filed in connection with an exchange
offer), the Company shall give written notice of the proposed registration to
each Holder at least fifteen (15) days prior to the filing thereof, and each
Holder shall have the right to request that all or any part of its Registrable
Shares be included in such registration by giving written notice to the Company
within fifteen (15) days after the giving of such notice by the Company. If the
registration statement is to cover an underwritten offering, such Registrable
Shares shall be included in the underwriting on the same terms and conditions as
the securities otherwise being sold through the underwriters. Notwithstanding
the foregoing, an Executive Holder may not request the registration of its
Registrable Executive Shares if such Registrable Executive Shares may, at the
time (or within thirty days thereafter), be distributed to the public pursuant
to paragraph (k), as such paragraph may be amended from time to time, or any
other similar provision hereafter adopted by the SEC, of Rule 144.
4.3.2 Priority on Piggyback Registrations.
(a) Company Registrations. If the registration is an
underwritten primary registration on behalf of the Company and the managing
underwriter(s) of such offering determine in their good faith judgment that the
aggregate number of securities, including Registrable Shares, of the Company
which all Holders and all other security holders of the Company, pursuant to
contractual rights to participate in such registration (the "Other Holders"),
propose to include in such registration statement exceeds the maximum number of
securities, including Registrable Shares, that can reasonably be expected to be
sold in such offering without materially and adversely affecting the
marketability of the offering or the selling price to be obtained, the Company
will include in such registration, first, the shares of Common Stock or other
securities which the Company proposes to sell and, second, the Registrable
Shares of such Selling Holders and other securities to be sold for the account
of Other Holders, pro rata among all such Selling Holders and Other Holders,
taken together, on the basis of the number of Registrable Shares or other
securities of the Company requested to be included by all Selling Holders and
Other Holders who have requested that securities owned by them be so included
(it being agreed and understood, however, that such managing underwriter(s)
shall have the right to eliminate entirely the participation in such
registration of all Selling Holders and Other Holders).
(b) Selling Holders' Registration. If the registration is an
underwritten secondary registration on behalf of Selling Holders that are
Purchaser Holders pursuant to
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Section 4.2 hereof, and the managing underwriter(s) determine that the aggregate
number of securities which all Selling Holders, the Company and all Other
Holders propose to include in such registration exceeds the maximum number of
securities that can reasonably be expected to be sold within the price range
acceptable to the Company and the Purchaser Holders that are Selling Holders,
the Company will include in such registration, first, the Purchaser Registrable
Shares of the Selling Holders participating in such registration on a demand
basis in accordance with Section 4.2.4 hereof, and, second, any securities to be
sold for the account of the Company, securities to be sold for the account of
the Selling Holders participating in such offering on a piggyback basis and any
securities to be sold for the account of the Other Holders electing to include
securities in such registration, pro rata among the Company, all such Selling
Holders and all such Other Holders, taken together, on the basis of the number
of Shares or other securities to be sold by the Company in the absence of such
pro ration, the number of Registrable Shares or other securities requested to be
included by all such Selling Holders and the number of Shares or other
securities requested to be included by all such Other Holders (it being agreed
and understood, however, that such managing underwriter(s) shall have the right
to eliminate entirely the participation therein of the Company and of all such
Selling Holders and Other Holders).
(c) Other Holders' Registration. If the registration is an
underwritten secondary registration on behalf of any of the Other Holders
pursuant to demand registration rights and the managing underwriters determine
that the aggregate number of securities which all Selling Holders, the Company
and all Other Holders propose to include in such registration exceeds the
maximum number of securities that should be included therein, the Company will
include in such registration, first, the securities to be sold for the account
of the Other Holders demanding registration (but only to the extent such Other
Holders are entitled to demand inclusion thereof pursuant to demand registration
rights), second, any securities to be sold for the account of the Company, and,
third, the Registrable Shares of such Selling Holders and other securities to be
sold for the account of the Other Holders electing to include (but not being
entitled pursuant to demand registration rights to demand inclusion of)
securities in such registration, pro rata among all such Selling Holders and
Other Holders, taken together, on the basis of the number of Registrable Shares
or other securities of the Company requested to be included by all Selling
Holders and such Other Holders who have requested that securities owned by them
be included (it being agreed and understood, however, that such managing
underwriter(s) shall have the right to eliminate entirely the participation
therein of all such Selling Holders and Other Holders with respect to such
securities since they are not entitled to demand inclusion of such securities
pursuant to demand registration rights).
(d) Underwriters. Registrable Shares proposed to be registered
and sold for the account of any Selling Holder pursuant to a piggyback
registration shall be sold to prospective underwriters selected or approved by
the Company, and on the terms and subject to the conditions of one or more
underwriting agreements negotiated between the Company, the Purchaser Holders,
if any, and/or Other Holders demanding registration and such prospective
underwriters. The Selling Holders shall be permitted to withdraw all or a part
of the Registrable Shares held by such Selling Holders which were to be included
in such piggyback registration at any time prior to the effective date of such
registration. The Company may withdraw any registration statement for such
registration at any time before it becomes effective, or postpone the offering
of securities, without obligation or liability to any Selling Holder
participating on a piggy-back basis.
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4.4 Registration Statement. In connection with any registration of
Registrable Shares under the Securities Act pursuant to this Agreement, the
Company will furnish each Selling Holder and each underwriter, if any, with a
copy of the registration statement and all amendments thereto and will supply
each such Selling Holder with copies of any prospectus included therein
(including a preliminary prospectus and all amendments and supplements thereto),
in each case including all exhibits, and such other documents as may be
reasonably requested, in such quantities as may be reasonably necessary for the
purposes of the proposed sale or distribution covered by such registration (the
Company hereby consenting to the use in accordance with all applicable law of
each such registration statement (or amendment or post-effective amendment
thereto) and each such prospectus (or preliminary prospectus or supplement
thereto) by each such Selling Holder and the underwriters, if any, in connection
with the offering and sale of the Registrable Shares covered by such
registration statement or prospectus). The Company shall not, however, be
required to maintain the registration statement relating to a Demand
Registration and to supply copies of a prospectus for a period beyond the Demand
Period, and, at the end of such period, the Company may deregister any
Registrable Shares covered by such registration statement and not then sold or
distributed. In connection with any such registration of Registrable Shares, the
Company will, at the request of the managing underwriter with respect thereto
(or, if not an underwritten offering, at the request of Selling Holders holding
a majority of the Registrable Shares to be included in the registration) use its
best efforts to register or qualify such Registrable Shares for sale under the
securities laws of such states as is reasonably requested to permit the
distribution of such Registrable Shares and to use its reasonable efforts to
keep each such registration or qualification effective during the period such
registration statement is required to be kept effective and to do such other
acts or things reasonably necessary to enable the disposition in such
jurisdictions of the securities covered by the applicable registration statement
in accordance with applicable "blue sky" securities laws of such jurisdictions;
provided, however, that the Company shall not be required in connection
therewith or as a condition thereof to qualify as a foreign corporation or to
execute a general consent to service of process in any jurisdiction or become
subject to taxation in any jurisdiction.
In connection with any offering of Registrable Shares registered
pursuant to this Agreement, the Company shall (i) furnish each Selling Holder,
at the Company's expense and at least three (3) business days prior to the sale
of any Registrable Shares to the underwriters, with unlegended certificates in a
form eligible for deposit with The Depository Trust Company representing
ownership of the Registrable Shares which are sold pursuant to the registration
statement, in such denominations and registered in such names as the managing
underwriter, if any, or such Selling Holder shall reasonably request, and (ii)
instruct the transfer agent and registrar of the Common Stock to release any
stop transfer orders with respect to the Registrable Shares so sold.
4.5 Registration Procedures. In connection with the Company's
obligations to effect a registration pursuant to Sections 4.2 and 4.3 (but
subject to the last sentence of Section 4.3.2(d) and provided that any time
periods set forth in this Section 4.5 regarding effective periods and the like
shall apply only in the event of a Demand Registration), the Company will as
expeditiously as is reasonably practicable:
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(i) prepare and file with the Commission as soon as
practicable (in the case of a Demand Registration) a registration statement with
respect to such Registrable Shares, on a form available for the sale of the
Registrable Shares by the Holders thereof in accordance with the intended method
or methods of distribution thereof and use its commercially reasonable efforts
to cause each such registration statement to become and remain effective;
provided, however, that before filing a registration statement or prospectus or
any amendments or supplements thereto (including documents that would be
incorporated or deemed to be incorporated therein by reference) and, whether or
not filed pursuant to Section 4.2 or 4.3, the Company will furnish to the
Holders of the Registrable Shares covered by such registration statement and the
underwriters, if any, and any attorney, accountant or other agent retained by
the Holders of Registrable Shares covered by such registration statement, copies
of all such documents proposed to be filed, which documents will be subject to
the review and comment of such Holders, such counsel and underwriters, if any.
The Company will not file any registration statement or any amendment thereto or
any prospectus or any supplement thereto in connection with a Demand
Registration pursuant to Section 4.2 (including such documents incorporated by
reference and proposed to be filed after the initial filing of the registration
statement) to which the Holders of a majority of the Registrable Shares covered
by such registration statement or the underwriters, if any, shall reasonably and
timely object;
(ii) prepare and file with the Commission such amendments and
post-effective amendments to such registration statement and such supplements to
the prospectus used in connection therewith as may be necessary to keep such
registration statement effective (to the extent otherwise required by this
Agreement) and to comply with the provisions of the Securities Act with respect
to the disposition of all securities covered by such registration statement
until such time as all of such securities have been disposed of in accordance
with the intended methods of disposition by the seller or sellers thereof set
forth in such registration statement or the expiration of the Demand Period (in
the case of a Demand Registration), whichever occurs earlier; provided, however,
that the only remedy for any failure to keep the registration statement so
effective shall be as set forth in Section 4.2.2 and provided, further, that the
Company will have no obligation to a Selling Holder participating on a
"piggyback" basis in a registration statement that has become effective to keep
such registration statement effective for a period beyond 120 days from the
effective date of such registration statement;
(iii) cooperate and assist in any filings required to be made
with the National Association of Securities Dealers, Inc. (the "NASD");
(iv) notify each Selling Holder and the managing underwriter,
if any, promptly (and in any event within three (3) business days): (A) when the
prospectus or any prospectus supplement or post-effective amendment has been
filed, and with respect to the registration statement or any post-effective
amendment, when the same has become effective; (B) of any request by the
Commission or any other federal or state governmental authority for any
amendments or supplements to the registration statement or the prospectus or for
additional information; (C) of the issuance by the Commission of any stop order
suspending the effectiveness of the registration statement or the initiation of
any proceedings for that purpose; (D) if, at any time prior to the closing
contemplated by an underwriting agreement entered into in connection with such
registration statement, that the representations and warranties of the
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Company contained in such agreement cease to be true and correct; (E) of the
receipt by the Company of any notification with respect to the suspension of the
qualification of the Registrable Shares for sale in any jurisdiction or the
initiation or threatening of any proceeding for such purpose; (F) of the
happening of any event which makes any statement made in the registration
statement, the prospectus or any document incorporated or deemed to be
incorporated therein by reference untrue or which requires the making of any
changes in the registration statement, the prospectus or any document
incorporated therein by reference in order to make the statements therein not
misleading; and (G) of the Company's reasonable determination that a
post-effective amendment to a registration statement would be required;
(v) make commercially reasonable efforts to prevent the
issuance of any order suspending the effectiveness of the registration statement
or of any order preventing or suspending the use of a prospectus or suspending
the qualification of any of the Registrable Shares included therein for sale in
any jurisdiction (subject to the proviso at the end of the penultimate paragraph
of Section 4.4), and, in the event of the issuance of any stop order suspending
the effectiveness of the registration statement, or of any order suspending or
preventing the use of any related prospectus or suspending the qualification of
any Common Shares included in such registration statement for sale in any
jurisdiction (subject to the proviso at the end of the penultimate paragraph of
Section 4.4), the Company will use its best efforts to promptly obtain the
withdrawal of any such order;
(vi) furnish to each Selling Holder and the managing
underwriters, if any, without any additional charge, one signed copy of the
registration statement and any post-effective amendment thereto, including
financial statements and schedules, all documents incorporated therein by
reference and all exhibits (including those incorporated by reference);
(vii) as promptly as reasonably practicable, if required,
based on the advice of the Company's counsel, or upon the occurrence of any
event contemplated by Section 4.5(iv)(F), prepare and file a supplement or
post-effective amendment to the registration statement, the related prospectus
or any document incorporated therein by reference or file any other required
document so that, as thereafter delivered to the purchasers of the Registrable
Shares, the prospectus will not contain an untrue statement of a material fact
or omit to state any material fact necessary to make the statements therein not
misleading;
(viii) cause all Registrable Shares covered by the
registration statement to be listed on each securities exchange on which
identical securities issued by the Company are then listed if requested by the
Selling Holders holding a majority in number of the Registrable Shares covered
by the Registration Statement or the managing underwriters, if any;
(ix) provide and cause to be maintained a transfer agent and
registrar for all Registrable Shares covered by such registration statement from
and after a date not later than the effective date of such registration
statement;
(x) use its best efforts to provide a CUSIP number for the
Registrable Shares, not later than the effective date of the registration
statement;
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(xi) use its best efforts to (A) obtain opinions of counsel to
the Company (which counsel and opinions (in form, scope and substance) shall be
reasonably satisfactory to the managing underwriters, if any, and not objected
to by the Holders of a majority of the Registrable Shares being sold), and
updates thereof addressed to the Selling Holders, covering the matters
customarily covered in opinions requested in underwritten offerings and such
other matters as may be reasonably requested by the underwriters, if any; and
(B) obtain "cold comfort" letters and updates thereof (which letters and updates
(in form, scope and substance) shall be reasonably satisfactory to the managing
underwriters, if any, and counsel to the Holders of a majority of the
Registrable Shares being sold) from the Company's independent certified public
accountants addressed to such Selling Holders (and, if necessary, any other
independent certified public accountants of any subsidiary of the Company or of
any business acquired by the Company for which financial statements and
financial data are, or are required to be, included in the registration
statement), such letters to be in customary form and covering matters of the
type customarily covered in "cold comfort" letters by accountants in connection
with underwritten offerings and such other matters as the underwriters, if any,
or the Holders of a majority of the Registrable Shares being sold, reasonably
request. The above shall be done at each closing under such underwriting or
similar agreement or as and to the extent required thereunder or, if not an
underwritten offering, as otherwise reasonably requested by the Holders of a
majority of the Registrable Shares being sold;
(xii) make available for inspection by a representative of the
Selling Holders and any attorneys or accountants retained by such Holders (and,
to the extent reasonably requested, furnish copies), in connection with the
preparation of a registration statement pursuant to this Agreement, all
financial and other records and pertinent corporate documents and properties of
the Company, and cause the Company's officers, directors and employees to supply
all information reasonably requested by any such representative(s), attorney(s)
or accountant(s) in connection with such registration; provided, however, that
any records, information or documents that are designated by the Company in
writing as confidential shall be kept confidential by such persons unless
disclosure of such records, information or documents is required by court or
administrative order or under applicable law; and provided, further, that
appropriate arrangements are made, to the extent required by applicable
antitrust law, to limit access to such information of the Company to
representatives of the Holders who are not officers or employees of the Selling
Holders; and provided, further that, without limiting the foregoing, no such
information shall be used by any such Person in connection with any market
transactions in securities of the Company or its subsidiaries in violation of
law;
(xiii) enter into such agreements reasonably requested
(including, as applicable, an underwriting agreement in form, scope and
substance as is customary in underwritten secondary offerings and is reasonably
satisfactory to the Company) and take all such other customary and reasonable
actions in connection therewith (including those requested by the managing
underwriters) in order to expedite or facilitate the disposition of the
Registrable Shares, and in such connection, whether or not an underwriting
agreement is entered into and whether or not the registration is an underwritten
registration:
(a) make such representations and warranties to the Holders of
such Registrable Shares included in the registration statement and the
underwriters, if any,
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with respect to the business of the Company and the registration
statement, prospectus and documents, if any, incorporated or deemed to
be incorporated by reference therein, in each case, in form, substance
and scope as are customarily made by issuers to underwriters in
underwritten offerings and confirm the same, if and when reasonably
requested; and
(b) deliver such documents and certificates as may be
reasonably requested by the Holders of a majority of the Registrable
Shares being included in the registration statement and managing
underwriters, if any, to evidence compliance with clause (a) above and
with any provisions contained in the underwriting agreement or other
similar agreement entered into by the Company;
The above shall be done at each closing under such underwriting or similar
agreement or as and, if not an underwritten offering, to the extent otherwise
reasonably requested by the Holders of a majority of the Registrable Shares
being sold pursuant to the registration statement;
(xiv) (a) if so required by the managing underwriter in an
underwritten offering of Registrable Shares covered by a registration statement
filed pursuant to Section 4.2 or 4.3 hereof, not publicly or privately sell,
make any short sale of, loan, grant any option, effect any public sale or
distribution of or otherwise dispose of its equity securities or securities
convertible into or exchangeable or exercisable for any of such securities
during the ten (10) days prior to and the ninety (90) days after any
underwritten registration pursuant hereto has become effective, except as part
of such underwritten registration and except pursuant to any exchange offer or
registrations on Form S-4 or S-8 or any successor or similar forms thereto,
except that the Company may make grants of options under its stock option plans
and may issue securities issuable upon the exercise or conversion of outstanding
convertible securities, stock options and other options, warrants and rights of
the Company and (b) if requested, use reasonable efforts to cause each holder of
ten percent (10%) or more of the securities of the same class as the securities
included in any underwritten registration pursuant to Section 4.2 hereof, or any
securities convertible into or exchangeable or exercisable for such securities,
in each case purchased from the Company at any time after the date of this
Agreement (other than in a registered public offering) to agree not to effect
any public or private sale or distribution or otherwise dispose (including sales
pursuant to Rule 144 promulgated under the Act) of any such securities during
the ten (10) days prior to and the ninety (90) days after any underwritten
registration pursuant hereto has become effective (except as part of such
underwritten registration, if otherwise permitted), unless the underwriters
managing the registered public offering otherwise agree;
(xv) if requested, furnish each Selling Holder with a copy (or
a reasonable number of copies, as requested) of the registration statement
(together with the Exhibits thereto) and each amendment thereto prior to the
filing thereof with the Commission;
(xvi) if requested by the managing underwriters, if any, or a
Holder of Registrable Shares being sold, promptly incorporate in a prospectus,
supplement or post-effective amendment such information as the managing
underwriters, if any, and the Holders of the Registrable Shares being sold
reasonably request to be included therein relating to the sale of
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the Registrable Shares, including, without limitation, information with respect
to the number of Registrable Shares being sold to underwriters, the purchase
price being paid therefor by such underwriters and with respect to any other
terms of the underwritten offering of the Registrable Shares to be sold in such
offering; and make all required filings of such prospectus, supplement or
post-effective amendment promptly following notification of the matters to be
incorporated in such supplement or post-effective amendment;
(xvii) upon the occurrence of any event that would cause a
shelf registration statement (A) to contain a material misstatement or omission
or (B) to be not effective and usable for resale of Registrable Shares during
the Demand Period, the Company shall promptly file an amendment to such shelf
registration statement, in the case of clause (A), correcting any such
misstatement or omission and, in the case of either clause (A) or (B), use its
commercially reasonable efforts to cause such amendment to be declared effective
and such shelf registration statement to become usable as soon as reasonably
practicable thereafter;
(xviii) otherwise use its best efforts to (x) comply with all
applicable rules and regulations of the Commission and to take all other steps
reasonably necessary to effect the registration of the Registrable Shares
covered by the registration statement contemplated hereby, and (y) make
available to its securityholders an earnings statement which satisfies the
provisions of Section 11(a) of the Securities Act and Rule 158 thereunder (or
any similar rule promulgated under the Act) no later than forty-five (45) days
after the end of any twelve-month (12) period (or ninety (90) days after the end
of any twelve-month (12) period if such period is a fiscal year) (or in each
case within such extended period of time as may be permitted by the Commission
for filing the applicable report with the Commission) (i) commencing at the end
of any fiscal quarter in which Registrable Shares are sold to underwriters in a
firm commitment or best efforts underwritten offering and (ii) if not sold to
underwriters in such an offering, commencing on the first day of the first
fiscal quarter of the Company after the effective date of a Registration
Statement, which statements shall cover said twelve-month (12) periods; and
(xix) in connection with any underwritten offering, cooperate
with all marketing efforts reasonably requested by the managing underwriter or
managing underwriters in connection with the sale of the Registrable Shares,
including, without limitation, participation in a reasonable number of road-show
presentations (in major U.S. financial cities) and other marketing activity by
executives and other employees of the Company requested by such underwriter or
underwriters provided that the scheduling of the road-show presentations shall
be set in consultation with the Company and will not require the Company's
involvement at any time or place to which the Company has a reasonable
objection.
4.6 Holdback Agreements.
Restrictions on Public Sale by Holders of Registrable Shares.
Each Holder of Registrable Shares (whether or not such Registrable Shares are
covered by a Registration Statement filed pursuant to Section 4.2 or 4.3 hereof)
agrees, if requested (pursuant to a timely written notice) by the managing
underwriter or underwriters in an underwritten offering, not to effect any
public sale or distribution of any of the Company's securities, including a sale
pursuant to Rule 144 (except as part of such underwritten offering), during the
period beginning
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ten (10) days prior to, and ending ninety (90) days after, the closing date of
the underwritten offering made pursuant to such Registration Statement.
The foregoing provisions shall not apply to any holder of
Registrable Shares if such Holder is prevented by applicable statute or
regulation from entering into any such agreement; provided, however, that any
such Holder shall undertake not to effect any public sale or distribution of the
class of securities covered by such Registration Statement (except as part of
such underwritten offering) during such period unless it has provided sixty (60)
days' prior written notice of such sale or distribution to the managing
underwriter.
4.7 Registration Expenses. Except as otherwise required by state
securities laws or the rules and regulations promulgated thereunder, all
expenses, disbursements and fees incurred by the Company in connection with
carrying out its obligations under this Article 4, including but not limited to,
(i) the reasonable and documented fees and expenses of one counsel for the
Selling Holders (which counsel shall be selected by Holders of a majority of the
Registrable Shares included in the applicable registration), (ii) all
registration, filing fees and expenses (including fees with respect to filings
made with the NASD (including, if applicable, the fees and expenses of any
"qualified independent underwriter" and its counsel, as may be required by the
rules and regulations of the NASD, (iii) fees and expenses of compliance with
securities or blue sky laws (including fees and disbursements of counsel for the
underwriters or Selling Holders in connection with blue sky qualifications of
the Registrable Shares and determinations of their eligibility for investment
under the laws of such jurisdiction as the managing underwriters or Holders of a
majority of the Registrable Shares being sold may designate, subject to the
proviso to the last sentence of the penultimate paragraph of Section 4.4), (iv)
printing expenses (including printing certificates for the Registrable Shares to
be sold and the registration statements and prospectuses), messenger and
delivery expenses, duplication, word processing, and telephone, (v) fees and
disbursements of counsel for the Company, and (vi) fees and disbursements of all
independent certified public accountants of the Company incurred in connection
with such registration (including the expenses of any special audit and "cold
comfort" letters incident to such registration) and fees and disbursements of
underwriters (excluding discounts, commissions or fees of underwriters, selling
brokers, dealer managers or similar securities industry professionals relating
to the distribution of the Registrable Shares) and other Persons retained by the
Company (all such expenses being herein called "Registration Expenses"), will be
borne by the Company regardless of whether a registration statement becomes
effective; provided, however, that the Company will, in any event, pay its
internal expenses (including, without limitation), all salaries and expenses of
its officers and employees performing legal or accounting duties), the expenses
of any annual audit or quarterly review, the fees and expenses of any Person,
including special experts, retained by the Company, the expense of any liability
insurance and the expenses and fees for listing the securities to be registered
on each securities exchange on which similar securities issued by the Company
are then listed or on the NASD automated quotation system; and provided further,
that each Selling Holder shall pay (x) all costs and expenses of counsel (other
than the counsel costs referred to in (i) above), accounting or financing
professionals retained by such Selling Holder, (y) all underwriting discounts,
commissions, fees and expenses and all transfer taxes with respect to the
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Shares sold by such Selling Holder, and (z) all other expenses incurred by such
Selling Holder and incidental to the sale and delivery of the Shares to be sold
by such Holder.
4.8 Conditions to Holder's Rights. It shall be a condition of each
Selling Holder's rights hereunder that:
4.8.1 Cooperation. Such Selling Holder shall cooperate with
the Company by supplying information and executing documents relating to such
Selling Holder or the securities of the Company owned by such Selling Holder in
connection with such registration which are customary for offerings of this type
(including agreeing to sell such Selling Holder's Registrable Shares on the
basis provided in any underwriting arrangements containing customary terms
reasonably satisfactory to such Selling Holder);
4.8.2 Undertakings. Such Selling Holder shall enter into any
undertakings and take such other action relating to the conduct of the proposed
offering which the Company or the underwriters may reasonably request as being
necessary to insure compliance with federal and state securities laws and the
rules or other requirements of the NASD or which the Company or the underwriters
may reasonably request to otherwise effectuate the offering; and
4.8.3 Indemnification. Such Selling Holder shall execute and
deliver an agreement to indemnify to the fullest extent permitted by law and
hold harmless the Company, each of its directors, each of its officers who has
signed the registration statement, any underwriter (as defined in the Securities
Act), and each person, if any, who controls the Company or such underwriter
within the meaning of the Securities Act, against such losses, claims, damages
or liabilities (including reimbursement for legal and other expenses) to which
the Company or any such director, officer, underwriter or controlling person may
become subject under the Securities Act or otherwise, in such manner as is
customary for registrations of the type then proposed, but only with respect to
written information about or pertaining to such Selling Holder furnished by such
Selling Holder for inclusion in the Registration Statement.
4.9 Indemnification.
4.9.1 Indemnification by the Company. In the case of any
offering registered pursuant to this Agreement, the Company agrees to indemnify
to the fullest extent permitted by law and hold each Selling Holder, each
affiliate of such Selling Holder and each director, officer, agent,
representative and employee of such Selling Holder and its affiliates, each
Person who controls each Selling Holder within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act and the directors, officers,
agents or employees of each such controlling person harmless against any and all
losses, claims, damages, liabilities, actions (including reasonable and
documented costs (including, without limitation, costs of preparation and
reasonable attorneys' fees and disbursements) and expenses, including reasonable
expenses of investigation) (collectively "Losses") to which they or any of them
may become subject under the Securities Act or any other statute or common law
or otherwise, insofar as any such Losses shall arise out of, be caused by or
shall be based upon (i) any untrue statement or alleged untrue statement of a
material fact contained in the registration statement relating to the sale of
the Registrable Shares covered thereby, or the omission or alleged omission to
state therein a
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material fact required to be stated therein or necessary to make the statements
therein not misleading, or (ii) any untrue statement or alleged untrue statement
of a material fact contained in any preliminary prospectus (as amended or
supplemented if the Company shall have filed with the Commission any amendment
thereof or supplement thereof), if used prior to the effective date of such
registration statement, or contained in the prospectus (as amended or
supplemented if the Company shall have filed with the Commission any
amendment,thereof or supplement thereof, including the information deemed part
of such registration statement pursuant to Rule 430A promulgated under the
Securities Act), if used within the period during which the Company shall be
required to keep the registration statement to which such prospectus relates
current pursuant to the terms of this Agreement, or the omission or alleged
omission to state therein (if so used) a material fact necessary in order to
make the statements therein, in light of the circumstances under which they were
made, not misleading; provided, however, that the indemnification agreement
contained in this Section 4.9.1 shall not apply to such Losses which shall arise
from the sale of Registrable Shares to any Person if such Losses shall arise out
of, shall be caused by or shall be based upon any such untrue statement or
alleged untrue statement, or any such omission or alleged omission, (i) if such
statement or omission shall have been made in reliance upon and in conformity
with information furnished in writing to the Company by such Selling Holder
specifically for use in connection with the preparation of the registration
statement or any preliminary prospectus or prospectus contained in the
registration statement or any such amendment thereof or supplement thereto; (ii)
if such untrue statement or omission was made in any preliminary prospectus to
the extent that (a) the prospectus corrected such untrue statement or such
omission and (b) the Selling Holder was legally required to and failed to send
or deliver a copy of the prospectus with or prior to the delivery of written
confirmation of the sale by such Selling Holder of Registrable Shares to the
Person asserting the claim from which such Losses arise; or (iii) if any such
Losses arise out of, are caused by or are based upon an untrue statement or
omission in the prospectus, to the extent that (a) such untrue statement or
omission is corrected in an amendment or supplement to the prospectus and (b)
having previously been furnished by or on behalf of the Company with copies of
the prospectus as so amended or supplemented, such Selling Holder was legally
required to and thereafter fails to deliver such prospectus as so amended or
supplemented, prior to or concurrently with the sale of Registrable Shares to
the Person asserting the claim from which such Losses arise. This indemnity
shall be in addition to any other indemnification arrangements to which the
Company may otherwise be a party.
4.9.2 Indemnification by Holders of Registrable Shares. Each
Selling Holder agrees to indemnify to the fullest extent permitted by law and
hold the Company, its directors, officers, agents and employees, each Person 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 or employees
of such controlling persons harmless against any and all Losses arising out of,
caused by or based upon any untrue statement of a material fact contained in any
registration statement, prospectus or form of prospectus, or arising out of,
caused by or based upon any omission of a material fact required to be stated
therein or necessary to make the statements therein (in the case of the
preliminary prospectus and the prospectus, in each case, including amendments or
supplements, in light of the circumstances in which they were made) not
misleading, to the extent, but only to the extent, that such untrue statement or
omission is contained in any information furnished in writing by such Selling
Holder to the Company,
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expressly for use in such registration statement or prospectus; provided,
however, that the obligation to indemnify will be several and not joint and in
no event shall the liability of any Selling Holder hereunder be greater in
amount than the dollar amount of the proceeds (net of the payment of
underwriting discounts and commissions payable by such Selling Holder) received
by any such Selling Holder upon the sale of the Registrable Shares giving rise
to such indemnification obligation. The Company and the Selling Holders shall be
entitled to receive indemnities from underwriters, selling brokers, dealer
managers and similar securities industry professionals participating in the
distribution to the same extent as provided above with respect to information so
furnished in writing by such Persons expressly for use in any prospectus or
registration statement.
4.9.3 Conduct of Indemnification Proceedings. Any Person
entitled to indemnity under this Agreement (an "Indemnified Party") shall give
prompt written notice to the party from which such indemnity is sought (the
"Indemnifying Party") of any claim or of the commencement of any proceeding with
respect to which such Indemnified Party seeks indemnification or contribution
pursuant hereto; provided, however, that the failure so to notify the
Indemnifying Party shall not relieve the indemnifying party from any obligation
or liability except to the extent that the Indemnifying Party has been
prejudiced materially by such failure. The Indemnifying Party shall have the
right, exercisable by giving written notice to an Indemnified Party promptly
after the receipt of written notice from such Indemnified Party of such claim or
proceeding to assume, at the Indemnifying Party's expense, the defense of any
such claim or proceeding, with counsel reasonably satisfactory to such
Indemnified Party; provided, however, that under such circumstances an
Indemnified Party shall have the right to employ separate counsel in any such
claim or proceeding and to participate in the defense thereof, but the fees and
expenses of such counsel shall be at the expense of such Indemnified Party
unless: (1) the Indemnifying Party agrees to pay such fees and expenses; or (2)
the Indemnifying Party fails promptly to assume the defense of such claim or
proceeding or fails to employ counsel reasonably satisfactory to such
Indemnified Party; or (3) the Indemnified Party shall have been advised by
counsel that (i) there may be one or more material defenses available to such
Indemnified Party that are different from or additional to those available to
the Indemnifying Party or its affiliates, or (ii) a conflict of interest likely
exists if such counsel represents such Indemnified Party and such Indemnifying
Party or its affiliate, in which case, if such Indemnified Party notifies the
Indemnifying Party in writing that it elects to employ separate counsel at the
expense of the Indemnifying Party, the Indemnifying Party shall not have the
right to assume the defense thereof, it being understood, however, that the
Indemnifying Party shall not, in connection with any one such claim or
proceeding, or separate but substantially similar or related claims or
proceedings arising out of the same general allegations or circumstances, be
liable for the fees and expenses of more than one separate firm of attorneys
(together with appropriate local counsel which such counsel shall be designated
by the Indemnified Party and be reasonably acceptable to the Indemnifying Party)
at any time for such Indemnified Party, or for fees and expenses that are not
reasonable. Whether or not such defense is assumed by the Indemnifying Party,
such Indemnifying Party will not be subject to any liability for any settlement
made without its consent (which consent shall not be unreasonably withheld). The
Indemnifying Party shall not consent to entry of any judgment or settle or
compromise any pending or threatened claim, action or proceeding, unless it
contains as an unconditional term thereof the giving by the claimant or
plaintiff to the Indemnified Party of a
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release, in form and substance satisfactory to such Indemnified Party, from all
liability in respect of such claim or litigation for which such Indemnified
Party would be entitled to indemnification hereunder.
The Indemnifying Party's liability to any such Indemnified
Party hereunder shall not be extinguished solely because any other Indemnified
Party is not entitled to indemnity hereunder.
4.9.4 Contribution. If the indemnification provided for in
this Section 4.9 is unavailable to an Indemnified Party in respect of any Losses
or is insufficient to hold such Indemnified Party harmless, then, except to the
extent that contribution is not permitted under Section 11(f) of the Securities
Act, each applicable Indemnifying 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, on
the one hand, and such Indemnified Party, on the other hand, in connection with
the actions, statements or omissions that resulted in such Losses as well as any
other relevant equitable considerations appropriate under the circumstances. The
relative fault of such Indemnifying Party, on the one hand, and such Indemnified
Party, on the other hand, shall be determined by reference to, among other
things, whether any action in question, including any untrue statement of a
material fact or omission to state 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
concerning the matter with respect to which the claim was asserted 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
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 4.9.4 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 4.9.4, no Indemnifying
Party that is a Selling Holder shall be required to contribute any amount in
excess of the amount by which the net proceeds received by such Selling Holder
from the sale of Registrable Shares exceeds the amount of any damages that such
Selling Holder has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any Person who was not guilty of such
fraudulent misrepresentation.
The indemnity and contribution agreements contained in this
Section 4.9 are in addition to any liability that the Indemnifying Parties may
have to the Indemnified Parties.
4.9.5 Underwriting Agreement to Govern. At such time as an
underwriting agreement with respect to a particular underwriting is entered
into, the terms of any such underwriting agreement shall govern with respect to
the matters set forth therein to the extent inconsistent with this Section 4.9;
provided, however, that the indemnification provisions of such underwriting
agreement as they relate to Selling Holders are customary for registrations of
the
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type then proposed and provide for indemnification by such Selling Holders only
with respect to written information furnished by such Selling Holders.
4.10 Rule 144. Following a Public Offering Event, the Company shall
file the reports required to be filed by it under the Securities Act and the
Exchange Act and the rules and regulations adopted by the Commission thereunder
and will take such further action as any Holder of Registrable Shares may
reasonably request, all to the extent required from time to time to enable such
Holder to sell Registrable Shares without registration under the Securities Act
within the limitation of the exemptions provided by Rule 144. Upon the request
of any Holder of Registrable Shares, the Company will deliver to such Holder a
written statement as to whether it has complied with such requirements.
ARTICLE 5. Representations and Warranties
5.1 Representations and Warranties of the Company.
The Company represents and warrants to the Stockholders as
follows:
5.1.1 Organization. It is a corporation duly organized and
validly listing under the laws of the State of Delaware;
5.1.2 Authority. It has full corporate power and authority to
execute, deliver and perform this Agreement and to consummate the transactions
contemplated hereby;
5.1.3 Binding Obligation. The execution, delivery and
performance of this Agreement by it and the consummation by it of the
transactions contemplated hereby have been duly and validly authorized by all
necessary corporate action on its part, and this Agreement constitutes its
binding obligation, enforceable against it in accordance with its terms, except
insofar as enforceability may be limited by bankruptcy, insolvency, moratorium
or other laws which may affect creditors' rights and remedies generally and by
principles of equity (regardless of whether enforceability is considered in a
proceeding in equity or at law); and
5.1.4 No Conflict. The execution, delivery and performance of
this Agreement by it and the consummation by it of the transactions contemplated
hereby will not, with or without the giving of notice or the lapse of time, or
both, (i) violate any provision of law, statute, rule or regulation to which it
is subject, (ii) violate any order, judgment or decree applicable to it, or
(iii) conflict with, or result in a breach or default under, any term or
condition of its certificate or articles of incorporation or its by-laws or any
material agreement or other material instrument to which it is a party or by
which it or its property is bound.
5.2 Representations and Warranties of the Stockholders. Each of the
Stockholders represents and warrants to each other and to the Company as
follows:
5.2.1 Organization. If it is an entity, it is a corporation,
limited partnership or other entity duly organized and validly existing under
the laws of its respective state of organization;
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5.2.2 Authority. It has full power and authority to execute,
deliver and perform this Agreement and to consummate the transactions
contemplated hereby;
5.2.3 Binding Obligation. The execution, delivery and
performance of this Agreement by it and the consummation by it of the
transactions contemplated hereby have been duly and validly authorized by all
necessary action on its part, and this Agreement constitutes its binding
obligation, enforceable against it in accordance with its terms, except insofar
as enforceability may be limited by bankruptcy, insolvency, moratorium or other
laws which may affect creditors' rights and remedies generally and by principles
of equity (regardless of whether enforceability is considered in a proceeding in
equity or at law); and
5.2.4 No Conflict. The execution, delivery and performance of
this Agreement by it and the consummation by it of the transactions contemplated
hereby will not, with or without the giving of notice or the lapse of time, or
both, (i) violate any provision of law, statute, rule or regulation to which it
is subject, (ii) violate any order, judgment or decree applicable to it, or
(iii) conflict with, or result in a breach or default under, any term or
condition of its certificate of incorporation, bylaws or equivalent governing
document or any material agreement or other material instrument to which it is a
party or by which it or its property is bound.
ARTICLE 6. Termination of Agreement
Subject to the next succeeding sentence, this Agreement shall terminate
ten (10) years from the date of this Agreement (the "Termination Date"). The
provisions of Article 1 and Article 3 of this Agreement and the provisions of
Sections 2.4 and 2.8 of this Agreement shall terminate on the date of a Public
Offering Event which occurs prior to the Termination Date.
ARTICLE 7. General
7.1 Recapitalization, Exchanges, etc. Affecting the Shares. The
provisions of this Agreement shall apply to the full extent set forth herein
with respect to (a) the Shares and any option, right or warrant to acquire
Shares, and (b) any and all shares of capital stock of the Company or any
successor or assign of the Company (whether by merger, consolidation, sale of
assets or otherwise) which may be issued in respect of, in exchange for, or in
substitution for any Shares, by combination, recapitalization, reclassification,
merger, consolidation or otherwise. In the event of any change in the
capitalization of the Company, as a result of any stock split, stock dividend or
stock combination, the provisions of this Agreement shall be appropriately
adjusted.
7.2 Injunctive Relief. It is hereby agreed and acknowledged that it
will be impossible to measure in money the damages that would be suffered if the
parties fail to comply with any of the obligations herein imposed on them and
that, in the event of any such failure, an aggrieved person will be irreparably
damaged and will not have an adequate remedy of law. Any such person shall,
therefore, be entitled to injunctive relief, including specific performance, to
enforce such obligations, without the posting of any bond and if any action
should be brought in equity to enforce any of the provisions of this Agreement,
none of the parties hereto shall raise the defense that there is an adequate
remedy at law.
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7.3 Notices. Any and all notices, demands or other communications
required or permitted hereunder shall be in writing and shall be made by hand
delivery (deemed given upon receipt), or by certified mail return receipt
requested (deemed given upon execution of such return receipt), addressed to a
Stockholder and the Company at the address set forth below such person's or
entity's signature. Any party may change its address for notice by notice given
to each Stockholder and the Company in accordance with the foregoing. No
objection may be made to the method of delivery of any notice actually and
timely received.
7.4 Legend. In addition to any other legend which may be required by
applicable law, each share certificate representing Shares which are subject to
this Agreement shall have endorsed, to the extent appropriate, upon its face the
following words:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"), OR THE SECURITIES LAWS OF ANY JURISDICTION. SUCH
SECURITIES MAY NOT BE OFFERED, SOLD, TRANSFERRED, PLEDGED,
ASSIGNED, ENCUMBERED, HYPOTHECATED OR OTHERWISE DISPOSED OF
EXCEPT PURSUANT TO (I) A REGISTRATION STATEMENT WITH RESPECT
TO SUCH SECURITIES THAT IS EFFECTIVE UNDER SUCH ACT OR
APPLICABLE STATE SECURITIES LAW, OR (II) ANY EXEMPTION FROM
REGISTRATION UNDER SUCH ACT, OR APPLICABLE STATE SECURITIES
LAW, RELATING TO THE DISPOSITION OF SECURITIES, INCLUDING RULE
144, PROVIDED AN OPINION OF COUNSEL IS FURNISHED TO THE
COMPANY, IN FORM AND SUBSTANCE REASONABLY SATISFACTORY TO THE
COMPANY, TO THE EFFECT THAT AN EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE ACT AND/OR APPLICABLE STATE SECURITIES LAW
IS AVAILABLE.
IN ADDITION, THE SECURITIES REPRESENTED BY THIS CERTIFICATE
MAY NOT BE TRANSFERRED, SOLD, ASSIGNED, PLEDGED, HYPOTHECATED
OR OTHERWISE DISPOSED OF UNLESS SUCH TRANSFER COMPLIES WITH
THE PROVISIONS OF A STOCKHOLDERS AGREEMENT DATED AS OF MARCH
31, 1998 (THE "STOCKHOLDERS AGREEMENT"), A COPY OF WHICH IS ON
FILE AND MAY BE INSPECTED AT THE PRINCIPAL OFFICE OF THE
COMPANY. NO TRANSFER OF THE SECURITIES WILL BE MADE ON THE
BOOKS OF THE COMPANY UNLESS ACCOMPANIED BY EVIDENCE OF
COMPLIANCE WITH THE TERMS OF SUCH PRINCIPAL STOCKHOLDERS
AGREEMENT. THE SECURITIES REPRESENTED BY THIS
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CERTIFICATE ARE ALSO SUBJECT TO OTHER RIGHTS AND OBLIGATIONS
AS SET FORTH IN THE PRINCIPAL STOCKHOLDERS AGREEMENT.
7.5 Transferees Bound. All Shares owned by a Transferee shall, subject
to the terms of Section 2.3 of this Agreement, for all purposes be subject to
the terms of this Agreement, whether or not such Transferee has executed a
consent to be bound by this Agreement. The foregoing shall not apply in the case
of any Shares acquired by a Transferee pursuant to a sale of Shares pursuant to
an effective registration statement under the Securities Act or, except for
sales to an affiliate of the Company or sales made prior to a Public Offering
Event, pursuant to Rule 144.
7.6 Amendment; Waiver. This Agreement may be amended, modified,
supplemented or terminated only by a written instrument signed by each of (i)
the Company, (ii) Stockholders holding a majority of the Registrable Purchaser
Shares, and (iii) Stockholders holding a majority of the Registrable Executive
Shares. No provision of this Agreement may be waived orally, but only by a
written instrument signed by the party against whom enforcement of such waiver
is sought. Stockholders shall be bound from and after the date of the receipt of
a written notice from the Company setting forth such amendment or waiver by any
consent authorized by this Section, whether or not the Shares shall have been
marked to indicate such consent; no alteration, modification or impairment shall
be implied by reason of any previous waiver, extension of time, delay or
omission in exercise, or other indulgence.
7.7 Additional Documents. Each party hereto agrees to execute any and
all further documents and writings within its powers and to perform such other
actions which may be or become necessary or expedient to effectuate and carry
out this Agreement.
7.8 No Third-Party Benefits. None of the provisions of this Agreement
shall be for the benefit of, or enforceable by, any third-party beneficiary.
7.9 Successors and Assigns. Subject to the terms hereof, this Agreement
shall be binding upon and shall inure to the benefit of the Stockholders, and
their respective successors and permitted assigns; provided, however, (i)
neither this Agreement nor any rights or obligations hereunder may be
transferred by the Company and (ii) no rights or obligations of any Stockholder
under this Agreement may be assigned except that any Stockholder may transfer
its rights and obligations hereunder, in whole or in part, in connection with a
Transfer of Shares made in compliance with all of the provisions of this
Agreement.
7.10 Severability. In case any one or more of the provisions contained
in this Agreement shall, for any reason, be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provisions of this Agreement, and this Agreement
shall be construed as if such invalid, illegal or unenforceable provision had
never been contained herein; provided, however, that the parties hereto shall
use their best efforts to find and employ an alternative means to achieve the
same or substantially the same result as that contemplated by such invalid,
illegal or unenforceable term, provision, covenant or restriction.
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<PAGE>
7.11 Integration. This Agreement contains the entire understanding of
the parties with respect to the subject matter hereof. There are no
restrictions, agreements, promises, representations, warranties, covenants or
undertakings with respect to the subject matter hereof other than those
expressly set forth or referred to herein. This Agreement supersedes all prior
agreements and understandings between the parties with respect to its subject
matter.
7.12 Governing Law. THE RIGHTS AND LIABILITIES OF THE PARTIES SHALL BE
GOVERNED BY THE INTERNAL LAWS OF THE STATE OF NEW YORK, REGARDLESS OF THE CHOICE
OF LAWS PROVISIONS OF SUCH STATE OR ANY OTHER JURISDICTION.
7.13 Attorneys' Fees. Should any litigation or arbitration be commenced
(including any proceedings in a bankruptcy court) between the parties hereto or
their representatives concerning any provision of this Agreement or the rights
and duties of any person or entity hereunder, the party or parties prevailing in
such proceeding shall be entitled, in addition to such other relief as may be
granted, to the reasonable attorneys' fees and court costs incurred by reason of
such litigation or arbitration.
7.14 Headings. The headings in this Agreement are inserted only as a
matter of convenience, and in no way define, limit, or extend or interpret the
scope of this Agreement or of any particular Section.
7.15 Information for Notices. No Stockholder (other than a Stockholder
as of the date of this Agreement with respect to the Shares held as of such
date) shall hold any of its Shares in nominee name unless it otherwise provides
the Company and the other Stockholders with its name and address and other
information reasonably requested by the Company in order to establish such
Stockholder's particular status under this Agreement (e.g., Purchaser Holder,
Executive Party, etc.).
7.16 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
7.17 Consent to Jurisdiction. Each Stockholder agrees that any
proceeding arising out of or relating to this Agreement or the breach or
threatened breach of this Agreement may be commenced and prosecuted in a court
in the State of New York. Each Stockholder hereby irrevocably and
unconditionally consents and submits to the non-exclusive personal jurisdiction
of any court in the State of New York in respect of any such proceeding. Each
Stockholder consents to service of process upon it with respect to any such
proceeding by registered mail, return receipt requested, and by any other means
permitted by applicable laws and rules. Each Stockholder waives any objection
that it may now or hereafter have to the laying of venue of any such proceeding
in any court in the State of New York and any claim that it may now or hereafter
have that any such proceeding in any court in the State of New York has been
brought in an inconvenient forum.
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7.18 No Inconsistent Agreements. The Company will not hereafter enter
into any agreements with respect to its securities which are inconsistent with
or violate in any material respects the rights granted to the Holders of
Registrable Shares in this Agreement.
7.19 Certain Distributions Exempt. Notwithstanding anything to the
contrary contained in this Agreement, any distribution of Shares by the
Purchaser or any other Purchaser Party to its equity participants in accordance
with the terms of its limited partnership agreement, operating agreement or
other governing agreement or instrument shall be exempt from the terms and
conditions of this Agreement, other than that the Persons receiving the Shares
in connection with any such distribution shall be bound on a going-forward basis
by the terms and conditions of this Agreement. For example, and not by way of
limitation, any such distribution shall not trigger any of the "tag-along"
rights set forth in Section 2.4.
7.20 Certain Limitations. Notwithstanding anything to the contrary
contained in this Agreement, prior to the issuance or sale of any shares of the
Company's capital stock pursuant to an effective registration statement under
the Securities Act, the Company shall not be required to register any transfer
of Shares on the Company's books if in the reasonable, good faith judgment of
the Company, registering such transfer would cause the Company to become subject
to registration pursuant to the Exchange Act.
7.21 Information Regarding Beneficial Ownership. Each Stockholder
agrees to promptly provide to the Company any information or representations
that the Company may request regarding such holder's beneficial ownership of
shares of any class of the Company's capital stock.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first set forth above.
Diamond Triumph Auto Glass, Inc.
By: /s/ Kenneth Levine
----------------------------------
Name: Kenneth Levine
Title: Co-Chairman & Co-Chief
Executive Officer
220 Division Street
Kingston, Pennsylvania 18704
Fax: 717-287-9775
Attention: Co-Chairmen of the Board
Green Equity Investors II, L.P.
By: Grand Avenue Capital Partners, L.P.
By: Grand Avenue Capital Corporation,its
general partner
By: /s/ Gregory Annick
----------------------------------
Name: Gregory Annick
Title:
Leonard Green & Partners, L.P.
11111 Santa Monica Boulevard
Suite 200
Los Angeles, California 90025
Fax: 310-954-0404
Attention: Gregory J. Annick
/s/ Kenneth Levine
------------------------------------
Kenneth Levine
RD1 Box 411C
Dalton, PA 18414
Fax: 717-586-7733
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<PAGE>
/s/ Richard Rutta
------------------------------------
Richard Rutta
626 Taylor Avenue
Scranton, PA 18510
Fax: 717-342-3393
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<PAGE>
Exhibit 10.4
EMPLOYMENT AGREEMENT
by and between
DIAMOND TRIUMPH AUTO GLASS, INC.
and
KENNETH LEVINE
Dated as of
March 31, 1998
<PAGE>
This EMPLOYMENT AGREEMENT, dated as of March 31, 1998, by and
between KENNETH LEVINE (the "Employee") and DIAMOND TRIUMPH AUTO GLASS, INC., a
Delaware corporation (the "Company"). As used herein, the term "Companies" shall
refer to the Company and its existing and future subsidiaries.
The Company desires to engage Employee to perform services for
the Companies, and Employee desires to perform such services, on the terms and
conditions set forth below:
NOW, THEREFORE, in consideration of the foregoing and the
mutual agreements contained herein, the parties hereto, intending to be legally
bound, hereby agree as follows:
1. Employment, Term.
The Company will employ the Employee in its business, and the
Employee will work for the Company, for a term of five (5) years, commencing as
of March 31, 1998 and ending on March 31, 2003, upon the terms and subject to
the conditions set forth in this Agreement. Such period, including any
extensions or renewals thereof, is referred to herein as the "Employment
Period".
2. Duties.
2.1 During the Employment Period, the Employee shall serve as
the Co-Chairman of the Board and Co-Chief Executive Officer of the Company, and
perform duties of an executive character consisting of administrative and
managerial responsibilities on behalf of the Companies, and shall perform such
other duties on behalf of the Companies and exercise such authority as may from
time to time reasonably be delegated to the Employee by the Board of Directors
of the Company consistent with his abilities.
2.2 The Employee shall discharge his duties from the Company's
facility in Kingston, Pennsylvania. The Employee shall also engage in such
travel in furtherance of his duties set forth in Section 2.1, as shall be
reasonably requested by the Company.
3. Devotion of Time.
Throughout the Employment Period, the Employee shall: (a)
devote substantially all of his working time to the business and affairs of the
Companies; (b) faithfully and diligently perform his duties in conformity with
the directions of the Company; (c) devote his best efforts, energy and skill to
the services of the Companies and the promotion of their interests; and not take
part in activities known by the Employee to be detrimental to the best interests
of the Companies.
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<PAGE>
4. Compensation.
4.1 In consideration for the services to be performed by the
Employee during the Employment Period hereunder, the Company shall compensate
the Employee at a base salary of $300,000 per annum (the "Base Salary"). Such
salary shall be subject to annual review based on the Companies' and the
Employee's performance.
4.2 The Employee shall be eligible to receive, with respect to
each year of the Employment Period, a bonus (the "Bonus"), as set forth in
Exhibit A hereto (the "Bonus Plan").
5. Reimbursement of Expenses; Additional Benefits.
5.1 The Employee shall receive an automobile allowance for the
use of an automobile owned or leased by him in accordance with the policies and
procedures established by the Company from time to time for executive employees.
5.2 The Company shall pay directly, or reimburse the Employee
for, all other reasonable and necessary business expenses and disbursements
incurred by the Employee for or on behalf of the Company in the performance of
his duties under this Agreement. For such purposes, the Employee shall submit to
the Company itemized written reports of such expenses in accordance with the
policies and procedures established by the Company from time to time.
5.3 The Employee shall be entitled to paid vacations during
the Employment Period in accordance with the then prevalent practices of the
Company for its senior executives; provided, however, that Employee shall be
entitled to such paid vacations for not less than four (4) weeks per annum.
5.4 During the Employment Period, the Employee shall be
entitled to participate in, and to receive benefits under, such employee benefit
plans of the Company (including, without limitation, pension, profit sharing,
bonus, group life insurance and group medical insurance plans) as may exist from
time to time for the Company's senior executives.
6. Representations and Warranties of the Employee.
The Employee represents and warrants to the Company that the
Employee is under no contractual or other restriction or obligation which
conflicts with, violates or is inconsistent with the execution of this
Agreement, the performance of his duties hereunder, or the other rights of the
Company hereunder.
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<PAGE>
7. Non-competition.
During the Employment Period, including any unexpired portion
thereof, and for a period of one year thereafter, the Employee shall not,
directly or indirectly, own, manage, operate, join, control, participate in,
invest in or otherwise be connected or associated with, in any manner,
including, without limitation, as an officer, director, employee, distributor,
independent contractor, independent representative, partner, consultant,
advisor, agent, proprietor, trustee or investor, any Competing Business located
in any state or region (including foreign jurisdictions) where any of the
Companies conducts business or is considering doing business; provided, however,
that ownership of 1% or less of the stock or other securities of a corporation,
the stock of which is listed on a national securities exchange or is quoted on
The Nasdaq Stock Market's National Market, shall not constitute a breach of this
Section 7, so long as the Employee does not in fact have the power to control,
or direct the management of, or is not otherwise engaged in activities with,
such corporation.
For purposes hereof, the term "Competing Business" shall mean
any business or venture which is engaged, directly or indirectly, in (i)
developing, manufacturing, marketing, selling and/or distributing (including
wholesale distribution) of automobile or truck glass or windshields or other
glass products utilized in vehicles; repairing, replacing or installing
automobile or truck glass or windshields or other glass products utilized in
vehicles; or selling or installing those kinds of automobile or truck
accessories sold by any of the Companies, (ii) any other business engaged in or
actively being developed by any of the Companies, or (iii) any other business
which is substantially similar to the whole or any significant part of the
business conducted by the Companies.
8. No Solicitation.
During the Employment Period, including any unexpired portion
thereof, and for a period of one year thereafter, the Employee shall not,
directly or indirectly, including on behalf of, for the benefit of, or in
conjunction with, any other person or entity, (i) solicit, assist, advise,
influence, induce or otherwise encourage in any way, any employee of any of the
Companies to terminate its relationship with any of the Companies for any
reason, nor assist any person or entity in doing so, or employ, engage or
otherwise contract with any employee or former employee of any of the Companies
in a Competing Business or any other business unless such former employee shall
not have been employed by any of the Companies for a period of at least one
year, (ii) interfere in any manner with the relationship between any employee
and any of the Companies or (iii) contact, service or solicit any existing
clients, customers or accounts of any of the Companies on behalf of a Competing
Business, either as an individual on his own account, as an investor, or as an
officer, director, partner, joint venturer, consultant, employee, agent or
salesman of any other person or entity.
9. Confidential Information.
9.1 "Confidential Information" shall mean confidential records
and information, including, but not limited to, development, marketing,
purchasing, organizational, strategic, financial, managerial, administrative,
manufacturing, production, distribution and sales
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<PAGE>
information, distribution methods, data, specifications and processes (including
the Transferred Property as hereinafter defined) presently owned or at any time
hereafter developed by any of the Companies or its agents or consultants or used
presently or at any time hereafter in the course of the business of any of the
Companies, that are not otherwise part of the public domain.
9.2 The Employee hereby sells, transfers and assigns to the
Company, or to any person or entity designated by the Company, all of his entire
right, title and interest in and to all inventions, ideas, methods,
developments, disclosures and improvements (the "Inventions"), whether patented
or unpatented, and copyrightable material, and all trademarks, trade names, all
goodwill associated therewith and all federal and state registrations or
applications thereof, made, adopted or conceived by solely or jointly, in whole
or in part (collectively, the "Transferred Property"), prior to or during the
Employment Period which (i) relate to methods, apparatus, designs, products,
processes or devices sold, leased, used or under construction or development by
any of the Companies or (ii) otherwise relate to or pertain to the business,
products, services, functions or operations of any of the Companies. The
Employee shall make adequate written records of all Inventions, which records
shall be the Company's property and shall communicate promptly and disclose to
the Company, in such form as the Company requests, all information, details and
data pertaining to the aforementioned Inventions. Whether during the Employment
Period or thereafter, the Employee shall execute and deliver to the Company such
formal transfers and assignments and such other papers and documents as may be
required of the Employee to permit the Company, or any person or entity
designated by the Company, to file and prosecute patent applications (including,
but not limited to, records, memoranda or instruments deemed necessary by the
Company for the prosecution of a patent application or the acquisition of
letters patent in the United States, foreign countries or otherwise) and, as to
copyrightable material, to obtain copyrights thereon, and as to trademarks, to
record the transfer of ownership of any federal or state registrations or
applications.
9.3 All such Confidential Information is considered secret and
will be disclosed to the Employee in confidence, and the Employee acknowledges
that, as a consequence of his employment and position with the Company, the
Employee may have access to and become acquainted with Confidential Information.
Except in the performance of his duties as an employee of the Company, the
Employee shall not, during the Employment Period and at all times thereafter,
directly or indirectly for any reason whatsoever, disclose or use any such
Confidential Information. All records, files, drawings, documents, equipment and
other tangible items, wherever located, relating in any way to or containing
Confidential Information, which the Employee has prepared, used or encountered
or shall in the future prepare, use or encounter, shall be and remain the
Company's sole and exclusive property and shall be included in the Confidential
Information. Upon termination of this Agreement, or whenever requested by the
Company, the Employee shall promptly deliver to the Company any and all of the
Confidential Information and copies thereof, not previously delivered to the
Company, that may be in the possession or under the control of the Employee. The
foregoing restrictions shall not apply to the use, divulgence, disclosure or
grant of access to Confidential Information to the extent, but only to the
extent, (i) expressly permitted or required pursuant to any other written
agreement between the Employee and the Company, (ii) such Confidential
Information has been publicly disclosed (not due to a breach by the Employee of
his obligations hereunder, or by breach of any other person, of a fiduciary or
confidential obligation to any of the Companies) or (iii) the
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<PAGE>
Employee is required to disclose Confidential Information by or to any court of
competent jurisdiction or any governmental or quasi-governmental agency,
authority or instrumentality of competent jurisdiction, provided, however, that
the Employee shall, prior to any such disclosure, immediately notify the Company
of such requirement and provided further, however, that the Company shall have
the right, at its expense, to object to such disclosures and to seek
confidential treatment of any Confidential Information to be so disclosed on
such terms as it shall determine.
10. Acknowledgement; remedies; survival of this Agreement.
10.1 The Employee acknowledges that violation of any of the
covenants and provisions set forth in this Agreement would cause the Company
irreparable damage and agrees that the Company's remedies at law for a breach or
threatened breach of any of the provisions of this Agreement would be inadequate
and, in recognition of this fact, in the event of a breach or threatened breach
by the Employee of any of the provisions of this Agreement, it is agreed that,
in addition to the remedies at law or in equity, the Company shall be entitled,
without the posting of a bond, to equitable relief in the form of specific
performance, a temporary restraining order, temporary or permanent injunction,
or any other equitable remedy which may then be available for the purposes of
restraining the Employee from any actual or threatened breach of such covenants.
Without limiting the generality of the foregoing, if the Employee breaches or
threatens to breach Sections 7, 8, or 9 hereof, such breach or threatened breach
will entitle the Company to enjoin the Employee from disclosing any Confidential
Information to any Competing Business, to enjoin any Competing Business from
retaining the Employee or using any such Confidential Information, to enjoin the
Employee from engaging in any activities prohibited by Section 8 hereof and/or
to enjoin the Employee from rendering personal services to or in connection with
any Competing Business. The rights and remedies of the parties hereto are
cumulative and shall not be exclusive, and each such party shall be entitled to
pursue all legal and equitable rights and remedies and to secure performance of
the obligations and duties of the other under this Agreement, and the
enforcement of one or more of such rights and remedies by a party shall in no
way preclude such party from pursuing, at the same time or subsequently, any and
all other rights and remedies available to it.
10.2 The provisions of this Agreement shall survive the
termination of the Employee's employment with the Company.
11. Termination of Employment.
11.1 Termination. The Company may terminate the Employee's
employment for Cause (as hereinafter defined), in which case the provisions of
Section 11.2 shall apply. The Company may also terminate the Employee's
employment in the event of the Employee's death or Disability (as hereinafter
defined), in which case the provisions of Section 11.3 shall apply. The Company
may also terminate the Employee's employment for any other reason by written
notice to the Employee, in which case the provisions of Section 11.4 shall
apply. If the Employee's employment is terminated by reason of the Employee's
resignation, the provisions of Section 11.2 shall apply, provided that no
termination of this Agreement shall relieve the Employee from liability for any
breach of this Agreement or defeat or impair the right
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<PAGE>
of the Company to pursue such relief as may otherwise be available to it as a
result of any breach of this Agreement or any term, provision or covenant
contained herein.
11.2 Termination for Cause; Resignation. Notwithstanding
anything to the contrary contained herein, in the event that the Employee's
employment hereunder is terminated during the Agreement Term (x) by the Company
for Cause or (y) by reason of the Employee's resignation, then the Company shall
pay to the Employee, within thirty (30) days of the date of such termination,
only the Base Salary through such date of termination. For purposes of this
Agreement, "Cause" shall mean (i) conviction of, or plea of nolo contendere (no
contest) to, any crime (whether or not involving the Company) constituting a
felony in the jurisdiction involved; (ii) engaging in any act involving moral
turpitude; (iii) conduct related to the Employee's employment for which either
criminal or civil penalties against the Employee or any of the Companies may be
sought; (iv) gross neglect in the performance of the Employee's duties
hereunder; (v) misconduct in the performance of the Employee's duties hereunder,
which misconduct continues after notice thereof is given to the Employee by the
Board of Directors of the Company, (vi) willful failure or refusal to perform
such duties as may be delegated to the Employee commensurate with the Employee's
position, which misconduct continues after notice thereof is given to the
Employee by the Board of Directors of the Company, (vii) material violation of
the Company's policies, including, without limitation, those relating to sexual
harassment, the disclosure or misuse of Confidential Information (as hereinafter
defined), or those set forth in Company manuals or statements of policy, which
violation continues after notice thereof is given to the Employee by the Board
of Directors of the Company (viii) engaging in any conduct which is materially
injurious or materially damaging to any of the Companies or the reputation of
any of the Companies; or (ix) material breach of any provision of this Agreement
by the Employee.
11.3 Death or Disability. If, as a result of the Employee's
incapacity due to physical or mental illness, the Employee shall have been
absent from the Employee's duties hereunder for either (i) one hundred eighty
(180) days within any three hundred sixty-five (365) day period, or (ii) one
hundred twenty (120) consecutive days, and within thirty (30) days after written
notice of termination is given shall not have returned to the performance of the
Employee's duties hereunder on a full time basis, the Company may terminate the
Employee's employment hereunder for "Disability." In the event, this Agreement
is terminated by reason of the Employee's death or Disability, the Company shall
pay to the Employee (i) the Base Salary for a period of twelve months (but in no
event beyond March 31, 2003), which Base Salary shall be paid commencing with
such date of termination at the times and in the amounts such Base Salary would
have been paid, and (ii) the amount of any Bonus payable under the Bonus Plan
through such date of termination, which Bonus, if any, shall be payable at the
time provided in the Bonus Plan. During any period that the Employee fails to
perform the Employee's duties hereunder as a result of incapacity due to
physical or mental illness (a "Disability Period"), the Employee shall continue
to receive the compensation and benefits provided by Section 5.4 hereof until
the Employee's employment hereunder is terminated; provided, however, that the
amount of compensation and benefits received by the Employee during the
Disability Period shall be reduced by the aggregate amounts, if any, payable to
the Employee pursuant to Section 5.4 hereof or under the Social Security or
state disability insurance programs.
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<PAGE>
11.4 Termination By the Company For Any Other Reason. In the
event that the Employee's employment hereunder is terminated by the Company
during the Employment Period for any reason other than as provided in Sections
11.2 or 11.3 hereof, then the Company shall pay to the Employee, (i) within
thirty (30) days of the date of such termination, the Base Salary through such
date of termination, (ii) the amount of any Bonus payable under the Bonus Plan
through such date of termination, which Bonus, if any, shall be payable at the
time provided in the Bonus Plan, and (iii) in lieu of any further compensation,
benefits or other amounts for the balance of the Employment Period, severance
pay equal only to the Base Salary that Executive would have otherwise received
during the period beginning on such date of termination and ending on the
earlier of (i) the scheduled termination date of the Employment Period under
this Agreement and (ii) such time as Employee obtains other permanent
employment, which severance pay shall be paid commencing with such date of
termination at the times and in the amounts such Base Salary would have been
paid.
12. Assignment.
This Agreement, as it relates to the employment of the
Employee, is a personal contract and the rights, interests and obligations of
the Employee hereunder may not be sold transferred, assigned, pledged or
hypothecated. Except as otherwise herein expressly provided, this Agreement
shall be binding upon and inure to the benefit of the Employee and his personal
representatives and shall inure to the benefit of and be binding upon the
Company and its successors and assigns, including without limitation, any
corporation or other entity into which the Company is merged or which acquires
all of the outstanding shares of the Company's capital stock, or all or
substantially all of the assets of the Company. This Agreement may be assigned
by the Company to, any existing or future subsidiary or affiliate of the
Company, any purchaser of all or substantially all of the Company's business or
assets, any successor to the Company or any assignee thereof (whether direct or
indirect, by purchase, merger, consolidation or otherwise).
13. Notices.
Any notice, request, consent or approval required or permitted
to be given under this Agreement or pursuant to law shall be sufficient if in
writing, and if and when sent by certified or registered mail, return receipt
requested, with postage prepaid, or by a nationally recognized overnight courier
service to the Employee's residence (as reflected in the Company's records or as
otherwise designated by the Employee on thirty (30) days' prior written notice
to the Company) or to the Company's principal executive office, attention:
President (with copies to the General Counsel), as the case may be. All such
notices, requests, consents and approvals shall be effective upon being
deposited in the United States mail or upon delivery to such overnight courier
service. Rejection or other refusal to accept, or the inability to deliver
because of changed address of which no notice was given as provided herein,
shall be deemed to be receipt of the notice, request, consent or approval sent.
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(a) if to the Employee:
Kenneth Levine
RD1 Box 411C
Dalton, Pennsylvania 18414
With a copy to:
Cooperman Levitt Winikoff
Lester & Newman, P.C.
800 Third Avenue
New York, New York 10022
Attn.: Ira I. Roxland, Esq.
(b) if to the Company:
Diamond Triumph Auto Glass, Inc.
220 Division Street
Kingston, Pennsylvania 18704
Attn.: President
With a copy to:
Green Equity Investors II, L.P.
c/o Leonard Green & Partners, L.P.
11111 Santa Monica Blvd., (Suite 2000)
Los Angeles, California 90025
Attn.: Gregory J. Annick
or to such other address as any such party shall designate by written notice to
the other party.
14. Non-waiver.
Neither any course of dealing nor any failure or neglect of
either party hereto in any instance to exercise any right, power or privilege
hereunder or under law shall constitute a waiver of any other right, power or
privilege or of the same right, power or privilege in any other instance. All
waivers by either party hereto must be contained in a written instrument signed
by the party to be charged and, in the case of the Company, by its duly
authorized officer.
15. Entire Agreement.
This Agreement together with the Non-Competition Agreement
entered into between the Employee and the Company, the Stock Purchase Agreement
(as defined in Exhibit A hereto), and the agreements entered into in connection
therewith contain the entire agreement of the parties relating to the subject
matter hereof and supersede all prior agreements and understandings between
them.
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<PAGE>
16. Severability; Reasonableness of Agreement.
If any term, provision or covenant of this Agreement or part
thereof, or the application thereof to any person, place or circumstance shall
be held to be invalid, unenforceable or void by a court of competent
jurisdiction, the remainder of this Agreement and such term, provision or
covenant shall remain in full force and effect, and any such invalid,
unenforceable or void term, provision or covenant shall be deemed, without
further action on the part of the parties hereto, modified, amended and limited,
and the court shall have the power to modify, amend and limit any such term,
provision or covenant, to the extent necessary to render the same and the
remainder of this Agreement valid, enforceable and lawful. In this regard, the
Employee understands that the provisions of Sections 7, 8, 9, and 10 may limit
his ability to earn a livelihood in a business similar or related to the
business of the Company, but nevertheless agrees and acknowledges that (i) the
provisions of Sections 7, 8, 9 and 10 hereof are reasonable and necessary for
the protection of the Company, and do not impose a greater restraint than is
necessary to protect the goodwill or other business interests of the Company;
(ii) such provisions contain reasonable limitations as to the time and the scope
of activity to be restrained; and (iii) the consideration provided under the
Stock Purchase Agreement is sufficient to compensate the Employee for the
restrictions contained in Sections 7, 8, 9 and 10 hereof. In consideration of
the foregoing and in light of the Employee's education, skills and abilities,
the Employee agrees that all defenses by the Employee to the strict enforcement
of such provisions are hereby waived by the Employee.
17. Headings.
The headings of the sections of this Agreement are provided
for convenience only and are intended to have no effect in construing or
interpreting this Agreement.
18. Governing Law.
This Agreement, including the validity, interpretation,
construction and performance of this Agreement, shall be governed by and
construed in accordance with the internal laws of the State of New York, without
regard to principles of conflicts of law. All actions and proceedings relating
directly or indirectly to this Agreement shall be litigated in any state court
or federal court located in New York, New York. The parties hereto expressly
consent to the jurisdiction of any such court and to venue therein and consent
to the service of process in any such action or proceeding by certified or
registered mailing of the summons and complaint therein directed to the Employee
or the Company at the address as provided in Section 13 hereof.
19. Amendment.
This Agreement may be amended only by a writing which makes
express reference to this Agreement as the subject of such amendment and which
is signed by the Employee and, on behalf of the Company, by its duly authorized
officer.
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<PAGE>
20. Costs and Expenses.
Each party shall pay all of its own costs and expenses,
including reasonable legal fees, in connection with the execution, delivery,
performance and compliance with this Agreement by such party. If an action or
proceeding is commenced by a party to enforce or interpret any provision of this
Agreement, the non-prevailing party shall promptly reimburse the prevailing
party for the prevailing party's reasonable costs and expenses of such action or
proceeding, including reasonable attorneys' fees.
21. Counterparts.
This Agreement may be executed in one or more counterparts,
all of which together shall be deemed one original.
[THE BALANCE OF THIS PAGE IS INTENTIONALLY LEFT BLANK.]
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<PAGE>
IN WITNESS WHEREOF, the undersigned has duly executed this Agreement as
of the date and year first written above.
DIAMOND TRIUMPH AUTO GLASS, INC.
By: /s/ Richard Rutta
-----------------------------
Name: Richard Rutta
Title: Co-Chairman & Co-Chief
Executive Officer
/s/ Kenneth Levine
---------------------------------
Kenneth Levine
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<PAGE>
Exhibit 10.5
EMPLOYMENT AGREEMENT
by and between
DIAMOND TRIUMPH AUTO GLASS, INC.
and
RICHARD RUTTA
Dated as of
March 31, 1998
<PAGE>
This EMPLOYMENT AGREEMENT, dated as of March 31, 1998, by and
between RICHARD RUTTA (the "Employee") and DIAMOND TRIUMPH AUTO GLASS, INC., a
Delaware corporation (the "Company"). As used herein, the term "Companies" shall
refer to the Company and its existing and future subsidiaries.
The Company desires to engage Employee to perform services for
the Companies, and Employee desires to perform such services, on the terms and
conditions set forth below:
NOW, THEREFORE, in consideration of the foregoing and the
mutual agreements contained herein, the parties hereto, intending to be legally
bound, hereby agree as follows:
1. Employment, Term.
The Company will employ the Employee in its business, and the
Employee will work for the Company, for a term of five (5) years, commencing as
of March 31, 1998 and ending on March 31, 2003, upon the terms and subject to
the conditions set forth in this Agreement. Such period, including any
extensions or renewals thereof, is referred to herein as the "Employment
Period".
2. Duties.
2.1 During the Employment Period, the Employee shall serve as
the Co-Chairman of the Board and Co-Chief Executive Officer of the Company, and
perform duties of an executive character consisting of administrative and
managerial responsibilities on behalf of the Companies, and shall perform such
other duties on behalf of the Companies and exercise such authority as may from
time to time reasonably be delegated to the Employee by the Board of Directors
of the Company consistent with his abilities.
2.2 The Employee shall discharge his duties from the Company's
facility in Scranton, Pennsylvania. The Employee shall also engage in such
travel in furtherance of his duties set forth in Section 2.1, as shall be
reasonably requested by the Company.
3. Devotion of Time.
Throughout the Employment Period, the Employee shall: (a)
devote substantially all of his working time to the business and affairs of the
Companies; (b) faithfully and diligently perform his duties in conformity with
the directions of the Company; (c) devote his best efforts, energy and skill to
the services of the Companies and the promotion of their interests; and not take
part in activities known by the Employee to be detrimental to the best interests
of the Companies.
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<PAGE>
4. Compensation.
4.1 In consideration for the services to be performed by the
Employee during the Employment Period hereunder, the Company shall compensate
the Employee at a base salary of $300,000 per annum (the "Base Salary"). Such
salary shall be subject to annual review based on the Companies' and the
Employee's performance.
4.2 The Employee shall be eligible to receive, with respect to
each year of the Employment Period, a bonus (the "Bonus"), as set forth in
Exhibit A hereto (the "Bonus Plan").
5. Reimbursement of Expenses; Additional Benefits.
5.1 The Employee shall receive an automobile allowance for the
use of an automobile owned or leased by him in accordance with the policies and
procedures established by the Company from time to time for executive employees.
5.2 The Company shall pay directly, or reimburse the Employee
for, all other reasonable and necessary business expenses and disbursements
incurred by the Employee for or on behalf of the Company in the performance of
his duties under this Agreement. For such purposes, the Employee shall submit to
the Company itemized written reports of such expenses in accordance with the
policies and procedures established by the Company from time to time.
5.3 The Employee shall be entitled to paid vacations during
the Employment Period in accordance with the then prevalent practices of the
Company for its senior executives; provided, however, that Employee shall be
entitled to such paid vacations for not less than four (4) weeks per annum.
5.4 During the Employment Period, the Employee shall be
entitled to participate in, and to receive benefits under, such employee benefit
plans of the Company (including, without limitation, pension, profit sharing,
bonus, group life insurance and group medical insurance plans) as may exist from
time to time for the Company's senior executives.
6. Representations and Warranties of the Employee.
The Employee represents and warrants to the Company that the
Employee is under no contractual or other restriction or obligation which
conflicts with, violates or is inconsistent with the execution of this
Agreement, the performance of his duties hereunder, or the other rights of the
Company hereunder.
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<PAGE>
7. Non-competition.
During the Employment Period, including any unexpired portion
thereof, and for a period of one year thereafter, the Employee shall not,
directly or indirectly, own, manage, operate, join, control, participate in,
invest in or otherwise be connected or associated with, in any manner,
including, without limitation, as an officer, director, employee, distributor,
independent contractor, independent representative, partner, consultant,
advisor, agent, proprietor, trustee or investor, any Competing Business located
in any state or region (including foreign jurisdictions) where any of the
Companies conducts business or is considering doing business; provided, however,
that ownership of 1% or less of the stock or other securities of a corporation,
the stock of which is listed on a national securities exchange or is quoted on
The Nasdaq Stock Market's National Market, shall not constitute a breach of this
Section 7, so long as the Employee does not in fact have the power to control,
or direct the management of, or is not otherwise engaged in activities with,
such corporation.
For purposes hereof, the term "Competing Business" shall mean
any business or venture which is engaged, directly or indirectly, in (i)
developing, manufacturing, marketing, selling and/or distributing (including
wholesale distribution) of automobile or truck glass or windshields or other
glass products utilized in vehicles; repairing, replacing or installing
automobile or truck glass or windshields or other glass products utilized in
vehicles; or selling or installing those kinds of automobile or truck
accessories sold by any of the Companies, (ii) any other business engaged in or
actively being developed by any of the Companies, or (iii) any other business
which is substantially similar to the whole or any significant part of the
business conducted by the Companies.
8. No Solicitation.
During the Employment Period, including any unexpired portion
thereof, and for a period of one year thereafter, the Employee shall not,
directly or indirectly, including on behalf of, for the benefit of, or in
conjunction with, any other person or entity, (i) solicit, assist, advise,
influence, induce or otherwise encourage in any way, any employee of any of the
Companies to terminate its relationship with any of the Companies for any
reason, nor assist any person or entity in doing so, or employ, engage or
otherwise contract with any employee or former employee of any of the Companies
in a Competing Business or any other business unless such former employee shall
not have been employed by any of the Companies for a period of at least one
year, (ii) interfere in any manner with the relationship between any employee
and any of the Companies or (iii) contact, service or solicit any existing
clients, customers or accounts of any of the Companies on behalf of a Competing
Business, either as an individual on his own account, as an investor, or as an
officer, director, partner, joint venturer, consultant, employee, agent or
salesman of any other person or entity.
9. Confidential Information.
9.1 "Confidential Information" shall mean confidential records
and information, including, but not limited to, development, marketing,
purchasing, organizational, strategic, financial, managerial, administrative,
manufacturing, production, distribution and sales
-4-
<PAGE>
information, distribution methods, data, specifications and processes (including
the Transferred Property as hereinafter defined) presently owned or at any time
hereafter developed by any of the Companies or its agents or consultants or used
presently or at any time hereafter in the course of the business of any of the
Companies, that are not otherwise part of the public domain.
9.2 The Employee hereby sells, transfers and assigns to the
Company, or to any person or entity designated by the Company, all of his entire
right, title and interest in and to all inventions, ideas, methods,
developments, disclosures and improvements (the "Inventions"), whether patented
or unpatented, and copyrightable material, and all trademarks, trade names, all
goodwill associated therewith and all federal and state registrations or
applications thereof, made, adopted or conceived by solely or jointly, in whole
or in part (collectively, the "Transferred Property"), prior to or during the
Employment Period which (i) relate to methods, apparatus, designs, products,
processes or devices sold, leased, used or under construction or development by
any of the Companies or (ii) otherwise relate to or pertain to the business,
products, services, functions or operations of any of the Companies. The
Employee shall make adequate written records of all Inventions, which records
shall be the Company's property and shall communicate promptly and disclose to
the Company, in such form as the Company requests, all information, details and
data pertaining to the aforementioned Inventions. Whether during the Employment
Period or thereafter, the Employee shall execute and deliver to the Company such
formal transfers and assignments and such other papers and documents as may be
required of the Employee to permit the Company, or any person or entity
designated by the Company, to file and prosecute patent applications (including,
but not limited to, records, memoranda or instruments deemed necessary by the
Company for the prosecution of a patent application or the acquisition of
letters patent in the United States, foreign countries or otherwise) and, as to
copyrightable material, to obtain copyrights thereon, and as to trademarks, to
record the transfer of ownership of any federal or state registrations or
applications.
9.3 All such Confidential Information is considered secret and
will be disclosed to the Employee in confidence, and the Employee acknowledges
that, as a consequence of his employment and position with the Company, the
Employee may have access to and become acquainted with Confidential Information.
Except in the performance of his duties as an employee of the Company, the
Employee shall not, during the Employment Period and at all times thereafter,
directly or indirectly for any reason whatsoever, disclose or use any such
Confidential Information. All records, files, drawings, documents, equipment and
other tangible items, wherever located, relating in any way to or containing
Confidential Information, which the Employee has prepared, used or encountered
or shall in the future prepare, use or encounter, shall be and remain the
Company's sole and exclusive property and shall be included in the Confidential
Information. Upon termination of this Agreement, or whenever requested by the
Company, the Employee shall promptly deliver to the Company any and all of the
Confidential Information and copies thereof, not previously delivered to the
Company, that may be in the possession or under the control of the Employee. The
foregoing restrictions shall not apply to the use, divulgence, disclosure or
grant of access to Confidential Information to the extent, but only to the
extent, (i) expressly permitted or required pursuant to any other written
agreement between the Employee and the Company, (ii) such Confidential
Information has been publicly disclosed (not due to a breach by the Employee of
his obligations hereunder, or by breach of any other person, of a fiduciary or
confidential obligation to any of the Companies) or (iii) the
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<PAGE>
Employee is required to disclose Confidential Information by or to any court of
competent jurisdiction or any governmental or quasi-governmental agency,
authority or instrumentality of competent jurisdiction, provided, however, that
the Employee shall, prior to any such disclosure, immediately notify the Company
of such requirement and provided further, however, that the Company shall have
the right, at its expense, to object to such disclosures and to seek
confidential treatment of any Confidential Information to be so disclosed on
such terms as it shall determine.
10. Acknowledgement; remedies; survival of this Agreement.
10.1 The Employee acknowledges that violation of any of the
covenants and provisions set forth in this Agreement would cause the Company
irreparable damage and agrees that the Company's remedies at law for a breach or
threatened breach of any of the provisions of this Agreement would be inadequate
and, in recognition of this fact, in the event of a breach or threatened breach
by the Employee of any of the provisions of this Agreement, it is agreed that,
in addition to the remedies at law or in equity, the Company shall be entitled,
without the posting of a bond, to equitable relief in the form of specific
performance, a temporary restraining order, temporary or permanent injunction,
or any other equitable remedy which may then be available for the purposes of
restraining the Employee from any actual or threatened breach of such covenants.
Without limiting the generality of the foregoing, if the Employee breaches or
threatens to breach Sections 7, 8, or 9 hereof, such breach or threatened breach
will entitle the Company to enjoin the Employee from disclosing any Confidential
Information to any Competing Business, to enjoin any Competing Business from
retaining the Employee or using any such Confidential Information, to enjoin the
Employee from engaging in any activities prohibited by Section 8 hereof and/or
to enjoin the Employee from rendering personal services to or in connection with
any Competing Business. The rights and remedies of the parties hereto are
cumulative and shall not be exclusive, and each such party shall be entitled to
pursue all legal and equitable rights and remedies and to secure performance of
the obligations and duties of the other under this Agreement, and the
enforcement of one or more of such rights and remedies by a party shall in no
way preclude such party from pursuing, at the same time or subsequently, any and
all other rights and remedies available to it.
10.2 The provisions of this Agreement shall survive the
termination of the Employee's employment with the Company.
11. Termination of Employment.
11.1 Termination. The Company may terminate the
Employee's employment for Cause (as hereinafter defined), in which case the
provisions of Section 11.2 shall apply. The Company may also terminate the
Employee's employment in the event of the Employee's death or Disability (as
hereinafter defined), in which case the provisions of Section 11.3 shall apply.
The Company may also terminate the Employee's employment for any other reason by
written notice to the Employee, in which case the provisions of Section 11.4
shall apply. If the Employee's employment is terminated by reason of the
Employee's resignation, the provisions of Section 11.2 shall apply, provided
that no termination of this Agreement shall relieve the Employee from liability
for any breach of this Agreement or defeat or impair the right
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<PAGE>
of the Company to pursue such relief as may otherwise be available to it as a
result of any breach of this Agreement or any term, provision or covenant
contained herein.
11.2 Termination for Cause; Resignation. Notwithstanding
anything to the contrary contained herein, in the event that the Employee's
employment hereunder is terminated during the Agreement Term (x) by the Company
for Cause or (y) by reason of the Employee's resignation, then the Company shall
pay to the Employee, within thirty (30) days of the date of such termination,
only the Base Salary through such date of termination. For purposes of this
Agreement, "Cause" shall mean (i) conviction of, or plea of nolo contendere (no
contest) to, any crime (whether or not involving the Company) constituting a
felony in the jurisdiction involved; (ii) engaging in any act involving moral
turpitude; (iii) conduct related to the Employee's employment for which either
criminal or civil penalties against the Employee or any of the Companies may be
sought; (iv) gross neglect in the performance of the Employee's duties
hereunder; (v) misconduct in the performance of the Employee's duties hereunder,
which misconduct continues after notice thereof is given to the Employee by the
Board of Directors of the Company, (vi) willful failure or refusal to perform
such duties as may be delegated to the Employee commensurate with the Employee's
position, which misconduct continues after notice thereof is given to the
Employee by the Board of Directors of the Company, (vii) material violation of
the Company's policies, including, without limitation, those relating to sexual
harassment, the disclosure or misuse of Confidential Information (as hereinafter
defined), or those set forth in Company manuals or statements of policy, which
violation continues after notice thereof is given to the Employee by the Board
of Directors of the Company (viii) engaging in any conduct which is materially
injurious or materially damaging to any of the Companies or the reputation of
any of the Companies; or (ix) material breach of any provision of this Agreement
by the Employee.
11.3 Death or Disability. If, as a result of the
Employee's incapacity due to physical or mental illness, the Employee shall have
been absent from the Employee's duties hereunder for either (i) one hundred
eighty (180) days within any three hundred sixty-five (365) day period, or (ii)
one hundred twenty (120) consecutive days, and within thirty (30) days after
written notice of termination is given shall not have returned to the
performance of the Employee's duties hereunder on a full time basis, the Company
may terminate the Employee's employment hereunder for "Disability." In the
event, this Agreement is terminated by reason of the Employee's death or
Disability, the Company shall pay to the Employee (i) the Base Salary for a
period of twelve months (but in no event beyond March 31, 2003), which Base
Salary shall be paid commencing with such date of termination at the times and
in the amounts such Base Salary would have been paid, and (ii) the amount of any
Bonus payable under the Bonus Plan through such date of termination, which
Bonus, if any, shall be payable at the time provided in the Bonus Plan. During
any period that the Employee fails to perform the Employee's duties hereunder as
a result of incapacity due to physical or mental illness (a "Disability
Period"), the Employee shall continue to receive the compensation and benefits
provided by Section 5.4 hereof until the Employee's employment hereunder is
terminated; provided, however, that the amount of compensation and benefits
received by the Employee during the Disability Period shall be reduced by the
aggregate amounts, if any, payable to the Employee pursuant to Section 5.4
hereof or under the Social Security or state disability insurance programs.
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<PAGE>
11.4 Termination By the Company For Any Other Reason. In
the event that the Employee's employment hereunder is terminated by the Company
during the Employment Period for any reason other than as provided in Sections
11.2 or 11.3 hereof, then the Company shall pay to the Employee, (i) within
thirty (30) days of the date of such termination, the Base Salary through such
date of termination, (ii) the amount of any Bonus payable under the Bonus Plan
through such date of termination, which Bonus, if any, shall be payable at the
time provided in the Bonus Plan, and (iii) in lieu of any further compensation,
benefits or other amounts for the balance of the Employment Period, severance
pay equal only to the Base Salary that Executive would have otherwise received
during the period beginning on such date of termination and ending on the
earlier of (i) the scheduled termination date of the Employment Period under
this Agreement and (ii) such time as Employee obtains other permanent
employment, which severance pay shall be paid commencing with such date of
termination at the times and in the amounts such Base Salary would have been
paid.
12. Assignment.
This Agreement, as it relates to the employment of the
Employee, is a personal contract and the rights, interests and obligations of
the Employee hereunder may not be sold transferred, assigned, pledged or
hypothecated. Except as otherwise herein expressly provided, this Agreement
shall be binding upon and inure to the benefit of the Employee and his personal
representatives and shall inure to the benefit of and be binding upon the
Company and its successors and assigns, including without limitation, any
corporation or other entity into which the Company is merged or which acquires
all of the outstanding shares of the Company's capital stock, or all or
substantially all of the assets of the Company. This Agreement may be assigned
by the Company to, any existing or future subsidiary or affiliate of the
Company, any purchaser of all or substantially all of the Company's business or
assets, any successor to the Company or any assignee thereof (whether direct or
indirect, by purchase, merger, consolidation or otherwise).
13. Notices.
Any notice, request, consent or approval required or permitted
to be given under this Agreement or pursuant to law shall be sufficient if in
writing, and if and when sent by certified or registered mail, return receipt
requested, with postage prepaid, or by a nationally recognized overnight courier
service to the Employee's residence (as reflected in the Company's records or as
otherwise designated by the Employee on thirty (30) days' prior written notice
to the Company) or to the Company's principal executive office, attention:
President (with copies to the General Counsel), as the case may be. All such
notices, requests, consents and approvals shall be effective upon being
deposited in the United States mail or upon delivery to such overnight courier
service. Rejection or other refusal to accept, or the inability to deliver
because of changed address of which no notice was given as provided herein,
shall be deemed to be receipt of the notice, request, consent or approval sent.
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<PAGE>
a) if to the Employee:
Richard Rutta
626 Taylor Avenue
Scranton, Pennsylvania 18510
With a copy to:
Cooperman Levitt Winikoff
Lester & Newman, P.C.
800 Third Avenue
New York, New York 10022
Attn.: Ira I. Roxland, Esq.
(b) if to the Company:
Diamond Triumph Auto Glass, Inc.
220 Division Street
Kingston, Pennsylvania 18704
Attn.: President
With a copy to:
Green Equity Investors II, L.P.
c/o Leonard Green & Partners, L.P.
11111 Santa Monica Blvd., (Suite 2000)
Los Angeles, California 90025
Attn.: Gregory J. Annick
or to such other address as any such party shall designate by written notice to
the other party.
14. Non-waiver.
Neither any course of dealing nor any failure or neglect of
either party hereto in any instance to exercise any right, power or privilege
hereunder or under law shall constitute a waiver of any other right, power or
privilege or of the same right, power or privilege in any other instance. All
waivers by either party hereto must be contained in a written instrument signed
by the party to be charged and, in the case of the Company, by its duly
authorized officer.
15. Entire Agreement.
This Agreement together with the Non-Competition Agreement
entered into between the Employee and the Company, the Stock Purchase Agreement
(as defined in Exhibit A hereto), and the agreements entered into in connection
therewith contain the entire agreement of the parties relating to the subject
matter hereof and supersede all prior agreements and understandings between
them.
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<PAGE>
16. Severability; Reasonableness of Agreement.
If any term, provision or covenant of this Agreement or part
thereof, or the application thereof to any person, place or circumstance shall
be held to be invalid, unenforceable or void by a court of competent
jurisdiction, the remainder of this Agreement and such term, provision or
covenant shall remain in full force and effect, and any such invalid,
unenforceable or void term, provision or covenant shall be deemed, without
further action on the part of the parties hereto, modified, amended and limited,
and the court shall have the power to modify, amend and limit any such term,
provision or covenant, to the extent necessary to render the same and the
remainder of this Agreement valid, enforceable and lawful. In this regard, the
Employee understands that the provisions of Sections 7, 8, 9, and 10 may limit
his ability to earn a livelihood in a business similar or related to the
business of the Company, but nevertheless agrees and acknowledges that (i) the
provisions of Sections 7, 8, 9 and 10 hereof are reasonable and necessary for
the protection of the Company, and do not impose a greater restraint than is
necessary to protect the goodwill or other business interests of the Company;
(ii) such provisions contain reasonable limitations as to the time and the scope
of activity to be restrained; and (iii) the consideration provided under the
Stock Purchase Agreement is sufficient to compensate the Employee for the
restrictions contained in Sections 7, 8, 9 and 10 hereof. In consideration of
the foregoing and in light of the Employee's education, skills and abilities,
the Employee agrees that all defenses by the Employee to the strict enforcement
of such provisions are hereby waived by the Employee.
17. Headings.
The headings of the sections of this Agreement are provided
for convenience only and are intended to have no effect in construing or
interpreting this Agreement.
18. Governing Law.
This Agreement, including the validity, interpretation,
construction and performance of this Agreement, shall be governed by and
construed in accordance with the internal laws of the State of New York, without
regard to principles of conflicts of law. All actions and proceedings relating
directly or indirectly to this Agreement shall be litigated in any state court
or federal court located in New York, New York. The parties hereto expressly
consent to the jurisdiction of any such court and to venue therein and consent
to the service of process in any such action or proceeding by certified or
registered mailing of the summons and complaint therein directed to the Employee
or the Company at the address as provided in Section 13 hereof.
19. Amendment.
This Agreement may be amended only by a writing which makes
express reference to this Agreement as the subject of such amendment and which
is signed by the Employee and, on behalf of the Company, by its duly authorized
officer.
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<PAGE>
20. Costs and Expenses.
Each party shall pay all of its own costs and expenses,
including reasonable legal fees, in connection with the execution, delivery,
performance and compliance with this Agreement by such party. If an action or
proceeding is commenced by a party to enforce or interpret any provision of this
Agreement, the non-prevailing party shall promptly reimburse the prevailing
party for the prevailing party's reasonable costs and expenses of such action or
proceeding, including reasonable attorneys' fees.
21. Counterparts.
This Agreement may be executed in one or more counterparts,
all of which together shall be deemed one original.
[THE BALANCE OF THIS PAGE IS INTENTIONALLY LEFT BLANK.]
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<PAGE>
IN WITNESS WHEREOF, the undersigned has duly executed this Agreement as
of the date and year first written above.
DIAMOND TRIUMPH AUTO GLASS, INC.
By: /s/ Kenneth Levine
-----------------------------
Name: Kenneth Levine
Title: Co-Chairman & Co-Chief
Executive Officer
/s/ Richard Rutta
--------------------------------
Richard Rutta
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<PAGE>
Exhibit 10.6
EMPLOYMENT AGREEMENT
by and between
DIAMOND TRIUMPH AUTO GLASS, INC.
and
NORMAN HARRIS
Dated as of
March 31, 1998
<PAGE>
This EMPLOYMENT AGREEMENT, dated as of March 31, 1998, by and
between NORMAN HARRIS (the "Employee") and DIAMOND TRIUMPH AUTO GLASS, INC., a
Delaware corporation (the "Company"). As used herein, the term "Companies" shall
refer to the Company and its existing and future subsidiaries.
The Company desires to engage Employee to perform services for
the Companies, and Employee desires to perform such services, on the terms and
conditions set forth below:
NOW, THEREFORE, in consideration of the foregoing and the
mutual agreements contained herein, the parties hereto, intending to be legally
bound, hereby agree as follows:
1. Employment, Term.
The Company will employ the Employee in its business, and the
Employee will work for the Company, for a term of three (3) years, commencing as
of March 31, 1998 and ending on March 31, 2001, upon the terms and subject to
the conditions set forth in this Agreement. Such period, including any
extensions or renewals thereof, is referred to herein as the "Employment
Period".
2. Duties.
2.1 During the Employment Period, the Employee shall serve as
the President of the Company, and perform duties of an executive character
consisting of administrative and managerial responsibilities on behalf of the
Companies, and shall perform such other duties on behalf of the Companies and
exercise such authority as may from time to time reasonably be delegated to the
Employee by the Board of Directors of the Company consistent with his abilities.
2.2 The Employee shall discharge his duties from the Company's
distribution center in Columbus, Ohio. The Employee shall also engage in such
reasonable travel in furtherance of his duties set forth in Section 2.1, as
shall be reasonably requested by the Company.
3. Devotion of Time.
Throughout the Employment Period, the Employee shall: (a)
devote substantially all of his working time to the business and affairs of the
Companies; (b) faithfully and diligently perform his duties in conformity with
the directions of the Board of Directors of the Company; (c) devote his best
efforts, energy and skill to the services of the Companies and the promotion of
their interests; and not take part in activities known by the Employee to be
detrimental to the best interests of the Companies.
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<PAGE>
4. Compensation.
4.1 In consideration for the services to be performed by the
Employee during the Employment Period hereunder, the Company shall compensate
the Employee at a base salary of $275,000 per annum (the "Base Salary"). Such
salary shall be subject to annual review based on the Companies' and the
Employee's performance.
4.2 The Employee shall be eligible to receive, with respect to
each year of the Employment Period, a bonus (the "Bonus"), as set forth in
Exhibit A hereto (the "Bonus Plan").
5. Reimbursement of Expenses; Additional Benefits.
5.1 The Employee shall receive an automobile allowance for the
use of an automobile owned or leased by him in accordance with the policies and
procedures established by the Company from time to time for executive employees.
5.2 The Company shall pay directly, or reimburse the Employee
for, all other reasonable and necessary business expenses and disbursements
incurred by the Employee for or on behalf of the Company in the performance of
his duties under this Agreement. For such purposes, the Employee shall submit to
the Company itemized written reports of such expenses in accordance with the
policies and procedures established by the Company from time to time.
5.3 The Employee shall be entitled to paid vacations during
the Employment Period in accordance with the then prevalent practices of the
Company for its senior executives; provided, however, that Employee shall be
entitled to such paid vacations for not less than four (4) weeks per annum.
5.4 During the Employment Period, the Employee shall be
entitled to participate in, and to receive benefits under, such employee benefit
plans of the Company (including, without limitation, pension, profit sharing,
bonus, group life insurance and group medical insurance plans) as may exist from
time to time for the Company's senior executives.
6. Representations and Warranties of the Employee.
The Employee represents and warrants to the Company that the
Employee is under no contractual or other restriction or obligation which
conflicts with, violates or is inconsistent with the execution of this
Agreement, the performance of his duties hereunder, or the other rights of the
Company hereunder.
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7. Non-competition.
During the Employment Period, including any unexpired portion
thereof, the Employee shall not, directly or indirectly, own, manage, operate,
join, control, participate in, invest in or otherwise be connected or associated
with, in any manner, including, without limitation, as an officer, director,
employee, distributor, independent contractor, independent representative,
partner, consultant, advisor, agent, proprietor, trustee or investor, any
Competing Business located in any state or region (including foreign
jurisdictions) where any of the Companies conducts business or is considering
doing business; provided, however, that ownership of 1% or less of the stock or
other securities of a corporation, the stock of which is listed on a national
securities exchange or is quoted on The Nasdaq Stock Market's National Market,
shall not constitute a breach of this Section 7, so long as the Employee does
not in fact have the power to control, or direct the management of, or is not
otherwise engaged in activities with, such corporation.
For purposes hereof, the term "Competing Business" shall mean
any business or venture which is engaged, directly or indirectly, in (i)
developing, manufacturing, marketing, selling and/or distributing (including
wholesale distribution) of automobile or truck glass or windshields or other
glass products utilized in vehicles; repairing, replacing or installing
automobile or truck glass or windshields or other glass products utilized in
vehicles; or selling or installing those kinds of automobile or truck
accessories sold by any of the Companies, (ii) any other business engaged in or
actively being developed by any of the Companies, or (iii) any other business
which is substantially similar to the whole or any significant part of the
business conducted by the Companies.
8. No Solicitation.
During the Employment Period, including any unexpired portion
thereof, the Employee shall not, directly or indirectly, including on behalf of,
for the benefit of, or in conjunction with, any other person or entity, (i)
solicit, assist, advise, influence, induce or otherwise encourage in any way,
any employee of any of the Companies to terminate its relationship with any of
the Companies for any reason, nor assist any person or entity in doing so, or
employ, engage or otherwise contract with any employee or former employee of any
of the Companies in a Competing Business or any other business unless such
former employee shall not have been employed by any of the Companies for a
period of at least one year, (ii) interfere in any manner with the relationship
between any employee and any of the Companies or (iii) contact, service or
solicit any existing clients, customers or accounts of any of the Companies on
behalf of a Competing Business, either as an individual on his own account, as
an investor, or as an officer, director, partner, joint venturer, consultant,
employee, agent or salesman of any other person or entity.
9. Confidential Information.
9.1 "Confidential Information" shall mean confidential records
and information, including, but not limited to, development, marketing,
purchasing, organizational, strategic, financial, managerial, administrative,
manufacturing, production, distribution and sales
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information, distribution methods, data, specifications and processes (including
the Transferred Property as hereinafter defined) presently owned or at any time
hereafter developed by any of the Companies or its agents or consultants or used
presently or at any time hereafter in the course of the business of any of the
Companies, that are not otherwise part of the public domain.
9.2 The Employee hereby sells, transfers and assigns to the
Company, or to any person or entity designated by the Company, all of his entire
right, title and interest in and to all inventions, ideas, methods,
developments, disclosures and improvements (the "Inventions"), whether patented
or unpatented, and copyrightable material, and all trademarks, trade names, all
goodwill associated therewith and all federal and state registrations or
applications thereof, made, adopted or conceived by solely or jointly, in whole
or in part (collectively, the "Transferred Property"), prior to or during the
Employment Period which (i) relate to methods, apparatus, designs, products,
processes or devices sold, leased, used or under construction or development by
any of the Companies or (ii) otherwise relate to or pertain to the business,
products, services, functions or operations of any of the Companies. The
Employee shall make adequate written records of all Inventions, which records
shall be the Company's property and shall communicate promptly and disclose to
the Company, in such form as the Company requests, all information, details and
data pertaining to the aforementioned Inventions. Whether during the Employment
Period or thereafter, the Employee shall execute and deliver to the Company such
formal transfers and assignments and such other papers and documents as may be
required of the Employee to permit the Company, or any person or entity
designated by the Company, to file and prosecute patent applications (including,
but not limited to, records, memoranda or instruments deemed necessary by the
Company for the prosecution of a patent application or the acquisition of
letters patent in the United States, foreign countries or otherwise) and, as to
copyrightable material, to obtain copyrights thereon, and as to trademarks, to
record the transfer of ownership of any federal or state registrations or
applications.
9.3 All such Confidential Information is considered secret and
will be disclosed to the Employee in confidence, and the Employee acknowledges
that, as a consequence of his employment and position with the Company, the
Employee may have access to and become acquainted with Confidential Information.
Except in the performance of his duties as an employee of the Company, the
Employee shall not, during the Employment Period and at all times thereafter,
directly or indirectly for any reason whatsoever, disclose or use any such
Confidential Information. All records, files, drawings, documents, equipment and
other tangible items, wherever located, relating in any way to or containing
Confidential Information, which the Employee has prepared, used or encountered
or shall in the future prepare, use or encounter, shall be and remain the
Company's sole and exclusive property and shall be included in the Confidential
Information. Upon termination of this Agreement, or whenever requested by the
Company, the Employee shall promptly deliver to the Company any and all of the
Confidential Information and copies thereof, not previously delivered to the
Company, that may be in the possession or under the control of the Employee. The
foregoing restrictions shall not apply to the use, divulgence, disclosure or
grant of access to Confidential Information to the extent, but only to the
extent, (i) expressly permitted or required pursuant to any other written
agreement between the Employee and the Company, (ii) such Confidential
Information has been publicly disclosed (not due to a breach by the Employee of
his obligations hereunder, or by breach of any other person, of a fiduciary or
confidential obligation to any of the Companies) or (iii) the
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Employee is required to disclose Confidential Information by or to any court of
competent jurisdiction or any governmental or quasi-governmental agency,
authority or instrumentality of competent jurisdiction, provided, however, that
the Employee shall, prior to any such disclosure, immediately notify the Company
of such requirement and provided further, however, that the Company shall have
the right, at its expense, to object to such disclosures and to seek
confidential treatment of any Confidential Information to be so disclosed on
such terms as it shall determine.
10. Acknowledgement; remedies; survival of this Agreement.
10.1 The Employee acknowledges that violation of any of the
covenants and provisions set forth in this Agreement would cause the Company
irreparable damage and agrees that the Company's remedies at law for a breach or
threatened breach of any of the provisions of this Agreement would be inadequate
and, in recognition of this fact, in the event of a breach or threatened breach
by the Employee of any of the provisions of this Agreement, it is agreed that,
in addition to the remedies at law or in equity, the Company shall be entitled,
without the posting of a bond, to equitable relief in the form of specific
performance, a temporary restraining order, temporary or permanent injunction,
or any other equitable remedy which may then be available for the purposes of
restraining the Employee from any actual or threatened breach of such covenants.
Without limiting the generality of the foregoing, if the Employee breaches or
threatens to breach Sections 7, 8, or 9 hereof, such breach or threatened breach
will entitle the Company to enjoin the Employee from disclosing any Confidential
Information to any Competing Business, to enjoin any Competing Business from
retaining the Employee or using any such Confidential Information, to enjoin the
Employee from engaging in any activities prohibited by Section 8 hereof and/or
to enjoin the Employee from rendering personal services to or in connection with
any Competing Business. The rights and remedies of the parties hereto are
cumulative and shall not be exclusive, and each such party shall be entitled to
pursue all legal and equitable rights and remedies and to secure performance of
the obligations and duties of the other under this Agreement, and the
enforcement of one or more of such rights and remedies by a party shall in no
way preclude such party from pursuing, at the same time or subsequently, any and
all other rights and remedies available to it.
10.2 The provisions of this Agreement shall survive the
termination of the Employee's employment with the Company.
11. Termination of Employment.
11.1 Termination. The Company may terminate the
Employee's employment for Cause (as hereinafter defined), in which case the
provisions of Section 11.2 shall apply. The Company may also terminate the
Employee's employment in the event of the Employee's death or Disability (as
hereinafter defined), in which case the provisions of Section 11.3 shall apply.
The Company may also terminate the Employee's employment for any other reason by
written notice to the Employee, in which case the provisions of Section 11.4
shall apply. If the Employee's employment is terminated by reason of the
Employee's resignation, the provisions of Section 11.2 shall apply, provided
that no termination of this Agreement shall relieve the Employee from liability
for any breach of this Agreement or defeat or impair the right
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of the Company to pursue such relief as may otherwise be available to it as a
result of any breach of this Agreement or any term, provision or covenant
contained herein.
11.2 Termination for Cause; Resignation.
Notwithstanding anything to the contrary contained herein, in the event that the
Employee's employment hereunder is terminated during the Agreement Term (x) by
the Company for Cause or (y) by reason of the Employee's resignation, then the
Company shall pay to the Employee, within thirty (30) days of the date of such
termination, only the Base Salary through such date of termination. For purposes
of this Agreement, "Cause" shall mean (i) conviction of, or plea of nolo
contendere (no contest) to, any crime (whether or not involving the Company)
constituting a felony in the jurisdiction involved; (ii) engaging in any act
involving moral turpitude; (iii) conduct related to the Employee's employment
for which either criminal or civil penalties against the Employee or any of the
Companies may be sought; (iv) gross neglect in the performance of the Employee's
duties hereunder; (v) misconduct in the performance of the Employee's duties
hereunder, which misconduct continues after notice thereof is given to the
Employee by the Board of Directors of the Company, (vi) willful failure or
refusal to perform such duties as may be delegated to the Employee commensurate
with the Employee's position, which misconduct continues after notice thereof is
given to the Employee by the Board of Directors of the Company, (vii) material
violation of the Company's policies, including, without limitation, those
relating to sexual harassment, the disclosure or misuse of Confidential
Information (as hereinafter defined), or those set forth in Company manuals or
statements of policy, which violation continues after notice thereof is given to
the Employee by the Board of Directors of the Company (viii) engaging in any
conduct which is materially injurious or materially damaging to any of the
Companies or the reputation of any of the Companies; or (ix) material breach of
any provision of this Agreement by the Employee.
11.3 Death or Disability. If, as a result of the
Employee's incapacity due to physical or mental illness, the Employee shall have
been absent from the Employee's duties hereunder for either (i) one hundred
eighty (180) days within any three hundred sixty-five (365) day period, or (ii)
one hundred twenty (120) consecutive days, and within thirty (30) days after
written notice of termination is given shall not have returned to the
performance of the Employee's duties hereunder on a full time basis, the Company
may terminate the Employee's employment hereunder for "Disability." In the
event, this Agreement is terminated by reason of the Employee's death or
Disability, the Company shall pay to the Employee (i) the Base Salary for a
period of twelve months (but in no event beyond March 31, 2001), which Base
Salary shall be paid commencing with such date of termination at the times and
in the amounts such Base Salary would have been paid, and (ii) the amount of any
Bonus payable under the Bonus Plan through such date of termination, which
Bonus, if any, shall be payable at the time provided in the Bonus Plan. During
any period that the Employee fails to perform the Employee's duties hereunder as
a result of incapacity due to physical or mental illness (a "Disability
Period"), the Employee shall continue to receive the compensation and benefits
provided by Section 5.4 hereof until the Employee's employment hereunder is
terminated; provided, however, that the amount of compensation and benefits
received by the Employee during the Disability Period shall be reduced by the
aggregate amounts, if any, payable to the Employee pursuant to Section 5.4
hereof or under the Social Security or state disability insurance programs.
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11.4 Termination By the Company For Any Other Reason.
In the event that the Employee's employment hereunder is terminated by the
Company during the Employment Period for any reason other than as provided in
Sections 11.2 or 11.3 hereof, then the Company shall pay to the Employee, (i)
within thirty (30) days of the date of such termination, the Base Salary through
such date of termination, (ii) the amount of any Bonus payable under the Bonus
Plan through such date of termination, which Bonus, if any, shall be payable at
the time provided in the Bonus Plan, and (iii) in lieu of any further
compensation, benefits or other amounts for the balance of the Employment
Period, severance pay equal only to the Base Salary that Executive would have
otherwise received during the period beginning on such date of termination and
ending on the earlier of (i) the scheduled termination date of the Employment
Period under this Agreement or (ii) such time as Employee obtains other
employment which provides for compensation in an amount reasonably comparable to
the amount of the Base Salary (it being understood that the Company's obligation
under clause (iii) of this Section 11.4 shall be reduced by any amounts received
by the Executive by reason of any other employment), which severance pay shall
be paid commencing with such date of termination at the times and in the amounts
such Base Salary would have been paid.
12. Assignment.
This Agreement, as it relates to the employment of the
Employee, is a personal contract and the rights, interests and obligations of
the Employee hereunder may not be sold transferred, assigned, pledged or
hypothecated. Except as otherwise herein expressly provided, this Agreement
shall be binding upon and inure to the benefit of the Employee and his personal
representatives and shall inure to the benefit of and be binding upon the
Company and its successors and assigns, including without limitation, any
corporation or other entity into which the Company is merged or which acquires
all of the outstanding shares of the Company's capital stock, or all or
substantially all of the assets of the Company. This Agreement may be assigned
by the Company to, any existing or future subsidiary or affiliate of the
Company, any purchaser of all or substantially all of the Company's business or
assets, any successor to the Company or any assignee thereof (whether direct or
indirect, by purchase, merger, consolidation or otherwise).
13. Notices.
Any notice, request, consent or approval required or permitted
to be given under this Agreement or pursuant to law shall be sufficient if in
writing, and if and when sent by certified or registered mail, return receipt
requested, with postage prepaid, or by a nationally recognized overnight courier
service to the Employee's residence (as reflected in the Company's records or as
otherwise designated by the Employee on thirty (30) days' prior written notice
to the Company) or to the Company's principal executive office, attention:
President (with copies to the General Counsel), as the case may be. All such
notices, requests, consents and approvals shall be effective upon being
deposited in the United States mail or upon delivery to such overnight courier
service. Rejection or other refusal to accept, or the inability to deliver
because of changed address of which no notice was given as provided herein,
shall be deemed to be receipt of the notice, request, consent or approval sent.
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<PAGE>
(a) if to the Employee:
Norman Harris
222 Beach Ridge Drive
Powell, Ohio 43065
With a copy to:
The Law Offices of Mowery & Youell
130 East Wilson Bridge Road (Suite 210)
Worthington, Ohio 43085
Attn.:
(b) if to the Company:
Diamond Triumph Auto Glass, Inc.
220 Division Street
Kingston, Pennsylvania 18704
Attn.: Co-Chairmen of the Board
With a copy to:
Green Equity Investors II, L.P.
c/o Leonard Green & Partners, L.P.
11111 Santa Monica Blvd., (Suite 2000)
Los Angeles, California 90025
Attn.: Gregory J. Annick
or to such other address as any such party shall designate by written notice to
the other party.
14. Non-waiver.
Neither any course of dealing nor any failure or neglect of
either party hereto in any instance to exercise any right, power or privilege
hereunder or under law shall constitute a waiver of any other right, power or
privilege or of the same right, power or privilege in any other instance. All
waivers by either party hereto must be contained in a written instrument signed
by the party to be charged and, in the case of the Company, by its duly
authorized officer.
15. Entire Agreement.
This Agreement together with the Stock Purchase Agreement (as
defined in Exhibit A hereto), and the agreements entered into in connection
therewith contain the entire agreement of the parties relating to the subject
matter hereof and supersede all prior agreements and understandings between
them.
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16. Severability; Reasonableness of Agreement.
If any term, provision or covenant of this Agreement or part
thereof, or the application thereof to any person, place or circumstance shall
be held to be invalid, unenforceable or void by a court of competent
jurisdiction, the remainder of this Agreement and such term, provision or
covenant shall remain in full force and effect, and any such invalid,
unenforceable or void term, provision or covenant shall be deemed, without
further action on the part of the parties hereto, modified, amended and limited,
and the court shall have the power to modify, amend and limit any such term,
provision or covenant, to the extent necessary to render the same and the
remainder of this Agreement valid, enforceable and lawful. In this regard, the
Employee understands that the provisions of Sections 7, 8, 9, and 10 may limit
his ability to earn a livelihood in a business similar or related to the
business of the Company, but nevertheless agrees and acknowledges that (i) the
provisions of Sections 7, 8, 9 and 10 hereof are reasonable and necessary for
the protection of the Company, and do not impose a greater restraint than is
necessary to protect the goodwill or other business interests of the Company;
and (ii) such provisions contain reasonable limitations as to the time and the
scope of activity to be restrained. In consideration of the foregoing and in
light of the Employee's education, skills and abilities, the Employee agrees
that all defenses by the Employee to the strict enforcement of such provisions
are hereby waived by the Employee.
17. Headings.
The headings of the sections of this Agreement are provided
for convenience only and are intended to have no effect in construing or
interpreting this Agreement.
18. Governing Law.
This Agreement, including the validity, interpretation,
construction and performance of this Agreement, shall be governed by and
construed in accordance with the internal laws of the State of New York, without
regard to principles of conflicts of law. All actions and proceedings relating
directly or indirectly to this Agreement shall be litigated in any state court
or federal court located in New York, New York. The parties hereto expressly
consent to the jurisdiction of any such court and to venue therein and consent
to the service of process in any such action or proceeding by certified or
registered mailing of the summons and complaint therein directed to the Employee
or the Company at the address as provided in Section 13 hereof.
19. Amendment.
This Agreement may be amended only by a writing which makes
express reference to this Agreement as the subject of such amendment and which
is signed by the Employee and, on behalf of the Company, by its duly authorized
officer.
20. Costs and Expenses.
Each party shall pay all of its own costs and expenses,
including reasonable legal fees, in connection with the execution, delivery,
performance and compliance with this
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Agreement by such party. If an action or proceeding is commenced by a party to
enforce or interpret any provision of this Agreement, the non-prevailing party
shall promptly reimburse the prevailing party for the prevailing party's
reasonable costs and expenses of such action or proceeding, including reasonable
attorneys' fees.
21. Counterparts.
This Agreement may be executed in one or more counterparts,
all of which together shall be deemed one original.
[THE BALANCE OF THIS PAGE IS INTENTIONALLY LEFT BLANK.]
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IN WITNESS WHEREOF, the undersigned has duly executed this Agreement as
of the date and year first written above.
DIAMOND TRIUMPH AUTO GLASS, INC.
By /s/ Kenneth Levine
-----------------------------
Name: Kenneth Levine
Title: Co-Chairman & Co-Chief
Executive Officer
By /s/ Norman Harris
-----------------------------
Norman Harris
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<PAGE>
Exhibit 10.7
EMPLOYMENT AGREEMENT
by and between
DIAMOND TRIUMPH AUTO GLASS, INC.
and
MICHAEL SUMSKY
Dated as of
March 31, 1998
<PAGE>
This EMPLOYMENT AGREEMENT, dated as of March 31, 1998, by and
between MICHAEL SUMSKY (the "Employee") and DIAMOND TRIUMPH AUTO GLASS, INC., a
Delaware corporation (the "Company"). As used herein, the term "Companies" shall
refer to the Company and its existing and future subsidiaries.
The Company desires to engage Employee to perform services for
the Companies, and Employee desires to perform such services, on the terms and
conditions set forth below:
NOW, THEREFORE, in consideration of the foregoing and the
mutual agreements contained herein, the parties hereto, intending to be legally
bound, hereby agree as follows:
1. Employment, Term.
The Company will employ the Employee in its business, and the
Employee will work for the Company, for a term of three (3) years, commencing as
of March 31, 1998 and ending on March 31, 2001, upon the terms and subject to
the conditions set forth in this Agreement. Such period, including any
extensions or renewals thereof, is referred to herein as the "Employment
Period".
2. Duties.
2.1 During the Employment Period, the Employee shall serve as
the Executive Vice President, Chief Financial Officer, Treasurer, Secretary and
General Counsel of the Company, and perform duties of an executive character
consisting of administrative and managerial responsibilities on behalf of the
Companies, and shall perform such other duties on behalf of the Companies and
exercise such authority as may from time to time reasonably be delegated to the
Employee by the Board of Directors of the Company consistent with his abilities.
2.2 The Employee shall discharge his duties from the Company's
facility in Kingston, Pennsylvania. The Employee shall also engage in such
reasonable travel in furtherance of his duties set forth in Section 2.1, as
shall be reasonably requested by the Company.
3. Devotion of Time.
Throughout the Employment Period, the Employee shall: (a)
devote substantially all of his working time to the business and affairs of the
Companies; (b) faithfully and diligently perform his duties in conformity with
the directions of the Board of Directors of the Company; (c) devote his best
efforts, energy and skill to the services of the Companies and the promotion of
their interests; and not take part in activities known by the Employee to be
detrimental to the best interests of the Companies.
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4. Compensation.
4.1 In consideration for the services to be performed by the
Employee during the Employment Period hereunder, the Company shall compensate
the Employee at a base salary of $250,000 per annum (the "Base Salary"). Such
salary shall be subject to annual review based on the Companies' and the
Employee's performance.
4.2 The Employee shall be eligible to receive, with respect to
each year of the Employment Period, a bonus (the "Bonus"), as set forth in
Exhibit A hereto (the "Bonus Plan").
5. Reimbursement of Expenses; Additional Benefits.
5.1 The Employee shall receive an automobile allowance for the
use of an automobile owned or leased by him in accordance with the policies and
procedures established by the Company from time to time for executive employees.
5.2 The Company shall pay directly, or reimburse the Employee
for, all other reasonable and necessary business expenses and disbursements
incurred by the Employee for or on behalf of the Company in the performance of
his duties under this Agreement. For such purposes, the Employee shall submit to
the Company itemized written reports of such expenses in accordance with the
policies and procedures established by the Company from time to time.
5.3 The Employee shall be entitled to paid vacations during
the Employment Period in accordance with the then prevalent practices of the
Company for its senior executives; provided, however, that Employee shall be
entitled to such paid vacations for not less than four (4) weeks per annum.
5.4 During the Employment Period, the Employee shall be
entitled to participate in, and to receive benefits under, such employee benefit
plans of the Company (including, without limitation, pension, profit sharing,
bonus, group life insurance and group medical insurance plans) as may exist from
time to time for the Company's senior executives.
6. Representations and Warranties of the Employee.
The Employee represents and warrants to the Company that the
Employee is under no contractual or other restriction or obligation which
conflicts with, violates or is inconsistent with the execution of this
Agreement, the performance of his duties hereunder, or the other rights of the
Company hereunder.
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<PAGE>
7. Non-competition.
During the Employment Period, including any unexpired portion
thereof, the Employee shall not, directly or indirectly, own, manage, operate,
join, control, participate in, invest in or otherwise be connected or associated
with, in any manner, including, without limitation, as an officer, director,
employee, distributor, independent contractor, independent representative,
partner, consultant, advisor, agent, proprietor, trustee or investor, any
Competing Business located in any state or region (including foreign
jurisdictions) where any of the Companies conducts business or is considering
doing business; provided, however, that ownership of 1% or less of the stock or
other securities of a corporation, the stock of which is listed on a national
securities exchange or is quoted on The Nasdaq Stock Market's National Market,
shall not constitute a breach of this Section 7, so long as the Employee does
not in fact have the power to control, or direct the management of, or is not
otherwise engaged in activities with, such corporation.
For purposes hereof, the term "Competing Business" shall mean
any business or venture which is engaged, directly or indirectly, in (i)
developing, manufacturing, marketing, selling and/or distributing (including
wholesale distribution) of automobile or truck glass or windshields or other
glass products utilized in vehicles; repairing, replacing or installing
automobile or truck glass or windshields or other glass products utilized in
vehicles; or selling or installing those kinds of automobile or truck
accessories sold by any of the Companies, (ii) any other business engaged in or
actively being developed by any of the Companies, or (iii) any other business
which is substantially similar to the whole or any significant part of the
business conducted by the Companies.
8. No Solicitation.
During the Employment Period, including any unexpired portion
thereof, the Employee shall not, directly or indirectly, including on behalf of,
for the benefit of, or in conjunction with, any other person or entity, (i)
solicit, assist, advise, influence, induce or otherwise encourage in any way,
any employee of any of the Companies to terminate its relationship with any of
the Companies for any reason, nor assist any person or entity in doing so, or
employ, engage or otherwise contract with any employee or former employee of any
of the Companies in a Competing Business or any other business unless such
former employee shall not have been employed by any of the Companies for a
period of at least one year, (ii) interfere in any manner with the relationship
between any employee and any of the Companies or (iii) contact, service or
solicit any existing clients, customers or accounts of any of the Companies on
behalf of a Competing Business, either as an individual on his own account, as
an investor, or as an officer, director, partner, joint venturer, consultant,
employee, agent or salesman of any other person or entity.
9. Confidential Information.
9.1 "Confidential Information" shall mean confidential records
and information, including, but not limited to, development, marketing,
purchasing, organizational, strategic, financial, managerial, administrative,
manufacturing, production, distribution and sales
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information, distribution methods, data, specifications and processes (including
the Transferred Property as hereinafter defined) presently owned or at any time
hereafter developed by any of the Companies or its agents or consultants or used
presently or at any time hereafter in the course of the business of any of the
Companies, that are not otherwise part of the public domain.
9.2 The Employee hereby sells, transfers and assigns to the
Company, or to any person or entity designated by the Company, all of his entire
right, title and interest in and to all inventions, ideas, methods,
developments, disclosures and improvements (the "Inventions"), whether patented
or unpatented, and copyrightable material, and all trademarks, trade names, all
goodwill associated therewith and all federal and state registrations or
applications thereof, made, adopted or conceived by solely or jointly, in whole
or in part (collectively, the "Transferred Property"), prior to or during the
Employment Period which (i) relate to methods, apparatus, designs, products,
processes or devices sold, leased, used or under construction or development by
any of the Companies or (ii) otherwise relate to or pertain to the business,
products, services, functions or operations of any of the Companies. The
Employee shall make adequate written records of all Inventions, which records
shall be the Company's property and shall communicate promptly and disclose to
the Company, in such form as the Company requests, all information, details and
data pertaining to the aforementioned Inventions. Whether during the Employment
Period or thereafter, the Employee shall execute and deliver to the Company such
formal transfers and assignments and such other papers and documents as may be
required of the Employee to permit the Company, or any person or entity
designated by the Company, to file and prosecute patent applications (including,
but not limited to, records, memoranda or instruments deemed necessary by the
Company for the prosecution of a patent application or the acquisition of
letters patent in the United States, foreign countries or otherwise) and, as to
copyrightable material, to obtain copyrights thereon, and as to trademarks, to
record the transfer of ownership of any federal or state registrations or
applications.
9.3 All such Confidential Information is considered secret and
will be disclosed to the Employee in confidence, and the Employee acknowledges
that, as a consequence of his employment and position with the Company, the
Employee may have access to and become acquainted with Confidential Information.
Except in the performance of his duties as an employee of the Company, the
Employee shall not, during the Employment Period and at all times thereafter,
directly or indirectly for any reason whatsoever, disclose or use any such
Confidential Information. All records, files, drawings, documents, equipment and
other tangible items, wherever located, relating in any way to or containing
Confidential Information, which the Employee has prepared, used or encountered
or shall in the future prepare, use or encounter, shall be and remain the
Company's sole and exclusive property and shall be included in the Confidential
Information. Upon termination of this Agreement, or whenever requested by the
Company, the Employee shall promptly deliver to the Company any and all of the
Confidential Information and copies thereof, not previously delivered to the
Company, that may be in the possession or under the control of the Employee. The
foregoing restrictions shall not apply to the use, divulgence, disclosure or
grant of access to Confidential Information to the extent, but only to the
extent, (i) expressly permitted or required pursuant to any other written
agreement between the Employee and the Company, (ii) such Confidential
Information has been publicly disclosed (not due to a breach by the Employee of
his obligations hereunder, or by breach of any other person, of a fiduciary or
confidential obligation to any of the Companies) or (iii) the
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Employee is required to disclose Confidential Information by or to any court of
competent jurisdiction or any governmental or quasi-governmental agency,
authority or instrumentality of competent jurisdiction, provided, however, that
the Employee shall, prior to any such disclosure, immediately notify the Company
of such requirement and provided further, however, that the Company shall have
the right, at its expense, to object to such disclosures and to seek
confidential treatment of any Confidential Information to be so disclosed on
such terms as it shall determine.
10. Acknowledgement; remedies; survival of this Agreement.
10.1 The Employee acknowledges that violation of any of the
covenants and provisions set forth in this Agreement would cause the Company
irreparable damage and agrees that the Company's remedies at law for a breach or
threatened breach of any of the provisions of this Agreement would be inadequate
and, in recognition of this fact, in the event of a breach or threatened breach
by the Employee of any of the provisions of this Agreement, it is agreed that,
in addition to the remedies at law or in equity, the Company shall be entitled,
without the posting of a bond, to equitable relief in the form of specific
performance, a temporary restraining order, temporary or permanent injunction,
or any other equitable remedy which may then be available for the purposes of
restraining the Employee from any actual or threatened breach of such covenants.
Without limiting the generality of the foregoing, if the Employee breaches or
threatens to breach Sections 7, 8, or 9 hereof, such breach or threatened breach
will entitle the Company to enjoin the Employee from disclosing any Confidential
Information to any Competing Business, to enjoin any Competing Business from
retaining the Employee or using any such Confidential Information, to enjoin the
Employee from engaging in any activities prohibited by Section 8 hereof and/or
to enjoin the Employee from rendering personal services to or in connection with
any Competing Business. The rights and remedies of the parties hereto are
cumulative and shall not be exclusive, and each such party shall be entitled to
pursue all legal and equitable rights and remedies and to secure performance of
the obligations and duties of the other under this Agreement, and the
enforcement of one or more of such rights and remedies by a party shall in no
way preclude such party from pursuing, at the same time or subsequently, any and
all other rights and remedies available to it.
10.2 The provisions of this Agreement shall survive the
termination of the Employee's employment with the Company.
11. Termination of Employment.
11.1 Termination. The Company may terminate the Employee's
employment for Cause (as hereinafter defined), in which case the provisions of
Section 11.2 shall apply. The Company may also terminate the Employee's
employment in the event of the Employee's death or Disability (as hereinafter
defined), in which case the provisions of Section 11.3 shall apply. The Company
may also terminate the Employee's employment for any other reason by written
notice to the Employee, in which case the provisions of Section 11.4 shall
apply. If the Employee's employment is terminated by reason of the Employee's
resignation, the provisions of Section 11.2 shall apply, provided that no
termination of this Agreement shall relieve the Employee from liability for any
breach of this Agreement or defeat or impair the right
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of the Company to pursue such relief as may otherwise be available to it as a
result of any breach of this Agreement or any term, provision or covenant
contained herein.
11.2 Termination for Cause; Resignation. Notwithstanding
anything to the contrary contained herein, in the event that the Employee's
employment hereunder is terminated during the Agreement Term (x) by the Company
for Cause or (y) by reason of the Employee's resignation, then the Company shall
pay to the Employee, within thirty (30) days of the date of such termination,
only the Base Salary through such date of termination. For purposes of this
Agreement, "Cause" shall mean (i) conviction of, or plea of nolo contendere (no
contest) to, any crime (whether or not involving the Company) constituting a
felony in the jurisdiction involved; (ii) engaging in any act involving moral
turpitude; (iii) conduct related to the Employee's employment for which either
criminal or civil penalties against the Employee or any of the Companies may be
sought; (iv) gross neglect in the performance of the Employee's duties
hereunder; (v) misconduct in the performance of the Employee's duties hereunder,
which misconduct continues after notice thereof is given to the Employee by the
Board of Directors of the Company, (vi) willful failure or refusal to perform
such duties as may be delegated to the Employee commensurate with the Employee's
position, which misconduct continues after notice thereof is given to the
Employee by the Board of Directors of the Company, (vii) material violation of
the Company's policies, including, without limitation, those relating to sexual
harassment, the disclosure or misuse of Confidential Information (as hereinafter
defined), or those set forth in Company manuals or statements of policy, which
violation continues after notice thereof is given to the Employee by the Board
of Directors of the Company (viii) engaging in any conduct which is materially
injurious or materially damaging to any of the Companies or the reputation of
any of the Companies; or (ix) material breach of any provision of this Agreement
by the Employee.
11.3 Death or Disability. If, as a result of the Employee's
incapacity due to physical or mental illness, the Employee shall have been
absent from the Employee's duties hereunder for either (i) one hundred eighty
(180) days within any three hundred sixty-five (365) day period, or (ii) one
hundred twenty (120) consecutive days, and within thirty (30) days after written
notice of termination is given shall not have returned to the performance of the
Employee's duties hereunder on a full time basis, the Company may terminate the
Employee's employment hereunder for "Disability." In the event, this Agreement
is terminated by reason of the Employee's death or Disability, the Company shall
pay to the Employee (i) the Base Salary for a period of twelve months (but in no
event beyond March 31, 2001), which Base Salary shall be paid commencing with
such date of termination at the times and in the amounts such Base Salary would
have been paid, and (ii) the amount of any Bonus payable under the Bonus Plan
through such date of termination, which Bonus, if any, shall be payable at the
time provided in the Bonus Plan. During any period that the Employee fails to
perform the Employee's duties hereunder as a result of incapacity due to
physical or mental illness (a "Disability Period"), the Employee shall continue
to receive the compensation and benefits provided by Section 5.4 hereof until
the Employee's employment hereunder is terminated; provided, however, that the
amount of compensation and benefits received by the Employee during the
Disability Period shall be reduced by the aggregate amounts, if any, payable to
the Employee pursuant to Section 5.4 hereof or under the Social Security or
state disability insurance programs.
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11.4 Termination By the Company For Any Other Reason.
In the event that the Employee's employment hereunder is terminated by the
Company during the Employment Period for any reason other than as provided in
Sections 11.2 or 11.3 hereof, then the Company shall pay to the Employee, (i)
within thirty (30) days of the date of such termination, the Base Salary through
such date of termination, (ii) the amount of any Bonus payable under the Bonus
Plan through such date of termination, which Bonus, if any, shall be payable at
the time provided in the Bonus Plan, and (iii) in lieu of any further
compensation, benefits or other amounts for the balance of the Employment
Period, severance pay equal only to the Base Salary that Executive would have
otherwise received during the period beginning on such date of termination and
ending on the earlier of (i) the scheduled termination date of the Employment
Period under this Agreement or (ii) such time as Employee obtains other
employment which provides for compensation in an amount reasonably comparable to
the amount of the Base Salary (it being understood that the Company's obligation
under clause (iii) of this Section 11.4 shall be reduced by any amounts received
by the Executive by reason of any other employment, which severance pay shall be
paid commencing with such date of termination at the times and in the amounts
such Base Salary would have been paid.
12. Assignment.
This Agreement, as it relates to the employment of the
Employee, is a personal contract and the rights, interests and obligations of
the Employee hereunder may not be sold transferred, assigned, pledged or
hypothecated. Except as otherwise herein expressly provided, this Agreement
shall be binding upon and inure to the benefit of the Employee and his personal
representatives and shall inure to the benefit of and be binding upon the
Company and its successors and assigns, including without limitation, any
corporation or other entity into which the Company is merged or which acquires
all of the outstanding shares of the Company's capital stock, or all or
substantially all of the assets of the Company. This Agreement may be assigned
by the Company to, any existing or future subsidiary or affiliate of the
Company, any purchaser of all or substantially all of the Company's business or
assets, any successor to the Company or any assignee thereof (whether direct or
indirect, by purchase, merger, consolidation or otherwise).
13. Notices.
Any notice, request, consent or approval required or permitted
to be given under this Agreement or pursuant to law shall be sufficient if in
writing, and if and when sent by certified or registered mail, return receipt
requested, with postage prepaid, or by a nationally recognized overnight courier
service to the Employee's residence (as reflected in the Company's records or as
otherwise designated by the Employee on thirty (30) days' prior written notice
to the Company) or to the Company's principal executive office, attention:
President (with copies to the General Counsel), as the case may be. All such
notices, requests, consents and approvals shall be effective upon being
deposited in the United States mail or upon delivery to such overnight courier
service. Rejection or other refusal to accept, or the inability to deliver
because of changed address of which no notice was given as provided herein,
shall be deemed to be receipt of the notice, request, consent or approval sent.
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(a) if to the Employee:
Michael Sumsky
100 Ashbury Drive
Clarks Summit, Pennsylvania 18411
With a copy to:
Cooperman Levitt Winikoff
Lester & Newman, P.C.
800 Third Avenue
New York, New York 10022
Attn.: Ira I. Roxland, Esq.
(b) if to the Company:
Diamond Triumph Auto Glass, Inc.
220 Division Street
Kingston, Pennsylvania 18704
Attn.: President
With a copy to:
Green Equity Investors II, L.P.
c/o Leonard Green & Partners, L.P.
11111 Santa Monica Blvd., (Suite 2000)
Los Angeles, California 90025
Attn.: Gregory J. Annick
or to such other address as any such party shall designate by written notice to
the other party.
14. Non-waiver.
Neither any course of dealing nor any failure or neglect of
either party hereto in any instance to exercise any right, power or privilege
hereunder or under law shall constitute a waiver of any other right, power or
privilege or of the same right, power or privilege in any other instance. All
waivers by either party hereto must be contained in a written instrument signed
by the party to be charged and, in the case of the Company, by its duly
authorized officer.
15. Entire Agreement.
This Agreement together with the Stock Purchase Agreement (as
defined in Exhibit A hereto), and the agreements entered into in connection
therewith contain the entire agreement of the parties relating to the subject
matter hereof and supersede all prior agreements and understandings between
them.
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16. Severability; Reasonableness of Agreement.
If any term, provision or covenant of this Agreement or part
thereof, or the application thereof to any person, place or circumstance shall
be held to be invalid, unenforceable or void by a court of competent
jurisdiction, the remainder of this Agreement and such term, provision or
covenant shall remain in full force and effect, and any such invalid,
unenforceable or void term, provision or covenant shall be deemed, without
further action on the part of the parties hereto, modified, amended and limited,
and the court shall have the power to modify, amend and limit any such term,
provision or covenant, to the extent necessary to render the same and the
remainder of this Agreement valid, enforceable and lawful. In this regard, the
Employee understands that the provisions of Sections 7, 8, 9, and 10 may limit
his ability to earn a livelihood in a business similar or related to the
business of the Company, but nevertheless agrees and acknowledges that (i) the
provisions of Sections 7, 8, 9 and 10 hereof are reasonable and necessary for
the protection of the Company, and do not impose a greater restraint than is
necessary to protect the goodwill or other business interests of the Company;
and (ii) such provisions contain reasonable limitations as to the time and the
scope of activity to be restrained. In consideration of the foregoing and in
light of the Employee's education, skills and abilities, the Employee agrees
that all defenses by the Employee to the strict enforcement of such provisions
are hereby waived by the Employee.
17. Headings.
The headings of the sections of this Agreement are provided
for convenience only and are intended to have no effect in construing or
interpreting this Agreement.
18. Governing Law.
This Agreement, including the validity, interpretation,
construction and performance of this Agreement, shall be governed by and
construed in accordance with the internal laws of the State of New York, without
regard to principles of conflicts of law. All actions and proceedings relating
directly or indirectly to this Agreement shall be litigated in any state court
or federal court located in New York, New York. The parties hereto expressly
consent to the jurisdiction of any such court and to venue therein and consent
to the service of process in any such action or proceeding by certified or
registered mailing of the summons and complaint therein directed to the Employee
or the Company at the address as provided in Section 13 hereof.
19. Amendment.
This Agreement may be amended only by a writing which makes
express reference to this Agreement as the subject of such amendment and which
is signed by the Employee and, on behalf of the Company, by its duly authorized
officer.
20. Costs and Expenses.
Each party shall pay all of its own costs and expenses,
including reasonable legal fees, in connection with the execution, delivery,
performance and compliance with this
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Agreement by such party. If an action or proceeding is commenced by a party to
enforce or interpret any provision of this Agreement, the non-prevailing party
shall promptly reimburse the prevailing party for the prevailing party's
reasonable costs and expenses of such action or proceeding, including reasonable
attorneys' fees.
21. Counterparts.
This Agreement may be executed in one or more counterparts,
all of which together shall be deemed one original.
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IN WITNESS WHEREOF, the undersigned has duly executed this Agreement as
of the date and year first written above.
DIAMOND TRIUMPH AUTO GLASS, INC.
By: /s/ Kenneth Levine
-------------------------------
Name: Kenneth Levine
Title: Co-Chairman & Co-Chief
Executive Officer
/s/ Michael Sumsky
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Michael Sumsky
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Exhibit 10.8
NON-COMPETITION AGREEMENT
THIS AGREEMENT (the "Agreement"), made this 31st day of March,
1998, by and between Kenneth Levine, an individual presently residing at RD1 Box
411C, Dalton, PA 18414 ("Employee"), and Diamond Triumph Auto Glass, Inc., a
Delaware corporation ("Diamond"). As used herein, the term "Company" shall
refer, individually and/or collectively, as applicable, to Diamond and its
existing and future subsidiaries.
Green Equity Investors II, L.P. (the "Purchaser") would not
consummate the transactions contemplated by the Second Amended and Restated
Stock Purchase Agreement dated as of January 15, 1998 (the "Stock Purchase
Agreement") by and among the Purchaser, the Company, Kenneth Levine, Richard
Rutta and the other parties listed therein unless Employee delivers and complies
with all of the terms of this Agreement;
NOW, THEREFORE, in order to induce Employee to consummate the
transactions contemplated by the Stock Purchase Agreement, and in recognition
and acknowledgement of the Company's need to protect its goodwill and other
business interests and for other good and valuable consideration received by
Employee, the parties hereto, each intending to be legally bound, hereby
mutually covenant and agree as follows:
1. NON-COMPETITION.
For a period of five years from the date hereof (the
"Agreement Term"), Employee shall not, directly or indirectly, own,
manage, operate, join, control, participate in, invest in or otherwise
be connected or associated with, in any manner, including, without
limitation, as an officer, director, employee, distributor, independent
contractor, independent representative, partner, consultant, advisor,
agent, proprietor, trustee or investor, any Competing Business located
in any state or region (including foreign jurisdictions) where the
Company conducts business or is considering doing business; provided,
however, that ownership of 1% or less of the stock or other securities
of a corporation, the stock of which is listed on a national securities
exchange or is quoted on The Nasdaq Stock Market's National Market,
shall not constitute a breach of this Section 1, so long as Employee
does not in fact have the power to control, or direct the management
of, or is not otherwise engaged in activities with, such corporation.
For purposes hereof, the term "Competing Business" shall mean
any business or venture which is engaged, directly or indirectly, in
(i) developing, manufacturing, marketing, selling and/or distributing
(including wholesale distribution) of automobile or truck glass or
windshields or other glass products utilized in vehicles; repairing,
replacing or installing automobile or truck glass or windshields or
other glass products utilized in vehicles; or selling or installing
those kinds of automobile or truck accessories sold by the Company,
(ii) any other business engaged in or actively being developed by the
Company, or (iii) any other business which is substantially similar to
the whole or any significant part of the business conducted by the
Company.
<PAGE>
2. NO SOLICITATION.
During the Agreement Term, Employee shall not, directly or
indirectly, including on behalf of, for the benefit of, or in
conjunction with, any other person or entity, (i) solicit, assist,
advise, influence, induce or otherwise encourage in any way, any
employee of the Company to terminate its relationship with the Company
for any reason, nor assist any person or entity in doing so, or employ,
engage or otherwise contract with any employee or former employee of
the Company in a Competing Business or any other business unless such
former employee shall not have been employed by the Company for a
period of at least one year, (ii) interfere in any manner with the
relationship between any employee and the Company or (iii) contact,
service or solicit any existing clients, customers or accounts of the
Company on behalf of a Competing Business, either as an individual on
his own account, as an investor, or as an officer, director, partner,
joint venturer, consultant, employee, agent or salesman of any other
person or entity.
3. CONFIDENTIAL INFORMATION.
(a) "Confidential Information" shall mean confidential records
and information, including, but not limited to, development, marketing,
purchasing, organizational, strategic, financial, managerial,
administrative, manufacturing, production, distribution and sales
information, distribution methods, data, specifications and processes
(including the Transferred Property as hereinafter defined) presently
owned or at any time hereafter developed by the Company or its agents
or consultants or used presently or at any time hereafter in the course
of the business of the Company, that are not otherwise part of the
public domain.
(b) Employee hereby sells, transfers and assigns to the
Company, or to any person or entity designated by the Company, all of
his entire right, title and interest in and to all inventions, ideas,
methods, developments, disclosures and improvements (the "Inventions"),
whether patented or unpatented, and copyrightable material, and all
trademarks, trade names, all goodwill associated therewith and all
federal and state registrations or applications thereof, made, adopted
or conceived by solely or jointly, in whole or in part (collectively,
the "Transferred Property"), prior to or during the Agreement Term
which (i) relate to methods, apparatus, designs, products, processes or
devices sold, leased, used or under construction or development by the
Company or (ii) otherwise relate to or pertain to the business,
products, services, functions or operations of the Company. Employee
shall make adequate written records of all Inventions, which records
shall be the Company's property and shall communicate promptly and
disclose to the Company, in such form as the Company requests, all
information, details and data pertaining to the aforementioned
Inventions. Whether during the Agreement Term or thereafter, Employee
shall execute and deliver to the Company such formal transfers and
assignments and such other papers and documents as may be required of
Employee to permit the Company, or any person or entity designated by
the Company, to file and prosecute patent applications (including, but
not limited to, patent applications and any other records, memoranda or
instruments deemed necessary by the Company for the prosecution of a
patent application or the acquisition of letters patent in the United
States, foreign countries or otherwise) and, as to copyrightable
material, to obtain copyrights
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thereon, and as to trademarks, to record the transfer of ownership of
any federal or state registrations or applications.
(c) All such Confidential Information is considered secret and
will be disclosed to Employee in confidence, and Employee acknowledges
that, as a consequence of his employment and position with the Company,
Employee may have access to and become acquainted with Confidential
Information. Except in the performance of his duties as an employee of
the Company, Employee shall not, during the Agreement Term and at all
times thereafter, directly or indirectly for any reason whatsoever,
disclose or use any such Confidential Information. All records, files,
drawings, documents, equipment and other tangible items, wherever
located, relating in any way to or containing Confidential Information,
which Employee has prepared, used or encountered or shall in the future
prepare, use or encounter, shall be and remain the Company's sole and
exclusive property and shall be included in the Confidential
Information. Upon termination of this Agreement, or whenever requested
by the Company, Employee shall promptly deliver to the Company any and
all of the Confidential Information and copies thereof, not previously
delivered to the Company, that may be in the possession or under the
control of Employee. The foregoing restrictions shall not apply to the
use, divulgence, disclosure or grant of access to Confidential
Information to the extent, but only to the extent, (i) expressly
permitted or required pursuant to any other written agreement between
Employee and the Company, (ii) such Confidential Information has been
publicly disclosed (not due to a breach by Employee of his obligations
hereunder, or by breach of any other person, of a fiduciary or
confidential obligation to the Company) or (iii) Employee is required
to disclose Confidential Information by or to any court of competent
jurisdiction or any governmental or quasi-governmental agency,
authority or instrumentality of competent jurisdiction, provided,
however, that Employee shall, prior to any such disclosure, immediately
notify the Company of such requirement and provided further, however,
that the Company shall have the right, at its expense, to object to
such disclosures and to seek confidential treatment of any Confidential
Information to be so disclosed on such terms as it shall determine.
4. ACKNOWLEDGEMENT; REMEDIES; SURVIVAL OF THIS AGREEMENT.
(a) Employee acknowledges that violation of any of the
covenants and provisions set forth in this Agreement would cause the
Company irreparable damage and agrees that the Company's remedies at
law for a breach or threatened breach of any of the provisions of this
Agreement would be inadequate and, in recognition of this fact, in the
event of a breach or threatened breach by Employee of any of the
provisions of this Agreement, it is agreed that, in addition to the
remedies at law or in equity, the Company shall be entitled, without
the posting of a bond, to equitable relief in the form of specific
performance, a temporary restraining order, temporary or permanent
injunction, or any other equitable remedy which may then be available
for the purposes of restraining Employee from any actual or threatened
breach of such covenants. Without limiting the generality of the
foregoing, if Employee breaches or threatens to breach Sections 1, 2,
or 3 hereof, such breach or threatened breach will entitle the Company
to enjoin Employee from disclosing any Confidential Information to any
Competing Business, to enjoin any
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Competing Business from retaining Employee or using any such
Confidential Information, to enjoin Employee from engaging in any
activities prohibited by Section 2 hereof and/or to enjoin Employee
from rendering personal services to or in connection with any Competing
Business. The rights and remedies of the parties hereto are cumulative
and shall not be exclusive, and each such party shall be entitled to
pursue all legal and equitable rights and remedies and to secure
performance of the obligations and duties of the other under this
Agreement, and the enforcement of one or more of such rights and
remedies by a party shall in no way preclude such party from pursuing,
at the same time or subsequently, any and all other rights and remedies
available to it.
(b) The provisions of this Agreement shall survive the
termination of Employee's employment with Diamond.
5. NOTICES.
Any notice, request, consent or approval required or permitted
to be given under this Agreement or pursuant to law shall be sufficient
if in writing, and if and when sent by certified or registered mail,
return receipt requested, with postage prepaid, or by a nationally
recognized overnight courier service to Employee's residence (as
reflected in the Company's records or as otherwise designated by
Employee on thirty (30) days' prior written notice to the Company) or
to the Company's principal executive office, attention: President (with
copies to the General Counsel), as the case may be. All such notices,
requests, consents and approvals shall be effective upon being
deposited in the United States mail or upon delivery to such overnight
courier service. Rejection or other refusal to accept, or the inability
to deliver because of changed address of which no notice was given as
provided herein, shall be deemed to be receipt of the notice, request,
consent or approval sent.
6. NON-WAIVER.
Neither any course of dealing nor any failure or neglect of
either party hereto in any instance to exercise any right, power or
privilege hereunder or under law shall constitute a waiver of any other
right, power or privilege or of the same right, power or privilege in
any other instance. All waivers by either party hereto must be
contained in a written instrument signed by the party to be charged
and, in the case of the Company, by its duly authorized officer.
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7. ASSIGNMENT.
This Agreement shall inure to the benefit of and be
enforceable by, and may be assigned by the Company to, any existing or
future subsidiary or affiliate of the Company, any purchaser of all or
substantially all of the Company's business or assets, any successor to
the Company or any assignee thereof (whether direct or indirect, by
purchase, merger, consolidation or otherwise). This Agreement may not
be assigned by Employee.
8. ENTIRE AGREEMENT.
This Agreement together with the Employment Agreement entered
into between Employee and the Company, the Stock Purchase Agreement,
and the agreements entered into in connection therewith contain the
entire agreement of the parties relating to the subject matter hereof
and supersede all prior agreements and understandings between them.
9. SEVERABILITY; REASONABLENESS OF AGREEMENT.
If any term, provision or covenant of this Agreement or part
thereof, or the application thereof to any person, place or
circumstance shall be held to be invalid, unenforceable or void by a
court of competent jurisdiction, the remainder of this Agreement and
such term, provision or covenant shall remain in full force and effect,
and any such invalid, unenforceable or void term, provision or covenant
shall be deemed, without further action on the part of the parties
hereto, modified, amended and limited, and the court shall have the
power to modify, amend and limit any such term, provision or covenant,
to the extent necessary to render the same and the remainder of this
Agreement valid, enforceable and lawful. In this regard, Employee
understands that the provisions of Sections 1, 2, 3, and 4 may limit
his ability to earn a livelihood in a business similar or related to
the business of the Company, but nevertheless agrees and acknowledges
that (i) the provisions of Sections 1, 2, 3 and 4 hereof are reasonable
and necessary for the protection of the Company, and do not impose a
greater restraint than is necessary to protect the goodwill or other
business interests of the Company; (ii) such provisions contain
reasonable limitations as to the time and the scope of activity to be
restrained; and (iii) the consideration provided under the Stock
Purchase Agreement is sufficient to compensate Employee for the
restrictions contained in Sections 1, 2, 3 and 4 hereof. In
consideration of the foregoing and in light of Employee's education,
skills and abilities, Employee agrees that all defenses by Employee to
the strict enforcement of such provisions are hereby waived by
Employee.
10. HEADINGS.
The headings of the sections of this Agreement are provided
for convenience only and are intended to have no effect in construing
or interpreting this Agreement.
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11. GOVERNING LAW.
This Agreement, including the validity, interpretation,
construction and performance of this Agreement, shall be governed by
and construed in accordance with the internal laws of the State of New
York, without regard to principles of conflicts of law. All actions and
proceedings relating directly or indirectly to this Agreement shall be
litigated in any state court or federal court located in New York, New
York. The parties hereto expressly consent to the jurisdiction of any
such court and to venue therein and consent to the service of process
in any such action or proceeding by certified or registered mailing of
the summons and complaint therein directed to Employee or the Company
at the address as provided in Section 5 hereof.
12. AMENDMENT.
This Agreement may be amended only by a writing which makes
express reference to this Agreement as the subject of such amendment
and which is signed by Employee and, on behalf of the Company, by its
duly authorized officer.
13. COSTS AND EXPENSES.
Each party shall pay all of its own costs and expenses,
including reasonable legal fees, in connection with the execution,
delivery, performance and compliance with this Agreement by such party.
If an action or proceeding is commenced by a party to enforce or
interpret any provision of this Agreement, the non-prevailing party
shall promptly reimburse the prevailing party for the prevailing
party's reasonable costs and expenses of such action or proceeding,
including reasonable attorneys' fees.
14. COUNTERPARTS.
This Agreement may be executed in one or more counterparts,
all of which together shall be deemed one original.
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IN WITNESS WHEREOF, the Company has caused this Agreement to
be duly executed on its behalf by an officer thereunto duly authorized and
Employee has duly executed this Agreement, all as of the date and year first
written above.
DIAMOND TRIUMPH AUTO GLASS, INC.
By: /s/ Richard Rutta By: /s/ Kenneth Levine
----------------------------- ----------------------
Name: Richard Rutta Kenneth Levine
Title: Co-Chairman & Co-Chief
Executive Officer
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Exhibit 10.9
NON-COMPETITION AGREEMENT
THIS AGREEMENT (the "Agreement"), made this 31st day of March,
1998, by and between Richard Rutta, an individual presently residing at 626
Taylor Avenue, Scranton, PA 18510 ("Employee"), and Diamond Triumph Auto Glass,
Inc., a Delaware corporation ("Diamond"). As used herein, the term "Company"
shall refer, individually and/or collectively, as applicable, to Diamond and its
existing and future subsidiaries.
Green Equity Investors II, L.P. (the "Purchaser") would not
consummate the transactions contemplated by the Second Amended and Restated
Stock Purchase Agreement dated as of January 15, 1998 (the "Stock Purchase
Agreement") by and among the Purchaser, the Company, Kenneth Levine, Richard
Rutta and the other parties listed therein unless Employee delivers and complies
with all of the terms of this Agreement;
NOW, THEREFORE, in order to induce Employee to consummate the
transactions contemplated by the Stock Purchase Agreement, and in recognition
and acknowledgement of the Company's need to protect its goodwill and other
business interests and for other good and valuable consideration received by
Employee, the parties hereto, each intending to be legally bound, hereby
mutually covenant and agree as follows:
1. NON-COMPETITION.
For a period of five years from the date hereof (the
"Agreement Term"), Employee shall not, directly or indirectly, own,
manage, operate, join, control, participate in, invest in or otherwise
be connected or associated with, in any manner, including, without
limitation, as an officer, director, employee, distributor, independent
contractor, independent representative, partner, consultant, advisor,
agent, proprietor, trustee or investor, any Competing Business located
in any state or region (including foreign jurisdictions) where the
Company conducts business or is considering doing business; provided,
however, that ownership of 1% or less of the stock or other securities
of a corporation, the stock of which is listed on a national securities
exchange or is quoted on The Nasdaq Stock Market's National Market,
shall not constitute a breach of this Section 1, so long as Employee
does not in fact have the power to control, or direct the management
of, or is not otherwise engaged in activities with, such corporation.
For purposes hereof, the term "Competing Business" shall mean
any business or venture which is engaged, directly or indirectly, in
(i) developing, manufacturing, marketing, selling and/or distributing
(including wholesale distribution) of automobile or truck glass or
windshields or other glass products utilized in vehicles; repairing,
replacing or installing automobile or truck glass or windshields or
other glass products utilized in vehicles; or selling or installing
those kinds of automobile or truck accessories sold by the Company,
(ii) any other business engaged in or actively being developed by the
Company, or (iii) any other business which is substantially similar to
the whole or any significant part of the business conducted by the
Company.
<PAGE>
2. NO SOLICITATION.
During the Agreement Term, Employee shall not, directly or
indirectly, including on behalf of, for the benefit of, or in
conjunction with, any other person or entity, (i) solicit, assist,
advise, influence, induce or otherwise encourage in any way, any
employee of the Company to terminate its relationship with the Company
for any reason, nor assist any person or entity in doing so, or employ,
engage or otherwise contract with any employee or former employee of
the Company in a Competing Business or any other business unless such
former employee shall not have been employed by the Company for a
period of at least one year, (ii) interfere in any manner with the
relationship between any employee and the Company or (iii) contact,
service or solicit any existing clients, customers or accounts of the
Company on behalf of a Competing Business, either as an individual on
his own account, as an investor, or as an officer, director, partner,
joint venturer, consultant, employee, agent or salesman of any other
person or entity.
3. CONFIDENTIAL INFORMATION.
(a) "Confidential Information" shall mean confidential records
and information, including, but not limited to, development, marketing,
purchasing, organizational, strategic, financial, managerial,
administrative, manufacturing, production, distribution and sales
information, distribution methods, data, specifications and processes
(including the Transferred Property as hereinafter defined) presently
owned or at any time hereafter developed by the Company or its agents
or consultants or used presently or at any time hereafter in the course
of the business of the Company, that are not otherwise part of the
public domain.
(b) Employee hereby sells, transfers and assigns to the
Company, or to any person or entity designated by the Company, all of
his entire right, title and interest in and to all inventions, ideas,
methods, developments, disclosures and improvements (the "Inventions"),
whether patented or unpatented, and copyrightable material, and all
trademarks, trade names, all goodwill associated therewith and all
federal and state registrations or applications thereof, made, adopted
or conceived by solely or jointly, in whole or in part (collectively,
the "Transferred Property"), prior to or during the Agreement Term
which (i) relate to methods, apparatus, designs, products, processes or
devices sold, leased, used or under construction or development by the
Company or (ii) otherwise relate to or pertain to the business,
products, services, functions or operations of the Company. Employee
shall make adequate written records of all Inventions, which records
shall be the Company's property and shall communicate promptly and
disclose to the Company, in such form as the Company requests, all
information, details and data pertaining to the aforementioned
Inventions. Whether during the Agreement Term or thereafter, Employee
shall execute and deliver to the Company such formal transfers and
assignments and such other papers and documents as may be required of
Employee to permit the Company, or any person or entity designated by
the Company, to file and prosecute patent applications (including, but
not limited to, patent applications and any other records, memoranda or
instruments deemed necessary by the Company for the prosecution of a
patent application or the acquisition of letters patent in the United
States, foreign countries or otherwise) and, as to copyrightable
material, to obtain copyrights
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<PAGE>
thereon, and as to trademarks, to record the transfer of ownership of
any federal or state registrations or applications.
(c) All such Confidential Information is considered secret and
will be disclosed to Employee in confidence, and Employee acknowledges
that, as a consequence of his employment and position with the Company,
Employee may have access to and become acquainted with Confidential
Information. Except in the performance of his duties as an employee of
the Company, Employee shall not, during the Agreement Term and at all
times thereafter, directly or indirectly for any reason whatsoever,
disclose or use any such Confidential Information. All records, files,
drawings, documents, equipment and other tangible items, wherever
located, relating in any way to or containing Confidential Information,
which Employee has prepared, used or encountered or shall in the future
prepare, use or encounter, shall be and remain the Company's sole and
exclusive property and shall be included in the Confidential
Information. Upon termination of this Agreement, or whenever requested
by the Company, Employee shall promptly deliver to the Company any and
all of the Confidential Information and copies thereof, not previously
delivered to the Company, that may be in the possession or under the
control of Employee. The foregoing restrictions shall not apply to the
use, divulgence, disclosure or grant of access to Confidential
Information to the extent, but only to the extent, (i) expressly
permitted or required pursuant to any other written agreement between
Employee and the Company, (ii) such Confidential Information has been
publicly disclosed (not due to a breach by Employee of his obligations
hereunder, or by breach of any other person, of a fiduciary or
confidential obligation to the Company) or (iii) Employee is required
to disclose Confidential Information by or to any court of competent
jurisdiction or any governmental or quasi-governmental agency,
authority or instrumentality of competent jurisdiction, provided,
however, that Employee shall, prior to any such disclosure, immediately
notify the Company of such requirement and provided further, however,
that the Company shall have the right, at its expense, to object to
such disclosures and to seek confidential treatment of any Confidential
Information to be so disclosed on such terms as it shall determine.
4. ACKNOWLEDGEMENT; REMEDIES; SURVIVAL OF THIS AGREEMENT.
(a) Employee acknowledges that violation of any of the
covenants and provisions set forth in this Agreement would cause the
Company irreparable damage and agrees that the Company's remedies at
law for a breach or threatened breach of any of the provisions of this
Agreement would be inadequate and, in recognition of this fact, in the
event of a breach or threatened breach by Employee of any of the
provisions of this Agreement, it is agreed that, in addition to the
remedies at law or in equity, the Company shall be entitled, without
the posting of a bond, to equitable relief in the form of specific
performance, a temporary restraining order, temporary or permanent
injunction, or any other equitable remedy which may then be available
for the purposes of restraining Employee from any actual or threatened
breach of such covenants. Without limiting the generality of the
foregoing, if Employee breaches or threatens to breach Sections 1, 2,
or 3 hereof, such breach or threatened breach will entitle the Company
to enjoin Employee from disclosing any Confidential Information to any
Competing Business, to enjoin any
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<PAGE>
Competing Business from retaining Employee or using any such
Confidential Information, to enjoin Employee from engaging in any
activities prohibited by Section 2 hereof and/or to enjoin Employee
from rendering personal services to or in connection with any Competing
Business. The rights and remedies of the parties hereto are cumulative
and shall not be exclusive, and each such party shall be entitled to
pursue all legal and equitable rights and remedies and to secure
performance of the obligations and duties of the other under this
Agreement, and the enforcement of one or more of such rights and
remedies by a party shall in no way preclude such party from pursuing,
at the same time or subsequently, any and all other rights and remedies
available to it.
(b) The provisions of this Agreement shall survive the
termination of Employee's employment with Diamond.
5. NOTICES.
Any notice, request, consent or approval required or permitted
to be given under this Agreement or pursuant to law shall be sufficient
if in writing, and if and when sent by certified or registered mail,
return receipt requested, with postage prepaid, or by a nationally
recognized overnight courier service to Employee's residence (as
reflected in the Company's records or as otherwise designated by
Employee on thirty (30) days' prior written notice to the Company) or
to the Company's principal executive office, attention: President (with
copies to the General Counsel), as the case may be. All such notices,
requests, consents and approvals shall be effective upon being
deposited in the United States mail or upon delivery to such overnight
courier service. Rejection or other refusal to accept, or the inability
to deliver because of changed address of which no notice was given as
provided herein, shall be deemed to be receipt of the notice, request,
consent or approval sent.
6. NON-WAIVER.
Neither any course of dealing nor any failure or neglect of
either party hereto in any instance to exercise any right, power or
privilege hereunder or under law shall constitute a waiver of any other
right, power or privilege or of the same right, power or privilege in
any other instance. All waivers by either party hereto must be
contained in a written instrument signed by the party to be charged
and, in the case of the Company, by its duly authorized officer.
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<PAGE>
7. ASSIGNMENT.
This Agreement shall inure to the benefit of and be
enforceable by, and may be assigned by the Company to, any existing or
future subsidiary or affiliate of the Company, any purchaser of all or
substantially all of the Company's business or assets, any successor to
the Company or any assignee thereof (whether direct or indirect, by
purchase, merger, consolidation or otherwise). This Agreement may not
be assigned by Employee.
8. ENTIRE AGREEMENT.
This Agreement together with the Employment Agreement entered
into between Employee and the Company, the Stock Purchase Agreement,
and the agreements entered into in connection therewith contain the
entire agreement of the parties relating to the subject matter hereof
and supersede all prior agreements and understandings between them.
9. SEVERABILITY; REASONABLENESS OF AGREEMENT.
If any term, provision or covenant of this Agreement or part
thereof, or the application thereof to any person, place or
circumstance shall be held to be invalid, unenforceable or void by a
court of competent jurisdiction, the remainder of this Agreement and
such term, provision or covenant shall remain in full force and effect,
and any such invalid, unenforceable or void term, provision or covenant
shall be deemed, without further action on the part of the parties
hereto, modified, amended and limited, and the court shall have the
power to modify, amend and limit any such term, provision or covenant,
to the extent necessary to render the same and the remainder of this
Agreement valid, enforceable and lawful. In this regard, Employee
understands that the provisions of Sections 1, 2, 3, and 4 may limit
his ability to earn a livelihood in a business similar or related to
the business of the Company, but nevertheless agrees and acknowledges
that (i) the provisions of Sections 1, 2, 3 and 4 hereof are reasonable
and necessary for the protection of the Company, and do not impose a
greater restraint than is necessary to protect the goodwill or other
business interests of the Company; (ii) such provisions contain
reasonable limitations as to the time and the scope of activity to be
restrained; and (iii) the consideration provided under the Stock
Purchase Agreement is sufficient to compensate Employee for the
restrictions contained in Sections 1, 2, 3 and 4 hereof. In
consideration of the foregoing and in light of Employee's education,
skills and abilities, Employee agrees that all defenses by Employee to
the strict enforcement of such provisions are hereby waived by
Employee.
10. HEADINGS.
The headings of the sections of this Agreement are provided
for convenience only and are intended to have no effect in construing
or interpreting this Agreement.
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<PAGE>
11. GOVERNING LAW.
This Agreement, including the validity, interpretation,
construction and performance of this Agreement, shall be governed by
and construed in accordance with the internal laws of the State of New
York, without regard to principles of conflicts of law. All actions and
proceedings relating directly or indirectly to this Agreement shall be
litigated in any state court or federal court located in New York, New
York. The parties hereto expressly consent to the jurisdiction of any
such court and to venue therein and consent to the service of process
in any such action or proceeding by certified or registered mailing of
the summons and complaint therein directed to Employee or the Company
at the address as provided in Section 5 hereof.
12. AMENDMENT.
This Agreement may be amended only by a writing which makes
express reference to this Agreement as the subject of such amendment
and which is signed by Employee and, on behalf of the Company, by its
duly authorized officer.
13. COSTS AND EXPENSES.
Each party shall pay all of its own costs and expenses,
including reasonable legal fees, in connection with the execution,
delivery, performance and compliance with this Agreement by such party.
If an action or proceeding is commenced by a party to enforce or
interpret any provision of this Agreement, the non-prevailing party
shall promptly reimburse the prevailing party for the prevailing
party's reasonable costs and expenses of such action or proceeding,
including reasonable attorneys' fees.
14. COUNTERPARTS.
This Agreement may be executed in one or more counterparts,
all of which together shall be deemed one original.
[THE BALANCE OF THIS PAGE IS INTENTIONALLY LEFT BLANK]
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<PAGE>
IN WITNESS WHEREOF, the Company has caused this Agreement to
be duly executed on its behalf by an officer thereunto duly authorized and
Employee has duly executed this Agreement, all as of the date and year first
written above.
DIAMOND TRIUMPH AUTO GLASS, INC.
By: /s/ Kenneth Levine /s/ Richard Rutta
------------------------- --------------------------
Name: Kenneth Levine Richard Rutta
Title: Co-Chairman & Co-Chief
Executive Officer
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Exhibit 10.10
MANAGEMENT SERVICES AGREEMENT
This MANAGEMENT SERVICES AGREEMENT (the "Agreement"), dated as
of March 31, 1998, is made by and between DIAMOND TRIUMPH AUTO GLASS, INC., a
Delaware corporation ("Diamond"), and LEONARD GREEN & PARTNERS, L.P. ("LGP"). As
used herein, the term "Company" shall refer to DIAMOND and its existing and
future subsidiaries.
The Company desires to obtain from LGP, and LGP desires to
provide, certain management, consulting and financial planning services on an
ongoing basis and certain financial advisory and investment banking services in
connection with major financial transactions that may be undertaken from time to
time in the future;
NOW, THEREFORE, in consideration of the foregoing and the
mutual agreements contained herein, the parties hereto, intending to be legally
bound, hereby agree as follows:
1. Retention.
1.1 General Services. Subject to the terms and conditions
hereof, Diamond hereby retains LGP, and LGP hereby agrees to be retained by
Diamond, to provide management, consulting and financial planning services to
the Company on an ongoing basis in connection with the operation and growth of
the Company during the term of this Agreement (the "General Services").
1.2 Major Transaction Services. Subject to the terms and
conditions hereof, Diamond hereby retains LGP, and LGP hereby agrees to be
retained by Diamond, to provide financial advisory and investment banking
services to the Company in connection with major financial transactions ("Major
Transactions") that may be undertaken from time to time in the future ("Major
Transaction Services" and, together with the General Services, the "Services").
2. Compensation.
2.1 General Services Fee. In consideration of the General
Services, Diamond shall pay LGP an aggregate annual fee of $685,000. Such fee
shall be payable in equal monthly installments, in advance, on the first day of
each month commencing on the first such day following the date hereof.
2.2 Major Transaction Services Fee. In consideration of Major
Transaction Services provided by LGP from time to time, Diamond shall pay LGP
reasonable and customary fees for services of like kind, taking into
consideration all relevant factors, including but not limited to, the complexity
of the subject Major Transaction, the time devoted to providing such services,
and the value of LGP's investment banking expertise and relationships within the
business and financial community. The amount of such fees shall be (a) approved
in accordance with the procedures set forth in Diamond's charter documents or
financing agreements, or, if no such procedures are set forth therein, (b)
either (i) approved by a majority of the Board of
<PAGE>
Directors of Diamond or (ii) fair to Diamond from a financial point of view in
the opinion of an independent nationally recognized investment banking firm.
2.3 Expenses. In addition to the fees to be paid to LGP under
Section 2.1 and 2.2 hereof, Diamond shall pay to, or on behalf of, LGP, promptly
as billed, all reasonable out-of-pocket expenses incurred by LGP in connection
with the Services rendered hereunder. Such expenses shall include, among other
things, fees and disbursements of counsel, travel expenses, word processing
charges, messenger and duplicating services, facsimile expenses and other
customary expenditures.
3. Term.
3.1 Termination. This Agreement shall terminate on the tenth
anniversary of this Agreement. Notwithstanding the foregoing, this Agreement may
be terminated at any time by LGP by written notice to Diamond.
3.2 Survival of Certain Obligations. Notwithstanding any other
provision hereof, Diamond's obligation to pay amounts due pursuant to Section 2
hereof with respect to periods prior to the termination hereof and the
provisions of Section 5 hereof shall survive any termination of this Agreement.
4. Decisions/Authority of Management Advisor.
4.1 Decisions by Company. The Company reserves the right to
make all decisions with regard to any matter upon which LGP has rendered its
advice and consultation, and there shall be no liability to LGP for any such
advice accepted by the Company pursuant to the provisions of this Agreement or
otherwise.
4.2 Independent Contractor. LGP shall act solely as an
independent contractor and shall have complete charge of its personnel engaged
in the performance of the Services. As an independent contractor, LGP shall have
authority only to act as an advisor to the Company and shall have no authority
to enter into any agreement or to make any representation, commitment or
warranty binding upon the Company or to obtain or incur any right, obligation or
liability on behalf of the Company.
5. Indemnification.
5.1 Indemnification/Reimbursement of Expenses. Each Company
shall, jointly and severally, (i) indemnify, defend and hold harmless LGP and
Green Equity Investors II, L.P. ("GEI"), their respective affiliates, and the
partners, directors, officers, employees, agents and controlling persons of LGP
and GEI and their respective affiliates (collectively, the "Indemnified
Parties"), to the fullest extent permitted by law, from and against any and all
losses, claims, damages and liabilities, joint or several, to which any
Indemnified Party may become subject, caused by, related to or arising out of
the Services or any other advice or services contemplated by this Agreement or
the engagement of LGP pursuant to, and the performance by LGP of the Services
contemplated by, this Agreement, and (ii) promptly reimburse each Indemnified
Party for all costs and expenses (including reasonable attorneys' fees and
expenses), as incurred, in connection with the investigation of, preparation for
or
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<PAGE>
defense of any pending or threatened claim or any action or proceeding arising
therefrom, whether or not such Indemnified Party is a party and whether or not
such claim, action or proceeding is initiated or brought by or on behalf of any
Company and whether or not resulting in any liability.
5.2 Limited Liability. The Company shall not be liable under
the indemnification contained in Section 5.1 to the extent that such loss,
claim, damage, liability, cost or expense is found in a final non-appealable
judgment by a court to have resulted from LGP's bad faith or gross negligence.
The Company further agrees that no Indemnified Party shall have any liability
(whether direct or indirect, in contract, tort or otherwise) to the Company,
holders of their securities or their creditors related to or arising out of the
engagement of LGP pursuant to, or the performance by LGP of the Services
contemplated by, this Agreement, except to the extent that any loss, claim,
damage, liability, cost or expense is found in a final non-appealable judgment
by a court to have resulted from LGP's bad faith or gross negligence.
5.3 Contribution. In order to provide for just and equitable
contribution, if a claim for indemnification pursuant to this Agreement is made
but is found in a final non-appealable judgment by a court that such
indemnification may not be enforced in such case, even though the express
provisions hereof provide for indemnification in such case, then the Company on
the one hand, and LGP on the other hand, shall contribute to the losses, claims,
damages, liabilities, costs and expenses to which the Indemnified Parties may be
subject in accordance with the relative benefits received by the Company, on the
one hand, and LGP, on the other hand, and also the relative fault of the
Company, on the one hand, and LGP, on the other hand, in connection with the
statements, acts or omissions which resulted in such losses, claims, damages,
liabilities, costs and expenses and the relevant equitable considerations shall
also be considered. No person found liable for fraudulent misrepresentation
shall be entitled to contribution from any person who is not also found liable
for such fraudulent misrepresentation. Notwithstanding the foregoing, LGP shall
not be obligated to contribute any amount hereunder that exceeds the amount of
fees previously received by it pursuant to this Agreement.
6. Subordination.
6.1 Agreement to Subordinate. LGP agrees that, to the extent
set forth in this Section 6, all payments and fees owed to LGP pursuant to this
Agreement shall be subordinated in right of payment to the payment in full in
cash or cash equivalents of all Senior Indebtedness whether outstanding on the
date hereof or hereafter created, incurred, assumed or guaranteed, and that such
subordination is for the benefit of the holders of Senior Indebtedness. For
purposes of this Section 6, the term "Senior Indebtedness" means indebtedness of
the Company under the 9-1/4% Senior Notes due 2008 of the Company.
6.2 Relative Rights. Upon any distribution of assets of the
Company, winding up, total or partial liquidation or reorganization of the
Company, whether voluntary or involuntary, the holders of all Senior
Indebtedness shall be entitled to receive payment on such Senior Indebtedness in
full in cash or cash equivalent before LGP shall be entitled to receive any
payments pursuant to this Agreement. No payment (by set-off or otherwise) may be
made by or on behalf of the Company pursuant to this Agreement, for cash or
property, (i) upon the maturity of any Senior Indebtedness of the Company by
lapse of time, acceleration or otherwise, unless
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<PAGE>
and until all principal of, premium, if any, and the interest on and fees in
respect of such Senior Indebtedness are paid in full in cash or cash
equivalents, (ii) when such payment is prohibited by the Indenture relating to
the Senior Indebtedness (the "Indenture") and (iii) in the event of default in
the payment of any principal of, premium, if any, or interest on and fees in
respect of Senior Indebtedness of the Company when it becomes due and payable,
whether at maturity or at a date fixed for prepayment or by declaration or
otherwise (a "Payment Default"), unless and until such Payment Default has been
cured or waived or otherwise has ceased to exist.
6.3 When Amounts Must be Paid Over. In the event that,
notwithstanding the other provisions of this Agreement, LGP receives any payment
or distribution of any payment or fees pursuant to this Agreement at a time when
LGP has actual knowledge that such payment or distribution is prohibited by this
Section 6 or the Indenture, such payment or distribution shall be held by LGP in
trust for the benefit of, and shall be paid forthwith over and delivered, upon
written request, to, the holders of Senior Indebtedness remaining unpaid or
unprovided for, or to the trustee or trustees under the Indenture, ratably
according to aggregate principal amounts remaining unpaid on account of such
Senior Indebtedness held or represented by such, for application to the payment
of all obligations with respect to Senior Indebtedness remaining unpaid, to the
extent necessary to pay or to provide for the payment of all such obligations in
full in cash or cash equivalents in accordance with their terms, after giving
effect to any concurrent payment or distribution to or for holders of Senior
Indebtedness.
7. Miscellaneous.
7.1 Assignment. None of the parties hereto shall assign this
Agreement or the rights and obligations hereunder, in whole or in part, without
the prior written consent of the other party; provided, however, that, without
obtaining such consent, LGP may assign this Agreement or its rights and
obligations hereunder to (i) any of its affiliates; (ii) any investment manager,
investment advisor or partner of LGP, or any principal or beneficial owner of
any of the foregoing; or (iii) any investment fund, investment account or
investment entity whose investment manager, investment advisor or partner, or
any principal or beneficial owner of any of the foregoing, is either LGP or any
person identified in (i) or (ii) above. Subject to the foregoing, this Agreement
will be binding upon and inure solely for the benefit of the parties hereto and
their respective successors and assigns, and no other person shall acquire or
have any right hereunder or by virtue hereof.
7.2 Governing Law. This Agreement shall be governed by and
construed in accordance with the internal laws of the State of New York as
applied to contracts made and performed within the State of New York without
regard to principles of conflict of laws.
7.3 Severability. 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 best 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.
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<PAGE>
7.4 Entire Agreement. This Agreement contains the entire
agreement between the parties with respect to the subject matter of this
Agreement and memorializes and supersedes all written or verbal representations,
warranties, commitments and other understandings prior to the date of this
Agreement with respect to the subject matter hereof.
7.5 Further Assurances. The parties hereto agree to use all
reasonable efforts to obtain all consents and approvals and to do all other
things necessary to consummate the transactions contemplated by this Agreement.
The parties agree to take such further action and to deliver or cause to be
delivered any additional agreements or instruments as any of them may reasonably
request for the purpose of carrying out this Agreement and the agreements and
transactions contemplated hereby.
7.6 Attorneys' Fees. In any action or proceeding brought to
enforce any provision of this Agreement, or where any provision hereof is
validly asserted as a defense, the prevailing party, as determined by the court,
shall be entitled to recover reasonable attorneys' fees in addition to any other
available remedy.
7.7 Headings. The headings in this Agreement are for
convenience and reference only and shall not limit or otherwise affect the
meaning hereof.
7.8 Amendment and Waiver. This Agreement may be amended,
modified or supplemented, and waivers or consents to departures from the
provisions hereof may be given, provided that the same are in writing and signed
by each of the parties hereto. No waiver by any party hereto at any time of any
breach by another party hereto of, or compliance with, any condition or
provision of this Agreement to be performed by such other party shall be deemed
a waiver of similar or dissimilar provisions or conditions at the same time or
at any prior or subsequent time.
7.9 Counterparts. This Agreement may be executed in any number
of counterparts 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.
[THE BALANCE OF THIS PAGE IS INTENTIONALLY LEFT BLANK.]
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<PAGE>
IN WITNESS WHEREOF, the parties have executed this Management
Services Agreement on the date first appearing above
DIAMOND TRIUMPH AUTO GLASS, INC.
By: /s/ Kenneth Levine
--------------------------------
Name: Kenneth Levine
Title: Co-Chairman & Co-Chief
Executive Officer
LEONARD GREEN & PARTNERS, L.P.
By: LGP Management, Inc.,
its general partner
By: /s/ Gregory Annick
--------------------------------
Name: Gregory Annick
Title:
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Exhibit 10.12
DIAMOND TRIUMPH AUTO GLASS, INC.
1998 MANAGEMENT STOCK OPTION PLAN
1. Background; Purpose. The purpose of this Diamond Triumph
Auto Glass, Inc. 1998 Management Stock Option Plan (the "Plan") is to provide
for key employees of Diamond Triumph Auto Glass, Inc., a Delaware corporation
(the "Company"), and its Subsidiaries (as hereinafter defined) an incentive (a)
to remain in the service of the Company or its Subsidiaries, (b) to enhance the
long-term performance of the Company, and (c) to acquire a proprietary interest
in the Company.
The Company intends that awards of Stock Options, and the
issuance of Common Stock upon exercise of Stock Options hereunder (all as
hereinafter defined), shall constitute the offer and sale of securities pursuant
to a compensatory benefit plan within the meaning of Rule 701 promulgated under
the Securities Act of 1933, as amended (the "Securities Act"). The Plan will
provide a means whereby key employees of the Company and its Subsidiaries may
purchase shares of Common Stock, par value $.01 per share, of the Company
("Common Stock") pursuant to "non-incentive" or "non-qualified" Stock Options.
2. Administration. The Plan shall be administered by the Board
of Directors of the Company or, in the discretion of the Board, a Committee (in
either case, the "Committee"), consisting of three or more directors of the
Company to whom administration of the Plan has been duly delegated. If the
Committee is not the entire Board of Directors, the Committee shall be appointed
by the Board of Directors of the Company. From and after such time as the
Company is subject to the reporting requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), the Plan shall
be administered only by the Committee, which shall then consist solely of
persons who are "non-employee directors" within the meaning of Rule 16b-3
promulgated under the Exchange Act and "outside directors" within the meaning of
Section 162(m) of the Code (as hereinafter defined). Except as otherwise
provided in the Company's By-laws, any action of the Committee with respect to
administration of the Plan shall be taken by a majority vote at a meeting at
which a quorum is duly constituted or unanimous written consent of the
Committee's members.
Subject to the provisions of the Plan, the Committee shall
have full, unconditional, sole and final discretion and authority (i) to
construe and interpret the Plan and the Stock Option Agreements (as hereinafter
defined), (ii) to define the terms used herein, (iii) to prescribe, amend and
rescind rules and regulations relating to the Plan, (iv) to make awards of
options to purchase Common Stock ("Stock Options") hereunder, (v) to determine
the individuals to whom and the time or times at which awards of Stock Options
shall be made, the number of shares of Common Stock to be subject to such
awards, the vesting of such Stock Options, the time or times when vested Stock
Options become exercisable and the other terms of such Stock Options, (vi) to
determine the circumstances under which vesting or
<PAGE>
exercisability of any Stock Option may be accelerated, (vii) to determine the
exercise price (which shall not be less than the fair market value per share of
Common Stock on the date of the award as determined by the Committee), and the
duration of each Stock Option (which shall not be more than ten years), (viii)
to approve and determine the duration of leaves of absence which may be granted
to "Participants" (as defined below) without constituting a termination of their
employment or continuous service for the purposes of the Plan or the relevant
Stock Option Agreement (as defined below), (ix) to amend the terms of any
outstanding Stock Option, with consent of the holder (or as otherwise provided
in this Plan), and (x) to make all other determinations necessary or advisable
for the administration of the Plan. All determinations and interpretations made
by the Committee shall be binding and conclusive on all Participants in the Plan
and their legal representatives and beneficiaries.
3. Shares Subject to the Plan. The shares to be sold upon the
exercise of Stock Options awarded under this Plan shall consist of the Company's
authorized but unissued Common Stock. Subject to adjustment as provided in
Section 6 hereof, the aggregate number of shares of Common Stock which may be
sold upon the exercise of Stock Options awarded to Participants shall not exceed
Thirty Thousand (30,000) of such shares. Shares of Common Stock that are subject
to Stock Options that lapse or terminate without exercise shall be available to
be subject to newly issued Stock Options under the Plan.
4. Eligibility and Participation. All key employees of the
Company and its "Subsidiaries" (as defined in Section 424(f) of the Internal
Revenue Code of 1986, as amended (the "Code")) shall be eligible for selection
to participate in the Plan (each, a "Participant").
5. Awards. A Participant may receive one or more awards
hereunder, at any time and from time to time, as determined by the Committee.
Awards shall be in the form of Stock Options. All awards of Stock Options shall
be pursuant to, and shall be subject to the terms and restrictions provided in,
a Management Stock Option and Stockholders Agreement (a "Stock Option
Agreement") in a form determined by the Committee. Stock Options shall not be
transferrable by a Participant either voluntarily or by operation of law, other
than by will or by the laws of descent and distribution, and shall be
exercisable during the Participants's lifetime only by the Participant. Subject
to the terms of the Plan, the Committee shall determine the exact terms and
restrictions included in each Stock Option Agreement with respect to each award
to a Participant.
6. Adjustments. If the outstanding shares of the Common Stock
of the Company are increased, decreased, changed into or exchanged for a
different number of kind of shares or securities of the Company through:
(i) a distribution or payment of a dividend on the Common
Stock in shares of Common Stock;
-2-
<PAGE>
(ii) subdivision of reclassification, in a stock split or
similar transaction, of the outstanding shares of Common Stock into a
greater number of shares;
(iii) combination or reclassification of, in a reverse stock
split or similar transaction, the outstanding shares of Common Stock
into a smaller number of shares; or
(iv) issuance of any shares of capital stock by
reclassification of the Common Stock
then an appropriate and proportionate adjustment shall be made in the maximum
number and kind of shares which may be subject to Stock Options under this Plan
and to the number and kind of shares which are subject to outstanding Stock
Options.
Adjustments under this Section 6 shall be made by the
Committee, whose determination as to what adjustments shall be made, and the
extent thereof, shall be final, binding and conclusive.
7. Withholding Tax. The Company shall have the right to take
whatever steps the Committee deems necessary or appropriate to comply with all
applicable federal, state, local, and employment tax withholding requirements,
and the Company's obligations to deliver shares upon the exercise of Stock
Options under this Plan shall be conditioned upon compliance with all such
withholding tax requirements. Without limiting the generality of the foregoing,
upon the exercise of a Stock Option, the Company shall have the right to
withhold taxes from any other compensation or other amounts which it may owe to
the employee or to require such employee to pay to the Company the amount of any
taxes which the Company may be required to withhold with respect to such
exercise. Without limiting the generality of the foregoing, the Committee in its
discretion may authorize a Participant to satisfy all or part of any withholding
tax liability by (A) having the Company from the shares which would otherwise be
issued on the exercise of a Stock Option that number of shares having a fair
market value as of the date the withholding tax liability arises equal to or
less than the amount of the withholding tax liability, or (B) by delivering to
the Company previously-owned and unencumbered shares of the Common Stock of the
Company having a fair market value as of the date the withholding tax liability
arises equal to or less than the amount of the withholding tax liability.
8. Amendment and Termination of Plan. The Board may at any
time suspend or terminate the Plan. The Board may also at any time amend or
revise the terms of the Plan, provided that no such amendment or revision shall,
unless appropriate stockholder approval of such amendment or revision is
obtained, increase the maximum number of shares in the aggregate which may be
sold pursuant to Stock Options granted under the Plan, except as permitted under
the provisions of Section 6, or permit the granting of Stock Options to anyone
other
-3-
<PAGE>
than as provided in Section 4, or otherwise materially increase the benefits
accruing to Participants under the Plan.
Notwithstanding the foregoing, no amendment, suspension or
termination of the Plan that would materially adversely affect any rights or
obligations of any Participant under any Stock Option Agreement shall be
effective as to such Participant unless there shall have been specific action of
the Committee and written consent of the Participant; provided, however, that
the Board or the Committee may unilaterally amend this Plan or any Stock Option
Agreement, without the consent of the Participant, if such amendment is
necessary or desirable to comply with the Securities Act, state blue sky laws,
or applicable requirements of any principal securities exchange or market on
which shares of the same class of securities are listed or traded.
9. No Employment Rights. The selection of any person to
receive an award under the Plan shall not give such person any right to be
retained in the employment of, or to continue to render services to, the Company
or any of its Subsidiaries or any of their affiliates and the right and the
power of the Company or its Subsidiaries to discharge or terminate its
relationship with any such person shall not be affected by such award. No person
shall have any right or claim whatever, directly, indirectly or by implication,
to receive an award, nor any expectancy thereof, unless and until an award in
fact shall have been made to such person by the Committee as provided herein.
The award to any person hereunder at any time shall not create any right or
implication that any other or further award may or shall be made at another
time. Each award hereunder shall be separate and distinct from every other award
and shall not be construed as a part of any continuing series of awards or
compensation.
10. Plan Not Exclusive. The Plan is not exclusive. The Company
may have other plans, programs and arrangements for compensation or the issuance
of shares of capital stock or options relating thereto. The Plan does not
require that Participants hereunder be precluded from participation in such
other plans, programs and arrangements.
11. Effective Date and Term. This Plan shall be effective when
it has been adopted by the Board of Directors of the Company, provided that it
is approved by the holders of the outstanding voting stock of the Company within
12 months thereafter. The term of this Plan shall commence on the date of its
adoption by the Board and shall expire on the tenth (10th) anniversary of such
date, unless earlier terminated.
-4-
EXHIBIT 23.1
Consent of Independent Public Accountants
The Board of Directors
Diamond Triumph Auto Glass, Inc.:
We consent to the use in this Registration Statement on Form S-4 of Diamond
Triumph Auto Glass, Inc. of our report dated February 22, 2000, except for Note
12 which is as of March 27, 2000, on the financial statements of Diamond Triumph
Auto Glass, Inc. appearing in the prospectus, which is part of the Registration
Statement, and to the reference to our firm under the heading "Experts" in the
prospectus.
/s/ KPMG LLP
Allentown, Pennsylvania
March 27, 2000
Exhibit 25
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM T-1
---------
STATEMENT OF ELIGIBILITY UNDER THE
TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
Check if an Application to Determine Eligibility
of a Trustee Pursuant to Section 305(b)(2)
STATE STREET BANK AND TRUST COMPANY
(Exact name of trustee as specified in its charter)
Massachusetts 04-1867445
(Jurisdiction of incorporation or (I.R.S. Employer
organization if not a U.S. national bank) Identification No.)
225 Franklin Street, Boston, Massachusetts 02110
(Address of principal executive offices) (Zip Code)
Maureen Scannell Bateman, Esq. Executive Vice President and General Counsel
225 Franklin Street, Boston, Massachusetts 02110
(617) 654-3253
(Name, address and telephone number of agent for service)
Diamond Triumph Auto Glass, Inc.
(Exact name of obligor as specified in its charter)
Pennsylvania 23-2758853
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
220 Division Street, Kingston, Pennsylvania 18704
(Address of principal executive offices) (Zip Code)
9 1/4% Senior Notes due 2008
(Title of indenture securities)
<PAGE>
GENERAL
Item 1. General Information.
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervisory authority to which
it is subject.
Department of Banking and Insurance of The Commonwealth of
Massachusetts, 100 Cambridge Street, Boston, Massachusetts.
Board of Governors of the Federal Reserve System, Washington, D.C.,
Federal Deposit Insurance Corporation, Washington, D.C.
(b) Whether it is authorized to exercise corporate trust powers. Trustee
is authorized to exercise corporate trust powers.
Item 2. Affiliations with Obligor.
If the Obligor is an affiliate of the trustee, describe each such
affiliation.
The obligor is not an affiliate of the trustee or of its parent,
State Street Corporation.
(See note on page 2.)
Item 3. through Item 15. Not applicable.
Item 16. List of Exhibits.
List below all exhibits filed as part of this statement of eligibility.
1. A copy of the articles of association of the trustee as now in effect.
A copy of the Articles of Association of the trustee, as now
in effect, is on file with the Securities and Exchange Commission as
Exhibit 1 to Amendment No. 1 to the Statement of Eligibility and
Qualification of Trustee (Form T-1) filed with the Registration Statement
of Morse Shoe, Inc. (File No. 22-17940) and is incorporated herein by
reference thereto.
2. A copy of the certificate of authority of the trustee to commence
business, if not contained in the articles of association.
A copy of a Statement from the Commissioner of Banks of
Massachusetts that no certificate of authority for the trustee to commence
business was necessary or issued is on file with the Securities and
Exchange Commission as Exhibit 2 to Amendment No. 1 to the Statement of
Eligibility and Qualification of Trustee (Form T-1) filed with the
Registration Statement of Morse Shoe, Inc. (File No. 22-17940) and is
incorporated herein by reference thereto.
3. A copy of the authorization of the trustee to exercise corporate trust
powers, if such authorization is not contained in the documents specified
in paragraph (1) or (2), above.
A copy of the authorization of the trustee to exercise
corporate trust powers is on file with the Securities and Exchange
Commission as Exhibit 3 to Amendment No. 1 to the Statement of Eligibility
and Qualification of Trustee (Form T-1) filed with the Registration
Statement of Morse Shoe, Inc. (File No. 22-17940) and is incorporated
herein by reference thereto.
4. A copy of the existing by-laws of the trustee, or instruments
corresponding thereto.
A copy of the by-laws of the trustee, as now in effect, is on
file with the Securities and Exchange Commission as Exhibit 4
to the Statement of Eligibility and Qualification of Trustee
(Form T-1) filed with the Registration Statement of Eastern
Edison Company (File No. 33-37823) and is incorporated herein
by reference thereto.
1
<PAGE>
5. A copy of each indenture referred to in Item 4. if the obligor is in
default.
Not applicable.
6. The consents of United States institutional trustees required by
Section 321(b) of the Act.
The consent of the trustee required by Section 321(b) of the
Act is annexed hereto as Exhibit 6 and made a part hereof.
7. A copy of the latest report of condition of the trustee published
pursuant to law or the requirements of its supervising or examining authority.
A copy of the latest report of condition of the trustee
published pursuant to law or the requirements of its supervising or
examining authority is annexed hereto as Exhibit 7 and made a part
hereof.
NOTES
In answering any item of this Statement of Eligibility which relates to
matters peculiarly within the knowledge of the obligor or any underwriter for
the obligor, the trustee has relied upon information furnished to it by the
obligor and the underwriters, and the trustee disclaims responsibility for the
accuracy or completeness of such information.
The answer furnished to Item 2. of this statement will be amended, if
necessary, to reflect any facts which differ from those stated and which would
have been required to be stated if known at the date hereof.
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, as
amended, the trustee, State Street Bank and Trust Company, a corporation
organized and existing under the laws of The Commonwealth of Massachusetts, has
duly caused this statement of eligibility to be signed on its behalf by the
undersigned, thereunto duly authorized, all in the City of Boston and The
Commonwealth of Massachusetts, on the 9th day of March, 2000.
STATE STREET BANK AND TRUST COMPANY
By: /s/ Dennis Fisher
-------------------------------------
NAME: Dennis Fisher
TITLE: Assistant Vice President
2
<PAGE>
EXHIBIT 6
CONSENT OF THE TRUSTEE
Pursuant to the requirements of Section 321(b) of the Trust Indenture
Act of 1939, as amended, in connection with the proposed issuance by Diamond
Triumph Auto Glass, Inc.. of its 9 1/4 % Senior Notes due 2008, we hereby
consent that reports of examination by Federal, State, Territorial or District
authorities may be furnished by such authorities to the Securities and Exchange
Commission upon request therefor.
STATE STREET BANK AND TRUST COMPANY
By: /s/ Dennis Fisher
-------------------------------------
NAME: Dennis Fisher
TITLE: Assistant Vice President
Dated:
March 8th 2000
3
<PAGE>
EXHIBIT 7
Consolidated Report of Condition of State Street Bank and Trust Company,
Massachusetts and foreign and domestic subsidiaries, a state banking institution
organized and operating under the banking laws of this commonwealth and a member
of the Federal Reserve System, at the close of business December 31, 1997,
published in accordance with a call made by the Federal Reserve Bank of this
District pursuant to the provisions of the Federal Reserve Act and in accordance
with a call made by the Commissioner of Banks under General Laws, Chapter 172,
Section 22(a).
<TABLE>
<CAPTION>
Thousands of
ASSETS Dollars
<S> <C>
Cash and balances due from depository institutions:
Noninterest-bearing balances and currency and coin ................ 2,220,829
Interest-bearing balances ........................................ 10,076,045
Securities ................................................................. 10,373,821
Federal funds sold and securities purchased
under agreements to resell in domestic offices
of the bank and its Edge subsidiary ............................... 5,124,310
Loans and lease financing receivables:
Loans and leases, net of unearned income .......................... 6,270,348
Allowance for loan and lease losses ............................... 82,820
Allocated transfer risk reserve ................................... 0
Loans and leases, net of unearned income and allowances ........... 6,187,528
Assets held in trading accounts ............................................ 1,241,555
Premises and fixed assets .................................................. 410,029
Other real estate owned .................................................... 100
Investments in unconsolidated subsidiaries ............................... 38,831
Customers' liability to this bank on acceptances outstanding ............... 44,962
Intangible assets .......................................................... 224,049
Other assets ............................................................... 1,507,650
Total assets ............................................................... 37,449,709
LIABILITIES
Deposits:
In domestic offices ............................................. 10,115,205
Noninterest-bearing ...................................... 7,739,136
Interest-bearing ......................................... 2,376,069
In foreign offices and Edge subsidiary ............................ 14,791,134
Noninterest-bearing ...................................... 71,889
Interest-bearing ......................................... 14,719,245
Federal funds purchased and securities sold under
agreements to repurchase in domestic offices of
the bank and of its Edge subsidiary ............................... 7,603,920
Demand notes issued to the U.S. Treasury and Trading Liabilities ........... 194,059
Trading liabilities ........................................................ 1,036,905
Other borrowed money ....................................................... 459,252
Subordinated notes and debentures .......................................... 0
Bank's liability on acceptances executed and outstanding ................... 44,962
Other liabilities .......................................................... 972,782
Total liabilities .......................................................... 35,218,219
EQUITY CAPITAL
Perpetual preferred stock and related surplus .............................. 0
Common stock ............................................................... 29,931
Surplus .................................................................... 444,620
Undivided profits and capital reserves/Net unrealized holding gains (losses) 1,763,076
Cumulative foreign currency translation adjustments ........................ (6,137)
Total equity capital ....................................................... 2,231,490
Total liabilities and equity capital ....................................... 37,449,709
</TABLE>
4
<PAGE>
I, Rex S. Schuette, Senior Vice President and Comptroller of the above named
bank do hereby declare that this Report of Condition has been prepared in
conformance with the instructions issued by the Board of Governors of the
Federal Reserve System and is true to the best of my knowledge and belief.
/s/ Rex S. Schuette
We, the undersigned directors, attest to the correctness of this Report of
Condition and declare that it has been examined by us and to the best of our
knowledge and belief has been prepared in conformance with the instructions
issued by the Board of Governors of the Federal Reserve System and is true and
correct.
/s/ David A. Spina
/s/ Marshall N. Carter
/s/ Truman S. Casner
5
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0001109531
<NAME> DIAMOND TRIUMPH AUTO GLASS, INC.
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 94
<SECURITIES> 0
<RECEIVABLES> 12,040
<ALLOWANCES> 956
<INVENTORY> 12,620
<CURRENT-ASSETS> 27,841
<PP&E> 18,027
<DEPRECIATION> 10,334
<TOTAL-ASSETS> 87,519
<CURRENT-LIABILITIES> 15,205
<BONDS> 107,500
43,046
0
<COMMON> 10
<OTHER-SE> (121,288)
<TOTAL-LIABILITY-AND-EQUITY> 87,519
<SALES> 164,520
<TOTAL-REVENUES> 164,520
<CGS> 51,456
<TOTAL-COSTS> 153,350
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 1,341
<INTEREST-EXPENSE> 11,054
<INCOME-PRETAX> 147
<INCOME-TAX> 138
<INCOME-CONTINUING> (4,791)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (4,791)
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
